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Army Says It Will Withhold $19.6 Million From Halliburton, Citing Potential Contract Breach Print

By PHILIP SHENON - February 8, 2007

WASHINGTON, Feb. 7 — The Army announced during a House oversight committee hearing on Wednesday that it would withhold $19.6 million from the Halliburton Company after recently discovering that the contractor had hired the company Blackwater USA to provide armed security guards in Iraq, a potential breach of its government contract.

The Army has said that its contracts with Halliburton, which has a five-year, $16 billion deal to support American military operations in Iraq, generally barred the company and its subcontractors from using private armed guards. But in a statement, Halliburton disagreed with the Army’s interpretation and suggested that there was nothing to prohibit Halliburton’s subcontractors from hiring such guards.

The announcement came during a hearing of the House Government Oversight Committee that included emotional testimony about the killing of four Blackwater employees in Falluja, Iraq, in 2004.

In an e-mail message made public in the hearing and written only hours before the four were killed, another Blackwater worker told the company to end the “smoke and mirror show” and provide its employees in the war zone with adequate weapons and armored vehicles.

“I need ammo,” the worker, Tom Powell, said in an e-mail message dated March 30, 2004, to supervisors at Blackwater, which is based in North Carolina. “I need Glocks and M4s — all the client body armor you got,” he wrote. “Guys are in the field with borrowed stuff and in harm’s way.”

Mr. Powell said he had requested heavily armored vehicles “from the beginning, and from my understanding, an order is still pending.”

“Why? I ask,” he added.

The next day, a mob in Falluja attacked a supply convoy that was being guarded by Blackwater employees and killed four guards, later stringing up two of the mutilated, charred bodies from a bridge. The men were riding in vehicles that were only lightly armored, and their families have claimed in a lawsuit against Blackwater that the company failed to provide basic protective equipment.

Blackwater’s general counsel, Andrew G. Howell, told the House panel on Wednesday that the company, which also had a State Department contract to provide security services, believed that it had had an appropriate number of armored vehicles in Iraq. He said, “We have not skimped on equipment — no sir.”

The panel is investigating Blackwater and the work of other large American military contractors in Iraq.

In the dispute with Halliburton, the Army insisted repeatedly to Congressional investigators last year that it could find no evidence that Blackwater had been hired by Halliburton and its subcontractors in Iraq for security.

But in a letter dated Tuesday and made public on Wednesday, Army Secretary Francis J. Harvey said that additional investigation showed that Blackwater had provided private security guards for a Halliburton subcontractor, ESS Support Services, a construction and food services business, and that the costs “were not itemized in the contracts or invoices” prepared by ESS.

“The Army is continuing to investigate this matter and we are committed to providing full disclosures of the results of our investigations to the committee,” he wrote to the chairman of the oversight committee, Henry A. Waxman, a California Democrat. “We share your commitment to ensuring that contractors supporting the military and reconstruction efforts in Iraq comply with the terms and conditions of these contracts.”

In a statement, Halliburton insisted that it was not in breach of its contract with the government.

“Nowhere does it prohibit subcontractors from supplementing that protection with private security,” Halliburton said. “It is unrealistic to think that the military can both wage a war and at the same time protect every necessary civilian movement in Iraq.” The company said it would “sit down with the Army to discuss and resolve these issues.”

The committee also heard from family members of the four security guards.

“Why did Blackwater choose to make a profit over the safety of our loved ones?” asked Kathryn Helvenston-Wettengel, the mother of one of the men. “Blackwater gets paid for the number of warm bodies it can put on the ground in certain locations throughout the world. If some are killed, it replaces them at a moment’s notice.”

“Although everyone remembers those images of the bodies being burnt, beaten, dragged through the streets and ultimately hung from a bridge, we continue to relive that horror day after day, as those men were our fathers, sons and husbands,” she said. 

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