The government of Iraq opened a military base in Numaniyah at a reported cost of $165 million US. Laguna Construction Corporation, a business owned by Laguna Pueblo, was awarded a $40.8 million contract as part of the effort. Photo by Photo by Chief Petty Officer Joe Kane, US Navy
A New Mexico tribe has lost claims to millions of dollars in military contract work after being linked to a criminal kickback case. Leaders and employees of Laguna Pueblo were never implicated in the scheme. But the former vice president and a former project manager of Laguna Construction Co., a tribally-owned business, admitted they over-billed the Defense Department in order to receive kickbacks from the proceeds. As a result, the military disapproved $17.8 million in costs incurred by Laguna Construction for work performed in Iraq. The company subsequently submitted a claim for nearly $2.9 million of that amount but the Armed Services Board of Contract Appeals rejected the claim, citing the criminal case. "The aforementioned criminal acts were performed by appellant's project manager and by its vice president of operations, both of whom were operating under this contract and within the scope of their employment. This supports the imputation of their actions to Laguna," the board wrote in a September 2014 decision. The dispute didn't end there because the corporation took the case to the Federal Circuit Court of Appeals. But it looks like it might be over now since a three-judge panel issued a unanimous ruling that affirmed Laguna's ties to the criminal activity. "Based on the facts of this case, Laguna’s employees’ criminal acts constitute a first material breach of its contract with the government," Judge Todd M. Hughes wrote in the July 15 decision. The breach excuses the military's failure -- or "nonperformance" -- to pay the costs, the court determined.
Laguna Construction Corporation, a business owned by Laguna Pueblo, was awarded a $19.5 million contract to perform work on the Ministry of Defense in Baghdad, Iraq. Photo by LCC via Office of the Special Inspector General for Iraq Reconstruction
According to the U.S. Attorney's Office, the Laguna corporation at one point administered over $350 million in contracts for work in the Middle East. The Armed Services Board of Contract Appeals decision cited a total of 27 contracts that had been awarded to the company, following the start of the war in Iraq in 2003. One $19.5 million contract was for the Iraqi Ministry of Defense headquarters in Baghdad. As a condition of the work, Laguna was required to award subcontracts to foreign companies, which is how the over-billing and kickback scheme started, according to federal authorities. In the Ministry of Defense situation, a subcontract that was supposed to max out at $250,000 turned into $616,087 as a result of the scheming, according to the Armed Services Board. Additional contracts -- including $40.8 million, nearly $8.6 million and over $20.5 million for military, law enforcement and other facilities in Iraq -- resulted in numerous "change orders" that resulted in subcontractors receiving larger sums than originally expected, according to the board. Bradley G. Christiansen, the former vice president at Laguna, and Ismael "Mike" Salinas, a former project manager, later admitted their roles in the scheme. "These subcontractors were willing to pay us kickbacks because we circumvented the fair, open, and competitive bidding process," Christiansen admitted in court papers. Neal Kasper and his wife, Tiffany White, pleaded guilty for their roles in March. They also were employed by the Laguna corporation and had been indicted along with Christiansen and four foreign nationals whose whereabouts remain unknown. "I thank the Pueblo of Laguna for its cooperation during the investigation of this case," U.S. Attorney Damon Martinez said back in March. Christiansen, Kasper and White await sentencing. They face prison terms and will be ordered to pay restitution, according to Martinez's office. Federal Circuit Court of Appeals Decision:
Laguna Construction Co. v. Ashton Carter, Secretary of Defense (July 15, 2016)
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