Army Corps of Engineers Spokesperson Lt. Col. Gene Pawlik

DATE June 17, 2003 ACCOUNT NUMBER N/A
TIME 12:00 Noon-1:00 PM AUDIENCE N/A
NETWORK NPR
PROGRAM Fresh Air

Interview: Charles Lewis discusses ties between members of the
Bush administration and the defense industry and questions of
conflict of interest regarding lucrative contracts to rebuild Iraq
TERRY GROSS, host:

This is FRESH AIR. I'm Terry Gross.

Three wars have been fought during the Bush administration: the wars in
Afghanistan and Iraq and the ongoing war on terrorism. The weapons and
security systems required for these wars have led to some lucrative contracts
for the defense industry. Questions have been raised by watchdog groups,
members of Congress and journalists about ties between members of the Bush
administration and defense contractors: Do these ties represent conflicts of
interest?

The group the Center for Public Integrity has been examining these questions.
My guest is the founding executive director, Charles Lewis. The Center for
Public Integrity describes itself as a non-profit, non-partisan research
organization that investigates corruption and abuse of power by governments,
corporations and individuals involved in the political process.

I asked Charles Lewis to give us an overview of what he sees as the conflicts
of interest surrounding the Bush administration's ties to the defense
industry.

Mr. CHARLES LEWIS (Founding Executive Director, Center for Public Integrity):
One of the things we have looked at is the Defense Policy Board, this group of
advisers to Defense Secretary Rumsfeld, and we found that nine of the 30
members of that board were working for or connected to companies getting $76
billion in contracts in the last two years. And we thought that looked a
little funny and pointed it out.

I'm actually wanting very much to look more closely at what's going on in the
reconstruction of Iraq, but actually the documentation is almost non-existent.
We want to know who's on the ground. Apparently only 17 percent of the people
on the ground are actually Department of Defense employees, and the rest are
private individuals working with companies, and we don't know who they are or
which companies are involved. And when journalists have tried to get this
information, they've been told it's not available.

You know, so the folks that are sort of making money from this and doing it as
a business, that dimension of it is thwarted by the public and journalists and
folks that want to find that out, because that information is not available
from the Pentagon in this instance.

There's been quite a bit of controversy in recent weeks and months about
certain companies getting pretty cushy contracts, a select group of friendly
companies with long ties to the Republican Party or the Bush administration.
Bechtel is one of those companies. Another one, of course, is Halliburton,
the vice president's former company that he was the CEO of. And so we have
looked at all of those kinds of issues.

But what you're really seeing here is we have a defense contractor class which
is getting bloated up even larger because of what's happened with September
11th and what's happened in Iraq and the fact we've had two wars in two years.
I mean, a lot of companies are well positioned to do well contractually; in
other words, in terms of money. And the amount of scrutiny and the amount of
discussion about it is not what it ought to be, I think.

GROSS: Well, let's start with the Defense Policy Board...

Mr. LEWIS: Sure.

GROSS: ...which your group has investigated. First of all, describe what it
does. It's not a well-known group to the public.

Mr. LEWIS: Well, it isn't. There are a lot of advisory groups in Washington,
and this is one of them. It was created in 1985 to provide back-channel
advice to the secretary of Defense and his top people. And it's comprised of
a sort of Who's Who of the defense military establishment essentially, folks
from high positions in the sort of foreign policy and military arenas over the
last, you know, couple, two, three decades. Both parties are represented.
You have generals, you have admirals; you know, these are all formers. So
it's 30 people, and they meet at least four times a year in classified
meetings, two- and three-day-long meetings, and they discuss whatever the
secretary of Defense and his people want to talk about. They have financial
disclosure forms about their assets and their financial interests, but no one
can see them. It's only available to the Pentagon internally. And so that's
what they do.

They advise on munitions programs, new technologies. They might be interested
in getting involved in--and, you know, this is obviously for investors and for
the private sector. What goes on in these conversations is of immense
interest. And the folks on this board have incredible access and influence,
because they have the ear of the secretary of Defense and his top people.

GROSS: And you found that some of the people sitting on this board actually
have ties to defense contractors. What are some of the connections that you
found?

Mr. LEWIS: Well, I mean, one of my favorites--I say that with a slight
smile--Chris Williams was an aide to Donald Rumsfeld as Defense secretary, and
he left, went out into the private sector and became a lobbyist. And he went
to work for a lobbying firm that was mostly an energy lobbying firm. A former
Louisiana senator who was the energy chairman on the Senate started a lobbying
firm called Johnston and Associates. And so he joins that firm, and then he
starts--he clearly was hired to help broaden the firm from energy into other
areas.

