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Construction Company Reaches $13 Million Settlement To Resolve Kickback Allegations

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KBR Reaches $13 Million Settlement To Resolve Kickback Allegations

Kellogg Brown & Root Services Inc. and three related companies (collectively “KBR”) reached a $13.67 million settlement to resolve a suit alleging violations of the False Claims Act (FCA) and Anti-Kickback Act. The suit concerned a 2001 contract under which KBR was required to provide logistics support to U.S. Army forces in Iraq, and resolves claims that KBR employees accepted kickbacks in exchange for rewarding subcontracts.

According to the DOJ, in addition to accepting kickbacks, KBR employees inflated the cost of subcontracts and included the cost of kickbacks in prices charged to the U.S. government. In one case, KBR allegedly extended a subcontract for the lease of trucks and refrigerated trailers even though the equipment had already been returned to the subcontractor.

The suit began in 2006 when a former civilian truck driver for KBR filed a claim under the FCA’s qui tam provision. The United States intervened in the civil action in 2013 and filed a complaint in 2014.

The DOJ’s press release can be found here.

$1.5 Million Settlement Announced With Seller of Unregistered Disinfectant “Wipe Out!” Products

Tzumi Innovations, LLC agreed to a $1.5 million settlement to resolve claims that it illegally distributed products that it claimed to have antimicrobial properties during the height of the COVID-19 pandemic in violation of the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA). The $1.5 million penalty is one of the largest FIFRA settlements ever obtained. 

According to the DOJ, Tzumi sold products under the “Wipe Out!” brand intended to disinfect surfaces, including sprays and wipes, without having registered the products with the EPA in violation of FIFRA, which requires the registration of products that purport to have antimicrobial properties. Tzumi’s products were allegedly sold on websites as well as physical stores in the same sections as properly-registered products such as Clorox and Lysol wipes. The DOJ also claims that Tzumi targeted lower-income customers for the sale of its products.

In addition to the monetary penalty, the settlement requires Tzumi to issue corrective statements advising customers and retailers of the unregistered status and appropriate use of its products and to not distribute or sell unregistered products in the future.  

The DOJ’s press release can be found here.

Former CFO and Securities Seller Plead Guilty to Investment Fraud Scheme

Harley Barnes III, the former CFO of Dallas-based company EarthWater Limited, pleaded guilty to conspiracy, fraud, and money laundering charges for his alleged role in an investment fraud scheme that targeted elderly victims. In addition, Joe Edward Duchinsky, a seller of EarthWater securities, also pleaded guilty to conspiracy to commit mail and wire fraud for his alleged role in the scheme. In total, the DOJ claims that the scheme defrauded at least 300 victims of over $9.5 million.  

According to the DOJ, from about 2013 to 2019, Barnes and Duchinsky convinced investors in the United States, United Kingdom, and Canada to invest in EarthWater by representing that the investment funds would increase in value in the immediate future and be used to support the company’s operations. In reality, the funds were allegedly used to pay large commissions to Duchinsky and others.  

Barnes and Duchinsky are the eighth defendants to plead guilty for their roles in the alleged investment scheme. In May, EarthWater’s former president pleaded guilty to conspiring with Barnes for allegedly fraudulently directing the company’s payroll processer to continue to pay her and Barnes’ paychecks despite the company’s operations ceasing and for submitting a fraudulent mortgage application. Barnes faces up to 10 years imprisonment for the money laundering count and up to 20 years in prison for each of the other counts, and Duchinsky faces up to 20 years imprisonment.

The DOJ’s press release can be found here.

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