NEWS

By Patrice Hill
THE WASHINGTON TIMES

President Bush's sale of Harken Energy Corp. stock a decade ago is not such a serious matter for the White House, securities litagators say, but 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 Commission closed in October 1993 involving Mr. Bush's sale of Harken stock. Mr. Bush also has been criticized for the loans he received from the company to buy 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 under 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 under President Carter who was involved in the SEC's investigation of Burt Lance, 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 a whitewash or politically motivated, as some have charged, the securities lawyers said.

"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 asked not to be identified.

That is why litigators see a much greater hazard for Mr. Cheney and the 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 impose stiff penalties on chief executives who give misleading information to investors in their financial statements, an enforcement stance that appears to put Mr. Cheney at some risk.

"No one in this country gets a pass. No one gets special treatment."

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 the process of an independent regulatory body, which would be inappropriate."

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 of 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 organized 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 the 1998-99 oil industry recession in some quarters and pump up its profits in other quarters, the lawsuit charges. The investors contend that such a major change should have been fully disclosed and explained, a point echoed by the former SEC litigators.

Although the company referred to the change of accounting in the fine print of its financial statements, it was not highlighted in a way that drew attention or scrutiny. One lawyer said the company not only should have prominently disclosed the change but that it also should have sought out and received the approval 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 oil company and the vice president or even an indictment on fraud charges by the Justice Department.

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 will interview Mr. Cheney and he may be subject to congressional investigations no matter the outcome of the SEC's case.

"Harvey Pitt is a devoted professional, and I think he would be exactly the guy who would want to get to the bottom of the story," said Frank Velie 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. "The accountants will say the statements are those of the management, while the management will say they got professional advice" from the auditors that the accounting was OK, Mr. Velie said. "It's hard to say whether something cynical happened or it was an honest mistake."