"WASHINGTON - Just weeks after Pentagon auditors said Halliburton may have overcharged taxpayers to import oil to Iraq, the Defense Department is removing the Army Corps of Engineers from its role in supervising the program.
"The Defense Energy Support Center, which buys fuel for the military throughout the world, will supervise the shipments and choose new contractors to replace Halliburton, Vice President Dick Cheney's former company.
""We're taking over the mission," the center's spokeswoman, Lynette Ebberts, said Tuesday.
"Democratic lawmakers have criticized the prices charged the U.S. government by Halliburton's KBR subsidiary, which has been importing refined petroleum products into Iraq under a mission awarded without competitive bids. Cheney headed Halliburton before running for vice president.
"Earlier this month, the Defense Department's auditing agency supported the Democrats' allegations, finding the company may have charged up to $61 million too much for delivering gasoline to Iraqi citizens.
"Ebberts would not comment on whether the audit prompted the change, which was ordered Dec. 23...." [more]
* * *
Want a hint why USACE is being relieved of this responsibility?
At Halliburton, they call it "RIO." That sounds sexier than “ORIO,” the full acronym for the U.S. Army Corps of Engineers’ “Operation Restore Iraqi Oil.” The Corps coined the code word, but for the execs at Halliburton, the juicy LOGCAP contract covering all that “RIO” work must beckon like “The Girl From Ipanema.”
All those task orders. All those subcontracts. All that profit.
This site has obtained e-mails from Lt. Col. Eugene A. Pawlik of U.S. ACE headquarters that frankly describe how current contracts and regulations enable Halliburton – the parent company of Kellogg Brown & Root, which won the competitively-bid LOGCAPIII contract – to double-dip in RIO profits. The e-mails are business correspondence, exchanged over the last few weeks between Lt. Col. Pawlik and two business executives.
In one e-mail, the lieutenant colonel confirms that it’s “not a requirement” for sole-source contractors to bid subcontracts (a fact brought to light on this site on Wednesday, and by Congressman Henry Waxman Thursday in a letter to Les Brownlee, Acting Secretary of the Army).
But Halliburton spokesperson Wendy Hall told me this week via e-mail: “…because KBR’s procurement system has been reviewed and approved by the Federal Government, it requires that we compete all subcontract opportunities over $2500.”
According to Ms. Hall, “KBR’s procurement system was inititally reviewed and approved by the Defense Contract Management Agency in 1994. We have been subject to several audits since then, the most recent of which occurred within the last month.”
So KBR is audited. At least “several” times in the last decade. We can all agree that’s a good thing.
And they insist that they “compete all subcontract opportunities over $2500” (although Ms. Hall’s use of “compete” as a transitive verb doesn’t reveal anything about the actual process). The LOGCAP contract itself doesn’t require that competition.
Those are very skimpy safeguards against overcharging, and they promote economy about as much as thong bikinis encourage celibacy. In fact, one of the Lt. Col. Pawlik's e-mails makes the cost-control process seem particularly ineffectual in light of oil business practices: “USACE contract specialists review all the claims for payment against the contract and require supporting documentation for those claims. They then ensure those claims fall within the government/industry standards and within the scope of the contract.”
The colonel spells out the enormous vulnerability: USACE has no role whatsoever in selecting the subcontractors. “The prime contractor engages the subs, and the Corps monitors the contract process to ensure operations are conducted/managed within the scope of the prime’s contract.”
So in RIO, KBR is all on its own to hire whomever it desires. Such temptation!
Since USACE exerts no oversight in KBR’s bidding process for subcontractors, the chief spending restraint is delayed until after the work is done and the bills are submitted. All bills are paid if they’re “within the scope of the contract.”
And as I explained in “Halliburton’s ‘Sole-Source’ Shuffle,” it’s easy for firms in the oil business to submit “supporting documentation”– in the form of the inflated rack rate in their price book – to support very profitable claims.
Double-dipping for profits is apparently “within the scope of the contract,” so why resist? Two subsidiaries of Halliburton – Halliburton Energy Services and Landmark Graphics – are working as subcontractors now under Kellogg Brown & Root, itself a subsidiary of Halliburton. KBR takes its 3-5% profit, and the other subsidiaries take some more. The parent company fattens from both.
So Halliburton is living it up in RIO.
In one of the e-mails this site obtained, Lt. Col. Pawlik wrote -- just last week -- that the Corps has “not yet finalized the Acquisition Strategy for future contracting related to the Iraqi oil infrastructure.”
Meanwhile, KBR won't disclose how much it's paying its subcontractors, like its sister company, Halliburton Energy Services.
Let’s hope that a new “Acquisition Strategy” – and Henry Waxman’s tenacity -- can open up this very expensive RIO to the American public.
* * *
Lt. Col. Pawlik did not reply to e-mailed questions for this report.
THE SHELL GAME:
HALLIBURTON'S 'SOLE-SOURCE' SHUFFLE
Everyone likes to get a good deal, so that little card they post on the inside of certain hotel room doors – the one featuring the wildly inflated “rack rate” for the room – can be fun to read. You’re saving so much money!
It’s an easy hook for travel agents, too: Book now and save 50%! Figure the discount from the “peak rate” and the savings look even bigger.
A bargain? Travelers quickly learn that these rates are intentionally inflated: They are the hotel’s premium prices; competition usually keeps the tab a good deal lower. Still, travel agents love to tout those eye-popping discounts, because they’re a great lure for bargain-hunters.
The oil field service industries aren’t all that different in some key respects, according to two experts in the business who consulted freely with me via e-mail.
One of them -- who’s understandably concerned about retaliation for whistleblowing -- spelled it all out for me in a brief. He called it, “How The System Works,” and the business practices it exposes make it look as if Halliburton may have systematically squeezed American taxpayers for extra profit in Iraq. (Though the expert’s anonymity will be maintained here, his description of industry-wide practice was generally confirmed by Mike Miller of Safety Boss Inc. Mr. Miller emphasized that he has no knowledge of inside practices at Halliburton.)
According to this oil business insider, companies keep a “price book” which lists their rack rates, so to speak -- the maximum price that they charge. But that full retail price is only rarely billed. Fees are almost always negotiated down from what’s listed in the price book. Competition keeps fees lower. Discounts range from 10-70%
Of course, under the circumstances of a no-bid, sole-source contract, there’s no competition at all. That’s why, for good reason, the U.S. government limits the profit that a sole-source contractor can make to 3-5%: to keep the contractor from overcharging.
But our oil business insider alleges that the subcontractors aren’t subject to that kind of a ceiling. The subcontractors, he says, can – and do – charge their full rack rate as often as possible. No discounting is necessary.
So how could that apply to Halliburton?
Representative Henry Waxman (D-CA) is leading the charge to investigate the details of Halliburton subsidiary Kellogg Brown & Root’s oil well firefighting contract in Iraq – the one worth as much as $7 billion. The prime contractor in that now-notorious contract is Kellogg Brown & Root, a wholly-owned subsidiary of Halliburton. KBR, in turn, has subcontracted work to two other wholly-owned Halliburton subsidiaries, Halliburton Energy Services and Landmark Graphics. So, according to the expert, Halliburton Energy Services and Landmark Graphics can conceivably charge up to the top rate from their price book and KBR can mark that up an additional 3-5%.
Halliburton profits at both ends of the deal, with just a little extra juice at the subcontracting end.
We e-mailed Halliburton to get their reaction to this insider’s charges, and spokesperson Wendy Hall answered our questions – all except one, which will be discussed later.
Is it true that the subcontracts on KBR’s deal are “unregulated and no bidding is required?” According to Ms. Hall, “The subcontracting opportunities associated with Federal Government contracts are not generally governed by the Federal Acquisition Regulations.”
“However, because KBR’s procurement system has been reviewed and approved by the Federal Government, it requires that we compete all subcontract opportunities over $2500.”
Is it also true that subcontractors are routinely paid the full fee listed in their “price book”? Ms. Hall: “We do not publish the prices that we pay our subcontractors.”
With these kinds of answers from Halliburton, it’s impossible to disregard these allegations.
Halliburton contends “KBR’s subcontractors and potential subcontractors are selected through a competitive process. We evaluate such items as prices, schedule, quality, health & safety, and financial status. The price we agree to pay results from this competition.”
Which brings us to the question that Wendy Hall wouldn’t answer, despite having carefully responded to every other query: Under this contract, what companies have been hired as subcontractors in which Halliburton has partial ownership, through debt, stock or warrants for stock? No response.
