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June 16, 2004

Halliburton Under Renewed Fire for Iraq Deals

by Jim Lobe

WASHINGTON – U.S. military auditors have criticized construction giant Halliburton for the way it does business in Iraq, concerns amplified by former employees who are alleging financial abuses in the U.S.-occupied country.

"In our opinion, the contractor's billing system is inadequate in part," said the Defense Contract Audit Agency (DCAA) in a report made available Tuesday by California Representative Henry Waxman.

"Our examination disclosed several deficiencies in KBR's billing system, resulting in billings to the governments that are not prepared in accordance with applicable laws and regulations and contract terms," added the report, seen by IPS.

KBR is Kellogg Brown and Root, a subsidiary of Houston-based Halliburton, which has been awarded the most lucrative contracts for the reconstruction of Iraq after it was invaded by U.S.-led forces in March 2003.

The DCAA report examined the company's billing system, its oversight of subcontractor billing, the management review and approval process and its training of employees.

It revealed deficiencies that resulted in invoicing mistakes that were not prevented, detected or corrected in a timely manner. The May 13 report also found the company "does not monitor the ongoing physical progress of subcontracts or the related costs and billing."

The report demands that KBR be required to continue to provide all billings to DCAA for provisional approval prior to submission for payment. The auditors also recommended the company submit a detailed milestone plan for correcting the deficiencies cited in the report.

Waxman, from the Democratic Party, expressed concerns Monday that some KBR contracts would not be discussed in a congressional hearing Tuesday on the company's performance in Iraq.

He and other members of Congress have been seeking more information on contracts entered into by the Bush administration for reconstruction and development work in Iraq, including several billion-dollar contracts with the Halliburton subsidiary.

Members of the Government Reform Committee said during Tuesday's hearing they will ask Halliburton Chief Executive Officer David Lesar and KBR CEO Randy Harl to testify before Congress over the allegations swirling around their firms.

"DCAA has identified significant deficiencies in KBR's estimating practices related to the award of subcontract costs," said the agency's director, William H Reed, in prepared remarks at the hearing.

In an email statement Halliburton said late Tuesday, "KBR strongly believes DCAA's view is not supported by the contract. The ultimate decision regarding the payment of these costs will be made by KBR's customer, the Army Material Command."

"While we take no political position on the war in Iraq, we remain a convenient tool for some of those who oppose it. We expected there would be attempts before the end of June to deflect attention from the progress being made in Iraq, but we didn't think so much of it would originate here at home," added the statement, sent by Wendy Hall, director of public relations.

From no-bid contracts with little supervision, to allegedly manipulating gasoline prices, Halliburton – formerly led by Vice President Dick Cheney – has largely come to embody the secretive nature of awarding billions of dollars worth of contracts in post-war Iraq and hefty profiteering by U.S. firms, many with links to the Bush administration.

The Defense Department's Inspector General has referred Halliburton's billing for fuel in Iraq to the department's Defense Criminal Investigative Service for a possible criminal probe after it was revealed the company upped the price for gasoline bought in Kuwait by a dollar a gallon.

Waxman says the firm's performance deserves deeper congressional oversight, after five former employees and one former executive of a Halliburton subcontractor came forward and described serious examples of waste and fraud in Iraq.

In statements released by Waxman, David Wilson, a convoy commander for Halliburton, and James Warren, a company truck driver, described instances where brand-new trucks worth $85,000 were abandoned if they got a flat tire or experienced minor mechanical problems.

Marie De young, a Halliburton logistics specialist, also described widespread overcharging and mismanagement.

For example, she disclosed the company did not comply with the U.S. Army's request to move its employees from a five-star hotel in Kuwait, which cost U.S. taxpayers about $10,000 a day, into air-conditioned tent facilities, which would have cost less than $600 daily.

Michael West, a former Halliburton labor foreman, said he and other employees spent weeks in Iraq with virtually nothing to do, but were instructed to bill 12-hour days seven days a week on their timesheets.

He told Waxman that has superior directed him to buy unnecessary equipment, telling him: "Don't worry about it. It's a cost-plus-plus contract."

"These individuals have first-hand knowledge of egregious examples of waste, fraud and abuse involving Halliburton's Iraq contracts," Waxman said in his letter.

Halliburton has won many lucrative contracts under the growing U.S. defense budget, which is now is at more than $400 billion a year. The wars in Afghanistan and Iraq have cost $180 billion to date.

Halliburton alone received $8.2 billion worth of contracts from the Pentagon to provide support services such as meals, shelter, laundry and Internet connections for U.S. soldiers in Iraq. It is also helping rebuild the country's oil infrastructure, according to congressional sources. The value of its contracts is far more than any other firm doing business in Iraq.

Its employees also allegedly received some $6.3 million in kickbacks on another deal, charging for three times as many meals as were actually served at a major army facility in Kuwait.

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  • Jim Lobe, works as Inter Press Service's correspondent in the Washington, D.C., bureau. He has followed the ups and downs of neo-conservatives since well before their rise in the aftermath of the September 11, 2001 attacks.

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