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KBR, Inc.
Type Public
Founded 1998
Headquarters Houston, Texas
Key people Bill Utt
Industry Engineering
Construction
Private military contractor
Revenue US$ 11.581 billion (2008)
Operating income US$ 0.541 billion (2008)
Net income US$ 0.319 billion (2008)
Total assets US$ 5.884 billion (2008)
Total equity US$ 2.052 billion (2008)
Employees 57,000 (2009)
Website http://www.kbr.com/

KBR, Inc. (formerly Kellogg Brown & Root) NYSEKBR is an American engineering and construction company, formerly a subsidiary of Halliburton, headquartered in Houston. After Halliburton acquired Dresser Industries in 1998, Dresser's engineering subsidiary, The M. W. Kellogg Co., was merged with Halliburton's construction subsidiary, Brown & Root, to form Kellogg Brown & Root. KBR and its predecessors have won many contracts with the U.S. military, including during the 2003 invasion of Iraq, World War II and the Vietnam War.

KBR is the largest non-union construction company in the United States.[1] The company's corporate offices are in the KBR Tower in Downtown Houston.[2][3]

The company received significant media attention in the late 2000s, after an employee, Jamie Leigh Jones, was allegedly gang-raped and held hostage by her co-workers, before evidence went missing after it was handed to the company.

Contents

History

KBR Tower, the headquarters of KBR and a part of Cullen Center, with the Downtown Houston YMCA ahead
500 Jefferson, also a part of Cullen Center, has additional KBR offices[2]
KBR offices on Clinton Drive,[2][4] within the boundaries of the East End and the Fifth Ward.[5][6] It is the former headquarters of Brown & Root.[7]
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M.W. Kellogg

In 1901, Morris Kellogg founded The M. W. Kellogg Company in New York City. The company was incorporated in 1905 and its headquarters was moved to Jersey City, New Jersey. Initially Kellogg’s main business was power plant construction and fabrication of power plant components, but the development of hammer forge welding techniques helped ready the company to move into refining as the petroleum industry developed.

Kellogg’s entry into process engineering initially focused on the Fleming cracking process, but in the 1920s Kellogg partnered with The Texas Company (Texaco) and Standard Oil of Indiana to purchase the Cross thermal cracking process. Kellogg set up one of the first petroleum laboratories in the country in 1926 to commercialize and then license the technology. This led to Kellogg building some 130 units in the U.S. and abroad.

In the 1930s and '40s Kellogg worked with leading refiners on various technologies. For the war effort, these developments led to the construction of six hydroreformer units twenty fluid catalytic cracking units and the only complete refinery built during World War II. Even bigger than the refining work was K-25, the gaseous diffusion plant at Oak Ridge, Tennessee built as part of the Manhattan Project. This period also included the development of the Benedict-Webb-Rubin (BWR) equation of state which has since become an industry mainstay and provided the basis for Kellogg’s lead in cryogenics.

The 1950s Kellogg technology expanded into steam pyrolysis, Orthoflow fluid catalytic cracking, phenol-from-cumene and coal-to-synthetic fuels technologies and the '60s saw the growth in helium recovery, ethylene and the development of Kellogg’s ammonia process.

In 1970 Kellogg moved from New York City to Houston, Texas and in 1975, they completed the move by relocating the research and development lab as well. The '70s saw Kellogg become the first American contractor to receive contracts from the People’s Republic of China. Kellogg’s international work expanded with the major ammonia complexes in China, Indonesia and Mexico as well as LNG liquefaction plant in Algeria and 2 receiving terminals in the U.S., the world’s largest LPG plant in Kuwait and four fluid catalytic cracking units in Mexico. The '80s saw continuation of global activity in LNG and ethylene with millisecond furnaces starting up in the U.S.

Brown & Root

Brown & Root was founded in Texas in 1919 by two brothers, George R. Brown and Herman Brown, with money provided by their brother-in-law, Daniel Root. The company began its operations by building roads in Texas.

One of its first large-scale projects, according to the book Cadillac Desert, was building a dam on the Texas Colorado River near Austin during the Depression years. For assistance in federal payments, the company turned to the local Congressman, Lyndon B. Johnson. Brown & Root was the principal source of campaign funds for Johnson's initial run for Congress in 1937, in return for persuading the Bureau of Reclamation to change its rules against paying for a dam on land the federal government did not own, a decision that had to go all the way to President Franklin Delano Roosevelt, according to Robert A. Caro's book The Path to Power. After other very profitable construction projects for the federal government, Brown & Root gave massive sums of cash for Johnson's first run for the U.S. Senate in 1941. Brown and Root reportedly violated IRS rules over campaign contributions, largely in charging off its donations as deductible company expenses, according to Caro. A subsequent IRS investigation threatened to bring criminal charges of illegal campaign donations against Brown & Root, as well as Johnson and others. Roosevelt himself told the IRS to back off and allowed Brown and Root to settle for pennies on the dollar.

During World War II, Brown & Root built the Naval Air Station Corpus Christi and its subsidiary Brown Shipbuilding produced a series of warships for the U.S. Government.

In 1947, Brown & Root built one of the world's first offshore oil platforms.

According to Tracy Kidder's Pulitzer Prize-winning book Mountains Beyond Mountains, Brown & Root was a contractor in the Péligre Dam project. The project was designed by the U.S. Army Corps of Engineers and financed by the Export-Import Bank of the United States.

Halliburton years

Following the death of Herman Brown, Halliburton Energy Services acquired Brown & Root in December 1962. According to Dan Briody, who wrote a book on the subject, the company became part of a consortium of four companies that built about 85 percent of the infrastructure needed by the Navy during the Vietnam War. At the height of the anti-war movement of the 1960s, Brown & Root was derided as "Burn & Loot" by protesters.

The extent of their services included a vast array of logistical operations, historically under the jurisdiction of the military. Such operations included laundry services, meal services (Burger King, Subway, Papa John's Pizza), entertainment (Internet and cable access), and recreation (basketball courts and gym equipment).

