By Erik Eckholm
New York Times
15 March 2005
Excess billing for postwar fuel imports to Iraq by the Halliburton Company totaled more than $108 million, according to a report by Pentagon auditors that was completed last fall but has never been officially released to the public or to Congress.
In one case, according to the report, the company claimed that it had paid more than $27 million to transport liquefied petroleum gas it had purchased in Kuwait for just $82,000 - a fee the auditors tartly dismissed as "illogical."
The fuels report, by the Defense Contract Audit Agency, was one of nine audits involving a subsidiary of Halliburton, Kellogg, Brown & Root, that were completed in October 2004, in the month before the American presidential elections. But the administration has kept all of them confidential despite repeated requests from both Republican and Democratic members of Congress.
Excerpts were released yesterday by the office of Representative Henry A. Waxman of California, minority leader of the House Committee on Government Reform, which said it had obtained the audit through "unofficial channels."
Vice President Dick Cheney formerly headed Halliburton, a conglomerate based in Texas. Allegations of profiteering by the company - hotly disputed by Halliburton and administration officials - were raised in the presidential campaign.
"The facts show that KBR delivered fuel crucial to the Iraqi people when failure was not an option," said Wendy Hall, a spokeswoman for Halliburton, in an e-mail message. "We will continue to work with the Army to prove, once and for all, that KBR delivered these vital services for the Iraqi people at a fair and reasonable cost given the circumstances."
KBR has received more than $10 billion in contracts for work in Iraq, including oil-field repairs, fuel imports and, in a huge separate agreement, provision of housing, meals and other support to the military.
In a letter sent to President Bush yesterday, Mr. Waxman and Representative John D. Dingell of Michigan, minority leader of the House Committee on Energy and Commerce, asked for an explanation of why the auditing reports had not been released to Congress and demanded stronger efforts to reclaim funds from Halliburton.
Allegations of overcharging for the fuel imports have swirled from the initial days of the occupation, but in this latest audit the scale of officially disputed charges is higher than previously reported. In December 2003, the same Pentagon auditing agency announced that a preliminary study had discovered $61 million in unreasonable fuel bills up to that point.
The later audit describes "unreasonable" and "questionable" billing of $108 million of total billings of $875 million under an initial "task order" to Kellogg, Brown & Root to import fuels into Iraq.
Similar studies covered eight other task orders granted to KBR, all of them elements of a broad $2.5 billion contract, now completed, to import fuels and make initial repairs to Iraqi oil fields. The total level of questionable billing in those reports remains confidential but could be much higher than the $108 million, the congressmen note in their letter.
The largest allegations of overcharging involve Halliburton's hiring in early 2003, without competitive bidding, of a Kuwaiti company called Altanmia to buy and deliver fuels from Kuwait. Critics say Altanmia's prices were exorbitant, and Pentagon and other Federal investigators are still trying to discover which parties benefited from any excess or illegal profits. Under its "cost plus" contract with the Pentagon, Halliburton could pass along Altanmia's fees, then receive awards for itself ranging from 2 percent to 7 percent beyond its actual costs.
In 2003, officials of Altanmia asserted that Halliburton executives demanded kickbacks for the awarding of the lucrative fuels contract. Halliburton denied the charges.
At an unrelated Congressional hearing yesterday, the former ambassador to Kuwait, Richard H. Jones, said he had referred those allegations to Pentagon criminal investigators. Mr. Jones now heads the State Department's Iraq office.
The Pentagon's October audit said that, company assertions to the contrary, Halliburton signed its subcontract with Altanmia in early 2003 without competitive bidding. The American military regarded provision of gasoline and cooking fuel to the Iraqi public as an urgent priority at the time, and officials privately prodded Halliburton to act quickly.
Pentagon auditors said they recognized the challenges faced by KBR, but said that the high prices should have been renegotiated in subsequent months rather than paid without question for most of a year.
The auditor's questioning of a $27 million delivery bill for fuel worth $82,000 is misleading, said Ms. Hall, the Halliburton spokeswoman. Insurgent attacks on convoys, a local shortage of trucks and delays by military escorts all worked to raise the costs of fuel delivery, she said.
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Citation: Erik Eckholm, "Halliburton Overcharged $108 Million, Report Says," New York Times, 15 March 2005.
Original URL: http://www.nytimes.com/2005/03/15/politics/15halliburton.html?pagewanted=print&position=
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