Oh what a lovely war on terror it's been for Halliburton

Katherine Griffiths reports from New York on the American company with friends in the highest places, the contracts that all seemed to flow in one direction and the high-ranking army employee who blew the whistle

Halliburton, the world's largest military private contractor, has made at least $8bn (£4.3bn) in war-torn Iraq - doing everything from washing American troops' laundry to setting up vital oil supplies. Now, a critically well-placed army employee says contracts were unfairly awarded to Halliburton, whose chief executive used to be US Vice-President Dick Cheney.

Halliburton, the world's largest military private contractor, has made at least $8bn (£4.3bn) in war-torn Iraq - doing everything from washing American troops' laundry to setting up vital oil supplies. Now, a critically well-placed army employee says contracts were unfairly awarded to Halliburton, whose chief executive used to be US Vice-President Dick Cheney.

Bunnatine Greenhouse, the highest-ranking civilian in the US Army Corps of Engineers, saw the contracts handed to Halliburton pass over her desk. She objected to all of them on the grounds that the government was being too generous to the Texas-based company. Now she might lose her job.

The army tried to demote her last autumn after her performance ratings swung from excellent to sub-standard. An alternative offered to the 60-year-old, who followed her husband into the army, is a swift retirement.

According to Ms Greenhouse, who is hanging on to her job under American laws that protect whistleblowers, her superiors want her out because she is "a stickler for the rules". She hopes to stay on at the corps until she is ready to retire, even though many of her colleagues "treat me like I have the plague".

Having worked in government and army procurement for 23 years, she says her duty has been clear as the principal assistant responsible for contracting, known as the Parc. "In a time of war on terrorism, we as a government have to make sure there is a fairness, there is an integrity, and that there is an arm's length approach in the business of contracting," she said.

But when it came to Halliburton and its subsidiary Kellogg Brown & Root, whose services range from oil and gas to meeting all of soldiers' living needs, Ms Greenhouse found her commanders did not share her vision.

Time and again, there was little or no competition for the huge contracts the US administration awarded, and repeatedly, it seemed that senior army people were stepping in to overrule her attempts to make KBR accountable.

On top of that, there was a "revolving door", with senior army employees joining Halliburton. These included Tom Quigley, who had previously done Ms Greenhouse's job, and Chuck Dominy, a three-star general who is now Halliburton's chief lobbyist on Capitol Hill.

Halliburton, which Mr Cheney led from 1995 to 2000, has a long history of working for the US government in far-flung parts of the world. But it was the war on terror which really expanded its fortunes from government projects. It also focused critics' minds on how close Halliburton continued to be to Mr Cheney and his coterie of hawkish colleagues in Washington.

For Ms Greenhouse, who has been working at the Corps of Engineers since 1997, KBR's good connections became abundantly clear as the American administration prepared to attack Saddam Hussein's regime.

On 26 February 2003 - three weeks before the invasion of Iraq - senior government and army employees gathered in Washington to discuss details of how Iraq would be rebuilt after the US-led invasion. To Ms Greenhouse's surprise, several KBR employees were also present.

The company had apparently already received a letter indicating it would be awarded the work to put out any oil field fires started by the Iraqi dictator. The Restore Iraqi Oil (RIO) programme came to have the much wider remit of ensuring fuel supplies got into the country. It has netted KBR $2.5bn.

For Ms Greenhouse, several things were wrong with the contract, and she made her objections clear. "I got up and whispered in the ear of Lieutenant General [Carl] Strock, who was chairing the meeting, that it was time KBR left the meeting. If you know I've got a budget for $200,000, you're going to give me [a bid of] $199,000 plus some cents," she said.

Another problem for Ms Greenhouse was that KBR already had a contract worth more than $5bn with the US government, known as Logcap, under which it supplied a range of services to American troops around the world.

Having the Logcap contract seemed to put KBR in pole position to get the job of putting together the preliminary plan for RIO. It was called the contingency plan and, at a cost to taxpayers of nearly $2m, KBR mapped out ways to put Iraq back on its feet.

The US administration then made it a requirement that the contractor for RIO needed to be familiar with the contingency plan.

Michael Kohn, Ms Greenhouse's Washington-based lawyer, who is bringing her unfair-dismissal case on the grounds of race and sex discrimination as well as under whistleblower laws, put the issue like this: "If they felt they were going to give KBR the RIO contract later on, why would you give the contingency plan to KBR?

"And then why would you put in the follow-on that you have to have familiarity with the contingency plan? It could only go to KBR."

KBR pointed out in a detailed response to The Independent on Sunday that the Government Accountability Office - Congress's watchdog on public projects - said RIO was "properly awarded". But the body also noted that the contingency plan was improperly awarded.

A third problem for Ms Greenhouse was that she was already familiar with KBR's work, and she was not impressed. Since 1999, the company had earned almost $2bn supplying services to US troops in the Balkans. The costs had got "completely out of control", she said.

Most alarming of all were the proposed terms of the RIO contract. As in the Balkans, KBR was to be the sole contractor, under a five-year deal. Rather than getting a fixed fee, it would be allowed to pass on unlimited costs to the administration, and would receive a fee of between 2 and 7 per cent on top of that.

Ms Greenhouse balked at the proposed terms and tried to have the initial contract reduced to one year. "The Government said the contract was meant to be a bridge, but I could find no signs it was," she said.

