The Justice Department has dramatically increased its use of a powerful administrative subpoena in False Claims Act investigations, Assistant Attorney General Tony West of the Civil Division said Thursday.

Tony West (Andrew Ramonas/Main Justice)

Speaking at an American Bar Association conference in Washington on consumer protection, West said the DOJ issued six times more civil investigative demands last year than it had before the implementation of the 2009 Fraud Enforcement and Recovery Act amendments to the False Claims Act. The new law allowed the Attorney General to delegate his authority to demand documents, depositions and interrogatories in False Claims Act investigations.

Since early last year, West and U.S. Attorneys have been able to approve civil investigative demands, increasing their use. The DOJ can use the administrative subpoena prior to filing a complaint or until it joins a qui tam action, a lawsuit filed by the public on behalf of the federal government. This allows the DOJ to demand documents, depositions and interrogatories from a potential defendant before it can carry out its own discovery.

“I think obviously there needs to be appropriate use of the CID because it is a powerful investigative tool,” West said. “But I do believe it ought to be used.”

The federal government picked up $3 billion in fiscal 2010 from settlements of False Claims Act cases. The DOJ only recovered more civil fraud claims in 2006, when $3.2 billion was recovered.

A small southern Florida firm is set to rake in $88.4 million as a reward for blowing the whistle in False Claims Act cases settled last week against several pharmaceutical companies, the Florida Keys Keynoter reported.

Ven-A-Care of the Florida Keys Inc. is set to collect the biggest payment in its history for exposing alleged schemes by Abbott Laboratories Inc., B. Braun Medical Inc., Roxane Laboratories Inc. and their affiliated business entities to inflate the prices of drugs purchased by federal health care programs. The pharmaceutical companies will pay $421 million in total to settle the lawsuits.

U.S. Attorney Wifredo Ferrer of the Southern District commended Ven-A-Care, calling the company “an alert South Florida whistleblower,” according to the newspaper. A representative of the firm didn’t immediately respond to a request for comment from Main Justice.

Ven-A-Care started out in 1987 a pharmacy serving home-bound AIDS patients. It later found a lucrative niche shining light on drug companies that defraud Medicaid and Medicare. Its first big payday – $40 million – came in 2000, when it exposed a competitor for paying kickbacks to doctors and inflating prices charged to the government programs.

Taxpayers Against Fraud, a nonprofit organization that promotes use of the False Claims Act, called Ven-A-Care its Whistleblower of the Year in 2006.

“The truth is, these guys should win it every year,” Taxpayers Against Fraud spokesman Patrick Burns told the Keynoter in 2009. “What they have done is truly inspirational. They have changed the way the health-care industry does business, and prevented billions and billions of fraud against the Medicare and Medicaid programs that we all pay for.”

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FOR IMMEDIATE RELEASE CIV
TUESDAY, DECEMBER 7, 2010
WWW.JUSTICE.GOV TDD

REMARKS AS PREPARED FOR DELIVERY BY ASSISTANT ATTORNEY GENERAL TONY WEST AT PRESS CONFERENCE ANNOUNCING MAJOR SETTLEMENTS WITH PHARMACEUTICAL MANUFACTURERS

WASHINGTON, D.C.

Good morning and welcome. My name is Tony West, and I’m the Assistant Attorney General for the Civil Division of the Department of Justice. In that capacity I oversee much of the federal government’s civil litigation across the country. I am pleased this morning to be joined by three great colleagues and friends: Carmen Ortiz, the United States Attorney for the District of Massachusetts; Wifredo Ferrer, the United States Attorney for the Southern District of Florida; and Dan Levinson, the Inspector General of the Department of Health and Human Services.

Over the last two years, the Justice Department—in close collaboration with the Department of Health and Human Services—has made cracking down on health care fraud a top priority. Today, we announce the latest results of those efforts. We have reached significant settlements with three drug companies—Abbott Laboratories, Inc.; Roxane Laboratories, Inc.; and B. Braun Medical, Inc.—settlements that will collectively return more than $421 million to the Medicare and Medicaid programs. These settlements stem from lawsuits in which we’ve alleged that these companies engaged in a complicated and complex scheme to market their drugs through an unlawful pricing arrangement that amounted to kickbacks funded by taxpayer dollars.

