[Senate Hearing 110-101]
[From the U.S. Government Publishing Office]
S. Hrg. 110-101
HALLIBURTON AND U.S. BUSINESS TIES TO IRAN
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HEARING
before the
SUBCOMMITTEE ON INTERSTATE COMMERCE, TRADE, AND TOURISM
OF THE
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
APRIL 30, 2007
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
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35-959 PDF WASHINGTON DC: 2007
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
DANIEL K. INOUYE, Hawaii, Chairman
JOHN D. ROCKEFELLER IV, West TED STEVENS, Alaska, Vice Chairman
Virginia JOHN McCAIN, Arizona
JOHN F. KERRY, Massachusetts TRENT LOTT, Mississippi
BYRON L. DORGAN, North Dakota KAY BAILEY HUTCHISON, Texas
BARBARA BOXER, California OLYMPIA J. SNOWE, Maine
BILL NELSON, Florida GORDON H. SMITH, Oregon
MARIA CANTWELL, Washington JOHN ENSIGN, Nevada
FRANK R. LAUTENBERG, New Jersey JOHN E. SUNUNU, New Hampshire
MARK PRYOR, Arkansas JIM DeMINT, South Carolina
THOMAS R. CARPER, Delaware DAVID VITTER, Louisiana
CLAIRE McCASKILL, Missouri JOHN THUNE, South Dakota
AMY KLOBUCHAR, Minnesota
Margaret L. Cummisky, Democratic Staff Director and Chief Counsel
Lila Harper Helms, Democratic Deputy Staff Director and Policy Director
Margaret Spring, Democratic General Counsel
Christine D. Kurth, Republican Staff Director and General Counsel
Kenneth R. Nahigian, Republican Deputy Staff Director and Chief Counsel
------
SUBCOMMITTEE ON INTERSTATE COMMERCE, TRADE, AND TOURISM
BYRON L. DORGAN, North Dakota, JIM DeMINT, South Carolina,
Chairman Ranking
JOHN D. ROCKEFELLER IV, West JOHN McCAIN, Arizona
Virginia OLYMPIA J. SNOWE, Maine
JOHN F. KERRY, Massachusetts GORDON H. SMITH, Oregon
BARBARA BOXER, California JOHN ENSIGN, Nevada
MARIA CANTWELL, Washington JOHN E. SUNUNU, New Hampshire
MARK PRYOR, Arkansas
CLAIRE McCASKILL, Missouri
C O N T E N T S
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Page
Hearing held on April 30, 2007................................... 1
Statement of Senator Dorgan...................................... 1
Prepared statement........................................... 4
Statement of Senator Lautenberg.................................. 5
Witnesses
Brown, Hon. Sherrod, U.S. Senator from Ohio...................... 6
Comras, Esq., Victor D., Attorney/Consultant, Special Counsel,
Eren Law Firm.................................................. 16
Prepared statement........................................... 18
Thompson, Jr., William C., Comptroller, City of New York......... 8
Prepared statement........................................... 11
Williams, Sherry, Vice President/Corporate Secretary, Halliburton
Company........................................................ 13
Prepared statement........................................... 14
Appendix
Halliburton Company, supplementary information................... 35
HALLIBURTON AND U.S. BUSINESS TIES TO IRAN
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MONDAY, APRIL 30, 2007
U.S. Senate,
Subcommittee on Interstate Commerce, Trade, and
Tourism,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Subcommittee met at 2 p.m. in room SR-253, Russell
Senate Office Building, Hon. Byron L. Dorgan, Chairman of the
Subcommittee, presiding.
OPENING STATEMENT OF HON. BYRON L. DORGAN,
U.S. SENATOR FROM NORTH DAKOTA
Senator Dorgan. We'll call the hearing to order. This is a
hearing of the Interstate Commerce, Trade, and Tourism
Subcommittee.
We are joined today by Senator Lautenberg and I've invited
Senator Brown, who has legislation on the issue that is the
subject of the hearing, to join us today. We will be joined by
other colleagues as well.
Today's hearing is intended to examine the question of
whether U.S. corporations should be able to do business in
countries that are prohibited, countries with whom we have
economic sanctions. Particularly in this case we will talk
about Iran, but other countries are involved as well.
Should U.S. corporations be able to do business in these
countries through their foreign subsidiaries? We have a number
of countries that are subject at this point to sanctions, the
countries of Cuba, Iran, North Korea, Sudan, Syria, for
example.
This country has passed legislation dealing with a number
of these countries. With the country of Iran, we have passed
the Iran Sanctions Act. In a number of cases, we know from
information that we have received and we know from public
published reports that American-chartered corporations have
done business through the exceptions that exist with a number
of these countries.
Let me speak especially about the country of Iran for the
moment, but it applies, as I understand it, to other countries
as well.
When our country with a foreign policy objective
establishes sanctions against another country, a prohibited
country, suggesting that for foreign policy reasons we want to
prohibit certain economic activity and certain connections
between our country and theirs, in order to, through economic
sanctions, apply some pressure and some injury to a country for
behaving in a manner that is not consistent with the manner
that we determine appropriate.
In circumstances where those companies are prohibited from
doing business in those prohibited countries, however,
companies are able to, in some circumstances, circumvent that
by doing business through foreign subsidiaries, wholly owned or
partially owned foreign subsidiaries.
In the case of Iran, for example, the U.S. law that we
passed contains a loophole. The Iran Sanctions Act allows
foreign subsidiaries of U.S. corporations to do business with
Iran, so long as the subsidiary operates independently.
We have invited a number of witnesses today. One of the
witnesses is the Halliburton Company. Halliburton is a U.S.-
chartered corporation that has had some publicity about it
doing business with the country of Iran through a foreign
subsidiary.
In 2004, 60 Minutes did a report that disclosed how
Halliburton had a subsidiary in the Cayman Islands with
headquarters in Dubai, which did hundreds of millions of
dollars worth of business in the country of Iran.
In the 60 Minutes testimony, excuse me, 60 Minutes report,
it appeared the Cayman Islands office was not much more than a
mail drop and the Dubai office, which was supposed to operate
independently of the Houston-based company, 60 Minutes found
that the Dubai subsidiary shared office space, phone and fax
lines with a division of the Houston company.
Halliburton is by no means the only company that has had
business ties to Iran or in other cases with other countries
that have been prohibited countries by fashioning that business
through a foreign subsidiary.
There's no question that, for example, with Iran there are
substantial oil and gas reserves. There's no question that some
corporations in this country would want to do business in Iran
even though it is a prohibited country and so we understand
why, under current law, some companies have decided it's in
their economic interest to fashion foreign subsidiaries to do
this kind of business.
The question that we pose at this hearing is; should this
be the case. If we have a national goal here of establishing
sanctions for good reason, should we allow those purposes of
the sanctions to be undermined by U.S. companies creating
foreign subsidiaries, or through foreign subsidiaries, doing
business with a prohibited country? Does that not, in fact,
undermine the very thing we're attempting to accomplish?
The State Department, again, continuing with Iran, says,
``Iran is the most active state sponsor of terrorism''--says
that ``Iran has maintained a high profile role in encouraging
anti-Israeli terrorist activity, rhetorically, operationally,
and financially.''
The Supreme Leader and the President of Iran has praised
the Palestinian terrorist operations. Iran has provided the
Lebanese Hezbollah and Palestinian terrorist groups, notably,
Hamas and Islamic Jihad, funding, training and weapons.
President Ahmadinejad recently hosted a conference aimed at
denying the historical truth of the Holocaust.
I raise all this simply to say there are reasons, important
and strong reasons that this country has decided to impose
sanctions on countries, in this case, Iran. I could give a
similar discussion about North Korea and Syria. Having said
that, it is striking to me that we have a law that would allow
a U.S. company, through a foreign subsidiary, to do business
with a prohibited country. Why on earth would we allow that?
So today's hearing is intended to ask several questions,
first, should it be legal for subsidiaries of U.S. companies to
do business with prohibited countries through a U.S.
subsidiary? Senator Lautenberg is introducing legislation to
close this loophole.
Second, should U.S. companies that decide to do business
with a prohibited country, in this case, Iran, be eligible for
Federal contracts?
Senator Brown has introduced a piece of legislation, titled
the Restoring Integrity in Contracting Act of 2007. This bill
would prohibit U.S. companies that do business with Iran,
through U.S. subsidiaries and I believe it's through any
prohibited country; I'd have to check on that, from getting
Federal contracts.
Let me say I'm pleased that a representative of Halliburton
has agreed to testify at this hearing. I would note that
Halliburton has announced that it will no longer do any
business with the country of Iran. That's a welcome statement,
but Halliburton has been a major U.S. contractor and has done
business with Iran for many years and we'll talk about that.
The first witness today will be Sherry Williams, Vice
President and Corporate Secretary of Halliburton.
The second witness is William Thompson, the Comptroller of
New York City. Mr. Thompson oversees $80 billion in pension
funds for all city workers, part of which was invested in
Halliburton stock and that of other companies engaged in Iran
and Mr. Thompson has been instrumental in raising these issues
with corporations in a very important way.
And the third witness is Victor Comras. Mr. Comras retired
from the State Department in 2001 and is now a practicing
attorney and consultant on matters related to sanctions and
embargos. He led the State Department's foreign policy trade
control and sanctions programs for nearly a decade.
In 1999, Secretary Madeline Albright put him in charge of
developing an international sanctions program on Serbia aimed
at bringing down the Slobodan Milosevic regime. He also served
as the State Department's point man on sanctions related to
Iraq, Iran, Libya, Haiti, Cuba and North Korea.
I want to thank all the witnesses for appearing today and I
want to just again say, the reason that we are holding this
hearing is because many of us feel that we ought to answer a
very important question. If this country has objectives by
which it imposes sanctions on countries and creates a list of
prohibited countries, should there be any circumstance in which
a U.S.-chartered corporation would be doing business with those
prohibited countries by creating a foreign subsidiary?
I think not, but currently the law allows that kind of end-
run that I believe undermines our foreign policy objectives and
we will, in this hearing explore whether the law should be
changed and if so, how it should be changed.
[The prepared statement of Senator Dorgan follows:]
Prepared Statement of Hon. Byron L. Dorgan,
U.S. Senator from North Dakota
Today's hearing is intended to examine the question of whether U.S.
companies should be able to do business in Iran through their foreign
subsidiaries.
The State Department lists a handful of countries as state sponsors
of terrorism, and U.S. law generally prohibits U.S. companies with
doing business with those countries, whether directly or through their
foreign subsidiaries.
But in the case of Iran, U.S. law contains a serious loophole. The
Iran Sanctions Act allows foreign subsidiaries of U.S. companies to do
business with Iran, so long as the subsidiary operates independently.
One of the U.S. companies that we know has had foreign subsidiaries
do business with Iran is Halliburton. In 2004, 60 Minutes did a report
that showed how Halliburton had a subsidiary in the Cayman Islands,
with headquarters in Dubai, which did hundreds of millions of dollars
worth of business with Iran. The Cayman Islands office was little more
than a mail drop. And the Dubai office was supposedly run independently
of the Houston-based company, but the 60 Minutes investigation found
that the Dubai subsidiary shared office space, phone, and fax lines
with a division of the Houston company.
Halliburton is by no means the only company that has had business
ties to Iran in this fashion. But it was one of its most vocal in
defending the propriety of this type of arrangement.
Vice President Cheney, who in the 1990s was Chairman of
Halliburton, gave a speech to an energy industry conference in 1996, in
which he said that sanctions were the greatest threat to Halliburton
and other American oil companies trying to expand overseas. He said
that ``we seem to be sanction-happy as a government'' and that ``the
problem is that the good Lord didn't see fit to always put oil and gas
resources where there are democratic governments.''
Indeed, in a 1998 speech at the Cato Institute, Vice President
Cheney said that U.S. companies were ``cut out of the action'' in Iran
because of the sanctions.
Well, there is no question that Iran has very substantial oil and
gas reserves. But there is good reason why the United States makes it
illegal for U.S. companies to do business with Iran.
For starters, according to the State Department, Iran is the ``most
active state sponsor of terrorism.'' The State Department says that
Iran has ``maintained a high-profile role in encouraging anti-Israeli
terrorist activity--rhetorically, operationally, and financially.''
Supreme Leader Khamenei and President Ahmadinejad has praised
Palestinian terrorist operations, and Iran has provided Lebanese
Hezballah and Palestinian terrorist groups--notably Hamas, and Islamic
Jihad--with extensive funding, training, and weapons. President
Ahmadinejad recently hosted a conference aimed at denying the
historical truth of the Holocaust.
In addition, the Iranian regime is a country seemingly determined
to acquire nuclear weapons. President Ahmadinejad has described the
regime's quest for nuclear energy as an ``unstoppable train.''
So it is striking that U.S. companies would permit any of their
foreign subsidiaries to do business with Iran, even if such an action
were arguably legal under U.S. law.
Today's hearing is intended to ask several questions.
First, should it be legal for subsidiaries of U.S. companies to do
business with Iran through a U.S. subsidiary? Senator Lautenberg has
introduced legislation to close this loophole.