The question was e-mailed again, along with the plea: “If you don't have an answer for this off-hand, please tell me. I don't want to infer that this [is] a question Halliburton doesn't want answered.”
Still no response.
For now, I'll leave the inferences to you.
Just remember the obvious: That little "rack rate" card on the hotel room door doesn't mean much of anything.
"BAGHDAD, Iraq -- Smugglers have recently been draining Iraq of up to a fifth of its daily gasoline supply while sabotage and refinery breakdowns have limited production to only about 60 percent of what it was a year ago, according to a senior official with the Iraqi oil ministry.
"The gasoline shortage has been acute in recent weeks, producing long lines of cars at petrol stations and undermining confidence in an American-led occupation that is still struggling to satisfy basic fuel demands nearly nine months after Saddam Hussein's regime was toppled. This has placed added burdens on U.S. troops, who have had to protect gas tanker trucks from theft or sabotage. And the soldiers also have had to control lines at gas stations, sometime creating friction with frustrated Iraqis...." [more]
When reading Jeff Gerth's piece on Halliburton's "struggle to manage costs" (below), bear this in mind: Halliburton's profits as lead contractor may be strictly limited -- but there's precious little oversight on the subcontractors.
That's where the big profits are. And since Halliburton routinely contracts and sub-contracts with its own subsidiaries (see "Halliburton's Sole-Source Shuffle") -- and since subcontractors routinely claim enormous profit margins (like for that Kuwaiti gasoline Gerth mentions) -- it's just silly to keep harping on the notion that Halliburton's "profit" is squelched at 3-5%.
"WASHINGTON, Dec. 28 — The Qarmat Ali water treatment plant in southern Iraq is crucial to keeping the oil flowing from the region's petroleum-rich fields. So when American engineers found the antiquated plant barely operating earlier this year, there was no question that repairing it was important to the rebuilding of Iraq. Setting the price for the repairs was another matter.
"In July, the Halliburton Company estimated that the overhaul would cost $75.7 million, according to confidential documents that the company submitted to the Army Corps of Engineers. But in early September, the Bush administration asked Congress for $125 million to do the job — a 40 percent price increase in just six weeks.
"The initial price was based on "drive-by estimating," said Richard V. Dowling, a spokesman for the corps, which oversees the contract. The second was a result of a more complete assessment. "The best I can lamely fall back on is to say that estimates change," said Mr. Dowling, who is based in Baghdad. "This is not business as usual."
"The rebuilding of Iraq's oil industry has been characterized in the months since by increasing costs and scant public explanation. An examination of what has grown into a multibillion-dollar contract to restore Iraq's oil infrastructure shows no evidence of profiteering by Halliburton, the Houston-based oil services company, but it does demonstrate a struggle between price controls and the uncertainties of war, with price controls frequently losing.
"The Pentagon's contract with a Halliburton subsidiary, Kellogg Brown & Root, conceived in secrecy before the war and signed in March, was meant as a stopgap deal to last no more than a few months. But it has been in effect since then and has grown to more than $2 billion.
"The scope of the contract includes myriad tasks from importing fuels to repairing pipelines, and the costs have increased through task orders and subcontracts, some of which are carried out with limited documentation or disclosure.
"The reconstruction of Iraq has taken on "a Wild West atmosphere," said Gordon Adams, a military procurement expert at George Washington University. "Wartime creates an urgent need, and under an urgent need, contractors will deliver and take a price. There's a premium for getting it done fast."
"Earlier this month, Pentagon auditors questioned the $2.64 per gallon that Halliburton was charging to truck fuel from Kuwait to Iraq, and sought to recover $61 million. In response, company officials said they had actually saved the government money and had put the fuel supply subcontract up for competitive bidding. But there was little paperwork to show that any bidding had taken place, according to government officials familiar with the audit.
""Most of it was done on an emergency basis, very quickly, over the phone, and Halliburton has struggled to prove this was competitively bid," said one government official...." [more]
"His steely blue eyes scan the lobby of one of Baghdad's fortress-like hotels, his speech is fast and agitated, peppered with words like "discipline" and "assessment" and he has nothing but contempt for his Iraqi counterparts.
"He is a member of a burgeoning and shadowy army of western private security advisors and guards charged with protecting civilian coalition members, private contractors, Iraq's interim Governing Council elite and the country's vital oil infrastructure.
""Clients are looking for the maturity of soldiers that have been in intense security situations and are not going to jump out and start shooting right away," said the British security advisor on condition of anonymity.
"Since the fall of Saddam Hussein, Iraq has sunk into what the United States has characterised as "low intensity warfare" carried out by "desperate" former regime loyalists and "foreign terrorists".
"Private security firms jumped in, turning the country into a magnet for veterans of guerrilla wars in Africa, Latin America and Northern Ireland and cops who worked America's meanest streets. And all of them are mainly motivated by cold hard cash.
""It is about finances first and foremost," said the British advisor, refusing to disclose details of his own remuneration. But he said that the starting monthly salary for security advisors in Iraq was about 10,000 dollars, more than double the going rate in Britain, and not counting expenses and extras.
"An advertisement posted on the Internet by DynCorp International, which was hired by the US State Department to train Iraqi police, offers senior advisors 153,600 dollars for a one-year stint in Iraq. All applicants must have at least five years experience as civilian law enforcement or corrections officers.
"The security firm, which boasts "virtually every US agency and department" as clients, says it plans to hire up to 1,000 officers for its police training program in Iraq. But DynCorp's involvement in the war-torn country does not stop here.
""They have a lot of irons in the fire," said a Dyncorp security guard posted outside the barricaded Baghdad Hotel, where some members of Iraq's Governing Council are known to stay. The hotel was the site of a suicide car bombing that killed seven Iraqis October 12...." [more]
By Jackie Spinner and Ariana Eunjung Cha
Washington Post Staff Writers
"Iraqis spooked by rumors of a fuel shortage were hoarding the precious commodity, inadvertently causing exactly what they feared. Officials in charge of oil for the U.S.-led occupation government in Baghdad were worried that there would be riots if they didn't do something to improve the situation fast. And so on Nov. 29, they went to Saddam Hussein's former presidential palace and sought help.
"By nightfall, they had received an emergency allotment of $425 million to import fuel from neighboring countries. Although it didn't solve what appears to be a chronic fuel shortage, it did help avert a crisis.
"The spending was approved by the 11-member Program Review Board, a mini-Congress of sorts for the occupation government in its power to allocate money. The board -- comprising mostly Americans, Britons and Australians -- was appointed by L. Paul Bremer, the top administrator of the Coalition Provisional Authority. It uses Iraqi money that includes oil revenue and seized assets from the Hussein era to pay for projects not anticipated by the country's budget. So far the board has approved more than $4 billion in such spending...." [more]
"BEIRUT, Lebanon, Dec. 27 (UPI) -- Syria's oil minister says his country is discussing with Iraq a project to build a new oil pipeline between the two neighboring Arab nations.
"Ibrahim Haddad said the planned pipeline would have a 1.4 million barrels per day capacity and link Iraqi oil fields with Syrian terminals on the Mediterranean Sea, the Saudi daily al-Hayat reported Saturday.
"He said the sanctions that the United States is threatening to impose on Syria under the Syria Accountability Act "would not affect the Syrian oil sector."..." [more]
"WASHINGTON - When President Bush tapped longtime family adviser James A. Baker III to try to persuade U.S. allies to forgive Iraq's crushing $127 billion foreign debt, he summoned one of the country's most well-connected former officials for a difficult task.
"Now those same connections - a web of contacts that extends from his Houston law firm to the worlds of Washington insiders and financiers - are raising questions about potential conflicts of interest.
"The key issue: Can Baker, a former secretary of state whose business interests run far and wide, avoid benefiting his friends and business associates as he labors to help President Bush?..." [more]
"Hours after America's military assault on Iraq began in March, protesters surrounded the headquarters of one of San Francisco's oldest, most quiet companies.
"Bechtel Corp., known for its landmark engineering works and sterling political connections, wanted a government contract to help rebuild Iraq after the shooting stopped. To the protestors shutting down Beale Street, that smacked of war profiteering.
"For the company, it would prove the start of a difficult and dangerous job.
