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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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