Halliburton 'Over Billing' Controversy

 
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Case Details:

Case Code : BECG042
Case Length : 15 Pages
Period : 1997-2004
Pub. Date : 2004
Teaching Note :Not Available
Organization : Halliburton Company
Industry : Oil and Energy
Countries : US, Iraq

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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The Controversy

In August 2003, the DoD charged Halliburton with serving mediocre quality food to the US army in extremely unhygienic conditions for which it charged $28 per day per soldier. Reportedly the soldiers could have had their food in the best hotels of Iraq for this sum. Moreover, the company was also alleged to have falsely charged $186 mn for meals that were never delivered.

According to reports, the company did not kept record of how many soldiers were having their meals at a time. Analysts felt that this was done in order to make the estimate of the food-bill impossible to calculate. Halliburton, however, denied these charges and said that it was possible that there was some overestimation. The company said that in war time, exact estimation of number of soldiers that would come for lunch/dinner was not possible as soldiers went on leave or troops were shifted to other locations frequently without the knowledge of the company. The company also said that it did not keep records of the number of meals because the commanders did not want the soldiers to 'sign in' for meals due to security reasons...

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Politicizing the Matter

With the US presidential election being scheduled for early November 2004, the entire issue became politicized. The Democrats vehemently criticized Halliburton, Cheney and the US president George. W. Bush.

Stephanie Cutter, the spokesperson of the presidential contender of democrats - John Kerry (Kerry) said, "George Bush himself opposed pay increases for our troops in combat and gave no-bid contracts in Iraq to Halliburton, who grossly over billed the US government." Kerry declared, "Halliburton is guilty of shameful war-profiteering, and they need to be held accountable." Denying all charges, Halliburton said that it had become the target of 'political profiteering.' Though the company admitted that there might have been some mistakes in billing but also said that in the war zone faulty estimation was quite possible. Laser said, "When we are operating in a war zone under intense time pressures we will of course make some mistakes"...

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Exhibits

Exhibit I: Halliburton's Political Contributions
Exhibit II: Income Statement of Halliburton (1995-2003)
Exhibit III: Contracts Awarded to Halliburton
Exhibit IV: Halliburton's Stock Price Chart (August 1999 - July 2004)

 

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