Cheney's old firm accused of $61m overcharge

The Pentagon may withhold $61m (£35m) in reimbursements to Halliburton, after auditors unearthed evidence of "substantial overcharging" by a subsidiary of the oil services company once run by the Vice-President Dick Cheney.

The overcharging involves fuel deliveries in the massive no-bid reconstruction contracts in Iraq, awarded by the Pentagon. Of the $15.6bn of such contracts, an estimated $5bn went to the Halliburton group.

The auditors say the subsidiary, Kellogg, Brown & Root (KBR), would also have been overpaid by $67m had a cafeteria services proposal been accepted by the government. In the event, the deal was rejected by Pentagon.

Last night Donald Rumsfeld, the Defence Secretary, insisted the US government had not paid the money. "This is not an overpayment," he said. A "fairly normal" process was under way, "We've got auditors crawling over these companies", he said. Halliburton's chairman, Dave Lesar, denied overcharging and called the operation a "routine audit".

Halliburton, where Mr Cheney was chief executive before he became Mr Bush's running mate in 2000, has become a symbol of what critics say is cronyism and profiteering in the awarding of post-war contracts in Iraq. For some it is proof of how the real motive for the invasion was control of Iraqi oil.

KBR has been billing the US government $2.27 a gallon to deliver fuel from Kuwait compared with $1.18 charged for petrol imported from Turkey. A Pentagon spokesman said the extra profit margin went to a Kuwaiti subcontractor, not Halliburton. Halliburton apparently failed to spot the discrepancy between the price charged by the Kuwaiti company and other suppliers.

Critics say the US is allowing its own companies to feather their nests in Iraq.