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Cheney Is Named in Suit Alleging Corporate Fraud

Court: Legal watchdog group says that the firm the vice president headed engaged in illegal accounting practices. The charges are denied.

July 11, 2002|JAMES GERSTENZANG | TIMES STAFF WRITER

WASHINGTON — One day after President Bush unveiled his latest effort to stem corporate corruption, a legal watchdog group on Wednesday sued Vice President Dick Cheney and the Texas-based oil services business he once led, alleging fraudulent accounting practices by the company.

The suit filed by Judicial Watch in U.S. District Court in Dallas charges that Halliburton Co. overstated its revenue by $445 million from 1999 to 2001, part of the period Cheney was chairman and chief executive officer. The suit alleges the overstatements led to shareholder losses. Named as defendants are Cheney, Halliburton's board of directors and the Arthur Andersen accounting firm.

The Halliburton accounting practices challenged by the suit also are being investigated by the Securities and Exchange Commission.

Larry Klayman, chairman and general counsel of Judicial Watch, said the suit goes beyond the SEC investigation because it named the vice president and would involve public disclosures, rather than being conducted behind closed doors.

Klayman said Cheney was listed as a defendant because, as chief executive during the time targeted by the suit, "the buck stops with him."

Klayman added: "He's a meticulous manager. For them to make this kind of accounting change, he had to approve it."

White House Press Secretary Ari Fleischer dismissed the Judicial Watch suit, filed on behalf of two Halliburton shareholders, as "without merit." Cheney's spokeswoman, Jennifer Millerwise, said, "It's a Halliburton issue."

Halliburton's chief financial officer, Doug Foshee, called the suit's claims "untrue, unsupported and unfounded."

A spokesman for Andersen, which has been tainted in the recent spate of corporate scandals, said the company would decline to comment.

Beyond the suit's legal elements lie political dimensions. By filing its suit Wednesday, Judicial Watch renewed attention to the Bush administration's close links to big business.

Another reminder occurred Wednesday in the form of a 1996 promotional videotape that features Cheney praising the Andersen company for its audit work. The Wall Street Journal obtained a copy of the video, which can be viewed on the Internet.

On the tape, Cheney and six other executives applaud the accounting firm.

Andersen, once one of the country's most respected accounting companies, was convicted earlier this year of obstruction of justice by shredding documents that had to do with Enron Corp.

Enron's financial collapse late last year after revelations that it exaggerated profit to appeal to investors was the first of the recent wave of corporate scandals.

During the last week, Bush has faced renewed scrutiny about his own past as a businessman. The questions have involved his sale of stock in Harken Energy Corp. in 1990, shortly before the company, of which he was a director, reported a sizable loss.

Judicial Watch has developed a gadfly reputation in recent years. During the Clinton administration, it filed several lawsuits against government officials. It's best-known suit sought access to White House e-mails on such matters as the investigation of the Monica S. Lewinsky scandal.

Halliburton disclosed May 28 that the SEC was investigating the company's accounting of cost overruns on construction jobs. Contracts had allowed Halliburton to negotiate or sue for additional payment if such cost overruns ate into its profits.

In 1998, the company changed its accounting procedures and began listing those disputed claims as revenue, even though the clients had not agreed to pay them.

Foshee said that Halliburton was working with the SEC to resolve questions regarding the procedures, and that the company has followed SEC guidelines and generally accepted accounting principles.

Cheney was Halliburton's top executive when Bush selected him as his running mate in 2000. He received a retirement stock package variously valued at from $20 million to almost $34 million.

Judicial Watch's suit follows several others filed on behalf of shareholders allegedly defrauded by Halliburton's accounting practices, legal experts said.

At least five securities-fraud suits seeking class-action status for all Halliburton shareholders have been filed, including one June 3 by Milberg Weiss Bershad Hynes & Lerach, the best-known of the "strike suit" firms that accuse executives and public corporations of releasing false or misleading information.

Times staff writer Scott Reckard in Los Angeles and Associated Press contributed to this report.

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