By Janice Kelly
A whistleblower suit against KBR will go forward after a district court judge found that relators’ complaint sufficiently alleged a violation of the False Claims Act. Judge Michael M. Mihm found that relators’ claims that KBR sidestepped required inventory controls and ordered hundreds of millions of dollars of unneeded materials met the FCA’s requirement that fraud be pleaded with particularity. Constantine Cannon is lead counsel for the whistleblower.
KBR was awarded a contract under the Logistics Civil Augmentation Program to supply the Army in Iraq and Afghanistan. The contract required KBR to control, protect, and maintain the government property in its possession. These obligations included “cross-leveling”, a method of screening requests to determine whether they can be filled with material available in the theater, and maintaining an inventory system that identified when materials were in transit and when they had arrived at the warehouse. The lawsuit alleges that KBR bypassed these controls and also engaged in the practice of “reserving” materials for non-existent projects, making it seem that they were unavailable, and returned materials to the government as excess while ordering more.
Relators allege that these practices resulted in over $600 million of excess material in the Middle East. The contract reimbursed KBR a percentage fee on top of its costs, so additional purchases meant more money for the contractor.
The court found that relators adequately put KBR on notice of its deviation from requirements in government regulations and in the contract. Although KBR claimed that a “false certification” of compliance was required, the court agreed with relators that when a contractor makes a request for payment for supplies it knows are unnecessary, excessive and unallowable, it makes a false claim under the FCA. Relators did not rely on a theory of false certification; they claimed factual falsity in that if the government had known that KBR’s invoice included unreasonable and unallowable costs, it would not have paid.
The case is U.S. ex rel. Geoffrey Howard et al. v. KBR Inc. et al., case number 4:11-cv-04022, in the U.S. District Court for the Central District of Illinois.
See also, “KBR Must Face Whistleblower Suit Over ‘Excess’ Supplies”, Law360, October 15, 2015.
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