Risk Management

SEC Drops Charge Against Former CFO

Suit alleged that ex-Halliburton CFO helped to hide accounting changes that overstated income. But the regulator changed its mind about the former ...
Stephen TaubFebruary 26, 2007

A former chief financial officer of Halliburton Co. is in the clear from a legal perspective, after the Securities and Exchange Commission dropped a charge against him related to the company’s change in accounting policy during the years that Vice President Dick Cheney served as chief executive officer. The SEC said it will dismiss the charge against Gary V. Morris, that the former CFO allowed financial statements to be issued without the full accounting disclosure, according to the Associated Press.

In a filing in federal court in Houston, the regulator said it is seeking to dismiss the charge “in the interest of justice,” according to the AP. In August, CFO.com reported that the SEC brought charges against Halliburton, Morris, and its onetime controller Robert Muchmore, for failure to disclose a change in the company’s accounting practice related to cost overruns.

The SEC had alleged that Morris and Muchmore were responsible for hiding a 1998 accounting change that should have been reported in Halliburton’s public filings. The change resulted in a 46 percent overstatement of reported pretax income for 1998, according to the commission’s complaint. The accounting change took place during Cheney’s tenure, which spanned 1995 to 2000. Cheney was never accused of any wrongdoing.

In a settlement with the SEC, the company and Muchmore agreed to avoid future securities law violations. To settle civil charges for not fully cooperating with the commission’s probe, Muchmore and Halliburton agreed to pay $50,000 and $7.5 million in penalties, respectively. Morris, however, did not agree to settle. As a result, the SEC filed an enforcement action against the former finance executive.

In September 2005, a federal judge dismissed one of two civil charges leveled against Morris: an allegation that he helped the company put together financial reports that failed to promptly disclose a change in accounting procedures, according to several press reports. Now, the SEC is reportedly dropping the other remaining charge of negligence for allowing financial statements to be released without full accounting disclosure.