The Rap On Bush And Cheney

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Bush always came out of his business deals whole. He parlayed his Harken money into a piece of the Texas Rangers, which he later sold for a $15 million profit. But his political account has taken a loss. "His whole persona has been, 'I'm a straight shooter,'" says Steve Elmendorf, chief of staff to House minority leader Dick Gephardt. "He's not looking like such a straight shooter now."

At Cheney's Halliburton in 1998, the accountants (from where else?--Arthur Andersen) allowed the company to count uncollected bills cost overruns from fixed-price construction contracts as revenue. Under standard accounting rules, overruns should be listed as a cost unless there is a likelihood the bills will be collected and in the construction industry, overruns can be hotly contested. But in 1998, Halliburton turned at least $89 million in uncollected bills into revenue; by 2001, the figure had grown to $234 million.

That's not huge bucks for a company with $17 billion in revenues, as Halliburton reported in 1998. But scandals over what counts as sales took Xerox down a peg over the last year and have caught up with drug companies Merck and Bristol-Meyers Squibb. The Judicial Watch lawsuit alleges that Halliburton used the revenue-enhancement gimmick to ward off investor scrutiny as the company's financials deteriorated when the oil industry retrenched. Revenues fell anyway, to $12 billion by 2000, Cheney's last year in command.

But the more damning criticism of Cheney is that he was a lousy CEO. He spent $7.7 billion to merge with rival Dresser in 1998, knowing that one of its former subsidiaries, Harbison-Walker, was the target of manifold legal claims from employees who worked making refractory bricks. Halliburton officials believed that Dresser was indemnified. But when Harbison filed for Chapter 11, tort lawyers came after Halliburton. Cedric Burgher, Halliburton's vice president for investor relations, points out that, even with the asbestos claims, an Austrian company paid nearly $600 million for Harbison-Walker in 1999. Says Burgher: "Nobody foresaw this." Lawyers for asbestos victims say Cheney and Halliburton should have known better. "Everyone knew these were multimillion-dollar cases," said Glen Morgan, a leading asbestos-claims lawyer based in Beaumont, Texas. Whatever Cheney knew, he's not saying. His office refers all questions back to Halliburton.