Vice President Dick Cheney has a special interest in this week's Congressional debate on the Bush administration's request for $87 billion to maintain the occupation of Iraq and other military adventures abroad. If approved by the House and Senate in its current form, the proposal would allocate roughly $20 billion to reconstruct Iraq, with most of the rest of the money going to cover the costs of the occupation.
Approval of the $87 billion package would be good news for Cheney, who it is now evident, retains ties to his former employer, the energy and construction conglomerate Halliburton. Halliburton is, of course, a prime benecificary of military and reconstruction expenditures in Iraq.
The US Army Corps of Engineers has already awarded Halliburton's engineering and construction arm, Kellogg, Brown & Root, a no-bid contract to restore Iraq's oil industry. Halliburton parlayed an initial $37.5 million contract to put out oil-field fires into a range of responsibilities that has already run up roughly $1 billion in costs. "War is hell, but it has turned into financial heaven for Halliburton," said Senator Frank Lautenberg, D-New Jersey, who with Representative Henry Waxman, D-California, has led the charge to expose details of Halliburton's dealings in Iraq. "This sweetheart, no-bid contract given to Halliburton spikes up by hundreds of millions of dollars each week. It's outrageous."
The outrageousness does not stop there. The value of a contract between the Pentagon and Halliburton to manage military bases could end up costing as much as $2 billion.
Thus, if Congress approves the $87 billion spending bill, Halliburton will be well positioned to collect maximum payments on its existing contracts and to go for more gold as the Pentagon opens the dollar spigots. It is important to remember that Halliburton would not merely benefit from an increase in funding for reconstruction of Iraq's oil industry. Halliburton has also integrated itself into the military side of the operation. As much of one-third of the current $3.9 billion-a-month cost of maintaining US troops in Iraq is paid to private contractors such as Halliburton, according to independent analysts.
A Washington Post report in August revealed that, "Services performed by Halliburton, through its Brown and Root subsidiary, include building and managing military bases, logistical support for the 1,200 intelligence officers hunting Iraqi weapons of mass destruction, delivering mail and producing millions of hot meals. Often dressed in Army fatigues with civilian patches on their shoulders, Halliburton employees and contract personnel have become an integral part of Army life in Iraq."
So it should come as no surprise that, if Congress approves another $87 billion to maintain the occupation of Iraq and to pay for reconstruction initiatives, analysts expect the value of Halliburton stock to increase. And that's where the Congressional vote gets interesting for Cheney. As the former CEO of Halliburton, which saw its stock value sink during the energy crisis and after revelations about its long history of ties to the scandal-plagued Enron Corp., he could benefit from an uptick in Halliburton's fortunes.
Despite Cheney's claim during a September "Meet the Press" appearance that he had "severed all my ties with the company, gotten rid of all my financial interest" in Halliburton, Lautenberg argues that Cheney retains significant financial ties to the company. A successful businessman and investor before his election to the Senate, Lautenberg notes that Cheney, who received a $34 million package when he left Halliburton to become Vice President, continues to collect hundreds of thousands of dollars in deferred salary and retains $433,333 in unexercised stock options.
According to an analysis distributed by Lautenberg, if Cheney were to exercise his options, the Vice President could:
* Buy 100,000 shares of Halliburton stock at $54.50 before the end of 2007. That adds up to $5,420,000.
* Buy 33,333 shares of Halliburton stock at $28.13 by the end of 2008. That adds up to $937,657.29.
* Buy 100,000 shares of Halliburton stock at $39.50 by the end of 2009. That adds up to $3,950,000.
Cheney says that he would donate profits from the sale of these stock options to charity, and he says he will not take tax deductions for such donations. But he would still be able to enjoy the prestige and honor of delivering substantial resources to a favored charity -- perhaps the Richard Cheney Vice Presidential Library -- and he could also provide Halliburton with a sizable tax deduction.
Unfortunately for Cheney and his former firm, Halliburton shares have been selling for under $25. Thus, for Cheney to be able to cash out, Halliburton stock prices must move upward -- as they might well do once the Congress approves the $87 billion.
Does this all add up to a conflict of interest? Cheney's office says "the answer to that is, 'no.'" But that's because they interpret the Vice President's retention of unexercised stock options as something other than a tie to Halliburton. Lautenberg notes that, in addition to sitting on the stock options, the Vice President received $205,298 in deferred salary paid by Halliburton in 2001 and $162,392 in deferred salary paid by Halliburton in 2002, and he notes that Cheney is apparently scheduled to collect similar payments in 2003, 2004 and 2005. "The Vice President says he does not have any financial ties to Halliburton, but his own financial disclosure filings suggest something else," says Lautenberg. "In 2001 and 2002, Vice President Cheney was paid almost as much in salary from Halliburton as he made as Vice President."
Lautenberg is not alone in viewing the deferred salary payments and unexercised stock options as a lingering linkage between Cheney and Halliburton. A new Congressional Research Service report describes deferred salary and stock options as "among those benefits described by the Office of Government Ethics as 'retained ties' or 'linkages' to one's former employer."
So, while the Vice President and his aides spin their way around the question of whether conflicts exist, Lautenberg says, "I ask the Vice President to stop dodging the issue with legalese."
Assuming the Vice President does not take his advice, Lautenberg and other Senate Democrats are proposing an amendment to the $87 billion spending bill that would force Cheney to finally cut what the Congress Research Service describes as "retained ties" and "linkages" to Halliburton. The amendment would prevent companies with financial ties to Bush, Cheney and their Cabinet secretaries from obtaining Pentagon contracts in Iraq. And it would require members of the Bush Administration who retain stock options to exercise them in 90 days or forfeit the benefits.
Cheney aides claim all the talk about the Vice President's ties to Halliburton are a "a political cheap shot."
But as the details of Halliburton's sweetheart contract, its overcharging of the U.S. government and the ever expanding value of its contracts with the Pentagon are revealed, what Cheney aides call a "cheap shot" is starting to look like a smoking gun.
For the latest on US Senator Frank Lautenberg's examination of Cheney's lingering ties to Halliburton, click here
For the latest on US Representative Henry Waxman's examination of Halliburton's contracts with the Pentagon, click here.