Some critics contend the legislation could let companies like Halliburton, the energy giant formerly run by Vice President Dick Cheney, get out of proposed settlements with victims and pay less into the new fund.
Halliburton spokeswoman Wendy Hall said if the legislation passes before the company's settlement is finalized, Halliburton's asbestos claims would move to the national fund. The company says it doesn't know if it would save money that way.
"We have said for some time that legislation is needed to cure the problem," she said. "It would allow for a more orderly and fairer resolution of these claims, reduce amounts paid out in legal fees, and would provide for distributions to the legitimate asbestos claimants."
9.26.2003
Sens. to Propose Bill on Iraq Contracts
Two senators proposed Friday that an $87 billion spending bill for Iraq should require competition in most cases for lucrative reconstruction work. The proposal could curtail future controversies over a lack of competition, an issue that has enveloped Vice President Dick Cheney's former company.
Sens. Susan Collins, R-Maine and Ron Wyden, D-Ore., said their amendment would require that funds would be spent on fully competitive contracts, unless the awarding agency notified Congress and explained - in the official Federal Register - why full competition was rejected.
The amendment would do little to stop the controversy over Halliburton, run by Cheney before he became the vice presidential candidate in the year 2000. The company's KBR subsidiary has received noncompetitive work worth $1.2 billion so far to restore Iraq's oil industry. The U.S. Army Corps of Engineers has increased KBR's work several times by adding to its oil mission
Iraq Deals Not Helping Halliburton Stock
Halliburton Co.'s business may be booming in Iraq thanks to reconstruction efforts, but the small profit margins there and lingering asbestos liabilities are a drag on the stock, analysts said.
So far, the Houston company -- once headed by Vice President Dick Cheney -- has won $1.7 billion in Iraq-related contracts.
Halliburton's KBR engineering and construction division has been awarded a $705 million contract for oil field infrastructure repairs. It has also been awarded a Logistics Civil Augmentation Program (LOGCAP) contract, estimated at over $900 million, to build base camps and provide logistical services like delivering mail and providing hot meals. "The dollar values are huge," said Rep. Henry Waxman, a California Democrat who has reviewed the breakdown of the LOGCAP contract.
But while the KBR unit is expected to win millions of dollars more in additional contracts, the stock has not outperformed the broader market. The shares, which surged in May after President Bush declared an end to major combat operations in Iraq and said reconstruction of the nation was under way, are down nearly 4 percent since mid-June. The S&P 500 index is up slightly over the same period.
"While the dollar amount of the contracts is large, historically the profits off of them have been very small," said Jim Carroll, portfolio manager of the Loomis Sayles Value Fund which owns shares of Halliburton. "I don't know what the situation is in this particular contract, but I think investors have a fair amount of skepticism about hundreds of millions of dollars in profits." He added Halliburton's operating profit margins in the engineering and construction division are generally in the low single digits, as opposed to the low double-digit margins of its larger oilfield services business.
ASBESTOS UNCERTAINTY
At the same time, Halliburton's asbestos liabilities have weighed down the stock. The second-largest oilfield services company, behind Schlumberger Ltd., agreed late last year to a $4 billion cash-and-stock deal to settle 200,000 asbestos lawsuits. But since then, Halliburton has asked for and received extensions and last month said it needed even more time to document claims and file prepackaged Chapter 11 bankruptcy plans for its DII Industries LLC unit and KBR.
The latest postponement came as the U.S. Congress debates a plan that would limit the impact of asbestos litigation on companies and would reduce Halliburton's asbestos costs by an estimated $3.5 billion. Wicklund said uncertainty is the top issue for the stock. "You don't know how much it's going to cost them, how much insurance is going to pay them back, when they're going to get it done," he said. "And until they get it done, there's the question if they'll get it done."
Sens. Susan Collins, R-Maine and Ron Wyden, D-Ore., said their amendment would require that funds would be spent on fully competitive contracts, unless the awarding agency notified Congress and explained - in the official Federal Register - why full competition was rejected.
The amendment would do little to stop the controversy over Halliburton, run by Cheney before he became the vice presidential candidate in the year 2000. The company's KBR subsidiary has received noncompetitive work worth $1.2 billion so far to restore Iraq's oil industry. The U.S. Army Corps of Engineers has increased KBR's work several times by adding to its oil mission
Iraq Deals Not Helping Halliburton Stock
Halliburton Co.'s
So far, the Houston company -- once headed by Vice President Dick Cheney -- has won $1.7 billion in Iraq-related contracts.
Halliburton's KBR engineering and construction division has been awarded a $705 million contract for oil field infrastructure repairs. It has also been awarded a Logistics Civil Augmentation Program (LOGCAP) contract, estimated at over $900 million, to build base camps and provide logistical services like delivering mail and providing hot meals. "The dollar values are huge," said Rep. Henry Waxman, a California Democrat who has reviewed the breakdown of the LOGCAP contract.
But while the KBR unit is expected to win millions of dollars more in additional contracts, the stock has not outperformed the broader market. The shares, which surged in May after President Bush declared an end to major combat operations in Iraq and said reconstruction of the nation was under way, are down nearly 4 percent since mid-June. The S&P 500 index is up slightly over the same period.
"While the dollar amount of the contracts is large, historically the profits off of them have been very small," said Jim Carroll, portfolio manager of the Loomis Sayles Value Fund which owns shares of Halliburton. "I don't know what the situation is in this particular contract, but I think investors have a fair amount of skepticism about hundreds of millions of dollars in profits." He added Halliburton's operating profit margins in the engineering and construction division are generally in the low single digits, as opposed to the low double-digit margins of its larger oilfield services business.
ASBESTOS UNCERTAINTY
At the same time, Halliburton's asbestos liabilities have weighed down the stock. The second-largest oilfield services company, behind Schlumberger Ltd.
The latest postponement came as the U.S. Congress debates a plan that would limit the impact of asbestos litigation on companies and would reduce Halliburton's asbestos costs by an estimated $3.5 billion. Wicklund said uncertainty is the top issue for the stock. "You don't know how much it's going to cost them, how much insurance is going to pay them back, when they're going to get it done," he said. "And until they get it done, there's the question if they'll get it done."
Asbestos Bill Could Be Windfall for Business
The Senate has taken a major step toward setting up a national fund to compensate people whose health has been ruined by asbestos, but the first and biggest beneficiaries of the plan may be companies such as Halliburton - the Texas oil services firm - which could save $3.5 billion of its pending liability for asbestos claims.
On a 10-8 vote last week, the Senate Judiciary Committee sent to the floor a business-backed plan to close the courts to all asbestos claims. Instead, the claims would be transferred to a newly created federal trust fund. Over its 27-year life, the fund is supposed to have $108 billion to pay people who develop cancer or other health impairments from their exposure to asbestos in the workplace. The money in the trust fund would come from about 8,500 companies that made or sold asbestos products directly or through their subsidiaries, as well as the companies' insurers. But most of the firms would pay no more than $25 million a year.
The arrangement could prove a windfall for Halliburton and its insurers. In February, the company reached a "global settlement" of 200,000 asbestos claims. Under the deal, Halliburton and its insurers agreed to pay $4.2 billion to settle the claims. Dresser Industries, a Halliburton subsidiary, had incurred the asbestos liability through another company it once owned. But the Senate bill, the fate of which remains uncertain, would cancel all such pending settlements. At $25 million a year, Halliburton would pay $675 million over the 27-year life of the federal trust fund.
Halliburton asbestos claims costs to cut Q1 profits Dallas-based Halliburton Co. said Thursday it expects to take an 11 cent per share charge in the first quarter due to a write-off of receivables related to asbestos liabilities. The write-off relates to insurance coverage from Highlands Insurance Group Inc., which provided primary coverage for roughly 30,000 asbestos claims against Halliburton's Brown & Root Inc. unit
On Wednesday, the Delaware Supreme Court upheld a ruling by the Court of Chancery that the asbestos claims couldn't be covered by Highlands Insurance policies, which ended Jan. 23, 1996, when Highlands was spun off by Halliburton (NYSE: HAL).
However, Halliburton said the primary coverage represents only a portion of total insurance covering Brown & Root asbestos claims. The company said it has more than $2 billion of additional coverage.
"We are surprised by the decision of the court and we are currently reviewing our options,'' Dave Lesar, Halliburton's chairman and CEO, said in a statement. "The actions of the court only affect claims that are related to Brown & Root operations, which represent less than 11 percent of the total 274,000 claims outstanding at the end of last year."
Halliburton said it expects to write off about $80 million in claim receivables against the Highlands insurance policies for settlement and defense costs and pending asbestos litigation. The write-off will occur in the first quarter and result in an after-tax reduction in income of 11 cents per share.
Analysts polled by Thomson Financial/First Call had expected the oil services company to earn 24 cents per share for the quarter. Halliburton said about 45 percent of the receivables relate to payments of settlement and defense costs it has already made. The remainder is management's estimate of insurance recoveries against future settlement payments on existing Brown & Root asbestos claims.
Halliburton executives say the Dallas-based company settled 36,000 asbestos claims last year for slightly less than its average historic cost of $750 each, that insurers picked up all but $220, and that the management remained committed to fighting unreasonable settlement demands.
"We have got a strategy of being willing to take every single case to trial if we have to, but last year ended up in trials that concluded in verdicts in only 17," Chairman Dave Lesar said last week. "We settle, on average, 140 cases in a positive way every day. We don't put a press release out every time that happens."
Back in 1998, when he was CEO of oil-services giant Halliburton Co. (HAL ), Vice-President Dick Cheney bought smaller rival Dresser Industries Inc. On Dec. 7, the deal exploded on his former company. When a little-known former Dresser subsidiary suffered defeat in a key asbestos litigation case, worried investors sent shares plunging 42%, to $12.
Halliburton was already well off its 52-week high of $45 because of falling energy prices. Now investors are scared the company is about to get eaten by the asbestos monster--the same one that bankrupted Johns Manville and Owens Corning. With their coffers empty, asbestos lawyers are now going after other companies such as Halliburton, Viacom (VIA ), and Pfizer (PFE ). Although none of them produced the flame retardant, all sold products containing it or bought companies with asbestos exposure.
You'd think asbestos-exposure verdicts totaling more than $130 million against Dallas-based Halliburton (HAL ) might have a negative impact on the oil-patch giant's stock. Think again. Since the latest Texas jury verdict in December, shares of Halliburton have rebounded by about 50%, to $13 a share, from a 52-week low of $8.70.
Driving the run-up: The company rushed forward with a plausible strategy to deal with the lawsuits. Plus, rumors spread that President Bush would propose limiting corporations' exposure to asbestos litigation in his State of the Union address. After all, Vice-President Dick Cheney used to be CEO at Halliburton. However, the State of the Union address came and went on Jan. 29 with no such proposal in it.
Still, with Halliburton trading at a mere 12 times the consensus estimate of 2002 earnings of $1.06 a share, should investors consider diving in with hopes of scooping up a bargain? Only if they have a long time horizon and a stomach for risk, analysts say.
SMALL CLAIMS IN COURT Halliburton argues that asbestos claims won't ruin the company's finances. Ole Slorer, who follows Halliburton for Morgan Stanley Dean Witter, agrees. He estimates that future asbestos claims against the company will be less than $1 billion, or $2.30 a share. That's well under Halliburton's insurance coverage for asbestos claims, which the company says is substantially more than $2 billion, or $4.60 a share.
"We have got a strategy of being willing to take every single case to trial if we have to, but last year ended up in trials that concluded in verdicts in only 17," Chairman Dave Lesar said last week. "We settle, on average, 140 cases in a positive way every day. We don't put a press release out every time that happens."
Back in 1998, when he was CEO of oil-services giant Halliburton Co. (HAL ), Vice-President Dick Cheney bought smaller rival Dresser Industries Inc. On Dec. 7, the deal exploded on his former company. When a little-known former Dresser subsidiary suffered defeat in a key asbestos litigation case, worried investors sent shares plunging 42%, to $12.
Halliburton was already well off its 52-week high of $45 because of falling energy prices. Now investors are scared the company is about to get eaten by the asbestos monster--the same one that bankrupted Johns Manville and Owens Corning. With their coffers empty, asbestos lawyers are now going after other companies such as Halliburton, Viacom (VIA ), and Pfizer (PFE ). Although none of them produced the flame retardant, all sold products containing it or bought companies with asbestos exposure.
You'd think asbestos-exposure verdicts totaling more than $130 million against Dallas-based Halliburton (HAL ) might have a negative impact on the oil-patch giant's stock. Think again. Since the latest Texas jury verdict in December, shares of Halliburton have rebounded by about 50%, to $13 a share, from a 52-week low of $8.70.
Driving the run-up: The company rushed forward with a plausible strategy to deal with the lawsuits. Plus, rumors spread that President Bush would propose limiting corporations' exposure to asbestos litigation in his State of the Union address. After all, Vice-President Dick Cheney used to be CEO at Halliburton. However, the State of the Union address came and went on Jan. 29 with no such proposal in it.
Still, with Halliburton trading at a mere 12 times the consensus estimate of 2002 earnings of $1.06 a share, should investors consider diving in with hopes of scooping up a bargain? Only if they have a long time horizon and a stomach for risk, analysts say.
SMALL CLAIMS IN COURT Halliburton argues that asbestos claims won't ruin the company's finances. Ole Slorer, who follows Halliburton for Morgan Stanley Dean Witter, agrees. He estimates that future asbestos claims against the company will be less than $1 billion, or $2.30 a share. That's well under Halliburton's insurance coverage for asbestos claims, which the company says is substantially more than $2 billion, or $4.60 a share.
May 21, 2003 Client Information Letter and Temporary Restraining Order of February 2003 now in effect until September 30, 2003 after 2 extensions. A compendium of all Halliburton press releases and asbestos related filings from Attorneys Motley and Rice.
Title 11 of the United States Code:
TITLE 11 - BANKRUPTCY
CHAPTER 1 GENERAL PROVISIONS
CHAPTER 3 CASE ADMINISTRATION
CHAPTER 5 CREDITORS, THE DEBTOR, AND THE ESTATE
CHAPTER 7 LIQUIDATION
CHAPTER 9 ADJUSTMENT OF DEBTS OF A MUNICIPALITY
CHAPTER 11 REORGANIZATION
News story on S 115 Legislation introduced by Sen. Rick Santorum
(b) SUPERSEDING PROVISIONS-
(1) IN GENERAL- Any agreement, understanding, or undertaking by any person or affiliated group assigned to Tiers II through VI with respect to the treatment of any asbestos claim filed before the date of enactment of this Act that requires future performance by any party shall be superseded in its entirety by this Act.
(2) NO FORCE OR EFFECT- Any such agreement, understanding, or undertaking by any such person or affiliated group shall be of no force or effect, and no person shall have any rights or claims with respect to any of the foregoing.
(c) EXCLUSIVE REMEDY- The remedies provided under this Act shall be the exclusive remedy for any asbestos claim under any Federal or State law.
Halliburtons Earnings 2002
This chart shows that 2002 was the first year since 1993 that Halliburton showed Earned Income Before and After Taxes at a LOSS.
Oddly enough the provisions of the act base all payments on a percentage of 2002 Earnings: Halliburton has a settlement agreement much greater than 1 million dollars so they fall into sub Tier 1:
2) SUBTIER 1-
(A) IN GENERAL- All persons that are debtors with prior asbestos expenditures of $1,000,000 or greater, shall be assigned to Subtier 1.
(B) ASSIGNMENT- Each debtor assigned to Subtier 1 shall make annual payments based on a percentage of its 2002 revenues.
(C) PAYMENT- Each debtor assigned to Subtier 1 shall pay on an annual basis the following with respect to the year of the establishment of the Fund:
(i) Years 1 through 5, 1.5005 percent of the debtor's 2002 revenues.
(ii) Years 6 through 8, 1.3504 percent of the debtor's 2002 revenues.
(iii) Years 9 through 11, 1.2154 percent of the debtor's 2002 revenues.
(iv) Years 12 through 14, 1.0938 percent of the debtor's 2002 revenues.
(v) Years 15 through 17, .9845 percent of the debtor's 2002 revenues.
(vi) Years 18 through 20, .8860 percent of the debtor's 2002 revenues.
(vii) Years 21 through 23, .7974 percent of the debtor's 2002 revenues.
(viii) Years 24 through 26, .7177 percent of the debtor's 2002 revenues.
(ix) Year 27, .1794 percent of the debtor's 2002 revenues.
Yet their 2002 earnings were non-existent so they are liable for ZERO.
TITLE 11 - BANKRUPTCY
CHAPTER 1 GENERAL PROVISIONS
CHAPTER 3 CASE ADMINISTRATION
CHAPTER 5 CREDITORS, THE DEBTOR, AND THE ESTATE
CHAPTER 7 LIQUIDATION
CHAPTER 9 ADJUSTMENT OF DEBTS OF A MUNICIPALITY
CHAPTER 11 REORGANIZATION
News story on S 115 Legislation introduced by Sen. Rick Santorum
Two of the Republican Party's most desired legal changes - meant to reduce class-action lawsuits and asbestos litigation - will be presented to the Senate next week in one combined bill. The provisions, which were approved by the Senate Judiciary Committee but found strong opponents in Democrats, will be packaged together with other measures as part of a GOP jobs package, said Sen. Rick Santorum of Pennsylvania, a member of the Republican leadership.
