Another ‘lucky’ break for Halliburton

Just last month, Halliburton benefited from “a departure from normal policy” that allowed the company to get paid despite audit reports that said the company had not properly accounted for a wide variety of work in Iraq and Kuwait. Army auditors recommended withholding part of the payments, but the higher-ups overruled them. The exception to the usual policy was worth $60 million for Halliburton.

Even more startling, however, was a report from Erik Eckholm in the New York Times on the way in which the Pentagon is helping Halliburton hide its accounting troubles.

As Eckholm explained it, Halliburton subsidiary Kellogg, Brown & Root (KBR) won a lucrative, $2.5 billion no-bid contract to repair oil fields and import consumer fuels in Iraq. But in this contract, we aren’t paying the bills, Iraqis are — the U.N. authorized the Bush administration to spend Iraqi money and created a special international board of auditors to make sure the spending was benefiting the Iraqi people and was done “in a transparent manner.”

Questions were soon raised about over-billing and lax accounting. Were the international auditors satisfied with Halliburton’s bookkeeping practices? It’s hard to say; the auditors weren’t allowed to see much.

As American critics leveled their accusations at Halliburton and the Pentagon, those international overseers began expressing concerns, too. The board of monitors repeatedly asked for data on the no-bid fuels contract and was repeatedly rebuffed by the Pentagon. Last October, the board was handed copies of the Pentagon’s own audits of the nine components of that KBR contract, with numbers and many conclusions blacked out.

Last week, when Representative Henry Waxman, minority leader of the House Committee on Government Reform, released a largely unexpurgated version of one of those October audits, covering $875 million worth of fuel imports, news reports focused on the numbers. The Pentagon’s own monitors, it turned out, found excess billing of more than $100 million and criticized KBR for poor record-keeping.

But a comparison of the original with the blacked-out, or “redacted,” version that was sent to the international board last fall also raised new questions about the basis on which the Pentagon, at Halliburton’s suggestion, had chosen the items it had edited out of the document.

In this case, Halliburton was being audited, but the Pentagon let Halliburton hide as much of the books as the company wanted. Seriously.

For a company that has been suspected of special treatment, this is almost comical.

By law, commercially sensitive information provided by a company may be concealed when government documents are released. On that basis, it was proper to show KBR the audits before sending them along.

But in reply, KBR officials asked for, and then received, far more expansive deletions than is customary, said Thomas M. Susman, an attorney and regulatory expert with Ropes & Gray in Washington, including calculations and conclusions reached by the government that Mr. Susman said cannot be called proprietary.

As it turns out, Halliburton’s KBR redacted nearly every piece of information in the audit that it felt was critical of the company in any way. The Pentagon, in turn, accepted the company’s deletions, apparently without question.

And what of the international auditors, empowered by the U.N. to make sure Iraqi funds are spent “in a transparent manner”? The administration promised them than a new, “special” audit of Halliburton would be forthcoming, but so far, hasn’t lifted a finger to make it happen.

It’s amazing just how “lucky” Halliburton has been the last few years, isn’t it? It’s enough to make some people a little suspicious. I can’t imagine why.