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Halliburton Co. 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 C. Muchmore Jr., will pay a $50,000 penalty, the SEC announced Tuesday. Also Tuesday, Halliburton disclosed that the Justice Department has expanded its investigation related to an alleged $180 million bribery scandal involving a subsidiary’s efforts to get a contract in Nigeria. Neither the company nor Muchmore admit nor deny the SEC’s findings that the company didn’t properly disclose the accounting change, which recognized revenue from unapproved claims on long-term construction projects. The SEC has filed a complaint in U.S. District Court against Halliburton’s former chief financial officer, Gary V. 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 emphasizes the importance of complete transparency in a company’s financial disclosures,” said Harold F. Degenhardt, administrator of the SEC’s Fort Worth, Texas, office. “Important information bearing on a company’s results should be clearly and timely disclosed.” The SEC said Halliburton changed its accounting practice in the second quarter of 1998 to recognize 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 Bush’s running mate. The five SEC commissioners, including Chairman William Donaldson, voted unanimously to approve the settlement with Halliburton. No commissioner recused himself or herself from the vote. All five — Donaldson and two other Republicans plus two Democrats — were appointed by Bush. “We are pleased to bring closure to this matter,” Halliburton chief executive and chairman Dave Lesar said in a statement 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. The company said it has adjusted its previously announced second quarter results to reflect a loss of $58 million for continuing operations. The company earlier reported a loss of $54 million. The company’s net loss is now reflected as $667 million compared to the previously reported $663 million. The company additionally said it agreed to not commit or cause future securities law violations, based on the SEC’s “view that there were lapses in the company’s cooperation.” Halliburton said the SEC staff alleged those lapses delayed the production of information and documentation necessary for an “expeditious completion of its investigation.” Joan Claybrook, president of consumer and good-government group Public Citizen, said the $7.5 million fine “pales in comparison to the estimated $120 million by which accounting tricks boosted Halliburton’s profits during Cheney’s stewardship.” “The failure of the SEC to address the responsibility of Cheney, who was in charge when the accounting irregularities occurred, and instead focus upon the company’s chief financial officer and controller at the time, indicates that politics may have spared Cheney from necessary enforcement action,” she said in a statement. A spokesman who was traveling with Cheney Tuesday did not immediately return a phone message from The Associated Press. The probe into the Nigerian contract came to light in mid-June. Shortly after that, the company announced consultant A. Jack Stanley, who retired in December 2003 as chairman of subsidiary KBR, formerly known as Kellogg Brown & Root, was fired for receiving “improper personal benefits.” The company also fired a consultant identified only as a former employee of M.W. Kellogg Ltd., a joint venture in which KBR has a 55 percent interest. Federal investigators are now looking at whether Stanley may have received payments in connection with bidding practices on certain unspecified foreign projects, the company said Tuesday. Stanley has received a subpoena from the SEC. Halliburton also said the Department of Justice’s investigation involves parties other than Kellogg Brown & Root and M.W. Kellogg, Ltd. and covers “an extended period of time,” dating back to “significantly before” 1998. “Our investigation of these matters is too preliminary to determine any impact they may have on us,” the company said. Copyright 2004 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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