Second, should U.S. companies who do business with Iran be eligible
for Federal contracts? Senator Brown has introduced S. 1004, the
Restoring Integrity in Contracting Act of 2007, a bill that I have
cosponsored. This bill would prohibit U.S. companies that do business
with Iran through U.S. subsidiaries from getting Federal contracts.
I am pleased that Halliburton has agreed to testify at this
hearing. I would note that after we announced our intention to hold
this hearing, Halliburton announced that it would no longer do any
business with Iran. That's a welcome announcement, but I think that
given that Halliburton has been a major U.S. contractor and has done
business with Iran for years, we still have a lot to talk about.
I should add that I expect that it is no easy step for Halliburton
to appear before this Subcommittee, particularly given the fact that I
have been critical of the company for its performance relating to
contracts in Iraq. I do not intend to focus on the subject of Iraq
contracting at this hearing, but rather to focus on Iran--and there is
plenty to discuss on the subject of Halliburton and Iran.
The first witness, Sherry Williams is the Vice President and
Corporate Secretary of Halliburton.
The second witness is William Thompson. the Comptroller of New York
City. Mr. Thompson oversees the $80 billion in pension funds for all
city workers, part of which was invested in Halliburton stock and that
of other companies engaged in Iran.
The third witness is Victor Comras. Mr. Comras retired from the
State Department in 2001, and is now a practicing attorney and
consultant on matters related to sanctions and embargoes. Mr. Comras
led the U.S. State Department's foreign policy trade control and
sanctions programs for nearly a decade. In 1999, Secretary Madeleine
Albright put him in charge of developing an international sanctions
program on Serbia aimed at bringing down the Slobodan Milosevic regime.
He also served as the State Department's point-man on sanctions related
to Iraq, Iran, Libya, Haiti, Cuba and North Korea.
I thank all the witnesses for appearing today. I should note that
though Senator Brown is not a member of the Commerce Committee, I have
invited him to join us today given his interest in these issues.
Let me call on Senator Lautenberg.
STATEMENT OF HON. FRANK R. LAUTENBERG,
U.S. SENATOR FROM NEW JERSEY
Senator Lautenberg. Thanks, Mr. Chairman, for holding this
important hearing. It seems impossible to imagine that American
companies would try to circumvent the law and do business with
an enemy of ours, when we are actively at war, when we keep on
losing troops there, in Iraq. So, I think this is a
particularly opportune moment to discuss this.
I want to start off by talking about a young woman, who
came from New Jersey, from Teaneck, New Jersey. Her name was
Sarah Duker. She was studying in Israel and she and her fiance
were killed when their bus was blown up in Jerusalem in 1996.
She was 22 years old.
The bus was found to have been blown up by Hamas. Hamas
which receives funding and support from the Iranian government.
Now without support from Iran, Hamas and other terror groups
would not be able to carry out their attacks.
President Bush has said, ``Money is the life blood of
terrorist operations.'' So, it's stunning to me that some
American companies, like Halliburton, have conducted business
with terrorist states, like Iran, in defiance of the law that
principles against it.
Now I was the first member of the Congress to investigate
Halliburton's dealings with Iran. Some of what we uncovered was
forwarded to the U.S. Office of Foreign Assets Control in the
Treasury and has become part of their investigation.
We knew from a 60 Minutes piece, that the Halliburton
subsidiary had an office in Dubai and I asked my staff to learn
all we could about the activities of that office. My staff then
obtained copies of faxes between the Iranians and Halliburton
in Dubai.
And we noticed that the Iranians addressed these faxes to
specific people at Halliburton, the principal company. What is
unclear is who these people were? Did they work for the Cayman
Islands subsidiary or the parent company? Were they U.S.
nationals?
One fax was addressed to Ian Gooch and another to a Mr.
McIntyre. A third fax was to a Mr. Proctor. Now, I'm going to
be asking Ms. Williams today to identify what company these
people work for and what was their national background.
Another curious issue is Halliburton's January 2005
announcement that it would no longer do work in Iran. Now what
Halliburton didn't publicize at the time, that just before
their announcement, they signed an arrangement to deal with
Iran to help drill their South Pars natural gas field.
And of course, since he had just inked a multimillion
dollar contract with the Iranians, Halliburton's CEO, David
Lesar, made clear that the company will have to honor their
existing contracts with the Iranians, such as this South Pars
deal.
Doesn't sound like an honorable act to me. In fact, 2
months after Mr. Lesar's announcement that the company was
leaving Iran, NBC news sent out a video crew to Iran and caught
an image of this. This was at Pars Gas Field in Iran and you
see the name on the jacket, on the uniform of the fellow there,
Halliburton.
Mr. Chairman, we've got to stop this behavior. That's why I
reintroduced my bill, Stop Business with Terrorists Act last
week. The bill will close the loophole that Halliburton has
exploited in order to do business with Iran.
Simply put, Iran sponsors terrorists. Their terrorists have
killed hundreds of Americans including, Sarah Duker, from New
Jersey.
Companies that help terrorist states generate revenues that
are helping fund terrorist operations. It's that simple.
In the Republican Congress, I attempted to pass my bill
several times and we lost narrowly. In fact, on one occasion,
we lost a roll call vote in the Senate by a single vote, 49 to
50 and I know that my amendment helped keep pressure on
Halliburton to announce that they were getting out of Iran, but
we can't be fooled.
Halliburton's not getting out of Iran because they are
suddenly a good corporate citizen. They're not getting out of
Iran because it's the right thing to do. Halliburton is getting
out of Iran because they didn't like the bad publicity that
they're getting, but they plan to come back when things cool
down.
In fact, Halliburton CEO, David Lesar, said to the press,
``If more of our customers go to Iran, we're going to return to
this market.'' They can't wait to get out of that place. We
can't wait much longer to remove ourselves from places of
danger.
Mr. Chairman, we are trying to legislate on this issue
because left to their own devices, companies like Halliburton
will follow the money, not the morality and I thank you.
And I wanted to welcome Mr. Bill Thompson here. We've
worked together in the past and look forward to continuing our
work.
Senator Dorgan. Senator Brown.
STATEMENT OF HON. SHERROD BROWN,
U.S. SENATOR FROM OHIO
Senator Brown. Thank you, Mr. Chairman, and thank you for
the series of hearings that you're doing on trade and on our
national and our economic security, like many of us, I
certainly appreciate that.
In the post-9/11 world, U.S. economic policy can no longer
be viewed in a vacuum of bottom lines and profit margins. When
we open our borders to trade, as we should, we open them to
homeland security threats.
It's imperative that Congress takes proactive steps to
ensure that our homeland security needs are secured every bit
as much as our economic well-being and it's imperative that the
U.S. Government stop rewarding businesses, as Senator
Lautenberg said, that partner with state sponsors of terrorism,
such as Iran. We cannot hold Iran accountable if U.S. companies
help build its economy.
In 1995, my second term in the House of Representatives,
Congress voted in support of the Administration's sanctions on
Iran after that country was found to be in direct support of
organizations that seek to harm the United States and our
allies.
Over the past several years, Iran has increased its defense
spending from $4.2 billion in 2003 to $6.6 billion in 2006.
More importantly, in 2005, IAEA inspectors confirmed that Iran
had resumed uranium conversion in order to develop nuclear
technology and to fund these efforts; Iran has been working to
develop its energy sector, the life blood of its economy and
the major source of its revenue.
Oil exports account for roughly 80 to 90 percent of Iran's
total export earnings, 20 percent of the total GDP and around
half of its government's budget.
Iran's oil exports have increased 46 percent over the past
3 years to approximately $47 billion last year despite U.S.
sanctions.
While sanctions ban U.S. companies from engaging in the
development of Iran's strategic energy sector, both foreign-
based trans-national corporations and subsidiaries of U.S.-
based firms have supported Iran's development of its energy
sector over the past decade.
Since 1999, foreign, direct investment in this sector has
totaled more than $100 billion. Experts note that these foreign
investments have the potential to significantly increase Iran's
energy production and obviously its revenue potential.
Over the past several years, while the U.S. has maintained
sanctions on Iran, the Halliburton subsidiaries sold a reported
$30 million in oil extraction equipment to companies working in
Iran's energy sector.
Notably a Halliburton subsidiary sold oil drilling
equipment to help accomplish this objective assisting foreign
firms in Iran's development.
It's been reported that Halliburton recently elected to
cease their work in Iran and that is a step in the right
direction, as Senator Lautenberg said. However, aiding in the
development of a country that seeks to do America harm is never
in America's best interest.
It's the responsibility of Congress to secure our Nation.
It's the responsibility of our government to ensure that
taxpayer's money in the form of government contracts should not
go to corporations that seek to make a profit off rogue
governments.
This should also be the case for companies that move their
headquarters offshore. That's why Senator Dorgan and I have
introduced legislation to deny government contracts to U.S.
firms that do business with state sponsors of terrorism or that
choose to be corporate expatriates and move offshore to avoid
paying taxes.
The actions of these companies clearly undercut our efforts
to stop the development of weapons of mass destruction and
prevent the strengthening of terrorist organizations whose aim
is to harm our country.
We shouldn't help enrich companies that are undermining our
national security goals. It's as simple as that.
Thank you, Mr. Chairman, for the opportunity to join this
subcommittee today.
Senator Dorgan. Senator Brown, thank you very much. I'm
going to introduce the witnesses starting with Mr. Thompson.
Let me just again say that, the countries, those foreign
countries that our State Department has identified as countries
engaged in state-sponsored terrorism are countries against whom
our government has taken certain actions, but a loophole exists
allowing, in most cases, an opportunity for U.S. companies to,
through a foreign subsidiary, continue to do business with
countries that engage in state-sponsored terrorism and the
question for this Congress, I think, is, should we allow that
to continue?
The answer to me clearly, is no and so how do we stop it
and what kind of action do we take?
Mr. Thompson has been engaged in this fight for some while.
I first came to know him by reading about some of the work Mr.
Thompson has done.
He is the Comptroller of the City of New York. He is the
Chief Investment Advisor to the City's five retirement systems
which manage over, I now see, $100 billion in pension monies
for the City, according to his testimony today and he has
pressured corporations that they invest in, who do business
with state sponsors of terrorism to change their policies and
interestingly enough, has been quite successful taking a very
unusual approach.
Mr. Thompson, thank you for coming down from New York and
being willing to testify and telling us what you have been
doing and how you see this issue. You may proceed.
STATEMENT OF WILLIAM C. THOMPSON, JR., COMPTROLLER, CITY OF NEW
YORK
Mr. Thompson. Thank you, Mr. Chairman. It is definitely a
pleasure to be here, Senator Brown and definitely my friend,
Senator Lautenberg, always a pleasure seeing you, sir.
I appear before you today to express my deep concern over
the ability of American firms to circumvent the intent of
sanctions law with respect to nations deemed to be sponsors of
terror by our State Department.
As Comptroller for the City of New York, I am the Chief
Investment Advisor to the City's five retirement systems,
managing over $100 billion in pension funds for the City.
Our responsibility to protect retiree assets requires a
constant effort to pursue the highest standards of corporate
responsibility and companies in which we invest. We've argued
that when companies fail to consider the possible reputational
or financial damage resulting from their operations whether
directly or indirectly, they put their shareholders long-term
investments at risk.
As Comptroller, I've pressured corporations we invest in
that do business with state sponsors of terrorism to change
their policies. New York City pension funds have taken on a
number of U.S. corporate giants who are doing business with
rogue nations, such as Iran and Syria.
Americans have been hearing for years that there's a
connection between money and terrorism, but most didn't realize
that their own investments, including their retirement nest
eggs could be financing regimes that condone and even encourage
widespread violence and bloodshed.
It certainly came as a shock to New York City's police and
fire fighters, who suffered combined losses of 366 men and
women on September 11, 2001. Our police and fire department
pension funds own some 400,000 shares in Halliburton Company,
valued at roughly $10 million.
Our other funds had an additional $20 million invested in
Halliburton. And Halliburton, as we now well know, was doing
substantial business with Iran, a nation that had been
identified by the United States Department of State as a state
sponsor of terrorism.
Halliburton was not alone. Because of the loophole in
Federal law, other Fortune 500 companies like, General Electric
and ConocoPhillips were doing the same. How did this happen?
Our government forbids American companies from doing business
with or in countries it identifies as terror sponsors.
However, that ban does not apply to any foreign or offshore
subsidiary, so long as non-Americans are nominally in control.
This loophole was exploited by these companies.
In February of 2000, Halliburton opened an office in
Tehran, under the name of Halliburton Products and Services
Limited. It's a Cayman Island-based subsidiary. The alleged
headquarters for Halliburton Products and Services Limited was
in Abu Dhabi in the Persian Gulf, where it shared office space,
fax and phone numbers with its United States parent.
Given this evidence, the notion that Halliburton's
subsidiary was, in any way, independent was laughable.
Halliburton owed an explanation to thousands of current and
retired New York City police and firefighters, along with the
rest of the members of the New York City pension system.
On their behalf, my office submitted a shareholder proposal
to Halliburton in November of 2002 to review the potential
financial and reputational risks of its operations in Iran.
Similar resolutions were filed at that time with General
Electric and ConocoPhillips.
