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Gasoline Overcharges

Documents from the Army Corp of Engineers show Halliburton overcharged the government for importing gasoline into Iraq from Kuwait. The company was charging $2.64 per gallon to transport gasoline into Iraq while its competitors were transporting gasoline for less than half that price. For example, the Iraqi state oil company and the Pentagon's Defense Energy Support Center had been transporting gasoline from Kuwait to Iraq for less than half of Halliburton's price. The Army documents were released to Congressional investigators. Halliburton has the exclusive U.S. contract to import fuel into Iraq, but subcontracts the work to the Kuwaiti firm Altanmia Commercial Marketing Company, a company with no prior experience in oil transport, but which is believed to have hidden consultants or partners with ties to prominent Kuwaiti government officials.

In Dec. 2003, the Defense Contract Audit Agency (DCAA) confirmed in a preliminary audit that Halliburton and Altamnia had overcharged the U.S. government by at least $61 million through Sept. 2003. The DCCA formerly asked the Pentagon's inspector general to investigate the overcharges and said the fuel importation contract was given to Altanmia "under unusual circumstances." The DCAA was suspicious because the contract was awarded to Altanmia a few days before the bid solicitation process was officially closed. In fact, the bidding process existed for only one day, making it impossible for more than three companies to bid. In addition, Congressman Henry Waxman (R-CA) says evidence exists which indicates officials with Altanmia are close friends of high officials in the Kuwaiti government, which indicates the contract could have been awarded to Altanmia only because of cronyism, not merit. Congressman Henry Waxman makes the following assertions about Altanmia:

(1) Altanmia received the multimillion dollar contract to import fuel into Iraq even though it had no prior experience in transporting fuel, (2) The Bush administration exerted political pressure on Halliburton and the Army Corp of Engineers to use Altanmia as a subcontractor for importing large quantities of fuel from Kuwait even though importing fuel from Halliburton's subcontractors in Turkey could be done at less than half the cost, and (3) After the DCCA formerly requested the Pentagon's inspector general to investigate the gasoline overcharges, the Army intervened and released Halliburton from its obligation to provide "cost and pricing" data that could justify Altanmia's gasoline prices, thereby making a meaningful audit of Altanmia's charges impossible. A few weeks later, on December 19, 2003, the Army quickly ended the DCAA's audit of the gasoline overcharges. The Army called the overcharges "fair and reasonable." The Army subsequently forced the U.S. government to pay the higher gasoline price even though the Bush administration admitted that "other trucking and oil distributors have made proposals to [Halliburton] on more favorable terms" than Altanmia. Congressman Waxman called the Army's action a "whitewash".

Congressman Waxman believes the Bush administration gave "special treatment" to Halliburton and Altanmia "that has foreclosed an effective investigation by DCAA and prevented Congress and the public from learning the true facts about Halliburton's gasoline imports."After all the scrutiny and evidence of wrongdoing, a Halliburton spokesperson said, "The facts show KBR delivered fuel to Iraq at the best value, the best price and the best terms." Nevertheless, the case has been transferred for investigation by the Defense Criminal Investigative Service (DCIS) of the Pentagon's Inspector General's office. In addition to probing Halliburton, the DCIS is investigating whether U.S. embassy staff violated the law as well. Will the Bush administration stop the DCIS investigation the way it stopped the DCAA investigation? Stay tuned.

More Information

United States House of Representatives, Committee on Government Reform
NY Times: High Payments to Halliburton for Fuel in Iraq
Oil & Gas Reporter: Halliburton faces criminal inquiry by Pentagon for possible fraud
Halliburton Press Release: KBR delivered fuel at best value, price, terms