United States of America,ex rel Bud Conyers v Halliburton Company et al

Filing 346

MEMORANDUM OPINION AND ORDER granting in part and denying in part 336 KBR's MOTION for Summary Judgment and granting in part and denying in part 337 Government's MOTION for Partial Summary Judgment. 1. The Court grants summary judg ment to the Government on Count I and on Counts II and III, as to Subcontracts 167, 190, and Change Order 1 to Subcontract 167;2. The Court grants summary judgment to KBR on Counts II and III, as to Subcontracts 11 and 39; on Counts IV and V, as to S ubcontracts 167, 190, and Change Order 1 to 167, but denies summary judgment on Counts IV and V, as to Subcontracts 11 and 39; and3. The Court grants summary judgment to KBR on Count VI; and4. The Court grants summary judgment to KBR on Count VII, as to Subcontracts 167, 190, 39, and Change Order 1 to Subcontract 167, but denies summary judgment on Subcontract 11.(Signed by Judge Kenneth M Hoyt) Parties notified.(chorace)

Case 4:06-cv-04024 Document 346 Filed on 03/25/21 in TXSD Page 1 of 35
United States District Court
Southern District of Texas

ENTERED
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
UNITED STATES OF AMERICA
and
BUD CONYERS,
Plaintiffs,
VS.
HALLIBURTON COMPANY
and
KELLOGG BROWN & ROOT INC.
and
KELLOGG BROWN & ROOT SERVICES
INC., et al,
Defendants.

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March 25, 2021
Nathan Ochsner, Clerk

CIVIL ACTION NO. 4:06-CV-04024

MEMORANDUM OPINION AND ORDER
I.

INTRODUCTION
On January 8, 2014, the United States government (the “Government”) intervened in this

lawsuit and filed a complaint against Kellogg Brown & Root, and its affiliates (collectively,
“KBR”), and two foreign subcontractors.1 The foreign subcontractor defendants, Kuwaiti
corporations First Kuwaiti Trading & Contracting, WLL and La Nouvelle General Trading and
Contracting Co., have since been dismissed from this suit. The Government’s complaint alleges
that KBR and its former co-defendants committed varied acts of fraud and misconduct in the
execution of an Army contract to provide logistical support services to the Army in Iraq between
2002 and 2005.

1

Former relator-plaintiff Bud Conyers, previously a KBR employee, first brought this action on
December 20, 2006 as a qui tam suit under the federal False Claims Act against KBR and the two
subcontractors. Conyers passed away in 2018. On July 18, 2018, David Conyers, Bud Conyers’ son and
the representative of his estate, was substituted for Bud Conyers in this case.

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Pending before the Court is KBR’s motion for summary judgment (Dkt. 336) and the
Government’s motion for partial summary judgment (Dkt. 337-1). KBR and the Government
have both timely filed responses and replies to each other’s respective motions. After having
carefully considered the parties’ motions, responses, replies, the record, and the applicable law,
the Court determines that KBR’s motion for summary judgment should be GRANTED IN PART
and DENIED IN PART. Likewise, the Government’s motion for partial summary judgment
should be GRANTED IN PART and DENIED IN PART.
II.

FACTUAL BACKGROUND
On December 14, 2001, the United States Department of the Army (the Army) entered

into contract No. DAAA09-02-D-0007 with Brown & Root Services, then a division of Kellogg
Brown & Root, Inc., pursuant to the federal Logistics Civil Augmentation Program (the
“LOGCAP III” contract). On July 1, 2003, Kellogg Brown & Root Services, Inc. (“KBRSI”)
became the successor-in-interest to the LOGCAP III contract.2 (For purposes of this opinion, the
Court will refer to the Kellogg Brown & Root entities collectively as “KBR”). Under LOGCAP
III, KBR would provide logistical support services for the Army’s operations in Iraq. LOGCAP
III was an “umbrella” contract under which the Government would execute individual Task
Orders prescribing a particular scope of work (SOW) for the procurement of goods or services.
The Task Orders at issue in this case had a “cost-plus-award-fee” structure, meaning that, in
addition to being reimbursed for its costs, KBR would earn a one percent “base fee” and could
earn up to a two percent performance-based “award fee.” Each fee was calculated as a
percentage of the Task Order’s final “negotiated estimated costs” agreed upon by the Army and
KBR.
2

However, Kellogg Brown & Root, Inc. remained identified as “payee” on reimbursement vouchers
submitted to the Government as late as September 17, 2005.

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KBR sought payment from the Army by submitting to the Defense Contract Audit
Agency (DCAA) invoices called “public vouchers.” A separate agency, the Defense Contract
Management Agency (DCMA), was also involved in administering LOGCAP III. KBR’s
vouchers included the applicable Task Order number, the amount being billed, the date(s) that
the goods or services were delivered, and line-item summaries that typically indicated the
subcontractor that performed the job. The Government’s allegations in this case concern
vouchers submitted by KBR for services performed under LOGCAP III between 2002 and 2004.
KBR performed these services under three Task Orders issued by the Army. Task Order
43 required KBR to transport goods and supplies to U.S. troops throughout the war theater and,
specifically, to provide refrigerated transportation of items such as food, ice, and medicine. Task
Order 36 tasked KBR with providing tankers that would deliver and store diesel fuel at a military
airport near Kuwait. Task Order 27 required KBR to construct and maintain Camp Arifjan, a
facility in Kuwait that was to be used as a staging ground for Army personnel. KBR entered into
subcontracts with local firms in order to complete these Task Orders. The allegations of
misconduct by KBR’s employees in connection with the subcontracting process, as detailed
below, serve as the basis for the Government’s lawsuit. The parties have filed competing
summary judgment motions on the issues of liability only.
III.

THE PARTIES’ CONTENTIONS
In Count I, the Government alleges that KBR, acting through one of its employees,

violated former section 53 (now section 8706(a)(2))3 of the federal Anti-Kickback Act (AKA) by
including kickback fees in the contract price that KBR charged the Government for the costs of
3

Prior to 2011, the AKA was codified at 41 U.S.C. §§ 51–58. Congress re-codified the AKA without
substantive change, at 41 U.S.C. §§ 8701–07. See Public Contracts—Enact Certain Laws, Pub.L. No.
111–350, § 3, 124 Stat. 3677, 3838–41 (2011). This opinion will refer to the re-codified statutory sections
of the Act.

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Subcontracts 167 and 190. In its dueling motion, KBR contends that the AKA claims are barred
by the statute of limitations or, alternatively, that KBR’s employee lacked the requisite scienter
for the Government to establish a violation of the statute.
Both parties also move for summary judgment as to Counts II and III, which implicate
Subcontracts 167, 190, 39, and Change Order 1 to Subcontract 167. KBR, but not the
Government, also moves for summary judgment on these two counts as to Subcontract 11. On
Counts II and III, respectively, the Government alleges that KBR violated the federal False
Claims Act (FCA) by (i) knowingly presenting, or causing to be presented to the Government,
false claims for payment or approval; and (ii) knowingly making, using, or causing to be made or
used, false records or statements to get false claims paid or approved by the Government. KBR
asserts that the Government cannot create a fact issue as to three elements of its FCA claims,
and, for Subcontract 39, as to the requirements for a “claim.”
KBR also moves for summary judgment on Counts IV, V, and VI. Counts IV and V
allege that, as to each subcontract at issue, KBR violated the FCA by conspiring with its former
co-defendants to defraud the Government by getting a false claim paid. Id. As to Count VI, the
Government’s common law fraud claim, KBR asserts arguments similar to those made against
the FCA claims, along with an argument that such a claim is time-barred.
Finally, the parties present cross summary judgment motions on Count VII, the
Government’s claim that KBR breached the LOGCAP III contract by claiming costs that were
not allowable under the contract’s terms. KBR responds that the Court lacks jurisdiction over the
contract claim and, alternatively, that the Government cannot establish that the costs KBR
submitted for Subcontracts 11, 39, 167, and 190 were unreasonable.
IV.

APPLICABLE LAW
a.

