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Army to investigate new allegations of cronyism toward Halliburton
24 Oct. 2004

WASHINGTON, Oct. 24 (HalliburtonWatch.org) -- The Pentagon has agreed to investigate claims made by a senior Army contracting official that Halliburton's KBR subsidiary unfairly received a $7 billion no-bid contract for repairing Iraq's oil instrastructure, the Associated Press (AP) reported today.

The official, Bunnantine Greenhouse, told members of Congress in a letter that the Army gave the no-bid contract to Halliburton for political reasons. She also said the Army altered documents in order to legitimate Halliburton's contract work in the Balkans.

Greenhouse's allegations were first reported today by Time Magazine. Her allegations coincide with the magazine's discovery last June that Vice President Dick Cheney's office had coordinated efforts to give Halliburton the no-bid contract. The Pentagon later admitted that the contract was awarded to Halliburton after a "political appointee" from the Bush administration recommended the company for the job. Cheney's chief of staff, Lewis "Scooter" Libby, was briefed in October 2002 about the proposal to give the contract work to Halliburton. Furthermore, Pentagon officials admitted that a second political appointee, Undersecretary of Defense Douglas Feith, discussed the no-bid contract in advance with Cheney's office.

Government policy requires that contracts are to be given to companies based on merit rather than political pressure or connections to the White House or Congress. In general, contracts must be awarded by career civil servants, not political appointees. Ms. Greenhouse said the Army ignored this requirement in order to give contract work to Halliburton. She said the Army violated "the integrity of the federal contracting program as it relates to a major defense contractor."

"Employees of the U.S. government have taken improper action that favored KBR's interests," Greenhouse said in the letter. "This conduct has violated specific regulations and calls into question the independence" of the contracting process.

Since Halliburton's KBR subsidiary was involved in the Army's planning for the war in the months before the 2003 Iraq invasion, "the line between government officials and KBR had become so blurred that a perception of conflict of interest existed," Greenhouse said in the letter.

"This particular letter would have to be characterized as a smoking gun for a lot of the rumor and scuttle and publicly voiced criticisms as to this bidding process," Sam Gdanski, a former Pentagon assistant counsel who is now in private practice in Suffern, New York, told Bloomberg News.

"When Halliburton is sitting in on the drafting of its no-bid contract, you know the lines have been crossed," said Sen. Frank Lautenberg (D-NJ) in a statement.

Greenhouse is in a position to know the facts since her chief responsibility is to review the Army's compliance with rules intended to shield contract awards from unethical outside influences.

Halliburton repairs Iraq's oil infrastructure under the Army's Restore Iraqi Oil contract, or RIO, and supplies and feeds the troops around the world under the Army's LOGCAP contract.

In times of emergency, when national security is involved, the government is permitted to bypass normal procedures and award contracts to a single company, without competition. A month prior to the U.S.-led invasion of Iraq, the Army awarded Halliburton the RIO contract without competitive bidding. The army said the 5-year contract was awarded without competition because of a "national emergency" created by the pending war with Iraq. In other words, there was no time to offer other companies a chance to bid on the contract. But Greenhouse felt the 5-year duration of the contract was unnecessary because the emergency of war would not last for 5 years. She wanted to open the contract up for competitive bidding after one year. Her superiors disagreed at the time.

After senior officials approved the 5-year, no-bid RIO contract and returned it to Greenhouse for her required approval, she wrote on the contract beside her signature: "I caution that extending this sole-source effort beyond a one year period could convey an invalid perception that there is not strong intent for a limited competition."

Greenhouse was also critical of the Army's handling of LOGCAP work in the Balkans. Her lawyer, Michael D. Kohn, said in a letter to acting Army Secretary Les Brownlee that, in January 2002, Greenhouse sent an investigative team to examine Halliburton's performance of the LOGCAP operations in the Balkans. Afterward, she reported: "The general feeling in the theater is that the contractor [Halliburton/KBR] is `out of control.'" Army officials ignored her concerns. Instead, they renewed Halliburton's contract in the Balkans for another five years. Greenhouse said Tina Ballard, deputy assistant Army secretary for policy and procurement, was telephoned during a meeting and ordered to renew the contract for "political reasons."

Kohn said contracts were approved over Greenhouse's reservations and extensions were awarded because underlings signed them without her knowledge and in collusion with senior officials, the AP reported.

Kohn, who has represented government whistleblowers in the past, is calling for an independent organization, outside of the Pentagon, to investigate charges of cronyism regarding Halliburton's contracts. "This needs to be done by an outside agency," he told AP. "From past experience, we are uncomfortable with the DOD-IG handling this investigation by themselves." Kohn's concerns may be justified since a new report from Rep. Henry Waxman (D-CA) finds that President Bush has repeatedly appointed individuals with Republican political backgrounds to serve as nonpartisan Inspectors General at federal departments and agencies.

More Information:

Time Magazine: Beyond the Call of Duty

Letter written by Ms. Greenhouse's lawyer reciting her charges of "waste, fraud, abuse and corruption" (pdf)

Bloomberg News: Army Official Requests Probe of Halliburton Contracts

New document indicates Cheney may have lied about Halliburton contract deal

Pentagon knew Halliburton was prone to overcharges before awarding no-bid contract

Pentagon admits political appointee had role in awarding no-bid contract to Halliburton

Congress calls for investigation of Cheney

Cheney ignored contracting ethics to help Halliburton score big in Iraq

Democrats demand special prosecutor to investigate Cheney

GAO finds Pentagon violated law by hiring Halliburton for pre-war planning work

Documents Suggest Pentagon Concealed Halliburton Contract in Months Before War