Vice (17 page)

The worst was yet to come. The companies were so comfortable with each other that the full range of normal due diligence investigations was restricted. This may be why a thorough detailing of Dresser's
asbestos
liability was not included in the prospectus explaining the deal that was sent to the shareholders of both companies. Cheney would be safely in the White House by the time it became clear that he had saddled Halliburton with $4 billion worth of
asbestos liability
.

Cheney's failure to take the asbestos threat more seriously may have derived from a false sense of security. He believed that Halliburton had already escaped Brown & Root's liability for the cancer-causing fiber through a clever corporate shell game. In 1996, not long after Cheney joined the company, Halliburton spun off a wholly owned subsidiary called
Highland Insurance Group
. Once Highland was separated from its corporate parent, Halliburton asserted that thirty thousand asbestos claims against Brown & Root belonged to Highland. This came as a shock to Highland investors, as a letter signed by Cheney explaining the spin-off to stockholders failed to mention the liability. It wouldn't be until 2002, two years after Cheney's departure, that the Delaware Supreme Court closed the door on Halliburton's scheme to avoid liability, forcing the company to spend $80 million to settle the asbestos cases.

Cheney apologists assert that there is no way he could have known just how bad Dresser's asbestos claims would be. Yet even by 1998, litigation frenzy over worker exposure to asbestos had bankrupted dozens of companies. And it wasn't as if Dresser had a tangential relationship to the workplace carcinogen. A Pittsburgh division of the company called
Harbison-Walker
had used asbestos until 1970 in insulating bricks and coatings it sold. Most of the 66,000 asbestos claims aimed at the company could be traced to Harbison-Walker, which Dresser had spun off several years before the merger with Halliburton. While the new owner of Harbison-Walker had promised to cover claims filed after 1992, in mid-1998, prior to completion of the merger, it demanded that Dresser take on more of the burden. Halliburton later claimed ignorance of the pre-merger demand.

The real bleeding started in December 2001 when Halliburton revealed that it would have to pay three large asbestos awards. Its stock fell 42.5 percent in a day, to $12 a share. Claims swelled to 274,000 by the end of 2001. In the beginning of 2002, Harbison-Walker filed for bankruptcy, leaving its liability to Halliburton, whose stock tumbled to $9 a share. As Cheney sat in his West Wing office and contemplated taking out Saddam Hussein, Halliburton found its salvation in a "prepackaged Chapter 11 proceeding." The bankruptcy deal allowed Halliburton to jettison its liability and save the company. In exchange, it paid $5.1 billion in cash and stock, of which insurers paid $1.4 billion, to be held in trust for current and future asbestos victims.

Dick Cheney didn't just avoid any consequences, political or otherwise, from the ill effects of buying Dresser. His company lavishly rewarded him for his folly. In December 1998, Halliburton gave Cheney a $1.5 million bonus for "bringing the
Dresser merger
to a successful conclusion."

Asbestos would not be the only problem
Halliburton would inherit from Dresser. It also acquired an emerging corruption scandal in
Nigeria
involving secret bank accounts and a shady lawyer doling out government bribes. Consistently ranked among the most corrupt in the global community, the West African nation is just one of many dysfunctional and authoritarian places where a Cheney-led Halliburton did business. Halliburton's rogues' gallery of pariah-state clients also included Iraq, Iran,
Burma
, Libya, Indonesia, and
Azerbaijan
. Cheney has defended Halliburton's operations in countries that regularly abused the
human rights
of their citizens, and even some that exported
terrorism
, by simply stating, "We go where the business is."

In a speech to the
Cato Institute
in 1998, CEO Cheney made the case that his company could ill afford the luxury of factoring ethics into where it operated. "The good Lord didn't see fit to put oil and gas only where there are democratically elected regimes friendly to the United States," he noted. "Occasionally we have to operate in places where, all things considered, one would not normally choose to go."

