When Defense Policy Board chairman Richard Perle revealed that he was
getting $725,000 to help Global Crossing navigate the national security
issues surrounding the sale of its assets, the press jumped all over
Perle, and rightly so. There was indeed something fishy about the
chairman of a board that advises the Pentagon making that kind of money
to help a company that was having problems with national security
issues. Perle is also on the board of Onset Technology, the leading
provider of message conversion technology and a major supplier to
Bechtel - one of the leading candidates for rebuilding the Iraqi
As the Center for Public Integrity has documented, this kind of thing is
quite prevalent on the Defense Policy Board, where at least nine of the
30 members have ties to companies that have won more than $76 billion in
defense contracts in 2001 and 2002. As more and more wartime contracts
are announced, more and more conflicts of interest are coming to light.
After all, the Bush administration is riddled with ties to the weapons,
engineering, construction, and oil companies that have the most to
profit from a war in Iraq. Perle's story is certainly not unusual.
However, of all the administration members with potential conflicts of
interest, none seems more troubling than Vice President Dick Cheney.
Cheney is former CEO of Halliburton, an oil-services company that also
provides construction and military support services - a triple-header of
A few weeks ago, the U.S. Army Corp of Engineers awarded a no-bid
contract to extinguish oil well fires in Iraq to Kellogg Brown and Root
(KBR), a subsidiary of Halliburton. The contract was granted under a
January Bush administration waiver that, according to the Washington
Post, allowed "government agencies to handpick companies for Iraqi
The contract, which was not announced until more than two weeks after it
was awarded, was open-ended, with no time limits and no dollar limits.
It was also a "cost-plus" contract, meaning that the company is
guaranteed to recover costs and then make a guaranteed profit on top of
that. Its value is estimated at tens of millions of dollars.
This is not the first buck that Cheney's former company has made off
military conflict and likely won't be the last. KBR currently has
thousands of military support personnel on the ground in Kuwait and
Turkey as part of a multi-year contract worth close to a billion
dollars. The engineering subsidiary was also one of a select few firms
invited to bid on an initial $900 million USAID contract for rebuilding
post-war Iraq. Though it didn't get that job, Halliburton says it is
still in the running for subcontracts and there will likely be plenty
more opportunities. After all, the American Academy of Sciences
estimates the rebuilding Iraq will cost between $30 and $105 billion
dollars. At a recent investor conference call, Halliburton reported a
30% increase in year-over-year revenues, to $1.6 billion, for KBR.
Cheney, who served as CEO from 1995 to 2000, continues to receive as
much as $1 million a year in deferred compensation as Halliburton
executives enjoy a seat at the table during Administration discussions
over how to handle post-war oil production in Iraq.
The Cheney-Halliburton story is the classic military-industrial
revolving door tale. As Secretary of Defense under Bush I, Cheney paid
Brown and Root services (now Kellogg Brown and Root) $3.9 million to
report on how private companies could help the U.S. Army as Cheney cut
hundreds of thousands of Army jobs. Then Brown and Root won a five-year
contract to provide logistics for the U.S. Army Corp of Engineers all
over the globe. In 1995, Cheney became CEO and Halliburton jumped from
73rd to 18th on the Pentagon's list of top contractors, benefiting from
at least $3.8 billion in federal contracts and taxpayer-insured loans,
according to the Center for Public Integrity.
But the Halliburton story is more than just a simple revolving door
tale. Even without the Cheney conflicts of interest, serious doubts
remain about whether a company with a record like Halliburton's should
even be eligible to receive government contracts in the first place.
This, after all, is a company that has been accused of cost overruns,
tax avoidance, and cooking the books and has a history of doing business
in countries like Iraq, Iran and Libya.
Cost overruns: In September 2000, the General Accounting Office (GAO)
found that the U.S. Army had not taken appropriate steps to limit the
$2.2 billion costs Kellogg Brown and Root charged for logistical and
engineering support in the Balkans. According to the report, Army
officials "frequently have simply accepted the level of services the
contractor provided without questioning whether they could be provided
more efficiently or less frequently at lower cost."
Questionable Accounting: The SEC recently formalized an investigation
into whether Halliburton artificially inflated revenue by $234 million
over four years. Halliburton switched to a more aggressive accounting
method in 1998 under Cheney.
Access to Evil -- business dealings in Iraq, Iran, and Libya: News
reports suggest that Pentagon is currently using the Iran-Libya
Sanctions Act (ILSA) to draw up a blacklist of non-US companies that
have done business in Iran. Yet, Halliburton has conducted Business in
Iran through subsidiaries. When Cheney was CEO of Halliburton, he
inquired about an ILSA waiver to pursue oil field developments in Iran.
In 1997, Halliburton subsidiary Halliburton Energy Services paid $15,000
to settle Department of Commerce allegations that the company had broken
anti-boycott provisions of the U.S. Export Administration Act for an
Iran-related transaction. Halliburton recently agreed to evaluate its
operations in Iran, after the Securities and Exchange Commission
rebuffed the company's request to dismiss a New York City police and
fire pension funds shareholder proposal for the company to examine its
role in Iran.
Also forgotten is that story about how Cheney's Halliburton did business
with Saddam. According to the Washington Post, "Halliburton held stakes
in two firms that signed contracts to sell more than $73 million in oil
production equipment and spare parts to Iraq while Cheney was chairman
and chief executive officer."
Halliburton has also done business in Azerbaijan, Burma, Indonesia,
Libya and Nigeria. As Dick Cheney once said, "The good Lord didn't see
fit to put oil and gas only where there are democratic regimes friendly
to the United States."
Tax Havens: Under Cheney's tenure, the number of Halliburton
subsidiaries in offshore tax havens increased from 9 to 44. Meanwhile,
Halliburton went from paying $302 million in company taxes in 1998 to
getting an $85 million tax refund in 1999.
All told, the IRS loses about $70 billion a year in offshore tax
sheltering by corporations and wealthy individuals - almost enough to
cover the $75 billion Bush has asked for to cover the first six months
The Halliburton story is part of a larger dynamic that should not be
forgotten in a debate over contractor responsibility. While the
Halliburton contracts reek of blatant cronyism, almost all the major
firms that provide this kind of work are tied to the administration.
Somebody has to do the job. However, the level of secrecy surrounding
the contracts that have been given out so far is troubling, and
symptomatic of a bigger problem - the very legitimacy of a
reconstruction process controlled by the U.S. military and their
corporate contractors. Although the United States has the obligation to
pay for the costs of reconstructing Iraq, only the United Nations is the
proper body to provide governance and help rebuild a new government,
civil society and physical infrastructure if the current regime is
overthrown, not the White House, the Pentagon and their corporate cronies.
Note: In honor of Big Business Day 2003, Citizen Works will present Dick
Cheney the "Daddy Warbucks" Award for eminence in corporate war
profiteering on Friday, April 4.
Lee Drutman and Charlie Cray work with Citizen Works.