As ProPublica reported Tuesday, the $2 billion class-action claims security firms, support companies like KBR Inc., and their insurance providers “routinely lied, cheated and threatened injured workers,” while flouting the World War II-era law guaranteeing coverage for private workers supporting the U.S. military.

Reporter T. Christian Miller investigated how the wars in Iraq and Afghanistan have strained the system over the last few years, but the latest complaint may be the most far-reaching yet:

The lawsuit, believed to be the first of its kind, charges that major insurance corporations such as AIG and large federal contractors such as Houston-based KBR deliberately flouted the law, thereby defrauding taxpayers and boosting their profits. In interviews and at Congressional hearings, AIG and KBR have denied such allegations and said they fully complied with the law. They blamed problems in the delivery of care and benefits on the chaos of the war zones.

The suit names Houston-based KBR, Xe Services — the security firm formerly known as Blackwater — and Dyncorp International among the defendants, along with insurance giants AIG and CNA Global Insurance, the two major insurance providers for private workers under U.S. Department of Defense contracts.

Four Texas men are included as plaintiffs, along with others around the U.S. and South Africa. Their injuries include blast wounds from explosives, infected sandfly bites, post-traumatic stress disorder and traumatic brain injury.

Washington lawyer Scott Bloch, a former U.S. Special Counsel under George W. Bush, told the Texas Independent that he first heard about contractors’ troubles with their medical claims shortly after he started his private practice. Bloch represents former Blackwater employees in a separate case filed in June, also over medical benefits.

“My experience tells me it’ll require hundreds of millions of dollarsin damages for them to wake up,” Bloch said. He hopes this class action will eventually result in criminal and internal investigations, not only into the private companies named in the suit, but the government agencies that handle their contracts.

Contractors across the country continue fighting drawn-out cases over individual claims, and a 2009 House subcommittee hearing on health benefits for war contractors has brought little change in the law.

“This is a massive scandal, this is a bigger scandal than Walter Reed — much more wide-ranging,” Bloch said. “The light isn’t shining on it. The news outlets are like, ‘Well, we want the soldier’s stories. We want the guys carrying the guns with the sunglasses.’”

Houston attorney Gary Pitts has spent years on individual Defense Base Act cases involving some of the same companies and health issues — and testified before that House subcommittee hearing two years ago. While the types of injuries are different today than they were in 2004 — fewer truckers are injured by IEDs today — Pitts said the claims system remains just as difficult to navigate.

“We’re just sloggin’ away,” Pitts said. “Who knows how long this’ll go on?”

But grouping defendants together into class-action suit is a long shot for some claims in Bloch’s complaint, Pitts said, like allegations that workers were fired in retaliation.

“The trend of the courts over 10 to 20 years has been to make it harder and harder to bring a class action,” Pitts said. “I would say the odds are very very hard.”

Even these individual stories, though, don’t do justice to Bloch’s strange four-year career at OSC. He first raised eyebrows by reportedly refusing to investigate whistleblower complaints by homosexuals and stocking the OSC staff with religious conservatives.

Bloch went three years without investigating reports that the White House’s political arm, led by Karl Rove, was manipulating the civil service for partisan ends. Finally, last year, he investigated Lurita Doan, head of the General Services Admin., and found that Doan violated the Hatch Act, which prohibits the politicization of federal agencies.

In nabbing Doan, who was perceived, fairly or not, as a prototypical Bush crony, Bloch seemed to have turned his career around. But then it turned out that Bloch had been actively stopping OSC employees from investigating other possible Hatch Act violations.

Lawmakers from both parties had long since called on Bloch to resign. Now five months after Doan resigned, the person who precipitated her downfall is leaving as well.

The report recalls that Doan violated the Hatch Act by asking GSA civil servants “how we can help our candidates” and then entertainingly stonewalled the oversight committee’s look into the incident.

Doan responded to yesterday’s report with a gem of a letter to Rep. Henry. A Waxman (D-Calif.), the oversight committee chair. It accuses Waxman of “ubiquitous hypocrisy” and running a “kangaroo court.” (TPM Muckraker has helpfully put the letter in PDF form). But in the missive to Waxman is a valid point about the federal investigation that brought her down:

Your flawed report is also curious for what it does not contain. Nowhere is there mention that you relied heavily upon the flawed investigation of Special Counsel Mr. Scott Bloch.  Nor is there any mention of the fact that the OSC Director Mr. Bloch was forced to hire an outifit called ‘Geeks on Call’ to quickly come in and erase all the files of his government computers dealing with this investigation when it became clear that the evidence had been doctored, witnesses tampered with and conclusions driven by political ambitions. Nor did you mention that the FBI raided Mr. Bloch’s home and office.

Doan calls Waxman’s reliance on Bloch’s investigation “utterly craven.”

How problems with the Official of Special Counsel, a tiny federal agency designed to protect civil servants, affected the career of the head of GSA is inside baseball.

But Doan is right: Scott Bloch, the man who said she violated federal law, has been an embarrassing Bush administration appointee himself. In particular, he has been terrible investigating other instances of White House politicization of federal agencies. For this, Waxman has called for Bloch’s resignation.

Regardless, it’s good to see Doan back in the news. There are few other provocateurs who will say of Waxman, “Most Americans are familiar with your lack of candor.”