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hthbhe
"The two enemies of the people are criminals and government, 
so let us tie the second down with the chains of the Constitution
 so the second will not become the legalized version of the first." 
­ Thomas Jefferson
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fmfmmmf   
 Halliburton Accused of Accounting Fraud 
    By Jonathan Stempel 
    Reuters
     Friday 06 August 2004

http://www.truthout.org/docs_04/080704X.shtml

    New York - Halliburton Co. and several top executives intentionally engaged in "serial accounting fraud" from 1998 to 2001, including when it was led by Vice President Dick Cheney, according to a new filing in a shareholder class-action lawsuit against the company.

    The filing accuses Houston-based Halliburton, the world's No. 2 oilfield services company, of systematic accounting misdeeds far more wide-ranging than those charged in a recent civil lawsuit by the U.S. Securities and Exchange Commission. Cheney was not named as a defendant in either proceeding.

    Halliburton agreed on Tuesday to pay $7.5 million to settle SEC charges that it misled investors by not disclosing an accounting change that boosted profit in 1998 and 1999.

    Among other things, the filing accuses Halliburton of inflating results, failing to disclose a big asbestos verdict in a timely manner, and being unable to account for $3.1 billion of profit and cash.

    Halliburton in a statement called the lawsuit an abusive attempt to extort money from current shareholders and smear the company and its employees.

    The allegations in the 101-page filing and the SEC action cover two years when Cheney was Halliburton's chief executive officer.

    The filing with the U.S. District Court in Dallas was first reported by the New York Times. Reuters obtained a copy.

    Named as defendants in the lawsuit are Halliburton and four executives: David Lesar, formerly the company's chief operating officer and now its CEO; Douglas Foshee, a former chief financial officer and now CEO of El Paso Corp.; Gary Morris, another former CFO; and Robert Muchmore, a former controller.

    Muchmore has settled with the SEC, and like Halliburton, neither admitted nor denied wrongdoing. Morris did not settle, and is being sued by the SEC in federal court in Houston.

    El Paso and lawyers for Foshee and Muchmore could not immediately be reached for comment.

    Systematic fraud alleged
    Halliburton said the Dallas court had "preliminarily approved Halliburton's settlement of approximately 20 class-action securities cases ... and ordered that no further complaints be filed."

    These cases included two filed by class-action specialist Scott & Scott LLC of Colchester, Connecticut, on whose behalf the filing was made, the company said.

    "We have filed what we believe to be a very complete, detailed complaint for securities fraud violation," said David Scott, managing partner of Scott & Scott.

    He noted the proposed $6 million class-action settlement "is not in the best interest of the class and really puts a black eye on securities litigation. We feel, as members of the plaintiff securities bar, that the shareholders deserve better and that's what we're trying to do."

    Halliburton said the new complaint, attached as an exhibit to a motion to file it, is a bid to "generate publicity, while violating the spirit but not the letter of that order." "Many of their complaints have already been asked and already been answered. It is virtually a recycled lawsuit."

    The filing contends that Halliburton's Kellogg Brown & Root engineering and construction unit inflated results through artificially boosting revenue or understating expenses.

    One employee said supervisors told her to do "whatever it took to make (projects) come back to plan," or profitability, the filing said.

    The filing also said Halliburton did not disclose a $130 million jury verdict in September 2001 in an asbestos case involving its Harbison-Walker unit, and that five weeks after they learned of the verdict, Lesar and Foshee told analysts that news on asbestos liabilities was "positive."

    On Dec. 7, 2001, after news of that verdict and other asbestos verdicts became public, Halliburton shares fell 42 percent.

    The filing also said that from 1998 to 2001 about $3.1 billion "went missing" as the company generated $1 billion of profit and $2.1 billion from asset sales, yet ended the period with roughly the same amount of debt and cash as it started.

    Shares of Halliburton were down 30 cents, or 1 percent, at $29.81 in midday trade on the New York Stock Exchange.

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hthbhe
"This junta that is governing us, this Enron/Pentagon junta, dedicated only to enrichment through the oil business, 
as all the Bushes and Cheneys and so on are oil people, they are going to destroy, for personal profit, the United States. 
We are going to be destroyed by the hatred of the rest of the world." - GORE VIDAL
hthbhe
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hthbhe
"...But the murkiness of Iraq finances goes beyond a mere jiggering of the books. 
In the case of Iraq, there are no obvious books."

  Iraq Could Produce Another Enron 
     By Nomi Prins 
     Newsday 

"No one will ever see all the details but the [current] crookedness is unique in our history. 
Enron was the first storm warning but no one realized how easily accepted that cluster of capers would be
 by a polity marinated in corruption -- as Ben Franklin predicted, in 1789, as our eventual fate."

Nomi Prins, a former investment banker, is the author of the forthcoming book "Other People's Money: The Corporate Mugging of America."

02 December 2003

     Scrounging up money for anything Iraq-related has been the Bush administration's most consistent economic policy. And it's been ridiculously easy ever since Congress blessed the first "emergency package" defense budget addendum in April.

     Fast forward eight months, and the latest $87-billion injection that went predominantly into the Iraq black hole puts the total sum of "liberation and reconstruction" funds at more than a quarter- trillion dollars, roughly the combined annual revenue of IBM and General Electric.

     But you wouldn't know that we were dealing with such enormous quantities from the glaring absence of consolidated financial reporting on Capitol Hill. In fact, an endless gush of money keeps streaming out of Washington faster than the White House seems to be keeping track of it.

     Perhaps it's no surprise that complete financial statements on Iraq haven't been disclosed. After all, we're dealing with the same crew that hasn't indicted Enron's Ken Lay or WorldCom's Bernie Ebbers. But, by not producing comprehensive and transparent records, the Bush administration is shirking a major domestic and international oversight responsibility. As one UN senior insider said, "No country has ever had so much control over information and resources for reconstruction efforts in history."

     Although the amount of public money circling Iraq is staggering, there is no way to even trace it. Therefore, whether it's being spent wisely and methodically, whether projected revenues are on target or realistic, and whether cash is leaking out around the edges remain a total mystery.

