ATTORNEY WORK-PRODUCT

ATTORNEY-CLIENT PRIVILEGED
RELATES TO CASE TO BE FILED UNDER SEAL–DO NOT CIRCULATE

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLORADO

____________________________________________
)
UNITED STATES ex rel. )
KEVIN BARNES, ) FILE UNDER SEAL
1083 Vine Street ) AND IN CAMERA
Healdsburg, California 95448, ) (31 U.S.C. 3729 et seq.)
)
Qui Tam Plaintiff, )
)
v. ) No. _______________
)
ITT FEDERAL SERVICES INTERNATIONAL )
CORP. )
4410 East Fountain Boulevard )
Colorado Springs, Colorado 80916, )
)
and )
)
KUWAIT RESOURCES HOUSE )
Kuwait City, Sharq Area )
Al-Shuhada Street )
Al-Ghawali Center )
KRH–13th Floor )
Kuwait, )
)
Defendants. )
____________________________________________ )

COMPLAINT

1. This action concerns violations of the False Claims Act, 31 U.S.C. §§ 3720-32,

by Defendant ITT Federal Services International Corp. (“ITT,” or “Defendant”) and its
subcontractor Kuwait Reconstruction House (“KRH”).

2. As explained in detail below, the Defendants profiteered under ITT’s cost-plus

fixed/award-fee maintenance and operations contract in Kuwait by: (a) bid-rigging between

ITT and KRH to inflate subcontractor costs; (b) concocting a fictive KRH inflationary

increase to compensate KRH for a reduction in its building leases with ITT; (c) months of

billing for unfit and unoccupied housing; (d) billing for third-country national (“TCN”)

wages and benefits that were not actually paid; and (e) billing for Defense Base Act

insurance costs that ITT did not actually incur. When Relator Keven Barnes discovered and

reported the above waste, fraud and abuse, and took other actions in furtherance of this

action, Defendant ITT retaliated against Mr. Barnes and ultimately terminated him.

PARTIES

3. The Relator is Kevin Barnes (“Barnes”). Barnes is a citizen of the United

States. He resides at 1083 Vine Street, Healdsburg, California 95448, and presently works

overseas. In accordance with the False Claims Act, 31 U.S.C. §§ 3729-30, Barnes brings this

action on behalf of, and in the name of, the United States.

4. Defendant ITT Federal Services International Corp. is a subsidiary of ITT

Federal Services Corp., which in turn is a subsidiary of ITT Industries, Inc. Defendant ITT

is headquartered or maintains offices at 4410 East Fountain Boulevard, Colorado Springs,

Colorado 80916.

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 5. Defendant KRH is a Kuwaiti company that is headquartered in Kuwait. KRH

is headquartered or maintains office at Kuwait City, Sharq Area, Al-Shuhada Street, Al-

Ghawali Center, KRH–13th Floor, Kuwait.

JURISDICTION AND VENUE

6. This action arises under 31 U.S.C. §§ 3729 et seq. Therefore, this is a case or

controversy arising under the laws of the United States of America. There is subject matter

jurisdiction over this action under 28 U.S.C. § 1331 (2000) and 31 U.S.C. § 3732.

7. This action may be brought in this judicial district under 31 U.S.C. § 3732(a)

(2000), because Defendant ITT transacts business in this judicial district, and it can be found

in this judicial district.

I. BACKGROUND

8. In or around October 29, 2004, the U.S. Department of the Army (the “Army”)

awarded to Defendant ITT cost-plus fixed/award -fee Contract No. W52P1J-05-D-0003 (the

“Contract”), pursuant to Army Solicitation No. W52P1J-04-R-0024, as amended. The

Contract was awarded for a term of one year plus four option years.

9. Under the Contract, ITT was to provide Task-Order based: “Global

Maintenance and Supply Services (GMASS) in support of Army Materiel Command (AMC),

Army Field Support Command (AFSC), coalition forces, any other government agency

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and/or other branches of the Armed Services within CONUS or OCONUS in accordance

with GMASS Performance Work Statement (PWS) incorporated as attachment 001.” The

Army subsequently has exercised all four Contract option years.

