Halliburton Fined Over Accounting
Halliburton Co. agreed to pay a $7.5-million fine for alleged accounting irregularities in a case that pulled Vice President Dick Cheney off the campaign trail to provide sworn testimony to the Securities and Exchange Commission, the government and the company said Tuesday.
The commission accused Halliburton of improperly failing to disclose a change in its accounting practices in 1998 that boosted its bottom line. Cheney was chief executive at the time. The company acknowledged no wrongdoing.
SEC spokesman John Heine said the commission would provide no details of Cheney’s testimony in keeping with its policy not to disclose details of its investigations. He “provided sworn testimony and cooperated willingly and fully in the investigation,” the SEC said in a statement.
The agency charged two former Halliburton finance executives, but not Cheney. A source familiar with the investigation said the vice president was never a focus of the probe.
“I’m very comfortable that we brought the appropriate case based on the evidence that a very thorough investigation developed,” said Spencer Barasch, head of enforcement in the SEC’s Fort Worth office, which investigated the case.
News of the settlement comes as Democrats and other administration critics are using various allegations of wrongdoing by Halliburton to tarnish President Bush and his vice president, who served as CEO of the giant oil services company from 1995 until he became the vice presidential nominee in 2000.
“The penalty imposed today against Halliburton ... is too small and avoids addressing Cheney’s responsibility for the fraud,” complained Joan Claybrook, president of Public Citizen, a liberal government watchdog group.
According to papers filed by the SEC, Halliburton in 1998 accelerated its recognition of revenue from cost overrun claims under construction contracts. The change raised the company’s revenue and pretax profit in 1998 and 1999. In 1998, Halliburton’s pretax profit was 46% higher than it would have been without the accounting change.
The change in bookkeeping methodology should have been disclosed so that investors could take it into account, the SEC said.
The vice president’s office did not return calls seeking comment. Terrence O’Donnell, Cheney’s lawyer, said his client was not involved in the decision to change the accounting practice or its disclosure.
He said the vice president’s deposition took place “in the last few days,” a period when Cheney was campaigning in the Midwest and elsewhere.
Lorraine Horton, a forensic accountant in Kingston, R.I., described the accounting violation as blatant. She said that Halliburton listed its accounting method before the change but omitted the statement entirely after the change was made. She said that suggested that someone at the company took the trouble to remove it. The new method was disclosed only six quarters later, at the end of 1999.
“It clearly wasn’t an oversight. Clearly they were boosting income,” Horton said. However, she said a violation of that sort generally fell at the feet of the chief financial officer, not the CEO.
“Some CEOs would be cognizant of this kind of accounting change, but they wouldn’t necessarily follow through to make sure it was in the SEC statements. To make something like this stick against any CEO would be hard work,” Horton said.
The SEC charged two former Halliburton financial executives -- Comptroller Robert C. Muchmore Jr. and Chief Financial Officer Gary V. Morris -- in connection with the violation. The commission announced Tuesday that Muchmore had agreed to settle and pay a personal fine of $50,000. Morris is contesting the SEC’s allegations.
Investors were unperturbed by the news. Halliburton shares rose 8 cents in trading on the New York Stock Exchange on Tuesday, to close at $31.38. The stock is up 21% this year.
Halliburton faces a sea of other criminal and regulatory probes. The FBI is investigating charges that two employees accepted as much as $6.3 million in kickbacks, a federal grand jury in Houston is investigating the firm’s operations in Iran, French and SEC investigators are probing alleged bribes to Nigerian officials and the Pentagon is looking into allegations that the company overbilled by more than $200 million for meals and gasoline in Iraq.
Times staff writers T. Christian Miller in Washington and Thomas S. Mulligan in New York contributed to this report.
