Cheney deflects questions on Halliburton accounting

Aug. 7, 2002, 10:22PM
By BENNETT ROTH
Copyright 2002 Houston Chronicle Washington Bureau

WASHINGTON — Vice President Dick Cheney, facing his first public questioning about accounting changes made while he headed Halliburton Corp., refused to address the issue Wednesday.

Cheney has avoided situations where he might face questions since May, when the Securities and Exchange Commission began a probe into the Texas-based company’s accounting.

But the issue came up Wednesday, during a question-and-answer session before a group invited to San Francisco’s posh Commonwealth Club. In response, Cheney praised Halliburton as a “fine company,” but referred all inquiries about the disputed accounting to an explanation posted on the company’s Web site.

Before the Q&A, the vice president discussed a range of issues from the economy to Iraq, but was interrupted by hecklers who shouted, “Corporate crook.”

The Halliburton issue has provided ammunition for Democrats who claim the administration is too close to big business to police executive malfeasance. And the added scrutiny has hampered Cheney from helping President Bush combat the rash of corporate problems.

Cheney acknowledged his discomfort, saying, “The return to public life carries certain penalties. You pay a price once you get into the public arena, because you do become a target.”

Nevertheless, the vice president, who has been treated for a heart condition, said he would be happy to serve a second term with Bush “if the president’s willing and my wife approves and my doctors say it’s OK.”

But the vice president said he would open himself to attack if he elaborated on his dealings at Halliburton.

“I am, of necessity, restrained in terms of what I can say about that matter, because there are editorial writers all over America poised to put pen to paper and condemn me for exercising undue influence if I say too much about it, since this is a matter pending before an independent regulatory agency, the SEC,” Cheney said.

He referred inquiries to a July 24 defense of the accounting practices by Halliburton Chief Executive David Lesar and Chief Financial Officer Douglas Foshee to financial analysts, which is posted on the company Web site: www.halliburton.com.

In the presentation, Lesar said the accounting procedures were legal and complained that the company was being wrongly tarnished.

“Halliburton is being covered by the media as a political story and not a business story. And frankly that is not fair,” said Lesar, who succeeded Cheney when Bush tapped him to be his running mate in the summer of 2000.

Not only is Halliburton dealing with the government probe, but a Washington-based group, Judicial Watch, also has sued Cheney and company officials in federal court in Dallas, claiming they misled stockholders.

Acknowledging the company may have a public relations problem on its hands, the Halliburton executives said employees were “fighting mad” about what they called “unfair and unwarranted allegations.”

Halliburton, which with 83,000 employees is one of the world’s largest oil-field services and construction companies, has announced it will move its headquarters from Dallas to Houston. Cheney was chief executive officer of the company from 1995 to 2000.

At issue is an accounting change made by Halliburton in the late 1990s that allows the company to count as revenue disputed payments it has not yet received on construction projects.

Halliburton officials said the accounting practice is standard on fixed-price construction projects and is used by 10 of the 15 largest publicly traded construction companies. Halliburton officials also have said Cheney signed off on the change.

Foshee told analysts it often takes years to resolve disputes but that Halliburton has a good record of recovering these costs.

He said that of the $89 million in cost overruns the company believed it was due in 1989, Halliburton had collected $39 million, was pursuing $31 million, and had written off $19 million.

At the end of June of this year, Halliburton reported $200 million in disputed payments that it had not yet collected on construction projects.

Foshee acknowledged that the company did not report the accounting changes until 1999, one year after they were implemented. He said that officials were preoccupied in 1998 with Halliburton’s merger with Dresser Industries.

Foshee said the decision to wait a year to report the accounting changes was “not a significant issue at that time — with perfect hindsight could someone disagree with this conclusion — yes.” He said the SEC will have to resolve whether Halliburton waited too long to report the change.

Foshee said the change was approved by the company’s accounting firm at the time, Arthur Andersen, the same firm that audited Enron’s books.

Halliburton replaced Andersen earlier this year after the accounting firm was implicated in the Enron scandal. But Foshee said Halliburton’s new accounting firm, KPMG, also has endorsed the company’s accounting practice.

In his California speech Wednesday, Cheney sounded an upbeat note about the economy, as did Bush, who traveled from his Crawford ranch to Mississippi for a fund-raiser and other events.

The administration is hoping to use the August break to counter Democratic attacks that the Republicans have allowed the economy to sour.

In a speech near the headquarters of the bankrupt communications giant WorldCom, whose executives have been accused of inflating profits, Bush said the terrorist attacks and corporate corruption had indeed hurt the economy.

But he added, “We won’t let fear undermine our economy, and we’re not going to let fraud undermine it either.”

 

Comments are currently closed.