     During the stock market boom, fraudulent corporations hid losses and boosted earnings by playing complex financial shell games designed to withhold information from regulators and the public. Enron perfected this technique with the establishment of ghost subsidiaries. But the murkiness of Iraq finances goes beyond a mere jiggering of the books. In the case of Iraq, there are no obvious books.

     Adding to the subterfuge is the fact that a slew of separate entities are involved in what might be called Operation Incorporate Iraq. They span the State Department, Treasury Department, multiple Defense Department divisions, and international organizations like the World Bank and United Nations. Each is privy to receiving and responsible for disclosing only a subset of information.

     What should be established is an independent, international auditing body with full authority and ability to compile all the information regarding the Iraq balance sheet. Instead, the administration's modus operandi is adding layers to the existing U.S. structure. The Pentagon just set up a new division of the Coalition Provisional Authority, called the Program Management Office, to track the next round of contract money flow.

     On the revenue side of the Iraq balance sheet, we have oil, the true information about which lies solely with the CPA. The CPA and the administration continuously restate revenue estimates. To date, they are down from an unsubstantiated $20 billion before the war to an equally unsubstantiated $2.5 billion, an almost 90-percent drop. Yet, those dancing numbers were used to justify the CPA's most recent $18.7-billion handout.

     Brazenly, despite this obvious downward spiral, the CPA anticipates oil revenues to magically leap five-fold by the end of 2004 and seven-fold by 2007. That kind of unquestioned optimism fueled the Internet fire. No one in Congress raised a finger of caution then. No one in the administration is now. What's more, the CPA budget calls for another $39 billion in expenditures over the next three years.

     Even more alarming than those exploding expenses is that the CPA has no backup plan in case next year's oil revenues fall short. According to CPA spokesman, Maj. Joseph M. Yoswa, "It would be hard for me to predict what would happen. When we get there, we'll make determinations." If this year's regularly revised estimates of expenses and revenues are anything to go by, those "determinations" will translate into more congressional monetary demands.

     Inflated expectations and widespread deception first fabricated and then popped an $8-trillion stock market bubble. As Rep. Henry A. Waxman (D-Calif.), ranking minority member of the Committee on Government Reform, said, "With Enron, the lack of accountability and transparency took a huge toll on employees and investors who were left with nothing while executives walked away wealthy. We want to make sure that doesn't happen in Iraq." Because this time the toll of playing fast and loose with the money would be on the shoulders of taxpayers.

     Without a paper trail, there's also no way of assigning culpability for potential fraud. As it is, up to $11.2 billion in contracts have been awarded under less than competitive circumstances to companies such as Halliburton and Bechtel.

     This clandestine process leads to a lack of accountability. In the U.S. financial scandals, secrecy combined with corporate hype allowed CEOs to stuff their pockets during the boom. Likewise, the Bush administration has a lot riding on the perceived financial success of Corporation Iraq - re-election for starters.

     With high-stakes incentives to fudge numbers and no controls to monitor them, the results could be disastrous, or criminal. Unfortunately, we've all been there before, and the results weren't pretty.

Nomi Prins, a former investment banker, is the author of the forthcoming book "Other People's Money: The Corporate Mugging of America."

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bsdbeb
Spending On Iraq Sets Off Gold Rush 
Lawmakers Fear U.S. Is Losing Control of Funds

As the House today takes up President Bush's $87 billion spending request for Iraq and Afghanistan, the debate over the bill is increasingly focused not just on the amount of money but also on who will get it.

Of the $4 billion a month already being spent in Iraq, as much as a third is going to the private contractors who have flooded into the country, said Deborah D. Avant, a political scientist at George Washington University and an expert in the new breed of private military companies. The flow of money will increase greatly if Congress approves Bush's request.

Many of the services being sought -- including police training, crimes-against-humanity investigations and prison-construction expertise -- are highly specialized. Conditions are dangerous. Experts say American taxpayers can expect to pay a hefty premium to contractors in a classic seller's market.

Among the dozens of projects in the proposal is a State Department plan to spend $800 million to build a large training facility for a new Iraqi police force. Management fees alone would run $26 million a month, while 1,500 police trainers would cost $240,000 each per year, or $20,000 each per month. DynCorp of Reston is likely to get the contract.

"All I can say is it's mind-boggling," James Lyons, a former military subcontractor in Bosnia, said of the opportunities for private contractors. "People must be drooling."

Avant said that as many as 1 in 10 Americans deployed in Iraq and Kuwait -- perhaps 20,000 -- are contractors, a group larger than any of the military forces fielded there by Britain or other U.S. allies. Kellogg, Brown & Root, a subsidiary of Vice President Cheney's former firm, Houston-based Halliburton Corp., has an exclusive contract to rebuild Iraq's oil infrastructure. San Francisco-based Bechtel Corp. is the prime contractor for much of the infrastructure reconstruction.

The Iraqi gold rush has raised concerns on Capitol Hill that the administration may be losing control of the taxpayers' money. As the task of rebuilding shifts from government employees to for-profit contractors, members of Congress are worried that their oversight will diminish, cost controls will weaken and decisions about security, training and the shape of the new Iraqi government will be in the hands of people with financial stakes in the outcome. Avant calls it "the commercialization of foreign policy."

The Coalition Provisional Authority is bolstering its contracting operations to keep up with the flow of money from Washington, congressional aides said, but lawmakers still complain that the process of bidding out and awarding contracts and subcontracts needs to be far more transparent and organized.

"What we're seeing is waste and gold-plating that's enriching Halliburton and Bechtel while costing taxpayers billions of dollars and actually holding back the pace of reconstruction in Iraq," said Rep. Henry A. Waxman (D-Calif.), a leading critic of the administration's handling of Iraq. "We need greater transparency."

Driven by those concerns, the Senate last week added provisions to its version of the president's request that would increase penalties for war profiteering and demand a more open and competitive bidding system.

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hthbhe


Billions in Iraq funds 'missing'
San Jose Mercury News
From correspondents in Madrid
24 Oct 2003

http://www.themercury.news.com.au/common/story_page/0,5936,7654183%255E1702,00.html

THE US occupation authority in Iraq today rejected claims that billions of dollars earmarked for rebuilding the country had gone missing in "opaque" bank accounts.
Coalition Provisional Authority head Paul Bremer said all funds were being spent or transferred in a "completely transparent" way.

