The Rap on Bush and Cheney

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By 1990, when Bush was unloading those shares for $848,000, Harken was sliding down. The company, which owned everything from drill rigs to gas stations, was losing millions of dollars trading oil on the commodities market. With its balance sheet deteriorating, Harken devised a sale of 80% of a chain of gas stations, Aloha Petroleum in Hawaii, to an entity that included the company's chairman and another director. Harken recorded a gain of $7.9 million to offset other losses and finished the year $3.3 million in the red—bad, but far better than the reality.

The SEC reeled in the deal in the fall of 1990 and forced the company to restate its earnings early the next year. The $3.3 million loss became a $12.6 million loss. White House officials say Bush was clueless about the tricky accounting. "They gave discretion to the CEO," says communications director Dan Bartlett. He adds, "Audit committees were different then than they are now." Bush, who last week called on directors to "ask tough questions about accounting methods," doesn't hold himself to that standard. Harken's case, he told reporters, was one in which "the rules aren't as specific as one would expect, and therefore the accountants and the auditors make a decision." Hundreds of companies have restated their earnings in the past two years—one reason investors are so skittish.

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.

—Reported by Cathy Booth Thomas/Dallas and James Carney, John F. Dickerson and Michael Weisskopf/Washington