Halliburton Faces More Scrutiny

Halliburton : Hand with money over map and flag of Iraq and Halliburton logo
AP / CBS
Pentagon auditors found a Halliburton Co. subsidiary gave faulty cost estimates on a $2.7 billion contract to serve American troops in Iraq and Kuwait, and company officials acknowledged making mistakes, Defense Department documents show.

The estimate problems included a failure to tell contract managers that Halliburton had terminated two subcontracts for feeding troops, which affected costs on $1 billion worth of that work, the Defense Contract Audit Agency found. Halliburton also did not tell contract managers it had already awarded subcontracts worth $141.5 million for work it said would cost $208.8 million, the auditors found.

William F. Daneke, a manager for Halliburton subsidiary KBR, wrote to the DCAA Dec. 4 to acknowledge the company did not give current, accurate and complete cost data in its Oct. 7 spending proposal.

"There are many excuses and reasons available — but — in the end, KBR did not include the most current data in our proposal," Daneke wrote.

The pricing issue is just one of several problems with Halliburton contracts in Iraq. Both the Pentagon and Justice Department have launched criminal investigations of the company, formerly headed by Vice President Dick Cheney.

Halliburton's problems include:

  • An alleged kickback scheme that prompted Halliburton to fire two workers and reimburse the Pentagon $6.3 million.
  • Possible overcharging for food services which Halliburton reimbursed the Defense Department for nearly $30 million. Halliburton has set aside $141 million to pay other possible reimbursements.
  • A separate DCAA audit which accused KBR of overcharging by $61 million for gasoline delivered to serve the civilian market in Iraq last year. Halliburton has said the charges were proper.

    Democratic critics say Halliburton is an example of war profiteering by companies friendly to the Bush administration. Company and administration officials say politics had nothing to do with Halliburton's contracts in Iraq.

    Cheney has repeatedly said he had no involvement with the company once he left Halliburton before the 2000 campaign. However, his financial disclosure form indicates he still receives deferred compensation from the firm.

    Halliburton was a top Pentagon contractor well before Cheney became vice president. According to Defense Department statistics, from fiscal year 1996 to 2000, Halliburton won $2.4 billion in contracts. During the first two years of the Bush administration, Halliburton's take was about equal to its average over the last five years of the Clinton administration.

    But in fiscal year 2003, Halliburton became the seventh biggest Pentagon contractor, with $3.9 billion is Defense Department business.

    Halliburton is aggressively defending itself, running a series of television ads saying its critics are politically motivated.

    In a conference call with Wall Street analysts Friday, Halliburton executives repeated their complaints and said they were confident the investigations would exonerate Halliburton.

    "I don't expect that we're going to get fined. We haven't done anything wrong," said Bert Cornelison, Halliburton's executive vice president and general counsel.