Cheney, Halliburton and the Spoils of War

The Haliburton affair: conflict of interest at its worst

The issue of the company Haliburton represents the worst, in terms of conflict of interest and even corruption. It shows how much people in this government can do for their own self-interest and the interest of their friends if not held in check.“There is a fundamental difference of opinion in Washington, and it starts with folks in Washington forgetting whose money we’re spending.  All that money is not the government’s money; it’s the working people’s money. “George Bush, 3 September 2001

The White House would rather you not know about the Haliburton affair. Even though Cheney was CEO of Haliburton for five years before becoming Vice President, this is not mentioned in the White House biography of Cheney (as of 7 August 2004) –see http://www.whitehouse.gov/vicepresident/. (In case the White House changes this page, here is what it looked like, without the images, on 7 August 2004).

Below, we give a brief history of Haliburton. But first we note that Haliburton favoritism has been going on (local version) in spite of the Corps of Engineers’ chief contracting officer objecting to it. She refused to sign the contract. Her signature is required, but they let it go through with her assistant’s signature. She was threatened with demotion after raising the issue. This information has just come to light in the last few weeks. See also this article (local version).

Brief history of Haliburton:

1. Early 1990s. Cheney, as Secretary of Defense, gives contracts to Halliburton to rebuild facilities in Kuwait that had been destroyed in the first Persian Gulf war.

2. Early 1990 to 1993. Cheney, as Secretary of Defense, commissions Halliburton to do a classified (secret) study concerning replacing the U.S. military’s logistics by work done by private companies. Halliburton says, yes, a company can do the work. In August 1992, with essentially no bidding, Halliburton is selected by the US Army Corps of Engineers to do all work needed to support the military for the next five years! Thereafter, Halliburton (or its subsidiary KBR) and its military logistics business escalated rapidly. In the ten years thereafter revenues totaled $2.5 billion.

3. 1995-2000. Cheney is CEO of Halliburton. Under Cheney, Halliburton increases its offshore tax havens from 9 to 44, cutting its taxes from $302 million in 1998 to an $85 million refund in 1999. That’s almost $400 million they took from taxpayers in one year.

4. During Cheney’s tenure at Haliburton, Halliburton did business with countries like Azerbaijan, Indonesia, Iraq, Libya, Iran, and Nigeria even though the US had imposed strict sanctions on them. They skirted sanctions, and they lobbied against sanctions. Some of this business was illegal, and Halliburton was fined for it.

5. Spring 2000. Cheney heads Bush’s Vice-Presidential Search committee –while continuing as CEO of Halliburton. He ends up picking himself as Vice President.

6. July 2000. Cheney is asked whether Halliburton or its subsidaries were trying to do business with Iraq. He says no; he had a firm policy that they wouldn’t do anything in Iraq, even if it was legal. This was a blatant lie: subsidiaries sold over $73 million in oil-production parts to Iraq.

7. 2000. As CEO of Halliburton, Cheney clears $20 million in one year, after taxes.

8. July 2000. Cheney’s severance package from Halliburton (as CEO) is far and above what other company officers got when they left –some say it is as high as $62 million in stocks and stock options.

9. December 2001. KBR (Halliburton subsidiary) is granted an open-ended contract for Army troops supply and Navy construction, wherever U.S. troops go, for the next 10 years (so far, Afghanistan, the Philippines, Yemen, Iraq). This unique contract has no ceiling on cost. KBR is reimbursed for every dollar spent plus a base fee of 1 percent, which guarantees profit. Plus, they can get a bonus as a percentage of company costs.

10. January 2003. Bush sends a letter to Congress exercising his authority, as president, to waive section 9007, thus removing sanctions and allowing assistance to oil-rich Azerbaijan (see point 4). This administration invites the head of Azerbaijan to the White House, even though this person was the main reason for earlier sanctions against Azerbaijan. Reason? Azerbaijan has oil.

11. September 2003. Cheney states that when he became Vice President, he severed all ties with Halliburton, as required by law. This was a lie. Government accounting offices said that the compensation he continues to receive is a conflict of interest.

12. Dec 2003. Halliburton, without competitive bidding, is given a contract to restore the Iraqi oil sector. It is billed initially as a contract for putting out oil-well fires, something in which Halliburton has little expertise. It turns out that the contract is really for the full restoration of the oil business in Iraq. It is kept secret because of the “emergency conditions”. It is one of the highest military logistics contracts in history.

