Is KBR's Decade-Long Crime Spree Finally Coming to an End?
How infuriating has it been, the last five years, watching Halliburton and KBR get away with murder? Murder, poisoning, electrocution, rape, human trafficking, fraud, bribery -- their crimes go on and on. But could their decade-long spree may be coming to an end? This year, settlements for old offenses, new exposés and new lawsuits for more recent evil-doings, have resulted in plummeting stock prices, canceled contracts, and a soon-to-be imprisoned former CEO.
The latest blow came last Thursday, in a Texas court, where executives for Halliburton and KBR were described in legal papers as conducting a "reign of terror" and functioning "as criminal enterprises." Paying bribes, taking kickbacks, concealing gang rapes, and engaging in human trafficking were among the crimes listed on the May 14th complaint brought not by government or human rights lawyers, as you might expect, but by attorneys filing a class action suit for the pension fund of Detroit's Policemen and Firemen. According to the press release issued by the funds' attorneys, Grant & Eisenhofer, Halliburton and KBR's directors enabled "a pervasive environment of misdeed and corruption," resulting in suits, investigations, fines, penalties, and settlements of over $650 million, which have ravaged the corporations' reputations, prospects, finances, and in turn the pension fund's investment.
The complaint charges that executives hid pending investigations from shareholders until after KBR was spun off in 2006. Months later, the new KBR paid a settlement to the government for violating the U.S. False Claims Act through double-billing and inflating prices for goods and services for troops in Kosovo. In 2007, a report of the Special Inspector General for Iraq Reconstruction cited KBR for widespread waste, mismanagement, improper documentation, and lack of oversight, and the General Accounting Office recommended that the government withold a KBR contract. In 2008, Albert "Jack" Stanley, former CEO of KBR/Halliburton, admitted to coordinating briberies of Nigerian officials to secure contracts worth $6 billion. In February of this year, Halliburton agreed to pay $579 million in fines and penalties to settle the bribery charges, and Stanley now faces his own $10.8 million fine and seven years in prison.
The Texas suit covers the period both before and after KBR became an independent company, and names the majority of the two companies' recent and current boards, including such corporate heavyweights as past president and chairman of American Airlines, Robert Crandall. The May 14th press release by attorneys originally listed former Halliburton CEO, Dick Cheney as a defendant (not surprising, since most of the Nigerian bribes occurred under Cheney's tenure; Cheney also appointed and directly supervised Stanley), but a hastily issued correction stated that Cheney had been listed in error. The complaint identified some of Halliburton's and KBR's known "misdeeds" in Iraq, including providing troops with untreated, untested water from the Euphrates and delivering ice to troops in a truck that showed signs of its former use as storage for corpses. The complaint concluded, "The myriad crimes and wrongdoings discussed above simply could not have happened if Defendants were doing their jobs. As officers and directors of the Companies, the Defendants were required to ensure that the Companies' internal controls were in place, functioning properly, and sufficiently strong to prevent it from committing wrongful or illegal acts."
The Detroit pension fund suit is one of many recent suits against Halliburton and KBR. In November 2008, Joshua Eller, a civilian employee at Balad Air Force base northeast of Baghdad, cited rotten food, contaminated water and ice, and toxic fumes from open burn pits, as contributors to his ongoing depression, nightmares, and gastrointestinal and dermatological conditions. In March 2009, parents of Staff Sergeant Ryan Maseth sued KBR for wrongful death from electrocution in the shower at his Green Zone base. In April 2009, troops, private employees, and families filed nine lawsuits against KBR for compensation for illness and deaths from exposure to toxic fumes from Iraq and Afghanistan burn pits. The suits, which lawyers will be pursuing as a class-action, seek damages "in an amount sufficient to strip defendants of all of the revenue and profits" involved in managing waste for military bases."
But the pension fund suit is the first initiated by shareholders, and the stakes are high. Grant and Eisenhofer is a formidable opponent, ranking first among plaintiff firms in funds recovered for shareholder clients. The firm is currently involved in class action suits against Barclays Bank, Countrywide Financial, UBS, Pfizer,and Merck as well as Tremont Holdings Group Inc, a fund charged with feeding $3 billion of client investments to Bernard Madoff Securities.
Since 2004, in Iraq and Afghanistan, the Pentagon has fed $13 billion taxpayer dollars to U.S. military contractors for "unsupported" costs, and most often the recipient of the questionable payment has been KBR. This according to testimony earlier this month before the Commission on Wartime Contracting in Iraq and Afghanistan by the Pentagon's chief contract auditor, April Stephenson. All in all, KBR owes the government $100 million for overcharges and fraud, and Senators Claire McCaskill (D-Mo.) and Susan Collins (R-Maine) have written to Secretary Gates asking that the Pentagon do more to recover the money. In the meantime, fraud -- and larceny and rape and murder -- not withstanding, KBR remains the largest DoD contractor and one of three companies selected by them to bid on war-zone contracts, under the DoD Logcap (Logistics Civil Augmentation) Program.
What will it take to end the crime-spree of Halliburton, KBR, and their likes? This March, in Hays County, Texas, Iraq veterans who'd seen KBR crimes up close appeared, along with local activists, at the county commissioners meeting where a road-building contract with KBR was to be executed. So informed and persuasive was their testimony of KBR atrocities, fraud, and corruption, that commissioners voted unanimously, in April, to rescind the KBR contract. Now that was a class act, a rousing opener for this month's class action from Detroit.