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USA: Auditors Support 15 Percent Witholding on Halliburton's Iraq Work

Government auditors conclude that payments be withheld from Halliburton for Iraq work and a top contract official talks with FBI over claims of favoritism to the company.

by Sue PlemingReuters
November 24th, 2004

WASHINGTON - The U.S. Army should withhold some payments to Halliburton Co. for its work in Iraq, a government auditor said on Wednesday, in a move that could cost the contractor tens of millions of dollars a month.

In another development involving the Texas company, the lawyer for an Army Corps of Engineers whistle-blower said his client was interviewed by the FBI last week over her claims of contracting abuse involving Halliburton, which was run by U.S. Vice President Dick Cheney from 1995-2000.

The Houston-based company is the U.S. military's biggest contractor in Iraq with the potential to earn up to $18 billion for multiple contracts there. Its tasks range from cooking meals for troops to rebuilding Iraq's oil industry.

Stuart Bowen, special inspector general for Iraq reconstruction, said based on his "limited audit work," he supported military auditors' proposals last August for the Army to implement a 15 percent withholding on future Iraq invoices from Halliburton unit Kellogg Brown & Root.

"We agree with U.S. Army Materiel Command and DCAA (Defense Contract Audit Agency) positions (on the withholding issue)," Bowen said in the memorandum.

The U.S. Army did not follow the recommendations last August and opted instead to give Halliburton more time to resolve the ongoing billing dispute, fearing such punitive action could disrupt supplies to U.S. troops.

Military documents indicated the company had not provided enough details to support at least $1.82 billion out of $4.3 billion of logistical work for the U.S. Army, which estimated such a withholding could cost KBR about $60 million a month in unpaid bills.

Halliburton spokeswoman Cathy Gist said the company was still working hard with its client to resolve the dispute and it had not received any new information about a withholding.

Linda Theis, a spokeswoman for Army Field Support Command in Rock Island, Illinois, said there was no new information in Bowen's report. "But its contents will be evaluated as part of the Army's decision process (about the withholding)."

Whistleblower Talks to FBI
Aside from Halliburton's long-running billing dispute with the U.S. military, government investigators are looking into whether the company overcharged for work and whether there was any improper action that favored Cheney's old company.

A lawyer for Bunny Greenhouse, the Army Corps of Engineers top contracting official, said his client met for the full day last Wednesday with the FBI and an investigator from the Pentagon's Criminal Investigative Division.

"My client provided a lot of detailed answers to their questions," lawyer Michael Kohn said, while declining to provide any specifics.

He said much of the questioning focused on a no-bid oil contract handed out to KBR in March last year, which was later followed up by a competitively bid deal. KBR's business in the Balkans with the military was also examined.

Of particular interest are allegations over whether KBR overcharged the Army to deliver fuel to Iraq, which despite being crude oil-rich suffered from a shortage of refined oil products. A draft Pentagon audit last December found the company may have overcharged by at least $61 million for this service.

Democrats seized on the latest news. Sen. Frank Lautenberg of New Jersey said these developments showed the need to investigate Halliburton and its military contracts.

"When will the Republican Congress stop covering up Halliburton's wrongdoing and end this abuse of taxpayer dollars?" Lautenberg asked in a statement.

Halliburton stock rose 32 cents to close at $40.79 on the New York Stock Exchange after falling as low as $39.84





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