Ethics at Halliburton & KBR
Company Information
Halliburton Energy Services is a multination corporation with operations in over 120 countries. This company started as Halliburton Oil Well Cementing Company in 1920, became incorporated in 1924, and became listed on the New York Stock Exchange in 1948. In 1960, the name was shortened to Halliburton Company, and acquisitions followed in 1962, 1988 and 1998 of various companies.
Today they offer two major business segments: The Energy Services Group provides technical products and services for oil and gas exploration and production, and the KBR subsidiary is a major construction company of refineries, oil fields, pipelines, and chemical plants. Halliburton is currently based in Houston, Texas. They have recently announced that they will establish new headquarters in Dubai in the United Arab Emirates. The chairman, president, and CEO will office from and be based in Dubai to run the company from UAE.
The Corruption
It is hard to say where or when the company went wrong, but I can definitely say that the share of scandal is immense and complicated.
At the end of the Gulf War, the Pentagon, led by then Defense Secretary Dick Cheney, paid Halliburton subsidiary Brown & Root Service over $8.5 million to study the use of private military forces with American Soldiers in combat zones (Mayer, 2004). Then in 1995 the CEO, Thomas H. Cruikshank was replaced by Dick Cheney.
Halliburton quickly became the leading firm pocketing sole source contracts in Iraq. Halliburton received over $16 billion from the Pentagon for work in Iraq between the March 2003 invasion and July 2006 (Borosage et. al). The pattern in Iraq should be no surprise. It is only an extreme case of how the Pentagon, the largest source of waste, fraud and abuse in the federal government, does business.
The United States spent $270 billion in overall defense acquisitions and contracts between September 11, 2001 and 2005 (Borosage et al).
- Fully 50% of the contracts were awarded without competitive bidding.
- Only 41% of those contracts were subject to full and open competition.
- In 9% of the contracts, the means of procurement is not even known.
Just as there are no clear figures on how many contactors there are and what they are doing, there are no summary figures on the scope of the waste, fraud and abuse in procurement. But anecdotal evidence abounds, suggesting a procurement process that rewards cronies, and condones widespread abuse (Borosage et al).
In early 2004, the Wall Street Journal disclosed that the company had overcharged the government by $16 million on a bill for the cost of feeding troops at a military base in Kuwait. In January 2004, two Halliburton employees made a confession, that they had taken kickbacks resulting in overcharges of $6.3 million. Yet, the next day the Pentagon awarded another contract to Halliburton worth $1.2 billion, to rebuild the oil industry in southern Iraq (Halliburton, 2007).
Cooking the Books
In 2002, the U.S. Securities and Exchange Commission (SEC) investigated allegations against Halliburton, its current and former directors, and its accounting firm, Arthur Anderson LLP and Arthur Anderson Worldwide, for alleged accounting irregularities, said to be profit inflation by accounting for cost overruns as revenue. Halliburton accomplished the alleged fraud by changing the way it counted cost overruns from its construction projects. Under the new accounting method, Halliburton decided to assume that its subcontractors would pay for cost overruns, even though the question of who would pay those costs was still in dispute. So, instead of counting cost overruns as losses, Halliburton began marking them as revenues on the assumption that they funds would eventually be paid by the firms that had subcontracted with Halliburton in the first place. Halliburton argued that it was approved by their accounting firm, Arthur Anderson, and conformed to GAAP. This fraudulent accounting procedure allowed Halliburton to appear more profitable on their financial statements than they actually were. In August 2004, Halliburton paid $7.5 million fine to settle the issue (“Cooking the,” 2007).
Dick Cheney and Halliburton
As I further discuss Halliburton, you will become more aware of their connection with Dick Cheney. If you view Mr. Cheney’s official White House biography, he is highly spoken of in regards to his political endeavors, but they fail to mention that he served five lucrative years as the CEO of Halliburton. It is obvious that Mr. Cheney does not want to be tied to Halliburton, but it is difficult to overlook.
On the September 14, 2003 edition of NBC’s Meet the Press, Vice President Dick Cheney said, “And since I left Halliburton to become George Bush’s vice president, I’ve severed all my ties with the company, gotten rid of all my financial interest. I have no financial interest in Halliburton of any kind and haven’t had, now for over three years.”
