DOJ probes allegations against Panalpina, EGL
The U.S. Justice Department said it is pursuing allegations that freight forwarders Eagle Global Logistics and Panalpina provided unlawful kickbacks in the form of meals, drinks, tickets to sports events and golf outings to employees of Kellogg Brown & Root (KBR).
The agency has intervened in a whistleblower lawsuit against KBR, Panalpina Inc. and others that alleges employees of the two freight forwarders doing business with the companies provided unlawful kickbacks to KBR transportation department employees. KBR is the prime contractor under the Logistics Civil Augmentation Program (LOGCAP III) contract for logistical support of U.S. military operations in Iraq. The whistleblowers also allege overbilling by a KBR subcontractor in the Balkans, Wesco, under a military contract.
Eagle Global Logistics has since merged with TNT Logistics and become CEVA.
“The government will seek damages and penalties under the False Claims Act and common law, as well as penalties under the Anti-Kickback Act,” the Justice Department said in a press release issued Wednesday. The United States has declined to intervene in the remaining allegations of the suit.
The lawsuit was filed in U.S. District Court for the Eastern District of Texas under the whistleblower provisions of the False Claims Act by David Vavra and Jerry Hyatt, who have been active in the air cargo business. The act allows a private citizen, or “relator,” to sue on behalf of the United States. If the suit is successful, they may share in the recovery.
“Defense contractors cannot take advantage of the ongoing war effort by accepting unlawful kickbacks,” said Tony West, Assistant Attorney General of Justice's Civil Division. “We are committed to maintaining the integrity of the Department of Defense’s procurement process.”
The United States previously intervened in and settled the relators' allegations that EGL included non-existent charges for war risk insurance in invoices to KBR for air shipments to Iraq, costs that KBR passed on to the Army. Two EGL employees pleaded guilty to related criminal charges. EGL paid the United States $4 million in the civil settlement.
The government also intervened in and settled the relators' allegations that EGL's local agent in Kuwait, a company known as Al-Rashed, overcharged it for the rental (or demurrage) of shipping containers. The United States resolved potential claims arising from that matter against EGL for $300,000. Finally, EGL paid the government $750,000 to settle the relators' allegations that the company provided kickbacks to employees in KBR's transportation department. Former EGL employee Kevin Smoot and former KBR employee Bob Bennett pleaded guilty to related criminal charges in federal court in Rock Island the Justice Department said.
That case, [United States of America ex rel. Vavra, et al. v. Kellogg Brown & Root Inc., et al., C.A. No. 1:04-CV-00042 (E.D. Tex.)], is being prosecuted as part of a National Procurement Fraud Initiative. ' Chris Dupin