[lit-ideas] Halliburton under Cheney
- From: JulieReneB@xxxxxxx
- To: lit-ideas@xxxxxxxxxxxxx
- Date: Fri, 6 Aug 2004 19:04:39 EDT
http://www.reuters.com/newsArticle.jhtml?type=3DtopNews&storyID=3D5899651
Halliburton Accused of Accounting Fraud
Fri Aug 6, 2004 12:58 PM ET=20
By Jonathan Stempel=20
NEW YORK (Reuters) - Halliburton Co. (HAL.N: Quote, Profile, Research) and=20
several top executives intentionally engaged in "serial accounting fraud" f=
rom=20
1998 to 2001, including when it was led by Vice President Dick Cheney,=20
according to a new filing in a shareholder class-action lawsuit against the=
=20
company.=20
The filing accuses Houston-based Halliburton, the world's No. 2 oilfield=20
services company, of systematic accounting misdeeds far more wide-ranging t=
han=20
those charged in a recent civil lawsuit by the U.S. Securities and Exchange=
=20
Commission. Cheney was not named as a defendant in either proceeding.=20
Halliburton agreed on Tuesday to pay $7.5 million to settle SEC charges tha=
t=20
it misled investors by not disclosing an accounting change that boosted=20
profit in 1998 and 1999.=20
Among other things, the filing accuses Halliburton of inflating results,=20
failing to disclose a big asbestos verdict in a timely manner, and being un=
able=20
to account for $3.1 billion of profit and cash.=20
Halliburton in a statement called the lawsuit an abusive attempt to extort=20
money from current shareholders and smear the company and its employees. =20
The allegations in the 101-page filing and the SEC action cover two years =20
when Cheney was Halliburton's chief executive officer.=20
The filing with the U.S. District Court in Dallas was first reported by the=
=20
New York Times. Reuters obtained a copy.=20
Named as defendants in the lawsuit are Halliburton and four executives:=20
David Lesar, formerly the company's chief operating officer and now its CEO=
;=20
Douglas Foshee, a former chief financial officer and now CEO of El Paso Cor=
p.=20
(EP.N: Quote, Profile, Research) ; Gary Morris, another former CFO; and Rob=
ert=20
Muchmore, a former controller.=20
Muchmore has settled with the SEC, and like Halliburton, neither admitted=20
nor denied wrongdoing. Morris did not settle, and is being sued by the SEC=20=
in=20
federal court in Houston.=20
El Paso and lawyers for Foshee and Muchmore could not immediately be reache=
d=20
for comment. =20
SYSTEMATIC FRAUD ALLEGED=20
Halliburton said the Dallas court had "preliminarily approved Halliburton's=
=20
settlement of approximately 20 class-action securities cases ... and ordere=
d=20
that no further complaints be filed."=20
These cases included two filed by class-action specialist Scott & Scott LLC=
=20
of Colchester, Connecticut, on whose behalf the filing was made, the compan=
y=20
said.=20
"We have filed what we believe to be a very complete, detailed complaint fo=
r=20
securities fraud violation," said David Scott, managing partner of Scott &=20
Scott.=20
He noted the proposed $6 million class-action settlement "is not in the bes=
t=20
interest of the class and really puts a black eye on securities litigation.=
=20
We feel, as members of the plaintiff securities bar, that the shareholders=20
deserve better and that's what we're trying to do." =20
Halliburton said the new complaint, attached as an exhibit to a motion to =20
file it, is a bid to "generate publicity, while violating the spirit but not=
the=20
letter of that order." "Many of their complaints have already been asked an=
d=20
already been answered. It is virtually a recycled lawsuit."=20
The filing contends that Halliburton's Kellogg Brown & Root engineering and=
=20
construction unit inflated results through artificially boosting revenue or=20=
=20
understating expenses.=20
One employee said supervisors told her to do "whatever it took to make=20
(projects) come back to plan," or profitability, the filing said.=20
The filing also said Halliburton did not disclose a $130 million jury=20
verdict in September 2001 in an asbestos case involving its Harbison-Walker=
unit,=20
and that five weeks after they learned of the verdict, Lesar and Foshee tol=
d=20
analysts that news on asbestos liabilities was "positive." =20
On Dec. 7, 2001, after news of that verdict and other asbestos verdicts =20
became public, Halliburton shares fell 42 percent.=20
The filing also said that from 1998 to 2001 about $3.1 billion "went=20
missing" as the company generated $1 billion of profit and $2.1 billion fro=
m asset=20
sales, yet ended the period with roughly the same amount of debt and cash a=
s=20
it started.=20
Shares of Halliburton were down 30 cents, or 1 percent, at $29.81 in midday=
=20
trade on the New York Stock Exchange.=20
(Additional reporting by Carolyn Koo) =20
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n=20
or re-distribution of Reuters content or of any content used on this site,=20
including by framing or similar means, is expressly prohibited without prio=
r=20
written consent of Reuters.=20
Quotes and other data are provided for your personal information only, and=20
are not intended for trading purposes. Reuters, the members of its Group an=
d=20
its data providers shall not be liable for any errors or delays in the quot=
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or other data, or for any actions taken in reliance thereon.=20
=A9 Reuters 2004. All rights reserved. Republication or redistribution of=20
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prohibited without the prior written consent of Reuters. Reuters and the Re=
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sphere logo are registered trademarks and trademarks of the Reuters group o=
f=20
companies around the world.=20
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