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How KBR/Halliburton Collected $1 Billion in "Noncredible" Costs Print
June 17th, 2008
 
Those wacky government contractors.  Will we ever tire of of their sportive tricks?
I’ll never understand why more Republicans in Congress — who worry obsessively about taxes and who used to get teary-eyed about the troops whenever a Dem used the phrase ‘withdrawal deadline’ or ‘exit strategy’ — aren’t apoplectic over the amounts of tax dollars being flushed down the latrine in Iraq, not to mention the rampant war profiteering at the expense of our American soldiers.

For example: During the first two years of the Iraq war, Charles M. Smith was in charge of overseeing a ‘multibillion dollar contract with KBR in Iraq.  After army auditors determined that KBR didn’t have credible records to justify more than $1 billion in spending, he refused to pay them.(NYT)  Specifically, the auditors said that the claims were ‘noncredible.’  (After all, you wouldn’t want the government to pay out the tax dollars formerly known as ‘yours’ and ‘mine’ without verifying that the recipients delivered the goods, would you?)  I mean: $1 billion in insufficiently documented costs?  That’s a whole lot of missing invoices.

    “They had a gigantic amount of costs they couldn’t justify,” he said in an interview. “Ultimately, the money that was going to KBR was money being taken away from the troops, and I wasn’t going to do that.” (NYT)

By the way, when reading the following just insert the words ‘KBR/The Pentagon disputed Smith’s statement’ at appropriate intervals. It’s only fair to tell make this clear: as always, they have an answer to every allegation.

Anyway. Smith said no to paying $1 billion for services KBR couldn’t prove the Army had ever got.  And before you could say ‘Dick Cheney Hearts Halliburton’, he was out of a job.(NYT)   His successors hired an outside contractor to review the records. (NYT)  Then they approved them.

    “They came up with estimates, using very weak data from KBR,” Mr. Smith said. “They ignored D.C.A.A.’s auditors,” he said, referring to the Defense Contract Audit Agency….

    Bob Bauman, a former Pentagon fraud investigator and contracting expert, said all that that was a bit unusual. “I have never seen a contractor given that position, of estimating costs and scrubbing D.C.A.A.’s numbers,” he said. “I believe they are treading on dangerous ground." (NYT)

The Army had its reasons.

    Army officials denied that Mr. Smith had been removed because of the dispute, but confirmed that they had reversed his decision, arguing that blocking the payments to KBR would have eroded basic services to troops. They said that KBR had warned that if it was not paid, it would reduce payments to subcontractors, which in turn would cut back on services  (NYT; emphasis added)

Read that again.  ‘They said that KBR had warned that if it was not paid, it would reduce payments to subcontractors, which in turn would cut back on services .’

At Obsidian Wings, Hilzoy says:

    In fact, KBR did at one point threaten to stop providing basic supplies — little things like food — to our troops in Iraq…. What that means is, to my mind, even more scandalous than simple corruption by a company with good connections. It means that we have outsourced absolutely critical functions to private companies, companies which, unlike military personnel, can threaten to stop doing their jobs without facing courts-martial. In wartime, when a company is doing something as important as providing food to our troops, the military has no choice but to cave to their demands.

Hilzoy includes in her piece an excerpt from Betraying Our Troops: The Destructive Results of Privatizing War that describes this incident.  I recommend taking a look at it.

By the way, this is the same KBR to which the Pentagon just awarded part of a 10-year, $150 billion contract in Iraq. (NYT)  [KBR stands for Kellogg, Brown and Root and is a subsidiary of Halliburton. (NYT)] As Mark Kleiman — who uses the ‘B-word’ — notes:  ‘KBR was able to squeeze more than money out of the Army: it also demanded and got high performance ratings, which helped it win a share of a contract for $150 billion just awarded for support functions in Iraq.’

Asked to comment on Smith’s testimony, Henry Waxman —invaluable chair of the House Oversight and Government Reform Committee — said: ‘KBR has repeatedly gouged the taxpayer, and the Bush administration has looked the other way every time.’ (NYT; emphasis added)

There. Isn’t that fun?

And if you enjoyed this story of taxpayer-gouging and war profiteering, you might also enjoy:

    The BBC’s report that $23 billion dollars ‘may have
    been lost, stolen or just not properly accounted for in Iraq.’  Now that’s a lot of tax dollars.   Waxman said: ‘
    "It may well turn out to be the largest war profiteering in history."  Sadly, the BBC can’t give us full details, being under a gag order that applies to 70 cases.

    This story about the Pentagon’s award of an $80 million contract to supply jet fuel to a company owned by a fugitive who has been indicted by the Justice Department.

    This account of the outcome of ‘an internal audit of some $8 billion paid to U.S. and Iraqi contractors [which] found that nearly every transaction failed to comply with federal laws or regulations aimed at preventing fraud, in some cases lacking even basic invoices explaining how the money was spent.

    This story about electrocution of troops in Iraq allegedly resulting from shoddy wiring by KBR.   (BN-Politics)

    This story of the munitions supplier (headed by a 22 year old man) which received $300 million for arms to be applied to Afghanistan’s army and police forces and in return provided ‘ammunition from the stockpile of the Communist bloc that is more than 40 years old and in decomposing packaging,’ tens of millions of rifle and machine-gun cartridges that may have been illegally procured, and whose ‘president…was…secretly recorded in a conversation that suggested corruption in his company’s purchase of more than 100 million aging rounds in Albania.’

    This story about water site issues at three KBR sites in Iraq that allegedly caused troops  to suffer ‘skin abscesses, cellulitis, skin infections, diarrhea and other illnesses’ — because they don’t have enough stress in their lives already.

    This story about a company which received $670 million in contracts for work which the Defense Department barely uses.

    This story about a contractor who got $32 million for building barracks and offices which it then did not build.

    This story about the State Dept’s and Pentagon’s disregard of numerous warnings they received about the risks of using security contractors in Iraq.

    This story about the massacre of 16 Iraqi civilians by security contractors.

    This story about KBR/Halliburton’s tax management strategy.

    This story, explaining why it’s so easy for contractors to rip off the government.

And if that’s not enough, let me know.  There’s more where those came from.
 
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