(b) SUPERSEDING PROVISIONS-
(1) IN GENERAL- Any agreement, understanding, or undertaking by any person or affiliated group assigned to Tiers II through VI with respect to the treatment of any asbestos claim filed before the date of enactment of this Act that requires future performance by any party shall be superseded in its entirety by this Act.
(2) NO FORCE OR EFFECT- Any such agreement, understanding, or undertaking by any such person or affiliated group shall be of no force or effect, and no person shall have any rights or claims with respect to any of the foregoing.
(c) EXCLUSIVE REMEDY- The remedies provided under this Act shall be the exclusive remedy for any asbestos claim under any Federal or State law.
Halliburtons Earnings 2002
This chart shows that 2002 was the first year since 1993 that Halliburton showed Earned Income Before and After Taxes at a LOSS.
Oddly enough the provisions of the act base all payments on a percentage of 2002 Earnings: Halliburton has a settlement agreement much greater than 1 million dollars so they fall into sub Tier 1:
2) SUBTIER 1-
(A) IN GENERAL- All persons that are debtors with prior asbestos expenditures of $1,000,000 or greater, shall be assigned to Subtier 1.
(B) ASSIGNMENT- Each debtor assigned to Subtier 1 shall make annual payments based on a percentage of its 2002 revenues.
(C) PAYMENT- Each debtor assigned to Subtier 1 shall pay on an annual basis the following with respect to the year of the establishment of the Fund:
(i) Years 1 through 5, 1.5005 percent of the debtor's 2002 revenues.
(ii) Years 6 through 8, 1.3504 percent of the debtor's 2002 revenues.
(iii) Years 9 through 11, 1.2154 percent of the debtor's 2002 revenues.
(iv) Years 12 through 14, 1.0938 percent of the debtor's 2002 revenues.
(v) Years 15 through 17, .9845 percent of the debtor's 2002 revenues.
(vi) Years 18 through 20, .8860 percent of the debtor's 2002 revenues.
(vii) Years 21 through 23, .7974 percent of the debtor's 2002 revenues.
(viii) Years 24 through 26, .7177 percent of the debtor's 2002 revenues.
(ix) Year 27, .1794 percent of the debtor's 2002 revenues.
Yet their 2002 earnings were non-existent so they are liable for ZERO.
9.24.2003
Halliburton/Units: To Mail Disclosure Statement 09-22-03
Halliburton Co.'s (HAL) DII Industries Inc., Kellogg Brown & Root Inc. and other affected units began soliciting claimants in connection with its planned asbestos and silica settlement.
Last December, Halliburton agreed to pay $4 billion in cash and stock to a trust that would pay current and future asbestos claims. As part of the settlement, the company agreed to put DII unit, including its Kellogg Brown & Root Inc. construction business, into bankruptcy proceedings.
In a press release Monday, the oilfield-services company said the disclosure statement, which incorporates and describes the plan of reorganization and trust distribution procedures, is being printed and mailed to asbestos and silica claimants for the purpose of soliciting votes to approve the plan of reorganization. The company expects the mailing process will be completed in less than two weeks.
Remaining conditions to a Chapter 11 filing by the affected Halliburton units include completion of definitive financing arrangements, approval of the plan of reorganization by required creditors, including at least 75% of known present asbestos claimants, and Halliburton board approval. In July, Halliburton warned the cash required to fund the settlement may modestly exceed $2.78 billion, as a result of an increase in the estimated number of current asbestos claims. If this occurs, the company would need to reach an agreement with the claimant representatives to adjust the settlement matrices to reduce the overall amounts or increase the amounts the company would be willing to pay to resolve its asbestos and silica liabilities, resulting in an additional condition to a Chapter 11 filing. If all remaining conditions are timely satisfied, Halliburton anticipates that DII Industries, Kellogg Brown & Root and the other affected units would make the Chapter 11 filing in November. Company Web site:
9.23.2003
HALLIBURTON CRONY GETS TOP ENERGY POST
Houston's Robert E. McKee III, a former ConocoPhillips executive, has been appointed the new senior adviser to the Iraqi Oil Ministry.
He will replace Philip J. Carroll, the one-time head of Shell Oil Co. who has overseen the often tumultuous effort to jump-start Iraq's oil sector for less than five months.
His selection as the Bush administration's energy czar in Iraq already is drawing fire from Capitol Hill because of his ties to the prime contractor in the Iraqi oil fields, Houston-based Halliburton Co. He's the chairman of a venture partitioned by the giant Houston oil well service and engineering firm.
The Coalition Provisional Authority, in a brief statement released from Baghdad Monday, said McKee would take over as senior adviser next month.
He will report to L. Paul Bremer, the civil administrator of occupied Iraq, and serve as the liaison with Iraq's newly reconstituted oil companies.
The statement did not say why Carroll was leaving, except to note he would "return to private life."
Carroll could not be reached for immediate comment, but his wife, Charlene, reached by telephone in Houston, said Carroll had decided "it was time to hand it over to somebody else."
McKee also could not be reached for comment, despite repeated attempts.
Robin West, chairman of PFC Energy, a Washington-based energy consultancy, said the change in leadership is nothing more than a normal rotation out of Iraq, similar to the departure of Peter McPherson as the Provisional Authority's director of economic development.
Carroll, West said, "tried to do his best ... to bring order from chaos, but there were forces there beyond his control -- or anybody else's frankly."
McKee's appointment, however, comes as Iraq is still struggling to boost much-needed oil exports and meet basic domestic needs like gasoline and cooking oil.
Iraq has been able to ship only about 1 million barrels a day from its southern terminal, the London-based Centre for Global Energy Studies noted in a report.
That's a far cry from the export levels Bush administration officials had hoped to see by this time. But Iraq's oil workers have been forced to reinject the bulk of the crude production from the country's huge northern field of Kirkuk back into the ground, because a critical pipeline to Turkey has been shut down by repeated acts of sabotage.
On Sunday, Iraq produced 1.9 million barrels of oil, a record since the war, Bremer told a Senate panel. But he warned: "There will be bad days ahead. The saboteurs ... know how to attack ... where it hurts."
The chief responsibility of the senior oil adviser is to oversee the reestablishment of a functioning energy sector, purged of Baathist Party elements.
In a largely symbolic move to emphasize that transfer of power, Ibrahim Bahr al-Uloum, Iraq's newly appointed oil minister, will confer this week with other representatives from the Organization of Petroleum Exporting Countries in Vienna, Austria.
McKee's appointment already is coming under scrutiny because of his role as chairman of Houston-based Enventure Global Technology, an oil-field joint venture owned by Shell and Halliburton.
Halliburton's role in Iraq has been highly controversial, since the Corps of Engineers chose the firm once headed by Vice President Dick Cheney for the job of repairing Iraq's energy infrastructure without seeking bids from competing companies.
"The administration continues to create the impression that the fox is in charge of the hen house," said Rep. Henry Waxman of California, ranking Democrat on the House Government Reform Committee and a persistent critic of the Halliburton contract.
"Given Mr. McKee's close relationship with Halliburton, he's an odd choice to hold them accountable for the billions of dollars they are charging American taxpayers."
Officials from both ConocoPhillips and Enventure declined to discuss McKee's appointment Monday.
McKee, a native of Wyoming, earned a bachelor's degree in petroleum engineering from the Colorado School of Mines and a master's in industrial management from the Massachusetts Institute of Technology.
In 1967, he joined what was the Conoco in New Orleans and, over the next 36 years, worked his way up the ranks of the Houston-based oil giant.
In 1992, he was named executive vice president, responsible for the company's oil and gas exploration and production business, a position he would hold for a decade.
He retired in April, leaving what had become ConocoPhillips a wealthy man. McKee ranked second in the Houston Chronicle's latest list of 100 highest-paid executives, taking home $26.2 million in total compensation last year.
As the senior oil adviser, McKee will be responsible for both establishing energy policy for Iraq's new oil industry as well as operating a large petroleum operation, West noted. McKee is viewed as more of an operations man.
McKee also serves as co-chair of the volunteer committee for Super Bowl XXXVIII, to be played in Houston next year.
Halliburton Creating Iraqi Secret Police At Your Expense
To explain to the American people why the U.S. is spending more on the “war on terrorism”—some $215 million a day—than it does on education, Congress should audit the profiteers that service the military, starting with the company Dick Cheney headed before he became vice president.
KAPOSVAR, Hungary—“Camp Freedom” is a converted Soviet-era base at Taszár near Kaposvar, where the U.S. military trained an exile militia known as the “Free Iraqi Forces” and where it reportedly plans to train another 28,000 Iraqi “policemen.” The Taszár base resembles a high-security prison, and local authorities say they don’t know anything about what actually goes on inside the base.
Bernard B. Kerik, a former New York City police commissioner who heads the Iraqi Interior Ministry in Baghdad, told The New York Times that he hoped to begin training Iraqis at Taszár within a few months. Kerik said the courses in Hungary would be short and intensive, lasting about eight weeks.
When U.S. officials said they were holding talks with Hungary about training up to 28,000 Iraqi police officers at Taszár, the local authorities only learned of the plan when the Hungarian press picked up the story.
Karoly Szita, the mayor of Kaposvar, told the Hungarian press that it was “the same game” the U.S. had played earlier in the year when “nobody knew anything.” The exiles then were said to be training as interpreters for U.S. forces, but “were armed, in uniform, and being put through combat training,” The Guardian (UK) reported recently.
European press reports allege that the former Iraqi chief of staff and high-profile defector Gen. Nizar al-Khazraji, who mysteriously vanished on March 17 from Denmark where he was under house arrest, was snatched by the CIA and taken to Taszár, where he is helping the Americans train the new Iraqi forces.
Al-Khazraji, who was suspected of war crimes against Iraqi Kurds was under a court order to remain in Denmark, where he defected in 1999.
Danish reporter Arne Moeller said that CIA agents shepherded Khazraji out of Denmark to help with the war against Saddam: “All the witnesses told our newspaper that he left in a black car heading to the south of Denmark,” Moeller said. A Gulfstream aircraft “was ready to take off and two members of the CIA put him on board.”
American company Brown and Root Services, a subsidiary of Kellogg, Brown and Root (KBR) and its Dallas-based parent company Halliburton Corp., is running operations at the base from its fortress-like headquarters in Kaposvar. Brown and Root employees are forbidden from discussing what they do and see at the base. Local authorities say, “I don’t know” and add they are not allowed to discuss activities related to the base.
AFP visited KBR’s Kaposvar headquarters to ask about Wayne Uhl about the work the company did at the Taszár base. After an hour, a company representative named Valeria Strasszer emerged from the compound with the mayor of Taszár, Sándor Pataki.
“I don’t know,” Pataki replied to all questions.
Strasszer said all questions had to be submitted in writing. To a dozen questions submitted by AFP, Strasszer responded, “We do not discuss any given mission” and “we cannot answer on behalf of the U.S. Army.”
Kellogg, Brown and Root won a 10 year contract to provide support services to U.S. military bases around the world on Dec. 14, 2001. The contract is known as the Logistics Civil Augmentation Program (LOGCAP).
The LOGCAP contract “basically means that the federal government has an open-ended mandate and budget to send KBR anywhere in the world to run humanitarian or military operations for profit,” according to a 2002 article entitled “The War on Terrorism’s Gravy Train” published by the Berkeley-based (Calif.) CorpWatch.
Dick Cheney, who served as secretary of defense under President George H.W. Bush during the first Gulf War, was chief executive of Halliburton before resigning to run for office with George W. Bush. During his last two years at Halliburton (1999-2000) Cheney made nearly $30 million from compensation and stock sales. In 2001 KBR took in $13 billion in revenue, much of it from service contracts with the U.S. military.
The board of directors of Halliburton includes well-known former and active senior executives from the energy giants Chevron Corp., Hunt Oil Co., Phillips Petroleum Co., and Southern California Gas Co. Robert L Crandall, chairman emeritus of American Airlines and AMR Corp. has been on the board since 1986.
Assistant Secretary of State Richard Armitage worked as a consultant to Halliburton before his present job.
On “Meet the Press” on Sept. 14, Cheney said: “I have no financial interest in Halliburton of any kind and haven’t had, now, for over three years.” Cheney, however, continues to receive a large deferred salary of more than $160,000 a year from Halliburton. Cheney also holds 433,333 in unexercised Halliburton stock options.
Cheney bought an insurance policy for $15,000 before he was sworn in as vice president to protect this income if Halliburton were to go out of business, according to CNN. In 2001, Cheney received $205,298, and in 2002, another $162,393, in deferred salary payments from Halliburton.
Sens. Thomas Daschle (D-S.D.) and Frank Lautenberg (D-N.J.) say the revelations of Cheney’s financial interest in Halliburton and the no-bid contracts Halliburton has received from the Bush administration should be investigated.
“In 2001 and 2002, Cheney was paid almost as much in salary from Halliburton as he made as vice president,” Lautenberg said.
“The vice president needs to explain how he reconciles the claim that he has ‘no financial interest in Halliburton of any kind,’ with the hundreds of thousands of dollars in deferred salary payments he receives from Halliburton,” Daschle said in a statement.
On Sept. 16, Reps. Henry Waxman (D-Cal.) and John Dingell (D-Mich.) asked the General Accounting Office (GAO) to look into contracts awarded to Halliburton and its subsidiaries during the past two years.
KBR began providing services at U.S. military bases in 1992 after the Pentagon, under Cheney’s direction, paid the company nearly $9 million to produce a classified report on how private companies could help American troops. The same year, KBR won its first five-year logistical contract from the Army Corps of Engineers to provide services to the U.S. military in the Balkans and elsewhere.
CorpWatch reported that KBR’s Balkan operations had been the most profitable part of the company prior to the current U.S. war against Iraq. KBR has made more than $2.2 billion from its Balkan contract to provide a host of services for the U.S. military, according to the GAO.
In March 2003, Halliburton received a contract, without open bidding, from the Army Corps of Engineers (ACE) to repair and restore Iraq’s oil fields. The cost of this contract to taxpayers is about $1 billion, according to the ACE. Reuters reported that KBR has “racked up over $1 billion in expenses in Iraq, according to the U.S. Army Field Support Command.”
A February 1997 study by the GAO found that KBR overcharged the government $462.5 million for an operation it said would cost $191.6 million when presented to Congress in 1996.
In February 2002, KBR paid $2 million to settle a lawsuit with the Justice Department which alleged that the company had defrauded the government during its work in the closure of Fort Ord in Monterey, Calif.
Dammen Gant Campbell, a former contracts manager for KBR, turned whistle-blower and revealed “that between 1994 and 1998 the company had fraudulently inflated project costs by misrepresenting the quantities, quality and types of materials required for 224 projects,” CorpWatch reported.
“This is a company which has more experience with insider dealing and corruption than with efficiency,” Bill Hartung of the World Policy Institute said about KBR.
“During the Second World War, there was a Senate committee on war profiteering,” Hartung said, “I think we should set it up again and investigate Kellogg, Brown & Root.”
“The Bush-Cheney team have turned the United States into a family business,” Harvey Wasserman, author of The Last Energy War, said about the KBR contracts with the military. “That’s why we haven’t seen Cheney—he’s cutting deals with his old buddies who gave him a multi-million dollar golden handshake.”
The Enron-Cheney-Taliban Connection?
Enron is a scandal so enormous that it's hard to wrap your mind around it. Not just a single financial disaster, it's actually a jigsaw of interlocking scandals, each outrageous in its own right.
There's Enron the Wall St. con game, where company bookkeepers used sleight of hand to turn four years of steady losses into stunning profits. There's Enron the reverse Robin Hood, which stole from its own employees even as its executives were hauling millions of dollars out the backdoor. There's Enron's Ken Lay the Kingmaker, who used the corporation's fraudulent wealth to broker elections and skew public policy to his liking. And then there are the Enron coverups, as documents are shredded and the White House seeks to conceal details about meetings between Enron and Vice President Cheney.
The coverups are still very much a mystery. What were the documents that were fed into the shredder – even after the corporation declared bankruptcy? What is the White House fighting to keep secret, even going to the length of redefining executive privilege and inviting the first Congressional lawsuit ever filed against a president? Were the consequences of releasing these documents more damaging than the consequences of destroying them?
1: Starting in the mid-1990s, Unocal and its partners planned to build a 1,000 mile gas pipeline from Turkmenistan to Multan, Pakistan. Cost: about $2 billion (all pipeline routes shown are very approximate). Also considered was a more difficult route from Iran to Multan, which is not shown here.
2: A proposed 400-mile extension from Multan to New Delhi would bring some of the ultra-cheap gas into India's network of gas pipelines. Cost: $600 million.
3: The HBJ pipeline carries most of India's liquid natural gas.
4: Hazira, north of Bombay, is the end of the HBJ pipeline. But in 1997, Enron announced plans to link Dabhol to the Hazira terminal. Enron also said they were going to add to about 1500 miles to the HBJ pipeline. Costs: $300 million and $900 million, respectively.