Everyone sees there's a bonanza going on here, that if you're dealing in
anything with national security, defense or homeland security, the place to be
is in and around the Pentagon or this new Department of Homeland Security.
This is where the action is and where the money is and, frankly, where the
contracts are. And so if you're a lobbying firm and you're already getting
energy-type contracts because of your clout and your contacts but you want to
broaden, you hire a guy who used to work for Rumsfeld. It's a tried and true
method in Washington, the mercenary culture; people go into the private
sector, they substantially increase their salaries, they use their Rolodexes
and their personal contacts that they've built up over the years to make
money; not just for themselves, but for their new bosses, their new companies.

Williams brought in, I think, Boeing, TRW and Northrop Grumman into that firm,
which had been mostly an energy firm, and at the same he's on the Defense
Policy Board. And so now, you know, he's making huge sums of money. I don't
know how much exactly, but it's got to be well into the six figures, probably
triple, quadruple what he was making at the Pentagon as a public servant. And
he has access on a regular basis to the secretary of Defense and his top
people and a classified clearance on top of that. So he has the best of all
worlds.

GROSS: So when you say that he brought in these other companies, do you mean
he got contracts for them or he represented them as a lobbyist?

Mr. LEWIS: Right. I'm sorry. He got lobbying contracts for them. You know,
usually they run $100,000, $200,000, $300,000 a year for him on a monthly
retainer, but usually for a year or more. So TRW is hiring Johnston and
Associates to do their bidding in Washington, to try to grease the skids and
make sure that they get access to lawmakers when they need them both on the
Hill and downtown, the executive branch. That's kind of how Washington works
in all departments but especially and including the Defense Department.

GROSS: What are some of the other connections between members of the Defense
Policy Board and the defense industry?

Mr. LEWIS: Well, former Secretary of Defense Harold Brown, who served under
Jimmy Carter, and James Schlesinger, former CIA director under the Carter and
Nixon administration, both have ties to defense contractors. They are on the
boards of companies. Brown is on the board of Philip Morris, which actually
has defense contracts, which I didn't know before, and he's a trustee of the
Rand Corporation, which, of course, gets lots of contract work; had $83
million in contracts last year and $146 million the year before. That's the
Rand Corporation I'm talking about. Schlesinger is with Lehman Brothers, the
big Wall Street firm, and is the chair of the board of the M-I-T-R-E, Mitre
Corporation, a not-for-profit big defense place that got over $470 million
last year in contracts.

Some other cases are: former CIA Director James Woolsey, who's a vice
president of Booz Allen and Hamilton, which is one of the biggest defense
contractors around in Washington. They took in $680 million last year in
contracts. You know, you have Jack Sheehan, a retired general, who is with
Bechtel. Bechtel got a billion dollars last year and 650 million in 2001.
Sheehan is on that board. And you have--you know, there's a whole number of
people here really. You have Ronald Fogelman, a retired Air Force general,
who's on the board of companies that took in $900 million last year. You have
retired Admiral David Jeremiah, former vice chairman of the Joint Chiefs, in
the Navy 38 years, who is a director or adviser to five corporations that have
taken in $10 billion in contracts last year.

And so, you know, I could go on and on. And, of course, the one that has got
the most attention is Richard Perle, who was the chair of the Defense Policy
Board, who, after articles in The New Yorker and The New York Times and other
places, had to step down as chairman, although he still serves on the Defense
Policy Board. He did not leave the board. He just left as chair.

GROSS: What were the conflicts presented to him?

Mr. LEWIS: There were several news stories, actually. One was there was a
company called Trireme that was trying to do business with homeland security
and defense contracts, and he was meeting with these folks as a private
citizen and as an investor, and they were clearly trying to find out what he
knew. And he was obviously a big proponent of the war in Iraq and other
defense policies and has the ear of not only Defense Secretary Rumsfeld but
others in the White House itself. And so there was a solicitation where his
name was on it and it mentioned that he was with the Defense Policy Board, so
he was making no bones about his ties to the administration and his
quasi-public official status on this advisory unpaid board. So the story was
that he was trying to make money on the side while he was on the Defense
Policy Board.

And then other stories came out: He was getting a $750,000 fee for advising
Goldman Sachs on how to invest in the Pentagon and in weapons systems that
might be coming up. The Los Angeles Times did a more recent story where they
took the minutes of the meetings of the Defense Policy Board where certain
things like North Korea and Iraq were discussed, but like, `Where are we going
to go next? And what's the next hot spot in the world?' And that would be
discussed in a classified context, and then he would give a talk and pick up a
half a million or a three-quarter of a million dollar fee to advise investors
around the world for Goldman Sachs on defense investment opportunities. And
so there has been and continues to be the suspicion that Perle is making money
from his position on the Defense Policy Board, which he, of course, vehemently
denies. And when the first story came out, he called the reporter a
terrorist, so the tempers have been flaring there.