When Halliburton agreed to such a review, we withdrew our
proposal. Halliburton subsequently produced a report that,
rather than addressing the broader risks inherent to doing
business with rogue states, they offered a narrow legalistic
explanation of how its operations fall within the bounds of the
law.
They were clearly unwilling to address the broader
implications of its activities in Iran for both their
shareholders and the country.
In January of 2004, 60 Minutes aired a segment on
Halliburton that mentioned the efforts of my office and raised
the public awareness of this issue dramatically. The show
uncovered new information about Halliburton's subsidiary.
For instance, the Cayman Islands address is just a mailbox
at a local bank and barely that. When mail arrived there it was
rerouted to Halliburton headquarters in Houston.
The attention from the 60 Minutes show led ConocoPhillips
to announce within a month that they would not renew any
current contracts in Iran by their foreign subsidiaries and
cease any new business there.
As pressure mounted on Halliburton, we filed resolutions in
December of 2004 with two additional companies, Cooper Cameron
and Aon, to likewise cease their back-door dealings with Iran.
At the same time we applied pressure to another U.S. based
company, Foster Wheeler, that's incorporated in Bermuda and
therefore not subject to U.S. sanctions.
I'm pleased to say that only 3 months later in February of
2005, our campaign began to reap greater rewards as GE
announced that they would let all current contracts in Iran by
their foreign subsidiaries lapse and cease any new business.
The next month, Cooper Cameron, affirmed to my office that its
subsidiary would divest of any interest in its Iranian joint
venture.
Within weeks, Halliburton likewise committed with us, not
to pursue new business in Iran after current contracts by their
subsidiary ended. In December of that year, Foster Wheeler also
made a similar commitment and in January of 2006, the last firm
in our campaign, Aon, announced it would cease its back-door
operations in Iran.
Halliburton originally indicated that they'd be completely
out of Iran by the end of 2007. I saw a few weeks ago that they
announced that they are out for good.
Ultimately we have to close the loophole in Federal law
that allows U.S. companies to act through foreign subsidiaries.
In past sessions of Congress, I've been proud to support
language offered by Senator Lautenberg to do just that. The
Lautenberg language, I believe is now contained, in Oregon
Senator Gordon Smith's Iran Counter Proliferation Act of 2007.
I support that legislation also and have just found out that
the Senator has reintroduced it.
Senator Lautenberg introduced legislation last week, bill
S. 1234, which would achieve the similar purpose and I'm very
supportive of that piece of legislation also.
While the companies we identified as doing back-door
business with state sponsors of terror have all signed letters
of agreement with our offices to end that practice, other
companies could choose to engage in such dealings tomorrow, or
the next day.
Only the passage of tough legislation can ensure that no
new firms can take such measures. In the meantime we've begun
the process in my office of reviewing how we may be able to
influence firms with no ties to the United States and are not
subject to SEC shareholder proposal rules and we're meeting
with our trustees now to try and work on that.
After the events of last summer, in which Israeli cities
and towns were targeted by Hezbollah militia with missiles that
many believe were supplied by Iran and Syria, our efforts to
curtail the ability of these nations and others to engage in
acts of terror are more important than ever before.
And at a time when Iran has stated its intention to develop
a nuclear program, we can't ignore the risks proposed by that
regime, whether we're talking about the development of nuclear
weapons in Iran or the export of weapons, technology and
terrorism abroad.
For the safety and security of the United States and other
peace-seeking nations around the world, institutional investors
have to continue to insist that the firms they invest in not
attempt to wiggle out of sanctions against state sponsors of
terror by acting through subsidiaries not beholden to American
law.
And again, Mr. Chairman, I'd like to thank you and the
members of this subcommittee and the other members of the
Senate for convening this panel on this critically important
topic and for giving me the opportunity to present testimony
today. Thank you.
[The prepared statement of Mr. Thompson follows:]
Prepared Statement of William C. Thompson, Jr., Comptroller, City of
New York
Good afternoon, Chairman Dorgan, and honorable Members of the
Subcommittee on Interstate Commerce, Trade and Tourism.
I appear before you today to express my deep concern over the
ability of American firms to circumvent the intent of sanctions law
with respect to nations deemed to be sponsors of terror by our State
Department.
As Comptroller for the City of New York, I am the Chief Investment
Advisor to the City's five retirement systems, managing over $100
billion in pension monies for the City.
Our responsibility to protect retiree assets requires a constant
effort to pursue the highest standards of corporate responsibility at
companies in which we invest.
We have argued that when companies fail to consider the possible
reputational or financial damage resulting from their operations--
whether directly (through their hiring policies, for example) or
indirectly (through policies of the government with which they
contract)--they put their shareholders' long-term investments at risk.
As Comptroller, I have pressured corporations we invest in that do
business with state sponsors of terrorism to change their policies. . .
. New York City pension funds have taken on a number of U.S. corporate
giants who were doing business with rogue nations such as Iran and
Syria.
Americans have been hearing for years that there's a connection
between money and terrorism, but most didn't realize that their own
investments, including their retirement nest eggs, could be financing
regimes that condone and even encourage widespread violence and
bloodshed.
It certainly came as a shock to New York City's police and
firefighters, who suffered combined losses of 366 men and women on
September 11, 2001.
Our Police and Fire Department Pension Funds owned some 400,000
shares in Halliburton Co., valued at roughly $10 million. Our other
funds had an additional $20 million invested in Halliburton.
And Halliburton, as is now well known, was doing substantial
business with Iran, a nation that had been identified by the U.S. State
Department as a state sponsor of terrorism.
Halliburton was not alone. Because of a loophole in Federal law,
other Fortune 500 companies, like General Electric and ConocoPhillips,
were doing the same.
How did this happen? Our government forbids American companies from
doing business with or in countries it identifies as terror sponsors.
However, that ban does not apply to any foreign or offshore
subsidiary, so long as non-Americans are nominally in control. This
loophole was exploited by these companies.
In February 2000, Halliburton opened an office in Tehran under the
name of Halliburton Products and Services, Ltd., its Cayman Islands-
based subsidiary.
The alleged headquarters for Halliburton Products and Services Ltd.
is in Abu Dhabi in the Persian Gulf, where it shares office space, fax
and phone numbers with its U.S. parent.
Given this evidence, the notion that Halliburton's subsidiary is in
any way independent of its parent is laughable.
Halliburton owed an explanation to thousands of current and retired
New York City police and firefighters, along with the rest of the
members of the New York City pension system.
On their behalf, my office submitted a shareholder proposal to
Halliburton in November 2002 to review the potential financial and
reputational risks of its operations in Iran. Similar resolutions were
filed at that time with General Electric and ConocoPhillips.
When Halliburton agreed to such a review, my office withdrew the
proposal. Halliburton subsequently produced a report that, rather than
addressing the broader risks inherent to doing business with rogue
states, offered a narrow, legalistic explanation of how its operations
fall within the bounds of the law.
Halliburton was clearly unwilling to address the broader
implications of its activities in Iran for both its shareholders and
the country.
In January 2004, the television news program 60 Minutes aired a
segment on Halliburton that mentioned the efforts of my office and
raised the public awareness of this issue dramatically.
The show uncovered new information about Halliburton's subsidiary.
. . . For instance, the Cayman Islands address is just a mailbox in a
local bank--and barely that. When mail arrives there, it is rerouted to
Halliburton headquarters in Houston.
The attention from the 60 Minutes show led ConocoPhillips to
announce within a month that they would not renew any current contracts
in Iran by their foreign subsidiaries and cease any new business there.
As pressure mounted on Halliburton, my office filed resolutions in
December 2004 with two additional companies--Cooper Cameron (now
Cameron International) and Aon--to likewise cease their back-door
dealings with Iran.
At the same time, we applied pressure to another U.S.-based
company, Foster Wheeler, that is incorporated in Bermuda and therefore
not subject to U.S. sanctions.
I am pleased to say that only 3 months later, in February 2005, our
campaign began to reap greater rewards as GE announced that they would
let all current contracts in Iran by their foreign subsidiaries lapse
and cease any new business.
The next month Cooper Cameron affirmed to my office that its
subsidiary would divest of its interest in an Iranian joint venture.
Within weeks, Halliburton likewise committed with us not to pursue new
business in Iran after current contracts by their subsidiary ended.
In December of that year, Foster Wheeler made a similar commitment,
and in January of 2006 the last firm in our campaign, Aon, announced
that it would cease its back-door operations in Iran.
Halliburton originally indicated to my office that it would be
completely out of Iran by the end of 2007. A few weeks ago they
announced that they are now out for good.
Ultimately, we must close the loophole in Federal law that allows
U.S. companies to act through foreign subsidiaries. . . . In past
sessions of Congress, I have supported language offered by Senator
Frank Lautenberg to do just that.
The Lautenberg language is now contained in Oregon Senator Gordon
Smith's ``Iran Counter-Proliferation Act of 2007.'' I support that
legislation and encourage you all to work for its passage.
While the companies we identified as doing back-door business with
state sponsors of terror have all signed letters of agreement with our
office to end that practice, other companies could choose to engage in
such dealings tomorrow or the next day.
Only the passage of the Smith bill will ensure that no new firms
will take such measures.
In the meantime, my office has begun the process of reviewing how
we may be able to influence firms with no ties to the United States and
are not subject to the SEC shareholder proposal rule.
I am in the process of initiating a conversation with the Trustees
of the five New York City pension funds on this matter.
After the events of the summer, in which Israeli cities and towns
were targeted by the Hezbollah militia with missiles that many believe
were supplied by Iran and Syria, our efforts to curtail the ability of
these nations and others to engage in acts of terror are more important
than ever before.
And at a time when Iran has stated its intention to develop a
nuclear program, we cannot ignore the risks posed by the Ahmadinejad
regime--whether we are talking about the development of nuclear weapons
in Iran or the export of weapons, technology and terrorism abroad.
For the safety and security of the United States and other peace-
seeking nations around the world, institutional investors must continue
to insist that the firms they invest in not attempt to wriggle out of
sanctions against state sponsors of terror by acting through
subsidiaries not beholden to American law.
I want to thank Chairman Dorgan and all the Members of the
Subcommittee on Interstate Commerce, Trade, and Tourism for convening a
panel on this critically important topic and for giving me the
opportunity to present testimony here today.
It has been my very great pleasure to share with you the
experiences of my office and I look forward to our continued work
together on this very important issue.
Thank you very much.
Senator Dorgan. Mr. Thompson, thank you very much. We
appreciate your being here and your testimony.
Next, we will hear from Sherry Williams, who is the Vice
President and the Corporate Secretary of Halliburton Company. I
believe that you are coming to us from the Houston office, is
that correct?
Ms. Williams. Yes, I am.
Senator Dorgan. Welcome and thank you for traveling to
Washington to come to this hearing. You may proceed.
STATEMENT OF SHERRY WILLIAMS, VICE PRESIDENT/CORPORATE
SECRETARY, HALLIBURTON COMPANY
Ms. Williams. Chairman Dorgan and Members of the
Subcommittee, thank you for the opportunity to testify here
today about the work done by a subsidiary of our company in
Iran.
As you've heard, my name is Sherry Williams and I'm the
Vice President and Corporate Secretary of Halliburton Company.
Halliburton was founded in 1919 by Earl P. Halliburton and he
grew with the industry to build Halliburton into what it is
today, the second largest oil field services company in
existence.
Over the years, Halliburton has remained focused on the
Western Hemisphere. Today 70 percent of our business is
conducted in Canada, the United States and South America. Many
of these fields, however, are maturing and reaching a state
where they are no longer economically viable. For these reasons
the company has grown its business in the Eastern Hemisphere as
well.
Work by Halliburton in the Middle East region is not a new
phenomenon. The company has maintained international offices
for more than 80 years. Over time, Halliburton broadened its
business opportunities across the region through foreign
offices and currently has over 300 subsidiaries.
One such independent foreign subsidiary of the company,
Halliburton Products and Services Limited or HPSL, has done
work in Iran. HPSL formerly known as Otis International Limited
was incorporated in the Cayman Islands in 1974 and was
registered to do business in Dubai in 1978.
Dubai has been HPSL's principal place of doing business
since well before the imposition of Iranian sanctions in May
1995. At the time of the implementation of Iranian sanctions
and the executive orders in 1995, three highly qualified, major
American law firms provided advice to Halliburton on the issue
of whether independent foreign subsidiaries were impacted by
the unilateral economic sanctions.
In May 1995, OFAC hosted a meeting of many attorneys and
some company representatives concerning advice about the
sanctions law. The advice that came out of that meeting was
that independent foreign subsidiaries, such as HPSL, were not
within the bar of the sanctions to the extent that they were
independent of the U.S. parents in undertaking and execution of
their business.
Nevertheless, Halliburton announced in January 2005 that it
would not take any new contracts in Iran. Thus, HPSL has not
entered into any new contracts or projects with Iran since that
date. Existing contracts needed to be completed or the company
would have been sued for breach of contract.
The last of the contracts that existed at that time was
completed this year. During HPSL's activities in Iran,
decisions to undertake business were made by HPSL Managers and
Boards of Directors. Halliburton Company did not direct or
facilitate HPSL's activity. None of the HPSL Directors,
Managers, or employees is a U.S. citizen or a permanent
resident alien.
