U.S. Democrats Irked Over Halliburton Dubai Move

Oil services giant and key US military contractor Halliburton has raised eyebrows and the ire of US Democratic lawmakers by announcing it will move its corporate headquarters from Texas to Dubai in the United Arab Emirates.

The company says the move is designed to grow its business in the Eastern Hemisphere, an important market for the global oil and gas industry. US Vice-President Dick Cheney, former CEO of Halliburton from 1995-2000, also said the relocation would position the company to make the most of the booming energy industry in the Gulf region.

Yet leading Democrats in the US Congress have condemned the move, claiming it will provide a means for Halliburton to avoid paying US taxes, dodge investigations into corporate and criminal wrongdoing and conduct business with terrorist states.

Presidential candidate and US Senator Hillary Clinton (D-N.Y.) has asked whether Halliburton would “quit paying taxes in America”.

“They get a lot of government contracts; is this going to affect the investigations that are going on? Because we have a lot of evidence of misuse of government contracts and how they have cheated the American soldier and cheated the American taxpayer.”

Rep. Henry Waxman (D-Calif.), chairman of the House Oversight and Government Reform Committee, is already planning a hearing into the implications of Halliburton’s move to Dubai. The committee recently heard evidence of waste, fraud and abuse relating to US military contracts in Iraq, including evidence that Halliburton subsidiary Kellogg Brown and Root had substantially overcharged the US government and underperformed in its duties.

Halliburton has been awarded a total $27 billion in US military contracts in Iraq. The company has been accused of overcharging the US government by $2.7 billion.

The company has also drawn dark headlines for serving spoilt food to US troops, exposing soldiers to contaminated water and failing to provide its contractors with adequate equipment and protection, cited in the deaths of four employees in Fallujah in 2004.

Senator Patrick Leahy (D-Vt.), who heads the Senate Judiciary Committee, called the move to Dubai “an example of corporate greed at its worst”.

“This is an insult to the US soldiers and taxpayers who paid the tab for their no-bid contracts and endured their overcharges for all these years,” said Sen. Leahy. “At the same time that they’ll be avoiding US taxes, I’m sure they won’t stop insisting on taking their profits in cold hard US cash.”

However, it seems unlikely that Halliburton will avoid paying US taxes if it remains incorporated in the US, which is its stated intention. According to one analysis in the online magazine Slate, Internal Revenue Service regulations would require that Halliburton merge with an overseas company and dump existing shareholders in order to incorporate overseas. Only then could it avoid paying taxes in the US. This does not seem to be on the cards under the company’s immediate plan.

On the other hand, it is less clear whether the move will affect federal investigations into Halliburton’s military contracts, because Kellogg Brown and Root, its engineering and military subsidiary, will soon be a stand-alone company.

Concerns have also been raised that the move will open the door for Halliburton to do business with Iran, a “state sponsor of terrorism”. Senator Frank Lautenberg (D-N.J.) said, “Halliburton has gone to extraordinary lengths in the past to do business with the terrorist government in Iran. The company’s odd announcement this week certainly sets off alarm bells about its intention to do business with state sponsors of terrorism.”

Halliburton has been under investigation by the US Department of Treasury’s Office of Foreign Asset Control and the US Attorney for the Southern District of Texas, who examined the company’s business dealings with Iran through its foreign subsidiary, Halliburton Products and Services, Ltd (HPSL). It has been alleged that Halliburton violated US terror sanctions law by using HPSL as a front to do business with Iran.

In a letter to the Office of Foreign Assets Control,  Senator Lautenberg has urged Treasury officials to “immediately investigate Halliburton’s move, whether it’s related to evasion of terror sanctions laws and what impact it has on pending investigations.”

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