John Kerry Takes on Cheney and Halliburton

17, 2004

Kerry Takes on Cheney and Halliburton; Unveils Plan to Stop Halliburton Type Abuses

Albuquerque, NM - Democratic presidential nominee John Kerry pledged to move America in a new direction after four years of a president who has chosen to put the interests of his well-connected friends ahead of the American people. Offering up Halliburton, its close ties to Dick Cheney and the billions in no-bid contracts it has received as an example, Kerry stressed that George Bush has made the wrong choices for America, and he outlined the new Kerry-Edwards plan to put an end to Halliburton-type abuses.

“We need a Commander in Chief and a Vice President who put the interests of our troops and our taxpayers ahead of their big money friends,” Kerry said. “We need a president and a vice president who won’t sacrifice the taxpayers’ money on the altar of no bid cronyism while our fighting men and women go without the armor and equipment they need.”

Vice President Cheney made millions as the CEO of Halliburton from 1995-2000. He still maintains a financial interest in the company, receiving nearly $2 million since being sworn in. When it came time to give contracts to rebuild Iraqi oil fields, Halliburton was awarded a contract worth up to $7 billion.

In return for employing Cheney’s former company, the U.S. taxpayers have gotten waste, fraud and abuse. Halliburton’s overcharging has cost American taxpayers hundreds of millions of dollars, and a report by the GAO found “significant problems” in nearly every area of the Halliburton contract in Iraq.

“It is clear: George W. Bush and Dick Cheney have mismanaged every aspect of the war in Iraq,” Kerry said. “By blatantly turning a blind eye to the massive overcharging and waste of their friends at Halliburton, they have proven once again why they are the wrong choice, the wrong direction and the wrong leadership for America.”

Blasting a system that lets politics interfere with getting taxpayers the best deal and our troops the support they deserve, Kerry today unveiled his plan to reform the contracting system.

The Kerry plan will reform and simplify the contracting process, ensuring fair competition and reversing the trend towards awarding sole source contracts. It will overhaul the accounting process to ensure companies do not profit at taxpayers’ expense and severely punish any firm that overbills or profiteers.

“As President, I will stop companies like Halliburton from profiting at the expense of our troops and taxpayers,” Kerry said. “I will stop companies from receiving no-bid contracts from the government when the president or vice president is still receiving compensation from that company. I will make sure that all government funds are properly accounted for. And as Commander in Chief, I will have two words for companies that cheat the U.S. military – ‘You’re fired.’”

Separately Friday, the Kerry campaign announced a new television ad, “Cheney Halliburton.” The ad notes that the administration’s wrong choices have netted no-bid contracts for Halliburton, $2 million for Cheney and a $200 billion price tag, lost jobs and higher health care costs for the American people. The ad will greet Cheney today when he campaigns in Oregon and air in other battleground states next week.

ATTACHED.. The Worst of Halliburton: A Cheat Sheet

Cheney Made Millions As Halliburton CEO. Vice President Dick Cheney was the CEO of Texas-based Halliburton from 1995-2000. In addition to providing a massive salary and bonus for only eight months of work in 2000, Halliburton’s board of directors voted to give Dick Cheney a $20 million retirement package when he resigned. Cheney’s compensation for the eight months of 2000 he served as CEO of Halliburton, according to the Associated Press, was “$4.3 million in deferred compensation and bonuses, and $806,332 in salary.” [New York Times, 8/12/00; Los Angeles Times, 7/24/00; Associated Press, 7/18/02]

As Vice President, Cheney Has Received $2 Million From Halliburton. In his retirement package from Halliburton, Cheney was granted deferred compensation, which paid out his bonus and his salary from 1999 over a five-year period. So far as Vice President, Cheney has received nearly $2 million from Halliburton, and is expected to receive additional deferred compensation in 2004. [“Income: Type and amount,” Schedule A, Standard Form 278, Richard B. Cheney Personal Financial Disclosure, 5/15/02; 5/15/03; Cheney Income Tax Returns; Associated Press, 6/15/04]

Congressional Research Service Said Cheney’s Deferred Compensation Is Financial Interest. Cheney told NBC’s Tim Russert that, “since I left Halliburton to become George Bush's vice president, I've severed all my ties with the company, gotten rid of all my financial interests. I have no financial interest in Halliburton of any kind and haven't had now for over three years.” But, just days later, the Congressional Research Service released a report saying that federal ethics laws consider both Cheney’s deferred compensation and his unexercised stock options as a lingering financial interest in the company. [NBC News, Meet the Press, 9/14/03; Washington Post, 9/26/03]

