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Halliburton subsidiary contracts are probed

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WASHINGTON — The Army has agreed to a Pentagon investigation into claims by a top contracting official that a Halliburton subsidiary unfairly won no-bid contracts worth billions of dollars for work in Iraq and the Balkans, according to Army documents obtained Sunday.

The complaint alleges that the award of contracts to KBR, the Halliburton subsidiary, without competition to restore Iraq's oil industry and to supply and feed U.S. troops in the Balkans puts at risk "the integrity of the federal contracting program as it relates to a major defense contractor."

It also asks protection from retaliation for the whistle-blower, Bunnantine Greenhouse, chief contracting officer of the Army Corps of Engineers.

The Iraq contract with Halliburton has been a focus of the presidential campaign because of Vice President Dick Cheney's past ties to the company. Cheney was chief executive officer of Halliburton and continues to receive deferred compensation from the company.

In a letter to Greenhouse's lawyer, an Army attorney said that the matter is being referred to the Defense Department's inspector general for "review and action, as appropriate." It also said the Corps had been ordered to "suspend any adverse personnel action" against Greenhouse "until a sufficient record is available to address the specific matters" in her complaint.

Copies of the letter and complaints, documents which were provided to some members of Congress, were obtained Sunday by The Associated Press.

Halliburton spokeswoman Wendy Hall said from Houston, where the company is headquartered, "KBR doesn't have any information on what Bunny Greenhouse may or may not have said to other Pentagon officials in early 2003. Certainly we can't address any threatened legal action she may be considering against her employer."

"On the larger issues, the old allegations have once again been recycled, this time one week before the election," Hall said.

She emphasized that a report earlier this year by the Government Accountability Office, the auditing arm of Congress, concluded the Iraq contract had been properly awarded and she said the Balkans issue "was fully dealt with and resolved several years ago ... (and) since that time KBR has received high marks from the Army on our Balkans support contract."

Michael D. Kohn, who is Greenhouse's lawyer , in a letter to acting Army Secretary Les Brownlee, charged that in the Balkan contract a deputy assistant secretary of the Army had ordered changes in documents to legitimate the contract "for political reasons."

Kohn's complaint said contracts were approved over Greenhouse's reservations, handwritten on the original contracts, and extensions were awarded because underlings signed them without her knowledge and in collusion with senior officials.

After her superiors signed off on the Iraq contract and returned it for her necessary approval, the complaint said, Greenhouse wrote beside her signature: "I caution that extending this sole-source effort beyond a one year period could convey an invalid perception that there is not strong intent for a limited competition."

The contracts under investigation grew out of a $7 billion multiple-year award to Halliburton's KBR subsidiary to rehabilitate Iraq's oil industry after the U.S.-led invasion last year; and an 11-month extension, which cost $165 million, of a $2 billion services contract the Army awarded in May 1999.

The Iraq contract was awarded in February 2003, less than a month before the invasion, under a clause specifying no-bid contracts in cases of "compelling emergency." The complaint said Greenhouse objected to the five-year term, asking why the certainty that the emergency would continue for five years.

Kohn said Sunday that he still wants an independent investigation and will ask Attorney General John Ashcroft to appoint investigators to conduct their own probe to ensure the investigation is complete, independent and fair to his client.

"This needs to be done by an outside agency," Kohn said. "From past experience, we are uncomfortable with the DOD-IG handling this investigation by themselves."

According to the complaint, in January 2002 Greenhouse sent an investigative team to examine the Balkan operation. Afterward, she reported: "The general feeling in the theater is that the contractor (KBR) is 'out of control"' and was able to manipulate Corps of Engineer officials.

The Balkan contract was to have expired no later than May 27 of this year but was extended, without Greenhouse's knowledge, after a hunt for other contractors was stopped. Whereas it originally was awarded as a compelling emergency, the extension was awarded under the exception that KBR was the "one and only source."

Greenhouse questioned why the reason for extension was changed. While she never was officially provided the answer, the document said, "two individuals" told her in her office that Tina Ballard, deputy assistant Army secretary for policy and procurement, was telephoned during a meeting on the matter and ordered the change for "political reasons."