"Bechtel won the contract, now valued at more than $1 billion. The firm's engineers arrived in Iraq on the heels of American and British forces to assess damage and plan repairs. In the process, Bechtel found itself at the center of the world's biggest news event of 2003.
"The work would be hampered by sabotage and the threat of violent attack from insurgents who made prime targets of the U.S. contractors and the facilities they tried to repair.
"Bechtel's financial profit from the original contract wouldn't be much by the standards of corporate America -- less than $80 million by the government's estimate. But for a company that had spent decades building relations with Arab governments, it represented an investment that could pay off handsomely in the future.
"Cliff Mumm, the head of Bechtel's Iraq operation, compared Iraq to California in 1850 -- a land of soon-to-be-tapped wealth.
""It has two rivers, it's fertile, it's sitting on an ocean of oil," Mumm said in his spartan office near Saddam Hussein's former palace. "Iraq ought to be a major player in the world. And we want to be working for them long term."
"The reconstruction contract drew criticism before Bechtel won it.
"Rather than stage a competition open to all interested companies, the U.S. government invited Bechtel and a handful of other firms to bid for the work. The unusual process would save time, government officials argued. Critics noted that most of the invited firms -- including a division of Vice President Dick Cheney's former company, Halliburton -- had close ties to the government...." [more]
"Dec. 24, 2003 -- Current criticism over Halliburton's lucrative Iraq contracts has some historians drawing parallels to a similar controversy involving the company during Lyndon B. Johnson's administration.
"Nearly 40 years ago, Halliburton faced almost identical charges over its work for the U.S. government in Vietnam -- allegations of overcharging, sweetheart contracts from the White House and war profiteering. Back then, the company's close ties to President Johnson became a liability. Today -- as NPR's John Burnett reports in the last of a three-part series -- Halliburton seems to be distancing itself from its former chief executive officer, Vice President Dick Cheney.
"The story of Halliburton's ties to the White House dates back to the 1940s, when a Texas firm called Brown & Root constructed a massive damn project near Austin. The company's founders, Herman and George Brown, won the contract to build Mansfield Dam thanks to the efforts of Johnson, who was then a Texas congressman.
"After Johnson took over the Oval Office, Brown & Root won contracts for huge construction projects for the federal government. By the mid-1960s, newspaper columnists and the Republican minority in Congress began to suggest that the company's good luck was tied to its sizable contributions to Johnson's political campaign...." [more]
"In a speech in April 2001, Harry Stonecipher, then the president of The Boeing Co., touted the "partnership" he helped create with the Air Force.
"He singled out for praise Darleen Druyun, then the Air Force's second-ranking acquisition official, who had described herself as the "godmother" of Boeing's C-17 cargo plane.
""We all campaigned together, the service, the company and our suppliers, for the needed support in Congress," Stonecipher said at the Air Force-sponsored conference in San Antonio.
"Now in his first month as Boein'g chief executive, Stonecipher is attempting to recover after Boeing's top two executives left amid allegations that the company recruited Druyun for a job as she negotiated a $27.6 billion aerial tanker contract.
"Stonecipher's paradox: He is trying to restore the military's confidence in Boeing's ethics by using the very Air Force ties he cultivated as the company's second in command when misdeeds occurred.
""Someone's got to come in and say, 'This is not going to happen again,' " said Brian James, an analyst with Loomis Sayles & Co. He sold the 484,000 Boeing shares his company held among its $60 billion in assets in the past year...." [more]
"MOSCOW, Dec. 22 — Russia has offered to forgive more than half of Iraq's $8 billion debt to Russia, officials of Iraq's interim government said here on Monday, after the Iraqis signaled that Russia would have the chance to revive oil contracts signed during the Saddam Hussein era.
"Abdul Aziz al-Hakim, the current president of the American-backed Iraqi Governing Council, said President Vladimir V. Putin proposed in talks with the Iraqis to wipe out 65 percent of Iraq's Soviet-era debts to Russia in return for favorable treatment of Russian oil and other companies.
""We received a generous promise to write off the debt, or at least a part of it," Mr. Hakim said after meeting with Mr. Putin in the Kremlin. In return, "we will be open to all Russian companies," he added.
""Russia said it is willing to consider the write-off of the rest of the debt if it received beneficial treatment in terms of oil contracts," added Jalal Talabani, a member of the Iraqi delegation.
"Russia, one of Iraq's biggest creditors, wants the write-off negotiated through the Paris Club, a group of 19 creditor nations that negotiates debt.
""Iraq is a free market," said Mr. Talabani. "All companies and countries will be considered." However, the Iraqis singled out the oil giant Lukoil — Russia's No. 2 oil producer — for a meeting on Monday, as it tries to win back rights to the rich West Qurna oil field in Iraq.
"Lukoil's chairman, Vagit Alekperov, told Interfax News Agency that the high-profile Iraq visit "makes us certain that talks will begin soon with the Iraqi oil minister and will be successful."
"A delegation of Lukoil officials, including the president of Lukoil's overseas operation, Andrei Kuzyaev, will hold talks in Baghdad on Dec. 29 with the oil minister, Ibrahim Bahr al-Ulum, focusing on the West Qurna project. The original agreement on exploring the field, ended by Mr. Hussein just prior to the invasion of Iraq in March, was signed in March 1997...." [more]
"WASHINGTON (Reuters) - Democratic Rep. Henry Waxman, a relentless critic of Halliburton Corp. for its Iraq contracts, has accepted a $1,000 campaign gift from the donation arm of the company once run by Vice President Dick Cheney.
"The political action committee of energy services giant Halliburton gave the money last month and the California congressman will keep it, his spokeswoman Karen Lightfoot, said on Monday, without elaborating on the decision.
"Larry Noble, executive director of the non-profit Center for Responsive Politics, said the donation was "a little bit surprising" but may reflect the company's pragmatic approach to politics.
""I don't think they are hoping to change his position, but I think they probably want to keep the door open for future discussions," Noble said.
"Waxman and other Democrats in Congress have frequently taken issue with a multi-billion-dollar, noncompetitive contract the government gave to Halliburton subsidiary Kellogg Brown & Root in March to rebuild Iraq's oil industry.
"Waxman has also accused Halliburton of overcharging the U.S. government for gasoline the firm imports into Iraq...." [more]
By Anne Marie Squeo; and J. Lynn Lunsford
The Wall Street Journal
"Darleen Druyun was a hot prospect when she retired from the Department of the Air Force in November 2002.
"In three decades in various acquisition roles there, the lanky, no-nonsense civilian administrator had negotiated billion-dollar weapons contracts and amassed valuable insights into Pentagon policy and the strengths and weaknesses of defense contractors. At a retirement lunch at an Italian restaurant in northern Virginia near the Pentagon, more than a hundred industry executives and government officials gathered, some anxiously scanning the room for clues as to where she might land next.
"By the time of that Nov. 21 fete, Druyun had quietly talked about job opportunities with three of the nation's largest defense contractors — Boeing, Lockheed Martin and Raytheon. Lockheed President Robert Stevens attended. So did Boeing Chief Financial Officer Michael Sears and James Albaugh, the head of the company's space and defense businesses. When Sears sat down at Druyun's table to chat with her family, other executives in the room took note.
"A year later, the winner in the race to land Druyun — Boeing — turned out to be the big loser. Actions related to Druyun's hiring in January 2003 are now the subject of Pentagon and Justice Department probes as well as congressional scrutiny into the nation's No. 2 defense contractor. Boeing fired both Sears and Druyun in late November for what it called "unethical" conduct. Their dealings were a major factor in the resignation a week later of the company's chairman and chief executive, Phil Condit.
"Talk of a job at Boeing for Druyun began as early as Sept. 3, 2002, more than two months before she recused herself from overseeing Boeing contracts, according to people familiar with the investigation. While those job negotiations were under way, she was also continuing to push a controversial $21 billion plan to have the government lease and later buy 100 Boeing-made airplanes. Separately, Pentagon investigators are looking into whether Druyun broke the law by sharing a rival company's information with Boeing.
"Federal law bars government acquisition officers from discussing jobs with outside companies unless they disqualify themselves from contract decisions connected to those companies. The law also bans contractors from having job talks with an official if they know that he or she still has authority over contracts linked to them. The criminal part of the probe, which could result in jail time, centers on obstruction-of-justice charges related to alleged efforts in recent months by Sears and Druyun to cover up their early discussions...." [more]
"NEW YORK, Dec 22 (Reuters) - A Halliburton Co. (nyse: HAL - news - people) official said he and his staff were pressured by the U.S. Embassy and Kuwait government officials to buy gasoline from Kuwait as a political favor, rather than possibly cheaper Turkish gas, the Wall Street Journal said on Monday.
