KBR Secret Indemnity Agreement Signed By Army Chief Tainted In Enron Scandal
Ryan J. Reilly – (Huffington Post) – Washington – January 24, 2013 – The Army official who signed a secret agreement that military contractor KBR claims should burden taxpayers with the bill for the company’s negligent poisoning of U.S. soldiers in Iraq resigned from the military in 2003 after a tenure marked by questions about his ties to Enron Corp.
Thomas E. White, named secretary of the Army in 2001, signed an indemnity agreement protecting KBR, the military’s largest contractor, from legal liability on March 19, 2003. KBR had asked for the agreement as part of its contract to rebuild Iraq oilfields destroyed in the U.S. invasion. White resigned a month later, on April 23, under fire for his previous role as a senior Enron executive and after clashing with former Defense Secretary Donald Rumsfeld over his advocacy for a multi-billion dollar artillery system.
KBR’s indemnity agreement, obtained by The Huffington Post through a Freedom of Information Act request, was classified as secret until Dec. 21, 2012, the month after a federal jury in Oregon decided the company should pay $85 million for negligence that allowed a dozen soldiers to be exposed to a cancer-causing chemical sodium dichromate at the Qarmat Ali water treatment plant in Iraq.
The agreement, never made public until now, is crucial because KBR claims it means taxpayers have to pay both the verdict and the company’s $15 million in legal expenses. The company faces a separate lawsuit filed by national guardsmen from both Indiana and West Virginia, as well as troops from the U.K. The military has said it believes the agreement doesn’t shield KBR from paying for the lawsuits.
It’s not known how many defense contractors have secret indemnification agreements with the government. While most federal agencies are not allowed to enter open-ended indemnification agreements, the Pentagon is exempt under an executive order signed by President Richard Nixon in 1971. An amendment to the 2013 National Defense Authorization Act pushed by Sen. Ron Wyden (D-Ore.) now requires the Pentagon to disclose indemnification clauses that hold military contractors harmless and to justify the agreements to Congress.
White wrote in his 2003 memo granting KBR the indemnity that he “considered the availability, costs and terms of private insurance to cover these risks, as well as the viability of self-insurance, and have concluded that adequate insurance to cover the unusually hazardous risks is not reasonably available.” He said he had no clue how much the indemnity agreement could cost taxpayers.
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