5: Any gas pipeline across Pakistan could have a spur to the seaport of Gwadar, where tankers could take gas to Korea and Japan, largest consumers of liquid gas in the world. A sea route from Gwadar to Dabhol would be even easier.
Could the Big Secret be that the highest levels of the Bush Administration knew during the summer of 2001 that the largest bankruptcy in history was imminent? Or was it that Enron and the White House were working closely with the Taliban – including Osama bin Laden – up to weeks before the Sept. 11 attack? Was a deal in Afghanistan part of a desperate last-ditch "end run" to bail out Enron? Here's a tip for Congressional investigators and federal prosecutors: Start by looking at the India deal. Closely.
Enron had a $3 billion investment in the Dabhol power plant, near Bombay on India's west coast. The project began in 1992, and the liquefied natural gas- powered plant was supposed to supply energy- hungry India with about one-fifth of its energy needs by 1997. It was one of Enron's largest development projects ever (and the single largest direct foreign investment in India's history). The company owned 65 percent of Dabhol; the other partners were Bechtel, General Electric and State Electricity Board.
The fly in the ointment, however was that the Indian consumers could not afford the cost of the electricity that was to be produced. The World Bank had warned at the beginning that the energy produced by the plant would be too costly, and Enron proved them right. Power from the plant was 700 percent higher than electricity from other sources.
Enron had promised India that the Dabhol power would be affordable once the next phase of the project was completed. But to cut expenses, Enron had to find cheap gas to fuel it. They started burning naphtha, with plans that they would retrofit the plant to gas once it was available.
Originally, Enron was planning to get the liquefied natural gas (LNG) from Qatar, where Enron had a joint venture with the state-owned Qatar Gas and Pipeline Company. In fact, the Qatar project was one of the reasons why Enron selected India to set up Dabhol: it had to ensure that its Qatar gas did not remain unsold. In April 1999, however, the project was cancelled because of the global oil and gas glut. With Qatar gone, Enron was back to square one in trying to locate an inexpensive LNG supply source.
Enter the Afghanistan connection.
Where the "Great Game" in Afghanistan was once about czars and commissars seeking access to the warm water ports of the Persian Gulf, today it is about laying oil and gas pipelines via the untapped petroleum reserves of Central Asia, a region previously dominated by the former Soviet Union, with strong influence from Iran and Pakistan. Studies have placed the total worth of oil and gas reserves in the Central Asian republics at between $3 and $6 trillion.
Who has access to that vast sea of oil? Right now the only existing export routes from the Caspian Basin lead through Russia. U.S. oil companies have longed dreamed of their own pipeline routes that will give them control of the oil and gas resources of the Caspian Sea. Likewise, the U.S. government also wants to dominate Central Asian oil in order to reduce dependency on resources from the Persian/Arabian Gulf, which it cannot control. Thus the U.S. is poised to challenge Russian hegemony in a new version of the "Great Game."
Construction of oil and natural gas export pipelines through Afghanistan was under serious consideration during the Clinton years. In 1996, Unocal – one of the world's leading energy resource and project development companies – won a contract to build a 1,005-mile oil pipeline in order to exploit the vast Turkmenistan natural gas fields in Duletabad. The pipeline would extend through Afghanistan and Pakistan, terminating in Multan, near the India border.
Multan was also the end point for another proposed pipeline, this one from Iran. This project never left the drawing boards, however; the pipeline would be much longer (over 1,600 miles) and more expensive. Still, this route was being seriously considered as of early 2001, and it increased the odds that gas would be flowing into Multan from somewhere.
Unocal wasn't the only energy company laying pipe. In 1997, Enron announced that it was going to spend over $1 billion building and improving the lines between the Dabhol plant and India's network of gas pipelines.
Follow the map: Once a proposed 400-mile extension from Multan, Pakistan to New Delhi, India was built, Caspian Sea gas could flow into India's network to New Delhi, follow the route to Bombay – and bingo! A plentiful source of ultra-cheap LNG that could supply Enron's plant in India for three decades or more.
Besides the route to Multan, another proposed spur of the pipeline would have ended on the Pakistan coast, where an estimated one million barrels of LNG per day could be shipped to Japan and Korea, the largest consumers of LNG in the world. For Enron, there was an upside here as well. Entering the South Eastern Asian markets, which offered vast growth potential, could position Enron well in the global marketplace and offset some of their losses in other markets.
There was one gotcha: It looked like the trans-Afghan section of the pipeline might never be built. Afghanistan was controlled by religious extremists who didn't want to cooperate.
Enter the Taliban.
From 1997 to as late as August 2001, the U.S. government continued to negotiate with the Taliban, trying to find a stabilizing factor that would allow American oil ventures to proceed with this project without interference. To this end, in December 1997, Unocal invited the Taliban contingency to Texas to negotiate protection while the pipeline was under construction. At the end of their stay, the Afghan visitors were invited to Washington to meet with the government officials of the Clinton Administration.
But in August, 1998, terrorists linked to Osama bin Laden bombed two U.S. embassies in East Africa. After a few cruise missiles were fired into Afghanistan and the Pentagon boasted that we had disabled bin Laden's "terrorist network," Unocal said they were abandoning plans for a route through the country. But was such a potentially lucrative deal really dead?
Not hardly. Although Unocal had the largest share, the "Central Asian Gas Pipeline" (CentGas) consortium had six other partners, including companies in Saudi Arabia's Delta Oil Company – the next largest shareholder with 15 percent – and groups in Japan, Korea, Indonesia, Pakistan, and Turkmenistan. They vowed to continue the project, and had strong national interests in seeing the Afghanistan pipeline built.
The U.S. looked for other options, and the Trade and Development Agency commissioned a feasibility study for an improbable east- to- west route that would cross the Caspian Mountains and end at a Mediterranean seaport in Turkey. The company hired for that study was Enron. If that pipeline were to be constructed, Turkmenistan signed an agreement that it would be built by Bechtel and GE Capital Services – the same American companies that were Enron's business partners in the Dabhol power plant.
No matter which direction the Central Asia natural gas would eventually flow, Enron would profit. Should it go south towards ships waiting on the Pakistan coast, it would be still only a few hundred miles at sea to Dabhol. The trip from the Mediterranean would be farther (and thus more expensive for Enron to buy gas), but it was also the least likely route to be constructed. Estimated costs were almost $1 billion more than the route through Afghanistan, and engineering plans had not even started. No, the only practical route for the Caspian Sea gas was through Afghanistan and Pakistan to the border of India. All that was lacking was the political will to make it happen.
How Deeply Were Bush and Cheney Involved?
Was the Bush White House negotiating with the Taliban to help Kenneth Lay and Enron? Were Cabinet members and the National Security Council running a "war room" to save the company that was the closest friend of the president and vice president?
As of this writing in February 2002, little is really known. But if the White House, Enron, and Dabhol timelines are combined, curious details appear.
Enter George W. Bush.
Bush's long and personal relationship with Enron's former CEO Kenneth Lay is now well known, as is his generous contribution of over $600,000 to advance the political career of the man who now holds the White House. Not so well known is how Bush has helped Enron.
In 1988, Bush allegedly called Argentina's Minister of Public Works to pressure him into awarding Enron a $300 million contract shortly after his father won the presidency. Rodolfo Terragno recalled that the younger George Bush said that giving Enron the project "would be very favorable for Argentina and its relations with the United States." Terragno didn't know whether this message was from the White House or whether Bush was working a business deal on his own.
(Although unlikely, it is possible that Terragno was called by brother Neil Bush, who would later seek an oil drilling deal in Argentina. The Bush Sr. campaign denied that George W. made the call. This was, however, the time period when Lay began to cultivate his friendship with George W. and there is no known association between Neil Bush and Lay. That two Bush brothers are suspects, however, speaks to the levels of power that this family wields.)
By the time George W. became president, the India project was in serious trouble. Enron's reputation as a bully in India was legion. The Human Rights Watch released a report that indicated human rights violations had occurred as a result of opposition to the Dabhol Power project. Beginning in late 1996 and continuing throughout 1997, leading Indian environmental activists and employee organizations organized to oppose the project and, as a direct result of their opposition were not paid and subjected to repeated short-term detention. One ghastly report actually states that police stormed the homes of several women in western India who had led a massive protest against Enron's new natural-gas plant near their fishing village. According to Amnesty International, the women were dragged from their homes and beaten by officers paid by Enron.
The crisis came just a few months after the Bush inauguration. Contractors walked off the job, saying they hadn't been paid for over a month. The [India state of] Maharashtra Electricity Board stopped paying for Dabhol's power in May 2001, saying it was too expensive. Enron counter-charged that the Board owed them $64 million. The plant was closed, although it is said to be 97 percent complete. All that was missing was a source for cheap, cheap, natural gas.
Enter Dick Cheney.
Scarcely a month after Bush moves into the White House, Vice President Cheney has his first secret meeting with Ken Lay and other Enron executives on February 22, 2001. Other meetings follow on March 7 and April 17. It is the details of these meetings that the Bush Administration is seeking to keep private.
It's clear the Cheney had his own conflicts of interest with Enron. A chief benefactor in the trans-Caspian pipeline deal would have been Halliburton, the huge oil pipeline construction firm which was previously headed by Cheney. After Cheney's selection as Bush's Vice Presidential candidate, Halliburton also contributed a huge amount of cash into the Bush-Cheney campaign coffers.
So the obvious question: Did Enron lobby Cheney for help in India? It has already been documented that the Vice President's energy task force changed a draft energy proposal to include a provision to boost oil and natural gas production in India in February of last year. The amendment was so narrow that it apparently was targeted only to help Enron's Dabhol plant in India. Later, Cheney stepped in to try to help Enron collect its $64 million debt during a June 27 meeting with India's opposition leader Sonia Gandhi. But behind the scenes, much more was cooking.
A series of e-mail memos obtained by the Washington Post and NY Daily News in January revealed that the National Security Council led a "Dabhol Working Group" composed of officials from various Cabinet departments during the summer of 2001. The memos suggest that the Bush Administration was running exactly the sort of "war room" that was a favorite subject of ridicule by Republicans during the Clinton years.
The Working Group prepared "talking points" for both Cheney and Bush and recommended that the need to "broaden the advocacy" of settling the Enron debt. Every development was closely monitored: "Good news" a NSC staff member wrote in a e-mail memo: "The Veep mentioned Enron in his meeting with Sonia Gandhi." The Post commented that the NSC went so far that it "acted as a sort of concierge service for Enron Chairman Kenneth L. Lay and India's national security adviser, Brajesh Mishra" in trying to arrange a dinner meeting between the Indian official and Lay.
While lobbying India, it appears that the Bush Administration was also raising the heat on the Taliban to allow the pipeline.
The book "Bin Laden: the Forbidden Truth" by Jean-Charles Brisard and Guillaume Dasique claims that the U.S. tried to negotiate the pipeline deal with the Taliban as late as August, 2001. According to the authors, the Bush Administration attempted to get the Taliban on board and believed they could depend upon the regime to stabilize the country while the pipeline construction was underway. Bush had already indirectly given the Taliban $43 million for their supposed efforts to stamp out opium-poppy cultivation. Was this an award – or a bribe? The circumstances make this a valid question.
Enron was unraveling at the seams, yet in early August, Kenneth Lay seemed optimistic, even exuberant. Was he whistling past the graveyard, or did he have secret information? The last meeting between U.S. and Taliban representatives took place five weeks before the attacks on New York and Washington; on that occasion, Christina Rocca, in charge of Central Asian affairs for the U.S. government, met the Taliban ambassador to Pakistan in Islamabad on August 2, 2001. Rocca said the Taliban representative, Mr. Zaeef, was aware of the strong U.S. commitment to help the Afghan people and the fact that the United States had provided $132 million in relief assistance so far that year.
Lay's last documented e-mail was sent on August 27th, about the same time the Taliban allowed the International Red Cross to visit jailed foreign aid workers in Afghanistan. In it, Lay waxes optimistic about the strength and stability of his company, and exhorts his employees to buy into the company's stock program. Was Kenneth Lay anticipating a new pipeline deal, and an Enron contract, courtesy of George W. Bush? If a deal was at hand, he had every reason to be optimistic about the future.
Even though the trans-Caspian pipeline and the extension into India would be years from completion, Enron's conceit of working above the law was ultimately the guiding beacon in all of its transactions. They had played the game of subterfuge for so long, they were near experts at covering their tracks. Even if Lay knew at this point that bankruptcy was imminent, Enron had always survived major hurdles in the past, right? The possibility of a total meltdown was most likely not even a consideration – there could always be an 11th hour federal bailout.
However, from all records, relationships became strained. The Taliban had demanded that the U.S. should also reconstruct Afghanistan's infrastructure and that the pipeline be open for local consumption. Instead, the U.S. wanted a closed pipeline pumping gas for export only and was not interested in helping to rebuild the country.
In turn, the U.S. threatened the Taliban during the negotiations. The directive of "we'll either carpet you in gold or carpet you in bombs" was bantered about in the press to underscore the emerging willfulness of the U.S.
But sometime in late August, apparently the whole deal went sour.
Enron had one last card to play, and that was selling the Dabhol plant for quick cash – if it could. If Enron could get its asking price of $2.3 billion, then maybe the company could pull out of its bankruptcy nose dive.
In late August, Lay appeared to threaten India in an article in the London Financial Times. We expect full price for the plant, he warned; if they received anything less, there could be backlash: "There are laws that could prevent the U.S. government from providing any aid or assistance to India going forward if, in fact, they expropriate property of U.S. companies," he said. When Indian officials called these statements "strong arm tactics," an Enron statement claimed Lay "was merely referring to U.S. laws." Again Lay appeared to threaten India in a Sept. 14 letter to the Prime Minister, insisting that the $2.3 billion price was reasonable because they had a "legal claim" of up to $5 billion.
But the house of cards collapsed dramatically on November 8, when Enron disclosed that it had overstated earnings dating back to 1997 by almost $600 million. That same day, an e-mail ("Importance: High"), whose sender and recipient are blacked out, warned, "President Bush cannot talk about Dabhol as was already mentioned." The memo also said that Bush economic adviser Lawrence Lindsey could not discuss Enron either. Lindsey had been an Enron consultant.
The end came in December 2001, as Enron fired the 300 remaining workers at the plant. Enron also filed a $200 million claim with the U.S. government's Overseas Private Investment Corporation, a U.S. taxpayer- funded insurance fund for American companies abroad, in an attempt to recoup losses from the Dabhol Power Corporation.
On the last day of the year, President Bush appointed Zalmay Khalilzad as his special envoy to Afghanistan. Khalilzad is a former Unocal consultant, whose positions on Afghanistan changed in sync with Unocal's own. When it looked like the pipeline would be built in 1996, Khalilzad advocated that the U.S. should work with moderate elements in the Taliban. By 2000 Unocal was out of the project, and Khalilzad was writing that the U.S. must undermine the Taliban.
It's clear that once again the Great Game is afoot, now that the Taliban are gone. Today, Khalilzad is the Special Assistant to the President and National Security Council member responsible for setting up the post-Taliban "Pro-Unocal" regime in Afghanistan. International oil men euphemistically call the project the new "Silk Road." On Feb. 8, Afghanistan's interim leader Hamid Karzai and Pakistan's president agreed to revive plans for a trans-Afghanistan route for Iranian gas. The next day, Turkmenistan chimed in that they hoped their trans- Afghanistan route would be soon built. It's all but certain that gas from somewhere will reach Multan – and the Dabhol plant beyond.
For investors, Dabhol should be a bitter lesson. Enron was a company known for its hubris that tried to accomplish too much, too quickly, playing too fast and loose with financial realities. In the end, Enron found that its far-reaching global clout could no longer circumvent the rules of basic economics – nor could it count on the players they helped bring into power.
Until there is a full investigation, questions will remain about how far the Bush team went to try to save their buddies at Enron. Vice President Dick Cheney's refusal to release details about his private April meeting with Lay is suspicious. It is already known that Cheney accepted seven out of eight national energy policy recommendations made by Lay; so what are they so damned determined to keep secret? What could be more incriminating than that?
On Feb. 22, the GAO sued Cheney, who has stated that the White House will go to court to fight the release of the documents. (However, John W. Dean, former Nixon staffer and Watergate witness, is quick to point out that executive privilege is unique to the president, not the vice president.) With recent discovery that a highest-level "Dabhol Working Group" was set up in the Bush Administration, it appears that there is much more to be uncovered.
Is the White House covering up that it was molding foreign policy as well as energy policy to suit Enron? Did the Bush Administration know that Enron's collapse was coming as early as August? If any of these is true, the largest bankruptcy in American history may well connect with the greatest political scandal in American history.
Enron is a scandal so enormous that it's hard to wrap your mind around it. Not just a single financial disaster, it's actually a jigsaw of interlocking scandals, each outrageous in its own right.