The decision-making authority for HPSL on a day-to-day
basis, thus resided with local foreign management. Although
Halliburton has grown its business opportunities in the Eastern
Hemisphere, it is clear that the company has more to do, more
work to do, to remain competitive.
Our biggest competitor, Schlumberger, a French company, is
extremely active in the region and in other places where we are
prohibited from operating due to sanctions.
Where Halliburton is barred from performing in a country or
leaves that country due to economic sanctions, our
international competitors pick up the work that we leave
behind.
Schlumberger has recently stated that it intends to
continue work in U.S.-sanctioned countries and Schlumberger is
also listed as a New York Stock Exchange Company.
Let me conclude by noting that Halliburton has been a proud
American company for nearly 90 years and intends to remain just
that. We recently announced that our CEO, David Lesar, has
established an office in Dubai. The press coverage of that fact
was incorrect, leaving many with the mistaken impression that
Halliburton is moving its headquarters out of the United
States.
The company will remain headquartered in Houston. It will
remain a Delaware incorporated corporation subject to all laws
of the United States and the Securities and Exchange Commission
and Halliburton will remain a Houston company that is proud to
be one of Houston's best places to work according to the
Houston Business Journal. Thank you all very much.
[The prepared statement of Ms. Williams follows:]
Prepared Statement of Sherry Williams, Vice President/Corporate
Secretary, Halliburton Company
Chairman Dorgan and Members of the Subcommittee on Interstate
Commerce, Trade, and Tourism, I want to thank you for the opportunity
to testify here today about the work done by a subsidiary of our
company in Iran. Your staff has indicated that you are concerned about
the activities of subsidiaries in certain parts of the world and
whether those efforts should be limited by U.S. laws.
My name is Sherry Williams, and I am Vice President and Corporate
Secretary of Halliburton Company. Halliburton was founded in 1919 by
Earl P. Halliburton who lived the American dream. He worked the oil
fields as a young man until he discovered a revolutionary way to cement
oil wells, and he grew with the industry to build Halliburton into what
it is today: the second largest oil field services company in
existence.
Over the years, Halliburton has remained focused on the Western
Hemisphere. Today, 70 percent of our business is conducted in Canada,
the United States and South America. Many of these fields, however, are
mature and reaching a state where they are no longer economically
viable. According to some recent statistics, two-thirds of the known
petroleum and gas reserves in the world are in the Eastern Hemisphere.
For these reasons, the Company has grown its business in the Eastern
Hemisphere as well.
Work by Halliburton in the Middle East region is not a new
phenomenon. The company has maintained international offices for more
than 80 years. More specifically, Halliburton has had offices in the
Middle East for more than 60 years, beginning in 1946 with a project
for Arabian-American Oil. The following year, 1947, marked the
Company's first business in Kuwait.
Over time, Halliburton broadened its business opportunities across
the region through foreign offices and currently over 300 subsidiaries.
One such independent foreign subsidiary of the company, Halliburton
Products and Services Limited or HPSL, has done work in Iran. HPSL,
formerly known as Otis International, Ltd. (OIL), was incorporated in
the Cayman Islands in 1974 and was registered to do business in Dubai
in 1978. Dubai has been HPSL's principal place of doing business since
well prior to the imposition of the Iranian Sanctions of May 1995.
We believe it to be well established that owned or controlled
foreign subsidiaries of U.S. companies are not subject to the U.S.
trade sanctions against Iran. Prior to 1986, The Office of Foreign
Assets Control's (OFAC) sanctions programs covered U.S. companies, as
well as foreign companies that were owned or controlled by U.S.
companies. Today, only the Cuban sanctions program still has such broad
coverage. For programs instituted since 1986, such as the Iranian
Sanctions, OFAC's sanctions programs have clearly excluded foreign
subsidiaries of U.S. companies from their scope, but they have
continued to prohibit their U.S. parent companies from facilitating or
otherwise engaging in activities of those subsidiaries involving
sanctioned countries. In other words, with specific reference to the
Iranian Sanctions, mere ownership or control by a U.S. company is not
enough to destroy a foreign subsidiary's independence, and OFAC has
never required U.S. companies to divest their holdings in foreign
subsidiaries merely because they do business with sanctioned countries.
Instead, the rules look to actual or required involvement by a U.S.
parent in a foreign subsidiary's operations to determine whether that
foreign subsidiary has the requisite authority and ability to operate
independently. The sanctioning of foreign subsidiaries was the topic of
at least one piece of legislation in 1995, S. 277. While there was
discussion of this legislation, it was never enacted.
At the time of implementation of Iranian sanctions and executive
orders in 1995, three highly qualified major law firms provided advice
to Halliburton and other companies now included within Halliburton to
consider the issues of whether independent foreign subsidiaries were
impacted by the unilateral economic sanctions. In May 1995, OFAC hosted
a meeting of many attorneys, and some company representatives. The
advice that came out of that meeting was that independent foreign
subsidiaries, such as HPSL, were not within the bar of the sanctions to
the extent that they were independent of U.S. parents in the
undertaking and the execution of such business. The law firms also
determined that the sanctions did not apply to wholly-owned
subsidiaries, such as HPSL, that are of foreign incorporation and
subject to decision-making by non-U.S. citizens.
Nevertheless, Halliburton Energy Services announced in January
2005, that it would take no new contracts in Iran. Thus, HPSL has not
entered into any new contracts for projects in Iran since that date.
Existing contracts needed to be completed or the company would have
been successfully sued for breach of contract. The last of the
contracts that existed at the time of the announcement were completed
this year.
During HPSL's activity in Iran, decisions to undertake business
were made by the managers and the Board of Directors. Halliburton did
not direct or facilitate HPSL's activity. None of the HPSL directors,
managers, or employees are U.S. citizens or permanent resident aliens.
The decision making authority for HPSL on a day-to-day basis thus has
resided entirely in local management.
Before it ceased doing business in Iran, HPSL had about 133
employees. As of 2004, HPSL's employees included 2 Algerians, 1
Bangladeshi, 11 U.K. citizens, 1 Canadian, 10 Egyptians, 16 Filipinos,
40 Indians, 13 Indonesians, 33 Iranians, 2 Pakistanis, 3 Palestinians,
1 Portuguese, and 1 Sudanese. There were 41 employees who lived and
worked in Iran full-time. Thirty-three of those local employees were
Iranian and 8 were third-country nationals.
Although Halliburton has grown its business opportunities in the
Eastern Hemisphere, it is clear that the company has more work to do in
order to remain competitive. On March 14, 2007, the Wall Street Journal
published an article concerning our CEO's move to Dubai. The article,
entitled ``Halliburton Plays Catch Up'', made a strong case that our
competition is more deeply entrenched in the Eastern Hemisphere than we
are, and that the Company will need to ``hustle'' to meet the
competition. Two of our biggest competitors, Schlumberger and
Weatherford, are both extremely active in that region and in other
places where we are prohibited from operating due to sanctions. When
Halliburton is barred from performing in a country or leaves that
country due to unilateral economic sanctions, it does not mean that the
available work in those countries ceases. Rather, the work continues,
but our international competitors pick up the work we leave.
Schlumberger and Weatherford have stated they intend to continue to
work in U.S.-sanctioned countries. Both companies are listed on the New
York Stock Exchange.
It should be of some concern that non-U.S. companies are gaining
control of energy assets in countries where U.S. industry cannot work,
making it far more difficult for us to reach our national goal of
energy security. It is also troubling that our competition does not
always perform with as much respect for the environment as Halliburton
does. We use literally hundreds of new technologies to find petroleum
assets, image them, extract them, and transport them in an
environmentally safe, inexpensive manner.
Let me conclude my remarks by noting that Halliburton, which
employs 45,000 people in nearly 70 countries around the world, has been
a proud American company for nearly 90 years and intends to remain just
that. The Company is incorporated in Delaware and its principal
executive office is in Houston, Texas. We recently announced that our
CEO, Dave Lesar, has established an office in Dubai. The press coverage
of that fact was incorrect, leaving many with the mistaken impression
that Halliburton is moving its corporate headquarters out of the United
States. That is simply not the case. The company ``Halliburton''
remains headquartered in Houston, where it is proud to be one of
Houston's ``Best Places to Work'' according to the Houston Business
Journal.
Senator Dorgan. Ms. Williams, thank you very much. Finally,
we will hear from Mr. Victor Comras, retired from the U.S.
State Department in 2001, now a practicing attorney and
consultant on matters relating to sanctions and embargos. Mr.
Comras, you may proceed.
STATEMENT OF VICTOR D. COMRAS, ESQ., ATTORNEY/CONSULTANT,
SPECIAL COUNSEL, EREN LAW FIRM
Mr. Comras. Thank you, Mr. Chairman. Thank you for inviting
me here to give you my views on the application of U.S.
sanctions against Iran.
I've watched closely as the United States has sought to
engage other countries to join with us in applying increased
pressure on Iran to comply with international counter-
proliferation and counter-terrorism norms. This has been a very
slow and painful process.
One can understand that there's a certain reluctance to put
sanctions on Iran because of the dislocation that that might
cause to the world oil market which could drive the price of
oil well above current levels, but one must also weigh the
enormous strategic and security risks posed by a nuclear armed
Iran that supports international terrorism.
Every day the international community stands down, only
serves to strengthen Iran's resolve to forge ahead making
further confrontation increasingly inevitable and at an ever
increasing cost.
Since 1995, we have employed our own sanction laws and
regulations to seek to impair Iran's ability to acquire weapons
of mass destruction and to reduce the resources available to
them to fund terrorism activities. These sanctions have slowed
them down, but we have not stopped them. For that we need
broader international sanctions to bring home to Iran's leaders
that such conduct will not be tolerated.
The recent sanctions measures adopted by the Security
Council fall well short of these objectives. They've made
little impact, if any, on Iran's leaders and they do little
more than freeze the overseas assets of a few dozen Iranian
individuals and entities associated with their uranium
enrichment program.
They do almost nothing to limit Iran's trade or access to
foreign investments, loans or financial and development
assistance. They've left on the table billions of dollars of
trade deals and investments which undercut the international
communities' stated objective of getting to Iran, getting Iran
to change course.
They demonstrate that key countries can continue to lack
the political will necessary to face up to Iran's challenge and
this signal has been received loud and clear by the current
Iranian regime.
That brings us back to what we can and should do to protect
our national security and foreign policy interests. I think it
is very important that the Congress and the Administration are
now reviewing our domestic sanctions against Iran to see how
they might best be used and leveraged to apply pressure on Iran
and those doing business with Iran.
Let's start with our own business activities. Our own trade
with Iran has grown considerably since President Clinton
imposed trade sanctions in 1995, from less than $500,000 in
two-way trade in 1996, to over $242 million in 2006. In
addition, foreign subsidiaries of some 35 different U.S.
companies continue to remain active in Iran.
This includes such companies as Halliburton, Baker Hughes,
Smith International and General Electric. They get around the
sanctions because the regulatory guidelines here are quite
murky. The regulatory standards that apply to foreign
subsidiaries have differed from one sanctions program to
another.
The Cuban-North Korean embargos, for example, do apply to
foreign subsidiaries of U.S. companies. These sanctions were
imposed under the Trading With the Enemy Act but more recent
sanctions including the sanctions on Iran were imposed by
Presidential executive orders issued pursuant to IEEPA.
These sanctions reach out only to those foreign
subsidiaries which are deemed owned and controlled by a U.S.
person. So the issue has become whether or not there's a real
and effective management separation between the foreign
subsidiary and the U.S. parent.
Halliburton's position is that its foreign subsidiary
working in Iran, Halliburton Products and Services Ltd., is
managed and run completely independent from the U.S.
Halliburton parent.
Nevertheless a public outcry against this sort of activity
has led Halliburton and other companies, including GE, to
announce that they would no longer solicit new business in
Iran. This is an interesting declaration on their part given
the fact that they have long claimed to exercise absolutely no
corporate control over these subsidiaries.
Iran's banking sector is notorious for its failures to
comply with international anti-money laundering, fraudulent and
corrupt practices, and counter-terrorism financing norms. Yet,
Iranian banks continue to have broad access to, and to network
through, the international finance system.
The U.S. Treasury Department has recently begun to
scrutinize these ties and they have put the international
banking community on notice that keeping and servicing
customers that the United States has identified as terrorists
or proliferators could have serious consequences for their
ability to do business in the United States.
There is also a growing disinvestment movement in the
United States which is targeting international firms doing
business with countries like Iran that support terrorism and
proliferation. This is beginning to have an effect.
Several companies and international banks have recently
indicated their intentions to withdraw from Iran. Others have
cutoff Iranian business in dollars. We need to follow up on
these kinds of measures.
Overall, U.S. business with Iran remains relatively small
compared to the booming $26 billion two-way trade that has
developed between Iran and Europe over the intervening years.
Iran's fledgling commercial classes become very reliant on this
trade and it is this very commercial class that provides the
greatest number of employment opportunities in Tehran and
Iran's other urban centers.
Actions that threaten to constrict this trade can have a
considerable impact on the Iranian government and on the
economy and this, I think, is essential for us to pursue. This
is why it's so important that we continue to press our European
friends in other countries trading with Iran to take the
nuclear threat seriously and to use their own trading leverage
with Iran to bring it to a halt.
