Team Infidel
Forum Spin Doctor
San Francisco Chronicle
May 16, 2008
Pg. 9
House panel claims rampant fraud by contractors, insurers
By Richard Lardner, Associated Press
Washington -- 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 profit during 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.
According to the committee, the Pentagon allows its contractors to negotiate their own insurance contracts. By contrast, the State Department, U.S. Agency for International Development and the Army Corps of Engineers have all selected a single insurance carrier to provide the insurance at fixed rates.
"What makes the situation even worse is the people this program is supposed to benefit - the injured employees working for contractors - have to fight the insurance companies to get their benefits," committee Chairman Henry Waxman, D-Los Angeles., said at a hearing Thursday. "Delays and denials in paying claims are the rule."
KBR Inc., one of the largest defense contractors in Iraq, paid the insurance giant AIG $284 million for medical and disability coverage under the Defense Base Act, a reference to the federal law mandating the insurance. Due to the way KBR's contract is structured, this premium, along with an $8 million markup for KBR, gets billed to the taxpayer.
"Out of this amount, just $73 million actually goes to injured contractors, and AIG and KBR pocket over $100 million as profit," Waxman said.
In an e-mailed statement, AIG spokesman Chris Winans said the company is reviewing the staff report. But AIG is confident its coverage is accurately and fairly priced given the high risks to workers in war zones and the potential for sizable claims, Winans said.
All contractors doing work overseas for U.S. government agencies are required to insure their civilian employees, many of whom are handling dangerous jobs in hostile areas. Contractors get the coverage from private insurance companies, then they're reimbursed for what they spend. The insurance costs are included in the contract's overall price.
The Associated Press reported Wednesday that the Army Criminal Investigation Command has opened a probe into two companies working on Iraq reconstruction that have been accused of padding their profits by claiming reimbursements from the Corps of Engineers for insurance coverage they never purchased.
In Iraq on Thursday, U.S. and Iraqi troops moved against al Qaeda on two separate fronts, with house-to-house searches in Mosul and an operation in the desert to stanch the flow of insurgents and weapons to that northern city.
With the new sweep, Prime Minister Nouri al-Maliki is attempting to put down Sunni extremists after starting two other major offensives elsewhere in as many months targeting Shiite militants. Mosul, a key transport crossroads between Baghdad, Syria and other points, is considered the last major urban base of al Qaeda in Iraq after the group lost strongholds in western Anbar province.
May 16, 2008
Pg. 9
House panel claims rampant fraud by contractors, insurers
By Richard Lardner, Associated Press
Washington -- 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 profit during 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.
According to the committee, the Pentagon allows its contractors to negotiate their own insurance contracts. By contrast, the State Department, U.S. Agency for International Development and the Army Corps of Engineers have all selected a single insurance carrier to provide the insurance at fixed rates.
"What makes the situation even worse is the people this program is supposed to benefit - the injured employees working for contractors - have to fight the insurance companies to get their benefits," committee Chairman Henry Waxman, D-Los Angeles., said at a hearing Thursday. "Delays and denials in paying claims are the rule."
KBR Inc., one of the largest defense contractors in Iraq, paid the insurance giant AIG $284 million for medical and disability coverage under the Defense Base Act, a reference to the federal law mandating the insurance. Due to the way KBR's contract is structured, this premium, along with an $8 million markup for KBR, gets billed to the taxpayer.
"Out of this amount, just $73 million actually goes to injured contractors, and AIG and KBR pocket over $100 million as profit," Waxman said.
In an e-mailed statement, AIG spokesman Chris Winans said the company is reviewing the staff report. But AIG is confident its coverage is accurately and fairly priced given the high risks to workers in war zones and the potential for sizable claims, Winans said.
All contractors doing work overseas for U.S. government agencies are required to insure their civilian employees, many of whom are handling dangerous jobs in hostile areas. Contractors get the coverage from private insurance companies, then they're reimbursed for what they spend. The insurance costs are included in the contract's overall price.
The Associated Press reported Wednesday that the Army Criminal Investigation Command has opened a probe into two companies working on Iraq reconstruction that have been accused of padding their profits by claiming reimbursements from the Corps of Engineers for insurance coverage they never purchased.
In Iraq on Thursday, U.S. and Iraqi troops moved against al Qaeda on two separate fronts, with house-to-house searches in Mosul and an operation in the desert to stanch the flow of insurgents and weapons to that northern city.
With the new sweep, Prime Minister Nouri al-Maliki is attempting to put down Sunni extremists after starting two other major offensives elsewhere in as many months targeting Shiite militants. Mosul, a key transport crossroads between Baghdad, Syria and other points, is considered the last major urban base of al Qaeda in Iraq after the group lost strongholds in western Anbar province.