Tuesday, January 31, 2006

Inner City Press --Halliburton Repays $9 Million, While Iraq’s Oil Remains Unmetered

Byline: Matthew Russell Lee, Inner City Press U.N. Correspondent

January 31, NEW YORK – The U.S. government has required Halliburton subsidiary Kellogg, Brown & Root to repay only $9 million on a controversial contract, and promised information about the metering of Iraq’s oil output has still not been provided, in the stealth January 30 release by the International Advisory and Monitoring Board for Iraq.

The IAMB last took question from the media, including Inner City Press, on December 28 at the United Nations in New York. At that time, IAMB stated that an oil metering contract had recently been let. It promised to provide more information shortly. Inner City Press twice asked the IMF for this additional information, but none was provided. Then on January 30 a summary of a January 23 meeting in Paris was placed online. The release tersely states that at the meeting, the IAMB

“reiterated its concern that key actions, especially the installation of an oil metering system, were taking a long time to implement. The IAMB urged the Government of Iraq to implement all IAMB recommendations promptly."

Apparently, the December 28 statement that the oil metering contract was in place was incorrect. No one has apologized, and the (unmetered) oil continues to flow. The Jan. 30 release also states, in the nature of disclosure:

“The U.S. Government informed the IAMB that a global settlement of all six DFI funded task orders under the KBR contract was reached between the U.S. Government and KBR on December 22, 2005. The settlement provided for a reduction of contract costs of US$9 million.”

This is much less than had been contested, and previously reported. Given the costs, most importantly in lives, of this Iraq war, what kind of transparency is this? It also raises questions, on timing and other issues, in light of Halliburton's January 27 announcement that it intends to sell off a stake in Kellogg, Brown & Root in an initial public offering of stock. Developing...

Inner City Press's last report on this topic:

More Questions than Answers about the Development Fund for Iraq: Representatives of Iraq Absent from UN Meeting and Press Conference, Purportedly Due to Visa Problems

On December 28, four of the five members of the oversight board of the Development Fund for Iraq answered reporters’ questions for an hour at the United Nations in New York. Missing was the representative of Iraq on the International Advisory and Monitoring Board. The explanation offered by the IAMB’s chairman Jean-Pierre Halbwachs was that the Iraqi representatives had not been able to obtain U.S. visas in time. Their absence proved convenient, as questions soon arose about a line in Mr. Halbwachs prepared remarks, regarding the ongoing lack of metering on oil production in Iraq. Mr. Halbwachs read out: “we understand that a recent agreement has been reached between the Government of Iraq and a U.S. company to undertake the task” of oil metering.

When asked for the name of the U.S. company, the IAMB chairman’s response was that only the Iraqi representatives would have that information. When a question arose about the Iraqi representative’s written reference to the cost of metering being covered by “donations,” no answer was forthcoming. When asked why it has taken two years to make even this gesture toward metering, the representative of the Arab Fund for Economic and Social Development Khalifa Ali Dau shrugged and smiled. Finally, the IMF’s deputy press secretary said he will be providing follow-up information about the metering contract (presumably on the IAMB’s web site, www.iamb.info).

There were questions about KPMG’s partial audit, and Halliburton’s subsidiary Kellogg, Brown & Root. The IMF’s representative Bert Keuppens confirmed reports of oil smuggling out of, and in some cases back into, Iraq. (For another report, which puts the Iraqi absence last, see CNN. The UN’s own write-up is here).

-- Jean-Pierre Halbwachs briefing reporters on Dec. 28

When asked in conclusion to assign a grade to the transparency of the spending process at the Development Fund for Iraq, the World Bank’s representative Fayezul Choudhury declined to assign a grade, and pointed out that even most European Union countries, and also the United States, have only qualified opinions from their auditors. The press conference ended with many questions unanswered. The IMF’s Bert Keuppens rushed out of the briefing room. He returned a few minutes later and handed out two business cards. It would have made sense, one wag said, to provide contact information for the representatives to the IAMB from Iraq. And to have thought more deeply about this question of their visas. The IAMB's online self-description:

"The IAMB shall consist of duly qualified representatives of each of the Secretary-General of the United Nations, the Managing Director of the International Monetary Fund, the Director-General of the Arab Fund for Economic and Social Development and the President of the International Bank for Reconstruction and Development and a duly qualified individual designated by the Government of Iraq.

"B. The IAMB, after consulting with the Government of Iraq, may appoint up to 5 observers to the IAMB from a list of independent, qualified candidates, which should include Iraqi nationals nominated by the Government of Iraq.

"C. At any meeting of the IAMB, each member may be accompanied by an alternate, designated in a way identical to the designation of each member, and up to two advisors."
Neither the Iraqi representative nor his alternate / deputy nor even advisors were present, for the meeting or to answer questions.

Saturday, January 28, 2006

Halliburton prepares to spin off KBR unit - Financial Times - MSNBC.com

By Sheila McNulty in Houston
Financial Times
Updated: 12:43 a.m. ET Jan. 28, 2006

Halliburton, the world's largest diversified energy services, engineering and construction company, on Friday said it was ready to spin off and list its KBR unit, which is the US's biggest private contractor in Iraq, and might also consider selling "some pieces of KBR" outright.