The Iranian sanctions target foreign companies that make
substantial new investments in the Iran's oil and gas sector.
That sector accounts for 80 percent of Iran's foreign earnings
and over 50 percent of the government's operating budget.
Despite its provisions, no sanctions have been applied to any
of the huge investments now being made to support expansion of
Iran's energy sector.
Many argue that imposing sanctions on companies in third
countries would be counter-productive to U.S. business
interests and would harm our ability to convince these
countries to cooperate further with us vis-a-vis Iran.
But there's good reason to believe, Mr. Chairman that today
in the current atmosphere of growing concern with Iran's
nuclear program, the threat of such action might just lead
companies in Europe, Japan and elsewhere and their governments
to act more intently in pressing Iran to change course. Thank
you very much, Mr. Chairman.
[The prepared statement of Mr. Comras follows:]
Prepared Statement of Victor D. Comras, Esq., Attorney/Consultant,
Special Counsel, Eren Law Firm
Thank you, Mr. Chairman for inviting me to share my views on the
application of U.S. sanctions measures against Iran. I have watched
closely as the United States has sought to engage other countries to
join with us in applying increased pressure on Iran to comply with
international counter-proliferation and counter-terrorism norms. This
has been a very slow and painful process, and it is regrettable that so
little has been accomplished. The international community continues to
remain reluctant and seriously divided when it comes to taking
meaningful steps to convince Iran to change course.
One can understand a certain amount of reluctance and caution on
the part of many countries when it comes to imposing sanctions on Iran,
given Iran's importance as a supplier to the world oil market. There
are legitimate concerns that sanctions might cause dislocation in the
world market which could drive the price of oil well above current high
levels. But, one must also weigh the enormous strategic and security
risks posed by a nuclear-armed Iran that supports international
terrorism. Every day the international community stands down only
serves to strengthen Iran's resolve to forge ahead making further
confrontation increasingly inevitable, and at an ever increasing cost.
This situation has placed a considerable burden on the United
States, which many years ago chose to impose unilateral sanctions on
Iran to demonstrate our approbation and concern with Iran's
international misconduct. And it has imposed a considerable burden on
U.S. companies. These U.S. measures sought to impair Iran's potential
to develop chemical, biological, and nuclear weapons, and to reduce
resources available to the Iranian government to fund terrorism. These
objectives are still far from being realized, for we have, so far,
failed to convince others in the international community to follow this
lead, and to also adopt measures that will bring home to Iran's leaders
that their conduct will not be tolerated.
I have long advocated using well-considered targeted, economic and
political sanctions to dissuade Iran from pursuing its irresponsible
nuclear programs. By well-considered I mean sanctions tailored to
achieve specific objectives by having a significant impact on those
individuals or entities, and/or specific segments of the targeted
country's economy, that are likely to influence the course of conduct
in question. I believe that the credible threat or use of such
sanctions offers us the best chance of convincing Iran to change course
without having to engage in costly and dangerous military action. I do
not believe that the current United Nations sanctions program can
achieve these objectives.
The recent sanctions measures adopted by the Security Council fall
well short of the measures long advocated by the United States. They
have had little, if any, impact on Iran's leaders and do little more
than freeze the overseas assets of a few dozen Iranian individuals and
entities associated with Iran's uranium enrichment program. The most
important measure adopted by the United Nations, so far, has been to
ban transactions with Iran's fifth largest bank, Bank Sepah, and to cut
that bank off from the international financial network. Bank Sepah has
been closely involved in funding Iran's missile development program.
This is the kind of action that needs to be adopted and replicated on a
much broader scale. Beyond that, the U.N. resolutions merely call upon
all countries ``to exercise vigilance and restraint'' when it comes to
supplying sensitive nuclear, military and dual-use equipment to Iran,
or allowing key Iranian military and nuclear industry officials to
visit and travel within their countries. Each country remains pretty
much free to decide for itself which sensitive military equipment and
technology they should no longer provide. These are not obligatory
measures.
The U.N. resolutions have purposely stayed away from limiting
commercial ties with Iran or restricting investments, loans or
financial and developmental assistance. They leave Russia free to
pursue an ambitious multibillion dollar Iran trade promotion program
and to support Iran's Russian-built nuclear reactor at Bushehr. They
also leave on the table a substantial number of signed or still to be
negotiated oil and gas development deals, including a potential $10
billion investment by Royal Dutch Shell and the Spanish oil company
Repsol YFP to develop Iran's South Pars field; the construction of a
multi-billion LPG export plant by Total; and a $20 billion investment
by SKS Ventures of Malaysia to produce national gas in Iran's Golshan
and Ferdow fields. Chinese companies have also been active in lining up
lucrative energy contracts with Iran. China's state-owned oil trading
company, Zhuhai Zhenrong Corporation, has signed a 25-year deal to
import some 110 million tons of liquefied natural gas (LNG) from Iran.
And China's state-owned oil company, Sinopec, signed an agreement in
October 2004 that allows China to import a further 250 million tons of
LNG from Iran's Yadavaran oilfield over a 25-year period. This huge
deal also envisages substantial Chinese investment in Iranian energy
exploration, drilling and production as well as in petrochemical and
natural gas infrastructure. Total Chinese investment targeted toward
Iran's energy sector could exceed some $100 billion over 25 years.
These are precisely the types of investments and business activity
that the Iran Sanctions Act, and the preceding Iran-Libya Sanctions
Act, sought to discourage so long as Iran continues to violate key
international commitments that threaten international peace and
security. These major investment projects undermine U.S. objectives to
get Iran to change course, and they eliminate any chance for the
current U.N. sanctions to influence Iran's leaders. They demonstrate
that key countries continue to lack the political will necessary to
face up to Iran's challenge. And this signal has been received loud and
clear by the current Iranian regime.
Iran will only change course if and when its leadership is
convinced that the international community will, in fact, take the
steps necessary to seriously impact Iran's leaders and Iran's very
vulnerable economy. Such an impact on Iran's economy, Iran's leaders
know, would, in turn, seriously threaten the stability and durability
of their regime.
That brings us back to what we can and should do to protect our own
national security and foreign policy interests. I think it is important
that the Congress and the Administration are now reviewing our domestic
sanctions against Iran to see how they might best be used and leveraged
to apply pressure on Iran.
I am pleased that this process has already led to changes in policy
and has already produced some results.
Treasury Under Secretary Stuart Levey recently informed the Senate
Banking Committee of the Treasury Department's new high level outreach
program directed at the international private sector. Senior Treasury
Department officials, he said, have met with more than 40 banks
worldwide to discuss the threat Iran poses to the international
financial system. The message was clear. By keeping and servicing
customers that the United States has identified as terrorists or
proliferators, the banks risk facing American public scrutiny and
regulatory action that could have a serious impact on their ability to
do business with the United States. An increasing number of
international banks, financial institutions, and corporations are
taking this message seriously and are now beginning to limit their
exposure re Iran. Several international banks have already indicated
their intentions to withdraw from Iran completely. Others have cutoff
Iranian business in dollars. We must follow up on these kinds of
measures.
There are a number of additional steps we can take to maximize the
leverage capabilities of the various sanctions measures that we have
adopted.
Following President Clinton's imposition of trade sanctions against
Iran in 1995, annual both-direction trade with Iran fell to less than
$500,000. But, by 2006, this combined trade had again grown to over
$242 million ($85 million in exports to Iran and $157 million in
imports, principally Iranian nuts, dried fruits, carpets, and caviar).
This is still quite small compared to the booming $26 billion two-way
trade that has developed between Iran and Europe over these intervening
years. Iran's fledgling commercial class has become very reliant on
this growing trade. And it is this very commercial class that provides
the greatest number of employment opportunities in Tehran and Iran's
other urban centers. Sanctions that threaten to constrict this trade
could have a considerable impact on this commercial class, placing
further distress on Iran's vulnerable economy and high urban
unemployment. And this in turn will have an impact on Iran's leaders.
Ironically, Iran, which is such a major exporter of oil and gas,
is, itself a major importer of gasoline and other finished petroleum
products. With a daily consumption of more than 18 million gallons of
gasoline Iran must now import some 180 to 200 million gallons of
gasoline per month. Rising petroleum prices have already been the cause
of civil unrest, and gasoline shortages could have a significant impact
on local business activity and put increased pressure on Iranian
leaders to alter course. Royal Dutch/Shell is now serving as an
advisory partner with Iran in an assessment project to upgrade Iran's
refining capacities. This is the kind of activity that should be
halted.
The Iran Sanctions Act targets Iran's energy, oil and gas sector,
and calls for U.S. sanctions to be imposed on foreign companies making
investments of more than $20 million in 1 year in Iran's energy sector.
The President is required to impose at least two out of a menu of six
sanctions against overseas companies violating these guidelines. These
secondary sanctions can be waived by the President, however, if the
President certifies that waiving the sanctions is important to the U.S.
national interest. Despite continued, and broad investment in Iran's
energy sector, these sanctions have never been invoked.
Many argue that imposing sanctions on companies in third countries
would be counter-productive to U.S. business interests, and would harm
our ability to convince these countries to cooperate further with us
vis-a-vis Iran. But, there is also good reason to believe that, in the
current atmosphere of growing concern with Iran's nuclear program, the
threat of such action might lead Europe, and European companies doing
business in both Iran and the United States, to act more intently in
pressing Iran to change.
We have already used third-party sanctions against companies in
third countries that have violated the Iran Nonproliferation Act. This
has included companies in Austria, Belarus, China, India, Macedonia,
North Korea, Russia, Spain, Taiwan, UAE, and Ukraine. These measures
may well have helped convince the international community to move
forward on the U.N. sanctions that do target the sale of sensitive
equipment and technology to Iran's military and uranium enrichment
programs.
U.S. sanctions regulations have prohibited U.S. persons from doing
business directly or indirectly with Iran since May 1995. This ban also
covers brokering transactions on behalf of Iran, or engaging in any
transaction with a foreign entity where there is reason to know it is
intended for Iran. But what about the dealings of foreign subsidiaries
of U.S. firms with Iran? Here the guidelines are murky. The regulatory
standards applied to foreign subsidiaries have varied over the years
and under different sanctions and export control programs. The Cuba and
North Korean embargos, for example, do extend to foreign subsidiaries
of U.S. companies. These sanctions were implemented under the Trading
with the Enemy Act (TWEA) which provides broad enough authority to
cover foreign subsidiaries. But, more recently imposed sanctions,
including the current Iran sanctions, are based on Presidential
Executive Orders issued pursuant to the International Economic
Emergency Powers Act (IEEPA). The authorities under that act are more
circumspect. This is because IEEPA sanctions apply only to ``United
States persons,'' and the Act defines ``United States person'' as ``any
United States citizen, permanent resident alien, entity organized under
the laws of the United States (including foreign branches), or any
person in the United States.'' In line with this definition, the
prohibitions in Executive Order 12959 of May 6, 1995, issued by
President Clinton pursuant to IEEPA reach only to foreign subsidiaries
``owned and controlled'' by a U.S. person, or otherwise used by a U.S.
person to ``evade, avoid, or violate'' any of the prohibitions set
forth in the executive order. The issue here is whether or not there is
a real and effective management separation between the U.S. parent and
foreign subsidiary, and whether or not the foreign subsidiary is
actually being used by the U.S. person to ``evade or avoid'' the
prohibitions against its doing business with or in Iran. These are
difficult factual issues to determine.
On January 11, 2005, Iran announced publicly that it had just
concluded a contract with the U.S. Company, Halliburton, and an Iranian
company, Oriental Kish, to drill for gas in Phases 9 and 10 of South
Pars. Under the deal, a Halliburton subsidiary registered in the Cayman
Islands, but doing business out of Dubai, Halliburton Products and
Services Limited (HPSL), was awarded a subcontract from the Iranian
firm Oriental Kish to provide some $30 million to $35 million worth of
engineering services per year through Oriental Kish. HPSL had also
previously been engaged, since 1995 in several other offshore oil and
gas drilling and related engineering projects in Iran. In addition to
its Dubai headquarter, the company reportedly also maintained an
operational office in Tehran.
Halliburton's position is that the transactions involving HPSL do
not violate U.S. sanctions since Halliburton does not exercise
direction or control of HPSL's activities. They point out that
Halliburton Product and Services has no American employees; that its 5-
person board of directors consists of four British citizens and a
Canadian citizen, but no Americans; and that the ``day-to-day''
management and decision-making responsibility at HPSL resides with the
Management Director (who is a British citizen) and other local
management, all of whom reside in Dubai. Nevertheless, revelation of
this Iran project led to a public outcry.
In response, Halliburton subsequently announced that all
Halliburton employees would be withdrawn from Iran and that it would
end its pursuit of future business in Iran, apart from the ongoing
Oriental Kish deal.
Halliburton is not the only U.S. corporation with foreign
subsidiaries working with and in Iran. Some of its main competitors in
the oil field industry, including Baker Hughes, and Smith
International, also have foreign operations there. General Electric's
Canadian, Italian and French subsidiaries have also long been engaged
in business deals with Iran, and there is a Swiss-owned Caterpillar
dealership in the heart of Tehran. Some 35 foreign subsidiaries of
different U.S. companies reportedly are now operating in Iran. Several,
including GE have decided to follow Halliburton's example. They have
announced they also will no longer seek new business deals with Iran.
