Investigations Multiply for Oil Giant Halliburton

French Judg Cites Cheney

By Marc Perelman

Published February 06, 2004, issue of February 06, 2004.
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Mired in controversy over Iraq contracts, the giant oil services company Halliburton is being scrutinized over its business dealings in Iran and is now reportedly the subject of a French corruption investigation that could lead to charges against its former CEO, Vice President Dick Cheney.

An investigative judge in France, Renaud van Ruymbeke, is looking into allegations that a Halliburton subsidiary, Kellogg Brown & Root, the French company Technip and two other partners, bribed Nigerian officials to land a $6.7 billion contract for a liquefied natural gas project in the late 1990s. Although Van Ruymbeke has ruled out bringing bribery charges against Cheney, he said he could prosecute the vice president for complicity in the “misuse of corporate assets,” according to a confidential memo cited by the French daily Le Figaro.

“These allegations are false,” Wendy Hall, a Halliburton spokeswoman, told the Forward in an e-mail. “There has been no lawsuit filed and the company has not been contacted by the French authorities.”

The French partner has acknowledged the existence of the probe.

Kellogg Brown & Root, or KBR, also is being investigated by the Defense Department over several alleged instances of bribery and overcharges to the U.S. government in Iraq and Kuwait. Two Democrats, New York City Comptroller William Thompson and Rep. Henry Waxman of Cali-fornia each told the Forward that they suspect Halliburton of violat-ing U.S. sanctions against American companies doing business with Iran — an allegation company officials vehemently deny.

“It is inconsistent to have some companies violate sanctions against countries we list as terrorists be awarded contracts in Iraq in the context of the war on terrorism,” Waxman said.

Waxman, one of Halliburton’s staunchest critics on Capitol Hill, said he sees “some indications” that his recent request for hearings on Iraq reconstruction contracts might be accepted by the Republican chair of the House Government Reform Committee, Rep. Tom Davis of Virginia. Calls to Davis’s office were unreturned.

Thompson is training his sights on the Iran dealings. “There is a clear violation of the spirit of the law,” he told the Forward in an interview. Referring to a recent report on “60 Minutes,” Thompson added: “And what I saw on CBS leads me to believe there might very well be a violation of the letter of the law as well.”

Waxman’s and Thompson’s complaints revolve around a Halliburton subsidiary called Halliburton Products and Services, which is based in Dubai and registered in the Cayman Islands, a tax haven in the Caribbean. As the Financial Times first reported, the subsidiary opened an office in Tehran in February 2000, when Cheney was still CEO of Halliburton. The subsidiary has sold $40 million worth of oil services in Iran.

Thompson, who is acting on behalf of the city’s pension funds, has asked Halliburton for clarifications about its business dealings in Iran, a country listed by the American government as a sponsor of terrorism and thus subject to stringent U.S. trade sanctions. Thompson claims that Halliburton has been using its subsidiary to circumvent a 1995 executive order barring American companies from doing business with Tehran.

Halliburton and Cheney have argued that U.S. sanctions against Iran do not cover “independent foreign subsidiaries,” a description that they say applies to the Cayman Islands-based subsidiary.

A treasury department spokesperson said “wholly independent subsidiaries” were indeed not subject to U.S. sanctions against Iran.

But the “60 Minutes” report claimed that Halliburton and the subsidiary in question share office space, phone and fax lines in Dubai, and raised the possibility that the parent company might be in violation of the 1995 executive order.

Hall, however, told the Forward that the company’s business in Iran is “clearly permissible under applicable laws and regulations.”

“We hope the New York City Comptroller’s office is not playing politics with pension funds,” the Halliburton spokeswoman added.

In a recent SEC filing, the company warned its investors that it was likely to be subjected to increased scrutiny from “political adversaries of the Vice President and the current Bush Administration” as the 2004 elections approach. Cheney has indicated that he would be willing to run for reelection on a Bush presidential ticket.

Cheney was CEO of Halliburton from October 1995 until August 2000, when he agreed to become George W. Bush’s running mate. After his resignation from the company, Cheney placed his shares and stock options in a trust and said he had severed all links to the company. Still, critics continue to allege that Cheney has used his influence to direct government contracts toward the Dallas-based oil giant, especially since the invasion of Iraq.

As a result of the heightened scrutiny, the company said in a January 23 filing that it could lose future government contracts or renewals, be asked to reimburse material payments and even be subject to fines and penalties.

The warning was first reported by footnoted.org, a financial news blog run by author Michelle Leder.

Thompson said that his actions had nothing to do with politics, but rather he was merely doing his job as overseer of New York City’s five pensions funds. He said the funds were worth a combined $80 billion, of which an estimated $45 million is invested in Halliburton.

Waxman wrote a letter to Secretary of Defense Donald Rumsfeld on April 30, 2003, raising the issue of the subsidiary’s work in Iran. The congressman told the Forward that he did not receive a written response and was told by a Pentagon official that the Department of Defense was not responsible for enforcing trade sanctions.

Calls to the Pentagon seeking comment were not returned.

With regards to the French investigation, Halliburton rejected the allegations and referred all questions to Technip, its French partner in the Nigerian operation.

In a December 23 statement, Technip admitted that a probe had been opened. However, it said it did not target Technip or KBR but rather “certain contracts” involving “unnamed persons.”

According to Le Figaro, Van Ruymbeke, who has a track record of indicting senior officials in graft scandals, sent a confidential memo to the French Justice Department detailing possible charges. Van Ruymbeke has refused to comment on the French judicial probe, which was opened in October.

He is focusing on a $180 million sum wired to offshore bank accounts through shell companies in Gibraltar and the Portuguese island of Madeira, according to news accounts. The money could have ended up in the coffers of former Nigerian dictator Sani Abacha and some of his advisers, the reports added.

The Independent of London reported last week that the British Department of Trade and Industry had opened its own probe into the Nigeria contract. The British government gave a collateral guarantee of some $200 million to the Halliburton subsidiary involved in the project.

Cheney’s office has referred all comments to Halliburton.

Halliburton is currently being scrutinized by the Pentagon over allegations that KBR overcharged the government for delivering oil to Iraq and meals to U.S. troops in Kuwait, and that some of its employees pocketed kickbacks in Kuwait.

On Monday, The Wall Street Journal reported the overcharging of some $16 million for meals served at a military base in Kuwait, part of a major 10-year contract KBR obtained in December 2001 to build military bases and cater to U.S. troops around the world.

Halliburton agreed to repay the $16 million and an additional $11.4 million for possible overbillings at four other military bases in Kuwait and Iraq pending review, the company said on Monday. The Pentagon’s inspector general is also reviewing a possible overcharge of $61 million in oil deliveries to Iraq by KBR under a contract with the Army Corps of Engineers, a Pentagon official said. The multibillion-dollar contract drew heavy criticism from congressional Democrats because it was awarded on a non-competitive basis.

The Halliburton subsidiary reimbursed the Pentagon $6.3 million after announcing that two of its employees had taken kickbacks from a Kuwaiti firm in return for contracts. The affair is also under review by the inspector general, the Pentagon official said.

Halliburton’s current chairman, president and CEO, Dave Lesar, said that company officials “expect and want continuing reviews and audits that detail our work in Iraq.”

“We welcome a thorough review of any and all of our government contracts,” Lesar said.






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