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Oregon Live – Pentagon disclosure highlights special indemnity with KBR contract in Iraq in hexavalent chromium exposure case by Oregon soldiers

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Julie Sullivan, The Oregonian Julie Sullivan, The Oregonian

The Pentagon legally covers dozens of military contractors doing dangerous jobs at home, such as making anthrax vaccine or disposing of mustard gas. But the immunity for harm granted KBR in Iraq appears to be far broader — and potentially costlier to taxpayers — according to documents released by U.S. Rep. Earl Blumenauer on Wednesday.

The disclosure comes as The Oregonian independently obtained a Feb. 18, 2010, letter from KBR managers reporting that the total cost of soldiers’ claims against the contractor could exceed $150

“KBR does not believe that the company is liable for any damages,” KBR’s Michael Morrow wrote to the U.S. Army Corps of Engineers. But he wrote that KBR continues to incur research and legal fees, and would bill the government for allowable costs not paid by insurance.

Who pays when a military contractor causes harm has become a key issue in an Oregon lawsuit in which 34 National Guard soldiers have sued KBR. They allege that while guarding KBR’s operations, they were exposed to a rust-fighter piled around the Qarmat Ali water treatment plant in 2003. It contained the carcinogen hexavalent chromium, and soldiers say they suffer serious health problems from it.

KBR collected $2.5 billion in its no-bid contract to get Iraqi oil flowing.

A deposition filed last summer in U.S. District Court in Portland revealed that on the eve of the Iraq invasion, a KBR attorney won a secret clause ensuring that U.S. taxpayers, and not KBR, would pay in the event of any death or injury. In September, Democratic Reps. Blumenauer and Kurt Schrader, and Sens. Ron Wyden and Jeff Merkley introduced a bill in both houses to boost congressional oversight of defense contracts.

Blumenauer also sought a list of contracts with similar immunity provisions from the Pentagon. On Nov. 24, Undersecretary of Defense Frank Kendall released a list of more than 120 contracts issued by the Army, Air Force, Navy and other defense agencies since 2004. They are posted on Blumenauer’s website.
To date, at least one case has resulted in lawsuits or taxpayer fees. In December 2008, Emergent BioDefense Operations Lansing Inc. sought $1.5 million from the Army for 14 lawsuits arising from its manufacture of the anthrax vaccine. The Pentagon deemed many of the claims ineligible and paid $646,000 in two of the lawsuits.

The only other immunity clause granted a contractor in Iraq besides KBR went to Raytheon Technical Service Co. for chemical, radiological, nuclear and high-explosive expertise. It did not result in any lawsuit or taxpayer legal cost, according to the release.

“This is a victory for transparency,” Blumenauer said in a statement. “Many of these documents reveal a diligent, responsible process for work carried out in the United States that protects taxpayers from liability in cases of contractor negligence. However, these documents also suggest that contracts associated with our Iraq war efforts do not contain similar protections.”

Blumenauer said he remained concerned that “KBR’s contract may be much more loosely drawn, removing incentives for the contractor to behave responsibly and exposing taxpayers to enormous liability. Taxpayers should not be on the hook for KBR’s reckless actions that exposed our National Guard troops to harm.”

KBR’s specific agreement remains classified.

The Oregon Democrats have proposed legislation to require congressional notification in all cases where the Department of Defense accepts liability, remove the protection for harm caused by a defense contractor’s own gross negligence or misconduct, and prevent what Blumenauer calls “indemnification creep.”

Allison Stanger, a political science professor at Middlebury College in Vermont and author of “One Nation Under Contract, the Outsourcing of American Power and the Future of Foreign Policy,” said most Americans don’t realize the transformation that has taken place in their government.

About 82 percent of the Pentagon’s current budget goes to contractors and grants, along with 83 percent of the State Department’s and 99 percent of USAID’s net operation costs. Every federal contract and grant needs to be managed, she said, yet the government currently lacks the capacity for appropriate oversight.

“Contractors are doing the functions government used to do but are not bound by the same rules and ethics,” Stanger said. “When you privatize government functions and you don’t talk about the unintended consequences, you’re in very dangerous and uncharted territory.”

Julie Sullivan

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