Halliburton Settles SEC Case; Faces Shareholder Suit
Filings in a class-action suit on behalf of disgruntled Halliburton Co. investors indicate that high-level accounting fraud occurred at the company between 1998 and 2001, which includes the two years Vice President Dick Cheney was the company's chief executive, the New York Times reported.
The filings reflect the contentions of four former finance employees and indicate the accounting improprieties extend far beyond those outlined by the Securities and Exchange Commission, which settled its civil suit with the company on Tuesday. Halliburton will pay $7.5 million to settle the SEC charges.
On the same day the settlement was announced, the shareholder suit was filed. Cheney was not named as a defendant in either the SEC action or the class-action suit. SEC officials told the New York Times that Cheney participated willingly in their probe and Cheney's attorney Terrence O'Donnell said Cheney's actions as Halliburton chief executive were “proper in all respects.”
The four accounting/financial management employees, who are not identified in the suit, contend that Halliburton's engineering and construction unit Kellogg Brown & Root inflated its results by overbilling for services, overstating its accounts receivable due from customers and understating accounts payable owed to vendors, the Times reported.
One former employee is quoted in the filing as saying she was told to do “whatever it took” to make projects appear profitable and to meet Wall Street estimates for the company's earnings, the Times reported. The filings report a series of other strategies that were employed to enhance the company's financial appearance.
"What we found to be compelling about this is that there appeared to be a series of schemes designed to bolster Halliburton's financial health that did not allow people to really understand the true financial picture at the company," David Scott, a lawyer at Scott & Scott in Colchester, CT, told the Times. "We found that this was not just one isolated event; it appears to be a course of conduct designed to deceive the public."
Halliburton called the lawsuit abusive and an effort to smear the company and extort money from its shareholders, the Times reported.