Today the Times reports
that the the SEC has fined Halliburton $7.5 million for, in effect, defrauding its shareholders.
The charges stem from a change in accounting methods Halliburton made in 1998. The SEC found that the old and the new accounting methods were both permissible under accepted practices. The key, however, is that Halliburton did not inform investors of the change. That allowed Halliburton to "report annual earnings in 1998 that were 46 percent higher than they would have been had the change not been made ... [and] a substantially higher profit in 1999."
This change came just as Halliburton was struggling with falling share prices that threatened to sink its proposed merger with Dresser Industries.
Again from the Times
It reported a 34 percent gain in profit for the quarter, far better than other oil services companies were reporting, and Mr. Cheney said then that "Halliburton continues to make good financial progress despite uncertainties over future oil demand."
The commission said yesterday that the gain would have been just 6.7 percent without the undisclosed change in accounting policies.
This is sorta like, "Hey, we just changed the temperature reading in our refrigeration trucks from Fahrenheit to Celsius without telling you. So what's the problem?"
The SEC and the even the Times
goes to some length to avoid the colloquial term for this sort of behavior: i.e., fraud. The SEC did levy the fine. And it did point the finger of blame at two lower levels Halliburton officials. Yet the SEC, in the words of the Times
, "did not detail the extent to which [Cheney] was aware of the change or of the requirement to disclose it to investors." And not surprisingly, in the article, Cheney's lawyer, Terrence O'Donnell is trumpeting the results of the investigation as a clean bill of health for Cheney.
Now, with a whitewash, you might at least expect that Cheney would be denying knowledge that this took place, as implausible as it might sound. But he won't. After taking down O'Donnell's crowing about the results of the investigation, the Times
asked whether Cheney "had been aware of the effect of the accounting change on the company's profits." But O'Donnell wouldn't answer.
So here you have the Vice President of the United States. His company gets caught in about as clear a case of cooking the books to inflate profits as you can imagine during the time he was CEO. (His salary and bonuses are tied to company profits.) And he won't even go to the trouble of denying that he was aware of the wrongdoing.
Can we have some more aggressive reporting on this one?