Statement of Rep. Henry A. Waxman on Contracting Abuses in Iraq October 15, 2003

Read Waxman's Letter to the OMB
There is a lot that is controversial about the war in Iraq and its aftermath. Many Americans believe the President misled the country about the reasons for going to war. Others think the Administration is not doing enough to protect our troops in Iraq. And many more question why so much money is going to Iraq when economic conditions are so tough at home.

But there is one thing that everyone should agree on: If we are going to be spending taxpayer dollars to rebuild Iraq, we ought to be getting our money’s worth. Yet even on something as basic as this, the Administration is failing. There is growing evidence that favored contractors like Halliburton and Bechtel are getting sweetheart deals that are costing the taxpayer a bundle but delivering scant results.

Today, I am releasing with Rep. John Dingell a letter to OMB Director Bolten that details the latest evidence of overcharging by Halliburton. I asked my staff a simple question: Can we trace the path of a gallon of gasoline from a refinery in Kuwait to the streets of Baghdad? Although the question was simple, getting the answer was hard. Obtaining useful information from this Administration is virtually impossible. But what independent experts told us was appalling. The taxpayer is getting gouged by Halliburton.

The wholesale price of refined gasoline in Kuwait and other Mideast nations is 71 cents per gallon. A reasonable cost to transport gasoline into Iraq is another 10 to 25 cents per gallon - unless the company is Halliburton. It is charging taxpayers nearly $1 per gallon to truck this gasoline 400 miles from Kuwait to Baghdad.

When we checked with independent experts to see if this fee was reasonable, they were stunned. One called Halliburton’s prices “outrageously high.” Another said it was “highway robbery.”We then learned that this gasoline is being sold inside Iraq for as little as 4 to 15 cents per gallon. Although Iraq is an oil-rich nation, the Administration has apparently made a policy decision that the U.S. taxpayer — not the Iraqi consumer — should pay the costs of gasoline that Iraqi citizens and companies consume. As a result, the U.S. taxpayer loses $1.50 or more every time a gallon of gasoline is sold in Iraq.

Unfortunately, this dramatic example of overcharging is more likely the rule than the exception. The problem is that the Administration’s approach to contracting in Iraq is fundamentally flawed. The Administration is making three basic mistakes. First, it is relying almost exclusively on cost-plus contracts. These contracts are a great deal for companies like Halliburton and Bechtel because they are structured so that the more the companies spend, the more profits they will make. They are notoriously prone to abuse.

Second, the Administration is shielding Halliburton and Bechtel from any competition by granting them virtual monopolies over basic services. The kind of contracts that Halliburton and Bechtel have received are umbrella contracts called IDIQ contracts because they involve “indefinite delivery and indefinite quantities.” These umbrella contracts are supposed to be awarded to multiple companies at the same time. That way, when there’s a specific task that needs to be performed, the government can make the contractors bid against each other.

But there’s no competition in Iraq. Halliburton has a monopoly over oil reconstruction contracts and Bechtel has a monopoly over infrastructure reconstruction contracts. Again, this is great for the companies, but terrible for the taxpayer. Both companies are already in Iraq. They can both do the same work. Think how much money the taxpayer could save if the companies actually had to compete against each other for specific projects.
The third problem is that the Administration is not taking advantage of Iraqi companies who could often do the work at a fraction of the cost that Halliburton and Bechtel charge. We have been told that the Iraqi oil company SOMO has been able to import gasoline at a price that is 50 cents per gallon less than Halliburton charges. If that’s true, something very wrong is going on.

Ultimately, the root cause of these problems is the Administration’s insistence on virtually absolute secrecy about how it is spending the taxpayer’s money. These abuses could not continue if the Administration were forced to disclose the details of these sweetheart arrangements. That’s why I will support amendments on the House floor to inject transparency into the contracting process. And on top of this, there’s virtually no congressional oversight, so there’s no accountability. If we at least had hearings on these issues, we could put pressure on the companies to cut wasteful spending. Millions of Americans want to help Iraqis, but they don’t want to be fleeced.
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Suicides now account for 10% of the non-combatant deaths in IRAQ - via talk left

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A Speedkill of Bill O'Reilly is available here

Dems seek to strip VP of $500K

Dems seek to strip VP of $500K

Senate Democrats want to deprive Vice President Dick Cheney of close to $500,000 in deferred compensation he is scheduled to receive from Halliburton, the energy company he once headed, and to divest himself of over 400,000 stock options he holds in the firm. The group, ed by Sens. Frank Lautenberg (N.J.), Dick Durbin (Ill.), Russ Feingold (Wis.) and Joe Biden (Del.), the top Democrat on the Foreign Relations Committee, will try to amend the $87 billion reconstruction supplemental bill that is currently before the Senate.

