Halliburton distances itself from KBR | Reuters
Under Mr. Cheney's reign, Halliburton acquired Dresser Industries which included the Kellogg Company (the K of KBR), a major engineering. Halliburton defrauded American taxpayers of "hundreds of millions of Halliburton's KBR held one of the largest contracts given during the Iraq. The Bush campaign maintains that Mr. Cheney has cut his ties with Halliburton and that the administration has given the company no special treatment. At a community center in Albuquerque on Sept. 17, Mr. Kerry declared: "Dick Cheney's old company Halliburton has profited from the.
Cheney's Halliburton was the contractor of choice to do the work that the military had always done in past wars. This time, though, the war would be privatized to suit the ideology and obfuscation of the Bush team, which wanted to pretend that the number of people we'd need in Iraq would be small so outsource it and that the government can be privatized so outsource it to friends.
The Iraq debacle is now the subject of at least a half a dozen books, including the terrific Fiasco, by Tom Ricks. The reason is simple: Even in Bush's America, where journalists often fear to write and careers end for truths told, the facts eventually speak for themselves. But you gotta make a buck, so Halliburton sent the trucks out. And more hatred between US and locals ensued, further destabilizing the mess that is Iraq. It's hard to tell just how rich he has gotten on the intestinal tracts of our soldiers and the bodies of his former employees, but it's probably enough money for him to live happily ever after in several countries outside the U.
Let's keep following the money, though. The reason for the sale of the giant subsidiary, according to the filing, is that "the full value of KBR is not reflected in Halliburton's stock price. In other words, the news about KBR in Iraq was getting out, so KBR's share price, were it an independent company, would not fetch what Halliburton wants for it, so they'll just stick it to the shareholders.
Besides, KBR's government contracts in Iraq are on the wane, because the government funding for Iraq is on the wane. Lesar probably learned a lesson from his mentor, Mr. Cheney, who bought Dresser and with it billions of dollars of liabilities. With the truth coming out and law suits pending, Mr.
Lesar may well think that by dumping KBR, he can shove the liabilities into the hands of new owners of KBR think pension plans, index funds and individual investorsof which Halliburton will not be one. And there's another related reason: Publicly traded companies such as Halliburton and Wal-Mart do not like "headline risk.
Who wants to own the stock of a company that might lose one of its major clients the US Government and that might face tens of millions or more in potential liability claims?
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On Monday, 18 September in Washington, Senator Dorgan, a crusader for truth and oversight of companies such as Halliburton, together with Senators Reid and Bingaman, is holding hearings with four witnesses from the film who will talk about the "Friday Massacre.
One side is the oilfield-service business, one of two premier players in an industry that provides the technology and muscle needed to extract hydrocarbons from the ground. Halliburton, known as "Big Red," specialized in brawn. Its business dates back towhen Erle Halliburton, a strong-willed Tennessean with little money but big ambitions, landed in the booming Oklahoma oilfields.
He peddled the virtues of "cementing" wells: Today cementing is an essential step in drilling wells--and Halliburton dominates this piece of the oilfield business. Even as it diversified, adding new technologies and services and going public inHalliburton never attained the prestige of Schlumberger, which specialized in "wireline logging"--the more sophisticated and lucrative art of sending sensing devices into a well to evaluate oil and gas formations. Erle hated Schlumberger, and its Paris origins only made it more loathsome.
In a rare meeting between the two companies, convened over a patent dispute, ended abruptly when Erle jumped to his feet. It wasn't in the construction business, and it was rabidly anti-union. There was a certain synergy about the marriage, at least in theory.
The oilfield business tied up lots of capital, but its jobs enjoyed juicy profit margins--at least during good times. When drilling was down, construction and engineering might be up. The company's engineers prided themselves on being able to build anything, anywhere--"Brownbuilders," they called themselves. For two decades the combined company grew like crazy. This was Halliburton's Golden Age, and the company became a Wall Street darling, receiving praise not heard today.
