Tamimi Global Company, LTD v. Kellogg Brown & Root, L.L.C., Kellogg Brown & Root International, Inc., and Kellogg Brown & Root Services, Inc. ( 2015 )

ACCEPTED
14-13-00824-CV
FOURTEENTH COURT OF APPEALS
HOUSTON, TEXAS
11/23/2015 4:29:17 PM
CHRISTOPHER PRINE
CLERK
No. 14-13-00824-CV
FILED IN
IN THE 14th COURT OF APPEALS
FOURTEENTH COURT OF APPEALS HOUSTON, TEXAS
HOUSTON, TEXAS 11/23/2015 4:29:17 PM
CHRISTOPHER A. PRINE
Clerk
TAMIMI GLOBAL COMPANY, LTD.
Appellant/Cross Appellee,
v.
KELLOGG BROWN & ROOT, L.L.C., KELLOGG
BROWN & ROOT INTERNATIONAL, INC., AND
KELLOGG BROWN & ROOT SERVICES, INC.,
Appellees/Cross-
Appellants.
MOTION FOR REHEARING
Lauren B. Harris
Texas Bar No. 02009470
lharris@porterhedges.com
Nicholas A. Simms
Kerry M. McMahon
David W. Salton
Porter Hedges LLP
1000 Main Street, 36th Floor
Houston, Texas 77002
Telephone: (713) 226-6624
Facsimile: (713) 226-6224
Attorneys for Appellees and Cross-
Appellants Kellogg Brown & Root,
L.L.C., Kellogg Brown & Root
International, Inc., and Kellogg Brown &
Root Services, Inc.
TO THE HONORABLE FOURTEENTH COURT OF APPEALS:
Pursuant to the Texas Rules of Appellate Procedure, Appellees and Cross-
Appellants Kellogg Brown & Root, L.L.C., Kellogg Brown & Root International,
Inc., and Kellogg Brown & Root Services, Inc. (collectively “KBR”) file this
Motion for Rehearing, and would respectfully show the Court as follows:
Argument
KBR files this motion for rehearing to address a single issue: whether this
Court properly affirmed the district court’s denial of KBR’s breach of contract
counterclaim seeking recovery of $930,000 in attorneys’ fees and costs it incurred
in third-party litigation arising from Tamimi’s payment of illegal kickbacks. This
Court affirmed the trial court’s findings that the collateral litigation against KBR
was not caused by Tamimi’s breach of the contract by offering kickbacks, but the
acceptance of those kickbacks by two KBR employees (Terry Hall and Luther
Holmes). Op. at 43-47. KBR respectfully urges this Court to reconsider its
decision because the Court’s analysis is contrary to controlling standards of
causation the Texas Supreme Court has carefully established.
I. Tamimi’s Offers of Kickbacks and Their Acceptance By Hall and
Holmes Were Concurring Causes of KBR’s Damages.
The Court’s causation analysis demonstrates that it failed to properly adhere
to controlling standards for evaluating causation, and in particular, for applying the
“substantial factor” test. Rather than properly considering Tamimi’s conduct in
1
paying kickbacks, the Court incorrectly determined that causation was not proven
because of Hall and Holmes’ acceptance of the illicit offer. The breakdown in the
Court’s reasoning, however, is that Tamimi not only initiated the entire chain of
events by offering kickbacks, but it paid them over an extended time period and
allegedly benefitted from those payments—the very reason the United States
government deemed its contract “tainted” and KBR was sued. The acceptance of
kickbacks was, at the very least, a concurring cause of KBR’s damages.
The Court’s analysis further demonstrates that it improperly treated the
acceptance of kickbacks as a superseding cause that absolved Tamimi from any
liability. That theory, however, has no application under these facts where the
acceptance of kickbacks was within the scope of the risk created by Tamimi’s
conduct and foreseeable. The Court then compounded its error by erroneously
concluding that the federal counterclaim attributed any misconduct only to the
acceptance of kickbacks, when that interpretation is refuted by its plain language.
Tamimi’s breach of the contractual anti-kickback provision was a “substantial
factor” in causing the government’s federal counterclaim as a matter of law.
A. The “Substantial Factor” Standard Does Not Require Tamimi’s
Conduct To Be The Sole Cause of Harm.
The trial court misconstrued the “substantial factor” test to require that
Tamimi’s conduct be the only cause of KBR’s damages. The trial court criticized
KBR for failing to offer proof that the United States would have “filed its
2
counterclaim had there been an offer of kickback from Mr. Khan but no acceptance
by KBR employees.” CR2592-93¶12. In other words, the trial court incorrectly
construed the “substantial factor” standard to essentially require KBR to eliminate
Hall and Holmes’ conduct as a basis for the counterclaim—disregarding that, at the
very least, Tamimi’s conduct was a concurrent cause of KBR’s damages.
The “substantial factor” test permits a finding of causation-in-fact
notwithstanding concurrent causation by other intervening events. See
Transcontinental Ins. Co. v. Crump, 330 S.W.3d 211, 222-23 (Tex. 2010). The
proximate cause standard has been defined to include the substantial factor
requirement (cause-in-fact) as well as a foreseeability component:
“Proximate cause” means a cause that was a substantial factor in
bringing about an event, and without which cause such an event
would not have occurred. In order to be a proximate cause, the act or
omission complained of must be such that a person using the degree
of care required of him would have foreseen that the event, or some
similar event, might reasonably result therefrom. There may be more
than one proximate cause of an event.
See State Bar of Tex., Texas Pattern Jury Charges: Business, Consumer, Insurance
& Employment PJC §100.14 (2012 ed.); Crump, 330 S.W.3d at 223. The trial
court’s analysis fails to recognize that there can be more than one cause of an
event, and that a concurrent act that cooperates with the original act will not cut off
the liability of the original wrongdoer. See Travis v. City of Mesquite, 830 S.W.2d
94, 98 (Tex. 1992); Bell v. Campbell, 434 S.W.2d 117, 122 (Tex. 1968); 2RR41.
3
The foreseeable conduct of another does not break the chain of causation.1 See
Mewhinney v. London Wineman, Inc., 339 S.W.3d 177, 182 (Tex. App.—Dallas
2011, pet. denied).
The trial court mistakenly believed that the “substantial factor” standard
imposed a higher burden on KBR that its plain language implies. CR2592¶11. In
Crump, the Texas Supreme Court rejected the view that the “substantial factor”
requirement imposes a higher threshold, stating:
The word “substantial” is used to denote the fact that the defendant’s
conduct has such an effect in producing the harm as to lead reasonable
men to regard it as a cause, using that word in the popular sense, in
which there always lurks the idea of responsibility, rather than in the
so-called “philosophic sense,” which includes every one of the great
number of events without which any happening would not have
occurred. Each of these events is a cause in the so-called “philosophic
sense,” yet the effect of many of them is so insignificant that no
ordinary mind would think of them as causes.
Crump, 330 S.W.3d at 224 (citing Lear Siegler, Inc. v. Perez, 819 S.W.2d 470, 472
& n.1 (Tex. 1991)). Despite the supreme court’s guidance, the trial court declined
to find that Tamimi could be “responsible for whatever happens next.”
CR2592¶14.
1
These Texas cases discuss the proximate cause standard in the context of tort
claims, such as general negligence. However, to the extent the trial court and court of
appeals applied the proximate cause standard here, these cases are applicable.
4
The trial court and Court of Appeals erroneously failed to recognize that
Tamimi initiated the chain of events causing the ultimate harm, i.e. paying the
kickbacks that “ensured that Tamimi would obtain lucrative dining facility
(“DFAC”) subcontracts from KBR,” and that the government alleged resulted in
inflated claims. KBR Ex. 23, ¶108; App. Tab A. This is not a situation (as the
Court here appears to have accepted) where a mere offer and attenuated acceptance
occurred. The scheme between Tamimi, Hall and Holmes took place over an
extended period, as Tamimi continued to pay them over the course of more than a
year. Id. at ¶115. Throughout this period, Hall and Holmes were allegedly
involved in making decisions that continued to benefit Tamimi as it received
lucrative contracts from KBR. Id. at ¶116. Tamimi’s conduct was a substantial
factor in sparking the government’s counterclaim as a matter of law, and, at least, a
concurring cause of KBR’s damages. The trial court’s contrary decision is also
against the great weight and preponderance of the evidence.
The trial court never properly focused on the conduct of Tamimi and its
contractual breaches, or considered the foreseeability component of the proximate
cause test. The possibility that a lower level KBR employee might accept
kickbacks was certainly foreseeable to Tamimi. See, e.g. County of El Paso, Tex.
v. Jones, No. EP-09-CV-000119-KC, 2009 WL 4730303 *11 (W.D. Tex. 2009)
(not designated for publication) (“Because it is also foreseeable that Defendants’
5
conduct in offering bribes to Flores would lead to acceptance of the offer, the
County has established proximate cause.”). In fact, the prohibition on kickbacks
was expressly stated in the parties’ subcontracts. These subcontracts were
reviewed by Shabbir Kahn (“Kahn”), who ran Tamimi as its chief of operations.
2RR75, 3RR26, 31. And it was Khan who was responsible for initiating the
kickbacks. 3RR23, 27-28, 32, 39. Also see El Chico Corp. v. Poole, 732 S.W.2d
306, 314 (Tex. 1987) (recognizing that it is foreseeable that the sale of alcohol to a
minor will result in the minor driving while intoxicated and causing injury to
himself or others).
