[Congressional Record (Bound Edition), Volume 150 (2004), Part 1]
[Senate]
[Pages 353-354]
[From the U.S. Government Publishing Office, www.gpo.gov]




                           LEGISLATIVE AGENDA

  Mr. DASCHLE. Mr. President, the majority leader talked briefly about 
the schedule. I spoke yesterday on the pension bill, and I am very 
hopeful we can complete our work on the pension bill at an early date. 
I think it is a bill that merits broad bipartisan support and, judging 
from the cosponsors, prominent Members on both sides of the aisle who 
have worked to get us to this point, I have every expectation that we 
will see completion of our work on the pension bill sometime early next 
week.
  We have--it is an overused word but certainly a word applicable 
here--a crisis with regard to pensions and retirement security, both in 
multiemployer plans as well as single-employer plans.
  That crisis will not be satisfactorily or successfully confronted 
until we take several steps. This is only meant to be an interim step, 
but it is an important step. It is a temporary step that will allow us 
some stability and confidence that we can address this issue more 
effectively in the months and years ahead.
  Secondly, with regard to schedule, it is important for us to 
recognize the narrow window of opportunity we have to deal with the 
highway bill. We have already lost valuable time. We should have done 
this bill last year. Not only have we lost 90,000 jobs as a result of 
our failure to pass the bill last fall, we have also threatened the 
contract season this year by our inability to move this legislation 
more expeditiously. For all intents and purposes, the contract cycle 
has already started in the South. It is important that we send the 
message that we intend to finish this bill as early as possible. It is 
a jobs bill, an infrastructure bill. I cannot think of a greater 
economic stimulus. We are told by experts that we could create 800,000 
new, good-paying jobs if we can move this legislation forward.
  So it is my hope we will take this legislation up well before the 
President's Day recess in order to complete our work before that recess 
and send a signal to the country that we understand the importance of 
this legislation.
  Finally, I call attention to a front-page story in the Wall Street 
Journal this morning. The headline of the story reads, ``Halliburton 
Tells the Pentagon Workers Took Iraq-Deal Kickbacks.'' The first couple 
of paragraphs begin:

       Halliburton Co. has told the Pentagon that two employees 
     took kickbacks valued at up to $6 million in return for 
     awarding a Kuwaiti-based company with lucrative work 
     supplying U.S. troops in Iraq. The disclosure is the first 
     firm indication of corruption involving U.S.-funded projects 
     in Iraq and raises new questions about Halliburton's dealings 
     there. The company's work already is being scrutinized 
     because of accusations that the U.S. government was 
     overcharged for gasoline under another controversial 
     contract.

  It says a little later down, referring to that second charge now 
under investigation:

       . . . the top Defense Department auditor asked the office 
     to investigate whether Halliburton subsidy Kellogg Brown & 
     Root overcharged for fuel deliveries by more than $61 
     million.

  These charges in this new report are terribly disturbing. I ask 
unanimous consent that the article be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

             [From the Wall Street Journal, Jan. 23, 2004]

    Halliburton Tells the Pentagon Workers Took Iraq-Deal Kickbacks

                          (By Neil King, Jr.)

