Impeach Bush

Halliburton overcharges government in Iraq
SF Gate.com
Douglas Jehl
New York Times
December 12, 2003

Washington -- A Pentagon investigation has found evidence that a subsidiary of the politically connected Halliburton Co. overcharged the government by as much as $61 million for gasoline delivered to Iraq under huge no-bid reconstruction contracts, senior defense officials said on Thursday.

The subsidiary, Kellogg, Brown & Root, also submitted a proposal for cafeteria services that inflated the cost by $67 million, the officials said. The Pentagon rejected that proposal, they said.

The problems involving Halliburton, Vice President Dick Cheney's former company, were described in a preliminary report by auditors, the officials said. They said the issues are a source of deep concern within the Pentagon, whose contracts with KBR were awarded without competitive bidding and have a potential value of $15.6 billion.

The company denied overcharging and called the inquiry a "routine audit." Dave Lesar, the company's chairman, president and chief executive, said in an e-mail statement, "We welcome a thorough review of any and all of our government contracts."

Dov Zakheim, the Pentagon's budget chief, said that "contractor improprieties and/or contract mischarging on department contracts will neither be condoned nor allowed to continue."

Halliburton, an enormous corporation that had more than $12.5 billion in revenues in 2002, has emerged as a symbol for many people who opposed the war in Iraq and who said the interests of such companies with close political ties were given too much consideration by the administration.

Criticism of the company intensified when it received the no-bid contract worth billions of dollars to provide a variety of services in Iraq. Administration officials counter that few companies have the resources and expertise to carry out the work that is needed there.

Defense officials said the Pentagon is negotiating with KBR over how to resolve the issue over the fuel charges. But Michael Thibault, deputy director of the Defense Contract Audit Agency, said that a draft report by the agency has recommended that the Army Corps of Engineers seek reimbursement from the company.

The defense officials said Halliburton does not appear to have profited from the overcharging for fuel, but instead paid a subcontractor too much for the gasoline in the first place.

Halliburton also has said that one reason it needs to charge a high price for fuel is that it must be delivered in a combat zone. Several KBR workers have been killed or wounded in attacks by Iraqi insurgents.

Other questions, in a second contract with the Army, involve unacceptable delays by the Halliburton subsidiary in providing cost estimates to the government for dozens of separate projects already under way in Iraq, Thibault said. These violations, for work that includes the construction of food, housing and other facilities for the military, could involve inflated costs as well, Thibault said.

Halliburton spokeswoman Wendy Hall said in an e-mail that the inquiry was part of a routine audit and that it was "not the fact that KBR has overcharged. "

"KBR is confident its processes will continue to stand against the rigorous audits conducted by the defense contract auditing agency," Hall wrote.

Recent public estimates by the Army have put the current value of the Halliburton contracts at about $5 billion, considerably less than the figure cited by the auditors.

Thibault said it would be "premature" to describe the auditor's conclusions as final, saying the investigation is continuing and that the Halliburton subsidiary "deserves a chance to respond to our findings." He said auditors expect to issue a final report this month, but added that preliminary findings involve overcharging that is "potentially very substantial."

The two Halliburton contracts are by far the largest awarded by the Pentagon for work by private companies in Iraq. Some Democrats have criticized the awarding of Iraq reconstruction contracts to the Halliburton subsidiary, saying the contracts might appear to be a political payoff to a firm well connected with Republicans.

But Bush administration and Halliburton officials have denied that politics played any role in the awarding of business to KBR, whose work in Iraq involves a contract with the Army Corps of Engineers for repairing and restoring Iraq's oil industry. The initial value of the work was set at $7 billion. A second contract with the Army for logistical support has a maximum value of $8.6 billion, defense officials said.

Thibault would not be specific about the basis on which the auditors have found evidence that the Halliburton subsidiary has overcharged for the fuel it is providing in Iraq under the oil contract.

But government documents show that the U.S. government is paying Halliburton Co. an average of $2.64 a gallon to import gasoline to Iraq from Kuwait, more than twice what others are paying to truck in Kuwaiti fuel.

Rep. Henry Waxman, D-Los Angeles, the leading congressional critic of the contract, said the report of the audit "confirms what we've known for months: Halliburton has been gouging taxpayers, and the White House has been letting them get away with it."

"It is deplorable, and we need to put an immediate end to it," Waxman said in a written statement. "There needs to be a top-to-bottom review of all the Iraqi contracts."

Defense Department and other government officials said a draft report of the Defense Contracting Audit Agency's finding was sent to KBR on Dec. 5, and included "harsh assessments" of KBR's handling of its contract for importing fuel into Iraq.

Thibault said that Halliburton has promised a response by Dec. 17, and that the audit agency will issue a final report within a week after that. The final report will be turned over to the clients, including the Army Corps of Engineers, which asked KBR to import tens of millions of gallons of gasoline, benzene and other fuel into Iraq under the oil contract, which was issued in March.

The defense audit agency has also been in discussions with KBR about delays in the pricing of elements of the logistics contract, defense officials said. Among projects under way, the company has provided the government with cost estimates for just 12 task orders, with 69 still outstanding and overdue, officials said. They said the delays raise the possibility that the company will eventually claim an unacceptably high cost for a project whose work is already largely completed.

Cheney is Halliburton's former chief executive officer, and left the company in 2000, after Bush asked him to become his vice presidential nominee.

The Army awarded the logistics support contract to Halliburton in 2001, on a competitive basis, but its size has swelled since the Iraq war, with additional work awarded without competition.

The second contract, for the oil reconstruction project, was formally awarded in March on a sole-source basis, but the decision to give the project to Halliburton was made in late 2002, by senior administration officials who were part of a secret task force planning for postwar Iraq.

©2003 San Francisco Chronicle

Commentary:
Surprise, surprise. Geez, they got a contract without bidding for it, which used to be illegal and now they're stealing money from US taxpayers, which also used to be illegal. Bush wants them to pay back their ill-gotten gains. I say throw them out of Iraq and into jail, like all the other crooks in the White House.

Bush's cronies at Halliburton are buying gas for $2.64 a gallon and selling it to the Iraqi's for 5 cents a gallon. The US taxpayer is making up the difference which is Halliburton's share of the a no-bid contract.