10. The U.S. Army has awarded one or more Task Orders to ITT under the

Contract, including Task Order No. 1 for GMASS (the “Task Order”). ITT worked under

Task Order No. 1 at Camp Arifjan in Kuwait, and elsewhere. Task Order No.1 was

performed over the full, five-year period of the Contract.

11. In connection with the Task Order, ITT subcontracted with Defendant KRH

to provide TCN sponsorships, TCN labor, and facilities at or around Camp Arifjan in

Kuwait.

12. On information and belief, ITT submitted cost and pricing data in connection

with its proposals to induce the award of the Contract, the four Contract option years and the

Task Order. In this connection, ITT certified that its proposed costs, including subcontractor

KRH-related costs, were reasonable; and that such cost data consisted of all data existing up

to the time of agreement on price that reasonably could affect the price. ITT further

represented that its historical and proposed KRH-related subcontract costs were competitive,

reasonable and consistent with the Federal Acquisition Regulation (“FAR”).

13. One or more of such Contract, Contract option year and Task Order proposals

was signed by ITT Contracts Manager Molly Harris.

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 14. ITT submitted invoices or payment vouchers under the Contract and the Task

Order at least monthly. The invoices submitted by ITT under the Contract included both

“cost vouchers” and “Invoice 2-in-One (services)” on-line payment claims. For example,

Mr. Barnes is aware that the Task Order 1 invoice for the month of December of 2007 was

approximately $22 million. Under the Contract, ITT was required to support all such

invoices with documentation of the labor and material costs charged therein; and to obtain

subcontracted materials and services at the most advantageous price. The ITT Contract

invoices also constitute or were accompanied by an ITT representation that the items and

services billed therein in fact were provided.

15. Relator Barnes has a Bachelor’s Degree in Economics. As a U.S. Air Force

reservist, Mr. Barnes worked as a Contracts Administrator for the Defense Contract

Management Agency. Before joining ITT, Mr. Barnes worked as a Subcontracts

Administrator for another U.S. Department of Defense contractor in Bagdad and provided

contracting advise to the Iraqi Ministry of Defense.

16. On or about October 30, 2008, ITT employed Relator Barnes as Contract

Administrator based at Camp Arifjan in Kuwait. As discussed below, Mr. Barnes discovered

the above mentioned categories of fraud, waste and abuse. He reported it, attempted to

rectify it, and took other actions in furtherance of this action under the False Claims Act. In

response, ITT retaliated against Mr. Barnes and ultimately terminated Mr. Barnes on or about

January 29, 2008. The retaliation continued even after Mr. Barnes was termination.

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 II. FALSE AND FRAUDULENT CLAIMS

A. Bid-Rigging and Inflated KRH Subcontract Costs

17. As noted above, Defendant ITT subcontracted TCN sponsorship, labor and

related items to Defendant KRH. ITT did so virtually without competition and at inflated

subcontract prices.

18. ITT actively declined inquiries from other potential competitor to KRH for the

subcontracted items. For example, Ramin Trading was another potential subcontractor for

the KRH work. The U.S. Embassy in Kuwait listed Ramin Trading as one of the top Kuwaiti

companies to hire for TCN sponsorships, labor and related items. Ramin Trading revealed

to Relator Barnes that ITT was not interested in receiving competitive bids for the TCN

sponsorships, labor and related items. Indeed, Ramin Trading’s Robert Simon actually had

submitted an unsolicited competitive bid for the TCN sponsorships, labor and related items.

The Ramin Trading bid was rejected by ITT, even though Ramin Trading had offered to

perform the KRH work for approximately half the cost of KRH.

19. When Relator Barnes recommended that ITT compete items subcontracted to

KRH, IIT’s Mike Lassiter flatly refused. For example, in December of 2007, Relator Barnes

learned that 51 new leased vehicles were needed for the Contract. In Kuwait, there are over

20 vehicle leasing companies that could have provided the vehicles at a competitive price.

ITT refused to obtain competing bids. Instead, ITT simply ordered them from KRH, which

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was a middleman and not a dealer, without even attempting to compete the requirement.

Similarly, on or about January 5, 2008, Mr. Barnes reported the lack of price competition ITT

Contracts Manager John Blecher.

