Kuwait Documents Allege Halliburton Bribe Scandal

Editor's Note: New information has been added June 6, 2005, at the 
end of this story regarding KBR procurement manager Laszlo Tibold.

Tom Crum, Middle East chief for Halliburton's Kellogg, Brown & Root (KBR) subsidiary, demanded that Kuwaiti Hilton staff get his wife a diamond-encrusted Cartier watch in the middle of the night, according allegations reported by internal United States embassy memos.

Meanwhile his senior managers, who have made the seaside villas at the hotel their headquarters for almost two years, were openly soliciting bribes from anyone who wanted to get a share of the multi-billion dollar contracts that the company oversees for the military occupation force in Iraq, the accusations claim.

At the very least, KBR staff are portrayed as arrogant and heavy-handed by the allegations, which largely date from December 2003 and the early months of 2004. At worst, the accusations paint a picture of illegal behavior.

The internal embassy communications also portray Richard Jones, the U.S. ambassador to Kuwait, as anxiously pushing the Texas-based company to buy overpriced fuel from a specific company, Altanmia Commercial Marketing Company. Altanmia officials counter that KBR staff were deliberately undermining their bids.

The collection of documents, including e-mails, memos and reports were released to the media by California Representative Henry Waxman, to top ranking Democrat on the House Committee on Government Reform. They are only a small part of over 400 internal documents delivered to the committee, which wields oversight of U.S. contracts relating to Iraq.

"Get off your f&^%ing ass, put my wife in a car, and go get her a watch," Crum is alleged to have told Camille Geha, the sales manager at the Hilton in Kuwait, in early 2004. Aware that the company was spending up to $1.5 million a month at the hotel, Geha is said to have told an unnamed embassy staffer that he had a jewelry store at the Marina Mall opened in the middle of the night to get a new watch.

Wendy Hall, a spokesperson for Halliburton, says her company views the incident differently. Crum's "wife had a watch, valued at $2,600, stolen from the hotel and the hotel replaced it," she wrote in an email to CorpWatch.

Geha said he has no recollection of any incident involving a watch and that he had no idea of why anyone would make such claims.

"It is absolutely untrue," said Geha, who left his position at the Hilton in December 2003. "The Hilton is an international company with international standards."

"It just doesn't make sense," he added. "KBR was my best customer. They paid on time and we had an excellent relationship."

Allegations and Acknowledgements

Related allegations made by Altanmia officers in the newly released embassy documents also include:

-- KBR officers solicited bribes openly and "that anyone visiting their seaside villas at the Kuwaiti Hilton who offers to provide services will be asked for a bribe."

- A senior level Iraqi employee of KBR was fired in August 2003 for complaining to company managers about corruption.

- KBR managers conspired to sabotage Altanmia's ability to fulfill a contract so that the agreement could be reassigned to another company willing to pay a bribe.
- KBR trucks were being used to "backhaul" stolen crude oil out of Iraq for personal gain.

- The wife of a KBR senior executive received a watch valued at well over $20,000 (8,000 Kuwaiti dinars) in appreciation from a real estate company that was receiving rent at twice the market value from KBR for office space. (This allegation overlaps with the story of Tom Crum's wife but is significantly different, although it may be one incident reported incorrectly by a second source).

Last week Halliburton filed a declaration with the Securities and Exchange Commission stating that the Pentagon would be investigating employees who worked on the Iraq contracts. "The Inspector General's Office may investigate whether these two employees may have solicited and/or accepted payments from these third-party subcontractors while they were employed by us," the company stated. No names have been disclosed.

Also in an internal company memo dated May 13 obtained by CorpWatch, Randy Harl, KBR chairman, advises company employees that "one or two of our former employees may have received 'kick backs' from a selected contractor," and that government investigators had been informed.

The KBR memo further cautions employees to not "discard, shred, delete or dispose" of any documents relating to Altanmia as well as food and logistics contractors Tamimi of Saudi Arabia and La Nouvelle of Kuwait.

