KBR and Halliburton: A Shocking Turn of Events

Five years ago, the Securities and Exchange Commission (SEC) and Department of Justice (DOJ) began investigating whether KBR was among several companies that paid $180 million in bribes to win contracts to construct a natural gas liquefaction plant in Nigeria.  Last September, former KBR executive Albert Jackson Stanley cut a deal with the SEC and DOJ, and now KBR and its former parent, Halliburton, have done the same.

Yesterday, KBR pleaded guilty to violating the Foreign Corrupt Practices Act (FCPA).  (Click here to see the plea agreement.)  Halliburton and KBR also agreed to pay the government $579 million (due to an indemnification agreement signed when the two companies split in 2007, KBR only has to pay $20 million of that), and KBR agreed to retain a corporate monitor for a period of three years.  According to the plea agreement, the DOJ will choose the monitor from candidates proposed by KBR, a selection process that will hopefully avoid the controversy that surrounded another corporate monitor deal involving a certain former U.S. Attorney General.

The plea in the Nigerian bribery case follows last week's outrage, when it was announced that KBR had been awarded a $35.4 million U.S. Army Corps of Engineers contract to build an electrical distribution center in Iraq despite being under investigation for causing the electrocution deaths of several U.S. soldiers.

How can this be?  The Federal Acquisition Regulation (FAR) clearly states that a conviction or "adequate evidence" of bribery may be grounds for suspension or debarment from federal contracting.  The contract award was announced on January 28, and KBR pleaded guilty to bribery yesterday.  Score one for KBR's hard-working legal department, which successfully held off the guilty plea until after the contract was awarded.  On the other hand, what about there being "adequate evidence" of bribery?  The investigation had been going on since 2004, and a high-ranking KBR executive was convicted in the matter last September, long before the Iraq contract was awarded.

Furthermore, the FAR contains several other catch-all grounds for suspension or debarment, including a conviction, civil judgment, or adequate evidence of "any other offense indicating a lack of business integrity or business honesty" and serious violations of the terms of a government contract.  Certainly, the Nigerian bribery incident and/or the electrocution investigation would have satisfied one or more of these conditions.  As far back as September, the Pentagon had strong doubts about KBR's competence.  That month, David J. Graff, commander of the Defense Contract Management Agency, wrote a letter in which he strongly criticized KBR's "continuing quality deficiencies" with regard to its electrical work in Iraq and wrote that "many within DoD have lost or are losing all remaining confidence in KBR's ability to successfully and repeatedly perform the required electrical support services mission in Iraq."

POGO wonders what mystical power KBR holds over contracting officials at the Pentagon.  KBR gets off with a $20 million slap on the wrist in a massive bribery scandal while being investigated for multiple deaths linked to its work, and it is allowed to continue doing business with the government.  Despite having a long track record of misconduct and attracting controversy like a water bottle attracting displaced koala bears in Australia, it's business as usual for KBR.

-- Neil Gordon

Comments

[ron Harris]

ms sparky

I am going through arbitration with KBR. I am looking for a lawyer in the Kansas City area to help me. Do you have some links that I could refer too.

[Not an Attorney]

I also am astonished as I tend to concur towards Ms. Sparky, Neil and the Author of this (another) seemingly superb and excellent and seemingly and initially a spot perfect and very serious and in my view much needed brave, courageous and with fidelity Article from POGO.

Also, as POGO usual and customery communication has seemingly also been very king and gracious towards all so I somehow will try to remain in the hopes that there will be a re-calibration and with a more enlightened kind and gracious clarification of the expressed views in the future from the notably noted mentioned blog comment reply.

Thank you for your time and consideration.

Sincerely,
Not an Attorney

[Neil]

KSBR --
I guess the next time you need electrical work done on your home, you won't hesitate to hire KBR because, even though they are suspected of having caused the electrocution deaths of several soldiers, nothing has been conclusively proven yet in a court of law.

Or, do you think you might behave a little differently if it were your own life and money on the line?

[ksbr esq]

Neil,

As an attorney you'll appreciate the difference between a conviction and "adequate evidence." The latter has no formal definition, but a conviction strongly suggests (confirms) the evidence was adequate. So, you are dreaming if you think the growing federal case since 2004 would have been adequate to debar. It required a verdict, no?
This misunderstanding is a stone's throw from POGO's enduring desire to classify a civil court settlement as contractor misconduct, even though there is no admission or denial of wrongdoing by the contractor, and that assertion is fully accepted by the government. Those contractors are not guilty of anything.
Make sense, sir?

[Ms Sparky]

Unbelievable!!! It's time for the American people to stand up and stay enough is enough. I vote for debarrment!!!

Ms Sparky