20. As a result, the KRH pricing for TCN sponsorship, labor, housing and related

items is believed to have been artificially inflated to at least double the market rate.

21. As noted above, ITT submitted invoices to the Army at least monthly. In those

invoices, ITT billed the inflated KRH subcontract costs, along with the concomitantly

inflated indirect charges, to the Army. In those invoices, ITT falsely represented (explicitly

or implicitly) that the KRH subcontract costs were reasonable, and based on adequate price

competition.

B. Fictitious Inflationary Increases.

22. During Contract option year three (September 30, 2007 through September 29,

2008), and specifically in or about December of 2007, ITT informed KRH that many of the

approximately over 6 TCN housing buildings leased from KRH no longer were needed.

23. KRH objected to any reduction in the amount of TCN housing. KRH

threatened to send the TCNs home or to move all of the remaining TCNs and U.S. civilian

personnel to cheaper housing in order to maintain its existing profit levels. This essentially

amounted to a KRH threat to put the existence of the Contract in jeopardy.

24. The KRH threats were made at two meetings held in the offices of ITT in the

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Waha Mall, Deleel, Farwaniya. The later meeting was attended by approximately eleven ITT

personnel, along with KRH personnel. When KRH objected to the reduction at the meeting,

ITT’s Gary McGraw left the meeting room with a KRH representative for private

conversation. When the two returned to the meeting, ITT’s McGraw announced to ITT’s

Contract Manager Molly Harris and others that they had resolved the dispute.

25. As Mr. McGraw described it, the “resolution” of KRH’s objection was a

private agreement between ITT and KRH to concoct a fictive and retroactive “inflationary

increase” to compensate KRH for the returned TCN housing. Specifically, KRH was to

accept the return of approximately five of the buildings that it was leasing to ITT. This

would result in approximately $2 million in savings under the Contract. However, KRH was

to recoup approximately $2.5 million through a fictive inflationary increase backdated to

October of 2007.

26. ITT’s McGraw told ITT’s Molly Harris to “do whatever you need to write this

up and make it work and get them their money” (or very similarly words). As Mr. Barnes

observed, Molly Harris promptly wrote the justification for KRH, and presented it as if KRH

has written the justification itself.

27. ITT’s Molly Harris subsequently submitted the inflationary increase

justification to the Contract administration offices at Camp Arifjan and at Rock Island,

Illinois. Relator Barnes heard Ms. Harris discussing the increase with the Government the

next day, and specifically heard her justifying the claimed “inflation.”.

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 28. The U.S. Army was told that there was a legitimate and documented

inflationary increase, and was billed for it.

C. Billing for Unoccupied and Unfit Housing

29. As noted above, the Task Order permitted ITT to bill for cost to house the

TCNs, including Americans, working under the Contract. KRH leased housing to ITT.

30. One such building was “Building 50.” Building 50 was not fit for occupancy

until approximately February of 2008.

31. In early December of 2007, Mr. Barnes discovered that ITT was planning to

charge approximately $61,400 per month for Building 50 as if Building 50 was occupied.

Specifically, in late 2007, ITT and KRH agreed to back-charge the Army for Building 50.

The back-charges were to cover the four month period of October of 2007 to January of

2008. The Defendants agreed to back-charge the Army, despite the absence of TCN or other

personnel housed in Building 50 during that entire period; and further despite the fact that

Building 50 was unfit for housing any personnel as confirmed by a documented building

inspection. The inspection was conducted on or about January 3, 2008, and Mr. Barnes

personally was in attendance during the inspection. ITT then built those “costs” into the ITT

Contract option year three proposal.

D. Billing for TCN Wages and Benefits Not Paid to the TCNs

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 32. During Contract options years one and two, ITT and KRH ask the Army to

approve TCN pay raises of three to five percent. The raises were approved and billed during

Contract option years two and three; and, on information and belief, during Contract option

year four.

33. In early December of 2007, Mr. Barnes discovered that ITT was not paying all

of the TCNs the pay increases. Specifically, KRH stated that they only gave the pay raises

to KRH employees with over two years of service. Yet KRH and ITT billed the pay raises

for all TCNs. Instead of passing on the pay increases to the affected TCN’s, KRH and ITT

kept the money for themselves.

