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Cheney's old skeletons rattle Bush
White House attempts to clean up corporate America are dogged by the vice-president's years in the oil business
David Teather in Dallas
Wednesday July 31, 2002
President Bush signed a wide-ranging corporate reform bill yesterday in the hope that taking action, together with a rebounding stock market, will restore confidence in Wall Street before the mid-term elections in November.
The threat to the his administration posed by the corporate scandals that have shaken America is clear. His approval rating slipped below 70% last week for the first time since September 11.
But signing the bill, together with his recently adopted line in angry rhetoric, may not put the Republicans in the clear, in particular the vice-president, Dick Cheney, who is embroiled in controversy stemming from his stewardship of the oil services company Halliburton before he took office.
About 15 minutes' walk from Mr Cheney's former $3m (£2m) home lies Highland Park Village. This is no typical US retail centre: its 40 or so shops include Prada, Gucci and Calvin Klein - no Wal-Mart, Kmart or Piggly Wiggly here - piped classical music drifts into sharp blue skies, and it lies in in one of the most prestigious parts of Dallas.
But even in this affluent part of Texas, in what should be a Republican stronghold, doubts about the administration are beginning to creep in.
"The scariest thing to me is you really can't trust people," said Bob Johnson, a 44-year-old database manager. "I think most people who have voted Republican were happier with an ideologue like Reagan. Some of these guys talk the talk but walk the self-interest walk instead of being a little more high-minded and principled. Reagan may have had his problems but no one thought he was lining his pockets."
The White House is scrambling to deflate what some aides refer to as the "Cheney problem".
As Washington attempts to take a firm grip on the accounting scandals and corporate greed that have stunned America, the White House is being forced to tread a difficult line. An administration packed with former businessmen is looking extremely vulnerable to accusations of at best, hypocrisy, at worst, past financial misdeeds of their own.
While President Bush has vowed to hunt down corporate wrongdoers, Mr Cheney has noticeably slipped back into the shadows.
The "problem" stems from Mr Cheney's five years as chief executive of Halliburton, an oil services company with annual revenues of more than $17bn. He steered the business between 1995 and 2000 before quitting to stand as vice-president. During that time he used his White House experience to win substantial government contracts for Halliburton.
To the Bush administration's embarrassment, the US financial watchdog, the securities and exchange commission (SEC), began investigating Halliburton's accounting practices in May. The inquiry centres on an obscure change to the company's accounting policy in 1998 which had the effect of inflating its revenue by $234m over a period of four years.
But that was not the only piece of controversy during Mr Cheney's time at the company. It was criticised for dealing with Libya and Iran, the latter now one end of President Bush's "axis of evil". The Washington Post reported two years ago that a Halliburton subsidiary had dealt with Iraq - something that Mr Cheney denied knowing anything about.
Nor does Mr Cheney appear to be in any position to take a strong line on the culture of greed and excess that President Bush has lately railed against. When he left Halliburton to take office, Mr Cheney pocketed $36m from cashing in share options and from a generous farewell package.
A former defence secretary and widely regarded as providing the diplomatic experience that President Bush lacked in Washington, Mr Cheney is in danger of becoming the administration's greatest liability. He even appeared in a promotional video for the now disgraced accounting firm Arthur Andersen, in which he praised its advice "over and above the, just sort of the normal by-the-books audit arrangement".
The Halliburton Mr Cheney left behind is struggling to stay afloat. Shortly after he left, the company warned that it was doing worse than expected and the share price fell heavily. It also admitted being under a grand jury investigation for allegedly over-billing the government.
Last week the company reported heavy losses, largely due to potential asbestos claims against businesses bought while Mr Cheney was chief executive. The shares, worth $52 when he sold, are now worth $12.70.
The SEC investigation into Halliburton is focusing on changes made to the way the company accounted for revenues that were in dispute on projects that had run over budget.
Halliburton builds everything from offshore drilling platforms to drill bits. Since the accounting change, it has estimated how much of the disputed costs it expects to collect and booked the unpaid revenue immediately.
The company maintains that the practice complied with accounting regulations. "Halliburton has always followed and will continue to follow guidelines established by the SEC and GAAP [generally accepted accounting principles]," its finance director, Doug Foshee, said.
But the timing of the change is significant. Without the new policy in 1998, Halliburton's profits would have failed to meet the targets of Wall Street. It took the company more than a year to disclose the accounting change.
The California Democrat Henry Waxman has written to Mr Cheney suggesting that he donate some of his profits to the thousands of Halliburton workers who have lost their jobs in the past two years. "Vice-President Cheney could provide an extraordinary example of personal responsibility," he said.
Judicial Watch, a self-appointed public watchdog, is suing the company on behalf of two shareholders.
"To look the other way for the vice-president would be to set a precedent that the Washington elite are above the law," said Larry Klayman, chairman of the organisation and its general counsel.
Mr Cheney's close relationship to the big business world is still under examination in the formation of the administration's energy policy.
He is the head of the government's energy taskforce, which arrived at a policy last year that would ease the tax burden on oil companies and allow drilling in the Arctic national wildlife reserve in Alaska.
Conservationists have complained that they were barred from dozens of meetings held with the industry, including Enron, when forming the policy.
Mr Cheney received backing from the oil industry in his election campaign, including donations from two directors on the Halliburton board.
Fortunately for the White House, the SEC investigation is unlikely to yield any results before the November elections. One insider said this kind of inquiry could last several years.
"You first of all have to establish whether the accounting change was material or if it didn't make a dime's bit of difference," he said.
"Then you have to prove whether it was fraudulently done or just a goof-up. If there was fraud, you have to determine who committed it and then you look at the auditors and the executives. Depending on the complexities involved, it could take years."
The assertion two weeks ago from President Bush that the SEC would clear Mr Cheney of wrongdoing raised plenty of eyebrows.
The chairman of the SEC was appointed by President Bush and is himself under fire for the volume of financial scandals. President Bush has backed him publicly and it is perhaps unwise to leave any hint of pressure over Halliburton.
Judicial Watch pointed out that George Bush Sr was president when his son was the subject of an investigation at Harken Energy a decade ago. Although unspoken, the suggestion is clear enough - that President Bush Sr may have pulled some strings behind the scenes to clear his son. The insider dealing investigation was closed and no action was taken.
To Democrats at least there is a chink of light in the otherwise impregnable popularity ratings that the administration has enjoyed since September 11.
Zac Porter, a real estate manager in Highland Park, said he was growing increasingly concerned about the allegations against Mr Cheney and President Bush. For now he gives them the benefit of the doubt, but that could change.
"The concern is there and you can't help thinking about it," he said. "It would be an election issue for me.
"We've got to keep the economy looking good and if it turns out the people in office are contributing to the smoke and mirrors on Wall Street on financial reporting, then, yeah, you have to take that into consideration when you are electing leaders."
Guardian Unlimited © Guardian Newspapers Limited 2002
-- Cherri (email@example.com), August 01, 2002
When he left Halliburton to take office, Mr Cheney pocketed $36m from cashing in share options and from a generous farewell package.
No mention of course that it was the Dems who wanted Cheney to sell his stock to avoid a conflict of interest.
The California Democrat Henry Waxman has written to Mr Cheney suggesting that he donate some of his profits to the thousands of Halliburton workers who have lost their jobs in the past two years.
Right. And did Waxedasshole send a letter to Terry MacAuliff (sp?) urging the same gesture? Doubt it.
Politics as usual among the ruling class, Dem and Rep both.
-- Uncle Deedah (unkeeD@yahoo.com), August 01, 2002.