US accuses contractor KBR of improperly billing for private security services in Iraq

By Devlin Barrett, AP
Thursday, April 1, 2010

US sues contractor KBR over Iraq bills

WASHINGTON — The federal government sued KBR Inc., the largest contractor in Iraq, on Thursday over what prosecutors say were improper charges to the Army for private security services.

Houston-based KBR Inc. is a former subsidiary of Halliburton Co. It recently won a new contract potentially worth more than $2 billion for support work in the country.

The lawsuit filed in federal court in Washington charged that KBR and 33 of its subcontractors used private armed security at various times from 2003 to 2006. The suit claimed KBR knew under the terms of its contract the company could not bill the U.S. government for such services but did so anyway.

While the lawsuit is a contractual dispute, the case highlights what became a confusing question in the U.S. occupation of Iraq: What authority did private contractors have to carry weapons and use force in the unstable country?

KBR reported 2009 revenues of $4.8 billion from work under the Logistics Civil Augmentation Program, according to the independent Commission on Wartime Contracting in Iraq and Afghanistan.

But under the terms of that program, prosecutors said, KBR was to provide logistical support, such as food services, transportation, laundry and mail for U.S. military operations in Iraq. Security protection was to be provided by the U.S. military under the terms of the contract.

In a statement, KBR countered that it was the Army, not the company, that breached the contract “by repeatedly failing to provide the necessary force protection and, in fact, frequently left KBR, its employees and its subcontractors unprotected.”

The government’s court papers did not say how much money the alleged improper billing may have cost taxpayers.

The suit charged that KBR violated terms of the contract by failing to get Army authorization to arm subcontractors and by allowing the use of private security contractors who were not registered with the Iraqi Interior Ministry.

“Defense contractors cannot ignore their contractual obligations to the military and pass along improper charges to the United States,” said Tony West, head of the Justice Department’s civil division.

The case grew out of a 2006 initiative aimed at cracking down on fraud in government contracting.

Sen. Bob Casey, D-Pa., a critic of the company, said: “KBR’s pattern of abuse must be punished for past behavior and in future contract decisions.”

Associated Press writer Kimberly Hefling contributed to this report.

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