"Thomas Crum, chief operating officer for Halliburton's Kellogg, Brown & Root unit's Middle East government operations, was quoted in the newspaper as saying, "There's been considerable pressure here on our people from the embassy encouraging us to buy as much fuel as we can from Kuwait, telling us it's a political issue."
"Earlier in December, the Pentagon said a draft audit found evidence KBR may have overcharged U.S. taxpayers $61 million to supply fuel to Iraq from Kuwait. Halliburton has strongly denied any wrongdoing.
"According to the paper, Crum said that embassy officials, whom he did not identify, indicated that the political nature of the issue related to the U.S. government's desire to show appreciation to Kuwait for its help in the American-led invasion of Iraq...." [more]
"BAGHDAD, Iraq - Insurgents attacked pipelines and a petrol storage depot in Iraq, setting fires that blazed for hours and lost millions of liters (gallons) of oil, officials reported Sunday as the country confronts a critical fuel shortage.
"To alleviate the crisis, Iraq has negotiated a part-barter deal with Syria, which started sending oil on Saturday, Iraqi oil sources told Dow Jones Newswires.
"Meanwhile, the president of the U.S.-handpicked governing council, Abdel-Aziz al-Hakim, went to neighboring Syria this weekend for talks with President Bashar Assad. Later Sunday he is scheduled to leave for Moscow, where talks are expected to include that fate of big contracts signed by Russian oil companies and the former Iraqi regime.
"In southern Baghdad on Saturday, rebels firing RPG rockets hit storage tanks and ignited fires that burned about 10 million liters (2.6 million gallons) of gasoline, said Issam Jihad, a spokesman for the Oil Ministry.
"He said Iraqi police were investigating the attack.
"Also Saturday, a pipeline exploded in the al-Mashahda area 25 kilometers (15 miles) north of Baghdad, in what Jihad called "an act of sabotage."
""The explosion led to the destruction of (part of) the pipeline and to the leakage of vast quantities of oil products," Jihad said.
"In a separate incident Saturday thieves trying to steal gasoline caused an explosion when they breached a pipeline near Samarra, 120 kilometers (75 miles) north of Baghdad, creating a blaze that burned out three cars that were loaded with barrels of gas.
"Officials corrected reports that saboteurs were responsible for pipeline fires in northern Iraq, saying they were set to burn residual oil...." [more]
"BAGHDAD -- A primary-school principal, Fawzyia al Ali, was thrilled when workers appeared this fall with orders to fix up the school. But a month and $38,000 from the US government later, she was left with bitter disappointment and a pool of raw sewage on the playground.
""When they came, they promised me a lot and had an agreement with a big company for construction," Ali said recently while standing by the sewage, which welled up after workers dug in the wrong place to find a septic tank. "I had a lot of hope. They promised a lot, and the result was the opposite."
"Ali's Al Julan school, in the Kadasiyah neighborhood of southwest Baghdad, is among several schools in the capital with a list of complaints about renovations this fall supervised by Bechtel International Systems Inc.
"The problems, which also include leaky roofs and new water pumps that don't work, highlight the hurdles that American companies and Iraqis face as they work together to rebuild an infrastructure left decrepit by 20 years of war and 12 years of international sanctions.
"The complaints about Bechtel also arose as another giant contractor, Halliburton, was accused of overcharging for gasoline delivered in Iraq.
"Prevented from working in Iraq since sanctions began, American firms have no background in local market prices, materials, or the labor force and little knowledge about several thousand Iraqi companies that come to them seeking subcontracts.
"Bechtel won the government's largest Iraq reconstruction contract, worth about $1 billion, to repair everything from hospitals to the southern port in Umm Qasr. Under the contract from the US Agency for International Development, Bechtel renovated 1,239 schools for a total of about $48 million, about $38,000 per school.
"Thor Christiansen, who oversaw school reconstruction for Bechtel, did not give an exact breakdown on how the money was spent on each school. But he said materials and salaries for 10 expatriates who oversaw the work of the Iraqi subcontractors accounted for the bulk.
"He said he did not know the salaries of those workers, because it is "hard to differentiate the building sector" costs from other sectors Bechtel is working in, such as helping to improve water and electricity supplies.
"But Iraqi school officials say American taxpayers didn't get much bang for their buck.
""For that much money, we can build a new school," said Isra Mohammed, one of four regional planning directors in Baghdad. On her desk sat a stack of complaints about the reconstruction work from schools in the area she oversees.
"Two months after the work was finished, students were getting locked into classrooms when new door handles broke. Toilets were overflowing because sewer systems weren't cleaned properly. Children couldn't wash their hands, because handles on new water taps had snapped off. Desks and chalkboards, already in short supply, were in the trash heap after painters had used them as makeshift stepladders. Laborers had carted off working ceiling fans and sturdy doors, and installed cheap replacements, teachers and principals said...." [more]
"BAGHDAD — Hunched over an unadorned desk in a claustrophobic office on the ground floor of Saddam Hussein's former Republican Palace sits the most popular reconstruction official in Baghdad.
"Retired Adm. David Nash seems an unlikely focus of international attention. Yet the lanky, soft-spoken Nash has one asset that has had him collecting more calling cards than civilian administrator L. Paul Bremer III and U.S. commander Lt. Gen. Ricardo Sanchez combined: $18.6 billion.
"As the man responsible for doling out rebuilding contracts approved by Congress this fall, Nash found himself besieged at a sold-out seminar for 1,400 contractors in Washington and at a more intimate London gathering. But the Coalition Provisional Authority official keeps a coy distance from them and the stream of would-be suitors in Iraq.
""I have friends I didn't even know I had. They write me and call me all the time," Nash, 61, said in a recent interview. "Sometimes I strike it up to old age that I don't even know who they are."
"But the allure of a job doling out historic largess has come with headaches of equal proportion.
"The process has angered the French, Germans and Russians, all of whom were declared ineligible for the 26 prime contracts for failing to join the U.S.-led coalition. And it is now irking eligible contractors because of this week's White House directive that Nash stop issuing requests for proposals while rule changes are considered.
"That means the money will probably not be doled out by the Feb. 1 target date. Meanwhile, Iraqi public opinion, increasingly hostile amid lingering power and water shortages and an unending spree of postwar violence, has shown no sign of reversing...." [more]
"WASHINGTON -- The Pentagon has launched a sweeping review of two pending Iraqi oil field contracts, pulling the $2 billion deals out of the normal contracting process in a highly unusual move and preventing the Army Corps of Engineers from making new awards.
"News of the previously undisclosed review follows a Pentagon audit agency's allegations last week that Halliburton, the Houston-based firm that Vice President Dick Cheney ran before taking office, appeared to have overcharged the government $61 million for imported emergency gasoline for Iraqis.
"The new Pentagon review further delays the government's awarding of competitively bid contracts that are to replace a controversial no-bid contract that it awarded in March to a Halliburton subsidiary, Kellogg, Brown & Root, for stopgap protection of Iraqi oil pipelines and other infrastructure during the subsequent war.
"The new contracts to rebuild and maintain 22 oil fields in southern and northern Iraq were originally supposed to have been awarded in August, with a maximum cost of $1 billion. Now, in light of the unusual high-level Pentagon review and the fresh controversy over the Halliburton gasoline charges, contracting sources don't expect the contracts, whose potential price tag has risen to $2 billion, to be awarded until mid-January at the earliest.
""The award is on hold, pending a review of the matter at the Pentagon," said Scott Saunders, a spokesman for the Army Corps of Engineers. "It's been elevated above the Army Corps of Engineers."..." [more]
"WASHINGTON (AP) - Vice President Dick Cheney's former company said Thursday it has saved the Pentagon money even as new allegations surfaced that Halliburton's own auditors warned of possible overcharging for fuel delivered to Iraq.
"Halliburton said in a statement it expected to be cleared by the Defense Department of overcharging for gasoline it trucked into Iraq from Kuwait. Last week, Pentagon auditors said they suspected a Halliburton subsidiary, Kellogg, Brown & Root, had overcharged the department by about $61 million on a no-bid contract to supply gasoline to Iraqi citizens.
