Anti bribery versus anti bribery reporting: Halliburton, KBR, and Bush-Cheney

Follow-up to previous post:

Before and after the interview reviewed in last week’s post, former Halliburton contract employee David A. Smith continued to press for investigation on matters raised by the mis-sent company emails that he received by error. As previously written, the Bush administration ceased publication of the Department of State annual report titled Battling International Bribery after Colin Powell, who supported the report’s findings, was replaced as Secretary of State by Condoleezza Rice. The last issue of the report came out in 2004; the company formerly headed by Vice President Dick Cheney, Halliburton, involved in long-running inquiries into its dealings with the government of Nigeria among others, would seem to have benefited from the halt.

Secretary of State Colin Powell

David Smith’s on-site observations indicate that HAL was equally averse to investigation closer to home. In the interview, along with his partner, Smith corroborated the experience narrated in SEC filings in October 2006. Parent company Halliburton at the time still owned subsidiary KBR, formerly Kellogg Brown & Root, which had its own long-term problems including asbestos liability and retiree litigation associated with the former Dresser Industries, part of KBR after a series of acquisitions. The company spun off KBR in 2006 and 2007, continuing the spin-off during the time Smith was filing his complaints.

KBR, formerly Kellogg Brown & Root

KBR/Halliburton, like other military contractors, was subject to audit by the Defense Contract Audit Agency. Among the audit procedures were unannounced visits, including those at the facility at 1550 Wilson Boulevard in Arlington, Va., where Smith worked. Smith states unequivocally that company compliance officers and other personnel engaged in stalling the auditors. “When the DCAA auditors arrived unannounced,” Smith stated, Halliburton compliance officers “stalled them in the lobby with polite conversation and offers of refreshment.” Meanwhile, Human Resources personnel “raced to spread the word that everyone should get their timekeeping records in order, and shuttled ‘problem’ employees away from their desks.” DCAA auditors were conducted through the offices only when compliance officers got the ‘all clear’ from Human Resources, Smith says.

“I distinctly recall one auditor commenting on how many people were out of the office that day. One of the KBR [compliance] officers responded smoothly, to the effect that some were out sick, but many were at an off-site meeting. I was stunned to hear this blatant lie . . . I can distinctly remember the person whose timekeeping record they used to demonstrate compliance for our group . . . and the [compliance] officer coming by later in the day to joke with him about what a great job he’d done as the auditor-facing facade for our group. It was a Potemkin procession, carefully choreographed for the auditors’ perception.”

Oversight and accountability are ongoing needs. Need for oversight, transparency and accountability at KBR in particular is extensively documented by now. Smith’s narrative gives a worm’s-eye view of the company ethos. Smith sat in on, for example, business development meetings where Halliburton’s bid to rebuild the American Embassy in Kabul, Afghanistan, was discussed:

“When I asked one of the business development guys whether the situation on the ground was secure enough for our employees, he joked that we could handle a few ‘towelheads with slingshots’ . . . “When I persisted, and asked what would happen if–during construction–the Embassy and our employees and equipment were to be hit, he joked that we’d just bill the Federal Government for a do-over.” [emphasis added]

The reasonable inference is that KBR’s internal atmosphere reflected Halliburton’s coziness with the Bush-Cheney administration, and Smith has particulars to corroborate the inference. “In all seriousness . . . it was very common to see the KBR bigwigs getting off the elevator on floors where Halliburton/KBR had no operations, for meetings with the principals of other tenants of the building.” The offices were located at 1550 Wilson and 1560 Wilson at the time. Tenants included private security consulting company AALC, founded by Richard Armitage, former Bush Deputy Secretary of State. Smith goes on, “During business development and proposal development meetings at KBR’s offices at 1550 Wilson, frequent references were made to phone calls, breakfast meetings, and other ‘outreach efforts’ that our business development team would make to sitting members of the Bush Administration, to help secure Federal contracts.”

