Taxpayers must shoulder $30 million in KBR legal fees for Iraq War toxic chemical case, judge rules

U.S. taxpayers will have to pay at least $30 million to cover attorney fees incurred by defense contractor KBR Inc., accused of wrongly exposing U.S. and British soldiers - including dozens from Oregon - to toxic chemicals during duty in the Iraq War

KBR's contract to restore Iraq's oil fields indemnifies the company from paying legal costs to defend itself against the soldiers' lawsuits, an Armed Services Board of Contract Appeals judge ruled last month.

This leaves the costs of KBR's lawyers, and any potential court judgments, up to the Army to pay - a burden ultimately shouldered by taxpayers. The skyrocketing costs, with no end in sight, have left public officials outraged.

Three years have passed since U.S. Sen. Ron Wyden, D-Ore., asked Defense Secretary Leon Panetta to examine billable hours run up by KBR as part of its contract with the Pentagon. Wyden's staff pored through court records, finding that lawyers for the company billed up to $750 an hour, sometimes flew first class to legal proceedings and paid millions to expert witnesses. One expert, paid more than $500,000, dozed off during a deposition.

Lawyers for KBR say the Aug. 13 opinion by Administrative Judge Jack Delman correctly interprets the Pentagon contract, which they say clearly indemnifies KBR from paying the costs of defending the company against multiple lawsuits. KBR's lawyers rang up billable hours, airfare, travel and meals in the normal course of defending the company against those suits, according to a 2012 court filing in Oregon.

"As a taxpayer, it's unbelievable that you'd be given incentive for the worst kind of misconduct," said Houston lawyer Mike Doyle, who represents 159 veterans who have sued KBR for exposing them to sodium dichromate.

The U.S. Department of Veterans Affairs acknowledges that in 2003, more than 800 service members guarding the Qarmat Ali water treatment facility in the oil fields of southern Iraq were exposed to sodium dichromate dust. The primary material in that dust is hexavalent chromium, a known carcinogen made famous in the movie "Erin Brockovich."

At Garmat Ali, service members guarded KBR workers as they rebuilt Iraq's oil fields.

"There is no medical evidence - scientific or otherwise - that the individuals who have filed claims are sick because of the time they spent at Qarmat Ali," said Mark E. Lowes, KBR's vice president for litigation. The majority of the 150-170 plaintiffs now suing KBR spent less than 24 hours at the water treatment facility, he said.

More than 30 Oregon Army National Guard soldiers who served at Qarmat Ali filed a 2009 fraud and negligence lawsuit against KBR in Portland, alleging that exposure to the toxic dust caused them to suffer health problems, including serious respiratory illnesses.

A jury in U.S. District Court found in favor of the sick veterans in 2012, determining that KBR was negligent. The panel awarded a dozen of them $85 million. But last May, the 9th U.S. Circuit Court of Appeals threw out that verdict on jurisdictional grounds. The case is expected to be transferred to federal court in Houston, home of the company formerly known as Kellogg Brown & Root.

Oregon's Democratic congressional leaders expressed outrage this summer after KBR sought nearly $850,000 from the sick soldiers. In a July 14 letter to Defense Secretary Ashton Carter, they asked that the Pentagon seize control of the "seemingly endless and expensive litigation" to reach an equitable settlement.

But in an Aug. 4 response, Secretary of the Army John M. McHugh wrote that the Army's position was to remain neutral in matters of private litigation.

"While the Army will continue to cooperate with all of the parties to these cases through its published litigation regulations, the Army does not currently intend to recommend that the Department of Justice take control of these cases and, thus, assume financial responsibility for any liability that KBR may have."

Lawyers involved in the case are watching to see whether the Justice Department, which represents the Treasury Department and the Army, will appeal Judge Delman's ruling.

-- Bryan Denson

503-294-7614; @Bryan_Denson

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