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United States ex rel. Barko v. Halliburton Co.

United States District Court, District of Columbia

March 14, 2017

HALLIBURTON COMPANY, et al. Defendants.


          Royce C. Lamberth United States District Judge.


         In the early 2000s, the United States engaged in a war in Iraq, which persisted for several years. To support the military on the ground, the United States government contracted with civilian companies to provide a wide variety of services. Defendant Kellogg, Brown & Root (“KBR”) received one of these contracts. This dispute revolves around KBR's contracting practices while in Iraq, specifically, KBR's subcontracts with defendant Daoud & Partners (“D&P”).[1] Relator Harry Barko filed an amended complaint in 2007 alleging numerous violations of the False Claims Act [ECF No. 12]. KBR has moved for summary judgment [ECF No. 136].[2] The Court will grant KBR's motion and will award summary judgment to KBR on the entirety of Mr. Barko's Amended Complaint. It will not allow additional time for discovery.


         In 2007, Mr. Barko, a former subcontract administrator for KBR in Iraq from July 2004 through June 2005, brought claims under the False Claims Act, 31 U.S.C. § 3729 et al., against KBR and D&P, a KBR subcontractor. KBR is a government contractor who provided services and materials to the United States government during the war in Iraq under the U.S. Army's Logistics Civil Augmentation Program (“LOGCAP”). In 2001, the government awarded the LOGCAP III contract to KBR, a prime contractor. KBR then selected subcontractors, such as D&P, to provide labor, laundry services, construction, and well-drilling at the “B Sites” in Western Iraq. Mr. Barko paints a picture of a contracting environment rife with fraud, collusion, and other anticompetitive activity, claiming that KBR submitted false claims to the government by accepting kickbacks, rigging bids, inflating costs, and otherwise engaging in improper procurement practices. The Court will first discuss the LOGCAP III contract, then will summarize the four subcontract areas at issue as well as Mr. Barko's allegations with regard to each of them, and finally will address the procedural history of this case.

         A. LOGCAP III

         In order to analyze Mr. Barko's claims and the propriety of summary judgment, the Court finds it prudent to first summarize the fairly complicated contracting scheme at issue here. LOGCAP “was established in 1985 to facilitate civilian contractor logistical support for United States military forces deployed overseas, principally in countries with which the United States does not have treaties or agreements that would enable the host country to provide such support.” United States ex rel. Watkins v. KBR, Inc., 106 F.Supp.3d 946, 951 (C.D. Ill. 2015). Under LOGCAP, the government awards contracts to a single company-a prime contractor-to provide various services in support of the military, such as laundry, construction, and food. The government awarded KBR the LOGCAP III contract on December 14, 2001 to provide logistical services to the military in Iraq and other countries. Under the LOGCAP III contract, KBR solicited bids for certain services and awarded subcontracts to various bidders for those services. At times, KBR and subcontractors negotiated change orders that modified the terms of the subcontract.

         Although the Court will quote from an exhibit submitted by KBR-the declaration of Global Director of Procurement and Materials for KBR Cheryl Ritondale-the Court finds that there are no genuine disputes of material facts regarding the following information. The LOGCAP III contract was “an Indefinite Delivery/Indefinite Quantity umbrella contract, pursuant to which the Army Sustainment Command (“ASC”) issue[d] Task Orders to KBR to perform certain services. Cost Plus Award Fee (“CPAF”) Task Orders were issued to [KBR] against the LOGCAP III contract for particular types of services in particular locations.” KBR Ex. 3, Ritondale Decl. ¶ 5, ECF No. 136-2. A cost plus award fee contract is “a cost-reimbursement contract that provides for a fee consisting of (a) a base amount (which may be zero) fixed at inception of the contract and (b) an award amount, based upon a judgmental evaluation by the Government, sufficient to provide motivation for excellence in contract performance.” 48 C.F.R. 16.405-2. LOGCAP III and the Task Orders issued under it are governed by the Federal Acquisition Regulation (“FAR”), codified at Title 48 of the Code of Federal Regulations.

         After the government issued Task Orders, KBR and the government engaged in the process of definitization, meaning “the agreement on, or determination of, contract terms, specifications, and price, which converts the undefinitized contract action to a definitive contract.” 48 C.F.R. 217.7401(b). During this process, KBR evaluated the statement of work (“SOW”) accompanying a Task Order and prepared an estimate of its cost to perform those services. Ritondale Decl. ¶ 7. KBR and the government then negotiated the SOW and KBR's cost estimates before agreeing on a “negotiated estimated cost” for the services. Id. KBR was reimbursed for the costs it incurred in performing the services, including subcontractor costs. Id. It was not reimbursed for delivering particular results, but rather was “obligated to use its best efforts to achieve the scope of work specified in each Task Order, ” and was then “entitled to be reimbursed its allowable direct and indirect costs incurred in performing the contract.” Ritondale Decl. ¶ 6-7.

