Halliburton Bribe Case Haunts Cheney
Dick Cheney’s tenure at Halliburton ended eight years ago, but a federal investigation of alleged bribes from a company
subsidiary to Nigerian officials lingers from the Cheney era, raising questions about what the Vice President knew or
should have known.
In its quarterly filing to the Securities and Exchange Commission on April 25, Halliburton said the Justice Department
was widening its probe to determine whether Kellogg Brown & Root paid $180 million in bribes to Nigerian officials to win a $5 billion construction contract for the Bonny Island
natural gas liquefaction plant.
Halliburton also said the Justice Department is investigating whether bribes were paid to Nigerian officials relating to
KBR’s construction of an offshore platform. The bribes allegedly went to the notoriously corrupt Nigerian dictator Sani
Abacha and some of his subordinates.
The Justice Department "has evidence of payments to Nigerian officials by another agent in connection with a separate
KBR-managed project in Nigeria called the Shell EA project," according to a footnote in Halliburton’s SEC filing.
The footnote’s reference to Shell was the first time the petroleum giant was linked to the bribery suspicions.
Representatives from Shell and Halliburton did not return repeated calls or e-mails for comment.
KBR, which also has handled lucrative U.S. government support contracts for U.S. troops in Iraq and elsewhere, was spun
off from Halliburton last year into a separate company.
In its quarterly filing last October, Halliburton said it was subpoenaed by the Justice Department and SEC over the use
– by a KBR-led consortium known as TSKJ – “of an immigration services provider, apparently managed by a Nigerian
immigration official, to which approximately $1.8 million in payments in excess of costs of visas were allegedly made
between approximately 1997 and the termination of the provider in December 2004 and our 2007 reporting of this matter to
the government.”
Halliburton also noted that federal investigators had “expressed concern regarding the level of our cooperation,”
wording that suggests suspicion of a cover-up or at least foot-dragging.
Halliburton’s April 25 filing marked the first time that specific evidence was cited to support claims that Halliburton
bribed Nigerian officials in violation of the U.S. Corrupt Foreign Practices Act while Cheney was the company’s chief
executive officer.
The SEC, which regulates companies that sell stock on public markets as Halliburton does, also has been investigating
the case. Halliburton said it had agreed to extend the statute of limitations related to the investigation.
According to previous published accounts of the bribery scandal, the cash allegedly was laundered through UK lawyer
Jeffrey Tesler, who served as a consultant to KBR after it was formed in a 1998 merger that Cheney engineered between
Halliburton and Dresser Industries.
French Disclosures
The bribery investigation was launched in 2003 when Georges Krammer, a former executive French company Technip, a member
of the consortium for the Bonny Island project, informed French magistrate Renaud Van Ruymbeke that the contracts his
group obtained came as a result of payments Tesler made to Nigerian officials from a slush fund the lawyer allegedly
managed.
For more than a year, the magistrate poured over evidence to determine whether Cheney may have been responsible under
French law for at least one of four bribery payments to the Nigerian officials.
Under French law, “the head of a company can be charged with ‘misuse of corporate assets’ for bribes paid by any
employee – even if the executive didn’t know about the improper payments.” Authorities in the UK and Switzerland also
have been investigating the matter.
Legal observers say it is highly unlikely that the U.S. Justice Department will further implicate Cheney in the scandal
even if alleged bribery did take place on his watch. To date, there has been no direct evidence indicating that Cheney
played a direct role in the bribes.
However, during Cheney’s tenure, Halliburton did expand operations in Nigeria despite human rights abuses by Gen.
Abacha’s regime and environmental damage to the Niger Delta caused by international oil companies, Shell and Chevron,
both of which signed contracts with Halliburton subsidiaries.
In April 2000, Brown & Root Energy Services, a business unit of Halliburton, was selected by Shell Petroleum Development Co. of Nigeria to
work on the development of an offshore oil and gas facility, the first of its kind for Shell.
The deal, valued at $300 million, has been questioned by activists who have tried to hold Shell accountable for the
pollution and the human rights abuses that have harmed Nigerian indigenous groups in a part of the Niger Delta known as
Ogoniland.
In its four-plus decades of oil exploration in Nigeria, Shell has been responsible for repeated environmental
calamities, involving oil spills, noxious gas flares, cleared forests, despoiled farmland and pipeline blowouts.
Gen. Abacha’s appreciation for the money that Shell’s operations put into his coffers made him an eager ally when the
oil industry faced popular protests, which were crushed by the dictator’s army and security forces.
