KBR Compelled To Release Internal Reports Documenting Iraq War Contracting Fraud

Washington, D.C. November 24, 2014. A U.S District Court judge has ordered defense contractor Kellogg Brown & Root (KBR), the massive multinational company responsible for many of the construction projects in the Iraq war, to turn over incriminating documents prepared as part of an internal investigation of multi-million dollar war contracting fraud.

The order to produce the investigative reports was issued in connection with a whistleblower lawsuit filed on behalf of the United States by Harry Barko. The decision, dated November 20, 2014, issued by U.S. District Court Judge James Gwin, ordered KBR to produce its Code of Business Conduct (“CBOC”) investigative reports.

The Court’s decision acknowledges, “major discrepancies exist between [KBR Attorney] Heinrich’s testimony and the contents of the [COBC] writings Heinrich [admitted he] had reviewed” in preparation to testify on behalf of KBR. The Court concluded that by injecting the false assertion about what the investigative findings actually contain, KBR waived its right to keep the reports hidden.

KBR initiated an internal investigation of fraud allegations it received from its employees. KBR then required all of its employees involved with the investigation to sign highly restrictive non-disclosure agreements threatening termination if they spoke about the multi-million dollar fraud to anyone outside of KBR’s legal department. The U.S. Securities and Exchange Commission and members of Congress are currently investigating whether those non-disclosure agreements violate federal laws. According to Michael Kohn, Mr. Barko’s lead counsel, “KBR designed a system that concealed evidence of fraud after an employee reported it to the company. It accomplished this in large part by gagging its employees by having them sign agreements threatening them with termination if they spoke out.”

The production of the COBC documents originally erupted into a major legal battle between KBR and Mr. Barko’s counsel following a March 6, 2014, decision issued by the trial judge ordering the production of the documents. This order established that the internal reports contained evidence that fraud and bribery had occurred in connection with numerous subcontracts KBR gave to a favored Jordanian firm, Daoud & Partners, during the Iraq War that KBR then billed to the government. That order states in part:

“The Court has reviewed KBR’s COBC Reports and they are eye-openers. KBR’s investigator found Daoud: “received preferential treatment.” The reports include both direct and circumstantial evidence that Daoud paid off KBR employees and KBR employees steered business to [Daoud]. And the KBR investigation “reported a trend that [Daoud] would routinely submit bids after proposals from other companies had been received.” The reports suggest some KBR employee or employees fed information about competitor bids to Daoud to allow Daoud to submit a late bid undercutting the competitors.”

United States ex rel. Barko v. Halliburton Co. et al., No. 1:05-CV-1276 (D.D.C.), March 6, 2014 order.

KBR’s relationship with Dauod predated the Iraq War when Daoud agreed to serve as KBR’s Jordanian “corporate sponsor.” Daoud’s corporate sponsorship was important to KBR’s expansion of its the Middle East business dealings. According to documents already released, KBR knew that Daoud had direct ties to the Jordanian Royal family and that Daoud had offered to place Royal Jordanian Air Force assets at KBR’s disposal.

KBR objected to Judge Gwin’s initial order and filed an emergency appeal to the U.S. Court of Appeals for the District of Columbia Circuit. In that appeal KBR was successful in convincing the Court of Appeals that the documents were protected attorney-client communications. However, the District Court ordered KBR to disclose the documents after determining KBR waived their privilege.

In its November 20, 2014, order, the District Court found that KBR had in fact waived the privilege and ordered KBR to release the documents. “Both Mr. Barko’s right to due process, and the public interest, demand that KBR produce all of the documents demonstrating fraud in these multi-million dollar contracts. When companies steal from the tax payers, they cannot hide behind attorney-run compliance programs,” Kohn added.

Related documents are all available online at Whistleblower Blog:

• Court Order Requiring KBR to Produce the Records: November 20, 2014 Order of the District Court
• United States ex rel. Barko v. Halliburton Co. et al., No. 1:05-CV-1276 (D.D.C.), March 6, 2014 order  (first order of the district court ordering production of the KBR documents that demonstrate KBR’s fraud against the taxpayer)
• United States ex rel. Barko v. Halliburton Co. et al., No. 1:05-CV-1276 (D.D.C.), March 11, 2014 order (Follow-up order from the district court requiring production of the KBR documents)
• In re: Kellogg Brown & Root, Inc., et al, June 27, 2014 order of the Appeals Court upholding KBR’s claim of attorney client privilege, but permitting a remand on the “waiver” issue
• Washington Post Reports SEC Investigating KBR
• Washington Post Reports Workplace secrecy agreements appear to violate federal whistleblower laws
• Washington Times Reports KBR contractor probed by Senate, House over documents silencing whistleblowers
• Federal Times Reports Lawmakers say KBR non-disclosure agreements stop whistle blowers
• November 20, 2014 Letter from Lawmakers to KBR CEO Stuart Bradie

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