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.”

 

Cheney keeps low profile as dealings scrutinized

July 29, 2002, 10:00AM
By BENNETT ROTH
Copyright 2002 Houston Chronicle Washington Bureau

Cheney, once highly visible, has maintained a noticeably lower profile in recent weeks, plagued by scrutiny into his business dealings when he ran Texas-based Halliburton Corp.

WASHINGTON — One day last week, as White House officials worked to contain fallout from the spate of corporate scandal, Vice President Dick Cheney was far away — in a submarine off the Florida coast.

Now that the company’s accounting practices are the subject of several lawsuits and a Securities and Exchange Commission investigation, the vice president has avoided making appearances where he might face questions.

Administration officials insist Cheney has done nothing wrong, but experts say the scrutiny is hampering his ability to help Bush steer an economy threatened by a volatile stock market and executive malfeasance.

Cheney was once the administration’s choice mouthpiece on the influential Sunday television talk shows. But he has not appeared to advance the administration’s agenda since the middle of May, before Halliburton announced that the SEC was looking into accounting changes approved under Cheney’s watch.

White House officials say the vice president has been counseled not to talk about the SEC probe, but they bristle at the suggestion that he is trying to dodge the issue of corporate abuse.

“To suggest that Cheney is hiding something is crap,” said Adam Levine, the White House press officer responsible for placing administration officials on talk shows.

Levine said the administration always used Cheney more sparingly than other White House officials on television and only when it had an important message to get out. He said that Cheney had appeared on talk shows six times this year and that he probably will appear again around the anniversary of the Sept. 11 terrorist attacks.

The vice president regularly travels around the country speaking to the Republican faithful, helping the party’s candidates raise money, but those appearances have been tightly controlled to ensure he faces no media inquiries.

When he went to Florida last Tuesday to watch the submarine USS Wyoming test its ballistic missile system, the trip was announced at the last minute and he made no public appearances.

Cheney also is not expected to participate in an economic forum that Bush will host Aug. 13 in Waco — an event that will include Cabinet members, corporate executives, ethics experts and economists from all over the country.

Even in Washington, Cheney has left it up to others, including President Bush, to defend him against Democratic charges that he has not been forthcoming about what went on at Halliburton.

“He is not in a position to help the president a whole lot right now,” said Charles Cook, a political analyst.

Cheney’s spokeswoman, Jennifer Millerwise, said the vice president’s fund-raising speeches regularly include calls to crack down on corporate abuse.

But she added, “It would be inappropriate to comment on specifics of the SEC inquiry. Our office cannot and is not working on Halliburton issues.”

She said that Cheney, who is expected to attend about 60 GOP fund-raisers by November, has had a policy since February of not taking media questions at such events.

At a recent fund-raising luncheon the vice president attended in Houston for U.S. Senate candidate John Cornyn, the media were kept at the back of the room, too far away to shout questions.

A Cornyn official said the campaign did not want a news conference because it would detract from the focus on the candidate. When Cheney’s office was advised that there would be no media availability, the official said the response was, “Good, we don’t have to worry about that.”

White House officials also say that Cheney, despite his extensive business experience, has focused largely on military and foreign policy issues, not the economic agenda.

They point out that the vice president was not the lead spokesman when the president was trying to sell his tax cut last year and that he is more regularly involved in meetings of the National Security Council than in those of the president’s economic team.

Formerly the secretary of defense under Bush’s father, Cheney has been intimately involved in the anti-terrorism effort. And he flew to the Middle East to try to smooth the tension in that troubled region.

The vice president was last dispatched to the talk shows May 19 to respond to the Democratic uproar over media accounts that the president had received advanced warnings about the Sept. 11 attacks.

Right after those attacks, the vice president was often dispatched to secret locations for security reasons, so that one top official would be protected in case of further terrorism.

But after several months, Cheney re-emerged and made a rare appearance with Bush at the president’s State of the Union speech in January.

In recent months, however, Cheney has not been at Bush’s side, as Democrats and reporters have pressed the vice president to disclose what he knew about the accounting changes at Halliburton.

A spokeswoman for Sen. Joseph Lieberman, D-Conn., who heads the Government Affairs Committee, said the lawmaker would not consider launching an official probe into the vice president’s business dealings until the SEC finishes its investigation.