A bald faced lie since he forgot to mention the fact that he continues to collect deferred compensation worth approximately $150,000 a year, and he retains stock options worth more than eighteen million dollars (Mayer, 2004). Cheney’s deferred compensation and stock option benefits are in addition to a $20 million retirement package, a $1.4 million cash bonus paid to him in 2001, in addition to the $44 million he was paid during his employment at Halliburton (“Cheney violates,” 2007). According to the Halliburton Watch.org, “In 2002, Cheney’s total assets were valued at between $19.1 million and $86.4 million.”
In the early 1990’s Halliburton was found to be in violation of federal trade barriers in Iraq and Libya, having sold these countries dual-use oil drilling equipment, and through its former subsidiary, Halliburton Logging Services, sending six pulse neutron generators to Libya. After having pleaded guilty, the company was fined $1.2 million, with another $2.6 million in penalties. While Cheney was CEO there was mention that they company may have violated the Trading with Enemy Act when a company HPS, sharing both the logo and name of Halliburton Energy Services was operating in Tehran. The company argued that it was a foreign subsidiary, and no US person was involved in this business. No legal action was taken against this company or its officials.
It is obvious that Cheney had had a hand in the increasing close relationship between the Department of Defense and a group of private military contractors, allowing companies such as Halliburton to profit enormously. Cheney has long argued that commercial marketplace can provide better and cheaper service than a government bureaucracy. According to an article published in the New Yorker, “In 2002, more than $150 billion dollars of public money was transferred from the Pentagon to private contractors. Private contractors do no have to worry about the Freedom of Information Act that government agencies are required to adhere to today. Jan Schakowsky, a Democratic representative from Illinois said, “It’s almost as if these private military contractors are involved in a secret war.” Sam Gardiner, a retired Air Force colonel noted that, “So many of the contracts in Iraq are going to companies with personal connections with the Bush Administration that the procurement process has essential become a ‘patronage system’.” The Bush Administration has been accused of favoring the conglomerate with lucrative no-bid contracts in Iraq. I also learned that Brown & Root, now merged with Halliburton, served as a munificent sponsor to L.B.J.’s political campaigns, and in return was awarded with big government contracts.
As Singer writes in “Corporate Warriors,” the Pentagon commissioned Halliburton to do a classified study of how a single company can provide the bulk of the business of planning and providing support for military operations abroad. In effect, the company was being asked to create its own market. Halliburton was paid $3.9 million to write its initial report and later the Pentagon paid Halliburton $5 million more to do a follow-up study (Mayer, 2004). According to Jane Mayer of the New Yorker, In August 1992, Halliburton was selected by the U.S. Army Corps of Engineering to all the work needed to support the military during the next five years, in accordance with the plan it had drawn up itself. Why was the Pentagon relying so heavily on one single company? In the past, much of the menial work was performed by reserve soldiers, which were now being contracted out to Halliburton.
Lawrence Eagleburger, the Secretary of State in the first Bush Administration, became a Halliburton board member after Cheney joined the company. Halliburton chose Cheney because he was ideal for the position. He was close to many world leaders, and could best help the company expand its business around the world. While Cheney was CEO of Halliburton, the company thrived. In 1998, the company acquired Dresser Industries through negotiations done by Cheney. Halliburton failed to learn of the legal liabilities that came with Dresser, and the lawsuits dealing with asbestos poisoning. This division later filed for bankruptcy protection due to the cost of settling the asbestos lawsuits. This business endeavor brought much criticism against Cheney, suggesting that he made a narrow-minded decision that greatly affected the company. This makes me question that there might have been possible promises made by Cheney to the company because of the losses the company encountered.
In the spring of 2000, Halliburton allowed its CEO, Mr. Cheney, to serve simultaneously as the head of George W. Bush’s Vice-Presidential search committee. Cheney gained great information on all of the candidates he considered, but in the end picked himself. His longtime friend Stuart Spencer described this as “the most Machiavellian thing I’ve ever seen.”
The Bush Administration’s war on terror has become a source of substantial profit for Halliburton. Even though Halliburton had ties to terrorist states, it did not prevent them from playing a prominent role in the war. There is so much more that Mr. Cheney and the Bush Administration is involved in that it would be exhausting to give attention to every agenda that they have, but it does not add up. Why give more contracts to a company that is ripping off the government? Why not use soldiers to do the menial work, and use contractor workers for specialized task? Soldiers were capable of these tasks before; why should the government help a private company earn billions? Are these government officials looking towards the best interest of taxpayers or their own?
