A number of top Halliburton managers, including several finance executives, engaged in illegal accounting activities from 1998 to 2002, a shareholder class-action lawsuit reportedly alleges.
The 101-page suit charges that the company and the executives engaged in “serial accounting fraud,” including inflating results, failing to disclose a big asbestos verdict in a timely way, and being unable to account for $3.1 billion of profit and cash, according to Reuters.
First reported on in The New York Times the suit filed in U.S. District Court in Dallas come a few days after the Securities and Exchange Commission brought charges against the oil well services and equipment company and two of its former finance executives. The SEC charged them with failure to disclose a change it its accounting practice during a period when vice president Dick Cheney served as chief executive officer of the company.
Halliburton agreed to pay a $7.5 million penalty to settle civil charges for not fully cooperating with the SEC’s probe.
Halliburton called the class-action suit an abusive attempt to extort shareholders’ money and smear the company and its workers, according to Reuters.
Among the defendants named in the lawsuit are David Lesar, formerly the company’s chief operating officer and its current CEO, and three former finance executives–Douglas Foshee, a former CFO and now CEO of El Paso Corp.; Gary Morris, another former CFO; and Robert Muchmore, a former controller.
Muchmore settled the SEC’s enforcement actions by agreeing to cease and desist from committing or causing future securities law violations. He also agreed to pay $50,000.
The enforcement action against Morris, filed in U.S. District Court in Houston, however, remains unsettled.
Reuters noted that El Paso and lawyers for Foshee and Muchmore could not immediately be reached for comment.
Halliburton said the Dallas court had “preliminarily approved Halliburton’s settlement of approximately 20 class-action securities cases … and ordered that no further complaints be filed,” according to the wire service.
The filing contends that Kellogg Brown & Root, Halliburton’s engineering and construction unit, inflated results by artificially boosting revenue or understating expenses, according to the wire service’s account of the suit.
One employee said supervisors told her to do “whatever it took to make [projects] come back to plan,” or profitability, the filing reportedly said.
The wire service also noted that the filing asserted that Halliburton did not disclose a $130 million jury verdict in September 2001 in an asbestos case involving its Harbison-Walker unit. The filing also reportedly charged that five weeks after Lesar and Foshee learned of the verdict, they told analysts that news on asbestos liabilities was “positive.”
It also said the charges claim that from 1998 to 2001 about $3.1 billion “went missing” as the company generated $1 billion of profit and $2.1 billion from asset sales, yet ended the period with roughly the same amount of debt and cash as it started with.