Eagle Global Logistics will reimburse government for war risk surcharges

EGL Inc. (EGL) has received an offer from the United States Attorney General for the Eastern District of Texas to settle a war risk surcharge case against EGL for the sum of $4 million.

An administrative subpoena received in 2004 from the Department of Defense (DOD) first alerted the company to the possibility that it had submitted unwarranted war risk surcharges to its customer and DOD general contractor, Kellogg, Brown & Root, Inc. (KBR).

EGL launched an immediate internal investigation and requested a forensic analysis by accounting firm KPMG. The analysis concluded that approximately $1.14 million of war risk surcharges charged by EGL to KBR were not actually imposed on EGL by transportation providers. EGL provided the results of this analysis to the government and terminated two employees for violation of the company’s Code of Conduct.

"Our Code of Conduct could not be more clear on this subject, and every one of our more than 10,000 employees is required to sign a personal commitment to adhere to the code as a condition of employment," says James Crane, EGL CEO. "We deplore the fact that the isolated actions of a few employees could have tarnished the reputation we have worked so hard to build."

Recognizing EGL’s cooperation and assistance with the government’s investigation, as part of the settlement, the United States Attorneys Office for the Eastern District of Texas and the Defense Criminal Investigative Service will agree to waive all investigatory expenses and will make no recommendation to the Department of Defense for debarment of EGL from future Department of Defense contracts. In addition, the United States Attorneys Office for the Eastern District of Texas will not recommend any criminal charges against EGL.

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