There's Enron the Wall St. con game, where company bookkeepers used sleight of hand to turn four years of steady losses into stunning profits. There's Enron the reverse Robin Hood, which stole from its own employees even as its executives were hauling millions of dollars out the backdoor. There's Enron's Ken Lay the Kingmaker, who used the corporation's fraudulent wealth to broker elections and skew public policy to his liking. And then there are the Enron coverups, as documents are shredded and the White House seeks to conceal details about meetings between Enron and Vice President Cheney.
The coverups are still very much a mystery. What were the documents that were fed into the shredder – even after the corporation declared bankruptcy? What is the White House fighting to keep secret, even going to the length of redefining executive privilege and inviting the first Congressional lawsuit ever filed against a president? Were the consequences of releasing these documents more damaging than the consequences of destroying them?
1: Starting in the mid-1990s, Unocal and its partners planned to build a 1,000 mile gas pipeline from Turkmenistan to Multan, Pakistan. Cost: about $2 billion (all pipeline routes shown are very approximate). Also considered was a more difficult route from Iran to Multan, which is not shown here.
2: A proposed 400-mile extension from Multan to New Delhi would bring some of the ultra-cheap gas into India's network of gas pipelines. Cost: $600 million.
3: The HBJ pipeline carries most of India's liquid natural gas.
4: Hazira, north of Bombay, is the end of the HBJ pipeline. But in 1997, Enron announced plans to link Dabhol to the Hazira terminal. Enron also said they were going to add to about 1500 miles to the HBJ pipeline. Costs: $300 million and $900 million, respectively.
5: Any gas pipeline across Pakistan could have a spur to the seaport of Gwadar, where tankers could take gas to Korea and Japan, largest consumers of liquid gas in the world. A sea route from Gwadar to Dabhol would be even easier.
Could the Big Secret be that the highest levels of the Bush Administration knew during the summer of 2001 that the largest bankruptcy in history was imminent? Or was it that Enron and the White House were working closely with the Taliban – including Osama bin Laden – up to weeks before the Sept. 11 attack? Was a deal in Afghanistan part of a desperate last-ditch "end run" to bail out Enron? Here's a tip for Congressional investigators and federal prosecutors: Start by looking at the India deal. Closely.
Enron had a $3 billion investment in the Dabhol power plant, near Bombay on India's west coast. The project began in 1992, and the liquefied natural gas- powered plant was supposed to supply energy- hungry India with about one-fifth of its energy needs by 1997. It was one of Enron's largest development projects ever (and the single largest direct foreign investment in India's history). The company owned 65 percent of Dabhol; the other partners were Bechtel, General Electric and State Electricity Board.
The fly in the ointment, however was that the Indian consumers could not afford the cost of the electricity that was to be produced. The World Bank had warned at the beginning that the energy produced by the plant would be too costly, and Enron proved them right. Power from the plant was 700 percent higher than electricity from other sources.
Enron had promised India that the Dabhol power would be affordable once the next phase of the project was completed. But to cut expenses, Enron had to find cheap gas to fuel it. They started burning naphtha, with plans that they would retrofit the plant to gas once it was available.
Originally, Enron was planning to get the liquefied natural gas (LNG) from Qatar, where Enron had a joint venture with the state-owned Qatar Gas and Pipeline Company. In fact, the Qatar project was one of the reasons why Enron selected India to set up Dabhol: it had to ensure that its Qatar gas did not remain unsold. In April 1999, however, the project was cancelled because of the global oil and gas glut. With Qatar gone, Enron was back to square one in trying to locate an inexpensive LNG supply source.
Enter the Afghanistan connection.
Where the "Great Game" in Afghanistan was once about czars and commissars seeking access to the warm water ports of the Persian Gulf, today it is about laying oil and gas pipelines via the untapped petroleum reserves of Central Asia, a region previously dominated by the former Soviet Union, with strong influence from Iran and Pakistan. Studies have placed the total worth of oil and gas reserves in the Central Asian republics at between $3 and $6 trillion.
Who has access to that vast sea of oil? Right now the only existing export routes from the Caspian Basin lead through Russia. U.S. oil companies have longed dreamed of their own pipeline routes that will give them control of the oil and gas resources of the Caspian Sea. Likewise, the U.S. government also wants to dominate Central Asian oil in order to reduce dependency on resources from the Persian/Arabian Gulf, which it cannot control. Thus the U.S. is poised to challenge Russian hegemony in a new version of the "Great Game."
Construction of oil and natural gas export pipelines through Afghanistan was under serious consideration during the Clinton years. In 1996, Unocal – one of the world's leading energy resource and project development companies – won a contract to build a 1,005-mile oil pipeline in order to exploit the vast Turkmenistan natural gas fields in Duletabad. The pipeline would extend through Afghanistan and Pakistan, terminating in Multan, near the India border.
Multan was also the end point for another proposed pipeline, this one from Iran. This project never left the drawing boards, however; the pipeline would be much longer (over 1,600 miles) and more expensive. Still, this route was being seriously considered as of early 2001, and it increased the odds that gas would be flowing into Multan from somewhere.
Unocal wasn't the only energy company laying pipe. In 1997, Enron announced that it was going to spend over $1 billion building and improving the lines between the Dabhol plant and India's network of gas pipelines.
Follow the map: Once a proposed 400-mile extension from Multan, Pakistan to New Delhi, India was built, Caspian Sea gas could flow into India's network to New Delhi, follow the route to Bombay – and bingo! A plentiful source of ultra-cheap LNG that could supply Enron's plant in India for three decades or more.
Besides the route to Multan, another proposed spur of the pipeline would have ended on the Pakistan coast, where an estimated one million barrels of LNG per day could be shipped to Japan and Korea, the largest consumers of LNG in the world. For Enron, there was an upside here as well. Entering the South Eastern Asian markets, which offered vast growth potential, could position Enron well in the global marketplace and offset some of their losses in other markets.
There was one gotcha: It looked like the trans-Afghan section of the pipeline might never be built. Afghanistan was controlled by religious extremists who didn't want to cooperate.
Enter the Taliban.
From 1997 to as late as August 2001, the U.S. government continued to negotiate with the Taliban, trying to find a stabilizing factor that would allow American oil ventures to proceed with this project without interference. To this end, in December 1997, Unocal invited the Taliban contingency to Texas to negotiate protection while the pipeline was under construction. At the end of their stay, the Afghan visitors were invited to Washington to meet with the government officials of the Clinton Administration.
But in August, 1998, terrorists linked to Osama bin Laden bombed two U.S. embassies in East Africa. After a few cruise missiles were fired into Afghanistan and the Pentagon boasted that we had disabled bin Laden's "terrorist network," Unocal said they were abandoning plans for a route through the country. But was such a potentially lucrative deal really dead?
Not hardly. Although Unocal had the largest share, the "Central Asian Gas Pipeline" (CentGas) consortium had six other partners, including companies in Saudi Arabia's Delta Oil Company – the next largest shareholder with 15 percent – and groups in Japan, Korea, Indonesia, Pakistan, and Turkmenistan. They vowed to continue the project, and had strong national interests in seeing the Afghanistan pipeline built.
The U.S. looked for other options, and the Trade and Development Agency commissioned a feasibility study for an improbable east- to- west route that would cross the Caspian Mountains and end at a Mediterranean seaport in Turkey. The company hired for that study was Enron. If that pipeline were to be constructed, Turkmenistan signed an agreement that it would be built by Bechtel and GE Capital Services – the same American companies that were Enron's business partners in the Dabhol power plant.
No matter which direction the Central Asia natural gas would eventually flow, Enron would profit. Should it go south towards ships waiting on the Pakistan coast, it would be still only a few hundred miles at sea to Dabhol. The trip from the Mediterranean would be farther (and thus more expensive for Enron to buy gas), but it was also the least likely route to be constructed. Estimated costs were almost $1 billion more than the route through Afghanistan, and engineering plans had not even started. No, the only practical route for the Caspian Sea gas was through Afghanistan and Pakistan to the border of India. All that was lacking was the political will to make it happen.
How Deeply Were Bush and Cheney Involved?
Was the Bush White House negotiating with the Taliban to help Kenneth Lay and Enron? Were Cabinet members and the National Security Council running a "war room" to save the company that was the closest friend of the president and vice president?
As of this writing in February 2002, little is really known. But if the White House, Enron, and Dabhol timelines are combined, curious details appear.
Enter George W. Bush.
Bush's long and personal relationship with Enron's former CEO Kenneth Lay is now well known, as is his generous contribution of over $600,000 to advance the political career of the man who now holds the White House. Not so well known is how Bush has helped Enron.
In 1988, Bush allegedly called Argentina's Minister of Public Works to pressure him into awarding Enron a $300 million contract shortly after his father won the presidency. Rodolfo Terragno recalled that the younger George Bush said that giving Enron the project "would be very favorable for Argentina and its relations with the United States." Terragno didn't know whether this message was from the White House or whether Bush was working a business deal on his own.
(Although unlikely, it is possible that Terragno was called by brother Neil Bush, who would later seek an oil drilling deal in Argentina. The Bush Sr. campaign denied that George W. made the call. This was, however, the time period when Lay began to cultivate his friendship with George W. and there is no known association between Neil Bush and Lay. That two Bush brothers are suspects, however, speaks to the levels of power that this family wields.)
By the time George W. became president, the India project was in serious trouble. Enron's reputation as a bully in India was legion. The Human Rights Watch released a report that indicated human rights violations had occurred as a result of opposition to the Dabhol Power project. Beginning in late 1996 and continuing throughout 1997, leading Indian environmental activists and employee organizations organized to oppose the project and, as a direct result of their opposition were not paid and subjected to repeated short-term detention. One ghastly report actually states that police stormed the homes of several women in western India who had led a massive protest against Enron's new natural-gas plant near their fishing village. According to Amnesty International, the women were dragged from their homes and beaten by officers paid by Enron.
The crisis came just a few months after the Bush inauguration. Contractors walked off the job, saying they hadn't been paid for over a month. The [India state of] Maharashtra Electricity Board stopped paying for Dabhol's power in May 2001, saying it was too expensive. Enron counter-charged that the Board owed them $64 million. The plant was closed, although it is said to be 97 percent complete. All that was missing was a source for cheap, cheap, natural gas.
Enter Dick Cheney.
Scarcely a month after Bush moves into the White House, Vice President Cheney has his first secret meeting with Ken Lay and other Enron executives on February 22, 2001. Other meetings follow on March 7 and April 17. It is the details of these meetings that the Bush Administration is seeking to keep private.
It's clear the Cheney had his own conflicts of interest with Enron. A chief benefactor in the trans-Caspian pipeline deal would have been Halliburton, the huge oil pipeline construction firm which was previously headed by Cheney. After Cheney's selection as Bush's Vice Presidential candidate, Halliburton also contributed a huge amount of cash into the Bush-Cheney campaign coffers.
So the obvious question: Did Enron lobby Cheney for help in India? It has already been documented that the Vice President's energy task force changed a draft energy proposal to include a provision to boost oil and natural gas production in India in February of last year. The amendment was so narrow that it apparently was targeted only to help Enron's Dabhol plant in India. Later, Cheney stepped in to try to help Enron collect its $64 million debt during a June 27 meeting with India's opposition leader Sonia Gandhi. But behind the scenes, much more was cooking.
A series of e-mail memos obtained by the Washington Post and NY Daily News in January revealed that the National Security Council led a "Dabhol Working Group" composed of officials from various Cabinet departments during the summer of 2001. The memos suggest that the Bush Administration was running exactly the sort of "war room" that was a favorite subject of ridicule by Republicans during the Clinton years.
The Working Group prepared "talking points" for both Cheney and Bush and recommended that the need to "broaden the advocacy" of settling the Enron debt. Every development was closely monitored: "Good news" a NSC staff member wrote in a e-mail memo: "The Veep mentioned Enron in his meeting with Sonia Gandhi." The Post commented that the NSC went so far that it "acted as a sort of concierge service for Enron Chairman Kenneth L. Lay and India's national security adviser, Brajesh Mishra" in trying to arrange a dinner meeting between the Indian official and Lay.
While lobbying India, it appears that the Bush Administration was also raising the heat on the Taliban to allow the pipeline.
The book "Bin Laden: the Forbidden Truth" by Jean-Charles Brisard and Guillaume Dasique claims that the U.S. tried to negotiate the pipeline deal with the Taliban as late as August, 2001. According to the authors, the Bush Administration attempted to get the Taliban on board and believed they could depend upon the regime to stabilize the country while the pipeline construction was underway. Bush had already indirectly given the Taliban $43 million for their supposed efforts to stamp out opium-poppy cultivation. Was this an award – or a bribe? The circumstances make this a valid question.
Enron was unraveling at the seams, yet in early August, Kenneth Lay seemed optimistic, even exuberant. Was he whistling past the graveyard, or did he have secret information? The last meeting between U.S. and Taliban representatives took place five weeks before the attacks on New York and Washington; on that occasion, Christina Rocca, in charge of Central Asian affairs for the U.S. government, met the Taliban ambassador to Pakistan in Islamabad on August 2, 2001. Rocca said the Taliban representative, Mr. Zaeef, was aware of the strong U.S. commitment to help the Afghan people and the fact that the United States had provided $132 million in relief assistance so far that year.
Lay's last documented e-mail was sent on August 27th, about the same time the Taliban allowed the International Red Cross to visit jailed foreign aid workers in Afghanistan. In it, Lay waxes optimistic about the strength and stability of his company, and exhorts his employees to buy into the company's stock program. Was Kenneth Lay anticipating a new pipeline deal, and an Enron contract, courtesy of George W. Bush? If a deal was at hand, he had every reason to be optimistic about the future.
Even though the trans-Caspian pipeline and the extension into India would be years from completion, Enron's conceit of working above the law was ultimately the guiding beacon in all of its transactions. They had played the game of subterfuge for so long, they were near experts at covering their tracks. Even if Lay knew at this point that bankruptcy was imminent, Enron had always survived major hurdles in the past, right? The possibility of a total meltdown was most likely not even a consideration – there could always be an 11th hour federal bailout.
However, from all records, relationships became strained. The Taliban had demanded that the U.S. should also reconstruct Afghanistan's infrastructure and that the pipeline be open for local consumption. Instead, the U.S. wanted a closed pipeline pumping gas for export only and was not interested in helping to rebuild the country.
In turn, the U.S. threatened the Taliban during the negotiations. The directive of "we'll either carpet you in gold or carpet you in bombs" was bantered about in the press to underscore the emerging willfulness of the U.S.
But sometime in late August, apparently the whole deal went sour.
Enron had one last card to play, and that was selling the Dabhol plant for quick cash – if it could. If Enron could get its asking price of $2.3 billion, then maybe the company could pull out of its bankruptcy nose dive.
In late August, Lay appeared to threaten India in an article in the London Financial Times. We expect full price for the plant, he warned; if they received anything less, there could be backlash: "There are laws that could prevent the U.S. government from providing any aid or assistance to India going forward if, in fact, they expropriate property of U.S. companies," he said. When Indian officials called these statements "strong arm tactics," an Enron statement claimed Lay "was merely referring to U.S. laws." Again Lay appeared to threaten India in a Sept. 14 letter to the Prime Minister, insisting that the $2.3 billion price was reasonable because they had a "legal claim" of up to $5 billion.
But the house of cards collapsed dramatically on November 8, when Enron disclosed that it had overstated earnings dating back to 1997 by almost $600 million. That same day, an e-mail ("Importance: High"), whose sender and recipient are blacked out, warned, "President Bush cannot talk about Dabhol as was already mentioned." The memo also said that Bush economic adviser Lawrence Lindsey could not discuss Enron either. Lindsey had been an Enron consultant.
The end came in December 2001, as Enron fired the 300 remaining workers at the plant. Enron also filed a $200 million claim with the U.S. government's Overseas Private Investment Corporation, a U.S. taxpayer- funded insurance fund for American companies abroad, in an attempt to recoup losses from the Dabhol Power Corporation.
On the last day of the year, President Bush appointed Zalmay Khalilzad as his special envoy to Afghanistan. Khalilzad is a former Unocal consultant, whose positions on Afghanistan changed in sync with Unocal's own. When it looked like the pipeline would be built in 1996, Khalilzad advocated that the U.S. should work with moderate elements in the Taliban. By 2000 Unocal was out of the project, and Khalilzad was writing that the U.S. must undermine the Taliban.
It's clear that once again the Great Game is afoot, now that the Taliban are gone. Today, Khalilzad is the Special Assistant to the President and National Security Council member responsible for setting up the post-Taliban "Pro-Unocal" regime in Afghanistan. International oil men euphemistically call the project the new "Silk Road." On Feb. 8, Afghanistan's interim leader Hamid Karzai and Pakistan's president agreed to revive plans for a trans-Afghanistan route for Iranian gas. The next day, Turkmenistan chimed in that they hoped their trans- Afghanistan route would be soon built. It's all but certain that gas from somewhere will reach Multan – and the Dabhol plant beyond.
For investors, Dabhol should be a bitter lesson. Enron was a company known for its hubris that tried to accomplish too much, too quickly, playing too fast and loose with financial realities. In the end, Enron found that its far-reaching global clout could no longer circumvent the rules of basic economics – nor could it count on the players they helped bring into power.
