Halliburton's attempt to shed KBR and announcement that it plans to move to Dubai are tantamount to fleeing the scene of a crime, given that the company is still being investigated in the U.S. for all sorts of alleged crimes -- including bribery, bid rigging, defrauding the military and illegally profiting in Iran.
Halliburton has been attempting to divest all of its ownership interest in the scandal-plagued KBR subsidiary, notorious for overcharging the military and serving contaminated food and water to the troops in Iraq.
The move to Dubai confirms a few things, including what we already knew about Halliburton: That
despite getting billions in US government contracts, it has no loyalty or sense of obligation to US troops or taxpyaers. And just because they're spinning off KBR doesn't absolve Lesar of responsibility for their
performance.
Although Halliburton says it will still be incorporated inside the United States, moving its corporate headquarters to UAE is still likely to make it more difficult for federal investigators to hold the company accountable, while Martin Sullivan, editor of Tax Notes, says it will "significantly" change the company's tax situation.
Most Fortune 500 companies have global operations. And most use all sorts of strategies (including transfer pricing, offshore accounts) to avoid taxes. But with today's technologies, there's no real reason to have to physically relocate one's headquarters to an area where an operational hub would serve just as well. Those that do move are, in effect, attempting to evade U.S. oversight and tax authorities. (Imagine how much harder it will be for IRS auditors to audit the company when it's operations are primarily located in Dubai instead of Houston).
Dubai is a tax-free haven - no corporate or employee taxes. Halliburton claims this is not a big deal, but I can't imagine Lesar will be working over there alone in a little cubicle, or out welding pipelines.
The company has already proven adept at using offshore subsidiaries to circumvent restrictions on doing business in Iran and elude responsibility for paying benefits to former employees.
In Iraq, Halliburton also used its operational structure -- especially multiple layers of subcontractors -- to elude oversight and accountability to taxpayers.
Lesar says he will work in Dubai and fly back and forth to the U.S. Which means he's going to the same place that one of the few individuals who has received even more bad publicity in recent years -- Michael Jackson.
For Halliburton and perhaps Lesar, moving to UAE may also provide one additional benefit: hindering any ongoing government investigations into Halliburton's alleged bribes paid to the government of Nigeria. CEO David Lesar, a former accountant who is presumably very adept at structural finance, supervised former KBR chairman Albert "Jack" Stanley during the time when KBR is alleged to have bribed Nigerian government officials. Stanley was subsequently fired after allegedly receiving $5 million in "improper" payments related the bribery scheme. Lesar, who was president and chief operating officer at the time, reported directly to then CEO Dick Cheney. According to the Dallas Morning News, "Mr. Cheney ran Halliburton when one of four suspicious payments occurred." (Dallas Morning News, Sept. 8, 2004.) (Dallas Morning News, Sept. 8, 2004.)
I can't imagine how any smart accountant would not have caught the bribery scam happening right under his nose. And as a former Andersen accounting partner, now CEO, Lesar is anything but dumb. Anyone who manages to make about $50 million personally off the war on terror while providing shoddy service to the US military can't be all that dumb or clueless.
Don't get me wrong -- the move to Dubai may indeed be motivated by a business strategy that comes after they finally escape the KBR ball-and-chain: consolidated around the core oil and gas business. But that doesn't mean these collateral advantages are not as important, especially to those who might be worried that they could be hauled off to the slammer.
Policymakers have an obligation to closely scrutinize this move and determine whether or not it will allow the company and/or its executives to further elude accountability or undermine the national interest -- and how.
Indeed, the shapeshifting nature of big companies -- whether it's the "Benedict Arnold" tax traitors who move their parent company offshore on paper, or the corporate criminals who use Special Purpose Entities and derivatives and other financial instruments to hide their debts in cyberspace -- etc. are all an important potential national security concern. As author Ted Nace warned in his brilliant history of corporations, Gangs of America, corporations have always been "sophisticated, complex, adaptive, continually evolving systems -- mindless yet intelligent beings governed by an array of internal and external programming."
Yet the multinational corporations' selfish tradition of grab and go has also been resisted by real American patriots ever since the Boston Tea Party and ever since Thomas Jefferson warned that "Merchants have no country. The mere spot they stand on does not constitute so strong an attachment as that from which they draw their guns."
Although he will be accused of partisan opportunism, it is in that tradition that Rep. Waxman has indicated he wants to hold hearings about this issue. Which means at least someone up on the Hill gets it. (Senator Leahy who set off Cheney's F-thrower the last time he dropped the H-word, also criticized Halliburton's announcement, which he suggested was "an example of corporate greed at its worst.")
The litmus test will be whether or not Congress can tighten the reins on this kind of activity. Whether or not Halliburton eludes their grasp, they could at least start by barring companies that repeatedly break the law and/or avoid paying taxes from receiving any federal contracts or corporate welfare.