Posted on: Wednesday, August 4, 2004
Halliburton to pay $7.5M to settle accounting probe
By Pam Easton
Associated Press
HOUSTON — Halliburton Co. will pay $7.5 million to settle a Securities and Exchange Commission probe that it failed to disclose a change in its accounting procedures in 1998 when the oil services conglomerate was run by Vice President Dick Cheney.
Besides the company's fine, former Halliburton controller, Robert C. Muchmore, Jr., will pay a $50,000 penalty, the SEC announced yesterday.
Halliburton also disclosed that the Justice Department has expanded its investigation related to an alleged $180 million bribery scandal involving a subsidiary's efforts to get a contract in Nigeria.
Neither the company nor Muchmore admit nor deny the SEC's findings that the company didn't properly disclose the accounting change, which recognized revenue from unapproved claims on long-term construction projects.
The SEC has filed a complaint in U.S. District Court against Halliburton's former chief financial officer, Gary V. Morris.
The commission says the undisclosed accounting change caused Halliburton's public statements regarding its income in 1998 and 1999 to be materially misleading.
"The SEC's action today emphasizes the importance of complete transparency in a company's financial disclosures," said Harold F. Degenhardt, administrator of the SEC's Fort Worth office.
The SEC said Halliburton changed its accounting practice in the second quarter of 1998 to recognize revenues "that the company believed were probable of collection rather than ... claims that had been finally resolved with its customers."
"Although both of Halliburton's claims recognition practices, the historical one and the revised one, are appropriate under Generally Accepted Accounting Principles, there was a significant difference in their respective effects on Halliburton's financial presentation: the new practice reduced losses on several large construction projects," and resulted in a higher reported income, the SEC said in a statement.
The commission said Halliburton failed to disclose the new accounting practice for six reporting periods.
"In the absence of any disclosure, the investing public was deprived of a full opportunity to assess Halliburton's reported income — more particularly, the precise nature of that income, and its comparability to Halliburton's income in prior periods," according to the commission.
During its investigation, which began in 2002, the commission said it reviewed 340,000 documents and took sworn testimony from 23 individuals.
Cheney was among those who provided testimony, according to the SEC, which said he "cooperated willingly and fully."
Cheney was Halliburton's CEO from 1995 to 2000. He resigned to be President Bush's running mate.
The five SEC commissioners, including Chairman William Donaldson, voted unanimously to approve the settlement with Halliburton. No commissioner recused himself or herself from the vote. All five — Donaldson and two other Republicans plus two Democrats — were appointed by Bush.
"We are pleased to bring closure to this matter," Halliburton chief executive and chairman Dave Lesar said in a statement yesterday.
The company said it disclosed the accounting practice change in 1999 and that the SEC did not find any accounting errors or fraud.
Halliburton said there would be no restatement of previous period financial statements.
