Post Politics
New home.
Still the best political coverage.

Halliburton Chief's Move to Dubai Evokes Warnings on Hill

Network News

X Profile
View More Activity
By Steven Mufson and Dana Hedgpeth
Washington Post Staff Writers
Tuesday, March 13, 2007

Ever since Erle P. Halliburton established the New Method Oil Well Cementing Co. in Oklahoma in 1919, his name has been associated with American corporate know-how in the oilfield services business.

But over the weekend, the company now known as Halliburton announced that its chief executive, Dave Lesar, would move to a new corporate headquarters in Dubai to focus on business in the Middle East, Africa, Europe and Asia.

The announcement sparked warnings from members of Congress, who suspected that the company once run by Vice President Cheney was trying to trim its tax bill and remove itself from the limelight here, where it has come under fire about the way it obtained and executed government contracts, especially those connected to troubled reconstruction projects in Iraq.

"The CEO of Halliburton has decided to leave this country to move his offices to Dubai because he says it is 'a great business center.' That is a bizarre announcement," said Sen. Byron L. Dorgan (D-N.D.), who is a member of the Senate Commerce Committee.

Dorgan, who said he would seek hearings on the move, added: "I want to know, is Halliburton trying to run away from bad publicity on their contracts? Are they trying to run away from the obligation to pay U.S. taxes? Or are they trying to set up a corporate presence in Dubai so that they can avoid the restrictions that currently exist on doing business with prohibited countries like Iran?"

People familiar with investigations carried out by the Pentagon and special Iraq inspectors general said there were many aspects of Halliburton's contracts in Iraq that have not yet come under full scrutiny. With Democrats in control of Congress, further hearings on those contracts are likely. Last year, Halliburton received $6.1 billion of Defense Department contracts, the sixth-largest total of any company. In 2005, it received $5.8 billion.

Halliburton announced last month that it would spin off its 81 percent stake in KBR, its subsidiary that received more than 90 percent of its Pentagon contracts in 2006. Securities analysts said the move would aid Halliburton's stock price, which has languished at lower price-to-earnings ratios than other oilfield services companies.

The chief executive's move will mean little change for the thousands of Halliburton employees, who work in 70 countries, including the United States. The company said it would maintain its U.S. registration and its substantial presence in Houston.

Lawyers who specialize in corporate litigation said that Halliburton, as a company run by U.S. citizens and traded on U.S. stock exchanges, would still be subject to such laws as the Foreign Corrupt Practices Act and Sarbanes-Oxley.

"The bottom line seems to be that the only change in status is in respect to tax consequences," said Gregory Craig, a partner at the firm of Williams and Connolly. Income earned abroad and paid to a company based abroad would not be subject to U.S. taxes, Craig said.

"It's an example of corporate greed at its worst," said Sen. Patrick J. Leahy (D-Vt.). "This is an insult to the U.S. soldiers and taxpayers who paid the tab for their no-bid contracts and endured their overcharges for all these years. At the same time they'll be avoiding U.S. taxes, I'm sure they won't stop insisting on taking their profits in cold, hard U.S. cash."

Dubai, part of the United Arab Emirates, has been pushing to attract companies and is already a major Middle Eastern banking center.

Some oil analysts and consultants said the company's explanation for the move was genuine. Halliburton noted that in 2006 38 percent of its $13 billion oilfield services revenue came from the Eastern Hemisphere and that that is where it is growing.

"The Eastern Hemisphere is a market that is more heavily weighted toward oil exploration and production opportunities, and growing our business here will bring more balance to Halliburton's overall portfolio," Lesar said in a statement released Sunday.

"What this indicates is that this is where the business is shifting," said J. Robinson West, chairman of PFC Energy, a consulting firm in the District. "This is part of an effort to shift Halliburton from being an American company doing international business to Halliburton being a truly international business."

Yet suspicions were widespread given the politically charged atmosphere over the war and the troubled occupation and reconstruction efforts in Iraq.

Youssef Ibrahim, a newspaper columnist and consultant with the Strategic Energy Investment Group of Dubai, said Halliburton had been doing business in those parts of the world for a long time. "What is new in the picture is more questions are being asked," he said. "There's nothing innocent about this decision. It falls into the category of corporate decisions that we have to get out of here before it gets worse."

Staff writer Renae Merle contributed to this report.


More in the Politics Section

Campaign Finance -- Presidential Race

2008 Fundraising

See who is giving to the '08 presidential candidates.

Latest Politics Blog Updates

© 2007 The Washington Post Company

Network News

X My Profile
View More Activity