"Pentagon officials said the source of the overcharging was the high price charged by a Kuwaiti firm that supplied the gas to Halliburton. Halliburton, a Houston-based oil services company, said the Kuwaiti firm was the only one approved as a supplier by the U.S. Army Corps of Engineers, which oversees the contract.
"Pentagon officials have also said the Kuwaiti company was the only one approved by the Kuwaiti government to export gasoline from the oil-rich monarchy. Democratic presidential candidate Joe Lieberman identified the firm as the Altanmia Commercial Marketing Co.
"The Connecticut senator said auditors found Halliburton officials had questioned the contract and called again for another investigation of the company.
"Lieberman said his staff met with Michael Thibault, an official with the Defense Contract Audit Agency, which is investigating the Halliburton contract. Lieberman said Thibault told him DCAA auditors found a Halliburton draft audit warning that the Kuwaiti company was charging excessive prices and the procedures may have violated U.S. contracting regulations...." [more]
"WASHINGTON -- Pentagon auditors have accused Halliburton Co. (HAL, news) of refusing to turn over documents that show the company was aware of "significant internal control weaknesses" in an Iraq fuel contract that has allegedly overcharged taxpayers nearly $100 million.
"The dispute is laid out in a previously undisclosed Dec. 10 letter from the Defense Contract Audit Agency to a top official at Kellogg Brown & Root, the Halliburton subsidiary handling more than $5 billion of work in Iraq. The letter says that KBR's refusal to turn over the internal audit "is not in the spirit of open communication, trust and cooperation."
"Vice President Dick Cheney ran the company until 2000, and it won both of its two contracts in Iraq without competition.
"Defense officials say a DCAA auditor stumbled upon the audit last month while looking through unrelated KBR files in Kuwait. The government auditor took notes but wasn't allowed to keep a copy of the internal report, an official said...." [more]
MUTUAL INTERESTS The Texas story of Veridian Inc. provides a snapshot of the military-industrial-government complex
BY LUCIUS LOMAX
"If you live in Texas, no matter where you live or what sort of work you do, you're profiting from the various wars, armed interventions, covert actions, and miscellaneous military conflicts now being pursued worldwide by American armed forces and the U.S. intelligence community.
"On an upper floor of an office tower in downtown Austin, about a mile from the Capitol, is the suite belonging to an investment company called the Texas Growth Fund. The growth fund represents a relatively recent effort by the state of Texas to become a more active force in profiting, directly and indirectly, from the state's investments.
"The money that TGF invests is yours and mine -- specifically, it comes from money allocated by the Teacher Retirement System of Texas and the Employees Retirement System of Texas, the University of Texas and Texas A&M, as well as the less-rich San Antonio Fire and Police Pension Fund. In the bear market of the last few years, TGF has generally not done well. But there has been at least one very notable exception: an investment in what was until recently an obscure company named Veridian Inc. Veridian, which a few months ago became a division of General Dynamics, is in the "information warfare" business -- a classified contractor to the U.S. Department of Defense and other arms of the federal government.
"In 1995, the state of Texas, through the TGF and during the administration of then-Gov. George W. Bush, helped create a very formidable defense contractor by investing millions of dollars of state money in Veridian. The company has gone from $100 million in revenues (prior to the state's investment) to $1.2 billion now, benefiting directly from a slew of federal defense-related contracts, as President George W. Bush's "War on Terror" has taken shape. Recently, the state has capitalized on its foresight and investment talent by receiving a big pot of money. ..." [more]
"LONDON (Reuters) - Oil prices climbed further Wednesday as news emerged of fresh attacks on Iraq's oil facilities and traders bet that figures would show cold weather drawing down U.S. fuel inventories.
"London's Brent crude futures for February delivery rose 23 cents to $30.20 a barrel, within 40 cents of two-month highs hit briefly Tuesday.
"U.S. light crude rose 13 cents to $33.02, extending gains of more than 10 percent this month.
"Prices rose as a senior Iraqi oil official said Iraq's northern export pipeline, closed since March's U.S.-led invasion, had come under fresh attacks at the time of the weekend capture of former Iraqi leader Saddam Hussein.
"Adel Kazzaz, head of the North Oil Company told Reuters the latest attack showed the line, which runs from Iraq's Kirkuk oilfields to Turkey's Mediterranean coast, was still too vulnerable to restart.
""It was subject to an attack only three days ago. Security measures remain insufficient to start the pipeline," Kazzaz said by telephone from Kirkuk. Separately, a fuel truck bomb in Baghdad killed 17 people Wednesday.
"Iraq's sole oil export option is the southern Basra oil terminal in the Gulf, which has been shipping just under 1.5 million barrels per day (bpd) of Basra crude so far this month. Iraq had pre-war export capacity of 2.2 million bpd...." [more]
By DAVID IVANOVICH
Copyright 2003 Houston Chronicle Washington Bureau
"WASHINGTON -- New York City's comptroller is prodding Houston-based Halliburton Co. to release more details about its business dealings in Iran.
"William Thompson Jr., who manages the New York police and fire department pension funds, has been agitating for months for Halliburton's board to reconsider doing business in Iran because of that country's links to terrorism.
"Federal law bars American citizens from doing business in Iran, but independent foreign subsidiaries of U.S. firms can operate there.
"The two New York funds have about $31 million invested in Halliburton.
""If we are trying to eradicate terrorism, we must ensure that companies in our portfolio are not using offshore subsidiaries to legally evade United States sanctions against terrorist-sponsoring states," Thompson said...." [more]
"WASHINGTON (Reuters) - The U.S. military said on Monday Vice President Dick Cheney's former company Halliburton was allocated $222 million more last week for work in Iraq, at the same time as a Pentagon audit found the firm may have overbilled for some services there.
"Halliburton subsidiary Kellogg Brown and Root has now clocked up $2.26 billion under its March no-bid contract with the U.S. Army Corps of Engineers to rebuild Iraq's oil sector.
"Army Corps of Engineers spokesman Bob Faletti said a new task order was made for KBR last week worth up to $222 million for the "restoration of essential infrastructure."
"Faletti said this work order would be paid for by money from the Development Fund for Iraq and not from $18.6 billion in new funds to rebuild Iraq appropriated by Congress...." [more]
"Last week there were major news stories about possible profiteering by Halliburton and other American contractors in Iraq. These stories have, inevitably and appropriately, been pushed temporarily into the background by the news of Saddam's capture. But the questions remain. In fact, the more you look into this issue, the more you worry that we have entered a new era of excess for the military-industrial complex.
"The story about Halliburton's strangely expensive gasoline imports into Iraq gets curiouser and curiouser. High-priced gasoline was purchased from a supplier whose name is unfamiliar to industry experts, but that appears to be run by a prominent Kuwaiti family (no doubt still grateful for the 1991 liberation). U.S. Army Corps of Engineers documents seen by The Wall Street Journal refer to "political pressures" from Kuwait's government and the U.S. embassy in Kuwait to deal only with that firm. I wonder where that trail leads.
"Meanwhile, NBC News has obtained Pentagon inspection reports of unsanitary conditions at mess halls run by Halliburton in Iraq: "Blood all over the floors of refrigerators, dirty pans, dirty grills, dirty salad bars, rotting meat and vegetables." An October report complains that Halliburton had promised to fix the problem but didn't.
"And more detail has been emerging about Bechtel's much-touted school repairs. Again, a Pentagon report found "horrible" work: dangerous debris left in playground areas, sloppy paint jobs and broken toilets.
"Are these isolated bad examples, or part of a pattern? It's impossible to be sure without a broad, scrupulously independent investigation. Yet such an inquiry is hard to imagine in the current political environment — which is precisely why one can't help suspecting the worst.
"Let's be clear: worries about profiteering aren't a left-right issue. Conservatives have long warned that regulatory agencies tend to be "captured" by the industries they regulate; the same must be true of agencies that hand out contracts. Halliburton, Bechtel and other major contractors in Iraq have invested heavily in political influence, not just through campaign contributions, but by enriching people they believe might be helpful. Dick Cheney is part of a long if not exactly proud tradition: Brown & Root, which later became the Halliburton subsidiary doing those dubious deals in Iraq, profited handsomely from its early support of a young politician named Lyndon Johnson.
"So is there any reason to think that things are worse now? Yes...." [more]
"WASHINGTON (Reuters) - The U.S. Supreme Court agreed on Monday to hear Vice President Dick Cheney's arguments for keeping his energy task force papers secret, a battle he has fought in lower courts for more than two years.
