Team Infidel
Forum Spin Doctor
Boston Globe
March 25, 2008
Pg. 1
Tax loophole may subject construction firm to damages
By Farah Stockman, Globe Staff
WASHINGTON - When the American team arrived in Iraq in the summer of 2003 to repair the Qarmat Ali water injection plant, supervisors told them the orange, sand-like substance strewn around the looted facility was just a "mild irritant," workers recall.
The workers got it on their hands and clothing every day while racing for 2 1/2 months to meet a deadline to get the plant, a crucial part of Iraq's oil infrastructure, up and running.
But the chemical turned out to be sodium dichromate, a substance so dangerous that even limited exposure greatly increases the risk of cancer. Soon, many of the 22 Americans and 100-plus Iraqis began to complain of nosebleeds, ulcers, and shortness of breath. Within weeks, nearly 60 percent exhibited symptoms of exposure, according to the minutes of a meeting of project managers from KBR, the Houston-based construction company in charge of the repairs.
Now, nine Americans are accusing KBR, then a subsidiary of the oil conglomerate Halliburton, of knowingly exposing them to the deadly substance and failing to provide them with the protective equipment needed to keep them safe.
But the workers, like all employees injured in Iraq, face an uphill struggle in their quest for damages. Under a World War II-era federal workers compensation law, employers are generally protected from employee lawsuits, except in rare cases in which it can be proven that the company intentionally harmed its employees or committed outright fraud.
KBR is citing the law, called the Defense Base Act, as grounds to reject the workers' request for damages.
But the company's own actions have undermined its case: To avoid payroll taxes for its American employees, KBR hired the workers through two subsidiaries registered in the Cayman Islands, part of a strategy that has allowed KBR to dodge hundreds of millions of dollars in Social Security and Medicare taxes.
That gives the workers' lawyer, Mike Doyle of Houston, a chance to argue to an arbitration board that KBR is not an employer protected by federal law, but a third-party that can be sued.
KBR's lawyers argued in a legal brief that the workers should be considered employees of KBR because they were part of a corporate subsidiary that was working on a KBR team. The company's spokeswoman, Heather Browne, pointed out that the company's projects in Iraq take place in a "dangerous, unpredictable environment," but said the firm maintains an "unwavering commitment to safety."
Like domestic workers' compensation plans, the Defense Base Act entitles employees in Iraq to medical care, disability, and death benefits, regardless of who is at fault for the injury. In exchange, it generally prohibits employees from seeking any further compensation, even if the employer is at fault.
For this reason, fewer than 10 high-profile lawsuits have been filed against contractors in Iraq. So far, none has been decided in favor of the employees, lawyers say, although some cases are ongoing.
But the law - approved in 1941, a year when few defense contractors were engaged on the front lines - is coming under increasing criticism from Iraq war workers.
"In Iraq, there is so much more at stake," said Marc Miles, a lawyer for the relatives of four men working for the security company Blackwater USA, who were killed by a mob in 2004. "If the employer is negligent, the employee doesn't just slip and fall and hurt his back. The employee could be killed or dismembered."
Yet in almost all cases, if an employer puts profit over safety in Iraq, an injured employee has no right to collect anything beyond medical care and a portion of his or her salary while out of work, Miles said.
"If [companies] are looking at their bottom line, and looking at profit, they would tend to cut the services and equipment that might be necessary to protect the employees' lives, because there would be no recourse for doing so," he said.
The workers at the Qarmat Ali plant now say KBR's managers discouraged them from raising safety concerns about the chemical and were slow to take action to mitigate health risks because they didn't want to miss their deadline for finishing the work.
"What was done to us, I believe, it's criminal," said Danny Langford , a motor specialist from Texas who worked in the most contaminated room in the facility. "I think it was deliberate. They wanted this six month job - get you in, get you out, and send you on your way, and 10 years later you start dying of cancer."
