During Vice President Dick Cheney's term as Halliburton Corp. chief executive, the company altered its accounting policies so it could report as revenue more than $100 million in disputed costs on big construction projects, public filings by the company show.
Halliburton, an energy industry services company, did not disclose the change to investors for more than a year.
At the time of the change — approved by Arthur Andersen, the company's auditor at the time — Halliburton was suffering big losses on some of its long-term contracts, according to the filings. Its stock had slumped because of a recession in the oil industry. Two former executives of Dresser Industries, which merged with Halliburton in 1998, said that they concluded after the merger that Halliburton had instituted aggressive accounting practices to obscure its losses.
Much of Halliburton's business comes from big construction projects, like natural gas processing plants, which sometimes run over budget. With the accounting policy change, Halliburton began to book revenue on the assumption that its customers would pay at least part of the cost overruns, although they remained in dispute. Before 1998, the company had been more conservative, reporting revenue from overruns only after settling with its customers.
As chief executive, Cheney had ultimate responsibility for Halliburton's books. But the company's chief financial officer, Doug Foshee, said Tuesday that he could not imagine that Cheney had specifically approved the change, which he called a routine decision dictated by a shift in Halliburton's business mix.
Cheney declined to comment Tuesday. Andersen, which was fired as Halliburton's auditor last month, referred all questions to the company.
Foshee said he was certain that the accounting change was approved by David Lesar, a former Andersen accountant who was Cheney's second-in-command and who succeeded him as chief executive in 2000. Halliburton, which continues to follow the more aggressive policy, declined to make Lesar available for comment.
Some accounting specialists said the change stretched — and possibly may have broken — accounting rules.
"If they changed their accounting from recording claims when they were settled and collected to recording claims at an earlier point in time, then that would raise a red flag and would raise a question as to whether it's a permissible change," said Lynn Turner, a professor of accounting at Colorado State University and former chief accountant of the Securities and Exchange Commission.
A company that revises an accounting practice usually must show that its new method gives investors more accurate financial information than its old method. Halliburton's revision, Turner said, does not seem to meet that standard. In addition, such changes at a publicly held company are supposed to be disclosed promptly, he said.