NEW YORK: Halliburton, the American energy and construction group which used to be run by US vice-president Dick Cheney, is understood to have hired Goldman Sachs to run the $US9 billion ($12.8 billion) float of its Kellogg Brown & Root subsidiary.
KBR has been heavily criticised for its dominant role in war-torn Iraq as major contractor to the US military, the contracts won apparently without arms' length tenders being called, and for heavily overcharging.
In Washington on Tuesday frustrated US Government auditors pleaded, cajoled and finally threatened Halliburton executives who repeatedly failed to comply with government reporting requirements under a key Iraq contract with a $US1.2 billion potential price tag, newly released documents show.
The documents, along with a report, were issued on Tuesday by the Democratic staff of the House Committee on Government Reform.
The 15-page report cites findings by auditors that Halliburton overcharged - "apparently intentionally" - on the contract by using hidden calculations and attempted, in one instance, to invoice the US Government for $US26 million in costs it did not incur.
The report blamed the Department of Defence for awarding the contract despite warnings from auditors that Halliburton's cost estimating system had "significant deficiencies".
Halliburton remains the largest private contractor in Iraq.
The contract, awarded in January 2004, was one of three Iraq contracts awarded to Halliburton.
While the other two agreements - one for supplies for US troops and the other for fuel and oil industry repairs - have faced heavy criticism as no-bid contracts, Mr Waxman and his staff said Tuesday's report was the first to focus on the third Halliburton contract, for the repair of oilfields in southern Iraq, which was awarded after a competitive bidding process.
Melissa Norcross, a spokeswoman for Halliburton, dismissed the report as "partisan".
Halliburton is planning to float 20 per cent of KBR in the next few months and the remaining 80 per cent in a year's time. KBR has been selling some of its assets, including Kellogg Brown Root Production Services, based in Aberdeen, Scotland, for £100 million ($248 million) to its own management two weeks ago.
The sale came amid renewed speculation about the future of the Plymouth-based Devonport group in the UK, which refits Britain's nuclear submarine fleet and is 51 per cent owned by KBR
Thursday, March 30, 2006
Wednesday, March 29, 2006
Report Adds to Criticism of Halliburton's Iraq Role - New York Times
Even as a Halliburton subsidiary was absorbing harsh criticism of its costs on a 2003 no-bid contract for work in Iraq, the government officials overseeing a second contract wrote that the company was running up exorbitant new expenses on similar work, according to a report issued yesterday by the staff for the Democrats on the House Government Reform Committee.
The report, prepared for a frequent critic of Halliburton, Representative Henry A. Waxman of California, is based on previously undisclosed correspondence and performance evaluations from 2004 and 2005.
The documents show that the government's contracting officers became increasingly frustrated as they tried to penetrate what they considered to be inaccurate or misleading progress reports and expense vouchers filed by the subsidiary, Kellogg Brown & Root.
In August 2004, one of the officers wrote to the company that "you have universally failed to provide adequate cost information as required."
A few months later, after the company was served with a "cure notice," in which the government threatened to terminate the contract if performance was not improved, or "cured," another officer said he was writing "in sheer frustration with the consistent lack of accurate data."
Kellogg Brown & Root's second contract, awarded in January 2004 for rebuilding oil infrastructure in southern Iraq, has a maximum value of $1.2 billion. A company spokeswoman, Melissa Norcross, said that the report was "as devoid of context as it is new information" and that many of the issues raised by the contracting officers had been resolved.
The company, Ms. Norcross said, was forced to work with an ever-shifting cast of oversight organizations and at least 15 government contracting officials. "With each change, the company adjusted to meet the needs of its customer," she said, "all while operating in an extremely hostile war zone."
But Mr. Waxman, the ranking Democrat on the committee, said the report showed that the company had "actually done a worse job under its second Iraq oil contract than it did under the original no-bid contract."
William L. Nash, a retired Army general who is a senior fellow at the Council on Foreign Relations and an expert on post-conflict zones, said the unusually revealing documents laid bare "a microcosm of all the ills" of the Iraq rebuilding effort. "This a continuing example of the mismanagement of the Iraq reconstruction from the highest levels down to the contractors on the ground," he said.
The second contract was not terminated after the cure notice, and contracting officers later noted improvements in some areas. But the company received what appears to be a rebuke when it was given nothing out of a possible $7.9 million in socalled award fees for its first year of work on the contract. The award fees are incentives given by the government to reward good performance.
An award fee given for a later period, roughly the first half of 2005, was about 20 percent of the maximum, which Mr. Nash, who has been involved in determining such fees, described as extraordinarily low.
Both Kellogg Brown & Root contracts called for things like repairing oil wells and pipelines, installing power generators at oil facilities and importing fuel to Iraq. The first contract, worth $2.4 billion, generated enormous controversy after Pentagon auditors questioned more than $200 million in fuel delivery costs.
Critics like Mr. Waxman called the challenged costs overcharges, a description rejected by the company, which claimed a measure of vindication last month when the Army overruled the auditors and reimbursed nearly all of the delivery charges.
The new report, which says that Pentagon auditors have questioned $45 million of the $365 million in costs they reviewed, may revive the battle. A spokesman for the Defense Contract Audit Agency confirmed those figures.
Responding to the numbers, an official with Kellogg Brown & Root said, "Audits are part of the normal contracting process, and it is important to note that the auditors' role in the process is advisory only."
But what are likely to be seen as the most striking portions of the report are those that cite the variously stern, heated and even anguished language of contracting officers trying to bring the company to heel.
"As I have said in numerous meetings, KBR's lack of cost containment and funds management is the single biggest detriment to this program," one officer, Maj. Michael V. Waggle, wrote in the cure notice. He noted that the company had listed an impossibly high cost overrun of $436,019,574 on one job, charges of $114,308 for an oil spill cleanup that failed to remove any oil and another set of tasks in which the overruns were 36.9 percent of all costs.
The slides used in presentations during the deliberations of the board that determined the first award fee are almost equally eye-catching. On one slide, covering the company's success at meeting its planned schedules, a section labeled "Strengths" bears only the notation "N/A," presumably meaning no answer or not applicable. The "Weaknesses" section contains four detailed items.
The report, prepared for a frequent critic of Halliburton, Representative Henry A. Waxman of California, is based on previously undisclosed correspondence and performance evaluations from 2004 and 2005.
The documents show that the government's contracting officers became increasingly frustrated as they tried to penetrate what they considered to be inaccurate or misleading progress reports and expense vouchers filed by the subsidiary, Kellogg Brown & Root.
In August 2004, one of the officers wrote to the company that "you have universally failed to provide adequate cost information as required."
A few months later, after the company was served with a "cure notice," in which the government threatened to terminate the contract if performance was not improved, or "cured," another officer said he was writing "in sheer frustration with the consistent lack of accurate data."
Kellogg Brown & Root's second contract, awarded in January 2004 for rebuilding oil infrastructure in southern Iraq, has a maximum value of $1.2 billion. A company spokeswoman, Melissa Norcross, said that the report was "as devoid of context as it is new information" and that many of the issues raised by the contracting officers had been resolved.
The company, Ms. Norcross said, was forced to work with an ever-shifting cast of oversight organizations and at least 15 government contracting officials. "With each change, the company adjusted to meet the needs of its customer," she said, "all while operating in an extremely hostile war zone."
But Mr. Waxman, the ranking Democrat on the committee, said the report showed that the company had "actually done a worse job under its second Iraq oil contract than it did under the original no-bid contract."
William L. Nash, a retired Army general who is a senior fellow at the Council on Foreign Relations and an expert on post-conflict zones, said the unusually revealing documents laid bare "a microcosm of all the ills" of the Iraq rebuilding effort. "This a continuing example of the mismanagement of the Iraq reconstruction from the highest levels down to the contractors on the ground," he said.
The second contract was not terminated after the cure notice, and contracting officers later noted improvements in some areas. But the company received what appears to be a rebuke when it was given nothing out of a possible $7.9 million in socalled award fees for its first year of work on the contract. The award fees are incentives given by the government to reward good performance.
An award fee given for a later period, roughly the first half of 2005, was about 20 percent of the maximum, which Mr. Nash, who has been involved in determining such fees, described as extraordinarily low.
Both Kellogg Brown & Root contracts called for things like repairing oil wells and pipelines, installing power generators at oil facilities and importing fuel to Iraq. The first contract, worth $2.4 billion, generated enormous controversy after Pentagon auditors questioned more than $200 million in fuel delivery costs.
Critics like Mr. Waxman called the challenged costs overcharges, a description rejected by the company, which claimed a measure of vindication last month when the Army overruled the auditors and reimbursed nearly all of the delivery charges.
The new report, which says that Pentagon auditors have questioned $45 million of the $365 million in costs they reviewed, may revive the battle. A spokesman for the Defense Contract Audit Agency confirmed those figures.
Responding to the numbers, an official with Kellogg Brown & Root said, "Audits are part of the normal contracting process, and it is important to note that the auditors' role in the process is advisory only."
But what are likely to be seen as the most striking portions of the report are those that cite the variously stern, heated and even anguished language of contracting officers trying to bring the company to heel.
"As I have said in numerous meetings, KBR's lack of cost containment and funds management is the single biggest detriment to this program," one officer, Maj. Michael V. Waggle, wrote in the cure notice. He noted that the company had listed an impossibly high cost overrun of $436,019,574 on one job, charges of $114,308 for an oil spill cleanup that failed to remove any oil and another set of tasks in which the overruns were 36.9 percent of all costs.
The slides used in presentations during the deliberations of the board that determined the first award fee are almost equally eye-catching. On one slide, covering the company's success at meeting its planned schedules, a section labeled "Strengths" bears only the notation "N/A," presumably meaning no answer or not applicable. The "Weaknesses" section contains four detailed items.
Report Adds to Criticism of Halliburton's Iraq Role - New York Times
Even as a Halliburton subsidiary was absorbing harsh criticism of its costs on a 2003 no-bid contract for work in Iraq, the government officials overseeing a second contract wrote that the company was running up exorbitant new expenses on similar work, according to a report issued yesterday by the staff for the Democrats on the House Government Reform Committee.
The report, prepared for a frequent critic of Halliburton, Representative Henry A. Waxman of California, is based on previously undisclosed correspondence and performance evaluations from 2004 and 2005.
The documents show that the government's contracting officers became increasingly frustrated as they tried to penetrate what they considered to be inaccurate or misleading progress reports and expense vouchers filed by the subsidiary, Kellogg Brown & Root.
In August 2004, one of the officers wrote to the company that "you have universally failed to provide adequate cost information as required."
A few months later, after the company was served with a "cure notice," in which the government threatened to terminate the contract if performance was not improved, or "cured," another officer said he was writing "in sheer frustration with the consistent lack of accurate data."
Kellogg Brown & Root's second contract, awarded in January 2004 for rebuilding oil infrastructure in southern Iraq, has a maximum value of $1.2 billion. A company spokeswoman, Melissa Norcross, said that the report was "as devoid of context as it is new information" and that many of the issues raised by the contracting officers had been resolved.
The company, Ms. Norcross said, was forced to work with an ever-shifting cast of oversight organizations and at least 15 government contracting officials. "With each change, the company adjusted to meet the needs of its customer," she said, "all while operating in an extremely hostile war zone."
But Mr. Waxman, the ranking Democrat on the committee, said the report showed that the company had "actually done a worse job under its second Iraq oil contract than it did under the original no-bid contract."
William L. Nash, a retired Army general who is a senior fellow at the Council on Foreign Relations and an expert on post-conflict zones, said the unusually revealing documents laid bare "a microcosm of all the ills" of the Iraq rebuilding effort. "This a continuing example of the mismanagement of the Iraq reconstruction from the highest levels down to the contractors on the ground," he said.
The second contract was not terminated after the cure notice, and contracting officers later noted improvements in some areas. But the company received what appears to be a rebuke when it was given nothing out of a possible $7.9 million in socalled award fees for its first year of work on the contract. The award fees are incentives given by the government to reward good performance.
An award fee given for a later period, roughly the first half of 2005, was about 20 percent of the maximum, which Mr. Nash, who has been involved in determining such fees, described as extraordinarily low.
Both Kellogg Brown & Root contracts called for things like repairing oil wells and pipelines, installing power generators at oil facilities and importing fuel to Iraq. The first contract, worth $2.4 billion, generated enormous controversy after Pentagon auditors questioned more than $200 million in fuel delivery costs.
Critics like Mr. Waxman called the challenged costs overcharges, a description rejected by the company, which claimed a measure of vindication last month when the Army overruled the auditors and reimbursed nearly all of the delivery charges.
The new report, which says that Pentagon auditors have questioned $45 million of the $365 million in costs they reviewed, may revive the battle. A spokesman for the Defense Contract Audit Agency confirmed those figures.
Responding to the numbers, an official with Kellogg Brown & Root said, "Audits are part of the normal contracting process, and it is important to note that the auditors' role in the process is advisory only."
But what are likely to be seen as the most striking portions of the report are those that cite the variously stern, heated and even anguished language of contracting officers trying to bring the company to heel.
"As I have said in numerous meetings, KBR's lack of cost containment and funds management is the single biggest detriment to this program," one officer, Maj. Michael V. Waggle, wrote in the cure notice. He noted that the company had listed an impossibly high cost overrun of $436,019,574 on one job, charges of $114,308 for an oil spill cleanup that failed to remove any oil and another set of tasks in which the overruns were 36.9 percent of all costs.
The slides used in presentations during the deliberations of the board that determined the first award fee are almost equally eye-catching. On one slide, covering the company's success at meeting its planned schedules, a section labeled "Strengths" bears only the notation "N/A," presumably meaning no answer or not applicable. The "Weaknesses" section contains four detailed items.
The report, prepared for a frequent critic of Halliburton, Representative Henry A. Waxman of California, is based on previously undisclosed correspondence and performance evaluations from 2004 and 2005.
The documents show that the government's contracting officers became increasingly frustrated as they tried to penetrate what they considered to be inaccurate or misleading progress reports and expense vouchers filed by the subsidiary, Kellogg Brown & Root.
In August 2004, one of the officers wrote to the company that "you have universally failed to provide adequate cost information as required."
A few months later, after the company was served with a "cure notice," in which the government threatened to terminate the contract if performance was not improved, or "cured," another officer said he was writing "in sheer frustration with the consistent lack of accurate data."
Kellogg Brown & Root's second contract, awarded in January 2004 for rebuilding oil infrastructure in southern Iraq, has a maximum value of $1.2 billion. A company spokeswoman, Melissa Norcross, said that the report was "as devoid of context as it is new information" and that many of the issues raised by the contracting officers had been resolved.
The company, Ms. Norcross said, was forced to work with an ever-shifting cast of oversight organizations and at least 15 government contracting officials. "With each change, the company adjusted to meet the needs of its customer," she said, "all while operating in an extremely hostile war zone."
But Mr. Waxman, the ranking Democrat on the committee, said the report showed that the company had "actually done a worse job under its second Iraq oil contract than it did under the original no-bid contract."
William L. Nash, a retired Army general who is a senior fellow at the Council on Foreign Relations and an expert on post-conflict zones, said the unusually revealing documents laid bare "a microcosm of all the ills" of the Iraq rebuilding effort. "This a continuing example of the mismanagement of the Iraq reconstruction from the highest levels down to the contractors on the ground," he said.
The second contract was not terminated after the cure notice, and contracting officers later noted improvements in some areas. But the company received what appears to be a rebuke when it was given nothing out of a possible $7.9 million in socalled award fees for its first year of work on the contract. The award fees are incentives given by the government to reward good performance.
An award fee given for a later period, roughly the first half of 2005, was about 20 percent of the maximum, which Mr. Nash, who has been involved in determining such fees, described as extraordinarily low.
Both Kellogg Brown & Root contracts called for things like repairing oil wells and pipelines, installing power generators at oil facilities and importing fuel to Iraq. The first contract, worth $2.4 billion, generated enormous controversy after Pentagon auditors questioned more than $200 million in fuel delivery costs.
Critics like Mr. Waxman called the challenged costs overcharges, a description rejected by the company, which claimed a measure of vindication last month when the Army overruled the auditors and reimbursed nearly all of the delivery charges.
The new report, which says that Pentagon auditors have questioned $45 million of the $365 million in costs they reviewed, may revive the battle. A spokesman for the Defense Contract Audit Agency confirmed those figures.
Responding to the numbers, an official with Kellogg Brown & Root said, "Audits are part of the normal contracting process, and it is important to note that the auditors' role in the process is advisory only."
But what are likely to be seen as the most striking portions of the report are those that cite the variously stern, heated and even anguished language of contracting officers trying to bring the company to heel.
