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Pentagon Opens Criminal Fraud Investigation into Halliburton

Location: Washington, DC


The SPEAKER pro tempore (Mr. Bishop of Utah). Under the Speaker's announced policy of January 7, 2003, the gentleman from New Jersey (Mr. Pallone) is recognized for 60 minutes as the designee of the minority leader.

Mr. PALLONE. Mr. Speaker, earlier this week the Pentagon did something that the House Republican leadership should have done many months ago, and that is they opened a criminal fraud investigation into Halliburton. The Pentagon is expected to investigate the overcharging of at least $61 million for fuel shipped from Iraq to Kuwait. Halliburton has also been accused of charging the government for meals it never served at dining facilities in Iraq and Kuwait. The company agreed to reimburse the government $27.4 million for potential overcharges related to the meals and $6.2 million to cover other potential overcharges.

Now, Mr. Speaker, all I can say is it is about time. I have been coming to the floor with a group of my Democratic colleagues to highlight these possible overcharges by Halliburton and called on the House Republican leadership to hold open hearings on whether or not Halliburton is overcharging the American taxpayer with its reconstruction work in Iraq. Instead, the Senate and the House, both controlled by Republicans, continue to turn a blind eye to possible waste and mismanagement by Halliburton in Iraq. Congressional Republicans even refuse to question the Bush administration on the billions of dollars of taxpayer money now going to Halliburton, much less create any special committee to oversee these funds.

I ask you, Mr. Speaker, what are my Republican colleagues afraid of? Why do they refuse to hold Halliburton accountable for the billions it is now spending in Iraq? Could it be that congressional Republicans do not want to draw more attention to the fact that the company profiting from the reconstruction of Iraq, Halliburton, has close ties to Vice President Cheney? Back in 2002, Vice President DICK CHENEY said these words, and I quote, "Halliburton is a fine company, and I am pleased that I was associated with the company."

Now, how can the Vice President say that Halliburton is a fine company? Let us look at some of the facts.
Fact number one: Halliburton has acknowledged that it accepted, and I quote, "accepted up to $6 million in kickbacks in its contract work in Iraq."

Fact number two: Halliburton is now being investigated by the Pentagon for overcharging the American government for its work in Iraq.

Fact No. 3, Halliburton faces criminal charges in a $180 million international bribery scandal during the time that
CHENEY was the CEO of the company.

Fact No. 4, Halliburton has been repeatedly warned by the Pentagon that the food it was serving 110,000 U.S. troops in Iraq was dirty, and a Pentagon audit found blood all over the floor of the kitchens Halliburton supplies over in Iraq.

Fact No. 5, Halliburton is getting around an American law that forbids doing business with rogue nations. Thanks to a giant loophole, Halliburton is able to do business with Iran, of all nations, through a subsidiary in the Cayman Islands.

Mr. Speaker, how can the Vice President characterize Halliburton as a fine company? One has to wonder since Vice President Cheney seems to condone such conduct if the company was any different when he was in charge. It probably makes sense for the Vice President to continue to praise Halliburton considering that the company continues to pay the
Vice President hundreds of thousands of dollars each year. Vice President Cheney tried to squash such a story when he appeared on Meet the Press last year. He stated, "And since I left Halliburton to become George Bush's Vice President,
I have severed all of my ties with the company, gotten rid of all my financial interest. I have no financial interest in Halliburton of any kind, and have not had now for over 3 years." That was the Vice President's quote on Meet the Press.

But despite the Vice President's claims, the Congressional Research Service issued a report several weeks later concluding that because Cheney receives a deferred salary and continues to hold stock interests, he still has a financial interest in Halliburton. In fact, if the company were to go under, the Vice President could lose the deferred salary, a salary he is expecting to continue to receive this year and next year. While losing around $200,000 a year might not put a dent in the Vice President's wallet, he clearly still has a stake in the success of Halliburton.

The Vice President also neglects to mention that he continues to hold more than 433,000 stock options. The Congressional Research Service reports that these stock ties "represent a continuing financial interest in those employers which make them potential conflicts of interest."