This is an interesting declaration given the fact that they have long
claimed to exercise absolutely no corporate control over these
subsidiaries.
Iran's banking sector is notorious for its failures to comply with
international anti-money laundering, fraudulent and corrupt practices,
and counter-terrorism financing norms. Yet, Iranian banks continue to
have broad access to, and to network through, the international
financial and banking sectors. The U.S. Treasury Department recently
began to scrutinize ties of foreign banks with branches in the United
States with Iran. These actions are being taken ostensibly to ensure
that U.S. branches are not used to facilitate exchanges or transfers
for Iranian banks and other entities. The Treasury Department recently
fined the Dutch bank ABN Amro some $80 million for failing to report
the processing of financial transactions involving Iran's Bank Melli.
And since January 2007 bars U.S. banks, including U.S. branches of
foreign banks, from facilitating any dollar transactions for banks
dealing with Iran's state-owned Bank Saderat or Bank Sepah.
I believe additional Iranian banks should be added to the Treasury
Department's designated list and that further actions should be taken
to isolate these banks and to assure that all transactions stemming
from, or destined to or through Iranian banks be subjected to close
regulation and scrutiny. Such action would also bring home to Iran a
significant cost for the irresponsible policies it is pursuing.
As noted above, convincing foreign subsidiaries of U.S. companies
to withdraw from Iran may provoke some reactions from their parent
countries, especially in Canada and Europe, who remain very sensitive
to what they consider U.S. attempts to reach extra-territorially into
their bailiwick. But, our task now must really be to convince these
countries to join with us in putting greater pressure on Iran by
cutting back their business dealings with Iran.
There are some positive signs that the EU leaders are finally
coming to the realization that the EU's carrot-sweet negotiating
approach toward Iran must be strengthened by the addition of sticks. EU
Foreign Ministers agreed last week to move beyond the paltry Security
Council measures and to impose a more extensive asset freeze, travel
ban, and arms embargo on Iran. But, these measures still fall short of
impacting Iran's vulnerable economy.
We must continue to press our European friends and allies, and
Japan to take even firmer measures. This should include getting their
companies and financial institutions to refrain from entering into new
deals or making further capital investment commitments in Iran until
Iran complies with the U.N.'s non-proliferation resolutions. Beyond
that, we must use our combined economic clout with Europe and Japan to
retain pressure on Russian and China not to undercut these sanctions
measures.
Thank you, Mr. Chairman.
Senator Dorgan. Mr. Comras, thank you very much for being
here. In your testimony, Mr. Comras, you said that there are
``some 35 foreign subsidiaries of different U.S. companies
reportedly now operating in Iran.'' What's the source of that
number?
Mr. Comras. I take that number from public press reports,
Mr. Chairman.
Senator Dorgan. Mr. Thompson, how many companies do you
think have foreign subsidiaries now operating in Iran, how many
U.S. companies?
Mr. Thompson. We're not exactly sure. I mean, what we have
done was to take a look and see where substantial business was
being done and that's where we targeted companies as opposed
to, say a bank that had a small branch in Iran, we didn't want
to necessarily overreact, but what we had tried to do was to
see where the substantial business was being done.
So, we're not exactly sure, at this point, how many
companies are, you know, doing real business through
subsidiaries of American companies.
Senator Dorgan. Is the loophole on foreign subsidiaries a
loophole that applies with Cuba, Mr. Comras?
Mr. Comras. There is no similar loophole in the Cuba
embargo. Foreign subsidiaries are covered. In many cases, OFAC
has issued specific or general licenses to cover the activities
of some of these overseas foreign subsidiaries, but they are
covered by the sanctions themselves.
Senator Dorgan. How about North Korea?
Mr. Comras. Same with North Korea, Mr. Chairman.
Senator Dorgan. Is it the case that companies that decide,
particularly I'm talking about American companies now, but the
companies that come from other countries with whom we are
allied to try to bring Iran, for example, into a different
circumstance with respect to nuclear production?
Is it the case that nuclear weapons production, I should
say, is it the case that doing business with Iran by any of
these corporations, especially U.S. corporations, enhances and
strengthens their economy? Mr. Thompson.
Mr. Thompson. Absolutely. It goes without saying. As I
said, whether it is American-based companies through their
subsidiaries, whether it's foreign-based companies, these days
that are doing direct business, all of these activities enhance
their economy and undermine the efforts to sanction countries
that support terrorism.
Senator Dorgan. Does it then, based upon what President
Bush has said and what we know from intelligence reports and
the public dialogue, does it help terrorism?
Mr. Thompson. Absolutely.
Senator Dorgan. It helps fund terrorism?
Mr. Thompson. Yes, it does.
Senator Dorgan. So, in this case American corporate
activity, as well as corporate activity by our allies that are
investing in the country of Iran are, you believe, furthering
the interest of terrorism?
Mr. Thompson. Yes, Mr. Chairman, we do.
Senator Dorgan. I believe, Mr. Comras, you perhaps
described Royal Dutch/Shell, $10 billion. Who went through a
list of those?
Mr. Comras. Yes, in my written statement. Yes, Mr.
Chairman, there are a number of large proposals on the table
and investments on the table including Total building an LPG
facility, including Shell helping Iran come up with the
possibility of developing new refineries to deal with its own
requirements that it imports finished products today.
With respect to China, which has an enormous amount of
investment underway and an estimated $100 billion worth of
investment that could result over the next 10 to 20 years.
Senator Dorgan. Do either of you know whether there's a way
for anyone to get a list or to obtain a list of American
charter corporations doing business with Iran through a foreign
subsidiary?
Mr. Thompson. I would believe that there is such a list.
I'm trying to remember, one of the individuals that we have
worked with, last name, Robinson.
Mr. Comras. Roger Robinson.
Mr. Thompson. Roger Robinson. Roger has been very helpful
in originally putting together a list and we believe that Roger
would be able to come up with a larger list and then you can
cull from that list, American companies that are doing business
and we can make sure that we get him and put him in touch with
your office.
Senator Dorgan. Ms. Williams, I didn't quite understand, is
Halliburton still doing business, but has announced that it
will not do business in the future beyond this contract, or are
all of your contracts now completed and you are no longer doing
business through a foreign subsidiary in the country of Iran?
Ms. Williams. All of our contracts are completed and we no
longer have any further operations. There are some wind-down
procedures that are happening, but that is not active
operational work.
Senator Dorgan. In 2005, Mr. Lesar, the CEO, said that when
he announced that Halliburton would no longer do business in
Iran, ``if more of our customers go there, we will return to
this market.'' Has that changed?
Ms. Williams. Well, it has to change because once we pulled
out of the Iranian market; we are prohibited from going back in
under the sanctions law.
Senator Dorgan. Ms. Williams, your testimony, I believe, is
that it was perfectly OK for Halliburton to do business in Iraq
through a foreign corporation, excuse me, Iran.
Let me say that again, your testimony was that it was
perfectly proper for Halliburton to do business in the country
of Iran, through a foreign subsidiary because it was allowed by
law and I don't dispute that.
Now you're promising never to do it again. Tell me the
mindset of the corporation. What have you gone through to move
from a position that this is perfectly appropriate. We want to
do it. It's profitable to now, apparently, agreeing with Mr.
Thompson and Mr. Comras, that it is in fact, strengthening a
terrorist state by doing business in a country like Iran.
Ms. Williams. What I would say is that our decision to pull
out of Iran was based upon a number of factors and no one of
them was the driving force in that. It was based upon the fact
that it's very difficult to do business in Iran. It was based
upon the fact that our business there had been diminishing over
a long period of time and a number of other factors.
And, so, when we decided to pull out, we had information
from our legal team that the decision would create a barrier to
re-entry and we were comfortable with that from a corporate
perspective.
Senator Dorgan. Was there any discussion about whether,
from a values standpoint, that doing business through a foreign
subsidiary with a prohibited country like Iran, was in fact,
helping the terrorists?
Ms. Williams. I was not a part of those discussions,
Senator, so I cannot answer that question.
Senator Dorgan. Let me ask about the Cayman Islands
subsidiary. As you know, 60 Minutes did the piece, went to the
Cayman Islands and you indicated the Cayman Islands subsidiary
was created in 1974, I believe.
Ms. Williams. Yes, it was.
Senator Dorgan. Long ago. They went to the Cayman Islands
and discovered there was no one there, apparently just a mail
drop and then went to Dubai and discovered that the office in
Dubai was an office where there was a sharing of telephones and
faxes and so on with the Houston company and raised a lot of
questions that were never really satisfactorily answered for
me.
Tell us about that. What can you tell us about a 60 Minutes
report that goes to Dubai and incidentally, my understanding is
that 100 percent of the profit of the Cayman Islands subsidiary
came from the activities in Dubai and doing business with the
country of Iran.
Tell me about the response to the 60 Minutes report that
they go to Dubai and it appears from that office that it is
just an extension of the Houston office.
Ms. Williams. I have not seen the 60 Minutes report, but
what I can tell you is that the Cayman Islands registration is
very similar to, I would say, the registration of our parent
company which is registered in Delaware when we have no active
business office in Delaware.
So, the registration in the Cayman Islands is perfectly
appropriate under the law and it's not different than how we've
registered other subsidiaries.
As far as the appearance that the Dubai office, I think
that 60 Minutes, based upon the transcript that I reviewed and
I did not see the report, they simply are incorrect in the
assumptions that they made.
The HPSL office operates in a completely separate location
in Dubai. The Al-Moosa Tower location that they went to is a
registered office of a subsidiary with none of the HPSL
managers; none of the Board of Directors, none of the work from
HPSL took place at that location.
Senator Dorgan. Ms. Williams, you heard the testimony of
the other two witnesses and clearly some companies that are
chartered in foreign countries will continue to do business in
Iran and we will attempt to find ways with our allies to shut
that down, but if we are not successful, one could probably
make the case that an American company is prohibited from doing
business in Iran and yet their competitors are not.
Let me ask what Halliburton's position would be if next
week, for example, during a mark-up of this Commerce Committee,
Senator Lautenberg would offer as an amendment his piece of
legislation which I would certainly support.
Would Halliburton be supportive of legislation that would
shut down the loophole, or close the loophole?
Ms. Williams. The Company has not taken any position on
that, but what I can tell you is that we have followed U.S.
law. We will continue to follow U.S. law and we believe that it
is the role and the appropriate role of this body to set U.S.
foreign policy and we will continue to completely comply with
that, whatever Congress decides that policy is.
Senator Dorgan. Mr. Comras, do you believe that having
American corporations use foreign subsidiaries to invest in the
country of Iran is assisting in the sponsorship of terrorism?
Mr. Comras. Yes, I do, Mr. Chairman. I think that it's
somewhat ironic and difficult to understand why we place a
burden on American companies with respect to sanctions and then
go ahead and allow foreign subsidiaries to continue to compete
with companies that don't create these foreign subsidiaries.
If our intent is to cut off our own companies from dealing
with Iran and other terrorism-supporting states, it seems quite
logical that we would want that to extend as far as possible to
anyone that we could influence, including using our corporate
influence and our overall policies to dissuade others,
including foreign subsidiaries from undercutting the very
objectives that our sanctions were put in place for.
Senator Dorgan. Interestingly, if the foreign subsidiary is
not controlled by the domestic corporation, how does the
foreign subsidiary, when domestic policy and domestic politics
in this country say, ``wait a second, you're doing business
with terrorists, for God's sake. You're financing terrorism.''
How does a foreign subsidiary, all of a sudden, make a
decision on behalf of the domestic company, if it is in fact,
independent? Mr. Thompson, could you answer that?
Mr. Thompson. Difficult to answer, I mean.
Senator Dorgan. What do you think?
Mr. Thompson. It's clear that those subsidiaries, whether
they are independent or not, and then all too often and in all
too many cases, they aren't really independent, should not be
doing business in those countries. It is as simple as that.
Looking at what the parent can and can't do, it is just a
back-door attempt to do business with these countries and I
believe that legislation should close it off, period.
Senator Dorgan. Ms. Williams, you're here. There are other
companies that could be sitting in that seat, who have done
business in Iran through a loophole that, in fact, has existed.
You're quite correct that you have not violated the law
with respect to intending to do business through a foreign
subsidiary. I'm not so sure that Halliburton has been on the
right side of the line with respect to the way that foreign
subsidiary was established.
For example, didn't HPSL in Dubai use the same telephone
number as Halliburton's Dubai office?
Ms. Williams. Senator, I would have to reiterate that that
was, the telephone number listed in the telephone book is
actually incorrect and we have checked into that.
That was a registration office that was there because at
one point we were changing the names from Otis International
Limited to HPSL. The HPSL office, where all of its operations
and its employees were, was a completely separate location and
we would be happy to provide more detailed information on that
to you or your staff.
Senator Dorgan. Is it the case that 100 percent of the
profits of your Cayman Islands subsidiary came from Dubai, from
the foreign subsidiary in Dubai?
Ms. Williams. Yes, because the Cayman Islands is a
registration for HPSL and their operations office is in Dubai.
