Page 2 of 2 DISPATCHES FROM AMERICA
Is Halliburton forgiven and forgotten?
By Pratap Chatterjee
widespread problems with KBR's electrical work, the Pentagon decided to give
KBR bonuses totaling $83.4 million for such work?" he wondered.
KBR, of course, denies everything. "We believe the standards that we did employ
were standards that were known and thought to be acceptable in an expeditionary
environment," KBR's William P Utt told the Associated Press in response. "We
don't think the wiring that we installed was potentially dangerous." In a brief
statement about the deaths, the company wrote: "Based on our current knowledge
and the information we have gathered to date, KBR has found no evidence of a
link between the work the military
tasked KBR to perform and the reported deaths that have resulted from
electrocution."
Who is responsible?
One of the biggest problems with the sprawling 2008 KBR mega-contract appears
to be that not enough people are watching the store (and evidently, some of
those who do regularly doze off when payment issues arise).
In early May, Michael Thibault, co-chair of the independent Commission on
Wartime Contracting in Iraq and Afghanistan, highlighted a simple, if
disturbing statistic at the second hearing of his newly established commission.
Out of 504 oversight officials that, by Pentagon estimate, are needed to keep
an eye on KBR's contract in Afghanistan alone, just 166 were actually in the
field in April 2009. As Thibault added:
After more than six years of
fighting, this is just one example of serious and persistent shortfalls in
staffing and training. In military parlance, no one is pulling guard duty on
contractor performance. This example, an issue by itself, points to another
broader question. Who is responsible? Who's going to fix these types of issues?
At the Democratic Policy Committee hearing in late May, Charles M Smith, a
31-year veteran of contract management in the US Army, testified that Pentagon
officials were deliberately ignoring criticism in deciding to reward KBR. Smith
was in charge of KBR contracts in Afghanistan and Iraq, as well as of the
award-fee or bonus-payment process that went with them. He refused to allow any
bonuses to be paid out, however, because the company was not able to provide
proper documentation of its costs. This was one reason, he believes, that he
was taken off the contract in August 2004. Smith became a whistleblower after
he retired a year ago. Here is a sample of his testimony:
The award-fee
process is supposed to evaluate a contractor's performance level and provide a
"bonus" or award fee for superior performance. Failure to perform
satisfactorily should result in a significantly lower or no award fee. [The
award system] appears to me to have failed to work as it was intended and to
have led to poor service for American troops, wasted taxpayer money, and
possibly the deaths of soldiers in KBR operated facilities ...
The problems for operating in the environment of Iraq and Afghanistan are not
insignificant. However, the major failure appears to me to have been a culture
that decided KBR was too big to fail and too important to be held to account.
The Army was aware of KBR's poor performance in Iraq. There have been numerous
government inspections and reports. The Army, however, continued to give KBR
high award fees. Those high award fees appear to have sent a message to KBR
that performance did not really matter. Award-fee boards and decisions are a
communications tool between the government and the contractor. The contractor
learns what is important to the government and will respond accordingly.
And the record shows that KBR did "respond accordingly".
Remembering Halliburton
In the meantime, Halliburton, which provided so many years of corporate
"oversight" for KBR, has been cleansed of all charges in the court of public
opinion and has essentially dropped from view. It has also done its best to
ignore a shareholder resolution brought by Patrick Doherty, the comptroller of
the city of New York, that raises the obvious issue of war profiteering in
Iraq, based on the Pentagon dollars it raked in while its former CEO helped
oversee the war that was making it so much money.
Some shareholder activists continue to pursue the company by other means. For
instance, the pension fund of the Policemen and Firemen Retirement System of
the City of Detroit filed a lawsuit in mid-May against David Lesar and other
executives of KBR and Halliburton, accusing them of a "reign of terror". The
lawsuit listed a number of complaints including bribes in Nigeria, overcharging
the Pentagon for services rendered, accepting kickbacks, engaging in human
trafficking, and concealing the rape of an employee.
"Under defendants' watch, and supposedly under their control and supervision,
the companies were permitted to engage in conduct so notorious that the name
'Halliburton' has become virtually synonymous with 'corruption'," the pension
fund said in a complaint filed at the Harris County District Court in Houston.
"Defendants' failures have caused the companies to suffer hundreds of millions
of dollars in damages, and to be exposed to substantial additional judgments in
the future."
Heather Browne, a company spokeswoman, responded: "It appears that the lawsuit
is based on unfounded allegations. We intend to vigorously defend ourselves."
Another shareholder activist, John Harrington, a socially responsible
investment manager in California, used his KBR shares to file a protest
resolution against the company this May. According to Harrington's press
release:
KBR's management is obviously not taking their human rights
footprint very seriously. The board of directors is accountable to
shareholders, but only if we assert ourselves as the real owners of the
company. Understandably, shareholders don't like being associated with
atrocities. If ever there was a need for responsible fiduciary human rights
oversight within a company, it is with KBR. This company has been castigated in
the press, sued, and accused of bribery, rape, murder, political corruption,
tax avoidance, and who knows what else.
KBR nonetheless took in
another $5.7 billion from the US taxpayer in 2008, up 15% from the $4.8 billion
it received in 2007. With the planned drawdown of US troops in Iraq, KBR
expects its revenue to fall this year. But shareholders need not worry: its
contract with the Pentagon, signed in April 2008, potentially sets it up to
make more than triple the maximum profits allowed in the previous six years.
Recently, the Financial Times ran an interview with KBR's Utt, aptly headlined
"KBR believes it is ready to construct a new image." The same day stock analyst
Will Gabrielski raised his profit estimate for KBR, causing company shares to
jump.
If forgiving and forgetting are now the norm when it comes to the records of
Halliburton and KBR in the Bush years, the question remains: Will the Pentagon
complete this cleansing ritual or engage in the serious task of investigating
both companies?
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