This was not the first time that Vice President Cheney has misrepresented his role in Halliburton. Just last month the Vice President stated, in reference to government manipulation by Halliburton during his tenure, "I would not know how to manipulate the process if I wanted to." But what the Vice President neglects to say is that Halliburton cashed in after Cheney took over Halliburton. Under Cheney's leadership, Halliburton doubled the value of its government contracts. According to a report by the Washington-based Center for Public Integrity, the company took in revenue of $2.3 billion on government contracts, which was up $1.2 billion from the 5-year period before the Vice President arrived.

It is possible that Halliburton is the right company to do this work, but then how does the Bush administration and the Republican Congress explain why there is so much secrecy surrounding the whole deal? Could it be that the Republican Congress and the Bush administration are concerned that the more light that is shed on Halliburton's use of taxpayer money, the more examples of waste and mismanagement are likely to be exposed?

Mr. Speaker, earlier this month since congressional Republicans refused to hold hearings on the billions of dollars handed over to Halliburton with no oversight, my Democratic colleagues in the other Chamber held a hearing in which a former Halliburton employee testified about the company's practices. Mr. Bunting purchased supplies for Halliburton in Kuwait last summer. According to Bunting, Halliburton spent too much on supplies for the reconstruction effort in part because it wanted to avoid seeking competitive bids from government suppliers. Bunting charges that
Halliburton's supervisors wanted purchasers to buy from a preferred list of companies in Kuwait even when those companies charged high prices. Supervisors also told their workers to keep most purchase orders below $2,500 so that the company would not have to seek bids from multiple vendors. Now Bunting is a former employee of Halliburton's, and he is telling a group of Democratic Senators that the company is overcharging the American taxpayer.

Even with all of this information, the House Republicans continue to allow Halliburton to receive billions of dollars without any oversight from Congress. If Democrats were in the majority in the House, we would definitely be making sure that Halliburton was no longer ripping off the American taxpayer. In fact, if it had not been for the resourceful work and the dedication of two of my colleagues, Halliburton would still be robbing the taxpayers blind with outrageous gasoline prices.

Last year two of my Democratic colleagues on the Committee on Energy and Commerce, a committee on which I serve, the gentleman from Michigan (Mr. Dingell) and the gentleman from California (Mr. Waxman) exposed the outrageous fact that Halliburton was inflating gasoline prices at a great cost to American taxpayers. In a letter to the OMB Director Mr. Bolten, the gentleman from Michigan (Mr. Dingell) and the gentleman from California (Mr. Waxman) wrote that the independent experts that they consulted have been appalled to learn that the U.S. Government has paid Halliburton $1.62 to $1.70 to import gasoline into Iraq.

According to these experts, the price that Halliburton was charging the gasoline is outrageously high, potentially a huge rip-off, and highway robbery. During the relevant period, the average wholesale cost of gasoline in the Mideast was around 71 cents a gallon, meaning that Halliburton was charging over 90 cents per gallon just to transport the fuel into Iraq. Let me just repeat that again. The U.S. Government was paying Halliburton $1.62 to $1.70 to import gasoline into Iraq, but at that time the wholesale cost in the Middle East was around 71 cents a gallon. So Halliburton was
charging 90 cents per gallon more just to transport the fuel from Kuwait. There is no way that could be justified. According to the experts, this exorbitant transportation charge is inflated many times over.

Compounding the cost to the taxpayers, this expensive gasoline is then sold to Iraqis at a price of just 4 to 15 cents per gallon. Although Iraq has the second largest oil reserves in the world, the U.S. taxpayers are in effect subsidizing over 90 percent of the cost of gasoline sold in Iraq. This is just incredible when we think about it.

Mr. Speaker, in light of this new information, the gentleman from California (Mr. Waxman) and the gentleman from Michigan (Mr. Dingell) requested that OMB Director Bolten provide copies of all contracts, task orders, invoices and related documents issued to date regarding Halliburton's work in Iraq. The purpose was so Congress could conduct its own independent investigation of these issues on behalf of the U.S. taxpayer.

