Democrats join to target Halliburton 'profiteering'

By Erik Eckholm The New York Times
WEDNESDAY, JUNE 29, 2005


WASHINGTON Legislators from the Democratic Party stepped up criticism of Halliburton on Monday for what they called "war profiteering," citing Pentagon audits that question more than $1 billion of the company's bills for work in Iraq.

The estimates of excessive spending and improper billing by Halliburton, a Texas-based company that provides logistical support and oil-field repairs in Iraq, are more than twice as high as those in previous official reports. The findings, including previously unpublicized internal Pentagon studies, were released at a forum sponsored by the Democrats.

Party leaders said they organized the forum because the Bush administration and congressional Republicans have refused to hold the contractor accountable.

"The bottom line is, the Republican leadership in the Congress is giving Halliburton a free pass," said Senator Frank Lautenberg, a Democrat from New Jersey.

Large contracts awarded to a Halliburton subsidiary, Kellogg, Brown & Root, have been questioned and criticized since before the invasion of Iraq in 2003, in part because some contracts were awarded without competition and because of allegations that the company, led by Dick Cheney before he became vice president, was aided by political connections. In some cases, the Pentagon has publicly complained about excess billing and reduced its payments as a result, but the audit figures released by the Democrats suggest that billing disputes have been more extensive than previously revealed.

Halliburton said that it performed well and honestly in Iraq and that any billing disputes were part of the routine give-and-take of government contracting. It said that it had been singled out for partisan attack.

Kellogg, Brown & Root, or KBR, "will continue to work with our customers and with the appropriate government agencies to prove, once and for all, that KBR has delivered vital services for U.S. troops and the Iraqi people at a fair and reasonable cost, given the circumstances," said Cathy Gist-Mann, a Halliburton spokeswoman, in an e-mail message.

The estimated total for questioned bills in the Democratic hearing, Gist-Mann said, is "an aggregation of many reviews over a three-year period, and the amount is a gross mischaracterization of the true facts."



The hearing featured videotaped testimony from a former KBR food manager in Iraq who said that the dining hall where he worked in early 2004 charged the U.S. Army for 20,000 meals a day when it was serving only 10,000, routinely used expired foods and punished him for speaking to auditors by transferring him to a more dangerous outpost in Falluja.

The former manager, Rory Mayberry, worked on Halliburton's largest single contract in Iraq: providing housing, food and other logistical services to the U.S. military. As of September 2004, the company had received $8.6 billion under the contract, known as Logcap, which is part of the military's effort to outsource noncombat jobs.

Pentagon auditors had previously criticized the company for poor record-keeping and reduced some payments when the company was found to be charging for more meals than it served.

A new report, released on Monday by two Democrats, Senator Byron Dorgan from North Carolina and Representative Henry Waxman from California, quoted the chief of the Defense Contract Audit Agency, an internal Pentagon watchdog, as saying that "questioned" costs under the Logcap contract now total $813 million.

"Questioned" costs are defined by the agency as those "on which audit action has been completed" and "which are not considered acceptable."

The second-largest KBR contract, now completed and with a total billing of $2.5 billion, was for the repair of Iraqi oil fields after the 2003 invasion and for imports of consumer fuels.

Pentagon audits of the company's performance under that second contract, known as RIO-1, have found $219 million in "questioned" costs, mainly because of what critics have called exorbitant fees paid for fuel imports in 2003.

The company received the oil-repair and fuel contract without competitive bidding, and after it had been secretly hired to detail the needs and the probable costs of postwar oil repairs.

Bunnatine Greenhouse, a senior civilian contracting official with the U.S. Army Corps of Engineers, told the forum that granting the RIO-1 contract to KBR, initially for a period of up to five years, was "the most blatant and improper contract abuse I have witnessed during the course of my professional career."

Beyond the $1 billion in questioned costs, Pentagon auditors found that KBR had not properly documented another $443 million in expenditures under the two largest contracts.

The totals in the report do not include problems with a current $1.2 billion contract that KBR holds to repair Iraq's southern oil fields. The company has already been warned about serious cost overruns and poor performance.






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