Kuwait Contracts Under Federal Investigation, According to Bracewell attorneys David Stockwell and John Couch in Dubai office

October 9, 2007

DUBAI, UAE (October 9, 2007):  Investigations are underway in Kuwait on some $3 to $5 billion worth of contracts for food, supplies, shelter, weaponry and other goods and services provided by hundreds of companies and civilian contractors.

This scrutiny from the U.S. Defense and Justice Departments affects virtually all current or prospective government contractors and subcontractors -- and those associated with them.

“Anyone with a government contract in Kuwait in place needs to pay very close attention to the situation as it develops,” said David M. Stockwell, managing partner of Bracewell & Giuliani’s Dubai office. “Contractors targeted for alleged wrongdoing are strongly encouraged to begin internal investigation and to structure best practices for an initial response to allegations.”

Problems with contracts include, among other things, alleged bid rigging, kickbacks, product substitution, defective products, double billing and other schemes. These investigations are expected to target corporate and individual contractors, military personnel, other government employees and local nationals.

In addition to some 73 criminal investigations relating to contract fraud and some 20 civilian and military personnel who have been charged with taking over $15 million in bribes in Iraq, Kuwait and Afghanistan, the U.S. government has also vigorously been using its civil fraud and suspension authority to proceed against foreign and U.S. domestic companies and individuals in conjunction with the criminal efforts.

In addition, qui tam cases – where a private party brings a False Claims Act case on behalf of the government – have followed the growth trend.  Recent cases are testing the issue of false implied certifications.  Another case is based, in part, upon the violation of an expired Organizational Conflict of Interest clause that the contractor failed to challenge.

“Government investigations will have many prongs and facets,” said John A. Couch, a senior international and tax partner in Bracewell's Dubai office. “Developing a response plan as soon as possible is far preferable to having to deal with a government investigation in a disorganized and reactionary manner.”