"The entire accounts of the Development Fund for Iraq will be posted on the Internet and made available on a regular basis to the members of the international board," Bremer said.

He said the CPA had moved to hire its own independent auditor (Arthur Anderson?) to go over the fund's accounts and that its findings would be made public.

"There is absolutely no question about transparency," Bremer told reporters at an international donors conference for Iraq, at which the US and others are expected to pledge billions in assistance.

"I have absolutely no qualms about it, I don't think we have anything to apologise for. There are no secrets about it."

The British-based charity Christian Aid yesterday alleged that $US4 ($5.69) billion out of an estimated $US5 ($7.11) billion had "disappeared into opaque bank accounts" administered by the CPA.

The group urged any potential contributor at the conference to demand explanations before pledging any additional assistance, claiming that "no independent body knows where this cash has gone".

It said the "financial black hole" would only fuel suspicions that large amounts of the money in the fund were being siphoned off for large US firms and not being channelled to deal with Iraq's serious needs.

The oversight body to monitor the US-led coalition's handling of Iraqi oil money - the International Advisory and Monitoring Board (IAMB) for post-war Iraq - was formally established on Wednesday.

The IAMB, which was spelled out by a UN Security Council resolution in May, is to ensure that Iraqi oil and gas is sold at fair value and that revenues go to rebuilding the war-battered country and meeting humanitarian needs.

Bremer rejected charges that he and the CPA had obstructed its creation.

"That's nonsense," Bremer bristled when asked about the charge. "It is simply untrue to say we obstructed it. I've been anxious to get this board established.

UNITED NATIONS -- During last year's presidential campaign, Richard B. Cheney acknowledged that the oil-field supply corporation he headed, Halliburton Co., did business with Libya and Iran through foreign subsidiaries. But he insisted that he had imposed a "firm policy" against trading with Iraq.

"Iraq's different," he said.

According to oil industry executives and confidential United Nations records, however, Halliburton held stakes in two firms that signed contracts to sell more than $73 million in oil production equipment and spare parts to Iraq while Cheney was chairman and chief executive officer of the Dallas-based company.

Two former senior executives of the Halliburton subsidiaries say that, as far as they knew, there was no policy against doing business with Iraq. One of the executives also says that although he never spoke directly to Cheney about the Iraqi contracts, he is certain Cheney knew about them.

Mary Matalin, Cheney's counselor, said that if he "was ever in a conversation or meeting where there was a question of pursuing a project with someone in Iraq, he said, 'No.' "

"In a joint venture, he would not have reviewed all their existing contracts," Matalin said. "The nature of those joint ventures was that they had a separate governing structure, so he had no control over them."

The trade was perfectly legal. Indeed, it is a case study of how U.S. firms routinely use foreign subsidiaries and joint ventures to avoid the opprobrium of doing business with Baghdad, which does not violate U.S. law as long as it occurs within the "oil-for-food" program run by the United Nations.

Halliburton's trade with Iraq was first reported by The Washington Post in February 2000. But U.N. records recently obtained by The Post show that the dealings were more extensive than originally reported and than Vice President Cheney has acknowledged.

As secretary of defense in the first Bush administration, Cheney helped to lead a multinational coalition against Iraq in the Persian Gulf War and to devise a comprehensive economic embargo to isolate Saddam Hussein's government. After Cheney was named in 1995 to head Halliburton, he promised to maintain a hard line against Baghdad.

But in 1998, Cheney oversaw Halliburton's acquisition of Dresser Industries Inc., which exported equipment to Iraq through two subsidiaries of a joint venture with another large U.S. equipment maker, Ingersoll-Rand Co.

The subsidiaries, Dresser-Rand and Ingersoll Dresser Pump Co., sold water and sewage treatment pumps, spare parts for oil facilities and pipeline equipment to Baghdad through French affiliates from the first half of 1997 to the summer of 2000, U.N. records show. Ingersoll Dresser Pump also signed contracts -- later blocked by the United States -- to help repair an Iraqi oil terminal that U.S.-led military forces destroyed in the Gulf War.

Former executives at the subsidiaries said they had never heard objections -- from Cheney or any other Halliburton official -- to trading with Baghdad.

"Halliburton and Ingersoll-Rand, as far as I know, had no official policy about that, other than we would be in compliance with applicable U.S. and international laws," said Cleive Dumas, who oversaw Ingersoll Dresser Pump's business in the Middle East, including Iraq.

Halliburton's primary concern, added Ingersoll-Rand's former chairman, James E. Perrella, "was that if we did business with [the Iraqi regime], that it be allowed by the United States government. If it wasn't allowed, we wouldn't do it."

Dumas and Perrella said their companies' commercial links to the Iraqi oil industry began before the U.N. Security Council imposed an oil embargo on Baghdad in the wake of its 1990 invasion of Kuwait.

They returned to dealing with Iraq after the council established the "oil-for-food" program in December 1996, permitting Iraq to export oil under U.N. supervision and use the proceeds to buy food, medicine and humanitarian goods. The program was expanded in 1998 to allow Iraq to import spare parts for its oil facilities.

The Halliburton subsidiaries joined dozens of American and foreign oil supply companies that helped Iraq increase its crude exports from $4 billion in 1997 to nearly $18 billion in 2000. Since the program began, Iraq has exported oil worth more than $40 billion.

The proceeds funded a sharp increase in the country's nutritional standards, nearly doubling the food rations distributed to Iraq's poor.

But U.S. and European officials acknowledged that the expanded production also increased Saddam Hussein's capacity to siphon off money for weapons, luxury goods and palaces. Security Council diplomats estimate that Iraq may be skimming off as much as 10 percent of the proceeds from the oil-for-food program.

Cheney has offered contradictory accounts of how much he knew about Halliburton's dealings with Iraq. In a July 30, 2000, interview on ABC-TV's "This Week," he denied that Halliburton or its subsidiaries traded with Baghdad.

"I had a firm policy that we wouldn't do anything in Iraq, even arrangements that were supposedly legal," he said. "We've not done any business in Iraq since U.N. sanctions were imposed on Iraq in 1990, and I had a standing policy that I wouldn't do that."