Now before my colleagues and I describe the details of this elaborate scheme, let me note that these cases are the latest in a string of settlements, judgments, convictions and fines that are part of Attorney General Eric Holder’s aggressive effort to combat fraud in all its forms over the last two years. In fact, I’m pleased to announce, that since January 2009, the Civil Division, working closely with our U.S. Attorney partners around the country, has recovered more money lost to fraud than ever before—over $9 billion in civil and criminal cases involving fraud on American taxpayers and consumers; a staggering and unprecedented amount that represents the largest two-year fraud recovery in the Department’s history.

The cases that make up that record-breaking amount cover the full spectrum of Civil Division fraud cases: from the financial fraud cases like mortgage fraud that victimize homeowners who are already struggling to hold on to their homes; to procurement fraud cases involving substandard provisions supplied to our troops in Iraq and Afghanistan; to the investor fraud scams involving fake business opportunities that cheat honest small businesspeople out of their hard-earned investments. Together, these cases represent an aggressive, coordinated and sustained effort at the federal level to hold perpetrators of fraud accountable, be they large companies or individuals –and over the last two years we have done just that.

Over half of that record-breaking sum—more than $5 billion—is comprised of health care fraud cases like the settlements against Abbott, Roxane and B. Braun we are announcing today.

These three cases involve something called the AWP, or “Average Wholesale Price.” That’s the price companies report to published national pricing lists as the price of their drugs. The government uses these same price lists to pay health care providers who purchased those drugs for their Medicare and Medicaid patients.

Now this was the honor system: companies were supposed to report the Average Wholesale Price they were actually charging for their drugs, but in fact, we allege, that’s not what they did. Instead, the AWP reported by these defendants—the same prices used by the government to pay providers—were greatly inflated. This allowed drug companies to create an incentive for the purchase of their drugs, since buyers could pay the drug companies one price and obtain government payment at an inflated price and pocket the difference—essentially a kickback scheme funded by taxpayer dollars. Not only did this practice cost our public healthcare programs millions of dollars, it also threatened to undermine the integrity of the choices health care providers made for their patients.

In fact, this practice within the pharmaceutical industry was widespread—so much so that instead of Average Wholesale Price, “AWP,” it was jokingly said, really stood for: “Ain’t What’s Paid.” Indeed, the only purchasers who paid the inflated, reported drug price were you, the American taxpayers.

Now, this was a very complicated and hard-fought case that required years of tireless, persistent and dedicated work by our lawyers, paralegals and investigators here in the Civil Division, in the U.S. Attorneys Offices for Massachusetts and the Southern District of Florida and in the HHS Office of Inspector General, especially over the last three years. Without them, this important victory for our public healthcare programs would not have occurred. It’s a reminder of the high commitment to public service our federal civil servants embody.

The Justice Department Civil Division chief on Monday announced one of the highest annual civil fraud claims recoveries, touting the Barack Obama administration’s dedicated pursuit of swindlers.

Assistant Attorney General Tony West of the Civil Division told reporters at DOJ headquarters that the federal government recovered $3 billion in fiscal 2010 from settlements of False Claims Act cases. The DOJ only picked up more civil fraud claims in 2006, when $3.2 billion was recovered.

He said the Obama administration’s dedication to combating fraud in the health care industry and in federal programs was instrumental in bringing one of the largest annual civil fraud recoveries in U.S. history.

“Resolving cases requires individuals to engage in negotiation and to do so with the intent of holding people accountable so cases can be resolved and settled in a whole number of ways,” West said. “I think the fact that we’ve been successful in settling these cases for record amounts, resolving these cases for record amounts as well as opening more investigations, more cases in the last two years than we have previously shows this administration’s commitment to not only health care fraud, but fraud more generally.”

Attorney General Eric Holder and the other top DOJ leaders have made efforts to root out swindlers — especially fraudsters in the health care industry — a top priority. The DOJ brought in its largest annual health care recovery in U.S. history during fiscal 2010, securing $2.5 billion in health care fraud settlements.

In May 2009, Holder and Health and Human Services Secretary Kathleen Sebelius launched the Health Care Fraud Prevention and Enforcement Action Team to improve cooperation between the Department of Health and Human Service and the DOJ on criminal and civil enforcement matters.

The DOJ resolved high-profile cases in fiscal 2010 against AstraZeneca and Pfizer Inc., which were accused of promoting the drugs they manufactured for off-label purposes.

AstraZeneca paid the federal government $302 million to resolve the claims against it. Pfizer paid $669 million. But Pfizer had to pay a total of $2.3 billion in fines, damages and forfeitures, making the agreement the largest health care settlement in U.S. history.

