KBR Settles False Claims Act Case for Alleged Kickback Scheme in Iraq

The Department of Justice announced that this week that a defense contractor has settled a False Claims Act case involving illegal kickbacks for $13.67 million. The contractor, Kellogg Brown & Root Services, Inc. (“KBR”), was accused of steering subcontracts to two Kuwaiti companies in exchange for payments to KBR employees.

In 2001, the U.S. Government awarded KBR the Logistics Civil Augmentation Program III contract, under which KBR was supposed to provide logistical support to the U.S. Army in Iraq. KBR then awarded local companies with subcontracts to carry out work on its behalf. One of these subcontracts involved the leasing of trucks to transport fuel and refrigerated items into Iraq. The Government, however, alleged that a KBR employee steered this subcontract to First Kuwaiti Trading & Contracting Co. in exchange for monetary payment and that KBR did so at higher prices than allowed for under the Army’s contract.

The $13.67 million settlement is the latest adverse action against KBR for alleged kickbacks and overpayment. The Government previously litigated a case against KBR for overpaying First Kuwaiti and won a $51 million judgment (which was upheld on appeal in 2021).

Anytime a defense contractor is awarded a contract by the U.S. Government it must certify compliance with the Anti-Kickback Statute (“AKS”) and the False Claims Act (“FCA”). Both of these laws strictly prohibit a defense contractor from receiving payment from a subcontractor in exchange for awarding a subcontract. The penalties for doing so can be severe. The AKS is a criminal statute which can carry up to five years in prison for each violation. And the False Claims Act can cost an offending company more than $10,000 per violation as well as three times the total amount of fraud (also known as treble damages).

Individuals who blow the whistle on defense contractor fraud can recover significant sums of money. Under the False Claims Act, a whistleblower is entitled to anywhere between 15% to 30% of the total amount of fraud recovered by the Government.

If you are aware of a defense contractor committing fraud, contact our team of experienced False Claims Act attorneys to find out how stop the fraud and an earn an award.

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