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Iraq has become an important profit center — contracts there netted the company $900 million for the quarter, 15 percent of its operating budget. The Iraq contracts are cost-plus: the government reimburses the company for its costs, then adds on a profit of 2 percent to 7 percent. Critics say this creates a perverse incentive: the more you spend, the more you make. The Pentagon says this type of flexible contract is necessary in a war zone.

In the mid-1990s, a whistleblower revealed that the company, then known as Brown & Root, had overcharged the government on a contract to convert military bases to civilian uses. Halliburton subsidiary Brown & Root agreed to pay a $2 million dollar fine, but admitted no wrongdoing.

Despite the current controversy, Halliburton does not have a reputation of defrauding the government, says Jim Moorman, president of Taxpayers Against Fraud.

Mr Drake, a former official at the National Security Agency (NSA), tried to report mismanagement and illegalities at the agency to government officials, but was ignored. He then went to the press. The government charged him with misappropriating classified material, though he denied he had shared any secrets. Prosecutors, wary of revealing sensitive material in court, tried to tempt him with a generous plea deal, but he held out until last week. Originally facing up to 35 years in prison, he will now receive a much milder sentence, perhaps including no time in jail.