       Washington.--Halliburton Co. has told the Pentagon that two 
     employees took kickbacks valued at up to $6 million in return 
     for awarding a Kuwaiti-based company with lucrative work 
     supplying U.S. troops in Iraq.
       The disclosure is the first firm indication of corruption 
     involving U.S.-funded projects in Iraq and raises new 
     questions about Halliburton's dealings there. The company's 
     work already is being scrutinized because of accusations that 
     the U.S. government was overcharged for gasoline under 
     another controversial contract.
       Halliburton has strenuously defended its Iraq work as 
     fairly priced and free of taint. A discovery of kickbacks 
     could expose the company to hefty fines and other punishments 
     such as potential fraud charges. At the least, contacting 
     experts say, Halliburton will be required to reimburse the 
     money.
       Any blow could be softened by the fact that Halliburton 
     itself disclosed the misconduct to the Pentagon inspector 
     general's office this week. That disclosure came just days 
     after the top Defense Department auditor asked the office to 
     investigate whether Halliburton subsidiary Kellogg Brown & 
     Root overcharged for fuel deliveries by more than $61 
     million.
       The latest revelation, though, is sure to increased the 
     already intense scrutiny Halliburton has received from 
     congressional Democrats, some of whom charge that the 
     Houston-based company benefited from political favoritism in 
     securing lucrative work in Iraq. The news also is likely to 
     further raise suspicions abroad that Iraq reconstruction work 
     is largely benefiting U.S. companies and their employees.
       Vice President Dick Cheney, who was chairman of Halliburton 
     until he left in 2000, defended the company Wednesday in a 
     Fox Radio Network interview. ``They get unfairly maligned 
     simply because of their past association with me,'' he said.
       Halliburton stressed that it promptly told the Pentagon of 
     the problem. ``The key issue here is self-disclosure and 
     self-reporting,'' a Halliburton spokeswoman said. 
     ``Halliburton international auditors found the irregularity, 
     which is a violation of our company's philosophy, policy and 
     our code of ethics. We found it quickly, and we immediately 
     reported it to the inspector general. We do not tolerate this 
     kind of behavior by anyone at any level in any Halliburton 
     company.'' A company statement said the payments were 
     ``detected through the company's internal control 
     procedures.''
       The company has fired the two employees, who were based in 
     Kuwait and whose names were not disclosed. Halliburton said 
     it could not discuss specifics of the matters because of a 
     Pentagon review.
       KBR is now repairing Iraqi oil fields and supplying 
     everything from food and laundry services to housing for U.S. 
     troops and coalition officials in Iraq under two huge 
     contracts valued at up to $16 billion. That work has so far 
     cost nearly $6 billion, well over twice what has gone into 
     all of the other 40 other U.S. contractors in Iraq, according 
     to government records.
       In all, the U.S. has so far funded a total of about $9 
     billion in Iraqi reconstruction costs, and expects to award 
     contracts valued at another $18.6 billion. Both the 
     congressional general accounting office and the Pentagon are 
     now completing large-scale investigations of all U.S.-funded 
     reconstruction work in Iraq.
       The alleged kickbacks involve the same KBR contracting 
     office in Kuwait that handled the controversial gasoline 
     contact. The Pentagon inspector general's office received the 
     disclosure while conducting its own review to decide whether 
     to open a criminal investigation into the gasoline contract. 
     Pentagon officials decline to comment on the status of that 
     investigation.
       The current accusations do not involve the gasoline 
     contract. Instead, the Kuwaiti company is said to have paid 
     kickbacks to the KBR officials after winning lucrative 
     subcontracts to help support U.S. troops in Iraq under what's 
     known as KBR's LogCap contract. U.S. officials declined to 
     provide specifics on the subcontracts involved or the name of 
     the company implicated in the payoffs.
       Halliburton said in a statement that the disclosure of what 
     it called a ``potential overcharge'' was a sign of its 
     ``diligence'' in managing its Iraq contracts. ``KBR will 
     ensure that questionable charges will be credited to the 
     government and will seek recovery from the offending 
     subcontractors.''
       Halliburton negotiated its current LogCap contract with a 
     very thin profit margin of 1% over costs. It has a maximum 
     bonus of an added 2% available if it delivers the needed 
     services in an expeditious way. But under these so-called 
     cost-plus arrangements, companies have little incentive to 
     rein in costs or to assure that they pick the most 
     competitive subcontractors, since the higher the costs, the 
     higher the profit.
       The disclosure comes as Pentagon documents continue to 
     raise broader questions about KBR's financial controls in 
     Iraq. A previously undisclosed Jan. 13 memorandum from a 
     branch office of the Defense Control Audit Agency levels as 
     ``inadequate'' KBR's system for accurately estimating the 
     cost of ongoing work in order to justify payments. The memo 
     was sent to various Army contracting officials.
       The Pentagon has had to reject two huge proposed bills from 
     KBR, including one for $2.7 billion, because of myriad 
     ``deficiencies,'' the memo says. ``We consider [the 
     company's] estimates in the area of subcontracts to be 
     inadequate,'' the memo says. The agency is now auditing 
     proposed KBR bills totaling $2.1 billion, the memo says.
       Pentagon auditors last month said that KBR's Kuwaiti 
     supplier, Altanmia Commercial Marketing Co., was charging the 
     U.S. almost double the market price for gasoline.

