How to Stay Out of Sight While Making Millions from the War in Iraq

By Pratap Chatterjee, Tomdispatch.com. Posted June 3, 2009.

Five shareholder activists did manage to attend Halliburton's annual meeting, including me. (I own a single share of Halliburton stock.) When I asked Lesar about the company's links to KBR, he responded unequivocally, "First of all, let's be very clear, KBR and Halliburton are legally separated."

Just three months ago, however, Halliburton didn't hesitate to pay off $382 million in fines to the U.S. Department of Justice as part of the settlement of a controversial KBR gas project in Nigeria in which the company admitted to paying a $180 million bribe to government officials. Halliburton, Lesar assured us, had been willing to pony up such a sum to ensure that KBR could survive on its own. He painted the payment as an act of corporate generosity. I asked Albert Cornelison and Mark McCollum, Halliburton's top lawyer and chief financial officer, if the company had similarly agreed to pay off any future judgments against the company on its monster military logistics contracts in Iraq. Cornelison responded that he doubted the company had financial obligations for KBR's work in Iraq.

Military Investigations Continue

In reality, Halliburton's decision to spin the company off was surely tied to hopes that it might indeed escape a number of pending Iraq investigations and lawsuits, as well as tamp down the bad publicity KBR was generating. Still, those investigations are ongoing. At Fort Belvoir, Virginia, the headquarters of the Defense Contract Audit Agency (DCAA), the office in charge of reviewing the Pentagon's payments to KBR, a small group of investigators continue to pursue that company's failures.

In early May, at a hearing on Capitol Hill, DCAA director April G. Stephenson told the independent, bipartisan, congressionally-mandated Commission on Wartime Contracting in Iraq and Afghanistan that, since 2004, her staff had sent 32 cases of suspected over-billing, bribery, and other possible violations of the law to the Pentagon inspector general. The "vast majority" of these cases, she testified, were linked to KBR, which accounts for a staggering 43% of the dollars the Pentagon has spent in Iraq. "I don't think we're aware of a program, contract, or contractor that has had this number of suspensions or referrals," she told the hearing. (In the allied area of overpricing services, DCAA also recommended $4.3 billion worth of reductions to proposed or billed costs and pointed to another $3.3 billion worth of costs under the KBR contract that they believed were simply not supported.)

Stephenson's staff, she indicated, recommended not paying the costs KBR had billed to the Pentagon on more than 100 occasions, among other things suspending or blocking some $553 million in payments. In but one example of typical KBR practices revealed at the hearing, the company allegedly billed the Pentagon for 4,100 prefabricated living units for military bases in Iraq at an average price of $38,000, even though another contractor offered to provide similar units for $18,000 each.

None of this may, however, matter, if the Pentagon continues to follow the precedents it has recently set. As Stephenson notes, the Pentagon has already agreed to pay out at least $439 million of the $553 million the DCAA questioned, after accepting the company's explanations for each incident.

"I'm struck by the fact [that] the military doesn't seem to care about the cost as long as they get the service," said Commissioner Christopher Shays, former Republican congressman from Connecticut. "Is part of the problem that, in essence with this one contractor, we've basically said, 'KBR is too big to fail?'"

Shocking Revelations

The Pentagon even appears willing to pay KBR for contracts that may have resulted in the deaths of military personnel in Iraq, allegedly electrocuted due to shoddy work by the company's electricians.

Just as Lesar was addressing Halliburton's shareholders in Houston, Senator Byron Dorgan's Senate Democratic Policy Committee was holding a hearing on Capitol Hill focused on KBR. Testifying was Jim Childs, a master electrician hired by the U.S. Army to help review military facilities in Iraq.

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Pratap Chatterjee is the author of Halliburton's Army: How a Well-Connected Texas Oil Company Revolutionized the Way America Makes War. He is the former executive director of CorpWatch and a shareholder of both Halliburton and KBR.

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