Sunday, March 20, 2005

Now You See It: An Audit of KBR

By ERIK ECKHOLM

By law, commercially sensitive information provided by a company may be concealed when government documents are released. On that basis, it was proper to show KBR the audits before sending them along.

But in reply, KBR officials asked for, and then received, far more expansive deletions than is customary, said Thomas M. Susman, an attorney and regulatory expert with Ropes & Gray in Washington, including calculations and conclusions reached by the government that Mr. Susman said cannot be called proprietary.

“As it prepared to attack Iraq in early 2003, the Pentagon gave a multibillion-dollar contract, without competitive bidding, to the Halliburton subsidiary Kellogg, Brown & Root to repair oil fields and import consumer fuels. Almost from the first, the Bush administration and the company were hounded by allegations of favoritism and reckless spending under that contract, for which KBR eventually billed $2.5 billion.

In the American debate, colored by election politics last fall, one part of the story was often overlooked: most of the money used to pay KBR was not taxpayer dollars but Iraqi money, mainly oil revenues. The United Nations had authorized the American occupiers to spend Iraqi funds - for the good of the Iraqi people and "in a transparent manner" - and created a special international board of auditors to insure that those conditions were met.

As American critics leveled their accusations at Halliburton and the Pentagon, those international overseers began expressing concerns, too. The board of monitors repeatedly asked for data on the no-bid fuels contract and was repeatedly rebuffed by the Pentagon. Last October, the board was handed copies of the Pentagon's own audits of the nine components of that KBR contract, with numbers and many conclusions blacked out.

Last week, when Representative Henry Waxman, minority leader of the House Committee on Government Reform, released a largely unexpurgated version of one of those October audits, covering $875 million worth of fuel imports, news reports focused on the numbers. The Pentagon's own monitors, it turned out, found excess billing of more than $100 million and criticized KBR for poor record-keeping.

But a comparison of the original with the blacked-out, or "redacted," version that was sent to the international board last fall also raised new questions about the basis on which the Pentagon, at Halliburton's suggestion, had chosen the items it had edited out of the document.…”

…KBR officials asked for, and then received, far more expansive deletions than is customary, said Thomas M. Susman, an attorney and regulatory expert with Ropes & Gray in Washington, including calculations and conclusions reached by the government that Mr. Susman said cannot be called proprietary.

Michael A. Morrow, KBR's contracts manager, said in a Sept. 28, 2004, letter to the contracting agency, the Army Corps of Engineers, that the company insisted on blacking out proprietary information and also any statements “that we believe are factually incorrect or misleading and could be used by a competitor to damage KBR's ability to win and negotiate new work.”

Nearly every number and comment critical of KBR in the report was blacked out in the redacted copy. Last week, in an e-mail message, The New York Times asked Halliburton's chief information officer for further clarification of which aspects of the audit the company considered to be inaccurate or unfair, but received no reply.

Mr. Susman, who has examined Mr. Morrow's letter and both versions of the audit report, said: “KBR proposed redacting anything that could be embarrassing to the company plus anything it disagreed with.”

“They apparently felt they could get away with this,” he added.

http://www.nytimes.com/2005/03/20/weekinreview/20eckh.html?pagewanted=print&position=
con·cept: Now You See It: An Audit of KBR