"As I have said in numerous meetings, KBR's lack of cost containment and funds management is the single biggest detriment to this program," one officer, Maj. Michael V. Waggle, wrote in the cure notice. He noted that the company had listed an impossibly high cost overrun of $436,019,574 on one job, charges of $114,308 for an oil spill cleanup that failed to remove any oil and another set of tasks in which the overruns were 36.9 percent of all costs.
The slides used in presentations during the deliberations of the board that determined the first award fee are almost equally eye-catching. On one slide, covering the company's success at meeting its planned schedules, a section labeled "Strengths" bears only the notation "N/A," presumably meaning no answer or not applicable. The "Weaknesses" section contains four detailed items.
Saturday, March 25, 2006
Battle Creek Enquirer - Whistleblower, "community heroes" honored
Bunnatine Greenhouse describes leadership as "taking the responsibility to do what is right and make a difference," so she seemed to fit right in with local leaders and activists in Battle Creek.
Greenhouse, a former senior contracting official of the U.S. Army Corps of Engineers, made headlines when she testified against Halliburton — one of the world's largest providers of oil and gas services — alleging specific instances of fraud, waste and other irregularities by Halliburton in regard to its operations in Iraq.
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Greenhouse was the key speaker and guest of honor at a Community Heroes Mixer held Friday at McCamly Plaza. The event honored both Greenhouse and community members who have created positive change in the local area.
"I am so honored to be in Battle Creek and you all have etched something on my mind and in my heart," Greenhouse said. "This is an activist community and people here work to improve this community for their neighbors. I am blessed to have had the Battle Creek experience."
The South Central Michigan American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), PheNix Concepts, a local Concerned Citizens group and Families Against Murder/For Equal Justice (F.A.M.E.) sponsored Greenhouse's visit. The evening was emceed by Richard Frantz, president of the South Central Michigan AFL-CIO, Reba Harrington of PheNix Concepts and Mary Knapp, a community activist.
Several dozen community members were awarded certificates on behalf of PheNix Concepts and the AFL-CIO for "outstanding community leadership and unselfish service."
Trace Christenson, a reporter for the Enquirer was an award recipient. A complete list of winners and their accomplishments will be published at a later date.
Greenhouse was presented with a T-shirt from F.A.M.E. with a list of victims of local unsolved murders on the back, which she commented she will wear in Washington with pride. Mildred Mallard, owner of ABC Boutique in Battle Creek presented Greenhouse with a collectible statue of Sojourner Truth.
"We are so proud that you shared your story with us. You remind of us so much of Sojourner," Mallard said. "She said speak the truth and we want you to continue to speak your truth."
After the awards, Greenhouse — joined by her lawyer Michael Kohn — delivered a passionate speech on her demotion and dismissal from her position at the Army Corps of Engineers. A video of an Enquirer interview with Greenhouse is available online at battlecreekenquirer.com.
"I was dismissed from my job because I did my job too well," Greenhouse said. "I am now fighting the most important fight of my career and I am fighting for the people. Please know that Battle Creek's support gives me the strength to go on fighting."
Greenhouse, a former senior contracting official of the U.S. Army Corps of Engineers, made headlines when she testified against Halliburton — one of the world's largest providers of oil and gas services — alleging specific instances of fraud, waste and other irregularities by Halliburton in regard to its operations in Iraq.
ADVERTISEMENT
Greenhouse was the key speaker and guest of honor at a Community Heroes Mixer held Friday at McCamly Plaza. The event honored both Greenhouse and community members who have created positive change in the local area.
"I am so honored to be in Battle Creek and you all have etched something on my mind and in my heart," Greenhouse said. "This is an activist community and people here work to improve this community for their neighbors. I am blessed to have had the Battle Creek experience."
The South Central Michigan American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), PheNix Concepts, a local Concerned Citizens group and Families Against Murder/For Equal Justice (F.A.M.E.) sponsored Greenhouse's visit. The evening was emceed by Richard Frantz, president of the South Central Michigan AFL-CIO, Reba Harrington of PheNix Concepts and Mary Knapp, a community activist.
Several dozen community members were awarded certificates on behalf of PheNix Concepts and the AFL-CIO for "outstanding community leadership and unselfish service."
Trace Christenson, a reporter for the Enquirer was an award recipient. A complete list of winners and their accomplishments will be published at a later date.
Greenhouse was presented with a T-shirt from F.A.M.E. with a list of victims of local unsolved murders on the back, which she commented she will wear in Washington with pride. Mildred Mallard, owner of ABC Boutique in Battle Creek presented Greenhouse with a collectible statue of Sojourner Truth.
"We are so proud that you shared your story with us. You remind of us so much of Sojourner," Mallard said. "She said speak the truth and we want you to continue to speak your truth."
After the awards, Greenhouse — joined by her lawyer Michael Kohn — delivered a passionate speech on her demotion and dismissal from her position at the Army Corps of Engineers. A video of an Enquirer interview with Greenhouse is available online at battlecreekenquirer.com.
"I was dismissed from my job because I did my job too well," Greenhouse said. "I am now fighting the most important fight of my career and I am fighting for the people. Please know that Battle Creek's support gives me the strength to go on fighting."
Thursday, March 16, 2006
Chron.com | Firm Failed to Protect U.S. Troops' Water
By LARRY MARGASAK Associated Press Writer
© 2006 The Associated Press
WASHINGTON — Halliburton Co. failed to protect the water supply it is paid to purify for U.S. soldiers throughout Iraq, in one instance missing contamination that could have caused "mass sickness or death," an internal company report concluded.
The report, obtained by The Associated Press, said the company failed to assemble and use its own water purification equipment, allowing contaminated water directly from the Euphrates River to be used for washing and laundry at Camp Ar Ramadi in Ramadi, Iraq.
The problems discovered last year at that site _ poor training, miscommunication and lax record keeping _ occurred at Halliburton's other operations throughout Iraq, the report said.
"Countrywide, all camps suffer to some extent from all or some of the deficiencies noted," Wil Granger, Theatre Water Quality Manager in the war zone for Halliburton's KBR subsidiary, wrote in his May 2005 report.
AP reported earlier this year allegations from whistleblowers about the Camp Ar Ramadi incident, but Halliburton never made public Granger's internal report alleging wider problems.
The water quality expert warned Halliburton the problems "will have to be dealt with at a very elevated level of management" to protect health and safety of U.S. personnel.
Halliburton said Wednesday it conducted a second review last year that found no evidence of any illnesses in Iraq from water and it believes some of its earlier conclusions were incomplete and inaccurate. The company declined to release the second report.
The company said it has "worked closely with the Army to develop standards and take action to ensure that the water provided in Iraq is safe and of the highest quality possible."
Halliburton was headed by Vice President Dick Cheney for several years before he ran for vice president. Its KBR subsidiary, also known as Kellogg Brown & Root, works under contract to provide a number of services to the U.S. military in Iraq, including providing water and purifying it.
The contaminated, non-chlorinated water at Ar Ramadi was discovered in March 2005 in a commode by Ben Carter, a KBR water expert at the base. In an interview, Carter said he resigned after KBR barred him from notifying the military and senior company officials about the untreated water.
A supervisor at Ar Ramadi "told me to stop e-mailing" company officials outside the base and warned that informing the military "was none of my concern," Carter said. He said he threatened to sue if company officials didn't let him be examined to determine whether he suffered medical problems from exposure to the contaminated water.
Granger's report cited several countrywide problems:
_A lack of training for key personnel. "Theatre wide there is no formalized training for anyone at any level in concerns to water operations."
_Confusion between KBR and military officials over their respective roles. For instance, each assumed the other would chlorinate the water at Ar Ramadi for any uses that would require the treatment.
_Inadequate or nonexistent records that could have caught problems in advance. Little or no documentation was kept on water inventories, safety stand-downs, audits of water quality, deliveries, inspections and logs showing alterations or modifications to water systems.
_Relying on employees the company identified as semiskilled labor, and paid as unskilled workers in the pay structure.
The report said the event at Ar Ramadi could have been prevented if KBR's Reverse Osmosis Units on the site had been assembled, instead of relying on the military's water production facilities.
"This event should be considered a 'near miss' as the consequences of these actions could have been very severe resulting in mass sickness or death," Granger wrote.
The report said that KBR officials at Ar Ramadi tried to keep the contamination from senior company officials.
"The event that was submitted in a report to local camp management should have been classified as a recordable occurrence and communicated to senior management in a timely manner," Granger wrote. "The primary awareness to this event came through threat of domestic litigation."
Beginning last May, Halliburton said it began using its equipment to remove contaminants, bacteria, and viruses in Ar Ramadi, and disinfect the water with chlorine. The company said KBR has worked closely with the Army to develop safe water standards.
It said its subsequent review in August-September 2005 found nonpotable water used for washing "was effectively filtered" to remove at least 99 percent of the parasite giardia and 90 percent of viruses. The Ar Ramadi water also tested negative for bacteria, Halliburton added.
© 2006 The Associated Press
WASHINGTON — Halliburton Co. failed to protect the water supply it is paid to purify for U.S. soldiers throughout Iraq, in one instance missing contamination that could have caused "mass sickness or death," an internal company report concluded.
The report, obtained by The Associated Press, said the company failed to assemble and use its own water purification equipment, allowing contaminated water directly from the Euphrates River to be used for washing and laundry at Camp Ar Ramadi in Ramadi, Iraq.
The problems discovered last year at that site _ poor training, miscommunication and lax record keeping _ occurred at Halliburton's other operations throughout Iraq, the report said.
"Countrywide, all camps suffer to some extent from all or some of the deficiencies noted," Wil Granger, Theatre Water Quality Manager in the war zone for Halliburton's KBR subsidiary, wrote in his May 2005 report.
AP reported earlier this year allegations from whistleblowers about the Camp Ar Ramadi incident, but Halliburton never made public Granger's internal report alleging wider problems.
The water quality expert warned Halliburton the problems "will have to be dealt with at a very elevated level of management" to protect health and safety of U.S. personnel.
Halliburton said Wednesday it conducted a second review last year that found no evidence of any illnesses in Iraq from water and it believes some of its earlier conclusions were incomplete and inaccurate. The company declined to release the second report.
The company said it has "worked closely with the Army to develop standards and take action to ensure that the water provided in Iraq is safe and of the highest quality possible."
Halliburton was headed by Vice President Dick Cheney for several years before he ran for vice president. Its KBR subsidiary, also known as Kellogg Brown & Root, works under contract to provide a number of services to the U.S. military in Iraq, including providing water and purifying it.
The contaminated, non-chlorinated water at Ar Ramadi was discovered in March 2005 in a commode by Ben Carter, a KBR water expert at the base. In an interview, Carter said he resigned after KBR barred him from notifying the military and senior company officials about the untreated water.
A supervisor at Ar Ramadi "told me to stop e-mailing" company officials outside the base and warned that informing the military "was none of my concern," Carter said. He said he threatened to sue if company officials didn't let him be examined to determine whether he suffered medical problems from exposure to the contaminated water.
Granger's report cited several countrywide problems:
_A lack of training for key personnel. "Theatre wide there is no formalized training for anyone at any level in concerns to water operations."
_Confusion between KBR and military officials over their respective roles. For instance, each assumed the other would chlorinate the water at Ar Ramadi for any uses that would require the treatment.
_Inadequate or nonexistent records that could have caught problems in advance. Little or no documentation was kept on water inventories, safety stand-downs, audits of water quality, deliveries, inspections and logs showing alterations or modifications to water systems.
_Relying on employees the company identified as semiskilled labor, and paid as unskilled workers in the pay structure.
The report said the event at Ar Ramadi could have been prevented if KBR's Reverse Osmosis Units on the site had been assembled, instead of relying on the military's water production facilities.
"This event should be considered a 'near miss' as the consequences of these actions could have been very severe resulting in mass sickness or death," Granger wrote.
The report said that KBR officials at Ar Ramadi tried to keep the contamination from senior company officials.
"The event that was submitted in a report to local camp management should have been classified as a recordable occurrence and communicated to senior management in a timely manner," Granger wrote. "The primary awareness to this event came through threat of domestic litigation."
Beginning last May, Halliburton said it began using its equipment to remove contaminants, bacteria, and viruses in Ar Ramadi, and disinfect the water with chlorine. The company said KBR has worked closely with the Army to develop safe water standards.
It said its subsequent review in August-September 2005 found nonpotable water used for washing "was effectively filtered" to remove at least 99 percent of the parasite giardia and 90 percent of viruses. The Ar Ramadi water also tested negative for bacteria, Halliburton added.
Monday, February 27, 2006
Army to Pay Halliburton Unit Most Costs Disputed by Audit - New York Times
By JAMES GLANZ
The Army has decided to reimburse a Halliburton subsidiary for 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.
The Army said in response to questions on Friday that questionable business practices by the subsidiary, Kellogg Brown & Root, had in some cases driven up the company's costs. But in the haste and peril of war, it had largely done as well as could be expected, the Army said, and aside from a few penalties, the government was compelled to reimburse the company for its costs.
Under the type of contract awarded to the company, "the contractor is not required to perform perfectly to be entitled to reimbursement," said Rhonda James, a spokeswoman for the southwestern division of the United States Army Corps of Engineers, based in Dallas, where the contract is administered.
The contract has been the subject of intense scrutiny after disclosures in 2003 that it had been awarded without competitive bidding. That produced criticism from Congressional Democrats and others that the company had benefited from its connection with Dick Cheney, who was Halliburton's chief executive before becoming vice president.
Later that year auditors began focusing on the fuel deliveries under the contract, finding that the fuel transportation costs that the company was charging the Army were in some cases nearly triple what others were charging to do the same job. But Kellogg Brown & Root, which has consistently maintained that its costs were justified, characterized the Army's decision as an official repudiation of those criticisms.
"Once all the facts were fully examined, it is clear, and now confirmed, that KBR performed this work appropriately per the client's direction and within the contract terms," said Cathy Mann, a company spokeswoman, in a written statement on the decision. The company's charges, she said, "were deemed properly incurred."
The Pentagon's Defense Contract Audit Agency had questioned $263 million in costs for fuel deliveries, pipeline repairs and other tasks that auditors said were potentially inflated or unsupported by documentation. But the Army decided to pay all but $10.1 million of those contested costs, which were mostly for trucking fuel from Kuwait and Turkey.
That means the Army is withholding payment on just 3.8 percent of the charges questioned by the Pentagon audit agency, which is far below the rate at which the agency's recommendation is usually followed or sustained by the military — the so-called "sustention rate."
Figures provided by the Pentagon audit agency on thousands of military contracts over the past three years show how far the Halliburton decision lies outside the norm.
In 2003, the agency's figures show, the military withheld an average of 66.4 percent of what the auditors had recommended, while in 2004 the figure was 75.2 percent and in 2005 it was 56.4 percent.
Rick Barton, co-director of the postconflict reconstruction project at the Center for Strategic and International Studies in Washington, said despite the difficulties of doing business in a war zone, the low rate of recovery on such huge and widely disputed charges was hard to understand. "To think that it's near zero is ridiculous when you're talking these kinds of numbers," he said.
The Halliburton contract is referred to as a "cost-plus" agreement, meaning that after the company recovers its costs, it also receives various markups and award fees. Although the markups and fees are difficult to calculate exactly using the Army figures, they appear to be about $100 million.
One of Halliburton's most persistent critics, Representative Henry A. Waxman, a California Democrat who is the ranking minority member of the House Committee on Government Reform, said in a written statement about the Army's decision, "Halliburton gouged the taxpayer, government auditors caught the company red-handed, yet the Pentagon ignored the auditors and paid Halliburton hundreds of millions of dollars and a huge bonus."
About $208 million of the disputed charges was mostly related to the cost of importing fuel, which was at the heart of the controversy surrounding the contract. Kellogg Brown & Root hired a little-known Kuwaiti company, Altanmia, to transport fuel in enormous truck convoys. The Pentagon auditors found that in part because of the transportation fees that Kellogg Brown & Root agreed to pay Altanmia, the cost for a gallon of gasoline was roughly 40 percent higher than what the American military paid when it did the job itself — under a separate contract it had negotiated with Altanmia.
The Army said in a written statement that it had largely accepted Kellogg Brown & Root's assertions that costs had been driven up by factors beyond its control — the exigencies of war and the hard-line negotiating stance of the state-owned Kuwait Petroleum Corporation. The Army said the Kuwaiti fuel company blocked attempts by Kellogg Brown & Root to renegotiate its transportation contract with Altanmia. In the end, the Army decided to pay the Halliburton subsidiary all but $3.81 million of the $208 million in fuel-related costs questioned by auditors.
The Kellogg Brown & Root contract, called Restore Iraqi Oil, or RIO, will be paid with about $900 million of American taxpayer money and $1.5 billion of Iraqi oil proceeds and money seized from Saddam Hussein's government. Official criticism of the work became so intense that in November, an auditing board sponsored by the United Nations recommended that the United States repay some or all of the $208 million related to the alleged fuel overcharges — an allegation Halliburton says has never been justified.
