KBR

Last edited by lenazun on December 17, 2009 - 2:36pm

Company Snapshot:

KBR specializes in engineering and construction, and is a major contractor for the US Military. It is a former subsidiary of Halliburton, and is the largest non-union construction company in the United States. KBR is the largest US private employer in Iraq with roughly 20,000 employees and 40,000 subcontractors.

Website:

http://www.kbr.com/

Net Income:

$168.0 (Mil)

Total revenue:

$9,633.0 (Mil)

Corporate accountability

Accountability overview:

Although KBR/Halliburton probably have the longest rap sheet of any government contractor, leading members of Congress to call for the companies' suspension and/or debarment from taxpayer-funded federal contracts, the military has refused to suspend or debar the recidivist companies from federal contracts.

Larry Allen, of the Coalition for Government Procurement, a corporate contractors' coalition explained to the Democratic Policy Committee, "There are no rules that guide government officials on what type of behavior might trigger suspensions or debarments and as such all evaluations are inherently subjective. We believe that even if rules are devised, such factors expose the procurement process to politicization and a slew of unintended consequences."

But critics say the no-bid crony contracting process is politicized by the fact that there are no such enforcement standards.

Tax issues:

KBR's use of offshore subsidiaries in tax haven countries has drawn fire from employees and members of Congress.

In one instance, KBR used a company called Service Employees International Inc. (incorporated in the Cayman Islands) to dodge taxes.

Farah Stockman, a Boston Globe reporter, reported in 2008 that KBR is using the company to avoid paying taxes on Medicare and Social Security for its employees in Iraq. More than 21,000 people work for KBR in Iraq - including about 10,500 Americans. They "are listed as employees of two companies that exist in a computer file on the fourth floor of a building on a palm-studded boulevard here in the Caribbean. Neither company has an office or phone number in the Cayman Islands....the use of the loophole results in a significantly greater loss of revenue to the government as a whole, particularly to the Social Security and Medicare trust funds."

A second Cayman Islands company called Overseas Administrative Services, listed as the employer of 1,020 mostly managerial workers in Iraq, "was established two months after Cheney's appointment. And the creation of shell companies in places such as the Cayman Islands to avoid taxes has long been attacked by members of Congress. Heather Browne, a spokeswoman for KBR, acknowledged via e-mail that the two Cayman Islands companies were set up "in order to allow us to reduce certain tax obligations of the company and its employees." " (see Farah Stockman, "Top Iraq contractor skirts US taxes offshore," Boston Globe March 6, 2008).

Labor:

KBR has also used its Cayman Islands subsidiary (Service Employees International Inc.) to avoid paying unemployment taxes in Texas. According to the Boston Globe, the accounting trick amounts to between $20 and $559 per American employee per year, depending on the company's rate of turnover.

Under Texas law, employees of the offshore company are not entitled to unemployment benefits, because they were technically employed by a company incorporated in a "foreign" nation. In one typical case identified by Halliburton Watch, the Texas Workforce Commission ruled against a former Halliburton employee by concluding: "The claimant is not entitled to unemployment benefits because [Halliburton's foreign subsidiary] does not satisfy the definition for an 'American employer' under the [Texas] statute."

Environment and product safety:

KBR was named in a Pentagon report describing troop illnesses in Iraq after serving contaminated water for non-potable uses at US military bases in Iraq.

A Pentagon Inspector General's report obtained by The Associated Press said soldiers experienced skin abscesses, cellulitis, skin infections, diarrhea and other illnesses after using discolored, smelly water for personal hygiene and laundry at five U.S. military sites in Iraq.