“I think our results both in the cases that we’ve resolved and the investigations that we’ve opened and the cases that we’ve brought indicate that we’re making good on that promise,” West said about DOJ’s focus on fighting fraud, especially in the health care industry.

West also noted DOJ efforts to settle claims of payment schemes involving government procurement contracts for the production of bullet-proof vests for law enforcement officials. In fiscal 2010, the DOJ secured a total of $11.74 million in settlements with manufacturers Lincoln Fabrics Ltd., Lincoln Textiles Inc and Aramark Company LLC.

Sen. Charles Grassley (R-Iowa), who wrote legislation that bolstered the False Claims Act over the decades, applauded the fiscal 2010 recovery. He said his work on the False Claims Act has helped protect taxpayers and empower whistleblowers.

“This law is the most powerful tool in rooting out fraud against the federal treasury,” Grassley said. “Not only does the law help recover billions of taxpayer dollars, but it also deters untold more.”

The manufacturer of Botox agreed to plead guilty in a False Claims Act case, in which the pharmaceutical company, Allergan Inc., was accused of unlawfully promoting the anti-wrinkle drug, the head of the Justice Department Civil Division announced Wednesday.

Allergan will pay $600 million in fines and forfeiture as part of the plea agreement, with $37.8 million going to the five whistleblowers in the case.

Assistant Attorney General Tony West of the Civil Division said Allergan illegally marketed Botox for applications that were not endorsed by the Food and Drug Administration, including treatments for headaches, pain, juvenile cerebral palsy and spasticity. He said the company also gave kickbacks to doctors to encourage them to use the drug for off-label purposes, in addition to showing them how to miscode Botox for billing claims.

U.S. Attorney Sally Yates looks on as Assistant Attorney General Tony West announces the Allergan Inc. settlement. (photo by Andrew Ramonas / Main Justice)

West said the actions of Allergan aren’t “victimless crimes.”

“When our public health care programs are burdened with fraudulent charges, it drives the cost of health care up for all of us – consumers  pay more in premiums; companies pay more to cover their employees,” West said at a news conference at DOJ headquarters. “And when a pharmaceutical manufacturer violates the integrity of the drug- approval process established by Congress and the FDA by paying kickbacks to encourage the off-label use of an unapproved drug, that not only undermines the judgments of health care professionals, but also threatens to put patients’ health and safety at risk.”

U.S. Attorney Sally Yates of the Northern District of Georgia, whose office assisted with the case, said the Justice Department is committed to ensuring that prescription drugs are safe and federal health care funds aren’t wasted.

“With cases like this one, we hope to put an end to the practice known in the pharmaceutical industry as off-label marketing,” Yates said at the news conference.

An ad for HP laptops at a Best Buy store in San Francisco. The company agreed to pay $50 million to settle two lawsuits that it submitted false claims to the U.S. government. (Getty)

Hewlett Packard Co. announced Monday that it had reached a settlement agreement in principle with the U.S. Department of Justice to resolve an investigation into alleged kickbacks paid between HP, Sun Microsystems Inc. and Accenture PLC for government contracts.

The California-based computer manufacturer will pay about $50 million to settle two lawsuits, originally filed in U.S. District Court in Little Rock, Ark., that alleged HP submitted false claims to the U.S. government for technology contracts, Bloomberg News reported Tuesday.

The case dates back to 2004, when two former employees of the consulting giant Accenture, Norman Rille and Neal Roberts, filed whistleblower suits under the False Claims Act. Those suits accused HP, Accenture and Sun, which was acquired by Oracle Corp. in January, of arranging kickback schemes that defrauded the government. The Justice Department joined the lawsuits against HP in 2007.

In a statement, HP said that settlement is subject to the approval of the Justice Department and the courts. The company also said it had agreed to the settlement without any admission of wrongdoing.

The Justice Department declined to comment to the Associated Press.

HP is also under investigation for potential violations of the Foreign Corrupt Practices Act. In April, The U.S. Justice Department and the Securities and Exchange Commission joined a widening German and Russian probe into potential bribes paid by HP executives to officials in the Russian government.

EMC Corp. paid the the U.S. $87.5 million to settle a lawsuit alleging that the information technology company lied to the General Services Administration and paid kickbacks to consulting companies that pushed its product, the Justice Department said.

