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Democrats ask GAO to probe Halliburton defense contracts

Cheney ties questioned

From Dana Bash
CNN Washington Bureau

A spokeswoman for Vice President Dick Cheney says he has nothing to do with contracts awarded to Halliburton.
A spokeswoman for Vice President Dick Cheney says he has nothing to do with contracts awarded to Halliburton.

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WASHINGTON (CNN) -- Two senior congressional Democrats called for an investigation into whether the oil services company Vice President Dick Cheney once headed has received special treatment in getting defense contracts.

Rep. Henry Waxman, D-California, and Rep. John Dingell, D-Michigan, Tuesday asked the General Accounting Office, the investigative arm of Congress, to look into contracts received over the last two years by the Texas-based Halliburton Corp. and its subsidiaries, which the congressmen said totaled at least $600 million.

"The ties between the vice president and Halliburton have raised concerns about whether the company has received favorable treatment from the administration," Waxman and Dingell wrote in a letter to the GAO.

But a spokeswoman for Cheney, who was Halliburton's CEO from 1995 to 2000, said he "has nothing at all to do with awarding these contracts, the bidding process or the current work orders."

"He severed all financial ties with Halliburton before he took office," said spokeswoman Jennifer Millerwise.

Among the contracts that Waxman and Dingell want the GAO to investigate is one awarded last month by the U.S. Army Corps of Engineers to Kellogg Brown and Root, a Halliburton subsidiary, to put out oil fires in Iraq, without competitive bidding or a price cap.

But a spokesman for the Corps of Engineers told CNN that KBR was awarded the contract because it had already won a bid in December 2001 to pre-position firefighting assets in the region.

"They were the only ones who had the people and equipment there to respond quickly," said spokesman Scott Saunders. "Oil well fires are environmentally and economically disastrous, and we couldn't wait."

Wendy Hall, a spokeswoman for Halliburton, said charges of preferential treatment were off base, noting that KBR has been working for the Defense Department since before World War II.

"The vice president has absolutely nothing to do with the awarding of defense contracts," she said.

"With more than 60 years of government experience, KBR has a proven track record on military contracts, such as production of Navy war ships for World War II, the construction of the Phan Rang Air Base in Vietnam in 1965 and the designation as the premier logistics services provider for U.S. troops stationed in the Balkans."

However, Dingell and Waxman asked the GAO to look into why KBR was awarded the contract when the GAO itself has found that the company billed the Army for questionable expenses for work it did in the Balkans.

They also noted that Halliburton is being investigated by the Securities and Exchange Commission for alleged accounting irregularities in 1998, when Cheney was CEO.

In making their request, the congressmen noted that Cheney has received more than $33 million from Halliburton stock and stock options and still continues to receive deferred compensation from the company of about $180,000 a year.

But sources close to the vice president said that the payments are part of a compensation package negotiated in December 1998 -- well before Cheney was picked to be President Bush's running mate -- and that the payments aren't dependent on the state of the company's finances. He chose to spread the payments out over five years, likely for tax purposes, the sources said.

Halliburton sources and industry analysts also note there are only a handful of companies equipped to handle large government contracts to rebuild oil fields and perform other reconstruction projects.

"Only four or five companies can do this in the world, and Halliburton is one," said Jim Wicklund, oil analyst for Bank of America Securities. "This has nothing to do with Dick Cheney."

The U.S. Agency for International Development is poised to award the first contract for civil reconstruction in Iraq, estimated to be worth $600 million. Halliburton has said it doesn't plan to bid on that contract but may bid for some subcontracting work.

In their letter, the Democrats questioned whether Halliburton "will now attempt to play a low-profile, but still lucrative, subcontracting role on the contract."

A leading expert on government procurement says the secrecy under which the government may be awarding contracts could leave the perception of questionable conduct, but that historically there has been a bright line drawn.

"Politicians don't award contracts, career civil servants do. One of the things we do well in American procurement is to insulate politics from the process," said Professor Steve Schooner of George Washington University Law School.

Democratic members have Congress have complained since before the war started not only about questionable contracts, but about the fact that companies in the running to rebuild Iraq had more information on the administration's plans than they did.


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