Mark Lowes, in-house counsel for KBR, was the only expert witness to
testify as to KBR’s attorneys’ fees and the reason why they were incurred:
Q: (Mr. Simms): And how did the offer of bribes to Terry Hall
cause damages to KBR?
A: (Mr. Lowes): Well, but for that, we would haven’t had the
counterclaim and we wouldn’t have had to defend. We would have
only had the contract action.
3RR24.
Q: (Mr. Klasing): ….isn’t it true that the trigger for every single
one of these causes of action,….is the fact that KBR employees
actually took kickbacks from someone?
A: (Mr. Lowes): You and I have and I have had this semantic
discussion before and I respectfully disagree. Our contract says
you’re not going to make the offer, but for the offer, it’s impossible
for anyone to accept it….
6
3RR80-81. Tamimi did not offer any witness to contradict this testimony. Also
see 3RR53 (“…but for the bribe, which the government claimed tainted the
contract, I wouldn’t have had to defend these actions.”). Because the court
misinterpreted the “substantial factor” test to require KBR to disprove that Hall
and Holmes’ conduct was also a reason for the government’s counterclaim, the
judgment should be reversed.
B. Hall and Holmes’ Acceptance of Kickbacks Was Not An
Intervening Cause That Vitiated Tamimi’s Liability.
Without expressly using the term “new and independent” (or superseding)
cause, this Court and the trial court effectively decided that Hall and Holmes’
acceptance of the kickbacks absolved Tamimi of liability for the consequences of
its breach. However, this inferential rebuttal theory has no applicability where the
intervening forces are foreseeable and within the scope of the risk created by the
defendant’s conduct.
A “new and independent cause” is one that intervenes between the original
wrong and the final injury such that the injury is attributed to the new cause rather
than the first and more remote cause. See Dew v. Crown Derrick Erectors, Inc.,
208 S.W.3d 448, 450 (Tex. 2006). An intervening cause supersedes the
defendant’s conduct and destroys the causal connection between that conduct and
the plaintiff’s injury. Id. However, this Court and the trial court failed to
recognize that if the intervening force was foreseeable, it is “considered to be a
7
concurring cause of the plaintiffs’ injuries and the defendant remains liable.” Id. at
451.
As the Texas Supreme Court noted in Dew, intervening forces are within the
scope of the original risk created by the defendant’s misconduct:
Obviously the defendant cannot be relieved from liability by the fact
that the risk, or a substantial and important part of the risk, to which
the defendant has subjected the plaintiff has indeed come to pass.
Foreseeable and intervening forces are within the scope of the original
risk, and hence of the defendant’s negligence. The courts are quite
generally agreed that intervening causes which fall fairly in this
category will not supersede the defendant’s responsibility.
Id. at 453. “Where the intervening act’s risk is the very same risk that renders the
original actor negligent, the intervening act cannot serve as a superseding cause.”
Id.
Similarly, it is no defense to Tamimi’s liability that the acceptance of the
kickbacks was a criminal act. Intentional criminal conduct is also not a
superseding cause of injury where the criminal conduct is foreseeable. See Phan
Son Van v. Peňa, 990 S.W.2d 751, 753 (Tex. 1999). As stated in the Restatement
of Torts,
[t]he act of a third person in committing an intentional tort or crime is
a superseding cause of harm to another resulting therefrom, although
the actor’s negligent conduct created a situation which afforded an
opportunity to the third person to commit such a tort or crime, unless
the actor at the time of his negligent conduct realized or should have
realized the likelihood that such a situation might be created, and that
a third person might avail himself of the opportunity to commit such a
tort or crime.
8
Id. at 753, citing RESTATEMENT (SECOND) OF TORTS §448 (1965). Here, Tamimi’s
conduct went well beyond being merely negligent—Tamimi intentionally
committed a crime by offering a kickback and created a situation where that offer
was accepted.
The Court effectively (but incorrectly) decided that Hall and Holmes’
acceptance of kickbacks relieved Tamimi of any responsibility for its breach,
allowing Tamimi to breach its contracts with impunity. Although the trial court
acknowledged the federal court of claims’ finding that knowledge of the kickbacks
had not been imputed to KBR in the federal court proceeding (CR2591¶6, KBR
Ex. 25; 3RR58), the court improperly decided that it was KBR’s acceptance of the
kickbacks that caused the collateral litigation against KBR. The trial court,
however, never made any finding that KBR was responsible for the illegal actions
of Hall and Holmes, or that their conduct was authorized. See J & C Drilling Co.
v. Salaiz, 866 S.W.2d 632, 636 (Tex. App.—San Antonio 1993, no pet.) (finding
that claim of respondeat superior was waived where no evidence of course and
scope of employment was presented). The trial court’s determination that KBR’s
conduct, and not Tamimi’s, was the cause of KBR’s damages is in error.
C. The Court Improperly Construed The Federal Pleadings To State
That The Counterclaim Was A Result of KBR’s Conduct Alone.
The Court’s affirmance of the trial court’s judgment is also in error because
the lower court solely relied on the federal court counterclaim to decide that the
9
lawsuit was caused by “KBR’s acceptance of the offer which triggered the
litigation.” CR2592. However, the trial court disregarded the allegations
throughout the petition that Tamimi’s repeated illicit payments to Hall and Holmes
also served as a basis for the counterclaim.
The allegations in the counterclaim describe a course of payments Tamimi
made over several years, after Hall initially declined the offer “but reported it to
nobody.” See KBR Ex. 23, ¶114-116; App. Tab A. The pleadings further describe
decisions for the “benefit of Tamimi as a KBR subcontractor” during the time the
payments were made. Id. at ¶116. The government also alleged that these
kickbacks resulted in “inflated contract prices from Tamimi for which KBR sought
reimbursement.” Id. at ¶118. Any conclusion that the government filed its
counterclaim purely based on Hall and Holmes’ acceptance of the kickbacks,
belies the plain language of the pleadings.2
If the focus of the counterclaim was on KBR, it was because Tamimi, as a
subcontractor, was not a party to that litigation. It is undisputed that Tamimi and
2
At the hearing on the motion for entry of judgment, the trial court stated that the
basis for his judgment was that “the only actual evidence I had was the federal
government saying that it was the acceptance of the offer and not the making of the offer
that caused their lawsuit.” 1RR7. To the contrary, the pleadings state that the
“counterclaims generally arise from the receipt of kickbacks by KBR employees from
Tamimi Global Company.” KBR Ex. 23, ¶108 (emphasis added); 3RR 23. Nowhere do
the pleadings state that Tamimi’s payments played no role in the litigation.
10
Khan were, in fact, separately prosecuted for their roles in the scheme. Tamimi
was charged with conspiracy to pay kickbacks and conspiracy to pay gratuities.
4BRR at DX 11, ¶1. Tamimi entered into a Deferred Prosecution Agreement with
the government (4BRR at DX 11) (App. Tab B), and Khan went to prison (4B RR
at DX 16). As part of the Deferred Agreement, Tamimi expressly admitted that it
was responsible for the “past crimes” and “unlawful conduct” of Khan in paying
kickbacks to Hall and Holmes (described therein as “Person A”). 4BRR at DX 11,
¶4, 22, Attachment A, ¶1, 41-43; 3RR31, 35. Tamimi also agreed to pay a
monetary penalty of $5.6 million. 4BRR at DX 11, ¶8. According to the
agreement, Khan made the payments to Hall and Holmes “in order to ensure that
[Tamimi] kept the DFAC subcontracts that it had, and to ensure that [Tamimi]
would continue to get additional subcontracts as they became available.” Id. at
¶43.
The government’s counterclaim against KBR, as well as Tamimi’s plea
agreement, unequivocally describe Tamimi’s pervasive role in paying illegal
kickbacks to obtain subcontracts at inflated prices. The trial court and court of
appeals’ decisions that the federal court litigation was only attributable to conduct
of KBR is simply wrong.
11
II. Texas Law Allows for The Recovery of Attorneys’ Fees Incurred In
Defending Foreseeable Litigation Caused By A Breach of Contract.
Although the trial court and this Court applied the “proximate cause”
standard in this case, that test is not typically applied in a breach of contract
dispute. See Abraxas Pet. Corp. v. Hornburg, 20 S.W.3d 741, 758 n.12 (Tex.
App.—El Paso 2000, no pet.); Winograd v. Clear Lake City Water Auth., 811
S.W.2d 147, 156 (Tex. App.—Houston [1st Dist.] 1991, writ denied) (“While
proximate cause must be proven in a tort action, it is not the causal standard
applied in a suit for damages for breach of contract.”); see Michol O’Connor,
O’CONNOR’S TEXAS CAUSES OF ACTION, ch. 5-B, §2.1 (2015 ed.). The Texas
Supreme Court has indicated that the proper test for breach of contract is whether
the damages “result from” the alleged breach. See McKnight v. Hill & Hill
Exterminators, Inc., 689 S.W.2d 206, 209 (Tex. 1985). Even if this higher
standard is applied,3 however, KBR was still entitled to recover its attorneys’ fees
as a matter of law.
3
The requirement of foreseeability is a more severe limitation of liability than is
the requirement of substantial or “proximate” cause in the case of an action in tort or for
breach of warranty. See RESTATEMENT (SECOND) OF CONTRACTS §351 cmt. a (1981).
