Senate Hearing on Waste, Fraud & Abuse in Iraq
"An Oversight Hearing on Waste, Fraud, and Abuse in U.S. Government Contracting in Iraq"
Monday, June 27, 2005
Last night, this hearing was broadcast on CSPAN. Basically, there was only one culprit named as committing "waste, fraud and abuse", and that was Halliburton KBR.
Previously undisclosed Defense Department audits reveal that Halliburton's overcharges in Iraq have skyrocketed. Under the company's two largest, multi-billion-dollar contracts - one to repair Iraq's oil infrastructure (RIO), the second to provide logistical support for American troops (LOGCAP) - Halliburton's overcharges now dwarf the amounts publicly disclosed by the Bush Administration. At this hearing, Senator Dorgan and Representative Waxman will release a report detailing these overcharges, and whistleblower witnesses will explain how Halliburton and the Bush Administration have overcharged the American taxpayer by hundreds of millions of dollars.Ms. Greenhouse is awesome. Read this VANITY FAIR expose on this story, which was published last year, at this LINK.
Witnesses
Bunnatine Greenhouse: Bunny Greenhouse is the top civilian contracting official at the U.S. Army Corps of Engineers, responsible for reviewing all contracts worth more than $10 million. After objecting to special treatment for Halliburton on several occasions, Greenhouse was bypassed, ignored, and ultimately forced to resign or face demotion. Ms. Greenhouse will report on how Halliburton was awarded multi-billion-dollar contracts without competitive bidding.
"...There's another way to look at KBR's work in Iraq. Without it, the company would be in truly bad shape. In fact, the Iraq work accounts for nearly all of KBR's growth at a time when it has staggered under $4.2 billion in asbestos claims—thanks in large part to Halliburton's former C.E.O. Dick Cheney. Back in 1998, Cheney decided to merge Halliburton with Dresser Industries, a Texas-based energy company. Unfortunately, he failed to do his homework on Dresser: a mountain of lawsuits over asbestos-contamination claims were about to be filed against it. KBR, formed from the merger, bore the brunt of those. By late 2003, Dresser was forced into bankruptcy and began organizing a court-ordered settlement plan. KBR incurred huge liabilities—handily offset by those contracts in Iraq. Now that painful ordeal is over: in December a federal judge approved Dresser's $4.2 billion asbestos settlement. That means the company can come out of bankruptcy, and analysts seem to agree on what will happen, as a result, in the next months. Halliburton will sell KBR."
Halliburton Iraq deals described as contract abuse
By Sue Pleming, Mon Jun 27
WASHINGTON (Reuters) - A top U.S. Army procurement official said on Monday Halliburton's deals in Iraq were the worst example of contract abuse she had seen as Pentagon auditors flagged over $1 billion of potential overcharges by the Texas-based firm. Bunny Greenhouse, the Army Corps of Engineers' top contracting official-turned whistle-blower, said in testimony at a hearing by Democrats on Capitol Hill that "every aspect" of Halliburton's oil contract in Iraq had been under the control of the Office of the Secretary of Defense.
"I can unequivocally state that the abuse related to contracts awarded to KBR (Kellogg Brown and Root) represents the most blatant and improper contract abuse I have witnessed during the course of my professional career," said Greenhouse, a procurement veteran of more than 20 years.
Her blistering criticism came as the Democrats released a new report including Pentagon audits that identified more than $1.03 billion in "questioned" costs and $422 million in "unsupported" costs for Halliburton's work in Iraq. Halliburton's subsidiary KBR is the U.S. military's biggest contractor in Iraq and has been accused by Democrats of getting lucrative work there because of its ties to Vice President Dick Cheney who headed the company from 1995-2000.
Pressed by lawmakers whether she thought the Defense Secretary's office was involved in the handout and running of contracts to KBR, Greenhouse replied: "That is true."
"I observed, first hand, that essentially every aspect of the RIO (Restore Iraqi Oil) contract remained under the control of the Office of the Secretary of Defense. This troubled me and was wrong," said Greenhouse.
Both the Pentagon and the Army Corps of Engineers, which was in charge of a sole-source oil contract given to KBR in Iraq, have denied any special treatment for KBR. The Corps did not immediately respond to questions. Democrats called for an urgent hearing and an investigation into what they said were contracting abuses involving KBR.
"This testimony doesn't just call for Congressional oversight -- it screams for it," said Sen. Byron Dorgan (news, bio, voting record), a Democrat from North Dakota.
What concerned Greenhouse most was that the oil contract, which had a top value of $7 billion, was given to KBR without competitive bidding. She irked her bosses by handwriting her concerns in official documents for the oil deal but said these were overlooked, she said. In one instance, she said Army Corps officials bypassed getting her signature to grant a waiver for KBR to be relieved of its obligation to provide cost and pricing data for bringing fuel into Iraq. That waiver was granted after a draft Army audit said KBR may have overcharged the military by at least $61 million to bring in fuel to Iraq to ease a shortage of refined oil.
