KBR agrees to settle Army fraud allegations

WASHINGTON (CNN) -- Halliburton subsidiary KBR has agreed to pay $8 million to settle allegations the firm overcharged the U.S. Army for logistical support of military operations in the Balkans in 1999 and 2000.

The allegations involved double billing and delivery of products that did not conform to requirements for use in construction of an Army camp in Kosovo. Other claims involved inflation of prices for various goods resulting from the alleged failure to ensure competitive procurements, the Justice Department said.

"The Department of Justice remains committed to vigorously pursuing allegations of procurement abuses affecting the military," said Peter Keisler, assistant attorney general for the department's Civil Division.

The Justice Department said the settlement resolves allegations that concerned various purchase orders awarded to 10 foreign KBR subcontractors or vendors.

Company spokeswoman Melissa Norcross issued a statement noting that "the government closed its investigation without making allegations of fraud or filing a complaint."

"KBR has agreed to make a payment totaling $8 million to the government, representing an adjustment to the contracts under which KBR provided logistical support to the U.S. military in the Balkans," she said.

"Of that amount, $2.1 million was previously credited to our customer in January 2001 as the result of an internal investigation. The remaining sum will be paid directly to the U.S. Treasury because the appropriations accounts under which a contract credit could have been made have since expired."

KBR also has been the subject of investigations into military contracts it gained to support military operations in Iraq.

Halliburton (up $0.96 to $33.59, Charts) has initiated steps to spin off the KBR unit, which issued an initial public offering of stock earlier this month.

KBR (up $0.03 to $21.98, Charts) shares edged lower in afternoon trade Wednesday on the New York Stock Exchange.

--from CNN's Terry Frieden and Katy Byron

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