Military Industrial Complex: Bush and Halliburton

[Erick A. Bovik]

The no-bid “cost-plus” contract should be quite profitable for Halliburton, especially after the sectarian violence subsides. I’m just guessing here, but I would speculate the no-bid oilfield contract was quid quo pro for taking the unprofitable KBR service contract. The KBR contract did not keep Halliburton afloat as Mr. Speer suggests. They barely turned a profit on it and the overhead was huge.

This is the contract I was talking about. In 1992 Dick Cheney, head of the US Department of Defence, gave a $3.9m contract (a further $5m was added later) to Kellog Brown & Root (KBR), a subsidiary of Halliburton. The contract involved writing a report about how private contractors could help the Pentagon deal with 13 different “hot spots” around the world.

The KBR report remains a classified document. However, the report convinced Cheney to award a umbrella contract to one company to deal with these problems. This contract, which became known as the Logistics Civil Augmentation Programme (Logcap), was of course awarded to KBR. It is an unique contract and is effectively a blank cheque from the government. KBR makes it money from a built in profit percentage. When your profit is a percentage of the cost, the more you spend, the more you make.

KBR’s first task was to go to Somalia as part of Operation Restore Hope. KBR arrived before the US Army. Over the next few months KBR made a profit of $109.7m. In August 1994 KBR made $6.3m in Rwanda. Later that year they received $150m profit from its work in Haiti. KBR made its money from building base camps, supplying troops with food and water, fuel and munitions, cleaning latrines and washing clothes.

The contract came up for renewal in 1997. By this time Cheney had been appointed as CEO of Halliburton. The Clinton administration gave the contract to Dyncorp. The contract came to an end in 2001. Cheney was now back in power and KBR won back the Logcap contract. This time it was granted for ten years. The beauty of this contract is that it does not matter where the US armed forces are in action, the KBR makes money from its activities. However, the longer the troops stay, the more money it makes.

KBR is now busy in Iraq (it also built the detention cells in Guantanamo Bay). What is more Halliburton was given the contract for restoring the Iraqi oil infrastructure (no competitive bid took place).

Cheney sold his stock options in Halliburton for $30m when he became vice president. He claimed he had got rid of all his financial interests in Halliburton. However, the Congressional Research Service (CRS) discovered that he has been receiving yearly sums from Halliburton: $205,298 (2001), $162,392 (2002), etc. They also found he still holds 433,333 unexercised stock options in Halliburton.

Regardless of whether the KBR contract was for 1993, 2003, '04, '05 or '06 the profits therefrom were a very small percentage of Halliburton's overall profit.

The Vice President's assets are held in a blind trust and most of the proceeds go to charity.

http://en.wikipedia.org/wiki/Dick_cheney

Cheney has a Gift Trust Agreement pursuant to which an Administrative Agent has the right to exercise those options and distribute the proceeds from the sale of the resulting stock to certain charitable organizations.[29][not in citation given] Who that administrative agent is has not been disclosed. All proceeds of the options will be split between the George Washington University Medical Faculty Associates, Inc. for the benefit of the Cardiothoracic Institute, the University of Wyoming for the benefit of the University of Wyoming Foundation, and Capital Partners for Education for the benefit of low-income high school students in the Washington, D.C. area.[citation needed]

Cheney resigned as CEO of Halliburton on July 25, 2000, and put all of his corporate shares into a blind trust. As part of his deferred compensation agreements with Halliburton contractually arranged prior to Cheney becoming Vice President, Cheney's public financial disclosure sheets filed with the U.S. Office of Government Ethics showed he received $162,392 in 2002 and $205,298 in 2001.[citation needed] Upon his nomination as a Vice Presidential candidate, Cheney purchased an annuity that would guarantee his deferred payments regardless of the company's performance.[citation needed] He argued that this step removed any conflict of interest. Cheney's net worth, estimated to be between $30 million and $100 million, is largely derived from his post at Halliburton.[citation needed]

In 2005, the Cheneys reported their gross income as nearly $8.82 million. This was largely the result of exercising Halliburton stock options that had been set aside in 2001 with the Gift Trust Agreement. The Cheneys donated just under $6.87 million to charity from the stock options and royalties from Mrs. Cheney's books.[30][not in citation given]

[Michael Hogan]

Regardless of whether the KBR contract was for 1993, 2003, '04, '05 or '06 the profits therefrom were a very small percentage of Halliburton's overall profit.