Whistleblower 2: From February 2004 through April 2004, this witness was employed by Halliburton subsidiary KBR as a Food Production Manager at Camp Anaconda in Iraq. While in Iraq, he witnessed firsthand KBR's practice of overcharging for dining hall services as well as efforts by KBR managers to avoid the scrutiny of government auditors. Because they suspected he would raise concerns with those auditors, KBR managers sent him to a more dangerous camp in Fallujah during the auditors' visit to Camp Anaconda. His convoy was attacked on the return from Fallujah.
This man is Rory Mayberry. Here is a transcript of his pre-recorded testimony:Witness 3: This witness is an executive with a security and operations management firm that has contracts to monitor and secure the loading and delivery of Kuwaiti fuels into Iraq for use and sale by Iraq's state oil company. He is expected to testify that Halliburton's overcharges for the transport of fuel are even greater than previously known and that, despite its claims, KBR has not completed key fuel distribution infrastructure work.
My name is Rory Mayberry. I'm sorry I'm not able to be in person to testify to the committee, but I returned from Iraq on June 14th. I'm working as Medical Examiner and Medical Supervisor for a company called Emergent Services. I wanted to testify today about my experiences working with Halliburton in Iraq. I was hired by Halliburton subsidiary KBR in January 2004 as Food Production Manager for a dining hall in Camp Anaconda, Iraq. I worked under the Halliburton's logcap contract from Feb. 2004 until April 2004.
When I was assigned to the dining facility, KBR managers informed me that there were KBR practices that were to be followed every day. These practices led to major overcharges.
--First, KBR was supposed to feed 600 Turkish and Filipino workers meals according to their custom. Although KBR charged the government for this service, they didn't prepare the meals; instead, these workers were given leftover food in boxes and garbage bags after the troops ate. Sometimes there were no leftovers to give them.
--Second, KBR charged the government for meals it never served to the troops until late 2003. Anaconda was transition site for Army personnel. Because there could be large numbers of extra personnel passing thru every date at KBR, KBR would charge surge capacity of 5,000 troops per meal; however, KBR continued to charge for the extra head count even after Anaconda was no longer the transition site. When I questioned these practices, the managers told us that this is needed, and because KBR lost money in prior months when the government suspended some of their dining hall payments to the company. The managers said that they were adjusting the numbers to make up for what was suspended in the payments. I would prepare food orders each week in order to get the food we needed at the camp in the coming week. KBR managers would triple the order every week to bring in as much food as we needed. They did this because they were charging an extra 5,000 troops and weren't actually feeding. Most of the food went to waste dump.
--Third, KBR paid too much for the food itself. Initially, a company called Tamimi Catering was KBR's subcontractor for the food. Tamimi paid local prices for the food in the towns and the cities around the base in addition to the orders sent to the main office. Tamimi's pricing was fair for the conditions of the country. Then KBR switched to a new supplier, PWC. PWC's prices were almost triple from what Tamimi's were. For example, tomatoes cost $5.00 a box locally, but PWC prices was $13-$15 per box. The local price of a 15-lb box of bacon was $12, compared to PWC's price of $80 per box. PWC charged a lot for transportation because they brought the food from Philadelphia. KBR switched from Tamimi to PWC because Tamimi complained about KBR's poor treatment of its staff. They were living in tents with sand floors and no beds.
--There were other problems that were not related to KBR costs. Food items were being brought into the base that were outdated or expired as much as a year. We were told by KBR food service managers to use these items anyway. This food was fed to the troops. A lot of these frozen foods, chicken, beef, fish and ice cream. The trucks that were hit by convoys firing and bombings, we were told to go into the trucks and remove the food items and use them after removing the bullets and any shrapnel from the bad food. We were told to remove the bullets and turn them over to the managers for souvenirs. When I had the military check some of the food shipments, they returned the food items away, but there wasn't any marking on the record, so KBR just sent the food to another base for use. The problem with expired food was actually worsened with the switch of PWC because it took longer for the food items to get to the base, as they were shipped from the U.S. to a warehouse in Kuwait.
--KBR also paid for spoiled food. When Tamimi dropped off food, there was often no place to put it in the freezers or refridgeration. Food would stay in the freezer or refridgeration trucks until they ran out of fuel. KBR wouldn't re-fuel the trucks so the food would spoil. This happened quite a bit. In addition, KBR would cater events for KBR employees, like management parties and barbeques. This happened about three times a week. As a result, there were shortages of certain food items, such as beef, chicken, pork, salads, dressings, and sodas for the troops.
--The food service personnel were given sanitation rules from the military, preventive medicine information programs, and rules to follow by the Armed Forces. But KBR managers informed us that the information was not to be followed, and they knew best, to keep following their instructions; so our employees weren't following sanitation rules as set forth.
--Also, the Iraq subcontractor drivers of food convoys that arrived in the base were not fed. They were given MRE's, or Meals Ready to Eat with pork, which they couldn't eat because of religious reasons. As a result, the drivers would raid the trucks for food.
