<font color=brown> Long...in three parts.......but well worth the read!<font color=black>
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CONTRACT SPORT
by JANE MAYER
What did the Vice-President do for Halliburton?
Issue of 2004-02-16 and 23
Posted 2004-02-09
Vice-President Dick Cheney is well known for his discretion, but his official White House biography, as posted on his Web site, may exceed even his own stringent standards. It traces the sixty-three years from his birth, in Lincoln, Nebraska, in 1941, through college and graduate school, and describes his increasingly powerful jobs in Washington. Yet one chapter of Cheney’s life is missing. The record notes that he has been a “businessman” but fails to mention the five extraordinarily lucrative years that he spent, immediately before becoming Vice-President, as chief executive of Halliburton, the world’s largest oil-and-gas-services company. The conglomerate, which is based in Houston, is now the biggest private contractor for American forces in Iraq; it has received contracts worth some eleven billion dollars for its work there.
Cheney earned forty-four million dollars during his tenure at Halliburton. Although he has said that he “severed all my ties with the company,” he continues to collect deferred compensation worth approximately a hundred and fifty thousand dollars a year, and he retains stock options worth more than eighteen million dollars. He has announced that he will donate proceeds from the stock options to charity.
Such actions have not quelled criticism. Halliburton has become a favorite target for Democrats, who use it as shorthand for a host of doubts about conflicts of interest, undue corporate influence, and hidden motives behind Bush Administration policy—in particular, its reasons for going to war in Iraq. Like Dow Chemical during the Vietnam War, or Enron three years ago, Halliburton has evolved into a symbol useful in rallying the opposition. On the night that John Kerry won the Iowa caucuses, he took a ritual swipe at the Administration’s “open hand” for Halliburton.
For months, Cheney and Halliburton have insisted that he had no part in the government’s decision about the Iraq contracts. Cheney has stuck by a statement he made last September on “Meet the Press”: “I have absolutely no influence of, involvement of, knowledge of in any way, shape, or form of contracts led by the Corps of Engineers or anybody else in the federal government.” He has declined to discuss Halliburton in depth, and, despite a number of recent media appearances meant to soften his public image, he turned down several requests for an interview on the subject. Cheney’s spokesman, Kevin Kellems, responded to questions by e-mail.
Representative Henry Waxman, a liberal Democrat from California and the ranking minority member of the House Committee on Government Reform, has argued aggressively that the Bush Administration has left many questions about Halliburton unanswered. Last year, for example, a secret task force in the Bush Administration picked Halliburton to receive a noncompetitive contract for up to seven billion dollars to rebuild Iraq’s oil operations. According to the Times, the decision was authorized at the “highest levels of the Administration.” In an interview, Waxman asked, “Whose decision was it? Was it made outside the regular channels of the procurement process? We know that Halliburton got very special treatment. What we don’t know is why.”
Halliburton has been accused of exploiting its privileged status. Last year, a division of the company overcharged the government by as much as sixty-one million dollars in the course of buying and transporting fuel from Kuwait into Iraq. Halliburton charged the United States as much as $2.38 per gallon, an amount that a Pentagon audit determined to be about a dollar per gallon too high. Although Halliburton has denied any criminal wrongdoing, the inspector general for the Department of Defense is considering an investigation.
Halliburton blamed the high costs on an obscure Kuwaiti firm, Altanmia Commercial Marketing, which it subcontracted to deliver the fuel. In Kuwait, the oil business is controlled by the state, and Halliburton has claimed that government officials there pressured it into hiring Altanmia, which had no experience in fuel transport. Yet a previously undisclosed letter, dated May 4, 2003, and sent from an American contracting officer to Kuwait’s oil minister, plainly describes the decision to use Altanmia as Halliburton’s own “recommendation.” The letter also shows that the Army Corps of Engineers, the federal agency that oversees such transactions, supported Halliburton’s decision to use the expensive subcontractor—which may explain why it has been reluctant to criticize the deal.
Scott Saunders, a spokesman for the Army Corps of Engineers, confirmed the authenticity of the letter, and acknowledged that Halliburton had picked Altanmia. “Halliburton told us that only Altanmia could meet our requirements,” he said.
Experts in the Persian Gulf oil business say that the Altanmia deal looks suspicious. “There is not a reason on earth to sell gasoline at the price they did,” Youssef Ibrahim, the managing director of the Strategic Energy Investment Group, a consulting firm in Dubai, said. “Halliburton and their Kuwaiti partners made out like bandits.” A well-informed Kuwaiti source called the prices charged by Altanmia “absurd,” and said that Halliburton’s arrangement to buy Kuwaiti oil through a middleman, rather than directly from the government, was “highly irregular.” He added, “There is no way that this could have transpired without the knowledge and direction” of Kuwait’s oil minister, Sheikh Ahmad Al-Fahad Al-Sabah. Two sources told me that the oil minister’s brother, Talal Al-Fahad Al-Sabah, may have secret financial ties to Altanmia. (The brothers are also nephews of the Emir and the Prime Minister of Kuwait.) “There are calls in parliament to open an investigation,” the Kuwaiti source said. “It could shake the government.”
Halliburton, meanwhile, is contending with two new scandals. Last week, the Wall Street Journal reported that the company had overcharged the government by sixteen million dollars on a bill for the cost of feeding troops at a military base in Kuwait. And last month the company made an astonishing confession: two of its employees, it said, had taken kickbacks resulting in overcharges of $6.3 million, in return for hiring a different Kuwaiti subcontractor in Iraq. Halliburton said that the employees, whose names it declined to reveal, had been fired and the funds returned. The day after this disclosure, the Pentagon awarded yet another contract to Halliburton, worth $1.2 billion, to rebuild the oil industry in southern Iraq.
Defenders of Halliburton deny that it has been politically favored, arguing that very few other companies could have handled these complex jobs. As Cheney said last September on “Meet the Press,”“Halliburton is a unique kind of company. There are very few companies out there that have the combination of very large engineering construction capability and significant oil-field services.” Dan Guttman, a fellow at Johns Hopkins University, agrees with Cheney’s assessment, but sees Halliburton’s dominance as part of a wider problem—one that has reached a crisis point in Iraq. After years of cutting government jobs in favor of hiring private firms, he said, “contractors have become so big and entrenched that it’s a fiction that the government maintains any control.” He wasn’t surprised that Halliburton’s admission of wrongdoing in Kuwait had failed to harm its position in Washington. “What can the government say—‘Stop right there’?” Guttman said of Halliburton. “They’re half done rebuilding Iraq.”
The Vice-President has not been connected directly to any of Halliburton’s current legal problems. Cheney’s spokesman said that the Vice-President “does not have knowledge of the contracting disputes beyond what has appeared in newspapers.” Yet, in a broader sense, Cheney does bear some responsibility. He has been both an architect and a beneficiary of the increasingly close relationship between the Department of Defense and an élite group of private military contractors—a relationship that has allowed companies such as Halliburton to profit enormously. As a government official and as Halliburton’s C.E.O., he has long argued that the commercial marketplace can provide better and cheaper services than a government bureaucracy. He has also been an advocate of limiting government regulation of the private sector. His vision has been fully realized: in 2002, more than a hundred and fifty billion dollars of public money was transferred from the Pentagon to private contractors.
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