         After incurring costs for each Task Order, KBR submitted invoices for reimbursement to the government on public vouchers-Standard Form 1034. Id. ¶ 9. KBR extracted from its accounting system all direct and indirect allowable costs incurred on the Task Orders, including subcontractor costs, and submitted them on these forms. Id. These invoices were then reviewed by the Defense Contract Audit Agency (“DCAA”). Id. ¶ 10. The DCAA determined whether to allow the claimed costs based on reasonableneness, allocability, Cost Accounting Standards Board standards or other general accounting principles and practices, the contract terms, and certain regulatory limitations. Id.; 48 C.F.R. 31.201-2. “A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person in the conduct of competitive business, ” which depends on “a variety of considerations and circumstances.” 48 C.F.R. 31.201- 3. A cost is generally allocable “if it is assignable or chargeable to one or more cost objectives on the basis of relative benefits received or other equitable relationship.” 48 C.F.R. 31.201-4. If DCAA found that a cost was not allowable, it would recommend the suspension or disallowing of payment to KBR, after which the Defense Contract Management Agency (“DCMA”) could disallow claimed costs. Ritondale Decl. ¶¶ 10-11.

         B. Subcontracts

         Mr. Barko's allegations relate to four types of subcontract: those for construction of the “man camp” at Site B6 (Counts VIII-X); those for laundry services (Counts I-VI, XII, XIII); those for water well drilling (Counts VII, XV); and those for labor (Counts XI, and XIV). Generally, Mr. Barko alleges that KBR employee Robert Gerlach had an improper and collusive relationship with D&P and was accepting kickbacks in exchange for rigging bids, suppressing competition, and awarding contracts to D&P. He also alleges double billing and overcharges on D&P subcontracts, and that KBR submitted material false statements in a Certified Claim for the work completed on the man camp construction contract after the contract was terminated for convenience. Mr. Barko claims that several instances of fraud were reported to KBR via its Code of Business Conduct (“COBC”) policy-which it was required to investigate under the terms of the LOGCAP III contract-and via other reporting up the chain of command. The parties' briefs discuss in detail the four subcontracting areas and the allegations surrounding them. Many of the following facts and claims are disputed. The Court will briefly summarize Mr. Barko's allegations.

         1. Site B6 “Man Camp” Construction Subcontract

         First, with respect to the Site B6 “man camp” construction subcontract, Mr. Barko alleges various instances of anticompetitive bidding and activity. Mr. Barko claims that although the Subcontracts Administrator for the B6 subcontract was George Covelli, Gerlach made the contract award to D&P and falsely stated that Covelli had approved and signed the contract and determined the price fair and reasonable, Pl.'s Opp'n at 6-7, ECF No. 265. In addition, Mr. Barko claims that the B6 contract was a “time is of the essence” project, but that D&P was unable to meet the construction schedules-as known by KBR. Id. at 7. He states that D&P should have also been disqualified because the bid package was missing certain elements, and that the contract should have gone to Prime Projects International, “because they were the only contractor to mobilize to B6 at the time the B6 man camp was to be constructed, had already been awarded a Master Contract by KBR and had already demonstrated excellent construction capabilities at ¶ 6, and much liked by the client.” Id. at 7-8. Mr. Barko claims that KBR employees had raised concerns that the contract had been improperly awarded to D&P, and that PPI was improperly excluded from consideration in violation of FAR Clause 52.203-7, which prohibits kickbacks. Barko SOF ¶¶ 88- 89, ECF No. 265.

         In addition, Mr. Barko raises issues with respect to D&P's performance of the man camp construction subcontract. He claims that D&P continuously failed to meet the requirements of the construction subcontract and was unable to cure its deficiencies, and that KBR knew it had to execute a termination for default, but failed to do so. Pl.'s Opp'n at 8-12; Barko SOF ¶ 136. When the government cancelled KBR's outstanding LOGCAP III subcontracts in July 2005, it “provided KBR with the opportunity to deceive the government of its knowledge that the B6 man camp subcontract was in long-standing default and presented an opportunity for KBR to falsely bill the government for the construction of the B6 man camp.” Barko SOF ¶ 137-38. KBR concealed D&P's default and presented a “Certified Claim” for $3, 326, 832.24 containing allegedly material false statements regarding the submission of bids on a competitive basis, performance failures and deficiencies, and percentages of completion. Pl.'s Opp'n at 12; Barko SOF ¶¶ 145-68.

         2. Laundry Subcontracts

         KBR also contracted with D&P to construct laundry facilities and provide laundry services at the B sites. Mr. Barko first takes issue with the bidding process. He claims that Gerlach knew that he should have solicited bids from at least three vendors, but that he only solicited bids from D&P and Rezayat (another subcontractor), that Gerlach knew Rezayat had priced itself out of being competitive, and that Gerlach awarded the subcontract to D&P before Rezayat submitted its final bid proposal. Pl.'s Opp'n at 14. Next, Mr. Barko claims that Gerlach did not comply with the Spore Directive, which stated that “‘construction of buildings which may exceed $750K' could proceed provided ‘the [Administrative Contracting Officer's (“ACO”)] approval [is] annotated on any such requisitions.'” Id. at 13, 15. After being asked whether the Spore Directive had any implications for the laundry subcontract, Mr. Barko alleges that Gerlach falsely responded that the contract bid tabulation submitted by D&P did not specifically indicate the building costs, even though he knew that the construction costs exceeded $750, 000, and then failed to seek or obtain ACO approval for the cost of constructing the laundry facility. Id. at 15. Mr. Barko also argues that the procurement file was deficient because it does not include a copy of the final Rezayat proposal, Barko SOF ¶ 39, and that Gerlach prepared and submitted an unauthorized Notice to Proceed, id. ¶ 40.

