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New Halliburton Whistleblowers Say Millions Wasted in Iraq

by Pratap ChatterjeeSpecial to CorpWatch
June 16th, 2004

Cartoonist: Khalil Bendib

New testimony from former Halliburton workers and congressional auditors released in Washington, D.C., this week has revealed millions of dollars worth of wasteful practices, major over billing and virtually no oversight of the company's work to support the U.S. invasion and occupation of Iraq in March 2003.

Under an agreement for logistical support for Operation Iraqi Freedom, Kellogg Brown and Root (KBR), a Halliburton subsidiary, has received $4.5 billion for activities in Iraq and Kuwait since the invasion, including more than $3 billion to import fuel and repair oil fields. The full contract may eventually be worth as much as $18 billion.

In testimony submitted to members of Congress, one truck driver explained in detail how taxpayers were billed for empty trucks driven up and down Iraq and how $85,000 vehicles were abandoned for lack of spare tires. A labor foreman said dozens of workers were told to "look busy" while doing virtually no work for salaries of $80,000 a year. An auditor related how the company was spending an average of $100 for every single bag of laundry and $10,000 a month for company employees to stay in five-star hotels.

"We saw very little concern for cost considerations," David Walker, head of the General Accounting Office, the investigative arm of the Congress, told members of the Congress who attended a hearing at the Government Reform Committee in the House of Representatives. "There are serious problems, they still exist, and they are exacerbated in a wartime climate."

William Reed, director of the Pentagon's Defense Contract Audit Agency (DCAA), also released a report to members of Congress that stated: "In our opinion, the contractor's billing system is inadequate in part. We also found system deficiencies resulting in material invoicing misstatements that are not prevented, detected, and/or corrected in a timely manner."

Critics say that the Halliburton's contract with the military has been especially problematic because the company has what is called a "cost-plus" contract, which means the company is repaid for all expenditures, plus a percentage fee and possible bonus on top of that.

"While the Bush administration failed to adequately plan for the safety of our troops--as proven by its failure to provide sufficient body armor--it made certain that Halliburton would make a killing long before the war began," said Jim Donahue, coordinator for Halliburton Watch, a nonprofit organization based in Washington.

But Republicans say the charges are simply an attempt to muddy the image of Vice President Dick Cheney, who was previously the chief executive officer of Halliburton.

"Too many Democrats … have chosen to practice oversight by press release, oversight by leaking draft reports, and confidential briefings," said Congressman Tom Davis, chairman of the government reform committee. "This is a strategy being driven top down by the House democratic leadership."

Davis refused to allow testimony from five former Halliburton employees who had additional evidence of waste, fraud, and abuse. Instead, Henry Waxman, the highest-ranked Democrat on the committee, released their statements to the public.

One statement came from David Wilson, a Halliburton employee charged with delivering supplies by from Camp Cedar II in southern Iraq to Camp Anaconda just north of Baghdad between November 2003 and March 2004. He explained that his supervisors didn't care what was being transported, so long as the trucks drove as many times as possible from one end of the country to the other.

"The paperwork I carried had no details about the contents of our cargo - basically all they were looking for was the number of trucks with freight on them (but) a related problem was that KBR would run trucks empty quite often," Wilson said. "Sometimes they would have five empty trucks, sometimes they would have a dozen. One time we ran 28 trucks and only one had anything on it. There were several times when we had empty trucks both on the way to Anaconda and then on the way back to Cedar II. I don't understand why KBR would have placed our lives in danger that way for no reason."

He also described what appeared to be a complete lack of cost controls and systems to maintain equipment properly. "When I arrived at Camp Arifjan in Kuwait last November, I noticed 50 to 100 brand new trucks sitting there unused," Wilson remembered. "Five months later, when I came home. A large number of trucks were still there, not being used. These are $85,000 (or more) Mercedes and Volvo trucks.

"As every other trucker working on those convoys will tell you, KBR had virtually no facilities in place to do maintenance on these trucks. There were absolutely no oil filters or fuel filters for months on end. I begged for filters but never got any. I was told that oil changes were out of the question. KBR removed all the spare tires in Kuwait. So when one of our trucks got a flat tire on the highway, we just had to leave it there for the Iraqis to loot, which is just crazy. I remember saying to myself when it happened, 'You just lost yourself an $85,000 truck because of a spare tire. We lost a truck because we didn't have $25 hydraulic line to assist the clutch.'"

