Halliburton
Halliburton Energy Services (NYSE: HAL) is a multinational corporation with operations in over 120 countries. It is based in Houston, Texas in the United States, but has announced that it will establish a new headquarters in Dubai in the United Arab Emirates, where Chairman and CEO David J. Lesar will work and reside. However, corporate offices will remain in Houston [2] and the company will remain incorporated in the United States. [3] Halliburton operates two major business segments: The Energy Services Group provides technical products and services for oil and gas exploration and production, and the KBR subsidiary is a major construction company of refineries, oil fields, pipelines, and chemical plants. KBR is in the last stages of being spun off from Halliburton. Business overview Energy Services, the company's historical cornerstone, includes drilling & formation evaluation, digital & consulting solutions, production volume optimization, and fluid systems. This business continues to be profitable, and the company is one of the world's largest players in this industry; Schlumberger is the world's leading provider of oilfield services. With the acquisition of Dresser Industries in 1998, the Kellogg-Brown & Root division (in 2002 renamed to KBR) was formed by merging Halliburton's Brown & Root (acquired 1962) subsidiary and the M.W. Kellogg division of Dresser (which Dresser had merged with in 1988). KBR is a major international construction company, which is a highly volatile undertaking subject to wild fluctuations in revenue and profit. Asbestos-related litigation from the Kellogg acquisition caused the company to book over US$4.0 billion in losses from 2002 through 2004. As a result of the asbestos-related costs, Halliburton lost approximately $900 million U.S. a year from 2002 through 2004. A final non-appealable settlement in the asbestos case was reached in January 2005 which allowed Halliburton subsidiary KBR to exit Chapter 11 bankruptcy and returned the company to quarterly profitability. So, while Halliburton's revenues have skyrocketed because of war in the middle east, its bottom line continues to suffer.[4] At a meeting for investors and analysts in August 2004, a plan was outlined to divest the KBR division through a possible sale, spin-off or initial public offering. Analysts at Deutsche Bank value KBR at up to $2.15 billion, while others believe it could be worth closer to $3 billion by 2005. History 1919 to 1990 Vida and Erle P. Halliburton first tried to find work cementing oil wells in Burkburnett, Texas then moved their business (New Method Oil Well Cementing Company) to the Healdton field near Ardmore, Oklahoma. * 1920: Reorganized - Halliburton Oil Well Cementing Company * 1921: Headquarters - Duncan, Oklahoma * 1924: Incorporated * 1948: Became Listed on the New York Stock Exchange * 1957: Acquisition of Welex Jet Services of Fort Worth, Texas * 1960: Name Shortened to Halliburton Company * 1961: Headquarters - Dallas, Texas * 1962: Acquisition of Brown and Root of Houston, Texas * 1982: Workforce was 115,000 * 1982: Energy Industry Decline * 1988: Acquisition of Geophysical Service Incorporated from Texas Instruments * 1988: Halliburton Logging Services * 1988: Acquisition of Gearhart, which had previously acquired Geosource in 1985 * 1991: Workforce was 73,000 Prescott Bush was a director of Dresser Industries, which is now part of Halliburton. Former United States president George H. W. Bush worked for Dresser Industries in several positions from 1948-1951, before he founded Zapata Corporation. 1990s * Following the end of the Gulf War, the Pentagon, led by then Defense Secretary Dick Cheney, paid Halliburton subsidiary Brown & Root Services over $8.5 million to study the use of private military forces with American soldiers in combat zones.[5] * Thomas H. Cruikshank served as chairman and CEO from 1989 until 1995 when he is replaced by Dick Cheney. * In the aftermath of Operation Desert Storm in Kuwait in 1991, Halliburton crews helped bring 320 burning oil wells under control. * In the early 1990s Halliburton was found to be in violation of federal trade barriers in Iraq and Libya, having sold these countries dual-use oil drilling equipment and, through its former subsidiary, Halliburton Logging Services, sending six pulse neutron generators to Libya. After having pleaded guilty, the company was fined $1.2 million, with another $2.61 million in penalties.[citation needed] * In the Balkans conflict in the 1990s, KBR supported U.S. peacekeeping forces in Bosnia and Herzegovina, Croatia and Hungary with food, laundry, transportation and other lifecycle management services. * In 1998 Halliburton merged with Dresser Industries, which included Kellogg. 