|This article appears in the December 26, 2003 issue of Executive Intelligence Review.
Cheney's Halliburton Becomes
by Carl Osgood
The `Enron' of War Profiteers
Vice President Dick Cheney's Halliburton Corporation has been caught, once again, ripping off U.S. taxpayers. This time, it's not just overcharging for gasoline or other contracted items; it's the very food being fed to American soldiers in Iraq; and it's not just taxpayers, but U.S. troops being exposed to filthy mess halls and rotten food, according to official Pentagon inspection reports.
According to a Dec. 12 NBC "Nightly News" investigative reportconfirmed to EIR by other sourcesa Pentagon audit found dirty and unsafe conditions in four mess halls that Halliburton's KBR subsidiary operates in Iraq. NBC also reported that KBR's promises to improve its food services "have not been followed through," and that the Pentagon warns that "serious repercussions may result" if the contractor does not clean up its act. The auditors reported finding "blood all over the floor ... dirty pans ... dirty salad bars ... rotting meats... and vegetables" during a series of inspections in August, September, and Octoberincluding of the mess hall that President Bush visited during his Thanksgiving visit to Baghdad. (No wonder he was parading around with the decorative turkey. He wouldn't want to touch the real thing.)
For this "service," Halliburton charges $28 for each meal that it serves to over 100,000 troops each day. The day before the NBC report, Defense Department officials had also reported that KBR had proposed a charge of $220 million for cafeteria services, about $67 million more than it was paying its subcontractor.
Representative Henry Waxman (D-Calif.), who has been relentlessly pursuing his own investigation of Halliburton's war profiteering since last April, said that the revelations in the audit add up "to a company that arrogantly is overcharging when they can get away with it and not providing the quality of service that they agreed to do."
The same day that the NBC report came out, Secretary of Defense Donald Rumsfeld was questioned about the services that Halliburton provides to American troops in Iraq, by a Midwest legislator at a conference of the National Conference of State Legislatorsindicating that it was already becoming a national scandal. Minnesota State Sen. Becky Lourey, who has a son serving in Iraq, told Rumsfeld that "I'm very upset about the services to our servicemen that Halliburton is providing. Not only could we save a lot of money if they weren't overcharging as much as they are, but the services that they are providing now for our servicemen are not as efficient as, for instance, they were in Bosnia, when my son was in Bosnia, and the Army was responsible for that.... It is a great concern when our servicemen and women are over there, and an entity, non-bid, such as Halliburton, is not doing the job that our own Army had always done much better."
Rumsfeld acknowledged that the Defense Department has "moved from uniformed military personnel providing food services" for deployed military personnel, to private contractors, but claimed, "they've done a very good job. To the extent they don't do a very good job, they get let go as a contractor and it gets changed." Rumsfeld protested, "What you're reading about in the paper is not an overpayment at all, it is a disagreement ... as to what ought to be charged."
Making a Stock Rise by War
Halliburton has the two largest contracts in Iraq, one for $8.6 billion under the Pentagon's Logistics Civil Augmentation Program (LOGCAP) for providing logistical services to the U.S. military, and a second one for $7 billion for rebuilding Iraq's oil infrastructure. In a May 2 letter to Representative Waxman, Lt. Gen. Robert Flowers, the commander of the U.S. Army Corps of Engineers, revealed that KBR was selected on Nov. 11, 2002 to develop a contingency plan for the repair and continuity of operations of Iraqi oil infrastructure under the LOGCAP contract, which it had been awarded in December 2001. On March 8, 2003, the Army awarded the second contract to KBR "to carry out the contingency plans it had developed," without any competitive bidding, and in secret. The only acknowledgment of the contract was a pair of press releases issued by the Pentagon, during March, announcing that KBR had been hired to help fight oil well fires in Iraq. According to an April 27 report on CBS's "60 Minutes," while all this was going on, another company, GSM Consulting, expert in stopping oil well fires and rebuilding petroleum services, had been told in a Defense Department letter dated Dec. 30, 2002 that "it was too soon to speculate" about Iraq "in the event that war breaks out in the region."
It appears, then, that the Cheney chicken-hawks had already secretly decided on war and were lining up their cronies to get the profits.
In response to Flowers' May 2 letter, Waxman wrote back on May 6, saying that the contract with Halliburton's KBR is "considerably broader in scope than previously known." He noted that the contract "can include 'operation' of the Iraqi oil fields and 'distribution' of Iraqi oil," and said that an earlier letter from Flowers indicated that Halliburton's contract could stay in place until January of 2004.
It did not end there, however, as Waxman's continuing investigation uncovered, in October, that Halliburton was charging up to $2.65 per gallon for importing gasoline into Iraq from Kuwait. Halliburton's pricing, Waxman wrote to National Security Advisor Condoleezza Rice on Dec. 10, raises "serious questions," including: Why is Halliburton paying $1.17 per gallon of gasoline when the average wholesale price in the Mideast is 71¢? Why is Halliburton charging $1.21 for transporting gasoline from Kuwait, when the Defense Department and the state-owned Iraqi oil company are paying a fraction of that? Why is Halliburton being paid the 24¢ mark-up plus the 2¢ "other" charge, when their main function is to hire a subcontractor to actually purchase and transport the gasoline?
"We do not understand the White House's seeming indifference to this evidence of overcharging, nor why the White House has not responded to our previous letters," Waxman wrote. He reported that more recent data indicated that Halliburton was shipping gasoline at a cost of as much as $3.06 gallon.
