Soldier of Fortune

Did Vice President Dick Cheney steer $7 billion in Iraq war contracts to his old pals at Halliburton?

November 2006By and Comments

Michael Mobbs’s June 8, 2004, briefing of a House committee staff included one very surprising moment of testimony. Mobbs, a special adviser to the under secretary of defense for policy at the Pentagon, was on the Hill to discuss what the staff of Vice President Dick Cheney might have known about the multibillion-dollar government contracts awarded to Halliburton and its subsidiary KBR to rebuild infrastructure in postwar Iraq and to house and supply U.S. troops stationed there. It was one of the smaller questions at the edge of a potential scandal involving the vice president. At the time Mobbs testified, KBR (formerly Kellogg, Brown & Root) was the nation’s biggest single recipient of government funding for military logistics and reconstruction, and not only had Cheney been the CEO of its parent company for the five years before he was elected vice president, but the no-bid process by which Halliburton and KBR has gotten their Iraq contracts had been put in place by Cheney while he was Secretary of Defense, from 1989 to 1993. Considering all this, Democratic members of the House Committee on Government Reform, led by California congressman Henry Waxman, thought it well within the scope of reasonable congressional inquiry to ask if anyone on the vice president’s staff had been involved in awarding the contracts.

The vice president didn’t find it so reasonable. He had already addressed the matter on NBC’s Meet the Press nine months before, telling Tim Russert: “Since I left Halliburton to become George Bush’s vice president, I’ve severed all my ties with the company, gotten rid of all my financial interests. I have no financial interest in Halliburton of any kind and haven’t had now for over three years. And as vice president, I have absolutely no influence of, involvement of, knowledge of in any way, shape, or form of contracts let by the Corps of Engineers or anybody else in the federal government.”

Following the interview, Department of Defense officials confirmed that Cheney’s office had nothing to do with the contracts. Then, Judicial Watch filed a Freedom of Information Act request, and when the DOD refused to comply with the request, the public-interest foundation sued and obtained files that included an e-mail from regional director for the U.S. Army Corps of Engineers Stephen Browning stating that Halliburton contracts were “coordinated through the Vice President’s office.”

The staff meeting at which Mobbs testified was closed to the public. Only those present in the Rayburn House Office Building committee room would ever hear what he had to say. He wasn’t sworn in, as this was not a full committee hearing with members of the House present. But lying to Congress is a violation of federal law, and staff members expected the truth. They got more than they expected.

“We asked Mobbs who, outside the Pentagon, he had spoken to regarding the KBR contracts,” said a staff member who sat in on the briefing. “He said he met with the deputies. . . . He began to name one deputy after another [including Cheney’s deputy national security director, Stephen Hadley, who chaired the meeting]. Then we asked him, what about Cheney’s office? And he said, ‘Yeah, Scooter Libby.’”

“Yeah, Scooter Libby”?

That was a surprise.

“I don’t think anybody in the room expected to hear that,” said the House staff member.

Until he was indicted for perjury and obstruction of justice, I. Lewis “Scooter” Libby rode to work with Dick Cheney. As the vice president’s chief of staff, he met with Cheney every day. They worked together. They were friends. Their families dined together. If Libby had been briefed on the Halliburton contracts, it was all but impossible that Cheney was out of the loop.

In fact, much of what the vice president said on Meet the Press was not true. (It is not a crime to lie to a reporter.) Cheney had held more than $3 million in Halliburton stock options until sometime in 2005, according to his IRS filings. In the same year that Cheney told the NBC news anchor, “I have no financial interest in Halliburton of any kind and haven’t had now for over three years,” Halliburton paid the vice president $178,438 in deferred compensation.

Halliburton’s Iraq war revenue stream can be followed back to the military outsourcing that began in 1992, while Dick Cheney was Secretary of Defense. At Cheney’s bidding, the Defense Department paid Halliburton $3.9 million to prepare a classified report on privatizing the logistics of war—housing, feeding, and clothing troops. Halliburton went through the $3.9 million, secured an additional $5 million for a follow-up, then landed a five-year Corps of Engineers contract to provide logistical support for the Army. That process became the template for the Halliburton-KBR Iraq war contracts eleven years later. It was an extraordinary deal. On the DOD’s dime—or millions—the company wrote a classified marketing plan for its own product. Then—because it owned the proprietary information, which was classified—it effortlessly moved into the market. As Halliburton followed the Army into Somalia and Bosnia, it became the Wal-Mart of the defense service economy.