Even so, KBR should also prevail under the foreseeability test.
12
The Restatement (First) of Contracts §334 contemplates that attorneys’ fees
incurred in the defense of collateral litigation caused by a defendant’s breach of
contract are recoverable. The Restatement provides:
If a breach of contract is the cause of litigation between the plaintiff
and third parties that the defendant has reason to foresee when the
contract was made, the plaintiff’s reasonable expenditures in such
litigation are included in estimating damages.
See RESTATEMENT (FIRST) OF CONTRACTS §334 (1932) (emphasis added). As the
Restatement recognizes, the key inquiry is the foreseeability of third party
litigation expenses resulting from any breach. See Mead v. Johnson Group, Inc.,
615 S.W.2d 685, 687 (Tex. 1981) (“In an action for breach of contract, actual
damages may be recovered when loss is the natural, probable, and foreseeable
consequence of the defendant’s conduct.”). A contracting party is expected to
account for those risks that are foreseeable at the time the contract is made. See
RESTATEMENT (SECOND) OF CONTRACTS §351 cmt. a, c.
Foreseeability is a fundamental prerequisite to the recovery of consequential
damages for breach of contract. Basic Capital Management, Inc. v. Dynex
Commercial, Inc., 348 S.W.3d 894, 901 (Tex. 2011). As the Texas Supreme Court
has recognized:
Consequential damages are those damages that result naturally, but
not necessarily, from the defendant’s wrongful acts. They are not
recoverable unless the parties contemplated at the time they made the
contract that such damages would be a probable result of the breach.
13
Thus, to be recoverable, consequential damages must be foreseeable
and directly traceable to the wrongful act and result from it.
Stuart v. Bayless, 964 S.W.2d 920, 921 (Tex. 1998) (per curiam) (internal citations
omitted). Texas jurisprudence regarding the foreseeability requirement has been
derived in part from Hadley v. Baxendale, in which the court recognized that:
Where two parties have made a contract which one of them has
broken, the damages which the other party ought to receive in respect
of such breach of contract should be such as may fairly and
reasonably be considered either arising naturally, i.e. according to the
usual course of things, from such breach of contract itself, or such as
may reasonably be supposed to have been in the contemplation of
both parties at the time they made the contract as the probable result
of the breach of it.
Basic Capital, 348 S.W.3d at 901, citing Hadley v. Baxendale, 9 Exch. 341, 156
Eng. Rep. 145, 151 (1854).
The Texas Supreme Court has specifically acknowledged the applicability of
section 351 of the Restatement (Second) of Contracts in which the parameters for
determining whether a loss is a foreseeable result of any breach is defined. See
Basic Capital, 348 S.W.3d at 901-02. The Restatement provides:
(1) Damages are not recoverable for loss that the party in breach did
not have reason to foresee as a probable result of the breach when
the contract was made.
(2) Loss may be foreseeable as a probable result of a breach because
it follows from the breach
a. in the ordinary course of events, or
14
b. as a result of special circumstances, beyond the ordinary
course of events, that the party in breach had reason to
know.
See RESTATEMENT (SECOND) OF CONTRACTS §351. If the contract is silent as to
risks the defendant has assumed, courts will determine what risks were foreseen or
foreseeable when the contract was made by viewing the matter in the light of
common sense, considering the nature and purpose of the contract, the surrounding
circumstances, and what liability the breaching party may reasonably have
assumed. See 24 SAMUEL WILLISTON & RICHARD A. LORD, A TREATISE ON THE
LAW OF CONTRACTS §64:13 (4th ed.).
In Basic Capital, the Texas Supreme Court, applying this test, reversed the
court of appeals’ determination that lost profits a borrower claimed as
consequential damages for breach of a commitment to provide financing were not
foreseeable. Basic Capital, 348 S.W.3d at 902-03. The lender agreed to loan the
borrower $37 million to acquire and rehabilitate three commercial buildings, if its
other entities would borrow $160 million over a two year period. After loaning
$37 million to acquire the buildings, however, the lender refused to provide further
financing once interest rates rose. Id. at 897. The borrower claimed damages for
lost profits, which the court of appeals disallowed. The Texas Supreme Court
reversed the court of appeals’ determination that the borrower’s lost profits were
not foreseeable. Id. at 901-02. The Court reasoned that the lender “cannot profess
15
blindness to foreseeability that its breach would also cost [the borrower] business.”
Id. at 903.
Applying these principles here, there is no question that Tamimi’s breach of
the contract precluding the offer of kickbacks was a cause of collateral litigation
initiated by the government. As in Basic Capital, Tamimi cannot claim that it was
unaware that if it breached the contract by offering kickbacks, those offers might
be accepted (unbeknown to KBR). And it is certainly foreseeable that this illegal
conduct might be discovered, and the perpetrators prosecuted. It is axiomatic that
when a person commits a crime, the actor contemplates the possibility of getting
caught. Tamimi, through Khan, knew it would breach the subcontracts and
commit a crime by offering kickbacks, yet chose to do so anyway.
The context and purpose of the contract between Tamimi and KBR must
also be considered in deciding whether KBR’s attorneys’ fees incurred in the
collateral litigation are foreseeable. KBR retained Tamimi as a subcontractor to
provide food services to the American troops during wartime in the Middle East.
3RR10-16. The parties certainly contemplated through the inclusion of the “anti-
kickback” provision in the contract that such offers were a possibility—especially
where the work was to be performed in a country experiencing lawlessness and
political unrest. The subcontracts specifically prohibit “kickbacks” not only
because they are illegal, but also to avoid the exact course of events that unfolded
16
here—that the government could decline to reimburse KBR for its payments to
Tamimi, and the parties could face criminal prosecution.
KBR included an anti-kickback notice in each of its subcontracts in
connection with the war effort in Iraq. 3RR17, 20. Certainly, KBR expected its
subcontractors to adhere to this agreement, and expressly contracted for
compliance. 3RR17. KBR maintains an active compliance program that is “part
of its corporate culture.” 3RR35. KBR has written policies and procedures
prohibiting kickbacks, and each employee participates in annual training to
reinforce them. 3RR35. Similarly, KBR provides hotlines to allow employees to
report potential violations of its corporate policies. 3RR36. The decisions of both
the trial court and this Court render KBR’s compliance program and the parties’
anti-kickback provision—which expressly prohibits Tamimi from offering
kickbacks—meaningless.
KBR was entitled to the recovery of attorneys’ fees because it was forced to
defend itself in collateral litigation that arose from Tamimi’s breach of the contract
and illegal conduct. The acceptance of any kickback offer was clearly foreseeable
to Tamimi because it occurred “in the ordinary course of events,” or at the very
least, occurred “as a result of special circumstances, beyond the ordinary course of
events, that [Tamimi] had reason to know.” See RESTATEMENT (SECOND) OF
CONTRACTS §351. The reasonably foreseeable consequences of a breach of
17
contract are compensable, “even if the criminal act of a third person intervened.”
See 24 SAMUEL WILLISTON & RICHARD A. LORD, A TREATISE ON THE LAW OF
CONTRACTS §64:13 at n.44. This Court incorrectly determined that the acceptance
of the kickback offers by KBR employees precluded KBR’s recovery of its
attorneys’ fees. KBR respectfully urges the Court to reconsider that decision.
WHEREFORE, Appellees and Cross-Appellants Kellogg Brown & Root,
L.L.C., Kellogg Brown & Root International, Inc., and Kellogg Brown & Root
Services, Inc. respectfully requests that the Court grant this Motion for Rehearing,
and for such other and further relief to which they may show themselves to be
justly entitled to receive.
Respectfully submitted,
PORTER HEDGES LLP
By: /s/ Lauren Beck Harris
Lauren Beck Harris
State Bar No. 02009470
Nicholas A. Simms
Kerry M. McMahon
David W. Salton
1000 Main Street, 36th Floor
Houston, Texas 77002
Telephone: (713) 226-6624
Facsimile: (713) 226-6224
Attorneys for Appellees and Cross-
Appellants Kellogg Brown & Root,
L.L.C., Kellogg Brown & Root
International, Inc., and Kellogg Brown
& Root Services, Inc.
18
CERTIFICATE OF SERVICE
Pursuant to Rules 6.3 and 9.5(b), (d), and (e) of the Texas Rules of Appellate
Procedure, this is to certify that on this 23rd day of November 2015, a true and
correct copy of the foregoing was served on the following counsel of record by
U.S. first class mail and by electronic delivery as follows:
Murphy S. Klasing
Weycer, Kaplan, Pulaski & Zuber, P.C.
11 Greenway Plaza, Suite 1400
Houston, TX 77046
Attorneys for Appellant Tamimi Global Company Ltd.
/s/ Lauren B. Harris
Lauren B. Harris
CERTIFICATE OF COMPLIANCE
1. This brief complies with the type-volume limitation of Texas Rule of
Appellate Procedure 9.4(i)(2)(D) because this brief contains 4,274 words,
excluding the parts of the brief exempted by Texas Rule of Appellate Procedure
9.4(i)(1).
2. This brief complies with the typeface requirements of Texas Rule of
Appellate Procedure 9.4(e) and the type style requirements of Texas Rule of
Appellate Procedure 9.4(e) because this brief has been prepared in a proportionally
spaced typeface using Microsoft Word in 14-point Times New Roman font or
larger.
