AUSTRALIA: Halliburton Expands Military Presence Downunder

Pulling into Darwin's train yard late on a muggy Sunday in January, the driver of the FreightLink's afternoon freight train might have breathed a sigh of relief. After a two-day trip across the scorching plains of northern Australia, the driver had safely delivered the first load of radioactive uranium to travel on the Adelaide-to-Darwin rail link.

The rail link, partly owned by the controversial Texan energy giant and military contractor Halliburton, had successfully passed another test.

Had the driver known the fate of another load of radioactive material - also carried on behalf of Halliburton, this time from Russia to the United States - the sigh might have been more of a loud cheer.

It would not be public knowledge for another two weeks, but at that time in mid-January Halliburton executives in the US were trying to find a missing delivery of americum, a radioactive substance used by Halliburton in oil exploration. After a frantic search, the container was found by US federal officials in a warehouse in Massachusetts, 1000 kilometres from Halliburton's Texan headquarters. It had been missing for four months.

Halliburton is now under investigation by the US Nuclear Regulatory Commission for not reporting the loss of the americum earlier.

The Australian activities of Halliburton range from the Adelaide-to-Darwin railway to hundreds of secret Defence projects to management of the Australian Grand Prix.

Halliburton's Australian operations have never attracted much attention here, although in recent years this controversial US company has made headlines around the world for all the wrong reasons.

Headed by Dick Cheney, the US Vice-President, before he joined the White House, Halliburton holds about $US10 billion ($12.7 billion) worth of defence contracts in Iraq and Afghanistan, making it by far the biggest corporate winner in Bush's war on terrorism.

During the US election campaign, it was revealed that Halliburton had paid Cheney more than $US2 million in pension payments since he resigned as the boss in 2000. Protesters in the US have alleged the payments are linked to contracts handed to Halliburton during the Iraq war. The US Government Accountability Office found that Halliburton's contract to reconstruct Iraqi oil fields was awarded without full and open competition.

Other allegations against the company - which reported $US16 billion revenue in 2003 - are under investigation in the US and elsewhere. In May last year, a Pentagon auditor alleged that a Halliburton subsidiary, Kellogg Brown & Root (KBR), overestimated the price of feeding soldiers in Iraq by $67 million. The US Army withheld payments until last month, when that decision was overruled by the Pentagon.

In November, Halliburton acknowledged that a former executive may have paid $US130 million to Nigerian officials to win a $US12 billion natural gas contract in the late 1990s. The US Justice Department opened an inquiry last month over Halliburton's alleged involvement in $US180 million worth of kickbacks to secure the contract.

Halliburton paid a $US7.5 million settlement to the Securities and Exchange Commission in August, following a two-year investigation into charges it artificially boosted profits between 1998 and 1999.

In the US, Halliburton was forced to place part of KBR into a bankruptcy protection scheme as a result of asbestos claims. In January, it partly settled the claims with a payment of $US2.7 billion.

The military contracts, in particular, have been the subject of protests against the company in the US. (There are even anti-Halliburton websites such as http://www.halliburtonwatch.org .) The allegations were raised in the British Parliament last month when the Government announced that Halliburton had won a central role in building Britain's biggest ever aircraft carriers.

In Australia, however, while the company has quietly put down deep roots, it has attracted little attention.

Halliburton's involvement in Australian defence industries has grown exponentially in recent years.

In 2003 the Defence Minister, Robert Hill, commissioned a report on overhauling the Defence Materiel Organisation (DMO), the operation responsible for procuring military hardware.

Hill appointed the 2003 South Australian of the Year, Malcolm Kinnaird, to head the review team. Kinnaird was a consultant for Halliburton's KBR Australia subsidiary and had been a director from 1979 to 1999. He is still a KBR consultant and has a joint company, Kinhill Investments, with the US giant.

The Kinnaird report recommended increased private sector involvement in the defence force activities and the creation of a defence procurement advisory board to help implement the new agenda. Early last year, Hill appointed Kinnaird to that board.

In 2003, Halliburton subsidiaries successfully tendered for Defence contracts worth $18 million, up from about $2.5 million in 2000, according to Defence Department and Australian Government Gazette contract databases.

Last year KBR won more than 150 Defence contracts. As with other Defence contracts, the details of many of these projects are kept secret by the Government.

