SEC investigation puts Cheney in political peril
July 16, 2002
By Patrice Hill###
THE WASHINGTON TIMES
President Bush's sale of Harken Energy Corp. stock a decade ago is
such a serious matter for the White House, securities litagators say,
the investigation into accounting fraud at Halliburton Co., when it was
headed by Vice President Richard B. Cheney, may be.
Media attention in recent weeks has focused intensely on an
insider-trading investigation that the Securities and Exchange
closed in October 1993 involving Mr. Bush's sale of Harken stock. Mr.
also has been criticized for the loans he received from the company to
the stock (this was legal at the time) and tardy filings with the SEC
reporting the stock transactions.
But securities lawyers and former SEC prosecutors say the questions
raised about Mr. Bush's actions pale in comparison to the charges of
accounting fraud at Halliburton, levied against Mr. Cheney, currently
investigation by the SEC, in an investors' lawsuit filed last week.
"What's public information about the president's Harken situation
appears to be jaywalking, if it's that," said a former SEC prosecutor
President Carter who was involved in the SEC's investigation of Burt
the first budget director in the Carter administration.
The SEC's decision to close the Bush insider-trading investigation,
occurring after President Clinton took office, almost certainly was not
whitewash or politically motivated, as some have charged, the
"The fact that the White House or someone running for office is
involved doesn't slow the SEC down one bit" but rather might have
accelerated the investigation, said the former SEC prosecutor, who
to be identified.
That is why litigators see a much greater hazard for Mr. Cheney and
White House as a result of the Halliburton investigation. SEC Chairman
Harvey Pitt vowed once again this weekend to pursue the probe no matter
where it leads.
"We will take whatever action is appropriate," Mr. Pitt told NBC's
"Meet the Press." Mr. Pitt and Mr. Bush have been trumpeting plans to
stiff penalties on chief executives who give misleading information to
investors in their financial statements, an enforcement stance that
to put Mr. Cheney at some risk.
"No one in this country gets a pass. No one gets special
Mr. Cheney maintained his silence on the matter yesterday.
"Until such time as the SEC concludes its review of Halliburton's
practices, the vice president will refrain from commenting," said Mary
Matalin, Mr. Cheney's senior adviser.
"Any statement could be misinterpreted as an effort to influence
process of an independent regulatory body, which would be
Halliburton has said it is trying to resolve questions about its
bookkeeping with the SEC. The company's current chief executive, David
Lesar, said this week in a Newsweek interview that Mr. Cheney was aware
the accounting practices under investigation.
A critical decision was made in 1998 when Mr. Cheney was chief
executive to start booking as revenue the uncollected payments for cost
overruns on oil construction projects, says the investors' lawsuit
by Judicial Watch. Previously, the company reported such uncollected
payments as losses in its financial statements.
The result was to wipe out losses Halliburton experienced during
1998-99 oil industry recession in some quarters and pump up its profits
other quarters, the lawsuit charges. The investors contend that such a
change should have been fully disclosed and explained, a point echoed
former SEC litigators.
Although the company referred to the change of accounting in the
print of its financial statements, it was not highlighted in a way that
attention or scrutiny.
One lawyer said the company not only should have prominently
the change but that it also should have sought out and received the
of the SEC's chief accountant before making it.
"This is a serious" legal matter hanging over the White House, the
former SEC prosecutor said. If the charges are borne out by the SEC's
investigation, they could result in civil fines and penalties for the
company and the vice president or even an indictment on fraud charges
Normally such investigations can take years to complete, but the
securities lawyers said the Halliburton matter most likely has been
expedited in view of its sensitivity. At some point, they say, the SEC
interview Mr. Cheney and he may be subject to congressional
no matter the outcome of the SEC's case.
"Harvey Pitt is a devoted professional, and I think he would be
the guy who would want to get to the bottom of the story," said Frank
of Salans, Hertzfeld, Heilbronn, Christy & Viener.
But accounting fraud can be difficult to prove, he said, because
accounting rules are complex and subject to varying interpretations.
accountants will say the statements are those of the management, while
management will say they got professional advice" from the auditors
accounting was OK, Mr. Velie said. "It's hard to say whether something
cynical happened or it was an honest mistake."