No-Bid Contracts “Coordinated” With Dick Cheney’s Office

Halliburton’s No-Bid Contract in Iraq was “Coordinated” with Dick Cheney’s office. In March 2003, the Pentagon awarded a subsidiary of Halliburton a no-bid contract worth up to $7 billion to help rebuild Iraqi oil fields. According to Time, an internal Pentagon e-mail said “action” on the contract was “coordinated” with the Vice President’s office. A senior political appointee in the Defense Department acknowledged that he selected Halliburton for Iraq reconstruction work. Before awarding the contract, the official briefed White House staff, including Lewis “Scooter” Libby, Cheney’s top aide. Los Angeles Times, 5/7/03; Washington Post, 2/10/04, 6/14/04]

Several Critical Audits Have Criticized Halliburton’s Work in Iraq

Halliburton Has Had Eight Critical Audits and a Criminal Investigation on Its Work In Iraq and Kuwait. Halliburton has had eight critical audits performed by the Defense Contract Audit Agency, the Coalition Provisional Authority’s Inspector General and General Accounting Office into its work in Iraq and Kuwait. [Associated Press, 2/9/04; Rep. Waxman Letter, 8/24/04]

Halliburton Hasn’t Accounted for Almost Half its Work in Iraq and Kuwait. According to a report by Pentagon auditors, Halliburton has not adequately accounted for more than $1.8 billion of work in Iraq and Kuwait, representing 43% of the $4.18 billion that Halliburton subsidiary Kellogg Brown & Root has billed the Pentagon so far. The Wall Street Journal reported “the latest Pentagon audit report underscores that KBR’s billing problems remain widespread and could pressure Army officials to begin withholding substantial sums from the company.” [Wall Street Journal, 8/11/04]

Pentagon Auditors Said Halliburton Overcharged Government by $186 Million. During congressional testimony, William Reed, director of the Defense Contract Audit Agency, said Halliburton overcharged the government by $186 million for meals than were served to troops in Iraq. Four former Halliburton employees issued signed statements charging that Halliburton among other things, had paid $45 apiece for cases of soda and $100 per bag of laundry, and had abandoned nearly new, $85,000 trucks in the desert for lack of spare parts. [Houston Chronicle, 6/16/04; New York Times, 6/16/04]

Halliburton Gouged The U.S. Government For Oil And Troops’ Food. The military investigated Halliburton and found that it overcharged for gas it imported into Iraq from Kuwait by as much as $61 million. In March 2003, the Pentagon announced it would withhold nearly $300 million in payments to Halliburton due to the company’s overcharging on food contracts. [AP, 2/9/04, 3/17/04; Reuters, 2/23/04]

Pentagon Opened A Criminal Investigation into Halliburton. Pentagon auditors asked the Department of Defense to investigate Halliburton’s activity in Kuwait, and in December 2003 the military ended its contract to with Halliburton subsidiary Kellogg Brown & Root to import oil. On February 23, 2004 the Pentagon opened a criminal probe into Halliburton’s price-gouging. [Associated Press, 2/9/04, 11/5/03; Reuters, 12/11/03, 2/23/04; New York Times, 12/10/03; Washington Post, 1/16/04, 12/31/04; Wall Street Journal , 8/3/04]

Halliburton Under Cheney Being Investigated

Halliburton Is Under Investigation By Justice Department for Overcharging in the Balkans Under Cheney. Halliburton acknowledged in its quarterly filing that it is under investigation by the Justice Department over possible over billing on government services work done in the Balkans from 1996 through 2000, when Cheney was the Halliburton’s CEO. The charges stem from a General Accounting Office report that found in 1997 that Halliburton billed the Army for questionable expenses for work in the Balkans, including charges of $85.98 per sheet of plywood that cost $14.06. A follow-up report by the GAO in 2000 found inflated costs, including charges for cleaning some offices up to four times a day. [New Yorker, 2/16/04; Associated Press, 4/9/03; New York Times, 8/6/04]

