In light of the American military’s increasing dependence on corporate entities, Halliburton’s Army: How a Well-Connected Texas Oil Company Revolutionized the Way America Makes War questions our government’s ability to oversee massively profitable armed forces contracts. The author, who lives in Oakland, California, is the managing editor of the investigative Web site CorpWatch; his previous book, Iraq, Inc: A Profitable Occupation, was published in 2004.
What first attracted you to Halliburton as a book-worthy topic? Halliburton is the largest contractor to the U.S. military, taking in as much as half of the money provided to contractors in places like Iraq. This alone made it an interesting topic, particularly given all the allegations of corruption and political favoritism [that have been made against the company]. Once I visited U.S. military bases, I realized Halliburton is about transforming the way the U.S. goes to war in the twenty-first century. Halliburton’s job is to make soldiers as comfortable as possible by doing all the dirty work—erecting tents, cooking food, cleaning toilets—so that they go to war without the hardship that previous soldiers faced. Today a soldier is more likely to put on weight than to return looking gaunt and famished.
Is this Halliburton-serviced military an improvement on the traditional model? In many ways, yes. In the book, I quote Major Tim Horton [at Camp Anaconda, in Iraq]. He points out that if the average soldier gets $100,000 worth of training, then the military has to spend another $100,000 to train every replacement soldier. “What if we spend an extra $6,000 to get them to stay and save the loss of talent?” he says. “There are some creature comforts in this Wal-Mart and McDonald’s society we live in that soldiers have come to expect. They expect to play an Xbox, to keep in touch by e-mail. They expect to eat a variety of foods . . . Our soldiers need to feel and believe that we care about them, or they will leave.” What are the downsides to this model? Well, there is the obvious corruption when contractors figure out how to [steal from the system]. But there is a bigger downside: Halliburton has created a bubble from which the U.S. military can play war games at will, rather like at a video arcade. But you will eventually run out of quarters to play your game—we see that already with the current economic crisis—and asymmetrical warfare by Iraqis can defeat a comfortable military elephant that wants its slice of pizza and double helping of ice cream.
How important was Dick Cheney’s tenure as CEO to Halliburton’s monopolization of the government services industry during the Bush administration? Everything and nothing. The correct short answer is that he had really very little to do with hiring the company, in my opinion, but the longer answer is that his job at Halliburton can be seen in the context of the revolving door between high-level government officials and the military oligopolies whose sole client is the Pentagon.
In Halliburton’s Army, I try to explain the growth of Halliburton’s government work. When Cheney was still at college, long before he made it to Washington, D.C., Halliburton was winning contracts to build bases in Vietnam. The company had already inked the work in former Yugoslavia before he took the helm at the company. Cheney was clear that he would steer clear of the military contracts when he was at Halliburton, and even the smoking gun memo of him being informed of the Restore Iraqi Oil contracts in March 2003 was to make sure he knew that it was happening at the Pentagon, though there was potential for a political fallout—which turned out to be correct. A careful read of the memo, a study of the Special Inspector General report on this, and Douglas Feith’s memoir suggest that Cheney had nothing to do with the contract. The man who actually made sure that Halliburton got the contracts in Iraq was Michael Mobbs, who worked for Rumsfeld.
Why was Cheney hired to work at Halliburton? Because he was a fishing buddy of the former CEO, not because he had any experience in business. He was a terrible CEO, from most accounts, buying companies with billions in liabilities and apparently unaware of several accounting messes. But he hired three men who had worked with him at the Pentagon who knew how to get contracts: Charles “Chuck” Dominy, a former three-star general with the Army Corps of Engineers; David Gribbin, who had served as Cheney’s assistant secretary of defense for legislative affairs; and Admiral T. Joseph “Joe” Lopez. They are the ones who ramped up the existing military business of the company. It must also be noted that Halliburton went from Vietnam and building bases in Diego Garcia to managing airfields in Turkey and winning its first logistics contracts in 1992—starting in Somalia—long before Cheney came to work at the company. By 2003, the company had the best résumé in the field, in fact, effectively a monopoly. Once the military decided to go with a sole-source contractor to help it prepare for war in 2002, it was obvious that Halliburton was the only candidate.
Your publisher calls the book “a devastating bestiary of corporate malfeasance and political cronyism.” Is that PR hyperbole or is Halliburton’s history truly that odious? Every one of Halliburton’s senior managers is ex-government, often from the very department that they are now providing outside contractor services to. Halliburton’s Army shows this political cronyism in detail. Was there malfeasance in Afghanistan and Iraq? Absolutely! What else would you call a litany of worker abuses, a complete failure to fix the oil fields, as well as a widespread waste of taxpayer dollars on unnecessary luxuries?
If we go back to Brown & Root’s public works projects in the Texas Hill Country, do we find a more socially responsible—if still profit-driven—corporate culture at work? That’s a hard question for me to answer, as I did not really study that in detail. But George Brown made a lot of money by befriending Lyndon Johnson from projects in Texas, whether it was the Marshall Ford Dam or the Corpus Christi naval base. The dam was a boondoggle, if there ever was one in Texas, which was sold to the taxpayer on shaky public interest grounds and was built with dollars intended to employ unemployed workers, not for-profit corporations.
What does the future hold for Halliburton: growth or scandalous Enron-like collapse? Halliburton and KBR are now separate companies, after KBR was spun off completely in 2007. Halliburton, which became a pure energy services company, was doing phenomenally well—notably well for a company that went through bankruptcy. But today its share price has collapsed from a high of $53.91 in early July to a $17 trading range, so it is doing quite badly, hit by the double whammy of the stock market and the oil price collapse. Its future is completely tied to the oil business, which is likely to recover in the medium term, and it is legally shielded from any Iraq problems by the spin-off.
KBR has taken all the military business, which continues to be profitable, as the need for battlefield services has yet to slow down. Its share price has fallen less, comparatively, from a high of about $44 in October 2007 to about $15 now. But it is very vulnerable to any significant drawdown in troop strength, and also to any major litigation or investigations. Its profit margin is razor thin—just 2 percent in Iraq, compared with the 20 percent profit that Halliburton can make—so it could be hit badly if anything goes wrong.
Enron and the investment banks on Wall Street collapsed because they were lying on their balance sheets—their profits were fabricated. I’m not aware that such problems exist at Halliburton or KBR.
What projects are next for Pratap Chatterjee? I continue to look at military contracting, notably in the intelligence sector. I have also just returned from Afghanistan, where I expect to focus on contractors that may get more money if Obama expands the war there. I’ll also focus on contractors and corruption in the Obama administration, as I expect there to be a lot more scandals with the large government handouts that have been promised. Perseus Books, $26.95
