Topic: The Economy
High Finance - You can't touch me! Ha!
Most everyone who follows such things saw this latest item about Halliburton, and the Times makes it all rather clear. Dick is clean.
Halliburton Settles S.E.C. Accusations
Floyd Norris, The New York Times, August 4, 2004
The bare bones?
Whoa, they lied about their earnings and mislead investors while Dick Cheney ran the place? They defrauded the market? Really?The Halliburton Company secretly changed its accounting practices when Vice President Dick Cheney was its chief executive, the Securities and Exchange Commission said yesterday as it fined the company $7.5 million and brought actions against two former financial officials.
The commission said the accounting change enabled Halliburton, one of the nation's largest energy services companies, to report annual earnings in 1998 that were 46 percent higher than they would have been had the change not been made. It also allowed the company to report a substantially higher profit in 1999, the commission said.
Man, the Chief Financial Office and the Controller took a hit here. They did that. Big fine. It really is so hard to get good help these days.
Did Cheney know what was up? No comment. He lawyer won't say, and Dick isn't saying dick.The commission did not say that Mr. Cheney acted improperly...
... A lawyer for Mr. Cheney, Terrence O'Donnell, said the vice president's "conduct as C.E.O. of Halliburton was proper in all respects,'' adding that the S.E.C. "investigated this matter very, very thoroughly and did not find any responsibility for nondisclosure at the board level or the C.E.O. level.''
Mr. O'Donnell, a partner at Williams & Connolly in Washington, declined to answer a question as to whether Mr. Cheney had been aware of the effect of the accounting change on the company's profits.
What's this all about?
So? Caveat Emptor as they say.... The accounting change dealt with the way Halliburton booked cost overruns on projects. At the time, it was having large cost overruns on projects in the Middle East operated by its Brown & Root Energy Services business, which under its old accounting policy would have reduced its reported profit.
The actual change in accounting, the commission said, was permissible under generally accepted accounting principles, but the failure to inform investors that the change had been made - and of its effect on the company's reported profit - violated securities laws.
"At bottom, what this case is about is insuring that investors understand the numbers," said Stephen M. Cutler, the S.E.C.'s enforcement director. "If you change methodologies and don't explain that, then investors are not going to understand what they are seeing."
What investors didn't know?
So you might have purchased shares of a chimera, a house of cards. What? You were tricked? You should have know better.... Until the second quarter of 1998, Halliburton had dealt with cost overruns on projects by taking a loss for the amount of the overrun unless and until the company that it was working for agreed to pay part or all of the overrun. But confronted with a large overrun on a fixed-fee project to build a gas production plant in the Middle East - the commission did not say in which country - Halliburton changed its policy so that it would record the income it thought the customer would eventually agree to pay.
That change in policy was not disclosed until March 2000, when the company filed its 1999 annual report with the S.E.C. The commission said that pretax profit for all of 1998 was reported at $278.8 million, 46 percent more than the $190.9 million that would have been reported under the old accounting.
Don't you know Dick?
The Times mentions that at the time the accounting was changed, Halliburton was preparing to merge with Dresser Industries and was dealing with a decline in the company's share price partly caused by slumping oil prices. Hard times. And you don't want to discourage people, or discourage investors.
Yes, the Bush family once owned Dresser Industries. A minor bit of trivia the Times is too formal to mention here. They do quote Cheney at the time saying to investors - "Halliburton continues to make good financial progress despite uncertainties over future oil demand."
Of course. Of course.
And would Dick lie to you? He and his lawyer refuse to say what he knew and when he knew it - and the SEC shrugs. They couldn't find clear and irrefutable evidence to say he had any idea.
Kevin Drum over at The Washington Monthly seems, well, a bit unconvinced. He comments -
Is Kevin just jealous that he can't pull off something like this - that he is just an outsider with his own sour grapes watching the big boys play, and win.... All I can say about this is that it must be mind-numbingly frustrating to be an SEC investigator. Dick Cheney -- like most CEOs in cases like this -- is off the hook because there's no smoking gun. But anybody who's spent even a few minutes in the executive suite of a large corporation knows that of course Cheney knew about this. Not only did he know, but this over-budget project was almost certainly a subject of considerable interest to him, the cost overruns were probably a subject of numerous status reports, and its effect on Halliburton's earnings was surely a frequent source of conversation. There is nothing that a CEO pays more attention to than his company's quarterly and yearly earnings reports. Nothing.
So Cheney knew. But as long as his former CFO and controller are willing to fall on their swords for him, there will never be any proof. And we will all go on pretending that when FY98 earnings turned out to be 46% higher than expected, Dick Cheney just scratched his chin, said "I'll be damned, things turned out OK after all," and then went out and played a round of golf. When he got back, nobody on his financial team, nobody in sales, nobody on the board, none of the analysts who follow Halliburton, and nobody in operations ever mentioned the subject of surprisingly high corporate earnings in his presence again.
And they all lived happily ever after.
There are winners and losers in this world. Deal with it.
Andy Borowitz here mocks the whole business -
Oh hell, why not?CHENEY URGES AMERICANS TO SEND HIM THEIR MONEY FOR SAFEKEEPING
Will Protect Assets Until Threat Has Passed
In the face of terror threats to America's financial institutions, Vice President Dick Cheney today urged all Americans to send him their money for safekeeping until the danger has passed.
In a nationally televised address, Mr. Cheney said that in the current climate the only safe place for Americans to put their money "is with me."
Using a chart and pointer reminiscent of real estate infomercials, Mr. Cheney gave a series of easy-to-follow instructions showing the American people how to transfer all of their worldly assets to him via check, wire transfer, or big bags of money.
"Your money will he invested personally by me in high-yield, no-bid Iraqi reconstruction contracts," Mr. Cheney said. ...
Actually this Halliburton case here - along with the cost overruns in Iraq now - and along with Halliburton losing one third of the physical equipment we supplied them to work in Iraq (trucks, computers and whatnot all gone) - along with the nearly two billion they cannot track down at the moment ... Well, it seems like this is all an political ploy, a way to gain votes.
How? Envy, of course.
Imagine the powerless white guys being pushed around by everyone and everything in the world every single damned day. They see stuff like this and think, "What sly bastards, and so clever putting it to the losers. In your face, world!" They smile. Dick and George are pretty cool.
As Jesse James is reported to have said, "Everyone loves an outlaw."
Posted by Alan at 16:18 PDT
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