Lautenberg is likely to file the amendment tomorrow. A Lautenberg aide projected that nearly the entire Democratic Caucus, with one or two possible exceptions, will support the effort to force Cheney to relinquish his financial stake in Halliburton. Cheney served as the energy giant’s CEO from 1995 to 2000. On the House side, Rep. Henry Waxman (D-Calif.), the top Democrat on the House Government Reform Committee, will send a letter to the Bush administration this week alerting it that Halliburton has manipulated the price of exported Iraqi oil, Democratic sources said.

The dual efforts in the Senate and House indicate that Democrats now view Bush as vulnerable to criticism that corporations with close ties to the administration will reap a windfall from the Iraqi occupation from U.S. taxpayers. Democrats campaigning for president also have made Halliburton’s large government contracts in Iraq an issue on the trail.

The Senate Democrats amendment would also bar companies with current financial ties to the president, the vice president, or cabinet secretaries from receiving government contracts in Iraq. Officials holding stock options or due to receive deferred compensation from a company with an Iraq contract would have 90 days to exercise them or forfeit them. The amendment could also affect Secretary of Defense Donald Rumsfeld who holds stock options in several companies from which he also receives deferred compensation. However, none of those companies has government contracts in Iraq.

Earlier this year, the Army Corps of Engineers awarded Halliburton a no-bid contract to extinguish potential oil fires in Iraq. However, the open nature of the contract has expanded to include digging ditches for telecommunications lines and managing military bases, Senate Democrats charge. So far, the contract has earned Halliburton $1.25 billion. It was one of several Iraqi reconstruction contracts awarded to Kellogg, Brown & Root, a Halliburton subsidiary.

Cheney, who earned $192,600 last year from the government last year, also received over $200,000 in deferred compensation in 2001, and over $160,000 in 2002. Cheney is due to receive similar payments this year and in 2004 and 2005. If the Democrats prevail, Cheney would have to forego his future compensation because Halliburton already has a contract in Iraq. Earlier this year, Cheney reported assets worth between $19 million and $87 million in a filing with the Office of Government Ethics.

The vice president also holds 433,333 in unexercised Halliburton stock options. He has the option to buy 100,000 shares at $54.50 by the end of 2007, 33,333 shares at $28.13 by the end of 2007 and 100,000 shares at $39.50 by the end of 2009, data compiled by Lautenberg shows. Halliburton stock closed on the Big Board yesterday at $24.38 a share. For Cheney to cash in on his options, Halliburton’s stock would have to climb to above those strike prices.

During an appearance on NBC’s “Meet the Press” last month, Cheney emphatically denied that he had any financial interest in Halliburton. “Since I left Halliburton to become George Bush’s vice president, I’ve severed all my ties with the company, gotten rid of all my financial interest.” He argues that he plans to donate his stock options to charity if they become valuable. He has also taken out an insurance policy that guarantees that he will receive his deferred compensation even if the company goes out of business.

However, a Congressional Research Service (CRS) report requested by Senate Democrats contradicted the vice president. CRS concluded that unexercised stock options in a private corporation, as well as deferred salary received from a private corporation were “retained ties” or “linkages” to a former employer and should be reported as “financial interests.”


Cheney, Halliburton ties facing more questions

Cheney, Halliburton ties facing more questions

WASHINGTON -- Between 1995 and 2000, while Democrat Bill Clinton ran the country and Republican Dick Cheney ran Halliburton, there was no talk of favoritism or political ties as the Houston-based company billed the government $2.2 billion for its work in Kosovo.

Now, six months after the United States toppled Saddam Hussein, there is mounting scrutiny of Halliburton's Iraq contracts, which total $3.1 billion and grow by the day. The contracts look suspect to some critics, given Halliburton's past overcharges to the government, its ties to Cheney and the absence of competitive bidding for a $1.4 billion oil fields contract.

At the same time Cheney, vice president since January 2001, faces renewed criticism for getting nearly $368,000 in deferred salary from a company that is profiting so handsomely from a war he helped launch.

Not surprisingly, many of the critics are Democrats. Sen. Frank Lautenberg of New Jersey, brandishing a Congressional Research Service report that he said proves the vice president's ongoing financial ties to Halliburton, urged Cheney on Sept. 25 to come clean. "I ask the vice president to stop dodging the issue with legalese and acknowledge his continued financial ties with Halliburton to the American people," he said.