==Government Auditors would have caught and fixed many of the problems, but KBR managers told us not to speak with the auditors. The managers themselves would leave the base or hide from the auditors when they were on the base, and not answer the radios when they were called for them. We were told to follow instructions or get off of the base. The threat of being sent to a camp under fire was their way of keeping us quiet. The employees that talked to the auditors were moved to other bases that were under fire and more fire than Anaconda. If they refused to move, they were fired and sent home. I personally was sent to Falluja for three weeks. The manager told me I was being sent away until the auditors were gone because I had opened my mouth to the auditors. When I returned from Falluja, the convoy was attacked. I was put under danger because the KBR management didn't want me to talk to the US auditors. When KBR wanted me to go to Tikrit, I headed home on rotation. I wasn't officially fired, and I didn't formally quit. I am happy to answer any questions the committee may have for me.
QUESTION: First question--are you saying that Halliburton deliberately falsified the number of meals they prepared and then submitted false claims for reimbursement and that they did this to make up for past amounts auditors had disallowed?
RM: Yes.
QUESTION: So when they couldn't get re-imbursed legitimately, they committed fraud by submitting these false bills?
RM: Yes.
QUESTION: How many meals were served at the dining hall each day?
RM: 2,500 meals per meal, times 4, there was 4 meals, breakfast, lunch dinner, and a midnight meal.
QUESTION: So every day, Halliburton was charging for 20,000 meals it never served?
RM: Correct. They were charging for 20,000 meals and they were only serving 10,000 meals.
QUESTION: Was it rare for expired food to be served to the troops?
RM: No, it was an everyday occurence, sometimes every meal.
QUESTION: You've described routine overcharging and unsanitary practices by Halliburton as well as shortages of food for troops because of private Halliburton parties. Halliburton managers were not only aware of these practices, they ordered them, is that correct?
RM: Correct.
QUESTION: How senior were these managers?
RM: The managers, the main manager was manager of all of Iraq, assigned by KBR.
QUESTION: So these practices may have been ordered at other dining halls as well?
RM: Most likely, yes.
QUESTION: When government auditors arrived, these senior managers deliberately avoided them?
RM: Yes.
QUESTION: And these senior managers ordered you and other employees not to discuss your concerns with
the auditors?
RM: Yes, we were informed if we talked we would be rotated out to other camps that were under fire.
QUESTION: Is it fair to say that the managers used the threat of transfer to a more dangerous base to intimidate employees to be quiet?
RM: Yes.
QUESTION: When employees did talk to auditors, what happened?
RM: All the employees that did talk to the auditors were switched out to other camps or fired because they refused to go to the other camps.
QUESTION: Is there anything else that you would like us to know?
RM: Not at this time, no.
These two witnesses, Gary Butters and Larry Owen, Chairman and CEO, respectively, of Lloyd-Owen International (a Minnesota-registered contracting firm), hired by the Iraq government to supply oil and gas from Kuwait to the people or Iraq. Mr Butters testified that Geo-Tech (a Kuwaiti firm that Lloyd-Owen is employed by to transport fuel and provide security for the transportation) get paid 18 cents per gallon for delivering fuel. Halliburton made $1.30 per gallon to do the same job. They have been transporting 100 tankers of fuel into Iraq daily. They have been harrassed by Halliburton personnel when trying to cross from Kuwait to Iraq using the "military crossing" location operated by KBR, denied access to the crossing on the grounds that they did not have a contract with the US. On another occasion they were not warned of danger when providing services to Halliburton facilities and fired on by insurgents, resulting in injuries and casualties to LOI personnel, and then when they arrived at the Halliburton facilities, LOI personnel were told by Halliburton employees that they had been instructed not provide assistance to Lloyd-Owen employees. The Lloyd-Owen employees were instead assisted by military personnel. They also found inadequate oil and gas related hardware at facilities that Halliburton claimed to have outfitted for use, that was inoperable, out of date, or unusable.
The hearing comes just as we learn that Halliburton has received another contract, this one to support U.S. troops in the Balkans, worth up to $1 billion. Do you remember what happened the last time the Army gave Halliburton a contract in the Balkans? Think Progress does: The General Accounting Office found in 1997 Halliburton "billed the Army for questionable expenses for work in the Balkans, including charges of $85.98 per sheet of plywood that cost $14.06. A year 2000 follow-up report on the Balkans work that found inflated costs, including charges for cleaning some offices up to four times a day." In all, the GAO said KBR's cost-overruns in the Balkans "inflated the original contract price by 32 percent." Nothing like rewarding good behavior.
When Greek tycoon Gus Boulis was gunned down in his BMW on February 6, 2001 Fort Lauderdale police investigators immediately began scrutinizing SunCruz Casinos. Suspicion focused on the recent sale of the fleet. Boulis and one of the three men had been carrying on a very public feud.

