What Did Cheney Know?
Corporate accounting scandals have been working their way through the Fortune 500 like a kind of financial Ebola outbreak, claiming some high-profile victims. But none quite so high as its latest apparent victim, the Vice President of the United States.
Last week the New York Times broke the story that Halliburton Corp. had cooked its books to the tune of $100 million (with a little help from their accountants from Arthur Andersen.) The questionable accounting occurred between 1998 and 2000, during Dick Cheney's reign as Halliburton's CEO.
Since the Times story broke Cheney has remained in a secure, undisclosed location of his own making, maintaining a stony silence on the matter.
But each day this week the chorus of newspaper stories and commentaries on the Halliburton caper have grown in number and detail. In a column in the Washington Post on May 31 Michael Kinsley framed the question on inquiring minds:
"And where was the future vice president while this was going on?" Kinsley asks.
This may be the very question that is keeping Cheney out of the reach of reporters for now. It is difficult to fathom an answer that would not make the VP look like either a clueless CEO or a Ken Lay wanna-be.
After all, what can Cheney say? That he did not notice that of Halliburton's income in 1999 of $438 million, a healthy chunk of it was from the $100 million in disputed charges Halliburton's clients had refused to pay? Hardly a believable answer for a man Americans have come to know as a person obsessed with details.
This week the SEC turned up the heat on Halliburton, announcing that it had opened a formal inquiry into the company's accounting practices during Cheney's term as CEO.
Cheney was well compensated for his work at Halliburton, racking in just over $36 million in salary, stock and whatnots in 2000 alone. Some of that compensation was a bonus tied to the company's reported pre-tax income. Some of that income -- we now learn -- was an illusion created for Halliburton by their Arthur Andersen magicians.
Cheney was so happy with the work Andersen did for him during his tenure at Halliburton that he cut a TV spot for them before leaving to become America's VP.
"I get good advice, if you will, from their people based upon how we're doing business and how we're operating," Cheney says in the ad. "...just the sort of normal by-the-books auditing arrangement."
The SEC investigation of Halliburton is going to be interesting to watch, if for no other reason than the tangle of conflicts that exists at the top of that agency. SEC commissioner Harvey Pitt was Arthur Andersen's attorney before taking his current post as Arthur Andersen's regulator. And, of course, Pitt owes his post to the Bush/Cheney team.
No one expects that draconian measures will be taken against Cheney, even if evil doing is proven. That's just not the SEC's style. Wall Street types do not adapt well to prison, so penalties tend to be more civil, literally and figuratively.
One recourse the SEC uses in such cases is "disgorgement" -- ordering the evildoer to cough up all or a portion of the money they made by lying and cheating. If part of Cheney's annual bonuses were indeed calculated on the currently disputed revenues, Cheney could be ordered to repay them to the company and its shareholders.
We'll be following this one closely.
Stephen Pizzo is the editor of The Daily Enron. His bestselling book, "Inside Job: The Looting of America's Savings and Loans," is now available as an ebook.