Crony Capitalism: Halliburton Gets $70 Million Bonus Despite Fraud

On Tuesday, May 10, 2005, and without a hint of shame, the Bush administration awarded Halliburton subsidiary Kellogg, Brown and Root (KBR) $72 million in bonuses for its "very good" and "excellent" work in Iraq. Excuse me? Just two months ago, the Justice Department indicted a KBR manager for "major fraud against the United States" under the same LOGCAP contract for which KBR is now being awarded bonuses. According to the indictment, former KBR manager Jeff Mazon billed the U.S. more than $5.5 million for $680,000 worth of work. In other words, Mazon inflated KBR's bill by over 700 percent. By the way, that LOGCAP contract is a cost-plus-award-fee, indefinite delivery/indefinite quantity contract. That means Halliburton/KBR supplies an indefinite quantity of supplies for an indefinite period of time, its costs are fully reimbursed, and it get paid an additional amount of 2 to 7 percent of those costs. Good work, if you can get it. Bush & Co. decided to award KBR over $72 million in bonuses despite the fact that senior Halliburton/KBR officials perjured themselves before the House Committee on Government Reform back in July of 2004. At the time, the Committee was investigating allegations that Halliburton/KBR employees were taking kickbacks under the LOGCAP contract. At the hearing, Halliburton/KBR representatives testified, under oath, that none of their thieving employees were managers. Oops. According to the federal indictment, Mazon was KBR's Procurement, Materials and Property Manager. Aside from the LOGCAP contract, Halliburton/KBR has bilked and defrauded the U.S. for millions of dollars on other contracts associated with the "rebuilding" of Iraq. Investigations by the Defense Contract Audit Agency (DCAA), revealed that Halliburton/KBR overcharged the U.S. no less than $212 million under its Restore Iraqi Oil (RIO) contract. The Bush administration awarded the RIO contract to Halliburton/KBR without asking for competitive bids. Under the RIO contract, Halliburton/KBR was issued ten task orders for oil-related work throughout Iraq. While the Bush administration has repeatedly refused to provide Congress with any unredacted copies of the DCAA's audits of the ten task orders, the National Security Subcommittee of the Committee on Government Reform was able to obtain the audits for task orders 5 through 10. Those audits reveal that Halliburton/KBR overcharged by as much as 47.4 percent of the total value of the individual task orders. The average overcharge by Halliburton/KBR amounted to 12.6 percent of the task order value. Ever-eager to defend the good name of the Vice President and his former company, Bush & Co. have repeatedly refused to provide Congress with the audit reports prepared by the DCAA. In fact, Bush & Co. made the extensive redactions to the audit reports at the specific request of Halliburton/KBR. Then, when the National Security Subcommittee threatened to subpoena the audit reports (after its requests for the audits were denied no fewer than 12 times), the Pentagon replied that "issuing a subpoena will not get the material released any faster." Or, in the immortal words of our poetic Vice President, "Go fuck yourself." In fairness, what good would it be to have the Vice President in your pocket if it didn't allow you to conceal evidence of your fraudulent activity and then get a $72 million bonus? Regardless, Bush & Co. have decided to conceal the documented criminality of Halliburton/KBR despite Bush's earlier promise to the contrary. Upon the release of the DCAA's preliminary findings regarding the fraud and thievery of Halliburton/KBR, Bush declared at a press conference on December 12, 2003, that the DCAA's investigation would "lay the facts out for everybody to see." Apparently, Bush doesn't include Congress and the American public in his definition of "everybody."