Halliburton violated rules on contracts, audit says

Data on costs inaccurate, incomplete, Pentagon says

March 11, 2004|By KNIGHT RIDDER/TRIBUNE

WASHINGTON - Halliburton, the big contractor that has won a big share of government contracts to rebuild Iraq, significantly and systematically violated federal contracting rules by providing inaccurate and incomplete information about its costs, according to a Dec. 31 report by Defense Department auditors.

But 16 days after the report and after a second warning by Pentagon auditors, the Army Corps of Engineers gave Halliburton, formerly headed by Vice President Dick Cheney, a new $1.2 billion contract.

An eight-page Democratic memo summarizing the auditors' report and criticizing Halliburton's cost estimates was prepared in advance of a congressional hearing today on $9 billion in federal contracts in Iraq, where Halliburton has received $5.8 billion in contracts.

The memo was written by Rep. Henry A. Waxman of California, the senior Democrat on the House Government Reform Committee, which oversees government contracting.

The suggestion that a company with ties to the Bush administration might have profited excessively from the war in Iraq could compound the administration's growing difficulties over the war, which include the possibility that Cheney and other top officials exaggerated the threat Iraq posed in an effort to marshal support for the war.

The Pentagon audit "depicts a situation where costs are virtually uncontrolled and Halliburton can overcharge the taxpayer by phenomenal sums," Waxman wrote. "Given our nation's mounting debt and the escalating costs in Iraq, all members of Congress should be extraordinarily concerned about this new evidence of waste, fraud and abuse in contracting in Iraq."

Halliburton spokeswoman Wendy Hall said yesterday that "we are disappointed, once again, that selective portions of audit reports have been released publicly even before KBR [Kellogg Brown & Root, a subsidiary of Halliburton] and the Army have made final reviews of the information. Releases of partial reports are inappropriate because the true and complete story cannot be conveyed. In fact, the release of these reports could violate established federal policy."

In its investigation, released this year, the Houston-based oil and engineering conglomerate found significant problems with its cost estimates.

A Pentagon spokeswoman said senior Defense Department officials said they hadn't had a chance to review Waxman's memo.

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