In 1989, Halliburton acquired another major engineering and construction contractor, C. F. Braun & Co., of Alhambra California, and merged it into Brown & Root.[8]

From 1995-2002, Halliburton KBR was awarded at least $2.5 billion to construct and run military bases, some in secret locations, as part of the Army's Logistics Civil Augmentation Program (LOGCAP).[9]

In September 2005, under a competitive bid contract it won in July 2005 to provide debris removal and other emergency work associated with natural disasters, KBR started assessment of the cleanup and reconstruction of Gulf Coast Marine and Navy facilities damaged in the aftermath of Hurricane Katrina. The facilities include: Naval Station Pascagoula, Naval Station Gulfport, the John C. Stennis Space Center in Mississippi, two smaller U.S. Navy facilities in New Orleans, Louisiana and others in the Gulf Coast region. KBR has had similar contracts for more than 15 years.

Formation of KBR, Inc.

Halliburton announced on April 5, 2007 that it had finally broken ties with KBR, which has been its contracting, engineering and construction unit as a part of the company for 44 years.[10] The move was prefaced by a statement registered with the United States Securities and Exchange Commission on April 15, 2006 stating that Halliburton planned to sell up to 20 percent of its KBR stock on the New York Stock Exchange (NYSE). On November 16, 2006, KBR shares were offered for the public in an Initial Public Offering with shares priced at $17. The shares closed on the first day up more than 22 percent to $20.75 a share.[11]

On May 7, 2008, the company announced that it would acquire Birmingham, Alabama-based engineering and construction firm BE&K for $550 million. BE&K plans to remain headquartered in Birmingham.[12]

Planned office facility

In 2008 the firm announced that a new office facility would appear at the intersection of the Grand Parkway and Interstate 10 in unincorporated western Harris County, Texas, between Houston and Katy.[13] The new complex would have been be in close proximity to the Energy Corridor area of Houston.[14] KBR planned to continue to have a corporate presence in Downtown.[15] In December KBR said that it would not continue with the plans due to a weakened economy.[16]

Kosovo

In 1996, Brown & Root was awarded a contract to support U.S. and North Atlantic Treaty Organization (NATO) troops as part of the SFOR operation in the Balkan region. This contract was extended to also include KFOR operations in Kosovo starting in 1999. Camp Bondsteel in Kosovo was constructed by the 94th Engineer Construction Battalion together with the private Kellogg Brown & Root (KBR) under the direction of the Army Corps of Engineers. KBR is also the prime contractor for the operation of the camp. The camp is built mainly of wooden, semi permanent SEA (South East Asia) huts and is surrounded by a 2.5 meter high earthen wall. To construct the base two hills were lopped off and the valley between them was filled with the resulting material.

Afghanistan

KBR was awarded a $100 million contract in 2002 to build a new U.S. embassy in Kabul, Afghanistan, from the State Department.

KBR has also been awarded 15 Logistics Civil Augmentation Program (LOGCAP) task orders worth more than $216 million for work under Operation Enduring Freedom, the military name for operations in Afghanistan. These include establishing base camps at Kandahar and Bagram Air Base and training foreign troops from the Republic of Georgia.

Cuba

KBR has also been actively involved in the development of works in Cuba. Most notably sections of the U.S. Naval base in Guantanamo, completed in 2006. Camp 6, the newest facility built for detainees at Naval Station Guantanamo Bay, is designed after a maximum-security penitentiary in the U.S.[17]

Iraq

KBR employs more American private contractors and holds a larger contract with the U.S. government than does any other firm in Iraq. The company's roughly 14,000 U.S. employees in Iraq provide logistical support to the U.S. armed forces.[18]

The United States Army hired KBR to provide housing for approximately 100,000 soldiers in Iraq in a contract worth $200 million, based on a long-term contract signed in December 2001 under the Logistics Civil Augmentation Program (LOGCAP). Other LOGCAP orders have included a pre-invasion order to repair oil facilities in Iraq; $28.2 million to build POW camps; and $40.8 million to accommodate the Iraqi Survey Group, which was deployed after the invasion to find weapons of mass destruction.

Controversy

Political connections and corruption

Brown and Root had a well-documented relationship with U.S. President Lyndon Johnson, which began when he used his position as a Texas congressman to assist them in landing a lucrative dam contract. In return they gave him the funds for his 1948 Senate race against Coke R. Stevenson.[19] The relationship continued for years, with Johnson awarding military construction contracts to B&R.

Following the end of the first Gulf War, the Pentagon, led by then Defense Secretary Dick Cheney, paid Halliburton subsidiary Brown & Root Services over $8.5 million to study the use of private military forces with American soldiers in combat zones.[9]

Some controversy arose in February 1999 when KBR was awarded a substantial contract to provide emergency support to US military operations in the Balkans,[20] despite DynCorp having been awarded a contract, known as LOGCAP II, in 1994 to provide emergency support in exactly these sort of circumstances.[21]

RIO, or Restore Iraqi Oil, was awarded to KBR without competition when the United States Department of Defense determined that KBR was "the only contractor that could satisfy the requirement for immediate execution of the plan".[22] As of September 2006, hearings were still being conducted into the RIO project over possible billing, management, and procurement violations.

Another prime topic of interest is the Defense Contract Audit Agency (DCAA) report on billing-methods for meals. The auditors knew about, but disregarded, the Army's requirement, whereas KBR was directed to have varying amounts of meals prepared at certain locations regardless of how many people actually used the service. Although KBR was paying for the food, the DCAA did not believe they should be able to charge the DoD for meals prepared but not served.[23]

In June 2008, Charles M. Smith, the senior civilian Defense Department official overseeing the government's multibillion-dollar contract with KBR during the early stages of the war in Iraq said he was forced out of his job in 2004 for refusing to approve $1 billion in questionable charges to KBR. Smith refused to approve the payments because Army auditors determined that KBR lacked credible records to support more than $1 billion in spending. Smith stated, "They had a gigantic amount of costs they couldn’t justify." He said that following his action he was suddenly dismissed and according to media "his successors — after taking the unusual step of hiring an outside contractor to consider KBR’s claims — approved most of the payments he had tried to block."[24]

Shell companies in Cayman Islands

In March 2008, the Boston Globe reported that KBR had avoided paying hundreds of millions of dollars in federal Medicare and Social Security taxes by hiring workers through shell companies based in the tax haven of the Cayman Islands. More than 21,000 people working for KBR in Iraq - including about 10,500 Americans - are listed as employees of two companies, Service Employers International Inc., and Overseas Administrative Services, which exist on the island only in computer files in an office. KBR acknowledged that the companies were set up "in order to allow us to reduce certain tax obligations of the company and its employees." But KBR does claim the workers as its own with regards to the legal immunity extended to employers working in Iraq.[25]