         Mr. Barko posits that D&P intentionally submitted a low bid, then KBR and D&P later modified the contract to seek more money. Mr. Barko claims that despite instructions to base negotiations on actual usage (unit rate), not overall troops, Gerlach disobeyed these instructions and priced the laundry subcontracts on overall troops. Id. at 16-17. “Instead of executing a subcontract specifying a unit basis for doing the laundry Gerlach defrauded the government by permitting D&P to invoice the laundry subcontracts as a firm fixed price subcontract based on projected troop strength instead of on actual usage.” Barko SOF ¶ 47. This resulted in overcharges. Pl.'s Opp'n at 16. KBR then engaged in a renegotiation with D&P so that the subcontracts would reflect that they were priced out on a unit basis, although no documents of such negotiations exist. Barko SOF ¶ 44.

         Many of Mr. Barko's claims with respect to the laundry subcontracts relate to double billing-for the laundry facilities, laundry labor, and laundry supplies. Mr. Barko claims that Gerlach “suggested KBR use the renegotiation to obtain title to the laundry facilities, ” even though KBR allegedly took title of the facilities on behalf of the government under the original subcontract. Id. at 18. Thus, KBR “double billed” for the facilities. Mr. Barko alleges that “[t]he double purchase of the laundry facilities was ultimately accomplished using a change order to avoid alerting the ACO that the purchase was to take place and to avoid having to allow other bidders to compete.” Id. at 19. He states that “Gerlach purchased the laundry facilities for 125% of the original construction cost, ” and that “KBR's strategy of negotiating the purchase of the laundry facilities D&P had already constructed for KBR amounts to a ‘predetermined' outcome that D&P would end up being paid be purchased for a 25% premium above what KBR originally paid for the facilities instead of obtaining competitive bids.” Barko SOF ¶ 65.

         In addition, Mr. Barko makes several allegations with respect to double billing for maintenance and service of the laundries. Pl.'s Opp'n at 19. He claims that KBR had to step in and operate the laundries for D&P-who had subcontracted the work and then failed to produce replacement labor when its subcontractor abandoned the sites-for several months. Then, “Gerlach was asked to backcharge D&P for the cost of KBR labor, but did not.” Id. Furthermore, Mr. Barko claims that he found approximately $400, 000 worth of laundry supplies charges that KBR paid for, but which should have been backcharged to D&P.

         3. Water Well Drilling Subcontracts

         Mr. Barko also alleges that the water well drilling subcontracts were procured by collusion and fraud because “KBR improperly steered business to D&P and manipulated the bidding to award subcontracts at site B-1 that were expressly not approved by the ACO, ” but which actually required ACO approval. Id. at 19-20. Therefore, Mr. Barko claims that “[i]n an attempt to get around the requirement that a construction contract was needed for the wells and that KBR needed to have ACO approval, KBR committed fraud. It created requisitions indicating drilling for wells would be a service rather than a construction contract.” Barko SOF ¶ 172. He claims that KBR then awarded the subcontracts to D&P at grossly inflated prices “and the bids were rigged to favor D&P over other subcontractors who could provide well drilling for less money.” Pl.'s Opp'n at 20. Mr. Barko finally details apparent problems with D&P's performance: D&P was unable to commence drilling in a timely fashion; KBR overcharged for D&P's security; and a different company was able to obtain water by drilling wells at shallow depths for better water at a reduced cost. Id. at 20-21.

         4. Labor Subcontract

         Finally, Mr. Barko brings claims based on the labor subcontract. He alleges that “KBR and Robert Gerlach engaged in anti-competitive activity designed to ensure D&P would receive payment for the labor subcontract throughout the B-sites” and then KBR “presented false claims to the United States for as much as $23 million in labor.” Id. at 21. According to Mr. Barko, Gerlach (1) told KBR managers that D&P was the “only approved source” for the labor subcontract, even though other contractors were available; (2) he misrepresented the scope of the subcontract to a competitor, thereby inducing them to withdraw from bidding, and never contacted other potential bidders; and (3) he created one price reasonableness determination memorandum, which was used to substantiate prices for the contract instead of competition, and which substantially inflated the competing price for two classes of labor “creat[ing] the false impression that D&P's rates were competitive and fair.” Id. at 22. He states that KBR further “misled the DCAA that the Master Agreement had been competitively bid.” Id.

         KBR largely disputes Mr. Barko's factual allegations and argues that Mr. Barko is “attempt[ing] to manufacture a fraud case from a hodge-podge of procurement issues and purported irregularities without in a single instance making out the basic elements of a False Claims Act (“FCA”) action.” Defs.' Reply at 1, ECF No. 268. In general, KBR argues that all of the allegations regarding an improper relationship between D&P and Gerlach are merely “rumors, speculation, and creative (often inaccurate) interpretation of the written record, ” refuted by Gerlach and not supported by a deposition of Gerlach. Id. Regarding the procurement allegations, KBR claims that Mr. Barko's allegations are unsupported or contradicted by the evidence and, more importantly, that “he is unable to tie any alleged kickback to an inflated cost to the government, he fails to set out ‘objective falsehoods' constituting false claims, he does not establish the materiality of supposed procurement irregularities to the government's payment of KBR claims, and he falls short on showing KBR's scienter.” Id. at 2.