Until there is a full investigation, questions will remain about how far the Bush team went to try to save their buddies at Enron. Vice President Dick Cheney's refusal to release details about his private April meeting with Lay is suspicious. It is already known that Cheney accepted seven out of eight national energy policy recommendations made by Lay; so what are they so damned determined to keep secret? What could be more incriminating than that?
On Feb. 22, the GAO sued Cheney, who has stated that the White House will go to court to fight the release of the documents. (However, John W. Dean, former Nixon staffer and Watergate witness, is quick to point out that executive privilege is unique to the president, not the vice president.) With recent discovery that a highest-level "Dabhol Working Group" was set up in the Bush Administration, it appears that there is much more to be uncovered.
Is the White House covering up that it was molding foreign policy as well as energy policy to suit Enron? Did the Bush Administration know that Enron's collapse was coming as early as August? If any of these is true, the largest bankruptcy in American history may well connect with the greatest political scandal in American history.
More Questions For Cheney
Reps. Kucinich, Maloney and Sanders are members of the Subcommittee on National Security, Emerging Threats and International Relations.
September 17, 2003
The Honorable Dick Cheney
Vice President
Office of the Vice President of the United States
Eisenhower Executive Office Building
Washington, DC 20501
Dear Mr. Vice President:
On July 21, 2003, we sent a letter to you inquiring about your role in the dissemination of the disinformation that Iraq purchased uranium from Niger. We asked you ten questions relating to your direct personal visits to CIA's Iraq analysts; your request for an investigation of the Niger uranium claim that resulted in an investigation by a former U.S. ambassador, and your several high-profile public assertions about Iraq's alleged pursuit of nuclear weapons. To date, we have not received your response to our inquiries.
Since our last letter to you, you spoke at the American Enterprise Institute and once again made reference to the already proven false assertion that Iraq was reconstituting its nuclear weapons program. In order to legitimize the war, you cited findings listed in the National Intelligence Estimate (NIE), some of which had been refuted months before you cited them.
Most recently, on September 14, 2003, after almost a year of repeating the claim, you finally admitted the inaccuracy of your previous assertions on Iraq's nuclear capabilities when you appeared on Meet the Press. The chronology shows that you knew or should have known that the claim was false when you first made it on Meet the Press in March 2003. We would like to inquire as to why your admission took so long to be made publicly. We would also like answers to our previous questions about your role in the dissemination of the nuclear uranium claim.
I. Concerning "unusual" personal visits by the Vice President to CIA analysts.
According to The Washington Post, June 5, 2003, you made "multiple" "unusual" visits to CIA to meet directly with Iraq analysts. The Post reported: "Vice President Cheney and his most senior aide made multiple trips to the CIA over the past year to question analysts studying Iraq's weapons programs."
These visits were unprecedented. Normally, Vice Presidents, yourself included, receive regular briefings from CIA in your office and have a CIA officer on permanent detail. In other words, there is no reason for the Vice President to make personal visits to CIA analysts. According to the Post, your unprecedented visits created "an environment in which some analysts felt they were being pressured to make their assessments fit with the Bush administration's policy objectives."
On 'Meet the Press' on Sunday September 14, 2003, you dismissed The Washington Post article by suggesting that your frequent trips to the CIA were because of a longtime interest of yours in the field of intelligence. You also denied that your visits to the CIA had any impact on the changing of intelligence:
"In terms of asking questions, I plead guilty. I ask a hell of a lot of questions. That's my job. I've had an interest in the intelligence area since I worked for Gerry Ford 30 years ago, served on the Intel Committee in the House for years in the '80s, ran a big part of the intelligence community when I was secretary of Defense in the early '90s…Shouldn't be any pressure. I can't think of a single instance. Maybe somebody can produce one. I'm unaware of anywhere the community changed a judgment that they made because I asked questions."
Questions:
1) How many visits did you and your chief of staff make to CIA to meet directly with CIA analysts working on Iraq?
2) What was the purpose of each of these visits?
3) Did you ever meet with CIA analysts working on other intelligence matters, such as Al Qaeda?
4) Did you or a member of your staff at any time request or demand rewriting of intelligence assessments concerning the existence of weapons of mass destruction in Iraq?
II. Concerning a request by the Vice President to investigate intelligence of Niger uranium sale, revealing forgery one year ago.
This alleged sale of uranium to Iraq by Niger was critical to the administration's case that Iraq was reconstituting a nuclear weapons program. During the period of time you reportedly paid visits to CIA, you also requested that CIA investigate intelligence that purported to show Iraqi pursuit of uranium from Niger, and your office received a briefing on the investigation. According to The New York Times of May 6, 2003, "more than a year ago the vice president's office asked for an investigation of the uranium deal, so a former U.S. Ambassador to Africa was dispatched to Niger."
The ambassador "reported to the CIA and State Department that the information was unequivocally wrong and that the documents had been forged," according to the Times. Indeed, that former U.S. Ambassador, Joseph Wilson, wrote in The New York Times, July 6, 2003, "The vice president's office asked a serious question. We were asked to help formulate the answer. We did so, and we have every confidence that the answer we provided was circulated to the appropriate officials within our government."
Moreover, your chief of staff, Mr. Libby, told Time magazine this week that you did in fact express interest in the report to the CIA briefer. Our understanding is that Standard Operating Procedure is that if a principal asks about a report, he is given a specific answer.
On Meet the Press on Sunday September 14, 2003, contrary to Ambassador Wilson and Mr. Libby, you denied receiving Ambassador Wilson's findings in February, or March of 2002. You also denied sending Ambassador Wilson to look into the claim.
"I don't know Joe Wilson. I've never met Joe Wilson... I get a daily brief on my own each day before I meet with the president to go through the intel. And I ask lots of question. One of the questions I asked at that particular time about this, I said, "What do we know about this?" They take the question. He came back within a day or two and said, "This is all we know. There's a lot we don't know," end of statement... And Joe Wilson -- I don't who sent Joe Wilson."
Questions:
5) Who in the office of Vice President was informed of the contents of Ambassador Wilson's report?
6) When did you personally become informed of Ambassador Wilson's findings?
7) If the staff who took your question said, "This is all we know. There's a lot we don't know", why did you continue to use the shaky uranium claim in your public statements over the past year?
8) What efforts were made by your office to disseminate the findings of Ambassador Wilson's investigation to the President, National Security Adviser, and Secretary of Defense?
III. Speech by the Vice President to the American Enterprise Institute on July 25, 2003
In a speech to the American Enterprise Institute on July 25, 2003, you read from several sections of the October 2002 National Intelligence Estimate (NIE). You said that the Administration could not ignore the findings in the NIE because doing so would be irresponsible. You said:
Those charged with the security of this nation could not read such an assessment and pretend that it did not exist. Ignoring such information, or trying to wish it away, would be irresponsible in the extreme. And our President did not ignore that information -- he faced it... Against this background, to disregard the NIE's warnings would have been irresponsible in the extreme. And our President did not ignore that information -- he faced it, and acted to remove the danger.
You cited the following sections of NIE as findings the President could not ignore:
"Baghdad has chemical and biological weapons, as well as missiles with ranges in excess of U.N. restrictions. If left unchecked, it probably will have a nuclear weapon during this decade... Since inspections ended in 1998, Iraq has maintained its chemical weapons effort, energized its missile program, and invested more heavily in biological weapons; in the view of most agencies, Baghdad is reconstituting its nuclear weapons program... Iraq is continuing, and in some areas expanding, its chemical, biological, nuclear and missile programs contrary to U.N. Resolutions."
What is concerning about your speech is that in your attempt to legitimize the cause for war with Iraq, you cited intelligence listed in the National Intelligence Estimate that had already been refuted before you spoke. Even more disturbing is that it was your office, the Office of the Vice President, that learned of the false uranium story seven months before the NIE was written and issued in October 2002.
Furthermore, questions have been raised about the intent of the drafting of the NIE document. Former CIA-analyst Ray McGovern, in an article printed in The Miami Herald on August 8, 2003 wrote:
Start with the fact that there was no NIE before the decision for war last summer. Such decisions are supposed to be based on the conclusions of NIEs, not the other way around. This time the process was reversed... The marketing rollout for the war was keynoted by the vice president, who in a shrill speech on Aug. 26 charged, "Saddam has resumed his efforts to acquire nuclear weapons." A NIE was then ordered up, essentially to support the extreme judgments voiced by Cheney, and its various drafts were used effectively to frighten members of Congress into voting to authorize war.
Because it appears as if the NIE may have been drafted so as to support certain claims for the war in Iraq, using it as a supporting document for intelligence that the President "could not ignore" is misleading and irresponsible.
9) Since your address to the AEI was delivered several months after the nuclear uranium claim had been disputed, on what basis did you make the claim that the President "could not ignore" the false nuclear findings in the NIE?
IV. Assertions by the Vice President and other high-ranking members of the Administration claiming Iraqi nuclear weapons program.
The President's erroneous reference to the faked Niger uranium sale in his State of the Union address was only one example of a pattern of similar assertions by high-ranking members of the administration, including you. The assertion was made repeatedly in the administration's campaign to win congressional approval of military action against Iraq.
For instance, you said to the 103d National Convention of the Veterans of Foreign Wars on August 26, 2002, "they [the Iraqi regime] continue to pursue the nuclear program they began so many years ago... we now know that Saddam has resumed his efforts to acquire nuclear weapons... Should all his ambitions be realized... [he could] subject the United States or any other nation to nuclear blackmail."
In sworn testimony before the House Armed Services Committee, just weeks before the House of Representatives voted to authorize military action against Iraq, Secretary of Defense Donald Rumsfeld testified on September 18, 2002:
"He [Saddam]... is pursuing nuclear weapons. If he demonstrates the capability to deliver them to our shores, the world would be changed. Our people would be at great risk. Our willingness to be engaged in the world, our willingness to project power to stop aggression, our ability to forge coalitions for multilateral action, could all be under question. And many lives could be lost."
Questions:
10) Since your address to the VFW occurred nearly 7 months after Ambassador Wilson reported his findings to the CIA and State Department, what evidence did you have for the assertion that Iraq was continuing "to pursue the nuclear program" and that Saddam had "resumed his efforts to acquire nuclear weapons"?
11) Since the Secretary of Defense testified to Congress that Iraq was "pursuing nuclear weapons" nearly 8 months after Ambassador Wilson's briefing to CIA and the State Department, what effort did you make to determine what evidence the Secretary of Defense had for his assertion to Congress?
Further refutation of the authenticity of the forged Niger documents came from IAEA Director General ElBaradei, when he reported to the U.N. Security Council on March 7, 2003: "These documents, which formed the basis for reports of recent uranium transactions between Iraq and Niger, are in fact not authentic. We have therefore concluded that these specific allegations are unfounded... we have found no evidence or plausible indication of the revival of a nuclear weapons programme in Iraq." Yet on March 16 -- nine days afterwards -- you again repeated the unfounded assertion on national television (Meet the Press, Sunday, March 16, 2003). You said:
"We think Mr. ElBaradei frankly is wrong," and "We believe [Saddam] has, in fact, reconstituted nuclear weapons."
On September 14, 2003, after almost a year of repeating the nuclear claim, you finally retracted your position on Iraq's nuclear capabilities when you appeared on Meet the Press. When asked about your March 16, 2003 Meet the Press interview in which you accused Mohammed ElBaradei of being wrong about Iraq not having reconstituted its nuclear weapons program, you said:
"Yeah. I did misspeak. I said repeatedly during the show weapons capability. We never had any evidence that he had acquired a nuclear weapon."
Question:
12) What accounts for the length of time it took you to publicly retract the Niger uranium claim?
We hope you will take the opportunity to answer these questions about your role in the dissemination of false information about Iraq's nuclear program to justify the war in Iraq. We look forward to a response.
Sincerely,
Dennis J. Kucinich
Ranking Minority Member
Subcommittee on National Security,
Emerging Threats and
International Relations
Carolyn B. Maloney
Member
Ranking Minority Member
Subcommittee on National Security,
Emerging Threats and
International Relations
Bernie Sanders
Member
Ranking Minority Member
Subcommittee on National Security,
Emerging Threats and
International Relations
Reps. Kucinich, Maloney and Sanders are members of the Subcommittee on National Security, Emerging Threats and International Relations.
September 17, 2003
The Honorable Dick Cheney
Vice President
Office of the Vice President of the United States
Eisenhower Executive Office Building
Washington, DC 20501
Dear Mr. Vice President:
On July 21, 2003, we sent a letter to you inquiring about your role in the dissemination of the disinformation that Iraq purchased uranium from Niger. We asked you ten questions relating to your direct personal visits to CIA's Iraq analysts; your request for an investigation of the Niger uranium claim that resulted in an investigation by a former U.S. ambassador, and your several high-profile public assertions about Iraq's alleged pursuit of nuclear weapons. To date, we have not received your response to our inquiries.
Since our last letter to you, you spoke at the American Enterprise Institute and once again made reference to the already proven false assertion that Iraq was reconstituting its nuclear weapons program. In order to legitimize the war, you cited findings listed in the National Intelligence Estimate (NIE), some of which had been refuted months before you cited them.
Most recently, on September 14, 2003, after almost a year of repeating the claim, you finally admitted the inaccuracy of your previous assertions on Iraq's nuclear capabilities when you appeared on Meet the Press. The chronology shows that you knew or should have known that the claim was false when you first made it on Meet the Press in March 2003. We would like to inquire as to why your admission took so long to be made publicly. We would also like answers to our previous questions about your role in the dissemination of the nuclear uranium claim.
I. Concerning "unusual" personal visits by the Vice President to CIA analysts.
According to The Washington Post, June 5, 2003, you made "multiple" "unusual" visits to CIA to meet directly with Iraq analysts. The Post reported: "Vice President Cheney and his most senior aide made multiple trips to the CIA over the past year to question analysts studying Iraq's weapons programs."
These visits were unprecedented. Normally, Vice Presidents, yourself included, receive regular briefings from CIA in your office and have a CIA officer on permanent detail. In other words, there is no reason for the Vice President to make personal visits to CIA analysts. According to the Post, your unprecedented visits created "an environment in which some analysts felt they were being pressured to make their assessments fit with the Bush administration's policy objectives."
On 'Meet the Press' on Sunday September 14, 2003, you dismissed The Washington Post article by suggesting that your frequent trips to the CIA were because of a longtime interest of yours in the field of intelligence. You also denied that your visits to the CIA had any impact on the changing of intelligence:
"In terms of asking questions, I plead guilty. I ask a hell of a lot of questions. That's my job. I've had an interest in the intelligence area since I worked for Gerry Ford 30 years ago, served on the Intel Committee in the House for years in the '80s, ran a big part of the intelligence community when I was secretary of Defense in the early '90s…Shouldn't be any pressure. I can't think of a single instance. Maybe somebody can produce one. I'm unaware of anywhere the community changed a judgment that they made because I asked questions."
Questions:
1) How many visits did you and your chief of staff make to CIA to meet directly with CIA analysts working on Iraq?
2) What was the purpose of each of these visits?
3) Did you ever meet with CIA analysts working on other intelligence matters, such as Al Qaeda?
4) Did you or a member of your staff at any time request or demand rewriting of intelligence assessments concerning the existence of weapons of mass destruction in Iraq?
II. Concerning a request by the Vice President to investigate intelligence of Niger uranium sale, revealing forgery one year ago.
This alleged sale of uranium to Iraq by Niger was critical to the administration's case that Iraq was reconstituting a nuclear weapons program. During the period of time you reportedly paid visits to CIA, you also requested that CIA investigate intelligence that purported to show Iraqi pursuit of uranium from Niger, and your office received a briefing on the investigation. According to The New York Times of May 6, 2003, "more than a year ago the vice president's office asked for an investigation of the uranium deal, so a former U.S. Ambassador to Africa was dispatched to Niger."
The ambassador "reported to the CIA and State Department that the information was unequivocally wrong and that the documents had been forged," according to the Times. Indeed, that former U.S. Ambassador, Joseph Wilson, wrote in The New York Times, July 6, 2003, "The vice president's office asked a serious question. We were asked to help formulate the answer. We did so, and we have every confidence that the answer we provided was circulated to the appropriate officials within our government."
Moreover, your chief of staff, Mr. Libby, told Time magazine this week that you did in fact express interest in the report to the CIA briefer. Our understanding is that Standard Operating Procedure is that if a principal asks about a report, he is given a specific answer.
On Meet the Press on Sunday September 14, 2003, contrary to Ambassador Wilson and Mr. Libby, you denied receiving Ambassador Wilson's findings in February, or March of 2002. You also denied sending Ambassador Wilson to look into the claim.
"I don't know Joe Wilson. I've never met Joe Wilson... I get a daily brief on my own each day before I meet with the president to go through the intel. And I ask lots of question. One of the questions I asked at that particular time about this, I said, "What do we know about this?" They take the question. He came back within a day or two and said, "This is all we know. There's a lot we don't know," end of statement... And Joe Wilson -- I don't who sent Joe Wilson."
Questions:
5) Who in the office of Vice President was informed of the contents of Ambassador Wilson's report?
