The New York-based Wall Street Journal on Friday reported the two employees took kickbacks of up to $6 million in exchange for awarding a Kuwait-based company with the supply contract.

Halliburton is reported to have brought the scam to the notice of the Pentagon.

If confirmed, it would be the first case of proven corruption involving US-funded projects in Iraq.

Mounting woes

The report adds to the discomfiture of Halliburton, already under scrutiny for its contracts in Iraq. Critics say the giant has been favoured for its close ties to the present White House administration.

The firm has also been accused of over-charging for fuel it supplies to US troops in Iraq.

Halliburton in a statement acknowledged auditors finding a "potential overbilling of approximately $6 million by a subcontractor under a contract in Iraq."

"This internal audit function, which continually audits all financial aspects of the company operations, detected this potential overbilling," the firm said.

"In according with the company policy and government regulation, this potential overcharge was reported to the Department of Defence, Inspector General's office as well as to the contract customer."

Action pledged

Halliburton and its Kellogg Brown and Root subsidiary "will ensure that questionable charges will be credited to the government and will seek recovery from the offending subcontractor," the statement added.

But the firm –formerly headed by US Vice President Dick Cheney- declined to give details.

"We can't discuss the specifics of the case because we don’t want to say anything that would harm the Inspector General's review," Halliburton spokeswoman Wendy Hall said.

The overbilling related to "solicited and or accepted payments to former employees," she said.

The two employees have reportedly since been fired.