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Halliburton Contracts Focus of Hearing

House Democrats criticize the company's performance in Iraq. Republicans concede shortcomings but warn of a rush to judgment.

March 12, 2004|T. Christian Miller | Times Staff Writer

WASHINGTON — Engaging on a partisan battleground during a presidential election year, congressional Democrats and Republicans on Thursday displayed markedly different attitudes on U.S. efforts to rebuild Iraq with private contractors.

Though billed as a review of Iraqi contracts, a House Government Reform Committee hearing Thursday not coincidentally focused on the company that is the single largest contractor in the war-torn country: Halliburton Inc., run by Vice President Dick Cheney from 1995 to 2000.

Democrats led by Rep. Henry A. Waxman (D-Los Angeles), the ranking minority member, repeatedly criticized Halliburton's performance, from providing overpriced fuel to overcharging for meals served to U.S. troops to violating federal contracting law.

Republicans, by contrast, portrayed the Houston-based company as doing a tough job in a difficult environment and stressed the need for a more thorough investigation before rushing to judgment.

"This is a monumental task, and there is no room for error," said Rep. Thomas M. Davis, the Virginia Republican who chairs the committee. "Nor is there room for partisan sniping aimed merely at undermining the overall reconstruction efforts."

The examination of the contracting process came on a day when the Pentagon awarded $1.1 billion in construction contracts. Greenville, S.C.-based Ameco, a subsidiary of Fluor Corp., won a $500-million contract to rehabilitate the country's power grid, and a joint venture of Washington International Inc. and Black & Veatch of Boise, Idaho, won a $600-million contract to restore Iraq's water supply.

But Halliburton, an oil services, construction and logistics support company, was the focus. House Democratic staff confirmed reports that the Justice Department had begun an investigation of charges that the company had overbilled the U.S. in fuel costs by $61 million.

The company is under investigation on several fronts. Besides the fuel overcharging, Halliburton has admitted that one or two of its employees took kickbacks in a scheme to help a subcontractor overcharge the government $6.3 million. The company has repaid the money.

In addition, Halliburton has suspended billing for $177 million on a food services contract after an audit revealed that the company had billed for meals never served.

Halliburton's connection to Cheney was a constant theme. Democrats have seized on the issue of whether Cheney -- who receives deferred compensation from the company -- was linked to a decision to award to Halliburton no-bid Iraq contracts, which have a potential payout of $18 billion.

Cheney has repeatedly denied having anything to do with the decision to award the contracts, pointing out that Halliburton is one of few companies that could handle the complex logistics work required in Iraq.

Davis began his questioning by quizzing each of the witnesses -- high-ranking officials in the Army, U.S. Agency for International Development and U.S.-led Coalition Provisional Authority in charge of Iraq -- on whether they had ever been contacted by the vice president.

Each responded with a solemn "No."

Dov Zakheim, the Pentagon's comptroller, noted that, as previously reported, audits by the Defense Contract Audit Agency had turned up "significant deficiencies" in Halliburton's accounting practices.

Zakheim, a Bush appointee, clashed with Waxman in the most intense moments of the four-hour hearing after Waxman wondered aloud why Halliburton continued to receive U.S. taxpayer dollars despite the numerous charges against it.

"I don't think it should be the job of the administration to give Halliburton the benefit of the doubt in every case," Waxman said.

Zakheim shot back, "It seems to me, in the larger context, with a massive task that is tasking one of the largest companies in the country, they're not doing a great job and they're not doing a terrible job."

Republicans joined Democrats in voicing concern over Halliburton's overcharging for fuel it delivered to Iraq and over the kickbacks.

Several committee members were angry that the Army Corps of Engineers, which oversaw the fuel contract, wouldn't name the Halliburton employees accused of taking the money, or their positions in the company. "I'm concerned right now," said Rep. Stephen F. Lynch, a Massachusetts Democrat. "There's got to be more serious consequences."

Zakheim told lawmakers that the Pentagon was looking for alternative sources of funds to equip Iraqi security forces, now that a $327-million contract to do so was canceled because of "irregularities."

The contract, awarded to a small Virginia firm called Nour USA, is being rebid in a process that could take 60 to 90 days.

Several top-ranking military commanders have complained that the lack of equipment for the U.S.-trained Iraqi troops is hampering their ability to secure the country and lessen the risk to U.S. soldiers.

"We need to get these people supplied," said Rep. John R. Carter, a Texas Republican.

Zakheim said the Pentagon was examining whether Iraqi oil revenue could be put to use quickly to buy the equipment.

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