Newsweek: Halliburton CEO Says Cheney Knew About Firm's Accounting Practices; 'The Vice President Was Aware of Who Owed Us Money, And He Helped Us Collect It' -- Republicans Want Army Secretary White to Resign to Avoid Controversy Over Enron; 'How is It Going to Look When One of the Guys Leading the War on Terrorism Takes the Fifth?' Says One GOP Source
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Story Filed: Sunday, July 14, 2002 11:01 AM EST
NEW YORK, Jul 14, 2002 /PRNewswire via COMTEX/ -- In his first extensive interview on the vice president's role in the controversy at oil services company Halliburton, current CEO David Lesar defended the firm's bookkeeping and said that former CEO Dick Cheney was aware of the firm's accounting methods, report Wall Street Editor Allan Sloan and Senior Writer Johnnie L. Roberts. Lesar says Cheney knew that the firm was counting projected cost-overrun payments as revenues, "The vice president was aware of who owed us money, and he helped us collect it," Lesar tells Newsweek. The firm says it has always accounted for overrun revenues the way it does now, but the amounts weren't significant until the end of 1998. "We stand behind the accounting treatment," Lesar said.
(Photo: http://www.newscom.com/cgi-bin/prnh/20020714/NYSU004 )
The Securities and Exchange Commission is looking into how Halliburton -- the company Cheney ran for five years -- booked revenues and profits from fixed-price projects, and may seek Cheney's testimony, write Sloan and Roberts. The question involves Halliburton counting projected payments from cost-overruns as revenues while the work is under way, rather than waiting until the projects are completed, Newsweek reports in the July 22 issue (on newsstands Monday, July 15). Critics allege that the company changed its accounting method for such contracts in 1998, boosting revenue and profits considerably.
And Douglas Foshee, Halliburton's chief financial officer, tells Newsweek, the SEC is investigating both whether the company accounted for these revenues properly, and whether it adequately disclosed the information. He said the disclosure consisted of changing some financial footnotes from one year to the next. However, few people outside the company seem to have picked up on the wording change.
Cheney's tenure at Halliburton raises some of the issues that have enraged investors in companies such as Global Crossing and Enron: big fish making millions from stock sales while small-fry shareholders and employees get swallowed. Halliburton's stock has fallen 75 percent since Cheney left to run for vice president -- twice as much as the market as a whole during that period
-- in large part because of fallout from a huge takeover Cheney orchestrated in 1998. The vice president's office says they won't discuss Halliburton issues. "His view is that it would be a distraction from what he's trying to get done here," said Mary Matalin, Cheney's chief political aide. His office has instead been referring calls to Halliburton, which doesn't appreciate the attention. "At some point, he [Cheney] is going to have to address these [accounting] questions," said Wendy Hall, a Halliburton spokesperson.
Newsweek has also learned that Republicans on the Hill are quietly passing the word that they'd prefer Army Secretary Thomas White to resign, even though the White House has continued to back him. White cashed out as an Enron executive with $31 million just before the company collapsed. Federal investigators are combing through the wreckage of Enron, including trading strategies used by White's Enron unit to hike electricity prices in California in 2000 and 2001. He is scheduled to testify this week before a Senate committee. And Republicans don't want to see him testify. They say if he does, he will be forced to invoke his constitutional right not to respond, reports Chief Political Correspondent Howard Fineman. "How is it going to look when one of the guys leading the war on terrorism takes the Fifth?" said a leading GOP source on the hill. "We're betting that he'll quit."