13. June 2004. Cheney has said all along that he had no contact with government officials who coordinated Halliburtons many contracts with the military. A March 2003 Pentagon email refutes this claim. It says that action on a no-bid Halliburton contract to rebuild Iraq’s oil industry was “coordinated” with Cheney’s office. This has to do with a no-bid contract given to Halliburton for rebuilding Iraq.

14. August 2004. The SEC (Security Exchange Comission) levies a fine of $7.5 million on Halliburton for illegal accounting changes in 1998, when Cheney was CEO of Halliburton. Some people think that politics may have shielded Cheney and others from being held more accountable.


Serious doubts remain about whether a company with a record like Halliburton’s should even be eligible to receive government contracts in the first place. This company has been accused of cost overruns, tax avoidance, and cooking the books and has a history of doing business in government-sanctioned countries like Iraq, Iran, and Libya. Many of Halliburton’s no-bid contracts are allowed because of waivers by the Bush administration that allow government agencies to handpick companies for Iraqi reconstruction projects.

This site (local version) contains a list of claims by Cheney and the real facts, which show that each claim is a lie.

Cheney, Halliburton and the Spoils of War

Published by Citizen Works | By Lee Drutman and Charlie Cray | Friday, April 4, 2003

When Defense Policy Board chairman Richard Perle revealed that he was getting $725,000 to help Global Crossing navigate the national security issues surrounding the sale of its assets, the press jumped all over Perle, and rightly so. There was indeed something fishy about a top Pentagon advisor making that kind of money to help a company that was having problems with national security issues. Perle is also on the board of Onset Technology, the leading provider of message conversion technology and a major supplier to Bechtel – one of the leading candidates for rebuilding Iraqi infrastructure.

As the Center for Public Integrity has documented, this kind of thing is not unusual. At least nine of the 30 members of the Defense Policy Board have ties to corporations that have won more than $76 billion in defense contracts in 2001 and 2002. As more and more wartime contracts are announced, more and more conflicts of interest are coming to light. After all, the Bush administration is riddled with ties to the weapons, engineering, construction, and oil companies that have the most to profit from in the Iraq war.

Cheney’s Conflict of Interest

However, of all the administration members with potential conflicts of interest, none seems more troubling than Vice President Dick Cheney. Cheney is former CEO of Halliburton, an oil-services company that also provides construction and military support services – a triple-header of wartime spoils.

A few weeks ago, the U.S. Army Corp of Engineers awarded a no-bid contract to extinguish oil well fires in Iraq to Kellogg Brown and Root (KBR), a subsidiary of Halliburton. The contract was granted under a January Bush administration waiver that, according to the Washington Post, allowed “government agencies to handpick companies for Iraqi reconstruction projects.”

The contract, which was not announced until more than two weeks after it was awarded, was open-ended, with no time limits and no dollar limits. It was also a “cost-plus” contract, meaning that the company is guaranteed to recover costs and then make a guaranteed profit on top of that. Its value is estimated at tens of millions of dollars.

This is not the first buck that Cheney’s former company has made off military conflict and likely won’t be the last. KBR currently has thousands of military support personnel on the ground in Kuwait and Turkey as part of a multi-year contract worth close to a billion dollars. The engineering subsidiary was also one of a select few firms invited to bid on an initial $900 million USAID contract for rebuilding post-war Iraq. Though it didn’t get that job, Halliburton says it is still in the running for subcontracts and there will likely be plenty more opportunities. The American Academy of Sciences estimates the rebuilding Iraq will cost between $30 and $105 billion dollars. At a recent investor conference call, Halliburton reported a 30% increase in year-over-year revenues, to $1.6 billion, for KBR.

The Revolving Door Between Big Business and Government

Cheney, who served as CEO from 1995 to 2000, continues to receive as much as $1 million a year in deferred compensation as Halliburton executives enjoy a seat at the table during Administration discussions over how to handle post-war oil production in Iraq.