6) When did you personally become informed of Ambassador Wilson's findings?
7) If the staff who took your question said, "This is all we know. There's a lot we don't know", why did you continue to use the shaky uranium claim in your public statements over the past year?
8) What efforts were made by your office to disseminate the findings of Ambassador Wilson's investigation to the President, National Security Adviser, and Secretary of Defense?
III. Speech by the Vice President to the American Enterprise Institute on July 25, 2003
In a speech to the American Enterprise Institute on July 25, 2003, you read from several sections of the October 2002 National Intelligence Estimate (NIE). You said that the Administration could not ignore the findings in the NIE because doing so would be irresponsible. You said:
Those charged with the security of this nation could not read such an assessment and pretend that it did not exist. Ignoring such information, or trying to wish it away, would be irresponsible in the extreme. And our President did not ignore that information -- he faced it... Against this background, to disregard the NIE's warnings would have been irresponsible in the extreme. And our President did not ignore that information -- he faced it, and acted to remove the danger.
You cited the following sections of NIE as findings the President could not ignore:
"Baghdad has chemical and biological weapons, as well as missiles with ranges in excess of U.N. restrictions. If left unchecked, it probably will have a nuclear weapon during this decade... Since inspections ended in 1998, Iraq has maintained its chemical weapons effort, energized its missile program, and invested more heavily in biological weapons; in the view of most agencies, Baghdad is reconstituting its nuclear weapons program... Iraq is continuing, and in some areas expanding, its chemical, biological, nuclear and missile programs contrary to U.N. Resolutions."
What is concerning about your speech is that in your attempt to legitimize the cause for war with Iraq, you cited intelligence listed in the National Intelligence Estimate that had already been refuted before you spoke. Even more disturbing is that it was your office, the Office of the Vice President, that learned of the false uranium story seven months before the NIE was written and issued in October 2002.
Furthermore, questions have been raised about the intent of the drafting of the NIE document. Former CIA-analyst Ray McGovern, in an article printed in The Miami Herald on August 8, 2003 wrote:
Start with the fact that there was no NIE before the decision for war last summer. Such decisions are supposed to be based on the conclusions of NIEs, not the other way around. This time the process was reversed... The marketing rollout for the war was keynoted by the vice president, who in a shrill speech on Aug. 26 charged, "Saddam has resumed his efforts to acquire nuclear weapons." A NIE was then ordered up, essentially to support the extreme judgments voiced by Cheney, and its various drafts were used effectively to frighten members of Congress into voting to authorize war.
Because it appears as if the NIE may have been drafted so as to support certain claims for the war in Iraq, using it as a supporting document for intelligence that the President "could not ignore" is misleading and irresponsible.
9) Since your address to the AEI was delivered several months after the nuclear uranium claim had been disputed, on what basis did you make the claim that the President "could not ignore" the false nuclear findings in the NIE?
IV. Assertions by the Vice President and other high-ranking members of the Administration claiming Iraqi nuclear weapons program.
The President's erroneous reference to the faked Niger uranium sale in his State of the Union address was only one example of a pattern of similar assertions by high-ranking members of the administration, including you. The assertion was made repeatedly in the administration's campaign to win congressional approval of military action against Iraq.
For instance, you said to the 103d National Convention of the Veterans of Foreign Wars on August 26, 2002, "they [the Iraqi regime] continue to pursue the nuclear program they began so many years ago... we now know that Saddam has resumed his efforts to acquire nuclear weapons... Should all his ambitions be realized... [he could] subject the United States or any other nation to nuclear blackmail."
In sworn testimony before the House Armed Services Committee, just weeks before the House of Representatives voted to authorize military action against Iraq, Secretary of Defense Donald Rumsfeld testified on September 18, 2002:
"He [Saddam]... is pursuing nuclear weapons. If he demonstrates the capability to deliver them to our shores, the world would be changed. Our people would be at great risk. Our willingness to be engaged in the world, our willingness to project power to stop aggression, our ability to forge coalitions for multilateral action, could all be under question. And many lives could be lost."
Questions:
10) Since your address to the VFW occurred nearly 7 months after Ambassador Wilson reported his findings to the CIA and State Department, what evidence did you have for the assertion that Iraq was continuing "to pursue the nuclear program" and that Saddam had "resumed his efforts to acquire nuclear weapons"?
11) Since the Secretary of Defense testified to Congress that Iraq was "pursuing nuclear weapons" nearly 8 months after Ambassador Wilson's briefing to CIA and the State Department, what effort did you make to determine what evidence the Secretary of Defense had for his assertion to Congress?
Further refutation of the authenticity of the forged Niger documents came from IAEA Director General ElBaradei, when he reported to the U.N. Security Council on March 7, 2003: "These documents, which formed the basis for reports of recent uranium transactions between Iraq and Niger, are in fact not authentic. We have therefore concluded that these specific allegations are unfounded... we have found no evidence or plausible indication of the revival of a nuclear weapons programme in Iraq." Yet on March 16 -- nine days afterwards -- you again repeated the unfounded assertion on national television (Meet the Press, Sunday, March 16, 2003). You said:
"We think Mr. ElBaradei frankly is wrong," and "We believe [Saddam] has, in fact, reconstituted nuclear weapons."
On September 14, 2003, after almost a year of repeating the nuclear claim, you finally retracted your position on Iraq's nuclear capabilities when you appeared on Meet the Press. When asked about your March 16, 2003 Meet the Press interview in which you accused Mohammed ElBaradei of being wrong about Iraq not having reconstituted its nuclear weapons program, you said:
"Yeah. I did misspeak. I said repeatedly during the show weapons capability. We never had any evidence that he had acquired a nuclear weapon."
Question:
12) What accounts for the length of time it took you to publicly retract the Niger uranium claim?
We hope you will take the opportunity to answer these questions about your role in the dissemination of false information about Iraq's nuclear program to justify the war in Iraq. We look forward to a response.
Sincerely,
Dennis J. Kucinich
Ranking Minority Member
Subcommittee on National Security,
Emerging Threats and
International Relations
Carolyn B. Maloney
Member
Ranking Minority Member
Subcommittee on National Security,
Emerging Threats and
International Relations
Bernie Sanders
Member
Ranking Minority Member
Subcommittee on National Security,
Emerging Threats and
International Relations
Iraq: Halliburton Reaping Huge Profits
One in Three US Military Dollars Spent Goes to Contractors
Halliburton, the company formerly headed by Vice President Cheney, has won contracts worth more than $1.7 billion under Operation Iraqi Freedom and stands to make hundreds of millions more dollars under a no-bid contract awarded by the U.S. Army Corps of Engineers, according to newly available documents.
The size and scope of the government contracts awarded to Halliburton in connection with the war in Iraq are significantly greater than was previously disclosed and demonstrate the U.S. military's increasing reliance on for-profit corporations to run its logistical operations. Independent experts estimate that as much as one-third of the monthly $3.9 billion cost of keeping U.S. troops in Iraq is going to independent contractors.
Services performed by Halliburton, through its Brown and Root subsidiary, include building and managing military bases, logistical support for the 1,200 intelligence officers hunting Iraqi weapons of mass destruction, delivering mail and producing millions of hot meals. Often dressed in Army fatigues with civilian patches on their shoulders, Halliburton employees and contract personnel have become an integral part of Army life in Iraq.
Spreadsheets drawn up by the Army Joint Munitions Command show that about $1 billion had been allocated to Brown and Root Services through mid-August for contracts associated with Operation Iraqi Freedom, the Pentagon's name for the U.S.-led war and occupation. In addition, the company has earned about $705 million for an initial round of oil field rehabilitation work for the Army Corps of Engineers, a corps spokesman said.
Specific work orders assigned to the subsidiary under Operation Iraqi Freedom include $142 million for base camp operations in Kuwait, $170 million for logistical support for the Iraqi reconstruction effort and $28 million for the construction of prisoner of war camps, the Army spreadsheet shows. The company was also allocated $39 million for building and operating U.S. base camps in Jordan, the existence of which the Pentagon has not previously publicly acknowledged.
Over the past decade, Halliburton, a Houston-based company that made its name servicing pipelines and oil wells, has positioned itself to take advantage of an increasing trend by the federal government to contract out many support operations overseas. It has emerged as the biggest single government contractor in Iraq, followed by such companies as Bechtel, a California-based engineering firm that has won hundreds of millions of dollars in U.S. Agency for International Development reconstruction contracts, and Virginia-based DynCorp, which is training the new Iraqi police force.
The government said the practice has been spurred by cutbacks in the military budget and a string of wars since the end of the Cold War that have placed enormous demand on the armed forces.
But, according to Rep. Henry A. Waxman (D-Calif.) and other critics, the Iraq war and occupation have provided a handful of companies with good political connections, particularly Halliburton, with unprecedented money-making opportunities. "The amount of money [earned by Halliburton] is quite staggering, far more than we were originally led to believe," Waxman said. "This is clearly a trend under this administration, and it concerns me because often the privatization of government services ends up costing the taxpayers more money rather than less."
Wendy Hall, a Halliburton spokeswoman, declined to discuss the details of the company's operations in Iraq, or confirm or deny estimates of the amounts the company has earned from its contracting work on behalf of the military. In an e-mail message, however, she said that suggestions of war profiteering were "an affront to all hard-working, honorable Halliburton employees."
Hall added that military contracts were awarded "not by politicians but by government civil servants, under strict guidelines."
Daniel Carlson, a spokesman for the Army's Joint Munitions Command, said Brown and Root had won a competitive bidding process in 2001 to provide a wide range of "contingency" services to the military in the event of the deployment of U.S. troops overseas. He said the contract, known as the Logistics Civil Augmentation Program, or LOGCAP, was designed to free uniformed personnel for combat duties and did not preclude deals with other contractors.
Carlson said the money earmarked for Brown and Root was an estimate, and could go "up or down" depending on the work performed.
The Joint Munitions Command provided The Washington Post with an updated version of a spreadsheet the Army released to Waxman earlier this month, giving detailed estimates of money obligated to Brown and Root under Operation Iraqi Freedom. Estimates of the company's revenue from Iraq have been increasing steadily since February, when the Corps of Engineers announced the company had won a $37.5 million contract for pre-positioning fire equipment in the region.
In addition to its Iraq contracts, Brown and Root has also earned $183 million from Operation Enduring Freedom, the military name for the war on terrorism and combat operations in Afghanistan, according to the Army's numbers.
Waxman's interest in Halliburton was ignited by a routine Corps of Engineers announcement in March reporting that the company had been awarded a no-bid contract, with a $7 billion limit, for putting out fires at Iraqi oil wells. Corps spokesmen justified the lack of competition on the grounds that the operation was part of a classified war plan and the Army did not have time to secure competitive bids for the work.
The corps said the oil rehabilitation deal was an offshoot of the LOGCAP contract, a one-year agreement renewable for 10 years. Individual work orders assigned under LOGCAP do not have to be competitively bid. But Waxman and other critics maintain that the oil work has nothing to do with the logistics operation.
The practice of delegating a vast array of logistics operations to a single contractor dates to the aftermath of the 1991 Persian Gulf War and a study commissioned by Cheney, then defense secretary, on military outsourcing. The Pentagon chose Brown and Root to carry out the study and subsequently selected the company to implement its own plan. Cheney served as chief executive of Brown and Root's parent company, Halliburton, from 1995 to 2000, when he resigned to run for the vice presidency.
At the time, said P.W. Singer, a Brookings Institution scholar and author of "Corporate Warriors," it was impossible to predict how lucrative the military contracting business would become. He estimates the number of contract workers in Iraq at 20,000, or about one for every 10 soldiers. During the Gulf War, the proportion was about one in 100.
Brown and Root's revenue from Operation Iraqi Freedom is already rivaling its earnings from its contracts in the Balkans, and is a major factor in increasing the value of Halliburton shares by 50 percent over the past year, according to industry analysts. The company reported a net profit of $26 million in the second quarter of this year, in contrast to a $498 million loss in the same period last year.
Waxman aides said they have been told by the General Accounting Office that Brown and Root is likely to earn "several hundred million more dollars" from the no-bid Corps of Engineers contract to rehabilitate Iraqi oil fields. Waxman, the ranking minority member on the House Government Reform Committee, had asked the GAO to investigate the corps' decision not to bid out the contract.
After a round of unfavorable publicity, the corps explained that the sole award to Brown and Root would be replaced by a competitively bid contract. But the deadline for announcing the results of the competition has slipped from August to October, causing rival companies to complain that little work will be left for anybody else. Bechtel, one of Halliburton's main competitors, announced this month that it would not bid for the corps contract and would instead focus on securing work from the Iraqi oil ministry.
In addition to the Army contracts, Halliburton has profited from other government-related work in Iraq and the war on terrorism, and has a $300 million contract with the Navy structured along similar lines to LOGCAP.
Pentagon officials said the increasing reliance on contractors is inevitable, given the multiple demands on the military, particularly since Sept. 11, 2001. Defense Secretary Donald H. Rumsfeld is a champion of "outsourcing," writing in The Post in May that "more than 300,000 uniformed personnel" were doing jobs that civilians could do.
Independent experts said the trend toward outsourcing logistic operations has resulted in new problems, such as a lack of accountability and transparency on the part of private military firms and sometimes questionable billing practices.
A major problem in Iraq, Singer said, has been the phenomenon of "no-shows" caused by the inhospitable security environment, including the killing of contract workers, including a Halliburton mail delivery employee earlier this month.
"At the end of the day, neither these companies nor their employees are bound by military justice, and it is up to them whether to show up or not," Singer said. "The result is that there have been delays in setting up showers for soldiers, getting them cooked meals and so on."
A related concern is the rising cost of hiring contract workers because of skyrocketing insurance premiums. Singer estimates that premiums have increased by 300 percent to 400 percent this year, costs that are passed on to the taxpayer under the cost-plus-award fee system that is the basis for most contracts.
The LOGCAP contract awarded to Brown and Root in 2001 was the third, and potentially most lucrative, super-contract awarded by the Army. Brown and Root won the first five-year contract in 1992, but lost the second to rival DynCorp in 1997 after the GAO criticized the Army for not adequately controlling contracting costs in Bosnia.
One in Three US Military Dollars Spent Goes to Contractors
Halliburton, the company formerly headed by Vice President Cheney, has won contracts worth more than $1.7 billion under Operation Iraqi Freedom and stands to make hundreds of millions more dollars under a no-bid contract awarded by the U.S. Army Corps of Engineers, according to newly available documents.
The size and scope of the government contracts awarded to Halliburton in connection with the war in Iraq are significantly greater than was previously disclosed and demonstrate the U.S. military's increasing reliance on for-profit corporations to run its logistical operations. Independent experts estimate that as much as one-third of the monthly $3.9 billion cost of keeping U.S. troops in Iraq is going to independent contractors.
Services performed by Halliburton, through its Brown and Root subsidiary, include building and managing military bases, logistical support for the 1,200 intelligence officers hunting Iraqi weapons of mass destruction, delivering mail and producing millions of hot meals. Often dressed in Army fatigues with civilian patches on their shoulders, Halliburton employees and contract personnel have become an integral part of Army life in Iraq.
Spreadsheets drawn up by the Army Joint Munitions Command show that about $1 billion had been allocated to Brown and Root Services through mid-August for contracts associated with Operation Iraqi Freedom, the Pentagon's name for the U.S.-led war and occupation. In addition, the company has earned about $705 million for an initial round of oil field rehabilitation work for the Army Corps of Engineers, a corps spokesman said.
Specific work orders assigned to the subsidiary under Operation Iraqi Freedom include $142 million for base camp operations in Kuwait, $170 million for logistical support for the Iraqi reconstruction effort and $28 million for the construction of prisoner of war camps, the Army spreadsheet shows. The company was also allocated $39 million for building and operating U.S. base camps in Jordan, the existence of which the Pentagon has not previously publicly acknowledged.
Over the past decade, Halliburton, a Houston-based company that made its name servicing pipelines and oil wells, has positioned itself to take advantage of an increasing trend by the federal government to contract out many support operations overseas. It has emerged as the biggest single government contractor in Iraq, followed by such companies as Bechtel, a California-based engineering firm that has won hundreds of millions of dollars in U.S. Agency for International Development reconstruction contracts, and Virginia-based DynCorp, which is training the new Iraqi police force.
The government said the practice has been spurred by cutbacks in the military budget and a string of wars since the end of the Cold War that have placed enormous demand on the armed forces.
But, according to Rep. Henry A. Waxman (D-Calif.) and other critics, the Iraq war and occupation have provided a handful of companies with good political connections, particularly Halliburton, with unprecedented money-making opportunities. "The amount of money [earned by Halliburton] is quite staggering, far more than we were originally led to believe," Waxman said. "This is clearly a trend under this administration, and it concerns me because often the privatization of government services ends up costing the taxpayers more money rather than less."
Wendy Hall, a Halliburton spokeswoman, declined to discuss the details of the company's operations in Iraq, or confirm or deny estimates of the amounts the company has earned from its contracting work on behalf of the military. In an e-mail message, however, she said that suggestions of war profiteering were "an affront to all hard-working, honorable Halliburton employees."
