This is one of the "right" scams the SEC garbage
sweeps under the carpet in short order:
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Halliburton Says SEC Is Investigating 1998 Accounting Change
By Daniel Taub
Dallas, May 29 (Bloomberg) -- Halliburton Co. said the Securities and Exchange Commission is investigating the oilfield services company's practice of booking revenue from some disputed construction jobs, an accounting change made while U.S. Vice President Dick Cheney ran the firm.
The world's second-biggest provider of services to oil and natural-gas companies received a one-paragraph letter from the SEC disclosing a probe into how Halliburton treats cost overruns on construction jobs, Chief Financial Officer Doug Foshee said in an interview. Halliburton expects to receive a formal request for documents or a subpoena in the next few days.
Halliburton changed the way it booked revenue for disputed construction projects in 1998 when Cheney was chief executive officer and Arthur Andersen LLP was the company's accountant. Halliburton said it never booked a profit from a job it didn't get paid for. Halliburton shares have tumbled 59 percent in the past year, partly on concern about rising asbestos claims.
``There were some business-driven changes that prompted them to change their accounting,'' said Fred Mutalibov, an analyst with SWS Securities who rates Halliburton shares ``strong buy'' and doesn't own them. ``There could be a short-term drag on the stock'' because of the SEC investigation, he said.
The SEC already is investigating the accounting at several large energy firms, including Dynegy Inc., Reliant Energy Inc., CMS Energy Corp., Baker Hughes Inc. and Hanover Compressor Co. The industry came under scrutiny amid last year's collapse of Enron Corp., once the world's largest energy trader, which filed the biggest-ever corporate bankruptcy in December.
Halliburton said in a statement the investigation probably stems from a New York Times article published last week that said the company altered its accounting to report as revenue more than $100 million in disputed construction costs, and didn't disclose the change to investors for more than a year.
Cheney
Cheney, who headed the Bush administration's energy task force, was Dallas-based Halliburton's chief executive officer from 1995 to August 2000. He also served as the company's chairman from 1996 to October 1998 and again from February to August 2000.
Executives from Exxon Mobil Corp., Apache Corp., Enron and Exelon Corp. were among those who met with Cheney and the energy task force as the group developed a national energy policy for President George W. Bush.
The meetings sparked questions and criticism about the role companies and Republican campaign contributors played in devising policy, especially after an accounting scandal led to the collapse of Houston-based Enron, Bush's biggest corporate donor.
A spokeswoman for Cheney didn't return phone calls seeking comment.
Andersen Fired
Arthur Andersen, Halliburton's auditor at the time of the change, is on trial in Houston for destroying Enron audit records. Halliburton fired Andersen on April 17.
Prior to its acquisition of Dresser Industries Inc. in 1998, Halliburton didn't record items as revenue or accounts receivable unless they were agreed to by customers. The company posted losses on engineering and construction projects that ``it did not feel would be accepted by customers.''
That year, the company began to record items for those engineering and construction projects, such as chemical plants, refineries and pipelines, for which it expected to be paid. ``The company has continued this accounting treatment of similar items since 1998,'' it said in the statement.
The change came amid a slump in oil and gas prices. Halliburton's shares fell 43 percent in 1998 and the company posted a $14.7 net loss compared with a $772.4 million profit a year earlier.
`Immaterial'
``The amount affected was immaterial to their total revenue,'' SWS Securities' Mutalibov said.
Halliburton's 2000 annual report filed with the SEC cites $98 million of ``unbilled collectibles'' at the end of 1999, up from $89 million at the end of 1998.
The company said it told the SEC that it will cooperate with the investigation.
Electricity and gas companies have come under increased scrutiny since the collapse and bankruptcy last year of Enron, which disclosed irregularities that sparked dozens of federal investigations.
Credit ratings for energy companies have been slashed as electricity prices fell and investors began to question the industry's growth prospects. This month, Enron admitted using trading methods that manipulated California energy prices while that state was enduring power outages in 2000 and 2001.
Dynegy Chief Executive Officer Charles L. Watson resigned today after investigations of the company's trading and accounting contributed to a 62 percent drop in its stock this year.
Watson departed after the company disclosed bogus electricity trades with CMS Energy Corp., whose CEO resigned Friday. The top two traders at Reliant Resources Inc., which did similar ``round- trip'' trades with CMS, also have quit.
Halliburton settled 30 asbestos cases in New York for an undisclosed amount yesterday. It had three asbestos-exposure verdicts totaling $152 million in 2001.
Shares of Halliburton rose 25 cents to $19.35 yesterday. |