The company allegedly misrepresented its pricing practices to secure more lucrative contracts with the GSA in violation of the False Claims Act. The department also alleged the company broke the federal anti-kickback law by giving consulting companies sweeteners each time they recommended an EMC product to the government.

The lawsuit against the Hopkinton, Mass.-based company was initially filed in the Eastern District of Arkansas but was transferred to the Eastern District of Virginia.

The Justice Department news release on the settlement is below.

MASSACHUSETTS-BASED EMC CORPORATION PAYS U.S. $87.5 MILLION TO SETTLE FALSE CLAIMS ACT CASE

Also is Alleged to Have Violated Federal Anti-Kickback Act

WASHINGTON – EMC Corporation has paid the United States $87.5 million to settle a lawsuit alleging that the information technology company violated the False Claims Act and the federal Anti-kickback Act, the Justice Department announced today.

The United States alleged that, by misrepresenting its commercial pricing practices, EMC  fraudulently induced the General Services Administration (GSA) to enter into a contract with prices that were higher than they would have been had the information technology company not made false misrepresentations.  Specifically, the United States alleged that the Hopkinton, Mass.-based company represented during contract negotiations that, for each government order under the contract, EMC would conduct a price comparison to ensure that the government received the lowest price provided to any of the company’s commercial customers making a comparable purchase.  According to the government’s complaint, EMC knew that it was not capable of conducting such a comparison, and so EMC’s representations during the negotiations – as well as its subsequent representations to GSA that it was conducting the comparisons – were false or fraudulent.

The United States also alleged that EMC engaged in an illegal kickback scheme designed to influence the government to purchase the company’s products.  EMC maintained agreements whereby it paid consulting companies fees each time the companies recommended that a government agency purchase an EMC product.  These kickback allegations are part of a larger investigation of government technology vendors that has resulted in settlements to date with three other companies, with several other investigations and actions still pending.  The kickback investigation was initiated by a lawsuit filed under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private citizens to sue for fraud on behalf of the United States and share in any recovery.

“Misrepresentations during contract negotiations and the payment of kickbacks or illegal inducements undermine the integrity of the government procurement process,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “The Justice Department is acting to ensure that government purchasers of commercial products can be assured that they are getting the prices they are entitled to.”

The lawsuit, initially filed in the Eastern District of Arkansas, was transferred to the U.S. District Court for the Eastern District of Virginia where it is captioned United States of America ex rel. Rille and Roberts v. EMC Corporation, Civil Action 1:09-cv-00628 (E.D. Va.).

“Companies should not keep charging higher prices to the Government when costs go down.  The American taxpayers deserve a better deal,” said GSA Inspector General Brian D. Miller.  “This case is another demonstration of the value of OIG audits.”

The case was handled by the Justice Department’s Civil Division and the U.S. Attorney for the Eastern District of Virginia, with the assistance of the General Services Administration Office of the Inspector General, the Department of Energy Office of the Inspector General, the U.S. Postal Service Office of the Inspector General, the Defense Criminal Investigative Service, and the Treasury Department’s Inspector General for Tax Administration.

The Health Alliance of Greater Cincinnati and one of its former member hospitals agreed a $108 million civil settlement with the Justice Department Friday to resolve claims that they violated the Anti-Kickback Statute and the False Claims Act, according to a DOJ news release.

The health alliance is accused of allegedly engaging in a pay-to-play scheme in which it made unlawful payments to doctors in exchange for referring cardiac patients to The Christ Hospital.

Laurence Freedman, a partner at Patton Boggs LLP, said the settlement was representative of a new DOJ legal theory concerning the Anti-Kickback Statute.

“This is the first DOJ litigation alleging that the hospital’s method of scheduling essential services — cardiology testing here — can violate the Anti-Kickback Statute,” said Freedman, who represented the health alliance until May 2009.

According to the release, the allegations emerged in a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act, which allows citizens to file lawsuits alleging fraud on behalf of the government. The whistleblower, Dr. Harry Fry, a cardiologist who formerly worked at The Christ Hospital, will receive $23.5 million under the settlement.

“The False Claims Act is a valuable tool in deterring fraud, waste, and abuse in government,” said William E. Hunt, the acting U.S. Attorney for the Southern District of Ohio for this case.“The law was put to good use in this case as the government was able to recover from those who sought to gain financially by jeopardizing the integrity of the health care system.”

Representatives of the The Christ Hospital said in a news release that it had agreed to the settlement to avoid the risk of a larger award that was sought by the government.

