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Cheney's ex-firm to receive full probe
SEC chief promises to pull no punches
Zachary Coile, Chronicle Washington Bureau
Monday, July 1, 2002
©2002 San Francisco Chronicle.
URL: http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2002/07/01/MN173709.DTL
Washington -- The nation's top securities regulator has promised to continue his
probe of a Dallas energy firm formerly run by Vice President Dick Cheney, saying
"we don't give anyone a pass" in the larger mission to restore faith in America's
boardrooms.
Securities and Exchange Commission Chairman Harvey Pitt said political
considerations would not impede the investigation into accounting irregularities at
the energy firm Halliburton, where Cheney was chairman and chief executive until
July 2000.
"I head an independent regulatory agency," Pitt said. "We don't give anyone a pass.
If anybody violates the law, we go after them."
Responding to a growing crisis of confidence among investors over questionable
accounting by some of the nation's biggest firms, Pitt also said his agency planned
to try to make an example of any corporate executives found guilty of fraud by
stripping them of their personal assets.
"The way to hit them where they really hurt is in their pocketbooks and in their
ability
to ever do this again," Pitt said Sunday on ABC's "This Week."
"What we're doing is, we're stripping them of their salaries, their bonuses,
their options," Pitt said. "And we're getting the courts to give us orders that make it
certain that they will never be able to serve in any public company."
Halliburton acknowledged a month ago that the SEC had started an investigation
into whether the company reported $100 million in cost overruns on oil contracts as
revenue in an effort to boost profits during merger negotiations with a rival firm.
QUESTIONABLE ACCOUNTING
The questionable accounting occurred in 1998, when Cheney was chief executive.
The company's auditor was the accounting firm Arthur Andersen, which has been
under scrutiny for its role in business scandals at Enron Corp. and
telecommunications giant WorldCom.
Halliburton has denied any wrongdoing and said it did not mislead investors with its
bookkeeping.
But the investigation could become politically embarrassing for the Bush
administration as it tries to fashion a response to the spate of accounting scandals
on Wall Street.
The SEC last week charged WorldCom with defrauding investors by misreporting
$3.8 billion in expenses. The agency ordered the company to provide a full
accounting of what went wrong by today.
Pitt, a Bush appointee, said the SEC would get the report before the markets
opened and immediately would make the information public so investors could see
for themselves what had gone wrong. If executives misreport any financial
information, they could risk losing millions of dollars in salary, stock and pension
benefits.
"If there is even an iota of false statement in there, people will pay heavily," Pitt
said.
The SEC chairman's tough words were aimed at restoring confidence to investors
shaken by the spate of corporate scandals and at staunching criticism that his
agency has failed to crack down on fraud at some of the nation's biggest
companies.
Critics, including Sen. John McCain, R-Ariz., have questioned whether Pitt is the
right man for the job because he was previously a top lobbyist for several Wall
Street brokerage firms and the accounting industry.
GORE ON THE ATTACK
Former Vice President Al Gore said in a speech Saturday, "They picked the
principal lawyer and lobbyist for the big five accounting firms who, before coming to
the government, went and pleaded with the SEC to open up loopholes for the
accounting companies."
But Pitt said that as SEC chairman, he had led a vigorous effort to both prosecute
and prevent financial abuse. Last week, he ordered the chief executive and financial
officers of America's 945 largest corporations -- from General Electric to
ExxonMobil to Oracle -- to certify that their financial statements are true, starting
with quarterly and annual reports filed after Aug. 14.
Pitt also said the agency had plans for further action against Xerox Corp., which
announced last week that it had improperly recorded more than $6 billion in revenue
over the past five years -- twice the amount that the SEC had estimated when it
took action against the company this spring.
"We're not finished with the Xerox case," Pitt said. "Everyone who may have been
involved is still under investigation. And before much longer, we're going to make
all of them responsible for what they've done."
Still some members of Congress are looking at even more punitive measures,
including increased criminal penalties for executives found guilty of fraud. The
Senate plans to vote next week on a bill, opposed by the accounting industry, to
create a regulatory board to oversee and certify auditors.
Bush is expected to make a major address on corporate accountability on July 9.
His aides say he may endorse the idea of new criminal penalties for executives who
sign off on misleading or fraudulent statements.
Chronicle news services contributed to this report. / E-mail Zachary Coile at
[EMAIL PROTECTED]
©2002 San Francisco Chronicle. Page A - 1
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