Accounting for $108 million in overcharges

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Accounting for $108 million in overcharges

Rep. Waxman accuses the Bush administration of deliberately withholding U.N. auditors' findings on Halliburton contracts.

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By Suzanne Goldenberg

The Pentagon stood accused of sitting on a damaging report from its own auditors on a $108.4 million overcharge by Halliburton for its services in Iraq on Tuesday.

In a scathing letter to President Bush, Democratic Reps. Henry Waxman of California and John Dingell of Michigan said the Defense Contract Audit Agency's audit was completed last October -- before the election. They also note that 12 separate requests to the Pentagon to view the completed audits on the contractor's $2.5 billion contract to supply fuel and other services in postwar Iraq had been ignored.

"We would like to know why this audit report -- and audit reports on nine additional task orders -- are being withheld from Congress," they wrote. "We also want to know what steps you are taking to recover these funds from Halliburton."

In a second public letter Tuesday, Waxman accused Bush administration officials of deliberately withholding information on overcharges by Halliburton from U.N. auditors -- at its behest. Some $1.6 billion of the $2.5 billion Halliburton contract was funded from Iraqi oil revenues overseen by the U.N.

"The evidence suggests that the U.S. used Iraqi oil proceeds to overpay Halliburton and then sought to hide the evidence of these overcharges from the international auditors," the letter says.

The audit, released by the congressmen on Monday, offers the most definitive glimpse so far of overbilling by Halliburton, once run by Vice President Dick Cheney. In the most startling transaction, it charged the Pentagon $27.5 million to ship $82,100 worth of cooking and heating fuel to Iraq from Kuwait -- 335 times the actual cost of the liquefied petroleum gas, a charge the Pentagon auditors said was "illogical."

The firm and its subsidiary, Kellogg, Brown and Root, face several investigations, including a fraud inquiry by the Justice Department. A preliminary Pentagon audit, focused on the immediate aftermath of the U.S.-led invasion, found that KBR overcharged the Pentagon by $61 million for kerosene and other fuels.

Critics of Halliburton are convinced this represents just a fraction of the overcharges. The audit released this week covers only one of 10 task orders undertaken under the $2.5 billion no-bid contract awarded immediately after the invasion of Iraq. The overcharges identified in the single task order already dwarf the $61 million in previously discovered overcharges. Halliburton charged the Army Corps of Engineers $875 million to supply fuel from May 2003 to March 2004. Auditors questioned $108.4 million of those costs.

As the congressmen note, the auditors criticized charges in nearly every area, saying the firm misled auditors and failed to supervise subcontracts. "Halliburton failed to demonstrate its prices for Kuwaiti fuel were 'fair and reasonable,'" the auditors say. They also note that Halliburton refused repeatedly to provide information on costs of obtaining fuel from Turkey and Jordan, or to reveal how it selected its contractors in Kuwait.

A Halliburton spokeswoman, Wendy Hall, said it was forced into paying, and charging, high costs because of the security situation following the war. "Transporting fuel into Iraq was a mission fraught with danger, which increased the prices that firms were willing to offer for transportation," she told reporters. "The report fails to take into account the fact KBR performed an urgent mission at the Army's request and the mission took place in a wartime environment."

The lawyer for an Army Corps of Engineers whistle-blower said that his client was set to be interviewed for a second time by Pentagon investigators on April 4 over her claims of contracting abuse involving KBR.

originally published March 16, 2005