Halliburton unit gets Iraq pact

WASHINGTON -- The Army awarded Vice President Dick Cheney's former company a contract worth up to $1.2 billion yesterday to rebuild the oil industry in southern Iraq, despite a deepening investigation into allegations that Halliburton Co. overcharged for fuel in Iraq.

The Army gave Halliburton subsidiary KBR a no-bid contract to rebuild oil infrastructure throughout Iraq shortly after the US-led invasion of Iraq in March. The Army subsequently opened that contract for competitive bids last fall and split it into one for northern Iraq and one for southern Iraq.

The northern Iraq contract, worth up to $800 million, was given yesterday to a joint venture of California-based Parsons Corp. and the Australian firm Worley Group Ltd.

The Army Corps of Engineers awarded the pacts as Democratic representatives released a letter indicating that the inquiry into allegations of overcharging for fuel by KBR had been handed over for consideration by criminal investigators.

In a letter addressed to Joseph E. Schmitz, the Defense Department's inspector general, Democratic representatives Henry A. Waxman of California and John D. Dingell of Michigan, along with Connecticut Senator Joseph I. Lieberman, said they were informed by members of Schmitz's staff that an audit into Kellogg Brown & Root's Iraq operations had been referred to a criminal investigation unit of the inspector general's office.

The move comes after the Defense Department's auditing agency requested that Schmitz open an investigation into evidence KBR had overcharged by an estimated $61 million for fuel deliveries to Iraq from Kuwait.

The letter revealed the latest twist in an ongoing probe by ranking Democrats, led by Waxman, into the most lucrative single contract issued to rebuild postwar Iraq.

Halliburton, of which Cheney was once chairman, was secretly awarded the no-bid contract to redevelop Iraq's battered oil sector by the Army Corp of Engineers in March; Halliburton's mandate was supposed to last only a few months, but it has since garnered the company more than $2 billion in new business.

Requests from Halliburton for comment on yesterday's letter were not answered. A Pentagon spokesman said the inspector general is assessing the referral, and no decision has been made.

At issue is whether KBR violated procurement standards in hiring Altanmia Commercial Marketing Co., a Kuwaiti general trader, to deliver gasoline to energy-strapped Iraq.

In a Jan. 15 letter to National Security Adviser Condoleezza Rice, Waxman said Altanmia won the KBR subcontract a day after the bidding process opened, and a week before the bidding was scheduled to close. Altanmia had no experience transporting fuel before it was awarded the contract, according to the letter, and charged 60 percent more per gallon of delivered gasoline than prevailing spot prices.

From April 11 to Sept. 19, according to public documents, 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 71 cents. 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. KBR also added a commission of 26 cents per gallon.

In addition, the Waxman letter cited allegations of financial ties between Altanmia and a brother of Kuwait's oil minister. "My staff has received multiple allegations that Talal Fahad Al Sabah is acting as a consultant for the company or as a hidden partner by proxy," Waxman wrote.

Waxman also alleged the Army Corps of Engineers preempted the Defense Department audit of KBR. Four days after the Pentagon announced the probe, the Army Corps declared Altanmia's prices were "fair and reasonable" and waived any requirements for KBR to provide cost and pricing data from Altanmia.

An Army Corps official said the waiver was necessary because Kuwaiti law prohibits fuel exporters from releasing certified pricing details -- an assertion Waxman said was refuted in a telephone interview his staff had with the former general manager of Kuwait Petroleum Co.

Pentagon auditors referred the Altanmia contract to the inspector general's office in response to the Army Corps waiver, Waxman said.

Material from the Associated Press was used in this report. Stephen J. Glain can be reached at glain@globe.com.