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newyorker cheney halliburton article

newyorker cheney halliburton article

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Published by Guy Razer

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Published by: Guy Razer on Jan 27, 2010
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NewYorker Cheney Halliburton Article

Vice-President Dick Cheney is well known for his discretion, but his official White
House biography, as posted on his Web site, may exceed even his own stringent
standards. It traces the sixty-three years from his birth, in Lincoln, Nebraska, in 1941,
through college and graduate school, and describes his increasingly powerful jobs in
Washington. Yet one chapter of Cheney\u2019s life is missing. The record notes that he has
been a \u201cbusinessman\u201d but fails to mention the five extraordinarily lucrative years that he
spent, immediately before becoming Vice-President, as chief executive of Halliburton,
the world\u2019s largest oil-and-gas-services company. The conglomerate, which is based in
Houston, is now the biggest private contractor for American forces in Iraq; it has received
contracts worth some eleven billion dollars for its work there.

Cheney earned forty-four million dollars during his tenure at Halliburton. Although he
has said that he \u201csevered all my ties with the company,\u201d he continues to collect deferred
compensation worth approximately a hundred and fifty thousand dollars a year, and he
retains stock options worth more than eighteen million dollars. He has announced that he
will donate proceeds from the stock options to charity.

Such actions have not quelled criticism. Halliburton has become a favorite target for
Democrats, who use it as shorthand for a host of doubts about conflicts of interest, undue
corporate influence, and hidden motives behind Bush Administration policy\u2014in
particular, its reasons for going to war in Iraq. Like Dow Chemical during the Vietnam
War, or Enron three years ago, Halliburton has evolved into a symbol useful in rallying
the opposition. On the night that John Kerry won the Iowa caucuses, he took a ritual
swipe at the Administration\u2019s \u201copen hand\u201d for Halliburton.

For months, Cheney and Halliburton have insisted that he had no part in the
government\u2019s decision about the Iraq contracts. Cheney has stuck by a statement he made
last September on \u201cMeet the Press\u201d: \u201cI have absolutely no influence of, involvement of,
knowledge of in any way, shape, or form of contracts led by the Corps of Engineers or
anybody else in the federal government.\u201d He has declined to discuss Halliburton in depth,
and, despite a number of recent media appearances meant to soften his public image, he
turned down several requests for an interview on the subject. Cheney\u2019s spokesman, Kevin
Kellems, responded to questions by e-mail.

Representative Henry Waxman, a liberal Democrat from California and the ranking
minority member of the House Committee on Government Reform, has argued
aggressively that the Bush Administration has left many questions about Halliburton
unanswered. Last year, for example, a secret task force in the Bush Administration picked
Halliburton to receive a noncompetitive contract for up to seven billion dollars to rebuild
Iraq\u2019s oil operations. According to theTim es, the decision was authorized at the \u201chighest
levels of the Administration.\u201d In an interview, Waxman asked, \u201cWhose decision was it?
Was it made outside the regular channels of the procurement process? We know that
Halliburton got very special treatment. What we don\u2019t know is why.\u201d

Halliburton has been accused of exploiting its privileged status. Last year, a division of
the company overcharged the government by as much as sixty-one million dollars in the
course of buying and transporting fuel from Kuwait into Iraq. Halliburton charged the
United States as much as $2.38 per gallon, an amount that a Pentagon audit determined to
be about a dollar per gallon too high. Although Halliburton has denied any criminal
wrongdoing, the inspector general for the Department of Defense is considering an

Halliburton blamed the high costs on an obscure Kuwaiti firm, Altanmia Commercial
Marketing, which it subcontracted to deliver the fuel. In Kuwait, the oil business is
controlled by the state, and Halliburton has claimed that government officials there
pressured it into hiring Altanmia, which had no experience in fuel transport. Yet a
previously undisclosed letter, dated May 4, 2003, and sent from an American contracting
officer to Kuwait\u2019s oil minister, plainly describes the decision to use Altanmia as
Halliburton\u2019s own \u201crecommendation.\u201d The letter also shows that the Army Corps of
Engineers, the federal agency that oversees such transactions, supported Halliburton\u2019s
decision to use the expensive subcontractor\u2014which may explain why it has been
reluctant to criticize the deal.

Scott Saunders, a spokesman for the Army Corps of Engineers, confirmed the
authenticity of the letter, and acknowledged that Halliburton had picked Altanmia.
\u201cHalliburton told us that only Altanmia could meet our requirements,\u201d he said.