One analyst called it "a superb, well-managed, strongly financed growth company. The tough times continued into the early s under CEO Tom Cruikshank, who consolidated the oilfield side, merging the ten service companies Halliburton had collected into a single business called Halliburton Energy Services. Almost 3, executives lost their jobs. This wrenching reorganization was completed with the help of a new vice president hired from Arthur Andersen: Lesar had no experience operating a business.
He'd spent his entire career at Andersen, where he'd done work on the Halliburton account.
Conflict of interest: Haliburton
But "he was impressive from day one," Cruikshank says. He was a performer. Three months later he had a new boss: Halliburton desperately needed more work overseas the hot area in the energy businessand no one had better contacts than Cheney--with heads of state, no less! Cheney would serve as Halliburton's global salesman-in-chief. The messy details of actually running the company? He could delegate those to someone else.
That person, of course, would be Lesar--who had only slightly more business experience than Cheney. In MayCheney elevated Lesar to president and chief operating officer. Cheney was "hands off, very much a delegator," Lesar later told the New York Times. It would have the heft to provide what he called "integrated energy solutions," handling everything from drilling to offshore-platform construction, and thus could tackle giant projects that few rivals could handle, especially for national oil companies overseas.
To force-feed his consolidation, he established a powerful "shared services" division, run by Lesar, to control administrative functions companywide, from purchasing to finance to hiring.
Then, in FebruaryCheney made his big move: Dresser, based in Dallas, was nearly as big as Halliburton, with separate oilfield and engineering divisions of its own. The engineering business, M. But the combination seemed complementary; only a few of their businesses overlapped. It also made Halliburton the biggest player in the industry--bigger even than Schlumberger!
Cheney declared the deal "a win-win combination for both companies' shareholders, customers, and employees. The integration of the two companies was also ugly. Cheney had pronounced them "an outstanding business and cultural fit. And there would be no question who would prevail in this "merger of equals": Dresser's executive talent fled in droves.
Former Dresser president Donald Vaughn, who left Halliburton inlater said the two sides felt they could complete their investigation of each other's operations "in very short order" because they knew each other so well. The prospectus sent to both companies' shareholders for approval contained a laundry list of business risks posed by the merger--everything from changes in the price of chemicals to political conflict in Nigeria.
Unmentioned was the biggest risk of all: By the time Cheney's deal with Dresser went down, asbestos was already one of the biggest legal onslaughts in history.
Halliburton and Cheney: War Profiteers in Chief Fight to Keep Their Wallets Fat | HuffPost
Most of the people filing suit had yet to show any symptoms of asbestos-related disease and had experienced only fleeting exposure to the substance. In addition, many of the companies being sued had only a distant relationship to the exposure. Byasbestos litigation had bankrupted more than two dozen companies.
Dresserfaced 66, claims alleging its responsibility for asbestos-related health problems, most dating back to a former Dresser subsidiary in Pittsburgh, Harbison-Walker. Until the s, Harbison-Walker had used asbestos in industrial products it sold, such as insulating bricks and coatings. Dresser had spun off the division in but retained partial liability. Halliburton officials concluded that its problem could be "managed. For another, the inflow of new claims seemed to be holding steady, and most were being settled cheaply.
Both companies also had insurance, and Dresser had an agreement that Harbison's new owner would pick up much of the asbestos tab. The situation rapidly deteriorated. It turned out that the new owner of Harbison-Walker, which had promised to cover claims filed afterhad demanded in mid that Dresser foot more of the bill.
Halliburton, which hadn't known about the request before the merger closed, dismissed it as "without merit. Halliburton insisted they would all be resolved "without material effect. Halliburton called the suit "without merit. Still, Lesar insisted the asbestos problem would have no material effect. ByWall Street had begun to doubt Lesar's prognosis, and Halliburton shares started sinking. Yet five weeks later Lesar told analysts, "There have been no adverse developments at all with respect to the Harbison-Walker situation.
It wasn't final, the company expected it to be reversed on appeal, and the claims were insured. By year-end, Halliburton facedclaims. In JanuaryMoody's cut its debt rating. A month later, Harbison-Walker filed for bankruptcy, dumping all its liability in Halliburton's lap.
