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KBR

Government Fraud Counterclaims in LOGCAP Dispute

Date: 03/15/2011 (Date of Government Counterclaims)

Misconduct Type: Government Contract Fraud

Enforcement Agency: Justice

Contracting Party: Defense - Army

Court Type: Civil

Amount: $38,000

Disposition: Judgment Against Defendant

Synopsis: In response to a lawsuit filed by KBR seeking approximately $41 million the government ordered KBR to return under the Logistics Civil Augmentation Program (“LOGCAP”) III contract, the Department of Justice filed counterclaims alleging KBR managers received kickbacks from dining facility (“DFAC”) subcontractor Tamimi Global Company in violation of the False Claims Act and the Anti-Kickback Act. The government claimed that from late 2002 through 2003, KBR regional food services manager Terry Hall and his deputy, Luther Holmes, received more than $45,000 in kickbacks from Mohammad Shabbir Khan, vice president of Tamimi, in return for awarding the company more than $400 million in subcontracts. The Department of Justice alleged that the “taint” of the kickbacks should cause KBR to forfeit its claims against the government. In 2006, Khan was sentenced to 51 months in prison for paying kickbacks to KBR employee Stephen Lowell Seamans, who was sentenced to 12 months in prison for accepting the kickbacks in return for helping Tamimi win two DFAC subcontracts in Iraq and Kuwait worth $21.8 million (see KBR instance, “KBR Employee Sentenced for Accepting Kickbacks”). In September 2011, Tamimi paid $13 million and entered a deferred prosecution agreement to settle U.S. criminal and civil charges. After a trial, in April 2012 the U.S. Court of Federal Claims awarded KBR $11,792,505 plus interest accrued since July 2008. However, the court awarded the government $38,000 in civil penalties on its Anti-Kickback Act counterclaim, holding KBR strictly liable for the kickbacks taken by Hall and Holmes.