By Charlie Cray
Published March 12, 2007
With various ongoing investigations, Halliburton’s sale of KBR and announcement that it will soon move to Dubai (in the United Arab Emirates), are tantamount to fleeing the scene of a crime.
It is currently in the process of divesting all of its ownership interest in the scandal-plagued KBR subsidiary, notorious for overcharging the military and serving contaminated food and water to the troops in Iraq.
Although Halliburton will still be incorporated inside the United States, moving its corporate headquarters to UAE will make it easier to avoid accountability from federal investigators. The company has proven adept at using offshore subsidiaries to circumvent restrictions on doing business in Iran and to elude responsibility for paying benefits to former employees.
Halliburton has also used its operational structure for contracts in Iraq and post-Katrina — especially multiple layers of subcontractors — to elude oversight and accountability to taxpayers.
Moving to UAE may also hinder ongoing government investigations into Halliburton’s alleged bribes paid to the government of Nigeria. CEO David Lesar, a former accountant who is presumably very adept at structural finance, supervised former KBR chairman Albert “Jack” Stanley during the time when KBR is alleged to have bribed Nigerian government officials. Stanley was subsequently fired after allegedly receiving $5 million in “improper” payments related the bribery scheme. Lesar, who was president and chief operating officer at the time, reported directly to then CEO Dick Cheney. According to the Dallas Morning News (9/8/04), “Mr. Cheney ran Halliburton when one of four suspicious payments occurred.”
The United States has no extradition treaty with the UAE.
Given the multiple ongoing investigations into Halliburton’s alleged wrongdoing, policymakers should closely scrutinize Halliburton’s latest move, and whether it will allow the company to further elude accountability. Moreover, this underscores the need for Congress to bar companies that have broken the law, or avoided paying taxes, from receiving federal contracts, which 18 members already suggested last year should immediately be the policy regarding Halliburton.
Sarah Anderson of the Institute for Policy Studies notes that most Fortune 500 companies have global operations, so that moving an entire headquarters to another country is not necessary. “With today’s technologies, there’s no real reason to have to physically relocate,” she said. “Those that have are trying to evade U.S. oversight and tax authorities. And Dubai is a tax-free haven — no corporate or employee taxes. Halliburton claims this is not a big deal, but I can’t imagine Lesar will be working over there alone in a little cubicle. This will be a much-expanded operation in Dubai.”
“Despite the billions in US government contracts Halliburton has received, it has no loyalty or sense of obligation to US troops or taxpayers,” she said, adding, “I find it ironic that Lesar is going to the same place as one of the only other individuals who’s received even more bad publicity in recent years — Michael Jackson.”
Martin Sullivan, contributing editor at the nonpartisan Tax Notes magazine, said relocating to the no-tax jurisdiction of Dubai would change Halliburton’s tax situation “significantly” even though the company would still be registered in the US. By re-locating its CEO and other top executives to Dubai, Halliburton can argue that a portion of its profits should be attributed to the no-tax jurisdiction, he said.
Halliburton earned a record $2.3 billion in profit last year. That’s almost equal to the $2.7 billion the Pentagon found in the company’s overcharges in Iraq.
Members of Congress have called for an investigation. Sen. Byron Dorgan (D-ND) said, “I want to know, is Halliburton trying to run away from bad publicity on their contracts? Are they trying to run away from the obligation to pay US taxes? Or are they trying to set up a corporate presence in Dubai so that they can avoid the restrictions that currently exist on doing business with prohibited countries like Iran?”
Sen. Patrick Leahy (D-VT) said, “This is an insult to the US soldiers and taxpayers who paid the tab for their no-bid contracts and endured their overcharges for all these years.”
Rep. Henry Waxman, chairman of the powerful House Committee on Oversight and Government Reform, has promised hearings into the matter. “I want to understand the ramifications for U.S. taxpayers and national security,” he said.
In addition to grilling Lesar about the regulatory and tax avoidance aspects of their announced move, the question of jurisdiction should also be raised w/relation to the company’s executives’ personal incomes.
Lesar has already managed to make about $50 million personally in recent years — much of it off the war on terror, while providing shoddy service to the US military. The guy is a former partner with Enron’s auditors, Arthur Andersen. So, it’s hard to imagine they’re really just interested in locating their executives near the action so they can deal with Sheiks and oversee all that welding and drilling.
The military manages to run CENTCOM, its Middle Easter command center, out of MacDill Air Force Base in Florida. Is Halliburton so special that they have to locate their top executives so near their field operations? What would an accountant know about drilling and welding anyway? Isn’t it more likely to be the case that they’d rather live in a tax haven so they can set themselves up to play more of the kind of shell games that they have been playing already in Iraq, Iran, Nigeria and elsewhere?
It looks like what’s really going on is that Halliburton has decided to construct a new globalized corporate crime strategy. What a fine export. And we were worried about Dubai running some ports!
Charlie Cray is the director of the Center for Corporate Policy, co-founder of Halliburton Watch, and co-author of the highly recommended The People’s Business: Controlling Corporations and Restoring Democracy.
© 2007 Charlie Cray
Previous features on Halliburton:
- It’s Time to Bar Corporate Criminals from Federal Contracting (also by Charlie Cray)