Halliburton acknowledged to the Pentagon in December 2003 that two KBR employees had been found to have taken kickbacks in return for awarding a lucrative contract for military support work to a Kuwait company. At the time, KBR returned $6.3 million to the Defense Department following the admission and said the two employees had been fired. No names relating to the matter have been made public.

KBR also apparently discharged employees earlier this year working at Camp Anaconda in Iraq believed to be involved in wrongdoing. In postings on the Web blog called "A Minute Longer - A Soldier's Tale," one former procurement manager, Laszlo Tibold, is accused of awarding a gravel contract at five times the price of a competing offer. Another posting claimed that KBR's contracting department at Camp Anaconda was getting kickbacks.

A March 12 posting then announces:

"Mr. Tibold has since been fired for his contract writings there at Camp Anaconda, along with some of his buddies. However their contracts still remain and we continue to pay against them." The response is credited to the email address of Randy Harl, chairman of KBR.

Harl has not responded to inquiries made about the May 13 memo or the Tibold incident.

One subcontractor who claims that KBR owes his company tens of millions of dollars, told CorpWatch that the number of employees that could be referred for investigation "should be more like 30."

Asked this week about the allegations of kickbacks to KBR managers, Halliburton spokeswoman responded in a November 9 email: "We are doing everything we can to make sure this particular scenario won't happen again. We will not tolerate such behavior. We are terminating any relationship with the subcontractors."

Hall declined to offer details about what contracts have been terminated.

Altanmia Affair

Once again the State department documents shed some light on this matter. On June 29, 2003, following the Iraq invasion, accusations in an internal memo within the U.S. embassy in Kuwait reports KBR managers were attempting to disqualify Altanmia from providing fuel to Iraq because the company's general manager, Waleed Al-Humaidi, refused to pay kickbacks to KBR executives.

"Al-Humaidi caveats this by requesting that we not address 'kickback' issues with KBR directly," the memo cautions. "He fears being blacklisted by KBR."

The memo further reports that Al-Humaidi believes KBR executives plan to "find a reason" to fault Altanmia for poor performance on an earlier fuel contract, while Altanmia believed it was exceeding KBR's expectations. Any shortcomings were blamed on KBR's failure to obtain tanker trucks and to secure military escorts for the convoys to Baghdad through war torn Iraq.

In fact, the memo says, Altanmia believed that KBR was failing to meet contract requirements, which included having racked up more than $23 million ( 7 million Kuwati dinars) in unpaid bills owed to the Kuwait firm. Another embassy memo summarizes a list of allegations made by Altanmia officers who maintained that it was "common knowledge" that "KBR officers are on the take."

Halliburton has repeatedly claimed that they were pressured into doing business with Altnamia. One December 2003 email from Ambassador Jones appears to back up KBR's claims.

"Please tell KBR to get off their butts and conclude deals with Kuwait NOW!" Jones demanded to an official whose name has been deleted from the documents. "Tell them we want a deal done with Altanmia within 24 hours and don't take any excuses." Jones concludes that if the Coalition Provisional Authority head, Paul Bremer, hears that Halliburton is "dragging its feet," then he "will be livid."

At the same time Mary Robertson, a senior contracting officer at the Army Corps of Engineers, protested that Altanmia's cost estimates were too high. "Since the U.S. government is paying for these services, I will not succumb to the political pressures from the [government of Kuwait] or the U.S. embassy to go against my integrity and pay a higher price for fuel than necessary," she wrote.

KBR managers say that Altanmia refused to meet competitive pricing or open its books to justify its higher prices for fuel, the State Department documents also reveal.
When the Pentagon got the bill from KBR the numbers were indeed high - an average of $2.64 a gallon and as much as $3.06 on occasion.

By comparison, the Defense Department's Energy Support Center (ESC) had been doing a similar job supplying fuel at $1.32 a gallon, and SOMO, the local oil company, was doing the same provision for only $0.96 a gallon. The total bill to the taxpayer for 61 million gallons of fuel from Kuwait and about 179 million gallons from Turkey, between May and late October, was $383 million, over $100 million more than what local providers, or even the ESC, would have charged.

Hall denies that there were any problems. She says "the facts show that KBR delivered fuel to Iraq at the best value, the best price and the best terms and in ways completely consistent with government procurement policies."