The SEC is looking into the appropriateness of the changes Halliburton made in the late 1990s that resulted in the company reporting as revenue disputed payments it had not received on construction projects.

Halliburton officials contend the accounting changes were legal and that Cheney, who was chief executive officer of the company from 1995-2000, had signed off on them.

Critics claimed that the accounting changes allowed the company to hide financial problems, some of them stemming from a slowdown in business as well as asbestos-related lawsuits inherited when Halliburton merged with Dresser Industries in 1998.

Last week, Halliburton reported a second-quarter loss of $498 million — its first loss in four years — that it attributed largely to asbestos lawsuits and problems with an offshore construction project in Brazil.

Halliburton, one of the world’s largest oil-fields service companies, is planning to move its headquarters from Dallas to Houston, where it has 15,000 employees.

John Wall, an attorney who represents a number of laid-off workers at a Halliburton oil-field products plant in suburban Dallas, questioned why Cheney would approve a merger that brought such financial liabilities with it.

“Why buy something that has so many obvious problems?” Wall asked. “Mr. Cheney is by all accounts a smart man. How could such a smart man make such a foolish mistake?”

Wall noted that Cheney chose to merge Halliburton with a company that had ties to the Bush family. The president’s grandfather, Prescott Bush, was the banker who was instrumental in getting Dresser started. He also served on the company’s board.

Bush’s father, the former president, also worked for Dresser for a short period and got his start in the Texas oil business with the help of former Dresser President Neil Mallon.

Millerwise, Cheney’s spokeswoman, would not comment on the Dresser merger and the asbestos lawsuits.

 

Contacts between Bush administration officials and Enron executives

May 22, 2002, 8:45PM
Associated Press

Some contacts between Bush administration officials and Enron executives provided by the White House to a Senate committee Wednesday. Many of the contacts described were disclosed by the administration early this year when the Enron scandal broke, in response to questions from lawmakers and reporters.

• A half-hour private meeting on April 17, 2001, that then-Enron Chairman Kenneth Lay had with Vice President Dick Cheney, in which energy policy and the power crisis in California were discussed. Cheney, who headed an energy-policy task force, disclosed the meeting in a PBS television documentary earlier this year. Cheney also has disclosed similar meetings related to the task force’s work with Enron officials in February, March, April, August and October of last year.

• Lay telephoned Bush political adviser Karl Rove in early 2001 regarding Bush’s intention to nominate Nora Brownell to the Federal Energy Regulatory Commission. Lay expressed support for Brownell’s nomination and expressed concern that some people were trying to discourage her from accepting it. Rove later called Lay to tell him no such efforts were taking place, the White House said. Rove owned Enron stock at the beginning of Bush’s term but sold it because of federal ethics rules.

• Clay Johnson, Bush’s assistant for presidential personnel, received a letter from Lay on Jan. 8, 2001, regarding appointments to the energy commission. Lay recommended seven possible candidates, including Brownell and Pat Wood, the Texas utility commissioner who eventually became FERC chairman. Lay also phoned Johnson twice in early 2001 to follow up. Johnson thanked Lay in a form letter on March 6 for recommending Wood.

• Bush economic adviser Larry Lindsey had “a few communications” with Lay in the winter and spring of 2001, most likely about the California electricity shortage. Lindsey met on April 6 with Lay and other White House economic aides to discuss electricity issues. Lindsey earned $50,000 from Enron for serving on a company board last year.

• Enron Executive Vice President David Haug and a few other people from the private sector met on March 7, 2001, with Andrew Lundquist, the executive director of the energy-policy task force, to discuss energy policy. Lewis Libby, Cheney’s chief of staff, was present for several minutes.

• In the months before the task force released its report, Steve Ruhlen, Cheney’s assistant for legislative affairs, received several phone calls from Pat Shortridge, an Enron lobbyist and personal friend of Ruhlen. Shortridge was seeking information on what the energy plan would likely contain. Ruhlen said he had no knowledge of specific information regarding the plan but said it was expected to conform to Bush’s policy positions during the 2000 election campaign.

• Haug met with Cheryl Oldham of the presidential personnel office on Sept. 13, 2001, to discuss potential job opportunities in the administration, mostly in fields other than energy. Nothing came of the discussion and Haug was not named to a government position, the White House said. Lay had sent a letter of recommendation to the White House on Haug’s behalf.