Halliburton inquiry grows; FBI investigating deal complaint

Seattle Times news services

Sen. Frank Lautenberg criticized Halliburton deal.

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The attorney for Bunnatine Greenhouse revealed the investigation yesterday, and Halliburton, not commenting on the specifics of the allegation, pointed to the timing of the revelation less than a week before the election.

Greenhouse, the Army Corps' chief contracting officer, has been granted official whistleblower protection. Lawyer Michael Kohn said his client had not yet been interviewed by the FBI but would cooperate fully.

The FBI had already been investigating whether Halliburton overcharged the government for fuel in Iraq. Officials at the FBI and the Justice Department declined to comment yesterday.

Halliburton has been under scrutiny for the billions it has received in no-bid contracts in Iraq. Vice President Dick Cheney was the chief executive officer of Halliburton in the late 1990s and continues to receive deferred compensation from the company.

Army Corps spokeswoman Carol Sanders acknowledged that her agency is talking with the FBI about the matter but declined to discuss details of the inquiry.

"The FBI has asked some questions. Our role is to cooperate," Sanders said yesterday. "I can't comment on any specifics of the investigation, if there is any investigation."

Greenhouse's most serious allegation is that in February 2003, before the war started, the Army Corps decided to go with Halliburton for a no-bid contract on oil infrastructure and fields repairs, if needed.

Greenhouse objected to the presence of a Halliburton official in the room during planning and said it was wrong to give the firm a five-year emergency contract, instead of a more standard one-year contract.

When Greenhouse's superiors overruled her, she noted her objections in handwriting on the contract: "I caution that extending this sole source effort beyond a one year period could convey an invalid perception that there is not strong intent for a limited competition."

Later, after the $7 billion oil contract became public and the Pentagon came under criticism, the contract was withdrawn, split in two and bid publicly. Halliburton won one of the contracts.
 
An internal 2003 Pentagon e-mail says the Iraq contract "has been coordinated" with Cheney's White House office.

The oil-restoration work was given to Halliburton subsidiary KBR without competitive bidding through 10 separate work assignments called "task orders." The orders were issued under an existing contract between Halliburton and the U.S. military that was awarded competitively in December 2001.

While the Corps was authorized to spend up to $7 billion for the oil-restoration work, the actual cost so far has been $2.5 billion. Halliburton is still working on the oil facilities, but it is now operating under a new, competitively awarded contract.

Halliburton has downplayed Greenhouse's allegations as "old news" and questioned the political timing of their release.

"The GAO said, earlier this year, that the contract was properly awarded because Halliburton was the only contractor that could do the work," Halliburton spokeswoman Wendy Hall said. "We look forward to the end of the election, because no matter who is elected president, Halliburton is proud to serve the troops just as we have for the past 60 years for both Democrat and Republican administrations."

Cheney spokesman Kevin Kellems, asked if investigators had contacted the vice president or his office about the contracts, said they had not.

Democrats have tried to make Halliburton an election-year issue, and vice-presidential candidate John Edwards quickly seized upon the latest development. "Good people came forward to tell the truth about these contracts because they — like the American people — know that the administration's special treatment of Halliburton was wrong," Edwards said in a statement.

Sen. Frank Lautenberg, D-N.J., a Senate Governmental Affairs Committee member who has been investigating Halliburton's contracts, said his office was told the FBI recently sought documents from various government offices. The requests focused on how and why Halliburton got the Iraq contracts.

"This multibillion dollar no-bid contract to Halliburton was suspicious from day one, and now our worst suspicions are confirmed," Lautenberg said. "The FBI doesn't get involved unless there are possible criminal violations."

In a related matter, the inspector general for the now-defunct Coalition Provisional Authority estimated that at least $1.1 million in government property entrusted to Halliburton was lost or unaccounted for in the staging area of Kuwait. About 43 percent of the inventory items that auditors looked for appeared lost.

The findings come after a July report concluded that the contractor couldn't account for $18.6 million in U.S. property it was responsible for in Baghdad.

In the latest report, released yesterday, auditors listed 30 items they couldn't find in Kuwait that KBR was supposed to safeguard. The list includes seven small trucks, three portable generators, a laptop computer, four printers, a 119-gallon water heater, four bulletproof vests, two bulletproof helmets, a microwave and a portable toilet worth $438.

The IG examined a small percentage of the government's inventory that was under Halliburton's control. Based on that sample, it estimated the value of the missing goods.

Halliburton and the Defense Contracting Management Agency, which oversees the company contract, faulted the inspector general for using a small random sample of inventory searches.

The firm "operates an approved government property control system that has stood the test of time, even under the stresses of supporting the U.S. troops in Iraq and Kuwait, and the challenges of property control in a war zone," Halliburton's Hall said. "The projections contained in this audit were based on an extremely limited sample of 30 items, and we do not believe such a small sample can be used to make such broad generalizations."

Hall said some of the items were never U.S. property — a point disputed by the IG — and other items were given to the Iraqi government.

Halliburton also is being investigated by the Justice Department and Securities and Exchange Commission regarding work it did in Nigeria, Iran and Iraq.

Compiled from Knight Ridder Newspapers, The Associated Press and The Washington Post reports