/s/ Lauren B. Harris
Lauren B. Harris
19
APPENDIX A
Case 1:09-cv-00351-CCM Document 47 Filed 03115)11 Page 1 of 26
IN THE UNiTED STATES COURT Of FEDERAL CLAIMS
KELLOGG BROWN & ROOT SERVICES, )
INC.,
?laintiff, )
v. ) No. 09-351C
) (Judge Christine Miller)
THE UNITED STATES, )
)
Defendant )
DEFENDANT’S AMENDED ANSWER AND COUNTERCLAIMSt
For its amended answer to plaintiff’s complaint, defendant admits, denies, and alleges as
follows:
The allegations contained in the first sentence of the first paragraph of plaintiffs
“Introduction” are plaintiffs characterization, of its case, to which no response is required; to the
extent that they may be deemed allegations of fact, they are denied. Admits the allegations
contained in the second sentence of the first paragraph of plaintiffs “Introduction” to the
extent supported by the referenced contract, which is the best evidence of its contents; otherwise
denies the allegations. Admits the allegations contained in the third sentence of the first
paragraph of plaintiffs “Introduction.”
Denies the allegations contained in the first sentence of the second paragraph of
plaintiff’s “Introduction” for lack of knowledge or information sufficient to form a belief as to
their tmth. The remainder of the allegations contained in the second paragraph of plaintiffs
Although we made earlier filings in this case related to the potential affirmative
defenses and fraud counterclaims under seal because of the pendency of Mr. Terry Hall’s
testimony in a criminal case, this filing is not made under seal because Mr. Hall’s testimony in
that case has been completed and there is no longer any need to keep the information contained
herein confidential.
KBRPRODOO58839
Case I :09-cv-00351-CCM Document 47 Filed 03/15/11 Page 2 of 26
“Introduction” constitute plaintiff’s characterization of its case and conclusions oflaw, to which
no response is required; to the extent that they may be deemed allegations of fact, they are
denied.
The allegations contained in the third paragraph of plaintiffs “Introduction” constitute
plaintiffs characterization of its case and conclusions of law, to which no response is required; to
the extent that they may be deemed allegations of fact, they are denied.
1. Denies the allegations contained in paragraph 1 for lack of knowledge or information
sufficient to form a belief as to their truth.
2. The allegations contained in paragraph 2 are plaintiff’s characterization of its case, to
which no response is required; to the extent that they may be deemed allegations of fact, they are
denied.
3. The allegations contained in paragraph 3 are conclusions of law to which no response
is required; to the extent that they may be deemed allegations of fact, they are denied.
4. Admits the allegations contained in paragraph 4 that, on July 17,2008, plaintiff filed a
claim with Ms. Mendoza to the extent supported by the referenced claim document, which is the
best evidence of its contents; otherwise denies the allegations.
5. The allegations contained in paragraph 5 are conclusions of law to which no response
is required; to the extent that they may be deemed allegations of fact, they are denied.
6. Admits the allegations contained in paragraph 6 to the extent supported by the
referenced notification document, which is the best evidence of its contents; otherwise denies the
allegations.
2
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7. Avers that the referenced letter from the Administrative Contracting Officer was dated
November 25, 2008, but other wise admits the allegations contained in paragraph? to the extent
supported by the referenced letter, which is the best evidence of its contents; otherwise denies the
allegations.
8. Admits the allegations contained in paragraph 8 to the extent supported by the
referenced notification document, which is the best evidence of its contents; otherwise denies the
allegations.
9. Admits the allegations contained in paragraph 9 to the extent supported by the
referenced notification document, which is the best evidence of its contents; otherwise denies the
allegations.
10. The allegations contained in paragraph 10 are conclusions of law to which no
response is required; to the extent that they maybe deemed allegations of fact, they are denied.
11. Admits the allegations contained in paragraph 11 to the extent supported by the
referenced contract, which is the best evidence of its contents; otherwise denies the allegations.
12. Admits the allegations contained in paragraph 12 to the extent supported by the
referenced novafion document, which is the best evidence of its contents; otherwise denies the
allegations.
13. Admits the allegations contained in paragraph 13 to the extent supported by the
referenced contract, which is the best evidence of its contents; otherwise denies the allegations.
14. Admits the allegations contained in paragraph 14 to the extent supported by the
referenced contract, which is the best evidence of its contents; otherwise denies the allegations.
3
KBRPRODOO5884I
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15. Admits the allegations contained in paragraph 15 to the extent supported by the
referenced contract, which is the best evidence of its contents; otherwise denies the allegations.
16. Admits the allegations contained in paragraph 16 to the extent supported by the
referenced task order, which is the best evidence of its contents; otherwise denies the allegations.
17. Admits the allegations contained in paragraph 17 to the extent supported by the
referenced task order, which is the best evidence of its contents; otherwise denies the allegations.
18. Admits,
19. Admits,
20. Admits the allegations contained in paragraph 20 that, on occasion during the
performance of Task Order 59, some roads in Iraq were closed due to hostilities and contractors
in Iraq were sometimes the targets of insurgent activities. The allegations in this paragraph
relating to the means of performing the contract are admitted to the extent supported by the
contract task order, which is the best evidence of its contents; otherwise denies the allegations.
Denies all other allegations contained in this paragraph.
21. The allegations contained in paragraph 21 are plaintiffs characterization of its case,
to which no response is required and are so vague that they are not susceptible to responsive
pleading; to the extent that they may be deemed allegations of fact, they are denIed.
22. Admits the allegations contained in paragraph 22 to the extent supported by the
referenced task order, which is the best evidence ofits contents; otherwise denies the allegations.
23. The allegations contained in paragraph 23 are conclusions of law to which no
response is required; to the extent that they may be deemed allegations of fact, they are denied.
4
KBRPRODOO58$42
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24. The allegations contained in paragraph 24 are conclusions of law to which no
response is required; to the extent that they may be deemed allegations of fact, they are denied.
25. Admits the allegations contained in paragraph 25 to the extent supported by the
referenced task order, which is the best evidence of its contents; otherwise denies the allegations.
26. Admits.
27. Admits the allegations contained in paragraph 27 to the extent supported by the
referenced task order modification, which is the best evidence of its contents; otherwise denies
the allegations.
28. Admits the allegations contained in the first sentence of paragraph 28 to the extent
supported by the referenced statement of work, which is the best evidence of its contents;
otherwise denies the allegations. Admits the allegations contained in the second sentence of
paragraph 28.
29. Admits the allegations contained in paragraph 29 to the extent supported by the
referenced statement of work, which is the best evidence of its contents; otherwise denies the
aliegations.
30. Admits.
31. Denies the allegations contained in paragraph 31 for lack of knowledge or
information sufficient to form a belief as to their truth.
32. The allegations contained in paragraph 32 are ambiguous and plaintiffs
characterization of its case, to which no response is requfred to the extent that they may be
deemed allegations of fact, they are denied.
5
KBRPRODOO58843
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33. Denies the allegations contained in paragraph 33 for lack of knowledge or
information sufficient to foma a belief as to their tiuth.
34. Admits.
35. Admits.
36. Admits the allegations contained in paragraph 36 to the extent supported by the
referenced agreement, which is the best evidence of its contents; otherwise denies the allegations.
37. Admits the allegations contained in paragraph 37 to the extent supported by the
referenced “work release,” which is the best evidence of its contents; otherwise denies the
allegations.
38. Admits the allegations contained in paragraph 38 to the extent supported by the
referenced “revised work release,” which is the best evidence of its contents; otherwise denies
the allegations.
39. The allegations contained in paragraph 39 are conclusions of law to which no
response is required; to the extent that they may be deemed allegations of fact, they are denied.
40. Admits the allegations contained in paragraph 40 to the extent supported by the
referenced “Tamimi Subcontract” which is the best evidence of its contents; otherwise denies the
allegations.
41. Admits the allegations contained in paragraph 41 to the extent supported by the
referenced modification to ‘MA3, which is the best evidence of its contents; otherwise denies
the allegations.
42. AdmitS the allegations contained in paragraph 42 to the extent supported by the
referenced “Tamimi Subcontract” which is the beet evidence of its contents; otherwise denies the
6
KBRPRODOO58844
Case I :09-cv-00351-CCM Document 47 Filed 03/15/11 Page 7 of 26
‘S.
allegations.
43. Admits the allegations contained in paragraph 43 that facilities were constructed at
Camp Anaconda at sites A-I and A4 by Prime Projects International. Denies the remainder of
the allegations contained in paragraph 43 for lack of knowledge or information sufficient to form
a belief as to their truth.
44. The allegations contained in paragraph 44 are ambiguous and plaintiffs
characterization of its case, to which no response is required; to the extent that they may be
deemed allegations of fact, they are denied.
45. Denies the allegations contained in paragraph 45 for lack of knowledge or
information sufficient to form a belief as to their truth.
46. Denies the ailegations contained in paragraph 46 for lack of knowledge or
information sufficient to form a belief as to their truth.
47. Admits the allegations contained in paragraph 47 to the extent supported by the
referenced change order which is the best evidence of its contents; otherwise denies the
allegations.
48. Denies the allegations contained in paragraph 48 for lack of knowledge or
information sufficient to form a belief as to their truth.
