Bert Caldwell: Halliburton move builds a gulf of mistrust

If Dave Lesar were chief executive officer of most companies, his decision to relocate to Dubai would be unremarkable. Thousands of executive officers yearn for the furnace heat and other amenities of a Persian Gulf post.

Yeah, right.

Add the fact Lesar heads Halliburton, and the move qualifies for diligent application of the smell test.

Halliburton and subsidiary KBR have a well-earned reputation for abusing U.S. taxpayers, mostly as chief provisioner for American soldiers in Iraq. The Army’s inspector general’s office has challenged billions in expenditures by government contractors, of which KBR is by far the largest.

Congress, which feigned oversight when under Republican control, is finally scrutinizing the no-bid deals that handed so many taxpayer dollars to a company once headed by Vice President Dick Cheney.

The suggestion Halliburton might be trying to put profits from those deals beyond the reach of the IRS does nothing to allay suspicions the company has something to hide.

Dubai levies no corporate or income tax. Halliburton, like other U.S. companies, will be able to keep the profits earned in the Middle East untaxed so long as the funds remain there. The company has reportedly not been shy about using tax havens in the past.

Halliburton disavows any intention to beat the taxman, noting that it will remain a Delaware-chartered corporation with its major office in Texas. The chief operations and financial officers will remain in Houston, as will some 4,000 employees. The company collects half its earnings in the U.S.

But if your major line of business is energy services, the Mideast is your future. Despite, or because of, the vast reserves already developed in the region, many other areas have yet to be explored. Dubai is also closer to intensified exploration activity in Africa.

Many of the reserves yet to be developed are owned by the national governments. Securing contracts from the leaders of those governments takes the kind of face time difficult to accomplish from Houston. Raising the corporate flag in Dubai puts more than lip service behind commitment to the region. And Lesar astutely announced the decision at an energy conference in Bahrain, just up the Persian Gulf coast from Dubai.

Houston employees and local officials found out by way of an announcement posted on the company’s Web site.

Halliburton’s will not be the first major U.S. corporate presence in the region. Other U.S. oil service companies, Baker Hughes and Schlumberger among them, have already opened offices for the same reasons.

Dubai, besides its attractiveness as a tax haven, is reputedly among the more progressive cities in the Mideast. Westerners can move freely with little threat of violence, and its oil wealth is underwriting some of the most opulent developments anywhere. The United Arab Emirates, for which Dubai is the major urban center, has been friendly to the U.S., although there have been charges its financial institutions have laundered terrorist money.

Emirates, the national airline, has been a big Boeing customer.

But there are challenges ahead for Lesar and Halliburton. The Web can do miracles, but truly managing a $21 billion corporation with his financial and operations officers nine time zones away will be awkward, to say the least.

And then there are pending and promised congressional inquiries into just how Halliburton and KBR, soon to be an independent company, conducted business the last few years. Committee chairmen will want Lesar, not a lieutenant, answering their questions.

A substantial Mideast presence by U.S. companies can serve the nation well as China, India and other countries come calling for more of the region’s oil. But, as the Iraq war all too tragically demonstrates, the U.S. puts grievous amounts of blood and treasure at risk to defend those interests.

When, not if, Lesar shows up on Capitol Hill, he should be made to explain why Halliburton profits earned by its Mideast operations should not support the military effort that makes it possible for his company and many others to operate there.