Iraq for Sale
More recently, there has been much criticism brought against Halliburton, and their respect and treatment of US Soldiers. Halliburton was given cost-plus contract to do work in Iraq. Halliburton was contracting employees to do task that could have easily been done by soldiers, and were over charging the government for these tasks.
Halliburton failed to protect the water supply it was paid to purify for U.S. soldiers throughout Iraq. In the eye-opening documentary “Iraq for Sale,” by Robert Greenwald, a KBR/Halliburton Former Water Purification Specialist, Ben Carter gave testament to this shocking discovery. Ben Carter notes in the documentary, “Of the 67 water storage tanks that Halliburton was getting paid to run, 63 were not providing safe water.” Mr. Carter fearfully goes on to explain that the water that was being provided to soldiers was “extremely contaminated” meaning possible disease such as, “malaria, typhus, giardia …” and that they soldiers can come home with these pathogens and not even know, putting their families at risk. Mr. Carter tells of his first day in Iraq, “that’s when my eyes were open…I saw incredible waste and compromised safety standards.”
Soldier in the documentary express how government contracts with private companies like Halliburton have felt them feel unneeded, and agree that it has affected retention. One soldier expresses his disgust in not being able to wash his own clothes, because that is what Halliburton does. He further explains that Halliburton receives $99/bag of clothes that they wash; yet, they do a poor job. He wants to do his own laundry; he can do his laundry at home for $3/load, so why is Halliburton getting paid $99?
The US Soldiers want to perform logistics, become better soldiers and be more proficient at their job, but instead they are being replaced by outside contractors, while they have to sit watch in a booth and provide protection to the contractors. F. Scott Service, SGT US Army explains, “profiteering going on over there is highly demoralizing to soldiers…you get this attitude, why should I care.”
Another soldier spoke of his visit to use the Internet services; a civilian woman was sitting at a desk to sign them in to the computers; she was being paid six figures. Why was she in Iraq performing a job that any soldier could perform for less money? Less money is definitely the case, soldiers are disgusted that they are in Iraq fighting for their country why there family is struggling back home, and the contracted workers are getting paid $150,000.
Even outside intelligence operations were being outsourced. Where is the loyalty? If Halliburton’s subsidiaries were doing business in terrorist states, what is to stop them from leaking information? They obviously have no respect for the US government, or its soldiers, but only for its money. They could lead the government to believe what ever they wanted them to believe, since they were not only performing the work, but also the initial reports.
Watching the clips of the movie that I was able to see, what I saw Halliburton doing made me sick. The US Soldiers are putting their own lives at risk to protect civilian contractors. They are trusting in Halliburton that they have clean drinking and bathing water, and that their food is fresh. It is no surprise to me that the current CEO, David Lesar, is a former partner at Arthur Anderson. In earlier research, I came across a report detailing the connection between Halliburton members, Enron members, Arthur Anderson members, and member of the Bush Administration. There were too many connections between these four companies to not see that a conspiracy was going on.
Most recently on May 10, 2007, Iraq for Sale was banned in Congress. Roberts Greenwald, the director of Iraq for Sale, was invited to testify before Congress by Rep. Jim Moran. He prepared to show 4 minutes from the documentary. Republicans insisted in not be shown.
Halliburton is moving
By moving to the UAE, Halliburton will be avoiding US taxes, but will the US continue to give them bid and allow them to take more US money? Halliburton continues to insult US Soldiers and taxpayers who paid the tab for their no-bid contracts and endured the overcharges for all these years.
Jim Donahue, co-director of Halliburton Watch says, “Halliburton is moving to UAE at a time when it is being investigated in the U.S. for bribery, bid rigging, defrauding the military and illegally profiting in Iran. It is currently in the process of divesting all of its ownership interest in the scandal-plagued KBR subsidiary, notorious for overcharging the military and serving contaminated food and water to the troops in Iraq.” Halliburton will remain incorporated inside the United States, but moving its corporate headquarters to UAE will make it easier to avoid accountability from federal investigators.