Rep. Henry Waxman, a Los Angeles Democrat, wrote White House budget director Joshua Bolten on Tuesday to inquire about "waste and gold-plating" in Iraq. "Too much money appears to be going to Halliburton and Bechtel while costing the U.S. taxpayer millions and imperiling the goal of Iraqi reconstruction," Waxman wrote.

Bechtel, a San Francisco-based engineering and construction company, has a $1 billion contract from a State Department agency to rebuild Iraqi infrastructure apart from the oil industry. That contract also is likely to grow. Beyond Bechtel, a number of other companies have landed smaller contracts. But Halliburton is so dominant that it is hardly a stretch to call it the general contractor of the war in Iraq and its aftermath.

Spending not capped

Kellogg Brown & Root, a Halliburton subsidiary, has received $1.7 billion so far under a broad-based, competitively bid Pentagon contract signed in December 2001 for an array of military support services in and around Iraq. The contract, which is annually renewable through 2011, has no cap on spending.

Under a separate contract awarded in March -- without seeking bids from other companies -- the Army Corps of Engineers is paying Halliburton $1.4 billion to rebuild Iraq's oil industry. Halliburton is one of four firms competing for a massive oil services contract that the corps expects to announce any day.

Cheney and his aides vigor- ously reject allegations of wrongdoing in the awarding of Halliburton contracts or the receipt of Halliburton money. The vice president has nothing to do with deciding which companies get government contracts, they say, and his payments from Halliburton since taking office are for 1999 salary that he chose to defer long before taking office. "Since I left Halliburton to become George Bush's vice president, I've severed all my ties with the company," Cheney said last month on NBC's "Meet the Press."

Giving an outside administrator control over 433,333 Halliburton stock options that Cheney owns and designating three charities to receive any profits from exercising those options. A recent rise in Halliburton's stock price -- which is up 50 percent since Bush began talking about war in Iraq 18 months ago -- has pushed the value of Cheney's options to more than $10 million. It is not known whether his administrator has exercised any options this year. (Ed note: Regardless Cheney still owns the options and will benefit when he is retired by vote next year) None was exercised in 2001 or 2002, according to Cheney's tax returns.

For its part, Halliburton is no stranger to controversy when it comes to dealings with the fed- eral government. In 1978, the company paid $1 million to settle grand jury charges that it and a competitor had colluded on construction work. The government fined Halliburton $3.8 million in 1995 for making illegal exports to Libya. The company also settled a lawsuit last year, filed in Sacra- mento, agreeing to pay the government $2 million over charges of contract inflation for maintenance and repairs at Ford Ord, a now-closed military base near Monterey, between 1994 and 1998. Cheney was Halliburton's chief executive officer during most of that time.

Kosovo services unnecessary

And a September 2000 report by the General Accounting Office, the investigative arm of Congress, found that Brown & Root, the subsidiary, had overbilled the government millions of dollars for excessive electric-ity, overstaffing and unnecessary furniture in Kosovo. Despite the outcry among some Democrats on Capitol Hill, polls show the Halliburton controversy barely registering with the American public.

Benjamin Barber, a University of Maryland political science professor and author of "Fear's Empire," a new book about the war on terrorism, said many Americans don't care about the Cheney-Halliburton questions because of broader changes in public thinking that began nearly a quarter-century ago.

Under an ideological revolution introduced by Ronald Reagan, Barber said, government was branded as bulky and inefficient and many public functions were shifted to the private sector. The result, according to Barber, is a blurring of the tradi-tional line between public service and private work. "When the government is the problem and the market is the solution, it no longer is corruption," he said. "It becomes efficiency."


Cheney's former company in probe

Cheney's former company in probe

The French public prosecutor's office is to open a judicial inquiry into alleged corruption by a French engineering firm and the American oil services giant Halliburton, which was headed until two years ago by Dick Cheney, the Vice-President of the United States.

The investigation is the first of its kind in France under laws introduced as part of an international convention on cross-border corruption signed in 1997 by about 35 countries, including the US.

The financial crimes squad in Paris believes a French oil and gas engineering firm, Technip, and particularly the Halliburton subsidiary KBR, were jointly involved during the 1990s in the payment of up to $US200 million of under-the-counter "commissions" in relation to a huge gas contract in Nigeria.

The convention, under the auspices of the Organisation for Economic Co-operation and Development, aims to fight corporate attempts to buy the favours of public authorities abroad.

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You gotta love the H. L Mencken quote on Musings of a Philosophical Scrivner today:
The notion that a radical is one who hates his country is naive and usually idiotic. He is, more likely, one who likes his country more than the rest of us and is thus more disturbed than the rest of us when he sees it debauched. He is not a bad citizen turning to crime; he is a good citizen driven to despair.
--H.L. Mencken
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