49. Admits the allegations contained in the first sentence of paragraph 49 to the extent
supported by the referenced change order which is the best evidence of its contents; otherwise
denies the allegations. Denies the allegations contained in the seconds sentence of paragraph 49
for lack of knowledge or information sufficient to form a belief as to their truth.
7
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Page 8$ of
50.
50. Denies.
51. the allegations
51. Admits the 51, regarding the contents of plaintiff’s
allegations contained in paragraph 51, plaintiff's
"RFP" theextent
to the
“RPP” to supportedby
extentsupported the referenced
bythe referenced document,
document, which is the best evidence of its
evidence of
contents; otherwise the allegations.
denies the
otherwise denies allegations. Denies the remainder of contained in
of the allegations contained
paragraph 51
paragraph lack of
for lack
51 for knowledge or
ofknowledge or information
information sufficient to forra
form a belief to their truth.
belief as to
52. Admits the
52. aUegation contained
the allegation responded
contained in paragraph 52, that Tamimi and others responded
to the "RFP." Deniesthe
“RFP.” Denies remainderof
theremainder ofthe
the allegation
allegation contained
contained in paragraph 52.
53.
53. Admits the allegations contained
the allegations in the first sentence of
containedin the extent
of paragraph 53 to the
supported by the
supported by the referenced change order
referenced change order which is the best evidence of otherwise
of its contents; otherwise
denies the allegations.
54. Admits the
54. the allegations contained in paragraph 54 to the extent supported by the
allegations contained
referenced change
change order which is
order which is the best evidence of
of its contents; otherwise denies the
allegations.
allegations.
55. Admits the
55. allegations contained
the allegations supported by the
contained in paragraph 55 to the extent supported
referenced
referenced change
change order
order which
which is the
the best
best evidence
evidence of denies the
of its contents; otherwise denies
allegations.
56, Admits the
56. the allegations contained in
allegations contained in paragraph 56 to the extent supported by the
referenced
referenced change
change order
order which is the best evidence
which is of its contents; otherwise denies the
evidence of
allegations.
57. Admits the
57. allegations contained
the allegations contained in supported by the
in paragraph 57 to the extent supported
referenced change
change order
order which is
is the best evidence of the
of its contents; otherwise denies the
allegations.
8
KBRPROD0058846
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Case I ;09-cv-00351-CCM Document 47 Filed 03115/11 Page 9 of 26
58. Denies the allegations contained in paragraph 58 for lack of knowledge or
information sufficient to form a belief as to their truth.
59. Admits the allegations contained in paragraph 59 that plaintiff solicited and received
proposals from vendors for the recruitment and transportation of laborers to Camp Anaconda.
Denies the remainder of the allegations contained in paragraph 59 for lack of knowledge or
information sufficient to form a belief as to their truth.
60. Admits the allegation contained in paragraph 60 that plaintiff awarded a subcontract
to “ESS” in August 2004 to provide labor. Denies the remainder of the allegations contained in
paragraph 60 for lack of knowledge or information sufficient to form a belief as to their truth.
61. Denies the allegations contained in paragraph 61 for lack of knowledge or
information sufficient to form a belief as to their truth.
62. Admits the allegations contained in paragraph 62 to the extent supported by the
referenced change order which is the best evidence of its contents; otherwise denies the
allegations.
63. Denies the allegations contained in paragraph 63 for lack of knowledge or
information sufficient to form a belief as to their truth.
64. Admits the allegation contained in paragraph 64 that plaintiff terminated its
subcontract with ESS. Denies the remainder of the allegations contained in paragraph 64 for lack
of knowledge or information sufficient to form a belief as to their truth.
65. Denies the allegations contained in paragraph 65 for lack of knowledge or
information sufficient to form a belief as to their truth.
9
.Vc.
KBRP RODOO5$847
Case 1:09-cv-00351-CCM Document 47 Filed 03/15111 Page 10 of 26
66. Denies the allegations contained In paragraph 66 for lack of knowledge or
information sufficient to form a belief as to their truth.
67. Denies the allegations contained in paragraph 67 for lack of knowledge or
information sufficient to form a belief as to their truth.
68. Admits the allegations contained in the second sentence of paragraph 68 that Tamimi
continued to perform its contract with plainti during negotiations. Denies the allegations
contained in paragraph 68 for lack of knowledge or information sufficient to form a belief as to
their truth.
69. Denies the allegations contained in paragraph 69 for lack of knowledge or
information sufficient to form a belief as to their truth.
70. Admits the allegations contained in paragraph 70 to the extent supported by the
referenced contract modification which is the best evidence of its contents; otherwise denies the
allegations for lack ofknowledge or information sufficient to form a belief as to their truth.
71. Admits the allegations contained in paragraph 71 to the extent supported by the
referenced change orders which are the best evidence of their contents; otherwise denies the
allegations.
72. Denies the allegations contained in paragraph 72 because the phrase, “substantially
based upon” is ambiguous and for lack of knowledge or information sufficient to form a belief as
to their truth.
73. Admits the allegations contained in paragraph 73 to the extent supported by the
referenced change order which is the best evidence of its contents; otherwise denies the
allegations.
10•
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Case 1:09-cv-00351-CCM Document 47 Filed 03/15/11 Page 11 of 26
74. Denies.
75. The allegations contained in paragraph 75 are plaintiffs characterization of its case,
to which no response is required; to the extent that they may be deemed allegations ofct, they
are denied.
76. The allegations contained in paragraph 76 are ambiguous and plaintiffs
characterization of its case, to which no response is required; to the extent that they may be
deemed allegations of fact, they are denied.
77. The allegations contained in paragraph 77 are ambiguous and plaintiff’s
characterization of its case, to which no response is required to the extent that they may be
4eemed allegations of fact, they are denied.
78. The allegations contained in paragraph 78 are ambiguous and plaintiffs
characterization of its case, to which no response is required to the extent that they may be
deemed allegations of fact, they arc denied.
79. Denies the allegations contained in paragraph 79-for lack of knowledge or
information sufficient to form a belief as to their truth.
20. Admits the allegations, contained in paragraph 80, that plaintiff provided vouchers to
the Government, that included statements of amounts paid to Tamimi pursuant to Task Order 59.
Denies the remainder of the allegations contained in paragraph 80 for lack of knowledge or
information sufficient to form a belief as to their truth.
81. Admits. -
82. Admits.
83. Admits the allegations contained in paragraph 83 to the extent supported by the
11
KBRPRODOO58849
Case 1 :09-cv-00351-CCM Document 47 Filed 03/15/11 Page 12 of 26
referenced audit report which is the best evidence of its contents; otherwise denies the
allegations.
84. Admits.
85. Admits the allegations contained in paragraph 85 to the extent supported by the
referenced DCAA form lwhich is the best evidence of its contents; otherwise denies the
allegations.
86, Admits the allegations contained in paragraph 86 to the extent supported by the
referenced DCAA form lwhich is the best evidence of its contents; otherwise denies the
allegations.
87. The allegations contained in paragraph $7 are plaintiffs characterization of its case,
to which no response is required; to the extent that they may be deemed allegations of fact, they
are denied.
88. Admits the allegations contained in paragraph 88 to the extent supported by the
referenced DCAA Form lwhich is the best evIdence of its contents; otherwise denies the
allegations.
89. Admits the allegation contained in paragraph 89, that the “PCO” has withheld
$41,070,624 from plaintifl The remainder of the allegations contained in paragraph 89 are
plaintiff’s characterization of its case, to which no response is required; to the extent that they
may be deemed allegations of fact, they are denied.
90. Defendant incorporates by reference its responses to the allegations of paragraphs 1
through 89 of the complaint.
12
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91. The allegations contained in paragraph 91 are conclusions oflaw and plaintiffs
characterization of its case, to which no response is required; to the extent that they may be
deemed allegations of fact, they are denied.
92. The allegations contained in paragraph 92 are conclusions of law and plaintiffs
characterization of its case, to which no response is required; to the extent that they may be
deemed allegations of fact, they are denied.
93. Admits the allegations contained in paragraph 93 to the extent supported by the
referenced regulation, which is the best evidence of its contents; otherwise denies the allegations.
94. The allegations contained in paragraph 94 are conclusions of law and plaintiff’s
characterization of its case, to which no response is required; to the extent that they may be
deemed allegations of fact, they are denied,
95. The al]egations contained in paragraph 95 are conclusions of law and plaintiff’s
characterization of its case, to which no response is required; to the extent that they may be
deemed allegations of fact, they are denied.
96. Denies.
97. The allegations contained in paragraph 97 are conclusions of law and plaintiffs
characterization of its case, to which no response is required; to the extent that they may be
deemed allegations of fact, they are denied.
98. The allegations contained in paragraph 98 are conclusions of law and plaintiffs
characterization of its case, to which no response is required; to the extent that they may be
deemed allegations of fact, they are denied.
‘3
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contabed in paragraph 99
99. The allegations contained
99. 99 are conclusions of law and plaintiff’s
plaintiff's
characterization
characterization of its case,
of its case, to which no response is required; to the extent
to which that they may be
extent that
deemed allegations
deemed allegations of fact, they
offact, are denied.
they are
100. The
100. allegations contained
The allegations 10 are conclusions of law and plaintiff’s
contained in paragraph 10 plaintiff's
characterization of
characterization its case,
of its to which
case, to no response
which no response isis required; to the extent
to the that they
extent that may be
they may
deemed allegations of
deemed allegations offact, they are
fact, they are denied.
denied.