Bribing Nigerian officials

On February 6, 2009, the Justice Department announced KBR had been charged with paying "tens of millions of dollars" in bribes to Nigerian officials in order to win government contracts, in violation of the Foreign Corrupt Practices Act. A 22-page document filed in a Houston federal court alleged massive bribes in connection with the construction of a natural gas plant on Bonny Island requiring $7.5bn USD. KBR officials had no comment.[26] KBR was found guilty and ordered to pay $420m USD in penalties. Former CEO Albert Jackson Stanley, who ran KBR when it was a subsidiary to Halliburton, agreed to be sentenced to 7 years in prison via plea agreement.[27][28]

Waxman allegations

The Army's actions came under fire from California Congressman Henry Waxman, who, along with Michigan Congressman John Dingell, asked the General Accounting Office to investigate whether the U.S. Agency for International Development and The Pentagon were circumventing government contracting procedures and favoring companies with ties to the Bush administration. They also accused KBR of inflating prices for importing gasoline into Iraq.[29] In June 2003, the Army announced that it would replace KBR's oil-infrastructure contract with two public-bid contracts worth a maximum total of $1 billion, to be awarded in October. However, the Army announced in October it would expand the contract ceiling to $2 billion and the solicitation period to December. As of October 16, 2003, KBR had performed nearly $1.6 billion worth of work. In the meantime, KBR has subcontracted with two companies to work on the project: Boots & Coots, an oil field emergency response firm that Halliburton works in partnership with (CEO Jerry L. Winchester was a former Halliburton manager) and Wild Well Control. Both firms are based in Texas.[30]

Professional negligence

KBR's maintenance work in Iraq has been criticized after reports of soldiers electrocuted from faulty wiring.[31] Specifically, KBR has been charged by the Army for improper installation of electrical units in bathrooms throughout U.S. bases. CNN reported that an Army Special Forces soldier, Staff Sergeant Ryan Maseth, died by electrocution in his shower stall on January 2, 2008. Army documents showed that KBR inspected the building and found serious electrical problems a full 11 months before his death. KBR noted "several safety issues concerning the improper grounding of electrical devices." But KBR's contract did not cover "fixing potential hazards;" It covered repairing items only after they broke down.[32] Maseth's family has sued KBR.[33] In January 2009, the US Army CID investigator assigned to the case recommended that Maseth's official cause of death should be changed from "accidental" to "negligent homicide". KBR supervisors were blamed for failing to ensure electrical and plumbing work were performed by qualified employees, and for failure to inspect the work.[34] In late January 2009, the Defense Contract Management Agency handed down a "Level III Corrective Action Request" to KBR. This is disseminated after a contractor is found being in a state of "serious noncompliance," and is one step from suspending or terminating a contract.[34] Despite these issues, KBR was recently awarded a $35 million contract for major electrical work.[35]

Employee safety

As of June 9, 2008, 81 American and foreign KBR employees and subcontractors have been killed, and more than 380 have been wounded by hostile action while performing services under the company's government contracts in Iraq, Afghanistan and Kuwait. Family members of injured or killed employees have sued the company in relation to the 2004 Iraq KBR convoy ambush.[36]

Sexual assault and abuse

Jamie Leigh Jones testified at a Congressional hearing that she had been gang-raped by as many as seven co-workers in Iraq in 2005 when she was an employee of KBR, and then falsely imprisoned in a shipping container for 24 hours without food or drink.[37][38]. KBR was a subsidiary of Halliburton at the time. Jones and her lawyers said that 38 women have contacted her reporting similar experiences while working as contractors in Iraq, Kuwait, and other countries. On September 15, 2009, the 5th Circuit Court of Appeals ruled in favor of Jones, in a 2 to 1 ruling, and found that her alleged injuries were not, in fact, in any way related to her employment and thus, not covered by the contract.[38]

Jamie Leigh Jones's case led Senator Al Franken to propose an amendment to the defence appropriations bill, which was passed in October 2009, to allow employees of firms with government contracts access to the courts.[39]

Mary Beth Kineston, an Ohio truck driver, said she was sexually harassed and groped by several KBR employees, and was later fired after reporting to the company the threats and harassment endured by female employees.[40]

Jo Frederiksen, another female employee, filed a law suit against the company for allegedly being "inappropriately touched, stalked, intimidated and verbally harassed" during her time with the firm in 2003. According to Frederiksen, after she complained to the firm she was moved to an even more hostile location while some of her abusers were promoted. The lawsuit claimed"women are second-rate citizens provided for the pleasure of men" at the firm. Frederiksen also alleged a lack of oversight to "rampant illicit criminal behavior" related to prostitution and human trafficking by other KBR employees. [41]

Human trafficking lawsuit

On August 28, 2008, defense contractor KBR, Inc. and a Jordanian subcontractor were accused of human trafficking in a federal lawsuit filed in Los Angeles.[42] The suit alleged that 13 Nepali men were recruited by Daoud & Partners to work in hotels and restaurants in Jordan, but upon arrival all 13 men had their passports seized by the contractor and were sent to Iraq to work on the Al-Asad U.S. air base. Twelve of the employees were abducted when their unprotected convoy was attacked by a group calling itself the Army of Ansar al-Sunna, while enroute to the base. Shortly thereafter, a video was released of one of the men being beheaded and the other 11 shot. The remaining employee, Buddi Prasad Gurung, claims to have been held against his will for 15 months, during which time he was forced to work at the base.[43] Reuters quoted attorney Matthew Handley as saying, "It doesn't appear that any of them knew they were going to Iraq". KBR made no public comment on the lawsuit, but released a statement which stated in part that it, "in no way condones or tolerates unethical or illegal behaviour".[44]

"Burn pits" lawsuits

More than 20 federal lawsuits naming KBR and seeking class-action status were filed in late 2008 and 2009 over the practice of operating "burn pits" at U.S. bases in both Iraq and Afghanistan and thus exposing soldiers to smoke containing dioxin, asbestos and other harmful substances. The pits are said to include "every type of waste imaginable," with items such as "tires, lithium batteries, Styrofoam, paper, wood, rubber, petroleum-oil-lubricating products, metals, hydraulic fluids, munitions boxes, medical waste, biohazard materials (including human corpses), medical supplies (including those used during smallpox inoculations), paints, solvents, asbestos insulation, items containing pesticides, polyvinyl chloride pipes, animal carcasses, dangerous chemicals, and hundreds of thousands of plastic water bottles."