In fact, Ms. Mann said, the Army's decision clearly showed that "any claims that the figures contained in these audit reports are 'overcharges' are uninformed and flat wrong." She said that the fuel charges themselves had been 100 percent reimbursed and that the reductions all came from adjustments on administrative costs associated with that mission.
Still, the Army conceded that some of the criticisms of the company's business practices were legitimate. As a result, the Army said, it would exclude about half of the auditors' questioned charges from the amount used to derive the markups and fees, which are calculated as a sliding percentage of the costs. That decision could cost the company a maximum of about $7 million.
Ms. James, the Corps of Engineers spokeswoman, said that in addition to the other modest penalties that Kellogg Brown & Root had been assessed by the Army's contracting officers, the sliding percentages on some of the fees had been lowered by unspecified amounts to reflect shortcomings in the company's dealings in Iraq. "All fees were awarded in accordance with the award fee plan set out in the contract, which placed more emphasis on timely mission accomplishment than on cost control and paperwork," Ms. James said.
Mr. Barton, of the Center for Strategic and International Studies, said that with the relatively small penalties paid by the company for falling short in its performance in Iraq, it was hard to see what the Army's scrutiny of the company's practices had amounted to in the end.
"When they say, 'We questioned their business model or their business decisions' — well, yeah, so what?" Mr. Barton said. "You questioned it but there was no result."
In answer to written questions, a spokesman for the Defense Contract Audit Agency, Lt. Col. Brian Maka, said the settlement of the disputed charges was based on "broader business case considerations" beyond just Pentagon audits.
But when asked whether the Army's decision reflected on the quality of the audits, Colonel Maka said only that the agency "has no indication of problems with the audit process," and he referred questions on the settlement itself to the Army.
A former senior Defense Department manager knowledgeable about the audits and the related contracting issues said, "That's as close as D.C.A.A. can get to saying, 'We're not happy with it either.' "
Because of the size of the contract and the contention surrounding Halliburton's dealings with the government, the RIO audits were carried out by the agency's top personnel and were subjected to extraordinarily thorough reviews, the former manager said.
This is unlikely to be the last time the Army and Halliburton meet over negotiated costs. On a separate contract in Iraq, for logistics support to the United States military, more than $11 billion had been disbursed to Kellogg Brown & Root by mid-January, according to the Army Field Support Command, based in Rock Island, Ill. Pentagon auditors have begun scrutinizing that contract as well.
The Army has decided to reimburse a Halliburton subsidiary for 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.
The Army said in response to questions on Friday that questionable business practices by the subsidiary, Kellogg Brown & Root, had in some cases driven up the company's costs. But in the haste and peril of war, it had largely done as well as could be expected, the Army said, and aside from a few penalties, the government was compelled to reimburse the company for its costs.
Under the type of contract awarded to the company, "the contractor is not required to perform perfectly to be entitled to reimbursement," said Rhonda James, a spokeswoman for the southwestern division of the United States Army Corps of Engineers, based in Dallas, where the contract is administered.
The contract has been the subject of intense scrutiny after disclosures in 2003 that it had been awarded without competitive bidding. That produced criticism from Congressional Democrats and others that the company had benefited from its connection with Dick Cheney, who was Halliburton's chief executive before becoming vice president.
Later that year auditors began focusing on the fuel deliveries under the contract, finding that the fuel transportation costs that the company was charging the Army were in some cases nearly triple what others were charging to do the same job. But Kellogg Brown & Root, which has consistently maintained that its costs were justified, characterized the Army's decision as an official repudiation of those criticisms.
"Once all the facts were fully examined, it is clear, and now confirmed, that KBR performed this work appropriately per the client's direction and within the contract terms," said Cathy Mann, a company spokeswoman, in a written statement on the decision. The company's charges, she said, "were deemed properly incurred."
The Pentagon's Defense Contract Audit Agency had questioned $263 million in costs for fuel deliveries, pipeline repairs and other tasks that auditors said were potentially inflated or unsupported by documentation. But the Army decided to pay all but $10.1 million of those contested costs, which were mostly for trucking fuel from Kuwait and Turkey.
That means the Army is withholding payment on just 3.8 percent of the charges questioned by the Pentagon audit agency, which is far below the rate at which the agency's recommendation is usually followed or sustained by the military — the so-called "sustention rate."
Figures provided by the Pentagon audit agency on thousands of military contracts over the past three years show how far the Halliburton decision lies outside the norm.
In 2003, the agency's figures show, the military withheld an average of 66.4 percent of what the auditors had recommended, while in 2004 the figure was 75.2 percent and in 2005 it was 56.4 percent.
Rick Barton, co-director of the postconflict reconstruction project at the Center for Strategic and International Studies in Washington, said despite the difficulties of doing business in a war zone, the low rate of recovery on such huge and widely disputed charges was hard to understand. "To think that it's near zero is ridiculous when you're talking these kinds of numbers," he said.
The Halliburton contract is referred to as a "cost-plus" agreement, meaning that after the company recovers its costs, it also receives various markups and award fees. Although the markups and fees are difficult to calculate exactly using the Army figures, they appear to be about $100 million.
One of Halliburton's most persistent critics, Representative Henry A. Waxman, a California Democrat who is the ranking minority member of the House Committee on Government Reform, said in a written statement about the Army's decision, "Halliburton gouged the taxpayer, government auditors caught the company red-handed, yet the Pentagon ignored the auditors and paid Halliburton hundreds of millions of dollars and a huge bonus."
About $208 million of the disputed charges was mostly related to the cost of importing fuel, which was at the heart of the controversy surrounding the contract. Kellogg Brown & Root hired a little-known Kuwaiti company, Altanmia, to transport fuel in enormous truck convoys. The Pentagon auditors found that in part because of the transportation fees that Kellogg Brown & Root agreed to pay Altanmia, the cost for a gallon of gasoline was roughly 40 percent higher than what the American military paid when it did the job itself — under a separate contract it had negotiated with Altanmia.
The Army said in a written statement that it had largely accepted Kellogg Brown & Root's assertions that costs had been driven up by factors beyond its control — the exigencies of war and the hard-line negotiating stance of the state-owned Kuwait Petroleum Corporation. The Army said the Kuwaiti fuel company blocked attempts by Kellogg Brown & Root to renegotiate its transportation contract with Altanmia. In the end, the Army decided to pay the Halliburton subsidiary all but $3.81 million of the $208 million in fuel-related costs questioned by auditors.
The Kellogg Brown & Root contract, called Restore Iraqi Oil, or RIO, will be paid with about $900 million of American taxpayer money and $1.5 billion of Iraqi oil proceeds and money seized from Saddam Hussein's government. Official criticism of the work became so intense that in November, an auditing board sponsored by the United Nations recommended that the United States repay some or all of the $208 million related to the alleged fuel overcharges — an allegation Halliburton says has never been justified.
In fact, Ms. Mann said, the Army's decision clearly showed that "any claims that the figures contained in these audit reports are 'overcharges' are uninformed and flat wrong." She said that the fuel charges themselves had been 100 percent reimbursed and that the reductions all came from adjustments on administrative costs associated with that mission.
Still, the Army conceded that some of the criticisms of the company's business practices were legitimate. As a result, the Army said, it would exclude about half of the auditors' questioned charges from the amount used to derive the markups and fees, which are calculated as a sliding percentage of the costs. That decision could cost the company a maximum of about $7 million.
Ms. James, the Corps of Engineers spokeswoman, said that in addition to the other modest penalties that Kellogg Brown & Root had been assessed by the Army's contracting officers, the sliding percentages on some of the fees had been lowered by unspecified amounts to reflect shortcomings in the company's dealings in Iraq. "All fees were awarded in accordance with the award fee plan set out in the contract, which placed more emphasis on timely mission accomplishment than on cost control and paperwork," Ms. James said.
Mr. Barton, of the Center for Strategic and International Studies, said that with the relatively small penalties paid by the company for falling short in its performance in Iraq, it was hard to see what the Army's scrutiny of the company's practices had amounted to in the end.
"When they say, 'We questioned their business model or their business decisions' — well, yeah, so what?" Mr. Barton said. "You questioned it but there was no result."
In answer to written questions, a spokesman for the Defense Contract Audit Agency, Lt. Col. Brian Maka, said the settlement of the disputed charges was based on "broader business case considerations" beyond just Pentagon audits.
But when asked whether the Army's decision reflected on the quality of the audits, Colonel Maka said only that the agency "has no indication of problems with the audit process," and he referred questions on the settlement itself to the Army.
A former senior Defense Department manager knowledgeable about the audits and the related contracting issues said, "That's as close as D.C.A.A. can get to saying, 'We're not happy with it either.' "
Because of the size of the contract and the contention surrounding Halliburton's dealings with the government, the RIO audits were carried out by the agency's top personnel and were subjected to extraordinarily thorough reviews, the former manager said.
This is unlikely to be the last time the Army and Halliburton meet over negotiated costs. On a separate contract in Iraq, for logistics support to the United States military, more than $11 billion had been disbursed to Kellogg Brown & Root by mid-January, according to the Army Field Support Command, based in Rock Island, Ill. Pentagon auditors have begun scrutinizing that contract as well.
Monday, February 06, 2006
IPO stems insider stock sales - Houston - MSNBC.com
KBR disclosure curbs brisk trading activity by Halliburton CEO
By Jim Greer
Houston Business Journal
Updated: 7:00 p.m. ET Feb. 5, 2006
David Lesar made millions on insider stock sales over the past two months, but Halliburton Co. policy prevented the chairman and CEO from making millions more this week.
On Jan. 27, Lesar went public with the news that 20 percent of the energy service company's KBR unit was slated for an initial public offering.
On Jan. 26, he sold 75,000 shares of Halliburton at more than $73 per share for a gross of about $5.5 million.
Added to eight previous stock sales executed in December and January, Lesar cashed in just under 354,000 shares for about $24.3 million in an eight-week period (see chart).
The KBR public offering announcement lit an even bigger fire under an already hot Halliburton stock price.
At close of trading on Jan. 27, the stock had moved into the $79 range after closing near $75 on the previous day. On Jan. 30, the price topped $82 before settling near $81.
On Feb. 1, in midday trading, shares of Houston-based Halliburton changed hands around $81.31, or about 8.4 percent above the stock's closing price the day before Lesar announced plans to publicly spin off the longtime engineering and construction business formerly known as Kellogg Brown & Root.
At midday on Feb. 1, the price remained north of $81, about 8.4 percent above the closing price the day Lesar executed his most recent sale.
But Lesar personally couldn't cash in on the extra boost Halliburton shares got from the KBR IPO news on the following day. Company policy restricts insiders from cashing in on material information that hasn't been made public knowledge.
The rule closed the trading window on Jan. 27 and forced Lesar to leave millions of dollars on the table.
At the stock's Feb. 1 perch above $81, shedding the same 353,981 shares that were sold in December and January transactions would have delivered Lesar an extra $4.5 million or so pretax.
Specifics for investors
The potentially plumper payout remains purely hypothetical.
A Halliburton representative points to the company's "Code of Business Conduct: Use and Public Disclosure Of Material Nonpublic Information."
This stodgy-sounding corporate policy, which reflects U.S. Securities and Exchange Commission regulations, states that it is a violation of federal laws "for any person to buy or sell securities if he or she is in possession of material nonpublic information relating to those securities."
The KBR IPO details publicly disclosed by Lesar on Jan. 27 appear to fall into the "material nonpublic information" category.
Last year, Halliburton reported an intent to sell or spin off KBR, with an IPO as one possible option. Timing remained unclear.
The specific course of action for KBR wasn't announced until Lesar's Jan. 27 disclosure that Halliburton would pursue a KBR IPO filing.
Wall Street already expected that Halliburton would do an IPO instead of pursuing another option. But Lesar on Jan. 27 offered specifics that investors have been awaiting, according to Citigroup Investment Research analyst Geoff Kieburtz.
Immediately after filing a 10K, the annual report due by mid-March, Halliburton expects to file KBR IPO documents, Kieburtz adds.
So various details on the planned IPO, including proceeds Halliburton could receive, aren't likely to emerge until next month, at the earliest.
But today, "the substantial proceeds expected from the IPO are already fueling rumors" of future acquisitions that Halliburton will make, according to a Jan. 30 report from equity analyst David Rewcastle of Argus Research Co.
Even ahead of the KBR stock offering, Halliburton is awash in cash.
Argus Research on Jan. 30 raised the 2006 earnings per share projection for Halliburton by $1.05 to $5.25. At the same time, Argus unveiled a preliminary estimate that envisions Halliburton earning $6.55 per share for 2007.
Halliburton is the world's second-largest energy services company.
Late in the day on Jan. 26, Halliburton announced robust financial results for the fourth quarter and full year of 2005.
"The best (year) in our 86-year history," Lesar said in the Jan. 26 news release.
Halliburton's announcement of the banner year, including fourth-quarter earnings that beat analyst expectations, came out only hours after Lesar made the last of his most recent stock sales.
So the earnings news, like the KBR details, also had qualified as material nonpublic information. One more reason Lesar wouldn't have been able to cash in his stock at the new highs set this week.
Still, Lesar's selling of Halliburton shares at prices well below previous levels points up the fact that insiders aren't necessarily the best traders. Indeed. Lesar also shed stock in the oilfield services giant before December last year, again leaving millions of dollars on the table.
"His track record's actually quite bad," says Jonathan Moreland, editor of Insider Insights. "He sells and it goes up."
But Lesar still has ample ammunition for future trading.
According to a Jan. 26 filing with the Securities and Exchange Commission, Lesar still beneficially owns nearly 700,000 shares of Halliburton.
By Jim Greer
Houston Business Journal
Updated: 7:00 p.m. ET Feb. 5, 2006
David Lesar made millions on insider stock sales over the past two months, but Halliburton Co. policy prevented the chairman and CEO from making millions more this week.
On Jan. 27, Lesar went public with the news that 20 percent of the energy service company's KBR unit was slated for an initial public offering.
On Jan. 26, he sold 75,000 shares of Halliburton at more than $73 per share for a gross of about $5.5 million.
Added to eight previous stock sales executed in December and January, Lesar cashed in just under 354,000 shares for about $24.3 million in an eight-week period (see chart).
The KBR public offering announcement lit an even bigger fire under an already hot Halliburton stock price.
At close of trading on Jan. 27, the stock had moved into the $79 range after closing near $75 on the previous day. On Jan. 30, the price topped $82 before settling near $81.
On Feb. 1, in midday trading, shares of Houston-based Halliburton changed hands around $81.31, or about 8.4 percent above the stock's closing price the day before Lesar announced plans to publicly spin off the longtime engineering and construction business formerly known as Kellogg Brown & Root.
At midday on Feb. 1, the price remained north of $81, about 8.4 percent above the closing price the day Lesar executed his most recent sale.
But Lesar personally couldn't cash in on the extra boost Halliburton shares got from the KBR IPO news on the following day. Company policy restricts insiders from cashing in on material information that hasn't been made public knowledge.
The rule closed the trading window on Jan. 27 and forced Lesar to leave millions of dollars on the table.
At the stock's Feb. 1 perch above $81, shedding the same 353,981 shares that were sold in December and January transactions would have delivered Lesar an extra $4.5 million or so pretax.
Specifics for investors
The potentially plumper payout remains purely hypothetical.
A Halliburton representative points to the company's "Code of Business Conduct: Use and Public Disclosure Of Material Nonpublic Information."
This stodgy-sounding corporate policy, which reflects U.S. Securities and Exchange Commission regulations, states that it is a violation of federal laws "for any person to buy or sell securities if he or she is in possession of material nonpublic information relating to those securities."
The KBR IPO details publicly disclosed by Lesar on Jan. 27 appear to fall into the "material nonpublic information" category.
Last year, Halliburton reported an intent to sell or spin off KBR, with an IPO as one possible option. Timing remained unclear.
The specific course of action for KBR wasn't announced until Lesar's Jan. 27 disclosure that Halliburton would pursue a KBR IPO filing.
Wall Street already expected that Halliburton would do an IPO instead of pursuing another option. But Lesar on Jan. 27 offered specifics that investors have been awaiting, according to Citigroup Investment Research analyst Geoff Kieburtz.
Immediately after filing a 10K, the annual report due by mid-March, Halliburton expects to file KBR IPO documents, Kieburtz adds.
So various details on the planned IPO, including proceeds Halliburton could receive, aren't likely to emerge until next month, at the earliest.
But today, "the substantial proceeds expected from the IPO are already fueling rumors" of future acquisitions that Halliburton will make, according to a Jan. 30 report from equity analyst David Rewcastle of Argus Research Co.
Even ahead of the KBR stock offering, Halliburton is awash in cash.