The decision to list 20 per cent of KBR, which had been expected, comes as Halliburton reported the best annual figures in its 86-year history – it earned $2.4bn, or $4.54 per share, in 2005, compared with a full-year net loss of $1bn, or $2.22 per share, in 2004.

Its overall gains were driven not only by KBR but also its Energy Services Group, which has benefited from increased use of its crews and assets amid an industry scramble for oil and gas resources in the high-priced environment.

Halliburton is eager to separate itself from KBR, which, despite bringing in billions of dollars from US military contracts in Iraq, has plagued the parent company with controversy since the war began. Not only was KBR accused of overcharging for services, but critics said KBR was being favoured by the US government for contracts because US vice president Dick Cheney used to run Halliburton. Even though Halliburton has denied any wrong-doing, the controversy has dogged it.

The company had to wait to hive off KBR because the unit was caught up in a bankruptcy restructuring as part of the company's $4bn asbestos settlement.

Dave Lesar, Halliburton president, chairman and chief executive, said Halliburton planned to file for an initial public offering for KBR soon after filing its 10-K financial form with regulators, which should be a matter of months.

"We believe the IPO market in general, and the public market for engineering and construction companies in particular, is very attractive, and a public valuation of KBR would benefit Halliburton's stock price," Mr Lesar said.

"Valuation multiples of publicly traded engineering and construction firms are currently very favourable."

Copyright The Financial Times Ltd. All rights reserved.

Monday, January 23, 2006

WKYT 27 NEWSFIRST & WYMT Mountain News - Contractor allegedly supplied tainted water to Iraq base

WASHINGTON -- Water supplied to a U.S. base in Iraq was contaminated and the contractor in charge, Halliburton, failed to tell troops and civilians at the facility, according to internal documents from the company and interviews with former Halliburton officials.

Although the allegations came from Halliburton's own water quality experts, the company once headed by Vice President Dick Cheney denied there was a contamination problem at Camp Junction City, in Ramadi.

"We exposed a base camp population (military and civilian) to a water source that was not treated," said a July 15, 2005, memo by William Granger, the official for Halliburton's KBR subsidiary who was in charge of water quality in Iraq and Kuwait.

"The level of contamination was roughly 2x the normal contamination of untreated water from the Euphrates River," Granger wrote in one of several documents.

The Associated Press obtained the documents from Senate Democrats who are holding a public inquiry into the allegations Monday.

Sen. Byron Dorgan, D-N.D., who will chair the session, held a number of similar inquiries last year on contracting abuses in Iraq. He said Democrats were acting on their own because they had not been able to persuade committee chairmen in the Republican-run Senate to investigate.

The company's former water treatment expert at Camp Junction City said he discovered the problem last March, a statement confirmed by his e-mail the day after he tested the water.

While bottled water was available for drinking, the contaminated water was used for virtually everything else, including handwashing, laundry, bathing and making coffee, said water expert Ben Carter of Cedar City, Utah.

Another former Halliburton employee who worked at the base, Ken May of Louisville, Ky., said there were numerous instances of diarrhea and stomach cramps _ problems he also suffered.

A spokeswoman for Halliburton, Melissa Norcross, said its own inspection found neither contaminated water nor medical evidence to substantiate reports of illnesses at the base. The company now operates its own water treatment plant there, she said.

A military medical unit that visited Camp Ramadi in mid-April found nothing out of the ordinary in terms of water quality, said Marine Corps Maj. Tim Keefe, a military spokesman. Water-quality testing records from May 23 show the water within normal parameters, he said.

"The allegations appear not to have merit," Keefe said.

Halliburton has contracts to provide a number of services to U.S. forces in Iraq and was responsible for the water quality at the Ramadi base.

Granger's July 15 memo said the exposure had gone on for "possibly a year" and added, "I am not sure if any attempt to notify the exposed population was ever made."

The first memo on the problem _ written by Carter to Halliburton officials on March 24, 2005 _ was an "incident report" from tests Carter performed the previous day.

"It is my opinion that the water source is without question contaminated with numerous micro-organisms, including Coliform bacteria," Carter wrote. "There is little doubt that raw sewage is routinely dumped upstream of intake much less than the required 2 mile distance.

"Therefore, it is my conclusion that chlorination of our water tanks while certainly beneficial is not sufficient protection from parasitic exposure."

Carter said he resigned in early April after Halliburton officials did not take any action to inform the camp population.

The water expert said he told company officials at the base that they would have to notify the military. "They told me it was none of my concern and to keep my mouth shut," he said.

On at least one occasion, Carter said, he spoke to the chief military surgeon at the base, asking him whether he was aware of stomach problems afflicting people. He said the surgeon told him he would look into it.

"They brushed it under the carpet," Carter said. "I told everyone, 'Don't take showers, use bottled water."

A July 14, 2005, memo showed that Halliburton's public relations department knew of the problem.

"I don't want to turn it into a big issue right now," staff member Jennifer Dellinger wrote in the memo, "but if we end up getting some media calls I want to make sure we have all the facts so we are ready to respond."

Halliburton's performance in Iraq has been criticized in a number of military audits, and congressional Democrats have contended that the Bush administration has favored the company with noncompetitive contracts.