A company statement responding to the allegations said that "at the sites where KBR provides burn pit services, the company does so... in accordance with the relevant provisions" of its contracts as well as "operational guidelines approved by the Army."[45]

Legacy in Houston

KBR Tower, the headquarters of KBR, with the Continental Center I at night

Houston's convention center was named after company founder and namesake George R. Brown. Rice University's Margaret Root Brown College, George R. Brown School of Engineering, George R. Brown Hall, Alice Pratt Brown Hall and Herman Brown Hall are all named for Brown and members of the Brown family, who have made significant monetary contributions to Rice and other Houston schools. A residence hall at Southwestern University is named after Herman Brown.

References

  1. ^ KBR intends to acquire BE & K Inc. Pravda, 5 July 2008.
  2. ^ a b c Eriksen, Helen. "Will KBR ditch its Houston headquarters for Katy suburbia?." Houston Chronicle. April 30, 2008. Retrieved on January 13, 2009.
  3. ^ "Locations." KBR. Retrieved on January 13, 2009.
  4. ^ "KBR Announces Pricing of Its Initial Public Offering." KBR. November 15, 2006. Retrieved on July 25, 2009.
  5. ^ "Map." East End Management District. Retrieved on July 30, 2009.
  6. ^ Fifth Ward, Houston from the Handbook of Texas Online Retrieved on June 25, 2009.
  7. ^ "Offices." Brown & Root. January 31, 1998. Retrieved on September 15, 2009.
  8. ^ Halliburton Deal New York Times, June 17, 1989.
  9. ^ a b Yeoman, Barry (2003-06-01). "Soldiers of Good Fortune". Mother Jones. http://www.motherjones.com/news/feature/2003/05/ma_365_01.html. Retrieved 2007-05-08.  
  10. ^ Clanton, Brett. "KBR is officially out on its own." Houston Chronicle, April 5, 2007.
  11. ^ Kennett, Jim. "Halliburton's KBR Jumps 22% in First Day of Trading." Bloomberg. November 16, 2006. Retrieved on January 13, 2009.
  12. ^ Cooper, Lauren B. (2008-05-07). "Houston company to buy Birmingham's BE&K". Birmingham Business Journal. http://www.bizjournals.com/birmingham/stories/2008/05/05/daily21.html. Retrieved 2008-05-07.  
  13. ^ Dawson, Jennifer. "KBR plans HQ campus." Houston Business Journal. Friday April 4, 2008. Retrieved on January 13, 2009.
  14. ^ Sarnoff, Nancy. "KBR says it's moving to Energy Corridor / Getting close to customers among reasons to leave downtown." Houston Chronicle. Saturday May 3, 2008. Business 1. Retrieved on January 13, 2009.
  15. ^ "KBR Announces Plan for West Houston Campus Location." KBR. May 2, 2008. Retrieved on January 13, 2009.
  16. ^ Sarnoff, Nancy. "Economic crunch undercuts real estate projects." Houston Chronicle. January 3, 2009. Retrieved on January 21, 2009.
  17. ^ "U.S. Department of Defense - Gitmo Photos" 5 April, 2006.
  18. ^ "Private contractors outnumber U.S. troops in Iraq" Los Angeles Times 4 July 2007.
  19. ^ Bryce, Robert. "The Candidate from Brown and Root. (reprint)" Texas Observer, October 6, 2000.
  20. ^ Defenselink News "Contracts Awarded", February 19, 1999.
  21. ^ Defenselink News "FAQ About Contracting".
  22. ^ USACE "USACE Information sheet on RIO".
  23. ^ Halliburton response "Halliburton statement".
  24. ^ "Army Overseer Tells of Ouster Over KBR Stir", The New York Times, 17 June 2008.
  25. ^ Farah Stockman, "Top Iraq contractor skirts U.S. taxes offshore: Shell companies in Cayman Islands allow KBR to avoid Medicare, Social Security deductions", Boston Globe, 2008-03-06.
  26. ^ KBR charged with bribing Nigerian officials for contracts. CNN, 2009-02-07.
  27. ^ Albert Jackson Stanley Plea Agreement, USDC, Southern District of Texas, Houston Division.
  28. ^ SEC Charges Former CEO of Kellogg, Brown & Root, Inc. with Foreign Bribery, 2008-09-03.
  29. ^ Industry Experts Call Halliburton Gasoline Prices "Highway Robbery" :: Committee on Oversight and Government Reform :: United States House of Representatives.
  30. ^ 2003 Press Releases.
  31. ^ "Despite Alert, Flawed Wiring Still Kills G.I.’s". New York Times. 2008-05-04. http://www.nytimes.com/2008/05/04/world/middleeast/04electrocute.html?hp. Retrieved 2008-05-07.  
  32. ^ Green Beret electrocuted in shower on Iraq base - CNN.com.
  33. ^ Iraq electrocutions show U.S. failed to provide for troops Standard Speaker, 7 August 2008.
  34. ^ a b Investigator: Soldier's electrocution 'negligent homicide' - CNN.com.
  35. ^ Hefling, Kimberly. KBR Wins Contract Despite Criminal Probe of Deaths. Associated Press via ABC News, 2009-02-07.
  36. ^ KBR Iraq cases involve casualties among contractors Houston Chronicle, 31 January 2009.
  37. ^ New York Times.
  38. ^ a b Court rules that KBR employee’s gang rape wasn’t a personal injury ‘arising in the workplace.’
  39. ^ Rape case to force US defence firms into the open
  40. ^ Limbo for U.S. Women Reporting Iraq Assaults
  41. ^ Come For The Nation-Building, Stay For The Brothels.
  42. ^ "Nepalese man sues KBR on human trafficking charges," Associated Press article.
  43. ^ "Families of 12 Slain in Iraq File Lawsuit," New York Times, August 28, 2008. Retrieved from NYTimes.com on 2008-11-18.
  44. ^ "Nepalese sue US company over Iraq," BBC, August 28, 2008. Retrieved from news.bbc.co.uk on 2009-3-14.
  45. ^ Wood, E. Thomas (2009-11-08). "Soldiers claim war zone contractors exposed them to toxins". NashvillePost.com Retrieved on 2009-11-09. http://www.nashvillepost.com/news/2009/11/8/soldiers_claim_war_zone_contractors_exposed_them_to_toxins.  