Cheney modified his response in an interview on the same program three weeks later, after he was informed that a Halliburton spokesman had acknowledged that Dresser Rand and Ingersoll Dresser Pump traded with Iraq.

He said he was unaware that the subsidiaries were doing business with the Iraqi regime when Halliburton purchased Dresser Industries in September 1998.

"We inherited two joint ventures with Ingersoll-Rand that were selling some parts into Iraq," Cheney explained, "but we divested ourselves of those interests."

The divestiture, however, was not immediate. The firms traded with Baghdad for more than a year under Cheney, signing nearly $30 million in contracts before he sold Halliburton's 49 percent stake in Ingersoll Dresser Pump Co. in December 1999 and its 51 percent interest in Dresser Rand to Ingersoll-Rand in February 2000, according to U.N. records.

Perrella said he believes Halliburton officials must have known about the Iraqi links before they purchased Dresser. "They obviously did due diligence," he said.

And even if Cheney was not told about the business with Baghdad before the purchase, Perrella said, the CEO almost certainly would have learned about it after the acquisition. "Oh, definitely, he was aware of the business," Perrella said, although Perrella conceded that this was an assumption based on knowledge of how the company worked, not a fact to which he could personally attest because he never discussed the Iraqi contracts with Cheney.

A long-time critic of unilateral U.S. sanctions, which he has argued penalize American companies while failing to punish the targeted regimes, Cheney has pushed for a review of U.S. policy toward countries such as Iraq, Iran and Libya.

In the first expression of that new thinking, the Bush administration is campaigning in the U.N. Security Council to end an 11-year embargo on sales of civilian goods, including oil-related equipment, to Iraq.

U.S. officials say the new policy is aimed at easing restrictions on companies that conduct legitimate trade with Iraq, while clamping down on weapons smuggling and other black-market activity.

If the plan is approved, there would be "nothing to stop Iraq from importing [as many] oil spare parts as it needs" from Halliburton and other suppliers, according to a British official who briefed reporters on the proposal when it was introduced last month.

Cheney resigned as chairman of Halliburton last August. Although he has retained stock options worth about $8 million, he has arranged to donate to charity any profits from the eventual exercise of those options, Glover Weiss said.

Confidential U.N. documents show that Halliburton's affiliates have had broad, and sometimes controversial, dealings with the Iraqi regime.

For instance, the documents detail more than $2.5 million in contracts between Ingersoll Dresser Pump Co. and Iraq that were blocked by the Clinton administration. They included agreements by the firm to sell $760,000 in spare parts, compressors and firefighting equipment to refurbish an offshore oil terminal, Khor al Amaya.

The Persian Gulf terminal was badly damaged during the 1980-88 Iran-Iraq War and later was destroyed by allied warplanes during Operation Desert Storm. At the time, Cheney was secretary of defense.

Washington halted the sale because the facility was "not authorized under the oil-for-food deal," according to U.N. documents. Under the terms of the oil-for-food program, Baghdad is permitted to export crude oil, subject to U.N. supervision, through only two terminals, Ceyhan in Turkey and Mina al Bakr on the Persian Gulf.

The equipment was never delivered to Iraq, but Baghdad subsequently repaired the Khor al Amaya facility on its own.

A senior Iraqi oil ministry official, Faiz Shaheen, told an official Iraqi newspaper that Iraq would soon be able to export about 600,000 barrels a day of crude oil from the terminal.

Dumas said he was not aware of the dispute over the Khor al Amaya terminal. It was unlikely, he added, that Cheney or other top Halliburton executives would have known about the specific deals. "We had great independence in running our business," he said.

U.S. officials say the Bush administration is prepared to allow Iraq to resume exports from Khor al Amaya, as long as the earnings are placed in a U.N. escrow account that is used to pay for humanitarian supplies and further improvements to the oil industry.

"The U.S. attitude towards Iraqi exports has evolved considerably," said James A. Placke, a Washington-based analyst for Cambridge Energy Research Associates, a consulting firm. "They used to tightly restrict Iraqi oil exports, and now there is no limitation on Iraqi exports."

Iraq's power to entice foreign investment, meanwhile, has increased with the soaring demand for oil. U.S. companies, which have been able to trade with Iraq only through foreign subsidiaries and middlemen, are wary of dealing with Baghdad but eager to get a piece of the action, according to industry sources.

"The American oil industry is very interested in trying to enter Iraq," said J. Robinson West, chairman of Petroleum Finance Co., a consulting firm. "But I think that they are quite respectful of U.S. policy towards Saddam Hussein. There is a very strong feeling that in fact he is the greatest threat to oil production in the Middle East."

     Halliburton, the engineering group formerly run by US vice-president Dick Cheney, has been given $1 billion worth of reconstruction work in Iraq by the US government without having to compete for it, thanks to repeated delays in opening up a key contract to competition.

     The Houston-based company was controversially awarded a contract to repair Iraq's damaged oil infrastructure without competition in February.

     The cost-plus contract means the amount spent by the US Army Corps of Engineers (USACE), which is running the work, is open-ended, rather than being fixed at the outset, because the scope of the damage was unknown. The USACE described the contract as a 'bridge to competition', but original plans to award the work competitively in August have repeatedly slipped. So far, $1.7bn has been made available to Halliburton for the work.

     Figures obtained from the USACE by Democrat Congressman Henry Waxman indicate that on 21 August, around the time the contract should have been opened to competition, the amount made available to KBR (Kellog, Brown and Root), the Halliburton subsidiary involved, was $704m. Since then the total has risen by $1.011bn.

     Waxman said: 'Since August, when the follow-on contracts were supposed to be awarded, the administration has obligated more than $1bn to Halliburton under the oil infrastructure contract. These inexplicable delays may be good for Halliburton; they are costing taxpayers a bundle.'

     The figures have emerged as the UK Government and contractors reacted with dismay to news this week that competitive tendering had again been pushed back to between 15 December and 17 January. Previously it was delayed to mid-October, late October, then year-end.

     One leading UK contractor, which made strong representations in Whitehall this week, said: 'We are very disappointed that it has been put back again,' adding that the longer the delay, the more KBR benefited.