         C. Procedural History

         This case has now been pending for nearly twelve years. The parties have engaged in several years' worth of discovery, which has been the subject of numerous District Court and Court of Appeals' opinions. Much of this dispute has revolved around whether KBR's COBC reports were protected by the attorney client privilege. In March 2014, the District Court Judge previously assigned to this case determined that the attorney client privilege did not apply to documents related to KBR's internal investigations into alleged fraud pursuant to its COBC policy and ordered the production of such documents. United States ex rel. Barko v. Halliburton Co., 37 F.Supp.3d 1, 5 (D.D.C. 2014). The Court of Appeals, finding that “there can be no serious dispute that one of the significant purposes of the KBR internal investigation was to obtain or provide legal advice, ” reversed the decision of the District Court and vacated its order compelling the production of the COBC documents. In re Kellogg Brown & Root, Inc., 756 F.3d 754, 760 (D.C. Cir. 2014) (KBR I).

         Then, on remand, the District Court found that KBR had waived its claim of privilege over the reports for two reasons: 1) KBR waived its privilege under Federal Rule of Evidence 612 because it had used the COBC reports to refresh the memory of its Rule 30(b)(6) witness prior to his deposition; and 2) KBR had used the contents of the COBC reports in its filings, thereby placing the contents of the documents at issue and implicitly waiving its claim of privilege. See United States ex rel. Barko v. Halliburton Co., No. 05-cv-1276, ECF No. 205 at 23 (D.D.C. Nov. 20, 2014). Several weeks later, the District Court compelled the production of parts of the COBC reports because “they [were] discoverable fact work product and Barko show[ed] substantial need.” United States ex rel. Barko v. Halliburton Co., 75 F.Supp.3d 532, 536 (D.D.C. 2014). The Court of Appeals vacated both of these decisions. In re Kellogg Brown & Root, Inc., 796 F.3d 137, 152 (D.C. Cir. 2015) (KBR II). The Supreme Court denied certiorari. See U.S. ex rel. Barko v. Kellogg Brown & Root, Inc., 135 S.Ct. 1163 (2015); U.S. ex rel. Barko v. Kellogg Brown & Root, Inc., 136 S.Ct. 823 (2016).


         A. Summary Judgment

         Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). Courts must “view the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in its favor.” Athridge v. Aetna Cas. & Sur. Co., 604 F.3d 625, 629 (D.C. Cir. 2010) (internal quotation marks omitted). To show that a dispute is “genuine” and defeat summary judgment, the nonmoving party must present evidence “such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted.” Id. (internal citations omitted). Furthermore, “[w]hen opposing parties tell two different stories, one of which is blatantly contradicted by the record, so that no reasonable jury could believe it, a court should not adopt that version of the facts for purposes of ruling on a motion for summary judgment.” Scott v. Harris, 550 U.S. 372, 380 (2007).

         Summary judgment is also appropriate when, “after adequate time for discovery, ” the nonmoving party “fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial . . . since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

         B. False Claims Act

         Mr. Barko brings these claims under the False Claims Act, 31 U.S.C. § 3279 et seq. The FCA prohibits “(A) knowingly present[ing], or caus[ing] to be presented, a false or fraudulent claim for payment or approval; [and] (B) knowingly mak[ing], us[ing], or caus[ing] to be made or used, a false record or statement material to a false or fraudulent claim.” 31 U.S.C. § 3279(a)(1)(A)-(B). The elements of an FCA claim are as follows: “(1) the defendant submitted a claim to the government, (2) the claim was false, and (3) the defendant knew the claim was false.” Pencheng Si v. Laogai Research Found., 71 F.Supp.3d 73, 91 (D.D.C. 2014) (internal quotation marks omitted). A defendant “knows” a claim is false if he or she “(i) has actual knowledge of the information; (ii) acts in deliberate ignorance of the truth or falsity of the information; or (iii) acts in reckless disregard of the truth or falsity of the information.” 31 U.S.C. § 3729(b)(1)(A).

         1. Factual Falsity

         A claim may be either factually or legally “false.” A factually false claim is one that “is untrue on its face, ” for example if it “include[s] ‘an incorrect description of goods or services provided or a request for reimbursement for goods or services never provided.'” United States v. Kellogg Brown & Root Servs., Inc., 800 F.Supp.2d 143, 154 (D.D.C. 2011) (citing United States v. Sci. Applications Int'l Corp. (SAIC II), 626 F.3d 1257, 1266 (D.C. Cir.2010)); see also U.S. ex rel. Hockett v. Columbia/HCA Healthcare Corp., 498 F.Supp.2d 25, 64 (D.D.C. 2007).

         2. Legal Falsity

         A legally false claim-a “false certification”-may be either express or implied. Kellogg Brown & Root Servs., Inc., 800 F.Supp.2d at 154. An express false certification “occurs when a claimant explicitly represents that he or she has complied with a contractual condition, but in fact has not complied.” Id. An implied false certification “occurs when the claimant makes no affirmative representation but fails to comply with a contractual or regulatory provision ‘where certification was a prerequisite to the government action sought.'” Id.; accord U.S. ex rel. Barrett v. Columbia/HCA Healthcare Corp., 251 F.Supp.2d 28, 33 (D.D.C. 2003) (“The theory of implied certification . . . is that where the government pays funds to a party, and would not have paid those funds had it known of a violation of a law or regulation, the claim submitted for those funds contained an implied certification of compliance with the law or regulation and was fraudulent.”) The Supreme Court recently held that to succeed on a theory of implied false certification, two conditions must be satisfied: “first, the claim does not merely request payment, but also makes specific representations about the goods or services provided; and second, the defendant's failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths.” Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S.Ct. 1989, 2001 (2016).