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Summary Judgment Standard

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Rule 56 of the Federal Rules of Civil Procedure authorizes summary judgment against a
party who fails to make a sufficient showing of the existence of an element essential to the
party’s case and on which that party bears the burden at trial. See Celotex Corp. v. Catrett, 477
U.S. 317, 322 (1986); Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc).
The movant bears the initial burden of “informing the Court of the basis of its motion” and
identifying those portions of the record “which it believes demonstrate the absence of a genuine
issue of material fact.” Celotex, 477 U.S. at 323; see also Martinez v. Schlumber, Ltd., 338 F.3d
407, 411 (5th Cir. 2003). Summary judgment is appropriate where “the pleadings, the discovery
and disclosure materials on file, and any affidavits show that there is no genuine issue as to any
material fact and that the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(c).
“If the dispositive issue is one on which the nonmoving party will bear the burden of
proof at trial, the moving party may satisfy its burden by merely pointing out that the evidence in
the record contains insufficient proof concerning an essential element of the nonmoving party’s
claim.” Norwegian Bulk Transport A/S v. International Marine Terminals Partnership, 520 F.3d
409, 412 (5th Cir. 2008). If the movant meets its burden, the burden shifts to the nonmovant to
“go beyond the pleadings and designate specific facts showing that there is a genuine issue for
trial.” Stults v. Conoco, Inc., 76 F.3d 651, 656 (5th Cir. 1996) (citing Tubacex, Inc. v. M/V Risan,
45 F.3d 951, 954 (5th Cir. 1995). “To meet this burden, the nonmovant must ‘identify specific
evidence in the record and articulate the ‘precise manner’ in which that evidence support[s] [its]
claim[s].’” Stults, 76 F.3d at 656 (citing Forsyth v. Barr, 19 F.3d 1527, 1537 (5th Cir. 1994),
cert. denied, 513 U.S. 871, 115 S. Ct. 195, 130 L. Ed.2d 127 (1994)). It may not satisfy its
burden “with some metaphysical doubt as to the material facts, by conclusory allegations, by

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unsubstantiated assertions, or by only a scintilla of evidence.” Little, 37 F.3d at 1075 (internal
quotation marks and citations omitted). Instead, it “must set forth specific facts showing the
existence of a ‘genuine’ issue concerning every essential component of its case.” Am. Eagle
Airlines, Inc. v. Air Line Pilots Ass’n, Intern., 343 F.3d 401, 405 (5th Cir. 2003) (citing Morris v.
Covan World Wide Moving, Inc., 144 F.3d 377, 380 (5th Cir. 1998)).
“A fact is material only if its resolution would affect the outcome of the action, . . . and
an issue is genuine only ‘if the evidence is sufficient for a reasonable jury to return a verdict for
the [nonmovant].’” Wiley v. State Farm Fire and Cas. Co., 585 F.3d 206, 210 (5th Cir. 2009)
(internal citations omitted). When determining whether a genuine issue of material fact has been
established, a reviewing court is required to construe “all facts and inferences . . . in the light
most favorable to the [nonmovant].” Boudreaux v. Swift Transp. Co., Inc., 402 F.3d 536,
540 (5th Cir. 2005) (citing Armstrong v. Am. Home Shield Corp., 333 F.3d 566, 568 (5th Cir.
2003)). Likewise, all “factual controversies [are to be resolved] in favor of the [nonmovant], but
only where there is an actual controversy, that is, when both parties have submitted evidence of
contradictory facts.” Boudreaux, 402 F.3d at 540 (citing Little, 37 F.3d at 1075 (emphasis
omitted)). In sum, “[t]he appropriate inquiry [on summary judgment] is ‘whether the evidence
presents a sufficient disagreement to require submission to a jury or whether it is so one-sided
that one party must prevail as a matter of law.’” Septimus v. Univ. of Hous., 399 F.3d 601, 609
(5th Cir. 2005) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251–52, (1986)).
b.

The Anti-Kickback Act

The AKA makes unlawful the provision, acceptance, or inclusion, in claims for
reimbursement, of kickbacks—or “commercial bribes”—by parties doing business with the
federal government. United States ex rel Vavra v. Kellogg Brown & Root, Inc., 727 F.3d 343,
346 (5th Cir. 2013). The AKA defines as “kickback” broadly as:
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any money, fee, commission, credit, gift, gratuity, thing of value, or compensation
of any kind that is provided to a prime contractor, prime contractor employee,
subcontractor, or subcontractor employee to improperly obtain or reward
favorable treatment in connection with a prime contract 4 or a subcontract5 relating
to a prime contract.
41 U.S.C. § 8701(2) (2012) (emphasis added). The AKA’s prohibitions are as follows:
A person may not—
(1) provide, attempt to provide, or offer to provide a kickback;
(2) solicit, accept, or attempt to accept a kickback; or
(3) include the amount of a kickback prohibited by paragraph (1) or (2) in the
contract price—
(A) a subcontractor charges a prime contractor or a higher tier
subcontractor; or
(B) a prime contractor charges the Federal Government.
41 U.S.C. § 8702. Under the AKA, the term “person” includes “a corporation, partnership,
business association of any kind, trust, joint-stock company, or individual.” Id. § 8701(3). The
AKA’s strict liability provision allows the Government to recover the amount of a kickback from
a company “whose employee, subcontractor, or subcontractor employee violates section 8702
. . . by providing, accepting, or charging a kickback.” Id. § 8706(a).
c.

The False Claims Act

A person is liable under the FCA if that person, inter alia, (1) “knowingly presents or
causes to be presented to [the Government] a false or fraudulent claim for payment or approval”
or (2) “knowingly makes, uses, or causes to be made or used, a false record or statement to get a
false or fraudulent claim paid by the Government.” 31 U.S.C. § 3729(a) (2006). On Counts II
4

A “prime contract” is “a contract or contractual action entered into by the Federal Government to obtain
supplies, materials, equipment, or services of any kind.” 41 U.S.C. § 8701(3).
5

A “subcontract” is “a contract or contractual action entered into by a prime contractor or a subcontractor
to obtain supplies, materials, equipment, or services of any kind under a prime contract.” 41 U.S.C.
§ 8701(7).

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and III, the Government must establish each of the following elements: (1) there was a false
statement or fraudulent course of conduct; (2) the claim, record, or statement was made “with the
requisite scienter”; (3) the claim, record, or statement was material; and (4) the claim, record, or
statement caused the Government to pay out money or to forfeit moneys due (i.e., involved a
claim). United States ex rel Lemon v. Nurses to Go, Inc., 924 F.3d 155, 159 (5th Cir. 2019). Also
at issue in this case is a theory of conspiracy liability under the FCA. Under the FCA version
applicable here,6 a person who “conspires to defraud the Government by getting a false or
fraudulent claim allowed or paid” is subject to FCA liability. 31 U.S.C. § 3129(a)(3) (2006).
V.

ANALYSIS AND DISCUSSION
Each subcontract at issue in this case is the subject of multiple theories of liability alleged

by the Government. While it appears the Fifth Circuit has not addressed this issue, the Court of
Federal Claims has held that a court may impose both civil penalties under the AKA, and
separate civil penalties and treble damages under the FCA for the same acts. Morse Diesel Int’l,
Inc. v. United States, 79 Fed. Cl. 116, 124 (Ct. Fed. Cl .2007). Accordingly, the Court examines
the Government’s claims under both the AKA and the FCA. Except as to Count VI, the Court
addresses the parties’ arguments in turn, beginning with a summary of the relevant facts. Unless
expressly stated otherwise, where summary judgment is granted the facts in support of that
summary have been established by competent summary judgment evidence.
Importantly, the parties have made certain stipulations as to the timeliness of the
Government’s claims. As noted, the Government filed its complaint on January 8, 2014. KBR
has stipulated that for the purpose of statutes of limitations, laches, or other time bars, the period

6

Congress amended the FCA in 2009, including the conspiracy provision. However, because the events
giving rise to this suit occurred between 2001 and 2005, the pre-2009 version of the statute is applicable
here.

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from August 4, 2008 to March 31, 2012 is excluded. Therefore, the parties agree, pursuant to a
series of tolling agreements, that the Government’s FCA, AKA, and breach of contract claims
are not time-barred, to the extent those claims accrued after May 9, 2004.
a.