The Vice President's assets are held in a blind trust and most of the proceeds go to charity.

http://en.wikipedia.org/wiki/Dick_cheney

Cheney has a Gift Trust Agreement pursuant to which an Administrative Agent has the right to exercise those options and distribute the proceeds from the sale of the resulting stock to certain charitable organizations.[29][not in citation given] Who that administrative agent is has not been disclosed. All proceeds of the options will be split between the George Washington University Medical Faculty Associates, Inc. for the benefit of the Cardiothoracic Institute, the University of Wyoming for the benefit of the University of Wyoming Foundation, and Capital Partners for Education for the benefit of low-income high school students in the Washington, D.C. area.[citation needed]

Cheney resigned as CEO of Halliburton on July 25, 2000, and put all of his corporate shares into a blind trust. As part of his deferred compensation agreements with Halliburton contractually arranged prior to Cheney becoming Vice President, Cheney's public financial disclosure sheets filed with the U.S. Office of Government Ethics showed he received $162,392 in 2002 and $205,298 in 2001.[citation needed] Upon his nomination as a Vice Presidential candidate, Cheney purchased an annuity that would guarantee his deferred payments regardless of the company's performance.[citation needed] He argued that this step removed any conflict of interest. Cheney's net worth, estimated to be between $30 million and $100 million, is largely derived from his post at Halliburton.[citation needed]

In 2005, the Cheneys reported their gross income as nearly $8.82 million. This was largely the result of exercising Halliburton stock options that had been set aside in 2001 with the Gift Trust Agreement. The Cheneys donated just under $6.87 million to charity from the stock options and royalties from Mrs. Cheney's books.[30][not in citation given]

(Emphases added)

[John Simkin]

Article in the Guardian that American taxpayers might want to read:

http://www.guardian.co.uk/frontpage/story/0,,2008191,00.html

How the US sent $12bn in cash to Iraq. And watched it vanish

David Pallister

Thursday February 8, 2007

The Guardian

The US flew nearly $12bn in shrink-wrapped $100 bills into Iraq, then distributed the cash with no proper control over who was receiving it and how it was being spent.

The staggering scale of the biggest transfer of cash in the history of the Federal Reserve has been graphically laid bare by a US congressional committee.

In the year after the invasion of Iraq in 2003 nearly 281 million notes, weighing 363 tonnes, were sent from New York to Baghdad for disbursement to Iraqi ministries and US contractors. Using C-130 planes, the deliveries took place once or twice a month with the biggest of $2,401,600,000 on June 22 2004, six days before the handover.

Details of the shipments have emerged in a memorandum prepared for the meeting of the House committee on oversight and government reform which is examining Iraqi reconstruction. Its chairman, Henry Waxman, a fierce critic of the war, said the way the cash had been handled was mind-boggling. "The numbers are so large that it doesn't seem possible that they're true. Who in their right mind would send 363 tonnes of cash into a war zone?"

The memorandum details the casual manner in which the US-led Coalition Provisional Authority disbursed the money, which came from Iraqi oil sales, surplus funds from the UN oil-for-food programme and seized Iraqi assets.

"One CPA official described an environment awash in $100 bills," the memorandum says. "One contractor received a $2m payment in a duffel bag stuffed with shrink-wrapped bundles of currency. Auditors discovered that the key to a vault was kept in an unsecured backpack.

"They also found that $774,300 in cash had been stolen from one division's vault. Cash payments were made from the back of a pickup truck, and cash was stored in unguarded sacks in Iraqi ministry offices. One official was given $6.75m in cash, and was ordered to spend it in one week before the interim Iraqi government took control of Iraqi funds."

The minutes from a May 2004 CPA meeting reveal "a single disbursement of $500m in security funding labelled merely 'TBD', meaning 'to be determined'."

The memorandum concludes: "Many of the funds appear to have been lost to corruption and waste ... thousands of 'ghost employees' were receiving pay cheques from Iraqi ministries under the CPA's control. Some of the funds could have enriched both criminals and insurgents fighting the United States."