It's not surprising that bottom-line-oriented businessmen would rationalize dealing with despots or even paying off foreign officials. Government authority exists to restrain such corrosive behavior. Cheney has seen it from both sides and is nothing if not consistent: oil and gas trump government authority, and they certainly supersede human rights considerations. Cheney put this attitude on display in a tour of former Soviet bloc countries in the spring of 2006. During a stop in
Lithuania
, he castigated
Russian
president
Vladimir Putin
for "unfairly and improperly" restricting the rights of his people and using oil and gas as "tools of intimidation." The next day, in
Kazakhstan
, which has an abysmal human rights record but extensive gas and oil fields, Cheney said hardly a word about one of the most repressive regimes on the planet. A month later, Putin fired back on the
Today
show
. "I think your vice president's expression there is like his bad shot on his hunting trip," the Russian president said. "I believe that his concerns do not look sincere and therefore they are not convincing."

Whether Dick Cheney put his business above the law in Nigeria is the subject of a seemingly stalled Department of Justice and Securities and Exchange Commission investigation. The reason we even know about the case is that
France
,
Italy
,
Switzerland
, and Nigeria have also investigated. All of these countries as well as the United States have statutes making it illegal to bribe a foreign official to obtain business. The U.S. bribery inquiry has dragged on for at least three years without a definitive answer to a simple question: Did Halliburton, under Dick Cheney, violate the
Foreign Corrupt Practices Act (FCPA)
in Nigeria?

Somebody broke the law, by Halliburton's own admission. "We have reason to believe, based on the ongoing investigations, that payments may have been made to Nigerian officials," the company has stated. Considering what's already on the public record, the company position seems understated.

When Cheney bought Dresser, its subsidiary M. W. Kellogg had likely been involved in illegal activities in Nigeria since at least the early 1990s, about the time it joined the international business consortium
TSKJ
to bid on a contract to build a gas liquefaction complex at Bonny Island in Rivers State, Nigeria. According to documents Halliburton provided to foreign investigators and made public as part of an inquiry in France, the consortium agreed to pay London-based lawyer
Jeffrey Tesler
$180 million to smooth the way for the Nigerian contracts. In a French deposition, Teslar claimed the $180 million was used to obtain Nigerian currency for the project. He has denied the money went for bribes. In 1995, TSKJ won the $2.2 billion contract.

Tesler reportedly was a financial adviser to Nigerian dictator General
Sani Abacha
. He also had a longtime relationship with
A. Jack Stanley
, the head of Kellogg's operations in Nigeria. When Halliburton took over Dresser, Cheney named Stanley chairman of the newly formed Kellogg Brown & Root subsidiary. Cheney told an industry newsletter that before the merger went through, what worried him the most was integrating Kellogg with Brown & Root. He happily reported that it had gone more smoothly than he had thought it would, in part because of Stanley. In March 1999, TSKJ won another Nigerian contract, worth $1.4 billion, to build more facilities on Bonny Island. French media would later report that Tesler deposited as much as a million dollars in a Swiss bank account controlled by Stanley. How the money was disbursed and to whom is still unclear.

In 2003, while Cheney enjoyed unprecedented power in the White House, an executive with one of the companies in the consortium revealed to French investigators the existence of the $180-million slush fund. A year after the involvement of the French, the SEC and DOJ joined the investigation. The U.S. Attorney for the Southern District of Texas in Houston convened a grand jury and issued subpoenas for documents from both Halliburton and Stanley. Investigators have interviewed Stanley at least three times. Stanley's lawyer refuses to comment. Halliburton has said that it is cooperating with all of the investigations.

Halliburton has communicated to shareholders that its internal investigation uncovered plans for payments to Nigerian officials beginning as early as 1995, as well as bid rigging by Stanley and other employees dating possibly as far back as the mid-1980s. In June 2004, well after the investigation had begun, the company ended its relationship with Stanley. "The termination occurred because of violations of Halliburton's Code of Business Conduct that allegedly involved the receipt of improper personal benefits in connection with TSKJ's construction of the natural gas liquefaction facility in Nigeria," reported Halliburton.

Around the same time, the SEC broadened its investigation to include Halliburton's conduct abroad over the past twenty years. If the agency ever finishes its exhaustive review and determines that the company violated the Foreign Corrupt Practices Act, Halliburton could be barred from receiving government money. At stake would be $6.6 billion in federal contracts. The company has already indicated that if charged, it would ask for "administrative agreements or waivers from the DoD and other agencies to avoid suspension or disbarment." With its former CEO as vice president and Halliburton an essential cog in the War on Terror, it's doubtful the company would be denied a waiver.

