Halliburton Suspends Bill for Army Meals

Halliburton, the firm formerly run by the American vice president, Dick Cheney, was yesterday threatening to become a political liability for the Bush administration as it became embroiled in a fresh row over work carried out in Iraq.

The oil services and logistics company said it had suspended billing the US army for catering services in the Middle East in the face of allegations of massive overcharging.

Halliburton has been awarded more than $9bn (£4.8bn) worth of contracts in Iraq, more than any other company, but has been plagued by allegations of cronyism, corruption and financial mismanagement.

Among other issues, the US justice department is investigating claims that Halliburton bribed Nigerian officials, while the treasury department is conducting an inquiry into whether the company broke trade embargoes with Iran.

Last week an orange gym towel supplied by the company to US troops and embroidered with the logo of subsidiary, Kellogg Brown & Root, was at the centre of a Democratic party hearing. According to a whistle-blowing former employee, the company tripled the price it charged the army, just to add its own initials.

The orange towel, though not quite ranking with the blue dress that haunted the previous administration, is likely to become a potent symbol in the upcoming presidential elections.

In a statement, Halliburton said it had temporarily suspended $174m of invoices for meal services it provides to the US army in Iraq and Kuwait. The announcement came two weeks after the company agreed to repay $27m for meals served at five military bases last year. KBR has a broad contract to provide support services.

According to a Pentagon e-mail quoted in the Wall Street Journal, in one camp alone last July, KBR billed for an average 42,000 meals a day but served only 14,000. Across a seven-month period overcharging in that camp totalled $16m.

Halliburton argues that it is difficult to plan for meals in a shifting environment "Most cooks know how many people are coming to dinner when they are preparing food," said KBR's chief executive, Randy Harl. "It's just not that simple in Iraq.

He said the company was working with the army to better predict numbers. "This is not any sort of 'admission'. As a responsible government contractor it is the right thing to do."

The Pentagon's relations with Halliburton are already strained. Defence auditors are still investigating whether the company overcharged the US government for fuel it was importing into Iraq from Kuwait by $61m.

Halliburton has been under scrutiny since it emerged that the company had secretly been awarded a contract without a tender to fight oilwell fires in Iraq before the invasion.

Mr Cheney ran the company between 1995 and 2000 when he quit to run for office and it has been argued that the connection helped secure the business. He was given a severance package of $36m when he left Halliburton.

Likely presidential nominee John Kerry has railed against special interests in the White House and already focused on the company as a potential election issue.

"At a time when Halliburton is defrauding the federal government and facing serious allegations of bribery, we look forward to taking this debate to George Bush," he said recently.

Last week Halliburton said it had been informed that the an investigation into possible business dealings with Iran during Mr Cheney's tenure had been reopened because of new evidence.

It also faces allegations of corruption for its part in the building of a gas plant in Nigeria. A French whistle-blower has claimed that the consortium that built the plant, including KBR, paid $180m to Nigerian officials to secure the contract.

Halliburton has admitted that two employees had taken kickbacks from a Kuwaiti subcontractor who was supplying services to the US army and reimbursed the government for $6.3m. In every other case though, the company denies the accusations.

Two former KBR employees have come forward as whistle-blowers providing democrats with plenty of further ammunition. They said the company "routinely overcharged" for its work in Iraq.

"High-level Halliburton officials frequently told employees that the high prices charged by vendors were not a problem because the US government would reimburse Halliburton's costs and then pay Halliburton an additional fee," Democrat Henry Waxman said.

The company has begun fighting back against the negative publicity. A television advertisement tells viewers: "We are serving our troops because of what we know, not who we know."