Another former Halliburton employee, Mike West, said that prior to Halliburton, he had working as an area manager for Valero Energy with a yearly salary of $70,000. "When I heard about a chance to earn more with Halliburton, I called them up," he said. "After just a few minutes, the woman said I was hired as a labor foreman at a salary of $130,000. I didn't even have to send in a resume."

When he arrived, West explained he was paid despite the fact that he had no work. "I only worked one day out of six in Kuwait," he explained. "That day, a supervisor told me to operate a forklift. I explained that I didn't have a license to operate a forklift or any experience The response was: 'It's easy and no one will know.'"

When West got to Camp Anaconda in southern Iraq, he says that he didn't have any work to do. Nor did most of the other 35 workers. The supervisors told them to walk around and look busy. Then they went to a camp in Al Asad, where they had only one day of work out of five days. They were told to bill for 12 hours of labor every day. From there, his group was sent Fallujah for six weeks, where once again he had almost no work to do except help with security and follow Iraqi workers around to make sure they cleaned the toilets properly.

"One day, I was ordering some equipment. I asked the camp manager if it was OK to order a drill," West said. "He said to order four. I responded that we didn't need four. He said: 'Don't worry about it. It's a cost-plus contract.' I asked him, 'So basically, this is a blank check?' The camp manager laughed and said, 'Yeah.' He repeated this over and over again to the employees."

As a Halliburton employee, I was disappointed by all of the company's lies and disorganization. As a taxpayer, I'm disgusted by all of the money spent by Halliburton to pay employees to do nothing."

A third person who submitted testimony to Waxman's office was Marie de Young, who had previously worked for the military for 10 years, rising to the level of captain. De Young, who had also authored two books about women in the military, worked for Halliburton in Kosovo and was hired in December to help oversee Operation Iraqi Freedom contracts in Kuwait.

"I soon discovered that there was not a complete up-to-date list of all of the sub-contracts.. also, the document control department had provided incorrect lists to all of the task order managers from an inaccurate database," she said.

In January and February 2004, a series of articles in the media, especially in the Wall Street Journal, chronicled the overcharging and fraud in Halliburton's operations. In response Halliburton hired what it dubbed the "Tiger Team" to audit and correct problems. De Young worked closely with the team and discovered not only that it did not correct anything, but that the team continued "questionable auditing and administration practices."

"When the Tiger Team examined a subcontract, they just checked to make sure that all the forms were in the file," she said. "They didn't assess the reasonableness of the price or consult with site managers. The team's sole purpose was to close as many subcontracts as possible, under the mistaken assumption that everything that was closed prior to the arrival of the government audit team would be exempt from further scrutiny. For three months, this Tiger Team occupied waterfront villas at the Hilton hotel and shuffled papers, but did nothing to effectively clean up old subcontracts.

"We were instructed to pay invoices without verifying whether services were delivered. I personally told a KBR Tiger Team member not to pay an invoice that I knew was a double billing (but) the long term KBR employee told me I didn't know what I was doing."

De Young says that Halliburton paid the Kuwaiti subcontractor La Nouvelle $100 per bag for laundry services--four times more than they were paying elsewhere. That added up to more than $1 million per month. Another time, the company ordered 37,200 cases of soda at $1.50 a case, but was delivered only 37,200 cans, resulting in charges that were five times the normal wholesale cost for the drinks.

Halliburton housed the Tiger Team at the five-star Kempinski Hotel for $10,000 per employee per month. At the same time, soldiers were required to live in tents at a cost of $1.39 a day. The military requested that Halliburton employees move into the tents, but they refused, De Young said.

"The Halliburton corporate culture is one of intimidation and fear," De Young said. "I had been advised by subcontract administrators who quit the company that employees get moved around when they get too close to the truth. I personally observed and experienced this as a routine company practice. Ironically, other previous managers who tolerated bad practices were promoted to better paying jobs in Iraq or Houston or Jordan."

In an email, Halliburton spokeswoman Wendy Hall told reporters: "We take any charges of improper conduct seriously… . We will look into these assertions. If issues arise, we are committed to addressing them forthrightly and openly.

"Halliburton believes its actions in Iraq are designed to deliver the best quality products and services on the best terms available as called for in our contract. We will work with the committee to assist them in fulfilling their important oversight functions.''

Meanwhile, top executives of Halliburton have been asked to testify next month before another congressional committee investigating potential favoritism and waste in Iraq reconstruction contracts.