34. Mr. Barnes was told by TCNs that they were not getting any pay slips from

KRH with their pay. When the TCNs did receive their pay stubs weeks later, they could see

they had not been paid the promised pay raises.

35. Mr. Barnes received complaints from TCNs about this practice. He brought

those complaints to the attention of ITT’s Contract Manager Molly Harris and Human

Resources manager Shelvy Brown. Ms. Harris told Mr. Barnes that the practice was none

of his concern. On or about January 16, 2008, Relator learned that ITT manager Gary

McGraw had forced Ms. Brown to resign.

E. False Claims for Defense Base Act Insurance Costs

36. The Contract incorporated in full FAR 52.228-3 (Workers Compensation

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Insurance [Defense Base Act]). FAR 52.228-3 requires the insertion of the identical

provision in all subcontracts. ITT billed subcontractor Defense Base Act (“DBA”) insurance

costs, including subcontractor DBA insurance costs, to the Army. The subcontractors

included KRH and “Stanley Associates.” On information and belief, the cost of such ITT

and subcontractor insurance was included in ITT’s proposal to obtain the Contract, the

Contract option years, and the Task Order; and those DBA insurance costs later were billed

to the Army.

37. On or about December 31, 2007, Relator Barnes discovered that neither ITT

nor KRH in fact maintained Defense Base Act insurance. ITT incurred no DBA insurance

costs on account of itself or KRH, because ITT and KRH had no DBA insurance. Relator

discovered this when Stanley Associates had three employee injured over a six month period.

Relator began to review the ITT subcontract files on KRH and Stanley and Associates. He

discovered that ITT’s subcontract file did not reflect the accidents, and that KRH’s files did

not reflect the damage to the vehicles that ITT leased from KRH for use by the injured

Stanley Associates subcontract workers. In further reviewing the files, Barnes discovered

that KRH was not maintaining DBA insurance on the nearly 1,300 TCN workers.

38. Barnes then informed ITT’s Molly Harris and Mike Lassiter of the ITT

subcontractors’ failure to maintain the required DBA insurance. Their response was: “that

would be off our bottom line” (or very similar words). Those statements further confirmed

that ITT was billing the Army for the non-existent subcontractor DBA insurance costs.

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When Mr. Barnes reiterated his concern, the ITT managers stated in a scoffing manner that

perhaps Mr. Barnes should write a “White Paper” on why ITT needed to maintain DBA

insurance.

III. RETALIATION

39. During his employment with ITT between October 30, 2007 and January 29,

200, Relator Barnes repeatedly advised ITT management about the above-outlined of waste,

fraud and abuse, and other instances of waste fraud and abuse. The ITT management

included Mr. Lassiter, Mr. McGraw, Ms. Harris (all of whom are mentioned above), as well

as ITT’s Human Resources Vice President Frank Peloso and Human Resources Manager

Shelvy Brown.

40. Once he discovered the waste, fraud and abuse, Mr. Barnes further investigated

it. When no corrective action was taken, Mr. Barnes took additional actions in further of this

civil action and to report his concerns to authorities. For example, he collected

documentation and electronic files that related to the issues on which he had raised his

concerns.

41. On or about January 17, 2008, two Colorado-based ITT attorneys (one an ITT

in-house counsel and the second from an outside law firm) arrived in Kuwait to “investigate”

Barnes’ report to John Blecher. A day or so later, an ITT Colorado-based Contracts Manager

also arrived in Kuwait. This led to a meeting between Barnes and the ITT attorneys and

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Contract Manager. At the meeting, Mr. Barnes detailed his discoveries of fraud, waste and

abuse at ITT.

42. Several weeks after the meeting, on or about January 28, 2008, ITT’s Blecher

stated that ITT had concluded that much of what Mr. Barnes had reported was true; and that

ITT would take corrective action. Instead, on or about January 29, 2008, ITT terminated

Barnes’ employment with ITT.

43. ITT subsequently filed a charge with the Kuwait Police falsely alleging that

Mr. Barnes had stolen an ITT computer. As a result, Kuwait placed a travel ban on Mr.