Argus Research on Jan. 30 raised the 2006 earnings per share projection for Halliburton by $1.05 to $5.25. At the same time, Argus unveiled a preliminary estimate that envisions Halliburton earning $6.55 per share for 2007.
Halliburton is the world's second-largest energy services company.
Late in the day on Jan. 26, Halliburton announced robust financial results for the fourth quarter and full year of 2005.
"The best (year) in our 86-year history," Lesar said in the Jan. 26 news release.
Halliburton's announcement of the banner year, including fourth-quarter earnings that beat analyst expectations, came out only hours after Lesar made the last of his most recent stock sales.
So the earnings news, like the KBR details, also had qualified as material nonpublic information. One more reason Lesar wouldn't have been able to cash in his stock at the new highs set this week.
Still, Lesar's selling of Halliburton shares at prices well below previous levels points up the fact that insiders aren't necessarily the best traders. Indeed. Lesar also shed stock in the oilfield services giant before December last year, again leaving millions of dollars on the table.
"His track record's actually quite bad," says Jonathan Moreland, editor of Insider Insights. "He sells and it goes up."
But Lesar still has ample ammunition for future trading.
According to a Jan. 26 filing with the Securities and Exchange Commission, Lesar still beneficially owns nearly 700,000 shares of Halliburton.
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.
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.
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.
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.
Wednesday, December 28, 2005
The Raw Story | Halliburton, other lobbyists stall Pentagon ban on human trafficking
Filed by RAW STORY
Three years after a 2002 Presidential Directive demanding an end to trafficking in humans for forced labor and prostitution by U.S. contractors, the Pentagon is still yet to actually bar the practice, The Chicago Tribune reports. Congress approved a similar ban one year later, which was reauthorized by the Senate just last week.
The President and Congress have demanded that government agencies include anti-trafficking provisions (covering forced labor and prostitution) in all overseas company contracts. It also extended the ban to subcontractors.
According to the Tribune, the concerns of five lobbying groups - including representatives of Halliburton subsidiary KBR and DynCorp - are stalling Pentagon action. These companies are specifically targeting provisions requiring companies to monitor their overseas contractors for violations. Both KBR and DynCorp have been linked to human trafficking cases in the past.
The original Bush order came on the heels of revelations that DynCorp employees had purchased women and girls as sex slaves during the 1990s U.S. military presence in Bosnia. The company responded by firing eight employees over the incidents, as well as involvement in illegal arms sales.
An excerpt from the Tribune piece details Halliburton's role:
#
In a two-part series published in October, the Tribune detailed how Middle Eastern firms working under American subcontracts in Iraq, and a chain of human brokers beneath them, engaged in the kind of abuses condemned elsewhere by the U.S. government as human trafficking. KBR, the Halliburton subsidiary, relies on more than 200 subcontractors to carry out a multibillion-dollar U.S. Army contract for privatization of military support operations in the war zone.
...
The Tribune retraced the journey of 12 Nepali men recruited from poor villages in one of the most remote and impoverished corners of the world and documented a trail of deceit, fraud and negligence stretching into Iraq. The men were kidnapped from an unprotected caravan and executed en route to jobs at an American military base in 2004.
At the time, Halliburton said it was not responsible for the recruitment or hiring practices of its subcontractors, and the U.S. Army, which oversees the privatization contract, said questions about alleged misconduct "by subcontractor firms should be addressed to those firms, as these are not Army issues."
Once implemented, the new policy could dramatically change responsibilities for KBR and the Army.
Three years after a 2002 Presidential Directive demanding an end to trafficking in humans for forced labor and prostitution by U.S. contractors, the Pentagon is still yet to actually bar the practice, The Chicago Tribune reports. Congress approved a similar ban one year later, which was reauthorized by the Senate just last week.
The President and Congress have demanded that government agencies include anti-trafficking provisions (covering forced labor and prostitution) in all overseas company contracts. It also extended the ban to subcontractors.
According to the Tribune, the concerns of five lobbying groups - including representatives of Halliburton subsidiary KBR and DynCorp - are stalling Pentagon action. These companies are specifically targeting provisions requiring companies to monitor their overseas contractors for violations. Both KBR and DynCorp have been linked to human trafficking cases in the past.
The original Bush order came on the heels of revelations that DynCorp employees had purchased women and girls as sex slaves during the 1990s U.S. military presence in Bosnia. The company responded by firing eight employees over the incidents, as well as involvement in illegal arms sales.
An excerpt from the Tribune piece details Halliburton's role:
#
In a two-part series published in October, the Tribune detailed how Middle Eastern firms working under American subcontracts in Iraq, and a chain of human brokers beneath them, engaged in the kind of abuses condemned elsewhere by the U.S. government as human trafficking. KBR, the Halliburton subsidiary, relies on more than 200 subcontractors to carry out a multibillion-dollar U.S. Army contract for privatization of military support operations in the war zone.
...
The Tribune retraced the journey of 12 Nepali men recruited from poor villages in one of the most remote and impoverished corners of the world and documented a trail of deceit, fraud and negligence stretching into Iraq. The men were kidnapped from an unprotected caravan and executed en route to jobs at an American military base in 2004.
At the time, Halliburton said it was not responsible for the recruitment or hiring practices of its subcontractors, and the U.S. Army, which oversees the privatization contract, said questions about alleged misconduct "by subcontractor firms should be addressed to those firms, as these are not Army issues."
Once implemented, the new policy could dramatically change responsibilities for KBR and the Army.
Friday, December 16, 2005
ABC News: Halliburton Contractor Arrested for Alleged Bribery Attempt
Contractor Was Returning From Cruise in Mexico
By JACK DATE
WASHINGTON, Dec. 15, 2005 ? A contractor who works for Halliburton in Iraq was arrested Thursday in Tampa for allegedly attempting to bribe Immigration and Customs Enforcement agents at Tampa Seaport in Florida, an ICE official tells ABC News.
The man, who works as a driver of jet fuel trucks in Iraq, was not identified.
Returning from a Mexican cruise, the contractor and his fianc�e, also a government contractor, were stopped by customs officials for questioning regarding small amounts of painkillers that officials said they were bringing into the country.
After learning the two were contractors for U.S. Central Command, ICE agents contacted CENTCOM headquarters at MacDill Air Force Base in Tampa. CENTCOM told ICE to confiscate the pair's military contractor IDs.
The male contractor then allegedly asked ICE agents what it would take to make this incident go away. Officials say he then offered a $1,000 bribe to the ICE agent. The agent asked the pair to meet for lunch.
According to an ICE official, the ICE agent got approval to wear a microphone. During the meeting, officials say the Halliburton contractor offered the ICE agent a bribe and handed him $1,000. The contractor was arrested and is expected to be charged with bribery. His fianc�e was released and has sought counsel.
By JACK DATE
WASHINGTON, Dec. 15, 2005 ? A contractor who works for Halliburton in Iraq was arrested Thursday in Tampa for allegedly attempting to bribe Immigration and Customs Enforcement agents at Tampa Seaport in Florida, an ICE official tells ABC News.
The man, who works as a driver of jet fuel trucks in Iraq, was not identified.
Returning from a Mexican cruise, the contractor and his fianc�e, also a government contractor, were stopped by customs officials for questioning regarding small amounts of painkillers that officials said they were bringing into the country.
After learning the two were contractors for U.S. Central Command, ICE agents contacted CENTCOM headquarters at MacDill Air Force Base in Tampa. CENTCOM told ICE to confiscate the pair's military contractor IDs.
The male contractor then allegedly asked ICE agents what it would take to make this incident go away. Officials say he then offered a $1,000 bribe to the ICE agent. The agent asked the pair to meet for lunch.
According to an ICE official, the ICE agent got approval to wear a microphone. During the meeting, officials say the Halliburton contractor offered the ICE agent a bribe and handed him $1,000. The contractor was arrested and is expected to be charged with bribery. His fianc�e was released and has sought counsel.
Wednesday, December 07, 2005
TownOnline.com - Braintree Forum - Lynch seeks crackdown on bribery, fraud in Iraq contracting
Holbrook's congressman, Stephen F. Lynch, member of the House Subcommittee on National Security, Emerging Threats and International Relations, introduced the "Iraq Contracting Fraud Review Act of 2005" (H.R. 4351), legislation that would ensure greater accountability and transparency in Iraq contracting.
Specifically, Lynch's bill would require the Secretary of Defense to review all Defense Department Iraq reconstruction and troop support contracts involving any contractor, subcontractor, or U.S. official that has been indicted or convicted for related contract illegalities. The bill would also require the secretary to report subsequent findings back to Congress within 180 days.
Lynch's legislation stems from the subcommittee's continuing investigation of documented waste, fraud, and abuse in Iraq reconstruction and troop support contracting and arose in response to the recent federal indictments of a former Halliburton official and subcontractor.
In March of 2005, the Department of Justice announced that Jeffrey Mazon, a former Halliburton procurement manager, and Ali Hijazi, the managing partner of LaNouvelle General Trading and Contracting Company, a Kuwaiti firm and Halliburton subcontractor, had been indicted in relation to a kickback scheme through which the company overcharged the U.S. government by approximately $3.5 million.
During resulting subcommittee hearings, Lynch repeatedly asked Defense Department representatives whether, in light of the indictments, all contracts involving Mazon, Hijazi, or LaNouvelle were being reviewed. Unfortunately, aside from very vague assurances that a contractual review is "ongoing," these officials failed to offer any specifics on the nature, scope, and any results of the work.
According to Lynch, "Our goal with this legislation is to assist in tracking the flow of up to $20 billion that has already been misallocated or unaccounted for in Iraq and ensure greater governmental transparency and accountability as we continue towards the stabilization and reconstruction of Iraq. Regrettably, the extent of financial waste, fraud, and abuse amounts to a lost opportunity to provide meaningful assistance to the Iraqi people and has frustrated our overall policy in Iraq, an effort for which we've sacrificed a great deal financially and, more importantly, the lives of more than 2,000 of our men and women in uniform."
Lynch added, "This is a matter of common sense. Clearly, these indictments have raised significant questions regarding the integrity of other contracts involving these parties, yet a comprehensive contractual review does not appear to be a priority for the Defense Department. It's about time we adopt a real system of accountability."
Specifically, Lynch's bill would promote greater governmental transparency and accountability in Iraq reconstruction contracting by requiring the Secretary of Defense to:
Review all defense contracts (including a task or delivery order contract) entered into on or after March 1, 2003 by the Defense Department that:
Relate to reconstruction or troop support in Iraq; and
Involve any contractor, subcontractor, or federal officer/employee that has been indicted or convicted for fraud or any other violation of federal law with respect to another Defense Department contract relating to reconstruction or troop support in Iraq.
Notify the House Government Reform and Armed Services Committees and Senate Governmental Affairs and Armed Services Committees when the review required by the Act has begun.
Complete the review and submit a subsequent report to the appropriate Committees within 180 days of enactment.
Specifically, Lynch's bill would require the Secretary of Defense to review all Defense Department Iraq reconstruction and troop support contracts involving any contractor, subcontractor, or U.S. official that has been indicted or convicted for related contract illegalities. The bill would also require the secretary to report subsequent findings back to Congress within 180 days.
Lynch's legislation stems from the subcommittee's continuing investigation of documented waste, fraud, and abuse in Iraq reconstruction and troop support contracting and arose in response to the recent federal indictments of a former Halliburton official and subcontractor.
In March of 2005, the Department of Justice announced that Jeffrey Mazon, a former Halliburton procurement manager, and Ali Hijazi, the managing partner of LaNouvelle General Trading and Contracting Company, a Kuwaiti firm and Halliburton subcontractor, had been indicted in relation to a kickback scheme through which the company overcharged the U.S. government by approximately $3.5 million.
During resulting subcommittee hearings, Lynch repeatedly asked Defense Department representatives whether, in light of the indictments, all contracts involving Mazon, Hijazi, or LaNouvelle were being reviewed. Unfortunately, aside from very vague assurances that a contractual review is "ongoing," these officials failed to offer any specifics on the nature, scope, and any results of the work.
According to Lynch, "Our goal with this legislation is to assist in tracking the flow of up to $20 billion that has already been misallocated or unaccounted for in Iraq and ensure greater governmental transparency and accountability as we continue towards the stabilization and reconstruction of Iraq. Regrettably, the extent of financial waste, fraud, and abuse amounts to a lost opportunity to provide meaningful assistance to the Iraqi people and has frustrated our overall policy in Iraq, an effort for which we've sacrificed a great deal financially and, more importantly, the lives of more than 2,000 of our men and women in uniform."
Lynch added, "This is a matter of common sense. Clearly, these indictments have raised significant questions regarding the integrity of other contracts involving these parties, yet a comprehensive contractual review does not appear to be a priority for the Defense Department. It's about time we adopt a real system of accountability."
Specifically, Lynch's bill would promote greater governmental transparency and accountability in Iraq reconstruction contracting by requiring the Secretary of Defense to:
Review all defense contracts (including a task or delivery order contract) entered into on or after March 1, 2003 by the Defense Department that:
Relate to reconstruction or troop support in Iraq; and
Involve any contractor, subcontractor, or federal officer/employee that has been indicted or convicted for fraud or any other violation of federal law with respect to another Defense Department contract relating to reconstruction or troop support in Iraq.
Notify the House Government Reform and Armed Services Committees and Senate Governmental Affairs and Armed Services Committees when the review required by the Act has begun.
Complete the review and submit a subsequent report to the appropriate Committees within 180 days of enactment.
Friday, December 02, 2005
The Raw Story | Congressman says Pentagon auditors found Halliburton paid $130 million for 'unsupported' charges
Filed by RAW STORY
Congressman Henry Waxman (D-CA), the ranking Democrat on the House Government Reform Committee has disclosed that Halliburton received $130 million for charges that the Pentagon's own auditors had found to be "unsupported," RAW STORY has learned.
Waxman disclosed the information in a letter to Rep. Tom Davis (R-VA), the Republican chairman of the Government Reform Committee, in which he called on Rep. Davis to convene hearings.
Waxman's letter follows, slightly abbreviated.
#
The Honorable Tom Davis
Chairman
Committee on Government Reform
U.S. House of Representatives
Washington, DC 20515
Dear Mr. Chairman:
I am writing to request a hearing on the decision by the Army Corps of Engineers to pay Halliburton $130 million in cost reimbursements, profits, and bonuses for billings that Defense Department auditors determined to be unreasonable and unsupported. The Committee should also insist that the Corps of Engineers provide the award fee documentation for Halliburton's contract that we requested in April.
The payments in question were made under the no-bid Restore Iraqi Oil (RIO) contract, which Halliburton was awarded in March 2003. Under the contract, the Defense Department issued ten task orders to Halliburton for oil-related work in Iraq, including the importation of fuel and the repair of oil facilities. Halliburton charged over $2.5 billion for this work, which is now complete. Because RIO is a cost-plus contract, Halliburton is reimbursed for its costs and then receives additional profits and bonuses. The profits are based on a negotiated estimate of the contract costs, known as a "definitization." Under the RIO contract, Halliburton receives 2% of the definitized costs as an automatic base fee and up to 5% of the definitized costs as an additional award fee bonus. Based on considerations such as cost control and performance, a government award fee board or official determines what percentage bonus, if any, Halliburton should receive under each task order.
Recently, without any announcement, the Corps of Engineers posted on its website the definitized value of six RIO task orders and the amount of Halliburton's fees and bonuses under each of these task orders. The posted information reveals that the Corps of Engineers appears to have ignored auditor findings in three ways: by reimbursing Halliburton for costs determined to be unreasonable or unsupported, by permitting Halliburton to collect profits on these challenged costs, and by giving Halliburton unwarranted bonuses.
Pentagon auditors identified $169 million in excessive and unsubstantiated costs under the six task orders. The auditors found Halliburton's fuel importation and other costs to be unreasonably high and determined that Halliburton's cost proposals were "not acceptable for negotiation of a fair and reasonable price." As a result, the auditors recommended that Halliburton not be reimbursed for these costs and not receive profits on them.
It now appears, however, that the Corps rejected the auditor findings and paid Halliburton for $124 million of the challenged costs. Although between 60% and 70% of costs challenged by Pentagon auditors are typically sustained, the Corps sustained only 27% of the challenged costs in this case. The Administration has offered no explanation for this decision to pay three-quarters of Halliburton's challenged costs.
Moreover, because RIO is a cost-plus contract, the decision to pay Halliburton for these challenged costs increased the company's profits by millions of dollars. Under the RIO contract, Halliburton received a larger base fee because the pool of definitized costs is larger. In this case, Halliburton was paid $2.5 million in base fee profits for billings that Pentagon auditors challenged.