The Cheney-Halliburton story is the classic military-industrial revolving door tale. As Secretary of Defense under Bush I, Cheney paid Brown and Root services (now Kellogg Brown and Root) $3.9 million to report on how private companies could help the U.S. Army as Cheney cut hundreds of thousands of Army jobs. Then Brown and Root won a five-year contract to provide logistics for the U.S. Army Corp of Engineers all over the globe. In 1995, Cheney became CEO and Halliburton jumped from 73rd to 18th on the Pentagon’s list of top contractors, benefiting from at least $3.8 billion in federal contracts and taxpayer-insured loans, according to the Center for Public Integrity.

Halliburton’s Dubious Track Record

But the Halliburton story is more than just a simple revolving door tale. Even without the Cheney conflicts of interest, serious doubts remain about whether a company with a record like Halliburton’s should even be eligible to receive government contracts in the first place. This, after all, is a company that has been accused of cost overruns, tax avoidance, and cooking the books and has a history of doing business in countries like Iraq, Iran and Libya.

Cost overruns: In September 2000, the General Accounting Office (GAO) found that the U.S. Army had not taken appropriate steps to limit the $2.2 billion costs Kellogg Brown and Root charged for logistical and engineering support in the Balkans. According to the report, Army officials “frequently have simply accepted the level of services the contractor provided without questioning whether they could be provided more efficiently or less frequently at lower cost.”

Questionable Accounting: The SEC recently formalized an investigation into whether Halliburton artificially inflated revenue by $234 million over four years. Halliburton switched to a more aggressive accounting method in 1998 under Cheney.

Access to Evil — Business Dealings in Iraq, Iran, and Libya: News reports suggest that Pentagon is currently using the Iran-Libya Sanctions Act (ILSA) to draw up a blacklist of non-US companies that have done business in Iran. Yet, Halliburton has conducted Business in Iran through subsidiaries. When Cheney was CEO of Halliburton, he inquired about an ILSA waiver to pursue oil field developments in Iran. In 1997, Halliburton subsidiary Halliburton Energy Services paid $15,000 to settle Department of Commerce allegations that the company had broken anti-boycott provisions of the U.S. Export Administration Act for an Iran-related transaction. Halliburton recently agreed to evaluate its operations in Iran, after the Securities and Exchange Commission rebuffed the company’s request to dismiss a New York City police and fire pension funds shareholder proposal for the company to examine its role in Iran.

Also forgotten is that story about how Cheney’s Halliburton did business with Saddam. According to the Washington Post, “Halliburton held stakes in two firms that signed contracts to sell more than $73 million in oil production equipment and spare parts to Iraq while Cheney was chairman and chief executive officer.”

Halliburton has also done business in Azerbaijan, Burma, Indonesia, Libya and Nigeria. As Dick Cheney once said, “The good Lord didn’t see fit to put oil and gas only where there are democratic regimes friendly to the United States.”

Tax Havens: Under Cheney’s tenure, the number of Halliburton subsidiaries in offshore tax havens increased from 9 to 44. Meanwhile, Halliburton went from paying $302 million in company taxes in 1998 to getting an $85 million tax refund in 1999.

All told, the IRS loses about $70 billion a year in offshore tax sheltering by corporations and wealthy individuals – almost enough to cover the $75 billion Bush has asked for to cover the first six months of war.

What to Do About Crony Capitalism?

The Halliburton story is part of a larger dynamic that should not be forgotten in a debate over contractor responsibility. While the Halliburton contracts reek of blatant cronyism, almost all the major firms that provide this kind of work are tied to the administration.

Somebody has to do the job. However, the level of secrecy surrounding the contracts that have been given out so far is troubling, and symptomatic of a bigger problem – the very legitimacy of a reconstruction process controlled by the U.S. military and their corporate contractors. Although the United States has the obligation to pay for the costs of reconstructing Iraq, only the United Nations is the proper body to provide governance and help rebuild a new government, civil society and physical infrastructure if the current regime is overthrown, not the White House, the Pentagon and their corporate cronies.

Note: In honor of Big Business Day 2003, Citizen Works presented Dick Cheney the “Daddy Warbucks” Award for eminence in corporate war profiteering on Friday, April 4.

Check out Citizen Works’ DC Corporate War Map.

Lee Drutman is the Communications Director and Charlie Cray is the Corporate Reform Campaigner at Citizen Works in Washington DC.

AMP Section Name:War & Disaster Profiteering

Author: spirit