BostonHerald.com - Business News: Halliburton, set to clean up, denies overcharges

By Brett Arends
Monday, September 19, 2005

Politically-wired Halliburton Inc. is denying it overbilled the U.S government in Iraq – just three months after a Pentagon report showed $422 million in ``unsupported'' costs in the company's contracts.

The company, which is in line for Federal work helping rebuild New Orleans and the Gulf Coast, also responded to scrutiny of its CEO's growing fortune by taking the unusual step of highlighting the share option gains of an executive at a rival firm.

Halliburton has been a target of Bush administration critics over its work in Iraq. Vice-President Dick Cheney ran the company from 1995 to 2000.

In an exclusive communication to the Herald, company communications director Cathy Mann said audits of Halliburton's $9 billion in Iraq contracts ``are part of the normal contracting process'' and their role ``is advisory only. Any claims that the figures contained in these audit reports are `overcharges' are uninformed and flat wrong.''

Her assertion comes just three months after the release of a Pentagon report which showed $1.03 billion in ``questioned'' costs and $422 million in ``unsupported'' costs in the company's Iraq contracts.

The Department of Defense Audit Agency, in a detailed review, criticized the company for failing to provide ``current, accurate, and complete data'' on the financials of its Iraq work, noting the error was so bad ``it decreases the government confidence in and reliance on the contractor estimating system.''

Halliburton, at the time, disputed many of the findings. But it admitted, in a submission to the Defense Contract Audit Agency in December 2003, that ``we did not use current, accurate or complete information that was available for pricing of subcontracts.''

In one instance, the Pentagon found ``an approximate $67 million overstatement of proposed costs'' in Halliburton's bill setting up and running military canteens in Iraq.

In reply, Halliburton's own director of government compliance, William R. Walter, agreed with the point but disputed the figure. ``(T)he difference between the proposed cost of total dining facility costs and the amount using the current, accurate and complete data provided was a total of $37 million,'' he wrote.

``There are many excuses and reasons available – but – in the end, KBR did not include the most current data in our proposal,'' he wrote to the Pentagon.

KBR is the Halliburton division involved in the Iraqi work.

The company's latest statement followed a Herald article last week about Halliburton's soaring stock price and the resulting paper profits made by CEO David Lesar.

Communications director Cathy Mann asked why no ``other energy services company or executive'' was cited in the analysis, adding: ``A review of public trading information for other energy services industry executives would have revealed that one Weatherford executive has exercised 446,839 shares since early September.''

Companies rarely point fingers at rivals, let alone at rival executives. Weatherford, like Halliburton and most of the big oil companies, is based in Houston, Tex.