External links


KBR, Inc.
Type Public
Industry Engineering
Construction
Private military contractor
Founded 1998
Headquarters KBR Tower
Downtown Houston, Texas
Key people Bill Utt
Revenue US$ 12.105 billion (2009)
Operating income US$ 0.536 billion (2009)
Net income US$ 0.290 billion (2009)
Total assets US$ 5.327 billion (2009)
Total equity US$ 2.288 billion (2009)
Employees 57,000 (2009)
Website http://www.kbr.com/

KBR, Inc. (formerly Kellogg Brown & Root) NYSEKBR is an American engineering, construction and private military contracting company, formerly a subsidiary of Halliburton, headquartered in Houston. The company also has large offices in Arlington, Birmingham and Dallas. After Halliburton acquired Dresser Industries in 1998, Dresser's engineering subsidiary, The M. W. Kellogg Co., was merged with Halliburton's construction subsidiary, Brown & Root, to form Kellogg Brown & Root. KBR and its predecessors have won many contracts with the U.S. military, including during the 2003 invasion of Iraq, World War II and the Vietnam War.

KBR is the largest non-union construction company in the United States.[1] The company's corporate offices are in the KBR Tower in Downtown Houston.[2][3]

The company received significant media attention in the late 2000s, after an employee, Jamie Leigh Jones, was allegedly gang-raped and held hostage by her co-workers, before evidence disappeared after it was handed to the company.

Contents

History

[[File:|thumb|KBR Tower, the headquarters of KBR and a part of Cullen Center, with the Downtown Houston YMCA ahead]] [[File:|thumb|500 Jefferson, also a part of Cullen Center, has additional KBR offices[2]]] [[File:|thumb|KBR offices on Clinton Drive,[2][4] within the boundaries of the East End and the Fifth Ward.[5][6] It is the former headquarters of Brown & Root.[7]]]

M.W. Kellogg

In 1901, Morris Kellogg founded The M. W. Kellogg Company in New York City. The company was incorporated in 1905 and its headquarters was moved to Jersey City, New Jersey. Initially Kellogg’s main business was power plant construction and fabrication of power plant components, but the development of hammer forge welding techniques helped ready the company to move into refining as the petroleum industry developed.

Kellogg’s entry into process engineering initially focused on the Fleming cracking process, but in the 1920s Kellogg partnered with The Texas Company (Texaco) and Standard Oil of Indiana to purchase the Cross thermal cracking process. Kellogg set up one of the first petroleum laboratories in the country in 1926 to commercialize and then license the technology. This led to Kellogg building some 130 units in the U.S. and abroad.

In the 1930s and '40s Kellogg worked with leading refiners on various technologies. For the war effort, these developments led to the construction of six hydroreformer units twenty fluid catalytic cracking units and the only complete refinery built during World War II. Even bigger than the refining work was K-25, the gaseous diffusion plant at Oak Ridge, Tennessee built as part of the Manhattan Project. This period also included the development of the Benedict-Webb-Rubin (BWR) equation of state which has since become an industry mainstay and provided the basis for Kellogg’s lead in cryogenics.

The 1950s Kellogg technology expanded into steam pyrolysis, Orthoflow fluid catalytic cracking, phenol-from-cumene and coal-to-synthetic fuels technologies and the '60s saw the growth in helium recovery, ethylene and the development of Kellogg’s ammonia process.

In 1970 Kellogg moved from New York City to Houston, Texas and in 1975, they completed the move by relocating the research and development lab as well. The '70s saw Kellogg become the first American contractor to receive contracts from the People’s Republic of China. Kellogg’s international work expanded with the major ammonia complexes in China, Indonesia and Mexico as well as LNG liquefaction plant in Algeria and 2 receiving terminals in the U.S., the world’s largest LPG plant in Kuwait and four fluid catalytic cracking units in Mexico. The '80s saw continuation of global activity in LNG and ethylene with millisecond furnaces starting up in the U.S.

Brown & Root

Brown & Root was founded in Texas in 1919 by two brothers, George R. Brown and Herman Brown, with money provided by their brother-in-law, Daniel Root. The company began its operations by building roads in Texas.

One of its first large-scale projects, according to the book Cadillac Desert, was building a dam on the Texas Colorado River near Austin during the Depression years. For assistance in federal payments, the company turned to the local Congressman, Lyndon B. Johnson. Brown & Root was the principal source of campaign funds for Johnson's initial run for Congress in 1937, in return for persuading the Bureau of Reclamation to change its rules against paying for a dam on land the federal government did not own, a decision that had to go all the way to President Franklin Delano Roosevelt, according to Robert A. Caro's book The Path to Power. After other very profitable construction projects for the federal government, Brown & Root gave massive sums of cash for Johnson's first run for the U.S. Senate in 1941. Brown and Root reportedly violated IRS rules over campaign contributions, largely in charging off its donations as deductible company expenses, according to Caro. A subsequent IRS investigation threatened to bring criminal charges of illegal campaign donations against Brown & Root, as well as Johnson and others. Roosevelt himself told the IRS to back off and allowed Brown and Root to settle for pennies on the dollar.

During World War II, Brown & Root built the Naval Air Station Corpus Christi and its subsidiary Brown Shipbuilding produced a series of warships for the U.S. Government.

In 1947, Brown & Root built one of the world's first offshore oil platforms.

According to Tracy Kidder's Pulitzer Prize-winning book Mountains Beyond Mountains, Brown & Root was a contractor in the Péligre Dam project. The project was designed by the U.S. Army Corps of Engineers and financed by the Export-Import Bank of the United States.

Halliburton years

Following the death of Herman Brown, Halliburton Energy Services acquired Brown & Root in December 1962. According to Dan Briody, who wrote a book on the subject, the company became part of a consortium of four companies that built about 85 percent of the infrastructure needed by the Navy during the Vietnam War. At the height of the anti-war movement of the 1960s, Brown & Root was derided as "Burn & Loot" by protesters.

