Haliburton, KBR shareholders sue firms as proxy for Bush-Cheney cronyism
Remember how MBA George W. Bush was going to be our CEO president? How he was going to run the country like he would run a business? Well, on that promise, at least, he delivered.
Americans frustrated by the lack of accountability of the Bush-Cheney White House may get some satisfaction from the knowledge that the administration ran the main businesses it was tied to the same way it ran the country — and there is some rich accountability taking hold in that realm.
Riding high for the last decade on its unabashed crony connections, pulling down mega-sized, no-bid government contracts and creating fast fortunes for its execs — including for Dick Cheney — Haliburton and its subsidiary KBR have come to rack up some of the largest criminal fines in history.
And, almost better than any Congressional impeachment, this week we get Haliburton and KBR shareholders suing the companies and their current and former directors, including Cheney, for criminal mismanagement, gross incompetence and corruption. Shareholder of course, being the people whose interests companies are supposed to serve, in this case are a perfect non-partisan non-ideological stand-in for the American people.
Indeed, the men and women running the New York and Michigan municipal pension funds that invested with Haliburton-KBR, have apparently seen all they need to see.
In what is believed to be the first legal action brought by shareholders against oilfield services provider Halliburton Company (NYSE: HAL) and its one-time subsidiary KBR, Inc. (NYSE: KBR), a municipal pension fund has filed a lawsuit alleging that poor oversight and lack of internal controls at the two companies enabled a pervasive environment of misdeed and corruption, resulting in enforcement actions and substantial government penalties that have severely damaged investors’ holdings.
Shareholders accuse Halliburton’s board of directors of breach of fiduciary duty in failing to rein in years of shoddy business practices and criminal activity that resulted in massive fines, penalties and settlements paid to the federal government.
Named as defendants are 32 former and current directors of Halliburton and KBR — the majority of the companies’ two boards — including ex-Vice President Dick Cheney, former Secretary of State Lawrence Eagleburger, and Robert Crandall, past president and chairman of American Airlines.
The complaint states, “As fiduciaries … the Halliburton defendants were required to exercise prudent supervision over the management, policies, practices, controls, and financial and corporate affairs of Halliburton and KBR, which Halliburton controlled.” The plaintiffs are asking for a jury trial and intend to seek damages.
Go and read the PR Newswire story. No novelist could construct a better metaphor for what the country has been through and is dealing with today as a result.
Here’s North Dakota’s sober Sen. Dorgan, who has run a series of hearings on contractor corruption involving the companies, commenting on the news.
And here, because it’s irresistible and cathartic, is more from the PR Newswire account. Enjoy.
Largest Criminal Fines Ever in an FCPA Action tied to Nigeria
Following a series of U.S. government investigations and lawsuits, Halliburton and KBR have paid more than $650 million in fines, penalties, and settlements — including the largest fine ever assessed by the U.S. Commerce Department and the largest settlement ever paid by U.S. companies for violations of the Foreign Corrupt Practices Act.
This past February, KBR pleaded guilty to bribing Nigerian officials and to violations of the FCPA, while both KBR and Halliburton settled related civil suits with the Securities and Exchange Commission. KBR’s payment of some $579 million in criminal fines and penalties is believed to be the largest payment ever made by a U.S. company in settling an FCPA enforcement action. Earlier, the SEC penalized Halliburton $7.5 million for improper accounting practices that led to the company distributing materially misleading financial statements.
Former KBR Chairman Albert Stanley is serving seven years in prison for orchestrating the bribery scheme in Nigeria and receiving kickbacks. Other KBR employees pleaded guilty to accepting kickbacks or attempting to defraud the U.S. government, as well as conspiracy and bribery, and several have served prison time.
In 2006 KBR settled government contentions that it overcharged for services to peacekeeping troops in Kosovo and violated the U.S. False Claims Act by, among other things, double-billing and inflating prices of products and services.
Iraq Contracts Singled Out as “Textbook Example of Corporate Irresponsibility”
In 2007 the Special Inspector General for Iraq Reconstruction found widespread waste, mismanagement, improper documentation, and lack of oversight by KBR relating to services to American forces in Iraq, specifically regarding meals, dining facilities, and fuel imports. The two companies had already earned notorious reputations on Capitol Hill, where New Jersey Senator Frank Lautenberg, who serves on the Senate Appropriations Committee, commented, “Halliburton’s record of overcharging, bribery, and accounting fraud recites like a textbook example of corporate irresponsibility.” In 2007 the General Accounting Office recommended that a contract awarded to KBR be reconsidered.
Other incidents detailed in the complaint have previously led to government investigations and raised serious questions about Halliburton and KBR’s fitness and commitment to serve American military personnel in Iraq. KBR employees admitted that troops were provided untreated and untested water from the Euphrates River. On another occasion, a KBR truck used to store corpses was later put in service to deliver ice to troops — a clear violation of U.S. Army regulations even if the truck had been cleaned, which it had not.
The U.S. Justice Department is currently investigating Halliburton for possible illegal transactions with Iran through the company’s Cayman Islands subsidiary.
The complaint concludes, “The myriad crimes and wrongdoings discussed above simply could not have happened if Defendants were doing their jobs. As officers and directors of the Companies, the Defendants were required to ensure that the Companies’ internal controls were in place, functioning properly, and sufficiently strong to prevent it from committing wrongful or illegal acts.”
Like this story? Steal it! Feel free to republish it in part or in full, just please give credit to The Colorado Independent and add a link to the original.
SIGN UP FOR OUR WEEKLY NEWSLETTER
The Colorado Criminal Defense Bar (CCDB) and the Community College of Denver (CCD) Paralegal Program are holding a public debate for the candidates seeking the position […]Read More
On Wednesday, Denver Post journalists learned the budget ax would fall hard on their newsroom cutting deeper than previous layoffs and splintering roughly a third of their […]Read More