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Thursday, June 7, 2007

Dick-(less) Cheney: Robber Baron

Halliburton Energy Services (NYSE: HAL) is a multinational corporation with operations in over 120 countries. It is based in Houston, Texas in the United States, but has announced that it will establish a new headquarters in Dubai in the United Arab Emirates, where Chairman and CEO David J. Lesar will work and reside. However, corporate offices will remain in Houston [2] and the company will remain incorporated in the United States. [3] Halliburton operates two major business segments: The Energy Services Group provides technical products and services for oil and gas exploration and production, and the KBR subsidiary is a major construction company of refineries, oil fields, pipelines, and chemical plants. KBR is in the last stages of being spun off from Halliburton.

Halliburton is the only company mentioned by Osama bin Laden in an April 2004 tape in which he claims that "this is a war [in Iraq] that is benefiting major companies with billions of dollars." [13] Similar sentiments by others often makes Halliburton the target of the "disaster capitalism" label.

Halliburton's deals recall Vietnam-Era controversy. Vice President Cheney's ties to company are reminiscent of President Lyndon B. Johnson's relationships with Brown & Root.

Ties with Dick Cheney

In recent years the company has become the center of several controversies involving the 2003 Iraq War and the company's ties to U.S. Vice President Dick Cheney. Cheney retired from the company during the 2000 U.S. presidential election campaign with a severance package worth $34 million[15]. As of 2004, he had received $398,548 in deferred compensation from Halliburton while Vice President.[16] Concerns have been raised regarding the possible conflict of interest resulting from Cheney's deferred compensation and stock options from Halliburton. However, before entering office in 2001, Cheney bought an insurance policy that guaranteed a fixed amount of deferred payments from Halliburton each year for five years so that the payments would not depend on the company's fortunes.[16] He is legally bound by an agreement he signed which turns over power of attorney to a trust administrator to sell the options at some future time and to give the after-tax profits to three charities. The agreement specifies that 40% will go to the University of Wyoming (in Cheney's home state), 40% will go to George Washington University's medical faculty to be used for tax-exempt charitable purposes, and 20% will go to Capital Partners for Education. The agreement states that it is "irrevocable and may not be terminated, waived or amended," preventing Cheney from taking back the options at a later date.

Allegations of fraud by Halliburton, specifically with regard to its operations in Iraq, have persisted since before the Iraq War. The associations between Cheney and Halliburton had led many to speculate with regard to improprieties and profiteering from the war.

On 27 June 2005, the Democratic Party held a "mock" committee hearing, aired on C-SPAN 3, at which former civilian employees based in or administering operations in Iraq, testified to specific instances of waste, fraud, and other abuses and irregularities by Halliburton and its subsidiary Kellogg, Brown and Root (KBR).

Among the senators and representatives present at the hearing were Byron Dorgan (presiding), Henry Waxman, Frank Lautenberg, and Mark Dayton.

Among those testifying were Bunny Greenhouse, former Chief Contracting Officer of the U.S. Army Corps of Engineers; Rory Mayberry, former Food Program Manager for a Halliburton subsidiary; and Allan Waller of the Lloyd-Owen International security and operations firm.

Greenhouse, who provided the bulk of testimony, spoke for several minutes about her involvement in the evaluation and crafting of government Army contracts, and explaining how her superiors undermined and dismissed her concerns of illegal business practices. "Ultimately my main concern was the repeated insistence RIO contract be awarded to KBR without competitive bidding," Greenhouse said. She testified to have been given misinformation in answer to her complaints, saying she was "overtly misled."

Mayberry, still in Iraq, testified by video from questions prepared by the committee. He said that KBR routinely sold expired food rations to the Army.

The recorded interviewer asked, "Are you saying that Halliburton deliberately falsified the number of meals they prepared and then submitted false claims for reimbursement and that they did this to make up for past amounts auditors had disallowed?" Mayberry firmly answered "yes." He said that serving expired food rations was "an everyday occurrence, sometimes every meal." He also explained that Halliburton systematically overcharged for the number of meals as well, saying, "they were charging for 20,000 meals and they were only serving 10,000 meals." Dorgan later commented, "obviously there's no honor here, by a company that would serve outdated food to our troops in Iraq."

Halliburton and its subcontractors contend that billing discrepancies for the dining facilities stemmed from interpretive differences in their contracts, which required them to be prepared to serve a minimum number of meals per day. When they billed for these minimum numbers however, the DCAA countered that they should only be required to pay for meals served. Of the more-than-$200 million in question, $51 million was eventually retained by the U.S. Army Field Support Command.

Mayberry also claimed would-be whistleblowers were threatened "to be sent to Fallujah" and other "places under fire" if they talked to media or governmental oversight officials. In 2003 and 2004, Fallujah had been well known as dangerous for foreign troops and civilians. "I personally was sent to Fallujah for three weeks. The manager told me that I was being sent away until the auditors were gone, because I had talked to the auditors," Mayberry said.

"The threat of being sent to a camp under fire was their way of keeping us quiet. The employees who talked to auditors were sent to camps under more fire than other camps, and Anaconda." This report led Dorgan and others to voice considerable outrage.

Allan Waller testified to specific examples of how KBR officials had conspired in blocking of Lloyd-Owen fuel transports, and using other coercive means against its competitor. British based Lloyd-Owen has a direct contract with the Iraqi government to provide fuel to various parts of the country.

In his introductory remarks, Dorgan said that Senate Republicans had blocked any attempts at having a formal bi-partisan hearing, resulting in a separate committee.

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