SEC probes how Halliburton accounts for its cost overruns

Journal Record, The (Oklahoma City), May 30, 2002

DALLAS (AP) -- Halliburton shares fell more than 3 percent in morning trading Wednesday in the wake of the disclosure that the Securities and Exchange Commission is investigating the how the oilfield services company once headed by Vice President Dick Cheney accounts for cost overruns on construction jobs.

On the New York Stock Exchange, Halliburton shares declined 63 cents, or 3.3 percent, to close Wednesday at $18.72.

Halliburton executives said Tuesday that the SEC had launched a preliminary investigation and they intended to cooperate. Officials say they expect to receive a formal agency request for documents or a subpoena in the next few days.

Cedric Burgher, vice president of investor relations, said that the SEC's concerns revolve around accounting changes that the company made in 1998.

The company said it believes the SEC's interest stems from a story in The New York Times last Wednesday.

The Times story said the Dallas-based company was counting cost overruns on construction projects as additional revenue, even before the customer agreed to pay for the overruns.

Burgher said the company believes it adhered to generally accepted accounting principles.

Cheney was chairman and chief executive of the world's largest oilfield services company from 1995 to 2000.

The SEC's investigation is the latest in a series of federal probes into accounting questions at energy and technology companies.

After the collapse of energy trader Enron amid accounting questions, Enron's auditor Arthur Andersen is on trial on federal obstruction-of-justice charges and the SEC is investigating accounting at Qwest Communications International, Computer Associates International and Peregrine Systems.

Peregrine and Halliburton were clients of Andersen, and subsequently dismissed the firm. Qwest is no longer using Andersen for consulting services, and its board of directors is reviewing whether to keep the firm for auditing purposes, said Tyler Gronbach, a Qwest spokesman.

"Clearly this feels like an era of heightened scrutiny on accounting issues," Burgher said.

Halliburton announced earlier Tuesday that it has settled 30 lawsuits pending against it in a New York federal court.

The lawsuits had sought millions of dollars in damages from those with lung cancers allegedly caused by asbestos exposure. The company declined to release terms of the settlements.

In recent months, Halliburton lost verdicts totaling more than $150 million in asbestos cases.

Some of Halliburton's units and former subsidiaries made construction products with the heat-resistant material. Most of the claims were filed by workers who alleged they had developed cancer from inhaling the asbestos fibers.

In March, Halliburton said it had closed 200,500 claims since 1976 for about $750 apiece, or $150 million total. In its first quarter 2002 earnings report, the company stated that it had taken an after- tax charge of $28 million that quarter to cover asbestos claims.