Houston, We Have a Problem
Posted in: War profiteering
Total contracts: $10.832 billion (Center for Public Integrity)
Halliburton Five-Year Chart stock prices (Yahoo! Finance)
Kind of says it all, don’t you think?
Founded in 1919, Halliburton is a Houston-based company that prides itself as a "leading government services contractor." With its former CEO calling the shots from behind the curtain in the Bush White House, it is not very difficult to know why.
Five student deferments, a few appointed positions in the White House and a stint as Defense Secretary later, Dick Cheney was named CEO of Halliburton in 1995. Despite zero business experience, he held the post until the summer of 2000 as the presidential election drew near. In fact, Cheney was the head of George W. Bush’s committee charged with searching for GWB’s running mate. He chose himself.
Cheney’s former employer has a long history of benefitting from his contacts in government. Halliburton Watch, a project of non-profits Essential Information and the Center for Corporate Policy, outlined a history of connections from the last fourteen years. (Kellogg Brown & Root, then called Brown & Root before its merger, had ties to Texan LBJ during the Vietnam War.) Cheney’s government work (including Secretary of Defense during Bush 41 and later as Vice President) coupled with his involvement in the private sector is a classic case of revolving-door politics.
As the war began in 2003, the United States blocked the Europeans and Russians from bidding on post-war reconstruction contracts. Immediately, corporate watchdog groups protested that it would pave the way for "sweetheart deals" for "corporations close to the White House." The subsidiary Kellogg, Brown & Root (KBR) received a no-bid contract to quell oil fires in Iraq. The New York Times divulged the details of the contract in April:
The Pentagon contract given without competition to a Halliburton subsidiary to fight oil well fires in Iraq is worth as much as $7 billion over two years, according to a letter from the Army Corps of Engineers that was released today.
The contract also allows Kellogg Brown & Root, the Halliburton subsidiary, to earn as much as 7 percent profit. That could amount to $490 million.
USA Today noted the broader contract implications in May that the no-bid contract also allowed for Halliburton to seize control of "operation of facilities and distribution of products" outlined in a letter from the U.S. Army Corps of Engineers to Rep. Henry Waxman (D-California), the ranking Democrat on the Committee on Government Reform.
That summer, the responsibilities of KBR were heavily expanded according to a June 2003 article from the Boston Globe. In it, reporters Stephen J. Glain and Robert Schlesinger write that KBR "[had] expanded its role to include everything from gasoline imports to laundry services."
There was growing criticism as the cost of the contract awarded to Halliburton began to skyrocket. Cheney claimed on several occassions that he had severed all financial ties to the company (from his September 14, 2003 appearance on NBC’s Meet the Press with Tim Russert):
And since I left Halliburton to become George Bush’s vice president, I’ve severed all my ties with the company, gotten rid of all my financial interests. I have no financial interest in Halliburton of any kind and haven’t had now for over three years. And as vice president, I have absolutely no influence of, involvement of, knowledge of in any way, shape or form of contracts led by the Corps of Engineers or anybody else in the federal government …
It was discovered two days later that Cheney was still receiving hundreds of thousands of dollars from his former firm since he had taken office in 2001. Hardly the "no financial interest of any kind" claim he made to water-carrying extraordinaire Timmeh. Cheney’s denial was also in stark contrast to an e-mail that surfaced the following year from senior Pentagon official Douglas Feith in which he signed off on the 2003 oil fire deal that required executive approval, however, he wrote "We anticipate no issues since action has been coordinated w VP’s office." Colonel Larry Wilkerson was right when he said "[s]eldom in my life have I met a dumber man." (C&L video is hilarious every time) Feith totally blew it for the Veep right there. Rookie mistake.
