ABOUT HALLIBURTON

The Securities and Exchange Commission (SEC) is investigating allegations reported in the The New York Times that Halliburton committed accounting fraud during the period when Dick Cheney was CEO. According to the Times, Halliburton illegally overstated revenues by $100 million in order to hide tremendous losses the company had experienced due to a recession in the oil industry.

The overstatement of revenues was approved by Halliburton's accountant, Arthur Andersen, the same firm convicted for helping Enron hide illegal accounting practices.

Halliburton accomplished the alleged fraud by changing the way it counted cost-overruns from its construction projects. Under the new accounting method, Halliburton decided to assume that its subcontractors would pay for cost overruns, even though the question of who would pay those costs was still in dispute. So, instead of counting cost overruns as losses, Halliburton began marking them as revenue on the assumption that the funds would eventually be paid by the firms that had subcontracted with Halliburton in the first place.

Halliburton failed to disclose the change in its accounting practice to investors for over a year, thereby allowing the company's financial statements to appear more profitable than was actually the case. According to Newsday, the cost overruns accounted for a growing portion of Halliburton's book revenues every year, climbing from $89 million in 1989 to $234 million in 2001.

Several shareholder class action lawsuits were filed against Halliburton, alleging the company violated U.S. securities laws and defrauded stockholders. Halliburton settled the lawsuits for $6 million in May of 2003. Although the lawsuits were settled, the SEC continues its investigation of the accounting allegations as well as Halliburton's failure to disclose the new accounting method to investors. The SEC initiated its formal investigation a long time ago -- on December 20, 2002. The SEC's Dallas office initiated an informal investigation in May, 2002. But the case is still unresolved. Will the SEC finish its investigation before the elections in November? Don't hold your breath!


More Information

BBC: Cheney accused of corporate fraud
NY Times: Under Cheney, Halliburton altered policy on accounting
Institute for Global Ethics: Halliburton under investigation for accounting practices
Washington Times: SEC investigation puts Cheney in political peril
Democratic Underground: Mr. Cheney, step down