Halliburton Case Is Referred to Justice Department

The New York Times

Saturday 19 November 2005

Pentagon investigators have referred allegations of abuse in how the Halliburton Company was awarded a contract for work in Iraq to the Justice Department for possible criminal investigation, a Democratic senator who has been holding unofficial hearings on contract abuses in Iraq said yesterday in Washington.

The allegations mainly involve the Army's secret, noncompetitive awarding in 2003 of a multibillion dollar contract for oil field repairs in Iraq to Halliburton, a Texas-based company. The objections were raised publicly last year by Bunnatine H. Greenhouse, then the chief contracts monitor at the Army Corps of Engineers, the government agency that handled the contract and several others in Iraq.

In a letter received and released yesterday by Senator Byron L. Dorgan, Democrat of North Dakota, the assistant Pentagon inspector general, John R. Crane, said that the criminal investigation service of the Defense Department had examined Ms. Greenhouse's allegations "and has shared its findings with the Department of Justice." Senator Dorgan is the chairman of the Democratic Policy Committee, a Congressional group that has repeatedly used unofficial hearings to question the administration's record of awarding contracts in Iraq.

The Justice Department, the letter said, "is in the process of considering whether to pursue the matter."

Ms. Greenhouse, a 20-year veteran of military procurement work, says her objections before the contract was signed were ignored. After internal clashes with officials at the agency and threats of demotion, she went public with her charges in the fall of 2004.

This year, she was demoted in August from the elite Senior Executive Service, on charges of poor performance, and given a lower-ranking job as a project manager. She has filed appeals, but for now "she has no projects to manage and she just sits in the corner," her attorney, Michael Kohn, said yesterday in a telephone interview from Washington. The inspector general's office at the Defense Department had already begun its own investigation of her charges regarding the contracting. Exactly which issues are of most interest to investigators in the Justice Department is unclear. Mr. Crane wrote that he could not provide more details "as this is an ongoing criminal investigation."

Melissa Norcross, a spokeswoman for Halliburton, said in an e-mail message, "The company continues to cooperate fully with the Justice Department's investigation of certain issues pertaining to our work in Iraq."

In letters to senior Army officials and in public testimony, Ms. Greenhouse said that in early 2003 the Corps had violated procedures when it secretly awarded a five-year, potentially $7 billion contract for oil field repairs to a Halliburton subsidiary, Kellogg Brown & Root.

Among other things, the same company had been secretly hired months earlier to draw up a plan for the job, she said. She also said that even if the urgency of war required dispensing with competitive bidding, the duration of the contract should have been shorter. She objected again in December 2003, when officials granted a waiver to Kellogg Brown & Root, approving the high prices it had paid to import fuel from Kuwait. Other Pentagon agencies said the company had paid tens of millions of dollars too much, without offering any justification for the payments.

In her e-mail message, Ms. Norcross said, "KBR will continue to work with our customers and the appropriate government agencies to demonstrate, once and for all, that KBR delivered vital services for the U.S. troops and the Iraqi people within the appropriate bounds of government contracting and at a fair and reasonable cost, given the circumstances."