Risk & Compliance

Cheney Blamed CFO for Halliburton Impropriety

In sworn testimony to the SEC in 2004, the vice president said he had no "specific recollection" of discussing accounting that led to charges.
Stephen TaubOctober 3, 2007

Vice President Dick Cheney, in sworn testimony to the Securities and Exchange Commission in 2004, blamed former Halliburton Co. finance executives for questionable accounting practices, and said he had no “specific recollection” of an alleged conversation with the defense contractor’s former CFO about the accounting issue.

On Tuesday, in response to a Freedom of Information Act request from Dow Jones, the SEC released the vice president’s testimony in the case to the news service.

In his testimony, according to the report, Cheney said he did not remember discussing the accounting with former finance chief Gary Morris — in a conversation that Morris in June 2004 told SEC investigators had taken place six years earlier. According to Dow Jones News Service, Morris had said plans were discussed to treat as revenue some disputed, over-budget expenses. At the time of the alleged discussions, in 1998, Cheney was Halliburton’s CEO.

Halliburton booked millions of dollars in construction cost overruns at a construction project in Egypt and in other countries as income, the wire service said. It also said that, according to the SEC, Cheney was not the target of the commission, and that he cooperated fully with the investigation.

The vice president reportedly said in 2004 that the Halliburton chief financial officer was “probably” the person “whose general area of responsibility this fell into.”

“I remember the project and the project got into trouble,” Cheney told investigators, referring to the Egyptian work, according to the report. “But I don’t have any recollection of the revenue recognition or the accounting for the project.”

Two days after Cheney testified in 2004, the SEC charged Halliburton, CFO Morris, and one-time controller Robert Muchmore Jr. for failure to disclose a change to its accounting practice.

In May 2007, the SEC dismissed claims against Morris, asserting it was “in the interests of justice.” According to the SEC at the time, Halliburton and Muchmore settled the enforcement actions by agreeing to cease and desist from committing or causing future securities law violations. Halliburton agreed to pay a $7.5 million penalty to settle civil charges for not fully cooperating with the SEC’s probe. Muchmore also agreed to pay $50,000.

In the original charges, the SEC alleged that Morris and Muchmore were responsible for hiding a 1998 accounting change that was supposed to be reported in Halliburton’s public filings. The failure to disclose the change, for six quarters, caused the company’s 1998 and 1999 stated income to be materially misleading. The duo also played key roles in the preparation and review of quarterly earnings releases and analyst teleconference scripts that included the affected income figures, said the SEC at the time.

Dow Jones said this week that Cheney’s account differs from testimony by a Halliburton executive whom the SEC didn’t identify in its documents. However, citing sources that it did not name, the wire service said that the individual was Morris.

Dow Jones also said that Morris had testified that he told Cheney about plans to treat some disputed, over-budget expenses as revenue.

The conversation between the two executives took place before a 1998 Halliburton board meeting that addressed recording cost overruns for the Egyptian project, according to the wire service report.