101. Denies
101. that plaintiff
Denies that plaintiffis
is entitled
entitled to the relief set forth in the prayer for relief
relief set relief
immediately following
immediately paragraph 100,
following paragraph 100, or reliefwhatsoever.
any relief
or to any whatsoever.
and every
each and
102. Denies each
102. previously admitted or otherwise qualified.
every allegation not previously
14
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Case I :09-cv-00351 -CCM Document 47 Filed 03/15111 Page 15 of 26
DEFENDANT’S FIRST AYFIRiv1JJIVE DEFENSE
103. Plaintiff’s claim is unenforceable because of the taint of”ldckbacks,”
DEFENDANT’S COUNTERCLAIMS
104. These counterclaims arise pursuant to the Special Plea in fraud, 28 U.S.C. § 2514,
the Anti-Kickback Act, 41 U.S.C. § 53, 55, the False Claims Act, 31 U.S.C. S 3729, and under
common law fraud.
105. The Court possesses jurisdiction pursuant to 28 U.S.C. § 1503 and 2508.
106. Defendant and counterclaim plaintiff is the United $tate.
107. Plaintiff and counterclaim defendant is Kellogg Brown & Root Services, Inc.
(“KBR”). V
108. These counterclaims generally arise from the receipt of kickbacks by KBR
employees from Tamimi Global Company (“Tamimi”). The two KBR employees most directly
implicated in this case are Mr. Terry Hall, who was KBR’s head of food services for Kuwait and
fracj from late 2002 through early 2004, and Mr. Luther Holmes, his deputy. Mr. Hall and Mr.
Holmes were both receiving kickbacks from a high-level Tamimi employee at the same time that
they were making decisions and recommendations that ensured that Tarnimi would obtain
lucrative dining facility (9)FAC”) subcontracts from KBR pursuant t the LOGCAP Ut contact
for which KBR would be reimbursed by United States taxpayer dollars along with a fee
determined by the subcontract costs. These actions resulted in, among other things, the
submission of falsely inflated and fraudulent claims to the contracting officer for payment from
the United States Treasury.
V
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109. October 2002, Mr. Hail
109. In October Hall was
was assiied
assigned to
to Kuwait
Kuwaitby
byKBR.
KBR. Mr.
Mr. Hall’s
Hall's
respcnsibiities included
responsibilities being the
included being the Regional Services Manager
Regional Food Services Manager for
for Kuwait
Kuwait (and
(and Iraq,
subsequent to its
subsequent its invasion
invasion by
by Coalition forces) under the LOGCAP m
Coalition forces) III contract.
contract. The
The Regional
Food Services Manager
food Services his staff
and his
Manager and staff were responsible for, among other things, ensuring that
subcontractors providing
subcontractors providingDFAC
DFAC services
services for
for KBR,
KBR, as
as required
required by
by task
task orders
orders upon
upon the
the LOGCAP
LOGCAP
Ill contract, were technically competent to perform such services; were responsible for helping
La
craft statements of
ofwork
work for
for subcontractors
subcontractors providing DFAC
OFAC services;
services; were
were responsible
responsible for
formally requisitioning
requisitioningDFAC
DFAC services
services (including
(including estimnting
estimating the
the costs
costs of
ofsuch
such services)
services) from
from the
KBR subcontractingstaff;
KER subcontracting staff; and were responsible
and were for overseeing
responsible for overseeing performance of DFAC
performance of OFAC
subcontracts.
subcontracts.
110. In early
110. early 2003,
2003, Mr.
Mr. Hall
Hall was
was joined in
in Kuwait
Kuwait by
by his
his newly-hired
newly-hired deputy,
deputy, Mr. Luther
Holmes.
111. One of
111. ofthe
the DFAC subcontractors Hall was Tarnimi
subcontractors supervised by Mr. Hail Atthe
Tamimi. At lime
the time
that Mr. Hall arrived
arrived in Kuwait, Tamimi
in Kuwait, Tamimi was
was already services related to the
already providing DFAC services
LOGCAP Ill
III contract as
as aa KBR
KBR subcontractor
subcontractoratatCamp
CampArian,
Arian, Kuwait.
Kuwait
112. Due to
112. to an
an electrical the Camp
electrical fire at the Camp Ariau
Arian DFAC,
OFAC,caused
causedthrough
through the fault of
Tamimi, Mr. Hall
Hail and
and his
his superiors
superiors at
at KBR
KBR contemplated KBR’s subcontract
contemplated terminating KBR's subcontract with
Tamimi in November
November 2002.
2002. They ultimatelychose
Theyultimately chose to continue to
to continue to subcontract TamimL
subcontract with Tamimi.
113. Through the
113. the performance of his duties and his dealings with
his dealings with Tamimi,
Tamimi, Mr. Hall
socialize with Tamimi's
came to know and socialize Tamimi’s chief ofoperations
chiefof and vice
operations and president, Mr.
vice president,
Mohammad Shabbir
Shabbir Khan.
Khan,
16
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Case I :09-cv-00351 -CCM Document 47 Filed 03/15111 Page 17 of 26
114. In November 2002, Mr. Khan first offered a kickback to Mr. Hall, stating that the
two could “make a lot of money together.” Mr. Hall accepted no money from Mr. Khan during
this conversation, but reported it to nobody.
115. At some point in late 2002 or early 2003, Mr. Hall began taking money from Mr.
Kiaan. Mr. Hall understood that the money was being provided so that Tamimi would remain in
KBR’s good graces and continue to get DPAC contracts from KBR. The money provided to Mr.
Hall first took the form of $5,000 in cash that Mr. Khan had delivered to him at the airport in
Kuwait prior to ins departure on a vacation in 2003. Mr. Khan. caused $5,000 in cash to be
delivered to Mi. Holmes at the airport at the same time. Mr. Klan also gave Mr. Hall an
automated teller machine (“ATM”) card that could be used to access a bank account into which
Mr. Klan had placed $5,000. Mr. Hall used the ATM card to withdraw approximately $3,500 in
cash from the bank account Mr. Holmes was also given access to the account by Mr. Khan, and
withdrew the remaining $1,500 from the account Mr. Holmes was also given $10,000 or more
in cash by Mr. Klan, which he gave to his secretary. Near the end of2003, Mr. Klan gave Mr.
Hall $20,000 which was ostensibly to be used as an investment in a “Golden Corral” restaurant,
although Mr. Hail did not, in fact, make such an investment with Mr. Klan’s money, nor did Mr.
IChan ever request that it be paid back.
116. During the time that Mr. Holmes and Mr. Hall were receiving money from Mr.
Klan, they were involved in decisions that were made to the benefit of Tamimi as a KBR
subcontractor. In Yune 2003, KBR convened a board to determine which local contractors would
be awarded “master agreement” suboontacts to perform DFAC services for KBR pursuant to the
LOOCAP UI contact. Once KBR awarded a “master agreement” to a contractor, it intended to
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26
“workreleases"
issue "work releases”upon the master
uponthe masteragreement
agreement as
as means to
to order
order DFAC
DFAC services
services at particular
Contractorsnot
locations. Contractors notawarded
awardedmaster
masteragreements
agreements would
would not
not be
be eligible
eligible for
for subcontracts
subcontracts to
operate
operate DFACs
OFACs for
for KBR.
KBR
117.
117, Mr. Holmes and
and Mr. Hall were amongst the KBR employees who sat
sat upon the
board to determine
board to determine which
which contractors
contractors would be awarded master agreements.
agreements. As
As Regional
Regional Food
Manager for
Services Manager for KBR,
KER, had Mr.
Mr. Hall
Hail objected
objected to the award
award of
of a master
master agreement
agreement to a
would have been highly unlikely that
contractor, it would that such
such an award
award would
would be
be made.
made. Tamimi and
five other contractors were
other contractors were awarded
awarded master
master agreements;
agreements; the
the board decided
decided not
not to
to award
award master
several other
agreements to several other contractors that sought them. The
The master
masteragreement
agreement awarded
awarded to
Tamimi was known
known as
as "Master
“Master Agreement 3."
3.”
118.
118. KBR issued multiple work
work releases upon Master Agreement 3 to obtain DFAC
in response
services in response to orders issued upon the LOGCAP UI
task orders
to task M contract. The relevant LOGCAP
The relevant
L._ M
UI task orders were
task orders TaskOrder
wereTask Order 59,
59, which
which was
was issued in
in August
August 2003, but effective from June
but effective
2003 through
through April
April 2005,
2005, and
and Task
Task Order
Order 89,
89, which
which covered
covered services
services from May 2005
from May 2005 through
August 2006. All told1Tamimi
Mltold, Tamimibilled
blUedand
andKBR
KBRpaid approximately$466,290,328
paidapproximately $466,290,328 upon all of the
all of
work releases for
for Master
Master Agreement 3. KBR
KBRregularly
regularly submitted
submitted vouchers
vouchers to
to the United States
seeking
seeking reimbursement
reimbursement for these amounts
for these amounts as
as direct
direct costs,
costs, plus
plus aa base
base fee of11 percent
fee of percent of
of direct
costs (also
(also referred
referred to
to as
as "definitized
“definitized costs"),
costs”), and
and an
an award
award fee
fee of
ofup
up to
to two percent of
two percent of direct
costs, plus a fee for
for indirect
indirect costs. Mr.
Mr. Hall
Hailand
and Mr.