Halliburton fired employees in January 2004 that allegedly took $6 million in kickbacks from a Kuwaiti subcontractor. The article also notes of another KBR official that "paid more than $2 million in bribes to a Nigerian official to get favorable tax treatment. A French judge investigating a KBR joint venture in Nigeria with a French firm has reportedly warned that Cheney, who headed Halliburton from 1995 until 2000, could be subject to criminal charges in France. Cheney has denied any wrongdoing." The Associated Press reported that month that the Army was allowing Halliburton to "increase the supplies of fuel delivered to Iraq without giving the usual data to justify its cost" on the heels of a report by Pentagon auditors that said KBR may have overcharged the government by $67 million. The following month, the Pentagon opened a criminal inquiry into possible price gouging by the firm regarding fuel transports.
Defense Department auditors concluded in March 2004 that Halliburton had violated contracting regulations. Rep. Waxman wrote "costs are virtually uncontrolled and Halliburton can overcharge the taxpayer by phenomenal sums." Waxman cited the report that Halliburton had "significant deficiencies" in determining estimations of costs.
By late 2004, Halliburton had received as much as $10 billion in contracts through two programs:
Thursday, December 09, 2004 — The value of Halliburton’s Iraq contracts has crossed the $10 billion threshold. Halliburton has now received $8.3 billion in Iraq work under its LOGCAP troop support contract and $2.5 billion under its no-bid Restore Iraqi Oil (RIO) contract, a total of $10.8 billion. … Fact Sheet (pdf)
Around this time, KBR associates were tied to a bribery scandal through a "collection of documents, including e-mails, memos and reports" released by Rep. Waxman.
Halliburton’s KBR subsidiary quietly won a $4.972 billion contract in May 2005 to provide to the U.S military "logistical needs includes camp maintenance, new construction and the serving of four meals a day for as many as 120,000 troops at 62 primary camps and a dozen satellite camps, according to a April 3 draft of the agreement, Task Order 89."
Earlier this year, Halliburton was accused of giving American soldiers contaminated water by former employees. Additionally, the subsidiary KBR tried to cover-up their mistake:
The subsidiary, Kellogg Brown and Root, also blocked employees’ attempts to inform the U.S. military at Camp Junction City in Ramadi that the water was foul or tell them that water tanks should immediately be chlorinated, the workers said.
Ben Carter, a water purification specialist who worked for KBR at Junction City, told Senate Democrats that KBR officials had assured him the water was being treated.
But after Carter discovered a problem, he started tests and learned that the water drawn from the Euphrates and polluted with sewage and other contaminates, was not being chlorinated.
In February, the Army decided to reimburse KBR "nearly all of its disputed costs on a $2.41 billion no-bid contract to deliver fuel and repair oil equipment in Iraq, even though the Pentagon’s own auditors had identified more than $250 million in charges as potentially excessive or unjustified." Rep. Waxman disclosed the first analysis of the RIO 2 contract in March and Halliburton received negative marks across the board, including "intentional overcharging … exorbitant costs … indequate cost reporting … schedule delays and … refusal to cooperate."
Last month, the New York Times reported that the Fatah pipeline was a complete disaster. "The Fatah project went ahead despite warnings from experts that it could not succeed because the underground terrain was shattered and unstable," James Glanz reported. Work stopped when the $75.7 million funds for the project dried up. Cam Simpson of the Chicago Tribune reported in April 2006 that of KBR’s 48,000 workers, 35,000 of them were "third country nationals." International reports from 2004 claimed that unemployment ranged from over 60% to 70% in Iraq. However, in the States, reports are not nearly as grim during the same period. (Coalition Provisional Authority said it was 25 to 30%; 18 to 40% estimate in early 2005).
Be sure to keep up with the ongoing investigations (last updated April ’05) into Halliburton.
One would think, when a nation goes to war and the company formerly headed by a sitting executive that has lingering financial ties and apparently had a hand in coordinating non-competitve lucrative contracts, that it would cause massive outrage in Washington.
Congress is long overdue on busting some balls on Capitol Hill over flagrant mismanagement and waste by companies like Halliburton. Perhaps the next FDL citizen action call to arms should be to send a collection of nutcrackers to members of Congress.
Matt O. also blogs at The Great Society
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