Aug. 3, 2004
Halliburton Settlement Too Little, Avoids Answering Question of Cheney’s Responsibility for Accounting Irregularities
Statement of Public Citizen President Joan Claybrook
The penalty imposed today against Halliburton to settle allegations of accounting irregularities when Vice President Dick Cheney was at the company’s helm is too small and avoids addressing Cheney’s responsibility for the fraud.
To settle allegations that the company improperly altered its accounting during Cheney’s tenure as CEO, Halliburton agreed to pay just $7.5 million, which pales in comparison to the estimated $120 million by which accounting tricks boosted Halliburton’s profits during Cheney’s stewardship.
Cheney was Halliburton’s CEO from 1995 to 2000. Beginning in 1997, crude oil prices began a sharp decline, falling 50 percent from January 1997 to March 1998. This drop in the price of a commodity upon which Halliburton was dependent rocked the company’s bottom line. Under financial pressure, the company in April 1998 embarked on a radical change in its accounting practices: It began booking cost overruns in its construction business as income, rather than as expenses, and did not adequately disclose this change in practice until a year later. As a direct result of not properly reporting this accounting change, Halliburton was able to boost its reported profits by more than $120 million, misleading investors.
The Securities and Exchange Commission (SEC) noted in a complaint released today that it is the SEC’s “view that there were unacceptable lapses in the company’s conduct during the course of the investigation, which had the effect of delaying the production of information and documentation necessary to the staff’s expeditious completion of its investigation.”
The failure of the SEC to address the responsibility of Cheney, who was in charge when the accounting irregularities occurred, and instead focus upon the company’s chief financial officer and controller at the time, indicates that politics may have spared Cheney from necessary enforcement action. The CFO and controller both reported to Cheney, and he ultimately should be held responsible.