“Given the multiple ongoing investigations into Halliburton’s alleged wrongdoing, policymakers should closely scrutinize Halliburton’s latest move, and whether it will allow the company to further elude accountability,” said Charlie Cray, co-director of Halliburton Watch and director of the Center for Corporate Policy. “Moreover, this underscores the need for Congress to bar companies that have broken the law, or avoided paying taxes, from receiving federal contracts” (“Halliburton bails,” 2007).
My Conclusion
Researching Halliburton has opened my eyes to the amount of conspiracy there is in politics and big business. Watching Enron was one thing, but what Halliburton did takes it a step further. I just cannot understand how this company is still in business, based on all the information of what they did wrong. I have come to the realization that the government is fully motivated by their own self-interest, and that they have no values. Yes, there are many people in government that do care, but their voices are never heard, or their votes are always vetoed. Will there be justice?
I would like to conclude with a song by M. Jagger and K. Richards of The Rolling Stones. I apologize if it offends, but I feel that Mr. Jagger is speaking for many when he expressed himself.
“You call yourself a Christian, I think that you’re a hypocrite, You say you are a patriot, I think that you’re a crock of shit
And listen, I love gasoline, I drink it every day, But it’s getting very pricey, And who is going to pay
How come you’re so wrong, My sweet neo con…. Yeah
It’s liberty for all, ‘Cause democracy’s our style, Unless you are against us, Then it’s prison without trial
But one thing that is certain, Life is good at Halliburton, If you’re really so astute, You should invest at Brown & Root…. Yeah
How come you’re so wrong, My sweet neo con, If you turn out right, I’ll eat my hat tonight
Yeah, yeah, yeah, yeah….
It’s getting very scary, Yes, I’m frightened out of my wits, There’s bombers in my bedroom, Yeah and it’s giving me the shits
We must have loads more bases, To protect us from our foes, Who needs these foolish friendships, We’re going it alone
How come you’re so wrong, My sweet neo con, Where’s the money gone, In the Pentagon.” View the lyrics
Work Cited
Borosage, R. L., Gerson, R., Lotke, E. (2006 September). War Profiteers Profit Over
Patriotism in Iraq. Retrieved May 10, 2007 from
http://home.ourfuture.org/reports/report-war-profiteers.pdf
Cheney Violates Ethics Law. Retrieved May 8, 2007 from
http://www.halliburtonwatch.org/about_hal/ethics.html.
Cooking the Books. Retrieved May 9, 2007 from
http://www.halliburtonwatch.org/about_hal/cookbooks.html.
Halliburton. Retrieved May 8, 2007 from http://en.wikipedia.org/wiki/Halliburton.
Halliburton bails out of Iraq, KBR and now America. 2 March 2007. Retrieved May 10,
2007 from http://www.halliburtonwatch.org/news/dubai.html.
Mayer, J. (February 16, 2004). What did the Vice-President do for Halliburton?
The New Yorker. Retrieved from http://www.newyorker.com/archive/2004/02/16/040216fa_fact.
Comments
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The government takes ethics in business very serious by imposing laws for safety, advertising, sexual harassment, and more.
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Nice job with Ethics at Halliburton & KBR | Ethics in Business. It was helpful….
Excellent write up. Wonder why the right wing has no problem with the relationship between Cheney and Haliburton?
I mean could you imagine if (pretend for a moment if Joe Biden was the CEO of a huge health mnt organization and got a $34,000,000 bonus when he became the vp and subsequently left the firm and was still on the payroll albeit for deferred comp and then…) his firm stood to control billions of billions of dollars in no compete government contracts with the passing of ObamaCare?
Hey, Mr. Cheney… I WANT MY TAXES BACK!!!
We the people, for the people, blah, blah, blah…
No wonder the tea party doesn’t trust the government, they have deeply seated feelings of distrust of themselves.
What is wrong with the Haliburton stock? They had a great third quarter earnings report! Practically every stock analyst in the world is writing that the stock is terribly underpriced and should be at about $59.00 a share today with a top side at about $78.00 a share down the road. The Dow Jones Index closed up 267.01 for the day on 10/21/11 and the Haliburton stock started the day well and ended up down $.97 cents for day at $33.50 a share. The stock has a 52 week low of $27.21 and a high of $57.71. What is going on here? Are we being conned to buy the stock so possibly the insiders can dump it? I purchased the stock in good faith about a week and I am losing the shirt off my back. Please someone clue me in on what is going on with this stock? Thank you!!!
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