Can Cheney lead amid questions about his role at Haliburton?
They never had to be, until the corporate trust scandals landed on the President and Vice President like a sack of nickels. At issue is whether the two men benefited during their business careers from the same kind of cronyism and slippery accounting that the Administration is now publicly condemning. The day before Bush was scheduled to deliver a speech meant to spank Wall Street, he held a press conference to advertise his standing as a Main Street kind of guy. He wanted to show small investors, says an aide, that he "shared their outrage."
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But once the questions began, Bush looked like a 5-year-old losing a battle with an ice-cream cone on a summer day. His sale of stock as a director of Harken Energy in 1990, a once scrutinized deal that had faded into obscurity, was now alive in a much less forgiving environment. Bush dumped $848,000 worth of Harken stock two months before the company announced a $23.2 million loss; he was 34 weeks late in filing a form the Securities and Exchange Commission required to record the sale. Old news, the President said, noting that the SEC investigated the sale and took no action.
Bush's business dealings were legal but on the wrong side of the new corporate morality he is now preaching. How could the President chastise executives for doing the same kinds of things he did as a director, without apology? Bush received subsidized loans from Harken to buy company stock—a practice he now wants to ban. In 1989 Harken concealed losses by selling most of a subsidiary to an off-the-books entity controlled by company insiders. Bush was on the audit committee, which, at least in theory, approved the deal. It's the same tactic used by Enron—on a massive, more pernicious scale—before it imploded.
As Bush struggled to explain away the past, Cheney was being investigated by the SEC and sued by Halliburton shareholders and the conservative activist group Judicial Watch. The allegation: that Halliburton, while Cheney was CEO, greased the books to boost the firm's flagging fortunes. Its decline was due in part to Cheney's signature strategic move—Halliburton's merger with Dresser Industries in 1998, when Dresser was about to be buried under asbestos-contamination lawsuits. Halliburton remains burdened with the liability of more than 200,000 suits and as of last year was on the hook for $125 million in settlements. Its stock has fallen from nearly $60 to about $13.50, imperiling the retirement savings of blue-collar workers. (Cheney cashed in his Halliburton stock options before taking office, clearing more than $20 million before the shares tanked.)
Markets need trust as much as they do liquidity. If Bush and Cheney aren't perceived as being clean, how much confidence can investors have in their reforms? "I'm one of these rare creatures who think there must be some responsibility," says Oklahoma City attorney Bill Federman, who is suing Halliburton. "The entire securities market is melting down, and you have the President and Vice President who were apparently involved in the same type of situation that's leading to the meltdown." Federman has company. In a new TIME/CNN poll, 43% said they believe the President's stock sale was improper but not illegal.
When Bush went into the oil business in Midland, Texas, he didn't discover enough of the stuff to strike it rich. He merged his first company, Arbusto (Spanish for "bush"), into one called Spectrum 7 in 1984 and then led the struggling firm into Harken's embrace in 1986. In exchange for his 15% stake in Spectrum, Bush got Harken stock worth some $320,000; he was also hired as an $80,000-a-year consultant. Harken founder Phil Kendrick explained it this way: "His name was George Bush," he told Time. "That was worth the money they paid him."