Pentagon Will Reduce Payments to Halliburton

The Pentagon plans to withhold about $300 million in payments to Halliburton Co. because of possible overcharging for meals served to troops in Iraq and Kuwait, defense officials said Wednesday.

Starting next month, the Defense Department will begin withholding 15% of the money paid to the company, formerly headed by Vice President Dick Cheney. The firm has a multibillion-dollar contract to provide services such as food, housing and laundry to U.S. forces in Iraq.

Halliburton spokeswoman Wendy Hall said the company disagreed with the decision and hoped to persuade the Pentagon to drop its plans. If the Defense Department does withhold the money, Halliburton will in turn withhold 15% of its payments to its subcontractors, Hall said.

The withholding won’t affect Halliburton’s bottom line, Hall said. Company executives told Wall Street analysts last week that the company was taking in about $1 billion a month from its operations in Iraq. The company has set aside $141 million to settle the allegations and already has repaid about $36 million.

Halliburton and its military services subsidiary, KBR, face a criminal investigation into allegations of misdeeds in government work in Iraq and Kuwait. In this case, Pentagon auditors accuse KBR of overestimating the number of troops to be served meals, thus reaping millions in overcharges. Halliburton has said any mistakes in estimating the number of troops came from having to operate in a war zone.

A letter from Pentagon Comptroller Dov Zakheim to Army officials, dated last month and released Wednesday, cited the “possibility of substantial overcharges” on KBR’s meal contract.