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U.S. says KBR boosted cost of trailers for troops in Iraq

By Nate Raymond

(Reuters) - The U.S. Justice Department said on Monday that it had sued KBR Inc, accusing the company and a Kuwaiti subcontractor of improperly charging the federal government for the costs of delivering and installing trailers for troops in Iraq.

The filing of the lawsuit came days after the Justice Department dropped a similar but unrelated case over KBR's costs for private armed security in Iraq.

Filed in the U.S. District Court in Rock Island, Illinois, the latest lawsuit alleges that KBR-hired subcontractor First Kuwaiti Trading Co inflated its crane, truck and driver costs and misrepresented delays on the installation of more than 2,250 trailers.

KBR provided many services to the U.S. government under a logistical support contract through subcontractors like First Kuwaiti.

First Kuwaiti's subcontract, awarded in 2003, had been for $80 million. The government said KBR later agreed to pay First Kuwaiti an extra $48.8 million after the subcontractor in 2004 submitted two claims contending government-caused delays in providing military escorts entitled it to extra money.

The lawsuit said KBR charged the government for the inflated costs despite knowing they were false. KBR knew First Kuwaiti "could not be trusted," the lawsuit said.

The complaint also said KBR quality assurance personnel had recommended permanently disqualifying First Kuwaiti from receiving any contracts for providing the army trailers two months before the subcontract was awarded.

In July 2004, a KBR representative said claims by First Kuwaiti's founder under other subcontracts "absolute highway robbery," the complaint said.

"The facts alleged in the complaint indicate that KBR and First Kuwaiti did not provide an honest accounting," said Jim Lewis, U.S. Attorney for the Central District of Illinois.

KBR said in a statement it had not seen the latest complaint, but that it believed the government's claims are "baseless and without merit."

"KBR has faithfully supported American troops in Iraq and has performed its work in support of the army with professionalism and in full compliance with its contract and the law," it said.

First Kuwaiti, based in Kuwait City, Kuwait, also goes by First Kuwaiti General Trading & Contracting Co, according to the complaint. A website for the company says it was founded in 1996 by businessman Wadih Al-Absi and employs more than 600 engineers and 15,000 staff members.

Rock Island was the location of an earlier criminal lawsuit against a former KBR employee, Anthony Martin, who pleaded guilty in July 2007 to participating in a kick-back scheme.

Monday's complaint refers to Martin's case and said that the kickback scheme was with Al-Absi. Martin received $10,000 and was promised another $190,000 to award First Kuwaiti subcontracts for trucks and trailers, the lawsuit said.

A representative for First Kuwaiti did not respond to an email seeking comment. A lawyer for Martin did not respond to a call and an email seeking comment.

Monday's lawsuit came after KBR last week welcomed the dismissal of an earlier lawsuit filed in U.S. District Court in Washington by the Justice Department in 2010.

The government gave no reason for dropping that case. It did so without prejudice, giving it the ability to refile the case at a later date.

Both lawsuits were under the False Claims Act, which allows the United States to recoup funds when companies overbill the government.

The statute allows the government to sue for three times its damages and assess civil penalties of $5,500 to $11,000 per false claim.

(Reporting by Nate Raymond; Editing by Dan Grebler, Tim Dobbyn and Michael Perry)

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