Halliburton Says S.E.C. Is Investigating Its Accountinggreenspun.com : LUSENET : Unk's Troll-free Private Saloon : One Thread
Halliburton Says S.E.C. Is Investigating Its Accounting
Wed May 29, 2:55 PM ET
By ALEX BERENSON The New York Times
The Halliburton Company says the Securities and Exchange Commission (news - web sites) is investigating a change in its accounting policies that the company made when Vice President Dick Cheney (news - web sites) was its chief executive.
Halliburton said it expected to receive a subpoena from the agency in the next few days. A subpoena would be a significant step for the S.E.C., which usually begins investigations by informally requesting that companies provide information, rather than subpoenas.
Halliburton disclosed the inquiry in a statement Tuesday night, well after the stock market had closed. Today, the company's shares fell sharply, trading down $1, or 5.2 percent, to $18.35 early this afternoon.
The company said it would cooperate fully with an S.E.C. investigation.
The inquiry concerns a change in the way Halliburton accounted for cost overruns on big construction projects, the company said. The New York Times reported on May 22 that Halliburton made the accounting change in late 1998, enabling it to report as revenue more than $100 million in disputed construction costs, but the company did not disclose the change to investors for more than a year. The company said in its statement that it believed the article in The Times had prompted the S.E.C. inquiry.
Much of Halliburton's business comes from big construction projects, like natural gas processing plants, which sometimes run over budget. In the fourth quarter of 1998, Halliburton began to book revenue on the assumption that its customers would pay at least part of the cost overruns, although they remained in dispute. Before that, Halliburton had been more conservative, reporting revenue from overruns only after settling with its customers.
The change enabled Halliburton to book about $89 million in unsettled claims as revenue in the fourth quarter. If Halliburton had written off the cost overruns as losses, its operating income would have been about 50 percent lower.
Independent accounting experts said last week that the change in policy stretched and may have broken accounting rules. Halliburton continues to follow the more aggressive method.
In its statement, Halliburton said it believed that its accounting was proper and in accordance with standard accounting rules. Doug Foshee, Halliburton's chief financial officer, said last week that the change in accounting was a routine decision dictated by a shift in Halliburton's business mix. Before the late 1990's, Halliburton had generally worked under "cost plus" contracts, which guaranteed the company a small profit on top of its costs, whatever they were.
But in the late 1990`s, Halliburton began to get more fixed-price contracts, requiring it to finish jobs for a set fee or else try to negotiate payment of cost overruns and change orders.Though resolving such disputes can take months or years, the company decided it was reasonable to recognize at least part of the revenue from the claims even while they remained in dispute, Mr. Foshee said.
As chief executive at the time of the change, Mr. Cheney had final responsibility for Halliburton's books. But Mr. Foshee said last week that he could not imagine that Mr. Cheney had specifically approved the change. Mr. Foshee said he was certain that the accounting change was approved by David Lesar, a former accountant at Arthur Andersen who was Mr. Cheney's second-in-command and succeeded him as chief executive in 2000.
Mr. Cheney declined to comment last week, and Andersen, which was fired as Halliburton's auditor last month, referred all questions to the company.
-- Dickhead burns stockholders (using same cheat scams @ as his buddy. Kenny Boy), May 29, 2002
It's unbelievable that this criminal bastard somehow got to be vice president of our country. Just goes to show how corrupt our political system is and how blind the people are, especially the repugs. Well, maybe they aren't really that blind, they just think that cheating is a good way to succeed in life.
-- Impeach the entire Dumbya administration NOW (Lock them up @ and. throw away the key), May 29, 2002.
Hal I. Burton is even more scurrilous than his brother Dan Burton. String him up by his nuts!
-- (firstname.lastname@example.org), May 30, 2002.
Don't forget Tim Burton
-- you are (Scary@Forth.con), May 31, 2002.
Richard Burton made my pussy a bearded Bard.
-- (Liz @ Liza's.nups), June 01, 2002.