What if "Daddy Warbucks" Came Clean?

While Cheney made millions off the company's good fortunes, it's safe to say that he left the title of "Daddy Warbucks" behind with his successor, Halliburton CEO David Lesar.
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We all know how Dick Cheney brought his rolodex with him to Houston to help Halliburton out as CEO. That was after serving as Secretary of Defense, where he hired KBR to produce a report that led to the decision to privatize military work and give the company billions of dollars through the LOGCAP contract, which has (along with its oil work) resulted in $18 billion worth of contract-related revenues so far for the company's work in Iraq.

Many people are also aware that Cheney carried some of his Halliburton salary over into his term as Vice President, when the company's no-bid oil contract was "coordinated" with his office. In fact, Cheney has received over a million dollars from Halliburton since he came to Washington.

Yet while Cheney himself has made millions off the company's good fortunes, it's safe to say that he left the title of "Daddy Warbucks" behind with his successor, Halliburton CEO David Lesar, who has made over $100 million since the war began which, as filmaker Robert Greenwald told Keith Olbermann, is "an obscenity."

Lesar, btw, is the subject of a hilarious video posted on the Iraq for Sale site today.

To understand what Lesar brought to the job, it's worth remembering back to 2002, when the ticker-tape of accounting scandals (Enron, Tyco, WorldCom, Adelphia, etc.) began to include companies with an even closer association with the administration - Harken and Halliburton.

Evidence began to surface which suggested Halliburton had Enron-like problems. It didn't help the administration that the problems might stem from Cheney's tenure at Halliburton, and that the two companies - Halliburton and Enron -- shared the same accounting firm, Arthur Andersen, which collapsed after it was convicted for shredding documentary evidence associated with the Enron investigation.

I'm sure Karl Rove thought they had to make sure the national debate switched to the war when he realized that the Dems could savage the administration with a promotional tape that surfaced in which Dick Cheney suggested that as Halliburton's CEO he had received an "over and above the normal, by-the-books auditing arrangement" from Anderson.

(Go here to download the 4-minute video. Note: Cheney appears toward the end of the video.)

(That's not all Andersen did for Cheney. The firm also prepared Cheney's 2001 personal financial disclosure report to the Federal Elections Commission.)

Meanwhile, bones were sticking out of the president's closet as well: The media were beginning to dig into the history of Bush's Harken stock trades. Peter Behr of the Washington Post reported in November 2002 the day after his father's SEC concluded its investigation, Bush's attorney sent the commission a letter that would have been the smoking gun. The SEC's general counsel James Doty (now a partner at Baker Botts with Halliburton as a client) failed to reopen the case. (See "Bush Sold Stock After Lawyers' Warning," Washington Post, November 1, 2002).

The point is, Cheney, Bush, Lesar and Halliburton would love it if we forgot all of this history. In the biographical summary posted on the company's web site the company conveniently omits the fact that Lesar worked for the now-disgraced accounting firm earlier in his career.

Lesar came to Halliburton in 1993. And what accounting skills did he bring to the company?

If we assume the bucks stop at the top (and in Lesar's case, that's certainly true - more later), then we can safely say that much of the waste, fraud and abuse witnessed in Iraq can be squarely placed at the his feet. For that reason, one suspects that all of the stories about unsubstantiated and unsupported charges associated with its contracts were less a matter of cost-accounting incompetence, and more a matter of deliberate financial obfuscation. As one whistleblower told Congress, the company's attitude about overcharging the taxpayer was "don't worry, [the contract] is cost-plus." Meaning they would receive a percentage of the expense as a bonus no matter what.

Although Lesar's fingerprints don't go that far down, he bears responsibility for the tone and tenor of the company's culture of waste, fraud and abuse.

In fact, although the military finally decided earlier this year that it would not renew the company's large troop-support contract (LOGCAP) in Iraq, Lesar had already anticipated this would happen. Two years before, he told reporters that if it ever happened, and if they chose to rebid for the new LOGCAP work after it was broken up into smaller contracts, the company would merely "jack the margins up significantly."

Spoken like someone who knows how to game the system.

