The following is an excellent excerpt from the book “FLEECED: How Barack Obama, Media Mockery of Terrorist Threats, Liberals Who Want to Kill Talk Radio, The Do-Nothing Congress, Companies That Help Iran, and Washington Lobbyists for Foreign Governments are Scamming Us. . . and What To Do About It” by Dick Morris and Eileen McGann from Chapter 15 “HOW HALLIBURTON RIPS OFF THE PENTAGON: While Some Fight for Freedom, Others Use War to Get Rich” on page 257 and I quote: ”Here is a quote from the Associated Press that begs to be read and reread, it is so impossible to believe; “Corruption has long plagued Iraq’s reconstruction. Congress approved more than $30 billion to rebuild Iraq, and at least $8.8 billion of it has disappeared, according to a government reconstruction audit.”
That’s right. The sorry fact is that both the Iraqi government and American defense contractors are fleecing the U.S. taxpayer big time. As swiftly as Congress appropriates tens of billions of dollars, the Pentagon spends them—with little oversight or checks and balances. As Shay D. Assad, the director of defense procurement and acquisition policy for the Pentagon, has conceded, “In [this] combat environment, we didn’t have the checks and balances we should have in place. So people who don’t have ethics and integrity [have been] able to get away with things.”
Apparently, this supervision gap has posed a massive opportunity for some contractors doing business in Iraq—particularly the American corporation Halliburton, its spin-off Kellogg Brown & Root, and officials and contractors in the Iraqi government.
Business fraud and siphoning off taxpayer dollars are bad enough under normal circumstances. But when it is perpetrated within the context of the heroic sacrifice so many young men and women are making to help Iraq win its freedom and escape from the grip of terrorists, it is downright obscene. Worse yet—if that’s possible—is that a number of whistle-blowers who have risked their careers and, in some cases, braved incarceration to tell the truth by exposing these contractors’ wrongdoing have been singled out for punishment—not rewards—by the powers that be.
We supported the invasion of Iraq and still feel that American forces are at work on a noble mission there. But Iraqi contractor fraud is not about backing or opposing the war. It is about honoring the patriotism of our armed forces by not going behind their back and stealing from taxpayers.
Halliburton, the Texas company formerly run by Vice President Dick Cheney, has been at best sloppy and at worst corrupt. According to the Committee on Oversight and Government Reform, “Pentagon auditors found $1 billion in ‘questioned’ costs and over $400 million in ‘unsupported’ costs.”
THE HALLIBURTON RIPOFFS
• “The company charged $45 for cases of soda, billed $100 to clean 15-pound bags of laundry, and insisted on housing its staff at the five-star Kempinski hotel in Kuwait.”
• “Halliburton truck drivers testified that the company ‘torched’ brand new $85,000 trucks rather than perform relatively minor repairs and regular maintenance.”
• “Halliburton procurement officials described the company’s informal motto in Iraq as ‘don’t worry about price. It’s cost-plus.’”
• “A Halliburton manager was indicted for ‘major fraud against the United States’ for allegedly billing more than $5.5 million for work that should have cost only $685,000 in exchange for a $1 million kickback from a Kuwaiti subcontractor.”
• “A Halliburton subsidiary charged $110 million for housing, food, water, laundry, and other services on bases in Iraq which had been shut down!”
• “A former manager for a Halliburton Co. subsidiary and an alleged accomplice in Kuwait [were charged in an indictment for having] defrauded the U.S. government out of nearly $4 million by inflating the price of supplying fuel tankers for military operations in Kuwait in 2003.”
• The army contends that KBR, the Halliburton subsidiary, overcharged $212 million for meal services to troops in Iraq, “including [charging] for meals never served to troops.” The army finally settled the dispute “by withholding $55 million of the disputed amount.”
• The Pentagon’s auditors found that KBR had charged double for some handling costs on “shipping containers outfitted as housing for U.S. troops.” The government auditors said that KBR sought payment for “unjustified delays” and “selectively used higher priced subcontractors without justification.””
KBR, a Halliburton subsidiary until the companies split in April 2007, has played a unique role in the contractor mess in Iraq. The successor of Brown and Root—the Texas powerhouse firm that funded Lyndon Johnson’s rise to political power and wealth—KBR has kept it political ties polished and up to date. As USA Today reports, it is “by far the largest government contractor in Iraq. [It] has been paid more than $20.1 billion through last October [of 2006]–about half of all government spending on contracts in Iraq, mostly under a multiyear Army contract to provide logistical support for U.S. troops. The company also has contracts to help rebuild Iraq’s oil industry.”
But the contracts haven’t always worked out so well. The newspaper reports that “the Defense contract Audit Agency (DCAA) has challenged nearly $2.2 billion of KBR’s invoices and cost proposals. The army has resolved nearly $1.3 billion of those questioned costs, paying KBR only $804 million, records show.”
Congressional criticism has focused, in particular, on Halliburton’s $2.5 billion contract, awarded without competitive bidding, to repair Iraqi oil fields damaged or destroyed during the war. But even when the company won a competitive bid, it could not account for the money it was paid. As The Washington Post notes, “auditors turned up $1.8 billion in ‘unsupported costs’ in [a] $10.5 billion logistics contract. . . which KBR won on a competitive bid. Despite those findings and a recommendation to withhold some of the payments, the Army decided last month to continue paying Halliburton in full, plus performance bonuses.”
