[corp-focus] A Flood of Fraud

[Robert Weissman]

A FLOOD OF FRAUD
By Russell Mokhiber and Robert Weissman

There's no question that post-hurricane relief and reconstruction in New
Orleans and the Gulf Coast are going to pose many genuinely difficult
challenges.

But some things seem pretty simple.

For example, it's a dumb idea to have cruise ships house evacuees and
then pay the cruise lines as four times what they would charge vacationers.

As it happens, however, that's exactly what the Federal Emergency
Management Agency (FEMA) is doing. An investigation by Senators Tom
Coburn, R-Oklahoma, and Barack Obama, D-Illinois, found that what should
have been a short-term FEMA emergency deal is turning into a six-month
boondoggle. FEMA has contracted with Carnival Cruise Lines, to the tune
of $192 million, to house hurricane evacuees on three cruise ships.

The result, according to the senators: "Taxpayers are paying, per
evacuee, four times the amount a vacation cruise passenger would have to
pay. Three Carnival ships are only half full and mostly occupied by
relief workers. Carnival's overhead costs in the FEMA operation are far
lower than during normal cruises. The Carnival ships are docked. No fuel
is being used and no entertainment is being provided to the relief
workers. Yet, taxpayers are paying $2,550 per guest per week, which is
four times the cost of a $599 per person '7 Day Western Caribbean'
Cruise from Galveston, Texas."

Another thing that seems straightforward: the government should not be
contracting with companies that have made a habit of ripping it off, or
engaging in illegal and irresponsible activities. (That happens to be
existing U.S. law, which stipulates that the government should contract
only with "responsible prospective contractors.")

There are many companies that one might reasonably argue fail this test,
but it would be hard to identify a corporation that fails it more
miserably than Halliburton.

Noting this, 19 members of the Congressional Progressive Caucus last
week wrote to President Bush, urging that Halliburton be "suspended from
any hurricane damage assessment and reconstruction contracts until the
many ongoing investigations into the company are completed."

The abridged version of Halliburton's wrongdoing cited in the
Progressive Caucus letter includes:

* Bribery. Halliburton has admitted that its KBR subsidiary "may" have
bribed the government of Nigeria for the purpose of winning a
multi-billion dollar construction contract.

* Bid-rigging on foreign projects. The Justice Department has initiated
a criminal inquiry into Halliburton for bid-rigging in connection with
the company's work on foreign construction projects.

* An epidemic of fraud and waste in Iraq: The company has allegedly
charged taxpayers $45 for a pack of soda. The inspector general for the
U.S. Coalition Provisional Authority found Halliburton charged the
government $2.85 million for hotel costs in Kuwait even though cheaper
housing arrangements were available. A defense audit agency says the
company overcharged for fuel by more than $200 million, and jacked up
the price of meals served to troops. (Is it really the case that the
army can't feed itself?)

(For a full dossier of Halliburton wrongdoing, and text of the
Progressive Caucus letter, see <halliburtonwatch.org>.)

The Progressive Caucus call was hailed by our colleagues at the Center
for Corporate Policy and Halliburton Watch. "The feeding frenzy of
contracts being handed out to well-connected cronies and crooks
threatens to add taxpayers to the list of those victimized by the
administration's disastrous response to Katrina, just like we saw in
Iraq," says Charlie Cray, director of the Center for Corporate Policy.
Cray warns of the dangers of "a flood of fraud in the future."

While federal rules are designed to ensure the government contracts with
firms that will do the work they are supposed to do honestly and in
accord with labor, environmental and other relevant standards, the idea
of suspending or debarring bad actor companies from getting their hands
in the government till has some other, not-so-trivial benefits.

The U.S. government spends more than $250 billion a year on goods and
services. It is the largest consumer in the world. In many industries
and for many companies, it is a crucial customer -- if they can't get
government business, they will feel real pain.

Thus, even occasional application of the contractor responsibility
standard against Fortune 500 companies would have a major deterrent
effect on corporate crime and abuse.

Of course, Halliburton is not just another company, and so the odds of
the Bush administration taking up the Progressive Caucus recommendation
are not great.

On the other hand, who would have imagined President Bush, as he did
last week, ordering federal agencies to "conserve natural gas,
electricity, gasoline, and diesel fuel to the maximum extent consistent
with the effective discharge of public responsibilities?"

Hurricane Katrina has stirred things up in Washington as well as the
Gulf Coast. Opportunities are opening not just for the profiteers who
hope to capitalize on the misery inflicted by Katrina and Rita, but for
advocates of social and environmental justice, as well as for a modicum
of corporate accountability.


Russell Mokhiber is editor of the Washington, D.C.-based Corporate
Crime\ Reporter, <http://www.corporatecrimereporter.com>. Robert
Weissman is editor of the Washington, D.C.-based Multinational Monitor,
http://www.multinationalmonitor.org, and on the steering committee of
the Center for Corporate Policy. Mokhiber and Weissman are co-authors of
On the Rampage: Corporate Predators and the Destruction of Democracy
(Monroe, Maine: Common Courage Press).

(c) Russell Mokhiber and Robert Weissman

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