Risk & Compliance

Don’t Blame Cheney

Four former Halliburton finance employees are trying to attach a new complaint in a federal class-action suit, charging ''serial accounting fraud.''
Kate O'SullivanSeptember 3, 2004

Finance employees are facing off in a newly filed complaint against Halliburton Co. Although the embattled energy and construction company recently paid $7.5 million to settle an SEC charge that it had failed to disclose a 1998 accounting change, Houston-based Halliburton is not yet in the clear. Four former finance employees are trying to attach a new complaint in a class-action suit in U.S. Federal Court in Dallas, charging “serial accounting fraud.”

The filing names current Halliburton chairman and CEO David Lesar as well as former CFO Douglas Foshee, now CEO of El Paso Corp.; Gary Morris, also a former CFO; and former controller Robert Muchmore Jr. as perpetrators of the alleged fraud, which the complaint says included underreporting of expenses, overreporting of revenues, and failure to disclose the outcome of an asbestos-related lawsuit. Lesar, Morris, and Muchmore worked under Vice President Dick Cheney, who served as CEO from 1995 to 2000. Cheney is not named in the suit, which concerns the years 1998-2001.

Scott and Scott LLC, one of the law firms involved in the original complaint, is asking to expand the existing suit, which Halliburton had preliminarily settled for $6 million in June. David R. Scott, managing partner at Scott and Scott, claims that Halliburton “caused hundreds of millions of dollars more in damages than has previously been alleged.” Scott says testimony from the four former finance employees supports this claim.

Halliburton’s director of public relations, Wendy Hall, vehemently denounces the new filing. “It is virtually a recycled lawsuit,” says Hall. Scott denies the charge. “They are settling a case that involves the same allegations that were raised in the SEC compliant as well as some additional violations, for $1.5 million less than the SEC fine,” he says.

Action on the case may be delayed, as the judge has rescued himself after discovering that the held Halliburton stock during the period under review.