The Spoils of War - Halliburton subsidiary KBR got $12 billion worth of exclusive contracts for work in Iraq.

Halliburton subsidiary KBR got $12 billion worth of exclusive contracts for work in Iraq. But even more shocking is how KBR spent some of the money. Former U.S. Army Corps of Engineers official Bunnatine Greenhouse is blowing the whistle on the Dick Cheney–linked company's profits of war...

By MICHAEL SHNAYERSON - Vanity Fair

This time, she was sure, they were going to get her.

Bunnatine Greenhouse had been a huge nuisance since the buildup to the war in Iraq—questioning contracts, writing caveats on them in her spidery script, wanting to know why Halliburton and its subsidiary KBR (formerly known as Kellogg, Brown and Root) should be thrown billions of dollars of government business while other companies, big and small, were shut out.

And Bunny Greenhouse wasn't that easy to ignore: she was the highest-ranking civilian at the U.S. Army Corps of Engineers (USACE). Specifically, she was the officer in charge of ensuring that any work contracted out by the Army Corps to private industry—from help in building bridges and dams and highways to support for wartime troops—was granted in a fair and aboveboard way. For two years, Greenhouse had asked hard questions about why the head of the Corps, to whom she reported directly, kept giving exclusive, non-compete contracts to KBR that now amounted to roughly $10.8 billion. Greenhouse was fearless, and she was blunt. In the Corps's male hierarchy, it probably didn't help that she was a woman—or that she was black.

On October 6, 2004, Greenhouse was summoned by the Corps's deputy commander, Major General Robert Griffin. She knew that the top brass was eager to finalize the Corps's latest contract for KBR, a $75 million extension for troop support in the Balkans. Already it had gone through several drafts, mostly because Greenhouse kept questioning the rationale for giving it to KBR without competitive bidding. What she didn't know was that her superiors had closed ranks against her.

When Greenhouse entered the general's office, he handed her a letter that explained she was being demoted for poor performance—a curious indictment, given that she'd received high performance ratings before the war. The demotion would knock her down to the government rank of GS-15. That was like going from senior vice president in a Fortune 500 company to middle management. She could retire instead with full benefits if she liked, the letter went on to say. She was, after all, 60.

Greenhouse chose a third alternative: she hired a lawyer and began to fight.

All through last year's searing presidential campaign, the mere mention of Halliburton stirred fury and bitterness in the blue states. How, Democrats asked, had the Houston-based oil-and-gas conglomerate won all those deals to provide services to troops in Iraq? What role had Dick Cheney played behind the scenes, given that the vice president had been Halliburton's C.E.O. from 1995 to 2000, walked away from the job with an estimated $35 million, and continues to get six-figure deferred-salary compensation from the company, despite his denials that he does? True, Halliburton's $12.5 billion division KBR had expanded over the years from oil and gas to do lots of government work: about half of its 60,000 employees in 43 countries handle military needs, from building bases to serving food. But other companies—Fluor for one, Parsons for another—service the military, too. Why hadn't they been considered?

Worse, KBR appeared to have mismanaged the work it got. At various hearings of the House Committee on Government Reform last year, ranking minority member Henry Waxman (a Democrat from California) turned livid as he detailed charges of reckless spending, chaos in the distribution of supplies, and profiteering by KBR executives—charges less often refuted than shrugged off.

Waxman had gotten many of his talking points from a plucky group of whistle-blowers: contract staffers and truckdrivers who'd worked for KBR in Iraq. Their view was from the ground, with startling allegations of how KBR operated—and operates still—on a day-to-day basis in the war zone.

Greenhouse, though, is the first to offer that view from a top-down perspective. The picture that emerges when her account is added to the others is of a company much like the law practice in John Grisham's novel The Firm: a rogue operation, with corrupt management, cynically conning the federal government as it rakes in billions of ill-earned taxpayer dollars.

Greenhouse knows how KBR got those contracts in the first place. She also thinks she knows why.

Not surprisingly, Greenhouse is a bit late one evening in Washington when she bustles into the offices of her lawyer, Michael Kohn, with an armload of documents. She's still at her job, having invoked protection under the whistle-blower law of 1989, which keeps federal employees from being fired or demoted until an investigation is conducted. Between doing her job and preparing her case, she's got a lot to juggle.

