Risk & Compliance

Halliburton May Settle Cheney-Era Probe

''A complicated SEC investigation is not like a fine wine; it doesn't get better with age.''
Stephen TaubJuly 26, 2004

Halliburton Co. may settle a two-year-old probe of its accounting practices during the period that Vice President Dick Cheney ran the company, according to Bloomberg, citing people familiar with the matter.

The wire service reported that the energy services and infrastructure services company has held talks with the SEC’s enforcement staff and may agree to pay a fine as soon as next month. But that fine, noted Bloomberg, probably will be lower than the penalties imposed by the commission in other recent, high-profile cases.

The SEC is trying to determine whether Halliburton improperly booked about $234 million in revenue related to construction contracts from 1998 through 2001. Cheney served as the company’s chief executive officer from 1995 to 2000.

Halliburton is also being investigated by federal agencies for its operations in Iraq and Iran and for alleged bribes to win business in Nigeria, according to Bloomberg.

“We have been cooperating with the SEC and working towards a resolution,” Halliburton spokeswoman Wendy Hall told the wire service in a statement. “However, we cannot comment on the possible outcome or the timing.” SEC spokesman John Nester also declined to comment.

Halliburton may be prepared to settle the accounting probe now because “a complicated SEC investigation is not like a fine wine; it doesn’t get better with age,” said Ralph Ferrara, a former SEC general counsel. Ferrara, now a partner at the law firm Debevoise & Plimpton in Washington, observed that Halliburton may wish avoid the risk that the SEC will demand stiffer settlement terms, or refuse to settle altogether, if the government uncovers evidence of other possible misconduct during the probe.

Bloomberg pointed out that in the past 16 months, the SEC has extracted penalties of $50 million or more in at least nine settlements.

The SEC has been investigating how Halliburton accounted for overspending on construction projects beginning in 1998, when the company began booking some of the excess costs as revenue even though clients hadn’t agreed to pay them, according to Bloomberg. Reportedly the SEC is looking into whether Halliburton adequately disclosed this accounting technique when it reported its financials.

In May 2003, Halliburton settled shareholder lawsuits that had alleged the company’s accounting was intended to inflate its revenue and, thus, its share price. According to Bloomberg, the company agreed to pay a total of $6 million but did not admit wrongdoing.