- The Washington Times - Wednesday, December 17, 2003

From combined dispatches

Halliburton Co. does not appear to have deliberately overcharged the United States on its reconstruction contract in Iraq, Pentagon Comptroller Dov Zakheim said yesterday.

A Pentagon audit found Halliburton may have overcharged as much as $61 million for fuel costs on its no-bid government contract in Iraq, an award worth as much as $7 billion to the world’s second-largest oilfield-services company.

“From what I have seen so far, from what the DCAA leadership have told me, I have no basis whatsoever to see anything nefarious,” Mr. Zakheim said.

The DCAA is the Pentagon’s Defense Contract Audit Agency. Halliburton didn’t profit from the potential overcharges, and the government and the company hope the question can be resolved by early February, he said.

Democratic lawmakers, including presidential candidates Rep. Richard A. Gephardt of Missouri and Sen. Joe Lieberman of Connecticut, have questioned Halliburton’s Iraq work and its link to the Bush administration through Vice President Dick Cheney, who was the company’s chief executive from 1995 to 2000.

The potential overcharge appears to stem from an antiquated accounting and cost-estimating system, and the company has assigned a 25-person team to correct that within “the next couple of months,” Mr. Zakheim said.

Halliburton’s KBR unit, formerly known as Kellogg, Brown & Root, has been paid $866 million on the oil reconstruction contract and “$61 million is actually the only part that is being questioned,” Mr. Zakheim said.

KBR has earned a base fee of 2 percent, or $17 million, on the amount paid to date — profit that would be wiped out if the DCAA concludes the company is required to pay back the money.

“If the auditors conclude that they were overpaid — and that has not been concluded yet, I have to underscore that — then it’s going to be the company that’s out the money, not the taxpayer,” Mr. Zakheim said.

Rep. Henry A. Waxman, a California Democrat who is the most outspoken critic of the Halliburton contract, remained unconvinced.

“Accounting errors don’t explain why the administration is paying $2.64 per gallon for gasoline that should cost one dollar and that is resold to Iraqis for a nickel,” Mr. Waxman said.

“There’s no question that the taxpayer is getting gouged on the gasoline contract. We need a full investigation to find out who is responsible and how this could have happened,” he said.

In trading on the New York Stock Exchange, Halliburton shares rose 46 cents to close at $25.60.


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