DOJ Intervenes in Lawsuit Alleging Freight Forwarder Kickbacks
The Justice Department has issued a press release announcing it has intervened in a whistleblower lawsuit1 against Kellogg Brown & Root (KBR), Panalpina Inc. and others which alleges that employees of two freight forwarders doing business with the companies provided unlawful kickbacks to KBR transportation department employees.
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(KBR is the prime contractor under the Logistics Civil Augmentation Program (LOGCAP III) contract for logistical support of U.S. military operations in Iraq.)
U.S. Alleges Freight Forwarders Provided Kickbacks of Meals, Tickets, Etc
The DOJ is pursuing allegations that the two freight forwarders, Eagle Global Logistics (EGL, which has since merged with TNT Logistics and become CEVA) and Panalpina provided unlawful kickbacks in the form of meals, drinks, tickets to sports events and golf outings to KBR employees.
Government Will Seek Damages and Penalties
The government will seek damages and penalties under the False Claims Act and common law, as well as penalties under the Anti-Kickback Act.
(The U.S. previously intervened in and settled the relators’ allegations2 that EGL included non-existent charges for war risk insurance in invoices to KBR for air shipments to Iraq, costs that KBR passed on to the army; that EGL’s local agent in Kuwait, a company known as Al-Rashed, overcharged it for the rental (or demurrage) of shipping containers; and that EGL provided kickbacks to employees in KBR’s transportation department. The U.S. has declined to intervene in the remaining allegations of the relators’ suit.)
Case is Part of National Procurement Fraud Initiative
According to DOJ, this case is being prosecuted as part of a National Procurement Fraud Initiative. In October 2006, the Deputy Attorney General announced the formation of a National Procurement Fraud Task Force designed to promote the early detection, identification, prevention and prosecution of procurement fraud associated with the increase in government contracting activity for national security and other government programs.
1The lawsuit was filed in U.S. District Court for the Eastern District of Texas under the qui tam or whistleblower provisions of the False Claims Act by David Vavra and Jerry Hyatt who have been active in the air cargo business--the industry relevant to the case. The case is United States of America ex rel. Vavra, et al. v. Kellogg Brown & Root, Inc., et al., C.A. No. 1:04-CV-00042 (E.D. Tex.).
2Under the qui tam or whistleblower provisions of the False Claims Act, a private citizen, known as a "relator," can sue on behalf of the U.S. If the suit is successful, the relator may share in the recovery.
[See ITT’s Online Archives or 11/13/07 and 04/10/01 news, (Ref: 07111399) #1 and (Ref: 01040963), for BP summaries of an EU forwarder investigation involving Panalpina and FMC settlement w. Panalpina to settle certain Shipping Act violations.]
DOJ press release (dated 05/05/10) available at http://www.justice.gov/opa/pr/2010/May/10-civ-529.html