The Guardian 23 February, 2005

What's a few billion between friends!

US Army agrees to pay Halliburton US$2 billion for imaginary work

The US Army agreed to pay Halliburton's KBR subsidiary nearly US$2 billion for work that nobody can prove ever took place. The work was allegedly performed in Iraq and Kuwait under the Army's LOGCAP contract, awarded to KBR in 2001 via competitive bidding. Under LOGCAP, KBR is responsible for military logistics, which includes feeding the troops, transporting military supplies, constructing military housing and offices, and maintaining laundry facilities. KBR is reimbursed by the Pentagon for its costs, then paid a fee of one to three percent of those costs. So far, KBR has received US$6.4 billion for work under LOGCAP.

Army auditors determined last year that 43 percent of the US$4.5 billion requested by Halliburton under LOGCAP could not be verified under normal accounting procedures.

In August, during the hotly-contested presidential campaign, the Army decided to withhold 15 percent of future reimbursements until KBR verifies when, how and to whom the suspicious expenses were paid. However, a few hours later the decision was abruptly reversed and the Army announced it would give Halliburton "more time" to explain itself.

No reason was given for the abrupt reversal, except that the Army claimed it did not want to harm the troops in the field by withholding payments to KBR. The Army had given the company three deadline extensions to explain the suspicious expenses, but the deadlines quickly passed with no explanation that satisfied Pentagon auditors.

The Army rejected claims by Democrats that the Bush administration had provided favourable treatment to KBR because of Vice President Dick Cheney's past association with Halliburton.

Last fall, the Pentagon's Army Matériel Command and the Defense Contract Audit Agency recommended withholding 15 percent of KBR payments. Nevertheless, the Pentagon's Defense Contract Management Agency praised the company for its "effective and efficient" accounting system. And finally, on February 3, after months of internal Pentagon wrangling and three months after the presidential election, the Army made its final decision and rejected calls to withhold 15 percent of payments.

In what the Washington Post called "a departure from normal policy", the Army decided to ignore its own auditors and pay KBR for all costs, plus the standard one to three percent fee, without any explanation that could justify the company's suspicious bills. The 15 percent withholding penalty could have cost KBR US$60 million a month.

"This is indeed great news for KBR", said Andy Lane, chief operating officer of Halliburton, in a news release. "The Army and KBR have agreed to continue working closely together to resolve any remaining billing issues."

"This action is incomprehensible", Democrat Rep Henry Waxman said in a prepared statement. "Once again, the Bush administration is putting Halliburton's interests above those of the taxpayers", he said.

Footnote: Halliburton Watch reports that the corporation has donated 12 laptop computers to an army brigade in Louisiana to be used by US troops in Iraq. "We are very happy to donate these laptop computers to help the troops who are putting their lives on the line to support freedom for the Iraqi people", said a spokesperson for Halliburton. How generous can you get!

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