Evidence has yet to surface that Cheney knew of any illegal activities undertaken in the company's name, and the degree to which Dick Cheney had a permissive approach to the Federal Corrupt Practices Act may well take subpoenas to pry out. There is plenty of evidence that the vice president is willing to disregard legislation with which he differs. One need look no further than his chief of staff David Addington and the more than eight hundred
signing statements
he has helped inspire, in which President Bush declares he will interpret the law as he sees fit. Such legal flexibility is harder to conjure when you're just the executive of a corporation rather than a country. Nonetheless, one can imagine Cheney taking a dim view of the Foreign Corrupt Practices Act. Passed in 1977 as part of Congress's
Watergate-era reforms
, the law emboldens federal regulators and represents government intrusion into the activities of corporations.

With a few exceptions, Cheney has been outspoken in his
opposition to the use of the government's economic power to impose unilateral international sanctions
. "I think it is a false dichotomy to be told that we have to choose between commercial interests and other interests that the United States might have in a particular country or region around the world," he declared to the Cato Institute crowd, before making a case for constructive engagement.

As a congressman in 1986, Cheney was one of only eighty-three representatives to vote against overriding President Ronald Reagan's veto of a
South Africa
n
sanctions
bill. At the Cato conference, he even extended his argument to
Cuba
, the third rail of presidential politics. A better approach to Cuba would be to create a West Berlin-type enclave of Cuban democracy and free enterprise out at the U.S. Navy base in
Guantánamo Bay
, Cheney reportedly said. Less than a decade later, as vice president, he did help transform Guantanámo—into a place of torture and indefinite detention. Yet as CEO, Cheney's defiance of sanctions while at Halliburton put the company in legal jeopardy. As with the
Nigeria bribery allegations
, federal investigations into Halliburton's possible
violations of U.S. sanctions
are ongoing.

Cheney's political opposition to sanctions didn't stop at speeches. Human rights activists in the 1990s, encouraged by the role of sanctions in South Africa's transformation and Democratic control of the White House, hoped to use U.S. economic power to force change on some of the world's worst regimes. In their sights were countries such as Burma,
Haiti
, Nigeria, and
Uzbekistan
. Responding to their efforts, in 1997 Halliburton helped found a lobby group called
USA Engage
to fight the growing sanctions movement. Cheney and USA Engage argued that unilateral sanctions didn't work and only hurt U.S. companies. The new association successfully fought off a bill that would have imposed sanctions on foreign governments that persecute religious groups. It opposed but failed to halt bipartisan bills that impose sanctions on financial transactions with governments that support terrorist activities, and one to bar American investment in
Iran
and Libya.

The lobby association had some of its most notable successes at the state level. It stopped a 1998 effort by the Maryland legislature to impose sanctions against firms doing business in Nigeria. Perhaps its greatest victory came in a Supreme Court case on the constitutionality of a
Massachusetts
law that restricted state purchases from companies doing business with Burma, also known as Myanmar. Cheney signed an amicus brief calling for the court to overturn the law. In June 2000, in a unanimous decision, the justices ruled that the Massachusetts law interfered with the federal government's ability to conduct foreign policy. Not coincidentally, a Halliburton affiliate,
European Marine Contractors
, helped build an environmentally damaging oil pipeline in Burma—through villages the Burmese military had brutally "pacified" to make way for the project.

It appears that each member of USA Engage picked a particular region or country about which to lobby. Cheney focused on Iran, where he had a history with industrial commerce. As members of the Ford administration, he and Donald Rumsfeld proposed selling Tehran Westinghouse technology that would have allowed Iran to reprocess plutonium and obtain uranium for a nuclear energy program. The agreement, which Ford reluctantly accepted, fell apart in 1979 under the Carter administration, when the Shah was overthrown as the current
Islam
ist government seized power. The CEO wanted Iran's oil service and construction business, and he didn't appreciate his government's telling him Halliburton had to stay out. Iran boasts 10 percent of the world's confirmed oil reserves and the second largest reserve of natural gas. Nonetheless, in 1995 President Clinton signed an Executive Order prohibiting U.S. companies from doing business there. The sanctions were further expanded in 1996, over Cheney's objections, with the passage of the
Iran Libya Sanctions Act (ILSA)
.