"The high court said Cheney's Justice Department lawyers could present a detailed explanation of why he should not have to comply with a federal judge's order last year to produce details of White House contacts with the energy industry.
"Justice Department lawyers say Cheney is immune to the court order on constitutional, separation-of-powers grounds.
"The environmentalist Sierra Club and Judicial Watch government watchdog group sued in 2001 to find out the names and positions of members of the energy task force headed by the vice president that year.
"They allege that Cheney, a former energy executive, drafted energy policy by consulting industry executives such as Enron Corp.'s Ken Lay, making them effective members of his task force while leaving environmentalists on the outside.
"Cheney was chief executive of energy and construction company Halliburton Co. from 1995 to 2000. His 2001 energy task force produced a policy paper calling for more oil and gas drilling and a revived nuclear power program.
"Cheney has acknowledged meeting Lay, but his lawyers say the energy task force was comprised of government officials, not corporate chieftains.
"The Supreme Court will hear arguments in the case in the spring next year, with a decision due by the end of June...." [more]
"DUBAI (Reuters) - Iraq said Monday the capture of Saddam Hussein should ease its oil security problems, but energy companies said they were still unlikely to rush for the country's prized oilfields.
"A security vacuum in postwar Iraq has scared off oil multinationals and shackled crude exports. Iraqi Oil Minister Ibrahim Bahr al-Uloum told Reuters that Saddam's arrest might be a turning point.
"``This is a new chapter. We expect his arrest will reduce the number of attacks in general,'' Uloum said.
"``There should be an improvement in security, but we can't eliminate any other possible (pipeline) attacks in the future.''
"Sabotage has kept the vital export pipeline from Iraq's Kirkuk fields to the Turkish Mediterranean closed since the war, cutting oil revenue for reconstruction.
``We plan to reopen the northern pipeline when the security situation permits,'' Bahr al-Uloum said without elaborating...." [more]
"Tensions have emerged between two influential formerly exiled political parties in Baghdad over control of Iraq's rapidly proliferating security organisations.
"The growing number of Iraqi-financed private military companies had already caused concern that secular leaders might be developing militias to match the paramilitary forces under the command of religious and Kurdish political groups.
"Now Ayad Allawi's Iraqi National Accord has accused the Iraqi National Congress (INC), led by Ahmad Chalabi, of undermining central authority by backing creation of a private military company to secure the oil sector. Mr Allawi is head of the security committee on the interim Governing Council and his deputy, Nouri Badran, runs the interior ministry, which controls more than 50,000 police.
"The sparring between Mr Chalabi and Mr Allawi dates from the 1990s, when both men led separate attempts to overthrow Saddam Hussein. While Mr Chalabi is close to the Pentagon and advocates redrawing the Middle East political map, Mr Allawi is regarded as closer to the CIA and fears that further upsetting the status quo would inflame the region.
"The latest dispute between the two, both members of the Governing Council's rotating presidency, erupted after close associates of Mr Chalabi teamed up with Erinys International, a Johannesburg-based security risk consultancy, to train and deploy a 6,500-strong Iraqi force at oil installations. The joint venture, Erinys Iraq, won an $80m (£46m) two-year contract.
""If such security companies are not under central government control there will be anarchy," said Mr Allawi. He said the interior ministry should regulate the oil security force...." [more]
"RENO, Nev. — A Republican congressman Saturday joined Democratic calls for hearings on allegations that Halliburton Co. charged up to $61 million too much for delivering gasoline to Iraqi citizens under a no-bid contract.
"Rep. Jim Gibbons, R-Nev., called the allegations "an absolute outrage" and said he wants the House Armed Services Committee to hold hearings early next year on Halliburton, Vice President Dick Cheney's former company.
""If these allegations which were found in a Pentagon audit of government contracts is true, then it's time for Halliburton to break out its checkbook and refund American taxpayers," Gibbons said.
"Gibbons, a committee member, said he's the first Republican member of Congress to call for congressional hearings of the company...." [more]
"It was a well-worn path, as businessmen, diplomats and government leaders headed to Baghdad to sell everything from nuclear reactors to missiles and components for chemical warfare.
"The Iraqi government may have been on the nose in diplomatic circles for some time, but in the jockeying between arms manufacturers, wealthy rogue states, such as Iraq, are actively wooed.
"The French President, Jacques Chirac, was one of the first of the current world leaders to latch on to Saddam Hussein in the mid-1970s, but he was far from the last, as a stream of diplomats, dignitaries and businessmen sought him out before he even took control of the country.
"In late 1974, Mr Chirac, who was then prime minister, began talks with Saddam to sell Iraq the Osirak nuclear reactor.
"Iraq bought the reactor, although the then French president, Valery Giscard d'Estaing, blocked an associated sale of weapons-grade uranium. Israel destroyed the Osirak reactor in 1981, before it was fully operational.
"Two years earlier, Israel had destroyed reactors being readied for shipment to Iraq at Toulon, in France, as part of the same deal.
"Iraq has since purchased a vast array of French military hardware such as air-defence systems, aircraft and missiles, selling France its oil in return.
"So close were the links between Paris and Baghdad that there have long been rumours that the Iraqi leader had been a regular contributor to Mr Chirac's various election campaigns, although nothing has been proved.
"France was not alone, with all the major arms manufacturers actively targeting Iraq from the outbreak of the Iraq-Iran war.
"Soon after France sold Iraq the Osirak reactor, the United States began manoeuvring to sell Iraq arms, keen not to miss out on the rising demand as the war between Iran and Iraq dragged on.
"In 1983, the current US Defence Secretary, Donald Rumsfeld, visited Baghdad as a special envoy of the then US president, Ronald Reagan, as the Iran-Iraq war was escalating.
"The stated purpose of the visit was to discuss regional issues, while also reminding Saddam of Iraq's importance to the US. Although he was aware of the claims that Iraq had begun using chemical warfare, Mr Rumsfeld failed to raise the matter, even though it was against international conventions.
"Even before that visit, there were claims that US cropdusting equipment and helicopters were being used for chemical warfare by Iraq against Iran. Chemical weapons production capability had been obtained from Western firms, with claims that a foreign subsidiary of a US firm had also been involved...." [more]
"WASHINGTON -- On the U.S. presidential election night three years ago, James Baker was looking forward to a long-planned pheasant-hunting foray in Europe with his old boss and friend, former president George Bush, and retired general Norman Schwarzkopf.
"But the silver-haired patrician power broker had to scrap the hunting trip. A far greater prize was at stake and the fate of the Bush family dynasty was hanging in the balance.
"George the younger had won -- or perhaps lost -- the 2000 election, and the outcome in Florida would determine whether the Bush family could claim both the 41st and 43rd presidents of the United States.
"So the family turned to its long-time confidant Mr. Baker, the former U.S. secretary of state whose unique combination of Ivy League polish, political connections, steely resolve and Texas gunslinger's nerve had helped the first president Bush negotiate a nuclear arms deal with Moscow, create an unprecedented coalition to fight the first Persian Gulf war, and mount an ultimately unsuccessful campaign against Bill Clinton in 1992.
"During 36 extraordinary days in Florida, it was Mr. Baker who was credited with outfoxing the Democrats to a Supreme Court ruling that installed George W. Bush in the White House.
"Now 73, Mr. Baker has been tapped again by the younger Mr. Bush, this time to apply his wily negotiating skills, business smarts and unmatched diplomatic connections to persuade irked allies and a deeply skeptical Arab world to write off a mountain of Iraqi debt. Any deal with Russia, Germany, France and a host of Arab nations to forgive more than $100-billion (U.S.) in Iraqi debt -- and perhaps an equal amount in unpaid reparations from the 1990-91 war -- is seen as essential to reconstruction efforts in Iraq.
"But Mr. Baker's legendary connections have also brought a new swirl of controversy to the White House, where the President yesterday was forced to defend his adviser's public and private interests.
""Jim Baker is a man of high integrity. He's a man of enormous experience," Mr. Bush told reporters, adding "we're fortunate to have Jim Baker agree to serve our country."
"He referred to the unpaid assignment as "a noble mission."
"Mr. Baker's Houston law firm of Baker Botts LLP represents Halliburton Co., the biggest contractor in Iraq, and he is a senior adviser to the Carlyle Group, an international investment company that does business with the Saudi royal family and has an office in Riyadh...." [more]
"WASHINGTON — President Bush, trying to calm a political storm, said Friday that Vice President Dick Cheney's former company should repay the government if it overcharged for gasoline delivered in Iraq under a controversial prewar contract.
