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Documents Raise New Questions About Army Contract With Vice President Dick Cheney's Former Firm
Associated Press/ABC News
January 15, 2004

WASHINGTON Jan. 15 -- Halliburton chose a high-priced Kuwaiti supplier for gasoline in Iraq just one day after considering bids from only three companies, an Army document says.

The Army Corps of Engineers document, obtained Thursday by The Associated Press, raises new questions about Vice President Dick Cheney's former company two days after Pentagon auditors requested an investigation of possible criminal wrongdoing.

Halliburton has denied doing anything wrong and called criticism of its actions unfair and politically motivated.

The Defense Contract Audit Agency on Tuesday asked the Pentagon's inspector general to investigate a "suspected irregularity" involving the Halliburton contract to provide gasoline to civilians in Iraq. Auditors had said last month that Halliburton and its Kuwaiti fuel supplier, the Altanmia Marketing Co., may have overcharged the Army by $61 million between May and September.

The referral to the inspector general indicates the auditors suspect illegal activity. The investigation will center on actions by government workers, not the company, a senior defense official said Thursday on condition of anonymity.

The Army Corps of Engineers, which oversees the contract, has backed Halliburton. Corps officials last month ruled that Halliburton subsidiary KBR didn't have to justify the price it was paying Altanmia for fuel.

The latest document to surface is a Corps of Engineers memo to DCAA last week called a "business case" justifying the fuel costs. Halliburton charged the Army more than double the cost for fuel it trucked into Iraq from Kuwait than for fuel it bought in Turkey.

Halliburton has claimed that Altanmia was the only company approved by the Kuwaiti government to sell fuel in Iraq.

But the Corps of Engineers document doesn't say that. It says Altanmia had to get Kuwaiti government approval for its sales to Halliburton because it had never sold fuel before. The Army document does not mention any demand by Kuwait that only Altanmia could be used as a supplier.

Halliburton got a contract to repair Iraq's crumbling oil industry as part of its contract to provide emergency construction and other services to the Army. On May 4, military commanders in Iraq told Halliburton to start supplying gasoline in Iraq because crowds in long lines at gas stations were becoming unruly.

That day, Halliburton asked three Kuwaiti firms to bid for that business. On May 5, Halliburton placed its first order with Altanmia, the Army memo says. The Army memo says Altanmia was the low bidder of the three but does not name the other two companies or say what their bids were.

The Army memo says Corps of Engineers officials weren't required to determine that Altanmia was the lowest-cost subcontractor. It says the urgent need for fuel in Iraq meant the contract had to be completed quickly, and the danger to fuel convoys could be one reason the Kuwaiti price was so high.

"The gas lines were a visible symptom of the failure of the coalition forces to maintain order or restore basic services to the Iraqi people," the Army memo says. "Those objecting to the war used the lack of fuel as indication that Iraq had fared better under the previous regime.

"Failure to provide the fuel was not an option."

Halliburton spokeswoman Wendy Hall said Thursday that the company followed proper procedures in the contract.

"This was a critical mission, and it was dangerous because of the violence throughout the country," Hall said in a statement. "We received the assignment, and were instructed to begin imports immediately. Regular fuel delivery did begin very shortly thereafter, and we believe it prevented or alleviated a national crisis."

Rep. Henry Waxman, the top Democrat on the House Government Reform Committee, said Thursday that another Pentagon agency and an Iraqi oil company pay less than half of Altanmia's price for fuel trucked into Iraq from Kuwait.

Waxman and other Democrats have called for further investigations of the matter and criticized the Halliburton contract as evidence of the Bush administration's rewarding its corporate friends. Cheney ran Halliburton from 1995 until he quit in 2000 to become Bush's running mate, and the company's executives donated thousands of dollars to the Bush campaign.

Halliburton continues to supply fuel to Iraq's civilian market under the Army contract while another Pentagon agency, the Defense Energy Support Center, prepares to take over that job. The Army hopes to replace Halliburton's contract to rebuild Iraq's oil industry through a competitive bid process that should be complete later this spring.

White House and Pentagon officials say political considerations do not affect the Defense Department's contract decisions. Cheney, a former defense secretary, is not involved in those decisions.

Copyright 2004 The Associated Press. All rights reserved.

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