Saturday, March 10, 2007

Halliburton: In the Company of Thieves

This Week in Babylon

Over the past few years, information has been dripping out about a scheme in which an international consortium led by a Halliburton subsidiary apparently bribed Nigerian officials to win construction contracts worth $5.3 billion. The four-member consortium, called TSKJ, beat out a bid from another group headed by Bechtel Corporation, and it now seems possible that Bechtel may be dragged into the scandal as well. In addition, there are questions about whether Vice President Dick Cheney, the former head of Halliburton, had knowledge (or chose not to have knowledge) of the illegal payments.

The story dates to 1995, when TSKJ was awarded an initial contract for $2.2 billion by the notorious regime of General Sani Abacha. It subsequently emerged that the consortium's agent in Nigeria, a British lawyer named Jeffrey Tesler, had created a firm in Gibraltar to manage the consortium's Nigerian business, and it seems that the Gibraltar company made $176 million in mysterious payments related to the project, with much of that money believed to be kickbacks to Nigerian officials.

When the original deal was signed in 1995, TSKJ was headed by an American firm called M.W. Kellogg. Halliburton got involved in 1998 (when Cheney was CEO) and it purchased Kellogg's parent firm. Kellogg was then merged with Brown & Root, a Halliburton unit, to form KBR, which continued to manage the firm's business in Nigeria. In March 1999, with Cheney still at the helm, TSKJ won a second contract worth $1.4 billion, and three years later, when Cheney was already V.P., the consortium won a third contract worth $1.7 billion.

Ever since these accusations first saw light, Halliburton has claimed that any dirty deals that took place occurred almost entirely before it became a partner in the consortium. But the series of agreements that TSKJ signed with Tesler to manage the deal includes several agreements that were made after Halliburton got involved, as well as one signed when Cheney was CEO. A few years ago, I interviewed Olivier Schnerb, an attorney for a former executive with another TSKJ member, the French firm Technip, and he affirmed Tesler made questionable payments well after Halliburton joined the project. “The plan,” he explained, “was to corrupt Nigerian officials.”

Meanwhile, Le Figaro has reported that Tesler deposited several million dollars in a Swiss bank account controlled by A. Jack Stanley, whom Cheney had picked to head KBR and oversee the company's interests in Nigeria. Tesler acknowledged making payments to Stanley, but he claims they were only to obtain local Nigerian currency for the project. This seemed far-fetched even to Halliburton, which subsequently severed all ties with Stanley on the grounds that he had violated the company's “codes of business conduct.”

That's the recap. But Halliburton's newly filed 10-K with the Securities and Exchange Commission includes some interesting new revelations and hints that more damaging information will be coming down the pike. According to the filing there are ongoing probes into the matter in the United States (by the SEC and the Justice Department), in Nigeria, in France, and in Switzerland. “We also believe,” reports the filing, “that the Serious Frauds Office in the United Kingdom is conducting an investigation.” According to the filing the SEC has issued a subpoena to Stanley, “and to others, including certain of our and KBR's current and former employees, former executive officers of KBR, and at least one subcontractor of KBR.”

After becoming the target of multiple international investigations, Halliburton says that it believes that payments were in fact made to Nigerian officials. In fact, the 10-K states that information uncovered by the company last summer indicates that, “prior to 1998, plans may have been made by employees of The M.W. Kellogg Company to make payments to government officials in connection with the pursuit of a number of other projects in countries outside of Nigeria.”

A well-placed source has been telling me for years that TSKJ and the Bechtel consortium secretly coordinated their bids on the Nigerian contract, and that a loser's pot was created to compensate the also-ran bidder. I'd never been able to confirm that, but the Halliburton filing suggests that there may be something to the allegation: “Information has been uncovered suggesting that Mr. Stanley and other former employees may have engaged in coordinated bidding with one or more competitors on certain foreign construction projects.”

Antony Goldman, a London-based political-risk consultant specializing in West Africa, wonders how Halliburton managed to uncover all of this troubling information only after investigations were launched on three continents. “The filing suggests that Halliburton's due diligence in acquiring Kellogg and its efforts to understand how its subsidiary had obtained this exceptionally lucrative business in Nigeria couldn't have been terribly rigorous,” he told me. “It looks like it could have done far more to explore the matter and to protect shareholders from this type of exposure.”

Iran Pushback

For months the Bush Administration has been claiming that it has the goods on Iran's meddling in Iraq and on its dirty doings in other parts of the world. In a series of press briefings and statements, officials have trotted out a host of evidence, including pictures of weapons captured in Iraq that have serial numbers “proving” that they were made in and supplied by Iran. But for some mysterious reason, these claims by the White House have encountered some skepticism, even (of all places) on Capitol Hill, according to an article (not online) by Laura Rozen in National Journal.

Rozen says that the case against Iran appears to be “murkier and less decisive than the thrust of recent administration statements suggests,” and that the Senate Select Committee on Intelligence is “moving aggressively to vet” a series of past National Intelligence Estimates on Iran. She identified three NIEs that are being reviewed:

One from May 2005 entitled “Iran's Nuclear Weapons Program”; a second from the same month that includes a look at Iran's foreign relations; and a third from three months earlier that focuses on Iran and terrorism.

According to Rozen's story, members of the Intelligence Committee are demanding to see the raw data that purports to back up the NIEs—because of what a congressional source described to Rozen as “the debacle of October 2002.” The source was referring to an NIE from that month in which it was claimed that Iraq was sitting atop stockpiles of WMDs. “Up to that point, we took the documents from the intelligence community at face value,” Rozen quotes this person as saying. “There's no way to tell there's anything wrong with the October 2002 NIE until one reads the source documents. The key part to understand is that there's not enough evidence to support key judgments they had in there.”

Hopefully the source was not exaggerating when he told Rozen that the intelligence community and the administration would no longer “get the benefit of the doubt . . . . This committee is not walking into another debate without performing due diligence on these documents.”

Comfort Women Make Abe Uncomfortable

I wrote last fall about Japan's lavishly financed Washington lobbying campaign to block a congressional resolution that would urge Japan to accept responsibility for forcing women and girls from other Asian countries into sexual slavery during the World War II era. Now there's a new effort in Congress on the “Comfort Women” issue that looks to be gaining momentum.

There's a good (and not just because it cited my old story) roundup on new developments by Tom Zeller Jr. at the New York Times website. Zeller cited the recent congressional testimony of Koon Ja Kim, who said that in 1942, when she was 16, she and a group of other Korean girls were loaded on to a freight train and taken to occupied China. “The next evening, a Japanese officer came to the house [where she was held],” she said. “He spoke Japanese, which I did not understand. I did not know what he was saying or what he wanted until he raped me. When I refused and fought back, he punched me in the face and the blow split my eardrum. That was the first of many days and nights that I was raped. On a daily basis, I was raped by Japanese soldiers, and it was common to be raped by 20 different soldiers a day.”

Despite such testimony and a mountain of other evidence, Japanese officials continue to deny the abuses against the Comfort Women. And Prime Minister Shinzo Abe told the BBC that “Even if the [congressional] resolution passes, that doesn't mean we will apologize.”

By Ken Silverstein

This is This Week in Babylon by Ken Silverstein, published Friday, March 9, 2007. It is part of Washington Babylon, which is part of Harpers.org.

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