But interestingly, no one in the administration asked him to step down from
the Defense Policy Board. No one thought that these associations were
untoward or, you know, embarrassing to the administration. It was something
Perle says he did to protect the administration basically.

GROSS: So sum up for me what you think the problem is when somebody on the
Defense Policy Board is also connected to the defense industry.

Mr. LEWIS: Well, I think the problem is we don't know who they're really
working for. The problem is--look, we want our generals and our policy-makers
of defense to have the benefit of decades of knowledge and prior public
service and experience, and I don't think anyone can argue that that's a bad
concept on its face; of course that makes sense. But if you're going to
interact with folks who have contracts with the government and who stand to
directly or indirectly make money from their association with the current
government officials, then you better disclose what they're doing; you better
have information about who serves.

And the fact of the matter is you can't find out anything about these people.
We investigated them using public documents in various parts of Washington and
commercially available databases, like LexisNexis and those kinds of places,
to stitch together who these people are from hundreds if not thousands of
sources around the world. But the actual disclosure forms that they have to
file to the government are not public. Well, that means they're not
available. That means there really is no disclosure. That means there's no
transparency about this activity. And I have a problem with that.

I think they have a basic standard of a requirement that we be assured that
they're not self-dealing. And I don't care that they have ethics officials
internally. None of those officials noticed any of the things I just
mentioned. None of them thought there was any problem whatsoever. So the
watchdogs over there at the Pentagon appear to be sleeping as far as I can
tell.

So the only thing to protect the public is information about what they're up
to. And right now this administration is one of the most secretive
administrations when it comes to public information of any we've seen in
decades, actually. And, you know, with this Defense Policy Board they should
at least tell us more about these people.

Now some of the people serving on this, like Henry Kissinger, a former
secretary of State, who declined to serve on the September 11th commission
because he didn't want to disclose who his clients were, is serving on the
Defense Policy Board because he does not have to disclose those clients. And
if there was a requirement, some of them would quit. I have no doubt. But I
also think there's lots of Americans, hundreds and hundreds of Americans, who
have enormous experience who are not looking for the next contract and would
not have a problem with disclosure. I happen to think in this democracy we
have an obligation to protect the trust and to hold these folks accountable,
and I just think that's essential. And right now that's not a commonly held
value across the river.

GROSS: My guest is Charles Lewis, the founding executive director of the
Center for Public Integrity. We'll talk more after a break. This is FRESH
AIR.

(Announcements)

GROSS: If you're just joining us, my guest is Charles Lewis. He's the
founder and executive director of the Center for Public Integrity, and this is
a group that researches corruption and abuse of power by governments,
corporations and individuals involved in the political process.

Let's look at some of the charges that there are conflicts of interest now in
the contracts that are being handed out for the rebuilding of Iraq. Why don't
we start with Halliburton? And this is the company that Vice President Cheney
headed from 1995 to 2000. What does Halliburton do?

Mr. LEWIS: They're an oil services company. I mean, they're best known for
going around the world and--they don't drill oil, but they help develop the
oil fields, the actual equipment and the manufacture of oil. It's sort of one
of their key areas of business. Halliburton is also a very large
multibillion-dollar company and they have subsidiaries. And Kellogg Brown &
Root is one of their subsidiaries, and they do a lot of military logistics
work where they do contracts on the ground, helping to serve the food, help to
provide the latrines, help to do a lot of the things that government used to
do but now companies like KBR do.

And so, you know, when Cheney was elected vice president, a lot of the
discussion was, `We have two oil executives as president and vice president,'
with Mr. Bush and Mr. Cheney, but actually Halliburton is also a major defense
contractor, because of KBR mostly, the subsidiary. And so that's what they
do. I mean, there's other parts of the company as well, but that's probably
what we're talking about now.

And so Halliburton--you know, this is not well-known, but in 1992, Halliburton
and its subsidiary KBR got a contract worth several million dollars from
Secretary of Defense Dick Cheney back in 1992 after the Gulf War to look at
ways to do more privatization of some of these military logistics issues that
occur at the Pentagon when they're in various danger zones around the world,
having companies come in and do what used to be done by Pentagon officials and
Department of Defense officials and soldiers, basically. And so they did a
study that said, `Yes, this is a great idea. You should start doing this more
and more. It's much more efficient, etc.'