According to Stuart Bowen, the special inspector general for Iraq reconstruction, the $8.8bn funds to Iraqi ministries were disbursed "without assurance the monies were properly used or accounted for". But, according to the memorandum, "he now believes that the lack of accountability and transparency extended to the entire $20bn expended by the CPA".

To oversee the expenditure the CPA was supposed to appoint an independent certified public accounting firm. "Instead the CPA hired an obscure consulting firm called North Star Consultants Inc. The firm was so small that it reportedly operates out of a private home in San Diego." Mr Bowen found that the company "did not perform a review of internal controls as required by the contract".

However, evidence before the committee suggests that senior American officials were unconcerned about the situation because the billions were not US taxpayers' money. Paul Bremer, the head of the CPA, reminded the committee that "the subject of today's hearing is the CPA's use and accounting for funds belonging to the Iraqi people held in the so-called Development Fund for Iraq. These are not appropriated American funds. They are Iraqi funds. I believe the CPA discharged its responsibilities to manage these Iraqi funds on behalf of the Iraqi people."

Bremer's financial adviser, retired Admiral David Oliver, is even more direct. The memorandum quotes an interview with the BBC World Service. Asked what had happened to the $8.8bn he replied: "I have no idea. I can't tell you whether or not the money went to the right things or didn't - nor do I actually think it's important."

Q: "But the fact is billions of dollars have disappeared without trace."

Oliver: "Of their money. Billions of dollars of their money, yeah I understand. I'm saying what difference does it make?"

Mr Bremer, whose disbanding of the Iraqi armed forces and de-Ba'athification programme have been blamed as contributing to the present chaos, told the committee: "I acknowledge that I made mistakes and that with the benefit of hindsight, I would have made some decisions differently. Our top priority was to get the economy moving again. The first step was to get money into the hands of the Iraqi people as quickly as possible."

Millions of civil service families had not received salaries or pensions for months and there was no effective banking system. "It was not a perfect solution," he said. "Delay might well have exacerbated the nascent insurgency and thereby increased the danger to Americans."

[Robert Howard]

Today, wire reports were carrying a story reporting that Halliburton's chief executive, Dave Lesar, would move to a new corporate headquarters in Dubai to focus on business in the Middle East, Africa, Europe and Asia.

Halliburton's current headquarters are in Houston, Texas; the reports are saying that Halliburton will remain legally incorporated in the United States. But detractors of the move state there is an underlying motivation for the move to Dubai, which is that it is motivated not only to be closer to the ostensible center of the world's oil market, but also to avoid paying taxes and circumvent any possible future investigation.

[John Simkin]

A true land of opportunity

Terry Jones

Tuesday June 12, 2007

The Guardian

Gordon Brown was in Iraq yesterday on a "fact-finding mission". It needn't all have looked gloomy for the next prime minister, however - not if he did some fact-finding about Blackwater, a North Carolina company that is now one of the most profitable military contractors operating in Iraq, and proves just what a land of opportunity Iraq really is. Blackwater's president, Gary Jackson, acclaimed a "staggering" 600% growth in 2004: "This is a billion-dollar industry," he said, "and Blackwater has only scratched the surface of it." So if Gordon, or any of us, wants to get on this Iraqi gravy train, we could do worse than see how Blackwater goes about it.

First you need your father to leave you a billion dollars or so, as happened to Erik Prince, Blackwater's founder. Then use the money to set up a company that specialises in shooting people. Of course, you say the company's vision is "to support security, peace, freedom and democracy everywhere". But your brochure is full of photos of men bursting into rooms with machine guns and shooting from helicopters - and it offers five sniping courses: basic military, advanced military, situation sniper, high angle (shooting people from rooftops) and, of course, helicopter.

Making money out of this sort of violence, no matter how you dress it up in idealistic language, can look a little morally dodgy, so it would be best if - like Erik - you were a born-again Christian and you donate pots of money to the Republicans. Since 1989, the Nation reports, Erik and his wife have given $275,550 to Republican campaigns, and $0 to the Democrats. A White House internship - something Erik did in the early 90s - could also provide enough friends in the right places. The odd no-bid contract, such as the one Blackwater got to guard Iraq's Coalition Provisional Authority, wouldn't go astray.