According to Ms Greenhouse, "there is no doubt" that KBR - which is now in line to be sold by Halliburton - was not the only company suitable to take on the work in Iraq. Others, such as the energy and engineering companies Fluor and Parsons, were capable.

In the end, RIO was awarded for two years, with three one-year options, and Parsons has now been taken on to restore oil fields in the north of Iraq, with KBR winning the work for the larger area of fields in the south.

The army said it would not comment because of Ms Greenhouse's legal dispute. But she claims her commanders were determined to promote KBR's interests, even if that meant taking the opportunity to do so behind her back.

One such occasion came in Decem- ber 2003, on a day Ms Greenhouse said she would be off because of illness. A document was formulated in Dallas and flown to Washington the same day, which gave KBR a waiver from having to show its paperwork to anyone else.

Plenty of people believe that the corps' commanders were guided by the wishes of those close to the White House. Ms Greenhouse can only point to one occasion when politics were overtly invoked as the reason for the lucrative work being heaped on the company.

She recalls that Tina Ballard - who held the high-ranking post of deputy assistant secretary of the army for policy and procurement - told people in Ms Greenhouse's office that there were "political reasons" why KBR was to be the sole contractor in the Balkans, despite evidence of cost over-runs and mismanagement.

Mr Cheney himself has stuck to a statement he made on the current affairs show Meet the Press in September 2003. "I have absolutely no influence of, or involvement of, knowledge of in any way, shape or form, of contracts led by the Corps of Engineers or anybody else in the federal government," he said.

Yet Mr Cheney's chief of staff, Lewis Libby, was told KBR had been awarded the task of preparing the contingency plan, according to the office of Henry Waxman, a Democrat member of the House of Representatives who is among Congress's most outspoken critics of Halliburton.

The Washington Post has reported that Mr Libby kept Mr Cheney out of the loop, although Vanity Fair and Time magazines have pointed to a Corps of Engineers email saying the contingency plan had been "co-ordinated" with the vice-president's office.

Mr Waxman has used his position as the most senior Democrat on the Government Reform Committee to try to clarify the opaque nature of Halliburton's political connections. He has also attacked the company over allegations that it overcharged taxpayers by more than $100m on oil supplies.

Mr Waxman unearthed details two weeks ago of a prolonged campaign by the UN's International Advisory and Monitoring Board - which monitors the way revenues from Iraqi oil is spent - to get hold of Defense Department audits of KBR's work in Iraq. It was only after "considerable foot-dragging", Mr Waxman said, that the board was given anything by the US government, and the documents it did receive had information removed at the request of Halliburton.

That included $62m the auditors felt were "unreasonable costs" relating to Halliburton's oil imports from Kuwait, which it carried out with a local company called Al Tanmia. The original audit, but not the altered version, also said "KBR did not always provide accurate information".

According to letters from Michael Morrow, KBR's contracts manager, to the Corps of Engineers, the company was withholding the information on "proprietary" grounds, and in cases where it felt that the audits were "misleading".

A KBR spokesperson strongly rejected the suggestion that it overcharged on fuel, saying: "KBR has delivered vital services for US troops and the Iraqi people at a fair and reasonable cost, given the circumstances".

The FBI is now probing KBR over its work in Kuwait. A former KBR employee was indicted by the Justice Department two weeks ago on fraud charges in connection with a contract he arranged with a Kuwaiti company called La Nouvelle.

KBR has pointed out that its "own internal auditors discovered possible wrongdoing in Kuwait more than a year ago".

Mr Waxman is pressing for his committee to hold more hearings on Halliburton this year. The House of Representatives' subcommittee on national security is also expected to take up the case.

Any significant action is likely to be difficult, though, as both houses in Congress are controlled by the Republicans, who are not known for their readiness to challenge Halliburton.

Ms Greenhouse is co-operating with the FBI investigation. She is also fighting her own case. If this comes to court, her lawyer Mr Kohn says, it will be "uncharted waters", as there has never before been such a senior army whistleblower.

In the meantime, Ms Greenhouse carries on going to work. "In the army they say 'adapt or die'," she said. "I feel I have died."

AROUND THE WORLD WITH KBR

Iraq

Kellogg Brown & Root has been accused of using political connections in its efforts to secure the two largest post-war contracts handed out by the US government: Restore Iraqi Oil and Logcap.

Once these were signed, KBR allegedly ramped up costs. A Defense Department audit says it overcharged US taxpayers by $100m for importing fuel from Kuwait and elsewhere.

Kuwait

There are multiple investigations into whether KBR staff accepted bribes. One former employee has been indicted by the Justice Department for allegedly committing fraud with a local subcontractor, La Nouvelle, in overcharging the US government for services such as doing troops' laundry.

Whistleblowers from the company have also come forward to say some KBR executives enjoyed lavish lifestyles on the company account, with costs being passed on to the US government. KBR has fired several employees working in the country.

The Balkans

According to Bunnatine Greenhouse, costs associated with the contract awarded to KBR in 1999 - to provide a wide range of services to troops - spiralled out of control. The exclusive five-year contract was due to end in May 2004, but was extended by the Army until April of this year.

Guantanamo Bay

Another controversial move, according to its critics, is that KBR has been given work to build cells at the military prison in Cuba.

Nigeria

French and Nigerian investigators are probing a contract to build a gas refinery at Bonny Island in Nigeria, in which KBR was involved. Fees of more than $100m were authorised by KBR executives, some in the UK, and passed through the offices of a small north London law firm.