NEW YORK -- In his first extensive interview on the vice president's role in
the controversy at oil services company Halliburton, current CEO David Lesar defended
the firm's bookkeeping and said that former CEO Dick Cheney was aware of the firm's
accounting methods, report Wall Street Editor Allan Sloan and Senior Writer Johnnie
L. Roberts. Lesar says Cheney knew that the firm was counting projected cost-overrun
payments as revenues, "The vice president was aware of who owed us money,
and he helped us collect it," Lesar tells Newsweek. The firm says it has
always accounted for overrun revenues the way it does now, but the amounts weren't
significant until the end of 1998. "We stand behind the accounting treatment,"
The Securities and Exchange Commission is looking into how Halliburton -- the
company Cheney ran for five years -- booked revenues and profits from
fixed-price projects, and may seek Cheney's testimony, write Sloan and Roberts.
The question involves Halliburton counting projected payments from cost-overruns
as revenues while the work is under way, rather than waiting until the projects
are completed, Newsweek reports in the July 22 issue (on newsstands Monday, July
15). Critics allege that the company changed its accounting method for such
contracts in 1998, boosting revenue and profits considerably.
And Douglas Foshee, Halliburton's chief financial officer, tells Newsweek, the
SEC is investigating both whether the company accounted for these revenues
properly, and whether it adequately disclosed the information. He said the
disclosure consisted of changing some financial footnotes from one year to the
next. However, few people outside the company seem to have picked up on the
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. Halliburton's 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 Cheney orchestrated in
1998. The vice president's office says they won't discuss Halliburton issues.
"His view is that it would be a distraction from what he's trying to get done
here," said Mary Matalin, Cheney's chief political aide. His office has instead
been referring calls to Halliburton, which doesn't appreciate the attention. "At
some point, he [Cheney] is going to have to address these [accounting]
questions," said Wendy Hall, a Halliburton spokesperson.
Newsweek has also learned that Republicans on the Hill are quietly passing
the word that they'd prefer Army Secretary Thomas White to resign, even though
the White House has continued to back him. White cashed out as an Enron executive
with $31 million just before the company collapsed. Federal investigators are
combing through the wreckage of Enron, including trading strategies used by White's
Enron unit to hike electricity prices in California in 2000 and 2001. He is scheduled
to testify this week before a Senate committee. And Republicans don't want to
see him testify. They say if he does, he will be forced to invoke his constitutional
right not to respond, reports Chief Political Correspondent Howard Fineman. "How
is it going to look when one of the guys leading the war on terrorism takes the
Fifth?" said a leading GOP source on the hill. "We're betting that he'll quit."