Halliburton faces scrutiny over security

Halliburton faces scrutiny over security
By Stephanie Kirchgaessner in Washington
Copyright The Financial Times Limited 2007
Published: February 8 2007 02:00 | Last updated: February 8 2007 02:00



The US military is weighing up whether to force Halliburton to pay back what could amount to tens of millions of dollars in fees it charged the army to pay for private security subcontractors in Iraq.

Tina Ballard, deputy assistant secretary of the army, said it was investigating allegations that Halliburton violated the terms of its $16bn (£8bn, €12bn) logistics contract in Iraq, known as Logcap, by knowingly or unknowingly paying for private security subcontractors, and that the army would consider taking steps to recoup those funds.

Use of private security contractors in Iraq, for duties ranging from protecting visiting US officials to securing reconstruction sites, has soared in recent years, costing US taxpayers about $3.8bn, according to a report by Democratic lawmakers.

Under the terms of Logcap, Halliburton is prohibited from using security contractors, such as Blackwater. Last year a top Defense Department official said in a letter to lawmakers investigating the issue that the department had been told by Halliburton subsidiary KBR that the company was "unaware" that Blackwater had been hired by any of KBR's many subcontractors.

But in testimony yesterday before the chief House oversight committee, Ms Ballard admitted that, after a subsequent army probe, one of KBR's subcontractors, ESS, a food services company that is a subsidiary of Compass of the UK, admitted it had hired Blackwater to protect ESS employees under a Logcap subcontract.

KBR's director of security yesterday said travelling in Iraq without security was "exceptionally dangerous".

The investigation of the alleged engagement of Blackwater by KBR and other contractors in Iraq lies at the heart of a wrongful death lawsuit against Blackwater by families of four employees who were ambushed in Falluja in 2004. Henry Waxman, the Democratic chairman of the oversight committee, said that, after three years investigating the ambush, it was still unclear whether the men, who were working for ESS, were ultimately working under a contract held by KBR - which would have violated contracting rules - or Fluor, another contractor, because ESS had offered conflicting information on the issue. Fluor yesterday denied ever working with Blackwater.

"It's remarkable that the world of contractors and subcontractors is so murky that we can't even get to the bottom of this, let alone calculate how many millions of dollars taxpayers lose in each step of the subcontracting process," said Mr Waxman.

In emotional testimony yesterday, the families of the four men, who were shot, dragged through the streets, burned and hanged from a bridge, said Blackwater failed to supply the men with teams big enough to ensure their safety, armoured vehicles and rear gunners, and other provisions. "It's like the wild west over there and there is no accountability," said Kathryn Helvenston-Wettengel, mother of one of those killed.

A Blackwater official declined to discuss details of the case, but said Congress was only hearing an "incomplete and one-sided exploration" of the incident.