2000s * On 10 April 2001 the Dresser division (excluding the former Kellogg division) entered an agreement to separate itself once again from Halliburton by management purchasing its equity, the new company to be called Dresser Inc. * In 2001 The Wall Street Journal reported that a subsidiary of Halliburton Energy Services called Halliburton Products and Services Ltd. opened an office in Tehran. The company, HPS, operated "behind an unmarked door on the ninth floor of a new north Tehran tower block." Although HPS was incorporated in the Cayman Islands in 1975 and is "non-American", it shares both the logo and name of Halliburton Energy Services and, according to Dow Jones Newswires offers services from Halliburton units world-wide through its Tehran office. Such behaviour, undertaken while Cheney was CEO of Halliburton, may have violated the Trading with the Enemy Act. A Halliburton spokesman, responding to inquiries from Dow Jones, said "This is not breaking any laws. This is a foreign subsidiary and no US person is involved in this. No US person is facilitating any transaction. We are not performing directly in that country." No legal action has been taken against the company or its officials.[citation needed] * In 2002, Judicial Watch, a public action law firm, filed suit on behalf of shareholders against Halliburton, its current and former directors, and its accounting firm, Arthur Andersen LLP and Arthur Andersen Worldwide, for alleged accounting irregularities, said to be profit inflation by accounting for cost overruns as revenue. The U.S. Securities and Exchange Commission (SEC) investigated the same issue. Halliburton counters that the practice was approved by its accounting firm, Arthur Andersen, and conforms to generally accepted accounting practices. In August, 2004, Halliburton paid a $7.5 million fine to settle the issue. * In April 2002, KBR was awarded a $7 million contract to construct steel holding cells at Camp X-Ray. [6] * From 1995-2002, Halliburton KBR has been awarded at least $2.5 billion to construct and run military bases, some in secret locations, as part of the Army's Logistics Civil Augmentation Program.[5] * In November 2002, KBR was tasked to plan oil well firefighting in Iraq, and in February 2003 was issued a contract to conduct the work. Critics contend that it was a no-bid contract, awarded due to Dick Cheney's position as Vice President. Concern was also expressed that the contract could allow KBR to pump and distribute Iraqi oil.[7] Others contend, however, that this was not strictly a no-bid contract, and was invoked under a contract that KBR won "in a competitive bid process."[8] The contract, referred to as LOGCAP, is a contingency-based contract that is invoked at the convenience of the Army. Because the contract is essentially a retainer, specific orders are not competitively bid (as the overall contract was). It has also been argued that when the contract was invoked in a similar manner during the Balkans crisis (when Bill Clinton was president), there was no controversy and very little scrutiny of the contract; proponents of this viewpoint argue that the KBR's LOGCAP contract was made a political issue by opponents of Bush and Cheney.[8] * In May 2003, Halliburton revealed in SEC filings that its KBR subsidiary had paid a Nigerian official $2.4 million in bribes in order to receive favorable tax treatment. [9][10] * As of 2003, Halliburton was still operating in Iran. CNN, in a report entitled "US companies are operating in Iran despite sanctions," reported that a Halliburton spokesperson told the news agency that HPS helps Iran build oil rigs in the country's south. * In February 2004, the Government Accountability Office (GAO) released a report on government contractorsPDF (774 KiB) that use offshore tax havens. It ranks the contractors in terms of the size of the contractors and provides information about how many subsidiaries the companies have offshore. Using data of the end of 2001, Halliburton ranked 30, had 17 offshore companies in tax havens, and 131 foreign subsidiaries. * In September 2005, under a competitive bid contract last it won in July of 2005, to provide debris removal and other emergency work associated with natural disasters, KBR started assessment of the cleanup and reconstruction of Gulf Coast U.S. Marine and U.S. Navy facilities that were damaged in the aftermath of Hurricane Katrina. The facilities include: Naval Air Station Pascagoula, Naval Station Gulfport, Stennis Space Center in Mississippi, two smaller U.S. Navy facilities in New Orleans and others in the Gulf Coast region. KBR has had similar contracts for more than 15 years. * In 2003, Halliburton's subsidiary KBR was responsible for the construction of the Allied military base in Babylon, Iraq. The action has come under increasing fire for the significant damage caused to the historical site. * On January 24, 2006 Halliburton's subsidiary KBR (formerly Kellogg, Brown