Lieberman: Halliburton Auditors Knew of Iraq Concerns

Halliburton's own auditors warned of problems with the company's contract to deliver fuel in Iraq even before Pentagon investigators raised similar concerns, a Democratic presidential candidate says.

Sen. Joe Lieberman (search), D-Conn., said a Pentagon official told him Halliburton was refusing to turn over copies of the internal audit, which Defense Department investigators found but did not copy.

Halliburton (search) spokeswoman Wendy Hall said the internal audit was confidential and a Pentagon auditor may have broken the law by reading it. Hall said the audit neither warned of excessive fuel charges nor pointed out possible violations of federal regulations.

Meanwhile, Halliburton, which is Vice President Dick Cheney's former company, said on Thursday it saved the Pentagon money and did not overcharge for gasoline it bought in Kuwait and distributed in Iraq.

The Houston-based oil services company said in a statement that it expected to be cleared by the Defense Department of the overcharging allegations. Pentagon auditors said last week that they suspected a Halliburton subsidiary, KBR (search), had overcharged the department by about $61 million on a no-bid contract to supply gasoline to Iraqi citizens.

Pentagon officials said the source of the overcharging was the high price charged by a Kuwaiti company that supplied the gas to Halliburton. Halliburton said the Kuwaiti company was the only one approved as a supplier by the U.S. Army Corps of Engineers (search), which oversees the contract.

The Kuwaiti company was the only one approved by the Kuwaiti government to export gasoline from the oil-rich monarchy, according to Pentagon officials. Lieberman identified the firm as the Altanmia Commercial Marketing Co.

The senator said his staff met with Michael Thibault, an official with the Defense Contract Audit Agency (search), which is investigating the Halliburton contract. Lieberman said Thibault told him a DCAA auditor found a Halliburton draft audit warning that the Kuwaiti company was charging excessive prices and the procedures may have violated U.S. contracting regulations.

Halliburton has refused to turn over copies of the draft audit, Lieberman said.

Hall said the Pentagon isn't entitled to see the draft audit.

"The DCAA employee ignored identification on the internal document - on each and every page - that clearly states the document was proprietary and confidential for KBR internal use only, and this could be a violation of the law," Hall said in a statement. "The confidential issues identified in the company's internal evaluation did not warn or say that there were excessive fuel prices and did not identify any violation of government contracting regulations."

Thibault did not return a telephone message left at his office Thursday.

Halliburton's earlier statement said it had suggested getting gasoline supplies from Turkey, which charged less. Pentagon auditors said Halliburton charged $1.09 a gallon more for gasoline from Kuwait than from Turkey.

Turkey is now the source of about two-thirds of the gasoline distributed in Iraq, Halliburton said. Using the Turkish supplier instead of the Kuwaiti company has saved the U.S. government about $164 million, the company said.

Halliburton defended the higher priced gasoline from Kuwait, saying it cost more because it had to be trucked farther in dangerous territory. Also, the company said three Halliburton drivers have been killed, 10 employees wounded and 60 pieces of equipment damaged in attacks on fuel convoys.

Pentagon officials declined comment on Halliburton's statement but confirmed the company had sent its response to Defense Department auditors.

Last week, President Bush said he thought Halliburton had overcharged and he expected the company to reimburse the government.

Democrats have criticized Halliburton's contracts in Iraq, which netted the company about $5 billion this year. Several Democrats in Congress have called for further investigation of the company and its Iraq contracts.

Cheney headed Halliburton from 1995 until he quit in 2000 to become Bush's running mate. He has said he severed all ties with the company.

Halliburton got its contract to rebuild Iraq's dilapidated oil industry as an outgrowth of a contract with the Army. It was to provide emergency logistical help for situations such as the Iraq war. The Army Corps of Engineers opened the oil rebuilding process to competitive bidding earlier this year and is preparing to award $2 billion in replacement contracts.