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The Canadian Press - ONLINE EDITION

US claims in lawsuit that KBR took kickbacks, submitted false claims on Iraq defence contract

WASHINGTON - The federal government is suing Kellogg, Brown & Root Services Inc., charging that the defence contractor submitted false claims and took kickbacks in connection to a U.S. Army contract in Iraq.

The government alleges that KBR employees took kickbacks from two Kuwaiti companies that it hired as subcontractors in 2003 and 2004, then filed claims for reimbursement for inflated costs.

The Justice Department said Thursday that it filed the lawsuit in federal court in Illinois.

Houston-based KBR said it could not comment on the lawsuit Thursday because it had just been filed.

KBR had a contract to provide transportation, maintenance, food, shelter and other services to support the Army in Iraq, and it used local subcontractors to perform some of the work.

In the civil lawsuit, the government charged that KBR employees took kickbacks from La Nouvelle General Trading & Contracting Co. and First Kuwaiti Trading Co. for the award and oversight of subcontracts, then filed false reimbursement claims.

In one case, the government said, KBR inflated the value of fuel tankers provided by La Nouvelle, which later gave the KBR employee who awarded the subcontract $1 million. In another, officials said, KBR continued to make monthly lease payments to First Kuwaiti for trucks that KBR had already returned to the subcontractor.

KBR also used refrigerated trailers to transport ice for consumption by troops that had been used as temporary morgues but hadn't been first sanitized, the lawsuit alleges.

The government is asking for civil penalties against KBR and the two Kuwaiti companies up to twice the amount of the alleged kickbacks and several times the amount of the false claims.

The Justice Department said that federal prosecutors in Illinois have won convictions against 10 companies and individuals in connection with contracts in Iraq, including three KBR subcontract managers who admitted taking kickbacks or making false statements.

Some allegations in the government's lawsuit were first raised in a lawsuit filed in Houston by a whistleblower. That case was transferred to U.S. District Court in Rock Island, Ill., where the Pentagon office handling the Iraq contract is based.

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