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How Cheney Got Away With $35 Million Before the Feds Launched a Probe into Halliburton

by JASON LEOPOLD

It’s obvious that no mainstream news reporter has the gumption to seriously question Vice President Dick Cheney’s ethics when he was chief executive of Halliburton, the oil-field services company that is currently embroiled in a scandal with the Pentagon due to its questionable accounting practices related to its work in war-torn Iraq.

Pity those journalists because this is the stuff Pulitzer’s are made of. What’s even more remarkable is that there’s reams of documents in the public domain showing how Cheney cooked the books when he was CEO of Halliburton, which makes the vice president look like Ken Lay’s twin brother. The evidence is beginning to collect dust. To tell the story of how Cheney’s Halliburton used accounting sleight of hand to fool investors all you need to do is connect the dots, which is what this story will do.

Let’s start with a bit of old news. A couple of weeks ago Halliburton agreed to pay a $7.5 million fine to settle a U.S. Securities and Exchange Commission probe related to a 1998 change in the way Halliburton accounted for construction revenue.

The commission says the undisclosed accounting change caused Halliburton’s public statements regarding its income in 1998 and 1999 to be materially misleading, boosting Halliburton’s profits on paper by $120 million.

“In the absence of any disclosure, the investing public was deprived of a full opportunity to assess Halliburton’s reported income – more particularly, the precise nature of that income, and its comparability to Halliburton’s income in prior periods,” according to the commission.

Cheney was CEO of Halliburton from 1995 to 2000. The SEC said Cheney cooperated with the agency’s investigation and as such he wasn’t penalized for his role in the charade. No big surprise there. All five of the SEC commissioners were appointed by President Bush. Dozens of the administration’s crimes have gone unpunished in the past three years. But dig a little more and you’ll see just how deep the rabbit hole goes.

Cheney has said publicly that he was unaware of Halliburton’s accounting machinations while he was CEO of the company. His Sgt. Schultz defense has been used before by the likes of Gary Winnick of Global Crossing, Dennis Kozlowski of Tyco, John Regas of Adelphia and Ken Lay of Enron, all of whom have been prosecuted by the Justice Department for cooking the books at their respective companies.

A story in the July 22, 2002 issue of Newsweek sets the record straight and proves that Cheney knew full well that Halliburton was engaging in accounting trickery to boost its stock and standing on Wall Street and he should be held accountable just like those other corporate evildoers.

In an interview with two of Newsweek’s reporters, Halliburton CEO David Lesar defended his company’s bookkeeping and said that former CEO Dick Cheney was aware of the firm’s accounting methods. Lesar says “Cheney knew that the firm was counting projected cost-overrun payments as revenues, “The vice president was aware of who owed us money, and he helped us collect it,” Lesar told Newsweek.

Wendy Hall, a spokeswoman for Halliburton, said at the time that “the vice president was aware we accrued revenue on unapproved claims in accordance with generally accepted accounting principles.”

By the way, those “generally accepted accounting principles” is what Enron used to cook its books and is why the company’s top two leaders have been charged with a whole of range of crimes by the Justice Department.

Just as disturbing is the fact that Cheney had now defunct auditor, Arthur Anderson, which unraveled in 2002 after the company was found guilty of obstruction of justice for destroying documents related to its role in the Enron debacle, approve Halliburton’s accounting methods. Cheney was so grateful to Anderson that he agreed to appear in a promotional video for Anderson and spoke glowingly about the company for going above and beyond routine audits for Halliburton.

“One of the things I like that they do for us is that, in effect, I get good advice, if you will, from their people based upon how we’re doing business and how we’re operating, over and above the, just sort of the normal by-the-books audit arrangement,” said Cheney in the 1996 tape.

In a separate but equally corrupt act of corporate malfeasance, a French judge is pouring over evidence to determine whether Cheney may have been responsible under French law for at least one of four bribery payments exchanged between a Halliburton subsidiary and Nigerian officials to obtain contracts for liquefied natural projects. Under French law, “the head of a company can be charged with ‘misuse of corporate assets’ for bribes paid by any employee – even if the executive didn’t know about the improper payments.” The U.S. Justice Department is also investigating the issue.

As if that weren’t enough to toss the vice president and his boss out of office, the Justice Department is also investigating whether Halliburton violated sanctions that prohibit U.S. corporations and businesses from engaging in commercial, financial, or trade transactions with Iran while Cheney headed the company. For the record, Cheney personally lobbied Congress in 1996 to lift those sanctions and when Congress denied the request Halliburton opened a Cayman Island subsidiary so it could do business in Iran by skirting U.S. law.

In July 2004, a federal grand jury issued a subpoena to Halliburton seeking information about its work in Iran. Government officials told the Washington Post such cases are referred to Justice only when there is evidence “intentional or willful” violations have occurred.

The Washington Post summed up Cheney’s tenure at Halliburton this way on July 16, 2002 following revelations that the vice president made a $35 million windfall from his sales of Halliburton stock, right before the company’s share price crashed on the announcement that it was being investigated by a grand jury related to the company overbilling the federal government for its work at Fort Ord in California (which also took place under Cheney’s watch), an issue that is identical to current charges that the company has overbilled the government for its work in Iraq.

“The developments at Halliburton since Cheney’s departure leave two possibilities: Either the vice president did not know of the magnitude of problems at the oilfield services company he ran for five years, or he sold his shares in August 2000 knowing the company was likely headed for a fall.”

Either way, the more evidence that surfaces related to Cheney’s role at Halliburton the more it becomes clear that the vice president is unfit to serve a second term in the White House.

JASON LEOPOLD is the former Los Angeles bureau chief of Dow Jones Newswires where he spent two years covering the energy crisis and the Enron bankruptcy. He just finished writing a book about the crisis, due out in December through Rowman & Littlefield. He can be reached at: jasonleopold@hotmail.com

 

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JASON LEOPOLD is the former Los Angeles bureau chief of Dow Jones Newswires where he spent two years covering the energy crisis and the Enron bankruptcy. He just finished writing a book about the crisis, due out in December through Rowman & Littlefield. He can be reached at: jasonleopold@hotmail.com

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