Justice Dept. Issued Subpoena Seeking Information of Halliburton’s Role In Iran Under Cheney. Halliburton received an inquiry in 2001 from the Office of Foreign Assets Control of the U.S. Treasury Department inquiring about operations in Iran by a Halliburton subsidiary. In July 2004, OFAC transferred the case to the Justice Department and a federal grand jury issued a subpoena to Halliburton seeking information about its work in Iran. Government officials told the Washington Post such cases are referred to the Justice Department only when there is evidence “intentional or willful” violations have occurred. [Houston Chronicle, 12/15/03; Halliburton Co. 10-Q, 5/7/04; Reuters, 7/19/04; Washington Post, 7/21/04]

SEC And Justice Department Investigating Halliburton Bribery Charges During Cheney’s Tenure. A French judge is looking at whether Vice President Dick Cheney may have been responsible under French law for at least one of four bribery payments exchanged between a Halliburton subsidiary and Nigerian officials to obtain contracts for liquefied natural projects. Under French law, “the head of a company can be charged with ‘misuse of corporate assets’ for bribes paid by any employee - even if the executive didn't know about the improper payments.” Furthermore, the SEC, the Justice Department and the Nigerian government are also investigating the bribery charges against Halliburton. [Dallas Morning News, 1/25/04, 2/10/04; Associated Press, 2/4/04, 2/5/04, 2/6/04; Houston Chronicle, 2/7/04]

Halliburton Agreed to Pay $7.5 Million to Settle SEC Probe into Cheney-Era Accounting Practices. Halliburton agreed to pay $7.5 million to settle a SEC probe of the company's accounting during the tenure of Dick Cheney. Halliburton failed in 1998 to disclose a change in the way it accounted for revenue from some construction work, the SEC said in a statement. The SEC said “the company misled investors and violated federal securities laws.” [Bloomberg News, 8/3/04; Complaint of SEC vs Halliburton Company and Robert Charles Muchmore Jr. 8/3/04]

John Kerry’s Plan to Reform the Defense Contracting System

The Bush Administration has created a mess in Iraq, and Halliburton has been a big part of the problem. Through fraud, waste and abuse, Halliburton has cost the U.S. taxpayer millions of dollars, more than enough money to pay for all the protective equipment our troops need. John Kerry has a plan to reform the defense contract procurement process to save taxpayer money, prevent these abuses in the future, and make sure that our troops get the best possible equipment and support. As president, John Kerry will:

1. Reform and Simplify the Contracting Award Process.

• John Kerry will ensure fair competition for government contracts to obtain the best price and prevent political interference. He will enforce existing procurement rules and reverse the trend towards awarding sole source contracts, which runs counter to the Competition in Contracting Act and encourages patronage.

• He will save taxpayer money by reassessing the reverse incentive contracts that reward companies that bill more. He also will explore ways to allow small and medium sized businesses to bid on parts of larger contracts.

• He will simplify the contract procurement process. The current system is cumbersome and bureaucratic, with so much paperwork and so many regulations that many good companies will not bid on defense contracts. By streamlining the process, John Kerry will ensure that we get the best the private sector has to offer so we can give our military the best possible equipment and support.

2. Overhaul the Accounting Process.

• The current lax system for accounting for government funds has allowed companies like Halliburton to profit at the expense of our taxpayers. John Kerry will implement a comprehensive system to keep track of expenditures and ensure that all taxpayer dollars are accounted for and spent wisely.

• Unlike the Enron-style accounting that currently exists at the Pentagon, John Kerry will ensure that there is full transparency in the accounting process by making sure the government does its own accounting instead of outsourcing these activities to third parties.

• In order to facilitate Congressional oversight of the accounting process, Kerry will examine ways to provide government audits of contracts to Congress and the public in a manner that does not reveal proprietary information.

3. Punish Companies for Abuses and Violations of Law.

• John Kerry will make sure the government does not reward law-breakers by ensuring that contracts are not awarded to companies that violate U.S. law.

• He will enforce current law that requires the government to withhold payments from contractors that cannot justify their costs.

• He will severely punish any firm that overbills or profiteers at the expense US taxpayer, and he will make sure that we tell companies that cheat the U.S. military: “You’re fired.”

