Veep Accused Of Accounting Fraud

Oil field services provider Halliburton Co. Wednesday said claims made in a lawsuit filed by a public interest group against a company and U.S. Vice President Cheney, its former chief executive, were without merit.

"The claims in this lawsuit are untrue, unsupported and unfounded," Halliburton Chief Financial Officer Doug Foshee said in a statement Wednesday.

Earlier Wednesday, the legal watchdog group Judicial Watch sued Cheney and the oil services company he once ran, Halliburton Co., alleging they defrauded shareholders by overstating the company's revenues. Cheney headed Halliburton from 1995 to 2000.

The accounting fraud lawsuit also names as defendants Halliburton's directors and its accounting firm, Arthur Andersen LLP.

The civil lawsuit was filed in federal court one day after President Bush went to Wall Street to outline proposals aimed at stopping the accounting scandals that have shaken investor faith in the U.S. financial markets.

In a separate development, an embarrassing promotional videotape has surfaced that features Cheney praising now-disgraced Arthur Andersen for going above and beyond routine audits for Halliburton. On the tape, Cheney and six other executives applaud the accounting firm.

"One of the things I like that they do for us is that, in effect, I get good advice, if you will, from their people based upon how we're doing business and how we're operating, over and above the, just sort of the normal by-the-books audit arrangement," said Cheney in the 1996 tape.

The four-minute video was produced by Andersen in 1996, well before the company was damaged by revelations about its role in such corporate scandals as the collapse of Enron Corp. and WorldCom Inc.

In May, Andersen was convicted of obstruction of justice by shredding documents that had to do with Enron, which admitted it exaggerated profit to appeal to investors.

A spokeswoman for the vice president said Halliburton had no reason to question Andersen at the time.

"Arthur Andersen was Halliburton's accountant for 50 years," said Jennifer Millerwise. "Obviously, they had never had a problem, so of course under those circumstances the vice president, along with many other CEOs, did a piece."

Millerwise said Cheney was unhappy that Andersen identified him as "vice president" in a recent copy of the video.

In the lawsuit filed Wednesday, the legal group Judicial Watch alleges that while Cheney was Halliburton's chief executive officer, the Texas company reported as income money that had not been received, from contract claims that were still "speculative" and in dispute.

"They overstated their revenues by tens of millions of dollars and that's an understatement," Larry Klayman, chairman of the Washington-based Judicial Watch, told reporters in Miami, where he was visiting on unrelated business.

The suit was filed in Dallas, where Halliburton is based.

In Washington, White House spokesman Ari Fleischer said he had spoken to Cheney's office and "they believe the suit is without merit, and that's where it stands."

Judicial Watch targets government corruption and has sued politicians of every stripe in the past.

Klayman said the inflated revenues resulted from accounting changes that were never made public as required by law, and inflated Halliburton's stock price.

The lawsuit, filed on behalf of two Halliburton shareholders who lost "a lot" of money, did not specify the amount of compensation the plaintiffs are seeking. But Klayman said: "We're seeking millions and millions of dollars ... It's to punish the people involved."

Fleischer said Tuesday the SEC would take its investigation of Halliburton "wherever it leads," dismissing suggestions investigators would come under pressure to back off if Cheney was implicated.

Cheney was chairman and chief executive of Halliburton from 1995 to 2000. The oil field services company announced on May 28 that it received notice from the Securities and Exchange Commission that the commission was looking into Halliburton's accounting methods - adopted in 1998 - for reporting cost overruns on construction jobs.

The SEC has not filed any charges against the Dallas-based company.

Before 1998, the company had been more conservative, reporting such revenue only after settling with customers.

The Washington-based group Judicial Watch alleges those accounting practices resulted in the overvaluation of Halliburton's shares, deceiving investors.

"We're seeking actual and punitive damages for allegations of securities fraud, for changing accounting practices and not advising the public of these changes," said Judicial Watch chairman and general counsel Larry Klayman, who is to hold a news conference Wednesday in Miami to announce further details on the legal action.

A spokesman for Cheney declined comment and instead referred all questions on the matter to Halliburton.

"We don't believe that there's any merit to this case," Halliburton spokeswoman Zelma Branch said.

The lawsuit, which is expected to be filed Wednesday in federal court in Dallas, also names ten of Halliburton's board members.

Judicial Watch is no stranger to conflict with the Bush administration, having previously sued for access to records of the Cheney-led energy task force that drafted the Bush administration's energy policy.

The leader of the group charges that President Bush's public campaign to crack down on corporate fraud - underscored with a speech on Wall Street yesterday - appears intended to deflect attention away from his and Cheney's own past business practices.

"To look the other way for the vice president would be to set a precedent that the Washington elite are above the law," said Klayman, arguing his case that Cheney and Halliburton were in the wrong.