Halliburton takes its taxes out of Texas

On 11 March, the world’s second largest oil-field services company and largest US contractor operating in Iraq announced it will move its corporate headquarters from Houston to Dubai in the United Arab Emirates. That company is Halliburton, whose former CEO Dick Cheney is now US Vice President.

The company has gained billions of dollars in US military contracts. Halliburton has a five-year, $16 billion contract with the US government reported a record $2.3 billion in profits in 2006. However it will now avoid paying a fortune in taxes by moving its headquarters from Texas to the Middle East. Energy analysts have calculated the company will save hundreds of million dollars in taxes.

Dave Lesar is Halliburton's chairman, president and chief executive officer and head of 45,000 employees in 70 countries. He made the announcement of the Dubai move at an energy conference in Bahrain. Lesar said the goal of the move was to focus on Eastern Hemisphere "oil exploration and production opportunities, and growing our business here will bring more balance to Halliburton's overall portfolio."

Lesar himself will relocate to Dubai as part of the move. Under his leadership Halliburton has become the top provider of logistical services in Iraq to the US army for transportation and food, but has attracted criticism for no-bid contracts and allegations it overcharged the government. But his shareholders are happy with his performance. In 2006 his salary was more than doubled to $26.6 million.

Through its subsidiary company KBR (Kellogg Brown Root), Halliburton had made an extraordinary $27 billion dollars out of the Iraq war to date. But now the army is threatening to dock up to $400 million for improperly using private security companies including North Carolina-based Blackwater USA. Army officials said private security companies were not allowed under Halliburton's main contract in Iraq – that was the military’s job. A 2004 enquiry into the death and mutilation of four Blackwater employees in Fallujah in 2004 concluded that layers of subcontracts in Iraq add to the Pentagon's costs and limit its oversight ability.

As well as its Iraqi problems, Halliburton is mired in other scandals and the company is being investigated in the US. Despite Senate Finance Committee making inquiries about a Halliburton subsidiary doing business in Iran in 2004, barely a year later it signed a new business deal to help develop the country’s natural gas fields. The deal was signed with an Iranian oil company whose principals include Sirus Naseri who is also Teheran’s chief negotiator for the country's nuclear enrichment program.

Halliburton was also in hot water for its African business dealings in 2004. The company made illegal payments to win a contract to build a natural gas process plant in Nigeria and paid $180 million in kickbacks to secure the deal. The gas plant is one of the largest in the world and was built by TSKJ, a consortium of four major international construction firms, including KBR.

The company was started by Erle P. Halliburton after World War I. He established the New Method Oil Well Cementing Company in Oklahoma in 1919. Around the same time brothers George and Herman Brown partnered with their brother-in-law Dan Root to found Brown & Root in Texas. Halliburton grew rapidly and had 201 offices in 21 countries by the time Erle died in 1957. Within five years Halliburton acquired Brown & Root following Herman Brown's death. At the time, Brown & Root was a road construction company, general contractor and had built the world's first offshore platform in 1947.

Vice President Dick Cheney was the company’s CEO from 1995 to 2000. Though he claimed he severed his ties with the company on becoming VP, he continued to receive compensation from the company. He also held options for Halliburton stock well into his vice presidency, refusing even to put his holdings into a blind trust, as wealthy political figures normally do to ensure there is no likelihood of conflict of interest. A 2003 report from the Congressional Research Service said his unexercised stock options and deferred salary fall within the definition of "retained ties" to his former company. That same year, Halliburton won its exclusive contract to supply the US army for the Iraq war.

Under Cheney’s watch in 1998, Halliburton paid $7.7 billion to take control of Dresser Industries, a major provider of integrated services and project management for the oil and gas industry. With the Dresser merger Halliburton also acquired M.W. Kellogg a technology creator and plant builder for petroleum refining and petrochemical processing. After the merger Halliburton’s revenues soared to $13 billion by 2001.

Critics say that the Dubai move will give Halliburton immunity from US legal scrutiny as UAE has no extradition treaty with the US. Democrats now plan to seek a congressional review of the decision, saying it is motivated by greed. Patrick Leahy, the chairman of the Senate Judiciary Committee, said the move was "an example of corporate greed at its worst". "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," he said.