Iraq War whistleblowers announce $108.75 million settlement with KBR over accusations of fraud, waste and abuse of taxpayer funds in Iraq

The settlement represents the largest recovery to date related to the Iraq War.

NEW YORK, July 6, 2023 /PRNewswire/ --Two whistleblowers have announced that a 12-year litigation with KBR Services has been settled for $108.75 million, the largest cash settlement ever obtained in connection with alleged Iraq War fraud. Filed under the "qui tam" provisions of the False Claims Act, the lawsuit by former KBR employees Geoffrey Howard and Zella Hemphill Anderson 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 alleged fraud.

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. The 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 in-country.

The whistleblowers' evidence as laid out in their lawsuit 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, KBR was allegedly 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, according to the complaint.

The lawsuit alleges that KBR knowingly ordered $340 million of excess materials over the course of its performance. The lawsuit cites one of KBR's top four executives in Iraq stated in an email "We are purchasing $5 Million per day when we've got $1.2 Billion in excess on hand. At some point, the [Government] is going to put KBR out of business if we keep doing this." The company also allegedly sanitized audit reports, in the words of one employee "turn[ing] Chicken crap into Chicken soup." Further, according to the complaint, a segment manager who inspected one site found that there had been an "extensive coverup."

Of particular note is that this case was prosecuted exclusively by private whistleblowers, who filed the lawsuit in Federal Court in 2011. Howard, a KBR IT employee in Kuwait, wrote programs revealing the amount of KBR's over-ordering, and Anderson, a KBR employee stationed in Iraq, 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. The Justice Department did an initial investigation but 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.

The whistleblowers' lead counsel Eric Havian of Constantine Cannon stated "For years, we have heard that KBR and other contractors ripped off the Army for billions of dollars during the Iraq War, yet this is one of the only cases to recover any of that money for taxpayers. It is especially notable that these courageous whistleblowers, not the government, held KBR to account for its 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."

Edward Arens of Phillips & Cohen LLP stressed that "This success is a significant victory for U.S. taxpayers. We think there was overwhelming evidence of fraud in this case. It is also noteworthy for whistleblowers to recover such a large amount for taxpayers in a case the government did not join."

While it did not litigate the case, the government monitored it and participated in the settlement. The whistleblowers and their counsel express their appreciation to Trial Attorney Kelley Hauser, who represented the United States.

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SOURCE CONSTANTINE CANNON