And after they get the contract in '92, Cheney becomes CEO of the parent
company, Halliburton, two years later. This is a guy who had no business
background whatsoever--had been a government official at high levels for many
years, from the '70s on, but had never run a company--and was brought in to
increase the public contract exposure and--more than exposure, their basic
revenues from government funds, government taxpayer money contracts.

And over the next eight or nine years, KBR got something like a thousand
contracts. There were approximately 3,000 contracts given out over the next
decade--you know, that's mostly the Clinton administration, but also into the
current Bush administration--giving these kinds of military logistic contracts
out to KBR and other companies. And I think the second-biggest recipient of
these contracts, hundreds and hundreds of them, was KB&R. So when we then
find out that Halliburton and KBR are getting contracts in Iraq, it suddenly
had a certain deja vu all over again feel to it because this is a company that
has benefited from its association with Cheney for many, many years. And
so...

GROSS: What's the contract that Kellogg Brown & Root has now in Iraq?

Mr. LEWIS: Well, you know, I think KB&R probably has many contracts, but the
one that got a lot of press, I think, in recent weeks and months was the
contract in Iraq from the Army Corps of Engineers. There was a $7 billion
sole-source contract--meaning, no one else was asked to bid on it--to help
clean up the oil fields and help out in general with the postwar Iraq. And
KB&R got this contract, again, with no other bidders, and no one knew about
the contract for months and months, until a congressman from California, Henry
Waxman, made a big issue of it. The media and the public really didn't know
much about it at all; in fact, they didn't know it existed.

GROSS: Charles Lewis is the founding executive director of the Center for
Public Integrity in Washington, DC. We'll talk more about the Bush
administration, the defense industry and questions regarding conflict of
interest in the second half of the show.

I'm Terry Gross, and this is FRESH AIR.

(Soundbite of music)

(Announcements)

GROSS: Coming up, we continue our conversation with Charles Lewis about ties
between the Bush administration and the defense industry. Then we talk with
Lieutenant Colonel Gene Pawlik, a spokesperson for the Army Corps of
Engineers, which awarded Kellogg Brown & Root the contract to repair the oil
fields in Iraq.

(Soundbite of music)

GROSS: This is FRESH AIR. I'm Terry Gross, back with Charles Lewis, the
founding executive director of the watchdog group the Center for Public
Integrity.

We're talking about ties between the Bush administration and the defense
industry and whether they represent conflicts of interest. When we left off,
we were talking about the contract given by the Army Corps of Engineers to
Kellogg Brown & Root, KBR, a subsidiary of Halliburton, which was headed by
Dick Cheney before he became vice president. The contract was awarded in
secret before the start of the war in Iraq. Last March, the Army said that
KBR had been given the contract to put out oil fires that might be set in Iraq
during the war. More recently, the Army admitted that the role of KBR is
broader, encompassing rebuilding oil fields and distributing oil.

Mr. LEWIS: Suddenly, things looked a little different to lots of people. I
mean, it was one thing to fix the oil fields; it's another thing to start
pumping oil and assisting in the oil production. And then suddenly, a lot of
people felt frustration because, once again, the public didn't really know
what was going on. They weren't told initially. And then you've got the vice
president's former company getting lucrative contracts, secretly in many
cases.

The contract itself, the major one, the $7 billion most-publicized contract,
has never been released. We don't know what the contract looks like. It's
classified. And so, you know, there is an aura of secrecy around it. And to
many people in Washington, the contract and the arrangement smells up to high
heaven and they're angry about it and they think it should be investigated,
but it's not happening.

GROSS: But Congressman Henry Waxman is leading an investigation into KB&R's
contract in Iraq, isn't he?

Mr. LEWIS: Well, he is, but let's back up a second. I mean, Henry Waxman is
one of the smartest and most experienced members of Congress today in
Washington. But he happens to be a Democrat, and that means he does not have
a committee, that means he cannot hold a hearing, it means he cannot issue a
subpoena because the Republican majority will not issue a subpoena frequently,
especially if it involves or could embarrass the president or the vice
president.

So Henry Waxman is doing an investigation without any of the traditional
investigative tools that help to get at the truth. And so I think he's done a
public service unleashing or, you know, getting information to the public that
we couldn't get otherwise: contracts and letters and correspondence that give
you some insights that reporters and the public can't get, but he's also going
to hit a wall here, if he hasn't already, because it's sort of, as Howard
Cosell once said, `a spitball against a battleship.' He's one lone member
trying to fight and find information about something, and the powers that be
are only going to occasionally tell him something, and it'll be very small,
whatever it is they give out to him.

