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Halliburton Uses Cayman Islands for Contract in Terrorist State
2004-07-02 00:04 (New York)
Halliburton Uses Cayman Islands for Contract in Terrorist State
(Published in Bloomberg Markets magazine.)
By David Evans
July 2 (Bloomberg) -- On April 13, 2003, President George W.
Bush accused Syria of having weapons of mass destruction. ``We
believe there are chemical weapons in Syria,'' he said on the
South Lawn of the White House.
Secretary of Defense Donald Rumsfeld, appearing on CBS's
``Face the Nation'' the same day, said busloads of Syrians were
sent to Iraq to kill Americans. ``Reasonable people don't want to
be associated with a state that's on a terrorist list,'' Rumsfeld
said. ``Who in the world would want to invest in Syria?''
Six weeks later, on May 31, Devon Energy Corp., an Oklahoma
City-based oil and gas producer, entered a partnership with the
Syrian government to spend $17 million to search for oil in
Syria, according to company filings with the U.S. Securities and
Exchange Commission.
Theodore Kattouf, then U.S. ambassador to Syria, attended
the contract signing in Damascus. Devon channeled the business
through a Cayman Islands subsidiary.
Devon's work in Syria didn't mark the first time a U.S.
company won a contract through a Cayman subsidiary in what the
U.S. called a terrorist state. A Halliburton Co. subsidiary sold
$33.6 million in products and services to Iran in 2001, according
to filings with the SEC.
Vice President Dick Cheney was chief executive officer of
Houston-based Halliburton, an energy services and engineering
company, from 1995 to 2000.
Iran Off Limits
Iran is blacklisted by the U.S. as a terrorist state, which
means U.S. companies are forbidden from accepting contracts from
Iran. The Halliburton unit that won the contract in Iran was
incorporated in the Cayman Islands and therefore wasn't subject
to U.S. law, Halliburton says.
``All of Halliburton's business is clearly permissible under
applicable U.S. laws and regulations,'' says Wendy Hall, a
Halliburton spokeswoman. ``If Congress decides to change the laws
and provisions, Halliburton will, of course, comply.''
Cheney spokesman Kevin Kellems says that before he was vice
president, Cheney usually opposed economic sanctions. ``He
believed they were rarely effective and they often discriminated
against American companies,'' he says.
In February, the U.S. Senate Finance Committee, chaired by
Republican Charles Grassley, sent a letter to the Treasury
Department asking if Halliburton was being investigated for
violating U.S. sanctions.
The committee also wrote letters to ConocoPhillips and
General Electric Co. asking about their revenue from terrorist
states, including Iran and Syria.
`Seal Those Doors'
``If these companies are going through the backdoor to
invest in terrorist nations, Congress must take action to
immediately close, lock and seal those doors,'' said Senator Max
Baucus, 62, of Montana, the senior Democrat on the committee.
The Finance Committee didn't challenge Devon's contract with
Syria. Congress and President Bush put restrictions on U.S.
companies working in Syria -- such as barring exports from the
U.S. to Syria, except for food and medicine -- without banning
them from working in that country.
``We entered Syria with the support of the U.S.
government,'' says Brian Jennings, 43, Devon's chief financial
officer. Jennings says that by using a Cayman subsidiary in
Syria, the company can finance that operation with profit earned
in China without first paying U.S. taxes on it.
13 Cayman Subsidiaries
Halliburton is the 30th-largest military contractor, with
fiscal 2001 federal contracts of $534.2 million, according to a
March study by the General Accounting Office, the auditing arm of
Congress. Halliburton has 13 subsidiaries in the Caymans, two in
Liechtenstein and two in Panama.
General Electric, the world's largest company by market
value, has sold locomotives in Syria; in Iran, it sold medical
equipment, provided oil and gas services and contracted to build
hydroelectric generators, according to the Senate Finance
Committee.
ConocoPhillips, the largest U.S. oil refiner, runs a gas
processing plant in Syria, the committee said. ``We comply
strictly with U.S. law in sales to Iran,'' says GE spokesman Gary
Sheffer. ``If Congress decides to change the law, we'll comply.''
ConocoPhillips spokesman Sam Falcona says the company often
talks with U.S. officials to keep up with the rules. ``We are in
full compliance with the letter and spirit of U.S. laws,'' he
says.
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