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Last Updated: Thursday, 15 January, 2004, 06:47 GMT
Pentagon mulls Halliburton probe
Basra oil refinery in Shuaiba, southern Iraq
KBR's fuel oil was nearly double the price of Iraqi fuel oil
The Pentagon's inspector general has reportedly been asked to investigate whether Halliburton overcharged the US military for fuel in Iraq.

The request came from military auditors, Pentagon officials speaking on condition of anonymity have told the Reuters and AFP news agencies.

Halliburton has said it has not been told of any new inquiry and denied any wrongdoing over the fuel oil sales.

Halliburton had looked to be in the clear after an earlier inquiry.

'Suspected irregularities'

The row focuses on a contract for Halliburton subsidiary Kellogg Brown & Root (KBR) to supply the US military in Iraq.

"The Defense Contract Audit Agency (DCAA) was doing a routine audit when it discovered an irregularity relating to Restore Iraqi Oil fuel purchases and they made the referral to the Defense Department's inspector general," Reuters quoted a US defence official as saying.

The referral was made on 13 January because of "suspected irregularities" with oil supplies to Iraq, according to US defence officials quoted by the Agence France Presse news agency.

The Pentagon's inspector general may have been asked to step in because the DCAA's powers are limited to audits and do not extend to investigations, according to a Pentagon official quoted in the Wall Street Journal.

If confirmed, the Pentagon's investigation would be a setback for Halliburton. A report in the Wall Street Journal last week said KBR had been cleared of wrongdoing by the commander of the US Army Corps of Engineers.

Criticism 'unfair'

A US Defense Department draft audit last year found evidence that KBR may have overcharged US taxpayers by $61m for oil imports from Kuwait.

Halliburton has reiterated that it delivered fuel to Iraq "at the best value" and cleared its purchases with the US military in advance.

"It is important to understand that the referral is a method of further studying the issue and not a condemnation of KBR processes," the firm said.

The Pentagon ended the contract with KBR last month and announced it was setting up special energy unit to ensure competitive tendering for military fuel contracts.

The row has embarrassed the White House as Vice President Dick Cheney was formerly Halliburton's chief executive.




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