WASHINGTON, July 20 (AFP) – A disclosure that Halliburton is under investigation for suspected dealings with Iran through an offshore subsidiary put another spotlight on the embattled oil services firm once headed by Vice President Dick Cheney.
This post adds some background and ‘atmosphere’. ed.
“This is the biggest scandal yet to hit Halliburton,” said Senator Frank Lautenberg on a conference call organized by the campaign of Democratic presidential candidate John Kerry.
“This could result in major felony charges, because it is illegal to do business with a terrorist state, particularly Iran.”
The company denied any US laws have been broken, but in a filing with the Securities and Exchange Commission on Monday, acknowledged a grand jury is investigating possible dealings with Iran through a Cayman Islands subsidiary.
Deputy Attorney General James Comey, asked during a Justice Department news conference, declined to comment on the matter.
“I can’t comment on any pending investigation,” Comey said, while refusing to speculate whether an offshore subsidiary of a US firm could be prosecuted for doing business with Iran.
But the development came as a special panel was expected to release evidence Iran may have allowed hijackers in the September 11 attacks to transit through the country.
The news also came as the Houston, Texas-based corporation faces multiple domestic and international probes into its operations extending from Iraq to Nigeria.
“We have a Cayman Islands subsidiary with operations in Iran, and other European subsidiaries that manufacture goods destined for Iran and/or render services in Iran,” Halliburton vice president Margaret Carriere acknowledged in the filing.
She said the company received this month a grand jury subpoena requesting documents related to the operations, the nature of which remains undisclosed.
US law bars US-incorporated entities, citizens and residents from engaging in commercial and financial transactions with Iran.
But Carriere insisted there was no wrongdoing on the part of the firm.
“We completed a study in 2003 of our activities in Iran during 2002 and 2003 and concluded that these activities were in full compliance with applicable sanction regulations,” she said.
A loophole in the law apparently allows US firms to circumvent the sanctions through foreign-based subsidiaries, if their dealings are not directly managed by US citizens or from US soil, according to legal experts.
Lautenberg said of the probe, “The question is whether or not this was a subsidiary set up to disguise who they are.”
Cheney was chairman of Halliburton from 1995 until his selection as George W. Bush’s running mate in the 2000 presidential race.
The grand jury probe added to a multitude of other investigations faced by the politically-connected Texas conglomerate over work done by its affiliates in Iraq and Nigeria.
The Pentagon and the Justice Department are looking into allegations that Kellogg Brown and Root, a Halliburton subsidiary that has secured an exclusive oil supply contract in Iraq, may have overcharged the US government by 61 million dollars.
Another damaging imbroglio involves allegedly overpriced meals served by Halliburton to US troops in Iraq and Kuwait, which prompted the army to withhold payments on some of the company’s invoices.
Meanwhile, US and French authorities are investigating if the company paid bribes to secure a Nigerian natural gas project. Such actions could violate the US Foreign Corrupt Practices Act, which bans bribes to foreign officials.
Standard and Poor’s said the news is likely to be negative for the group, noting, “This is the third significant investigation of various issues confronting the company.”
But Halliburton shares rose 15 cents to 31.43 in closing trade Tuesday.
http://www.reuters.com/newsArticle.jhtml?type=businessNews&storyID=5750342
Halliburton Faces the Heat at Hearing
Thu Jul 22, 2004 06:08 PM ET
By Sue Pleming
WASHINGTON (Reuters) – Halliburton defended its giant government contracts in Iraq on Thursday at a rancorous hearing on Capitol Hill at which ex-employees accused Vice President Dick Cheney’s old company of wasting taxpayer money.
Appearing at a House of Representatives committee hearing, executives from Halliburton (HAL.N: Quote, Profile, Research) unit Kellogg Brown and Root tried to squash accusations from whistle-blowers who said the corporate culture was one of waste, theft and misuse of funds.
“We absolutely do not have a policy that cost does not matter,” said William Walter, a director for the company’s government operations.
Halliburton is the U.S. Army’s main logistics contractor in Iraq and also has a separate deal trying to revive Iraq’s oil industry. This work has the potential to bring in $18 billion for the company, according to government estimates.
In a gloves-off, partisan hearing, the Rep. Tom Davis, the chairman of the House Committee on Government Reform, said many of the whistle-blowers’ accusations were “flat out wrong” and the goal was to embarrass Cheney during the presidential election campaign.
Cheney headed Halliburton until he joined the race for the White House in 2000 and Democrats have accused the Bush administration of giving the company special treatment.
“I believe that tunnel vision, inexperience and naivete are behind most of these witnesses’ allegations,” said Davis, a Republican from Virginia, adding that he believed some of the ex-employees were out to make book deals.
Former KBR logistics specialist Marie de Young said she decided to go before the committee because she believed the company was letting down soldiers and not for personal gain.
“Every dollar that is squandered because of waste, fraud, or abuse, is a dollar we do not have for critical equipment and supplies for our troops,” said de Young.
CHENEY FACTOR
Democratic lawmaker Rep. Henry Waxman of California, an ardent critic of Halliburton’s work, said government audits showed the company’s two major contracts in Iraq were plagued by mismanagement and inflated billings.
He reiterated earlier accusations that he believed Halliburton got work in Iraq because of its political connections, which the Republicans denied.
“The decision to give Halliburton the sole source Iraq work was made by a political appointee, not career procurement officials. And the Vice President’s chief of staff received an extensive briefing,” Waxman said.
De Young’s said KBR staff were housed in five-star hotels while troops stayed in dusty tents and that sub-contractors overcharged for laundry and supplies.
Moreover, she said the company lacked proper documentation when it handed out sub-contracts, which made it difficult to manage these deals.
Former KBR truck drivers complained that $85,000 trucks were abandoned because there were no spare tires while others were torched and some cargo looted at night.
“I do not understand how a company could ditch a brand new truck because they didn’t have a spare tire,” former KBR employee James Warren said.
But KBR regional project manager Keith Richard said all convoys had spare tires. If a truck broke down, it was up to the Army commander accompanying them to decide whether to abandon or destroy it.
KBR and its sub-contractors have lost more than 40 employees working in Iraq. A further 93 have been wounded.
“Improvised explosive devices are a constant threat as are rocket-propelled grenades, land mines, mortars, small arms fire and spikes in the road,” Richard said.
In one recent 25-truck convoy, he said 17 windshields were seriously damaged from rocks thrown in two particularly hostile cities. “That’s not unusual,” he said.