And a tacit admission that it probably would save taxpayers money if Halliburton were prohibited from bidding on any new contracts. Which, in fact, is the remedy that some members of Congress have been courageous enough to suggest.

How Halliburton might be able to "jack up the margins" in a competitive bidding process when the government uses "cost-plus" contracts is difficult to say. I suppose knowing the answer to that question is one reason why an accountant could become the head of a major Fortune 500 company whose business is increasingly dependent on government contracts.

Other evidence suggests the company's accounting system helps it hide a pattern of activities that might be described as criminogenic, including those Cayman Islands brass-plate subsidiaries (like the one used to do business in Iran) and the lawsuit by former employees alleging the accounting fraud goes much deeper.

And how else could they claim to not be aware of the $180 million that was allegedly paid in bribes associated with a natural gas project in Nigeria?

That particular scam was allegedly coordinated by a lawyer in the UK with the help of KBR Vice President, Albert Jack Stanley, who the company fired in 2004. Halliburton spokesperson Wendy Hall later told a reporter that Stanley reported to Lesar, who was then Halliburton's president and chief operating officer. Lesar in turn reported to Cheney, then the chief executive. According to the Dallas Morning News, "Mr. Cheney ran Halliburton when one of four suspicious payments occurred" during the alleged bribery scheme. (Dallas Morning News, Sept. 8, 2004.)

James Doty, the SEC's lawyer mentioned above, was hired a couple of years ago by Halliburton to conduct an "independent" investigation of the Nigeria case.

But no one with subpoena power ever seems willing to parse the evidence in public. Halliburton's defenders in Congress - virtually all of whom are Republicans who have resisted calls to defend taxpayers by forming a Truman Committee-style investigation of the war profiteers -- have suggested the company is unfairly being singled out for criticism because they have had the largest contracts in Iraq. But if the company wasn't gouging taxpayers, serving contaminated water to the troops and even sending its own employees out on suicide missions, they'd probably be coming in for far less criticism, and the ties to the vice president would seem like a tired conspiracy theory.

In fact, the company's incompetence had a lot to do with why we are in the mess we are. As the Inspector General of Iraq Reconstruction points out, Iraq would probably have been able to fund a lot more of its own reconstruction and a lot quicker if Halliburton hadn't botched a major pipeline repair job, a blunder that has cost the country billions in lost revenues during a time when it was critical to use the reconstruction to win the hearts and minds of Iraqis tempted to join the insurgency.

In the end, Lesar and Halliburton's defenders claim, earnings from work in Iraq provide only a small portion of Halliburton's profits, even if they help the bottom line when the oil and gas business cycle turns down.

So -- it's just a coincidence that the company's stock quadrupled in the first three years of the war?

And what kind of justification is that? Call it the Houston defense: "But, but, we're not raking in much from the war, especially if you compare it to what our friends at ExxonMobil and Chevron make normally." (Forget the fact that retired Chevron CEO Ken Derr is on Halliburton's board.)

Indeed, the oiligarchy hasn't suffered any significant setbacks since the company's ex-CEO went to Washington and began planning the nation's energy strategy in total secrecy with his friends from Enron and Exxon. And so, yes, in a sense, Lesar is right. Halliburton is hardly the only company that has benefited from the war and rising gas prices.

According to IPS and United for a Fair Economy, top U.S. oil and defense industry executives are raking in record personal profits as average Americans pay sky-high oil prices and shoulder the burden of paying for the war. In 2005, the top 15 U.S. oil industry CEOs got a 50 percent raise over 2004. They now average $32.7 million, compared with $11.6 million for all CEOs of large U.S. firms, according to the report.

If others are making more, their worth is astronomical, considering that the value of Lesar's stock in Halliburton has still risen stupendously since the war began.

After Katrina, it rose even further. According to the Boston Herald, which looked at the company's SEC filings, Lesar made an estimated $60 million in the four months after Katrina due to a consequent fuel crisis. His holdings were worth $72 million at the start of May 2005, rose to $113.5 million by late August, shortly before Katrina hit, and were worth a stunning $129.4 just two weeks later.

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