Halliburton may have overcharged in Iraq

11.45am

WASHINGTON - A Pentagon audit of Halliburton, the oil services firm once run by Vice President Dick Cheney, has found evidence the company may have overcharged for fuel it brought into Iraq from Kuwait, military sources said on Thursday.


The sources told Reuters that Halliburton unit Kellogg Brown and Root, which got a no-bid US government contract to rebuild Iraq's oil industry in March, had been notified of the evidence by the Pentagon's Defence Contract Audit Agency (DCAA).


So far the company has clocked up $2 billion in business from the March contract.


Halliburton spokeswoman Wendy Hall denied the allegations and said she was confident the company would be able to stand up to any audit of its work in Iraq.


"KBR has acted in full accordance with its fiduciary and contractual responsibilities under the contract," she said.


She added in an e-mail response: "It would not be appropriate to discuss the specifics of the questions until our conversations with DCAA are complete."


One military source said KBR was seeking "voluntary refunds" from the Kuwait National Petroleum Company over the import of fuel into Iraq but could not provide further details. KBR would have obtained its supplies from the Kuwait company.


In addition to allegations of over-pricing, auditors were also looking very closely into delays in providing details of pricing, one of the sources said.


"It's not just a matter of over-pricing, it's the delays," said the source, who asked not to be named.


Democratic lawmakers had raised questions over KBR's pricing for fuel being trucked into Iraq, an oil-rich country that is suffering a fuel shortage until its refineries can be restored to full capacity.


KBR has been bringing fuel into Iraq either from Turkey or via Kuwait and has defended its pricing by citing the high cost of security in a dangerous environment and a shortage of trucks.


The US military has been looking into ways of taking over the costly job of importing fuel into Iraq and has asked the military's Defence Energy Support Center to look into doing the job. A decision has not yet been taken on this.


Rep. Henry Waxman from California has complained in numerous letters to the Bush administration of alleged over-pricing, claiming Halliburton was charging about $2.64 a gallon for petrol.


Of the $2 billion allocated to KBR so far, about $1.2 billion has gone toward paying for oil supplies for the Iraqi people, according to the Army Corps of Engineers website.


Of that amount, $90 million has been paid out of seized Iraqi assets and $825 million has come from the Development Fund for Iraq, which was approved by the UN.


An Army Corps of Engineers spokesman said most of the funds to pay for fuel had intentionally been drawn from Iraqi coffers rather than from money made available by Congress, where criticism has been strongest over Halliburton's work in Iraq.


Several government agencies are closely monitoring Halliburton's performance in Iraq and the General Accounting Office, an investigative arm of Congress, is set to release a report next month on US government contracts in Iraq.


Halliburton's no-competition contract is set to be replaced by two separate deals to repair Iraq's oil sector. After several delays in awarding them, the Army is due to announce a decision on those contracts, worth $2 billion, by mid-January.

Herald Feature: Iraq