         To succeed on a theory of false certification, however, plaintiffs must also demonstrate that the misrepresentation was material to the government's decision to pay. Id. at 2002. “Material” “means having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property.” 31 U.S.C. § 3729(b)(4). It “look[s] to the effect on the likely or actual behavior of the recipient of the alleged misrepresentation.” Escobar, 126 S.Ct. at 2002. The Supreme Court recently discussed the contours of the “demanding” materiality requirement, finding that

[a] misrepresentation cannot be deemed material merely because the Government designates compliance with a particular statutory, regulatory, or contractual requirement as a condition of payment. Nor is it sufficient for a finding of materiality that the Government would have the option to decline to pay if it knew of the defendant's noncompliance. Materiality, in addition, cannot be found where noncompliance is minor or insubstantial.
In sum, when evaluating materiality under the False Claims Act, the Government's decision to expressly identify a provision as a condition of payment is relevant, but not automatically dispositive. Likewise, proof of materiality can include, but is not necessarily limited to, evidence that the defendant knows that the Government consistently refuses to pay claims in the mine run of cases based on noncompliance with the particular statutory, regulatory, or contractual requirement. Conversely, if the Government pays a particular claim in full despite its actual knowledge that certain requirements were violated, that is very strong evidence that those requirements are not material. Or, if the Government regularly pays a particular type of claim in full despite actual knowledge that certain requirements were violated, and has signaled no change in position, that is strong evidence that the requirements are not material.

Id. at 2003-04.

         3. Fraudulent Inducement

         One may also rely on a theory of fraudulent inducement to succeed on an FCA claim. Fraud in the inducement liability was recognized by the Supreme Court in United States ex rel Marcus v. Hess, in which the Court held contractors liable under the FCA for collusive and fraudulent bidding. U.S. ex rel. Marcus v. Hess, 317 U.S. 537, 543-44 (1943). The D.C. Circuit has upheld this theory of liability, finding that “[a]lthough the focus of the FCA is on false ‘claims, ' courts have employed a ‘fraud-in-the-inducement' theory to establish liability under the Act for each claim submitted to the Government under a contract which was procured by fraud, even in the absence of evidence that the claims were fraudulent in themselves.” U.S. ex rel. Bettis v. Odebrecht Contractors of Cal., Inc., 393 F.3d 1321, 1326 (D.C. Cir. 2005); see also U.S. ex rel. Schwedt v. Planning Research Corp., 59 F.3d 196, 199 (D.C. Cir. 1995) (“PRC made an initial misrepresentation about its capability to perform the contract in order to induce the government to enter into the contract and . . . this original misrepresentation tainted every subsequent claim made in relation to the contract.”).

         District courts within this Circuit have followed Bettis and Schwedt, focusing largely on whether a contract was “procured by fraud” to determine whether FCA liability flows from fraudulent inducement. See, e.g., United States ex rel. Shemesh v. CA, Inc., 89 F.Supp.3d 36, 47- 48 (D.D.C. 2015) (finding that relator stated a claim under a theory of fraudulent inducement by alleging that the contractor knowingly provided the government with price lists and discounts containing false information in order to induce it to enter into the contract); United States v. Honeywell Int'l Inc., 798 F.Supp.2d 12, 22 (D.D.C. 2011) (finding that a complaint stated an FCA claim under a fraudulent inducement theory when the government alleged that “[defendant's] misrepresentations about Zylon's accelerated deterioration induced Armor Holdings to sell Z Shields to the government . . . and these misrepresentations tainted all of Armor Holdings' claims for payment from the government”); United States v. Toyobo Co., 811 F.Supp.2d 37, 46 (D.D.C. 2011) (“The government's complaint here alleges . . . that Toyobo's misrepresentations about Zylon's accelerated deterioration induced the vest manufacturers to sell Zylon vests to the government.”).

         Courts have found that the fraudulent inducement theory also applies when “a party makes promises at the time of contracting that it intends to break.” United States ex rel. Head v. Kane Co., 798 F.Supp.2d 186, 196 (D.D.C.2011); see also United States ex rel. Tran v. Computer Scis. Corp., 53 F.Supp.3d 104, 130-31 (D.D.C. 2014) (finding that relator adequately alleged a fraudulent inducement claim by claiming that although the contractor's bid “‘represented that a minimum of forty percent (40%) of its subcontractor spending' would go to small business subcontractors . . . [t]his representation was false, as [the contractor] never had any intention of complying with its subcontracting plan”); Keaveney, 2016 WL 6988787, at *6 (“To state a claim for fraudulent inducement, a plaintiff may allege that the defendant ‘made an initial misrepresentation about its capability to perform the contract in order to induce the government to enter into the contract, ' . . . [or may allege] that the government would not have entered into the contract absent a defendant's false statements.”). In either situation, FCA liability attaches for later claims submitted because “had the government known about the fraud in the inducement, it never would have entered the contract, and no payments would have been made.” Hockett, 498 F.Supp.2d at 70.