The job at Qarmat Ali began shortly after the US-led invasion of Iraq. In the run-up to the war, KBR signed a secret, no-bid contract to revive Iraq's oil fields after the fall of Saddam Hussein.
The Qarmat Ali plant was a crucial part of that project, responsible for pumping water through the desert and into the oil fields to provide the pressure necessary to pump oil from the ground. Sodium dichromate was mixed into the water to prevent the oil pipes from rusting. The chemical contains the most toxic form of chromium, the substance responsible for poisoning people in Hinkley, Calif., in a case highlighted by the movie "Erin Brockovich."
Max Costa, an expert witness in the Hinkley case who is chairman of the Department of Environmental Medicine at New York University Medical Center, said the chemical is damaging, even in very small doses.
"You cannot be exposed," he said. "It gets into your cells, damages your DNA, depresses your immune system, and down the road, it causes cancer."
KBR managers knew as early as June 22 that the chemical was sodium dichromate, according to a KBR safety log from Qarmat Ali submitted to the arbitration board in Doyle's case.
But little was done to mitigate the harm, according to interviews with four former workers. One worker, who decided not to join Langford's complaint for fear of retaliation, said a supervisor and a chemical engineer assured him the chemical was harmless. "They said, 'No, it's safe, everything's fine,' so we continued to work," he recalled. "We had it all over us."
Then Edward Blacke, a health and safety representative on the project employed by one of KBR's Cayman Island subsidiaries, began to do his own Web research.
"I discovered that it was a real bad actor," Blacke said in a telephone interview from his home in Arizona. "It was fatal to swallow. Very harmful on contact with skin, respiratory tract burns, anything that dealt with a mucus membrane." He also learned that it attacks the liver and kidneys and increases the risk of cancer.
Blacke said he tried to raise safety concerns about it to his supervisors, but "the response was, 'Don't get involved. This is not your area,' " he said. "They said that I was blowing this thing out of proportion."
At the end of July, after a chemical specialist based in Kuwait who had just visited the plant wrote an e-mail to KBR project managers urging that they warn workers of the health hazards, the managers authorized warning signs to be displayed, according to copies of e-mails written by KBR staff.
But Blacke, who resigned from the project that August, felt more needed to be done. Workers were complaining of nosebleeds, eye problems, and inexplicable shortness of breath.
"We didn't know what it was," Langford said. "I kept going to the [Human Resources] department when we went back to Kuwait. They kept giving me pills. They said that maybe we were allergic to the sand. I said, 'I have been around sand all my life, and I have never been allergic to it.' "
After a series of worker complaints, two KBR staff members visited the site Aug. 9 and took air and soil samples. A memo about their trip described "piles of dark orange crystalline material" around the plant, noting that it was "most likely pure sodium dichromate."
The memo also said Iraqi workers with the state-owned Southern Oil Co. were observed eating their lunches on the floor next to the chemical tanks, and that one worker who had been shoveling contaminated sludge into a wheelbarrow without protection showed them ulcers on his chest and abdomen.
At the end of August, KBR managers announced that the air samples showed just negligible amounts of sodium dichromate in the air. But technicians at A & B Environmental Services, the Houston lab that tested the air samples, told the Globe that the method used to collect the air samples was not suitable for detecting the toxic substance. Around the same time, KBR workers persuaded their managers to test their blood for contamination.
The results showed "elevated chromium levels" in the men's blood, according to Michael Kilpatrick, the military's deputy director of Force Health Protection and Readiness, who was briefed on the situation at Qarmat Ali because some US soldiers had contact with the plant.
Although the blood tests were not sophisticated enough to conclusively prove that the chromium in their blood came from the toxic form present at Qarmat Ali, a senior KBR project manager in the Middle East called workers together and announced that he planned to clean up the site.
