Military

DATE=12/12/03

TYPE=CORRESPONDENT REPORT

TITLE=PENTAGON/IRAQ (L/S)

NUMBER=2-310795

BYLINE=NICK SIMEONE

DATELINE=WASHINGTON

CONTENT=

VOICED AT:

INTRO: U-S Defense Secretary Donald Rumsfeld is denying the Pentagon paid too much for work performed by a company in Iraq that has political connections to the White House. Correspondent Nick Simeone reports his comments follow a Defense Department audit, which found a subsidiary of the Halliburton oil services company may have overcharged the government by more than 60-million-dollars for fuel delivered to Iraq.

TEXT: A preliminary audit has found Halliburton subsidiary Kellogg, Brown and Root may have overcharged the government by as much as 61-million dollars for fuel delivered to Iraq from Kuwait. Another 67-million dollars in extra charges was found on bills for food services to troops. But the audit found those discrepancies before the bills were paid by the military.

Halliburton denies any overcharge, and on Friday, Defense Secretary Donald Rumsfeld said:

/// RUMSFELD ACT ///

There was no overpayment.

/// END ACT ///

Military officials say the Pentagon is now seeking additional information from the company in order to resolve the dispute.

/// SECOND RUMSFELD ACT ///

What you're reading about in the paper is not an overpayment at all. It may be a disagreement between the company and the Department of Defense, and possibly between the company and subcontractors.

/// END ACT ///

Military officials say the overcharge may have originated with a fuel supplier in Kuwait.

Halliburton has several billion dollars worth of contracts for work in Iraq that were not competitively bid. The Houston-based energy services and construction company was headed by Vice President Dick Cheney, who left when he became President Bush's running mate in 2000.

Because of the billions of dollars in non-competitive contracts it has been awarded in Iraq, Halliburton has become a target for anti-war critics, who believe only companies with connections to the White House are landing lucrative contracts.

Charles Lewis is director of the Center for Public Integrity, a group that monitors government ethics, which recently did a review of the allocation of government contracts. At a recent news conference presenting the findings, Mr. Lewis said:

/// LEWIS ACT ///

There is a stench of political favoritism and cronyism surrounding the contracting process in both Iraq and Afghanistan. We found numerous instances in which companies with thin or no credentials landed major multi-million dollar contracts.

/// END ACT ///

Bush administration officials, as well as many outside contracting experts, say very few companies exist with the type of experience that Halliburton has, namely the ability to provide everything from supplying meals, and housing to troops, to repairing Iraq's damaged oil infrastructure.

The allegation of contracting overcharges comes just a day after President Bush angered European nations by saying countries that did not send troops to Iraq will not be allowed to bid on billions of dollars worth of U-S-financed reconstruction work. (SIGNED)

NEB/NJS/TW/FC