Halliburton says expected audit of military work could hurt liquidity

By Kristen Hays
Associated Press

HOUSTON — Halliburton Co. said it expects the Pentagon to launch a formal audit of possible deficiencies in its procurement procedures in Iraq and Kuwait, which could "adversely affect" the company if it must pay back some of the money.

The Houston-based oil services conglomerate once run by Vice President Dick Cheney said in an annual report filed Monday with the Securities and Exchange Commission that the Defense Contract Audit Agency recently issued a deficiency report related to logistics contracts and is expected to initiate a formal probe soon.

A Halliburton subsidiary, KBR — formerly known as Kellogg Brown & Root — provides services for the military from building bases to delivering mail, and would be a possible target.

Auditors from the Pentagon have questioned possible overcharges connected to Halliburton's contract to serve food to U.S. troops. The company has credited the Defense Department $36 million and has delayed billing on $141 million until an investigation is complete.

In the SEC filing, the company said it believes the $141 million is the "order of magnitude" for the remaining amounts at issue but noted that government agencies still are reviewing matters.

The company said if it was required to make more refunds or withhold other invoices, "this could materially and adversely affect our liquidity."

"Filings require stark language with no mitigating comments, and must cover any eventuality, not just our expectations," Halliburton spokeswoman Wendy Hall said yesterday. "We continue to have about $1.8 billion in cash. When the Iraq work eventually slows, we will begin to collect the working capital currently outstanding — a major boost to our liquidity."

Halliburton's shares fell 91 cents, or 2.8 percent, to close at $30.70 on the New York Stock Exchange.