""If there's an overcharge, like we think there is, we expect that money be repaid," the president told reporters when asked about the Halliburton contract controversy.
"Pentagon auditors say the company charged up to $61 million too much for delivering gasoline to Iraqi citizens under a no-bid contract to rebuild Iraq's oil industry. Halliburton denies overcharging.
"Meanwhile, an Army spokesman disclosed that companies from France, Germany, Russia and Canada won't be eligible to replace Halliburton as the recipient of the oil reconstruction contract.
"The Army Corps of Engineers is reviewing bids and hopes to decide this month who will get the oil reconstruction deals worth up to $800 million in northern Iraq and $1.2 billion in the south.
"The decision means an additional $2 billion in contracts in Iraq — not disclosed before — would be forbidden to countries that opposed the war, along with the $18.6 billion in Iraq work the Bush administration declared off limits earlier this week.
"The countries that have been left out see the rules as payback, but Bush says limiting contracts to countries that sent troops and money to Iraq makes sense and will encourage more nations to join the U.S.-led coalition.
"Democrats have joined the fray, saying Bush is needlessly alienating allies and rewarding political supporters. Cheney headed Halliburton from 1995 until he became Bush's running mate in 2000, and other executives from the company gave generously to the Bush campaign...." [more]
"Two businessmen instrumental in setting up New Bridge Strategies, a well-connected Washington firm designed to help clients win contracts in Iraq, have previously used an association with the younger brother of President George W. Bush to seek business in the Middle East, an FT investigation has found.
"John Howland, the company president, and Jamal Daniel, a principal, have maintained an important business relationship with Neil Bush stretching back several years. In Mr Daniel's case, the relationship spans more than a decade, with his French office arranging a trip for Mr Bush's family to Disneyland Paris in 1992, while his father, George H.W.Bush, was president.
"On several occasions, the two have attempted to exploit their association with the president's brother to help win business and investors.
"Three people contacted by the FT have seen letters written by Neil Bush recommending business ventures promoted by Mr Howland, Mr Daniel and his family in the Middle East. Mr Daniel has also had his photograph taken with the elder Mr Bush. Such letters and photographs can be valuable props when doing business in the Middle East.
"Mr Daniel's Houston investment fund, Crest Investment Corporation, employs Neil Bush as co-chairman. Crest Investment also helped fund Neil Bush's Ignite!, an educational software company. Mr Daniel sometimes introduces himself as a founding backer of Mr Bush's company, a Middle-Eastern businessman who has met him said, and has persuaded the families of prominent leaders in the region to invest.
"Mr Daniel, Mr Bush and Mr Howland have also been directors of Silvermat, a Swiss company controlled by Crest Investment that supplies the hospitality industry and has had financial and industrial relations problems. Mr Howland is chairman of the company.
"Mr Howland, the Houston businessman who heads New Bridge, was accused in a court case in 1997 of misusing company funds, self-dealing and civil conspiracy, while running a company owned by a Saudi businessman. It was alleged more than $12m (?9.9m, £6.9m) went missing from the company while he was in sole charge of its finances. Mr Howland was also being paid by the company's sole supplier, American Rice, with whom he negotiated a "fraudulently induced" contract, it was claimed...." [more]
* * *
"Read an in-depth analysis of how New Bridge Strategies links controversial business associates of Neil Bush, brother of the US president, to some Republican heavy hitters. Go there." [FT subscription required.]
"WASHINGTON Dec. 12 — A Pentagon audit has found Vice President Dick Cheney's former company may have overcharged the Army by $1.09 per gallon for nearly 57 million gallons of gasoline delivered to citizens in Iraq, senior defense officials say.
Auditors found potential overcharges of up to $61 million for gasoline that a Halliburton subsidiary delivered as part of its no-bid contract to help rebuild Iraq's oil industry.
"But the company apparently didn't profit from the discrepancy, according to officials who briefed reporters Thursday on condition of anonymity. The problem, the officials said, was that Halliburton may have paid a Kuwaiti subcontractor too much for the gasoline in the first place.
"A Halliburton statement released Thursday said the Kuwaiti company was the only one that met the Army Corps of Engineers' specifications. "Halliburton only makes a few cents on the dollar when fuel is delivered from Kuwait to Iraq," the statement read.
"Democratic presidential candidates said the audit demonstrated the Bush administration's commitment to special and corporate interests...." [more]
By DAVID IVANOVICH
Copyright 2003 Houston Chronicle Washington Bureau
"WASHINGTON -- Under assault once again for the price it has been charging to import gasoline into Iraq, Houston-based Halliburton Co. said Wednesday it is still doing the work because "other organizations have not been able to handle the mission."
"In a spirited defense of its work in Iraq, which has been criticized by Congressional Democrats as overpriced, Halliburton said the U.S. Army Corps of Engineers has tried unsuccessfully "several times" over the last few months to turn over responsibility for fuel distribution to various Iraqi groups.
"But each time, Halliburton subsidiary KBR "was called upon to step in at a moment's notice, remobilize trucks and drivers and bridge the gap" between what other organizations were able to import and what Iraq's urgent domestic needs were, company spokeswoman Wendy Hall said.
"House Democrats, who have long been critical of Halliburton's contract with the Pentagon to repair Iraq's energy infrastructure, were on the attack again Wednesday, complaining that Halliburton was charging $2.64 a gallon to import fuel from Kuwait into Iraq, more than twice what others have been paid.
"In a letter to national security adviser Condoleezza Rice, Rep. Henry Waxman, D-Calif., and Rep. John Dingell, D-Mich., said Halliburton is collecting about 26 cents per gallon in markups and 2 cents in "other" charges -- for each gallon trucked in from Kuwait.
"But Halliburton's actual role in the importation of the fuel is limited, the lawmakers said.
""Essentially, Halliburton's function is to hire an `integrator' as a subcontractor to purchase the gasoline in Kuwait and transport it into Iraq. It is difficult to understand how this justifies an additional 26 cents per gallon charge on millions of gallons of gasoline."
"And those costs may be on the rise. In recent weeks, the lawmakers calculate, the company has been paying $3.06 per gallon.
"Costs of importing fuel from Turkey, meanwhile, have been only $1.24 a gallon. That figure included only 11 cents per gallons in markups and 2 cents for other charges...." [more]
"The Army Corps of Engineers will take the lead in awarding the $18.6 billion in new Iraq reconstruction contracts, government officials said yesterday.
"The decision, which will give the Pentagon tighter control over the second round of Iraq spending, was attributed to the Army Corps' expertise in construction matters. It will award at least half of the 26 prime contracts, covering electrical infrastructure, transportation, communications and justice facilities. The U.S. Navy Civil Engineer Corps will be responsible for awarding five public works and water contracts.
""We have determined the agencies in our government that are the subject-matter experts," said Maj. Joseph M. Yoswa, a Pentagon spokesman.
"The U.S. Agency for International Development was the leader in awarding more than $2 billion in initial reconstruction contracts. Half of the funding went to projects such as refurbishing school programs and assessing health needs . USAID is currently reviewing bids for a $1.7 billion infrastructure contract. "That's not an insignificant amount of work that we will continue to do in Iraq," said Portia Palmer, a USAID spokeswoman.
"The Army Corps has been under pressure from some Democrats in Congress to explain the prices it is paying a subsidiary of Houston-based Halliburton Co. to import fuel to Iraq under the existing fuel contract. Richard B. Cheney headed Halliburton before he became vice president...." [more]
* * *
Here's Congressman Henry Waxman's Government Reform page on Iraq Contracts. Henry has led the charge on this all along.
In case you'd like to cheer him on:
Rep. Henry A. Waxman
2204 Rayburn House Office Building
Washington, DC 20515
"Q The Vice President on Monday shot 70 pheasants and an unspecified number of ducks. And I'm wondering how many of these were Canadian. (Laughter.)
"MR. McCLELLAN: Ask the Vice President's office. Next question.
"Q Congressional Democrats looking into Halliburton in Iraq have found that they're charging about $2.64 a gallon for gas, and that's U.S. taxpayer money, I assume, that's going through the Halliburton contract. Do you have an explanation for taxpayers as to why it's costing so much for them to buy gas?
