Halliburton Overcharge Not Intentional, Pentagon Says
The Pentagon’s comptroller said Wednesday that he saw “no basis whatsoever” to believe Vice President Dick Cheney’s former company deliberately overcharged the Pentagon for oil deliveries to Iraq.
The potential overcharge appeared to stem from an outdated accounting and cost-estimating system within Halliburton Co., said the comptroller, Dov Zakheim. The company’s KBR unit, formerly known as Kellogg, Brown & Root Inc., failed to fully analyze the price it was charged by a Kuwaiti supplier, he said.
A recent Defense Department audit found that KBR sought as much as $61 million in excess charges for oil deliveries to Iraq.
An aide said Zakheim told defense writers at a breakfast that “the issue is not one of concealment.”
“The issue isn’t just the $61 million. The issue is that they’ve got a rather antiquated accounting system.”
The Pentagon has said that any overbilling would come out of Halliburton’s pockets. The Houston-based oil and gas company would then have to wrest the money back from a Kuwaiti subcontractor suspected of overcharging it for the oil.
“If they cannot recover, if auditors determine that there was X dollars in overpricing, then it’s the company that will be out, not the taxpayer,” Zakheim said.
He is the latest Bush administration official to suggest that the apparent overcharging was initiated not by Halliburton but by a Kuwaiti subcontractor. More recently, attention has focused on whether Halliburton was pressured to do business with the firm, identified as Altanmia Commercial Marketing Co.
The Wall Street Journal, citing Army Corps of Engineer documents, has reported that KBR tried to negotiate lower prices with Altanmia and sought a different contractor. But a Corps of Engineers official said there was possible “political pressure” on Halliburton by the Kuwaiti government and the U.S. Embassy in Kuwait to deal exclusively with Altanmia.
After serving as secretary of Defense in the first Bush administration, Cheney became Halliburton president and chief executive in 1995 and held the positions until he ran for vice president in 2000.
Cheney holds 433,333 unexercised stock options and received $162,000 in deferred salary in 2002. Halliburton said the vice president bought an insurance policy that guaranteed his deferred compensation regardless of how the company performed. And he “irrevocably” assigned any future profit from the sale of his stock options to charities, the company said.
