Friday, May 16, 2008

KBR Profits From Providing Insurance to Employees

As if allowing American soldiers to be electrocuted, refusing to fix the faulty wiring responsible, and avoiding the payment of payroll taxes by harboring its employees in shell companies weren't enough, now it appears that KBR, everyone's favorite Halliburton spin-off, has been profiting off paying workers' insurance claims at taxpayers' expense.

A poorly run Pentagon program for providing workman's compensation for civilian employees in Iraq and Afghanistan has allowed defense contractors and insurance companies to gouge American taxpayers, a House committee said Thursday.

Insurance companies alone have collected nearly $600 million in excessive profits over the past five years, says a Democratic staff report from the House Oversight and Government Reform Committee, but the Defense Department refuses to adjust its approach for managing the program.

Of the $284 million paid by tax payers for KBR employees' claims, just $114 million went to expenses incurred by AIG, the provider, garnering the company about $100 million in pure profit. On top of that, KBR, because of the cost-plus nature of its contract, garnered from $3 to $8 million for its troubles. What exactly were those troubles? Not sure, but paperwork's hard these days.

The report also said "Army auditors also raised concerns about the cost-plus nature of these charges. As the auditors stated, 'because the LOGCAP contract is primarily a cost-reimbursable contract, the cost of this insurance is ultimately passed on to the government. Of course, by government, they mean tax payers.

At any rate, I'm sure that both KBR and AIG are doing everything they can to keep cost overruns down:

The Army Audit Agency concluded that AIG's rates appear "unreasonably high" and "excessive," warning of an "increased risk that the Army could be overcharged." The audit report found that there is "a high risk that the contractor may have been paying more than necessary for this insurance" and that "[s]ignificant annual increases insurance companies made to DBA insurance rates don't appear to be consistent with the risk.

Then again, since neither stand to lose anything regardless of cost, maybe not.

The fleecing continues. Surely the excessive cost of employing KBR--along with the clear and present danger posed to American soldiers by short-prone, haphazard electrical work installed by cheap foreign labor--should be part of the discussion next time the "high cost of freedom" gets slapped on a bumper-sticker and bandied about the Capitol.

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