Panalpina pays $375,000 fine
The U.S. Justice Department said Friday that Swiss-based freight forwarder Panalpina Inc. has agreed to pay $375,000 to settle allegations the company paid kickbacks to employees of Kellogg Brown & Root Inc.
Justice said the kickbacks were related to shipping orders issued in connection with KBR's contract with the U.S. Army to provide logistical support to the U.S. military in Iraq and elsewhere. They were alleged to violate the False Claims Act and the Anti-Kickback Act.
The settlement resolves allegations that Panalpina provided kickbacks in the form of meals, drinks, tickets to sports events and golf outings to employees in KBR's transportation department in order to gain favorable treatment on subcontracts under the U.S. military's Logistics Civil Augmentation Program. Under the LOGCAP III contract, KBR was to provide logistical support for U.S. military operations abroad.
The United States previously settled claims with Eagle Global Logistics (EGL, now CEVA) related to the same lawsuit for more than $5 million. The government is continuing to pursue claims against KBR based on its employees taking kickbacks from Panalpina and EGL.
“Kickbacks paid for military subcontracts undermine the integrity of the government contracting process,” said Tony West, assistant attorney general for the civil division of the Justice Department. “We will not tolerate wartime profiteering at the expense of taxpayer dollars.”
The allegations against Panalpina were originally raised in the course of a lawsuit filed in the U.S. District Court for the Eastern District of Texas by David Vavra and Jerry Hyatt, two individuals active in the air cargo business. Under the whistleblower provisions of the False Claims Act, private citizens can file suit on behalf of the United States and share in any recovery. Vavra and Hyatt will receive $78,750 as their share of this settlement.
In a comment released Monday morning, Panalpina said the $375,000 fine was “substantially lower than settlement amounts paid by other defendants named in the plaintiffs' complaint.
“This low settlement amount reflects Panalpina's cooperation, its strong compliance program, and the fact that the alleged activities involved a former employee, without the knowledge, approval or involvement of present management. After learning of the allegations, Panalpina conducted an internal investigation and concluded that any persons allegedly involved in any improper activity were no longer employed by the company,” the forwarder said. ' Chris Dupin