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Friday, July 30, 2010

Freight Forwarder Panalpina Pays U.S. $375,000 to Settle False Claims and Kickbacks Allegations

WASHINGTON. – Swiss-based freight forwarder Panalpina Inc. has agreed to pay the United States $375,000 to settle allegations that the company paid kickbacks to employees of Kellogg Brown & Root Inc. (KBR). The kickbacks, which related to shipping orders issued in connection with KBR’s contract with the U.S. Army to provide logistical support to the U.S. military in Iraq and elsewhere, are alleged to violate the False Claims Act and the Anti-Kickback Act.

The settlement resolves allegations that Panalpina provided kickbacks in the form of meals, drinks, tickets to sports events and golf outings to employees in KBR’s transportation department in order to gain favorable treatment on subcontracts under the U.S. military’s Logistics Civil Augmentation Program (LOGCAP III). Under the LOGCAP III contract, KBR was to provide logistical support for U.S. military operations abroad.

Under the terms of the settlement agreement, Panalpina will pay the United States $375,000 to resolve its potential liability under the False Claims Act, the Anti-Kickback Act and common law theories. The United States previously settled claims with Eagle Global Logistics (EGL) (now CEVA) related to the same lawsuit for a total of $5,050,000. The government is continuing to pursue claims against KBR based on its employees taking kickbacks from Panalpina and EGL.

"Kickbacks paid for military subcontracts undermine the integrity of the government contracting process," said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. "We will not tolerate wartime profiteering at the expense of taxpayer dollars."

The allegations against Panalpina were originally raised in the course of a lawsuit filed in the U.S. District Court for the Eastern District of Texas by David Vavra and Jerry Hyatt, two individuals active in the air cargo business. Under the qui tam, or whistleblower, provisions of the False Claims Act, private citizens can file suit on behalf of the United States and share in any recovery. Vavra and Hyatt will receive $78,750 as their share of this settlement.

This case is being prosecuted as part of a National Procurement Fraud Initiative. In October 2006, the Deputy Attorney General announced the formation of a National Procurement Fraud Task Force designed to promote the early detection, identification, prevention and prosecution of procurement fraud associated with the increase in government contracting activity for national security and other government programs. The Procurement Fraud Task Force is chaired by the Assistant Attorney General for the Criminal Division and includes the Civil Division, U.S. Attorneys’ Offices, the FBI, the U.S. Inspectors General community and a number of other federal law enforcement agencies. The Defense Criminal Investigative Service and FBI participated in the investigation of this matter. This case, as well as others brought by members of the task force, demonstrates the Department of Justice’s commitment to ensuring the integrity of the government procurement process.

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Updated September 15, 2014