Mr. Holmes
Holmes knew,
knew, when
when they accepted their
they accepted
kickbacks from
from Mr.
Mr. Khan,
Khan, that
that KBR
KBR would
would file
file vouchers with
with the States seeking
the United States
reimbursement
reimbursement for any
any Tamimi subcontracts as set forth above.
above. Mr.
Mr. Hall and Mr. Holmes also
Hall and
knew or
or had reason
reason to
to know
know that
that the
the kickbacks
kickbacks that
that they
they received
received would inflated contract
lead to inflated
would lead
18
18
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prices from Tamimi.
119. When ICBR was tasked by the Army to take over performance of DFAC services at
Camp Anaconda, Iraq, KBR decided to continue to utilize Tainimi, which was the incumbent
contractor for the Army at Camp Anaconda. This decision was, in the initial instance, made, at
the urging of Mr. Hall and Mr. Gatlin, by Mr. Daniel Petsche, who was a LOGCAP m
subcontracts administrator for KBR, responsible for LOGCAP Ill subcontracting in Iraq. Mr.
Petsche did not possess the authority from KBR to commit the company to more than a certain
amount of spending on a particular subcontract, but he could make provisional decisions to agree
to certain subcontracts and then seek ratification from superiors at KBR wIth the proper authority
to commit the company to the larger contractual amounts. Mr. Petsche did not possess the
authority to commit KBR to the contractual amounts that would be necessary for the Camp
Anaconda OFAC contract.
120. Mr. Petsche made the decision to acquiesce to the award of the Camp Anaconda
subcontract to Tamlini based in large part upon the pressure supporting the award that he
received from Mr. aafl. Indeed, Mr. ?etsche had contemplated having the Camp Anaconda
DFAC subcontract be awarded to a different subcontractor than Tamimi, but changed his mind
based upon the advocacy for Tamimi that he received from Mr. Hail,
121. Mr. Hall’s strong advocacy on behalf of Tamimi, and the support given to Mr.
Hail’s positions by Mr. Hall’s direct supervisor, Mr. Robert “Butch” Gatlin, influenced Mr.
Petsche’s decision-maldng relating to TamimI at Camp Anaconda and elsewhere. Additionally,
Mr. Hall ‘rote and signed the memorandum for the KBR procurement file justifying the sole-
source award to Tamimi of the DFAC subcontract at Camp Anaconda.
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26
122.
122. Work Release 33 of Master
Master Agreement
Agreement 33 was
was the
the contractual
contractual vehicle
vehicle by
by which
which KBR
KBR
obtained DFAC services from
from Tamimi at Camp Anaconda, Iraq from August 2003
2003 through
December 2005. Tamimi
Tamimibilled
billedand
and KBR
KBR paid
paid approximately
approximately $307,630,344 upon Work Release
33 of Master Agreement 3. KBR
KBR then
then sought
sought and obtained payment of the $307,630,344, plus
and obtained plus
base and award fees and fees for indirect costs, from the United States.
States.
123.
123. In
In late
late December 2003
2003 Mr.
Mr. Petsche was flred
fired by for receiving a gift from a
by KBR for
subcontractor not Tamimi february2004,
Tarnimi. InInFebruary shortlyafter
2004, shortly after his
his termination,
termination, Mr. Petsche was
was
contacted by KBR employee David
David Hadcock.
Hadcock. Mr. Hadcock had been reviewing
reviewing KBR’s
KBR's Camp
Camp
Anaconda DFAC procurement
procurement files and
and was searching for both an authorization and justification
justification
for the cost of
of Master Agreement 3, Work Release 3.
3.
124.
124. Mr.
Mr. Petsohe
Petsche discussed the matter briefly with Mr. Hadcock on the telephone and
Mr. Hadoock
Hadoock at
sent a follow-up e-mail to Mr. Hadcock at his
his request Petsche stated that he
request. In the e-mail, Mr. Petsohe
had previously referred to the Anaconda DFAC as, “the
"the mother of all DEAC deals” because
DFAC drug deals"
surrounding it.
of all of the irregularities surrounding it. In Mr: Petsche’s words, the Anaconda OFAC
Mr. Petsche's DFAC was
was
"predestined
“predestined and out of the start.”
from the
of control from start." Mr.
Mr. Petsche Tamimi's pricing for the
Petache wrote that Tamimi’s the
Anaconda DFAC was "very
“very close
close to
to the [amount
amount in. the internal
in the internal KBR requisition," which Mr.
KBR] requisition,1’ Mr.
Petsche had thought
Petsohe thought indicated
indicated that been previously agreed to by
that the deal had been others from
by others from KBR
KBR
and Tamimi, but that he had
bad chosen not to
to question
question it Mr. Petsche further wrote that he had
it. Mr.
drafted a work release to effect this agreement, but had not signed it because he felt that he
needed more data to justify
justify its expense.
expense. Mr.
Mr. Petsche explained the
Petsche explained of a signed work release
the lack of
and price justification
justification memorandum by
by writing,
writing, “I
"I did not execute
did not execute the
the Work Release. I did not
WorkRelease.
do a Price Reasonableness
do write-up on
Reasonableness write-up it. II could
on it not present it with the data and support II had.”
could not had."
20
20
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Mr. Petsche added that, “[t]liere is a whole lot more to this story” and suggested that similar
irregularities could be found in other Tamimi subconftacts with KBR.
125. Upon receipt of Mr. Petsehe’s e-mail, Mr. Hadoock forwarded it to Mr. William
Jonas, head of procurement for KBR, and Mr. Charlie Carr, the head of KBR’s ‘DEAC team,”
which, by that time, had oversight of all DFACS in Kuwait and Iraq. Neither Mr. Hadoock, Mr.
Jonas, Mr. Carr, nor any other KBR employee took any action based upon Mr. Petsche’s e-mail
or the allegations contained therein. No KBR employee ever conveyed Mr. Petsohe’s concerns
(or any of their own) regarding the Camp Anaconda and other Tamimi contacts to any
representative of the United States Government. In March 2004, after Ms receipt of Mr.
Petsche’s e-mail and after his forwarding of the e-mail to Mr. Jonas and Mr. Carr, Mr. Hadcock
wrote a memorandum purporting to justify the costs for Master Agreement 3, Work Release 3.
Only after Mr. Hadoock’s memorandum was Master Agreement 3, Work Release 3 officially
ratified by KBR officials with the authority to do so.
126. The original period of performance for Master. Agreement 3, Work Release 3
concluded in March 2004. Through the issuance of change orders, KBR extended the period of
performance of Master Agreement 3, Work Release 3 through December 31, 2005.
Count I
Special Plea In fraud—28 U.S.C. 2514
127. The United States incorporates by reference the allegations set forth in paragraphs
104 through 126 above.
12$. Pursuant to 28 U.S.C. § 2514, defendant’s special plea in fraud seeks the forfeiture
of the plaintiff’s claim in this action.
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K5RPR0D0058859
Case I :09-cv-00351 -CCM Document 47 Filed 03/15/11 Page 22 of 26
129. The special plea in fraud statute, 28 U.S.C. § 2514, mandates, inter a/ia, the
forfeiture of any claim asserted against the United States where fraud is practiced or attempted
against the Government in inducing the Government to enter the contract, during performance of
the contract, or in the proof or statement of a claim against the Government.
130. Performance of the LOGCAP Ill contract, in particular Task Orders 59 and 89.
under which KBR was compensated for the costs of work performed under the various work
releases of Master Agreement 3, was tainted by the fraud of the kickbacks received by KBR’s
employees, Mr. Hall and Mr. Holmes, when they sat upon the board that awarded Master
Agreement 3 and when they took actions to encourage the issuance of Work Release 3 to Master
Agreement 3 to Tamimi for work at Camp Anaconda.
131. Accordingly, pursuant to 28 U.S.C. § 2514, plaintiff’s claim in this action is subject
to forfeiture in its entirety.
Count U
Anti-Kickback Act—41 U.S.C. § 53,55
132. The United States incorporates by reference the allegations set forth in paragraphs
104 through 131 above.
133. The Anti-Kickback Act, 41 U.S.C. § 53, 55, prohibits employees of Government
contractors from accepting “kickbacks” from subcontractors and establishes penalties for persons
who iciowingly violate the Act and for companies that violate the Act. A “kickback’ is payment
of money or a thing of value for the purpose of obtaining or rewarding favorable treatment of the
subcontractor by the prime contractor.
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KBRPRODOO5886O
Case I :09-cv-00351-CCM Document 47 Filed 03/15/fl Page 23 of 26
134. By virtue of accepting funds from Mr. Khan in return for their favorable treatment
of Tamimi and in reWard of that treatment, Mr. Holmes and Mr. Hall both violated the Anti
Kickback Act.
135. The violations of the Anti-Kickback Act by Mr. Hall and Mr. Holmes are
attributable to KBR because the two were acting as KBR’s agents at the time that they accepted
the kickbacks.
Count UI
False Claims Act—31 U.S.C. § 3729(a)(1)
136. The United States incorporates by reference the allegations set forth in paragraphs
104 through 135 above.
137. KBR knowingly presented and caused to be presented to officers and employees of
the United States Government false or fraudulent claims for payment or approval by submitting
vouchers for payment for costs associated with Master Agreement 3 and all of the work releases
upon it, The claims were false or fraudulent because KBR knew that the award ofMaster
Agreement 3 and the work releases upon it, including but not limited to Work Release 3, were
tainted by kickbacks given by Mr Khañ to Mr. Hall and Mr. Holmes.