HALLIBURTON’S COST TO THE TAXPAYER
(Results of audit of Halliburton subsidiary KBR
by Defense Department Auditors for 2003-2006,
as reported by USA Today;
numbers are in billions of dollars)
Total spent $20.1
Cost challenged by auditors $2.2
Challenges resolved $1.3
Challenges pending $0.9
Challenged costs paid $0.8
Source: Defense Contract Audit Agency.”
Behind these numbers lies a story of deceit, treachery, and chicanery that should make Halliburton’s executives (and Dick Cheney) blush. Media reports indicate that “federal investigators have uncovered what they describe as a sweeping network of kickbacks, bribes and fraud involving at least eight employees and subcontractos of KBR, the former Halliburton subsidiary, in a scheme to inflate charges for flying freight into Iraq in support of the war.”
The convictions have already begun. One former executive for an air-freight carrier “hired by KBR pleaded guilty in federal district court to dispensing bribes and then lying to federal investigators.” The subcontractor, Eagle Global Logistics, was hired to carry military goods from Dubai to Baghdad. But in November 2003, a plane “operated by a rival carrier, DHL, was struck by a missile and landed in Baghdad with its left wing in flames.” Federal prosecutors charge that “Eagle executives used that incident to charge a fraudulent ‘war-risk surcharge’ of 50 cents for every kilogram of freight on its own flights.”
To make sure that the extra charges would not raise eyebrows—or red pencils—the Eagle executives distributed “nearly $34,000 in nearly 90 gratuities ‘to obtain or reward favorable treatment’ in connection with the contract.” The “gratuities” included “meals, drinks, golf outings, tickets to rodeo events, baseball and football games and other entertainment items.”
Army Secretary Pete Geren admitted that “there have been reported cases of fraud, waste, and abuse of contracting operations, with many of the worst cases originating out of Kuwait.” He noted that “we’ve seen more cases lately and that’s a cause for concern.” Geren announced that seventy-six criminal cases “related to the acquisition of weapons and other supplies for forces in Iraq and Afghanistan” have already been brought.
The real question behind these Halliburton and Kellogg Brown & Root frauds is how much the companies used their influence with Vice President Dick Cheney to get their contracts. Democrats have been quick to charge unjustified bias in the process, but there has been no proof of any such preferential treatment.
There is no doubt that Cheney received a windfall compensation package when he left Halliburton to become vice president in 2001. He got a $20 million retirement package and an additional $1.4 million cash bonus. But the key question is, What is his financial stake in the future profitability of Halliburton?
Cheney maintains that he has “severed all [his] ties with the [Halliburton] company, gotten rid of all my financial interest.” In 2003, he said he had “no financial interest in Halliburton of any kind and haven’t had, now, for over three years.”
But Cheney’s ties with Halliburton are substantial. Between 2001 and 2004, he received $740,000 in income from the company in deferred compensation. He now holds almost 500,000 shares of company stock—worth more than $17 million at current prices.
The Congressional Research Service, in 2003, said that Cheney’s unexercised stock options and deferred salary “are among those benefits described by the Office of government Ethics as ‘retained ties’ or ‘linkages’ to ones’ former employer.”
Cheney counters that his deferred salary will be paid even if Halliburton goes broke because he has taken out an insurance policy, for which he pays annual premiums, that guarantees it. He also says that he will donate any profits or gains from his stock options to charity.
But presumably Cheney would not have to cash in his options during his government service. And afterward, he would not be obligated to give the proceeds to charity. So if Halliburton remains highly profitable until after he has left office in 2009, he would still stand to benefit.
Cheney’s critics also point out that his pledge to donate the profits from any stock sale to charity are not legally enforceable. No specific charity was named, so no such organization would have any standing to sue if he reneges on his commitment. Once he is out of the public eye, having retired as vice president, he would likely be free to sell the stocks and profit handsomely—with few, if any, public repercussions.
In the meantime, during the Bush administration, the value of Halliburton’s contracts with the government has increased exponentially. According to the Center for Public Integrity, “Halliburton, largely through its subsidiary Kellogg, Brown, & Root, has received more revenue from Government contracts in the last year (2003) than from 1998 through 2002.””
(VICE PRESIDENT DICK CHENEY, WHO USED TO BE CHAIRMAN OF HALLIBURTON, DUE TO THE POWER OF THE CHENEY OFFICE, THEY GOT NO-BID CONTRACTS TO DO WORK IN IRAQ DURING AND AFTER THE WAR. IF ANYBODY BLEW THE WHISTLE ON THEM, THEY WERE PERSECUTED, EVEN MILITARY PEOPLE SUCH AS A TOP CONTRACTING SPECIALIST FOR THE ARMY CORPS OF ENGINEERS. THE UNITED STATES NEVER SHOULD HAVE INVADED IRAQ BECAUSE NOBODY FROM IRAQ WAS INVOLVED IN THE 9/11 ATTACK ON THE WORLD TRADE CENTER, AS WELL AS THE PENTAGON. IT DISTURBED THE BALANCE OF POWER SO BAD THAT WE CAN’T SEEM TO DETECT THE GOOD MUSLIMS FROM THE BAD MUSLIMS, WHICH AFTER YEARS OF WAR, THEY FINALLY CALL ISIS, WHICH COULD BE A CIVIL WAR, SUCH AS IN SYRIA, LEADING TO MULTITUDES OF PEOPLE FLEEING TO EUROPE FROM MANY MIDDLE EASTERN COUNTRIES.
LaVern Isely, Progressive, Overtaxed, Independent Middle Class Taxpayer and Public Citizen Member and USAF Veteran