Hall added that military contracts were awarded "not by politicians but by government civil servants, under strict guidelines."
Daniel Carlson, a spokesman for the Army's Joint Munitions Command, said Brown and Root had won a competitive bidding process in 2001 to provide a wide range of "contingency" services to the military in the event of the deployment of U.S. troops overseas. He said the contract, known as the Logistics Civil Augmentation Program, or LOGCAP, was designed to free uniformed personnel for combat duties and did not preclude deals with other contractors.
Carlson said the money earmarked for Brown and Root was an estimate, and could go "up or down" depending on the work performed.
The Joint Munitions Command provided The Washington Post with an updated version of a spreadsheet the Army released to Waxman earlier this month, giving detailed estimates of money obligated to Brown and Root under Operation Iraqi Freedom. Estimates of the company's revenue from Iraq have been increasing steadily since February, when the Corps of Engineers announced the company had won a $37.5 million contract for pre-positioning fire equipment in the region.
In addition to its Iraq contracts, Brown and Root has also earned $183 million from Operation Enduring Freedom, the military name for the war on terrorism and combat operations in Afghanistan, according to the Army's numbers.
Waxman's interest in Halliburton was ignited by a routine Corps of Engineers announcement in March reporting that the company had been awarded a no-bid contract, with a $7 billion limit, for putting out fires at Iraqi oil wells. Corps spokesmen justified the lack of competition on the grounds that the operation was part of a classified war plan and the Army did not have time to secure competitive bids for the work.
The corps said the oil rehabilitation deal was an offshoot of the LOGCAP contract, a one-year agreement renewable for 10 years. Individual work orders assigned under LOGCAP do not have to be competitively bid. But Waxman and other critics maintain that the oil work has nothing to do with the logistics operation.
The practice of delegating a vast array of logistics operations to a single contractor dates to the aftermath of the 1991 Persian Gulf War and a study commissioned by Cheney, then defense secretary, on military outsourcing. The Pentagon chose Brown and Root to carry out the study and subsequently selected the company to implement its own plan. Cheney served as chief executive of Brown and Root's parent company, Halliburton, from 1995 to 2000, when he resigned to run for the vice presidency.
At the time, said P.W. Singer, a Brookings Institution scholar and author of "Corporate Warriors," it was impossible to predict how lucrative the military contracting business would become. He estimates the number of contract workers in Iraq at 20,000, or about one for every 10 soldiers. During the Gulf War, the proportion was about one in 100.
Brown and Root's revenue from Operation Iraqi Freedom is already rivaling its earnings from its contracts in the Balkans, and is a major factor in increasing the value of Halliburton shares by 50 percent over the past year, according to industry analysts. The company reported a net profit of $26 million in the second quarter of this year, in contrast to a $498 million loss in the same period last year.
Waxman aides said they have been told by the General Accounting Office that Brown and Root is likely to earn "several hundred million more dollars" from the no-bid Corps of Engineers contract to rehabilitate Iraqi oil fields. Waxman, the ranking minority member on the House Government Reform Committee, had asked the GAO to investigate the corps' decision not to bid out the contract.
After a round of unfavorable publicity, the corps explained that the sole award to Brown and Root would be replaced by a competitively bid contract. But the deadline for announcing the results of the competition has slipped from August to October, causing rival companies to complain that little work will be left for anybody else. Bechtel, one of Halliburton's main competitors, announced this month that it would not bid for the corps contract and would instead focus on securing work from the Iraqi oil ministry.
In addition to the Army contracts, Halliburton has profited from other government-related work in Iraq and the war on terrorism, and has a $300 million contract with the Navy structured along similar lines to LOGCAP.
Pentagon officials said the increasing reliance on contractors is inevitable, given the multiple demands on the military, particularly since Sept. 11, 2001. Defense Secretary Donald H. Rumsfeld is a champion of "outsourcing," writing in The Post in May that "more than 300,000 uniformed personnel" were doing jobs that civilians could do.
Independent experts said the trend toward outsourcing logistic operations has resulted in new problems, such as a lack of accountability and transparency on the part of private military firms and sometimes questionable billing practices.
A major problem in Iraq, Singer said, has been the phenomenon of "no-shows" caused by the inhospitable security environment, including the killing of contract workers, including a Halliburton mail delivery employee earlier this month.
"At the end of the day, neither these companies nor their employees are bound by military justice, and it is up to them whether to show up or not," Singer said. "The result is that there have been delays in setting up showers for soldiers, getting them cooked meals and so on."
A related concern is the rising cost of hiring contract workers because of skyrocketing insurance premiums. Singer estimates that premiums have increased by 300 percent to 400 percent this year, costs that are passed on to the taxpayer under the cost-plus-award fee system that is the basis for most contracts.
The LOGCAP contract awarded to Brown and Root in 2001 was the third, and potentially most lucrative, super-contract awarded by the Army. Brown and Root won the first five-year contract in 1992, but lost the second to rival DynCorp in 1997 after the GAO criticized the Army for not adequately controlling contracting costs in Bosnia.
Business terror links probed
NYC asks Halliburton, G.E. & CononoPhillips to review dealings in Iran and Syria.
NEW YORK (CNN/Money) - New York City's comptroller is asking three American corporations to examine subsidiary business with terrorism-related states.
Comptroller William Thompson, whose office oversees the city's pension funds, has submitted shareholder resolutions to three companies -- Halliburton, General Electric and ConocoPhillips -- asking for a review of the companies' dealings in Iran and Syria. The resolutions were filed on behalf of the city's fire and police department pensions.
"We believe their use of offshore and United Kingdom subsidiaries to establish operations with countries that sponsor terrorism violates the spirit, if not the letter of the law," Thompson said in a written statement. "These actions also expose the companies to the prospect of negative publicity, public protests, and a loss of consumer confidence, all of which can have a negative impact on shareholder value."
New York City's pension funds have $951 million invested in General Electric, $124 million in ConocoPhillips and $23 million in Halliburton.
The Halliburton resolution seeks a shareholder vote on doing business with Iran, which the U.S. government says has supported terrorism. Thompson says Halliburton has an office in Iran through its Cayman Subsidiary. He says Halliburton is seeking to block the resolution and has asked permission from the Securities and Exchange Commission to do so.
GE does business with Iran through its Canadian subsidiary. A spokesperson from GE told CNNfn the company is in full compliance with the law.
ConocoPhillips operates in both Iran and Syria through its British subsidiary. Neither Halliburton or ConocoPhillips returned calls seeking comment.
NYC asks Halliburton, G.E. & CononoPhillips to review dealings in Iran and Syria.
NEW YORK (CNN/Money) - New York City's comptroller is asking three American corporations to examine subsidiary business with terrorism-related states.
Comptroller William Thompson, whose office oversees the city's pension funds, has submitted shareholder resolutions to three companies -- Halliburton, General Electric and ConocoPhillips -- asking for a review of the companies' dealings in Iran and Syria. The resolutions were filed on behalf of the city's fire and police department pensions.
"We believe their use of offshore and United Kingdom subsidiaries to establish operations with countries that sponsor terrorism violates the spirit, if not the letter of the law," Thompson said in a written statement. "These actions also expose the companies to the prospect of negative publicity, public protests, and a loss of consumer confidence, all of which can have a negative impact on shareholder value."
New York City's pension funds have $951 million invested in General Electric, $124 million in ConocoPhillips and $23 million in Halliburton.
The Halliburton resolution seeks a shareholder vote on doing business with Iran, which the U.S. government says has supported terrorism. Thompson says Halliburton has an office in Iran through its Cayman Subsidiary. He says Halliburton is seeking to block the resolution and has asked permission from the Securities and Exchange Commission to do so.
GE does business with Iran through its Canadian subsidiary. A spokesperson from GE told CNNfn the company is in full compliance with the law.
ConocoPhillips operates in both Iran and Syria through its British subsidiary. Neither Halliburton or ConocoPhillips returned calls seeking comment.
Iraq rebuilding contracts awarded
Halliburton, Stevedoring Services of America get government contracts for early relief work.
NEW YORK (CNN/Money) - The first contracts for rebuilding post-war Iraq have been awarded, and Vice President Dick Cheney's old employer, Halliburton Co., is one of the early winners.
The Kellogg Brown & Root (KBR) unit of Halliburton (HAL: up $0.54 to $20.66, Research, Estimates), of which Cheney was CEO from 1995 to 2000, said late Monday that it was awarded a contract by the U.S. Army Corps of Engineers to put out oil fires and make emergency repairs to Iraq's oil infrastructure.
President Bush Tuesday asked Congress for $489.3 million to cover the cost of repairing damage to Iraq's oil facilities, much or all of which could go to Halliburton or its subcontractors under the terms of its contract with the Army.
Halliburton wouldn't speculate about the total monetary value or duration of its contract, under which it will put into action some of the firefighting and repair plans it outlined for the Army in a study it conducted in November.
"KBR's ... contract is limited to task orders under the contract for only those services which are necessary to support the mission in the near term," Halliburton spokeswoman Wendy Hall said.
The Army Corps of Engineers told CNN Tuesday that Halliburton would be paid on a "cost plus" basis, meaning it would be reimbursed for the costs of its work and would get a certain percentage of those costs as a fee.
Since it's still unknown how much damage has been or will be done to Iraqi oil fields in the war, it's difficult to estimate the contract's eventual dollar value.
But its biggest value could be that it puts Halliburton in a prime position to handle the complete refurbishment of Iraq's long-neglected oil infrastructure, which will be a plum job.
Getting Iraq's oil fields to pre-1991 production levels will take at least 18 months and cost about $5 billion initially, with $3 billion more in annual operating expenses, according to a recent study by the James A. Baker III Institute for Public Policy at Rice University, named for the first President Bush's secretary of state during the first Gulf War.
"Certainly Halliburton would have the lead [in the competition for that job], even absent this contract, given the size and scope of their current operations," said Pierre Conner, an analyst with Hibernia Southcoast Capital. "But there's no question they'll start with some footprint there. It clearly puts them in the position where they will know more about the situation and have a bit of an operation there."
Though none of the potential administrators of such a contract -- including the Defense Department, the State Department's U.S. Agency for International Development (USAID) and the United Nations -- have claimed responsibility for handing out the job, Monday's award and Bush's request for funding seem to indicate the U.S. government will be in charge.
Halliburton said it has subcontracted the firefighting portion of the Army contract to Houston-based companies Boots & Coots International Well Control Inc. (WEL: up $0.06 to $1.16, Research, Estimates) and Wild Well Control Inc., a private company.
Hall of Halliburton said all oil fires should be put out within 240 days. Very few oil wells have been set ablaze by Iraqis so far, in contrast to the first Gulf War in 1991, when Iraqi troops retreating from Kuwait set fire to more than 700 Kuwaiti oil wells. Halliburton's KBR unit was involved in putting out the 1991 fires.
Separately, USAID late Monday awarded a $4.8 million contract to Stevedoring Services of America (SSA), a private company based in Seattle, to manage the Umm Qasr ports in southern Iraq.
Umm Qasr's ports, where U.S. and British troops have struggled for full control, are seen as critical to efforts to bring humanitarian relief to Iraqis. SSA will handle several tasks, including assessing the need for dredging and repairs to the ports, and unloading and warehousing cargo.
USAID plans to issue seven other contracts, including one for $600 million for general construction work in post-war Iraq. Halliburton is among several companies reported to have put in bids for that contract.
Halliburton, Stevedoring Services of America get government contracts for early relief work.
NEW YORK (CNN/Money) - The first contracts for rebuilding post-war Iraq have been awarded, and Vice President Dick Cheney's old employer, Halliburton Co., is one of the early winners.
The Kellogg Brown & Root (KBR) unit of Halliburton (HAL: up $0.54 to $20.66, Research, Estimates), of which Cheney was CEO from 1995 to 2000, said late Monday that it was awarded a contract by the U.S. Army Corps of Engineers to put out oil fires and make emergency repairs to Iraq's oil infrastructure.
President Bush Tuesday asked Congress for $489.3 million to cover the cost of repairing damage to Iraq's oil facilities, much or all of which could go to Halliburton or its subcontractors under the terms of its contract with the Army.
Halliburton wouldn't speculate about the total monetary value or duration of its contract, under which it will put into action some of the firefighting and repair plans it outlined for the Army in a study it conducted in November.
"KBR's ... contract is limited to task orders under the contract for only those services which are necessary to support the mission in the near term," Halliburton spokeswoman Wendy Hall said.
The Army Corps of Engineers told CNN Tuesday that Halliburton would be paid on a "cost plus" basis, meaning it would be reimbursed for the costs of its work and would get a certain percentage of those costs as a fee.
Since it's still unknown how much damage has been or will be done to Iraqi oil fields in the war, it's difficult to estimate the contract's eventual dollar value.
But its biggest value could be that it puts Halliburton in a prime position to handle the complete refurbishment of Iraq's long-neglected oil infrastructure, which will be a plum job.
Getting Iraq's oil fields to pre-1991 production levels will take at least 18 months and cost about $5 billion initially, with $3 billion more in annual operating expenses, according to a recent study by the James A. Baker III Institute for Public Policy at Rice University, named for the first President Bush's secretary of state during the first Gulf War.
"Certainly Halliburton would have the lead [in the competition for that job], even absent this contract, given the size and scope of their current operations," said Pierre Conner, an analyst with Hibernia Southcoast Capital. "But there's no question they'll start with some footprint there. It clearly puts them in the position where they will know more about the situation and have a bit of an operation there."
Though none of the potential administrators of such a contract -- including the Defense Department, the State Department's U.S. Agency for International Development (USAID) and the United Nations -- have claimed responsibility for handing out the job, Monday's award and Bush's request for funding seem to indicate the U.S. government will be in charge.
Halliburton said it has subcontracted the firefighting portion of the Army contract to Houston-based companies Boots & Coots International Well Control Inc. (WEL: up $0.06 to $1.16, Research, Estimates) and Wild Well Control Inc., a private company.
Hall of Halliburton said all oil fires should be put out within 240 days. Very few oil wells have been set ablaze by Iraqis so far, in contrast to the first Gulf War in 1991, when Iraqi troops retreating from Kuwait set fire to more than 700 Kuwaiti oil wells. Halliburton's KBR unit was involved in putting out the 1991 fires.
Separately, USAID late Monday awarded a $4.8 million contract to Stevedoring Services of America (SSA), a private company based in Seattle, to manage the Umm Qasr ports in southern Iraq.
Umm Qasr's ports, where U.S. and British troops have struggled for full control, are seen as critical to efforts to bring humanitarian relief to Iraqis. SSA will handle several tasks, including assessing the need for dredging and repairs to the ports, and unloading and warehousing cargo.
USAID plans to issue seven other contracts, including one for $600 million for general construction work in post-war Iraq. Halliburton is among several companies reported to have put in bids for that contract.
60 Minutes on Sunday Night. Almost as soon as the last bomb was dropped over Iraq, the United States began the business of rebuilding the country. As it turns out, it's very big business.
The U.S. will spend approximately $25 billion to repair Iraq by the end of next year - and billions will be needed after that.
Almost all of that money will go to private contractors who vie for lucrative government deals to rebuild Iraq's roads, retrain its police force and operate its airports.
Given all the taxpayer money involved, you might think the process for awarding those contracts would be open and competitive.
But, as 60 Minutes reported last spring, the earliest contracts were given to a few favored companies. And some of the biggest winners in the sweepstakes to rebuild Iraq have one thing in common: lots of very close friends in very high places. Correspondent Steve Kroft reports.
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One is Halliburton, the Houston-based energy services and construction giant whose former CEO, Dick Cheney, is now vice president of the United States.
Even before the first shots were fired in Iraq, the Pentagon had secretly awarded Halliburton subsidiary Kellogg, Brown & Root a two-year, no-bid contract to put out oil well fires and to handle other unspecified duties involving war damage to the country’s petroleum industry. It is worth up to $7 billion.
But Robert Andersen, chief counsel for the Army Corps of Engineers, says that oil field damage was much less than anticipated and Halliburton will end up collecting only a small fraction of that $7 billion. But he can't say how small a fraction or exactly what the contract covers because the mission and the contract are considered classified information.
Under normal circumstances, the Army Corps of Engineers would have been required to put the oil fire contract out for competitive bidding. But in times of emergency, when national security is involved, the government is allowed to bypass normal procedures and award contracts to a single company, without competition.
And that's exactly what happened with Halliburton.
“We are the only company in the United States that had the kind of systems in place, people in place, contracts in place, to do that kind of thing,” says Chuck Dominy, Halliburton’s vice president for government affairs and its chief lobbyist on Capitol Hill.
He says the Pentagon came to Halliburton because the company already had an existing contract with the Army to provide logistical support to U.S. troops all over the world.
“Let me put a face on Halliburton. It's one of the world's largest energy services companies, and it has a strong engineering and construction arm that goes with that” says Dominy.
“You'll find us in 120 countries. We've got 83,000 people on our payroll, and we're involved in a ton of different things for a lot of wonderful clients worldwide.”
“They had assets prepositioned,” says Anderson. “They had capability to reach out and get sub-contractors to do the various types of work that might be required in a hostile situation.”