Common Law Fraud (Count VI)

The Court grants summary judgment for KBR as to Count VI, the Government’s
common law fraud claim. KBR asserts, and the Government does not dispute, that a three-year
limitations period applies to this claim. 28 U.S.C. § 2415(b) (setting forth a three-year statute of
limitations for “every action for money damages brought by the United States or an officer or
agency thereof which is founded upon a tort”). The Government does not allege that any
unlawful conduct by KBR occurred after May 2007, or within three years prior to the date suit
was filed (accounting for the excluded period of August 4, 2008 to March 31, 2012). Any fraud
claim concerning conduct prior to May 2007 is time-barred. Therefore, the Court grants
summary judgment to KBR as to Count VI.
b.

Subcontracts 167 and 190
i.

Factual Summary

The Government’s claims concern two subcontracts that KBR entered into in furtherance
of its performance under Task Order 43. On June 17, 2003, KBR executed Subcontract GU49KU-S00167 (Subcontract 167) with Kuwaiti firm First Kuwait Trading and Contracting, WLL
(FKTC), to lease 50 trucks (“heads”) and 50 refrigerated trailers (“reefers”) for six months. (The
Court will use the term “truck-trailer unit” to refer to a unit consisting of one truck and one
trailer.). On August 19, 2003, KBR executed GU49-KU-S0090 (Subcontract 190) with FKTC for
a six-month lease of 150 truck-trailer units. Both awards were the result of a kickback
arrangement between FKTC and KBR employee Anthony (Tony) Martin. In his capacity as
KBR’s subcontract administrator, Martin was responsible for soliciting bids from prospective
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subcontractors and for negotiating and awarding subcontracts under the LOGCAP III contract on
KBR’s behalf.
In exchange for an agreed payment of 50 Kuwaiti Dinars (KD) per month per trucktrailer unit leased through a subcontract, Martin provided FKTC Manager Wadih Al-Absi with
critical information about the bids of FKTC’s competitors. In total, Martin was to receive
$50,239.50 in kickbacks for Subcontract 167, and $150,265.35 for Subcontract 190. Ultimately,
Martin received only a $10,000 advance from Al-Absi. He admitted to the foregoing conduct in
his plea agreement with the Government, which Martin entered into on May 8, 2007.7
Martin awarded Subcontract 167 to FKTC in the amount of $4,672,273.50 and
Subcontract 190 in the amount of $8,865,656. On February 17, 2005, KBR submitted
reimbursement vouchers to the Government for reimbursement a voucher that included costs
associated with Subcontract 167. On July 30, 2004 and again on March 31, 2005, KBR also
submitted reimbursement vouchers to the Government that included costs associated with
Subcontract 190.
ii.

The Anti-Kickback Claims (Count I)

In connection with Subcontracts 167 and 190, the Government seeks summary judgment
under the AKA’s strict liability provision, section 8706(a)(2), alleging that KBR is strictly liable
for violating section 8702(3) of the statute by “includ[ing] the amount of a kickback . . . in the
contract price” that KBR, a “prime contractor,” charged the Government. KBR contends that the
AKA’s six-year limitations period bars the Government’s claims as to the foregoing subcontracts

7

Martin reaffirmed his conduct while testifying in front of a grand jury in his criminal case and during the
criminal trials of KBR employees Jeff Mazon and Stephen Seamans, as well as during his deposition
taken in this case.

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and, also, that the Government cannot establish that the amounts billed to the Government under
these subcontracts included any kickback amounts.
a.

The Statute of Limitations

The AKA requires the Government to bring a civil action under section 8706 no later
than six years after the date on which (1) the prohibited conduct establishing the cause of action
occurred, or (2) the Government first knew, or should reasonably have known, that the
prohibited conduct had occurred. 41 U.S.C. § 8706(b). The parties stipulate that the limitations
period for the AKA claims began to run on May 9, 2004. However, KBR contends that to the
extent the Government seeks to derive KBR’s liability from section 8702(3),8 the “inclusion” of
kickback amounts in the contract prices occurred when the prices of the respective subcontracts
were “fixed” or “set,” not when KBR actually billed the Government for the costs it incurred. 9
The Government responds that the “prohibited conduct” occurred when KBR submitted the
vouchers for Subcontracts 167 and 190 to the Government.
Finding no reason to depart from the statute’s plain language, the Court agrees with the
Government’s interpretation. Calogero v. Shows, Cali & Walsh, L.L.P., 970 F.3d 576, 582 (5th
Cir. 2020) (“[W]ords generally should be interpreted as taking their ordinary . . . meaning . . . at
the time Congress enacted the statute.”). The AKA expressly prohibits inclusion of a kickback
amount in the contract price that a prime contractor “charges” the Government. 10 Therefore, a
8

This section prohibits “includ[ing] the amount of a kickback . . . in the contract price that a prime
contractor to the Federal Government.”
9

KBR also points out that KBR employees Seamans and Martin accepted kickbacks in 2003 and that, as
to any liability premised on violation of section 8702(2), “the prohibited conduct establishing the cause of
action” occurred prior to May 9, 2004. The Government, however, derives KBR’s liability from a
violation of section 8702(3).
10

The term “charge” means “to demand a fee” or “to bill.” See Charge, BLACK’S LAW DICTIONARY (11th
ed. 2019). The Court must assume that if Congress had wished to instead use a word other than “charge,”
it would have done so. See also 41 U.S.C. § 8706(a)(2) (permitting recovery from a person whose agent
“violated section 8702 . . . by providing, accepting, or charging a kickback” (emphasis added)).

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violation of section 8702(3) occurred, and the Government’s cause of action accrued, when the
offense’s final element—charging the government—was completed. United States v. Ongaga,
820 F.3d 152, 159–60 (5th Cir. 2016) (“Generally, the statute of limitations begins to run when
the crime is complete, meaning that all the elements of the crime have been satisfied.”).
Furthermore, the Government’s cause of action under the AKA accrued separately on
each date that KBR submitted to the Government a voucher that included a kickback amount for
reimbursement. See, e.g., United States v. Gelais, 952 F.2d 90, 96–97 (5th Cir. 1992) (“Each
wire transmission in furtherance of a scheme to defraud constitutes a separate crime.”). KBR
submitted vouchers associated with Subcontract 167 to the Government on February 17, 2005
and submitted vouchers associated with Subcontract 190 on July 30, 2004 and March 31, 2005.
Therefore, the Government’s AKA claims as to these vouchers are not time-barred.
b.

The Merits of the AKA Claims

KBR also seeks to avoid summary judgment on the Government’s AKA claims by
arguing that the Government cannot establish, as a matter of law, that the vouchers submitted to
the Government for Subcontract 167 and 190 included the kickback amounts agreed upon by its
employee, Tony Martin. KBR does not dispute that Martin entered into a kickback arrangement
with FKTC manager Wadih Al-Absi, agreeing to inform FKTC of its competitors’ bids in
exchange for a monthly payment of 50 KD per truck leased through each subcontract. Martin
ultimately awarded Subcontracts 167 and 190 to FKTC, and KBR, subsequently, submitted
vouchers to the Governments for costs associated with each subcontract.
By this evidence, the Government has carried its initial burden to show that KBR’s
charges to the Government included the kickback amounts agreed upon by Martin and FKTC.
That is, having established Martin’s kickback arrangement, the Government is entitled to the
rebuttable presumption that FKTC’s bid would “reflect the amount [it] contemplates paying as a
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kickback, and [that] [its] inflated bid will be reflected in the prime contractor’s bid to the
Government.” See United States v. Acme Process Equip. Co., 385 U.S. 138, 143–44 (1966).
Seeking to rebut the Government’s initial showing, KBR cites Martin’s deposition
testimony in this case that he did not personally know whether FKTC’s bids to KBR, or the
amounts charged by KBR to the Government, included the kickback amounts that he negotiated.
However, Martin’s personal knowledge on this point is immaterial. “Kickbacks being made
criminal means that they must be made—if at all—in secrecy.” Id. at 144. The Acme Court noted
that kickbacks in government contracts “necessarily inflate the price to the Government[.]” Id.
(emphasis added). KBR, therefore, has failed to create a fact issue as to whether the
reimbursement voucher “include[d] the amount of a kickback . . . in the contract price” that
KBR, a “prime contractor,” charged the Government. Under Section 8706(a), KBR is strictly
liable for the conduct of its employees. 41 U.S.C. § 8706(a)(2). Therefore, KBR is liable for each
instance in which its employees charged the Government a kickback amount—here, on February
17, 2005 (Subcontract 167) and on July 30, 2004 and March 31, 2005 (Subcontract 190). The
Court grants summary judgment to the Government as to each violation.
i.

