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Thu, Aug 05, 2004 - Page 12 News List

Halliburton pays to settle SEC charges

FAILURE TO DISCLOSE The firm faces a hefty penalty for not telling investors about an accounting change that helped it to boost its pretax profits in 1998 and 1999


Halliburton Co will pay US$7.5 million to settle charges that it misled investors by not disclosing a 1998 accounting change at a time when US Vice President Dick Cheney was chief executive officer, officials said on Tuesday.

The US Securities and Exchange Commission (SEC) said it did not charge Cheney in the case. The agency charged the Houston-based oil services group, as well as its former chief financial officer Gary Morris and former controller Robert Muchmore.

The size of the penalty against Halliburton partly reflects an SEC view that company documents and information were not turned over quickly enough to commission investigators, it said.

"The commission will not tolerate lapses by companies that serve to delay or hinder the commission's investigative processes," Spencer Barasch, enforcement chief in the commission's Fort Worth, Texas office, said in a statement.

Cheney was chief executive officer of Halliburton from 1995 to 2000. He "provided sworn testimony and cooperated willingly and fully in the investigation," the commission said.

The case focused on Hallibur-ton's failure to disclose a change in accounting for revenue from claims against customers for construction project cost overruns, it said.

The accounting change boosted Halliburton's pretax profits over several quarters in 1998 and 1999 by more than US$120 million, but investors were not informed until March 2000, the commission said.

Washington consumer advocacy group Public Citizen said politics may have shielded Cheney from being held responsible, but the commission's top enforcement official said the case was brought on its merits.

"The commission brought the charges it believed were warranted by the evidence," said SEC Enforcement Director Stephen Cutler in an interview.

Cutler declined to discuss when Cheney testified and what the vice president told investigators.

The commission found Cheney was not involved in the accounting practice change, nor in the decision on whether to disclose it, said a lawyer for Cheney who asked not to be named.

Halliburton and Muchmore agreed to a settlement, with Muchmore paying a penalty of US$50,000 and the company a penalty of US$7.5 million. Neither admitted nor denied wrongdoing, as is customary in SEC settlement deals.

The enforcement action against Morris is unsettled and has been filed in US District Court in Hous-ton, the commission said.

"We think it's unfortunate the commission chose to file suit against Mr. Morris on a matter concerning events which occurred a number of years ago ... Mr. Morris intends to defend himself vigor-ously," said Tim McCormick, Morris' lawyer.

As a result of the Morris litigation, a transcript of Cheney's SEC testimony may become public through the legal discovery process, said a lawyer close to the case.

Halliburton said it is adjusting its second-quarter results to account for the settlement. It said there will be no restatement of prior financial disclosures.

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