Compounding these egregious payments, it appears that the Corps also gave Halliburton million-dollar bonuses for overbilling the taxpayers. Two factors determine the size of Halliburton's award-fee bonus: the percentage of the award fee provided to Halliburton and the value of the definitized task orders. In this case, both appear to be inflated, with Halliburton receiving bonus awards of up to 3.4% on the challenged costs being reimbursed. In fact, given Halliburton's track record of overcharging the government, the entire $38 million in bonuses awarded to Halliburton under the six task orders is questionable.
The decisions by the Corps of Engineers seem inexplicable. For many months, Pentagon auditors have criticized Halliburton's cost estimation systems as "inadequate" and its fuel charges as "unreasonable." Our Committee should require the Corps to explain why it decided to reimburse Halliburton for challenged costs, to permit Halliburton to collect profits on challenged costs, and to give Halliburton large bonuses as a reward. With reimbursement and fee decisions still pending on four other RIO task orders, it is important that we receive prompt answers.
Background
On March 8, 2003, the U.S. Army Corps of Engineers awarded Halliburton subsidiary KBR a no-bid monopoly contract to restore and operate Iraq's oil infrastructure. The contract was awarded in secret, and other qualified companies, like Bechtel, which did most of the oilfield work after the first Gulf War, were precluded from bidding.[1] Halliburton received the contract because it had previously been awarded a task order to prepare a contingency plan for Iraq's oil sector. The Government Accountability Office later investigated the award of the contingency contract and concluded that it was not "in accordance with legal requirements" because "preparation of the contingency support plan for this mission was beyond the scope of the contract."[2] GAO added that the work "should have been awarded using competitive procedures."[3]
Halliburton charged approximately $2.5 billion under the RIO contract, which had a potential value of $7 billion.[4] The Corps of Engineers issued ten different task orders under the RIO contract. Work has now concluded on all ten task orders.
Halliburton's work was split generally between oil infrastructure projects and fuel importation tasks: Task Orders 1, 2, 3, 4, and 6 related to various oil infrastructure projects, while Task Orders 5, 7, 8, 9, and 10 involved the importation of fuel from Kuwait, Turkey, and Jordan. The majority of Halliburton's charges under this contract were for fuel importation and distribution. Halliburton charged approximately $1.5 billion for fuel work and $1 billion for infrastructure work.[5] There were two sources of funding for this work: approximately $875 million came from U.S. taxpayer funds and $1.64 billion came from Iraqi oil proceeds and other funds in the U.S.-controlled Development Fund for Iraq.[6]
RIO is a "cost-plus" contract, meaning that Halliburton is reimbursed for its costs and then receives additional profits and bonuses. The profits are based on a negotiated estimate of the contract costs. The process by which the government and Halliburton agree on a cost estimate for each task order is called "definitization." Under the RIO contract, Halliburton receives 2% of the definitized costs as an automatic base fee and up to an additional 5% of the definitized costs as an optional award fee bonus. A government award fee board or award fee determination official considers factors such as cost control and performance to determine what bonus percentage between 0% and 5% Halliburton should receive under each task order.[7]
Audit Findings
Rep. John Dingell and I began to raise questions about Halliburton's RIO contract immediately after the contract was awarded in March 2003.[8] In a series of letters, we expressed concern about the exorbitant prices of Halliburton's fuel imports from Kuwait. We reported that Halliburton appeared to be charging twice as much as it should have for fuel imports,[9] and we cited independent experts who characterized Halliburton's charges as "highway robbery" and "outrageously high."[10]
Our concerns about Halliburton's inflated costs were validated by Pentagon auditors. In December 2003, the Defense Contract Audit Agency (DCAA) announced at a press conference that it had completed a preliminary draft audit of Halliburton's fuel importation work. DCAA auditors found that Halliburton had overcharged the U.S. government by as much as $61 million for gasoline imported from Kuwait into Iraq.[11] This audit was preliminary, however, and covered only the period until September 30, 2003.
In 2004 and 2005, DCAA completed final audits of each of the ten task orders. In this series of audits, DCAA identified $219 million in "questioned" costs under the entire RIO contract.[12] DCAA determined that all of these costs were unreasonably high. DCAA also identified $60 million in "unsupported" charges under the RIO contract.[13]
DCAA auditors found unreasonable costs for Kuwaiti fuel under all of Halliburton's fuel importation task orders. The auditors criticized Halliburton for failing to negotiate better pricing for the fuel and transportation costs, concluding that Halliburton failed to provide "adequate documentation to demonstrate the reasonableness of the Kuwait fuel prices over the life of the purchase orders."[14]
The auditors also repeatedly criticized Halliburton for making unnecessary retroactive payments to its Turkish fuel subcontractors. DCAA noted that Halliburton had negotiated "fixed-unit-rate" and "firm-fixed-price" subcontracts with various Turkish subcontractors to import fuel into Iraq. During the term of these subcontracts, the market price of the fuel increased. DCAA reported that the Turkish companies asked Halliburton "to increase the unit price of the fuel to compensate for losses due to market increases."[15] According to DCAA, Halliburton "agreed to pay the higher prices retroactively."[16] DCAA concluded: "We do not believe it was appropriate to retroactively adjust the fuel unit prices of KBR's fixed-unit-rate and firm-fixed-price subcontracts when there are no provisions in the subcontracts to do so."[17]
All the DCAA audits reported that Halliburton's proposals were "not acceptable for negotiation of a fair and reasonable price."[18] DCAA found that Halliburton's cost and pricing submissions were "not adequate" because "proposed" costs "exceed recorded costs," because Halliburton's proposals "did not contain data to support the reasonableness of the negotiated purchase orders," and because they were not prepared "in accordance with applicable Cost Accounting Standards and appropriate provisions of FAR," the Federal Acquisition Regulation.[19]
Moreover, DCAA criticized Halliburton for producing inadequate cost estimates for definitization. On December 31, 2003, DCAA issued a "Flash Report," alerting various Defense Department agencies about "significant deficiencies" in Halliburton's cost estimating system.[20] According to the auditors, these deficiencies "could adversely affect the organization's ability to propose subcontract costs in a manner consistent with applicable government contract laws and regulations."[21] On August 4, 2004, DCAA found Halliburton's "estimating system to be inadequate for providing verifiable, supportable, and documented cost estimates that are acceptable for negotiating a fair and reasonable price."[22]
I released a report in July 2004 with additional information about Halliburton's inflated gasoline charges. This report compared the price charged by Halliburton to import gasoline from Kuwait to Iraq with the costs incurred by the Pentagon's fuel importation office, the Defense Energy Support Center (DESC), to perform the same task. Because DESC assumed Halliburton's fuel importation responsibilities on April 1, 2004, a direct "apples-to-apples" price comparison could be made. The report found that Halliburton charged more to purchase fuel than DESC, three times as much to transport the fuel into Iraq, and 40 times as much to cover its fees and markups.[23]
On April 15, 2005, the Committee requested award fee determinations and related documents for a number of Iraq contracts.[24] After meeting with Committee staff, the Defense Department provided the requested information for 20 contracts.[25] However, the Department still has not provided the requested compensation documentation for the RIO contract.
Halliburton's Reimbursements, Profits, and Bonuses
On November 3, 2005, without any announcement, the Corps of Engineers posted on its website the definitized value of six RIO task orders and the amount of Halliburton's base and award fees under each of these task orders.[26] Information was posted for Task Orders 1, 2, 4, 5, 6, and 7. Together, these task orders are worth over $1.5 billion, or about 60% of the total value of the RIO contract.[27] Information for Task Orders 3, 8, 9, and 10 was not posted.
For these six task orders, DCAA had identified $169 million in questioned and unsupported costs.[28] The auditors recommended that Halliburton not be reimbursed for or receive profits on these costs.
The posted information reveals that the Corps of Engineers appears to have ignored the findings of the Defense Department's own auditors. According to the information from the Corps, the agency reimbursed Halliburton for unreasonably high costs challenged by auditors, allowed Halliburton to collect profits on these challenged costs, and even gave Halliburton a substantial bonus.
Instead of disallowing the costs challenged by DCAA, the Corps largely ignored the Pentagon auditors and reimbursed Halliburton for $124 million in questioned or unsupported costs.[29] This represents 73% of the $169 million in costs challenged by the auditors under these task orders. These figures are shown in Table A.
Historically, between 60% and 70% of DCAA's challenged costs have been sustained. But in this case, the Corps sustained only 27% of the challenged costs. On Task Order 7, one of the large fuel importation task orders, the Corps upheld just 8% of the costs challenged by auditors.
In addition to reimbursing Halliburton for challenged costs, the Corps also allowed Halliburton to profit from the challenged costs. Because Halliburton's pool of definitized costs includes $124 million in challenged costs, Halliburton's 2% base fee is larger than it should be. The company will automatically receive $2.5 million in profits for costs Pentagon auditors found to be unreasonably high or unsubstantiated.
Finally, the Corps gave Halliburton a large bonus for the costs challenged by the Department's auditors. For each task order, Halliburton's award fee bonus depends on two determinations: the percentage bonus awarded to Halliburton and the definitized value of each task order. Under the RIO contract, the Halliburton can receive a bonus fee of up to 5% of the definitized value of a task order. The bonus percentage selected by the award fee board or determination official is multiplied by the definitized value to produce the final bonus award.
Ironically, Halliburton received some of its highest bonuses for projects with the most inflated costs. On the two fuel importation task orders, Task Orders 5 and 7, the company was given an award fee of 3% despite repeated auditor findings of unreasonable charges for Kuwaiti fuel and improper overpayments to Turkish subcontractors. In fact, although Halliburton's fuel costs were deemed unreasonable by DCAA and have been the subject of widespread criticism, over $36 million of the $38 million bonus awarded to Halliburton are for these fuel task orders.
In total, Halliburton received reimbursements worth $124 million, base-fee profits worth $2.5 million, and bonuses worth $3.4 million for the specific charges challenged by DCAA. Given that Halliburton's entitlement to any bonuses could be called into question by its pattern of unreasonable billings, the company's entire bonus of $38 million for the six task orders is also suspect.
Conclusion
The Administration has consistently asserted that cost-plus contracts protect the taxpayer because the government can use the prospect of raising or lowering award fees to encourage "effective control of costs" by the contractor.[30] Clearly this has not occurred with the RIO contract. Rather than relying on the findings of its own auditors, the Pentagon reimbursed Halliburton for $124 million in costs that the auditors determined to be excessive or unsupported. And rather than holding Halliburton accountable for squandering taxpayer and Iraqi funds, the Administration rewarded Halliburton with large bonuses and special treatment.
The Committee on Government Reform has held no full Committee hearings on Iraq this Congress. In light of the mounting reconstruction problems in Iraq and the questions raised in this letter, the Committee should initiate a series of hearings into contracting in Iraq, starting with a hearing to investigate the federal payments to Halliburton. In order to adequately prepare for these hearings, we should also insist that the Pentagon produce the detailed RIO compensation determination documents previously requested by the Committee. We cannot allow the Administration to waste additional taxpayer dollars paying Halliburton's inflated costs and undeserved profits on the remaining four RIO task orders.
Sincerely,
Henry A. Waxman
Congressman Henry Waxman (D-CA), the ranking Democrat on the House Government Reform Committee has disclosed that Halliburton received $130 million for charges that the Pentagon's own auditors had found to be "unsupported," RAW STORY has learned.
Waxman disclosed the information in a letter to Rep. Tom Davis (R-VA), the Republican chairman of the Government Reform Committee, in which he called on Rep. Davis to convene hearings.
Waxman's letter follows, slightly abbreviated.
#
The Honorable Tom Davis
Chairman
Committee on Government Reform
U.S. House of Representatives
Washington, DC 20515
Dear Mr. Chairman:
I am writing to request a hearing on the decision by the Army Corps of Engineers to pay Halliburton $130 million in cost reimbursements, profits, and bonuses for billings that Defense Department auditors determined to be unreasonable and unsupported. The Committee should also insist that the Corps of Engineers provide the award fee documentation for Halliburton's contract that we requested in April.
The payments in question were made under the no-bid Restore Iraqi Oil (RIO) contract, which Halliburton was awarded in March 2003. Under the contract, the Defense Department issued ten task orders to Halliburton for oil-related work in Iraq, including the importation of fuel and the repair of oil facilities. Halliburton charged over $2.5 billion for this work, which is now complete. Because RIO is a cost-plus contract, Halliburton is reimbursed for its costs and then receives additional profits and bonuses. The profits are based on a negotiated estimate of the contract costs, known as a "definitization." Under the RIO contract, Halliburton receives 2% of the definitized costs as an automatic base fee and up to 5% of the definitized costs as an additional award fee bonus. Based on considerations such as cost control and performance, a government award fee board or official determines what percentage bonus, if any, Halliburton should receive under each task order.
Recently, without any announcement, the Corps of Engineers posted on its website the definitized value of six RIO task orders and the amount of Halliburton's fees and bonuses under each of these task orders. The posted information reveals that the Corps of Engineers appears to have ignored auditor findings in three ways: by reimbursing Halliburton for costs determined to be unreasonable or unsupported, by permitting Halliburton to collect profits on these challenged costs, and by giving Halliburton unwarranted bonuses.
Pentagon auditors identified $169 million in excessive and unsubstantiated costs under the six task orders. The auditors found Halliburton's fuel importation and other costs to be unreasonably high and determined that Halliburton's cost proposals were "not acceptable for negotiation of a fair and reasonable price." As a result, the auditors recommended that Halliburton not be reimbursed for these costs and not receive profits on them.
It now appears, however, that the Corps rejected the auditor findings and paid Halliburton for $124 million of the challenged costs. Although between 60% and 70% of costs challenged by Pentagon auditors are typically sustained, the Corps sustained only 27% of the challenged costs in this case. The Administration has offered no explanation for this decision to pay three-quarters of Halliburton's challenged costs.
Moreover, because RIO is a cost-plus contract, the decision to pay Halliburton for these challenged costs increased the company's profits by millions of dollars. Under the RIO contract, Halliburton received a larger base fee because the pool of definitized costs is larger. In this case, Halliburton was paid $2.5 million in base fee profits for billings that Pentagon auditors challenged.
Compounding these egregious payments, it appears that the Corps also gave Halliburton million-dollar bonuses for overbilling the taxpayers. Two factors determine the size of Halliburton's award-fee bonus: the percentage of the award fee provided to Halliburton and the value of the definitized task orders. In this case, both appear to be inflated, with Halliburton receiving bonus awards of up to 3.4% on the challenged costs being reimbursed. In fact, given Halliburton's track record of overcharging the government, the entire $38 million in bonuses awarded to Halliburton under the six task orders is questionable.
The decisions by the Corps of Engineers seem inexplicable. For many months, Pentagon auditors have criticized Halliburton's cost estimation systems as "inadequate" and its fuel charges as "unreasonable." Our Committee should require the Corps to explain why it decided to reimburse Halliburton for challenged costs, to permit Halliburton to collect profits on challenged costs, and to give Halliburton large bonuses as a reward. With reimbursement and fee decisions still pending on four other RIO task orders, it is important that we receive prompt answers.
Background
On March 8, 2003, the U.S. Army Corps of Engineers awarded Halliburton subsidiary KBR a no-bid monopoly contract to restore and operate Iraq's oil infrastructure. The contract was awarded in secret, and other qualified companies, like Bechtel, which did most of the oilfield work after the first Gulf War, were precluded from bidding.[1] Halliburton received the contract because it had previously been awarded a task order to prepare a contingency plan for Iraq's oil sector. The Government Accountability Office later investigated the award of the contingency contract and concluded that it was not "in accordance with legal requirements" because "preparation of the contingency support plan for this mission was beyond the scope of the contract."[2] GAO added that the work "should have been awarded using competitive procedures."[3]
Halliburton charged approximately $2.5 billion under the RIO contract, which had a potential value of $7 billion.[4] The Corps of Engineers issued ten different task orders under the RIO contract. Work has now concluded on all ten task orders.
Halliburton's work was split generally between oil infrastructure projects and fuel importation tasks: Task Orders 1, 2, 3, 4, and 6 related to various oil infrastructure projects, while Task Orders 5, 7, 8, 9, and 10 involved the importation of fuel from Kuwait, Turkey, and Jordan. The majority of Halliburton's charges under this contract were for fuel importation and distribution. Halliburton charged approximately $1.5 billion for fuel work and $1 billion for infrastructure work.[5] There were two sources of funding for this work: approximately $875 million came from U.S. taxpayer funds and $1.64 billion came from Iraqi oil proceeds and other funds in the U.S.-controlled Development Fund for Iraq.[6]
RIO is a "cost-plus" contract, meaning that Halliburton is reimbursed for its costs and then receives additional profits and bonuses. The profits are based on a negotiated estimate of the contract costs. The process by which the government and Halliburton agree on a cost estimate for each task order is called "definitization." Under the RIO contract, Halliburton receives 2% of the definitized costs as an automatic base fee and up to an additional 5% of the definitized costs as an optional award fee bonus. A government award fee board or award fee determination official considers factors such as cost control and performance to determine what bonus percentage between 0% and 5% Halliburton should receive under each task order.[7]
Audit Findings
Rep. John Dingell and I began to raise questions about Halliburton's RIO contract immediately after the contract was awarded in March 2003.[8] In a series of letters, we expressed concern about the exorbitant prices of Halliburton's fuel imports from Kuwait. We reported that Halliburton appeared to be charging twice as much as it should have for fuel imports,[9] and we cited independent experts who characterized Halliburton's charges as "highway robbery" and "outrageously high."[10]
Our concerns about Halliburton's inflated costs were validated by Pentagon auditors. In December 2003, the Defense Contract Audit Agency (DCAA) announced at a press conference that it had completed a preliminary draft audit of Halliburton's fuel importation work. DCAA auditors found that Halliburton had overcharged the U.S. government by as much as $61 million for gasoline imported from Kuwait into Iraq.[11] This audit was preliminary, however, and covered only the period until September 30, 2003.