False Claims Act Liability (Counts II and III)

As to Counts II and III, KBR asserts that the Government cannot establish three of the
four elements necessary under 31 U.S.C. § 3729(a)(1)(A) to maintain its claim for an FCA
violation, i.e., falsity of the claim, record, or statement; scienter, or knowledge; and materiality.
The Court addresses each element in turn. The Court then examines Count V, which alleges
liability under the FCA’s conspiracy provision.
1.

Falsity

The Government can establish the “falsity” element of its FCA theory for Counts II and
III by showing that KBR submitted a claim to the Government that was either “factually false” or
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“legally false.” United States ex rel. Bennett v. Medtronic, 747 F.Supp.2d 745, 765 (S.D. Tex.
2010). The Government argues that KBR’s claims associated with Subcontracts 167 and 190
were false under either definition, while KBR asserts that neither category of falsity is satisfied.
The Court is of the opinion that the claims at issue were factually false, as a matter of law.
A factually false claim involves “‘an incorrect description of goods or services or a
request for reimbursement for goods or services never provided.’” Waldmann v. Fulp, 259 F.
Supp. 3d 579, 590, 593 (S.D. Tex. 2016). See also United States ex rel Ruscher v. Omnicare,
Inc., No. 4:08–cv–3396, 2014 WL 2618158, at *6 (S.D. Tex. June 12, 2014) (“The most
straightforward FCA claims arise when a claimant requests compensation for services which he
has not performed, or overcharges for those that he has completed.”). KBR’s arguments on this
point resemble its argument as to the Government’s AKA claims and are premised on Anthony
Martin’s deposition testimony that he did not know whether FKTC’s bids to KBR, or the
amounts charged by KBR to the Government, included the kickback amounts that he negotiated.
As discussed supra, it is not relevant whether Martin had personal knowledge that
FKTC’s bids and KBR’s vouchers to the Government included the agreed-upon kickbacks.
Martin’s purported lack of knowledge does not rebut the Government’s initial showing that
KBR’s charges included the kickback amounts. Acme, 385 U.S. at 143–44. It follows, then, that
KBR passed on to the Government the cost of the kickbacks that were baked into each of
FKTC’s bids. Because those costs did not correspond to any service that KBR—or the
Government—actually received, KBR, by definition, overcharged the Government. Ruscher,
2014 WL 2618158, at *6. KBR’s vouchers associated with Subcontracts 167 and 190 were,
therefore, factually false claims, under section 3729(a)(1)(A), and factually false records, under
section 3729(a)(1)(B).

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2.

Knowledge

The FCA provides that a defendant acts “knowingly” if the defendant (i) has actual
knowledge of information; (ii) acts in deliberate ignorance of the truth or falsity of the
information; or (iii) acts in reckless disregard of the truth or falsity of the information. 31 U.S.C.
§ 3729(b). The standard for recklessness, in the civil context, is an objective one; the term
describes an act “entailing an unjustifiably high risk of harm that is either known or so obvious
that it should be known.” Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 68 (2007). Under these
FCA provisions, the Government need not show that a defendant had the specific intent to
defraud the Government. Id. Additionally, an employee’s knowledge may be imputed to his
employer for purposes of FCA liability if the employee was acting (1) within the scope of his
authority and (2) for the purpose of benefitting the corporation. United States v. Hangar One,
Inc., 563 F.2d 1155, 1158 (5th Cir. 1977) (citing United States v. Ridglea State Bank, 357 F.2d
495 (5th Cir. 1966)).11
The record evidence establishes that, in executing Subcontracts 167 and 190 for inflated
amounts, Martin knowingly caused the making or use of a false record related to KBR’s
subsequent claims for payment. Furthermore, at a minimum, Martin recklessly disregarded the
fact that his corrupt award of the subcontracts to FKTC would cause KBR to bill the Government
for the cost of his illicit arrangement with FKTC—i.e., to submit an inflated, or false, claim for
payment. Thus, Martin, created an “unjustifiable risk” that KBR would seek reimbursement for a
false claim.
11

Despite the Government’s arguments that Ridglea’s “intent-to-benefit” requirement for imputing an
employee’s knowledge to its corporate employer no longer applies, the Fifth Circuit recently declined to
overrule its precedent. United States ex rel. Vavra v. Kellogg Brown & Root, Inc., 727 F.3d 343, 352, n.12
(5th Cir. 2013) (“Ridglea is our court's precedent in FCA cases.”).

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The Government has also satisfied both requirements for Martin’s knowledge to be
imputed to KBR. The record evidence shows that Martin agreed to the kickback arrangements
and awarded Subcontracts 167 and 190 to FKTC in the course of performing his core
responsibilities—soliciting bids from prospective subcontractors, negotiating subcontracts, and
awarding subcontracts under LOGCAP III. See, e.g., United States v. BNP Paribas SA, 844
F.Supp.2d 589, 614 (S.D. Tex. 2012) (holding that a bank employee responsible for negotiating
lines of credit with the bank’s clients acted within the scope of his employment when he
accepted a bribe in exchange for helping a foreign entity improperly access financing from a
government program).
Similarly, Martin rigged the bidding process and awarded the subcontracts to FKTC to
benefit not only himself, but also KBR. In deposition, Martin attempted to justify his award of
Subcontract 190 to FKTC on the grounds that “[i]t supported the Army and made sure they got”
the vehicles the Army needed. Likewise, in a memorandum executed two days after the award of
Subcontract 167 to FKTC, Martin stated that “[t]he urgency of KBR to meet the deliveries of
food and medicinal requirements to the Army substantiated the immediate award[.]” In other
words, Martin believed that his conduct would benefit KBR by enabling it to timely perform its
obligations under LOGCAP III. United States ex rel. Wheeler v. Union Treatment Ctrs., LLC,
No: SA-13-CA-004-XR, 2019 WL 5026934, at *3 (S.D. Tex. July 1, 2019) (“The fact that the
scheme benefitted both Craighead and CCM&D does not negate the fact that it benefitted, and
was intended to benefit, CCM&D.”). Thus, as a matter of law, Martin’s scienter is imputed to
KBR.
3.

Materiality

A false claim, record, or statement is material if it has “a natural tendency to influence, or
be capable of influencing, the payment or receipt of money or property.” United States ex rel.
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Lemon v. Nurses To Go, Inc., 924 F.3d 155, 159 (5th Cir. 2021). The FCA’s materiality
requirements is “demanding.” Therefore, a court should consider: (1) whether the defendant’s
false claim violated an express condition of payment; (2) whether the Government would have
denied, or did deny, the defendant’s reimbursement claim, given actual knowledge of the false
claim; and (3) whether the falsity of the claim is “minor or insubstantial.” Id. at 163.
As to the first factor, the Court notes that LOGCAP III specifically incorporated a FAR
regulation12 that prohibited “including, directly or indirectly, the amount of any kickback in the
contract price charged by a prime Contractor to the United States.” See FAR 52.203-7. KBR
violated the AKA by submitting vouchers related to Subcontracts 167 and 190 that included the
costs of kickbacks arranged by Martin. The first factor under Lemon is, therefore, satisfied.
Regarding the second factor, there is no evidence that the Government knew of Martin’s
kickback arrangement when it paid vouchers related to Subcontracts 167 and 190. The
Government had paid all vouchers associated with Subcontracts 167 and 190 by May 2005, and
Martin entered his guilty plea in July 2007. KBR concedes that the DCAA learned of Martin’s
kickback arrangement sometime in 2008.13 Yet, KBR argues that, after learning of Martin’s plea
agreement, the Government did not offset, or otherwise attempt to recoup, unallowable costs
from KBR’s subsequent vouchers submitted under Task Order 43. In deposition, DCMA
representative Jerry Conry testified that the DCMA learned of the plea agreement sometime in
early 2008 and subsequently notified KBR that it intended to disallow approximately $25 million
12

The Federal Acquisition Regulation system (FAR) governs procurement procedures for all executive
agencies, as well as the Army. FAR is codified at Chapter 1 of Title 48 of the Code of Federal
Regulations. See 48 C.F.R. 1.
13

Citing a letter dated May 19, 2008, KBR alleges that “DCMA . . . specifically considered how Martin’s
kickback arrangement should affect the government’s payment of KBR’s claims for the costs of FKTC
subcontracts.” The record does not contain such a letter, and the Court has no basis to conclude that the
Government “specifically considered” Martin’s kickback arrangement in any audit that it conducted of
vouchers submitted under Task Order 43.