Experts in the Persian Gulf oil business say that the Altanmia deal looks suspicious.
\u201cThere is not a reason on earth to sell gasoline at the price they did,\u201d Youssef Ibrahim,
the managing director of the Strategic Energy Investment Group, a consulting firm in
Dubai, said. \u201cHalliburton and their Kuwaiti partners made out like bandits.\u201d A well-
informed Kuwaiti source called the prices charged by Altanmia \u201cabsurd,\u201d and said that
Halliburton\u2019s arrangement to buy Kuwaiti oil through a middleman, rather than directly
from the government, was \u201chighly irregular.\u201d He added, \u201cThere is no way that this could
have transpired without the knowledge and direction\u201d of Kuwait\u2019s oil minister, Sheikh
Ahmad Al-Fahad Al-Sabah. Two sources told me that the oil minister\u2019s brother, Talal Al-
Fahad Al-Sabah, may have secret financial ties to Altanmia. (The brothers are also
nephews of the Emir and the Prime Minister of Kuwait.) \u201cThere are calls in parliament to
open an investigation,\u201d the Kuwaiti source said. \u201cIt could shake the government.\u201d

Halliburton, meanwhile, is contending with two new scandals. Last week, the Wall Street
Journal reported that the company had overcharged the government by sixteen million

dollars on a bill for the cost of feeding troops at a military base in Kuwait. And last
month the company made an astonishing confession: two of its employees, it said, had
taken kickbacks resulting in overcharges of $6.3 million, in return for hiring a different
Kuwaiti subcontractor in Iraq. Halliburton said that the employees, whose names it
declined to reveal, had been fired and the funds returned. The day after this disclosure,
the Pentagon awarded yet another contract to Halliburton, worth $1.2 billion, to rebuild
the oil industry in southern Iraq.

Defenders of Halliburton deny that it has been politically favored, arguing that very few other companies could have handled these complex jobs. As Cheney said last September on \u201cMeet the Press,\u201d\u201cHalliburton is a unique kind of company. There are very few

companies out there that have the combination of very large engineering construction
capability and significant oil-field services.\u201d Dan Guttman, a fellow at Johns Hopkins
University, agrees with Cheney\u2019s assessment, but sees Halliburton\u2019s dominance as part of
a wider problem\u2014one that has reached a crisis point in Iraq. After years of cutting
government jobs in favor of hiring private firms, he said, \u201ccontractors have become so
big and entrenched that it\u2019s a fiction that the government maintains any control.\u201d He
wasn\u2019t surprised that Halliburton\u2019s admission of wrongdoing in Kuwait had failed to
harm its position in Washington. \u201cWhat can the government say\u2014\u2018Stop right there\u2019?\u201d
Guttman said of Halliburton. \u201cThey\u2019re half done rebuilding Iraq.\u201d

The Vice-President has not been connected directly to any of Halliburton\u2019s current legal
problems. Cheney\u2019s spokesman said that the Vice-President \u201cdoes not have knowledge of
the contracting disputes beyond what has appeared in newspapers.\u201d Yet, in a broader
sense, Cheney does bear some responsibility. He has been both an architect and a
beneficiary of the increasingly close relationship between the Department of Defense and
an \u00e9lite group of private military contractors\u2014a relationship that has allowed companies
such as Halliburton to profit enormously. As a government official and as Halliburton\u2019s
C.E.O., he has long argued that the commercial marketplace can provide better and
cheaper services than a government bureaucracy. He has also been an advocate of
limiting government regulation of the private sector. His vision has been fully realized: in
2002, more than a hundred and fifty billion dollars of public money was transferred from
the Pentagon to private contractors.

According to Peter W. Singer, a fellow at the Brookings Institution and the author of
\u201cCorporate Warriors,\u201d published last year, \u201cWe\u2019re turning the lifeblood of our defense
over to the marketplace.\u201d Advocates of privatization, who have included fiscally minded
Democrats as well as Republicans, have argued that competition in the marketplace is the
best way to control costs. But Steven Kelman, a professor of public management at
Harvard, notes that the competition for Iraq contracts is unusually low. \u201cOn battlefield
support, there are only a few companies that are willing and able to do the work,\u201d he said.
Moreover, critics such as Waxman point out that public accountability is being sacrificed.
\u201cWe can\u2019t even find out how much Halliburton charges to do the laundry,\u201d Waxman said.
\u201cIt\u2019s inexcusable that they should keep this information from the Congress, and the

Unlike government agencies, private contractors can resist Freedom of Information Act
requests and are insulated from direct congressional oversight. Jan Schakowsky, a
Democratic representative from Illinois, told me, \u201cIt\u2019s almost as if these private military
contractors are involved in a secret war.\u201d Private companies, she noted, can conceal
details of their missions from public scrutiny in the name of protecting trade secrets.
They are also largely exempt from salary caps and government ethics rules designed to
protect policy from being polluted by politics. The Hatch Act, for example, forbids most
government employees from giving money to political campaigns.

Halliburton has no such constraints. The company made political contributions of more
than seven hundred thousand dollars between 1999 and 2002, almost always to
Republican candidates or causes. In 2000, it donated $17,677 to the Bush-Cheney

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