     Brian Wilson, the Prime Minister's special representa tive on reconstruction, wrote to Blair in advance of President Bush's recent visit, urging him to press for a level playing field in Iraq.

     Wilson said: 'These are very important contracts for the future of the Iraqi oil industry. We think keeping a level playing field is very important, and the further delay is regrettable.'

     USACE says that the August date was not a deadline for contract award, but for tenders to be submitted. However, in a letter dated 2 May to Waxman, a US army general states the 'best estimate for the award of the contract based on this schedule is approximately the end of August'. According to contract rules, Halliburton can make a margin of up to 7 per cent on the work.

    Friday 13 February 2004

     WASHINGTON (AP) -- Frustrated that they couldn't convince Republicans to conduct hearings on Vice President Dick Cheney's former company, Democrats convened a panel of their own Friday to hear a former Halliburton employee testify that the company wastes taxpayers' money.

     Halliburton, which supplies military support services in Iraq and elsewhere, routinely purchased items at higher prices from preferred suppliers, said Henry Bunting, who worked for the company in Kuwait last year.

     "There were frequent instructions by procurement supervisors and management to keep ... requisitions under the $2,500 threshold to avoid competitive bidding," Bunting, of Houston, told the Senate Democratic Policy Committee.

     "Remember, this is a 'cost plus contract' so Halliburton would get reimbursed for its costs plus a percentage," he said.

     The chairman of the panel, Sen. Byron Dorgan, D-N.D., said the hearing was needed because of allegations that Halliburton overcharged for delivery of gasoline to Iraq; that company employees took kickbacks and that the firm charged too much for meals served to troops in Iraq.

     "It seems to me that these incidents may well reflect a broad mind-set: one that was born on the day that these contracts were awarded without competition, and that was nurtured through a lack of oversight by this current administration and majority-controlled Congress," Dorgan said.

     Sen. Frank Lautenberg, D-N.J., said he has been requesting for nine months that the Senate Governmental Affairs Committee, led by Republicans, conduct the hearing.

     Bunting, who quit after working 15 weeks for Halliburton in Kuwait, handed Dorgan an embroidered towel with the logo of a Halliburton subsidiary, saying a company manager insisted on ordering the towels for between $4.50 and $5.50 instead of $1.60 for cheaper towels.

     On Thursday, two House members wrote Pentagon auditors about allegations of waste by Bunting and a second, unidentified former Halliburton worker. The letter was sent by Reps. Henry Waxman, D-Calif., and John Dingell, D-Mich.

     Halliburton, run by Cheney before his 2000 vice presidential campaign, has consistently denied overcharges.

     Bunting was a field buyer who filled requisitions from Halliburton employees by locating vendors. The second ex-employee was a procurement supervisor who did similar work.

     According to Waxman and Dingell, Bunting and the unidentified whistleblower contend:

     --Top Halliburton officials frequently told employees that high prices charged by vendors were not a problem because the U.S. government would reimburse the costs and then pay the company an additional fee.

     --Higher than necessary prices were paid for ordinary vehicles, leased for $7,500 a month, and for furniture and cellular telephone service.

     --Halliburton tried to keep as many purchase orders as possible below $2,500 so its buyers could avoid the requirement to solicit quotes from more than one vendor.

     --Supervisers provided buyers with a list of preferred Kuwaiti vendors, including companies that charged excessive prices. Buyers were not encouraged to identify alternative vendors.

     Congressional Democrats and the party's presidential candidates have made Halliburton's extensive government contracts a major election issue, contending the business showed favoritism toward Cheney's former company.

     The vice president has repeatedly said he had no involvement with the company once he left Halliburton before the 2000 campaign.

     The letter was sent to the Defense Contract Audit Agency, which found in a preliminary audit that Halliburton may have overcharged taxpayers $61 million in delivery of oil to Iraq.

  ______________________________________________________________________________________________________________________________________________________

By Dana Milbank 
Washington Post Staff Writer
July 16, 2002

GO TO ORIGINAL

An executive sells shares in his energy company two months before the company announces unexpected bad news, and the stock price eventually tumbles to a quarter of the price at which the insider sold his.

George W. Bush at Harken Energy Corp. in 1990? Yes, but also Richard B. Cheney at Halliburton Co. in 2000.

When Cheney left Halliburton in August 2000 to be Bush's running mate, the oil services firm was swelling with profits and approaching a two-year high in its stock price. Investors and the public (and possibly Cheney himself) did not know how sick the company really was, as became evident in the months after Cheney left.

Whether through serendipity or shrewdness, Cheney made an $18.5 million profit selling his shares for more than $52 each in August 2000; 60 days later, the company surprised investors with a warning that its engineering and construction business was doing much worse than expected, driving shares down 11 percent in a day. About the same time, it announced it was under a grand jury investigation for overbilling the government.

In the months that followed, it became clear that Halliburton's liability for asbestos claims, stemming from a company Cheney acquired in 1998, were far greater than Halliburton realized. Then, in May of this year, the company announced it was under investigation by the Securities and Exchange Commission for controversial accounting under Cheney's leadership that inflated profits. Halliburton shares closed at $13.10 yesterday on the New York Stock Exchange.

There has been no serious allegation of wrongdoing by the vice president himself in all of this. But the highflying company Cheney hailed as a "great success story" during the 2000 campaign is now a troubled behemoth fighting for its life. The humbling of Halliburton raises doubts about Cheney's stewardship there and, by extension, his reputation as a smart executive bringing a businessman's acumen to the White House.

The developments at Halliburton since Cheney's departure leave two possibilities: Either the vice president did not know of the magnitude of problems at the oilfield services company he ran for five years, or he sold his shares in August 2000 knowing the company was likely headed for a fall.

Amid a wave of corporate accounting scandals, Democrats are eager to raise the issue of Cheney's leadership. Noting the collapse in Halliburton shares since Cheney sold, Rep. Henry A. Waxman (Calif.), the ranking Democrat on the House Government Reform Committee, wrote to Bush on Friday saying: "Vice President Cheney could provide an extraordinary example of personal responsibility by donating all or a portion of the profits" to a charity for displaced workers. Halliburton has shed 18,000 jobs since 1999.

