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Army agrees to pay Halliburton $2 billion for imaginary work
8 Feb. 2005

WASHINGTON, Feb. 8 (HalliburtonWatch.org) -- The U.S. Army agreed to pay Halliburton's KBR subsidiary nearly $2 billion for work that nobody can prove ever took place. The work was allegedly performed in Iraq and Kuwait under the Army's LOGCAP contract, awarded to KBR in 2001 via competitive bidding.

Under LOGCAP, KBR is responsible for military logistics, which includes feeding the troops, transporting military supplies, constructing military housing and offices, and maintaining laundry facilities. KBR is reimbursed by the Pentagon for its costs, then paid a fee of one to three percent of those costs. So far, KBR has received $6.4 billion for work under LOGCAP.

Army auditors determined last year that 43 percent of the $4.5 billion requested by Halliburton under LOGCAP could not be verified under normal accounting procedures. In August, during the hotly-contested presidential campaign, the Army decided to withhold 15 percent of future reimbursements until KBR verifies when, how and to whom the suspicious expenses were paid. However, a few hours later the decision was abruptly reversed and the Army announced it would give Halliburton "more time" to explain itself. No reason was given for the abrupt reversal, except that the Army claimed it did not want to harm the troops in the field by withholding payments to KBR. The Army had given the company three deadline extensions to explain the suspicious expenses, but the deadlines quickly passed with no explanation that satisfied Pentagon auditors. The Army rejected claims by Democrats that the Bush administration had provided favorable treatment to KBR because of Vice President Dick Cheney's past association with Halliburton.

Last fall, the Pentagon's Army Mat�riel Command and the Defense Contract Audit Agency recommended withholding 15 percent of KBR payments. Nevertheless, the Pentagon's Defense Contract Management Agency praised the company for its "effective and efficient" accounting system. And finally, on Feb. 3, after months of internal Pentagon wrangling and three months after the presidential election, the Army made its final decision and rejected calls to withhold 15 percent of payments. In what the Washington Post called "a departure from normal policy," the Army decided to ignore its own auditors and pay KBR for all costs, plus the standard one to three percent fee, without any explanation that could justify the company's suspicious bills. The 15 percent withholding penalty could have cost KBR $60 million a month.

"This is indeed great news for KBR," said Andy Lane, chief operating officer of Halliburton, in a news release. "The Army and KBR have agreed to continue working closely together to resolve any remaining billing issues."

"This action is incomprehensible," Rep. Henry Waxman (D-CA) said in a prepared statement. "Once again, the Bush administration is putting Halliburton's interests above those of the taxpayers," he said.

More Information:

Washington Post: Halliburton Payments Won't Be Withheld; Army Waives Rule Despite Audit Reports

Pentagon says 43% of Halliburton's Iraq expenses are not verifiable

Army will withhold payment to Halliburton due to suspicious bills

Army grants Halliburton more time to explain suspicious bills

Despite $1.8 billion in unsubstantiated bills, Pentagon praises Halliburton

Pentagon auditor "strongly encourages" Army withhold payments to Halliburton - Rep. Waxman (pdf)

Army thinks punishing Halliburton might hurt troops

Army extends Halliburton's deadline for justifying expenses

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

Halliburton loses $18.6 million worth of government property in Iraq

Former Army chaplain says KBR places profits before soldiers

U.S. military may cancel Halliburton's Iraq logistics contract

Halliburton may sell KBR to end public relations nightmare

Republicans, Democrats call for committee to probe Iraq contracts

Government watchdog calls for banning Halliburton from contracts