"They got up in front of us and said, 'We got the blood samples back, and y'all do have some exposure to chromium in your blood,' " Langford said, adding that the most senior manager told the workers they would be wasting their time to file a lawsuit. "He said, 'It's a war zone. Things happen like this.' "
KBR managers mandated that personal protective gear be used at the site, but when the crew arrived in September to help clean up the contamination, there was not enough gear to go around, according to a memo to KBR managers from a safety representative.
Kilpatrick confirmed that the impetus for mitigating the risk of the chemical "came from the workers themselves." He said he had no information about why KBR waited until mid-August to take action. "There may have been issues of not understanding what perhaps people were at risk from," he said.
Now Langford and his former co-workers face uncertain medical futures. When Langford returned to the United States, he underwent a time-consuming blood-filtering treatment, which KBR's insurance company paid for. But none of the other men interviewed by the Globe had taken such a step, and it is unclear whether the treatment mitigates the risk of cancer.
Bobby Boycher, 43, an electrician from Leesville, La., who installed electrical equipment at Qarmat Ali, has no health insurance now. "It's totally terrified me," Boycher said. "It's changed my life."
If any of the men do develop cancer, they can present evidence of the link to their time at Qarmat Ali and attempt to get their medical treatment paid for by Defense Base Act insurance, according to Chris Winans, a spokesman for AIG, KBR's provider of Defense Base Act insurance. But Winans acknowledged that the more time that passes, the harder it will be to prove a link.
Blacke said that the firm should do more to ensure that the workers do not have to fight for medical treatment if they get sick, and that KBR should pay damages for putting workers' health at risk. "I'm hoping that KBR will step up and say, 'We made a mistake,' " Blacke said.
So far, that looks unlikely. But Doyle hopes the arbitration board will be persuaded that his clients were not KBR employees - because they were hired through the company's Cayman Islands subsidiaries - and therefore allow him to hold KBR accountable for putting the workers' lives at risk.
"I wouldn't be doing this if at the end of the day I didn't think I could do something for the people I'm representing," said Doyle. "But the reality is, so far, they have pretty much been able to escape scot-free."
March 25, 2008
Pg. 1
Tax loophole may subject construction firm to damages
By Farah Stockman, Globe Staff
WASHINGTON - When the American team arrived in Iraq in the summer of 2003 to repair the Qarmat Ali water injection plant, supervisors told them the orange, sand-like substance strewn around the looted facility was just a "mild irritant," workers recall.
The workers got it on their hands and clothing every day while racing for 2 1/2 months to meet a deadline to get the plant, a crucial part of Iraq's oil infrastructure, up and running.
But the chemical turned out to be sodium dichromate, a substance so dangerous that even limited exposure greatly increases the risk of cancer. Soon, many of the 22 Americans and 100-plus Iraqis began to complain of nosebleeds, ulcers, and shortness of breath. Within weeks, nearly 60 percent exhibited symptoms of exposure, according to the minutes of a meeting of project managers from KBR, the Houston-based construction company in charge of the repairs.
Now, nine Americans are accusing KBR, then a subsidiary of the oil conglomerate Halliburton, of knowingly exposing them to the deadly substance and failing to provide them with the protective equipment needed to keep them safe.
But the workers, like all employees injured in Iraq, face an uphill struggle in their quest for damages. Under a World War II-era federal workers compensation law, employers are generally protected from employee lawsuits, except in rare cases in which it can be proven that the company intentionally harmed its employees or committed outright fraud.
KBR is citing the law, called the Defense Base Act, as grounds to reject the workers' request for damages.
But the company's own actions have undermined its case: To avoid payroll taxes for its American employees, KBR hired the workers through two subsidiaries registered in the Cayman Islands, part of a strategy that has allowed KBR to dodge hundreds of millions of dollars in Social Security and Medicare taxes.
That gives the workers' lawyer, Mike Doyle of Houston, a chance to argue to an arbitration board that KBR is not an employer protected by federal law, but a third-party that can be sued.
