Commentary
Vice President Dick Cheney has spent most of the past year in hiding, ostensibly from terrorists, but increasingly it seems obvious that it is Congress, the Securities and Exchange Commission (SEC) and the public he fears. And for good reason: Cheney’s business behavior could serve as a textbook case for what’s wrong with the way corporate CEOs have come to play the game of business – and have been able to influence the administration of President George W. Bush.
As might be expected of a company whose one-time CEO was once Secretary of Defense, Halliburton is a major beneficiary of the increased spending that comes with the Bush administration’s war on terrorism. Its contracts to build military bases around the world will cost taxpayers billions and be considerably higher than if the military’s own construction units do the work.
Unfortunately for Halliburton’s stockholders and employees, Cheney’s ability to parlay his Pentagon contacts into profit is his only business success. But even with a key to Uncle Sam’s candy store, Halliburton had trouble meeting Wall Street’s demand to increase profitability – until, with the help of Arthur Andersen, it changed its accounting rules. The trick was simple – count contested cost overruns on construction projects as income.
The switch increased Halliburton’s revenues by $98 million in 1999, $113 million in 2000 and $234 million last year. Although the company changed the way it accounted for cost overruns on contracts handled by its engineering and construction units in 1998, it didn’t report the change to the SEC until 2000.
Any effort at understanding what makes Dick Cheney tick begins with the recognition that he is – and has been – a political hack for most of his professional life, first as a staffer in the Ford White House, then as a congressman for a decade and after that as Secretary of Defense in the administration of Bush the First, and now the self-chosen vice president of Bush the Appointed. (Cheney had been appointed head of a search committee to select Bush’s running mate.)
This journey from the public payroll to the corporate towers and back left a slimy trail of conflict-of-interest questions. For example, Defense Secretary Cheney conveniently changed the rules restricting private contractors doing work on U.S. military bases, allowing the Kellogg, Brown & Root subsidiary of his future employer, Halliburton, to receive the first of $2.5 billion in contracts over the next decade.
By the time he left Halliburton, Cheney had transformed a second-tier oilfield services firm into the industry’s biggest player, employing 85,000 people in 100 countries. There was no end in sight and everybody was getting rich, especially Cheney, who cashed in stock and options worth more than $30 million on his way to the White House. It was, in his words, “a great success story.”
Two years later, the roof had fallen in, as Halliburton stock had plummeted 76 percent since Cheney sold his shares. All of the gains recorded during his tenure were erased and the company’s market value collapsed from $24 billion to $6 billion. And to make matters worse, the Securities and Exchange Commission announced it was looking into possible accounting irregularities at Halliburton during the Cheney years.
The vice president is one of a rogue’s gallery of cabinet members and White House officials who came to the Bush administration from corporate America and sold their stakes near the stock market’s peak. While the sales were required for those accepting high-level positions in the administration, the windfalls they enjoyed, and the administration’s tardiness in pushing for crackdowns on corporate wrongdoing, are viewed with suspicion.
“That makes it difficult for the White House to know which of these guys to put in front of the camera to try to restore confidence. … Let’s face it, the White House is on the run on this,” Kim Wallace, chief political analyst for Lehman Brothers, a Wall Street securities firm, said recently.
But Cheney seems to share one defining characteristic of ex-CEOs whose actions are now under intense scrutiny: He became a millionaire many times over by cashing in his stock options before problems came to light and ordinary shareholders began losing their shirts. When Cheney left Halliburton in August 2000 its stock was above $50 per share. It now hovers in the $13 range.
Fred Gaboury is a member of the People’s Weekly World Editorial Board. He can be reached at fgab708@aol.com
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