In 1995, the year Cheney joined Halliburton, renowned writer and environmental advocate Ken Saro-Wiwa and eight of his
colleagues were hanged by the Abacha government for their efforts to prevent Shell from continuing to poison the
environment of the Niger Delta.
It is estimated that more than 2,000 people have been murdered for their involvement in protests against Shell’s
activities in the Delta. Most of those murdered were Ogoni who had rallied behind Saro-Wiwa in the early 1990s.
In 1998, Gen. Abacha died of an apparent heart attack.
Aggressive Accounting Practices
Though Cheney’s five-year tenure at the helm of Halliburton made him a rich man, controversies surrounding the
Houston-based company have continued to dog him since he became George W. Bush’s Vice President.
During the 2004 presidential campaign, the company agreed to a $7.5 million settlement with the SEC over suspect
accounting practices that took place during Cheney’s affiliation with the company.
The SEC said Halliburton changed the way it accounted for construction revenues in 1998 and did not report that change
to investors for more than a year, a violation of securities rules.
The accounting sleight-of-hand by Halliburton caused the company's public statements regarding its income in 1998 and
1999 to be materially misleading, boosting Halliburton's paper profits by $120 million.
"In the absence of any disclosure, the investing public was deprived of a full opportunity to assess Halliburton's
reported income more particularly, the precise nature of that income, and its comparability to Halliburton's income in
prior periods," the SEC said.
The changes to the company's accounting practices led to a "significant difference in their respective effects on
Halliburton's financial presentation: the new practice reduced losses on several large construction projects" and
allowed the company to report a higher profit, the SEC said.
The accounting practices, which gave Wall Street the false impression that the oil-field services company was profitable
between 1998 and 1999, boosted the value of Halliburton's stock and helped Cheney earn more than $35 million when he
sold his shares in 2000.
The New York Times quoted two former Dresser Industries executives in a May 22, 2002, story as saying that after Cheney
guided the merger of Dresser with Halliburton in 1998, Halliburton "instituted aggressive accounting practices to
obscure its losses."
The accounting change altered the way Halliburton booked revenues from cost overruns on construction projects.
Previously, the company waited until a figure was agreed upon with a client. After 1998, however, Halliburton booked
revenues that it assumed a customer would pay even though the agreed-upon number might turn out to be lower.
Halliburton spokeswoman Wendy Hall said at the time that Cheney "was aware we accrued revenue on unapproved claims in
accordance with generally accepted accounting principles."
The gimmick, signed off on by the now-defunct accounting firm Arthur Andersen, allowed Halliburton to add $89 million in
revenues to its books in 1998, helping the company beat its earnings target by 2 cents a share for the year and boosting
its stock value.
If the accounting change hadn't been employed, said Wall Street analysts, the company would have missed its earnings
target by 11 cents a share, which would surely have depressed the stock price.
During Cheney's tenure, accounting irregularities at the company exceeded $234 million, according to documents obtained
by the watchdog group Center for Public Integrity.
Halliburton also faced allegations that it over-billed for work at Fort Ord in California under Cheney's watch, a
complaint similar to more recent charges that Halliburton padded its military contract work in Iraq.
Following revelations that Cheney made $35 million from his sales of Halliburton stock before the company's share price
fell on the announcement in 2000 that the company was being investigated, the Washington Post on July 16, 2002, summed
up Cheney's tenure at Halliburton this way:
"The developments at Halliburton since Cheney's departure leave two possibilities: Either the vice president did not
know of the magnitude of problems at the oilfield services company he ran for five years, or he sold his shares in
August 2000 knowing the company was likely headed for a fall."
As Halliburton's CEO, Cheney was responsible for Halliburton's books. He also went out of his way to praise the work
done for Halliburton by Arthur Andersen, the accounting firm that unraveled in 2002 after it was found guilty of
obstruction of justice for destroying documents for another energy-related client, Enron.
In a 1996 promotional video for Arthur Andersen, Cheney praised the firm for its business advice.
"One of the things I like that they do for us is that, in effect, 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, just sort of the normal by-the-books
audit arrangement," he said.
The SEC questioned Cheney during its two-year-long probe of Halliburton’s accounting irregularities and concluded that
he should not be held responsible for what went on behind the scenes at Halliburton.
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Investigative reporter Jason Leopold is the author of News Junkie, a memoir Visit http://www.newsjunkiebook.com for a preview.