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Pentagon to Withhold Halliburton Payment

Posted by Jeff (Guest) jeff@attoz.com - Thursday, March 18 2004, 11:19:35 (EST)
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Pentagon to Withhold Halliburton Payments

WASHINGTON - The Pentagon (news - web sites) is withholding about $300 million in payments to Halliburton Co. because of possible overcharging for meals served to troops in Iraq (news - web sites) and Kuwait.

Defense officials said Wednesday that starting next month, the government will begin withholding 15 percent of the money being paid to Halliburton under a multibillion-dollar contract to provide services such as food, housing, laundry and mail to American forces in Iraq.

Halliburton spokeswoman Wendy Hall said the company disagreed with the decision and hoped to persuade the Pentagon to drop its plans. But if the Defense Department does withhold the money, Halliburton in turn will withhold 15 percent of its payments to its subcontractors, she said.

The withholding won't affect Halliburton's bottom line, Hall said. Company executives told Wall Street analysts last week the company was taking in about $1 billion a month from its operations in Iraq. The company has set aside $141 million to settle the overcharging allegations and already has repaid about $36 million.

Halliburton and its military services subsidiary, KBR, face a criminal investigation into alleged misdeeds in government work in Iraq and Kuwait. In this case, Pentagon auditors accuse KBR of overestimating the number of troops to be served meals, thus reaping millions in overcharges.

Halliburton, founded in 1919 and headed for five years by Vice President Dick Cheney (news - web sites), has said any mistakes in estimating the number of troops came from having to operate in a war zone where the numbers changed quickly and unpredictably. KBR has been doing business with the government since World War II when it built ships for the Navy.

A letter from Pentagon comptroller Dov Zakheim to Army contracting officials, dated last month and released Wednesday, cited the "possibility of substantial overcharges" on KBR's meal contract.

"It is imperative that these allegations of overcharges be investigated and the best interests of the government are protected," Zakheim wrote in the letter, which also was signed by Michael Wynne, the acting Pentagon contracting chief.

The possible overcharging for meals is just one of Halliburton's troubles with its work in Iraq and Kuwait. The work also includes a contract to rebuild the dilapidated oil industry in southern Iraq.

Halliburton's other problems include:

_ Allegations of a kickback scheme by two former workers in Kuwait that prompted Halliburton to reimburse the Pentagon $6.3 million.

_ Faulty cost estimates on the $2.7 billion contract to serve troops in Iraq, including failing to tell the Pentagon that KBR fired two subcontractors. KBR admitted those mistakes in a letter to the Defense Contract Audit Agency.

_ A separate DCAA audit that accused KBR of overcharging by $61 million for gasoline delivered to serve the civilian market in Iraq last year. Halliburton has said the charges were proper.

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