GROSS: How do you prove conflict of interest? Here's what I'm thinking. You
know, you could argue that, you know, Vice President Cheney, because of his
work in government, is particularly well-suited to have headed Halliburton
because he understands the industry, he understands defense, he understands
other governments, he understands the way the world works. Likewise, his
experience as the CEO of Halliburton could really be benefitting him now as
vice president, because he understands how the defense industry works and he
understands how companies use the contracts that they get and what it takes
for them to do the work they need to do; for instance, in rebuilding the oil
industry of Iraq. So maybe this isn't a conflict at all. Maybe it's just a
mutually beneficial thing, and we should all be very pleased about it. How do
prove that it's a negative? How do you prove that it's a conflict?

Mr. LEWIS: Well, I mean, you know, that's a great question. And obviously,
there are a number of people that think this is outrageous to sully the good
name of the vice president or these companies that are doing God's work on
behalf of all Americans, and so this is an important question. And, you know,
fairly or unfairly, it's a glass of water half full and half empty. Yes, we
want people with experience. We want companies that know what they're doing
that are competent and have done things over the years on behalf of the United
States. Yes, we want all those things. But we also want openness and
transparency and rule of law. And if the company has committed fraud or paid
fines for misleading the public, maybe they shouldn't get contracts. Well,
none of that's enforced. We don't have accountability. People do commit
fraud and abuse and they keep getting contracts. Halliburton is one of those
companies.

And so the conflict of interest--it does look weird that you've got--you know,
it's not every day that a sitting CEO becomes vice president, which is sort of
what happened to Dick Cheney. And, you know, in some ways is Halliburton
being unfairly maligned because their former CEO happens to be the vice
president? Are they getting a little brighter light shined on them than all
the other contractors also getting contracts? Probably the answer is yes.

There is a great deal of suspicion all over the world that we went into Iraq
for commercial profiteering reasons, and not just oil. And, you know, when
people see these kinds of companies doing business without bidding, without
any public information about their activities, it does make people scratch
their heads. And you know what? That's OK. That's normal. That's called a
democracy. And I think--no one is suggesting that Dick Cheney ordered that
contract. Freedom of information does not apply to the White House, so you'll
never find that out anyway. You'll never get his e-mails and you'll never see
his appointment calendars. You'll never see who he talked to. And I'm not
suggesting that he did that. The problem here is he doesn't have to do
anything. Everyone in the Pentagon knows that Halliburton is Dick Cheney's
company.

And so it's complicated. Your question's a complicated one because how do you
prove that? It's one of those things where it kind of looks like hell, but it
probably is legal and almost certainly is legal.

GROSS: Do you think that the appearance of conflict of interest is important?
In other words, is the appearance of a possible conflict of interest serious
enough to try to avoid? Or do you think conflict of interest needs to be
proven, that it needs to rise to some kind of higher threshold before it
becomes a serious issue?

Mr. LEWIS: Well, again, I actually am OK that there's two standards: a legal
standard, which is a very, very tough, very, very high standard to prove,
which is why you hardly ever see it prosecuted, and then the kind of domain of
public discourse. If things look a little peculiar and it looks like there's
a wink-wink and someone got a contract but you can't prove it, but it looks
kind of strange and suddenly, they've gotten 10 contracts over a period of
time, that's an open society discussing current events and the public's money
being spent. And that may be an apparent conflict of interest, it may have
the appearance and it may not be a legal violation of the conflict-of-interest
laws.

But the public has the right to know who's making money, who's getting their
money and who's doing the public's business. And sometimes the people that
seem to get those contracts are extremely well-connected, and it does appear
like these things are related. And I happen to think that's an important
function in a democracy, to know all that. And if a company wants to avoid
looking like they're insiders and getting inside deals and inside contracts,
there's one very simply way to deal with it and it is to disclose, disclose,
disclose, disclose; put out information about the bid process, put out the
contracts, put out disclosure information when you're an adviser to a Defense
secretary about your holdings. And when you don't put that information out,
it looks bad to the public; it looks like you're hiding something. The famous
line, `Sunlight is the best disinfectant'--I happen to think that's right.

GROSS: Of course, in the corporate world, there's always a lot of secrecy
surrounding deals. They don't want to give away that information...

Mr. LEWIS: Right.

GROSS: ...to their competitors.

Mr. LEWIS: Right. And we see where we got with all that secrecy in the '90s
as dozens and dozens of companies' CEOs have been doing perp walks because
they lied and the board of directors didn't even know what they were doing.
And so I'm not sure how well served anyone was, including the shareholders, by
the excessive secrecy.