         Fraudulent inducement may occur in instances of bid rigging. Id. at 70 n.33; U.S. ex rel. Miller v. Bill Harbert Int'l Const., Inc., No. CIV.A.95 1231 RCL, 2007 WL 915237, at *2 (D.D.C. Mar. 27, 2007). For example, in Hess, electrical contractors entered into a collusive bidding scheme in which they averaged the price of the prospective bids and then chose from among the contractors one who would submit a bid for the averaged amount, while the others submitted higher bids. Hess, 317 U.S. at 540 n.1. The Court found that this type of collusive bidding qualified as a false claims violation. Id. at 543. Courts in other circuits have also found that bid rigging may result in FCA violations. See, e.g., United States v. Azzarelli, 647 F.2d 757 (7th Cir.1981); United States ex rel. McGee v. IBM Corp., 81 F.Supp.3d 643, 663 (N.D. Ill. 2015); United States v. Inc. Vill. of Island Park, 888 F.Supp. 419, 439 (E.D.N.Y. 1995).

         4. Limitations of the False Claims Act

         It is important to note that the FCA does not reach all bad behavior undertaken by government contractors. As noted by the Supreme Court, “[t]he False Claims Act is not ‘an all-purpose antifraud statute, ' or a vehicle for punishing garden-variety breaches of contract or regulatory violations.” Escobar, 136 S.Ct. at 2003 (internal citation omitted). The FCA does not reach breach of contract claims or complaints involving contractual performance when no falsehood exists. See U.S. ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370, 378 (4th Cir. 2008); Kellogg Brown & Root Servs., Inc., 800 F.Supp.2d at 155. It also does not reach kickback schemes that lack false claims. See Kellogg Brown & Root Servs., Inc. v. United States, 99 Fed.Cl. 488, 513 (2011), aff'd, 728 F.3d 1348 (Fed. Cir. 2013) (“[H]owever strong the policy concerns may be that are implicated by [kickbacks], they are not a substitute for the specific requirements that defendant allege facts showing the falsity of a claim and plaintiff's knowledge of that falsity under § 3729(a)(1).”). In sum, “[t]he FCA is not a catchall anti-fraud provision; it only goes after claims that are false, not claims that are submitted while fraud is afoot.” Hockett, 498 F.Supp.2d at 71.

         IV. ANALYSIS

         The parties' briefs and statements of facts contain countless discrepancies and disagreements. They have each submitted dozens of pages worth of statements of facts and hundreds of exhibits in support. After wading through the parties' submissions, the Court finds that, regardless of any disputes of fact, KBR is entitled to judgment as a matter of law. First, the Court finds that Mr. Barko has failed to offer evidence that a reasonable jury could use to find the existence of kickbacks from D&P to KBR in exchange for contracting favors. Second, the Court finds that KBR is entitled to judgment as a matter of law on the Counts based on anticompetitive activity because Mr. Barko has failed to show the falsity of claims or that the government was fraudulently induced to enter into a contract. Third, the Court finds that allegations regarding performance defects cannot constitute the basis of an FCA violation. Fourth, the Court finds that Mr. Barko has failed to provide evidence showing that KBR knowingly double billed for the purchase of the laundry facilities or that it was obligated to, and failed to backcharge for laundry labor and supplies. Finally, the Court finds that Mr. Barko cannot succeed on his claims relating to the B6 man camp construction subcontract for many of the same reasons listed above and because his Amended Complaint does not state a claim with regard to the Certified Claim submitted by KBR.

         A. Kickbacks/Bribes

         Mr. Barko's arguments revolve largely around an improper relationship between Gerlach and D&P. He makes numerous allegations regarding kickbacks or bribes accepted by Gerlach or KBR employees from D&P in exchange for a favorable contract award or other contracting favors. FAR Clause 52.203-7 prohibits any person from providing, soliciting, or accepting kickbacks, from including the amount of any kickback in the contract price charged by a subcontractor to a prime contractor, or by a prime contractor to the government, and mandates that contractors shall have in place procedures to detect and prevent kickback violations. 48 C.F.R. 52.203-7. In certain circumstances, the existence of kickback schemes or non-compliance with anti-kickback laws has been found to be material to the government's decision to pay the claims at issue, resulting in FCA liability. See Barrett, 251 F.Supp.2d at 33; U.S. ex rel. Pogue v. Diabetes Treatment Centers of Am., Inc., 238 F.Supp.2d 258, 264 (D.D.C. 2002).

         The Court does not decide here whether acceptance of the alleged kickbacks would be material to the government's decision to pay KBR because Mr. Barko has failed to present facts evidencing a genuine dispute regarding whether kickbacks actually occurred. The purported evidence supporting Mr. Barko's allegations is as follows: (1) reports through the COBC Policy, and the fact that KBR has refused to produce its COBC findings, which provides the inference that the investigation showed wrongdoing; (2) other statements by KBR employees regarding kickbacks; and (3) declarations of four former KBR employees allegedly corroborating allegations of kickbacks. The Court finds that none of Mr. Barko's proffered evidence creates a genuine dispute of material fact regarding kickbacks; Mr. Barko does not provide admissible evidence that kickbacks occurred in exchange for contracting favors to D&P.

         1. Reports of Kickbacks

         First, Mr. Barko claims that KBR received reports that Gerlach and other KBR employees were accepting bribes and/or kickbacks from D&P through its COBC policy or other reporting mechanisms. Barko SOF ¶¶ 17, 19, 20. He claims that, on October 20, 2004, a “COBC report was received identifying that KBR managers, Mssrs. Gerlach, Poe, Stallard, Cetnarski and Irizarry, ‘have received kickbacks from D&P, '” id. ¶ 17, and that Procurement and Supply Manager Paula Battles wrote in a memo that she was told by another subcontracts administrator and a buyer that Gerlach had engaged in unethical practices including the “exchange of money and suppression of competition, [and] receipt of gifts.” Id. ¶ 19. Mr. Barko sought the results of the COBC investigations of these incidents, over which KBR claimed privilege. This issue was the subject of several years of litigation. The Court of Appeals determined that these documents were in fact privileged and were not subject to waiver. See KBR II, 796 F.3d at 152; KBR I, 756 F.3d at 760.