"MR. McCLELLAN: Those are contract decisions that are made by the Pentagon and Coalition Provisional Authority. So you ought to direct those questions to the appropriate authorities, to the appropriate authorities there.
"Q Doesn't it seem absurdly high for a gallon of gas?
"MR. McCLELLAN: Well, I think that the ones who make the decisions on the contracting could discuss that with you.
"Q How concerned is the White House about the rising number of civilians that are dying in Afghanistan, and what is the White House doing about it?
"MR. McCLELLAN: One, our thoughts and prayers are always with the families of any innocent person who loses their life. The United States military goes out of their way to make sure that that doesn't happen. And there's been a couple of unfortunate incidents, and our thoughts and prayers are with the families of those who lost their lives.
"WASHINGTON, Dec 9 (Reuters) - Air Force Secretary James Roche has asked the Pentagon's inspector general to expand an investigation of an $18 billion deal for 100 Boeing Co. 767 tankers to include other major contracts, the Air Force said on Tuesday.
"Defense analysts, congressional aides and industry sources said the move marked increasing concern about awards won by the nation's second largest defense contractor in the wake of an ethics scandal that has already spawned a criminal investigation and a major management shakeup.
"But they said the scandal would have consequences for all U.S. defense firms, including tighter scrutiny of contracts and a major congressional review of rules governing the so-called "revolving door" between industry and military officials.
"Chris Hellman, at the Center for Arms Control and Non-Proliferation, said reform was long overdue, but he wasn't surprised by recent revelations in the Boeing tanker deal.
""It was 1956 when Dwight Eisenhower warned about the power of the military-industrial complex. To think that these things haven't been going on in the five decades since then is naive," Hellman said, noting that a major consolidation in the defense industry had raised the stakes when punishing any single firm...." [more]
"The United States government is paying the Halliburton Company an average of $2.64 a gallon to import gasoline and other fuel to Iraq from Kuwait, more than twice what others are paying to truck in Kuwaiti fuel, government documents show.
"Halliburton, which has the exclusive United States contract to import fuel into Iraq, subcontracts the work to a Kuwaiti firm, government officials said. But Halliburton gets 26 cents a gallon for its overhead and fee, according to documents from the Army Corps of Engineers.
"The cost of the imported fuel first came to public attention in October when two senior Democrats in Congress criticized Halliburton, the huge Houston-based oil-field services company, for "inflating gasoline prices at a great cost to American taxpayers." At the time, it was estimated that Halliburton was charging the United States government and Iraq's oil-for-food program an average of about $1.60 a gallon for fuel available for 71 cents wholesale.
"But a breakdown of fuel costs, contained in Army Corps documents recently provided to Democratic Congressional investigators and shared with The New York Times, shows that Halliburton is charging $2.64 for a gallon of fuel it imports from Kuwait and $1.24 per gallon for fuel from Turkey...." [more]
US ALLIES QUERY IRAQ CONTRACT BAN Countries set to be excluded from billion-dollar reconstruction contracts in Iraq have questioned the logic of the formal ban imposed by the US.
"Old US allies stand to lose contracts because they opposed the US-led war.
"France said it was studying the ban's legality and Canada, a substantial donor, said it would be hard to justify giving further funds for rebuilding.
"One German foreign ministry official said he could not see how the ban could be defended on the grounds of security.
"The 26 prime contracts are worth $18.6bn and cover areas such as oil, power, communications, water, housing and public works centres.
"US Deputy Defence Secretary Paul Wolfowitz said in guidelines revealed on Tuesday that the contracts were being restricted in order to protect America's "essential security interests".
"The French foreign ministry announced on Wednesday that it was studying the ban to see if it was in line with international competition law.
"In Canada, Deputy Prime Minister John Manley suggested that such a ban would make it difficult for his country to give further money for Iraqi rebuilding.
""To exclude Canadians just because they are Canadians would be unacceptable if they accept funds from Canadian taxpayers for the reconstruction of Iraq," he said.
"According to a spokesman for Canadian Prime Minister Jean Chretien, Canada has to date contributed more than $190m to the reconstruction effort....
"At the German foreign ministry, Karsten Voigt, coordinator for German-American relations, said he could not see how involving companies from Germany and other opponents of the war would damage America's security interests.
"To say... it is in the security interests of the US not to give contracts to German companies... [is] a little bit strange," he told the BBC's World Today programme...." [more]
By Stephen J. Hedges, Washington Bureau. Tribune senior correspondent William Neikirk contributed to this report
"WASHINGTON -- Citing national security concerns, the Bush administration is excluding France and Germany, which opposed the invasion of Iraq, from bidding on $18.6 billion in U.S.-funded reconstruction projects in the war-torn country.
"Deputy Defense Secretary Paul Wolfowitz signed an order to that effect Friday, saying it was "necessary for the protection of essential security interests of the United States" to limit competition for the contracts to the U.S., Iraq and countries that supplied forces or otherwise supported the coalition.
"Besides excluding contractors from France and Germany, the order also bars those from Russia and Canada, which also did not support the Iraqi invasion. The order, posted on a Pentagon Web site, said that "limiting competition for prime contracts will encourage the expansion of international cooperation in Iraq and in future efforts," presumably by dangling the prospect of contracts for those willing to contribute forces.
"Wolfowitz's order applies to the $18.6 billion that Congress appropriated earlier this year for Iraqi construction. Sixty-two countries, including Rwanda and the Marshall Islands, were declared eligible to compete on Iraqi construction contracts but not France or Germany. The French and Germans had rankled the Bush administration for their opposition to the war, and they did not pledge any money to an international Iraqi reconstruction fund during a conference in Madrid last month.
"Bush administration officials were saying little Tuesday about the policy, but Democrats were sharply critical of it.
"Sen. Joseph Biden (D-Del.), the ranking member of the Senate Foreign Relations Committee, said the order was a "gratuitous slap" at traditional U.S. allies.
"The decision "does nothing to protect our security interests and everything to alienate countries we need with us in Iraq," he said...." [more]
"The trustee in the Reed Slatkin bankruptcy doubled his estimate Monday of what victims of Slatkin's Ponzi scheme might recover, saying it could reach 40 cents for every dollar lost — and more if investors who came out ahead in the scam would "find it in their hearts" to return some of their profits.
"Hundreds of people were cheated by Slatkin, a former investment advisor from Santa Barbara who constructed an illusory empire using $593 million collected from Hollywood celebrities, Internet moguls and fellow Scientologists. He pleaded guilty to operating a financial fraud that continued for 15 years before dissolving into bankruptcy proceedings in May 2001. He is serving a federal prison term of 14 years.
"The bankruptcy trustee, Todd Neilson, initially had said that the scheme's victims might expect to recover just 20 cents for every dollar lost. That estimate was cited last week in complaints by some investors who argued that the legal battle to recover funds was too expensive and taking too long.
"In a memo presented at a hearing Monday before Bankruptcy Judge Robin Riblet in Santa Barbara, Neilson said the 20-cent reckoning was made at a stage of the case when "it was very difficult to estimate with any degree of reasonable accuracy possible payout percentages."
"The main reason for the uncertainty was the fact that only some of Slatkin's clients were paid back more than they invested — a common occurrence in such so-called Ponzi schemes, which use funds from later investors to pay phony profits or dividends to the earliest participants. ..." [more]
"The phone rang in the Pentagon office of Air Force Assistant Secretary Marvin Sambur about the same time the story of Boeing's ethics scandal hit news wires two Monday mornings ago.
"The caller was Jim Albaugh, chief of Boeing's (BA) defense and space unit, who told Sambur that his company had fired its chief financial officer and another executive — who had been a high-ranking Air Force procurement official in 2002 — for ethical misconduct. The circumstances were related to a pending $18 billion contract to supply the Air Force with modified Boeing 767 tankers, used to refuel fighter jets in midair.
"Albaugh's gesture was more than a courtesy call to the Air Force's top civilian official for acquisitions. He also wanted Sambur's help in closing the deal.
"Sambur did help, but his and Boeing's efforts in the days after Albaugh's call have raised new questions about the close ties between the Air Force and one of the nation's top defense contractors. Friday, Sen. John McCain, R-Ariz., who derided the original $21 billion tanker deal as a Boeing bailout, accused the Air Force of secretly trying to undercut Congress' scaled-down compromise plan.
""It's astonishing," McCain says. "Even in light of serious allegations, they continued to push to railroad the deal through, and they still are."..." [more]