In 1989, Halliburton acquired another major engineering and construction contractor, C. F. Braun & Co., of Alhambra California, and merged it into Brown & Root.[8]

From 1995-2002, Halliburton KBR was awarded at least $2.5 billion to construct and run military bases, some in secret locations, as part of the Army's Logistics Civil Augmentation Program (LOGCAP).[9]

The extent of their services included a vast array of logistical operations historically under the jurisdiction of the military. Such operations included laundry services, meal services (dining halls), entertainment (Internet and cable access), and recreation (basketball courts and gym equipment).

In September 2005, under a competitive bid contract it won in July 2005 to provide debris removal and other emergency work associated with natural disasters, KBR started assessment of the cleanup and reconstruction of Gulf Coast Marine and Navy facilities damaged in the aftermath of Hurricane Katrina. The facilities include: Naval Station Pascagoula, Naval Station Gulfport, the John C. Stennis Space Center in Mississippi, two smaller U.S. Navy facilities in New Orleans, Louisiana and others in the Gulf Coast region. KBR has had similar contracts for more than 15 years.

Formation of KBR, Inc.

Halliburton announced on April 5, 2007, that it had finally broken ties with KBR, which has been its contracting, engineering and construction unit as a part of the company for 44 years.[10] The move was prefaced by a statement registered with the United States Securities and Exchange Commission on April 15, 2006, stating that Halliburton planned to sell up to 20 percent of its KBR stock on the New York Stock Exchange (NYSE). On November 16, 2006, KBR shares were offered for the public in an Initial Public Offering with shares priced at $17. The shares closed up more than 22 percent to $20.75 a share on the first trading day.[11]

On May 7, 2008, the company announced that it would acquire Birmingham, Alabama-based engineering and construction firm BE&K for $550 million. BE&K plans to remain headquartered in Birmingham.[12]

Planned office facility

In January 2010 KBR announced plans to extend its lease and expand its presence in downtown Houston. The downtown expansion will replace previously announced plans to develop a KBR campus in West Houston. The new total of KBR leased space in downtown will be just over 1,200,000 square feet (111,000 m2) at completion.[13]

Kosovo

In 1996, Brown & Root was awarded a contract to support U.S. and North Atlantic Treaty Organization (NATO) troops as part of the SFOR operation in the Balkan region. This contract was extended to also include KFOR operations in Kosovo starting in 1999. Camp Bondsteel in Kosovo was constructed by the 94th Engineer Construction Battalion together with the private Kellogg Brown & Root (KBR) under the direction of the Army Corps of Engineers. KBR is also the prime contractor for the operation of the camp. The camp is built mainly of wooden, semi permanent SEA (South East Asia) huts and is surrounded by a 2.5 meter high earthen wall. To construct the base two hills were lopped off and the valley between them was filled with the resulting material.

Afghanistan

KBR was awarded a $100 million contract in 2002 to build a new U.S. embassy in Kabul, Afghanistan, from the State Department.

KBR has also been awarded 15 Logistics Civil Augmentation Program (LOGCAP) task orders worth more than $216 million for work under Operation Enduring Freedom, the military name for operations in Afghanistan. These include establishing base camps at Kandahar and Bagram Air Base and training foreign troops from the Republic of Georgia.

Cuba

KBR has also been actively involved in the development of works in Cuba. Most notably sections of the U.S. Naval base in Guantanamo, completed in 2006. Camp 6, the newest facility built for detainees at Naval Station Guantanamo Bay, is designed after a maximum-security penitentiary in the U.S.[14]

Iraq

KBR employs more American private contractors and holds a larger contract with the U.S. government than does any other firm in Iraq. The company's roughly 14,000 U.S. employees in Iraq provide logistical support to the U.S. armed forces.[15]

Controversy

Political connections and corruption

Brown and Root had a well-documented relationship with U.S. President Lyndon Johnson, which began when he used his position as a Texas congressman to assist them in landing a lucrative dam contract. In return they gave him the funds for his 1948 Senate race against Coke R. Stevenson.[16] The relationship continued for years, with Johnson awarding military construction contracts to B&R.

Following the end of the first Gulf War, the Pentagon, led by then Defense Secretary Dick Cheney, paid Halliburton subsidiary Brown & Root Services over $8.5 million to study the use of private military forces with American soldiers in combat zones.[9]

Some controversy arose in February 1999 when KBR was awarded a substantial contract to provide emergency support to US military operations in the Balkans,[17] despite DynCorp having been awarded a contract, known as LOGCAP II, in 1994 to provide emergency support in exactly these sort of circumstances.[18]

RIO, or Restore Iraqi Oil, was awarded to KBR without competition when the United States Department of Defense determined that KBR was "the only contractor that could satisfy the requirement for immediate execution of the plan".[19] As of September 2006, hearings were still being conducted into the RIO project over possible billing, management, and procurement violations.

Another prime topic of interest is the Defense Contract Audit Agency (DCAA) report on billing-methods for meals. The auditors knew about, but disregarded, the Army's requirement, whereas KBR was directed to have varying amounts of meals prepared at certain locations regardless of how many people actually used the service. Although KBR was paying for the food, the DCAA did not believe they should be able to charge the DoD for meals prepared but not served.[20]

In June 2008, Charles M. Smith, the senior civilian Defense Department official overseeing the government's multibillion-dollar contract with KBR during the early stages of the war in Iraq said he was forced out of his job in 2004 for refusing to approve $1 billion in questionable charges to KBR. Smith refused to approve the payments because Army auditors determined that KBR lacked credible records to support more than $1 billion in spending. Smith stated, "They had a gigantic amount of costs they couldn’t justify." He said that following his action he was suddenly dismissed and according to media "his successors — after taking the unusual step of hiring an outside contractor to consider KBR’s claims — approved most of the payments he had tried to block."[21]

In May 2010, it was reported that KBR was selected for a no-bid contract worth as much as $568 million through 2011 for military support services in Iraq.[22]

Shell companies in Cayman Islands

In March 2008, the Boston Globe reported that KBR had avoided paying hundreds of millions of dollars in federal Medicare and Social Security taxes by hiring workers through shell companies based in the tax haven of the Cayman Islands. More than 21,000 people working for KBR in Iraq - including about 10,500 Americans - are listed as employees of two companies, Service Employers International Inc., and Overseas Administrative Services, which exist on the island only in computer files in an office.

