$69.3 million Afghan-contracting fine may be a record

McClatchy NewspapersNovember 5, 2010 

WASHINGTON — A nearly $70 million fine announced Friday against one of the U.S. government's largest Afghanistan contractors is an apparent record war-zone settlement, and it grew from a classic David vs. Goliath confrontation.

New Jersey-based Louis Berger Group, which has overseen the construction of roads, power plants and schools across Afghanistan, acknowledged that It had knowingly and systematically overcharged the U.S. government and agreed to pay $69.3 million in criminal and civil penalties.

Louis Berger's antagonist was Harold Salomon, a Haitian immigrant and former employee who resisted pressure to keep quiet. He said Friday that he planned to donate part of his whistleblower's award to a nonprofit he founded that provides health care and other services in Haiti.

In 2006, Salomon went to law enforcement authorities with evidence — including CDs full of data — that the contractor had defrauded the government of millions in a complex accounting scheme that billed taxpayers for overhead and other costs that had nothing to do with its government contracts.

"Today I can affirm to those who told me the Louis Berger Group can get away with anything that they were wrong," Salomon said in a statement through his attorneys. "To those who said, 'If you cannot beat them, you have to join them,' I say they were wrong, too."

A Louis Berger spokeswoman, Holly Fisher, said Friday that the settlement meant that the firm could continue to do contracting for the U.S. government in Afghanistan. "The agreement affirms LBG's ability to complete existing federal projects and compete for new contracts," Fisher said.

McClatchy first reported the nature of the allegations and the existence of the whistleblower suit in September.

The Morristown, N.J., firm agreed Friday to pay $46.5 million to settle the whistleblower case, $18.7 million in criminal fines and $4.1 million to settle other contractual disputes.

The firm also agreed to a "deferred prosecution," under which the government's case will be dropped if the company complies with the terms of the agreement.

Louis Berger said that it initiated its own internal investigation in 2006, before it was aware of the federal probe, and began refunding the government for overcharges.

"LBG is a stronger company today as a result of this settlement as well as the company's corporate improvement program," company President Larry D. Walker said.

The settlement is the latest in a string that's involved some of the largest U.S. contractors in the Afghan and Iraq war zones, including Xe Services LLC, formerly known as Blackwater, and KBR, formerly a subsidiary of contracting giant Halliburton.

Louis Berger is one of the government's largest contractors in Afghanistan. Two months after Salomon came forward with his allegations, the U.S. Agency for International Development tapped Louis Berger to oversee $1.4 billion in reconstruction contracts there jointly with another company, Black & Veatch.

"Fraud undermines U.S. efforts in Afghanistan and Iraq," said Tim McCormack, a lawyer with Phillips & Cohen, a Washington practice that represented Salomon. "Money that should have been used to build roads, clinics and schools in Afghanistan to win support of the Afghan people was used instead to build Louis Berger's profits."

Under the whistleblower statutes, Salomon can receive 15 to 25 percent of the award.

He wasn't immediately available to answer questions. An online resume indicates that he worked at Louis Berger from March 2002 to October 2005, and among his job duties was to "calculate and submit year end overhead rate audit report(s)" to USAID and the Pentagon's Defense Contract Audit Agency. He's the founder of the American-Haitian Association for Medical Economic & Educational Support.

U.S. government officials, who asked to remain anonymous because of the sensitivity of the matter, said that the company continued to be the subject of separate investigations with regard to its work in Afghanistan.

Louis Berger's overbilling, a practice that dates to at least the mid-1990s, swelled to tens of millions in lost tax dollars, McClatchy reported in September.

In August 2007, federal agents raided Louis Berger's home office in New Jersey. The investigation targeted two senior officials, including one who's since left.

Founded in 1953, Louis Berger Group does engineering and construction-related work domestically and in about 80 countries worldwide, according to the company's website. It has more than 5,000 employees.

(Strobel reported from Kabul, Afghanistan.)

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McClatchy Newspapers 2010

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