"It is important to the company that clients, suppliers and host countries know Halliburton's Code of Business Conduct is expected to be followed in every country in which the company operates," she added.

Lawsuits and Hearings

Meanwhile several other sub-contractors, who worked in Iraq, are pursuing Halliburton in the courts. On October 15, La Nouvelle filed a lawsuit against KBR in the U.S. District Court of Eastern Virginia with demands of $224 million in unpaid bills for services performed in Iraq and Kuwait.

A separate lawsuit, filed October 26, charges that KBR has refused to pay $20.4 million for food services and other work near the city of Tikrit provided in 2003 by the Kuwait Company for Process Plant Construction & Contracting (KCPC) and the Morris Corporation of Australia for several months after the invasion of Iraq. Allegations of demands for a $3 million kickback during the original 2003 contract negotiations from individuals associated with KBR first surfaced after KBR fired KCPC and Morris because the two companies had fallen behind schedule.

"They wanted kickbacks of 3 percent to 4 percent, which pushed up the prices because then the subcontractors would add the price of the kickbacks to their costs," an unnamed source told the Sydney Morning Herald, which first reported the story.

Halliburton declined comment on the report at the time.

Upon release of the new embassy documents, Waxman requested that Congress soon schedule more hearing of the company, which holds more then $10 billion in contracts for work in Iraq to supply U.S. troops and assist in rebuilding the war torn country's oil industry.

"The implications of these new disclosures should be thoroughly investigated," Waxman said in a November 10 letter to Tom Davis, a Republican Congressman from Virginia, who is chairman of the House Government Reform Committee.

The documents appear to undermine months of claims by the Bush administration that the Halliburton contracts "were awarded without political interference and without knowledge of allegations of corruption," Waxman said.

Hall said that the California congressman is simply flogging old allegations that have already been thoroughly addressed.

"This appears to be nothing more than a retrospective look at all of the Congressman's letters and news releases during the presidential campaign," she said. "We continue to deliver our mission with great pride. No other company in the world could have acted with such resolve and dedication to accomplish so much in such a short order."
 

New Information Added June 6, 2005: 

Laszlo Tibold recently contacted CorpWatch after the original publishing of this story, insisting that he resigned from KBR with accolades and that he was never fired from KBR. As far as the gravel contract is concerned, Tibold said the original contractor was not providing enough gravel or the needed quality to cover an area the size of several football fields to accommodate the 30 trucks arriving and unloading at Camp Anaconda every day.

Tibold said the new gravel agreement called for deliveries of fives times the quantitiy of gravel for five times the price, hence, the same price for the same amount, but with the appropriate quality of gravel.

"In view of the facts, the well meaning mole obviously was not aware of all the facts and/or he has difficulty with his algebra," Tibold said.

Tibold, a career engineer and Vietnam veteran, said he located a second contractor that could meet the required contract on time and budget. "I suspect the first contractor is the one that is complaining," he said.

Now working as a manufacturing consultant in Hungry, Tibold said he resigned because of the ongoing dangers in Iraq and Camp Anaconda. "We were getting half a dozen mortar attacks a day," he said.

If anyone is to blame for KBR's poor contracting process in Iraq, it is KBR's senior management and planners at the U.S. Defense Department who were woefully unprepared for establishing an immediate presence and occupying the war-torn country. When he first arrived at Anaconda, KBR failed to provide even the most basic of office supplies, let alone computers, reliable telephones, contract forms or a list of pre-approved contractors to work with.

"Everyone was in pure reactionary mode," he said, adding that KBR's staff at Camp Anaconda began with six employees who were burdened with work "by industry standards" that only a staff of 185 could effectively handle. After a month, KBR's staff at Camp Anaconda was increased to 30, he said, and was responsible for writing contracts totaling a value in the hundreds of millions of dollars.

"KBR had no clue," he said. "They didn't know what they were getting into."

David Phinney is a journalist and broadcaster based in Washington, DC, whose work has appeared in The Los Angeles Times, New York Times and on ABC and PBS. He can be contacted at: phinneydavid@yahoo.com