It is known that KBR provides construction management, educational, computer, professional and other services to a wide range of army, navy and air force operations, including Australia's Baghdad military facilities. Details of many projects are sketchy. It's known that KBR has been involved in a number of projects including some kind of trials at Woomera last year; the long-range Tactical Air Defence Radar System; high-frequency communication systems; and a standing offer for logistics for contract "1354622", which is not specified.

KBR was recently awarded a $120,000 contract to provide logistical support for the first phase of the Air7000 project to develop unmanned reconnaissance aircraft for border security. By 2015 unmanned aircraft will replace the current drones at a cost of $5.5 billion, protecting maritime assets such as the Southern Ocean fisheries and oil and gas installations on the North-West Shelf.

The Defence Department refused to grant security clearance for details of such projects - including at least one in Iraq - when asked by the Herald.

Before embarking on the DMO review, Kinnaird says, in accordance with Government procedures he informed the Defence Minister, the DMO and the Defence Department of his continuing association with KBR. Kinnaird also says his partial ownership with Halliburton of Kinhill Investments is in the process of liquidation. Details of this were unavailable via the Australian Securities and Investment Commission database.

"Our relationship with KBR Halliburton has been good," Hill told the Herald.

"In relation to Malcolm Kinnaird, we very much appreciate the assistance he has given to Defence. He has been an extraordinarily valuable adviser in the reform of the DMO and we see no conflict of interest."

However, KBR has spelled trouble for one Australian defence contractor. Last year, the Herald reported that the US branch of KBR had arranged a six-month, $US100 million subcontract with Queensland's Morris Corporation to provide catering for US soldiers in Iraq. The subcontract was lost at the last minute, leading to a court battle between Morris and Halliburton.

The ensuing litigation brought to light accusations that a Halliburton employee solicited kickbacks in order to secure the contract, according to a person familiar with the situation, who declined to be named.

The deal would have amounted to $3 million being funnelled from the project over the six-month period, according to the Herald report.

Kinnard's company, Kinhill Engineering - which KBR bought in 1997 - became a core part of Halliburton's Asia Pacific operations.

Controversy was not unknown to Kinhill before it became part of the Halliburton family. In the mid-1990s Kinhill was criticised after producing a favourable environmental impact survey of Sydney Airport's third runway.

A 1995 Senate committee concluded that the survey had "failed adequately to present the environmental 'impact' of the third runway proposal and, in some ways, was an advocate's document - written to achieve a predetermined result."

The merger also meant that Adelaide's privatised water company, United Water International - then chaired by Kinnaird - became a wholly foreign-owned operation.

Questioned in 2002 by The Age about United Water's financial success and rising prices, Kinnaird said: "We're not here because we love the state and we've got bleeding hearts, for Christ's sake. We're here to make money. We're here to do business."

Kinnaird resigned as chairman of KBR's Australian operations in 1999, but still works as a consultant in KBR offices in Adelaide and owns shares in Kinhill Investments, according to ASIC.

Halliburton is also involved in public infrastructure projects such as water and energy.

Halliburton's Australian connections include:

An alliance with Western Australia's Water Corporation to maintain Perth's water assets.

A standing offer for KBR to provide risk management and security strategic advice to the Federal Department of Health and Ageing.

Organisation of the Melbourne Grand Prix.

Planning the athletes' village at Homebush Bay in the lead-up to the Sydney Olympics.

Private-sector projects, including a $260 million BHP underground pipeline from Port Campbell in Victoria to Adelaide; and a $630 million ammonia plant on the Burrup Peninsula for an Indian consortium.

Through Kinhill, Halliburton has also become heavily involved in Australian aid programs.

In the past two years KBR has secured $58 million worth of projects though the Federal Government's overseas aid program, AusAID.

Contracts include $13.5 million for a natural disaster mitigation and water resources project in Vietnam and $22 million for a water supply and sanitation program in India.

More recently KBR has won several contracts for the planning of a memorial hospital in Bali and, in November, a five-year, $13.5 million contract to maintain roads in Papua New Guinea.

AusAID was "aware of media reports of US investigations into Kellogg, Brown and Root and Halliburton, although we have received no official notification of these investigations", an AusAID spokeswoman said.

"The contracts have all been won competitively and prices agreed through contract negotiations.

"In May and June last year, an audit of the company considered KBR's financial management systems, including fraud control, to be adequate and sound."

Recently KBR opened an engineering office in Jakarta to support its petrochemical, gas, oil, fertiliser and refinery interests in Indonesia.

Although no announcements have been made about contracts to distribute Australia's billion-dollar tsunami aid package, the new office puts KBR in the box seat.

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