In the run-up to the Iraq war, Halliburton again got the nod, as KBR was paid $1.9 million to draw up a contingency plan to extinguish the oil well fires Saddam Hussein’s troops were expected to ignite. The proposed Restore Iraqi Oil plan (RIO) would be worth as much as $2 billion to the company that won the contract. The Defense Department was inviting Halliburton to follow the course it had charted eleven years earlier: Draw up a contingency plan on which contractors would bid, then join the competition in bidding on the contract. The process put Halliburton squarely in conflict with procurement guidelines at the Corps of Engineers, which was issuing the big Iraq contracts. The Corps’ (and most other) procurement protocols do not allow a company that drafts a contingency plan to bid on the contracts created by that plan. It’s a logical prohibition: Knowledge of the scope and budget of a plan provides a competitive advantage. Yet in this case Pentagon officials waived the rule. Halliburton drafted the contingency plan, then bid on the contract.

That odd arrangement caught the attention of Bunnatine Greenhouse, the principal assistant responsible for contracting at the Corps of Engineers. It was not only that KBR was bidding on a proposal it had drafted; “Bunny” Greenhouse sensed something more was afoot when a large contingent of Halliburton contractors filed into a meeting at which the contract was to be discussed. The date was February 26, 2003. The United States was very close to invading Iraq. And the secure room at the Pentagon where the bid was to be discussed was crammed full of Halliburton executives. Greenhouse was so disturbed that she discreetly asked the lieutenant general chairing the meeting to order them to leave.

Greenhouse ultimately agreed to accept the “compelling emergency” logic, which would permit awarding the contract to the contractor that had prepared the contingency plan. The compelling emergency was evident. Two days earlier, the United States, Spain, and Britain had submitted a resolution to the United Nations Security Council asking for authorization to use military force in Iraq. But Halliburton was being awarded a five-year sole-source contract worth $7 billion, and Greenhouse wasn’t buying into a five-year emergency with a guaranteed 2 to 5 percent profit margin. She insisted the contract be limited to one year, which would have allowed the government to evaluate Halliburton’s performance and possibly reopen the contract for competition at the end of the year.

As the lone dissenter in the room, Greenhouse (who is the sister of former University of Houston All-American Elvin Hayes) knew she couldn’t stop the contract. But the five-year term bothered her enough that she included this addendum to 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.”

This one-line protest would ultimately, it is alleged, cost Greenhouse her management position. After she added that cautionary note to the KBR contract, Greenhouse received the first negative evaluation of her tenure at the Corps of Engineers, where she had climbed from a lowly intern position to the apex of the management pyramid. Following the poor evaluation, she was demoted, stripped of her oversight responsibilities, and moved into a smaller office. Rather than dismiss her for challenging the contract, her supervisors claimed Greenhouse was not doing her job.

Greenhouse had no idea that when she sat down in that Pentagon secure room on February 26, the Halliburton contract was already a done deal. An e-mail written by a Corps of Engineers official discloses that the process had been completed by February 5. The names of the correspondents have been redacted, though it was later established that one of them was Corps of Engineers regional director Browning. The language indicates that the contracting decisions had been run through Cheney’s staff, with the president standing in line to sign off: “Accompanied OHRA [Office of Reconstruction and Humanitarian Aid] leader to get release of declass and authority to execute RIO. DepSecDef sent us to UnderSecPolicy Feith and gave him authority to approve both. Declass-Feith approved, contingent on informing the WH [White House] tomorrow. We anticipate no issues, since action has been coordinated w[ith] VP’s office.”

The Corps of Engineers made one attempt to create a bidding process—or at least the illusion of a bidding process. Five months after the February meeting that allegedly cost Bunny Greenhouse her position, the Corps of Engineers reopened some of the Iraq oil contract work for competitive bidding, informing contractors that $2 billion in work would be made available. The bidders’ conference was held in Dallas on July 14, 2003, and 184 contractors signed in.