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in costs as a result. The limited summary judgment evidence suggests that the parties continued
to negotiate into the summer of 2008 regarding the intended disallowance. The record indicates
neither, how long KBR continued billing the Government under Task Order 43, nor the result of
the parties’ negotiations. The Court is unwilling to infer from these facts that the Government
considered the kickback-related costs immaterial.
The third factor asks whether KBR “knew or had reason to know” that the Government
would “attach[] importance to the specific matter ‘in determining [its] choice of action[.]’”
Lemon, 924 F.3d at 163. The Court answers this question in the affirmative, given LOGCAP
III’s incorporation of FAR 52.203-7 as a contract term. The Court is of the opinion that such a
violation would be considered material by the Government in deciding whether to pay KBR’s
claims. Accordingly, the materiality element is satisfied, and the Government is entitled to
summary judgment on Counts II and III, as related to Subcontracts 167 and 190.
ii.

Conspiracy Liability under the FCA (Count V)

KBR also moves for summary judgment on Count V, alleging that KBR violated the
FCA by conspiring with its co-defendants to defraud the Government by getting a false claim
paid. As to Subcontracts 167 and 190, the Government has offered no evidence of an injury that
is independent of that arising under Counts II and III. White v. United States, 507 F.2d 1101,
1103 (5th Cir. 1975) (“[N]o duplicating recovery of damages for the same injury may be had.”).
Therefore, having granted summary judgment for the Government on Counts II and III, the Court
now grants summary judgment to KBR on Count V, as it relates to Subcontracts 167 and 190.
iii.

Breach of Contract Claims (Count VII)

The Court also finds that KBR breached the LOGCAP III contract by submitting to the
Government reimbursement vouchers for unallowable costs—here, kickback amounts. Billing
the Government these unallowable costs violated FAR 52.216-07, which LOGCAP III
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incorporated as a contract term.14 See Laguna Constr. Co., Inc. v. Carter, 828 F.3d 1364, 1371
(Fed. Cir. 2016); FAR 2.101 (“Unallowable cost means any cost that, under the provisions of any
pertinent law, regulation, or contract, cannot be included in prices, cost-reimbursements, or
settlements under a Government contract to which it is allocable.”). However, because the Court
determines that the FCA provides the Government with the greater recovery, and because the
Government it entitled to but one recovery, the Court will not determine damages based on the
Government’s breach of contract claim. Accordingly, the Court grants summary judgment for
KBR on Count VII, as it relates to Subcontracts 167 and 190.
c.

Change Order 1 to Subcontract 167
i.

Factual Summary

Subcontract 167 contemplated a six-month lease for truck-trailer units, ending on
December 20, 2003. However, between January and July 2004, FKTC continued to submit
monthly invoices under the subcontract for the cost of leasing all 50 units (232,500 KD or
$778,712.50). KBR’s October 18, 2004 reconciliation of trucks leased from FKTC under
Subcontract 167 showed that only two vehicles were returned to FKTC after January 4, 2004,
and KBR manager Jim Folkestad determined that KBR owed FKTC $176,625.85 for the latedelivered vehicles. In a January 2, 2005 memorandum,15 Folkestad stated that in May 2004,
FKTC asserted that the return dates in KBR’s reconciliation document were in fact the dates on
which KBR delivered the vehicles to FKTC for repair, not return. FKTC “could not produce any

14

Contrary to KBR’s assertion, the federal Contract Disputes Act (CDA) does not strip this Court of
jurisdiction to decide the Government’s contract claim. See, e.g., United States ex rel. Vavra v. Kellogg
Brown & Root, Inc., 903 F.Supp.2d 473, 480–81 (E.D. Tex. 2011) (affirming that a district court has
jurisdiction over the federal government’s breach of contract claims against contractors “where the
events, transactions, and contracts at issue in the lawsuit give rise to fraud allegations”), rev’d on other
grounds, 727 F.3d 343.
15

Folkestad testified that the memorandum was mistakenly dated January 2, 2004.

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other supporting documentation” for that position. By contrast, on July 22, 2004, KBR’s
Logistics Coordinator, Fatime Azemi, reported that she had obtained documentation from
FKTC’s workshop supervisor confirming that “only 7 Reefer Trailers [were] missing.”
Folkestad’s memorandum further stated that “it was agreed by both parties that the date
of 30 March 2004 [sic] would be used as the expiration date of [Subcontract 167,] and that KBR
would generate a change order to modify the subcontract to reflect this date.” In December 2004,
Azemi and another KBR employee, Asli Berbergolu, generated Material Requisition forms
requesting funds equivalent to three months’ worth of leasing 50 truck-trailer units, from
December 21, 2003 to March 20, 2004. KBR subsequently issued Change Order 1 to Subcontract
167 (“Change Order 1”), which retroactively extended the lease period to March 30, 2004, and
resulted in an additional payment to FKTC of $2,595,707.50. In its February 17, 2005 voucher to
the Government, KBR requested reimbursement for costs associated with Change Order 1,
totaling $2,655,018.28.
ii.

False Claims Act Liability (Counts II, III, and V)

The Government alleges that KBR knowingly submitted false claims for costs incurred in
connection with Change Order 1, and knowingly created, used, or caused to be created or used,
false records related to those claims. The parties dispute the falsity, scienter, and materiality
elements of these theories.
1.

Falsity

The Court finds that KBR’s voucher for costs associated with Change Order 1 was a
factually false claim. KBR has not been able to raise a genuine issue of material fact as to
whether, for the period of Change Order 1, KBR in fact leased the number of vehicles that would
substantiate the $2.6 million in costs for which it later charged the Government. Indeed, in
October 2004, KBR had determined that all but two of the leased trailer units had been returned
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to FKTC by January 4, 2004, and that KBR owed FKTC $176,625.85 for the delayed returns.
According to Folkestad, FKTC “could not produce any other supporting documentation” to show
that the vehicles had been brought to FKTC “for repair not [sic] return[.]”
KBR characterizes the amount of Change Order 1 as a “settlement of a dispute between
KBR and FKTC regarding when the vehicles leased under [Subcontract 167] had been returned
to FKTC.” However, neither the voucher associated with Change Order 1, nor any of the
documentation attached to the voucher indicated that KBR was billing for the cost of a
settlement, rather than for an extended lease of the vehicles. The requisition forms created by
KBR for Change Order 1 also stated nothing about a “settlement.”16 The voucher, as submitted
to the Government, sought reimbursement for costs that did not correspond to any service that
KBR—or the Government—actually received. Accordingly, KBR’s claim associated with
Change Order 1 was factually false. Additionally, both the voucher and the requisition forms
created by KBR for Change Order 1 were false records. Ruscher, 2014 WL 2618158, at *6.
2.

Knowledge

The Government has also established that, as a matter of law, KBR acted with the
requisite scienter. The question is whether, in generating Change Order 1, KBR employees
undertook an “unjustifiably high risk” that they were (i) causing KBR to present a false claim for
payment or (ii) making or using a materially false record in connection with such a claim.
The record shows that KBR employees did not have an objectively reasonable basis to
believe that a three-month extension for the lease of all 50 truck-trailer units was warranted. On
July 21, 2004, FKTC supervisor Noor advised KBR’s logistics coordinator Fatima Azemi that
16

While KBR asserts that Folkestad’s memorandum was in “[t]he KBR subcontract file, to which
government auditors had access upon request,” the FCA places the burden on the contractor to submit
accurate information in its claims for reimbursement. United States ex rel Ruscher v. Omnicare, Inc., 663
Fed. App’x 368, 723 (5th Cir. 2016) (“A claim is factually false when the information provided to the
government for reimbursement is inaccurate.” (emphasis added)).