In 2004 and 2005, DCAA completed final audits of each of the ten task orders. In this series of audits, DCAA identified $219 million in "questioned" costs under the entire RIO contract.[12] DCAA determined that all of these costs were unreasonably high. DCAA also identified $60 million in "unsupported" charges under the RIO contract.[13]
DCAA auditors found unreasonable costs for Kuwaiti fuel under all of Halliburton's fuel importation task orders. The auditors criticized Halliburton for failing to negotiate better pricing for the fuel and transportation costs, concluding that Halliburton failed to provide "adequate documentation to demonstrate the reasonableness of the Kuwait fuel prices over the life of the purchase orders."[14]
The auditors also repeatedly criticized Halliburton for making unnecessary retroactive payments to its Turkish fuel subcontractors. DCAA noted that Halliburton had negotiated "fixed-unit-rate" and "firm-fixed-price" subcontracts with various Turkish subcontractors to import fuel into Iraq. During the term of these subcontracts, the market price of the fuel increased. DCAA reported that the Turkish companies asked Halliburton "to increase the unit price of the fuel to compensate for losses due to market increases."[15] According to DCAA, Halliburton "agreed to pay the higher prices retroactively."[16] DCAA concluded: "We do not believe it was appropriate to retroactively adjust the fuel unit prices of KBR's fixed-unit-rate and firm-fixed-price subcontracts when there are no provisions in the subcontracts to do so."[17]
All the DCAA audits reported that Halliburton's proposals were "not acceptable for negotiation of a fair and reasonable price."[18] DCAA found that Halliburton's cost and pricing submissions were "not adequate" because "proposed" costs "exceed recorded costs," because Halliburton's proposals "did not contain data to support the reasonableness of the negotiated purchase orders," and because they were not prepared "in accordance with applicable Cost Accounting Standards and appropriate provisions of FAR," the Federal Acquisition Regulation.[19]
Moreover, DCAA criticized Halliburton for producing inadequate cost estimates for definitization. On December 31, 2003, DCAA issued a "Flash Report," alerting various Defense Department agencies about "significant deficiencies" in Halliburton's cost estimating system.[20] According to the auditors, these deficiencies "could adversely affect the organization's ability to propose subcontract costs in a manner consistent with applicable government contract laws and regulations."[21] On August 4, 2004, DCAA found Halliburton's "estimating system to be inadequate for providing verifiable, supportable, and documented cost estimates that are acceptable for negotiating a fair and reasonable price."[22]
I released a report in July 2004 with additional information about Halliburton's inflated gasoline charges. This report compared the price charged by Halliburton to import gasoline from Kuwait to Iraq with the costs incurred by the Pentagon's fuel importation office, the Defense Energy Support Center (DESC), to perform the same task. Because DESC assumed Halliburton's fuel importation responsibilities on April 1, 2004, a direct "apples-to-apples" price comparison could be made. The report found that Halliburton charged more to purchase fuel than DESC, three times as much to transport the fuel into Iraq, and 40 times as much to cover its fees and markups.[23]
On April 15, 2005, the Committee requested award fee determinations and related documents for a number of Iraq contracts.[24] After meeting with Committee staff, the Defense Department provided the requested information for 20 contracts.[25] However, the Department still has not provided the requested compensation documentation for the RIO contract.
Halliburton's Reimbursements, Profits, and Bonuses
On November 3, 2005, without any announcement, the Corps of Engineers posted on its website the definitized value of six RIO task orders and the amount of Halliburton's base and award fees under each of these task orders.[26] Information was posted for Task Orders 1, 2, 4, 5, 6, and 7. Together, these task orders are worth over $1.5 billion, or about 60% of the total value of the RIO contract.[27] Information for Task Orders 3, 8, 9, and 10 was not posted.
For these six task orders, DCAA had identified $169 million in questioned and unsupported costs.[28] The auditors recommended that Halliburton not be reimbursed for or receive profits on these costs.
The posted information reveals that the Corps of Engineers appears to have ignored the findings of the Defense Department's own auditors. According to the information from the Corps, the agency reimbursed Halliburton for unreasonably high costs challenged by auditors, allowed Halliburton to collect profits on these challenged costs, and even gave Halliburton a substantial bonus.
Instead of disallowing the costs challenged by DCAA, the Corps largely ignored the Pentagon auditors and reimbursed Halliburton for $124 million in questioned or unsupported costs.[29] This represents 73% of the $169 million in costs challenged by the auditors under these task orders. These figures are shown in Table A.
Historically, between 60% and 70% of DCAA's challenged costs have been sustained. But in this case, the Corps sustained only 27% of the challenged costs. On Task Order 7, one of the large fuel importation task orders, the Corps upheld just 8% of the costs challenged by auditors.
In addition to reimbursing Halliburton for challenged costs, the Corps also allowed Halliburton to profit from the challenged costs. Because Halliburton's pool of definitized costs includes $124 million in challenged costs, Halliburton's 2% base fee is larger than it should be. The company will automatically receive $2.5 million in profits for costs Pentagon auditors found to be unreasonably high or unsubstantiated.
Finally, the Corps gave Halliburton a large bonus for the costs challenged by the Department's auditors. For each task order, Halliburton's award fee bonus depends on two determinations: the percentage bonus awarded to Halliburton and the definitized value of each task order. Under the RIO contract, the Halliburton can receive a bonus fee of up to 5% of the definitized value of a task order. The bonus percentage selected by the award fee board or determination official is multiplied by the definitized value to produce the final bonus award.
Ironically, Halliburton received some of its highest bonuses for projects with the most inflated costs. On the two fuel importation task orders, Task Orders 5 and 7, the company was given an award fee of 3% despite repeated auditor findings of unreasonable charges for Kuwaiti fuel and improper overpayments to Turkish subcontractors. In fact, although Halliburton's fuel costs were deemed unreasonable by DCAA and have been the subject of widespread criticism, over $36 million of the $38 million bonus awarded to Halliburton are for these fuel task orders.
In total, Halliburton received reimbursements worth $124 million, base-fee profits worth $2.5 million, and bonuses worth $3.4 million for the specific charges challenged by DCAA. Given that Halliburton's entitlement to any bonuses could be called into question by its pattern of unreasonable billings, the company's entire bonus of $38 million for the six task orders is also suspect.
Conclusion
The Administration has consistently asserted that cost-plus contracts protect the taxpayer because the government can use the prospect of raising or lowering award fees to encourage "effective control of costs" by the contractor.[30] Clearly this has not occurred with the RIO contract. Rather than relying on the findings of its own auditors, the Pentagon reimbursed Halliburton for $124 million in costs that the auditors determined to be excessive or unsupported. And rather than holding Halliburton accountable for squandering taxpayer and Iraqi funds, the Administration rewarded Halliburton with large bonuses and special treatment.
The Committee on Government Reform has held no full Committee hearings on Iraq this Congress. In light of the mounting reconstruction problems in Iraq and the questions raised in this letter, the Committee should initiate a series of hearings into contracting in Iraq, starting with a hearing to investigate the federal payments to Halliburton. In order to adequately prepare for these hearings, we should also insist that the Pentagon produce the detailed RIO compensation determination documents previously requested by the Committee. We cannot allow the Administration to waste additional taxpayer dollars paying Halliburton's inflated costs and undeserved profits on the remaining four RIO task orders.
Sincerely,
Henry A. Waxman
Friday, November 25, 2005
Federal Times | Two charged with Iraq contracting abuses
The government has arrested a contractor and a former federal official on charges of corrupt contracting practices in Iraq.
An American businessman, Philip Bloom, is accused of conspiring with the official to rig the bids on more than $13 million in contracts that he won. He also allegedly paid hundreds of thousands of dollars in gifts to the official and others to win contracts.
The official, Robert Stein, was comptroller and funding officer for the Coalition Provisional Authority in South Central Iraq in 2003 and 2004.
Bloom and Stein are charged with conspiring to commit money laundering and wire fraud in connection with a bribery and fraud scheme, the Justice Department said in a Nov. 17 announcement.
Bloom owned numerous construction and service companies doing business in Iraq. The case is before the U.S. District Court in the District of Columbia.
The Justice Department is weighing another possible criminal case related to Iraq contracting, according to a letter released Nov. 14 by Sen. Byron Dorgan, D-N.D.
Justice is weighing claims by Bunnatine Greenhouse, principal assistant for contracting at the Army Corps of Engineers, of abuses in connection with a contract to Halliburton division Kellogg, Brown and Root, according to the letter to Dorgan from the Defense Department inspector general?s office.
A company spokeswoman, Melissa Norcross, said KBR ?continues to cooperate fully with the Justice Department?s investigation of certain issues pertaining to our work in Iraq? and said the company?s contracting practices are within bounds.
An American businessman, Philip Bloom, is accused of conspiring with the official to rig the bids on more than $13 million in contracts that he won. He also allegedly paid hundreds of thousands of dollars in gifts to the official and others to win contracts.
The official, Robert Stein, was comptroller and funding officer for the Coalition Provisional Authority in South Central Iraq in 2003 and 2004.
Bloom and Stein are charged with conspiring to commit money laundering and wire fraud in connection with a bribery and fraud scheme, the Justice Department said in a Nov. 17 announcement.
Bloom owned numerous construction and service companies doing business in Iraq. The case is before the U.S. District Court in the District of Columbia.
The Justice Department is weighing another possible criminal case related to Iraq contracting, according to a letter released Nov. 14 by Sen. Byron Dorgan, D-N.D.
Justice is weighing claims by Bunnatine Greenhouse, principal assistant for contracting at the Army Corps of Engineers, of abuses in connection with a contract to Halliburton division Kellogg, Brown and Root, according to the letter to Dorgan from the Defense Department inspector general?s office.
A company spokeswoman, Melissa Norcross, said KBR ?continues to cooperate fully with the Justice Department?s investigation of certain issues pertaining to our work in Iraq? and said the company?s contracting practices are within bounds.
Saturday, November 19, 2005
Ex-Halliburton Employee Gets Jail Sentence
Saturday, November 19, 2005
ROCK ISLAND, Ill. - A federal judge sentenced a former employee of a Halliburton subsidiary to 15 months in prison Friday for accepting more than $100,000 in kickbacks from an Iraqi company that was awarded a construction contract in Iraq.
Glenn Allen Powell, 40, of Cedar Park, Texas, was also ordered to pay restitution of $91,000. He pleaded guilty in August to fraud and violating an anti-kickback law.
Prosecutors said he was a subcontracts administrator for Halliburton subsidiary KBR Inc., which provides engineering and other project management services for the military.
In exchange for $110,300 in kickbacks, Powell recommended the Iraqi company for a $609,000 subcontract to renovate four buildings, prosecutors said. They declined to name the company.
An internal investigation by KBR in January uncovered the kickbacks.
Halliburton has said it removed the Iraqi company from its list of subcontractors and gave the military a credit for the amount of the kickback.
The case was prosecuted in Illinois because the Army Field Support Command at the Rock Island Arsenal oversees the military contract with KBR.
A service of the Associated Press(AP)
ROCK ISLAND, Ill. - A federal judge sentenced a former employee of a Halliburton subsidiary to 15 months in prison Friday for accepting more than $100,000 in kickbacks from an Iraqi company that was awarded a construction contract in Iraq.
Glenn Allen Powell, 40, of Cedar Park, Texas, was also ordered to pay restitution of $91,000. He pleaded guilty in August to fraud and violating an anti-kickback law.
Prosecutors said he was a subcontracts administrator for Halliburton subsidiary KBR Inc., which provides engineering and other project management services for the military.
In exchange for $110,300 in kickbacks, Powell recommended the Iraqi company for a $609,000 subcontract to renovate four buildings, prosecutors said. They declined to name the company.
An internal investigation by KBR in January uncovered the kickbacks.
Halliburton has said it removed the Iraqi company from its list of subcontractors and gave the military a credit for the amount of the kickback.
The case was prosecuted in Illinois because the Army Field Support Command at the Rock Island Arsenal oversees the military contract with KBR.
A service of the Associated Press(AP)
Halliburton Allegations Are Sent to Justice Dept.
No-Bid Contracts In Iraq Are at Issue
By Renae Merle
Washington Post Staff Writer
Saturday, November 19, 2005; A15
An investigative arm of the Pentagon has sent an Army Corps of Engineers whistle-blower's allegations of wrongdoing against Halliburton Co. to the Justice Department.
Bunnatine H. Greenhouse was removed from her position as the Corps of Engineers' top procurement official in August after raising concerns over the volume of Iraq-related work given to the Houston-based oil-services giant without competition. She is appealing.
Kellogg, Brown & Root, a Halliburton subsidiary, had a competitively awarded contract to provide logistics support for the military in the Middle East and was awarded a no-bid contract to repair Iraq oil fields.
The Defense Criminal Investigative Service, the criminal investigative arm of the Pentagon inspector general, investigated her charges and "has shared its findings" with the Justice Department, John R. Crane, assistant inspector general, said in a letter to Sen. Byron L. Dorgan (D-N.D.). "The DOJ is in the process of considering whether to pursue the matter," the letter said.
"This is the first evidence that someone is taking seriously these allegations," said Dorgan, chairman of the Democratic Policy Committee, which heard Greenhouse in June.
Two former Halliburton workers have been charged with taking kickbacks while working for the company in the Middle East. And Pentagon auditors have questioned more than $1billion in costs for the company's work there.
"The company continues to cooperate fully with the Justice Department's investigation of certain issues pertaining to our work in Iraq," Halliburton said in a written statement. "As the investigation is ongoing, it would be inappropriate to comment further at this time."
� 2005 The Washington Post Company
By Renae Merle
Washington Post Staff Writer
Saturday, November 19, 2005; A15
An investigative arm of the Pentagon has sent an Army Corps of Engineers whistle-blower's allegations of wrongdoing against Halliburton Co. to the Justice Department.
Bunnatine H. Greenhouse was removed from her position as the Corps of Engineers' top procurement official in August after raising concerns over the volume of Iraq-related work given to the Houston-based oil-services giant without competition. She is appealing.
Kellogg, Brown & Root, a Halliburton subsidiary, had a competitively awarded contract to provide logistics support for the military in the Middle East and was awarded a no-bid contract to repair Iraq oil fields.
The Defense Criminal Investigative Service, the criminal investigative arm of the Pentagon inspector general, investigated her charges and "has shared its findings" with the Justice Department, John R. Crane, assistant inspector general, said in a letter to Sen. Byron L. Dorgan (D-N.D.). "The DOJ is in the process of considering whether to pursue the matter," the letter said.
"This is the first evidence that someone is taking seriously these allegations," said Dorgan, chairman of the Democratic Policy Committee, which heard Greenhouse in June.
Two former Halliburton workers have been charged with taking kickbacks while working for the company in the Middle East. And Pentagon auditors have questioned more than $1billion in costs for the company's work there.
"The company continues to cooperate fully with the Justice Department's investigation of certain issues pertaining to our work in Iraq," Halliburton said in a written statement. "As the investigation is ongoing, it would be inappropriate to comment further at this time."
� 2005 The Washington Post Company
Friday, November 18, 2005
Halliburton Case Is Referred to Justice Dept., Senator Says - New York Times
By ERIK ECKHOLM
Pentagon investigators have referred allegations of abuse in how the Halliburton Company was awarded a contract for work in Iraq to the Justice Department for possible criminal investigation, a Democratic senator who has been holding unofficial hearings on contract abuses in Iraq said yesterday in Washington.
The allegations mainly involve the Army's secret, noncompetitive awarding in 2003 of a multibillion dollar contract for oil field repairs in Iraq to Halliburton, a Texas-based company. The objections were raised publicly last year by Bunnatine H. Greenhouse, then the chief contracts monitor at the Army Corps of Engineers, the government agency that handled the contract and several others in Iraq.
