Companies working in
support of U.S. troops in Iraq are hauling
Houston-headquartered defense contractor, Halliburton, into U.S. federal court with claims that the company
stiffed them for a sum totaling hundreds of millions of
dollars after they provided essential services in the war
The latest lawsuit,
filed October 26, charges that Halliburton subsidiary, Kellogg, Brown & Root (KBR), has refused to
pay $20.4 million for food services and other work near the
city of Tikrit provided in 2003 by the Kuwait Company for
Process Plant Construction & Contracting (KCPC) and the
Morris Corporation of Australia for several months after the
invasion of Iraq.
follows swiftly on the heels of an October 15 lawsuit on
behalf of the Kuwaiti construction company, La Nouvelle,
which demands of more than $224 million for similar services
the firm performed in Iraq and Kuwait as a subcontractor to
Both lawsuits are
individually filed in the U.S. District Court of Eastern
La Nouvelle is
represented by the law firm of Hogan & Hartson. KCPC and
the Morris Corporation are represented by Akin
Gump Strauss Hauer and Feld.
More Troubles on the Way
Halliburton may face similar legal actions from other subcontractors in
the coming weeks, according to several sources who worked
under KBR's sweeping multibillion dollar, 10-year Army
agreement to supply logistics services to the U.S. military
in Iraq and the Balkans.
hundreds of subcontractors in the same situation," said
contractor who claims his company
is owed tens of millions of dollars.
Other lawsuits are
also expected to be filed soon by truck drivers and their
families who say Halliburton placed them in unnecessarily dangerous circumstances in Iraq
that led to injuries and even death.
challenges only add to the mounting problems of the besieged
company once headed by Vice President Dick Cheney, which is
performing work in Iraq at an estimated value of $10 billion
The FBI also
recently expanded a criminal probe of the company’s
contracts following recent allegations made by a senior Army
Corps of Engineers contract executive, Bunnatine Greenhouse,
who is accusing high-level Army officials of violating
federal law and giving preferential treatment to
when they secretly awarded a $7 billion agreement to the
firm in 2003 to rebuild Iraq’s oil industrial base.
KBR racked up $2.5
billion in billings under that secret oil contract before it
was replaced with a new $1.2 billion contract at the
beginning of this year following an outcry of criticism over
the original award.
company has received work under a separate agreement for
Army logistics and support orders totaling $7.8 billion and
has been paid $4.5 billion to date for that work, according
to Army spokesman Dan Carlson. Pentagon auditors
acknowledged last August that they were questioning as much
as $1.8 billion of billings by Halliburton for possible overcharges and insufficient documentation,
according to the Wall Street Journal.
Halliburton said at that time that any auditing would soon determine its
accounting books to be sound. "We have extraordinary
documentation for the tasks our employees and subcontractors
have performed on behalf of the troops," Hall told the
Wall Street Journal.
Such audits are
nothing new to KBR. The company's Iraq business has been
under fire by a number of investigations by the Pentagon and
the U.S. Justice Department, including for $186 million in
charges for meals that were apparently never served and $61
million in overcharges on fuel imported from Kuwait.
Regardless of what
those investigations determine, the companies that have not
been paid by KBR for services rendered, apparently have no
recourse but to take their claims to court, say military
officials. "KBR subcontractors are paid by KBR,"
Pentagon spokeswoman Marine Lt. Col. Rose-Anne Lynch said.
La Nouvelle Lawsuit
KBR has already
been paid for the services provided by La Nouvelle, but the
company continues to refuse payment according to the Kuwaiti
La Nouvelle has
been in existence since 1997, providing services to
multinationals ranging from Pizza Express to Starbucks in
the Middle East. The U.S. Army hired originally hired the
company directly to provide logistical support to thousands
of Marines flying in from Twenty Nine Palms in California to
hastily constructed Camp Coyote in Kuwait about 30 miles
from the Iraqi border – known as "the tip of
spear" in the March 2003 invasion.
standing agreement, La Nouvelle was then placed under the
supervision of KBR, which signed dozens of small
sub-contracts with La Nouvelle for the provision of
"food services, laundry services, tents, generator
power and equipment" to U.S. troops in Kuwait and Iraq.
Billing for these
services took center stage last summer during several
congressional hearings when former KBR contract manager
Marie deYoung testified that a KBR laundry contract rocketed
to as much as $1.2 million a month after it was agreed to
pay La Nouvelle as much as $100 for every 15-pound bag of
DeYoung, who worked
for KBR in Kuwait for the first five months of 2004, said
she also discovered that La Nouvelle billed KBR for 37,200
cases of soda at a cost of $1.50 a case but that supporting
documents proved that the Kuwaiti company only delivered 37,200
cans at a cost that actually totaled $45 a case.
At the time, KBR supervisors seemed unconcerned about the
high prices on laundry and soda, and after repeatedly
pressuring KBR managers to acknowledge the problem, she was
taken off the La Nouvelle accounts, she said.
"I had been
advised by subcontract administrators who quit the company (KBR)
that employees get moved around when they get too close to
the truth," she said under sworn testimony. "I
personally observed and experienced this as a routine
A public relations spokeswoman for the legal team
representing La Nouvelle, Jennifer Thomas, declined to make
any La Nouvelle employees familiar with the laundry and soda
"They don't want to talk to the press," she said,
adding that La Nouvelle denies accusations of overcharges.
De Young stands by her findings, noting that her charges are
substantiated by La Nouvelle billing documents and sworn
testimony in Congress.
