Oct. 28 (Bloomberg) -- Halliburton Co., the biggest U.S. contractor in Iraq, is being investigated by the Federal Bureau of Investigation to determine whether the company received special treatment in winning an order from the Pentagon to repair Iraqi oilfields, according to an attorney representing an Army Corps of Engineers whistleblower.

Bunnatine H. Greenhouse, the top contracts officer at the corps, was asked to provide information to an agent with the FBI's Moline, Illinois, on Oct. 26, according to her Washington-based attorney, Michael Kohn. Greenhouse sent a letter on Oct. 21 to U.S. Army Secretary Les Brownlee that said Halliburton got special treatment in winning the no-bid contract soon after the U.S. invaded Iraq in March 2003.

``They were contacting her as a result of the letter,'' Kohn said in an interview. ``I'm expecting another call any day'' to set up an interview and spell out protection Greenhouse is seeking under whistleblower laws.

Halliburton, headed for five years by Vice President Dick Cheney, has been paid $436 million under a contract to manage U.S. government property in Iraq and Kuwait, according to Army Field Support Command data through Oct. 5. The work is part of a larger logistics contract worth up to $8.2 billion.

The U.S. Justice Department already is probing possible overcharges for Halliburton's work under an Army contract in the Balkans from 1996 to 2000 and allegations of kickbacks paid to KBR employees by a Kuwaiti subcontractor.

Kuwait Audit

A Pentagon audit showed that Halliburton could not properly account for 43 percent of the government property it manages in Kuwait, including trucks, generators and computers. A similar audit, released in July, of Halliburton's work in Iraq found that a third of the 20,531 items sampled were not accounted for properly.

``Government property was not effectively managed by Kellogg Brown and Root,'' the Kuwait audit said. ``The records were not sufficiently accurate or available to properly account for items.''

Requirements

The Defense Contract Management Agency, the primary Pentagon agency responsible for monitoring contractors, added a statement to the audit disagreeing with its conclusions. The company's property control system ``meets contract requirements and is in compliance,'' Sallie Flavin, deputy director at the contract management agency, said in the statement.

``KBR disagrees with both the methods and conclusions'' of the audit by the Pentagon's inspector general, said Wendy Hall, a spokeswoman for the Houston-based company.

Hall also said that the allegations from Greenhouse are old and are being ``recycled. This time one week before the election.'' President George W. Bush and Democratic challenger John Kerry, a four-term Senator from Massachusetts, are in a statistical tie in the race for the presidency to be decided Nov. 2, according to polls.

After Greenhouse's letter became public this week, Democrats including Senator Frank Lautenberg of New Jersey and Representative Henry Waxman of California said her allegations merited hearings in Congress and additional investigation.

The company is also the subject of U.S., French and Nigerian probes of possible bribes paid by a Nigerian joint venture it runs.

GAO Study

Shares of Halliburton fell 47 cents to $36.25 in New York Stock Exchange Composite trading. They have gained 39 percent this year amid rising oil prices and optimism that the company will complete a settlement of asbestos-related claims.

The U.S. Government Accountability Office, in a June 14 report on the Iraq oilfield contract, said, ``The Army Corps of Engineers properly awarded a sole-source contract for rebuilding Iraq's oil infrastructure.''

The March 2003 contract with Halliburton's KBR unit, covering repair and improvement of Iraqi oil infrastructure after the U.S. invasion, ended in January. Halliburton got $2.5 billion under the original contract and won one of two subsequent contracts awarded after competitive bids.

Greenhouse's Charges

Greenhouse said in her letter that she objected to the award of the oil service contract for five years without competitive bidding. A one-year term was appropriate and could be renewed, she said.

She charged that the Army Corps violated its own rules by having one of her subordinates sign contract documents after she raised objections related to Halliburton. She also said that Halliburton's KBR unit sat in on meetings where the terms of the contract were being discussed.

An FBI spokesman in Washington, Joe Parris, said he would not confirm or deny that the agency has begun an investigation, and he declined further comment.

Army Corps of Engineers spokeswoman Carol Sanders declined to comment on whether the FBI had contacted the agency. Greenhouse remains in her job, Sanders said.

To contact the reporter for this story: Tony Capaccio in Washington on at acapaccio@bloomberg.net.

Last Updated: October 28, 2004 23:23 EDT