KBR's lawyers argued in a legal brief that the workers should be considered employees of KBR because they were part of a corporate subsidiary that was working on a KBR team. The company's spokeswoman, Heather Browne, pointed out that the company's projects in Iraq take place in a "dangerous, unpredictable environment," but said the firm maintains an "unwavering commitment to safety."
Like domestic workers' compensation plans, the Defense Base Act entitles employees in Iraq to medical care, disability, and death benefits, regardless of who is at fault for the injury. In exchange, it generally prohibits employees from seeking any further compensation, even if the employer is at fault.
For this reason, fewer than 10 high-profile lawsuits have been filed against contractors in Iraq. So far, none has been decided in favor of the employees, lawyers say, although some cases are ongoing.
But the law - approved in 1941, a year when few defense contractors were engaged on the front lines - is coming under increasing criticism from Iraq war workers.
"In Iraq, there is so much more at stake," said Marc Miles, a lawyer for the relatives of four men working for the security company Blackwater USA, who were killed by a mob in 2004. "If the employer is negligent, the employee doesn't just slip and fall and hurt his back. The employee could be killed or dismembered."
Yet in almost all cases, if an employer puts profit over safety in Iraq, an injured employee has no right to collect anything beyond medical care and a portion of his or her salary while out of work, Miles said.
"If [companies] are looking at their bottom line, and looking at profit, they would tend to cut the services and equipment that might be necessary to protect the employees' lives, because there would be no recourse for doing so," he said.
The workers at the Qarmat Ali plant now say KBR's managers discouraged them from raising safety concerns about the chemical and were slow to take action to mitigate health risks because they didn't want to miss their deadline for finishing the work.
"What was done to us, I believe, it's criminal," said Danny Langford , a motor specialist from Texas who worked in the most contaminated room in the facility. "I think it was deliberate. They wanted this six month job - get you in, get you out, and send you on your way, and 10 years later you start dying of cancer."
The job at Qarmat Ali began shortly after the US-led invasion of Iraq. In the run-up to the war, KBR signed a secret, no-bid contract to revive Iraq's oil fields after the fall of Saddam Hussein.
The Qarmat Ali plant was a crucial part of that project, responsible for pumping water through the desert and into the oil fields to provide the pressure necessary to pump oil from the ground. Sodium dichromate was mixed into the water to prevent the oil pipes from rusting. The chemical contains the most toxic form of chromium, the substance responsible for poisoning people in Hinkley, Calif., in a case highlighted by the movie "Erin Brockovich."
Max Costa, an expert witness in the Hinkley case who is chairman of the Department of Environmental Medicine at New York University Medical Center, said the chemical is damaging, even in very small doses.
"You cannot be exposed," he said. "It gets into your cells, damages your DNA, depresses your immune system, and down the road, it causes cancer."
KBR managers knew as early as June 22 that the chemical was sodium dichromate, according to a KBR safety log from Qarmat Ali submitted to the arbitration board in Doyle's case.
But little was done to mitigate the harm, according to interviews with four former workers. One worker, who decided not to join Langford's complaint for fear of retaliation, said a supervisor and a chemical engineer assured him the chemical was harmless. "They said, 'No, it's safe, everything's fine,' so we continued to work," he recalled. "We had it all over us."
Then Edward Blacke, a health and safety representative on the project employed by one of KBR's Cayman Island subsidiaries, began to do his own Web research.
"I discovered that it was a real bad actor," Blacke said in a telephone interview from his home in Arizona. "It was fatal to swallow. Very harmful on contact with skin, respiratory tract burns, anything that dealt with a mucus membrane." He also learned that it attacks the liver and kidneys and increases the risk of cancer.
Blacke said he tried to raise safety concerns about it to his supervisors, but "the response was, 'Don't get involved. This is not your area,' " he said. "They said that I was blowing this thing out of proportion."
