Pentagon auditors request Halliburton probe

Halliburton Co. faced new troubles Thursday over its Iraqi operations as Pentagon auditors requested a formal investigation into the company, and a prominent House Democrat accused Halliburton and Bush administration officials of wrongdoing.

The Defense Contract Audit Agency asked the Pentagon's inspector general to consider launching a formal investigation into the company after finding "suspected irregularities," a Pentagon spokeswoman said Thursday. The agency issued a preliminary audit last month finding that Halliburton's Kellogg Brown & Root (KBR) subsidiary overcharged the U.S. government at least $61 million for importing fuel into Iraq from Kuwait from May 2003 to September 2003.

Additionally, the leading Democrat on the House Government Reform Committee issued a 10-page letter Thursday accusing the company and Bush administration officials of wrongdoing in selecting the Altanmia Commercial Marketing Co. to import hundreds of millions of dollars' worth of gasoline from Kuwait into Iraq.

Rep. Henry Waxman, D-Calif., said an investigation by his staff found that Altanmia was contracted under suspicious circumstances since the company had no prior experience transporting fuel, and Bush administration officials exerted political pressure to continue and increase imports from Altanmia even though the company's gasoline prices were more than twice those of contractors in Turkey. The letter was sent to National Security Adviser Condoleezza Rice.

Waxman claimed that the problems he found in his investigation are the likely reason the audit agency requested a formal investigation. The Pentagon spokeswoman declined to say why the request for an investigation was made, adding that the inspector general has not yet decided whether to conduct the investigation.

Halliburton spokeswoman Wendy Hall said KBR delivered fuel to Iraq at the best value under the best terms, and the request by Pentagon auditors for an investigation is a method of further studying the issue and not a condemnation of KBR processes.

"We welcome a thorough review of any and all of our government contracts," she said. "We have followed all government-approved processes."

On Dec. 11, 2003 the audit agency issued a draft report that found KBR fuel overcharges ran to $61 million through the end of September 2003. The audit agency also criticized the manner in which Halliburton chose Altanmia as its subcontractor in Kuwait.

A week later, however, the chief of the Army Corps of Engineers, Lt. Gen. Robert Flowers, issued a waiver declaring Altanmia's prices "fair and reasonable" and simultaneously waived Halliburton's requirement to provide "cost and pricing data" from Altanmia. Flowers also said KBR appropriately sought bids for its fuel subcontract last May and picked Altanmia as the lowest bidder.

Waxman claimed the audit agency needs the cost and pricing data to do a meaningful audit, and without it the agency "has its hands tied."

"In effect, the Dec. 19, 2003 waiver from the [Army Corps] was a whitewash, undermining DCAA's ability to conduct a genuine audit and forcing DCAA to take the extraordinary step of referring the matter to the Defense Department inspector general for a formal investigation," Waxman said.

Waxman called for the Bush administration to rescind the waiver and conduct an investigation into Altanmia.

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