Los Angeles Times Staff Writers
July 21, 2004
WASHINGTON — A Halliburton controversy erupted Tuesday, fueled by a grand
jury investigation into whether the oil services giant violated federal
sanctions by operating in Iran while Vice President Dick Cheney was running the
company.
The investigation centers on Halliburton Products and Services
Ltd., a subsidiary registered in the Cayman Islands and headquartered in Dubai
that provided oil field services in Iran. The unit's operations in Iran
included Cheney's stint as chief executive from 1995 to 2000, when he frequently
urged the lifting of such sanctions.
Numerous U.S. companies operate in
Iran, but under strict guidelines requiring that their subsidiaries have a
foreign registry and no U.S. employees, and that they act independently of the
parent company.
At issue is whether Halliburton's subsidiary met those
criteria.
The Treasury Department has been investigating the matter
since 2001. But Halliburton disclosed in public financial filings this week
that the depar tment had forwarded the case to the U.S. attorney in Houston for
further investigation. The company said a federal grand jury had subpoenaed
documents on its Iranian operations.
The Treasury Department refers such
complaints only after finding evidence of "serious and willful violations" of
the sanctions law, a government official said.
Sen. Frank R.
Lautenberg (D-N.J.), whose office has provided information on the case to the
Treasury Department, said Tuesday that Halliburton Products and Services was a
sham that existed only to circumvent the sanctions.
"It's unconscionable
that an American company would skirt the law to help Iran generate revenues,"
Lautenberg told reporters during a conference call arranged by the campaign of
the presumed Democratic presidential nominee, Sen. John F. Kerry of
Massachusetts.
Bush campaign spokesman Steve Schmidt called the
allegations against Cheney baseless, and accused Democrats of trying to use
Halliburton as a distraction. Cheney's offic e and the White House
characterized the latest criticisms of Halliburton as political.
"The
Democrats have made clear that their all-purpose strategy, no matter the issue,
whether it's healthcare or John Kerry's plans to raise taxes or John Kerry's
votes against our men and women in uniform or John Kerry's proposals to cut the
intelligence budget, will be met by one word: Halliburton," Schmidt said. "The
Kerry campaign has become increasingly flailing in their attacks as there has
been increasing focus on John Kerry's record."
Democrats have long
criticized Cheney for his connections to Halliburton, hoping to link the vice
president to the company's contracts for Iraq reconstruction and its overbilling
for services in that country. Cheney has denied any connection to the
contracts.
The company has repeatedly found itself at the center of
government investigations.
The Securities and Exchange Commission and
the Justice Department are looking into allegations that top officials i n a
consortium that included a Halliburton subsidiary paid millions of dollars in
bribes to win contracts in Nigeria. The Justice Department is also looking into
reports that Halliburton officials took $6.3 million in kickbacks in Iraq. The
Pentagon is examining whether the company overcharged U.S. taxpayers by more
than $186 million for meals never served to U.S. troops abroad.
Treasury and Justice officials declined to comment on their inquiry into the
Halliburton subsidiary.
Violation of the sanctions can result in
criminal charges, and those found guilty can face 10 years in prison. A company
can be fined as much as $500,000.
Lautenberg said that in the Iran case,
the actions taken by the Republican-controlled Justice and Treasury departments
showed that the accusations against Cheney were more than political.
He
noted that the grand jury investigation comes amid a flurry of questions about
Iran's role in terrorism against the United States.
The independent
commissi on investigating the 2001 terrorist attacks is expected to conclude in
a report due Thursday that several of the Sept. 11 hijackers passed through
Iran on their way to the United States.
Lautenberg's office distributed
copies of four letters from 1997 sent from a London arm of the Iranian state oil
company to Halliburton Products and Services in Dubai.
The four letters,
all requests for goods and services from the Halliburton subsidiary, included
handwritten notations to specific individuals. Lautenberg's staff questioned
whether the individuals worked for the foreign subsidiary or for a U.S.
subsidiary, in violation of the sanctions.
Halliburton confirmed the
authenticity of the documents, but said that two of the individuals were British
citizens who had never worked for any U.S. Halliburton subsidiary.
The other two handwritten notations did not list first names of the individuals,
and Halliburton said it was unable to locate records for them.
"These
documents do no t suggest that any violation of the applicable regulations
occurred," Halliburton spokeswoman Wendy Hall said in a statement.
Hall
said Halliburton's business in Iran had not violated any sanctions, and pledged
full cooperation with the government's inquiry.
"It is important to
understand, especially in the current political environment, that this is not a
condemnation of the company, but a method of further studying the facts," Hall
said of the grand jury subpoena. "We welcome a thorough review of any and all
of the company's business."
The law forbids U.S. companies from doing
business with countries considered by the U.S. government to be sponsors of
terrorism. The list includes Iran, North Korea, Cuba and Sudan.
An
executive order signed by President Clinton in 1995 specifically prohibits U.S.
firms from activities that would benefit the Iranian petroleum industry. The
order accuses Iran of sponsorship of international terrorism, undermining the
Middle East peace process an d developing weapons of mass destruction.
Development of petroleum resources, Clinton said at the time, "would provide new
funds that the Iranian government could use to continue its current
policies."
Halliburton's Iran operations are virtually all related to
oil and gas, and generated at least $39 million in revenue last year, the
company said.
The policy allowing U.S. firms to indirectly operate in
prohibited countries has come under increasing attack.
One leading
critic is New York City Comptroller William C. Thompson Jr., a Democrat who
oversees the city's pension fund. He has launched an effort to persuade
Halliburton and other firms he invests in to cut all ties to countries that
sponsor terrorism.
A January report by CBS' "60 Minutes" featured
Thompson and raised questions about the Halliburton subsidiary that does
business in Iran.
In that report, a CBS reporter traveled to the
company's Cayman Islands operations, only to find no such company there. In
stead, the building is owned by a local bank.
A bank employee told the
reporter that when mail arrived for the Halliburton subsidiary, it was forwarded
directly to Houston.