At the end of July, after a chemical specialist based in Kuwait who had just visited the plant wrote an e-mail to KBR project managers urging that they warn workers of the health hazards, the managers authorized warning signs to be displayed, according to copies of e-mails written by KBR staff.
But Blacke, who resigned from the project that August, felt more needed to be done. Workers were complaining of nosebleeds, eye problems, and inexplicable shortness of breath.
"We didn't know what it was," Langford said. "I kept going to the [Human Resources] department when we went back to Kuwait. They kept giving me pills. They said that maybe we were allergic to the sand. I said, 'I have been around sand all my life, and I have never been allergic to it.' "
After a series of worker complaints, two KBR staff members visited the site Aug. 9 and took air and soil samples. A memo about their trip described "piles of dark orange crystalline material" around the plant, noting that it was "most likely pure sodium dichromate."
The memo also said Iraqi workers with the state-owned Southern Oil Co. were observed eating their lunches on the floor next to the chemical tanks, and that one worker who had been shoveling contaminated sludge into a wheelbarrow without protection showed them ulcers on his chest and abdomen.
At the end of August, KBR managers announced that the air samples showed just negligible amounts of sodium dichromate in the air. But technicians at A & B Environmental Services, the Houston lab that tested the air samples, told the Globe that the method used to collect the air samples was not suitable for detecting the toxic substance. Around the same time, KBR workers persuaded their managers to test their blood for contamination.
The results showed "elevated chromium levels" in the men's blood, according to Michael Kilpatrick, the military's deputy director of Force Health Protection and Readiness, who was briefed on the situation at Qarmat Ali because some US soldiers had contact with the plant.
Although the blood tests were not sophisticated enough to conclusively prove that the chromium in their blood came from the toxic form present at Qarmat Ali, a senior KBR project manager in the Middle East called workers together and announced that he planned to clean up the site.
"They got up in front of us and said, 'We got the blood samples back, and y'all do have some exposure to chromium in your blood,' " Langford said, adding that the most senior manager told the workers they would be wasting their time to file a lawsuit. "He said, 'It's a war zone. Things happen like this.' "
KBR managers mandated that personal protective gear be used at the site, but when the crew arrived in September to help clean up the contamination, there was not enough gear to go around, according to a memo to KBR managers from a safety representative.
Kilpatrick confirmed that the impetus for mitigating the risk of the chemical "came from the workers themselves." He said he had no information about why KBR waited until mid-August to take action. "There may have been issues of not understanding what perhaps people were at risk from," he said.
Now Langford and his former co-workers face uncertain medical futures. When Langford returned to the United States, he underwent a time-consuming blood-filtering treatment, which KBR's insurance company paid for. But none of the other men interviewed by the Globe had taken such a step, and it is unclear whether the treatment mitigates the risk of cancer.
Bobby Boycher, 43, an electrician from Leesville, La., who installed electrical equipment at Qarmat Ali, has no health insurance now. "It's totally terrified me," Boycher said. "It's changed my life."
If any of the men do develop cancer, they can present evidence of the link to their time at Qarmat Ali and attempt to get their medical treatment paid for by Defense Base Act insurance, according to Chris Winans, a spokesman for AIG, KBR's provider of Defense Base Act insurance. But Winans acknowledged that the more time that passes, the harder it will be to prove a link.
Blacke said that the firm should do more to ensure that the workers do not have to fight for medical treatment if they get sick, and that KBR should pay damages for putting workers' health at risk. "I'm hoping that KBR will step up and say, 'We made a mistake,' " Blacke said.
So far, that looks unlikely. But Doyle hopes the arbitration board will be persuaded that his clients were not KBR employees - because they were hired through the company's Cayman Islands subsidiaries - and therefore allow him to hold KBR accountable for putting the workers' lives at risk.
"I wouldn't be doing this if at the end of the day I didn't think I could do something for the people I'm representing," said Doyle. "But the reality is, so far, they have pretty much been able to escape scot-free."