Waxman hits Halliburton fuel contract

WASHINGTON -- A senior House Democrat yesterday detailed what he charged were serious irregularities regarding Halliburton Co.'s contract to transport oil into Iraq.

In a letter to National Security Adviser Condoleezza Rice, California Representative Henry Waxman said Altanmia Commercial Marketing Co., a Kuwaiti trading company subcontracted by Halliburton subsidiary Kellogg, Brown & Root, won its contract under "unusual circumstances," is conspicuous for its lack of experience in fuel transport, and charged 60 percent more per gallon of delivered gasoline than spot prices. Waxman also said the Army Corps of Engineers, which awarded KBR the prime contract to deliver fuel to Iraq, obstructed a Pentagon audit into evidence that KBR overcharged for gasoline by $61 million through September 2003.

Waxman's letter, the latest in a series of memos issued from the ranking Democrat on the House Committee on Government Reform, was released a day after the Defense Contract Audit Agency requested the Pentagon's inspector general to open a formal investigation into fuel transports to Iraq administered by KBR.

"What I have learned raises many questions about why Altanmia was chosen for this lucrative contract and whether the administration is seeking to shield Halliburton and Altanmia from investigation," Waxman wrote.

A Halliburton spokesperson said it imported more expensive fuel from Kuwait with the full knowledge of the government to meet the urgent demand for Iraqi energy needs.

"This was a critical mission, and it was dangerous because of the violence throughout the country," said Halliburton public relations manager Wendy Hall. "We received the assignment, and were instructed to begin imports immediately. Regular fuel delivery did begin very shortly thereafter, and we believe it prevented or alleviated a national crisis."

Hall said only Altanmia met the subcontract's rigid requirements and charged the Waxman letter was "politically motivated."

Waxman said his staff was briefed on the Altanmia contract on Dec. 15 by a Pentagon auditor and other senior defense department officials. According to government documents, Altanmia won the contract a day after the bidding process opened and a week before the bidding was scheduled to close. "The abbreviated one-day process," Waxman said, "did not provide a reasonable opportunity for potential suppliers to compete for a contract worth hundreds of millions of dollars."

The letter from Waxman states that Altanmia is identified by the Kuwaiti Chamber of Commerce as a general trader with no experience transporting fuel. Samad Al Boulki, a former managing director at the Kuwait Petroleum Co., told Waxman and his staff that Altanmia's initial request to import fuel into Iraq was rejected because of its lack of experience.

Waxman also charged the Corps of Engineers with "effectively foreclosing" a December audit into evidence that KBR overcharged its fuel imports by $61 million by waiving any requirements for KBR to provide cost and pricing data from Altanmia. The Army Corps has confirmed KBR charged the US government $1.17 per gallon of gasoline delivered from Kuwait to Iraq at a time when the average spot price was $0.71. It charged an additional $1.21 per gallon in transport fees, far more than what Iraq's State Oil Marketing Organization charged for the same service.

The Army Corps waiver, issued on Dec. 19, so undermined the Pentagon's audit that it was forced to refer the matter to the Defense Department inspector general for a formal investigation, according to Waxman. An Army Corps of Engineers official said the waiver was necessary because Kuwaiti law prohibits its fuel exporters from releasing certified pricing details -- an assertion Waxman said was refuted by Al Boulki.

"According to Al Boulki," the letter states, "there is no law that would prohibit Altanmia from submitting cost and pricing data regarding the gasoline it is purchasing and transporting to Iraq."

Stephen J. Glain can be reached at glain@globe.com.