The Nation reported that the Department of Defense paid KBR more than $80 million in bonuses in 2007 and 2008 for contracts to install electrical wiring that has resulted in the electrocution deaths of US soldiers according to documents revealed on May 20, 2009 in a Senate Hearing. Charles Smith, a former Army official who managed the contracts under which KBR performed electrical work in Iraq called the company's work "dangerously substandard" and the bonuses they received "highly inappropriate". Since 2003, some 18 US soldiers have died as a result of KBR's negligent electrical work. A master electrician hired by the Army to review electrical work in Iraq during 2008 reported finding improper wiring in "every" building the company had wired in the country, equalling thousands. Work was not done to code and in some cases properly wired buildings were rewired making them unsafe. Multiple others have testified against KBR alleging that everywhere in Iraq, KBR would double-bill US taxpayers by performing incomplete or incorrect electrical wiring only to bill taxpayers again later for repairs to the faulty work.

Ecuador

According to writer Paul Theroux, Halliburton/KBR have had a hand in the destruction of the Ecuadorean Amazon regions.

Human rights:

In 2007 KBR attempted to cover up the drugging and rape of an employee by multiple coworkers. Jamie Leigh Jones alleged that the company locked her in a shipping container and posted a guard over her, where she was left without food or water for 24 hours after the crime was committed. The company misplaced the victim's rape kit after it was given to KBR by army doctors. The victim was refused a criminal trial, and took the suit to civil court, where the company enforced the victim's mandatory arbitration agreement, pushing the trial into private session with a company hired arbitrator.

Much of Halliburton's government business in Iraq and Kuwait, has been carried out by poor people from non-American countries. Many are underpaid, working for wages equivalent to one-tenth of what U.S. workers receive. For example, Halliburton subsidiary, KBR, pays workers $7 per day to work in kitchens at military bases.

One worker from India told the Washington Post that he was tricked into going to Iraq by a recruiting agent who told him the job was in Kuwait. The recruiting agent, Subhash Vijay, officially hired him in June 2003 for a two-year stint at a catering company. The job would pay $200 a month -- five times the salary of his job in India. He paid a $1,800 fee to the recruiting agent, borrowing money to do so, and traveled to Kuwait. Once he arrived, however, he was shipped off to Iraq to work for Gulf Catering Co. of Riyadh, Saudi Arabia, which was subcontracted to Alargan Group of Kuwait City, which was subcontracted to the Event Source of Salt Lake City, which in turn was subcontracted to Halliburton's KBR subsidiary. He and his co-workers were issued an ID card that said "Brown & Root" (a subsidiary of Halliburton). He said Halliburton treated its workers like animals and failed to provide adequate drinking water, food, health care or security for part of their time in Iraq.

Popular countries for recruitment are Pakistan, India and the Philippines. Several million expatriates from Kerala, India work in the Persian Gulf region as support staff for professionals. KBR (then part of Halliburton) used many tiers of subcontractors and employment agencies to recruit workers from the Third World, making oversight of the process difficult. Several layers of subcontractor recruitment firms make it easier to abuse workers who sign up for Iraq duty. There are no restrictions on how many subcontractors may be used.

Political influence (national and international):

KBR/Halliburton remains under investigation in numerous countries for a massive (est'd $180 million) bribery scheme related to the Bonny Island, Nigeria natural gas consortium that the company coordinated. For a chronology of the bribery scandal see Halliburton Watch's detailed timeline.

The Army's top civilian contracting official, Bunnatine Greenhouse, blew the whistle on the preferential treatment received by KBR/Halliburton in Iraq in late 2004. Greenhouse was demoted in August, 2005 after testifying before the Senate Democratic Policy Committee about what she called a "clubby" relationship between Halliburton's KBR subsidiary and the Army Corps of Engineers.

"I can unequivocally state that the abuse related to contracts awarded to KBR represents the most blatant and improper contract abuse I have witnessed during the course of my professional career," Greenhouse told Congress.

Although a criminal probe of Greenhouse's allegations was referred to the Department of Justice in November 2005, nearly three years later, no action has been taken.

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History

Other Information:

Other sources:

Financial information

Stock ticker symbol:

KBR

Fiscal year:

2006

Fiscal year:

2006

Additional descriptive data

Link to full list of subsidiaries:

SEC Form S-1/A EX-21.1 from December 20, 2005

KBR

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