Count IV
Rescission And Disgorgement (Master Agreement 3)
138. The United States incorporates by reference the allegations set forth in paragraphs
104 through 137 above.
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24 of 26
139. Because
139. Because of the kickbacks
ofthe kickbacks to
to Mr.
Mr. Hall and
and Mr. the portion of
Mr. Holmes, the ofthe LOGCAP
the LOGCAP
III contracttainted
III contract bysuch
taintedby suchkickbacks
kickbacksisisvoid
voidororvoidable.
voidable. Accordingly, the Government is
entitled to be restored to its pre-contract position
position relating
relating to of the LOGCAP
to these portions of LOOCA? III
Ill
contract.
contract
140. Based upon the facts described
140. described above,
above, the Government isis entitled
the Government to the
entitled to the rescission
rescission
of
of the portion of the LOGCAP M
of the DI contract
contract involving
involving all work performed by KBR
all work through its
KBk through
Master Agreement 3 subcontract with Tarnirni,
Tsmimi, inasmuch as that subcontract was tainted by
kickbacks and it would
would be contrary
contrary to
to public policy for the Government to pay for such
public policy
unlawMly
unlawfully awarded work. Government is
work. The Government of all sums paid to
is also entitled to disgorgement of
KBR as
as compensation related to
compensation related to the tainted subcontract.
the tainted subcontract.
Count
Count V
Disgorgement (Task Order
Order 59)
59)
141. The United States
141. States incorporates allegations set
incorporates by reference the allegations setforth
forth in paragraphs
inparagraphs
140 above.
through 140
104 through
Order 59 to the LOGCAP DI contract was issued
142. Task Order
142. KBR shortly after the
to KBR.
issued to
kickback-tainted award byKBR
awardby KBR of Master Agreement33 toto TamImi.
MasterAgreement All work releases upon
Taminai. All
issued under
Master Agreement 33 were issued the authority
under the of Task
authority of Task Order 59. Because the kickbacks to
Order59.
Hall and
Mr. Hall
Mr. Mr. Holmes
and Mr. Holmes necessarily tainted Task Order 59 at or about the
necessarily tainted the time of award by
time of
pricing and
the pricing
establishing a relationship that influenced the cost of
and cost ofthat
that task order, Task
task order, Order 59
Task Order
unjustly enriched KBR.
KBR.
described the
143. Based upon the facts described
143. the Government disgorgement of all
to disgorgement
Government isis entitled to
KBR pursuant
fees paid to KBR Order 59.
pursuant to Task Order 59.
24
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of 26
25 of
FOR RELIEF
PRAYER FOR RELIEF
WHEREFORE, defendant, United States,
defendant, the United States, requests
requests that the Court eater
enter judgment in its
judgment in its
favor,
favor, and
and against KBR as
as fo1lows
follows:
a. As
a. As to Count I,I, under
under the
the Special
Special Plea
Plea in
inFraud,
Fraud, 28
28U.S.C.
U.S.C. §§2514,
2514,against
againstplaintiff
plaintiff for
the forfeiture
forfeiture of
of KBR’s
KBR's entire claim;
claim;
b. As
b. As to Count II, under the
II, under the Anti-Kickback Act,
Act, 41
41 U.S.C.
U.S.C. §
§§ 53, 55, against plaintiff,
53, 55, plaintiff, for
for
damages
damages in the amount of double the amount of the
the kickbacks
kickbacks given to
to Mr.
Mr. Hall and Mr.
Mr. Holmes,
Holmes,
plus civit
plus civil penalties
penalties as are allowable by law
law of $5,500
$5,500 to
to $11,000
$11,000 per
per violation,
violation, post-judgment.
post-judgment
interest, and
interest, and costs;
costs;
c. As
c. As to
to Count fl],
III, under
under the
the False
False Claims
Claims Act,
Act, 31
31 U.S.C.
U.S.C. §§ 3729, the plaintiff,
3729, against the plaintiff, for
for
the damages
treble the damages sustained by the
the United
United States,
States, plus
plus civil
civil penalties
penalties as
as are allowable by
are allowable law of
by law of
$5,500 to
$5,500 to $11,000
$11,000 per violation,
violation, post-judgment
post-judgment interest,
interest, and
and costs;
costs;
d. As
d. As to
to Count W,
N, rescission
rescission and disgorgement related to Master Agreement 3,
and disgorgement 3, for
rescission of the portion of the LOGCA?
LOGCAP Ill
El contract that was effected by KBR the use
through the
KBR through use
Agreement 3,
of Master Agreement 3, and for disgorgement of all
all moneys
moneys paid
paid to
to KDR costs, indirect
KBR for direct costa, indirect
costs, fixed
costs, fixed fees,
fees, and award fees
fees related
related to any work
work release
release upon Master Agreement 3,3, post-
upon Master post-
judgment interest,
judgment interest, and
and costs;
costs;
e. As
e. As to
to Count V,
V for
for disgorgement
disgorgement of
ofall fees
all moneys paid to KBR for fixed and award fees
related to
related to Task
Task Order 59,
59, post-judgment
post-judgment interest, and costs.
costs.
f.f. For the
the dismissal
dismissal of
of KBR’s
KBR's complaint; and
complaint, and
g. For such other and further relief as
g. deem appropriate.
as the Court may deem appropriate.
25
25
KBRPRODOO5$863
KBRPR0D0058863
Case f:,O,9-cv-003 -CMDoccjmnt 47 Filed 03115t11 Fage of 2
Rspectfufly submittd
TONY WEST
Assistut Attorney General
s1Ieanne ‘E ]iisoi
JEANNE E. DAVIDSON
Dfrectör
a’J. Reid Prouty’
3. aEID PROUTY
SeniirTiai Counsel
Commercial tAtiatin Branok
‘Civil Division
Depatrnen of justice
11OaLs:tree, N.W.,
Atti: Classification Unit
BUi ‘Floor’
Wasbiugton, D.C., 2O3’O
TeIe (2O2)O5-7586
Fax: (2,02)514.7969
Attorneys for Defendant
March15, 20fl
EO
a’
26
KBRPRODOO58864
APPENDIX B
4:11-cr-40083-MMM-JAG # 6 Page 1 of 13 E-FILED
Monday, 19 September, 2011 10:32:32 AM
Clerk, U.S. District Court, ILCD
IN TIiI 17Arrpo STATES DISTRICT COURT FILED
rattiziet tint:AIWA
AT, E0 a ISLAND gEP
'UNITED STATES' OF AMERICA, FfAmstAtfsiisissoNbishic
IAS: DISTROTCOUAT. -
CENTRAL D.ISTRIcrtnialpfs'
Plaintiff, CaSeNml, I- 4083
vs.
TAMIMI oLoBAI., co., LTD;a/k/a fTAFGA,"
Defendant:
BEFERREBTROSECUTION AGREEMENT .
Defendant Taminii dobarCii.,:14:18„ also. as,:"1.0.0e(aii,ciL ST08ftettOgrreai to
as "TAFGA"), by its underSighedattorileys,puMuiliitte!atitlitkitY, &anted by TAFGA'a
Executive Board; and the, United StateSAfterney foro.octiitia)Thistrldt ofIllinoistat times
referred to herein as the "Goverrimentiventerliiimilihtleterredprosecutiowagreement
"Agreement").
The terms and toriditionstittiieldeferied proSteittibMagretthent are as fO1LowS:
1. TAFGA acknoWledges40 agreds:tliatthe:GOvetninent NSii.fliesfoteoubt.
crimifiathit'OrinatiOn,MtaChed, in.theUriited.StatesDistrictCourt
for the Central :Disti•iet'of IllinoiSyeliargingin:Counil Conspiracy to.PayKickbacksin viOlation
of Title 18; United States Section 371, and:tharging in :Count2 Conspiracy to-Pay
Gratuities in violatibridTitle,•13, -.United States, Code Section 311•Irtdoing:so, TAFGA.(a)
knowingly,waives its righttelndiottrientlin these ehargesi.as well as rights to peedy.Trial:
pursuant to the.Sbitb Unit44:$t4fOcp#0400piffitLelti;Linitect atatee'Peclei:
Section 3161, and,Federal Rule of Criminal Pmcedure 48(1)1.and (b) consents to thefiling of the
Information, as provided under theIerms.ofthis Agreement, irithe united:States District' Court;
for the Central District of Illinois.
KBRPROD0057701
4:1 1-cr-40083-MMM-JAG # 6 Page 2 of 13
A.
2.. TAPQA *laths that IS responsible for the WS of its officers, employees and
agents aSSerforthin theittforMatifiii and:the Statement of as Attnehinetit
A (incorporated by:refer-en:dein thiS.Agreemelit), With the execptiOn ofthe.paragraphs in the
Statementof Facts beginning with, the:Phrase (Accordingia the gov.ernineties tvidenee;”
Shotild the Government pursue' theprosecutiontliat is treferredbythis Agreement; TA.FdA
agrees thabit will neither ethitestrhe adraiSsibilityttnerboritradintrhethateinentbf Factsj.ivith
theekeeptiontofttie:ptitagrapiiS begititting."Attording td thegtiVeriirneitra2eVidefiee,"- in any
criniffialiirodeeding; including