[[Page 354]]

     Auditors said the overcharging amounted to $61 million 
     through September, and as much as $20 million a month since 
     then.
       The Army Corps defended the company's hiring of Altanmia in 
     a lengthy Jan. 6 report. The report said KBR had ``urgent and 
     compelling needs'' to use the Kuwaiti supplier, even at 
     significantly higher prices than other potential suppliers.
       Still, Pentagon officials are likely to home in on the 
     circumstances under which KBR hired Altanmia. The Army Corps 
     reports says KBR picked Altanmia on May 5 after making phone 
     calls to just two other bidders. Officials say there is no 
     indication of kickbacks involving Altanmia.
       A number of anonymous whistleblowers have come forward in 
     recent weeks with often-detailed allegations of KBR 
     wrongdoing in Kuwait, including accusations of paybacks from 
     companies that received lucrative subcontracting work from 
     KBR, according to U.S. officials and congressional sources. 
     These reports in turn have been taken up by the Pentagon's IG 
     office.
       The Pentagon's fuel unit, the Defense Energy Support 
     Center, solicited bids yesterday for three fuel-delivery 
     contracts meant to replace the work that KBR is now 
     performing. KBR officials have said for months that they 
     wanted out of the work, which they described as dangerous and 
     not very profitable.

  Mr. DASCHLE. As I said, it is very disturbing because there have 
already been serious concerns raised about the lack of scrutiny, 
auditing, and transparency with regard to the billions of dollars that 
are now being committed in Iraq. The Defense Contract Audit Agency has 
now been charged not only with taking responsibility for an audit, but 
they have also begun consideration of a criminal investigation. 
Clearly, if there is a possibility of a kickback, a criminal 
investigation is certainly warranted.
  I am troubled by the lack of any expressed concern in the Congress. 
There has been virtually no oversight in either the House or the 
Senate. When matters of this magnitude and concerns of this level are 
addressed on the front pages of some of the most prominent newspapers 
in the country, I cannot think of a more important wakeup call for us. 
One of our primary roles as Members of Congress, of course, is 
oversight, to make sure that the money we authorize and appropriate is 
not only spent well but is spent as the American people would expect 
it.
  I do not think we have any choice but to investigate this matter 
ourselves, to ask the appropriate committees, perhaps Government 
Affairs, Armed Services, Foreign Relations, to look into these issues, 
to ask the tough questions, and to have a somber appreciation ourselves 
of what is going on, why is it that we are reading for the first time 
reports of kickbacks when we have taken so little effort to understand 
the magnitude of the problem, the depth and scope of the issues that 
these allegations represent.
  I think it is also important for us to call for a halt in all further 
contracts with Halliburton until these issues are clarified. For the 
life of me, I cannot understand why we would reward corporations or 
organizations of any kind that face such serious allegations of fraud 
and corruption, that are under investigation for perhaps overpricing 
the American taxpayer by $61 million, at least with regard to the 
gasoline sold. Why we would award one more contract until these matters 
have been resolved? So I hope that on a bipartisan basis the Congress 
will live up to its responsibility, first, through oversight and, 
second, with a recognition that awarding contracts under circumstances 
such as these makes no sense whatsoever.
  We will have more to say as we learn more, of course. These are very 
disturbing revelations. They merit more careful consideration. We need 
to learn more and understand what circumstances allowed the kickbacks 
in the first place. Lack of transparency above and beyond anything else 
will generate stories and situations like this over and over again.
  Many of us have called for a complete public accounting of these 
funds, but here we are--no transparency, no public accounting, no 
oversight on the part of Congress, and the possibility of perhaps more 
contracts with Halliburton in the future. This is not the way to run a 
government, especially if we are hopeful of improving the confidence on 
the part of the American people that we understand the gravity of these 
issues and want very much to build their confidence that we are doing 
all we can in our efforts in Iraq to rebuild democracy, to provide for 
the assistance required. We have said on many occasions how troubling 
it is that we are the only real financial source for the economic, 
military, and public assistance provided to Iraq.
  When the American people hear that much of that money may now be 
under a cloud, it is all the more imperative that we act to remove that 
cloud, to provide the confidence, the transparency, the oversight, and 
certainly the corrective actions required.
  I yield the floor.

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