By Seth Borenstein Knight Ridder Newspapers
WASHINGTON - Halliburton Inc. paid high-priced bills for common items, such as soda, laundry and hotels, in Iraq and Kuwait and then passed the inflated costs along to taxpayers, according to several former Halliburton employees and a Pentagon internal audit.
Democrats in the House of Representatives, who are feuding with House Republicans over whether the spending should be publicly aired at a hearing on Tuesday, released signed statements Monday by five ex-Halliburton employees recounting the lavish spending.
Those former employees contend that the politically connected firm:
-Lodged 100 workers at a five-star hotel in Kuwait for a total of $10,000 a day while the Pentagon wanted them to stay in tents, like soldiers, at $139 a night.
-Abandoned $85,000 trucks because of flat tires and minor problems.
-Paid $100 to have a 15-pound bag of laundry cleaned as part of a million-dollar laundry contract in peaceful Kuwait. The price for cleaning the same amount of laundry in war-torn Iraq was $28.
-Spent $1.50 a can to buy 37,200 cans of soda in Kuwait, about 24 times higher than the contract price.
-Knowingly paid subcontractors twice for the same bill.
Halliburton is already under fire for allegations of overcharging the Pentagon for fuel and soldiers' meals. The latest accusations center on whether Halliburton properly keeps track of its bills from smaller subcontractors, Pentagon auditors said in a month-old report released Monday by Rep. Henry Waxman, D-Calif.
The 36-page report by the Defense Contract Audit Agency said that Halliburton subsidiary Kellogg, Brown and Root had a billing system that was "inadequate," had numerous deficiencies and billing misstatements and that KBR didn't follow laws and regulations relating to spending and recordkeeping. Its contracting practices are so bad, the auditors said, that KBR shouldn't be allowed to bill the Pentagon directly without the government poring over every detail in advance.
Statements by the whistleblowers - five of whom were identified - and the government's audit report "portray a company and a contracting environment that has run amok," Waxman wrote in a letter to Government Reform Committee Chairman Tom Davis, R-Va., on Monday.
Halliburton disputed the auditor's report and said Waxman was politically motivated.
Wendy Hall, a company spokeswoman, said Waxman's allegations do nothing "to feed a single member of our military, create a single unit of housing, repair a single oil well or supply a single piece of material for reconstruction."
Hall also noted that Halliburton continues "to be a target in this presidential election year. This is the 35th news release about Halliburton from the congressman's office since March 2003."
But one former Halliburton subcontracting manager, Marie deYoung, said in her signed statement that she had seen "significant waste and overpricing."
"Halliburton rarely collected adequate information from subcontractors to justify payment of invoices. When I attempted to properly verify invoice terms before setting up payment authorization, I was chastised," said deYoung, a former Army captain and chaplain who resigned from the company last month.
According to deYoung, Halliburton's financial staff lives at the five-star Kempinski Julai'a Hotel and Resort in Kuwait. "For a three-month period, the Kempinski hotel charged almost $1 million to house 100 Halliburton employees. By comparison, it costs less than $200,000 a year to lease tents that could house 400 soldiers. ... The military requested that Halliburton move into tents, but Halliburton refused."
Hall didn't respond to the specific charges made by deYoung and other employees, but said, "There are clear inaccuracies in these assertions. We take any charges of improper conduct seriously."
While the allegations of high prices and overcharging are startling, the Pentagon audit report found a larger problem in that Halliburton isn't controlling or watching what its suppliers charge, said Pete Singer, a Brookings Institution researcher who's written a book about private contractors' increasing role in the military.
KBR has a multibillion-dollar, multiyear logistics and supply contract that allows it to add on a profit of 1 to 2 percent and pass along all costs to the government. So far, the Army has agreed to pay KBR up to $4.55 billion for Operation Iraqi Freedom.
In his letter to Davis, Waxman charged that since House Republicans won't let the whistleblowers testify Tuesday, the congressional committee is "not fulfilling its obligation to protect the taxpayer from waste, fraud and abuse."
Davis' spokesman Dave Marin said Republicans "simply had not had the time to properly flesh out, corroborate, investigate the many and wide-ranging claims that these individuals have made." If the whistleblowers turn out to be legit, he said, the committee may schedule "a follow-up hearing in the summer months."
Also Monday, the General Accounting Office released its assessment of contracting in Iraq and said most of the no-bid work was legitimately awarded. The GAO did have some objections to a separate Halliburton contract on restoring oil production capacity in Iraq.
Last week, Halliburton revealed that it's being investigated by the Securities and Exchange Commission over allegations of bribery in Nigeria for the late 1990s, when Vice President Dick Cheney was in charge of the firm. Last month, a dozen truckers told Knight Ridder that Halliburton sent them back and forth across Iraq with empty trailers more than 100 times.