Criminal Probe Targets Halliburton Subsidiary
A company overseen by Republican vice presidential candidate Dick Cheney until four months ago is under criminal investigation for allegedly defrauding the federal government out of millions of dollars in the closure of the Ft. Ord military base.
The probe appears to have been triggered by a former Brown & Root Services Corp. manager who filed a whistle-blower lawsuit alleging that the engineering company billed the government for high-quality goods but substituted lesser-quality materials in its Northern California work. The employee has been subpoenaed by federal prosecutors to appear before a grand jury on the matter as early as Nov. 2, just days before the election, according to his attorney. More subpoenas are expected.
Brown & Root is a subsidiary of Halliburton Inc., the Texas-based oil and energy services giant that Cheney headed from 1995 until he stepped down in July--with a $34-million early retirement package--to become Texas Gov. George W. Bush’s running mate.
Halliburton, in response to inquiries from The Times, issued a public statement to its investors Monday acknowledging that it is “the target of a federal grand jury investigation” and that it has been ordered to produce documents on the Ft. Ord contract.
The firm denies any wrongdoing, and lawyers noted that no evidence has emerged linking Cheney directly to any of the allegations.
Even so, Cheney has pointed to his work at Halliburton as a high mark in his career, and the disclosure of a criminal probe into irregularities at his former company is a distraction that the Cheney camp would rather avoid in the closing weeks of the campaign.
Cheney joined Halliburton as chairman and chief executive officer in 1995, two years after concluding his stint as Defense secretary under President Bush. The company’s portfolio of military contracts and government-backed work grew under his stewardship.
While Brown & Root officials acknowledge that Cheney’s prominence as a past Pentagon chief may have opened doors for the firm, they say Cheney was always scrupulous about avoiding direct involvement in government contracts to avoid any appearance of a conflict.
Brown & Root landed a major contract after the military decided to close the 28,000-acre Ft. Ord compound in 1994 as part of a wave of peacetime base closures. Brown & Root helped convert the Monterey base to government and civilian uses.
But Dammen Gant Campbell, a former Brown & Root contracts manager who worked on the Ft. Ord project, alleges in a federal lawsuit that the company engaged in “a scheme to defraud the government” by inflating and fabricating its billings from 1995 to about 1997.
The overbillings could add up to $6 million, Campbell’s attorney, Daniel P. Schrader of Monterey, said in an interview. If Campbell proves his case in court, he would be entitled to 15% to 30% of the damages under the Federal False Claims Act of 1986--with the remainder going to the federal government.
Schrader alleges that Brown & Root inflated its billings by promising high-quality material and services, then using cheaper products. For example, Schrader said that inspections of a converted office building revealed that Brown & Root had promised to use cast-iron plumbing and sheet metal heat-ducts but used much less costly materials.
“They were promising the government a Cadillac, then giving them a Volkswagen,” he said. “When you go out to the project site, you see that certain things that were promised aren’t there. Seeing is believing.”
Key to the civil and criminal cases, Schrader said, will be determining whether top executives at Brown & Root and Halliburton were aware of the problems. “How far up the chain was it going? Who was ordering this?” Schrader asked.
Halliburton officials and lawyers refused to discuss the allegations except to say in a statement that Brown & Root “is cooperating in the investigation and believes that it has acted in accordance with the law and the Ft. Ord contract.”
The company also said it did not expect the litigation to hurt its stock, which closed Monday at $41.16, down $2.88, on the New York Stock Exchange.
Campbell first filed his lawsuit in 1997. It has progressed slowly through the federal courts, with the U.S. Justice Department declining to join in the lawsuit.
In the meantime, federal prosecutors stepped up their interest by serving Campbell with a subpoena about a week ago, requiring his testimony and production of documents before a criminal grand jury, his attorney said.
Federal prosecutors in Sacramento declined to comment on the case, and officials with Cheney’s campaign office did not return calls.