Halliburton: A Litany of Waste, Fraud, Abuse – and Friends in High Places

• Waste and overcharging by Halliburton has cost the American taxpayer billions of dollars. Halliburton has massively overcharged the American taxpayer for its work in Iraq. In fact, they cannot even account for $1.8 billion in costs billed to DoD—this is 43% of what they have billed under the LOGCAP contract. [Wall Street Journal, 8/11/04]

• Egregious overcharging includes: $186 million for meals not served at U.S. military mess halls (which Halliburton has admitted to); $61 million in gasoline overcharges; $100 charges per bag of laundry, $45 cases of soda; charging for empty truck convoys (termed by drivers as “shipping sailboat fuel”); and $85,000 trucks torched because of blown tires. The firm also paid its contractors in Iraq at rates 2-10 times what U.S. soldiers make, and even charged the government for adding the firm’s logo to hand towels. [Knight Ridder, 6/14/04; Reuters, 12/11/03; New York Times, 12/10/03; NBC 8/26/04; CBS, 12/11/03]

• GAO report found “significant problems” in nearly every area of the Halliburton contract in Iraq. The GAO found ineffective planning, inadequate cost control, insufficient training and a pattern of problems with controlling costs, meeting schedules, documenting purchases, and overseeing subcontractors in LOGCAP program. The GAO also found that Halliburton’s requisitions “frequently lack sufficient documentation” and that Halliburton “does not have good control over its subcontractors.” [GAO-04-854]

• The Halliburton situation has gotten so bad that the military is now planning to take the Iraq portion of the LOGCAP contract away from Halliburton and breaking it up into smaller parts which would be open to competitive bidding. [New York Times, 9/8/04]

• Proper procedures were not followed in awarding the no-bid contracts to Halliburton. The GAO found that the Pentagon “overstepped” competition laws by assigning additional work outside Halliburton’s existing logistics contracts (LOGCAP), specifically finding that the initial order for oil infrastructure contingency planning in Iraq given to Halliburton was not within the scope of its underlying contract. A contract that was meant to be about feeding and housing US troops turned into a no-bid multi billion dollar oil services contract for Halliburton. [GAO-04-869T]

• The “Cost-Plus” structure of the contracts with Halliburton was ripe for abuse. The structure of the contracts covers the costs of the company, plus a guaranteed profit percentage, meaning that the more the firm and its subcontractors bill, the more profit they make. [CNN, 3/25/03]

• Cheney still receives compensation from, and has financial interests, in Halliburton. Cheney received $33.7 million from Halliburton when he left in 2000. As Vice President, Cheney continued to receive deferred compensation from Halliburton. His 2001 income tax return shows that in 2001 he received a $1,598,977 bonus from Halliburton. According to a report by CRS, Cheney also received $205,298 from Halliburton in 2001, $162,392 in 2002 and $178,437 in 2003 deferred compensation. ["Income: Type and Amount," Schedule A, Standard Form 278, Richard B. Cheney Personal Financial Disclosure, May 15, 2002, May 15, 2003, May 15, 2004]

• CRS concluded that federal ethics laws consider both Cheney’s deferred compensation and his unexercised stock options as a lingering financial interest in Halliburton. Yet Cheney said on Meet the Press: “Since I left Halliburton to become George Bush's vice president, I've severed all my ties with the company, gotten rid of all my financial interest. I have no financial interest in Halliburton of any kind and haven't had, now, for over three years.” [Meet the Press, September 14, 2003]

• There are numerous investigations into an array of violations of law by Halliburton and its subsidiaries while Cheney was CEO – including doing business with Iran, potentially in violation of U.S. sanctions, a $180 million bribery scandal in Nigeria, and fraudulent accounting practices Cheney had to testify about in 2004 and for which Halliburton paid a $7.5 million penalty. Halliburton also used a foreign subsidiary to do business with Iraq during the 1990’s. While this was technically not illegal, Cheney said during the 2000 campaign that “I had a firm policy that we wouldn’t do anything in Iraq, even arrangements that were supposedly legal.” [Bloomberg, 6/11/04; New York Times, 2/7/04; SEC, 8/3/04; Houston Chronicle, 12/15/03; Office of New York City Comptroller William C. Thompson]

• Contracts “coordinated” with Dick Cheney’s office. Leaked emails show that officials from the Office of the Secretary of Defense “coordinated” with the Office of the Vice President on the issue of awarding Iraq contracts to Halliburton, contrary to public claims made by VP Cheney and in violation of federal codes that seek to keep political officials outside acquisition issues. [Time, 5/30/04; LA Times, 5/7/03; WP, 2/10/04, 6/14/04]

• In the last two years of the Clinton administration, Halliburton spent more than $1.2 million lobbying in the Senate and House; during the first two years of the Bush/Cheney administration, they spent $600,000, while receiving 3 times as much in government contracts. [Boston Globe, 3/27/04]

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