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Monday, Oct 13, 2008
Dick Cheney campaigned on a platform of business know-how. But his tenure as Halliburton CEO left the company mired in bad deals, investigations and lawsuits.
Jul 21, 2004 | In early September, during the Republican National Convention, the GOP is almost certain to name Dick Cheney as its nominee for vice president of the United States. In the meantime, it's clear that Cheney deserves another nomination: as one of the worst CEOs in recent American history.
Of course, there are plenty of CEOs that should to be on that list, including Enron's Kenneth Lay, Tyco's Dennis Kozlowski and Adelphia's John Rigas. While those bosses certainly are being pilloried, Cheney's disastrous five-year-long tenure at Halliburton deserves far more scrutiny than the mainstream business press has bothered to provide.
Cheney's job at Halliburton is particularly newsworthy now that John Kerry has chosen John Edwards as his running mate. The Republicans have already begun hammering Edwards for his work as a trial lawyer; Democrats have an opportunity to bash Cheney's performance at Halliburton. Given the wreckage that Cheney left behind, that record offers a target-rich environment.
Since Cheney's departure, the company's net worth has gone into free-fall, debt has soared, and it is now facing embarrassing legal entanglements that could hamper its profitability for years to come. Furthermore, despite being the largest oil-field services company on earth (last year, its revenues surpassed those of French giant Schlumberger), Halliburton hasn't been able to make any money. Instead, it's losing money -- lots of money. In 2002, the company lost $1 billion. In 2003, despite revenues of $16.2 billion, it lost another $800 million. In the first quarter of this year, losses totaled $65 million. More bad news is expected when the company reports its second quarter results on Friday.
The latest dose of Cheney-related bad news came on Monday, when Halliburton announced that the Justice Department has begun a criminal investigation of the company in connection with the operations of one of its subsidiaries in Iran. Halliburton also said that it has received a subpoena from a federal grand jury that is seeking documents from its Iranian dealings. In early 2000, while Cheney was CEO, a Halliburton subsidiary located in the Cayman Islands opened an office in Tehran. U.S. regulations prohibit American companies from trading with Iran and Libya because of their links to terrorist organizations. While at Halliburton, Cheney lobbied against the sanctions, saying that they were "ineffective."
A Halliburton spokesperson downplayed the investigation and the subpoena, telling the Wall Street Journal that it is "important to understand, especially in the current political environment, that this is not a condemnation of the company, but a method of further studying the facts."
The news of the criminal investigation follows close on the heels of other bad news: In late June, Halliburton said that it will take an $815 million charge against earnings for the second quarter. Of that amount, $200 million stems from cost overruns on the Barracuda-Caratinga offshore project in Brazil, a $2.5 billion undertaking that was announced in January of 2000 -- seven months before Cheney left Halliburton to become George W. Bush's running mate. The rest of the charge against earnings -- $615 million -- will cover the asbestos-related legal claims that stem from Cheney's decision to take over Dresser Industries in 1998.
Meanwhile, both the Securities and Exchange Commission and French investigators are investigating Halliburton for its alleged involvement in bribing Nigerian officials over a giant liquefied natural gas project. Much of the alleged bribery occurred on Cheney's watch.
Add in a recent $106 million legal judgment against the company for its involvement in a Kazakh oil deal done during Cheney's stint as CEO, along with the Pentagon's ongoing investigations into Halliburton's overbilling (investigators have recently found that Halliburton spent $11 million to house personnel at the five-star Kuwait Hilton), and it becomes clear that Halliburton may have trouble surviving Dick Cheney.
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