Global Policy Forum

Corporate Power - The Halliburton Fix


By Charlie Cray

Multinational Monitor
May/June 2004

In a TV ad rolled out in February, Halliburton chairman David Lesar addressed rising concerns about the company's work in Iraq: "Will things go wrong? Sure they will. It's a war zone. But when they do, we'll fix it. We always have -- for 60 years for both political parties." The "fix" Lesar was referring to clearly is not the no-bid contract the company received before the war, which crowned Halliburton king of the Bush administration's corporate cronies. The expansion of that contract from a contingency plan to handle oil well fires after the war to virtual monopoly control over half of the country's oil production and distribution infrastructure has critics fulminating about corruption and oil-related imperialism. "The entire Halliburton affair represents the worst in government contracts with private companies: influence peddling, kickbacks, overcharging and no-bid deals," Senator Frank Lautenberg, D-New Jersey, charged in March.

The company's close relationship with former CEO Vice President Dick Cheney has done nothing to douse charges of war profiteering and corruption. Cheney -- who pushed the nation towards war like an ideological pile-driver -- told "Meet the Press" host Tim Russert last September that he has "no financial interest in Halliburton of any kind and haven't had, now, for over three years." The claim was clearly bogus (Cheney received $178,437 from the company in 2003). While the Vice President is technically exempt from federal ethics laws, investigators from the Congressional Research Service concluded that deferred compensation payments like the ones Cheney will receive from Halliburton until 2005 constitute an "ongoing financial interest."

The Inside Track

Halliburton staked out its advantage in the lucrative Iraq contract bonanza long before the war began. Although Bush administration officials say Cheney had nothing to do with the contracts, the Wall Street Journal reported in January 2003 that executives from Halliburton and other big oil companies had met with Vice President Dick Cheney's staff in late 2002 to discuss how to jump-start Iraq's oil production after the war. Details of that meeting, like the Vice President's National Energy Task Force, remain a secret. In June, GAO investigators confirmed that Pentagon officials had broken competitive contracting requirements and overruled objections from an army lawyer to grant the first Iraq oil-related work order to Halliburton.

According to Representative Henry Waxman, D-California, Michael Mobbs, a neoconservative political appointee working under the direction of Under Secretary of Defense for Policy Douglas Feith, made the decision to award the oil contract to Halliburton. At the same time, an Army Corps of Engineers e-mail message surfaced, suggesting that the decision had been "coordinated w VP's office." In a letter to Cheney asking for more information, Waxman described an October 2002 meeting in which Cheney's chief of staff, I. Lewis "Scooter" Libby, was informed of the decision, along with other White House officials.

Halliburton's advantage was not just the result of its high-level contacts in the Bush White House. It was the product of a decades-long process through which Halliburton subsidiary KBR (formerly known as Kellogg, Brown & Root) has embedded itself deep into the Pentagon's decision-making structure. After the first Gulf War, when Cheney was secretary of defense under Bush Sr., he hired KBR to plan the privatization of military support services. As a result, KBR received the first global military logistics support contract (LOGCAP) in 1992.

Although Halliburton lost the LOGCAP in 1997 after problems were discovered with its performance in Bosnia, Halliburton won the LOGCAP back soon after Cheney became Vice President in 2001. Although the company says it gained the 10-year contract through an open-bidding process, the LOGCAP has given KBR an inside track for multiple subsequent task orders associated with the administration's military operations. "We are the only company in the United States that had the kind of systems in place, people in place, contracts in place, to do that kind of thing," Chuck Dominy, Halliburton's vice president for government affairs and its chief lobbyist on Capitol Hill, suggested in response to charges that the company had an inside track on the Iraq oil fire contract, an assertion backed up by the Army Corps of Engineers.

That was news to GSM Consulting's CEO Bob Grace, who led a team that extinguished more than 300 oil-well fires set by Saddam Hussein's troops after the first Gulf War. Grace contacted the Pentagon repeatedly in the fall of 2002 to try to bid on the post-war oil-fire work, but was effectively told to get lost. When Senator John Breaux inquired on behalf of GSM, he received a terse response from Alan Estevez, an Army supply chain management official, who asserted that: "The department is aware of a broad range of well firefighting capabilities and techniques available. However, we believe it is too early to speculate what might happen in the event that war breaks out in the region. If for any reason the U.S. government is called upon to suppress well fires through contractor support, we would do so in accordance with the Competition in Contracting Act and implementing regulations."

Estevez's letter was dated December 30, 2002 -- a month and a half after the Pentagon had issued the "Iraq Oil Field Plan" task order to Halliburton subsidiary KBR under the LOGCAP. That decision in fact violated the Competition in Contracting Act because, as David Walker, the Comptroller General, later determined, the oil infrastructure work was not "within the scope of the overall LOGCAP contract."

The "Don't Worry About Price" company

Although the November 2002 task order was worth only $2 million, it was just the first of many administration maneuvers that favored the Vice President's former firm. Waxman's persistent probing has uncovered a trail of evidence that suggests that the company received a huge no-bid contract months later, giving Halliburton authority over the "operation" of Iraq's oil fields and the "distribution" of Iraqi oil. The contract ultimately would cost U.S. taxpayers as much as $7 billion.

Officials from the Army Corps of Engineers repeatedly stated that the no-bid contract would be a short-term "bridge" contract that would only last until a new contract could be competitively bid. But the inside track established by Halliburton continued to give it at an advantage over other potential bidders for subsequent contracts. Former Bechtel employee Sherryl Tappan has alleged that the San Francisco firm withdrew from bidding on the oil contracts after finally realizing that the bidding process was a sham. In December 2003, Waxman wrote in a letter to Admiral Nash of the Pentagon's Program Management Office that "Halliburton has a monopoly on all oil work."

Meanwhile, Halliburton has come under fire for a variety of contract abuses associated with LOGCAP:

- Federal prosecutors opened a criminal probe after a Defense Contract Audit Agency audit found that Halliburton overcharged by $61 million for fuel deliveries from Kuwait to civilians in Iraq.

- A Pentagon audit concluded Halliburton charged millions of dollars for meals that it never served to troops. (Halliburton officials say problems might have occurred because the number of troops in and near Iraq often changed quickly and drastically.)

- The Defense Department is probing allegations a Kuwaiti subcontractor paid kickbacks to two former Halliburton employees. The company says it repaid $6 million to the government after it discovered the scheme and fired the employees as soon as the corrupt deals were discovered.

- This May, a dozen current and former truck drivers told reporters that the company ordered them to drive empty trucks on phantom missions across the desert, billing the Pentagon for unnecessary work, and putting their lives at risk. Thirty-four Halliburton employees and subcontractor employees have been killed since the war began.

- In June, Representative Tom Davis, R-Virginia, blocked an attempt by Waxman to bring whistleblowers into a Congressional committee hearing. They were ready to testify about specific abuses they observed at the company, including the ditching of $80,000 trucks because of a flat tire, a $100 average charge for 15-pound bags of laundry, $45 cases of soda and the use of five-star hotels in Kuwait.

- Critics suggest the way Halliburton's contracts were structured ("cost-plus" contracts reimburse the contractor for its actual costs, adding a percentage fee as profit) have provided an inherent incentive for these kinds of waste, abuse, and possible fraud. Halliburton whistleblowers have testified in Congress that it was common for high- and mid-level Halliburton officials to tell subordinates: "Don't worry about price. It's cost-plus."


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