'Halliburton, Dick Cheney, and wartime spoils'
Posted on Friday, April 04 @ 09:39:54 EST
By Lee Drutman and Charlie Cray, Common Dreams
When Defense Policy Board chairman Richard Perle revealed that he was getting
$725,000 to help Global Crossing navigate the national security issues surrounding the sale of its assets, the press jumped
all over Perle, and rightly so. There was indeed something fishy about the chairman of a board that advises the Pentagon making
that kind of money to help a company that was having problems with national security issues. Perle is also on the board of
Onset Technology, the leading provider of message conversion technology and a major supplier to Bechtel - one of the leading
candidates for rebuilding the Iraqi infrastructure.
As the Center for Public Integrity has documented, this kind of thing is quite prevalent on the
Defense Policy Board, where at least nine of the 30 members have ties to companies that have won more than $76 billion in
defense contracts in 2001 and 2002. As more and more wartime contracts are announced, more and more conflicts of interest
are coming to light. After all, the Bush administration is riddled with ties to the weapons, engineering, construction, and
oil companies that have the most to profit from a war in Iraq. Perle's story is certainly not unusual.
However, of all the administration members with potential
conflicts of interest, none seems more troubling than Vice President Dick Cheney. Cheney is former CEO of Halliburton, an
oil-services company that also provides construction and military support services - a triple-header of wartime spoils.
A few weeks ago, the U.S. Army Corp of Engineers awarded
a no-bid contract to extinguish oil well fires in Iraq to Kellogg Brown and Root (KBR), a subsidiary of Halliburton. The contract
was granted under a January Bush administration waiver that, according to the Washington Post, allowed "government agencies
to handpick companies for Iraqi reconstruction projects."
The contract, which was not announced until more than two weeks after it was awarded, was open-ended,
with no time limits and no dollar limits. It was also a "cost-plus" contract, meaning that the company is guaranteed to recover
costs and then make a guaranteed profit on top of that. Its value is estimated at tens of millions of dollars.
This is not the first buck that Cheney's former company
has made off military conflict and likely won't be the last. KBR currently has thousands of military support personnel on
the ground in Kuwait and Turkey as part of a multi-year contract worth close to a billion dollars. The engineering subsidiary
was also one of a select few firms invited to bid on an initial $900 million USAID contract for rebuilding post-war Iraq.
Though it didn't get that job, Halliburton says it is still in the running for subcontracts and there will likely be plenty
more opportunities. After all, the American Academy of Sciences estimates the rebuilding Iraq will cost between $30 and $105
billion dollars. At a recent investor conference call, Halliburton reported a 30% increase in year-over-year revenues, to
$1.6 billion, for KBR.
who served as CEO from 1995 to 2000, continues to receive as much as $1 million a year in deferred compensation as Halliburton
executives enjoy a seat at the table during Administration discussions over how to handle post-war oil production in Iraq.
The Cheney-Halliburton story
is the classic military-industrial revolving door tale. As Secretary of Defense under Bush I, Cheney paid Brown and Root services
(now Kellogg Brown and Root) $3.9 million to report on how private companies could help the U.S. Army as Cheney cut hundreds
of thousands of Army jobs. Then Brown and Root won a five-year contract to provide logistics for the U.S. Army Corp of Engineers
all over the globe. In 1995, Cheney became CEO and Halliburton jumped from 73rd to 18th on the Pentagon's list of top contractors,
benefiting from at least $3.8 billion in federal contracts and taxpayer-insured loans, according to the Center for Public
But the Halliburton
story is more than just a simple revolving door tale. Even without the Cheney conflicts of interest, serious doubts remain
about whether a company with a record like Halliburton's should even be eligible to receive government contracts in the first
place. This, after all, is a company that has been accused of cost overruns, tax evasion, and cooking the books and has a
history of doing business in countries like Iraq, Iran and Libya.
Cost overruns: In September 2000, the General Accounting Office (GAO) found that the U.S.
Army had not taken appropriate steps to limit the $2.2 billion costs Kellogg Brown and Root charged for logistical and engineering
support in the Balkans. According to the report, Army officials "frequently have simply accepted the level of services the
contractor provided without questioning whether they could be provided more efficiently or less frequently at lower cost."
The SEC recently formalized an investigation into whether Halliburton artificially inflated revenue by $234 million over four
years. Halliburton switched to a more aggressive accounting method in 1998 under Cheney.
Access to Evil -- business dealings in Iraq, Iran, and Libya: News reports
suggest that Pentagon is currently using the Iran-Libya Sanctions Act (ILSA) to draw up a blacklist of non-US companies that
have done business in Iran. Yet, Halliburton has conducted Business in Iran through subsidiaries. When Cheney was CEO of Halliburton,
he inquired about an ILSA waiver to pursue oil field developments in Iran. In 1997, Halliburton subsidiary Halliburton Energy
Services paid $15,000 to settle Department of Commerce allegations that the company had broken anti-boycott provisions of
the U.S. Export Administration Act for an Iran-related transaction. Halliburton recently agreed to evaluate its operations
in Iran, after the Securities and Exchange Commission rebuffed the company's request to dismiss a New York City police and
fire pension funds shareholder proposal for the company to examine its role in Iran.
Also forgotten is that story about how Cheney's Halliburton did business
with Saddam. According to the Washington Post, "Halliburton held stakes in two firms that signed contracts to sell more than
$73 million in oil production equipment and spare parts to Iraq while Cheney was chairman and chief executive officer."
Halliburton has also done business in Azerbaijan, Burma,
Indonesia, Libya and Nigeria. As Dick Cheney once said, "The good Lord didn't see fit to put oil and gas only where there
are democratic regimes friendly to the United States."
Tax Havens: Under Cheney's tenure, the number of Halliburton subsidiaries in offshore tax havens
increased from 9 to 44. Meanwhile, Halliburton went from paying $302 million in company taxes in 1998 to getting an $85 million
tax refund in 1999.
told, the IRS loses about $70 billion a year in offshore tax sheltering by corporations and wealthy individuals - almost enough
to cover the $75 billion Bush has asked for to cover the first six months of war.
It is hard to know what to do about Halliburton. While the contracts reek of crony capitalism,
almost all the major firms that provide this kind of work are tied to the administration, and somebody has to do the job.
However, there is no simply need for the level of secrecy surrounding Halliburton's contracts so far. Just as Cheney's stubborn
refusal to release the meeting notes of his energy task force has made everyone wonder what exactly he is trying to hide,
the secretive no-bid nature of these Halliburton deals also feeds our worst fears.
While we advocate stopping this war now and turning over the rebuilding process
to the UN, we recognize that this remains unlikely. However, if President Bush plans to continue this ill-advised war and
keep tight control over the rebuilding process, the administration should stay true to its stated intention of ending a brutal
and secretive regime by making sure that the billions of dollars that will inevitably flow to rebuild Iraq are awarded in
a fair and open manner, not in a shroud of secretive cronyism.
Note: In honor of Big Business Day 2003, Citizen Works will present Dick Cheney the "Daddy
Warbucks" Award for eminence in corporate war profiteering on Friday, April 4.
Lee Drutman and Charlie Cray work with Citizen Works.
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