| || || || |
| ||Political News|
A Halliburton Primer
Thursday, July 11, 2002
Following President Bush's demand for more corporate accountability, public interest group Judicial Watch, Inc., filed suit against Vice President Cheney and the Halliburton Company, alleging accounting fraud during Cheney's stewardship of Halliburton in the 1990s. The U.S. Securities and Exchange Commission is also investigating Halliburton's accounting practices.
Following is a brief explanation of Cheney's involvment with Halliburton and the pending lawsuit and SEC investigation.
What is Halliburton Co.?
The Dallas-based Halliburton Company provides products and services to the petroleum and energy industries to aid in the exploration, development and production of natural resources. Halliburton KBR, the company's engineering and construction division, designs, builds and provides additional services for the energy industry, governments and civil infrastructure. Halliburton employs 85,000 people in over 100 countries.
Halliburton came under fire in the early '90s for supplying Libya and Iraq with oil drilling equipment which could be used to detonate nuclear weapons. Halliburton Logging Services, a former subsidiary, was charged with shipping six pulse neutron generators through Italy to Libya. In 1995, the company pled guilty to criminal charges that it violated the U.S. ban on exports to Libya. Halliburton was fined $1.2 million and will pay $2.61 million in civil penalties.
What was Vice President Cheney's involvement with Halliburton?
Cheney was tapped in 1995 to lead Halliburton as chairman and chief executive officer while the company was a second-tier firm within the oil and energy industries. As secretary of defense during the Persian Gulf War, Cheney made international contacts which Halliburton executives hoped would propel the company to the industry's fore. Under his leadership, the company did expand overseas, swelling its domestic portfolio into foreign markets. Cheney also led the aggressive acquisition of competitors, an offensive strategy which occurred during a period of falling oil prices. The largest merger was with Dresser Industries for $5.4 billion in 1998 the same month in which layoffs cut nine percent of the work force.
During his chairmanship of Halliburton, Cheney criticized U.S. sanctions against "rogue" nations such as Iran and Libya in a 1998 speech. According to a July 26, 2000, Washington Post story, Cheney complained the sanctions "are nearly always motivated by domestic political pressure, the need for Congress to appeal to some domestic constituency."
Cheney's work with Halliburton yielded large financial reward. In May 2000 he sold stock holdings in the company worth $5 million. When he retired from Halliburton during the 2000 presidential campaign, Cheney was awarded a retirement package worth $20 million.
Why is Halliburton under investigation by the SEC?
A little more than a month ago, Halliburton announced that the SEC had begun a probe into the company's booking of cost overruns on energy-related construction jobs. This practice accounted for the overruns as revenue, even if customers had not yet approved the charges, and inflated Halliburton profits by almost $100 million in 1998.
According to a June 2, 2002, Washington Post story, Halliburton said a shift in its mix of business mandated the new accounting policy, and that it conformed to generally accepted accounting principles. The accounting change was approved by Halliburton auditor Arthur Andersen.
What is Judicial Watch?
Judicial Watch, Inc., is a self-described "nonpartisan" group which "investigates and prosecutes corruption by government officials," according to a press release. However, the organization has tilted conservative since its founding in 1994 by bringing numerous cases against former President Bill Clinton and his administration while offering legal representation for Paula Jones and Gennifer Flowers. The group also investigated the 2000 election Florida ballot dispute and currently has several cases pending against U.S. government agencies. Judicial Watch is a nonprofit group based in Washington, D.C., with satellite offices around the country.
What is Judicial Watch's lawsuit against Cheney?
Judicial Watch filed suit this week on behalf of shareholders against Cheney and 13 other Halliburton directors, as well as Halliburton itself and its accounting firm, Arthur Andersen LLP and Arthur Andersen Worldwide. The suit charges Cheney and Halliburton with fraudulent accounting practices and misleading press releases resulting in the overvaluation of the company's shares, leading to shareholder losses. The lawsuit alleges Halliburton overstated revenues by $445 million from 1999 through the end of 2001.
Two shareholders, Stephen S. Stephens of Indiana and Lyle and Deanna J. Lionbarger of New Mexico, have been listed as plaintiffs. The suit was filed in U.S. District Court in Dallas.
Compiled by Anne Rittman