and Root) announced that it had been awarded a $385 million contingency contract by the Department of Homeland Security to build more temporary security facilities. According to a press release posted on the Halliburton website, "The contract, which is effective immediately, provides for establishing temporary detention and processing capabilities to augment existing Immigration and Customs Enforcement (ICE) Detention and Removal Operations (DRO) Program facilities in the event of an emergency influx of immigrants into the U.S., or to support the rapid development of new programs. The contingency support contract provides for planning and, if required, initiation of specific engineering, construction and logistics support tasks to establish, operate and maintain one or more expansion facilities." [11] * On April 15, 2006, Halliburton filed a registration statement with the Securities and Exchange Commission to sell up to 20 percent of its KBR stock on the NYSE under the ticker symbol "KBR", as part of an eventual plan for KBR to be a separate company from Halliburton. [12] Today KBR employs over 30,000 people in Iraq. Halliburton's work in Iraq is diverse and complicated. In addition to troop support, Halliburton also provides air traffic control support; produces 74 million gallons of water a month for consumption, hygiene and laundry; deploys as many as 700 trucks a day to deliver essentials to American forces; and provides firefighter and crash-rescue services, as well as working to restore Iraqi oil infrastructure. Iraq controversy Halliburton is the only company mentioned by Osama bin Laden in an April 2004 tape in which he claims that "this is a war [in Iraq] that is benefiting major companies with billions of dollars." [13] Similar sentiments by others often makes Halliburton the target of the "disaster capitalism" label. Halliburton's deals recall Vietnam-Era controversy. Vice President Cheney's ties to company are reminiscent of President Lyndon B. Johnson's relationships with Brown & Root.[2] Financials The company's contracts in Iraq are expected to have generated more than $13 billion in sales by the time they start to expire in 2006, but most offer low margins -- less than 2% on average in 2003 and just 1.4% this year for the logistics work[citation needed] making these contracts less profitable than Halliburton's core energy business. The contracts in Iraq will be more profitable after the US Army reimburses them for costs that were originally investigated as potentially inflated.[citation needed] Meanwhile, KBR reconstruction contracts in Iraq 'tracked' by the US Department of Defense were shown to include as much as 55% of total project costs as overhead.[14] KBR has contracts in Iraq worth up to $18 billion, including a single no-bid contract known as "Restore Iraqi Oil" (RIO) which has an estimated worth of $7 billion.[citation needed] An audit of KBR by The Pentagon's Defense Contract Audit Agency (DCAA) found $108 million in "questioned costs" and, as of mid-March 2005, said they still had "major" unresolved issues with Halliburton.[citation needed] Ties with Dick Cheney In recent years the company has become the center of several controversies involving the 2003 Iraq War and the company's ties to U.S. Vice President Dick Cheney. Cheney retired from the company during the 2000 U.S. presidential election campaign with a severance package worth $34 million[15]. As of 2004, he had received $398,548 in deferred compensation from Halliburton while Vice President.[16] Concerns have been raised regarding the possible conflict of interest resulting from Cheney's deferred compensation and stock options from Halliburton. However, before entering office in 2001, Cheney bought an insurance policy that guaranteed a fixed amount of deferred payments from Halliburton each year for five years so that the payments would not depend on the company's fortunes.[16] He is legally bound by an agreement he signed which turns over power of attorney to a trust administrator to sell the options at some future time and to give the after-tax profits to three charities. The agreement specifies that 40% will go to the University of Wyoming (in Cheney's home state), 40% will go to George Washington University's medical faculty to be used for tax-exempt charitable purposes, and 20% will go to Capital Partners for Education. The agreement states that it is "irrevocable and may not be terminated, waived or amended," preventing Cheney from taking back the options at a later date.