There is no question that this request from my Democratic colleagues was reasonable. After all, if Halliburton was grossly overcharging the American taxpayer for the transportation of oil, it was highly unlikely that the overcharges ended there. Over the past couple of months, we have learned of lots of other overcharges; and yet still my Republican colleagues are silent on the issue. We do not see the waste watchers, a group of Republicans who come down to the floor periodically to rail against waste in the Federal Government, a government that they currently control, and we do not see them coming down to the floor to rail about Halliburton's gouging of the Federal purse. We do not see any Republicans expressing the need for more congressional oversight of the current contracts going to Halliburton and others, even though these problems continue to be exposed in the media on a regular basis.

Mr. Speaker, it just appears to be another example of how the House Republicans have taken this House away from the people and handed it over to an elite few, corporate executives and other interests. I do not know how many more days are going to go by or how many more weeks are going to go by with continuing charges, often backed up in the media, about what Halliburton is doing and how it is abusing its situation in Iraq before the Republicans in this body finally demand that there be some oversight and some hearings to look into these issues.

Mr. Speaker, again we have a huge deficit. We have a lot of spending needs. How can we possibly justify continuing to waste this money on behalf of Halliburton? It just does not make any sense.

Mr. Speaker, I see the gentleman from Ohio (Mr. Brown) is here, and I yield to the gentleman.


Mr. PALLONE. I appreciate my colleague from Ohio's comments. Regardless of how he has to phrase it, I think the bottom line is that there is a major inconsistency between what the Vice President said and what the reality is in terms of the amount of money and his connections to Halliburton. I have to say, though, "60 Minutes" did a report, I guess this was at the end of January, and I know that many of us have mentioned this before about this Halliburton subsidiary that is doing business with Iran. To me, although everything that we have mentioned is pretty bad, when this came out on the "60 Minutes" program back at the end of January, I was really more outraged by this than even all the other things that Halliburton was involved with.

This was on January 25, as I said, on "60 Minutes." Correspondent Leslie Stahl who was doing the report, the concern was on behalf of William Thompson, the New York City comptroller who oversees the $80 billion in pension funds for New York City workers or employees. What he was speaking about was the fact that New York City employees' pension funds are basically invested in several companies, including Halliburton, that through subsidiaries do business with the countries that President Bush has referred to as rogue nations, such as Iran and Syria, Libya and others. I just wanted to zero in on Halliburton. We could talk about the others, but tonight we are talking about Halliburton because of the potential conflict of interest with the Vice President.

What was said on "60 Minutes," again, and this is a quote, in the case of Halliburton as an example, this is Mr. Thompson speaking, they have an offshore subsidiary in the Cayman Islands that does business with Iran. That subsidiary, Halliburton Products and Services, Ltd., is wholly owned by the U.S.-based Halliburton and is registered in a building in the capital of the Cayman Islands, a building owned by the local Caledonian Bank. Halliburton and other companies set up in this Caribbean island because of tax and secrecy laws that are corporate-friendly.

Apparently the law says that an American company cannot do business with one of these rogue nations such as Iran, but you can get around it in some way because the law does not apply to any foreign or offshore subsidiary so long as it is run by non-Americans. But I would venture to say that even that loophole is being violated by Halliburton in this case because in this "60 Minutes" interview, I guess they actually went to the subsidiary in the Cayman Islands and they were not allowed to enter the building with a camera so they went in with a hidden camera and were introduced to
David Walker, the manager of the local bank where the subsidiary is registered.

"60 Minutes" figured, well, they would find some kind of operation here, some kind of business, but to their surprise they were told by David Walker, the manager of the bank, that while Halliburton Products and Services was registered at this address in the Cayman Islands, it was in name only. There was no actual office there or anywhere else in the Cayman Islands and there were no employees on the site. They were told, the "60 Minutes" reporters, that if mail for the Halliburton subsidiary comes to this address that they reroute it to the Halliburton headquarters in Houston.
Mr. Walker went on to say, the bank manager, and I quote, "If you understand what most of these companies do, they're not doing any business in Cayman per se. They're doing international business," says Walker. Would it make sense to have somebody in Cayman pushing paper around? I do not know. And it is mostly driven by whatever the issues are with the head office.