GROSS: Well, we've been focusing on the Bush administration, but have
Democrats been as--have the Democrats taken advantage of the revolving door in
the same way? Are there a lot of people from the Clinton administration who
are now in the defense industry?

Mr. LEWIS: Absolutely. We did a study a few weeks ago. It kind of got lost
in the din of Iraq. But we put out a report about the Clinton administration,
and where did the top 100 officials go after they left government. We found
that 50 or 60 of the 100 are lobbyists today in Washington, one way or another
connected to either law firms or corporate clients doing business with the
government one way or another, trying to get favors from government one way or
another. So in other words, it's a form of the revolving door. They're going
in and they're applying their wares as former high-level government officials
and now have probably tripled, quintupled their income by advising these
companies on how to operate with the government.

And so Democrats do this as well as Republicans. I mean, this is a bipartisan
phenomenon that's been going on for many, many years, for decades. And, you
know, when you have Defense secretaries like Harold Brown, who worked with
Jimmy Carter, working with companies getting defense contracts--now in
fairness to him, he'd say, `I'm just on the board of these companies; it's not
the same thing.' But you know, there are a lot of cases of Democrats now
making money and, you know, I've mentioned a few earlier.

GROSS: Charles Lewis, thank you very much for talking with us.

Mr. LEWIS: Well, thank you.

GROSS: Charles Lewis is the founding executive director of the watchdog group
the Center for Public Integrity in Washington, DC.

Coming up, Lieutenant Colonel Gene Pawlik, a spokesperson for the Army Corps
of Engineers, which awarded the contract to Kellogg Brown & Root to repair the
oil fields of Iraq. This is FRESH AIR.

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

Interview: Gene Pawlik discusses the awarding of a controversial
contract for work in Iraq by the US Army Corps of Engineers to a
company with ties to Vice President Dick Cheney
TERRY GROSS, host:

After our interview with Charles Lewis about ties between the Bush
administration and the defense industry and the questions those ties raise
about conflicts of interest, we wanted to hear the point of view from within
the Pentagon. Our interview requests were declined by the Pentagon's Public
Affairs Department and its Standards of Conduct Office, the inspector general
of the Department of Defense and Richard Perle, who recently resigned from his
position as chair of the Defense Policy Board, but remains on the board.

We were able to speak with Lieutenant Colonel Gene Pawlik, a spokesperson
for the Army Corps of Engineers, which awarded the contract to Kellogg Brown &
Root to restore the oil fields of Iraq. Kellogg Brown & Root, KBR, is a
subsidiary of Halliburton, the company which was formerly headed by Vice
President Dick Cheney.

Back in March, it was reported that Kellogg Brown & Root had gotten the
contract to put out the oil well fires in Iraq, you know, assuming that there
would be a war and that there would be oil fires. The contract was
controversial right from the start. The first issue was that it was a no-bid
contract. The contract was given out without letting any other companies bid,
and no one knew that this had happened until after the contract was made. Why
was it done like that, without competition?

Lieutenant Colonel GENE PAWLIK (US Army Corps of Engineers): Well, the
Kellogg Brown & Root had been previously engaged by the US Central Command to
do a study on what it would take to put out oil well fires in Iraq. Now their
preparation for doing this was based on the request by US Central Command, and
that was done under the authority of the logistics augmentation program, the
Log Cap program, which they had competitively been awarded a couple of years
ago.

You have to understand that, you know, Kellogg Brown & Root then, as having
been involved with the plan, when it came time to the US Army Corps of
Engineers being prepared to deal with the mission of putting out oil well
fires and addressing environmental hazards as a result of damage to the oil
infrastructure, our goal was to engage the company best positioned to deal
with that issue. And certainly, matters of security and the planning of going
into war would limit the ability to go out and do general contracting type
things. You know, i It's kind of hard to go out and do a wide bid advertising
and ask companies to be prepared to fight oil well fires, you know, on a
certain date in anticipation of war. And this was an element of that war
planning, so as with all the war planning, it's basically conducted in secret
and it's all classified, so it's not one of those things you go out and
generally advertise.

GROSS: Another question that was raised was that Kellogg Brown & Root is a
subsidiary of Halliburton, which is the company that Vice President Cheney ran
before he was vice president. Some people felt that Kellogg Brown & Root had
an unfair advantage for acquiring federal contracts because of that political
connection--because of that business connection to Vice President Cheney.
What's your response to that?

Lt. Col. PAWLIK: Kellogg Brown & Root was awarded the Log Cap contract a
couple of years ago in a competitive bid process. Their having won that
contract meant that they were positioned to be able to do this. So as far as
a conflict of interest or, you know, their ties to their parent corporation,
Halliburton, that really had nothing to do with our engaging their services.
The only thing that we were concerned with was who was going to be best
positioned to help us immediately deal with the threat that would be posed to
the environment and to the surrounding forces in Iraq if those oil wells were
put on fire.

