2 in Iraq Overbilling Are Fired, Halliburton Says

WASHINGTON —  Halliburton, Vice President Dick Cheney’s former company, said Friday that it fired two employees who allegedly accepted kickbacks in return for helping a subcontractor overbill the Pentagon’s Iraq reconstruction program by $6.3 million.

Halliburton officials said they informed Pentagon Inspector General Joseph Schmitz last week that an internal audit found that two employees of the company’s KBR subsidiary, formerly known as Kellogg, Brown & Root, might have accepted improper payments from a Kuwaiti subcontractor as part of an effort to bilk the Pentagon.

The incident could give ammunition to critics of the war in Iraq and to President Bush’s political opponents, just as the 2004 presidential election season heats up.

Halliburton, where Cheney served as chief executive immediately before becoming vice president, is already under investigation by the Pentagon for possible overbilling for gasoline in Iraq. Democrats responded to the new allegations by calling for a congressional investigation of the company, which has received numerous contracts worth billions for work in Iraq.

KBR President and Chief Executive Randy Harl said in a statement Friday that the $6.3 million in possible overcharges would be paid back even before a Pentagon investigation. He added: “We will bear the cost of the potential overcharge -- not the government.”

Spokeswoman Wendy Hall called the alleged billing scheme “a violation of our company’s philosophy, policy and our code of ethics” and emphasized that Halliburton caught the error itself.

“We do not tolerate this kind of behavior by anyone at any level in any Halliburton company,” she said.

On Capitol Hill, Senate Minority Leader Tom Daschle of South Dakota and other Democrats pounced on the allegations as evidence that Congress should investigate all Halliburton contracts in the Persian Gulf.

Sen. Frank R. Lautenberg (D-N.J.) called for all of Halliburton’s business with the government to be terminated, describing the new incident as a “fatal blow to the company’s credibility and the administration’s ability to defend these contracts.”

Sen. Joe Lieberman of Connecticut, the senior Democrat on the Senate Governmental Affairs Committee and a candidate for his party’s presidential nomination, said the disclosure confirmed “some of our worst fears about corporate profiteering run amok in Iraq.”

Cheney has repeatedly denied that he has influenced decisions to award contracts to Halliburton, and the White House on Friday appeared to dismiss calls for a congressional inquiry.

White House Press Secretary Scott McClellan called Democrats’ complaints “election-year politicking.” He said Bush expected the Pentagon to resolve any outstanding questions.

“The president has made it very clear that he expects the Department of Defense to get to the bottom of that matter, and ... if the federal government was overcharged, that Halliburton should repay that money,” McClellan said.

Some military analysts said that calls for halting Halliburton’s contracts were unrealistic.

“This is unlikely to have any effect on the company or on its business relations to the government or its common practices in Iraq,” said Dan Goure, a former Pentagon official and defense analyst at the Lexington Institute, an Arlington, Va., public policy group.

“The only thing that prevents government vehicles from running out of gas and the whole country shutting down is Halliburton.... You could no more shut the contracts down than disband NASA while the shuttle is in space,” Goure said.

Last month, the Pentagon’s Defense Contract Audit Agency asked the inspector general to review whether KBR overbilled the military for fuel in Iraq. A Defense Department audit had found that KBR sought as much as $61 million in excess charges for the deliveries. Bush administration officials have suggested that Halliburton was overcharged by a Kuwaiti subcontractor that supplied the fuel.

The possible kickbacks recently uncovered involved “a completely different contract,” spokeswoman Hall said. They were part of a contract to set up mess halls and perform other logistical tasks for U.S. forces.

Cheney said this week that Halliburton had been subjected to unusual scrutiny because of his former role with the firm.

“Halliburton gets unfairly maligned simply because of their past association with me,” the vice president said Thursday in an interview with National Public Radio. Allegations of impropriety stem from “desperate” political opponents who “can’t find any legitimate policy differences to debate,” he said.

Some military analysts have said there were few alternatives to Halliburton, because few companies have the wherewithal to mobilize the resources necessary to support the nation’s vast military halfway across the globe. Houston-based Halliburton, founded in 1919, provides construction, engineering and logistics services to the oil and gas industry. It has contracted with the Pentagon for well over half a century, building warships for the Navy in World War II and performing services in Afghanistan.

But the vice president’s links to the company have made allegations of impropriety an increasing source of criticism both here and abroad.

“This is not just a domestic criticism. It’s a strategic problem for the United States,” said Michael O’Hanlon, a former Congressional Budget Office analyst now at the Brookings Institution, a Washington think tank. “It gives the appearance to other nations of enriching Dick Cheney’s buddies as a way of carrying out foreign policy.

“We have to use this as an opportunity to put greater regulation and oversight on private firms that support military operations,” O’Hanlon said. “We’ve been using these firms a lot more in recent years, and it’s poorly overseen.”

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Times staff writer Richard Simon in Washington contributed to this report.