Wall Street worried about Halliburton's survival. Bert Cornelison, Halliburton's general counsel, says he believed the company would overturn the big awards on appeal or settle them for far smaller amounts. In the end, the pricetag soared far beyond company projections: With the needed court approvals in hand by the end ofthe money and shares went into a trust to settle present and future claims, resolving the matter for good.
And with each step toward resolution, Halliburton's shares kept moving back up. People will quibble with the price. The reality is, we got through it. Austern is general counsel of the Manville Personal Injury Settlement Trust and is one of the nation's top experts on asbestos litigation. As Austern explains it, the issue was never what asbestos had cost Dresser or the rate of new claims.
It was the certainty that asbestos would cost more in the future, as plaintiffs lawyers recruited more clients and targeted surviving companies with ever more remote connections to the problem.
No one's asbestos issue is 'under control. Halliburton had the same attitude that every other major corporation had in the middle to late s--that asbestos was a very expensive but confinable liability. And this inability would have been at least a red flag--if not a stop sign--with regard to the acquisition.
Harbin ran the company from toduring Halliburton's Golden Age. Now 88, he keeps a sheet of paper in the top drawer of his desk in his Dallas office. On it, he has jotted the annual profits of the company during each year of his tenure--and those of the three men he gently labels "my successors. He believes Lesar deserves credit for solving the asbestos problem, but that Halliburton never should have faced the mess in the first place.
That doesn't appeal to me. Skeptical teams of top executives would challenge every aspect of a job--from cost estimates to staffing to materials. Instead, Halliburton would "lose its ass. Fixed-price work can be much more profitable for the contractor than the usual "cost reimbursable" approach, because the contractor assumes the risk and reaps the upside if he manages the project efficiently.
But such deals are fraught with peril. If the project were to go over budget, Halliburton would have to eat the cost unless the customer agreed to pay more. And there was no riskier deal than Barracuda-Caratinga. For one thing, it was huge: It involved transforming a pair of year-old supertankers into floating production, storage, and offloading platforms, known as FPSOs.
Each of the supertankers would be massively refitted to processbarrels of oil a day and would hold two million barrels for offloading onto tankers.
Halliburton and Cheney: War Profiteers in Chief Fight to Keep Their Wallets Fat
The design would involve years of shipyard work, guided byengineering documents. And that wasn't the half of it. Halliburton would be doing all this for a tough-as-nails customer: The Brazilian national oil company was known for forcing contractors to absorb cost overruns on their projects--no matter who was at fault.
This meant using a shipyard that had been mothballed for years and training thousands of workers. One former KBR executive, who spent decades working in the offshore business, drolly sums up the venture this way: In hindsight, it's not something a wise person would want to do. Four former Halliburton offshore executives say he was deeply involved in the Brazil project from early on--something the company now denies.
In OctoberHalliburton was named as "preferred bidder. Work commenced almost immediately--and so did the problems. In negotiations with Petrobras, Halliburton had reduced its bid in the belief that it could cut costs by building two identical FPSOs. But Petrobras insisted on a different design for each of the oilfields. Its specifications for the project also required thousands of oversized valves, each weighing about 20 tons, far larger than Halliburton thought were needed or had priced for the FPSOs' production capacity.
Then the hulls needed unexpected repairs. Some of the shipyard work had to be redone. And on it went. More than a year into the work, Halliburton dispatched a new team of project managers to Brazil. But the situation only kept getting worse.
For a while Lesar kept insisting that Halliburton would in the end make money on the project. The two platforms are now onsite in the Atlantic, more than a year late, producing oil. Lesar projects that they will incur no further losses.
Cornelison, the general counsel, believes that Barracuda-Caratinga was doomed financially from the start. Andy Lane, a Halliburton executive sent into KBR to deal with problems in mid he was named Halliburton COO four months latersays, "The risks associated with it were underestimated," and Halliburton's margin was "negotiated away.
Lesar doesn't exactly raise his hand. He notes that the deal was signed before he became CEO.