“The procurement of this particular contract was done by career civil servants, and I know that it's a perception that those at the very highest levels of the administration, Democrat and Republican, get involved in procurement issues. It can happen. But for the very most part, the procurement system is designed to keep those judgments with the career public servants.”
But is political influence not unknown in the process? In this particular case, Anderson says, it was legally justified and prudent.
But not everyone thought it was prudent. Bob Grace is president of GSM Consulting, a small company in Amarillo, Texas, that has fought oil well fires all over the world. Grace worked for the Kuwait government after the first Gulf War and was in charge of firefighting strategy for the huge Bergan Oil Field, which had more than 300 fires. Last September, when it looked like there might be another Gulf war and more oil well fires, he and a lot of his friends in the industry began contacting the Pentagon and their congressmen.
“All we were trying to find out was, who do we present our credentials to,” says Grace. “We just want to be able to go to somebody and say, ‘Hey, here's who we are, and here's what we've done, and here's what we do.’”
“They basically told us that there wasn't going to be any oil well fires.”
Grace showed 60 Minutes a letter from the Department of Defense saying: "The department is aware of a broad range of well firefighting capabilities and techniques available. However, we believe it is too early to speculate what might happen in the event that war breaks out in the region."
It was dated Dec. 30, 2002, more than a month after the Army Corps of Engineers began talking to Halliburton about putting out oil well fires in Iraq.
“You just feel like you're beating your head against the wall,” says Grace.
However, Andersen says the Pentagon had a very good reason for putting out that message.
“The mission at that time was classified, and what we were doing to assess the possible damage and to prepare for it was classified,” says Andersen. “Communications with the public had to be made with that in mind.”
“I can accept confidentiality in terms of war plans and all that. But to have secrecy about Saddam Hussein blowing up oil wells, to me, is stupid,” says Grace. “I mean the guy's blown up a thousand of them. So why would that be a revelation to anybody?”
But Grace says the whole point of competitive bidding is to save the taxpayers money. He believes they are getting a raw deal. “From what I’ve read in the papers, they're charging $50,000 a day for a five-man team. I know there are guys that are equally as well-qualified as the guys that are over there that'll do it for half that.”
Grace and his friends are no match for Halliburton when it comes to landing government business. Last year alone, Halliburton and its Brown & Root subsidiary delivered $1.3 billion worth of services to the U.S. government.
Much of it was for work the U.S. military used to do itself.
“You help build base camps. You provide goods, laundry, power, sewage, all the kinds of things that keep an army in place in a field operation,” says Dominy.
“Young soldiers have said to me, ‘If I go to war, I want to go to war with Brown & Root.’"
And they have, in places like Afghanistan, Rwanda, Somalia, Kosovo and now Iraq.
“It's a sweetheart contract,” says Charles Lewis, executive director of the Center For Public Integrity, a non-profit organization that investigates corruption and abuse of power by government and corporations. “There's no other word for it.”
Lewis says the trend towards privatizing the military began during the first Bush administration when Dick Cheney was secretary of defense. In 1992, the Pentagon, under Cheney, commissioned the Halliburton subsidiary Brown & Root to do a classified study on whether it was a good idea to have private contractors do more of the military's work.
“Of course, they said it's a terrific idea, and over the next eight years, Kellogg, Brown & Root and another company got 2,700 contracts worth billions of dollars,” says Lewis.
“So they helped to design the architecture for privatizing a lot of what happens today in the Pentagon when we have military engagements. And two years later, when he leaves the department of defense, Cheney is CEO of Halliburton. Thank you very much. It's a nice arrangement for all concerned.”
During the five years that Cheney was at Halliburton, the company nearly doubled the value of its federal contracts, and the vice president became a very rich man.
Lewis is not saying that Cheney did anything illegal. But he doesn't believe for a minute that this was all just a coincidence.
“Why would a defense secretary, former chief of staff to a president, and former member of congress with no business experience ever in his life, not for a day, why would he become the CEO of a multibillion dollar oil services company,” asks Lewis
“Well, it could be related to government contracts. He was brought in to raise their government contract profile. And he did. And they ended up with billions of dollars in new contracts because they had a former defense secretary at the helm.”
Cheney, Lewis says, may be an honorable and brilliant man, but “as George Washington Plunkett once said, ‘I saw my … seen my opportunities and I took them."
Both Halliburton and the Pentagon believe Lewis is insulting not only the vice president but thousands of professional civil servants who evaluate and award defense contracts based strictly on merit.
But does the fact that Cheney used to run Halliburton have any effect at all on the company getting government contracts?
“Zero,” says Dominy. “I will guarantee you that. Absolutely zero impact.”
“In fact, I wish I could embed [critics] in the department of defense contracting system for a week or so. Once they'd done that, they'd have religion just like I do, about how the system cannot be influenced.”
Dominy has been with Halliburton for seven years. Before that, he was former three-star Army general. One of his last military assignments was as a commander at the Army Corps of Engineers.
And now, the Army Corps of Engineers is also the government agency that awards contracts to companies like Halliburton.
Asked if his expertise in that area had anything to do with his employment at Halliburton, Dominy replies, “None.”
But Lewis isn’t surprised at all.
“Of course, he’s from the Army Corps. And of course, he’s a general,” says Lewis. “I’m sure he and no one else at Halliburton sees the slightest thing that might look strange about that, or a little cozy maybe.”
Lewis says the best example of these cozy relationships is the defense policy board, a group of high-powered civilians who advise the secretary of defense on major policy issues - like whether or not to invade Iraq. Its 30 members are a Who's Who of former senior government and military officials.
There’s nothing wrong with that, but as the Center For Public Integrity recently discovered, nine of them have ties to corporations and private companies that have won more than $76 billion in defense contracts. And that's just in the last two years.
“This is not about the revolving door, people going in and out,” says Lewis. “There is no door. There's no wall. I can't tell where one stops and the other starts. I'm dead serious.”
“They have classified clearances, they go to classified meetings and they're with companies getting billions of dollars in classified contracts. And their disclosures about their activities are classified. Well, isn't that what they did when they were inside the government? What's the difference, except they're in the private sector.”
Richard Perle resigned as chairman of the defense policy board last month after it was disclosed that he had financial ties to several companies doing business with the Pentagon.
But Perle still sits on the board, along with former CIA director James Woolsey, who works for the consulting firm of Booz, Allen, Hamilton. The firm did nearly $700 million dollars in business with the Pentagon last year.
Another board member, retired four-star general Jack Sheehan, is now a senior vice president at the Bechtel corporation, which just won a $680 million contract to rebuild the infrastructure in Iraq.
That contract was awarded by the State Department, which used to be run by George Schultz, who sits on Bechtel's board of directors.
“I'm not saying that it's illegal. These guys wrote the laws. They set up the system for themselves. Of course it's legal,” says Lewis.
“It just looks like hell. It looks like you have folks feeding at the trough. And they may be doing it in red white and blue and we may be all singing the "Star Spangled Banner," but they're doing quite well.”
--------------------------------------------------------------------------------
Halliburton has done extremely well. So far, the company has earned almost a billion dollars on the oil well fire contract, and could earn another billion providing logistical support for U.S. troops stationed in Iraq.
As for Vice President Cheney, he says he had nothing to do with the Army Corp's decision to give the no bid contract to Halliburton. Cheney also insists he cut all financial ties to the company three years ago.
But this week, Senate democrats challenged that assertion. They say the vice president still gets hundreds of thousands of dollars from his former company each year - and they called for congressional hearings on Halliburton's contract.
The U.S. will spend approximately $25 billion to repair Iraq by the end of next year - and billions will be needed after that.
Almost all of that money will go to private contractors who vie for lucrative government deals to rebuild Iraq's roads, retrain its police force and operate its airports.
Given all the taxpayer money involved, you might think the process for awarding those contracts would be open and competitive.
But, as 60 Minutes reported last spring, the earliest contracts were given to a few favored companies. And some of the biggest winners in the sweepstakes to rebuild Iraq have one thing in common: lots of very close friends in very high places. Correspondent Steve Kroft reports.
--------------------------------------------------------------------------------
One is Halliburton, the Houston-based energy services and construction giant whose former CEO, Dick Cheney, is now vice president of the United States.
Even before the first shots were fired in Iraq, the Pentagon had secretly awarded Halliburton subsidiary Kellogg, Brown & Root a two-year, no-bid contract to put out oil well fires and to handle other unspecified duties involving war damage to the country’s petroleum industry. It is worth up to $7 billion.
But Robert Andersen, chief counsel for the Army Corps of Engineers, says that oil field damage was much less than anticipated and Halliburton will end up collecting only a small fraction of that $7 billion. But he can't say how small a fraction or exactly what the contract covers because the mission and the contract are considered classified information.
Under normal circumstances, the Army Corps of Engineers would have been required to put the oil fire contract out for competitive bidding. But in times of emergency, when national security is involved, the government is allowed to bypass normal procedures and award contracts to a single company, without competition.
And that's exactly what happened with Halliburton.
“We are the only company in the United States that had the kind of systems in place, people in place, contracts in place, to do that kind of thing,” says Chuck Dominy, Halliburton’s vice president for government affairs and its chief lobbyist on Capitol Hill.
He says the Pentagon came to Halliburton because the company already had an existing contract with the Army to provide logistical support to U.S. troops all over the world.
“Let me put a face on Halliburton. It's one of the world's largest energy services companies, and it has a strong engineering and construction arm that goes with that” says Dominy.
“You'll find us in 120 countries. We've got 83,000 people on our payroll, and we're involved in a ton of different things for a lot of wonderful clients worldwide.”
“They had assets prepositioned,” says Anderson. “They had capability to reach out and get sub-contractors to do the various types of work that might be required in a hostile situation.”
“The procurement of this particular contract was done by career civil servants, and I know that it's a perception that those at the very highest levels of the administration, Democrat and Republican, get involved in procurement issues. It can happen. But for the very most part, the procurement system is designed to keep those judgments with the career public servants.”
But is political influence not unknown in the process? In this particular case, Anderson says, it was legally justified and prudent.
But not everyone thought it was prudent. Bob Grace is president of GSM Consulting, a small company in Amarillo, Texas, that has fought oil well fires all over the world. Grace worked for the Kuwait government after the first Gulf War and was in charge of firefighting strategy for the huge Bergan Oil Field, which had more than 300 fires. Last September, when it looked like there might be another Gulf war and more oil well fires, he and a lot of his friends in the industry began contacting the Pentagon and their congressmen.
“All we were trying to find out was, who do we present our credentials to,” says Grace. “We just want to be able to go to somebody and say, ‘Hey, here's who we are, and here's what we've done, and here's what we do.’”
“They basically told us that there wasn't going to be any oil well fires.”
Grace showed 60 Minutes a letter from the Department of Defense saying: "The department is aware of a broad range of well firefighting capabilities and techniques available. However, we believe it is too early to speculate what might happen in the event that war breaks out in the region."
It was dated Dec. 30, 2002, more than a month after the Army Corps of Engineers began talking to Halliburton about putting out oil well fires in Iraq.
“You just feel like you're beating your head against the wall,” says Grace.
However, Andersen says the Pentagon had a very good reason for putting out that message.
“The mission at that time was classified, and what we were doing to assess the possible damage and to prepare for it was classified,” says Andersen. “Communications with the public had to be made with that in mind.”
“I can accept confidentiality in terms of war plans and all that. But to have secrecy about Saddam Hussein blowing up oil wells, to me, is stupid,” says Grace. “I mean the guy's blown up a thousand of them. So why would that be a revelation to anybody?”
But Grace says the whole point of competitive bidding is to save the taxpayers money. He believes they are getting a raw deal. “From what I’ve read in the papers, they're charging $50,000 a day for a five-man team. I know there are guys that are equally as well-qualified as the guys that are over there that'll do it for half that.”
Grace and his friends are no match for Halliburton when it comes to landing government business. Last year alone, Halliburton and its Brown & Root subsidiary delivered $1.3 billion worth of services to the U.S. government.
Much of it was for work the U.S. military used to do itself.
“You help build base camps. You provide goods, laundry, power, sewage, all the kinds of things that keep an army in place in a field operation,” says Dominy.
“Young soldiers have said to me, ‘If I go to war, I want to go to war with Brown & Root.’"
And they have, in places like Afghanistan, Rwanda, Somalia, Kosovo and now Iraq.
“It's a sweetheart contract,” says Charles Lewis, executive director of the Center For Public Integrity, a non-profit organization that investigates corruption and abuse of power by government and corporations. “There's no other word for it.”
Lewis says the trend towards privatizing the military began during the first Bush administration when Dick Cheney was secretary of defense. In 1992, the Pentagon, under Cheney, commissioned the Halliburton subsidiary Brown & Root to do a classified study on whether it was a good idea to have private contractors do more of the military's work.
“Of course, they said it's a terrific idea, and over the next eight years, Kellogg, Brown & Root and another company got 2,700 contracts worth billions of dollars,” says Lewis.
“So they helped to design the architecture for privatizing a lot of what happens today in the Pentagon when we have military engagements. And two years later, when he leaves the department of defense, Cheney is CEO of Halliburton. Thank you very much. It's a nice arrangement for all concerned.”
During the five years that Cheney was at Halliburton, the company nearly doubled the value of its federal contracts, and the vice president became a very rich man.
Lewis is not saying that Cheney did anything illegal. But he doesn't believe for a minute that this was all just a coincidence.
“Why would a defense secretary, former chief of staff to a president, and former member of congress with no business experience ever in his life, not for a day, why would he become the CEO of a multibillion dollar oil services company,” asks Lewis
“Well, it could be related to government contracts. He was brought in to raise their government contract profile. And he did. And they ended up with billions of dollars in new contracts because they had a former defense secretary at the helm.”
Cheney, Lewis says, may be an honorable and brilliant man, but “as George Washington Plunkett once said, ‘I saw my … seen my opportunities and I took them."
Both Halliburton and the Pentagon believe Lewis is insulting not only the vice president but thousands of professional civil servants who evaluate and award defense contracts based strictly on merit.
But does the fact that Cheney used to run Halliburton have any effect at all on the company getting government contracts?
“Zero,” says Dominy. “I will guarantee you that. Absolutely zero impact.”
“In fact, I wish I could embed [critics] in the department of defense contracting system for a week or so. Once they'd done that, they'd have religion just like I do, about how the system cannot be influenced.”
Dominy has been with Halliburton for seven years. Before that, he was former three-star Army general. One of his last military assignments was as a commander at the Army Corps of Engineers.
And now, the Army Corps of Engineers is also the government agency that awards contracts to companies like Halliburton.
Asked if his expertise in that area had anything to do with his employment at Halliburton, Dominy replies, “None.”
But Lewis isn’t surprised at all.
“Of course, he’s from the Army Corps. And of course, he’s a general,” says Lewis. “I’m sure he and no one else at Halliburton sees the slightest thing that might look strange about that, or a little cozy maybe.”
Lewis says the best example of these cozy relationships is the defense policy board, a group of high-powered civilians who advise the secretary of defense on major policy issues - like whether or not to invade Iraq. Its 30 members are a Who's Who of former senior government and military officials.
There’s nothing wrong with that, but as the Center For Public Integrity recently discovered, nine of them have ties to corporations and private companies that have won more than $76 billion in defense contracts. And that's just in the last two years.
“This is not about the revolving door, people going in and out,” says Lewis. “There is no door. There's no wall. I can't tell where one stops and the other starts. I'm dead serious.”
“They have classified clearances, they go to classified meetings and they're with companies getting billions of dollars in classified contracts. And their disclosures about their activities are classified. Well, isn't that what they did when they were inside the government? What's the difference, except they're in the private sector.”
Richard Perle resigned as chairman of the defense policy board last month after it was disclosed that he had financial ties to several companies doing business with the Pentagon.
But Perle still sits on the board, along with former CIA director James Woolsey, who works for the consulting firm of Booz, Allen, Hamilton. The firm did nearly $700 million dollars in business with the Pentagon last year.
Another board member, retired four-star general Jack Sheehan, is now a senior vice president at the Bechtel corporation, which just won a $680 million contract to rebuild the infrastructure in Iraq.
That contract was awarded by the State Department, which used to be run by George Schultz, who sits on Bechtel's board of directors.
“I'm not saying that it's illegal. These guys wrote the laws. They set up the system for themselves. Of course it's legal,” says Lewis.
“It just looks like hell. It looks like you have folks feeding at the trough. And they may be doing it in red white and blue and we may be all singing the "Star Spangled Banner," but they're doing quite well.”
--------------------------------------------------------------------------------
Halliburton has done extremely well. So far, the company has earned almost a billion dollars on the oil well fire contract, and could earn another billion providing logistical support for U.S. troops stationed in Iraq.
As for Vice President Cheney, he says he had nothing to do with the Army Corp's decision to give the no bid contract to Halliburton. Cheney also insists he cut all financial ties to the company three years ago.
But this week, Senate democrats challenged that assertion. They say the vice president still gets hundreds of thousands of dollars from his former company each year - and they called for congressional hearings on Halliburton's contract.
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