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.
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.
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.
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.
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.
Rep. Darrell Issa, R-Calif., asked what the Corps of Engineers is doing to stop other companies from bilking the federal government for unpaid insurance coverage.
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