Cheney oil firm accused of overcharging $61m in Iraq

Julian Borger in Washington

Saturday December 13, 2003

The Guardian

A Pentagon audit has found that Halliburton, the company formerly run by the US vice-president, Dick Cheney, overcharged the government by $61m (about �35m) for delivering petrol to Iraq.

The Texan oil services company has denied the charges and defence officials said there was no evidence that it profited disproportionately from the overcharging, saying it simply passed on high prices charged by a sub-contractor.

However, Democratic critics have pointed to army figures showing Halliburton charged 24 cents a gallon for imported petrol - nearly a tenth of the selling price - as a "mark-up" over and above the sub-contractors' charges, significantly higher than the profit margin of other companies.

The audit also found that a Halliburton subsidiary had charged $67m too much for building army canteens in Iraq. The army refused to pay.

President George Bush said the company would have to pay back any money accrued from overcharging, and promised to show openly that taxpayers' money was being diligently spent in Iraq.

"If there's an overcharge, like we think there is, we expect that money be repaid," he said. "We're going to make sure that as we spend money in Iraq, it's spent well, it's spent wisely."

The preliminary audit has fanned a growing row over the division of Iraqi reconstruction contracts, which was aggravated earlier this week when the Pentagon excluded French, German, Russian and Canadian companies from bidding, because they were not coalition partners.

The debate over the spoils of war is fuelled by Halliburton's intimate link to the White House and by the fact that through its subsidiary, Kellogg, Brown & Root (KBR), it has been awarded a series of contracts without competitive bidding, potentially worth more than $15bn.

A Halliburton spokeswoman, Wendy Hall, said the company was cooperating fully with the Pentagon auditors. It has defended its prices, pointing to the risks involved in driving fuel from Kuwait to Iraq. Several KBR employees have been killed or wounded.

However, the per-gallon price charged to the government by KBR, $2.64, is more than twice what other suppliers were asking.

Michael Thibault, the deputy director of the Defence Contract Audit Agency, said initial evidence suggested that overcharging was "potentially very substantial".

Halliburton has until December 17 to respond. Pentagon officials did not name the sub-contractor which supplied the fuel.

Henry Waxman, a Democratic congressman leading the attack against Halliburton, said the audit confirmed it had been "gouging taxpayers", and that "the White House has been letting them get away with it".

He wrote to Condoleezza Rice, the national security adviser: "Independent experts we consulted called these charges a huge rip-off of the taxpayer. Hundreds of millions of taxpayer dollars are at stake. Despite the enormous costs, the White House has refused to address this issue."

The publicity surrounding the audit, however, failed to dampen investor enthusiasm for its stock. Its price has risen 85% in the past two years and rose again yesterday.

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