Broad-shouldered and ebullient, Greenhouse radiates the conviction of her faith as a charismatic Catholic. She's sung in a Sunday church choir her whole adult life, and it's easy to imagine her there: she's the one in the back row with the booming voice. "Back in 1970, God impressed upon me that I was to be a fisher of men," she declares. "I didn't know what that meant. But now it's all falling together. Something good is going to come out of this. And more people who are lost right now are going to come into His fold."

Greenhouse has an up-by-the-bootstraps, all-American story. She was raised in the segregated cotton town of Rayville, Louisiana. Her father never made it to third grade. But he operated the steam compress in the middle of town that turned picked cotton bolls into bales, so he was, as his daughter recalls, an important figure in the community. He and his wife, a fervent Bible reader, urged their six children to strive for excellence, and that they did. Most earned advanced degrees. Bunny was valedictorian at Baton Rouge's Southern University and went on to acquire three master's degrees, all related to her work at the Corps. One of her brothers chose to excel in basketball. No one who follows the game has forgotten the Washington Bullets' and Houston Rockets' Hall of Famer, Elvin Hayes.

In 1965, Bunny married her college sweetheart, and when Aloysius Greenhouse became an army procurement officer—overseeing the purchase of supplies and services—she followed him on postings around the country and in Europe, teaching high-school and college math as she went. The only time they were apart was when her husband went to Vietnam, serving in the infantry—two tours, Silver Star. Eventually, Bunny went into procurement herself, for both government and industry. In 1997, General Joe Ballard, the Army Corps's first black chief engineer, brought Greenhouse in as the Corps's top procurement officer. He wanted her to shatter the cronyism that had led to bad contracts, and so she did.

At the Corps, as at other government agencies, senior officers often leave for cushy jobs with the very companies they negotiated with on the government's behalf. Especially the biggest ones, such as Halliburton and Parsons. Greenhouse's mission was to be sure some of the pie was saved for small and minority-owned businesses. That wasn't just policy—it was the law. Greenhouse had to sign off on every contract valued at more than $10 million. On no less than 50 of the documents she signed, she added clauses and conditions to make sure the law was upheld. There was grumbling from the start, and after Ballard, her mentor, left in 2000, she says, underlings started chopping big contracts into parts worth less than $10 million to try to evade her scrutiny. She could deal with that. But then came the war in Iraq, with its promise of glittering profits. And suddenly everything changed.

"The meeting was in the Pentagon—one of those really secure rooms," Greenhouse recalls. The date was February 26, 2003, three weeks before the Iraq invasion. The Army Corps's Lieutenant General Carl A. Strock was there; Greenhouse says he was the one who would lead the campaign to ax her 20 months later. There, too, were representatives from Defense, State, USAID and others, several dozen in all. A major item on the agenda was deciding which outside contractor would get the multi-billion-dollar job of putting out the oil-well fires that Saddam Hussein's troops would presumably set once the invasion began, and then getting the wells operating again. The project was to be known as RIO, for Restore Iraqi Oil.

Several U.S. companies had the know-how. Texas-based GSM Consulting, for one, had done such work in the wake of the Gulf War. Yet the assumption in the room was that KBR had the job—an assumption underscored by the extraordinary presence of KBR representatives at the high-level government meeting. "They came in late—it was a snow day," Greenhouse recalls. "I was just flabbergasted."

Greenhouse knew that the previous fall KBR had been paid $1.9 million to draft a contingency plan for how RIO should unfold. But that was reason enough not to let KBR do RIO. It was strict protocol in the procurement business that the contractor who drew up the contingency plan for a job should not be allowed to bid on the job itself: he'd know the exact budget and other details that would give him an unfair advantage. Yet here was KBR sliding into the job without an eyebrow raised—precisely because, as the participants at the meeting agreed, it was the only company that met the criteria outlined in its own contingency plan! To Greenhouse's greater shock, the senior officers and the KBR representatives around the table spoke of a sole-source, non-compete contract that could last five years. In the first of many detailed responses to Vanity Fair, KBR notes that the Government Accountability Office (G.A.O.) concluded that the RIO contract was "properly awarded." But the G.A.O. also concluded that the $1.9 million contingency plan on which RIO was based was improperly awarded.

Worst of all, the contract would be "cost-plus": KBR would just submit bills for whatever it spent, and the government would reimburse it, adding fees of between 2 and 7 percent as KBR's profit. It didn't take a genius to see that the more money KBR spent, the more profit it would make. KBR says that its award fee of up to 5 percent on RIO is based in large part on its ability to control costs. But the G.A.O. has concluded that KBR let costs spiral out of control.