Overall, financial analysts say Cheney was an unremarkable executive. "He came in at a time when any okay manager could ride the cyclical wave," said James Wicklund, an analyst with Banc of America Securities who has followed Halliburton for years. "He did okay. He did not blow anybody's doors off."

In particular, one of Cheney's actions, the 1998 acquisition of Dresser Industries, could end up ruining the company with asbestos liabilities. "You have to put that on Cheney," Wicklund said. "In hindsight, would they have done it? Of course not." Still, Wicklund added that the acquisition looked good at the time, and he wonders "how much could anybody have known" about the asbestos liability.

The vice president's office declined to comment for this article. "Until such time as the SEC concludes its review of Halliburton's practices, the vice president will refrain from commenting on this matter," Cheney adviser Mary Matalin said. "Any statement could be misinterpreted as an effort to influence the process of an independent regulatory body, which would be inappropriate."

After Aug. 16, 2000, his last day at Halliburton, Cheney exercised stock options and sold 660,000 shares between Aug. 21 and 28 for $35 million; Halliburton shares were soaring because of high oil prices.

Though Cheney was under pressure to sever his future financial interest in Halliburton, conflict-of-interest laws did not require the sale. "There's no conflict until I'm sworn in on January 20th," Cheney said Aug. 27. Four other Halliburton insiders also sold shares in August, including the vice chairman and the chief financial officer.

A Halliburton spokeswoman, Wendy Hall, said the sales were "pre-cleared with the legal department per company policy." She said the sales were made during a "window" before Aug. 31 in which "there were no trading restrictions imposed on executives due to inside information." The stock sales are not part of the SEC investigation.

Halliburton does everything from making drill bits and pipeline to building natural gas plants. The 83-year-old company provides a vast range of products and services to the energy industry, from exploration to production and maintenance.

When Cheney left, outward signs were good for Halliburton. On July 27, Deutsche Banc Alex. Brown analysts wrote that "quarterly earnings have impressively turned the corner, in our opinion." Even as late as Oct. 16, Jefferies & Co. analysts wrote that "Halliburton's earnings should show greater growth momentum in 2001 as the Engineering & Construction business turns decidedly more positive."

But on Oct. 24, Halliburton delivered a different message in a conference call with analysts: Despite its strong current earnings, Halliburton was encountering weak orders and high costs in its engineering and construction businesses -- about a third of the company. To rectify matters, it announced plans to combine the unit's two businesses, essentially reversing Cheney's strategy, which was to make each stand alone.

The change would lead to asset sales, layoffs and a $120 million after-tax charge against earnings. Cheney's successor, David Lesar, told analysts he was "not at all satisfied with this situation," and analysts sharply reduced their earnings forecasts. Halliburton's Hall said plans for the overhaul were made after Cheney left.

The news, coming a day after Halliburton acknowledged it was the target of a federal grand jury investigation related to overbilling of the government at Fort Ord in California, was a surprise.

By Nov. 13, Jefferies wrote that "Halliburton's stock has lost between $3 billion and $4 billion of total market value." The researchers attributed half of that to the bad news about the engineering business, and half to worries about Halliburton's asbestos troubles "since Owens-Corning filed for bankruptcy protection" in October.

Lately, much of the news coverage of Halliburton involves the SEC probe, announced in May, into an apparent 1998 change in the company's accounting practices. The change allowed Halliburton to increase revenue by $89 million in the fourth quarter of 1998 by postponing possible losses from customers' nonpayments.

Lesar, in an interview with Newsweek, defended the accounting treatment as a long-standing practice and said Cheney knew about it. Hall confirmed that "the vice president was aware we accrued revenue on unapproved claims in accordance with generally accepted accounting principles." Cheney, in a 1996 promotional video, praised Halliburton's accountants, Arthur Andersen, for their advice "over and above the, just sort of the normal by-the-books audit arrangement."

Whatever the SEC finds in its investigation, the matter is not of major financial importance to Halliburton, which had revenue of $13 billion last year.

As a financial matter, Halliburton's overbilling of the government at Fort Ord is even less significant. It agreed in February to pay $2 million to settle the accusations from a former employee of Halliburton's Brown & Root subsidiary who said his superiors told him to bill the government for work not performed at the military base from 1994 to 1998.

When Halliburton announced the grand jury inquiry in October 2000, the Bush-Cheney campaign suggested the prosecution was politically motivated. Daniel Schrader, the lawyer for the whistle-blower, said he has "circumstantial evidence" suggesting the overbilling is "a company-wide practice," but he could not prove it.

Such accusations are directed at the area in which Cheney most excelled at Halliburton: government business. In his five years, the company obtained $2.3 billion in federal contracts, up from $1.2 billion the previous five years, according to the Center for Public Integrity. Halliburton also received $1.5 billion in guaranteed or direct loans from government lenders, up from $100 million in the previous five years.

Halliburton said it does not overbill. "We have a long and successful relationship with government agencies," Hall said.

By far the greatest threat to Halliburton is the huge asbestos liability incurred in the 1998 purchase of Dresser Industries for $7.7 billion. In a quarterly report issued Aug. 10, 2000, six days before Cheney's departure, Halliburton was sanguine, setting aside reserves of $24 million for cases involving the cancer-causing material. Though adverse court rulings could change matters, the company wrote, "we believe that the pending asbestos claims will be resolved without material effect on our financial position."

Even after the October bankruptcy filing of Owens-Corning, also a target of asbestos lawsuits, Halliburton did not change. "Although there is no guarantee," analysts at A.G. Edwards & Sons wrote Oct. 25, "management does not anticipate increasing the accrued liability beyond the current level." On Nov. 9, Jefferies wrote: "Halliburton believes that insurance should cover most of the litigation costs or settlements."

But 2001 brought evidence to the contrary. In June, it became known that Harbison-Walker Refractories, which Dresser had spun off in 1992, could not pay asbestos claims against it, and the victims would go after Halliburton. By year's end, Halliburton had raised its reserves to $125 million as the number of open claims against it grew to 274,000 from 129,000 earlier in the year. Credit rating agencies downgraded Halliburton's debt.

