WASHINGTON, Aug. 29 (HalliburtonWatch.org) -- The top civilian contracting official at the US Army Corps of Engineers (USACE) was demoted after exposing cronyism between Halliburton and the Army, the New York Times reported today.

Bunnatine H. Greenhouse, a civil servant with 20 years of contracting experience, had complained to Army officials on numerous occasions that Halliburton's KBR subsidiary had been unlawfully receiving special treatment for work in Iraq, Kuwait and the Balkans. The seriousness of her allegations prompted the U.S. Justice Department, the Federal Bureau of Investigation (FBI) and the Pentagon's inspector general to open criminal investigations that continue today.

The USACE oversees many aspects of Iraq's reconstruction, including reconstruction of the country's oil industry. It awarded KBR the largest troop logistics contract in history, worth over $11 billion in revenues for the company so far, mostly from Iraq.

"I can unequivocally state that the abuse related to contracts awarded to KBR represents the most blatant and improper contract abuse I have witnessed during the course of my professional career," Greenhouse told a congressional hearing last June.

In one of the many examples of abuse, Greenhouse said military auditors caught KBR overcharging the Pentagon by $61 million for fuel deliveries into Iraq. (Those overcharges eventually totalled $212 million. In one case, the overcharges exceeded 47% of the total value of the work order.) But, says Greenhouse, the USACE "took the unusual step" of issuing an illegal waiver to excuse KBR from explaining why its oil transport prices were much higher than competitor prices. She said USACE "simply asserted that the price charged for the fuel was 'fair and reasonable', thereby relieving KBR of the contract requirement that cost and pricing data be provided."

By issuing the waiver, said Greenhouse, USACE officials "knowingly violated" the law by "intentionally failing" to obtain her approval. That's because they knew she would have refused to approve the waiver request. "The evidence suggests that the reasons why I was intentionally kept from seeing the waiver request were politically motivated," she said.

USACE had also concealed from the public a number of audits by the Defense Contract Audit Agency which were critical of Hallburton's work in Iraq and Kuwait.

Amid the controversy -- on December 30, 2003 -- the Pentagon fired Halliburton from the gasoline importation contract and assigned it to an internal office known as the Defense Energy Support Center. The result was a 50 percent reduction in gasoline prices charged to US taxpayers.

Greenhouse said USACE officials repeatedly violated regulations designed to shield contract awards from unethical outside influences. At one point, KBR executives were present in a meeting of USACE officials who were deliberating whether KBR should be awarded a contract. The executives left the meeting only after Ms. Greenhouse urged them to leave.

"[T]he line between government officials and KBR had become so blurred that a perception of conflict of interest existed," Greenhouse's attorney, Michael Kohn, said in a letter to the acting Secretary of the Army. "Employees of the U.S. government have taken improper action that favored KBR's interests," he said. "This conduct has violated specific regulations and calls into question the independence" of the contracting process.

Greenhouse also complained when Defense Secretary Donald Rumsfeld's office took control of "every aspect" of KBR's $7 billion no-bid Iraqi oil infrastructure contract. "In reality, the OSD [Office of Secretary of Defense] ultimately controlled the award of the [oil] contract to KBR," she said. This arrangement was illegal since the law requires career civil servants, not temporary political appointees like the folks in Rumsfeld's office, to determine the winners of government contracts. The purpose of the law is to prevent political appointees from awarding contracts only to their friends in the private sector. Rumsfeld's office violated this rule by involving itself in awarding the Iraqi oil contract to KBR.

"She is being demoted because of her strict adherence to procurement requirements and the Army's preference to sidestep them when it suits their needs," Greenhouse's attorney, Mr. Kohn, told the New York Times. He also said the Army had violated a commitment to delay Ms. Greenhouse's dismissal until the completion of an inquiry by the Pentagon's inspector general.

USACE officials say Greenhouse, who has received excellent performance ratings in the past, was demoted for her performance and not in retaliation for any disclosures of alleged improprieties.