Barnes. Mr. Barnes was unable to leave Kuwait for approximately three months.

First Claim - FALSE CLAIMS

44. All of the preceding allegations are incorporated herein.

45. As alleged above, the U.S. Army awarded the Contract to ITT in October of

2004. It subsequently awarded Task Order 1 and exercised all four of the Contract option

years.

46. As outlined above, ITT induced the Army to award the Contract, Contract

option years and the Task Order with the approval of certain costs on the grounds that they

were reasonable and current. In addition, ITT has presented claims for payment or approval

to the United States, or caused such claims to be presented. ITT billed the Government under

the Contract each month. Each of these Contract invoices, beginning in or around 2004 and

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continuing during the pendency of this lawsuit, is a false or fraudulent claim, for the reasons

alleged above. On information and belief, these false claims were presented to employees

of the U.S. Government in Iraq and Kuwait; and to the U.S. Defense Finance and Accounting

Service in Cleveland or Columbus, Ohio; Indianapolis, Indiana; Kansas City, Missouri; or

Denver, Colorado, inter alia. ITT knowingly presented these false claims for payment or

approval, and the other defendants knowingly caused them to be presented for payment or

approval.

47. The Defendant thus knowingly presented, or caused to be presented, to an

officer or employee of the United States Government or a member of the Armed Forces of

the United States false or fraudulent claims for payment or approval.

Second Claim - FALSE STATEMENTS

48. All of the preceding allegations are incorporated herein.

49. The Defendant knowingly made, used or caused to made or used false records

or statements to get the false or fraudulent claims paid or approved. These included

certification of that cost and pricing data was accurate, complete and current; that the above-

described costs were incurred.

Third Claim – Conspiracy

50. All of the preceding allegations are incorporated herein.

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 51. Defendants ITT and KRH knowingly conspired to defraud the Government.

The primary objection of their conspiracy was to cause the Government to pay the

Defendants inflated costs and to pay the Defendants for costs, services and items not

provided or needed. The Defendants conspired to get false or fraudulent claims allowed or

paid.

WHEREFORE, for each of the first two claims, the Qui Tam Plaintiff requests the

following relief from each of the Defendants, jointly and severally:

A. Three times the amount of damages that the Government sustains because of
the acts of the Defendants;

B. A civil penalty of $11,000 for each violation;

C. An award to the Qui Tam Plaintiff for collecting the civil penalties and
damages;

D. Award of an amount for reasonable expenses necessarily incurred;

E. Award of the Qui Tam Plaintiff’s reasonable attorneys’ fees and costs;

F. Interest; and

G. Such further relief as the Court deems just.

Fourth Claim - RETALIATION

52. All of the preceding allegations are incorporated herein.

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 53. For the reasons alleged above, the Qui Tam Plaintiff was an employee who was

discharged, suspended, threatened, harassed, and in other manners discriminated against in

the terms and conditions of employment by his employer because of lawful acts done by the

employee on behalf of the employee or others in furtherance of a False Claims Act action

under this section. This included his investigation for this action.

WHEREFORE, for this claim, the Qui Tam Plaintiff requests the following relief

from each of the Defendants, jointly and severally:

A. All relief necessary to make the Qui Tam Plaintiff whole;

B. An order providing for reinstatement with the same seniority status that the
Qui Tam Plaintiff would have had but for the discrimination, or in the
alternative, front pay;
C. Two times the amount of back pay and front pay;
D. Interest on the back pay and front pay;
E. Compensation for special damages sustained as a result of the discrimination,
including but not limited to litigation costs and reasonable attorneys fees;
F. Pre-judgment and post-judgment interest;
G. Punitive damages; and
H. Such further relief as the Court deems just.

JURY REQUEST
The Qui Tam Plaintiff requests a jury for all issues that may be tried by a jury.

Respectfully submitted,

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[LOCAL COUNSEL]

Of Counsel:
Victor A. Kubli, Esq.
Kubli & Associates, P.C.
9081 Shady Grove Court
Gaithersburg, Maryland 20877
(301) 801-2330

Attorneys for Qui Tam Plaintiff

Keven Barnes

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