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Pentagon Aided Halliburton, Official Charges

The company's no-bid contracts in Iraq are cited as examples of favorable treatment.

June 28, 2005|Steven Bodzin | Times Staff Writer

WASHINGTON — A top Army Corps of Engineers official charged Monday that Halliburton Co. was able to receive no-bid contracts for work in Iraq because of repeated assistance by the office of the secretary of Defense.

Bunnatine Greenhouse, a longtime senior procurement executive for the Army Corps of Engineers, made the accusation to Democratic lawmakers looking into allegations of war profiteering by the Texas oil services company.

She called the multiple interventions "the most blatant and improper contract abuse I have witnessed during the course of my professional career."

"Essentially every aspect of the RIO contract remained under the control of the office of the secretary of Defense," she said, referring to the acronym for the contract known as Rebuild Iraqi Oil. "That troubled me and was wrong."

Rebuild Iraqi Oil was just one of eight examples Democrats cited as "favorable treatment" for Halliburton since 2002.

Democrats also released a report that added up findings from previously undisclosed Defense Department audits. Together, they show more than $1 billion in possible overcharges and $422 million in billing that lacked the kind of documentation the auditors needed to determine whether the charges were proper.

The vast scale goes well beyond previously released figures. In earlier public reports, auditors had identified about $400 million in questioned costs.

A spokeswoman for the Department of Defense said Monday that officials had not had time to examine the Democrats' report, which was released in the afternoon. "The department is committed to an integrated, well-managed contracting process in Iraq," Marine Corps Lt. Col. Roseann Lynch said in an e-mail.

In a written statement, Cathy Gist-Mann of Halliburton called the alleged overcharges "a gross mischaracterization" and described the hearing as politically motivated.

Possible excessive charges for the oil services contract have been released previously. But Monday's report described possible overcharges of $800 million on "logistical" services, such as food service and trash hauling, conducted in Iraq by KBR, a Halliburton subsidiary formerly known as Kellogg, Brown & Root.

Rory Mayberry, a former KBR food service manager, discussed some of the overcharges in a videotaped statement. He said the company served troops food that had been expired for as long as a year, provided Turkish and Filipino workers with leftovers in trash bags rather than culturally appropriate food, and overcharged for 10,000 meals per day in order to make up for a financial sanction imposed by the Pentagon.

Mayberry's clams could not be independently corroborated.

"KBR's dining facilities are thoroughly inspected every month by the Army's Preventive Medicine Services division, and one of the main things they check is the expiration dates on various food products," Gist-Mann wrote. "If at any point food is deemed unfit to serve, KBR follows the government-approved processes and procedures to destroy it."

Sens. Byron L. Dorgan (D-N.D.), Frank R. Lautenberg (D-N.J.) and Mark Dayton (D-Minn.) and Rep. Henry A. Waxman (D-Los Angeles) questioned the Iraq oil contract, which Greenhouse said Halliburton should never have been offered because of the company's inside knowledge of the project budget.

Another possible impropriety was a waiver, apparently given by top Defense Department officials, that allowed Halliburton to bill the department without providing cost and pricing data. Greenhouse said she normally would have been required to sign any such waiver, but this one "didn't even appear in my system."

The waiver allowed the company to pay a politically connected Kuwaiti oil company more than $1 per gallon to transport gasoline -- work now being done, under worse security conditions, for 18 cents a gallon, according to executives of Lloyd-Owen International, which transports the fuel under contract with the Iraqi government.

Alan Waller, the chief executive officer of Lloyd-Owen, said at the hearing that the refineries had "no proper hoses, pumps or connectors. We have had to leave trucks as long as 15 days" before they can be unloaded because of broken-down and dangerous equipment.

Lautenberg pronounced himself shocked. "Profiteering is traitorous behavior," he said.

Greenhouse and Mayberry said they faced retribution for speaking out.

Greenhouse said she had been told by the acting chief counsel of the Corps of Engineers that appearing at the hearing "would not be in my best interest." Mayberry said that after he spoke to auditors in Iraq, he was transferred to a more dangerous assignment in Fallouja.

In response, Halliburton spokeswoman Gist-Mann wrote: "Audits are part of the normal contracting process and KBR and its employees routinely cooperate with all of these reviews of the company's operations. The company does not prohibit any employee from speaking with any auditor."

She also wrote that retribution against employees is forbidden in the firm's code of conduct.

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