KBR admitted that the companies were set up "in order to allow us to reduce certain tax obligations of the company and its employees." But KBR does claim the workers as its own with regards to the legal immunity extended to employers working in Iraq.[23]

Bribing Nigerian officials

On February 6, 2009, the Justice Department announced KBR had been charged with paying "tens of millions of dollars" in bribes to Nigerian officials in order to win government contracts, in violation of the Foreign Corrupt Practices Act. A 22-page document filed in a Houston federal court alleged massive bribes in connection with the construction of a natural gas plant on Bonny Island requiring $7.5bn USD. KBR officials had no comment.[24] KBR pleaded guilty and was ordered to pay $420m USD in penalties, nearly all of which was covered by Halliburton.

Former CEO Albert Jackson Stanley, who ran KBR when it was a subsidiary to Halliburton, was sentenced to 7 years in prison via plea agreement.[25][26]

Waxman allegations

The Army's actions came under fire from California Congressman Henry Waxman, who, along with Michigan Congressman John Dingell, asked the General Accounting Office to investigate whether the U.S. Agency for International Development and The Pentagon were circumventing government contracting procedures and favoring companies with ties to the Bush administration. They also accused KBR of inflating prices for importing gasoline into Iraq.[27] In June 2003, the Army announced that it would replace KBR's oil-infrastructure contract with two public-bid contracts worth a maximum total of $1 billion, to be awarded in October. However, the Army announced in October it would expand the contract ceiling to $2 billion and the solicitation period to December. As of October 16, 2003, KBR had performed nearly $1.6 billion worth of work. In the meantime, KBR has subcontracted with two companies to work on the project: Boots & Coots, an oil field emergency response firm that Halliburton works in partnership with (CEO Jerry L. Winchester was a former Halliburton manager) and Wild Well Control. Both firms are based in Texas.[28]

Professional negligence

KBR's maintenance work in Iraq has been criticized after reports of soldiers electrocuted from faulty wiring.[29] Specifically, KBR has been charged by the Army for improper installation of electrical units in bathrooms throughout U.S. bases. CNN reported that an Army Special Forces soldier, Staff Sergeant Ryan Maseth, died by electrocution in his shower stall on January 2, 2008. Army documents showed that KBR inspected the building and found serious electrical problems a full 11 months before his death. KBR noted "several safety issues concerning the improper grounding of electrical devices." But KBR's contract did not cover "fixing potential hazards;" It covered repairing items only after they broke down.[30] Maseth's family has sued KBR.[31] In January 2009, the US Army CID investigator assigned to the case recommended that Maseth's official cause of death should be changed from "accidental" to "negligent homicide". KBR supervisors were blamed for failing to ensure electrical and plumbing work were performed by qualified employees, and for failure to inspect the work.[32] In late January 2009, the Defense Contract Management Agency handed down a "Level III Corrective Action Request" to KBR. This is disseminated after a contractor is found being in a state of "serious noncompliance," and is one step from suspending or terminating a contract.[32] Despite these issues, KBR was recently awarded a $35 million contract for major electrical work.[33]

Employee safety

As of June 9, 2008, 81 American and foreign KBR employees and subcontractors have been killed, and more than 380 have been wounded by hostile action while performing services under the company's government contracts in Iraq, Afghanistan and Kuwait. Family members of injured or killed employees have sued the company in relation to the 2004 Iraq KBR convoy ambush.[34]

Sexual assault and abuse

Jamie Leigh Jones testified at a Congressional hearing that she had been gang-raped by as many as seven co-workers in Iraq in 2005 when she was an employee of KBR, and then falsely imprisoned in a shipping container for 24 hours without food or drink.[35][36] KBR was a subsidiary of Halliburton at the time. Jones and her lawyers said that 38 women have contacted her reporting similar experiences while working as contractors in Iraq, Kuwait, and other countries. On September 15, 2009, the 5th Circuit Court of Appeals ruled in favor of Jones, in a 2 to 1 ruling, and found that her alleged injuries were not, in fact, in any way related to her employment and thus, not covered by the contract.[36]

Jamie Leigh Jones's case led Senator Al Franken to propose an amendment to the defense appropriations bill, which was passed in October 2009, to allow employees of firms with government contracts access to the courts.[37]

Mary Beth Kineston, an Ohio truck driver, said she was sexually harassed and groped by several KBR employees, and was later fired after reporting to the company the threats and harassment endured by female employees.[38]

Jo Frederiksen, another female employee, filed a law suit against the company for allegedly being "inappropriately touched, stalked, intimidated and verbally harassed" during her time with the firm in 2003. According to Frederiksen, after she complained to the firm she was moved to an even more hostile location while some of her abusers were promoted. The lawsuit claimed "women are second-rate citizens provided for the pleasure of men" at the firm. Frederiksen also alleged a lack of oversight to "rampant illicit criminal behavior" related to prostitution and human trafficking by other KBR employees.[39]

Human trafficking lawsuit

On August 28, 2008, defense contractor KBR, Inc. and a Jordanian subcontractor were accused of human trafficking in a federal lawsuit filed in Los Angeles.[40] The suit alleged that 13 Nepali men were recruited by Daoud & Partners to work in hotels and restaurants in Jordan, but upon arrival all 13 men had their passports seized by the contractor and were sent to Iraq to work on the Al Asad Airbase. Twelve of the employees were abducted when their unprotected convoy was attacked by a group calling itself the Army of Ansar al-Sunna, while enroute to the base. Shortly thereafter, a video was released of one of the men being beheaded and the other 11 shot. The remaining employee, Buddi Prasad Gurung, claims to have been held against his will for 15 months, during which time he was forced to work at the base.[41] Reuters quoted attorney Matthew Handley as saying, "It doesn't appear that any of them knew they were going to Iraq". KBR made no public comment on the lawsuit, but released a statement which stated in part that it, "in no way condones or tolerates unethical or illegal behaviour".[42]

"Burn pits" lawsuits

More than 20 federal lawsuits naming KBR and seeking class-action status were filed in late 2008 and 2009 over the practice of operating "burn pits" at U.S. bases in both Iraq and Afghanistan and thus exposing soldiers to smoke containing dioxin, asbestos and other harmful substances. The pits are said to include "every type of waste imaginable," with items such as "tires, lithium batteries, Styrofoam, paper, wood, rubber, petroleum-oil-lubricating products, metals, hydraulic fluids, munitions boxes, medical waste, biohazard materials (including human corpses), medical supplies (including those used during smallpox inoculations), paints, solvents, asbestos insulation, items containing pesticides, polyvinyl chloride pipes, animal carcasses, dangerous chemicals, and hundreds of thousands of plastic water bottles."