You should be comfortable with your friends making money. For example, you pay your security guards $600 a day, but bill the Kuwaiti Regency Hotel company for $815. Regency, according to the Raleigh News & Observer, bills defence services company ESS for another chunk of money. ESS sends the bill to Kellogg, Brown & Root, who add a percentage for their services and present the inflated bill to the Pentagon. Senator Henry Waxman says he's been trying in vain to find out what that bill is for two years.

We can again learn from Blackwater in how to keep expenses down. On March 12 2004, Blackwater signed a contract with Regency and ESS specifying that each security mission should have a minimum of "two armoured vehicles to support ESS movements". Blackwater had the word "armoured" deleted from the contract and saved $1.5m.

This had was an unforeseen payoff when four Blackwater operatives were sent into Falluja and both vehicles were overwhelmed by a mob. The men were killed and their mutilated bodies hung on a bridge. Now rather than damage Blackwater's reputation, this incident was to prove the company's making as the US military got behind it. Brigadier General Mark Kimmitt vowed: "We will be back ... We will hunt down the criminals ... It will be precise, and it will be overwhelming." The result was that the US more or less destroyed the town.

The families of the four men decided to sue Blackwater to find out why they died - but the company can seek profit even in this situation: last Friday it was announced that Blackwater is suing the dead men's estates for $10m, according to the families' lawyers, "to silence the families and keep them out of court".

So there it is - more ways to make money out of Iraq than you or I would have dreamt of. And companies like Blackwater are showing us the way.

http://www.guardian.co.uk/comment/story/0,,2100802,00.html

· Terry Jones is a film director, actor and Python

http://www.terry-jones.net/main.htm

[John Simkin]

Robert Cummings has emailed me with details of his article in this month's Playboy. I highly recommend reading the complete article that can be found here:

http://www.playboy.com/magazine/features/lockheed/index.html

Bush couldn't go into Iraq without a major ally and Lockheed knew it. To sweeten the pot for Blair, Lockheed dragged BAE Systems into the F-35 deal. When BAE still struggled prior to the war (Goldman Sachs reported that BAE would have to cut its dividend), Lockheed began renegotiating the contract -- with the new version unveiled in 2005, giving BAE billions more to be paid "as needed." This put BAE back on its feet, able to build the Typhoon jet fighter for sale to Saudi Arabia in a $70 billion deal, saving 10,000 BAE jobs and 4,000 Rolls-Royce jet engine building jobs.

Meanwhile, a government accountability office report for Congress says the Defense Department is investing too heavily in the F-35 without knowing whether the aircraft will work properly. The report criticizes the Pentagon plan to spend $49 billion on 424 fighters before full testing on the stealth plane is completed in 2013. "Starting production before ensuring the design is mature through flight testing significantly increases the risk of costly design change that will push the program over budget and behind schedule," the report concludes. But that is all light years away, as far as Lockheed and BAE are concerned. As Bob Elrod, a senior executive at Lockheed's fighter plane division boasted, "We're looking at world domination of the market."

To make things even better for Blair, Lockheed brought the British in on the new presidential helicopter deal, notwithstanding the loud protests of then-Democratic Senator Joseph Lieberman from Connecticut, where Sikorsky -- America's leading helicopter manufacturer and the losing bidder -- is located.

Meanwhile Jackson closed down the Committee for the Liberation of Iraq in June 2003 because its human rights rationale for the war had been abandoned.

"We were cut out," Jackson explains, "after the whole thing went to Rumsfeld. The Department of Defense didn't want anyone looking over their shoulder. Rumsfeld took it all away from State." Jackson had lined up people like Vaclav Havel of the Czech Republic, Natan Sharansky of Israel and Carl Bildt, the prime minister of Sweden, to support the Committee for the Liberation of Iraq, but Bush and Rumsfeld took off in another direction. Stephen Hadley explained to Jackson that "terrorism and WMDs" were now the rationale for the war, not human rights.

News of torture at Abu Ghraib prison undermined all of Jackson's efforts and, to his credit, he called for Rumsfeld's resignation. He acknowledges that things are not going well in Iraq, but still sees the removal of Saddam Hussein as morally justified. He declines to predict how it will all end.