October 30, 2006
Halliburton's contracts for work in Iraq are what's known as cost plus contracts, meaning that after all the costs for labor, materials and other expenses are added together, the company makes its profit based on a percentage of that total.
It certainly does not take a financial genius to figure out that under the terms of such a contract, a company has every motive in the world to increase the costs of every project to increase profits.
Since the minute Dick Cheney authorized the no-bid contracts for Halliburton, the granddaddy of war profiteering has been ripping off American tax payers left, right, and center through the use of these cost plus contracts, and another clear-cut profiteering scheme was recently revealed in testimony at a Senate Democratic Policy Committee hearing.
On September 18, 2006, Julie McBride, a former Halliburton employee with the company's Morale, Welfare & Recreation Department (MWR) in Iraq, testified that "the mantra at Halliburton camps goes, 'It's cost plus, baby.'"
Ms. McBride was hired as an MWR coordinator in Camp Fallujah at facilities that organize recreational activities for off-duty troops. The two MWR facilities she coordinated were a fitness center and an Internet cafe.
The fitness center had gym equipment, pool and ping pong tables, video games, and a large room for movies, fitness classes and dances, and the Internet cafe housed telephones, computers, and a library.
At Camp Fallujah, she testified, she became concerned about several Halliburton practices and especially with the procedures used to compile the head count for the MWR Department.
"Funding for the MWR Department," Ms. McBride stated, "was evidently based, in part, on the head count that Halliburton reported."
She explained that to obtain a head count, each off-duty soldier who entered the fitness center or the Internet caf had to sign in, and that the number of soldiers on the sign-in sheet was referred to as the "Boots in the Door" count.
She then testified that she and other MWR employees were directed to use a specific methodology to intentionally inflate this head count to run up costs, and described how it worked.
"To begin," she told the panel, "each hour, on the hour, Halliburton staff were instructed to record the number of soldiers in each of the five rooms of the fitness center, and in the Internet caf library."
"In addition," she said, "each person who used any equipment in the fitness center was required to sign a form."
"This included balls, ping pong paddles, pool cues, board games, video games, etc.," she noted.
"Further," she testified, "a record was kept of the number of troops who attended fitness classes or other activities."
At the end of each day, she said, Halliburton instructed MWR coordinators to prepare a situation report, or "sit rep," to record what was purported to be the MWR head count for the day.
"To inflate that figure," Ms McBride explained, "the coordinators began by adding together the "Boots in the Door" count, and the hourly totals for each room in the fitness center throughout the day and in the library."
"For example," she said, "I was present in Iraq on February 27, 2005, when the "Boots in the Door" count at the MWR facility in Fallujah was about 330."
"The hourly count that day," she noted, "for each room was over 1,300."
"These totals were then combined for a fitness center head count in excess of 1,600," she stated, "or five times the actual number of troops that came into the facility."
On top of that she said, Halliburton would often add the number of troops who attended a fitness class or activity, even though each person had already been counted when he or she came in the door, and counted a second time in the hourly head count.
In addition, she testified, they would often add on the total number of equipment items that were checked out that day and sometimes they would even add the number of towels checked out by the troops.
"One day in February 2005, for example," Ms McBride told the panel, "179 towels were added into the head count."
On another day in January 2005, she said, they added 240 bottles of water used by the troops that day.
"Sometimes," she testified, "they used a sum total for the head count that was higher than the "Boots in the Door," hourly room counts, activity count, equipment count, and towels count combined."
After adding together all of the numbers to arrive at a "sum total," she said, coordinators were instructed to throw away the original "Boots in the Door" figure and the larger total was then designated as the head count for that day and emailed to Halliburton administrators who compiled the numbers for all of the MWR facilities in Iraq.
"There are many other Halliburton MWR coordinators who can verify this procedure," she told the committee.
Ms. McBride went on to describe how the fraudulent head counts are used to generate millions of dollars in unearned profits for the company by running up costs. "By inflating the number of users," she said, "Halliburton can rationalize a greater need for facilities, equipment, staffing and administrators than actually exists."
"The additional staffing," she said, "does not benefit the troops, but it does benefit Halliburton."
"Under its contract," Ms McBride points out, "the more facilities, equipment, staff and administrators Halliburton can show a need for, the more profit Halliburton makes."
She said that she also watched Halliburton employees use their control of the MWR and dining facility requisition procedures to requisition many items for their own personal use, by claiming that the items were for the troops.
"I have personally observed," she said, "cases of soda, stacked on top of each other in Halliburton administrative offices, which Halliburton employees obtained this way."
She pointed out that the employees not only drank soda free but they also generated more undeserved profits for Halliburton by running up the cost of supplies.
"By contrast," she told the committee, "US soldiers who make a quarter as much, or less, must go to the PX to purchase their soda with money from their own pockets."
Ms. McBride also described how Halliburton employees exploit requisitions to obtain luxuries that are not afforded to the troops. "One example of this," she said, "was a Super Bowl party, for Halliburton employees only, at taxpayer expense."
According to Ms. McBride, Halliburton requisitioned a big screen TV and lots of food for employees and thus, under the cost plus contract, the company even made money off its private Super Bowl party.
Following the party, she said, the Halliburton employees arranged a live television connection for the big screen TV so that they could watch more football games.
She told the committee that many Halliburton employees did not seem to care about the soldiers and often ignored troop requests, or treated them like an annoyance.
"Those same employees," she said, "indulged their own whims at taxpayer expense."
She also described methods used by Halliburton to discourages employees from speaking out about these issues. "It's not easy to stand up to Halliburton," she told the committee.
"After I voiced my concerns about what I believed to be accounting fraud," Ms. McBride said, "Halliburton placed me under guard and kept me in seclusion."
She said her property was searched, and she was specifically told that she was not allowed to speak to any member of the US military. "I remained under guard until I was flown out of the country," she said.
In concluding her testimony, Ms. McBride expressed her admiration and devotion to the US troops in Iraq as well as her purpose in testifying before the committee.
"During my time at Camp Fallujah," she said, "I came to love the young men and women in the military, who serve our country so well."
"It was an honor for me to help them in any way," she stated.
"I will never forget their kindness," she said, "and their courage has inspired me to speak out now on their behalf."
Democrats have promised to end Halliburton's war profiteering in Iraq as soon as they take control of Congress, and hopefully tax payers will hold them to it.