Iraq/Overseas Defense Contracting Fraud

U.S. military involvement in Iraq began in 2003 and has been the source of national controversy ever since. After the initial bombing campaign, the U.S. military began an extensive reconstruction plan to build Iraq’s infrastructure to provide services to its citizens. The U.S. government relies upon private civilian contracting firms to rebuild infrastructure and to provide goods and services in Iraq. Unfortunately, the Office of the Special Inspector General for Iraq Reconstruction revealed that billions of dollars in taxpayer money meant for Iraq reconstruction projects have been wasted through fraud committed by both contractors in Iraq and in the United States.

Misconduct may Include the Following:

  • Failing to perform contract specifications, while making no effort to revise the contract or payments
  • Double-billing for goods and services; inflating or overcharging for goods or services
  • Charging for goods never delivered or services never performed
  • Charging for services performed by untrained or unqualified contractors
  • Agreeing with conspirators to rig the bidding process

Prosecutors have faced a number of problems in the prosecution of qui tam actions against Iraq contractors. The FCA requires that false claims be submitted to the government and that a claim must result in some economic loss to the government. Reconstruction projects in Iraq were funded with money from four sources: funds appropriated from Congress for the general revenues of the United States, Iraqi funds confiscated by presidential order and given to the Department of the Treasury, Iraqi state assets seized by Coalition Forces in Iraq, and funds from the Development Fund for Iraq. Courts have held that Development Fund money was not controlled by the United States, and therefore any fraudulent payments made from that fund did not result in a loss to the U.S. government. Secondly, courts have held that claims made to the Coalition Provisional Authority were not claims presented to the U.S. government and could not form the basis for a False Claims Act.

Despite these difficulties, the Department of Justice has continued to pursue FCA claims against contractors who performed work in Iraq.


Eagle Global Logistics, hired by Halliburton subsidiary Kellogg, Brown & Root, allegedly overbilled the U.S. government for military cargo shipments in Iraq. The company was accused of adding a “war risk surcharge” to shipments received from Dubai and the United Arab Emirates between 2003 and 2004. To settle the claims, Kellogg, Brown & Root paid the government over $4 million in damages, with two whistleblowers receiving $800,000 each as a result.

In early 2014, the DOJ filed suit against Kellogg, Brown & Root for taking kickbacks from two subcontractors and filing false reimbursement claims with the government. The government alleges that KBR submitted claims for reimbursement for services that were “grossly deficient or not provided,” the DOJ said. Specifically, the government contends that KBR inflated the value of fuel tankers and that a KBR employee took a $1 million kickback from a subcontractor. In addition, KBR allegedly continuous making monthly lease payments for trucks that it had already returned to a subcontractor, and then sought government reimbursement. Finally, the government alleges that KBR used refrigerated trailers to transport ice for consumption by U.S. troops that had been previously used in morgues. The case is currently pending.

Whistleblower Attorneys Blog - Defense Industry Fraud

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