Firm Cheney Once Ran Settles Fraud Case

A company formerly overseen by Vice President Dick Cheney agreed Thursday to pay the federal government $2 million to settle allegations that it engaged in massive overbilling in the closure of the Ft. Ord military base in the mid-1990s.

Justice Department attorneys alleged that Kellogg Brown & Root, a subsidiary of Dallas-based energy giant Halliburton Inc., defrauded the government in its billings for more than 200 job orders during the closure of the Northern California base.

“Brown & Root failed to deliver what the Army thought it was getting,” Michael A. Hirst, a federal prosecutor in Sacramento, said in an interview. “The company exploited the [purchase order] system by inflating the apparent cost of the projects. In doing so, it increased its profits at the government’s expense.”

The Ft. Ord contract became an issue during the 2000 presidential campaign after The Times disclosed that a federal grand jury was looking into criminal allegations that Halliburton had engaged in fraud during the time Cheney served as the firm’s chairman and chief executive.

Although no evidence surfaced to suggest that Cheney knew about the alleged overbilling, Vice President Al Gore’s campaign demanded in October 2000 that Cheney “answer questions about his company’s alleged rip-off of taxpayers.” The Bush-Cheney campaign responded by accusing the Clinton administration of manipulating the grand jury system for its own political gain.

The civil settlement reached Thursday between Kellogg Brown & Root and the Justice Department appears to head off any further criminal investigation into the case.

Cheney’s office could not be reached for comment. Halliburton denied any wrongdoing in agreeing to the settlement.

“Although it believes that it properly administered the contract at Ft. Ord, Kellogg Brown & Root settled the lawsuit in order to resolve this matter and to avoid further litigation,” Halliburton said in a prepared statement. “It expects to continue its work as a major contractor to the United States government in numerous projects.”

The allegations in the case first surfaced several years ago when Dammen Gant Campbell, a former contracts manager for Brown & Root Services Corp., turned whistle-blower, charging that his firm had engaged in a massive scheme to fabricate its billings. He alleged that the firm promised to use high-quality goods in closing the Ft. Ord base and converting it to government and civilian use, but instead substituted products of lower quality.

As a whistle-blower in a government fraud case, Gant will receive between 15% and 30% of the $2-million settlement, with the final amount still to be determined, said his attorney, Daniel P. Schrader of Monterey.

“Overall, I’m very happy with the settlement,” Schrader said. Justice Department attorneys “did a good job of carrying this through to closure.”

Schrader alleged that the overbilling amounted to as much as $6 million--much more than the Justice Department’s calculation. Still, Schrader said, “this is a fairly reasonable compromise.”