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KBR had returned all but seven trailers. Noor gave Azemi a supporting document with the status
of each individual truck and trailer. This document was substantially consistent with KBR’s
internal documents, which showed that at most nine trailers had not been returned to FKTC as of
February 18, 2004. However, Wadih Al-Absi, Noor’s superior at FKTC, insisted that no vehicles
would be considered “returned” without production of delivery tickets and that those vehicles in
FKTC’s possession were there for “maintenance,” not “return.” Yet, the subcontract’s terms did
not require production of “delivery tickets” for vehicles to be considered returned and, in any
case, required FKTC to provide maintenance for the vehicles. As noted, Folkestad ultimately
determined that FKTC could not produce documentation substantiating Al-Absi’s claims and
concluded that KBR owed FKTC $176,625.85 for the delayed returns.
KBR cites testimony of multiple former employees stating that, under the circumstances,
the decision to settle with FKTC was reasonable. Construing all factual disputes in KBR’s favor,
the Court is of the opinion that the KBR employees’ testimony, at most, raises a fact issue as to
whether they subjectively believed that the parties’ “settlement” was an expedient solution to the
dispute.17 But “recklessness” under the FCA requires application of an objective standard. Burr,
551 U.S. at 68. Put simply, no objective observer could conclude that KBR had leased all 50
truck-trailer units for an additional three months beyond the subcontract’s original expiration
date. Accordingly, in generating Change Order 1, KBR employees undertook an “unjustifiably
high risk” that they would cause KBR to present a false claim for payment. Likewise, those
employees acted recklessly in creating and using false records (the change order and associated
requisition forms and invoices) in connection with such a claim.

17

Indeed, KBR employees’ contemporaneous statements in internal correspondence contradict their later
deposition testimony on this point.

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The Court also finds that the recklessness of KBR’s employees should be imputed to
KBR because they acted in the scope of their authority and to benefit KBR. Folkestad and KBR
Procurement and Supply Manager Tom Quigley negotiated, and Folkestad executed, Change
Order 1 while performing their respective core responsibilities. Likewise, Azemi and Berbergolu
generated the corresponding requisition forms, in their capacities as logistics coordinators, at
Folkestad’s direction. Further, internal correspondence demonstrates that the KBR employees
believed they were acting for KBR’s benefit. Accordingly, as a matter of law, the Government
has satisfied the knowledge element.
3.

Materiality

The Court also concludes that KBR’s false claim was material. FAR 52.216-7(a), which
LOGCAP III incorporated as a contractual term, provides that “[t]he Government will make
payments to the Contractor . . . in amounts determined to be allowable by the Contracting
Officer . . . in accordance with [FAR] subpart 31.2 in effect on the date of this contract and the
terms of this contract.” Costs are allowable only if they are “reasonable.” FAR 31.201-2(a). The
inclusion of these regulatory provisions in LOGCAP III “confirm that reasonableness is material
to payment.” United States v. DynCorp Int’l, LLC, 253 F.Supp.3d 89, 103 (D.D.C. 2017). As
discussed, KBR billed the Government $2.6 million for Change Order 1, when its best available
information indicated that KBR owed FKTC approximately $176,625.85 for the lease of reefer
units beyond Subcontract 167’s original termination date. Such a discrepancy was far from
reasonable, and “it is common sense that the [G]overnment would not pay claims if it knew that
they were outrageously excessive.” Id.

Additionally, KBR offers no evidence that the

Government knew when it audited KBR’s costs for the period of Change Order 1 that Changer

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Order 1 contained a false amount.18 The Court, thus, finds that the claim and requisition forms
related to Change Order 1 were materially false. Having established all elements of its FCA
theories, as a matter of law, the Government is entitled to summary judgment on Counts II and
III related to Change Order 1.
On Count V, the conspiracy liability theory under the FCA, the Government offers no
evidence of an injury that is independent of that arising under Counts II and III. Accordingly, the
Court grants summary judgment to KBR on Count V, as it relates to Change Order 1.
iii.

Breach of Contract Claim (Count VII)

The Court also finds that KBR breached the LOGCAP III contract by submitting to the
Government reimbursement vouchers for unreasonable—and, therefore, unallowable—costs.
Boeing N. Am., Inc. v. Roche, 298 F.3d 1274, 1281 (Fed. Cir. 2002). However, because the Court
determines that the FCA provides the Government with the greater recovery, and because the
Government is entitled to a single recovery, the Court will not determine damages based on the
Government’s breach of contract claim. Accordingly, the Court grants summary judgment for
KBR on Count VII, as it relates to Change Order 1.
d.

Subcontract 39
i.

Factual Summary

Jeff Mazon was responsible for issuing and administering subcontracts on KBR’s behalf
in Kuwait in the lead-up to the Army’s invasion of Iraq. On February 2, 2003, Mazon issued a
request for proposals (RFP) to prospective subcontractors for a six-month lease of 17 storage
tankers, to be used to deliver and store diesel fuel at a military airport (the “A-POD”) used by the
Army in Kuwait. Mazon had previously estimated the cost of fulfilling this item under Task
18

The DCMA appears to have audited KBR’s costs under LOGCAP III for fiscal year 2004 between
November 2008 and November 2012.

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Order 36 at $603,900, in a document called a Rough Order of Magnitude (ROM), and later at
$685,080, in a material requisition form. Three firms submitetd bids in response, and, on
February 14, 2003, Mazon awarded the subcontract to La Nouvelle General Trading and
Contracting Co. (La Nouvelle) as Subcontract 39. La Nouvelle’s bid totaled 507,000 KWD, or
approximately $1,673,100, but Mazon ultimately awarded the subcontract at a price of
$5,521,230.00. Mazon produced the final price by unnecessarily applying an additional currency
conversion formula to the bid amount in a bid tabulation form.
In a February 14, 2003 internal memorandum regarding the award, Mazon stated that the
prospective subcontractors’ final bids included “additional fees . . . associated with the transfer
of the tankers from [another] contract to support the US Government.” These penalties, “topped
off by the urgent and compelling need” of the request, “increased the total value of the
requirement from the estimated $685,000 to a total of $5,521,230.” Mazon testified in deposition
that, at the time he prepared the memorandum, he was unaware of his double currency
conversion and believed, without verifying, that the fees associated with the transfer of tankers
from another contract accounted for the significant price increase.19
Mazon’s memorandum further stated that “[t]he additional funds required were
communicated to the Project Manager who signed approval on the Bid Tabulation for the
subcontract on the date of the award.” In a March 24, 2009 plea agreement with the Government,
Mazon stipulated that when he wrote the memorandum, he “knew that he had not communicated
to the LOGCAP III Project Manager [Butch Gatlin] the additional funds required for Subcontract

19

La Nouvelle General Manager Ali Hijazi later told a KBR internal investigator that La Nouvelle had
submitted a second bid incorporating the purported KNPC penalties. Mazon denied ever receiving a
second bid, and none exists in the record.

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39.”20 Mazon did send the final bid tabulation form with La Nouvelle’s $5.5 million “bid” to
Gatlin and supervisor Don Gavin, both of whom approved the award. However, the form did not
indicate that La Nouvelle’s final bid represented greater than an eight-fold increase from
Mazon’s prior estimates. Additionally, when Mazon sought approval of the subcontract from
Gavin, Gavin asked, “Are you getting ACO [the Government Administrative Contract Officer’s]
Consent?” Mazon replied that ACO did not “sign consent to subcontract, unless it is over the
value p[l]aced on ROM.” Gavin understood Mazon to mean that the estimated cost in the ROM
was at least $5.5 million and that Mazon had confirmed with the ACO that the ACO’s consent
was unnecessary. In fact, the ROM estimate was $603,900.21 Between August 2003 and
February 2004, La Nouvelle submitted, and KBR paid, invoices based on the $5.5 million
subcontract amount. As discussed infra, the parties dispute whether KBR “re-billed” these
amounts to the Government after May 9, 2004.
After ending his employment with KBR in late June 2003, Mazon met with Hijazi in
Athens, Greece, where Hijazi offered Mazon $1 million to invest in Mazon’s own business
ventures. While Mazon insisted on structuring the payment as a loan and executed a loan
agreement to that effect, Hijazi informed Mazon that he did not want or expect repayment.
Additionally, while the loan agreement listed Hijazi as the lender, in subsequent email

20

This quoted statement in Mazon’s plea agreement, corroborated by Gatlin’s and Gavin’s trial testimony
during Mazon’s 2008 criminal trial, along with the actual documentation of the bid transmitted by Mazon
to his superiors, is admissible under Fed. R. Evid. 807. Additionally, in deposition, Mazon refused to
expressly contradict this part of his plea agreement.
21

During Mazon’s 2008 criminal trial, Gavin and Gatlin testified that Mazon did not inform them of the
discrepancy between his original estimate and the final award amount. The Court overrules KBR’s
objection that their testimony is hearsay and, therefore, inadmissible summary judgment evidence.
Tremont LLC v. Halliburton Energy Servs., 696 F.Supp.2d 741, 764, n.22 (S.D. Tex. 2010) (“[Certified]
transcripts [of prior court testimony] are not ‘hearsay’ merely because they consist of statements made by
a witness in a prior proceeding.”). Mazon’s statements to Gavin via email correspondence are admissible
under the state of mind exception to hearsay, pursuant to Fed. R. Evid. 803(3).