         The Court finds first that the COBC reports and allegations of kickbacks or bribes are not evidence of kickbacks or bribes sufficient to raise a genuine dispute of material facts. First, some of this evidence constitutes inadmissible hearsay, particularly Battles' statement that she was told by others that Gerlach had received kickbacks. The evidence that one who opposes summary judgment presents “must be capable of being converted into admissible evidence. . . . Verdicts cannot rest on inadmissible evidence.” Gleklen v. Democratic Cong. Campaign Comm., Inc., 199 F.3d 1365, 1369 (D.C. Cir. 2000). Battles' statements cannot be converted into admissible evidence as she would be prohibited from testifying about the alleged conversations regarding kickbacks. Id. (finding that the plaintiff's “evidence about [a conversation between two individuals regarding plaintiff that she was informed of] is sheer hearsay; she would not be permitted to testify about the conversation at trial, ” and that “[i]t therefore counts for nothing”). Therefore this evidence does not create a genuine dispute of material fact regarding the presence of kickbacks or bribes.

         Furthermore, the COBC reports alleging that kickbacks were received from D&P are just that-allegations, not evidence. A party cannot rely on mere allegations to oppose summary judgment; it must proffer evidence creating a genuine dispute of material fact. See MDB Commc'ns, Inc. v. Hartford Cas. Ins. Co., 479 F.Supp.2d 136, 140 (D.D.C. 2007) (“The non-moving party's opposition must consist of more than mere unsupported allegations or denials, and must be supported by affidavits, declarations or other competent evidence setting forth specific facts showing that there is a genuine issue for trial.”); see also Akers v. Beal Bank, 845 F.Supp.2d 238, 241 (D.D.C. 2012), aff'd sub nom. Akers v. Beal Bank & Countrywide Home Loans, No. 12-7045, 2012 WL 4774676 (D.C. Cir. Oct. 2, 2012) ([F]or the court to accept anything less [than ‘factual representations made in a sworn affidavit' or ‘direct testimonial evidence'] ‘would defeat the central purpose of the summary judgment device, which is to weed out those cases insufficiently meritorious to warrant the expense of a jury trial.'”); Gross v. Smith, No. 97-7075, 1997 WL 811803, at *1 (D.C. Cir. Nov. 21, 1997) (“Because Gross failed to establish evidence of a genuine factual dispute in response to the defendants' motion for summary judgment on his excessive force claim and adduced no evidence, as opposed to unsworn allegations, on his inadequate medical treatment and interference with treatment claim, summary judgment was proper.”). The allegations here were received through KBR's tip line; they are not supported by actual evidence in the record and are therefore insufficient to defeat summary judgment.

         The Court will also not accept the inference that because KBR claimed privilege over the results of the COBC investigations-a privilege which was upheld by the Court of Appeals-the investigations must have revealed wrongdoing. An assertion of privilege in this context cannot create an adverse inference. See Knorr-Bremse Systeme Fuer Nutzfahrzeuge GmbH v. Dana Corp., 383 F.3d 1337, 1344 (Fed. Cir. 2004); Parker v. Prudential Ins. Co. of Am., 900 F.2d 772, 775 (4th Cir. 1990); Whitney v. City of Milan. Tenn., No. 109CV01127JDBEGB, 2014 WL 11411675, at *1 (W.D. Tenn. Feb. 27, 2014); Astra Pharm. Prod., Inc. v. Beckman Instruments, Inc., No. CA-79-1445, 1983 WL 51933, at *4 (D. Mass. Mar. 24, 1983), aff'd, 718 F.2d 1201 (1st Cir. 1983). It is clear that the policy concerns which enshrine “the oldest of the privileges”- including encouraging frank and open discussion, see Upjohn Co. v. United States, 449 U.S. 383, 389 (1981)-could not allow for such results. If the assertion of attorney client privilege could produce an adverse inference “persons would be discouraged from seeking opinions, or lawyers would be discouraged from giving honest opinions. Such a penalty for invocation of the privilege would have seriously harmful consequences.” Nabisco, Inc. v. PF Brands, Inc., 191 F.3d 208, 226 (2d Cir. 1999) abrogated by Moseley v. V Secret Catalogue, Inc., 537 U.S. 418 (2003); accord Whitney, 2014 WL 11411675, at *1 (There is . . . an abundance of authority holding that an adverse inference cannot be drawn from invocation of the attorney-client privilege, as doing so would, to quote some of the cases, ‘have seriously harmful consequences, ' ‘intrude upon the protected realm' of the privilege, and even ultimately ‘oblige the client to produce the privileged materials.'” (internal citations omitted)). Mr. Barko has not offered any caselaw to the contrary nor has he persuasively argued that an adverse inference should be adopted here.

         Therefore, Mr. Barko's first two pieces of evidence-the COBC reports and Battles' memorandum, as well as KBR's assertion of privilege over the reports-are not admissible evidence of kickbacks or bribes from D&P to Gerlach or anyone at KBR.

