Dick Cheney's brilliant career
By David Olive
July 26, 2002
"By any measure you want to use, Halliburton has been a great success story."
—Dick Cheney, U.S. vice-presidential candidate, campaigning in 2000
"Halliburton Co. said Wednesday that it lost $498 million in the second quarter, weighed down by charges against earnings for asbestos-related claims and a troubled project in Brazil."
—News report, July 24, 2002
WITH SPIRO ("TED") Agnew, it was so simple. He was charged with pocketing more than $100,000 in graft from Maryland engineering firms, one of which took the trouble to have someone personally deliver an envelope with $10,000 in small bills to the newly elected U.S. vice-president at his suite in the Executive Office Building in Washington. Bribery is plainly illegal, so Ted pleaded "no contest" to the charges against him and quit public life in 1973.
But you look at Dick Cheney's brief stint in business from 1995 to 2000, prior to joining the Bush ticket, and you don't see anything illegal. Not yet, anyway.
There's nothing illegal about a former U.S. defence secretary and Gulf War hero accepting a plum post as CEO of a tainted firm, Halliburton Co., that was harshly criticized in the early 1990s for selling oil-drilling equipment to, of all places, Saddam Hussein's Iraq. In 1995, the same year Cheney decided to try his hand at business with Halliburton after a lifelong career in politics, the company pleaded guilty to violating the U.S. ban on exports to Libya, having peddled to strongman Moammar Gadhafi six pulse nuclear generators that could be used to detonate nuclear weapons.
Nor was there anything illegal about Cheney's inability, as CEO, to stop the stain of questionable conduct at the Texas-based oil-services and construction company from spreading. Under Cheney, Halliburton continued to do business with countries the U.S. has described as "rogue nations," including Libya, Iran and Iraq.
And it overbilled the Pentagon on contracts over a four-year period ending in 1998 — charging $750,000 (U.S.) for electrical repairs at Fort Ord in California that actually cost about $125,000, for example — and ultimately reached a settlement with the Army in which it paid a $2 million fine.
Also in 1998, Halliburton, with the assistance of its auditor, Arthur Andersen, altered the company's accounting methods in a way that postponed losses from deadbeat clients, a device that artificially inflated Halliburton's profits by about $100 million and is now the subject of an investigation by the U.S. Securities and Exchange Commission.
There was nothing improper about the unusually limited role expected of Cheney as head of a Fortune 500 company. He was recruited as CEO not long after a fortuitous five-day fishing trip in B.C. with several CEOs, including his predecessor at Halliburton, who was impressed by Cheney's fireside tales of how he had reorganized the Pentagon. That revamp, which called for a 25 per cent reduction in personnel and the closing of 800 bases, laid the foundation for the allegations Cheney and George Bush would make in the 2000 campaign of how the Clinton-Gore team had run down America's fighting strength.
At Halliburton, Cheney would be paid a total of $45 million in salary, bonuses, stock-option profits and stock-sale proceeds for his services. The principal function of this novice CEO was to be a high-priced lobbyist, using his contacts at the Pentagon and with kings, emirs and oil ministers to drum up business. The actual running of the $9 billion enterprise was delegated to Cheney's future successor, David Lesar, who later explained, "On major types of things, I would tell Cheney what the decisions were."
There's nothing illegal about the political influence that Cheney did wield on Halliburton's behalf. The company's U.S. government contracts soared to $2.3 billion during Cheney's tenure, more than double its take in the previous five years. That relationship continues now that Cheney has moved on, with Halliburton, despite its reputation for padding expenses, recently winning a post-Sept. 11 contract as exclusive logistics supplier for the U.S. Army and Navy. It will do work such as running canteens and carting fuel that the armed forces claim they could do themselves for 10 per cent to 20 per cent less than Halliburton will be paid.
CEO Cheney, a hard-right opponent of government spending during his political career, also reinforced Halliburton's status as a leading recipient of corporate welfare. The $1.5 billion in government financing and loan guarantees that Halliburton netted in Cheney's time was a 15-fold increase over the previous half-decade.
There's nothing improper about the assertion by Bush campaign communications director Karen Hughes in 2000 that "The American people should be pleased they have a vice-presidential candidate who has been successful in business." After all, Cheney's legacy at Halliburton didn't turn into a flaming wreck until several months after his inauguration — and four years after he reassured fellow employees at Halliburton that "this is where I expect to spend the rest of my career."
Cheney's crowning achievement in business was Halliburton's 1998 merger with archrival Dresser Industries Inc., a one-shot deal that briefly obscured the underlying weakness of Halliburton's basic business. But alas, the transaction was a Harvard-worthy case of mutual non-due diligence.
Only in the aftermath of the $8 billion merger did Dresser executives learn to their dismay about hundreds of millions of dollars of losses on major Halliburton construction projects that did not appear on its books — another indulgence in creative accounting. For its part, Halliburton was surprised to discover the magnitude of asbestos-related liabilities at a former Dresser subsidiary, for which it has paid out $152 million in injury claims in the past year alone.
There was nothing illegal about the decision by Cheney and four other Halliburton insiders to dump their shares in the company in August, 2000, about two months before Halliburton stunned investors with news that its engineering and construction business was spiralling downward, and that a grand jury was investigating charges it had overbilled the government.
Cheney took an $18.5 million profit on the sale of his shares. Halliburton stock has since plummeted to a 16-year low, losing about 75 per cent of its value since Cheney left the company.
Last Wednesday, Halliburton reported a $498 million loss for the second quarter. It also said that a consultant's study has estimated it faces liability of $2.2 billion between now and 2017 for existing and potential asbestos claims, and that Halliburton has insurance coverage of just $602 million. The company has worked overtime this year to quash rumours of its imminent bankruptcy.
Finally, there's nothing unconstitutional about the disappearance of the vice-president during a national crisis, namely the widespread malfeasance in Corporate America that has factored into the bear market on Wall Street.
A spokesperson at Halliburton, suggesting that Cheney might have some insight into that issue, after all, has appeared to implicate Cheney in the firm's accounting irregularities by stating, "the vice-president was aware we accrued revenue on unapproved claims." But then there's that famous promotional video for Arthur Andersen in which CEO Cheney lavishes praise on the innovative auditing firm, saying, "I get good advice, if you will, from their people based upon how we're doing business and how we're operating — over and above the sort of normal by-the-books auditing arrangement."
As Michael Kinsley conceded in Slate, "This remark from Cheney is a pretty convincing performance of a man who doesn't know what the hell he is talking about."
So Cheney, who still vets Bush's major appointments and held his hand after Sept. 11, is perhaps wise to renege on his campaign promise, and not bring his business acumen to bear on this particular problem. It must be said that no one has dropped into his Washington office to slip him an envelope stuffed with cash. Cheney has merely helped a private-sector firm relieve the taxpayers of some money, and then swollen the ranks of CEOs who walked away from a corporate catastrophe with bulging pockets.
No crime in that