Sticky Business: With the Stock Tanking and the SEC Looking into Accounting Practices at the Company He Used to Run, Cheney Has Been Noticeably Absent from the Debate over How to Fix Corporate America
Sloan, Allan, Roberts, Johnnie L., Newsweek
Byline: Allan Sloan and Johnnie L. Roberts
When President Bush came to Wall Street to jawbone chief executives about corporate responsibility, Dick Cheney, the vice president and a former CEO himself, wasn't with him. When Bush met at the White House with his new Justice Department corporate-crime "SWAT team," Cheney was elsewhere--at a national-security meeting, his aides said. Two cabinet CEOs--Paul O'Neill of Treasury and Don Evans of Commerce--headlined televised town-hall meetings after Bush's speech, and were headed to the Sunday TV talk shows to pitch the president's program. Cheney's only comments on the need for tougher oversight of business were made at Republican fundraisers.
Cheney's aides say it's all business as usual, that the veep normally doesn't play this kind of public role. But his absence from the debate about corporate behavior and CEO misdeeds is striking. After all, he seems to be more than qualified to work the mahogany pulpit. He ran Halliburton, the huge oil-services company, for five years. During the presidential campaign, he touted that experience as an asset, a CEO-M.B.A. ticket. At a campaign news conference in Oregon, Cheney said: "By any measure you want to use, Halliburton has been a great success story."
Today, though, his record at Halliburton seems hardly the stuff of bragging rights, which may go a long way toward explaining his recent low profile. Halliburton is enmeshed in a Securities and Exchange Commission investigation about accounting practices during his tenure. And its 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 he orchestrated in 1998. 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. Cheney's response? "We don't discuss Halliburton issues," says Mary Matalin, Cheney's chief political aide. "His view is that it would be a distraction from what he's trying to get done here." Cheney's office has been referring questions to Halliburton, which doesn't appreciate the attention. "At some point, [Cheney] is going to have to address these [accounting] questions," says Wendy Hall, a Halliburton spokeswoman.
Cheney may not have a choice. The SEC may seek his testimony in the accounting matter, which involves how Halliburton booked revenues and profits from fixed-price projects that incur cost overruns. Halliburton counts projected overrun reimbursements as revenues while the work is underway, rather than waiting until the projects are completed. Critics allege that the company changed its accounting method for such contracts in 1998, boosting revenue and profits considerably.
But in his first extensive interview on Cheney's tenure, Halliburton CEO David Lesar defended the firm's bookkeeping and said Cheney was aware that the firm was counting projected cost-overrun payments as revenue. "The vice president was aware of who owed us money, and he helped us collect it," Lesar told NEWSWEEK. The firm says it has always accounted for overrun revenues the same way, but the amounts weren't significant until late 1998. "We stand behind the accounting treatment," Lesar said. Doug Foshee, Halliburton's chief financial officer, says the SEC is investigating whether the company accounted for these revenues properly, and whether it adequately disclosed the information. He says the disclosure consisted of changing some footnotes in financial filings from one year to the next. However, few people outside the company seem to have picked up on the wording change. It's impossible to predict what the SEC, which declined to comment, will decide. Cheney, as CEO, signed Halliburton's 1998 and 1999 financial statements, which is why he may find himself chatting to the SEC someday. …