Centerra and Wackenhut: Salary and Leave Costs Billed Twice

The Centerra and Wackenhut Iraq fire-services settlement was a $7.4 million agreement to resolve allegations of double billing managers’ salaries and inflating labor rates for firefighting and fire protection at U.S. military bases. The government alleged that the same salary costs reached the bill through different accounting routes, while leave costs appeared twice inside the rate calculation. If you worked with payroll, overhead or subcontract billing, those are connections you may recognize before anyone reviewing the final invoice does.

Centerra Services International Inc., formerly Wackenhut Services LLC, is the company that agreed to pay. The security services company was headquartered in Palm Beach Gardens, Florida. In its February 1, 2016 announcement, the Justice Department described Wackenhut’s work under a subcontract with Kellogg Brown & Root Inc., known as KBR. KBR held the Army’s LOGCAP III logistics contract and passed the subcontract costs to the government.

Managers’ Salaries Charged Directly and Indirectly

The government alleged that from 2008 through 2010, Wackenhut billed certain managers’ salaries as direct costs under the subcontract even though those salaries had already been charged as indirect costs. That is the central indirect-cost fraud allegation: the same expense allegedly reached the customer through both a specific charge and the costs shared through overhead.

An accountant examining the allegation would need to connect the salary in the direct-cost ledger with its treatment in the indirect costs. The comparison follows the expense from payroll into the cost pool and the subcontract charge.

We see the problem in the duplication: putting a salary under another accounting heading does not create another manager. In the government’s account, taxpayers faced an added charge for a cost already included elsewhere. The useful insider knowledge is where the salary went after payroll recorded it, and how those entries fed the subcontract bill.

Leave Costs Counted Twice in the Labor Rate

The government separately alleged that Wackenhut inflated its labor rate by counting holiday, vacation, sick leave, rest and recuperation, and other variable labor costs twice. This allegation concerns the calculation used to build the rate. A bill can carry an inflated labor charge because the rate itself contains duplicate costs.

The distinction matters to someone who works with the numbers. For the managers’ salaries, the comparison runs between direct and indirect charging. For leave, it runs through the components of the labor-rate calculation. Payroll and leave records would help explain the underlying expenses, while the rate worksheet would show how those expenses entered the price charged to KBR.

That is why we would want to understand the calculation behind a rate presented as a finished number. The government’s allegation puts the duplication there, before the cost moves through the subcontract invoice. Someone who prepared or reviewed that calculation knows how its components reached the billed rate.

How the Subcontract Became the Army’s Bill

Wackenhut billed KBR, and KBR passed those costs to the government under LOGCAP III. LOGCAP III was the third generation of contracts under the Army’s Logistical Civil Augmentation Program, supplying support in the military theater. Wackenhut provided firefighting and fire protection services at U.S. bases in Iraq.

The alleged overcharge crossed the prime contractor and subcontractor relationship. In this case, following it means connecting Wackenhut’s salary or leave-cost calculation to its bill to KBR, then to the costs KBR passed on.

Research on military contracting explains why the people inside that chain matter. Transparency International Defence and Security’s 2022 report Hidden Costs: US Private Military and Security Companies and the Risks of Corruption and Conflict describes the Defense and State Departments’ reliance on prime contractors to vet lower-tier subcontractors. It also recounts concerns that limited public information about contract costs and performance standards obscured inefficiencies. An insider’s view of how a subcontract price was built reaches detail that a public description of the service leaves out.

The Whistleblower Case and the Announced Reward

A whistleblower brought the qui tam case that the Centerra settlement resolved. The Justice Department announced that the whistleblower would receive $1.3 million as a share of the recovery. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

What Evidence Is Needed to Prove Fraud?

We work with insiders to connect the original labor expense, its accounting treatment, the charge passed to the government and what the company knew. For allegations like these, our work follows the records behind a defense contractor’s bill from the payroll entry to the payment request.

The subcontract and relevant task order describe the work being purchased and the billing terms. Payroll records identify the salary expense, while the direct-cost ledger and indirect-cost pool show where the company assigned it. We read those records together to see whether the same manager’s salary entered both charging routes alleged in this case.

For the separate leave allegation, we compare the labor-rate worksheets with payroll and leave records. Those records show how holiday, vacation, sick leave and rest costs contributed to the rate, connecting each expense to the calculation used for billing.

Invoices and vouchers connect the accounting to government money. We would trace the subcontract charge through the prime contractor’s payment request, alongside the contract terms and supporting schedules. An insider’s explanation of who prepared or approved the calculation, what they knew and how the charge reached the customer makes that trail intelligible.

A Parallel in Navy Contract Accounting

Vector Planning and Services agreed to a separate $6.5 million settlement over allegations that direct costs already paid were included again in indirect pools allocated across Navy contracts. The Justice Department’s February 18, 2014 announcement also described allegations of charges for costs never incurred. The duplicate-cost allegation supplies the useful comparison with Wackenhut’s managers’ salaries: an expense already charged through one route allegedly appeared again through overhead.

For someone inside contract accounting, that comparison identifies where the story can be missed. A direct charge and an indirect allocation may sit in different parts of the accounts while drawing on the same expense. We follow that expense across both, because the government bill can reflect decisions made well before anyone prepares the invoice.

You Know What Went Into the Labor Rate

If you saw the same salary charged through overhead and direct billing, or leave costs counted twice in a rate, talk with our whistleblower experts about the calculation. We build your case with you and bring in defense contractor fraud whistleblower lawyers who understand labor rates, indirect costs and subcontract billing. We stay beside you from the first conversation about the accounts through the pursuit of the government’s recovery.