By NEIL GORDON
The U.S. Court of Federal Claims recently unsealed its opinion and order in the nearly four-year fight by KBR to recoup the $41 million it claims the U.S. Army owes under the LOGCAP III contract in Iraq. The government, in return, filed a countersuit claiming kickbacks two KBR contract managers took from a LOGCAP III subcontractor invalidates KBR's claim.
KBR filed a lawsuit in the Court of Federal Claims seeking $41 million in unpaid costs and fees incurred under LOGCAP III for dining facility (DFAC) services at Camp Anaconda, Iraq from July through December 2004. The government filed a counterclaim alleging that the thousands of dollars in kickbacks KBR managers Terry Hall and Luther Holmes accepted from DFAC subcontractor Tamimi Global Company, Ltd. should cause KBR to forfeit its claims against the government under various fraud theories and the Anti-Kickback Act.
The case went to trial in late 2011. Two weeks ago, the court issued its judgment, awarding KBR $11,792,505 plus interest but also awarding the government $38,000 in civil penalties on its Anti-Kickback Act counterclaim. Interestingly, KBR’s statement about the judgment filed with the U.S. Securities and Exchange Commission (SEC) last week does not mention the latter.
Overall, the court’s exhaustive, 97-page opinion is a pretty dry read, but it does contain some interesting details. The court made a few unflattering observations about the professionalism of KBR’s LOGCAP III personnel, especially Hall and Holmes. Hall “fell far short of conveying the background and experience to act as an executive or manager.” Hall and Holmes were “unsophisticated, unscrupulous” employees who “possess[ed] managerial titles and job responsibilities seemingly disproportionate in difficulty and scope to their respective abilities,” while their supervisor is twice tagged in the opinion as “unsavory.”
Iraq at that time was “a foreign commercial environment in which proscribed practices for obtaining and maintaining contracts are not uncommon,” according to the court. For KBR, these practices included subcontractors procuring alcohol for KBR employees and handing them envelopes containing thousands of dollars in cash for “party money” and other improper purposes. It was an environment in which a KBR subcontract administrator freely admitted to a colleague in an e-mail that the DFAC subcontract at Camp Anaconda was “the mother of all DFAC drug deals.” Given this environment, the court saw fit to only award KBR a fraction of what it sought, reasoning that “KBR must bear at least part of the responsibility for the procurement chaos its personnel created.”
Terry Hall pleaded guilty in 2010 to money laundering and paying more than $3 million in bribes to Army officials at Camp Arifjan, Kuwait to win contracts for companies he founded after leaving KBR. In March, he was sentenced to 39 months in prison and ordered to forfeit $15.8 million to the government. Another KBR employee, Stephen Lowell Seamans, pleaded guilty in 2006 to taking $133,000 in kickbacks from Tamimi Global Company in return for helping Tamimi win DFAC subcontracts in Iraq and Kuwait (including Camp Arifjan). He was sentenced to a prison term of 12 months and one day and ordered to pay $380,000 in restitution.
Neil Gordon is a POGO investigator.
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