So what is basically happening here is the head office in Houston of Halliburton is calling the shots. Nobody is working at this local subsidiary. It does not even have an office. It has simply been set up so that Halliburton can do business with Iran. Think about it. Iran is on the list of rogue nations. You cannot do business with them. Of course, Iran exports terrorism around the world. So essentially Halliburton is benefiting from terrorism. Here we are. The President said that the reason we went into Iraq was because of the war against terrorism. The biggest company that has the contracts, no-bid contracts, in Iraq is Halliburton, which was formerly headed by Vice President Cheney. They set up a subsidiary, probably contrary to the laws of the United States, that does business in Iran and Iran exports terrorism around the world, probably into Iraq as well, for all I know.

To me, it is unimaginable to think that the United States taxpayer is paying this company Halliburton which has had all these abuses but the biggest abuse of all in my opinion is that they are getting around the law and making money in Iran, which in turn is exporting terrorism that could potentially be used against the United States.
I see my colleague from Washington State is here. I am pleased to see that he is joining with us tonight and would yield to him.


Mr. PALLONE. Mr. Speaker, I appreciate what the gentleman said. And sometimes I think that we forget that not only these abuses are going on, but the circumstances in which they are going on, and all this money is being wasted.
And there was an editorial in the New York Times, I guess, January 30, and I am not going to read it all, but just the end. The whole thing was about Halliburton and all their abuses, and they wanted to remind us, and I would like to remind us, just by quoting a couple of sentences, "The United States is at war. The government is running deficits. Money is tight everywhere. But Halliburton won't even kick in its fair share. It continues to benefit from the Nation's largesse, while scouring the world for places to shelter as much of its American riches as possible."

It is bad enough that they have a subsidiary that is doing business in Iran and that there are all these overcharges and abuses, but keep in mind that this is happening while we are at war, the government is running record deficits, and money is tight, and things that we really need to spend Federal dollars on cannot be provided for, and in the middle of this they are involved in all this abuse.

I yield to the gentlewoman from Illinois (Ms. Schakowsky), who has been down here many times to address this same issue.


Mr. PALLONE. Mr. Speaker, I appreciate the gentlewoman coming down tonight to talk about this. I know she has done it before. Particularly when she raises the issues of the ads Halliburton is running, I have seen some of them, but I forgot about the fact in the middle of all this, they are spending money to basically tell people how wonderful they are while an investigation is going on. The bottom line is the Pentagon now is actually finally conducting an investigation. What you and I have said is we should have hearings here in the Congress.

I go back again to that New York Times editorial that I mentioned before that says keep in mind that while Halliburton commits all these abuses, the United States is at war. I cannot imagine that if this was World War II or another major conflict, but I will use World War II as an example, it is what we call war profiteering, and anyone who was associated with that, we have seen the old movies where there is an old World War II movie where they picture the war profiteers. They are the enemies of the State. They are like no different in the public's mind than Nazi Germany or the countries that were fighting the United States, because they were making a profit at the expense of the taxpayers during a time of war.

So, given the fact that all this has been exposed, and we do not have to go through the facts again, but everyone in the kickbacks on the contract work, which Halliburton actually admitted, the overcharging for the meals, the fact that you have the subsidiary and the questionable aspect that was brought up in 60 Minutes, why in the world are the Republicans not having hearings, bringing out how the United States might be wasting billions of dollars in a time of war?

I do not even have to add the deficit and the spending that we might want to see on other things more important for the average citizen. Just the fact this is happening at a time of war and this company may be making a profit on the war, it is just incredible to me.

All we are asking is that our Republican colleagues in control of the House have some sort of hearings and bring this up. That is all that you mentioned in the letter from our colleagues on our committee, the gentleman from Michigan (Mr. Dingell) and the gentleman from California (Mr. Waxman), want. That is all they are asking be done, and still the Republicans refuse to do it.

We are just going to come down here and continue to come down here until some effort is made by the majority party to have hearings and to have some accountability. We just cannot keep bleeding with all this money that is going into this company. It just does not make any sense.

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