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correspondence Hijazi referenced the money as coming from La Nouvelle.22 On September 18,
2003, Hijazi issued a bank draft for the $1 million to be paid to Mazon’s account in the United
States.
ii.

False Claims Act Liability (Counts II and III)

The Government alleges that KBR is liable under the FCA for billing the Government for
the inflated $5.5 million amount of Subcontract 39. For liability to attach under the FCA, a
defendant must have submitted a “claim” to the Government. The FCA defines a “claim” as
involving a “request or demand . . . for money or property . . . that . . . is presented to . . . the
United States.” 31 U.S.C. § 3729(b)(2) (2006). The threshold question here is whether, after
May, 9, 2004, KBR submitted vouchers to the Government for Subcontract 39 that were
“claims” within the meaning of the FCA.
The Government alleges that, on June 30, 2004 and August 31, 2005, respectively, KBR
“resubmitted additional vouchers [no’s. 30 and 43] seeking reimbursement” for La Nouvelle
invoices under Subcontract 39, invoices for which KBR had already sought reimbursement prior
to May 9, 2004. The June 2004 and August 2005 vouchers contain line-item summaries that
include the inflated costs billed by La Nouvelle, totaling approximately the final $5.5 million
award price of Subcontract 39. The Government also cites a “billing summary” prepared by
KBR that allegedly shows that on June 30, 2004 and August 31, 2005, KBR submitted vouchers
for the inflated costs.
KBR contends that the June 2004 and August 2005 vouchers were not actual “billings”
and, therefore, not “claims for payment” under the FCA. KBR asserts that these vouchers
22

Both Hijazi’s statements to Mazon and Mazon’s statements to SAIC investigators concerning Hijazi’s
intent regarding the $1 million payment are admissible, pursuant to Fed. R. Evid. 803(3). The testimony
of SAIC investigators Susan Frank and Tom Maslin at Mazon’s trial are admissible summary judgment
evidence. Tremont, 696 F.Supp.2d at 764, n.22.

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represent accounting transactions that simply reassigned costs to Task Order 36 that were
previously assigned to Task Order 27. In an affidavit, KBR representative Gregory Tashjian
states that, following this re-assignment, KBR “submitted public vouchers reversing previous
accounting transactions and rebooked the costs to a different internal Job Number on a new
public voucher.” Tashjian states that this process “did not impact the amount billed to the
government” and that “the government was billed once for the costs[,] contemporaneous to when
the costs were booked”—i.e., under original Task Order 27. Tashjian’s statements are consistent
with the results of a detailed DCAA audit report of Subcontract 39, dated April 10, 2007. The
DCAA conducted the audit after learning of Martin’s inflation of Subcontract 39 and after
KBR’s alleged “re-billing” in June 2004 and August 2005. Nowhere does the audit report state
that KBR sought payment for Subcontract 39 costs on those dates, as alleged by the
Government.23
Based on the record evidence, the Government has not established that, as a matter of
law, KBR submitted “claims for payment” on June 30, 2004 and August 31, 2005. Further, the
Court is of the opinion that, if presented with the results of the Government’s own audit, no
reasonable juror could conclude that KBR submitted claims for payment on those dates. It would
be unreasonable to conclude that the Government would have omitted from its exhaustive report
almost $5.5 million in additional inflated claims. The only reasonable conclusion is that the
Government did not consider the vouchers submitted on June 30, 2004 and August 31, 2005 to

23

The audit report notes that KBR issued two credits to the Government “to cover potential over billings
by La Nouvelle” for Subcontract 39: first, on January 23, 2004, for $5,521,230, and then again on June
30, 2004, for $5,634,808. According to the report, although KBR “re-billed” the $5,521,230 amount in
August 2005, “th[is] transaction zeroed out the double credits issued” by KBR to the Government.
Because KBR had originally issued the Government a double credit for the cost of Subcontract 39, the
August 2005 transaction resulted in only the single credit, preventing the Government from obtaining a
$5.5 million windfall.

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be “claims for payment.” Accordingly, the Court finds that KBR is entitled to summary
judgment as to the Government’s FCA claim pertaining to Subcontract 39.
iii.

Conspiracy Liability under the FCA (Count IV)

On Count IV, the Government alleges that KBR violated the FCA by conspiring with La
Nouvelle “to defraud the Government by getting a false or fraudulent claim allowed or paid,” in
connection with Subcontract 39. See 31 U.S.C. § 3729(a)(3) (2006). To allege and ultimately
prove a conspiracy under the pre-2009 version of the FCA, the Government must show “(1) the
existence of an unlawful agreement between defendants to get a false or fraudulent claim
allowed or paid by [the government] and (2) at least one act performed in furtherance of that
agreement.” U.S. ex rel. Farmer v. City of Houston, 523 F.3d 333, 343 (5th Cir. 2008). As part of
that showing, the Government must demonstrate that the defendants “shared a specific intent to
defraud the [G]overnment.” Id. (internal citation omitted). Circumstantial evidence may be used
to establish that the parties had an illicit agreement. United States ex rel. Tran v. Computer Sci.
Corp., 53 F.Supp.3d 104, 134 (D.C. Cir. 2014).
The Government has established a genuine issue of material fact as to each essential
element of conspiracy liability under the FCA. A reasonable jury could conclude that Mazon and
Hijazi entered into a tacit agreement to defraud the Government, based on: Mazon’s “doubleconversion” of the La Nouvelle’s original bid; Hijazi’s failure to produce a second bid to KBR
investigators that he stated would explain Subcontract 39’s price increase; Mazon’s failure to
inform his supervisors about the price increase and Mazon’s 2009 plea agreement; and Mazon’s
and Hijazi’s statements concerning Hijazi’s $1 million “loan” to Mazon. A jury could also find
that Mazon engaged in at least one overt act in furtherance of the conspiracy—for instance, by
seeking his supervisors’ approval of the inflated price and executing the subcontract with Hijazi.
A jury could also reasonably conclude that Mazon and Hijazi formed the agreement while
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Mazon was acting in the scope of his authority and to benefit KBR, such that Mazon’s scienter
should be imputed to KBR. Accordingly, KBR’s summary judgment motion as to Count IV is
denied.
iv.

Breach of Contract Claim (Count VII)

The Government alleges that KBR breached the LOGCAP III contract by “vouchering
the Government for the unallowable costs incurred” under Subcontract 39. As discussed supra,
the Court has determined that KBR’s vouchers related to Subcontract 39 did not constitute
“claims for payment.” Accordingly, the Court finds that KBR did not breach the LOGCAP III
contract. Therefore, the Court grants summary judgment for KBR on Count VII, as to this
subcontract.
e.

Subcontract 11
i.

