Halliburton will pay $7,5-million to settle a Securities and Exchange Commission probe that it failed to disclose a change in its accounting procedures in 1998 when the oil services conglomerate was run by vice-president Dick Cheney.
Besides the company’s fine, former Halliburton controller, Robert Muchmore, Jr., will pay a $50 000 penalty, the SEC announced on Tuesday.
Neither the company nor Muchmore admit nor deny the SEC’s findings that the company didn’t properly disclose the accounting change, which recognised revenue from unapproved claims on long-term construction projects.
The SEC has filed a complaint in US district court against Halliburton’s former chief financial officer, Gary Morris.
The commission says the undisclosed accounting change caused Halliburton’s public statements regarding its income in 1998 and 1999 to be materially misleading.
”The SEC’s action today emphasises the importance of complete transparency in a company’s financial disclosures,” said Harold Degenhardt, administrator of the SEC’s Fort Worth office.
The SEC said Halliburton changed its accounting practice in the second quarter of 1998 to recognise revenues ”that the company believed were probable of collection rather than … claims that had been finally resolved with its customers.”
”Although both of Halliburton’s claims recognition practices, the historical one and the revised one, are appropriate under Generally Accepted Accounting Principles, there was a significant difference in their respective effects on Halliburton’s financial presentation: the new practice reduced losses on several large construction projects,” and resulted in a higher reported income, the SEC said in a statement.
The commission said Halliburton failed to disclose the new accounting practice for six reporting periods.
”In the absence of any disclosure, the investing public was deprived of a full opportunity to assess Halliburton’s reported income — more particularly, the precise nature of that income, and its comparability to Halliburton’s income in prior periods,” according to the commission.
During its investigation, which began in 2002, the commission said it reviewed 340 000 documents and took sworn testimony from 23 individuals. Cheney was among those who provided testimony, according to the SEC, which said he ”cooperated willingly and fully”.
Cheney was Halliburton’s CEO from 1995 to 2000. He resigned to be President George Bush’s running mate.
”We are pleased to bring closure to this matter,” Halliburton chief executive and chairperson Dave Lesar said in a statement on Tuesday.
The company said it disclosed the accounting practice change in 1999 and that the SEC did not find any accounting errors or fraud.
Halliburton said there would be no restatement of previous period financial statements. It plans to take the $7,5-million charge in the second quarter of this year as a general corporate expense. – Sapa-AP