[16] Employee safety Halliburton does not arm its truck drivers, who in Iraq are often the target of insurgent attacks. In one case, on September 20, 2005, a Halliburton convoy of four trucks was ambushed north of Baghdad. All four trucks were struck by IEDs and were disabled. Their US National Guard escort was thought to have abandoned the disabled vehicles, leaving the unarmed truck drivers defenseless. Three of the four truck drivers were executed by the insurgents while the surviving driver, Preston Wheeler, caught the event on video. It was 45 minutes before the US military arrived again at the scene. [17] However, in a statement by senior military officials in Iraq, an investigation revealed that troops did not abandon the civilians and were exiting the "kill zone" during the ambush. [18] Allegations of fraud Allegations of fraud by Halliburton, specifically with regard to its operations in Iraq, have persisted since before the Iraq War. The associations between Cheney and Halliburton had led many to speculate with regard to improprieties and profiteering from the war. On 27 June, 2005, the Democratic Party held a "mock" committee hearing, aired on C-SPAN 3, at which former civilian employees based in or administering operations in Iraq, testified to specific instances of waste, fraud, and other abuses and irregularities by Halliburton and its subsidiary Kellogg, Brown and Root (KBR). Among the senators and representatives present at the hearing were Byron Dorgan (presiding), Henry Waxman, Frank Lautenberg, and Mark Dayton. Among those testifying were Bunny Greenhouse, former Chief Contracting Officer of the U.S. Army Corps of Engineers; Rory Mayberry, former Food Program Manager for a Halliburton subsidiary; and Allan Waller of the Lloyd-Owen International security and operations firm. Greenhouse, who provided the bulk of testimony, spoke for several minutes about her involvement in the evaluation and crafting of government Army contracts, and explaining how her superiors undermined and dismissed her concerns of illegal business practices. "Ultimately my main concern was the repeated insistence RIO contract be awarded to KBR without competitive bidding," Greenhouse said. She testified to have been given misinformation in answer to her complaints, saying she was "overtly misled." Mayberry, still in Iraq, testified by video from questions prepared by the committee. He said that KBR routinely sold expired food rations to the Army. The recorded interviewer asked, "Are you saying that Halliburton deliberately falsified the number of meals they prepared and then submitted false claims for reimbursement and that they did this to make up for past amounts auditors had disallowed?" Mayberry firmly answered "yes." He said that serving expired food rations was "an everyday occurrence, sometimes every meal." He also explained that Halliburton systematically overcharged for the number of meals as well, saying, "they were charging for 20,000 meals and they were only serving 10,000 meals." Dorgan later commented, "obviously there's no honor here, by a company that would serve outdated food to our troops in Iraq." Halliburton and its subcontractors contend that billing discrepancies for the dining facilities stemmed from interpretive differences in their contracts, which required them to be prepared to serve a minimum number of meals per day. When they billed for these minimum numbers however, the DCAA countered that they should only be required to pay for meals served. Of the more-than-$200 million in question, $51 million was eventually retained by the U.S. Army Field Support Command. Mayberry also claimed would-be whistleblowers were threatened "to be sent to Fallujah" and other "places under fire" if they talked to media or governmental oversight officials. In 2003 and 2004, Fallujah had been well known as dangerous for foreign troops and civilians. "I personally was sent to Fallujah for three weeks. The manager told me that I was being sent away until the auditors were gone, because I had talked to the auditors," Mayberry said. "The threat of being sent to a camp under fire was their way of keeping us quiet. The employees who talked to auditors were sent to camps under more fire than other camps, and Anaconda." This report led Dorgan and others to voice considerable outrage. Allan Waller testified to specific examples of how KBR officials had conspired in blocking of Lloyd-Owen fuel transports, and using other coercive means against its competitor. British based Lloyd-Owen has a direct contract with the Iraqi government to provide fuel to various parts of the country. In his introductory remarks, Dorgan said that Senate Republicans had blocked any attempts at having a formal bi-partisan hearing, resulting in a separate committee. See also: State-corporate crime Halliburton in the media * Iraq for Sale: The War Profiteers is a 2006 documentary by Robert Greenwald. * In Marvel Comics' Fantastic Four Halliburton has received many of the no-bid contracts for the repair of the Baxter Building. Reed Richards said that they overcharged for the work.[19] See also * List of oilfield service companies * Private military contractor
