Thursday, October 30, 2014

KBR Iraq Fraud Case Gets to Supreme Court

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Robert MacLean isn’t the only reason the Project On Government Oversight is closely watching the Supreme Court this term. (MacLean’s oral argument is on Tuesday, November 4.) Another case on the Court’s calendar has major implications for federal whistleblowers and the ability of the government to recover defrauded funds—a nearly nine-year-old False Claims Act (FCA) lawsuit accusing Halliburton and KBR of defrauding the government and endangering the health of U.S. troops in Iraq.

Benjamin Carter, who worked for KBR (then a subsidiary of Halliburton) in Iraq in 2005, claims the company falsely billed the government by instructing employees to submit timesheets showing they worked 12-hour days on water testing and purification services when no such work had been done. As a result, he contends, troops and other personnel were exposed to contaminated potable and non-potable water.

Carter made news when he testified before Congress about his experiences in Iraq. “Our men and women overseas deserve the best our taxpayer dollars can buy, and it saddens me to report that we’re falling short on something as simple and essential as providing them with clean, safe water,” he told the Senate Democratic Policy Committee at a January 2006 hearing.

Carter’s lawsuit, originally filed in 2006, kept getting dismissed for procedural reasons. Finally, in March 2013, a federal appeals court ruled the case could go forward, setting up the Supreme Court showdown. The specific issues the Supreme Court will decide are: Whether Carter filed his lawsuit within the legally mandated time limit, and whether his lawsuit is barred because another lawsuit making similar allegations had been filed earlier.

The latter issue involves the FCA’s first-to-file rule, which bars lawsuits that raise the same facts as a previously filed lawsuit. The rule is intended to encourage whistleblowers to promptly alert the government of wrongdoing and to discourage the filing of meritless, copycat lawsuits. A few weeks before Carter filed his lawsuit, another former KBR employee who worked in Iraq, Todd Thorpe, filed a lawsuit alleging employees at other bases performing different services were similarly instructed to bill the government for 12-hour days regardless of the actual number of hours they worked. Thorpe’s lawsuit was dismissed in 2010 before the court could rule on the merits. Nonetheless, KBR and Halliburton would like the Court to broadly interpret the first-to-file rule so that Thorpe’s lawsuit bars later actions filed by Carter, Peter Duprey, and others alleging timecard fraud by KBR or Halliburton.

The Carter, Thorpe, and Duprey cases involve the Army’s Logistics Civil Augmentation Program (LOGCAP) III support services contract, about which POGO has written extensively over the years. The far-reaching LOGCAP III contract has been mired in controversy ever since it was awarded to KBR in December 2001. At the time, it was pointed out that KBR/Halliburton’s former chairman and CEO was Vice President Dick Cheney. Since then, there have been repeated allegations of fraud, waste, or abuse on the LOGCAP III, on which the government has spent $38 billion.

Not under consideration by the Supreme Court, but an issue worthy of discussion, is government intervention in FCA lawsuits. The government declined to intervene in the Carter, Thorpe, and Duprey lawsuits. Government intervention in FCA cases means a smaller monetary recovery for the plaintiff whistleblower, but it also greatly increases the government’s ability to hold contractors accountable.

Furthermore, the law states that lawsuits must remain under seal (not publicly disclosed) “for at least 60 days” while the government decides whether to intervene, but in practice it usually takes longer—much longer in some cases. For Thorpe and Duprey, it was more than four years after they filed their lawsuits when the government notified them it would not intervene. Incredibly, the government informed Duprey that, after all that time, it had not completed its investigation into his claims and thus was “not able to make a fully informed decision regarding intervention.”
While sealing and delays are often necessary, at a certain point these measures become an unnecessary restriction on the public’s right to know about potential health or safety threats—like the water contamination problem Carter alleges in his lawsuit. POGO also worries about the effect these measures have on the continued viability of the False Claims Act, which is already under unrelenting attack from the business community. As of January 2011, more than 1,300 False Claims Act lawsuits were stuck in legal limbo awaiting the government’s intervention decision. (The Justice Department has not yet responded to POGO’s request for more recent False Claims Act/qui tam lawsuit statistics.)

Even though it declined to intervene in his case, the government has assisted Carter in the form of two amicus curiae (“friend of the court”) briefs submitted to the Supreme Court by U.S. Solicitor General Donald Verrilli. Back in May, Verrilli urged the Court to reject KBR and Halliburton’s appeal. Last week, he petitioned the Court to uphold the appellate court’s ruling and allow Carter’s lawsuit to proceed. Verrilli also requested to take ten minutes of Carter’s time at oral argument, scheduled for January 2015.

For the better part of a decade, Ben Carter has been trying to get the merits of his case before a judge and jury. We hope the Supreme Court finally gives him that chance.

Image from Flickr user Pete Jordan.
By: Neil Gordon
Investigator, POGO
Neil Gordon, Investigator
 Neil Gordon is an investigator for the Project On Government Oversight. Neil investigates and maintains POGO's Federal Contractor Misconduct Database.