Cheney: The “assertion that Halliburton defrauded the U.S. Government” has “no relationship to the facts”

From the June 6 edition of ABC's This Week:

ARIANNA HUFFINGTON: Right here we have the poster child of Bush-Cheney crony capitalism -- Halliburton -- involved in this, and you haven't said about that. They, after all, were responsible for cementing the well. Here's Halliburton, after it defrauded the American taxpayer hundreds of millions of dollars--

LIZ CHENEY: Arianna, I don't know what planet you live on --

HUFFINGTON: -- it's involved again.

CHENEY: -- but it's not -- it's not facts.

HUFFINGTON: I'm living on this planet, you're living in a planet that is --

CHENEY: Arianna, what you're saying has no relationship --

HUFFINGTON: -- continuing --

CHENEY: -- to the truth. No relationship to the facts.

HUFFINGTON: It is completely -- Halliburton was involved in this. How can you say --

[crosstalk]

JAKE TAPPER [host]: Halliburton was cementing the pipe.

HUFFINGTON: How can you say there's no relationship?

CHENEY: Her assertion that Halliburton defrauded the U.S. government --

HUFFINGTON: It did.

CHENEY: -- that there was Bush-Cheney cronyism. These are the left's talking points.

HUFFINGTON: Hundreds of millions of dollars in Iraq --

CHENEY: Arianna, it's absolutely not true. It is absolutely not true.

HUFFINGTON: OK, I'm so glad PolitiFact is going to be covering this.

CHENEY: Good.

HUFFINGTON: I'm so glad.

DOD auditor referred dozens of cases of suspected fraud, irregular conduct by Halliburton subsidiary, suspended or disapproved hundred of millions in billings

DOD audits of Halliburton's Iraq and Afghanistan contract found at least $1.4 billion in questioned and $441 million in unsupported costs. In December 2001, the federal government awarded the Logistics Civil Augmentation Program (LOGCAP) III contract to Halliburton subsidiary Kellogg Brown & Root (KBR). Under that contract, KBR provided support for government personnel in Iraq and Afghanistan. On April 5, 2007, Halliburton announced it had separated from KBR. At a May 4, 2009 hearing of the Commission on Wartime Contracting in Iraq and Afghanistan, the Defense Contract Audit Agency (DCAA) - a Department of Defense agency that audits Pentagon contracts -- presented data on its audits of KBR's LOGCAP III contract. According to the data, DCAA audits completed* prior to Halliburton's separation from KBR found more than $1.4 billion in questioned costs and $441 million in unsupported costs. According to the DCAA, questioned costs are “costs proposed or claimed by the contractor which DCAA considers to be unallowable in accordance with the Federal Acquisition Regulations or contract terms and conditions,” and unsupported costs are “costs for which the contractor has not provided sufficient rationale for their estimates.”

DOD audits led to $452M in suspended or disapproved costs. According to the DCAA document, when an audit finds a questioned or unsupported document, “if the contractor does not voluntarily remove the costs from billings” the “DCAA issues a Form 1, Notice of Contract Costs Suspended and/or Disapproved, to suspend or disapprove costs.” DCAA suspended or disapproved over $452 million in costs claimed by KBR through the LOGCAP III contract that were completed* before Halliburton separated from KBR.

Examples of suspended or disapproved costs include “KBR charg[ing] the government for significantly more meals than were actually served.” As an example of an exception produced by the audits, DCAA director April Stephenson stated:

For instance, the Army's Statement of Work required KBR to provide up to a specified number of meals per month to be served at a particular camp. Our audit determined KBR's subcontractors served significantly fewer meals. DCAA took exception to the costs of the excess meals and issued over 90 “DCAA Forms 1” suspending or disapproving over $130 million.

DOD audits noted 32 examples of suspected “fraud or other suspected irregular conduct” by Iraq and Afghanistan contractors, the “vast majority” of which were from KBR. According to the DCAA's data, the agency referred to investigative agencies 32 cases of suspected fraud or other irregular conduct with regard to Iraq and Afghanistan contractors. Of those 32, 21 were referred prior to the date Halliburton severed ties with KBR. At the May 4, 2009, hearing, Stephenson testified that the “vast majority” of those 32 referrals were related to KBR's contract. She added: “That is unprecedented, and any program that we have had in the past to have that many referrals, it absolutely concerns us,” adding that “in the history of DCAA I do not think we are aware of a program, a contract or a contractor that has had this number of suspensions or referrals.”

DOJ suing KBR for “improper charges to the United States”

DOJ has announced a lawsuit against KBR for charging “improper costs” in Iraq from 2003 to 2006. On April 1, the Justice Department announced it had filed a lawsuit against KBR, alleging violations of the False Claims Act committed from 2003 to 2006 -- while KBR was owned by Halliburton. The suit “alleges that KBR knowingly included impermissible costs for private armed security in billings to the Army under the Logistics Civil Augmentation Program (LOGCAP) III contract.”

KBR employees found guilty of defrauding the US Government

Three employees guilty of conspiracy in Afghanistan airfield fraud scheme. Former KBR employees James Sellman and Wallace Ward were charged in 2007 with conspiracy in a fraud scheme involving falsifying documents in exchange for payment at an Afghanistan airfield. According to the Justice Department:

James N. Sellman, 31, of Raeford, N.C., and Wallace A. Ward, 25, Columbus, Ga., were charged yesterday in a seven-count indictment with conspiracy, making a false writing, bribery, and making a false claim to the Department of Defense. The indictment alleges that between May and September 2006, while assigned to oversee fuel deliveries to Bagram Airfield in Afghanistan, Sellman and Ward conspired to accept bribes from Afghan truck drivers in return for falsifying government documents indicating receipt of the fuel and then diverting over 80 truckloads of fuel for sale outside the airfield. According to the indictment, the conspiracy involved over 784,000 gallons of fuel valued at more than $2.1 million.

Justice Department records show Sellman was sentenced in 2008 to 26 months in prison, three years of supervised release, and ordered to pay $675,000 in restitution; Ward was sentenced in 2008 to 26 months in prison and ordered to pay $216,000 in restitution. A third former employee, Raschad L. “Sean” Lewis, was found guilty in 2009 “of conspiracy, false writing, bribery of a public official, and false claims” for his part in the scheme.

Halliburton worker pleaded guilty to taking kickbacks on Iraqi subcontracts. According to an August 23, 2005, Washington Post article, Glenn Allen Powell, a KBR employee in Iraq from October 2003 to January 2005, “admitted to taking 20 percent off the top of a subcontract, or more than $110,000.” The Post also noted: “While the scheme was ongoing, KBR had been unwittingly billing the U.S. government an inflated amount for reimbursement because of the 20 percent kickback. The difference has since been refunded.”

KBR employee pleaded guilty to participating in kickback scheme with a Kuwaiti contractor. In July 2007, the Houston Chronicle reported that former KBR employee Anthony Martin “pleaded guilty to participating in a kickback scheme related to the award of a $4.7 million contract in 2003 to a Kuwaiti firm, the Department of Justice said.” The Chronicle reported that Martin told a federal jury that in 2003, “he worked with the manager of the Kuwaiti firm to hide more than $50,000 in kickbacks within a subcontract for heavy trucks and refrigerator trailers.”

*These costs do not include audits that were completed after April 5, 2007, but covered the time period in which Halliburton owned KBR.