Senator Dorgan. And that profit came exclusively from
activities in Iran?
Ms. Williams. The profit for that subsidiary came
exclusively from Iran operations, yes.
Senator Dorgan. Let me just say this. Well, first of all,
Ms. Williams, I appreciate your coming to testify, but I do
think that, we're holding this hearing because I think there's
something dreadfully wrong.
There is something fundamentally wrong and when I read what
Mr. Thompson has been engaged in for some long while now, it
occurred to me that we ought not to have to ask Mr. Thompson,
who manages $100 billion of pension assets in New York City, to
carry the burden of changing something that is wrong with
respect to U.S. law. If we're going to have sanctions against
prohibited countries then we ought not to have exceptions to it
and we ought not have someone going around the sanctions
through a loophole that says we still want to do business with
a terrorist state.
No company should be doing that, that is chartered in this
country and we need to pass legislation, post haste, to address
it.
So, I appreciate my colleagues being here. Senator
Lautenberg.
Senator Lautenberg. Thanks very much, Mr. Chairman. One of
the things I wanted to straighten out, Ms. Williams, is you
said that the building, the Al-Moosa Tower, was no longer a
place of occupancy by any Halliburton facility.
Ms. Williams. No, Al-Moosa Tower is currently still a
location for a Halliburton company. It is not the location for
HPSL.
Senator Lautenberg. Well, I hold here a fax, which I'm
happy to share. It's addressed to Halliburton Products and
Services, Al-Moosa Towers, Dubai. Now, they were working out of
that building.
Ms. Williams. There was a registration for that building,
yes.
Senator Lautenberg. Halliburton Products and Services did
at some point work out of that building?
Ms. Williams. Senator, I'm not sure about that answer, but
I'd be happy to provide it later.
Senator Lautenberg. I would appreciate it because it
directly contradicts your statement.
Do you know the names Ian Gooch, Mr. Proctor, Mr. McIntyre,
are they familiar names to you?
Ms. Williams. No, they are not.
Senator Lautenberg. Well, this table that was introduced
introduces their names as recipients of the request for
contract from the Iranian company and they were addressed as
such because they represent Halliburton and they wanted to be
in touch with them.
Now, so you don't know whether they work for Halliburton or
not?
Ms. Williams. Senator, I have never seen those faxes and I
do not recognize those names. However if I could get copies of
the names and faxes from your staff I would be happy to do an
appropriate investigation into that.
Senator Lautenberg. We'll give them to you, Ms. Williams.
See, I wasn't sure if the Chairman reviewed process. Let us
be clear. Profits earned by a subsidiary, wholly owned by
Halliburton would eventually accrue the Halliburton's profit
picture.
Ms. Williams. I'm sorry, is that your question?
Senator Lautenberg. Yes.
Ms. Williams. Yes, it would.
Senator Lautenberg. They would. OK. So Halliburton would be
the beneficiary of these operations, assuming that they were
profitable, fair to say?
Ms. Williams. Any operations earned from any subsidiary
does, you know, is accounted for in our books, yes.
Senator Lautenberg. I wonder if there's any challenge to
conscience if the rules are such that the company can't do
business directly, but if the structure is developed such that
profits pass through.
Is there no responsibility, I don't want to put you on the
spot, I think you're in a very delicate position, and I admire
your willingness to be here, but when I see the sleight of hand
that goes into creating this subsidiary and we see a picture of
a Halliburton employee in an Iranian situation and we get these
requests for proposals addressed to Halliburton employees and
that we don't know who these people are.
We know that they're Halliburton employees and they're
stationed in Dubai and I just wondered whether you knew who
they were.
Now, something else that you said, Ms. Williams that is
that you used a Delaware registration as a comparison, the
consequences of a Delaware license for a company to do
business, really it may hurt a particular state or community
but it certainly doesn't imperil American lives and when you
talk about well, if we're not there, competition will take the
business. At what point do we say that we ought not to be doing
things that endanger our people, simply because competition
will be there.
There were other companies doing business in Libya and we
didn't worry about them doing business there when we refused to
do business there. So, I don't frankly agree with you with the
reasoning that you presented.
Your CEO, David Lesar, announced in January 2005, we're
getting out of Iran, however, just before that we all heard
that a multimillion dollar deal with the Iranians was there to
help them drill for natural gas.
Do you see any conflict between signing the contract with
the Iranian company with the subsidiary and then making a
decision that they would get out of any further agreements? I
think the Chairman asked questions alluding to that situation.
Ms. Williams. Senator, in an effort to fully answer your
question, can I consult my colleagues on one thing about your
question?
Senator Lautenberg. Please, please do.
Ms. Williams. I would like to give you the most complete
answer possible so I appreciate you letting me get a
clarification.
Senator Lautenberg. Absolutely.
Ms. Williams. What you're referring to is a proposal that
started in negotiations in early 2004, which was over a year
before Mr. Lesar made the announcement that we were pulling out
of Iran. It was a consortium deal in which the portion that we
were bidding on in 2004 was very small.
What I can tell this committee is that contract was never
signed. It never came to fruition and so at the time, Mr. Lesar
made the announcement there was no contract that we had signed
to continue with that deal.
Senator Lautenberg. Is Halliburton still under
investigation by the U.S. Attorney in the Southern District of
Texas for possible violations of terror sanctions law?
Ms. Williams. I think that the investigation is ongoing. We
have responded to all of the inquiries from the Department of
Justice and we did that as late as 2005 and for the past 24
months we've heard no additional information from them. We have
cooperated fully.
Senator Lautenberg. Halliburton employees testified, did
they testify before the Grand Jury?
Ms. Williams. At this point I do not have that information,
but I would be happy to get it and provide it to you.
Senator Lautenberg. Please, let's see if they received
subpoenas in this case.
Did the decision in January 2005 have anything to do
related to the U.S. Attorney's criminal investigation of
Halliburton's activities?
Ms. Williams. The decision in 2005 was based upon a number
of factors. I was not participating in those conversations so I
can not tell you with any certainty of whether that issue was
discussed, but I do know that there were a number of issues
that went into the final decision on the withdrawal from Iran.
Senator Lautenberg. Mr. Thompson, you said that, I think it
was the fire department pension.
Mr. Thompson. Fire and police department pension funds.
Senator Lautenberg. Police and fire, owned some 400,000
shares in Halliburton Company.
Mr. Thompson. Yes, at that point.
Senator Lautenberg. Were you aware of the fact that the
Vice President of the United States had more than that on
option, over 400,000 shares on option?
Mr. Thompson. I was not, Senator.
Senator Lautenberg. Yes, he was. Do you know what the final
exercise date is on those options?
Mr. Thompson. I don't.
Senator Lautenberg. I do. It's 2009, after its full service
to the U.S. Government, all the way through there.
Mr. Thompson, given your work and research, do you think
that companies will stop doing business with terrorist nations
on their own or is legislation needed?
Mr. Thompson. Unfortunately, it's become clear over a
period of years that while things may be legal, it doesn't mean
that they are ethical and I believe that unless you close the
loophole, companies will continue to attempt to do business in
back-door fashions.
Senator Lautenberg. Thank you very much. Mr. Chairman,
thank you.
Senator Dorgan. Senator Brown.
Senator Brown. Thank you, Mr. Chairman. Thank you all for
being here. I appreciate your willingness to be here and your
candor with us.
Ms. Williams, I look at this; I'm not a member of this
Committee. I'm new to the Senate. I was in the House for 14
years and I'm just sort of amazed by how all of this has
unfolded in the last 5 years or so.
Your company is one that has had billions of dollars in
government contracts. Your company has made settlements with
the government, I believe because of overcharges on services to
our troops, often with non-delivery to the troops, often under
performance on those contracts. Your company has had millions
of dollars in contracts with terrorist states building up their
economy.
The Vice President of the United States, former executive
of your company, draws a pension three times what the average
American, middle class American earns in a year. Now you pretty
much say and the Republican Congress has pretty much done
nothing about any of this, now you say three things today.
You say well, the company was a subsidiary. You say we, the
company acted perfectly appropriately under the law and then
you said besides the French do it too. The French company seems
even worse. Do you or do other top executives at Halliburton
really understand why the American public gets so angry about
this?
Ms. Williams. I would say that we, the company has been
under the spotlight for a long time. We see what's printed in
the press about us and we listen to what our own employees have
to say and I think that from a purely sympathetic standpoint we
can look and say, based upon the information that the American
public gets that, you know, they have a right to their opinions
and to voice their opinions about our company in any way they
see fit.
Senator Brown. Based on the information the American public
gets, but the information is factual, huge government
contracts, overcharging of those contracts, non-delivery and
under performance in those contracts.
When it affected American troops in the field, the Vice
President, getting a huge pension from your company, dealing
with terrorist states, all of those things are not just, you
almost say it dismissingly, that's just what the American
public hears. Well, those are facts that the American public
hears.
In your response to Chairman Dorgan about why you sort of
moved out of Iran finally, albeit, reluctantly. None of those
answers had anything to do with patriotism or anything to do
with the values that I think our country holds dear.
They were all sort of business decisions and I understand
your business, but I understand that most businesses in our
country operate at least under some modicum of values and
patriotism and I just have been disappointed in all of those
answers, but, more so, I appreciate your courage being here. I
don't appreciate the company's behavior, the company for which
you work.
I guess I'll shift to Mr. Comras for a moment. You said
that North Korea and Cuba are included in the Trading with the
Enemies Act. Should we, as we figure all this out, working on
Senator Lautenberg's bill, the bill that Senator Dorgan and I
have introduced, how do we improve the current sanction
regimes?
Do we put it under the Trading with the Enemies Act? Is
that something we should expand? Should we do it through other
kinds of legislation? Give us and you too, Mr. Thompson, your
recommendation, specifically on what we should do.
Mr. Comras. I think there are many courses of action that
can be taken, including, to clarify, under IEPPA, the coverage
and the definition of U.S. persons and how that might relate to
another line that is also in that Act. As well as in the
Executive Order about avoiding or evading the sanctions, which
is also illegal for a U.S. person to do by using a foreign
entity.
So, there are ways to look closely, even at the existing
authorities and to reinterpret them, to clarify them and
various measures and acts in the legislature, but I do think it
is a loophole that does need to be dealt with.
In part the loophole does have a rationale. That rationale,
some of us recall from the time of the gas pipeline, when some
foreign countries were very upset with what they viewed as the
extra-territorial extension of U.S. authorities.
And so we do walk something of a line here, but I think in
the current context of Iran, it is very essential that we get
to that line and that line, I think, clearly does include
foreign subsidiaries of U.S. companies where the profits are
going to the U.S. company and where it is, ultimately, the
corporate decision of the parent rather than the subsidiary
with respect to what its conduct is, and I think we see that in
the parent being able to call it off and saying that no longer
will these subsidiaries do this kind of business.
So, I think that in this kind of context we should make it
clear that a foreign subsidiary that is owned and that is
corporately controlled by the parent should be covered, not a
question of day to day management, but day to day who can make
that ultimate decision and if that ultimate decision does, as
in fact it does, reside here in the United States by a U.S.
person then I think it should be obligatory on them to fall in
line with the same measures as any other U.S. corporation would
fall into.
Senator Brown. Mr. Thompson, anything to add to that?
Mr. Thompson. Times have changed. The world has changed and
the fight against terrorism is one that now goes into corporate
board rooms around this country and around the world.
We need to close the loopholes now and opportunities for
companies to do business in any fashion in any U.S.-based
company, whether it is directly or indirectly, those loopholes
should be closed.
We need to choke the flow of dollars off to some of these
regimes and some of these countries. Those dollars come back to
haunt us, and are used against us in other ways. So we need to
close those loopholes now and if it is in any way possible.
Senator Brown. Thank you. Thank you, Mr. Chairman.
Senator Lautenberg. Mr. Chairman, may I?
Senator Dorgan. Senator Lautenberg.
Senator Lautenberg. Thanks. If I could indicate something
here that in the Halliburton directory, they list KBR as a
division of the American company, a division. They list an
address in Al-Moosa Tower, tenth floor and they have a
designee. No, that's the address, I'm sorry, on the tenth
floor.
There's some conflict here as to whether or not the
testimony was accurate as to whether or not there was a
company, a Halliburton office and as well as the subsidiary
office, fully owned subsidiary office that was in this building
and I think you said in your testimony there was no such thing.
Ms. Williams. There was a registration office and the HPSL
had a separate office, however, as I indicated earlier,
Senator, I'll be happy to track down this information and
provide it to you so you'll be clear on those issues.
Senator Lautenberg. I would appreciate it. Thanks, Mr.
Chairman.
Senator Dorgan. Ms. Williams, I started to say a bit ago,
you are not the only corporation. You represent the Halliburton
Company. You're a senior executive there. Other corporations
could have sat in your chair having to answer the same
questions.
You happened to be here and you know yourself that
Halliburton has become a rather high profile company with
respect to contracting and a whole range of issues and I've
been involved in raising those questions. I appreciate your
coming to be willing to answer questions.
I must tell you, I personally think that corporate
decisions, with respect to these issues, have to contain more
than just a business sense, just the numbers, just the issue of
profitability.
