Who’s Looking Out for the Other Shareholders?

So here is last Wednesday’s New York Times with a small one-column article in the Business Section under the headline Under Cheney, Halliburton Altered Policy on Accounting. It is written by Alex Berenson and Lowell Bergman (Bergman is the former 60 Minutes Producer depicted in the movie The Insider, and a Very Great Man.)

It begins:

During Vice President Dick Cheney’s tenure as its chief executive, the Halliburton Corporation altered its accounting policies so it could report as revenue more than $100 million in disputed costs on big construction projects, public filings by the company show. Halliburton did not disclose the change to investors for over a year.

At the time of the change – which was approved by Arthur Andersen, the company’s auditor at the time – Halliburton was suffering big losses on some of its long-term contracts, according to the filings. Its stock had slumped because of a recession in the oil industry. Two former executives of Dresser Industries, which merged with Halliburton in 1998, said that they concluded after the merger that Halliburton had instituted aggressive accounting practices to obscure its losses.

The article goes on to say that the Vice President declined to comment. He may not even have been aware of this change – what’s an extra $100 million to a CEO with a huge number of stock options? But one gets the feeling that this is a guy who may have looked out for himself better than he looked out for his shareholders. As the article notes, Halliburton stock is now about where it was when he became CEO in October of 1995, as compared to the S&P 500, which is 86% higher. So for Halliburton shareholders, it’s been disappointing. But while he was there, Vice President Cheney was able to get the stock up high enough to make a fortune on his options.

And then you have President Bush. Here’s what U.S News & World Report – the most conservative of the three national newsweeklies – had to say in its March 16, 1992 issue:

Bush sold [his entire] $848,560 worth of Harken stock just one week before the company posted unusually poor quarterly earnings and Harken stock plunged sharply. Shares lost more than 60% of their value over 6 months. When Bush sold his shares, he was a member of a company committee studying the effect of Harken’s restructuring, a move to appease anxious creditors. According to documents on file with the Securities and Exchange Commission, his position on the Harken committee gave Bush detailed knowledge of the company’s deteriorating financial condition. The SEC received word of Bush’s trade eight month’s late. Bush has said he filed the notice but that it was lost.

Now, come on. Was it just a coincidence that an insider enmeshed in all this stuff, and on the three-man audit committee, would sell out a week before the bad news hit?

An SEC probe ended without charges being filed. Is it possible that the SEC might have gone easy on this guy because he was . . . oh, I don’t know . . . the President’s son?

Before running for Governor, Bush obtained a letter from the SEC saying that ‘the investigation has been terminated as to the conduct of Mr. Bush, and that, at this time, no enforcement action is contemplated with respect to him.’ According to the Washington Post (July 30, 1999), “Bush took that as vindication. ‘The SEC fully investigated the stock deal,’ he said in October 1994. ‘I was exonerated.’ . . . [Then Associate Director of the Division of Enforcement Bruce] Hiler, however, was more cautious. His statement said it ‘must in no way be construed as indicating that the party has been exonerated . . .”

Exonerated, not exonerated, guilty, not guilty – why split hairs? It was only $848,000.

Just once I would have liked Tim Russert to ask the then-candidate – who was making fun of Al Gore for the important work Gore really did do in helping to birth to the Internet (he never said he invented it) – a question like this: ‘Governor, what about the Harken Oil insider-trading investigation, where you, as a member of the board of directors and the three-man audit committee sold all your shares a week before bad news was announced? In the months following your sale, Harken stock dropped 60%. Did you have no idea what was going in your own company? Do you understand why the timing of your $848,000 sale leaves the impression with some that you violated a very basic securities law? The S.E.C. did not charge you (then the son of a sitting President) with an offense, but also did not exonerate you as you later alleged it had. Does this speak in any way to the character issue?’

Look. No one would suggest that we spend several years and $40 million investigating Cheney’s involvement in Halliburton’s accounting or Bush’s apparent insider trading – as we spent several years and $40 million investigating the Clintons’ $30,000 investment in Whitewater. At least I hope no one would. The President and Vice President have a few more important things we’d like them to stay focused on.

But neither should we use ‘the war’ to excuse or ignore egregious behavior or policies – as columnist Matt Miller persuasively argues this week. A senior fellow at Occidental College in Los Angeles, he writes (in part):

It’s time to challenge the premise behind White House efforts to de-legitimize questions on everything from pre-9/11 screw-ups to Enron to the budget . . .

Language matters. George Bush’s invocations of war echo Churchill stiffening English spines during the Blitz. But we are not in such a war. In such a war an entire nation mobilizes against daily and massive threats to its survival . . .

Bush has issued no such call for sacrifice, because none is presently required . . . Instead, we face a frightening new era in which terrorism, and the fight against terrorism, can be expected to be a permanent feature of American life . . . It is a ‘struggle,’ a ‘fight,’ a ‘battle,’ a ‘showdown,’ a ‘clash,’ a ‘conflict,’ filled with ‘combat.’ But it is not a war.

If this is a war, then . . . investigating Enron’s ties to the White House, and the firm’s influence on Bush’s energy plan and his neglect of California’s costly power crisis, are unpatriotic distractions. Don’t these carpers know there’s a war going on?

If there’s not a war, however, everything is different. If we’re in for decades of fending off terrorist threats via improved intelligence and targeted military action, then assessing flaws in our current intelligence process isn’t a diversion – it’s indispensable. . . .

And if it’s not ‘war,’ but something different, then Bush and his surrogates can’t hide behind the flag to shield scrutiny of their business giveaways and near-perfect fealty to the wishes of the wealthy.

As Gretchen Morgenstern reported in Sunday’s New York Times (click here for the whole thing):

In a speech last Wednesday before the United States Chamber of Commerce, Representative Michael G. Oxley, a Republican from Ohio and chairman of the House Financial Services Committee, said: “By coercing large sums of money from brokerage firms, actions like those undertaken by the attorney general will seriously weaken the ability of American companies to raise funds in the capital markets.”

American investors who lost funds in the capital markets clearly come second to Mr. Oxley. The large sum coerced out of Merrill – $100 million – is less than one-third of the amount the firm paid for office supplies and postage last year, $349 million.

It is no surprise that Mr. Spitzer is being dogged by Mr. Oxley, who has received $235,103 from political action committees tied to financial and insurance concerns this election cycle. That is 60 percent of his P.A.C. total and more than five times the receipts from his next-biggest industry donor.

The defenders of those companies that were publicly promoting securities that they privately labeled ‘crap’ would like to see these matters removed from the hands of folks like Eliot Spitzer and placed in the hands of S.E.C. Chairman Harvey Pitt, whom Bush/Cheney chose for the job knowing his long history of opposing the S.E.C.

It is, as I’ve pointed out before, a grand time to be rich and powerful in America.

Wednesday: Dick Davis, Breasts, and More