GROSS: More recently, it's been reported that Kellogg Brown & Root is doing
more than just putting out oil well fires, which was what the contract was
originally supposed to be for, a lot of people thought. The contract also
includes doing repair work in the oil fields and actually getting oil pumping
again and, I believe, distributing the oil, as well. Is that right?

Lt. Col. PAWLIK: The distribution that Kellogg Brown & Root is involved with
for us over there is primarily in arranging the distribution of products that
are required for the Iraqi populace to maintain or continue their lifestyle,
being able to get fuel for their automobiles and being able to get gas for
cooking in their homes, which is their primary method of cooking. So under
the emergency services piece of the contract that we issued Kellogg Brown &
Root, we used that to help continue to make sure that the Iraqi populace had
access to the critical fuels that they would need so that they continue and go
about their lives and continue with the recovery of the country.

GROSS: Now there's a report from the Associated Press last Friday that said
that the costs have doubled for KBR's work in the past month, you know, in
Iraq, and it said that the US Army Corps of Engineers backed off on estimates
that a fully competitive replacement contract would be awarded by August.
What happened there?

Lt. Col. PAWLIK: Well, as far as the doubling of costs, the AP story that
makes it sound like this is a new breaking story kind of has it wrong in that
it's not giving the full story. We said, many months back--or not many
months, but many weeks back, that we expected that in the end result of the
Kellogg Brown & Root contract, that we would probably be somewhere around $600
million for the contract. So we had never said that, you know, we thought $70
million would be where we would wind up. Our expectation has been that it
would be more on the order of $600 million total for that contract. So the
fact that they reported that we were up to $180 million was really nothing out
of the ordinary for what our expectations are on that contract.

GROSS: And did you expect to open the process up to competition sooner that
you're actually going to be able to?

Lt. Col. PAWLIK: Well, that's always one of those--it's a process that's
hard to totally define at the outset, because we have to coordinate from the
Corps of Engineers, with the Department of the Army and also the Department of
Defense to lay out what basically the strategy is going to be for future
contracting. And then you have to make sure that within the bounds of all
that contracting that you're meeting all the regulatory requirements for, you
know, federal acquisition laws. You're looking at things like international
competition. You're trying to determine the exact scope of the work. Part of
those early estimates, we had not had the opportunity to go in and do a full
assessment of the Iraqi oil infrastructure.

There's a lot of factors that even still are influencing the process. There
was not as much damage to the infrastructure as what was anticipated as being
possible at the onset of the war. At the same time, you know, we're still
dealing with--you know, the country has a problem with looting that's being
dealt with. We have a number of issues. I mean, we had to wait for security
to be in place where it was safe for the contractors and others folks to go in
and actually do assessments on the infrastructure.

And then another factor that influences this whole process is how quickly are
the Iraqi oil companies going to be able to come back to work and be ready to
assume the mission, because the intent of this has always been to hand the
mission and hand the oil infrastructure and the oil operations back over to
the Iraqi people as soon as they were in a position to assume the oil mission
again.

GROSS: My guest is Lieutenant Colonel Gene Pawlik, a spokesperson for the
Army Corps of Engineers. We'll talk more after a break. This is FRESH AIR.

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GROSS: Let's get back to our interview with Lieutenant Colonel Gene Pawlik,
a spokesperson for the Army Corps of Engineers, which awarded the contract to
restore the oil fields in Iraq to the Halliburton subsidiary Kellogg Brown &
Root.

Over the past few years, Kellogg Brown & Root has done a lot of work for the
federal government. There have been charges against the company of fraudulent
accounting practices, of KBR overcharging the government for work they had
done. The Securities and Exchange Commission has been looking into these
charges. Is this something that the Army Corps of Engineers takes into
account when giving a company a major contract?

Lt. Col. PAWLIK: Well, our criteria, or one of the criteria, for looking at
a company that's going to be doing work is to go in and make sure that they
are on a list of federally, you know, approved companies for us to deal with.
And when we awarded the contract to Kellogg Brown & Root, there was no
prohibition against our dealing with them for that work, so it met our
requirement for engaging their services.

GROSS: Were you satisfied with their fiscal responsibility record? For
example, there are other questions that have been raised about KBR's work.
They have a major contract to run US military bases overseas, and the General
Accounting Office did an investigation of their work, found many questionable
costs and overcharges. So, you know, was that taken into account when giving
them the contract?