Even internally, KBR cultivated a positive image, showing “slideshows, videos, and other internal marketing pieces, aimed at cultivating the image that the group’s proposal bids were leading to good works around the globe,” Smith says. “Just before one holiday party, the Proposals group had to sit through a video showing the laundry, galley, and other support services that KBR was purportedly providing to our military personnel stationed overseas. Smiling, happy-looking Halliburton/KBR employees were posed mid-task, while the narrator intoned soothingly about the important work we were doing.” At the time, Smith says, “KBR was desperately recruiting to backfill these positions, offering to train anyone how to be a forklift operator or truck driver, if they’d only sign up to go work overseas. Enticements such as signing bonuses, presentations about the tax-free earnings one could earn while working overseas, and the like were used to try to staff the contract’s shortfall roster.”

Coincidentally, Smith was privy to a different perspective. A Marine cousin of his had returned from Camp Bondsteel, near Kosovo:

“Since Camp Bondsteel was prominently featured in those corporate propaganda presentations as one of KBR’s [crowning achievements] (the company was the prime contractor both for building and operating the base), I was eager to hear my cousin’s firsthand, on-base experiences. Boy, did I ever get an earful about the true living conditions. My cousin’s compassion and enthusiasm for helping the locals was matched only by the ferocity with which he decried the base’s operations. He brought his laptop to the [family] reunion, to show his pictures of the local customs, countryside, and people; it didn’t take a photography critic to see that his off-base pictures were decidedly positive and upbeat, while his on-base pictures were pretty bleak. His pictures looked nothing like the ones the Proposal Group had been shown in KBR’s offices at 1550 Wilson Boulevard.”

Camp Bondsteel and landscape

(Smith notes that the company received the Afghanistan contract:

“As shown on FedBizOpps, the Department of State awarded the contract (valued at $114,989,000) to Brown and Root Services at 1550 Wilson Blvd. To view the award notification, use the search feature of FedBizOpps, and restrict your search as follows: 1. Change “Documents to Search” to “Both” active and archived documents; 2. Uncheck “All” and Check “Award”; and 3. Type “Afghanistan AND embassy” in the “Full Text Search” box. The award notification number is: SALMEC-02-C0042, and the contact information for the Department of State contracting office that oversaw the solicitation effort is included (e.g., for making FOIA requests to see Halliburton’s bid for the work).”)

Coziness, of course, is a two-edged sword. Smith noted “purges/layoffs in KBR’s Northern Virginia offices” in 2006. Smith emphasized in further email correspondence that “Vice President Cheney was not ‘out of the loop’ on the Foreign Corrupt Practices Act bribes paid in Nigeria on his watch as CEO,” and “Those bribes were not paid by ‘rogue elements’ within Halliburton.”

Smith also noted that appropriately the Associated Press story mentioning his allegations was picked up by an offshore publication, the Jamaica Gleaner. Halliburton’s global holdings include numerous island tax-haven offices, located in places like the Caymans that are not noted for oil production, in service to places like Iraq that are.

Company invitation for Islanders

As previously written, the emails received by David A. Smith were intended for Halliburton executive David R. Smith, Vice President of Tax. The tax connection appears to be key. One question Smith raises—which seems not to have been answered in previous correspondence with the company or during investigations—is why a high-level executive whose bailiwick was taxes was looped in on matters such as the Nigeria investigation in the first place. Not that David R. Smith was a newcomer to corporate embarrassments and public-relations challenges; he had come on board with the company in 1998, at the time when the Bush family’s Dresser Industries, with its liability-ridden asbestos contagion, was being acquired by Halliburton. (As David A. Smith points out, the timing of the transaction successfully removed Bush’s embarrassing asbestos associations from the 2000 election.)

As with any other corporate money, one question about money used to pay foreign bribes always is whether it has been taxed properly under U.S. law.

Added:

Regarding bribery, it is noteworthy that under the gun of the 2008 election, the Bush Justice Department did conduct some prosecutions of Halliburton personnel. On Sept. 3, 2008, former CEO and Chairman of KBR Albert Jackson “Jack” Stanley filed a guilty plea in federal court in Houston. One article here, picked up here, re-posted here.  Stanley pled guilty to bribing Nigerian officials.