Shell companies in Cayman Islands
In March 2008, the Boston Globe reported that KBR had avoided paying hundreds of millions of dollars in federal Medicare and Social Security taxes by hiring workers through shell companies based in the tax haven of the Cayman Islands. More than 21,000 people working for KBR in Iraq – including about 10,500 Americans – are listed as employees of two companies, Service Employers International Inc., and Overseas Administrative Services, which exist on the island only in computer files in an office.KBR admitted that the companies were set up "in order to allow us to reduce certain tax obligations of the company and its employees." But KBR does claim the workers as its own with regards to the legal immunity extended to employers working in Iraq.[29]
(Reuters) - The U.S.
Justice Department said on Monday that it had sued KBR Inc, accusing the company
and a Kuwaiti subcontractor of improperly charging the federal government for
the costs of delivering and installing trailers for troops in
Iraq.
The filing of the
lawsuit came days after the Justice Department dropped a similar but unrelated
case over KBR's costs for private armed security in Iraq.
Filed in the U.S.
District Court in Rock Island, Illinois, the latest lawsuit alleges that
KBR-hired subcontractor First Kuwaiti Trading Co inflated its crane, truck and
driver costs and misrepresented delays on the installation of more than 2,250
trailers.
KBR provided many
services to the U.S. government under a logistical support contract through
subcontractors like First Kuwaiti.
First Kuwaiti's
subcontract, awarded in 2003, had been for $80 million. The government said KBR
later agreed to pay First Kuwaiti an extra $48.8 million after the subcontractor
in 2004 submitted two claims contending government-caused delays in providing
military escorts entitled it to extra money.
The lawsuit said KBR
charged the government for the inflated costs despite knowing they were false.
KBR knew First Kuwaiti "could not be trusted," the lawsuit
said.
The complaint also
said KBR quality assurance personnel had recommended permanently disqualifying
First Kuwaiti from receiving any contracts for providing the army trailers two
months before the subcontract was awarded.
In July 2004, a KBR
representative said claims by First Kuwaiti's founder under other subcontracts
"absolute highway robbery," the complaint said.
"The facts alleged in
the complaint indicate that KBR and First Kuwaiti did not provide an honest
accounting," said Jim Lewis, U.S. Attorney for the Central District of
Illinois.
KBR said in a
statement it had not seen the latest complaint, but that it believed the
government's claims are "baseless and without merit."
"KBR has faithfully
supported American troops in Iraq and has performed its work in support of the
army with professionalism and in full compliance with its contract and the law,"
it said.
First Kuwaiti, based
in Kuwait City, Kuwait, also goes by First Kuwaiti General Trading &
Contracting Co, according to the complaint. A website for the company says it
was founded in 1996 by businessman Wadih Al-Absi and employs more than 600
engineers and 15,000 staff members.
Rock Island was the
location of an earlier criminal lawsuit against a former KBR employee, Anthony
Martin, who pleaded guilty in July 2007 to participating in a kick-back
scheme.
Monday's complaint
refers to Martin's case and said that the kickback scheme was with Al-Absi.
Martin received $10,000 and was promised another $190,000 to award First Kuwaiti
subcontracts for trucks and trailers, the lawsuit said.
A representative for
First Kuwaiti did not respond to an email seeking comment. A lawyer for Martin
did not respond to a call and an email seeking comment.
Monday's lawsuit came
after KBR last week welcomed the dismissal of an earlier lawsuit filed in U.S.
District Court in Washington by the Justice Department in
2010.
The government gave
no reason for dropping that case. It did so without prejudice, giving it the
ability to refile the case at a later date.
Both lawsuits were
under the False Claims Act, which allows the United States to recoup funds when
companies overbill the government.
The statute allows
the government to sue for three times its damages and assess civil penalties of
$5,500 to $11,000 per false claim.
(Reporting by Nate
Raymond; Editing by Dan Grebler, Tim Dobbyn and Michael Perry)
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