“While The Christ Hospital continues to disagree with the government’s allegations that the assignment of physicians to our cardiac testing station resulted in the inducement of local cardiologists to refer patients to the hospital, we decided to contribute to the joint settlement agreement with the Health Alliance of Greater Cincinnati instead of risking a potential catastrophic judgment that could jeopardize our ability to provide service to this community,” said Susan Croushore, President and CEO of the hospital.

According to the DOJ release, the settlement is part of the government’s emphasis on combating health care fraud, an initiative which has increasing relied on the False Claims Act to prosecute fraudsters.

Freedman, who previously was an assistant director in the DOJ’s Civil Fraud Section, said the government’s aggressive approach in this case could threaten the viability of hospitals and hospital systems.

“DOJ pursued a no-holds barred damages approach, seeking hundreds of millions of dollars in damages — and billions in mandatory penalties — against a non-profit hospital,” Freedman said.

The full release is below:

THE HEALTH ALLIANCE OF GREATER CINCINNATI AND THE CHRIST HOSPITAL TO PAY $108 MILLION FOR VIOLATING ANTI-KICKBACK STATUTE AND DEFRAUDING MEDICARE AND MEDICAID

WASHINGTON – The Health Alliance of Greater Cincinnati and one of its former member hospitals, The Christ Hospital, have agreed to pay the United States $108 million to settle claims that they violated the Anti-Kickback Statute and the False Claims Act by paying unlawful remuneration to doctors in exchange for referring cardiac patients to The Christ Hospital in a pay-to-play scheme, the Justice Department announced today.

The United States alleged that The Christ Hospital, a 555-bed acute care hospital located in Mount Auburn, Ohio, limited the opportunity to work at the Heart Station – an outpatient cardiology testing unit that provides non-invasive heart procedures – to those cardiologists who referred cardiac business to The Christ Hospital. The government further alleged that cardiologists whose referrals contributed at least two percent of the hospital’s yearly gross revenues were rewarded with a corresponding percentage of time at the Heart Station, where they had the opportunity to generate additional income by billing for the patients they treated at the unit and for any follow-up procedures that these patients required.

The government asserted that The Christ Hospital’s use of Heart Station panel time to induce lucrative cardiac referrals violated the federal Anti-Kickback Statute, which prohibits a hospital from offering or paying, or a physician from soliciting or receiving, anything of value in return for patient referrals. The United States also alleged that the claims The Christ Hospital submitted to Medicare and Medicaid as a result of this illegal kickback scheme constituted a violation of the False Claims Act.

“Health care providers should make medical decisions based on the needs of their patients, not on the financial interests of physicians or other providers,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “We will not allow hospitals to put profits ahead of sound medical decision-making.”

The allegations resolved by today’s settlement were initiated by a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act, which allow private parties to file actions on behalf of the United States and share in any recovery. The whistleblower in this suit, Dr. Harry Fry, a cardiologist who formerly worked at The Christ Hospital, will receive $23.5 million.

“The False Claims Act is a valuable tool in deterring fraud, waste, and abuse in government,” stated Acting U.S. Attorney for this case William E. Hunt.“The law was put to good use in this case as the government was able to recover from those who sought to gain financially by jeopardizing the integrity of the health care system.”

Assistant Attorney General West noted that this settlement was the result of a coordinated effort among the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Southern District of Ohio, the Office of the Inspector General of the U.S. Department of Health and Human Services, the Center for Medicare and Medicaid Services, and the FBI.

In joining today’s announcement, Daniel R. Levinson, Inspector General of the Department of Health and Human Services Office of Inspector General stated, “kickbacks can distort clinical decisions, cause overutilization, increase costs, and threaten the quality of care provided to beneficiaries. The OIG, and its law enforcement partners, are committed to protecting the integrity of our federal health care programs and the health and welfare of the beneficiaries of those programs.”

Because The Christ Hospital declined to enter into a Corporate Integrity Agreement acceptable to the OIG, the OIG did not provide a release of its administrative exclusion authorities and is further evaluating the matter.

This settlement is part of the government’s emphasis on combating health care fraud. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover approximately $2.8 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 have topped $3.7 billion.

People who blew the whistle on drug companies were often motivated by personal integrity, rather than financial gain, and their assistance in False Claims Act investigations took a large personal toll, according to a new study published in The New England Journal of Medicine Thursday.

