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Thursday, Mar. 11, 2004

In a memo to congressional colleagues, Rep. Henry Waxman, D-Calif., said Pentagon auditors found that a Halliburton subsidiary gave unreliable figures in a $2.7 billion proposal to provide logistics for troops in Iraq.

Specific problems cited by the Defense Contract Audit Agency include Halliburton's failure to reveal it fired two subcontractors responsible for $1 billion worth of food service to American forces, Waxman's memo said.

Halliburton told federal securities regulators on Monday it expects a formal Pentagon inquiry into alleged deficiencies in its procurement procedures in Iraq and Kuwait. The company told the Securities and Exchange Commission it has credited $36 million to the Defense Department and delayed billing the Pentagon for an additional $141 million because of the problem.

The Defense Department has launched a separate, criminal investigation into whether Vice President Dick Cheney's former company overcharged by $61 million last year for importing gasoline from Kuwait to Iraq for subsidized sales to Iraqi civilians. The military recently gave that contract to another Texas-based petroleum broker.

Halliburton also has acknowledged it fired two employees and reimbursed the Pentagon $6.3 million because of kickbacks allegedly paid to a Kuwaiti subcontractor on a different contract. The company's KBR subsidiary has reimbursed $27.4 million for alleged overcharging for meals served to troops in the Iraq area. Those two reimbursements alone account for $33.7 million of the $36 million Halliburton acknowledged reimbursing.

Denies Wrongdoing

Houston-based Halliburton has repeatedly denied any wrongdoing, saying its own auditors discovered the kickback scheme and the high gasoline prices were charged by a Kuwaiti subcontractor approved by the Army. The company has been running television commercials saying it proudly serves American troops in Iraq and dismissing criticism as politically motivated.

"We are disappointed, once again, that selective portions of audit reports have been released publicly even before KBR and the Army have made final reviews of the information," Halliburton spokeswoman Wendy Hall said in a statement Wednesday evening. "Releases of partial reports are inappropriate because the true and complete story cannot be conveyed."

Waxman and other Democrats in Congress have said the Halliburton problems show the Bush administration is soft on companies with GOP connections. Administration officials say Cheney -- who resigned as head of Halliburton to become Bush's running mate in 2000 -- has no role in awarding Pentagon contracts.

Waxman's memo says a December report from Pentagon auditors says Halliburton repeatedly violated federal regulations by giving incomplete and outdated information on subcontracting costs on a $2.7 billion proposal for military logistics spending in Iraq. Waxman wrote that the DCAA warned the U.S. Army Corps of Engineers on Jan. 13 that Halliburton's cost proposals were questionable, but the Corps awarded Halliburton a $1.6 billion Iraqi oil industry reconstruction contract three days later.

Investigators from the General Accounting Office, Congress' investigative arm, reported that a military review board approved a six-month extension of a Halliburton contract worth $587 million after reviewing only six pages of supporting documents and 10 minutes of discussion. The troops sent to Iraq to give commanders contracting advice include reservists with no contracting experience, the GAO found.

Top Pentagon officials, including Defense Department Comptroller Dov Zakheim, were scheduled to testify Thursday at a House Government Reform Committee hearing on government contracting in Iraq.

© 2004 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.

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