Early this year, Halliburton acknowledged that it has no idea what its asbestos liabilities may be and that its reserves "may not be sufficient." As Harbison-Walker headed into bankruptcy proceedings, Halliburton hired experts to estimate the liabilities; a report is due this year, which could allow Halliburton to reach a settlement next year.

Investors, meanwhile, are betting the liability is $8 billion to $9 billion, based on the amount Halliburton's market value, now just under $6 billion, has been discounted relative to others in its industry without asbestos woes.

The best hope for Halliburton, investors and analysts say, is for the federal government to pass a law limiting damages that can be claimed against former asbestos makers. Bush had planned to do just that by including a "tort reform" proposal in his State of the Union address in January. But Bush ultimately decided against calling for that, leaving the impression on Wall Street that the administration could not press for limits on asbestos damages -- because of Cheney's history at Halliburton.

 © 2004 The Washington Post Company
(In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.)
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  "If we define an American fascist as one who in case of conflict puts money and power ahead of human beings, then there are undoubtedly several million fascists in the United States. There are probably several hundred thousand if we narrow the definition to include only those who in their search for money and power are ruthless and deceitful. Most American fascists are enthusiastically supporting the war effort. They are doing this even in those cases where they hope to have profitable connections with German chemical firms after the war ends. They are patriotic in time of war because it is to their interest to be so, but in time of peace they follow power and the dollar wherever they may lead." -"The Danger of American Fascism by Henry A Wallace, The New York Times, 1944.

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By PAUL KRUGMAN
New York Times

Last week there were major news stories about possible profiteering by Halliburton and other American contractors in Iraq. These stories have, inevitably and appropriately, been pushed temporarily into the background by the news of Saddam's capture. But the questions remain. In fact, the more you look into this issue, the more you worry that we have entered a new era of excess for the military-industrial complex.

The story about Halliburton's strangely expensive gasoline imports into Iraq gets curiouser and curiouser. High-priced gasoline was purchased from a supplier whose name is unfamiliar to industry experts, but that appears to be run by a prominent Kuwaiti family (no doubt still grateful for the 1991 liberation). U.S. Army Corps of Engineers documents seen by The Wall Street Journal refer to "political pressures" from Kuwait's government and the U.S. embassy in Kuwait to deal only with that firm. I wonder where that trail leads.

Meanwhile, NBC News has obtained Pentagon inspection reports of unsanitary conditions at mess halls run by Halliburton in Iraq: "Blood all over the floors of refrigerators, dirty pans, dirty grills, dirty salad bars, rotting meat and vegetables." An October report complains that Halliburton had promised to fix the problem but didn't.

And more detail has been emerging about Bechtel's much-touted school repairs. Again, a Pentagon report found "horrible" work: dangerous debris left in playground areas, sloppy paint jobs and broken toilets.

Are these isolated bad examples, or part of a pattern? It's impossible to be sure without a broad, scrupulously independent investigation. Yet such an inquiry is hard to imagine in the current political environment - which is precisely why one can't help suspecting the worst.

Let's be clear: worries about profiteering aren't a left-right issue. Conservatives have long warned that regulatory agencies tend to be "captured" by the industries they regulate; the same must be true of agencies that hand out contracts. Halliburton, Bechtel and other major contractors in Iraq have invested heavily in political influence, not just through campaign contributions, but by enriching people they believe might be helpful. Dick Cheney is part of a long if not exactly proud tradition: Brown & Root, which later became the Halliburton subsidiary doing those dubious deals in Iraq, profited handsomely from its early support of a young politician named Lyndon Johnson.

So is there any reason to think that things are worse now? Yes.

The biggest curb on profiteering in government contracts is the threat of exposure: sunshine is the best disinfectant. Yet it's hard to think of a time when U.S. government dealings have been less subject to scrutiny.

First of all, we have one-party rule - and it's a highly disciplined, follow-your-orders party. There are members of Congress eager and willing to take on the profiteers, but they don't have the power to issue subpoenas.

And getting information without subpoena power has become much harder because, as a new report in U.S. News & World Report puts it, the Bush administration has "dropped a shroud of secrecy across many critical operations of the federal government." Since 9/11, the administration has invoked national security to justify this secrecy, but it actually began the day President Bush took office.

To top it all off, after 9/11 the U.S. media - which eagerly played up the merest hint of scandal during the Clinton years - became highly protective of the majesty of the office. As the stories I've cited indicate, they have become more searching lately. But even now, compare British and U.S. coverage of the Neil Bush saga.

The point is that we've had an environment in which officials inclined to do favors for their business friends, and contractors inclined to pad their bills or do shoddy work, didn't have to worry much about being exposed. Human nature being what it is, then, the odds are that the troubling stories that have come to light aren't isolated examples.

Some Americans still seem to feel that even suggesting the possibility of profiteering is somehow unpatriotic. They should learn the story of Harry Truman, a congressman who rose to prominence during World War II by leading a campaign against profiteering. Truman believed, correctly, that he was serving his country.

On the strength of that record, Franklin Roosevelt chose Truman as his vice president. George Bush, of course, chose Dick Cheney.

Copyright 2003 The New York Times Company (In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

  By Timothy J. Burger and Adam Zagorin
  Time
30 May 2004

  Vice President Dick Cheney was a guest on NBC's Meet the Press last September when host Tim Russert brought up Halliburton. Citing the company's role in rebuilding Iraq as well as Cheney's prior service as Halliburton's CEO, Russert asked, "Were you involved in any way in the awarding of those contracts?" Cheney's reply: "Of course not, Tim ... And as Vice President, I have absolutely no influence of, involvement of, knowledge of in any way, shape or form of contracts led by the [Army] Corps of Engineers or anybody else in the Federal Government."

  Cheney's relationship with Halliburton has been nothing but trouble since he left the company in 2000. Both he and the company say they have no ongoing connections. But TIME has obtained an internal Pentagon e-mail sent by an Army Corps of Engineers official-whose name was blacked out by the Pentagon-that raises questions about Cheney's arm's-length policy toward his old employer. Dated March 5, 2003, the e-mail says "action" on a multibillion-dollar Halliburton contract was "coordinated" with Cheney's office. The e-mail says Douglas Feith, a high-ranking Pentagon hawk, got the "authority to execute RIO," or Restore Iraqi Oil, from his boss, who is Deputy Defense Secretary Paul Wolfowitz. RIO is one of several large contracts the U.S. awarded to Halliburton last year.