“It was a farce,” says Sheryl Elam Tappan, who prepared a proposal for Bechtel. “The Iraq work plan was posted on the Internet on July 7. I read it the next morning, and it was crystal clear to me that it was all signed by U.S. government and Iraqi Ministry of Oil people who had agreed to commit to Halliburton.”

Tappan, a consultant with twelve years of experience writing contract proposals for engineering, environmental, and construction companies, including five years with Bechtel, was so offended by the process that she wrote a self-published (and career-ending) book entitled Shock and Awe in Fort Worth. In her book, Tappan makes a good case that the game was over before it began. Her title itself poses an interesting question. Why was such a big contracting process run out of the Corps’ regional offices in Fort Worth instead of Washington?

As bidders gathered in Dallas, Halliburton was already on the ground in Iraq, and more work was in the pipeline as a result of the contract that Greenhouse had protested. Tappan ran the numbers on a ten-page spreadsheet and concluded that 82 percent of the $1.144 billion for which Bechtel executives believed they were competing was already assigned to Halliburton by default. The work in Iraq was scheduled to be completed by December 2004. The Corps of Engineers wouldn’t announce the “two winners” to emerge from the Dallas conference until October 15. In the end, it didn’t wrap up the process until January, by which point many of the projects that bidders believed they were bidding on were already under way or even completed.

“Nobody in that room believed the process was fair,” Tappan says. “But contractors are like a big dysfunctional family. They keep quiet and take the abuse. If they get a reputation for speaking out in public, they fear they will lose work later.”

Bechtel eventually retracted its bid, though it competed for other work in Iraq. The company’s withdrawal from a bidding process in which it already had a substantial investment amounts to an indictment of the system the Corps of Engineers was using. An executive at another company involved in the bidding agrees. “It was evident,” he says, “that we were competing for far less than what the Corps of Engineers said was available.”

In the three years since Bechtel and the others got shut out in Dallas, KBR has emerged as the biggest and perhaps the only winner in the disastrous war in Iraq. But the victory might be short-lived. Iraq has obviously been better for KBR than it has for the vice president, whose public support is somewhere under 20 percent, but because the war hasn’t gone quite as Cheney predicted it would, KBR’s revenue stream is drying up. American and Iraqi money intended for rebuilding projects has been siphoned off to provide security in a civil war precipitated by the American invasion.

Corporations face legal sanctions, fines, and civil liability for lying to prospective shareholders, so KBR has had little choice but to admit that things aren’t going so well in Iraq. After the company’s 2006 prospectus was released, the Pentagon announced that the next contract to provide logistical support for troops stationed in Iraq would be split into three parts. The Army has apparently decided that the old process of sole-source, long-term contracts discourages accountability, competitive pricing, and a broader range of services for the troops. This decision, if a little late, vindicates Bunny Greenhouse—and will certainly be included in the whistle-blower case her attorneys are preparing.

The vice president’s office did not respond to questions regarding his possible involvement in the Halliburton contract. Yet an answer to the question, Did the vice president personally steer business to the company he had left two years earlier?, is not unobtainable. The House Committee on Government Reform could subpoena Scooter Libby and ask him. Or use its subpoena power to bring in Halliburton executives and ask them. That, however, is not going to happen—unless the Democrats win a majority of House seats this month. The House Committee on Government Reform routinely overrules Henry Waxman’s subpoena motions—on a straight party-line vote. (Waxman’s enthusiasm for robust congressional oversight lies at the heart of Republican fears of a Democratic takeover of the House in 2006.)

So the story continues to evolve. Halliburton is at $16 billion and counting on its Iraq totals, even as profits decline. Greenhouse is awaiting her day in court, which might provide answers to some questions related to Halliburton. Michael Mobbs won’t be back to tell his story to a congressional committee hearing open to the press and public unless and until Democrats control Congress. And as the country looks toward the midterm elections, the vice president has had little to say about Halliburton. He brushes off reporters’ questions on the topic. He has largely ignored Waxman’s inquiries. When Vermont senator Patrick Leahy approached him on the Senate floor a few months before the 2004 elections and mentioned the sole-source contracting that Greenhouse had challenged, Cheney’s response was straightforward.

“Go f— yourself,” said the vice president of the United States.

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