They also, it seems to me, if they are given life by a
corporate charter in the country and that is what gives life to
a corporation, they also must, it seems to me, answer the
question, is this the right thing to do? Is this what our
company wants to be doing and I think, not just with respect to
your corporation, but a good many others, too many others.
They apparently decided, you know what, profit really
trumps the other questions or perhaps they won't even ask the
other questions and I think Mr. Thompson has.
Mr. Thompson has started a national discussion and a role
as an activist, an equity shareholder. We want to ask these
companies various questions. The thing that I don't understand,
very frankly, one of the reasons I wanted to hold this
hearing--In addition to the fact that my colleague, Senator
Lautenberg has introduced legislation, my colleague, Senator
Brown has. I have never quite understood how it could be that a
foreign subsidiary would not necessarily have to be under the
control of a parent corporation.
The definition of that, the way it is made to sound by the
companies that are doing business with Iran are well, we're
doing business with Iran, but we're doing business through this
company over in Dubai or wherever and we have no control over
that.
Well, of course, that's absurd on its face. The parent
company will always have control, otherwise it wouldn't have
the foreign subsidiary. So, it is the creation of a fiction
here that has allowed some companies to do business with a
terrorist state, a state that is, with respect to Iran,
sponsoring acts of terrorism, funding acts of terrorism.
And I personally believe it's long past the time for us to
say we're going to stop it. We won't rely on Mr. Thompson to
stop it. We won't rely on companies to decide by themselves
that we will stop it. We'll just say it's a matter of law.
We're going to put an end to this fiction. No more trading
with the enemy. No more creating foreign subsidiaries for the
purpose of engaging in a business for a purpose of profit in
the country of Iran.
And so that's why we hold this hearing. I've not been able
to reconcile any plausible rationale for this fiction that
somehow foreign corporations are not controlled by the domestic
corporate entity that owns them.
Does anyone want to respond to that? Is there any way for
me to understand that allowing the creation of a corporate
structure that is a foreign subsidiary, does not in fact,
belong to the parent company and is, in fact, controlled by the
parent company? Can anybody disabuse me of that fiction?
Senator Lautenberg. May I add, Mr. Chairman, that would
violate the laws of the country as well. The structuring of the
corporation, is a device that, obviously, is used to the
detriment of our country and as a matter of fact, I think, Mr.
Comras, you said it correctly. What does it do to encourage
other countries to pay attention to this? We lose our
credibility and we lose our standing at the same time.
Senator Dorgan. Let me say, first of all, I welcome the
announced decision by Halliburton that it's no longer going to
do business in Iran through a foreign subsidiary.
I did not know until you indicated to me now that that
business has virtually ceased, except for as you indicate, some
clean-up details of a previous contract, but at this point that
it ceased.
My understanding is that other corporations have made
similar announcements and I welcome those announcements as well
because I think that moves us in the right direction and I
think, perhaps, it does say to other companies that are still
involved in doing business in Iran, they might ought to take a
really close look at it because there's a lot of concern here
in the U.S. Congress and with the American people that this is
not good business.
It is, in fact, undermining an important national goal and
that is to try to prevent the country of Iran from acquiring
nuclear weapons, prevent the country of Iran from sponsoring
terrorism, from funding terrorist activities.
That's a noble national goal that we have that, I think, is
undermined by those companies that will still be doing business
in the country of Iran.
I intend to work with my colleagues and others to move
legislation. We won't be having these discussions in the future
because we will have cut off the opportunity to do that.
Mr. Thompson, you wanted to say something?
Mr. Thompson. Just, Senator, that I would agree that there
is attention that has been focused in the last few years that
it has forced a number of companies to cease doing business in
Iran and in other nations like Syria.
It is important to pass legislation because when that
attention focuses in other places, if we don't pass
legislation, there will be other companies who will fill the
void through subsidiaries and come back and attempt to do
business.
So the passing of legislation and strong legislation that
will prevent it, period, is the way to go.
Senator Dorgan. Mr. Thompson, thank you for you work. Mr.
Comras, thank you.
Senator Lautenberg. Just one last thing, Mr. Chairman. And
that is to quote Mr. Lesar when he said to the press and you've
confirmed this, Ms. Williams. ``If more of our customers go to
Iran, we will return to this market.''
So the only guide is whether or not there's business there
it has little to do with the law, or ethics of this decision.
Senator Dorgan. Ms. Williams, I think you've responded to
that earlier in one response. Did you want to respond again to
that issue?
Ms. Williams. I would just say that is the statement Mr.
Lesar made; however, we have always followed the law. We will
continue to do so and whatever this body decides is the United
States applicable law and the United States foreign policy. We
will follow that.
Senator Lautenberg. I hope you get to be the CEO of
Halliburton. We would be better off. Thank you.
Senator Dorgan. To follow up on that point because I was
going to say thank you for coming and giving the company credit
for saying, ``we're leaving and we're not going to be doing
business in Iran.''
If his statement 2 years ago was a statement if that's
where the business goes, we will be back. My assumption has
been their most recent statement is we have decided we're not
going to do business with Iran and my assumption was that
statement was made because they understand that is not
something that they want the company to be involved in for the
reasons we've described today.
I don't quite understand your answer because you will do
what the law requires, but the law would, unless changed, the
law would allow you to continue to do business in Iran. My hope
would be that your statement, the corporate statement, is that
you have decided that is not the good thing, a wise thing or in
concert with this country's interests to do.
Ms. Williams. Senator, what I would say to that is when we
made the decision to pull out of Iran, we recognized that we
would not be able to go back into that, or go back into that
country even under the current law.
So, as it stands our decision to pull out of Iran was one
that was made with the understanding of the consequences that
the law would not allow us to go back in. So, the current law
would not allow us to go back in.
If you all decide to change the law in some way, we will
follow that law and continue to do so.
Senator Dorgan. Well, Ms. Williams, thank you for coming,
others would not. We appreciate your corporation sending you to
represent their views.
Mr. Thompson, thank you for your continuing work. I think
you've stimulated a great deal of interest in the Congress on
this issue.
Mr. Comras, thank you for your many years of service.
This hearing is adjourned.
[Whereupon, at 3:30 p.m. the hearing was adjourned.]
A P P E N D I X
Supplementary Information from Halliburton Company
1. HPSL Office in Dubai
a. Senator Lautenberg displayed three FAXs at the hearing. Two of
the three were sent in 1997 and one probably was sent in 1998 but all
three are only partially legible. His request was that he wanted to
know for whom the following people worked and whether they are U.S.
nationals.
Mr. Proctor
Mr. McIntyre
Mr. Gooch
Senator Lautenberg. Did they work for the Cayman Islands
subsidiary or the parent company? Were they U.S. nationals? One
fax was addressed to Ian Gootz, another to a Mr. McIntyre, a
third fax was to Mr. Procker--Proctor.
The three individuals mentioned in the FAXs and the subject of
Senator Lautenberg's question are not U.S. citizens. Messrs. Proctor
and Gooch were both employed by Halliburton Products and Services,
Limited (HPSL) at the time of the FAXs. We believe that Mr. McIntyre
was likely working for a U.K. subsidiary of Halliburton at the time of
the FAXs. Mr. McIntyre had been at one time the manager of Otis
International, Limited (OIL) before it became HPSL. According to the
handwritten note on the FAX furnished by Senator Lautenberg, the
correspondence was actively being transmitted on or about February 5,
1998. Our records indicate that Mr. McIntyre was the Corporate
Secretary of HPSL on that date.
b. What was the location of the HPSL operating office (not
registration office) in Dubai?
Ms. Williams. The Al Mossa Tower location that they went to is
a registered office of a subsidiary, but none of the HPSL
managers, none of the Board of Directors and none of the work
for HPSL took place from that location . . . The HPSL office,
where all of its operations and its employees were a completely
separate location, and we would be happy to provide more
detailed information on that to you or your staff.
Senator Lautenberg. No, the Halliburton Products and Services
did at some point work out of that building.
Ms. Williams. Senator, I'm not sure about that answer. But I'd
be happy to provide it later.
Senator Lautenberg. I would appreciate it because it directly
contradicts your statement.
The registered Dubai address for HPSL was, has been, and remains at
Al Moosa Tower. Since 1994, HPSL has maintained operations facilities
in the following Dubai locations:
Nad Al Sheeba (office), Sheikh Rashid Plot, Dubai, UAE.
Al Quoz (storage location and cement-mixing plant), Al Quoz,
Dubai, UAE.
Oilfield Supply Centre, B-15, Roundabout #8, Jebel Ali Free
Zone, UAE.
The Al Moosa Tower address was never the operational home or
address of HPSL. The Al Moosa Tower location was the home, for some
period of time of a branch office of Halliburton Limited (HL) a U.K.
corporation. and later of Halliburton Worldwide Limited (HWL), a
company registered in the Cayman Islands.
2. Status of DOJ Investigation
a. ``Senator Lautenberg. Is Halliburton still under investigation
by the U.S. Attorney in the Southern District of Texas for possible
violations of terrorist sanction law?''
Ms. Williams statement during the hearing was as follows: (Page 14
of the complete transcript provided to us, or page 53 of the partial
transcript) ``I think the investigation is ongoing. We have responded
to all of the inquiries from the Department of Justice and we did that
as late as 2005 and for the past 24 months, we've heard no additional
information from them.'' Her response to the question appears to answer
the Senator's question correctly and fully to our knowledge at this
time. The last submission to the Department was in the Fall of 2005. We
have not been notified as to whether the investigation is completed or
still ongoing.
b. ``Senator Lautenberg. And please--let us see if they receive
subpoenas in this case.''
Regarding the Justice Department's request for documents, a
subpoena was issued only to the company and not to any individuals,
either with respect to production of documents or to provide testimony.
That subpoena has been complied with.
3. Your E-mail of May 14, 2007 re Questions From Senator Lautenberg
a. What activities and contracts is KBR currently executing in
Iran?
According to information received from KBR. neither KBR nor any of
its foreign subsidiaries is currently performing work in Iran. Two
foreign subsidiaries (GVAC and MWKL) may have remaining contract issues
or obligations on contracts under which they previously provided
support to other companies doing work in Iran.
b. When did KBR receive its latest contract in Iran?
According to the information we have, the most recent contracts
undertaken by any element of KBR relating to Iran were entered into in
April 2004. KBR, and its subsidiaries maintain that they have not
sought or received any contracts relating to work in Iran since the end
of 2004.
c. Since September 11, 2001, what contracts did Halliburton win
from the Government of Iran? What contracts did it execute in Iran?
When did these contracts begin and end? What was the financial value of
these contracts? Which economic sector did these contracts cover? Which
U.S. companies were subcontractors to these contracts? Which non-U.S.
companies were subcontractors to these contracts?
Answer:
----------------------------------------------------------------------------------------------------------------
Approx.
Contract and Customer Value Completed Yes/ Sub-contracors (all
Entity (all involving the oil ($ Started Completed No non-U.S.)
and gas industry) 000s)
----------------------------------------------------------------------------------------------------------------
HPSL IOOC Material Supply 5,543 2001 End-2005 Yes None
Contract
----------------------------------------------------------------------------------------------------------------
HPSL Petropars/(Enterprise) 1,419 Pre-2001 June 2002 Yes Frank's International
Middle East LLC;
Drilling Tools
International LLC;
Geo Services S.A.
----------------------------------------------------------------------------------------------------------------
HPSL Shell Exploration 348 None
----------------------------------------------------------------------------------------------------------------
HPSL Statoil--South Pars 10,504 Q4-2003 End-2005 Yes None
----------------------------------------------------------------------------------------------------------------
HPSL POGC Integrated 16,285 Pre-2001 Q1-2006 Yes Geoservices, S.A.;
Services Pathfinder Energy
Services B.V. ;
Weatherford Oil Tool
Middle East, Ltd.;
Baker Hughes EHO
Limited
----------------------------------------------------------------------------------------------------------------
HPSL Agip Iran BV--(ENI) 21,488 2002 June 2006 Yes None
----------------------------------------------------------------------------------------------------------------
HPSL Petro-Iran, (PEDCO) 27,700 2002 September 2006 Yes None
----------------------------------------------------------------------------------------------------------------
HPSL Total--South Pars 12,616 Q1-2002 November 2005 Yes None
----------------------------------------------------------------------------------------------------------------
HPSL Total--Dorood Kharg 44,717 Q2-2001 March 31, 2007 Yes Al Ahlia Oilfields
Island Development Company
----------------------------------------------------------------------------------------------------------------
HPSL Norsk Hydro Anaran 12,183 Q4-2002 December 2006 Yes None
----------------------------------------------------------------------------------------------------------------
HPSL OOK-POGC 0 N/A N/A None
----------------------------------------------------------------------------------------------------------------
HPSL NIOC 18,977 Pre-2001 2006 Yes None
----------------------------------------------------------------------------------------------------------------
HPSL Kala 30,783 Pre-2001 2006 Yes None
----------------------------------------------------------------------------------------------------------------
HPSL Others--Misc. 12,705 Pre-2001 2006 Yes None
----------------------------------------------------------------------------------------------------------------
In 2004 and 2005, HPSL negotiated with OOK to perform services for POGC. A preliminary agreement was reached,
but no contract for actual work was ever concluded. The project was later canceled, and no work was ever done.