  The e-mail says Feith approved arrangements for the contract "contingent on informing WH [White House] tomorrow. We anticipate no issues since action has been coordinated w VP's [Vice President's] office." Three days later, the Army Corps of Engineers gave Halliburton the contract, without seeking other bids. TIME located the e-mail among documents provided by Judicial Watch, a conservative watchdog group.

  Cheney spokesman Kevin Kellems says the Vice President "has played no role whatsoever in government-contract decisions involving Halliburton" since 2000. A Pentagon spokesman says the e-mail means merely that "in anticipation of controversy over the award of a sole-source contract to Halliburton, we wanted to give the Vice President's staff a heads-up."

  Cheney is linked to his old firm in at least one other way. His recently filed 2003 financial-disclosure form reveals that Halliburton last year invoked an insurance policy to indemnify Cheney for what could be steep legal bills "arising from his service" at the company. Past and present Halliburton execs face an array of potentially costly litigation, including multibillion-dollar asbestos claims.

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CBS NEWS
July 10, 2002

http://www.cbsnews.com/stories/2002/07/17/politics/main515445.shtml

(CBS) Oil field services provider Halliburton Co. Wednesday said claims made in a lawsuit filed by a public interest group against a company and U.S. Vice President Cheney, its former chief executive, were without merit.

"The claims in this lawsuit are untrue, unsupported and unfounded," Halliburton Chief Financial Officer Doug Foshee said in a statement Wednesday.

Earlier Wednesday, the legal watchdog group Judicial Watch sued Cheney and the oil services company he once ran, Halliburton Co., alleging they defrauded shareholders by overstating the company's revenues. Cheney headed Halliburton from 1995 to 2000.

The accounting fraud lawsuit also names as defendants Halliburton's directors and its accounting firm, Arthur Andersen LLP.

The civil lawsuit was filed in federal court one day after President Bush went to Wall Street to outline proposals aimed at stopping the accounting scandals that have shaken investor faith in the U.S. financial markets.

In a separate development, an embarrassing promotional videotape has surfaced that features Cheney praising now-disgraced Arthur Andersen for going above and beyond routine audits for Halliburton. On the tape, Cheney and six other executives applaud the accounting firm.

"One of the things I like that they do for us is that, in effect, I get good advice, if you will, from their people based upon how we're doing business and how we're operating, over and above the, just sort of the normal by-the-books audit arrangement," said Cheney in the 1996 tape.

The four-minute video was produced by Andersen in 1996, well before the company was damaged by revelations about its role in such corporate scandals as the collapse of Enron Corp. and WorldCom Inc.

In May, Andersen was convicted of obstruction of justice by shredding documents that had to do with Enron, which admitted it exaggerated profit to appeal to investors.

A spokeswoman for the vice president said Halliburton had no reason to question Andersen at the time.

"Arthur Andersen was Halliburton's accountant for 50 years," said Jennifer Millerwise. "Obviously, they had never had a problem, so of course under those circumstances the vice president, along with many other CEOs, did a piece."

Millerwise said Cheney was unhappy that Andersen identified him as "vice president" in a recent copy of the video.

In the lawsuit filed Wednesday, the legal group Judicial Watch alleges that while Cheney was Halliburton's chief executive officer, the Texas company reported as income money that had not been received, from contract claims that were still "speculative" and in dispute.

"They overstated their revenues by tens of millions of dollars and that's an understatement," Larry Klayman, chairman of the Washington-based Judicial Watch, told reporters in Miami, where he was visiting on unrelated business.

The suit was filed in Dallas, where Halliburton is based.

In Washington, White House spokesman Ari Fleischer said he had spoken to Cheney's office and "they believe the suit is without merit, and that's where it stands."

Judicial Watch targets government corruption and has sued politicians of every stripe in the past.

Klayman said the inflated revenues resulted from accounting changes that were never made public as required by law, and inflated Halliburton's stock price.

The lawsuit, filed on behalf of two Halliburton shareholders who lost "a lot" of money, did not specify the amount of compensation the plaintiffs are seeking. But Klayman said: "We're seeking millions and millions of dollars ... It's to punish the people involved."

Fleischer said Tuesday the SEC would take its investigation of Halliburton "wherever it leads," dismissing suggestions investigators would come under pressure to back off if Cheney was implicated.

Cheney was chairman and chief executive of Halliburton from 1995 to 2000. The oil field services company announced on May 28 that it received notice from the Securities and Exchange Commission that the commission was looking into Halliburton's accounting methods - adopted in 1998 - for reporting cost overruns on construction jobs.

The SEC has not filed any charges against the Dallas-based company.

Before 1998, the company had been more conservative, reporting such revenue only after settling with customers.

The Washington-based group Judicial Watch alleges those accounting practices resulted in the overvaluation of Halliburton's shares, deceiving investors.

"We're seeking actual and punitive damages for allegations of securities fraud, for changing accounting practices and not advising the public of these changes," said Judicial Watch chairman and general counsel Larry Klayman, who is to hold a news conference Wednesday in Miami to announce further details on the legal action.

A spokesman for Cheney declined comment and instead referred all questions on the matter to Halliburton.

"We don't believe that there's any merit to this case," Halliburton spokeswoman Zelma Branch said.

The lawsuit, which is expected to be filed Wednesday in federal court in Dallas, also names ten of Halliburton's board members.

Judicial Watch is no stranger to conflict with the Bush administration, having previously sued for access to records of the Cheney-led energy task force that drafted the Bush administration's energy policy.

The leader of the group charges that President Bush's public campaign to crack down on corporate fraud - underscored with a speech on Wall Street yesterday - appears intended to deflect attention away from his and Cheney's own past business practices.

"To look the other way for the vice president would be to set a precedent that the Washington elite are above the law," said Klayman, arguing his case that Cheney and Halliburton were in the wrong.

© MMII, CBS Worldwide Inc. All Rights Reserved. In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. t r u t h o u t has no affiliation whatsoever with the originator of this article nor is t r u t h o u t endorsed or sponsored by the originator.)

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