The study was based on interviews with 26 whistleblowers, all of whom received a share of financial recoveries in cases against pharmaceutical manufactures that settled between 2001 and 2009. Their cuts ranged from $100,000 to $42 million, with a median of $3 million.

In order of most common to least, whistleblowers motivations included integrity, altruism or public safety, justice and self-preservation. The study shatters the popularly held view of whistleblowers living out their lives in opulence after helping the government recover millions in taxpayer dollars. In fact, a majority of those interviewed said the payoff wasn’t worth the personal costs. According to the study:

The settlements helped alleviate some of the financial and nonfinancial costs of the litigation. One relator likened his large settlement to “hitting the lottery” (Relator 5). But a majority perceived their net recovery to be small relative to the time they spent on the case and the disruption and damage to their careers…..One ruefully reported that he “should have taken the bribe” (Relator 7), and another noted that if she “stayed and took stock options” she “would’ve been worth a lot more” (Relator 4).

Some whistleblowers described feeling overwhelmed by their role. They spoke of long hours — and long years — punctuated by stressful situations.

One relator estimated spending “thousands of hours” on the case over its 5-year duration (Relator 17); another spent “probably 30 hours a week” during the first few years. Some meetings took place at Justice Department offices, with relators traveling at their own expense; others occurred unnervingly close to home. One reported that “a typical day could be meeting an FBI agent in a parkway rest stop. Sitting in his car with the windows rolled up. Neither heat nor air conditioning. Getting wired. Running to a meeting. . . . That might happen at 7 for a meeting at 8″ (Relator 16). Another said, “I would have FBI agents show up in the office. I told them, the company people, that they were computer people. Luckily they believed it. . . . That’s amusing now after the fact. But at the time they call you in 5 minutes. They say `We’re coming onto your campus’” (Relator 18).

The co-authors recommended, among other things, pouring more resources in the qui tam investigations to move them along more quickly, strengthening the penalties for violating anti-retaliation provisions and compensating insider whistleblowers more than outsiders.

Phillips & Cohen LLP’s Erika Kelton, who has represented several whistleblowers, including a sales representative in an illegal-marketing case against Pfizer Inc. that settled last year for $1.8 billion, said in a statement that the study tracked closely with her experience.

“People often turn to us after they have been fired or have raised their concerns with management but nothing changes.  Typically, whistleblowers decide to file a ‘qui tam’ lawsuit as a last resort,” she said. “Most are motivated more by exposing wrongdoing and stopping what often are harmful or dangerous practices than by any hope for a reward.”

KBR employees at a manufacturing plant located on British Army base in Camp Bastion in the Helmand Province, Afghanistan. (Getty)

Defense contractor Kellogg Brown & Root Services billed the federal government for unauthorized private security guards in Iraq, the Justice Department alleged in a lawsuit.

The complaint, filed Thursday in federal district court in Washington, said 33 KBR  subcontractors, as well as the company itself, used armed guards from 2003 to 2006 without approval from the Army. The company also failed to ensure that the guards were registered with the Iraqi Ministry of the Interior, as required, the department said.

Justice Department lawyers said in the complaint that the amount of taxpayer dollars lost to the alleged fraud would be determined at trial.

KBR was under contract to provide logistical support for military operations, including food services, transportation, laundry and mail. KBR and its subcontractors were required to use military protection, according to the complaint.

In addition to allegedly submitting bills with “impermissible costs” in violation of the False Claims Act, KBR is accused of flouting subcontract terms requiring travel only in military convoys, the department said.

KBR managers had expressed concerns that the Army would disallow costs for the private security contractors, but nonetheless charged the federal government for the unauthorized services, the complaint said. The company hired contractors Triple Canopy, Omega Risk Solutions, and Al Dhahir to provide security. KBR also used four of its own employees as armed security for company executives, the complaint said.

“Defense contractors cannot ignore their contractual obligations to the military and pass along improper charges to the United States,” said Tony West, Assistant Attorney General for the Civil Division, in a statement.

UPDATED:

In statement, the company strongly denied any violations of the law, noting that it filed claims of its own against the Army in 2008 to recover funds expended on security costs. The dispute is pending before the Armed Services Board of Contract Appeals.

“The Army breached the contract by repeatedly failing to provide the necessary force protection and, in fact, frequently left KBR, its employees and its subcontractors unprotected,” KBR said in the statement. “The absence of security provided by the U.S. Army made it more difficult and costly for KBR to fulfill its obligations.”

The complaint is embedded below.

Filed Complaint