The head of the Army Corps of Engineers quietly exonerated Halliburton Co. of any wrongdoing in a Kuwait fuel-delivery contract that Pentagon auditors asserted has overcharged the U.S. government by more than $100 million.
In a previously undisclosed Dec. 19 ruling, the commander of the Corps, Lt. Gen. Robert Flowers, cleared Halliburton's Kellogg Brown & Root subsidiary of the need to provide "any cost and pricing data" pertaining to a no-bid contract to deliver millions of gallons of gasoline from Kuwait to Iraq.
He acted after lower-level Army Corps officials concluded in a memo to him that Kellogg Brown & Root had provided enough data to show it had purchased the fuel and its delivery to Iraq at a "fair and reasonable price."
The decision, which Halliburton itself requested, came after Halliburton's pricing of gasoline sold to the U.S. government exploded into public controversy last month when Defense Department auditors alleged that Kellogg Brown & Root, known as KBR, was significantly overcharging.
According to the Dec. 19 Army Corps memo requesting the ruling, KBR adequately sought bids for the fuel subcontract last May and picked Altanmia Commercial Marketing Co., the Kuwaiti supplier, as the lowest bidder. But since then, other companies have come forward offering to deliver gasoline into Iraq "on more favorable terms than Altanmia," the memo states.
The government-owned Kuwaiti Petroleum Co., however, "has refused to grant permission" for any subcontractor other than Altanmia to perform the work, the Army Corps memo says. The petroleum company, which controls all domestic oil sales, has also prohibited Altanmia from providing KBR or the U.S. government with any cost data related to the fuel contract.
"It is common throughout the Middle East for contractors to refuse to provide such information," the memo says.
Very little is publicly known about Altanmia, other than it is controlled by a prominent Kuwaiti merchant family with real estate and other commercial interests. A representative of the company has said that its main businesses include real estate and government work, including unspecified service contracts with the Kuwaiti military.
Since KBR could use no other gasoline provider, and couldn't extract any financial information from Altanmia, the company "is left with no option for providing these services from Kuwait other than to continue obtaining them from Altanmia," the Corps memo says.
Democratic Rep. Henry Waxman of California, a relentless critic of Halliburton's work in Iraq, called the Flowers ruling "incomprehensible" and said "it appears the administration is deliberately sabotaging the government's ability to audit Halliburton."
Army Corps officials said Monday that the Flowers ruling was necessary to allow KBR to continue to deal with Altanmia at a time when the need for gasoline and kerosene in Iraq remains high. The process that led to the waiver, they said, began in early December when the Army Corps needed to increase the amount of gasoline coming in from Kuwait and KBR had to justify sticking with Altanmia instead of seeking a new supplier through a competitive bid.
The Kuwaiti monarchy, for whom the president's daddy waged the first Gulf War, is apparently pulling a few of Cheney's strings too.