Centerra to pay $7.4M to settle False Claims Act allegations

The Justice Department said today that Centerra Services International has agreed to pay $7.4 million to settle allegations it double-billed and inflated labor costs in connection with a firefighting and fire protection services contract in Iraq.

Centerra, previously known as Wackenhut Services, was a subcontractor to Kellogg Brown & Root, who held the Army's logistical support contract in theater. From 2008 to 2010, the government alleged, Wackenhut inflated the costs of its labor "by billing the salaries of certain managers as direct costs under the subcontract, when those salaries had already been charged as indirect costs."

Additionally, the government alleged the company "artificially inflated its labor rate by counting its costs for holidays, vacation, sick leave, rest and recuperation and other variable labor costs twice in calculating the rate."

The settlement resolves a lawsuit filed by a whistleblower, who will receive $1.3 million as his share.

The resolved claims remain allegations, and there was no determination of liability.

(UPDATE 10:45 a.m., Feb. 2)

In a statement provided to Inside Defense, Paul Donahue, Centerra's president and chief executive, said the company "made a difficult business decision to settle rather than prolong this dispute over how to account for activities that occurred as long as eight years ago in Iraq.

"The company denies categorically the Government's allegations," Donahue continued. "The dispute arises because of the complexities of how to account for labor costs as the Government closed bases and moved personnel in Iraq. As a subcontractor, the company moved its personnel and firefighting equipment to ensure effective fire protection services as the prime contractor performed the inherently complex task of operating, drawing down and closing dozens of bases and moving thousands of employees in Iraq during this period."