In a letter received and released yesterday by Senator Byron L. Dorgan, Democrat of North Dakota, the assistant Pentagon inspector general, John R. Crane, said that the criminal investigation service of the Defense Department had examined Ms. Greenhouse's allegations "and has shared its findings with the Department of Justice." Senator Dorgan is the chairman of the Democratic Policy Committee, a Congressional group that has repeatedly used unofficial hearings to question the administration's record of awarding contracts in Iraq.
The Justice Department, the letter said, "is in the process of considering whether to pursue the matter."
Ms. Greenhouse, a 20-year veteran of military procurement work, says her objections before the contract was signed were ignored. After internal clashes with officials at the agency and threats of demotion, she went public with her charges in the fall of 2004.
This year, she was demoted in August from the elite Senior Executive Service, on charges of poor performance, and given a lower-ranking job as a project manager. She has filed appeals, but for now "she has no projects to manage and she just sits in the corner," her attorney, Michael Kohn, said yesterday in a telephone interview from Washington. The inspector general's office at the Defense Department had already begun its own investigation of her charges regarding the contracting. Exactly which issues are of most interest to investigators in the Justice Department is unclear. Mr. Crane wrote that he could not provide more details "as this is an ongoing criminal investigation."
Melissa Norcross, a spokeswoman for Halliburton, said in an e-mail message, "The company continues to cooperate fully with the Justice Department's investigation of certain issues pertaining to our work in Iraq."
In letters to senior Army officials and in public testimony, Ms. Greenhouse said that in early 2003 the Corps had violated procedures when it secretly awarded a five-year, potentially $7 billion contract for oil field repairs to a Halliburton subsidiary, Kellogg Brown & Root.
Among other things, the same company had been secretly hired months earlier to draw up a plan for the job, she said. She also said that even if the urgency of war required dispensing with competitive bidding, the duration of the contract should have been shorter. She objected again in December 2003, when officials granted a waiver to Kellogg Brown & Root, approving the high prices it had paid to import fuel from Kuwait. Other Pentagon agencies said the company had paid tens of millions of dollars too much, without offering any justification for the payments.
In her e-mail message, Ms. Norcross said, "KBR will continue to work with our customers and the appropriate government agencies to demonstrate, once and for all, that KBR delivered vital services for the U.S. troops and the Iraqi people within the appropriate bounds of government contracting and at a fair and reasonable cost, given the circumstances."
Pentagon investigators have referred allegations of abuse in how the Halliburton Company was awarded a contract for work in Iraq to the Justice Department for possible criminal investigation, a Democratic senator who has been holding unofficial hearings on contract abuses in Iraq said yesterday in Washington.
The allegations mainly involve the Army's secret, noncompetitive awarding in 2003 of a multibillion dollar contract for oil field repairs in Iraq to Halliburton, a Texas-based company. The objections were raised publicly last year by Bunnatine H. Greenhouse, then the chief contracts monitor at the Army Corps of Engineers, the government agency that handled the contract and several others in Iraq.
In a letter received and released yesterday by Senator Byron L. Dorgan, Democrat of North Dakota, the assistant Pentagon inspector general, John R. Crane, said that the criminal investigation service of the Defense Department had examined Ms. Greenhouse's allegations "and has shared its findings with the Department of Justice." Senator Dorgan is the chairman of the Democratic Policy Committee, a Congressional group that has repeatedly used unofficial hearings to question the administration's record of awarding contracts in Iraq.
The Justice Department, the letter said, "is in the process of considering whether to pursue the matter."
Ms. Greenhouse, a 20-year veteran of military procurement work, says her objections before the contract was signed were ignored. After internal clashes with officials at the agency and threats of demotion, she went public with her charges in the fall of 2004.
This year, she was demoted in August from the elite Senior Executive Service, on charges of poor performance, and given a lower-ranking job as a project manager. She has filed appeals, but for now "she has no projects to manage and she just sits in the corner," her attorney, Michael Kohn, said yesterday in a telephone interview from Washington. The inspector general's office at the Defense Department had already begun its own investigation of her charges regarding the contracting. Exactly which issues are of most interest to investigators in the Justice Department is unclear. Mr. Crane wrote that he could not provide more details "as this is an ongoing criminal investigation."
Melissa Norcross, a spokeswoman for Halliburton, said in an e-mail message, "The company continues to cooperate fully with the Justice Department's investigation of certain issues pertaining to our work in Iraq."
In letters to senior Army officials and in public testimony, Ms. Greenhouse said that in early 2003 the Corps had violated procedures when it secretly awarded a five-year, potentially $7 billion contract for oil field repairs to a Halliburton subsidiary, Kellogg Brown & Root.
Among other things, the same company had been secretly hired months earlier to draw up a plan for the job, she said. She also said that even if the urgency of war required dispensing with competitive bidding, the duration of the contract should have been shorter. She objected again in December 2003, when officials granted a waiver to Kellogg Brown & Root, approving the high prices it had paid to import fuel from Kuwait. Other Pentagon agencies said the company had paid tens of millions of dollars too much, without offering any justification for the payments.
In her e-mail message, Ms. Norcross said, "KBR will continue to work with our customers and the appropriate government agencies to demonstrate, once and for all, that KBR delivered vital services for the U.S. troops and the Iraqi people within the appropriate bounds of government contracting and at a fair and reasonable cost, given the circumstances."
Tuesday, November 15, 2005
Salon.com News | Gulf Coast slaves
Halliburton and its subcontractors hired hundreds of undocumented Latino workers to clean up after Katrina -- only to mistreat them and throw them out without pay.
By Roberto Lovato
Nov. 15, 2005 | Arnulfo Martinez recalls seeing lots of hombres del ejercito standing at attention. Though he was living on the Belle Chasse Naval Base near New Orleans when President Bush spoke there on Oct. 11, he didn't understand anything the ruddy man in the rolled-up sleeves was saying to the troops.
Martinez, 16, speaks no English; his mother tongue is Zapotec. He had left the cornfields of Oaxaca, Mexico, four weeks earlier for the promise that he would make $8 an hour, plus room and board, while working for a subcontractor of KBR, a wholly owned subsidiary of Halliburton that was awarded a major contract by the Bush administration for disaster relief work. The job was helping to clean up a Gulf Coast naval base in the region devastated by Hurricane Katrina. "I was cleaning up the base, picking up branches and doing other work," Martinez said, speaking to me in broken Spanish.
Even if the Oaxacan teenager had understood Bush when he urged Americans that day to "help somebody find shelter or help somebody find food," he couldn't have known that he'd soon need similar help himself. But three weeks after arriving at the naval base from Texas, Martinez's boss, Karen Tovar, a job broker from North Carolina who hired workers for a KBR subcontractor called United Disaster Relief, booted him from the base and left him homeless, hungry and without money.
"They gave us two meals a day and sometimes only one," Martinez said.
He says that Tovar "kicked us off the base," forcing him and other cleanup workers -- many of them Mexican and undocumented -- to sleep on the streets of New Orleans. According to Martinez, they were not paid for three weeks of work. An immigrant rights group recently filed complaints with the Department of Labor on behalf of Martinez and 73 other workers allegedly owed more than $56,000 by Tovar. Tovar claims that she let the workers go because she was not paid by her own bosses at United Disaster Relief. In turn, UDR manager Zachary Johnson, who declined to be interviewed for this story, told the Washington Post on Nov. 4 that his company had not been paid by KBR for two months.
Wherever the buck may stop along the chain of subcontractors, Martinez is stuck at the short end of it -- and his situation is typical among many workers hired by subcontractors of KBR (formerly known as Kellogg Brown & Root) to clean and rebuild Belle Chasse and other Gulf Coast military bases. Immigrants rights groups and activists like Bill Chandler, president of the Mississippi Immigrant Rights Alliance, estimate that hundreds of undocumented workers are on the Gulf Coast military bases, a claim that the military and Halliburton/KBR deny -- even after the Immigration and Customs Enforcement agency turned up undocumented workers in a raid of the Belle Chasse facility last month. Visits to the naval bases and dozens of interviews by Salon confirm that undocumented workers are in the facilities. Still, tracing the line from unpaid undocumented workers to their multibillion-dollar employers is a daunting task. A shadowy labyrinth of contractors, subcontractors and job brokers, overseen by no single agency, have created a no man's land where nobody seems to be accountable for the hiring -- and abuse -- of these workers.
Right after Katrina barreled through the Gulf Coast, the Bush administration relaxed labor standards, creating conditions for rampant abuse, according to union leaders and civil rights advocates. Bush suspended the Davis-Bacon Act, which requires employers to pay "prevailing wages" for labor used to fulfill government contracts. The administration also waived the requirement for contractors rebuilding the Gulf Coast to provide valid I-9 employment eligibility forms completed by their workers. These moves allowed Halliburton/KBR and its subcontractors to hire undocumented workers and pay them meager wages (regardless of what wages the workers may have otherwise been promised). The two policies have recently been reversed in the face of sharp political pressure: Bush reinstated the Davis-Bacon Act on Nov. 3, while the Department of Homeland Security reinstated the I-9 requirements in late October, noting that it would once again "exercise prosecutorial discretion" of employers in violation "on a case-by-case basis." But critics say Bush's policies have already allowed extensive profiteering beneath layers of legal and political cover.
Halliburton/KBR, which enjoys an array of federal contracts in the United States, Iraq and Guant?namo Bay, Cuba, has long drawn criticism for its proximity to Vice President Dick Cheney, formerly Halliburton's CEO. Halliburton/KBR spokesperson Melissa Norcross declined to respond directly to allegations about undocumented workers in the Gulf. "In performing work for the U.S. government, KBR uses its government-approved procurement system to source and retain qualified subcontractors," she said in an e-mail. "KBR's subcontractors are required to comply with all applicable labor laws and provisions when performing this work."
Victoria Cintra is the Gulf Coast outreach organizer for Mississippi Immigrant Rights Alliance, which recently partnered with relief agency Oxfam America to help immigrant workers displaced by Katrina. She says KBR is exposing undocumented workers like Martinez to unethical and illegal treatment, even though they are supposed to be paid with federal Katrina-recovery dollars to clean and rebuild high-security facilities like the one President Bush recently visited. Cintra is one of several people fighting to recover the wages owed the workers: She drives her beat-up, chocolate-colored car across the swamps, damaged roads and broken bridges of the Gulf Coast to track down contractors and subcontractors. With yellow legal pad in hand, she and other advocates document abuses taking place at Belle Chasse, the Naval Construction Battalion Center at the Seabee naval base in Gulfport, Miss., and other military installations.
I was with Cintra when she received phone calls from several Latino workers who complained they were denied, under threat of deportation, the right to leave the base at Belle Chasse. Cintra also took me along on visits to squalid trailer parks -- like the one at Arlington Heights in Gulfport -- where up to 19 unpaid, unfed and undocumented KBR site workers inhabited a single trailer for $70 per person, per week. Workers there and on the bases complained of suffering from diarrhea, sprained ankles, cuts and bruises, and other injuries sustained on the KBR sites -- where they received no medical assistance, despite being close to medical facilities on the same bases they were cleaning and helping rebuild.
Cintra and other critics say there's been no accountability from the corporate leaders who signed on the dotted line when they were awarded multimillion-dollar Department of Defense contracts. "The workers may be hired by the subcontractors," Cintra says, "but KBR is ultimately responsible."
"Latino workers are being invited to New Orleans and the South without the proper conditions to protect them," adds Cintra, who recently provided tents to Martinez and several other unpaid Mexican workers who fled Belle Chasse for Gulfport after being dismissed by Tovar. Cintra, a Cuban exile and born-again Christian, has since seen a small tent city of homeless immigrants spring up in the yard of her church, Pass Road Baptist, in Gulfport. "This is evil on top of evil on top of evil," she says. "The Bush administration and Halliburton have opened up a Pandora's box that's not going to close now."
Halliburton/KBR is the general contractor with overarching responsibility for the federal cleanup contracts covering Katrina-damaged naval bases. Even so, there is an utter lack of transparency with the process -- and that invites malfeasance, says James Hale, a vice president of the Laborers' International Union of North America. "To my knowledge, not one member of Congress has been able to get their hands on a copy of a contract that was handed out to Halliburton or others," Hale says. "There is no central registry of Katrina contracts available. No data on the jobs or scope of the work." Hale says that his union's legislative staff has pressed members of Congress for more information; apparently the legislators were told that they could not get copies of the contracts because of "national security" concerns.
"If the contracts handed out to these primary contractors are opaque, then the contracts being let to the subcontractors are just plain invisible," Hale says. "There is simply no ability to ascertain or monitor the contractor-subcontractor relationships. This is an open invitation for exploitation, fraud and abuse."
Congress has heard a number of complaints recently about Halliburton/KBR's hiring practices, including the alleged exploitation of Filipino, Sri Lankan, Nepalese and other immigrant workers paid low wages on military installations in Iraq. And KBR subcontractor BE&K was a focus of Senate hearings in October, for the firing of 75 local Belle Chasse workers who said that they were replaced by "unskilled, out-of-state, out-of-country" workers earning $8 to $14 for work that typically paid $22 an hour.
Sen. Mary Landrieu, D-La., who has been an outspoken critic of the use of undocumented workers at Belle Chasse and on other Katrina cleanup jobs, said in a recent statement, "It is a downright shame that any contractor would use this tragedy as an opportunity to line its pockets by breaking the law and hiring a low-skilled, low-wage and undocumented work force."
Sen. Carl Levin, D-Mich., is also against the practice, citing its "serious social ramifications." As he told Salon, it devastates "local workers who have been hit twice, because they lost their homes."
Seventeen-year-old Simitrio Martinez (no relation to Arnulfo) is another one of the dozens of workers originally hired by Tovar, the North Carolina job broker working under KBR. "They were going to pay seven dollars an hour, and the food was going to be free, and rent, but they gave us nothing," says the thin Zapotec teenager. Simitrio spent nearly a month at the Seabee base. "They weren't feeding us. We ate cookies for five days. Cookies, nothing else," he says.
Simitrio, his co-workers, and the dozens of KBR subcontractors that employ them operate under public-private agreements like federal Task Order 0017, which defines the scope of work to be fulfilled under the contracts. Under the multimillion-dollar Department of Defense contract, KBR is supposed to provide services for "Hurricane Katrina stabilization and recovery at Naval Air Station Pascagoula, Naval Air Station Gulfport, Stennis Space Center and other Navy installations in the Southeast Region," according to a Defense Department press release.
But the details of the agreements remain murky. "Not only is it very difficult to see the actual signed DoD contracts, but it is nearly impossible to see the actual task orders, which assign the goods or services the government is buying," says Scott Amey, general counsel for the Project on Government Oversight in Washington. The military can ask for goods and services on an as-needed basis, he says, which means that the contracts, which add up to tens of millions of dollars, can remain open ended. According to DoD press statements, the contracts call for considerable manual labor, including "re-roofing of most buildings, barracks, debris removal from the entire base, water mitigation, mold mitigation, interior and exterior repairs to most buildings, waste treatment plants, and all incidental related work."
Simitrio and any other workers on the high-security military bases must get permission before entering the guarded gates, where they get patted down by M-16-wielding military police. Responsibility for getting private-sector construction and cleanup workers on the bases rests with the general contractor -- in KBR's case, security chief Kevin Flynn. One of Flynn's responsibilities is to negotiate passes and entry for KBR subcontractors -- and their hires -- to do the work stipulated by the task order.
Yet, following several complaints by Landrieu, and just a few days after President Bush visited the Belle Chasse base, agents from the Immigration and Customs Enforcement agency raided the facility and detained 10 workers who ICE spokeswoman Jamie Zuieback said had "questionable" documentation.
Representatives of Halliburton/KBR do not acknowledge the existence of undocumented workers providing labor for their operations on the Gulf Coast bases. Flynn suggested speaking to the U.S. military, who he said "has real strict control" and would know whether there were undocumented workers. "We have workers from all ethnic groups on the base," Flynn said. "To the best of my knowledge, there are no undocumented workers."
Steve Romano, head of housing on the Belle Chasse base, said, "We have no relationship with [KBR] at all. I have no idea what that's about." A similar response was given by an official at the base's health facility when asked about undocumented workers who complained about health issues and injuries sustained on the KBR sites. The only military person to acknowledge seeing Latino workers was a watch commander who greeted me at an entry to the base. The commander estimated there were 100 such workers there. Meanwhile, representatives with the Mississippi Immigrant Rights Alliance say they received calls from undocumented workers at Belle Chasse who estimated there were more than 500, or "about eight busloads" of immigrant workers on-site.
Texas-based DRS Cosmotech is another subcontractor that provided cleanup crews to Halliburton/KBR in the Gulf. Roy Lee Donaldson, CEO of the company, refused to respond to accusations of non-payment and exploitation leveled at his company by several workers, including 55-year-old Felipe Reyes of Linares, Nuevo Leon, Mexico. (Donaldson hung up the phone when I identified myself as a reporter.)
