Halliburton accused of Iraq overbilling

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California Rep. Waxman says the Texas oil-services company overcharged U.S. for exporting oil.



(CNN) October 15, 2003: 6:56 PM EDT



WASHINGTON (Reuters) - A Democratic lawmaker Wednesday accused Halliburton, the Texas oil services company once run by Vice President Dick Cheney, of overcharging the U.S. government for gasoline the firm imports into Iraq.



Halliburton subsidiary Kellogg Brown & Root, which defends its pricing as fair, has a contract with the U.S. Army Corps of Engineers to rebuild Iraq's oil sector. This has included importing gasoline products which are in short supply to the oil-rich nation.



"Millions of Americans want to help Iraqis but they don't want to be fleeced [by Halliburton]," Rep. Henry Waxman, of California, told a news conference.



Waxman said army documents showed that as of Sept. 18, the United States had paid Halliburton $300 million to import about 190 million gallons (719 million liters) of gasoline into Iraq.



Halliburton billed the government an average price of $1.59 per gallon (3.7 liters), excluding the company's fee of 2 percent to 7 percent, said Waxman.



He said the average wholesale cost of gasoline during that period in the Middle East was about 71 cents a gallon, a figure an oil industry source told Reuters was accurate. That meant Halliburton was charging more than 90 cents a gallon to transport fuel into Iraq from Kuwait



"When we checked with independent experts to see if this fee was reasonable, they were stunned," said Waxman, adding a reasonable transport cost would be 10 to 25 cents per gallon, especially as the U.S. military was providing security.



Asked to comment on the claims, a Halliburton spokeswoman defended the pricing as fair and said KBR had to transport gasoline through a "hostile environment" into Baghdad.



"We use a sound procurement process which has been approved by the government for procurement activities," said spokeswoman Wendy Hall. "KBR continues to negotiate fair and competitive prices to provide fuel to the Iraqi people," she added.



Waxman sent a letter on Wednesday to the White House Office of Management and Budget complaining KBR was overcharging for petroleum products.



"The overcharging by Halliburton is so extreme that one expert privately called it 'highway robbery,"' he wrote.



Army Corps of Engineers spokesman Bob Faletti said military auditors were closely monitoring work done by KBR and making sure the U.S. taxpayer was not being overcharged.



"So far there have not been any red flags," said Faletti. "They have not found any material errors. There are always small errors but there has been no defective pricing or anything untoward," he added.



Halliburton has so far received more than $1.4 billion in work in Iraq to repair and restore the country's oil industry under a no-competition contract issued in March. In another contract providing logistical support, more than $1.6 billion has been clocked so far, with more in the works.



Halliburton's no-bid contract is set to be replaced after the military announces the winners to two new tenders amounting to no more $1 billion.



Faletti said the winners for those two contracts, one for the north and the other for the south of Iraq, would be announced by the end of October.



In a related development, New Jersey Sen. Frank Lautenberg, a Democrat, suggested an amendment to the $87 billion Iraq spending bill in Congress that would prevent firms with ties to senior administration officials from getting Iraq contracts.



Lautenberg said the amendment would take effect 90 days after the bill became law which gave officials ample time to divest themselves from financial interests in a company.



Cheney has strongly denied any favoritism in the Halliburton deal in Iraq and says he has no financial interest in the company.

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