Cheney: The Business Record Revisited

| Sun Nov. 12, 2006 2:54 AM EST

In the "Headlines you don't see often enough" department, a favorite recent entry is "Buying Cheney's Blunder," over a Floyd Norris piece that the New York Times tucked away in the Friday business section. You'll recall how, back in the Bush honeymoon days, we heard about Cheney's successful record as a businessman, cf. his tenure at Halliburton. Now comes news that Halliburton is selling off Kellogg Brown Root, the subsidiary that handles most of its overpriced work in Iraq, at what may quite possibly be a fire-sale price. But the liability of owning KBR is not, in fact, mostly the Iraq stuff: The division is tangled in legal problems that, for Halliburton, "serve as a reminder of a deal gone awry." Now then:

That deal was Halliburton's $7.7 billion 1998 acquisition of Dresser Industries. Engineered by Dick Cheney, then Halliburton's chief executive, the merger accomplished a major strategic goal, making Halliburton the world's largest provider of oil field services.

But Halliburton's due diligence failed to either uncover or appreciate the importance of some significant issues. There were asbestos liabilities, which ended up forcing some Halliburton units into bankruptcy and cost the parent company billions.

Halliburton also failed to notice what it now says may have been illegal behavior overseas at Kellogg, a Dresser subsidiary that is now part of KBR. It says that there appears to have been bribery of Nigerian officials for years in connection with contracts there and that similar behavior may have occurred elsewhere. The Justice Department is investigating possible violations of the foreign corrupt practices act, and Britain has a similar inquiry.

While looking into those charges itself, Halliburton found evidence that Kellogg "may have engaged in coordinated bidding with one or more competitors on certain foreign construction projects, and that such coordination possibly began as early as the mid-1980's," KBR says in its prospectus.

[...]Halliburton began unloading parts of Dresser soon after Mr. Cheney became the vice president of the United States in 2001, and while some Dresser operations have been integrated into Halliburton, the disposal of KBR would remove a major reminder of that deal. That it will have taken more than eight years is a reminder of how long an ordeal can result from a big decision made with poor information.

So to review. Cheney led a major takeover, ignoring evidence that it was going to lead to a quagmire, overlooking possible illegal behavior, and leaving, in the end, to an ignominious bailout. (Oh yeah, and helped create the monster in the first place). Companies, to paraphrase the old saw, sell their mistakes. Countries bury theirs.