WASHINGTON, Sept. 30 (HalliburtonWatch.org) -- The U.S. Coalitional Provisional Authority (CPA), which governed Iraq until last June, gave Halliburton's KBR subsidiary 60 percent of $1.5 billion in reconstruction contracts financed by Iraqi oil revenues, a new report shows. The George Soros-backed Iraq Revenue Watch (IRW) issued the report, which criticizes the CPA for awarding most of the reconstruction contracts to non-Iraqi companies and without competitive bidding.

The CPA governed Iraq from May 2003 through June 2004 and has been widely criticized for mismanaging Iraq's oil revenues and contracts.

For months, the CPA rejected repeated demands by independent auditors and the United Nations to disclose the names of companies that received the $1.5 billion. But last August the CPA's inspector general issued a report disclosing the names.

According to IRW's analysis of the inspector general's report, U.S. companies received 74 percent of the $1.5 billion in contracts allocated for reconstruction; U.S. and British companies received 85 percent. But local Iraqi firms received only 2 percent. IRW director, Svetlana Tsalik, said Halliburton "benefited at the expense of Iraqi companies whose workers badly need jobs."

When Congress appropriated reconstruction funds for Iraq in October 2003, it specifically required competetive bidding on all future contracts. It made this requirement after finding problems with Halliburton's Iraq contracts, including potentially-fraudulent overcharges for gasoline importation. A criminal investigation by the U.S. Justice Department continues today.

But the CPA found a way to circumvent the new competitive bidding requirements imposed by Congress. It decided to award contracts through local Iraqi oil revenues, which are not subject to U.S. contract laws and were not part of the aid package enacted by Congress in 2003. The result was that 73 percent of the $1.5 billion in Iraqi funds were used to finance sole-source contracts that were not competitively bid.

Moreover, by using local Iraqi oil revenues to finance reconstruction contracts, the CPA was able to avoid strict accounting regulations required for U.S.-funded contracts. The CPA's inspector general wrote a scathing report, accusing the CPA of failing to provide adequate stewardship of over $8.8 billion in Iraq oil revenues. He said the CPA's accounting books contained numerous problems. For example, they showed that 74,000 guards were paid for work even though the actual number could not be validated. Another 8,206 guards were listed as employees even though only 603 people could be found doing any work.

In another example, Custer Battles - a nine-month old firm founded by two Army rangers - won a subcontract from Washington Group International to provide security. Custer Battles hired 700 security guards after six months of work and charged the Pentagon $20 million. But it paid the guards less than $200 per month. The company pocketed roughly $19 million of the $20 million earned over the six month period.

"The bulk of contracts paid for with Iraqi oil money went to Halliburton subsidiary Kellogg, Brown, & Root with no competition," IRW reported. It concluded, "The Iraqi interim government appears to be following the poor example set by the CPA, making public next to no information about [Iraq's oil revenues] since the transfer of power."

More Information:

Iraq Revenue Watch report (pdf)

Summary of IRW's report

U.S. mismanaged $8.8 billion in Iraqi funds: 'Ghost employees' hired for nonexistent work