- WASHINGTON -- On paper, the
Houston-based Halliburton oil services company didn't fare well as 2003
ended. Fourth-quarter results issued last week showed a $947 million loss
due to liabilities from asbestos-related cases.
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- And yet Halliburton's stock price rose with those financial
results. Part of the increase may have been because Halliburton reported
a 63 percent jump in revenues for the period, a jump the company said was
due to "government related activities in the Middle East."
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- In short, Halliburton has reaped the benefits of becoming
the premier U.S. company operating within the new Iraq, undertaking at
least $7 billion in Pentagon-related work before, during and after the
U.S. invasion last spring.
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- But lucrative as it may be, that work has also put Halliburton
in the middle of a political controversy.
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- Over the last year, Halliburton has been accused of multimillion
dollar overcharges and kickbacks linked to its ever-expanding Pentagon
portfolio, one that some Bush administration critics suggest the company
has built through White House connections.
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- Vice President Dick Cheney served as Halliburton's chief
executive officer before he was elected and still is due more than $400,000
in Halliburton stock options. Under a company plan, Cheney receives deferred
compensation - $162,392 in 2002, according to government disclosures -
while he is vice president.
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- Whether the charges of cronyism have merit, they promise
to resonate throughout this election year, especially because Halliburton's
Iraq contracts are the subject of investigations by the Pentagon's inspector
general and Congress' General Accounting Office.
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- Halliburton denies any wrongdoing, and an Army Corps
of Engineers audit has found that the company was not responsible for overcharging
the government $61 million for gasoline that was bought in Kuwait and delivered
to Iraq.
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- A separate, Pentagon investigation is under way in that
matter.
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- A Cheney spokesman said that the vice president has no
ties to the company, that he has donated outstanding stock options to charity
and that his deferred compensation is calibrated, through an insurance
policy, to remain constant, whether the company prospers or struggles.
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- "Nor is he involved in any way, shape or form in
the contracting issue," said Kevin Kellems, who added that the Halliburton
contracts have been awarded and managed by the Corps of Engineers and career
civilian employees in the Pentagon.
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- "No one has ever provided a shred of evidence ...
that the vice president was involved in the contracting or in any wrongdoing.
This is just an election season issue, one that's going away," Kellems
said.
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- Republican House and Senate leaders have so far blocked
Democratic demands for congressional hearings. But political experts say
Halliburton will be a hot issue this year.
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- "I think it already has become an issue, I suspect
it will continue to be one," said Howard Opinsky, who was a media
adviser to Sen. John McCain, R-Ariz., during his 2000 presidential campaign.
"It's up to the Democrats to run against the Bush-Halliburton ticket,
not the Bush-Cheney ticket. And the challenge for the Republicans is that
it's difficult to explain."
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- Halliburton has recently taken matters into its own hands.
In newspaper and television ads, including one taken out just before last
week's New Hampshire primary, the company argues that it is uniquely qualified
for the difficult work it is doing in Iraq.
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- In one ad, Halliburton President David Lesar wrote, "Halliburton
is one of the few companies in the world capable of contracting to assist
in rebuilding Iraq. Critics imply this contract was somehow related to
special interests. Nothing is further from the truth."
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- Those critics include the Democratic presidential candidates.
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- Sen. John Kerry of Massachusetts, after winning the Iowa
caucuses, told voters there that, "This president has an open hand
for his friends at Halliburton, but he has turned his back on our friends
and neighbors."
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- Sen. Joseph Lieberman, D-Conn., has used his post as
ranking member of the Senate's Government Affairs Committee to prod the
Halliburton issue in Washington and on the campaign trail, promising to
"cut out any gifts to Halliburton" in future Iraq funding.
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- A number of Democrats in Congress, including Senate Minority
Leader Tom Daschle, D-S.D., have called for a freeze on future Halliburton
contracts until the ongoing business is fully examined.
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- The administration and Pentagon, however, have argued
that the existing contracts were properly rewarded, and that the questions
raised so far don't warrant a suspension of Halliburton's involvement in
Iraq.
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- "We have our own internal audit process," said
Army Corps of Engineers spokesman Scott Saunders. "We haven't turned
up any serious wrongdoing or major problems."
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- Beginning in 2001, Halliburton bid for and won a multimillion-dollar
contract to provide logistical support to U.S. forces posted in the Middle
East. The work involved providing everything from food service to the delivery
of goods.
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- As the likelihood of war in Iraq grew, Pentagon officials
say, Defense Secretary Donald Rumsfeld asked the Corps of Engineers to
prepare for emergencies that a war might bring.
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- The chief concern, Saunders said, was that retreating
Iraqi forces would set fire to oil wells, as they did in Kuwait during
the 1991 Persian Gulf war.
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- The Corps chose to give a no-bid contract to the Halliburton
engineering subsidiary KBR (formerly Kellogg Brown & Root) to extinguish
any oil well fires.
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- "There was intelligence indicating that there would
be oil well fires, and KBR was the only large firm to have people and equipment
that could go in immediately," Saunders said. "If we had competitively
bid this, it would have taken 45, 60, 90 days, during which time the fires
would be burning."
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- It turned out that there were only about a half-dozen
fires in the Iraqi oil fields, compared with more than 700 in Kuwait in
1991. But once in Iraq, the Corps of Engineers gave KBR more work. Saunders
said that included contracts to repair Iraqi refineries and other oil-related
infrastructure, and to deliver gasoline to Iraq.
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- Rep. Henry Waxman, D-Calif., has questioned the Halliburton
contracts in a series of letters to the Pentagon beginning last March.
By August, even Halliburton competitors, including engineering giant Bechtel,
were complaining that the company seemed to have an inside track on the
Iraqi oil work.
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- In December, Pentagon auditors reported that Halliburton
might have overcharged the government millions of dollars for gasoline
it bought in Kuwait for delivery to Iraq.
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- Though the matter is under investigation, the Corps concluded
in its own review that Halliburton simply paid the price for gasoline that
it was charged by a supplier.
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- Late last month, Halliburton fired one employee for involvement
in a $6 million kickback scheme with its supplier in Kuwait. It also paid
the Army $6.3 million "to cover potential over billing charges by
a subcontractor."
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- But the company has steadfastly denied wrongdoing.
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- (c) 2004, Chicago Tribune.
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