The Pentagon's Dec. 11 admission that indeed, Halliburton may have overcharged for gasoline imports by as much as $61 million, spurred even President Bush to say on Dec. 13 that the Pentagon had "put the issue right out there on the table for everybody to see.... And if there's an overcharge, like we think there is, we expect the money to be repaid." The following day, Rep. Jim Gibbons (R-Nev.), a member of the House Armed Services Committee, called the overcharge allegation "an absolute outrage" and called on the committee to hold hearings on Halliburton early next year. "If these allegations which were found by a Pentagon audit of government contracts are true, then it's time for Halliburton to break out its checkbook and refund American taxpayers," he said.
Gibbons was the first Republican member of Congress to call for Congressional hearings on the company.
The Pentagon's audit agency is also accusing Halliburton of withholding internal documents that show that the company was aware of accounting problems relating to the fuel overcharges. A Dec. 10 letter from the agency to Halliburton's KBR, charged that the agency "has been denied access to" key documents concerning the fuel contract.
Cheney's Continuing Interest
Halliburton's war profiteering is intimately tied to its relationship with Vice President Cheney, who largely created Halliburton's present government contracting business from the ground up. Cheney's relationship with Halliburton goes back to at least 1991, when the company received contracts from then-Secretary of Defense Cheney to rebuild facilities in Kuwait that had been destroyed in the first Persian Gulf war.
Cheney subsequently commissioned Halliburton to do the original secret, Pentagon-funded study which has led to the ballooning of its war business in the decade since! The studywhose fruits Rumsfeld was referring to in "defending" Halliburtonwas on replacing the U.S. military's logistics in-depth with the present, bloated, mercenary model of privatization. When Cheney joined Halliburton as its CEO in 1995, he aggressively sought out more government business from this lucrative spigot he and Halliburton had teamed up to turn on, and is credited with nearly doubling Halliburton's government contracts during his five-year tenure that ended in 2000.
Cheney has falsely claimed that he severed all ties with the company in 2000. "I have no financial interest in Halliburton of any kind and haven't had, now, for three years," he said, on the Sept. 14 edition of NBC's "Meet the Press." Sen. Frank Lautenberg (D-N.J.) showed Cheney's claim to be a lie, with a Congressional Research Service report demonstrating that the stock options and the deferred salary that he is receiving from Halliburton, in fact, constitute a substantial financial interest. The CRS report, released by Launtenberg on Sept. 25, states that a deferred salary "is a not a retirement benefit or a payment from a third party escrow account, but rather an ongoing corporate obligation paid from company funds. If a company were to go under, the beneficiary could lose the deferred salary." Cheney also holds 433,333 unexercised Halliburton stock options, on which he has signed an agreement to donate any profits to charity. The report says, "Should Halliburton's stock price increase over the next few years, the Vice President could exercise his stock options for a substantial profit, benefitting not only his designated charities, but also providing Halliburton with a substantial tax deduction."
The CRS study reports that "deferred salary or compensation received from a private corporation in the reportable year is considered as among the 'ties' retained in or 'linkages to former employers' that may 'represent a continuing financial interest in those employers, which makes them potential conflicts of interest,' and must be disclosed as employment relationships and outside earned income." The study shows the same is true of "benefits ... such as deferred compensations."
Senator Lautenberg had, very presciently, charged on Oct. 2 that Halliburton was not only winning huge Iraq war contracts, but padding them. He said that Halliburton had had "a September to remember," with their contracts doubling from $700 million to $1.4 billion just before the bidding process opened up (they have since nearly doubled again). Lautenberg charged then that Halliburton's contract padding "would make [Enron chairman] Ken Lay proud."
'Drives Me Nuts'
Cheney is not simply engaged in profiteering off of war, however. He has been promoting a policy of "perpetual imperial war" for the United States after the collapse of the Soviet Union, since about the same time he began his financial relationship with Halliburton in 1991. Cheney's faction of "chicken-hawks," many of whom have similar conflict-of-interest problems, pushed the hardest for war against Iraqunsuccessfully before Sept. 11, 2001, and successfully since then.
However, Cheney is beginning to feel the heat. In an interview with right-wing commentator Armstrong Williams, reported in the Washington Post on Dec. 17, Cheney lashed out at "cheap-shot journalism" about himself and the Bush Administration, complaining that "it drives me nuts.... People don't check the facts." The Vice President was particularly incensed about press coverage of Halliburton, complaining that journalists have not tried to find out "the real facts" when writing about his favorite company. "There are an awful lot of people in the press who don't understand the business community. I think our political opponents have spent a lot of time hammering away on trying to find some allegation that Halliburton got favoritism on contracts, or trying to make some kind of connection they've never been able to make. There's no evidence to support anything like that, but if you repeat it often enough, it becomes sort of an article of faith."
Washington sources have told EIR that Cheney has become obsessed with Lyndon LaRouche's campaign against him, and that he blames LaRouche for the attacks on his war and profiteering policies, which have been picked up repeatedly in elements of the mass circulation media, most notably in a series of articles by investigative journalist Seymour Hersh in the New Yorker.
LaRouche's commented on Cheney's outburst: "What about that stinking dead meat that Cheney and Halliburton are sitting on top of? This stinking dead meat that he's trying to feed to U.S. soldiers? While Bush is parading around with an imaginary turkey, they're feeding rotten meat to the troops."