Moneymaker: Fanning The Flames

The stock market may be suffering, but Operation Iraqi Freedom has sure been good for business at Halliburton, the Houston oil-services company famous for its former CEO, Dick Cheney. The vice president hasn't entirely severed his financial ties to the big defense contractor. Even while Halliburton is scoring Army contracts that could top $2 billion, Cheney is still receiving annual compensation from the company he led from 1995 to August 2000, NEWSWEEK has learned.

When Cheney stepped down from Halliburton to run for vice president, he sold his company stock and gave profits from his stock options to charity. But he still had more compensation coming. Rather than taking it in a lump-sum payment of about $800,000, Cheney opted for "deferred compensation," Wendy Hall of Halliburton tells NEWSWEEK. Cheney chose annual payments of "less than $180,000" from 2001 to 2005, says Hall, which offers a tax benefit. Cheney, through spokeswoman Cathie Martin, contends he has no financial ties to Halliburton because of an insurance policy he took out for the value of his deferred compensation, which means he'll get paid even if the company goes under. "He has no financial interest in the success of the company," says Martin, who adds that Cheney has no say in awarding defense contracts. Indeed, NEWSWEEK learned last week that Halliburton is not a finalist for a $600 million reconstruction contract in Iraq.

But some Washington players are questioning the vice president's ethics. Cheney should "sever all financial ties to Halliburton," says Larry Noble of the nonpartisan Center for Responsive Politics. "I don't think this passes the smell test." Rep. Henry Waxman, a California Democrat, complained to the Army last week about the contract Halliburton's Kellogg, Brown & Root unit received in early March to fight Iraqi oil fires. The Army secretly awarded Halliburton the contract, which analysts say could be worth up to $1 billion, without receiving other bids. Waxman told NEWSWEEK that Cheney's ties to Halliburton "raise a red flag."

Cheney and Halliburton have a long history. While Defense secretary in the first Bush administration, Cheney awarded KBR the Army's first private contract to manage troop tent cities. During the Clinton years Halliburton lost that contract after KBR came under fire for allegedly overcharging the government. But after Cheney was elected, KBR was again awarded that Army contract and has rung up $1.15 billion so far on the 10-year deal. The Army says it chose KBR for the fires because it was in Kuwait and could work fast. For Cheney, the political flames may just be getting started.

Editors' Note