Incensed, Greenhouse went over to whisper in Lieutenant General Strock's ear that the KBR people had to leave the room. The general complied with her request, but seemed adamant that KBR get the job on the grounds of "compelling emergency." All Greenhouse could do was insist that the contract be limited to a year.

The next day, the final contract was submitted to Greenhouse for her approval. The basic terms—five years, non-compete, cost-plus—remained. Greenhouse signed—the country was, after all, on the eve of war—but only after writing, "I caution that extending this sole source effort beyond a one year period could convey an invalid perception that there is not strong intent for a limited competition." (In light of the pending investigation into Greenhouse's charges, the Army Corps declined to comment on any details of her case.)

To KBR, the contract was potentially worth $7 billion—just the start of its business from the war in Iraq.

There were signs, though no proof, that Vice President Cheney, or someone in his office, had played a part in tipping RIO to KBR. Certainly, his office had been informed of the decision to award the RIO contingency plan to KBR. Michael Mobbs, a political appointee who reported to Undersecretary of Defense for Policy Doug Feith, acknowledged to Congressman Waxman's staff that he had relayed the news that KBR would prepare the RIO plan to various White House officials in an October 2002 meeting. One of those officials was I. Lewis "Scooter" Libby, Cheney's chief of staff. (A Cheney spokesman, Kevin Kellems, subsequently told The Washington Post that Libby had kept Cheney out of the loop about the decision to use KBR for the plan.) And Time would unearth an Army Corps e-mail stating that the contingency plan had been "coordinated" with the vice president's office. As The Wall Street Journal reported, Halliburton executives then met directly with Cheney's staff. KBR, for its part, says the vice president had nothing to do with any of its Iraq contracts.

Greenhouse herself saw another dynamic was at work. "I think what this was all about was that Rumsfeld had made very negative statements about the Corps," she says. Rumsfeld saw the Corps as a bunch of geeky engineers, mostly tinkering with public works in the U.S. He'd actually raised the idea of sliding the Corps over to the Interior Department, which oversees all federally owned lands. That was anathema to the Corps, in name and tradition an integral part of the U.S. Army. So Lieutenant General Robert B. Flowers, at that time the Corps's chief engineer, made it his goal to show Rumsfeld what the Corps could do. "He was pushing everything that he could to get the Corps in the limelight," Greenhouse says. So eager was he, Greenhouse believes, that Rumsfeld saw Flowers could be used.

Ordinarily, the Department of Defense would have coordinated the RIO contract. But Rumsfeld, Greenhouse theorizes, wanted to put some political distance between Defense and a sole-source contract for KBR that could prove embarrassing, even as it pleased the White House. So the Corps was willing to be used as the vehicle to push this through and have Halliburton get the $7 billion contract.

The Corps, Greenhouse thought, would take the heat for giving RIO to KBR, and in the process play a larger role in Iraq. With any luck, it would show Rumsfeld it was worthy of remaining in the U.S. Army. A Defense spokesman calls the theory far-fetched. "The Secretary of Defense can't do that on his own. Congress would have to be involved, the president would be involved, it would be a decision by the administration."

To everyone's surprise, the Iraqi oil fields sustained hardly any damage, from either U.S. bombs or Saddam's troops, in the "shock and awe" invasion of March 2003. So there wasn't much RIO for KBR to do. Gamely, the company suggested it change its job to handling Iraq's immediate fuel needs: bringing in truckloads of gasoline from Kuwait for military and civilians alike. That was fine with the Corps.

The other surprise was that U.S. troops couldn't just leave the country they'd conquered. They had to stay, and be housed and fed. That meant a lot more work for KBR, which already had a lucrative contract for troop support in the Balkans—a type of contract known by the awkward acronym of LOGCAP—and had persuaded the Corps to draw up a similar one for Iraq. Marie deYoung, one of the whistle-blowers who would later cooperate with Congressman Waxman, came to believe soon after her arrival in Kuwait as a logistics specialist for KBR, in December 2003, that LOGCAP had an almost built-in potential for chaos, abuse, and graft.

Dark-haired and lively, deYoung seems far younger than her 50 years, talking a blue streak as she sketches a life that's taken her from orchestral conducting to social work for the U.S. Army to the seminary and back to the army again, with time out to write or co-write two books (This Woman's Army and Women in Combat) and be a television and radio commentator on social issues in the military. Thorough and seemingly tireless, she promises to follow up on a first interview by sending documents by e-mail. By day's end, she's sent 24 e-mails, with documents attached to each one.

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