Stephen Feinberg’s Cerberus owned military contractor that paid millions to settle government fraud suits

Feinberg could lead DOD after Cerberus-owned Dyncorp paid over $9 million to resolve DOJ lawsuits

This week, it was reported that President-elect Donald Trump selected Stephen Feinberg to be his deputy Defense secretary. Feinberg is the Co-Founder, Co-Chief Executive Officer, and Chief Investment Officer of Cerberus, a private equity firm with $65 billion in assets under management. Feinberg’s selection as a leader in the Department of Defense (DOD) is troubling given that the military contractor DynCorp, which Cerberus owned from 2010 to 2020, paid millions of dollars to settle multiple suits alleging that it defrauded the U.S. government during the time that Cerberus owned it.

“While under Stephen Feinberg’s leadership, Cerberus has been in the spotlight for all the wrong reasons,” said Jim Baker, Executive Director at the Private Equity Stakeholder Project (PESP). “It’s extremely concerning that the man who could now lead the U.S. Department of Defense oversaw Cerberus as one of its companies was accused of defrauding the U.S. government. How are we to trust a private equity billionaire whose firm looted a national hospital system, owned a contractor accused of defrauding the government, and whose portfolio companies have high levels of safety violations and layoffs?”

During the period that Cerberus owned government contractor Dyncorp (2010-2020) the company paid at least $9 million to resolve multiple lawsuits by the U.S. Department of Justice (DOJ) alleging that DynCorp had defrauded the U.S. Government.

In 2011, DynCorp agreed to pay the United States $7.7 million to resolve allegations that it submitted inflated claims for the construction of container camps at various locations in Iraq.

“This settlement demonstrates our commitment to aggressively investigating wartime profiteering that corrupts the integrity of our government contracting process,” said former U.S. Attorney Ronald C. Machen Jr.

Just five years later, in 2016, the DOJ sued DynCorp again for allegedly defrauding the US Government in relation to contracts in Iraq. The DOJ alleged that DynCorp knowingly submitted inflated claims in connection with a State Department contract to train Iraqi police forces. The case is ongoing.

In January 2020, in a separate case, DynCorp agreed to pay $1.5 million to settle civil fraud allegations involving two former DynCorp officials who solicited and accepted kickbacks from an Iraqi subcontractor in connection with DynCorp’s lease of property for its operations in Iraq on behalf of the U.S. Department of State.

Dyncorp is far from the only controversy Feinberg’s Cerberus has faced in recent years. The private equity firm owned Steward Health Care, a 31-hospital system operating in 10 states, from 2010 to 2020. On May 6, 2024, Steward, employing nearly 30,000 workers, and serving over 2 million patients annually, filed for Chapter 11 bankruptcy. Cerberus had made its money and ran, while Steward spiraled into financial distress.

Additionally, Cerberus’ proposed merger of grocery chain Albertsons with Kroger could push up grocery prices for Americans. Cerberus has already received a $4 billion payout related to the merger, which the Federal Trade Commission (FTC) is currently suing to block.

In the 2023 PESP Private Equity Labor Scorecard, Cerberus received the second-worst score and an F grade. Cerberus-owned companies represented the most significant mass layoffs of all the private  equity firms in the report, with 13.04 layoffs per every 1,000 employees. Cerberus-owned companies also had the highest number of reported 1,146 serious OSHA violations, with 0.29 serious violations per every 1,000 employees.