Sherry Williams, a Halliburton vice president and corporate secretary, told the Senate hearing yesterday that the company had consulted several law firms in 1995 after sanctions were imposed on Iran. Officials of the company determined that it was legal for independent foreign subsidiaries of US companies to do business there, she said.

“We have followed US,” she said. “We will continue to follow US law.”

Halliburton announced recently that it had completed its outstanding contracts in Iran and was leaving the country, fulfilling a promise it made in 2005 to wrap up its work there.

Senator Frank Lautenberg, a New Jersey Democrat who has helped lead the investigation into the company’s work in Iran, said Halliburton effectively financed terrorism by doing business there, an Associated Press report said.

“Companies that help terrorist states generate revenues that are helping fund terrorist operations,” he said. “It’s that simple.”

Senator Byron Dorgan, chairman of the Senate subcommittee that convened the hearing, took the same approach.

“Was there any discussion about whether from a values standpoint doing business through a foreign subsidiary with a prohibited country like Iran was in fact helping the terrorists?” AP quoted him as asking Williams.

Williams said she was “not a part of those discussions.” She cited an array of factors driving the decision to leave Iran, including the difficulty of working in the country and diminishing business there.

Senator Sherrod Brown, an Ohio Democrat, said he was incredulous that the reasons did not include “anything to do with patriotism or anything to do with the values that I think our country holds dear”.

In 2004, the Department of Justice began an investigation of Halliburton's work in Iran.

Federal law generally prohibits US companies from doing business with countries, like Iran, that are on a State Department list as sponsors of terrorism. But a gap in the law when it comes to Iran allows foreign subsidiaries of American corporations to do business there as long as they operate independently.

Halliburton’s work in Iran was carried out under the name of its Halliburton Products & Services Ltd subsidiary, which is registered in the Cayman Islands with headquarters in Dubai.

Lautenberg has introduced legislation to close the loophole for foreign subsidiaries. Meanwhile, Brown and Dorgan have introduced a bill to prohibit the awarding of government contracts to any company doing business with state sponsors of terrorism.

The senators pressed Williams about whether Halliburton’s subsidiary in Iran was truly independent of the parent company, citing a report on television current affairs show 60 Minutes in 2004 that found the Cayman Islands address for the subsidiary was little more than a mail drop and that in Dubai it shared office space, phone and fax lines with a division of Halliburton.

Williams said the Cayman Islands registration was “perfectly appropriate under the law”. She added that Halliburton itself was registered in Delaware, even though it has no offices there.

Published: 01 May 2007 06:14 GMT  | Last updated: 01 May 2007 06:14 GMT