WSJ - Reuters
Wednesday 11 August 2004

New York - Pentagon auditors have concluded that Halliburton Co. failed to adequately account for more than $1.8 billion of work in Iraq and Kuwait, the Wall Street Journal said on Wednesday, citing a Pentagon report.

The amount represents 43 percent of the $4.18 billion that Houston-based Halliburton's Kellogg Brown & Root unit has billed the Pentagon to feed and house troops in the region, the newspaper said.

It said the findings in the 60-page Pentagon audit report, dated Aug. 4 but not publicly released are likely to increase pressure on the U.S. government to withhold hundreds of millions of dollars of payments to Halliburton.

This, it said, potentially threatens the services that KBR provides U.S. troops and other personnel in Iraq and Kuwait.

Vice President Dick Cheney was Halliburton's chief executive from 1995 to 2000.

No one at Halliburton was immediately available to comment on the report. But the newspaper said KBR officials dispute the report's conclusions.

The officials say they have worked within the same Defense Department system for more than 10 years without problems, and believe differences can be resolved without the withholding of large payments, the newspaper said.

In a June securities filing Halliburton said a move by the Pentagon to withhold substantial payments or demand refunds could ``materially and adversely affect our liquidity.''

KBR filed for Chapter 11 bankruptcy protection last December under the weight of asbestos claims.

According to the newspaper Halliburton has until Sunday, after two prior extensions, to provide Army officials with all necessary cost information for its logistical work in Iraq and other locales.

This could lead to the withholding of as much as $600 million of payments, though KBR officials are confident the Army will again extend the deadline, and the Army is considering doing so, it said.

Halliburton shares closed on Tuesday at $29.83 on the New York Stock Exchange.