Factual Summary

In September 2002, the Army issued a SOW under Task Order 27 for the construction of
Camp Arifjan in Kuwait, a staging area for Army personnel. On November 20, 2002, Stephen
Seamans, a Procurement, Materials, & Property Manager for KBR, awarded Subcontract 11 to
La Nouvelle for cleaning services at Camp Arifjan, at a price of 29,784 KWD ($98,287) for a
one-year term. Although La Nouvelle was not the lowest bidder, Seamans justified the award in
a November 17, 2002 internal memorandum, stating that he disqualified the lowest bidder
because its bid contained miscalculations and did not comply with all requirements in the RFP.
While Seamans affirmed the memorandum’s statements in an October 8, 2018 declaration, he
disavowed them as “self-serving” in a subsequent declaration, and again during his deposition in
this case. Once La Nouvelle had submitted its bid, Seamans contacted another company, Tamimi
Global Company Limited (“Tamimi”), and asked Tamimi to “submit a bid that would be too
high for the work performed under [Subcontract 11]” to “justify awarding the subcontract to La
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Nouvelle.” Additionally, around the time Seamans awarded Subcontract 11 to La Nouvelle, he
solicited and received a $5,000 kickback from La Nouvelle General Manager Ali Hijazi.24 The
Government alleges that KBR submitted vouchers to the Government for costs related to
Subcontract 11 in June 2004 and August 2005, which KBR disputes.
Seamans had no further procurement involvement with Subcontract 11 after the initial
award and ended his employment with KBR in April 2003. Shortly after Seamans’ departure,
Hijazi offered Seamans a position at La Nouvelle with an annual salary of $1.2 million. When
Seamans asked Hijazi why the latter was offering him a job, Hijazi responded that “he’d like to
take care of people who took care of him.”25 Hijazi agreed to pay Seamans a $300,000 advance
on his salary, and the money was wired to Seamans’ bank account in the United States. Seamans
formalized the employment offer as an employment agreement, which Seamans and Hijazi
signed. In the October 2018 declaration, Seamans stated that the employment agreement and
advance “had no impact on [his] previous award of Subcontract 11.” However, both in the
January 2019 declaration and during his deposition, Seamans stated that he understood Hijazi’s
offer of employment to be a “quid pro quo” for awarding KBR business to La Nouvelle and that
he “rationalized the payment after-the-fact” and used the “acceptance of a sham employment
offer to justify [his] receipt of the money.”26

24

Seamans stated in the October 8, 2018 declaration that he received the kickback “shortly after” the
subcontract award, but he stated in the January 9, 2019 declaration that he received the kickback “no later
than the same time as the formal award.” During his October 20, 2020 deposition, Seamans stated that he
did not recall the exact timing of when he solicited and received the kickback.
25

Hijazi’s statement regarding the job offer, reported through Seamans’ deposition testimony, is
admissible, pursuant to Fed. R. Evid. 803(3).
26

In February 2006, Seamans entered into a plea agreement with the Government, pleading guilty to one
count of wire fraud and one count of conspiracy to launder money in connection with these events.
However, the Court does not base its factual findings on the factual statements that Seamans stipulated to
in the plea agreement.

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ii.

False Claims Act Liability (Counts II and III)

The Government offers two theories related to Subcontract 11 for both Counts II and III:
(1) that, in submitting vouchers to the Government for Subcontract 11, KBR knowingly sought
reimbursement of kickback amounts received by Seamans; and (2) that KBR sought
reimbursement of payments to La Nouvelle for cleaning services at Camp Arifjan at higher
prices than were authorized at the time the costs were billed to KBR. The Government does not
contest KBR’s motion as to the second theory, and the Court grants summary judgment for KBR
on that theory.27
KBR is also entitled to summary judgment on the Government’s first theory because the
record evidence establishes that the Government did not consider the kickback-related costs that
it incurred under Subcontract 11 to be material. Between December 2010 and August 2011, the
DCAA audited costs related to Subcontract 11, including the period of performance relevant
here—November 20, 2002 to April 16, 2004. The DCAA’s August 2011 draft audit report
indicates that, during its audit, the DCAA became aware of the facts surrounding Seamans’
guilty plea in connection with Subcontract 11. Yet, in a March 20, 2015 DCAA memorandum
regarding the audit of Subcontract 11, DCAA stated that it was “closing the assignment” because
it had determined that the concerns raised in the audit “were not material enough to the
respective incurred cost submission(s) to warrant additional efforts to issue the report and
negotiate the costs.” The DCAA reached this decision after learning that KBR’s vouchers under
Subcontract 11 may have included the costs of Seamans’ kickbacks, in violation of LOGCAP
III’s prohibition on kickbacks. “[I]f the Government pays a particular claim in full despite its
27

In its briefing, the Government offers no evidence that, after May 9, 2004: (1) KBR submitted false
claims to the Government for services performed by La Nouvelle at Camp Arifjan in February and March
2003; or (ii) KBR and La Nouvelle made, used, or caused to be made or used false records or statements
to get such false claims paid or approved.

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actual knowledge that certain requirements were violated, that is very strong evidence that those
requirements are not material.” Lemon, 924 F.3d at 162 (citing Univ. Health Servs, Inc. v. United
States ex rel. Escobar, 136 S.Ct. 1989, 1999, 195 L.Ed.2d 348 (2016)). The Government
concluded that any false claims arising from Seamans’ kickback arrangement were immaterial.
Accordingly, the Court grants summary judgment to KBR as to Counts II and III, as to
Subcontract 11.
iii.

Conspiracy Liability under the FCA (Count IV)

On Count IV, the Government alleges that KBR violated the FCA by conspiring with La
Nouvelle to defraud the Government by getting a false claim paid, in connection with
Subcontract 11.28 The Government has established a genuine issue of material fact as to each
essential element of its conspiracy liability theory. A reasonable jury could conclude that
Stephen Seamans and Ali Hijazi entered into a tacit agreement to defraud the Government, based
on: Seamans’ solicitation and receipt of a bribe from La Nouvelle around the time of the
subcontract award; Seamans’ “poisoning” of the bidding process through Tamimi; Hijazi’s job
offer to Seamans’ following Seamans’ resignation from KBR and Hijazi’s statements concerning
the job offer; and Seamans’ deposition and affidavit statements that the job offer was a “sham.”
A jury could also find that Mazon took at least one overt act in furtherance of the conspiracy—
for instance, by seeking his supervisors’ approval of the inflated price or by executing the
subcontract with Hijazi. A jury could also conclude that Seamans and Hijazi formed the
agreement while Seamans was acting in the scope of his authority and to benefit KBR, such that
Seamans’ scienter should be imputed to KBR. Accordingly, KBR’s summary judgment motion
as to Count V is denied.
28

The Government’s briefing gives no suggestion that Count IV is also premised on allegations that KBR
sought reimbursement of unauthorized payments to La Nouvelle for cleaning services at Camp Arifjan.

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iv.

Breach of Contract Claim (Count VII)

Opposing KBR’s summary judgment motion on the Government’s contract claim, the
Government alleges that, after May 9, 2004, KBR resubmitted reimbursement vouchers for La
Nouvelle invoices under Subcontract 11. The Government again cites the billing summary
prepared by KBR that allegedly shows that, starting on June 15, 2004, KBR submitted vouchers
for the inflated costs and that the Government paid those vouchers. Citing statements in the
Tashjian affidavit, KBR asserts that these vouchers represent accounting transactions that simply
reassigned previously-billed costs to a different task order. The Court is of the opinion that a
genuine issue of material fact exists as to whether the transactions at issue were claims for
payment submitted by KBR under Subcontract 11.29 Accordingly, the Court denies KBR’s
summary judgment motion on Count VII, as it relates to Subcontract 11.
VI.

ORDER
Based on the foregoing analysis and discussion, the Court finds KBR’s motion for

summary judgment should be GRANTED IN PART and DENIED IN PART. Likewise, the
Government’s motion for partial summary judgment should be GRANTED IN PART and
DENIED IN PART. It is, therefore, ORDERED that:
1.

The Court grants summary judgment to the Government on Count I and on
Counts II and III, as to Subcontracts 167, 190, and Change Order 1 to Subcontract
167;

2.

The Court grants summary judgment to KBR on Counts II and III, as to
Subcontracts 11 and 39; on Counts IV and V, as to Subcontracts 167, 190, and

29

Importantly, unlike with Subcontract 39, no DCAA audit report supports KBR’s contentions regarding
the disputed transactions under Subcontract 11. While DCAA’s internal memorandum, dated March 20,
2015, stated that the concerns raised regarding Subcontract 11 “were not material enough to . . . to
warrant additional efforts to issue the report and negotiate the costs,” the Government is not required to
show that a claim was material to prove its breach of contract claim.

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Change Order 1 to 167, but denies summary judgment on Counts IV and V, as to
Subcontracts 11 and 39; and
3.

The Court grants summary judgment to KBR on Count VI; and

4.

The Court grants summary judgment to KBR on Count VII, as to Subcontracts
167, 190, 39, and Change Order 1 to Subcontract 167, but denies summary
judgment on Subcontract 11.

It is so ORDERED.
SIGNED on this 25th day of March, 2021.
___________________________________
Kenneth M. Hoyt
United States District Judge

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