"Mr. Donaldson promised us we'd live in a hotel or a house. We lived in tents and only had hot water that smelled like petroleum," Reyes said. The city of Belle Chasse has been identified in recent years as one of the most toxically polluted areas in the entire region, with several major energy companies operating there. A wide range of advocacy groups have warned about serious health risks facing Katrina cleanup workers.
"They didn't want to pay us for two weeks of work. So we stopped working. We started a huelga [strike] on the base" added Reyes, who along with other workers, says he was later paid $1,100 -- only part of what he says he was owed.
Another KBR subcontractor, Alabama-based BE&K, says it is not responsible for keeping track of the workers. BE&K spokesperson Susan Wasley said, "I can't say that we require our subcontractors' employees to produce documentation for us, because that's what our subcontractor as employer has to do. That's his responsibility."
At the bottom of the KBR subcontracting pyramid are job brokers like Tovar and Gregorio Gonzalez, who helped hire laborers for Florida-based On Site Services, another subcontractor that reportedly failed to pay wages owed to workers in the Gulf Coast. The job brokers find workers by placing ads in Spanish-language newspapers like La Subasta and El Dia in Houston; the ads typically promise room, board and pay in the range of $1,200 a week. Job brokers also run television ads on Spanish-language stations like Univision. And they attend job fairs in places like Fresno, Calif.
Not all subcontractors refuse to discuss their links to KBR. Luis Sevilla is pretty open about it if you can get to the crowded hangar on the restricted premises of the Seabee naval base where he and his crew sleep and work. Sevilla put together crews for KBR subcontractors to remove asbestos and do other construction work; his workers told me they are paid and treated well. Asked about the people who own the R.V. with a "KBR" logo outside the hangar where his workers crowd into small tents, Sevilla says, "They contract with many, many companies." Interviews with members of Sevilla's crew revealed a number of undocumented workers.
Despite the evidence of undocumented workers cleaning up after Katrina, Halliburton/KBR maintains that it runs its operations within the bounds of the law. "KBR operates under a rigorous Code of Business Conduct that outlines legal and ethical behaviors that all employees and subcontractors are expected to follow in every aspect of their work," spokesperson Norcross said by e-mail. (She did not respond to several requests for a phone interview.) "We do not tolerate any exceptions to this Code at any level of our company."
Standing in spitting distance of the KBR-branded R.V., which is parked as if it were guarding the hangar, Jose Ruiz of Nicaragua knows that his role in the Katrina cleanup is anonymous at best. "I don't have any papers, kind of like in that song by Sting -- 'I'm an illegal alien,'" says Ruiz, who lived in the United States for many years before arriving to work for Sevilla at the Seabee base. "That's the way it is."
By Roberto Lovato
Nov. 15, 2005 | Arnulfo Martinez recalls seeing lots of hombres del ejercito standing at attention. Though he was living on the Belle Chasse Naval Base near New Orleans when President Bush spoke there on Oct. 11, he didn't understand anything the ruddy man in the rolled-up sleeves was saying to the troops.
Martinez, 16, speaks no English; his mother tongue is Zapotec. He had left the cornfields of Oaxaca, Mexico, four weeks earlier for the promise that he would make $8 an hour, plus room and board, while working for a subcontractor of KBR, a wholly owned subsidiary of Halliburton that was awarded a major contract by the Bush administration for disaster relief work. The job was helping to clean up a Gulf Coast naval base in the region devastated by Hurricane Katrina. "I was cleaning up the base, picking up branches and doing other work," Martinez said, speaking to me in broken Spanish.
Even if the Oaxacan teenager had understood Bush when he urged Americans that day to "help somebody find shelter or help somebody find food," he couldn't have known that he'd soon need similar help himself. But three weeks after arriving at the naval base from Texas, Martinez's boss, Karen Tovar, a job broker from North Carolina who hired workers for a KBR subcontractor called United Disaster Relief, booted him from the base and left him homeless, hungry and without money.
"They gave us two meals a day and sometimes only one," Martinez said.
He says that Tovar "kicked us off the base," forcing him and other cleanup workers -- many of them Mexican and undocumented -- to sleep on the streets of New Orleans. According to Martinez, they were not paid for three weeks of work. An immigrant rights group recently filed complaints with the Department of Labor on behalf of Martinez and 73 other workers allegedly owed more than $56,000 by Tovar. Tovar claims that she let the workers go because she was not paid by her own bosses at United Disaster Relief. In turn, UDR manager Zachary Johnson, who declined to be interviewed for this story, told the Washington Post on Nov. 4 that his company had not been paid by KBR for two months.
Wherever the buck may stop along the chain of subcontractors, Martinez is stuck at the short end of it -- and his situation is typical among many workers hired by subcontractors of KBR (formerly known as Kellogg Brown & Root) to clean and rebuild Belle Chasse and other Gulf Coast military bases. Immigrants rights groups and activists like Bill Chandler, president of the Mississippi Immigrant Rights Alliance, estimate that hundreds of undocumented workers are on the Gulf Coast military bases, a claim that the military and Halliburton/KBR deny -- even after the Immigration and Customs Enforcement agency turned up undocumented workers in a raid of the Belle Chasse facility last month. Visits to the naval bases and dozens of interviews by Salon confirm that undocumented workers are in the facilities. Still, tracing the line from unpaid undocumented workers to their multibillion-dollar employers is a daunting task. A shadowy labyrinth of contractors, subcontractors and job brokers, overseen by no single agency, have created a no man's land where nobody seems to be accountable for the hiring -- and abuse -- of these workers.
Right after Katrina barreled through the Gulf Coast, the Bush administration relaxed labor standards, creating conditions for rampant abuse, according to union leaders and civil rights advocates. Bush suspended the Davis-Bacon Act, which requires employers to pay "prevailing wages" for labor used to fulfill government contracts. The administration also waived the requirement for contractors rebuilding the Gulf Coast to provide valid I-9 employment eligibility forms completed by their workers. These moves allowed Halliburton/KBR and its subcontractors to hire undocumented workers and pay them meager wages (regardless of what wages the workers may have otherwise been promised). The two policies have recently been reversed in the face of sharp political pressure: Bush reinstated the Davis-Bacon Act on Nov. 3, while the Department of Homeland Security reinstated the I-9 requirements in late October, noting that it would once again "exercise prosecutorial discretion" of employers in violation "on a case-by-case basis." But critics say Bush's policies have already allowed extensive profiteering beneath layers of legal and political cover.
Halliburton/KBR, which enjoys an array of federal contracts in the United States, Iraq and Guant?namo Bay, Cuba, has long drawn criticism for its proximity to Vice President Dick Cheney, formerly Halliburton's CEO. Halliburton/KBR spokesperson Melissa Norcross declined to respond directly to allegations about undocumented workers in the Gulf. "In performing work for the U.S. government, KBR uses its government-approved procurement system to source and retain qualified subcontractors," she said in an e-mail. "KBR's subcontractors are required to comply with all applicable labor laws and provisions when performing this work."
Victoria Cintra is the Gulf Coast outreach organizer for Mississippi Immigrant Rights Alliance, which recently partnered with relief agency Oxfam America to help immigrant workers displaced by Katrina. She says KBR is exposing undocumented workers like Martinez to unethical and illegal treatment, even though they are supposed to be paid with federal Katrina-recovery dollars to clean and rebuild high-security facilities like the one President Bush recently visited. Cintra is one of several people fighting to recover the wages owed the workers: She drives her beat-up, chocolate-colored car across the swamps, damaged roads and broken bridges of the Gulf Coast to track down contractors and subcontractors. With yellow legal pad in hand, she and other advocates document abuses taking place at Belle Chasse, the Naval Construction Battalion Center at the Seabee naval base in Gulfport, Miss., and other military installations.
I was with Cintra when she received phone calls from several Latino workers who complained they were denied, under threat of deportation, the right to leave the base at Belle Chasse. Cintra also took me along on visits to squalid trailer parks -- like the one at Arlington Heights in Gulfport -- where up to 19 unpaid, unfed and undocumented KBR site workers inhabited a single trailer for $70 per person, per week. Workers there and on the bases complained of suffering from diarrhea, sprained ankles, cuts and bruises, and other injuries sustained on the KBR sites -- where they received no medical assistance, despite being close to medical facilities on the same bases they were cleaning and helping rebuild.
Cintra and other critics say there's been no accountability from the corporate leaders who signed on the dotted line when they were awarded multimillion-dollar Department of Defense contracts. "The workers may be hired by the subcontractors," Cintra says, "but KBR is ultimately responsible."
"Latino workers are being invited to New Orleans and the South without the proper conditions to protect them," adds Cintra, who recently provided tents to Martinez and several other unpaid Mexican workers who fled Belle Chasse for Gulfport after being dismissed by Tovar. Cintra, a Cuban exile and born-again Christian, has since seen a small tent city of homeless immigrants spring up in the yard of her church, Pass Road Baptist, in Gulfport. "This is evil on top of evil on top of evil," she says. "The Bush administration and Halliburton have opened up a Pandora's box that's not going to close now."
Halliburton/KBR is the general contractor with overarching responsibility for the federal cleanup contracts covering Katrina-damaged naval bases. Even so, there is an utter lack of transparency with the process -- and that invites malfeasance, says James Hale, a vice president of the Laborers' International Union of North America. "To my knowledge, not one member of Congress has been able to get their hands on a copy of a contract that was handed out to Halliburton or others," Hale says. "There is no central registry of Katrina contracts available. No data on the jobs or scope of the work." Hale says that his union's legislative staff has pressed members of Congress for more information; apparently the legislators were told that they could not get copies of the contracts because of "national security" concerns.
"If the contracts handed out to these primary contractors are opaque, then the contracts being let to the subcontractors are just plain invisible," Hale says. "There is simply no ability to ascertain or monitor the contractor-subcontractor relationships. This is an open invitation for exploitation, fraud and abuse."
Congress has heard a number of complaints recently about Halliburton/KBR's hiring practices, including the alleged exploitation of Filipino, Sri Lankan, Nepalese and other immigrant workers paid low wages on military installations in Iraq. And KBR subcontractor BE&K was a focus of Senate hearings in October, for the firing of 75 local Belle Chasse workers who said that they were replaced by "unskilled, out-of-state, out-of-country" workers earning $8 to $14 for work that typically paid $22 an hour.
Sen. Mary Landrieu, D-La., who has been an outspoken critic of the use of undocumented workers at Belle Chasse and on other Katrina cleanup jobs, said in a recent statement, "It is a downright shame that any contractor would use this tragedy as an opportunity to line its pockets by breaking the law and hiring a low-skilled, low-wage and undocumented work force."
Sen. Carl Levin, D-Mich., is also against the practice, citing its "serious social ramifications." As he told Salon, it devastates "local workers who have been hit twice, because they lost their homes."
Seventeen-year-old Simitrio Martinez (no relation to Arnulfo) is another one of the dozens of workers originally hired by Tovar, the North Carolina job broker working under KBR. "They were going to pay seven dollars an hour, and the food was going to be free, and rent, but they gave us nothing," says the thin Zapotec teenager. Simitrio spent nearly a month at the Seabee base. "They weren't feeding us. We ate cookies for five days. Cookies, nothing else," he says.
Simitrio, his co-workers, and the dozens of KBR subcontractors that employ them operate under public-private agreements like federal Task Order 0017, which defines the scope of work to be fulfilled under the contracts. Under the multimillion-dollar Department of Defense contract, KBR is supposed to provide services for "Hurricane Katrina stabilization and recovery at Naval Air Station Pascagoula, Naval Air Station Gulfport, Stennis Space Center and other Navy installations in the Southeast Region," according to a Defense Department press release.
But the details of the agreements remain murky. "Not only is it very difficult to see the actual signed DoD contracts, but it is nearly impossible to see the actual task orders, which assign the goods or services the government is buying," says Scott Amey, general counsel for the Project on Government Oversight in Washington. The military can ask for goods and services on an as-needed basis, he says, which means that the contracts, which add up to tens of millions of dollars, can remain open ended. According to DoD press statements, the contracts call for considerable manual labor, including "re-roofing of most buildings, barracks, debris removal from the entire base, water mitigation, mold mitigation, interior and exterior repairs to most buildings, waste treatment plants, and all incidental related work."
Simitrio and any other workers on the high-security military bases must get permission before entering the guarded gates, where they get patted down by M-16-wielding military police. Responsibility for getting private-sector construction and cleanup workers on the bases rests with the general contractor -- in KBR's case, security chief Kevin Flynn. One of Flynn's responsibilities is to negotiate passes and entry for KBR subcontractors -- and their hires -- to do the work stipulated by the task order.
Yet, following several complaints by Landrieu, and just a few days after President Bush visited the Belle Chasse base, agents from the Immigration and Customs Enforcement agency raided the facility and detained 10 workers who ICE spokeswoman Jamie Zuieback said had "questionable" documentation.
Representatives of Halliburton/KBR do not acknowledge the existence of undocumented workers providing labor for their operations on the Gulf Coast bases. Flynn suggested speaking to the U.S. military, who he said "has real strict control" and would know whether there were undocumented workers. "We have workers from all ethnic groups on the base," Flynn said. "To the best of my knowledge, there are no undocumented workers."
Steve Romano, head of housing on the Belle Chasse base, said, "We have no relationship with [KBR] at all. I have no idea what that's about." A similar response was given by an official at the base's health facility when asked about undocumented workers who complained about health issues and injuries sustained on the KBR sites. The only military person to acknowledge seeing Latino workers was a watch commander who greeted me at an entry to the base. The commander estimated there were 100 such workers there. Meanwhile, representatives with the Mississippi Immigrant Rights Alliance say they received calls from undocumented workers at Belle Chasse who estimated there were more than 500, or "about eight busloads" of immigrant workers on-site.
Texas-based DRS Cosmotech is another subcontractor that provided cleanup crews to Halliburton/KBR in the Gulf. Roy Lee Donaldson, CEO of the company, refused to respond to accusations of non-payment and exploitation leveled at his company by several workers, including 55-year-old Felipe Reyes of Linares, Nuevo Leon, Mexico. (Donaldson hung up the phone when I identified myself as a reporter.)
"Mr. Donaldson promised us we'd live in a hotel or a house. We lived in tents and only had hot water that smelled like petroleum," Reyes said. The city of Belle Chasse has been identified in recent years as one of the most toxically polluted areas in the entire region, with several major energy companies operating there. A wide range of advocacy groups have warned about serious health risks facing Katrina cleanup workers.
"They didn't want to pay us for two weeks of work. So we stopped working. We started a huelga [strike] on the base" added Reyes, who along with other workers, says he was later paid $1,100 -- only part of what he says he was owed.
Another KBR subcontractor, Alabama-based BE&K, says it is not responsible for keeping track of the workers. BE&K spokesperson Susan Wasley said, "I can't say that we require our subcontractors' employees to produce documentation for us, because that's what our subcontractor as employer has to do. That's his responsibility."
At the bottom of the KBR subcontracting pyramid are job brokers like Tovar and Gregorio Gonzalez, who helped hire laborers for Florida-based On Site Services, another subcontractor that reportedly failed to pay wages owed to workers in the Gulf Coast. The job brokers find workers by placing ads in Spanish-language newspapers like La Subasta and El Dia in Houston; the ads typically promise room, board and pay in the range of $1,200 a week. Job brokers also run television ads on Spanish-language stations like Univision. And they attend job fairs in places like Fresno, Calif.
Not all subcontractors refuse to discuss their links to KBR. Luis Sevilla is pretty open about it if you can get to the crowded hangar on the restricted premises of the Seabee naval base where he and his crew sleep and work. Sevilla put together crews for KBR subcontractors to remove asbestos and do other construction work; his workers told me they are paid and treated well. Asked about the people who own the R.V. with a "KBR" logo outside the hangar where his workers crowd into small tents, Sevilla says, "They contract with many, many companies." Interviews with members of Sevilla's crew revealed a number of undocumented workers.
Despite the evidence of undocumented workers cleaning up after Katrina, Halliburton/KBR maintains that it runs its operations within the bounds of the law. "KBR operates under a rigorous Code of Business Conduct that outlines legal and ethical behaviors that all employees and subcontractors are expected to follow in every aspect of their work," spokesperson Norcross said by e-mail. (She did not respond to several requests for a phone interview.) "We do not tolerate any exceptions to this Code at any level of our company."
Standing in spitting distance of the KBR-branded R.V., which is parked as if it were guarding the hangar, Jose Ruiz of Nicaragua knows that his role in the Katrina cleanup is anonymous at best. "I don't have any papers, kind of like in that song by Sting -- 'I'm an illegal alien,'" says Ruiz, who lived in the United States for many years before arriving to work for Sevilla at the Seabee base. "That's the way it is."
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