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Halliburton's Fleecing Ends

Posted in the database on Monday, July 17th, 2006 @ 19:03:25 MST (3200 views)
by Margaret Carlson    Bloomberg.com  

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Or Does It?

I wonder how many customers McDonald's Corp. would keep if instead of including a Coke with a Happy Meal, as the menu promised, the company charged for it twice.

That's what Halliburton Co. did to Uncle Sam, billing $45 for soda by the case and billing for it again when served by the glass at meals.

It's all part of the cost-plus, no-bid life of Halliburton and its subsidiary, Kellogg, Brown & Root, the sole source of just about everything the U.S. Army needs to supply troops in Iraq. For three years, the U.S. government kept paying double for soda and many other things with nary a complaint.

But last week, all that ground to a screeching halt when the Pentagon announced the end of no-bid contracts -- or did it?

Not really. That's like saying to the outlaw Jesse James, ``We'll no longer hand over the money. You have to ask nicely.''

Which is not to compare Halliburton to a common criminal.

There's nothing common about what Halliburton did and a heist of $1.4 billion, an estimate of Halliburton's overcharges by Pentagon auditors.

Two sets of hearings by Representative Henry Waxman and Senator Byron Dorgan, using the Pentagon's own information, exposed Halliburton's deceitful billing practices: charging for twice as many employees as actually hired and always choosing the most expensive vendor. Instead of paying 80 cents a pound for bacon, Halliburton paid $6. Instead of $450,000 for ice, Halliburton paid $3.4 million, blaming transportation costs. Where did it come from, Alaska?

`MWR Baghdad'

For 2,500 soldiers, KBR billed $152,000 for videos, and $617,000 for extra soft drinks for MWR (``morale, welfare and recreation''). How's $100 per bag of dirty laundry and $1.5 million for ``tailoring, seamstress service and textile repair'' sound? Need towels for the gym? Halliburton's happy to supply 'em at prices you won't believe.

At one hearing, former Halliburton employee Henry Bunting held up an ordinary towel made extraordinary after KBR insisted on embroidering a logo on it saying ``MWR Baghdad.'' That jacked the price up from $1.60 each to $7.50.

Halliburton charged for ``surge capacity'' for extra meals long after there was no chance 5,000 extra mouths would be passing through base camp to be fed. When Halliburton food manager Rory Mayberry noted the discrepancy, his superiors told him to keep quiet about it or face reassignment.

It would be bad enough if this awful behavior claimed no victims, but Halliburton's greed put soldiers already in harm's way at greater risk. Rather than purify the water, KBR ignored regulations so that soldiers bathed and brushed their teeth in water with E. coli bacteria floating in it. Rather than fix new but poorly maintained trucks, KBR abandoned or torched them, leaving soldiers stranded along roads mined with explosive devices, according to an eyewitness at Dorgan's hearings.

Sell-By Date

Food long past its sell-by date was served, along with food spoiled by insufficient refrigeration. Imagine coming home from a hard day at war trying not to get killed and being presented with rancid meat.

While soldiers were afraid to shower for fear of getting nasty bacterial infections, KBR managers charged the Pentagon for luxurious rooms with crystal clear water at the Kempinski Hotel on the ``unpolluted azure coastline'' of Kuwait for $10,000 a month, according to former Halliburton employee Marie DeYoung.

How could the Bush administration stand by and pay up while the troops were so poorly treated? The same way L. Paul Bremer, the U.S.'s former top official in Iraq, could get a Medal of Freedom even as a draft audit of the Coalition Provisional Authority shows that $8.8 billion went unaccounted for on his watch. At the same time, for telling auditors about those 5,000 daily meals not served (adding up to over $200 million), poor Rory Mayberry was banished to a hardship posting in Fallujah.

Life Is a Breeze

And consider what happened to Bunnatine Greenhouse, the highest-ranking civilian in the Army Corps of Engineers. She added a handwritten note that couldn't be missed to the Halliburton contract the Secretary of Defense had to see when he signed off advising the contract be limited to one year. She had already criticized the Defense Department for letting Halliburton attend confidential Pentagon meetings.

Greenhouse was ignored, sidelined and lost her job. She later testified before Congress to ``the most blatant and improper contract abuse'' she'd ever witnessed.

For Halliburton, life is still a breeze. The Pentagon ignored its own auditors and paid most of Halliburton's bills, including hundreds of millions for gas from Kuwait. To justify paying for double meals, it upped Halliburton's take to 3 percent of costs and every individual meal was counted as 1.3 meals.

Terrible Message

Letting Halliburton continue, much less bid on government logistics contracts again, sends a terrible message. It says, If I catch you bilking the government, I'll suggest you knock it off. But I'll still pay you, and require only that you compete for the opportunity to do so again -- and likely win because of experience gained from three years on the job, more information than anyone but the Army itself, and an infrastructure already in place. Halliburton could lose if federal procurement officials took into account ``past performance,'' as required, although their pathetic performance in the past makes this unlikely.

In March, Waxman tried to amend the defense appropriations bill to deny contracts to any firm the Pentagon found billed more than $100 million in unreasonable costs. Republicans blocked it.

With their tax cuts and sweetheart contracts, Republicans have asked mostly what their country could do for them even while the country is at war. Halliburton is just the lucky bidder. Dick Cheney, Halliburton's chief executive during the second half of the 1990s, should be ashamed of his former company.

(Margaret Carlson, author of ``Anyone Can Grow Up: How George Bush and I Made It to the White House'' and former White House correspondent for Time magazine, is a Bloomberg News columnist. The opinions expressed are her own.)

To contact the writer of this column:
Margaret Carlson in Washington at mcarlson3@bloomberg.net


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