Hapless Halliburton?

If there's an overcharge, like we think there is," said George W. Bush, "we expect that money to be repaid." And so the President added his voice last week to a growing chorus taking aim at Halliburton, the energy-and-construction conglomerate once headed by Vice President Dick Cheney, which has been accused by Pentagon auditors of overcharging taxpayers as much as $61 million for oil it delivered in Iraq.

But how culpable is the company? The Defense Department doesn't claim that Halliburton pocketed the money itself. Instead, auditors say Halliburton overpaid a Kuwaiti subcontractor for the oil. Auditors noted that oil shipped from Turkey cost about $1.18 per gallon, whereas Halliburton's Kuwaiti oil ran $2.27 per gallon. Halliburton, which received $5 billion in federal contracts in Iraq, has launched a vigorous defense. It contends the subcontractor was paid appropriately and claims that the $61 million can be explained by the military's many restrictions—for instance, requiring that the oil be bought only on expensive short-term contracts—and by the hazardous conditions. Halliburton says 20 fuel trucks have been stolen or damaged and one of its drivers has been killed. The Army Corps of Engineers, which hired Halliburton, says it has been happy with the company's work so far. Indeed, Halliburton may have been more hapless than wily. A senior Pentagon official called the overcharge "pretty stupid" and blamed it on miscommunication between Halliburton employees in Iraq and those at the company's Houston headquarters.

Meanwhile, the company's problems aren't limited to the contract brouhaha. Last week plaintiffs who claim they were injured by asbestos while working for a company later acquired by Halliburton approved a $2.7 billion settlement. To help pay for the deal, several subsidiaries of Kellogg, Brown & Root, the Halliburton company that made the Iraqi oil contract, will declare bankruptcy.