Morris Corporation Lawsuit
Allegations that KBR accepted overcharges have led to
unsubstantiated rumors by some involved in the contracting
process that KBR managers selected subcontractors after the
Iraq invasion for reasons other than competitive cost,
including favors for personal gain and kickbacks.
The possibility of
kickbacks among subcontractors was first reported May 21 in
the Sydney Morning Herald after a shortlived agreement held
by the Morris Corporation of Australia collapsed. KBR agreed
to pay Morris and its joint venture partner, KCPC of Kuwait,
up to $100 million to build and maintain mess halls at three
camps around Tikrit in the battle-torn Sunni Triangle.
Hired on June 17,
the joint venture was expected to be up and running in three
weeks but Morris and KCPC fell behind schedule because
problems caused by poor security and the U.S. military.
Citing poor performance, KBR fired the team on July 31 and
immediately whipped up a legal storm that soon sparked
allegations that a Halliburton employee had requested a $3 million kickback during the
original contract negotiations.
talking about a paper bag," a source told the Sydney
Morning Herald. "They wanted kickbacks of 3 percent to
4 percent, which pushed up the prices because then the
subcontractors would add the price of the kickbacks to their
Halliburton declined comment at the time of the report and no
subcontractor has come forward since with public claims of
But KBR's legal
problems continue. In its October 26 lawsuit, Morris and
KCPC allege that KBR has yet to pay an outstanding bill of
$20.4 million as part of a negotiated settlement agreement.
reached on May 19 with a team led by KBR procurement
vice-president William Jonas, following the contract's
termination. The complaint also alleges that KBR refused to
return 135 "reefers" (40-foot refrigerated
trailers with equipment and supplies) brought to the Tikrit
sites by Morris/KCPC, but has instead given them to a new
KBR agreed to pay
the disputed amount by July 18, the lawsuit says, but
"has since failed to make the payment." Instead on
July 23, KBR "requested that the joint venture provide
additional documentation in support of its claim," the
deYoung told CorpWatch she isn't surprised by the lawsuits
seeking payment from KBR. La Nouvelle may have gold plated
its prices, but KBR managers accepted the bills without
complaint, she said.
Willful Contract Violations
Halliburton must now also wrestle with the fallout from allegations made
by a top-ranking contract officer with the Army Corps of
Engineers (USACE), Bunnatine Greenhouse, who now claims that
Pentagon officials skirted the law and willfully violated
federal acquisition regulations when awarding the $7 billion
oil contract to Halliburton .
The media and
members of Congress have often raised this matter, but this
is the first time a senior official directly involved in
these contracts has made such accusations.
In a 12-page letter
sent to the Army on Oct. 21, Greenhouse alleges that she
repeatedly objected to the handling of a number of
Halliburton contracts, but that other Pentagon officials regularly
dismissed her concerns.
Her complaint cites
a sworn declaration made by a former USACE commander who
stated that Greenhouse "strictly followed the Federal
Acquisition Regulation (FAR) for contracting and approached
her work with high ethical standards," but that
pressure from individuals "associated with favorite
companies" resulting in "Greenhouse's strict and
ethical application of the FAR work(ing) against her when it
should have been viewed with high regard."
and "interference" to her protests over the
contracts peaked just before the invasion of Iraq, says the
complaint, and specifically over the five-year, $7 billion
Restore Iraqi Oil (RIO) agreement; the $1.2 billion
follow-on contract to the RIO agreement; and a $165 million
extension to an contract for military support services in
Each of these
contracts included serious violations to acquisition
regulations and ignored competition requirements, the
complaint says. After Greenhouse pointed out these concerns,
she frequently wrote her objections to contracts when asked
to sign official documents.
asked by USACE Deputy Commander Major General M.G. Griffin
to stop the practice.
was improper, the complaint says, and a clear interference
of Greenhouse's official duties as the principal assistant
responsible for contracting and competition advocate, a
position equal to a one star general and yet USACE
commanders again violated regulations by asking a Greenhouse
subordinate for signatures in order to keep her "in the
interference was largely focused on multi-billion-dollar
contract issues pertaining to Halliburton subsidiary, Kellogg Brown and Root," the letter reads.
"This conduct has violated specific regulations and
calls into question the independence of the USACE federal
Wendy Hall told CorpWatch that Halliburton lacks specific information of Greenhouse's dealings with her
commanders during the awarding and management of contracts
and is unable to address them. Ironically Greenhouse is
charging that Halliburton officials sat in on key closed door decision-making
"On the larger
issues, the old allegations have once again been recycled,
this time one week before the election," said Hall.
"We look forward to the end of the election, because no
matter who is elected president, Halliburton is proud to serve the troops just as we have for the past 60
years for both Democrat and Republican
noted that the General Accountability Office determined last
summer in an investigation of the Iraq contracting process
for restoring Iraq's oil wells, pipelines and refineries,
was properly awarded under emergency circumstances.
attorneys, Michael D. Kohn and Stephen M. Kohn believe that
the contract officer's allegations go to the highest levels
of the government.
Stephen Kohn told
CorpWatch that any investigation must not end at the
Pentagon because the role of current and former Halliburton and Pentagon employees must also be thoroughly explored.
"There is a
clear need for a special independent counsel to be
appointed," he said. "The public has the right to
a full and account of those who profited off the war in Iraq
Democrats are also
renewing their call for further hearings based on
charges are serious," said Rep. Henry Waxman, who
fought for several Halliburton hearings last year as the top Democrat on the House
Government Reform Committee. "The Bush Administration
has spent more than a year and a half claiming that
Halliburton's contract was awarded by civil servants without any
political influence. The senior career contracting official
at the Corps of Engineers is now saying that Halliburton received special treatment and that her judgments were