A company statement responding to the allegations said that "at the sites where KBR provides burn pit services, the company does so... in accordance with the relevant provisions" of its contracts as well as "operational guidelines approved by the Army."[43]

Legacy in Houston

[[File:|thumb|KBR Tower, the headquarters of KBR, with the Continental Center I at night]]

Houston's convention center was named after company founder and namesake George R. Brown. Rice University's Margaret Root Brown College, George R. Brown School of Engineering, George R. Brown Hall, Alice Pratt Brown Hall and Herman Brown Hall are all named for Brown and members of the Brown family, who have made significant monetary contributions to Rice and other Houston schools. A residence hall at Southwestern University is named after Herman Brown.

References

  1. ^ KBR intends to acquire BE & K Inc. Pravda, 5 July 2008.
  2. ^ a b c Eriksen, Helen. "Will KBR ditch its Houston headquarters for Katy suburbia?." Houston Chronicle. April 30, 2008. Retrieved on January 13, 2009.
  3. ^ "Locations." KBR. Retrieved on January 13, 2009.
  4. ^ "KBR Announces Pricing of Its Initial Public Offering." KBR. November 15, 2006. Retrieved on July 25, 2009.
  5. ^ "Map." East End Management District. Retrieved on July 30, 2009.
  6. ^ Fifth Ward, Houston from the Handbook of Texas Online Retrieved on June 25, 2009.
  7. ^ "Offices." Brown & Root. January 31, 1998. Retrieved on September 15, 2009.
  8. ^ Halliburton Deal New York Times, June 17, 1989.
  9. ^ a b Yeoman, Barry (2003-06-01). "Soldiers of Good Fortune". Mother Jones. http://www.motherjones.com/news/feature/2003/05/ma_365_01.html. Retrieved 2007-05-08. 
  10. ^ Clanton, Brett. "KBR is officially out on its own." Houston Chronicle, April 5, 2007.
  11. ^ Kennett, Jim. "Halliburton's KBR Jumps 22% in First Day of Trading." Bloomberg. November 16, 2006. Retrieved on January 13, 2009.
  12. ^ Cooper, Lauren B. (2008-05-07). "Houston company to buy Birmingham's BE&K". Birmingham Business Journal. http://www.bizjournals.com/birmingham/stories/2008/05/05/daily21.html. Retrieved 2008-05-07. 
  13. ^ KBR Announces Plans to Expand Downtown Houston Headquarters
  14. ^ "U.S. Department of Defense - Gitmo Photos" 5 April 2006.
  15. ^ "Private contractors outnumber U.S. troops in Iraq" Los Angeles Times 4 July 2007.
  16. ^ Bryce, Robert. "The Candidate from Brown and Root. (reprint)" Texas Observer, October 6, 2000.
  17. ^ Defenselink News "Contracts Awarded", February 19, 1999.
  18. ^ Defenselink News "FAQ About Contracting".
  19. ^ USACE "USACE Information sheet on RIO".
  20. ^ Halliburton response "Halliburton statement".
  21. ^ "Army Overseer Tells of Ouster Over KBR Stir", The New York Times, 17 June 2008.
  22. ^ KBR to Get No-Bid Army Work as U.S. Alleges Kickbacks, Business Week, May 6, 2010
  23. ^ Farah Stockman, "Top Iraq contractor skirts U.S. taxes offshore: Shell companies in Cayman Islands allow KBR to avoid Medicare, Social Security deductions", Boston Globe, 2008-03-06.
  24. ^ KBR charged with bribing Nigerian officials for contracts. CNN, 2009-02-07.
  25. ^ Albert Jackson Stanley Plea Agreement, USDC, Southern District of Texas, Houston Division.
  26. ^ SEC Charges Former CEO of Kellogg, Brown & Root, Inc. with Foreign Bribery, 2008-09-03.
  27. ^ Industry Experts Call Halliburton Gasoline Prices "Highway Robbery" :: Committee on Oversight and Government Reform :: United States House of Representatives.
  28. ^ 2003 Press Releases.
  29. ^ Risen, James (2008-05-04). "Despite Alert, Flawed Wiring Still Kills G.I.’s". New York Times. http://www.nytimes.com/2008/05/04/world/middleeast/04electrocute.html?hp. Retrieved 2008-05-07. 
  30. ^ "Green Beret electrocuted in shower on Iraq base - CNN.com". CNN. May 28, 2008. http://www.cnn.com/2008/US/05/28/soldier.electrocutions/index.html?iref=newssearch. Retrieved May 7, 2010. 
  31. ^ Iraq electrocutions show U.S. failed to provide for troops Standard Speaker, 7 August 2008.
  32. ^ a b Investigator: Soldier's electrocution 'negligent homicide' - CNN.com.
  33. ^ Hefling, Kimberly. KBR Wins Contract Despite Criminal Probe of Deaths. Associated Press via ABC News, 2009-02-07.
  34. ^ KBR Iraq cases involve casualties among contractors Houston Chronicle, 31 January 2009.
  35. ^ New York Times.
  36. ^ a b Court rules that KBR employee’s gang rape wasn’t a personal injury ‘arising in the workplace.’
  37. ^ Rape case to force US defence firms into the open
  38. ^ Limbo for U.S. Women Reporting Iraq Assaults
  39. ^ Come For The Nation-Building, Stay For The Brothels.
  40. ^ "Nepalese man sues KBR on human trafficking charges," Associated Press article.
  41. ^ "Families of 12 Slain in Iraq File Lawsuit," New York Times, August 28, 2008. Retrieved from NYTimes.com on 2008-11-18.
  42. ^ "Nepalese sue US company over Iraq," BBC, August 28, 2008. Retrieved from news.bbc.co.uk on 2009-3-14.
  43. ^ Wood, E. Thomas (2009-11-08). "Soldiers claim war zone contractors exposed them to toxins". NashvillePost.com Retrieved on 2009-11-09. http://www.nashvillepost.com/news/2009/11/8/soldiers_claim_war_zone_contractors_exposed_them_to_toxins. 

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