Iraq War whistleblowers announce $108.75 million settlement with KBR over fraud, waste and abuse of taxpayer funds in Iraq. The settlement represents the largest recovery to date related to the Iraq War. The whistleblowers were represented by David Chizewer of Goldberg Kohn, Eric Havian at Constantine Cannon and Ned Arens at Phillips and Cohen.
Filed under the “qui tam” provisions of the False Claims Act, the lawsuit alleged KBR defrauded the United States Army in connection with KBR’s contract to supply troops in the War with property and materials. Despite widespread reports of billions of dollars in waste, fraud and abuse over the course of the War, no other case has successfully recovered such a substantial sum for fraud.
KBR is a huge company that rarely settles out of court, making this settlement agreement highly unusual. David Chizewer of Goldberg Kohn noted that “KBR litigated every issue in the case endlessly, requiring our firms to respond in kind. KBR repeatedly lost most of these battles, but for years refused even to consider settlement. Whistleblowers without access to such legal firepower have little chance against the most powerful government contractors and their cadre of the largest law firms.”
The lawsuit alleges that KBR defrauded the Army under the multi-billion dollar LOGCAP III contract when it routinely ordered new materials when excess quantities of the same items were sitting in KBR warehouses in Iraq. The case cites extensive evidence that KBR routinely lied to the Army, certifying that it had checked for excess material before ordering anew. According to the whistleblowers, KBR was indifferent to this massive waste because the Army reimbursed KBR for all these unnecessary costs, plus profit. This fraud was related to “cross-leveling,” a LOGCAP requirement that before buying new material, KBR had to check within the theater to see if excess of that same material was sitting in warehouses in-country.
The whistleblowers’ evidence showed that KBR fraudulently manipulated its inventory management system such that vast amounts of material in inventory were “invisible” to anyone trying to cross-level. For example, the facts show that KBR was ordering new electrical wire when it had up to 65 years’ worth of inventory of such wire on hand. There was enough stock of four other items to last 32.9 years, 15.6 years, 13.0 years, and 12.7 years. This practice resulted in massive amounts of excess material paid for by U.S. taxpayers, much of which was turned over to the Government of Iraq or abandoned at the end of the War. The whistleblowers’ internal complaints to the company were routinely ignored.
Of particular note is that this case was prosecuted exclusively by private whistleblowers. It was filed in Federal Court in 2011 by Geoffrey Howard, a KBR IT employee in Kuwait who wrote programs revealing the amount of KBR’s over-ordering, and Zella Hemphill Anderson, a KBR employee stationed in Iraq who oversaw the process of checking inventory before buying new material. The two whistleblowers were represented by three of the leading whistleblower firms in the country, Constantine Cannon LLP, Goldberg Kohn, and Phillips & Cohen LLP. After the lawsuit was filed, the Justice Department did an initial investigation and declined to join the case. For over a decade, the two whistleblowers litigated the case on their own, with their attorneys reviewing more than 2.7 million documents and taking sworn testimony from dozens of witnesses. In recognition of their extraordinary effort, the whistleblowers will receive 29% (out of a maximum 30%) of the recovery they achieved.
WHAT SHOULD YOU DO IF YOU ENCOUNTER ILLEGAL KICKBACKS?
Under the False Claims Act, employees or other persons with knowledge who become aware of conduct which violates the Anti-Kickback Statute and leads to false claims on the government can file a qui tam lawsuit on behalf of the government to address these practices. Whistleblowers who sue on behalf of the government may receive between 15 to 30 percent of the money recovered by the government if the suit is successful.
The whistleblower attorneys at Goldberg Kohn can help. If you are aware of kickbacks or false claims being made on the government, call Goldberg Kohn at 312-284-3258 or contact us online. We are always willing to provide you with a free, confidential consultation to discuss a potential case.