Lt. Col. PAWLIK: Well, what we're doing is--one of our main responsibilities
in this contract is to provide contract oversight. So all of the bills and
all of the claims for reimbursement and claims of costs of Kellogg Brown &
Root associated with this contract, we have contract oversight specialists who
are responsible for ensuring that all the proper documentation is in place,
that costs are justified and that the costs are in accordance with what would
be considered normal industry standards. So that's a role for the Corps of
Engineers, to ensure that, in fact, the contract and the contract costs are
administered fairly.

GROSS: Now correct me if I'm wrong, but my understanding is that when Dick
Cheney was secretary of Defense under the first President Bush, he
commissioned a study from Kellogg Brown & Root about what it would take to
privatize certain functions of the military, certain infrastructure kind of
functions. Brown & Root was given a lot of money to do this study, they did
the study and, of course, recommended that certain of these functions be
privatized. And then Dick Cheney, you know, left government, became the CEO
of Halliburton, which is the parent company of Kellogg Brown & Root, and at
that point, Kellogg Brown & Root starts getting a lot of these contracts for
privatizing some of the military's work. And then Dick Cheney goes back to
government, becomes vice president and now Kellogg Brown & Root has this big
lucrative contract in Iraq. So you could argue that it's Dick Cheney who kind
of helped put Kellogg Brown & Root in the position where it could get these
lucrative contracts, put them in the position, both through his work as vice
president and as CEO of Halliburton.

Lt. Col. PAWLIK: I don't know enough about all the details of the history
behind what you were just describing, nor would it probably be in my lane to
comment on a lot of that. What I will say is that the Log Cap contract, when
it was first initiated in the early '90s, was competitively awarded to Kellogg
Brown & Root, or Brown & Root Services at the time. From there, the second
Log Cap contract was competitively awarded to Dynacorp, and then one again in
the third contract by Kellogg Brown & Root.

Now this entire operation that the Corps of Engineers has undergone with the
combatting of the oil well fires, had Dynacorp been in position and still been
the holders of the Log Cap contract, they would have been the organization
that did the study and they would have been the organization that we would
have awarded the contract to, to engage in the oil well fire fighting.

GROSS: You know, there's a lot of questions of conflict of interest that have
been raised about the Bush administration and the defense industry. And, you
know, one of those questions surrounds Vice President Dick Cheney because he's
the former CEO of Halliburton, which is the company that has Kellogg Brown &
Root as a subsidiary. Sometimes in the conflict of interest world, the
appearance of a conflict of interest is bad enough to make you think twice
about going through with something. Did the Army Corps of Engineers ever
think, `Well, this is going to look bad. Even if there isn't really a
conflict, even if we don't really believe that there's a conflict between the
fact that Dick Cheney is the vice president and he used to be the CEO of
Halliburton--even though we don't really believe there's a conflict, there
might be the appearance of a conflict and that's going to look bad, so we
should really think twice about this?'

Lt. Col. PAWLIK: Well, the bottom line to all of this is we went into this
fully realizing that, you know, there was a perception out there, a possible
perception, associated with Kellogg Brown & Root being related to Halliburton
and their linkage to the vice president when he was formerly with the company.
But the bottom line to all of this is--mission execution and not perception is
our criteria for success. You know, so our engagement of Kellogg Brown & Root
meant that we were, in fact, able to get in their quickly and deal with the
oil well fires, in fact, very successfully and get those put out. So again,
you know, the mission execution is what we were really interested in. And we
went into this fully understanding that, you know, some people would raise an
eyebrow about engaging their services, but they were the company best
positioned to make sure that we were successful.

GROSS: Any final thoughts that you'd like to add, Colonel?

Lt. Col. PAWLIK: I would say the Corps of Engineers has done things the
right way. We engaged a company that was positioned to provided us with a
quick response to being able to deal with the environmental threat and the
hazards associated with oil well fires and damage to the desert. We continue
to work towards competitively bid contracts for future work in Iraq, and we're
actually very proud that almost our entire response over there has been
through volunteers from the Corps of Engineers who have responded to this
mission from all over the country to go help the people of Iraq get back on
their feet.

GROSS: Colonel Pawlik, thank you very much for talking with us.

Lt. Col. PAWLIK: And appreciate the opportunity to tell the Corps' side of
this.

GROSS: Lieutenant Colonel Gene Pawlik is a spokesperson for the Army Corps
of Engineers, which awarded the contract to the Halliburton subsidiary Kellogg
Brown & Root to restore the oil fields of Iraq. Earlier, we heard from
Charles Lewis of the Center for Public Integrity.

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(Credits)

GROSS: I'm Terry Gross.

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