         2. KBR Employee Declarations

         The Court now turns to Mr. Barko's third piece of evidence-declarations of former KBR employees. Mr. Barko submits the declarations of George Covelli (KBR subcontracts administrator), Suzanne Raku (morale welfare and recreation regional manager), Roy Ramey (B-1 site construction supervisor), and Mr. Barko himself (subcontracts administrator). None, however, show actual evidence of kickbacks from D&P. First, George Covelli's declaration contains his concerns that D&P would be unable to perform the B6 man camp subcontract, his assertion that his “observations caused [him] to conclude that Mr. Gerlach had established an improper relationship with D&P, ” his assertion that D&P did not win the bid competitively and should have been disqualified from bidding, and descriptions of various issues with D&P's performance. Barko Ex. 64, Covelli Decl., ECF No. 265-18. It does not, however, describe- beyond assertions of an improper relationship-specific instances in which Gerlach took kickbacks from D&P, nor does it outright assert that kickbacks were present at all.

         Suzanne Raku declares that she confronted Gerlach regarding D&P's lack of performance, that he “became quite agitated and responded that [she] did not know what [she] was talking about and that there were other considerations, ” and that he “had all the contracts under lock and key and was loathe to share the details of any of them with anyone.” Barko Ex. 136, Raku Decl., ECF No. 265-34. Again, however, her declaration contains no descriptions of kickbacks or bribes and no assertions that any kickbacks or bribes were given or received.

         Mr. Barko's own declaration describes “discussion amongst various coworkers whether Gerlach and Cetnarski were colluding with D&P on a number of issues, including kickbacks, ” and that he observed that Gerlach and D&P's manager spent “an inordinate amount of time” in each other's offices. He also describes various other presumably improper behavior, such as Gerlach taking “Rest & Recovery” periods in venues alleged to be hosted by D&P, using sailing as a platform to conduct business in international waters, and the assertion that Gerlach bragged about a BMW that “he had presented to his wife as a result of his work in Iraq for KBR.” Barko Ex. 61, Barko Decl., ECF No. 265-14. He also reiterates that KBR had received COBC reports indicating kickbacks and that Paula Battles had received reports that Gerlach was taking kickbacks. Id.

         Mr. Barko was deposed by KBR. KBR Ex. 14, Barko Depo., ECF No. 136-3. He was asked “[w]hat evidence do you have that Mr. Gerlach was either colluding with [D&P] or accepting money or gifts in return for favorable treatment.” Id. at 10:5-10:8. Mr. Barko responded that he had seen Gerlach spend an “inordinate amount of time” in the D&P facility conducting private business. Id. at 10:21-11:4. But, Mr. Barko admits that he does not know what was discussed during these meetings. Id. at 234:4-234:7. He also testified that he had discussed sailing in international waters with Gerlach, but that he did not make a connection between that statement and Gerlach's relationship with D&P at the time and that there was no mention of D&P during this discussion. Id. at 12:16-13:8, 239:7-241:6. Mr. Barko then discussed Gerlach's relationship with Rami Oweis of D&P, noting that after Mr. Oweis died, Gerlach stated that if not for Mr. Oweis, Gerlach would not have his sailboat and that he owed the last six and a half years of his life in Jordan to Mr. Oweis. Id. at 13:8-14:19. Mr. Barko also stated that Gerlach spoke about a BMW for his wife, but that he also did not “connect that with any opportunities that came to [Gerlach] as a result of his friendship with [D&P]” and states that there was no mention of D&P in relation to the BMW. Id. at 12:5-16:11, 238:20-238:22. Mr. Barko also repeated “rumors” from the camp that Gerlach spent time on a yacht courtesy of D&P, id. at 16:13-16:21, and that Gerlach wore a Rolex watch acquired at the hands of D&P, id. at 20:15-21:13. In addition, he testified about a rest and relaxation trip where Gerlach bragged about spending $20, 000, but also stated that he did not know where the trip or the money came from, and that there was no reference to D&P. Id. at 41:8-41:22, 241:7-242:7. Finally, with regard to the laundry subcontracts, Mr. Barko acknowledged that he had no direct evidence that D&P had a role in KBR's award decision. Id. at 261:5-262:12. In sum, Mr. Barko failed to provide testimony evidencing bribes or kickbacks. He only disclosed rumors or admitted that he did not know whether D&P was involved in the various luxuries apparently enjoyed by Gerlach.

         Ramey's declaration comes the closest to providing actual evidence of kickbacks or bribes. It describes preferential treatment received by D&P and details the following situation that he observed in the D&P field office: “David Poe [KBR's B1 site manager] was standing next to the D&P supervisor. There was an empty envelope lying on the desk between them. Mr. Poe had a large stack of bills in his hand the top one being a $100 bill. I watched as Mr. Poe put the stack of bills into his pocket. Poe made a comment that he was making change for the D&P supervisor.” Barko Ex. 141, Ramey Decl. ¶ 7, ECF No. 265-34. Ramey reported the incident, which was investigated by KBR. Id. ¶ 8. The Court acknowledges that these differing stories-Ramey's perception of a bribe or kickback versus Poe's explanation of making change-could create a genuine dispute of material fact if Mr. Barko had claimed that Poe (on behalf of KBR) was receiving kickbacks on the specific contracts at issue resulting in the submission of ...

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