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    Middle East
     Apr 23, 2005
Double trouble for Halliburton
By William Fisher

NEW YORK - The Halliburton corporation, already the Iraq war's poster child for "waste, fraud and abuse", has been hit with a new double whammy. A report from the US State Department accuses the company of "poor performance" in its US$1.2 billion contract to repair Iraq's vital southern oilfields.

And a powerful California congressman is charging that Defense Department audits showing additional overcharges totaling $212 million were concealed from United Nations monitors by the administration of President George W Bush.

The new overcharges bring to $2 billion, or 42% of the contract amounts, the grand total of questionable bills from Halliburton.

According to Representative Henry Waxman, the top Democrat on the House of Representatives sub-committee on government reform, "both the amount of Halliburton's overcharges and the extent of the information withheld from the auditors at the UN's International Advisory and Monitoring Board [IAMB] were much greater than previously known".

Waxman said the Defense Contract Audit Agency, which monitors all Pentagon contracts, had identified Halliburton overcharges and questionable costs totaling $212.3 million - double the total amount of known overcharges under Halliburton's Iraq oil contract.

In one case, Waxman said, the overcharges exceeded 47% of the total value of the task order.

But the Defense Department - at Halliburton's request - withheld the new amount from IAMB, the UN audit oversight body for the Development Fund for Iraq, Waxman charged.

In letters to government auditors, Halliburton subsidiary Kellogg, Brown & Root (KBR) explained that it redacted statements it considered proprietary or "factually inaccurate or misleading" and gave consent for the release of the audits to international auditors "in redacted form". The administration then sent the heavily edited report to the IAMB.

"The withholding of this information is highly unusual and raises serious issues," Waxman complained in a letter to sub-committee chairman Christopher Shays. "The evidence suggests that the US used Iraqi oil proceeds to overpay Halliburton and then sought to hide the evidence of these overcharges from the international auditors."

Waxman also renewed his request that the sub-committee hold hearings on the administration's "mismanagement of the Development Fund for Iraq". Previously, Waxman disclosed that Defense Department auditors found $108 million in fuel-related overcharges by Halliburton for work in Iraq under one of several Halliburton task orders for the importation of fuel into Iraq.

He also alleged that although Halliburton was paid in significant part from Iraqi oil proceeds in the Development Fund for Iraq, the administration - acting at Halliburton's request - concealed these overcharges from the international auditors charged by the UN with monitoring the expenditures from the fund.

In these new audit reports, he said, "extensive additional information has been withheld by the administration from the IAMB. A review of these audits shows that references to overcharges and other questioned costs were blacked out over 450 times in the versions of audits sent to the IAMB."

Rick Blum of the advocacy group OpenTheGovernment.org told Inter Press Service (IPS), "Once again, the secrecy system fails us. They wouldn't have done it if they thought anyone cared or would find out. If the public had known about this earlier, we could stop it, better protect our troops, and better use our taxpayer dollars to make our families safer," he said. "This should be a wake-up call to ensure more openness to strengthen our national defense."

And Scott H Amey, general counsel of the Project on Government Oversight, a non-partisan government watchdog, told IPS, "If a taxpayer was able to support only 63% of their tax return, he or she would be brought to justice. In the case of Halliburton, however, the government continues to let it slide."

The State Department's report focused on KBR, the Halliburton subsidiary contracted to repair Iraq's southern oilfields. The report does not provide details about what it calls "poor performance and excess spending", but it says the American Embassy had issued a "Cure Notice", a threat to terminate the contract unless KBR replaced some senior managers. It says the government remained dissatisfied.

As a consequence, one of KBR's competitors, Parsons Corp, has been asked "to execute some of the remaining work" in the south originally meant for KBR.

KBR has previously been criticized for excess spending in its multibillion-dollar contract to provide logistical support for the military and in an earlier $2.2 billion contract for oil repairs and fuel imports that was granted secretly as the Iraq invasion began. KBR won the contract to work on northern oilfields.

The embassy has reallocated an additional $832 million in planned spending away from huge projects managed by US companies toward smaller repairs using local businesses and the training of Iraqis to maintain power and water systems.

Halliburton has attributed its slow progress to attacks by insurgents, and years of neglect and lack of investment in the country's oil facilities. The State Department report says Iraq's oil output of 2.1 million barrels a day in February was lower than it was last autumn.

Halliburton - of which Vice President Dick Cheney was formerly chief executive officer - is the largest single contractor in Iraq. The Pentagon has already awarded the company contracts worth up to $18 billion for its work in the country. Many of them were no-bid contracts that drew widespread criticism on Capitol Hill and in the press.

The company says it performed well under difficult circumstances in the aftermath of the invasion of Iraq and that cost disputes "are part of the normal contracting process". But former Halliburton employees have alleged intentional and systemic waste.

Lower-than-expected oil exports are exacerbating the Iraqi government's budget deficit, which the report estimates could reach $5 billion this year. A quarterly update on Iraqi reconstruction was delivered to US Congress last week.

A former Halliburton employee, Marie deYoung, audited accounts for KBR. She claims there was no effort to hold down costs because all costs were passed on directly to taxpayers. She repeatedly complained to superiors of waste and fraud. The company's response, according to deYoung, was: "We can be as dumb and stupid as we want in the first year of a war, nobody's going to care."

The former US Army chaplain produced documents detailing alleged waste even on routine services: $50,000 a month for soft drinks, at $45 a case; $1 million a month to clean clothes - or $100 for each 15-pound (seven-kilogram) bag of laundry. "That money could have been used to take care of soldiers," she said.

Another former employee, Mike West, says he was paid $82,000 a year to be a labor foreman in Iraq, but never had any laborers to supervise. "They said just log 12 hours a day and walk around and look busy," he said.

(Inter Press Service)


Where the missing $9 billion went
(Feb 2, '05)

The business end of US, Iran ties
(Jan 14, '05)

Halliburton coy on Iran gas deal
(Jan 13, '05)

 
 

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