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As CEO, Cheney's reviews mixed
©New York Times © St. Petersburg Times, published August 25, 2000 In 1998, Dick Cheney pulled off what was widely seen as a business coup. Ending years of fruitless talks, Cheney arranged a merger between Halliburton, the company he ran, and its chief rival, Dresser Industries, creating the world's largest oil-field services and construction company. Cheney, the chief executive of Halliburton, initiated the deal while on a quail hunt with his counterpart from Dresser. The negotiations that followed were so amicable, the companies dispensed with the close scrutiny of each other's businesses that is usually part of a merger, a Dresser official said. Some key Dresser executives quickly came to regret that decision, present and former company officials say. They were startled to learn after the deal closed that several of the major projects negotiated by Cheney's management team were much less healthy than they had appeared on Halliburton's books and were racking up significant losses. The newly merged company was hit with several-hundred-million dollars of unexpected losses, including an estimated $100-million on a single pipeline project in South America begun on Cheney's watch, according to company insiders and others in the oil industry. The Dresser merger was the biggest deal of Cheney's five years at Halliburton, and the losses that arose soon afterward were one of several missteps in a business record that has become part of his political resume since he became the Republican nominee for vice president. The Bush campaign has defended his multimillion retirement payment from Halliburton as fair compensation for a job well done. "The American people should be pleased they have a vice presidential nominee who has been successful in business," said Karen P. Hughes, communications director for the campaign of Gov. George W. Bush of Texas. Cheney vehemently defended his work in the oil services business Thursday, bristling at any suggestion that he was less than successful as the chief executive of Halliburton and insisting once more that as vice president he would take steps to ensure that his retirement package did not pose a conflict of interest. "We went from being a second-tier, second-rank energy services company to being the biggest in the world," he told reporters. He complained that this article was "a distortion," "bad journalism" and "seriously flawed." But just how successful Cheney was as a chief executive is a matter of dispute, judging by a survey of his record that included interviews with present and former company executives. Some praised him for doubling the size of the company through mergers and a growing government business that has made Halliburton the nation's fifth-largest military contractor. Asked to assess Cheney's performance, Halliburton's vice chairman, Donald Vaughn, said he deserved a "clearly superior" grade. "Mr. Cheney . . . changed Halliburton and the popular judgment is he changed it for the better." Other executives, however, said Cheney failed to keep a sufficiently tight rein on the company's aggressive pursuit of overseas energy projects and road-building work in the United States. Some Wall Street analysts, too, described Cheney's performance as little better than average. Before Thursday, a spokesman for Cheney declined to make him available for an interview and referred questions about his tenure at Halliburton to the company. Vaughn, the last president of Dresser, acknowledged in an interview that there had been "overall surprise" with the losses that emerged after the Dresser merger. Most of them, he said, came from contracts on the Halliburton side of the ledger. Vaughn blamed the reversals on an industry downturn caused by plummeting oil prices in late 1998 and on the complexity of the projects and said neither he nor his Dresser colleagues felt deceived. "No one was flimflammed," he said. Halliburton's stock price, often regarded as a gauge of executive performance, rose sharply during Cheney's early years at the company, but it trailed its competitors in the final year and a half of Cheney's tenure. David J. Lesar, the man Cheney picked to run the company's day-to-day operations, said his boss was "hands off, very much a delegator" whose main role at the company was cultivating clients and setting strategic direction. "He and I talked almost every day," Lesar said. "On major types of things, I would tell him what the decisions were." In assessing Cheney's record at Halliburton, it is difficult to say -- as it would be with any large corporation -- what specific role the chief executive played in each initiative during his tenure. For example, it is not clear how much of a hand Cheney had in his management team's decision to start bidding more aggressively on smaller-scale highway projects. The company won a host of new contracts but ran into difficulties in North Carolina and Bush's home state of Texas for failing to meet deadlines for completing the work. The projects were small by Halliburton standards, $20-million or less, but a company insider said the losses on several of them rose as high as $4-million to $5-million each. North Carolina and Texas eventually fined the company for its tardiness, and North Carolina officials went further, barring Halliburton from bidding on road work in the state. The company's travails in Texas are no secret: A partial list of the penalties, totaling $359,450, is on the Web site of the Bush administration's highway department. Lesar, who is now Halliburton's chief executive, said the setbacks in the road work were "part and parcel" of a business frequently punctuated by commercial disputes. "It's absolutely not an embarrassment," he said. Lesar acknowledged, however, that the company, which expanded its road building under Cheney, is getting out of the business of doing such small-scale projects. Company executives said Cheney was frustrated in his desire to phase out another Halliburton business: its dealings with Libya through its British subsidiary. The company said the arrangements were within the law. The U.S. embargo on Libya, imposed by President Ronald Reagan, allows subsidiaries of U.S. companies to earn money in Libya and send the profits home, provided the U.S. parent company has no role in managing the operations and no Americans are involved. Lesar said Cheney told executives soon after he arrived that he wanted to get out of Libya but was dissuaded by the argument that this would harm the company's relationship with its customers. Halliburton's subsidiary maintains smaller, similar business relationships in Iran and Iraq, said Vaughn, its vice chairman. Company insiders said that some of Halliburton's woes under Cheney were common to corporate America in the late 1990s. The company has had difficulties creating a unified computer system across all of its diverse units. It is also still wrestling with a companywide initiative, begun at the behest of Cheney, to set up central management of purchasing, personnel and other administrative functions. The financial blemishes on Cheney's record at Halliburton are, in large measure, a matter of public record. The company's public financial reports disclosed its disappointing profits in the highway construction business, without providing specific numbers. And it said it had "unusually high" losses of nearly $180-million on "technically complex" projects in 1998 and 1999. "I'm often asked why I left politics and went to Halliburton," Cheney said in a speech last November at the Institute of Petroleum in London, "and I explain that I reached the point where I was mean-spirited, short-tempered and intolerant of those who disagreed with me and they said, "Hell, you'd make a great CEO,' so I went to Texas and joined the private sector." Halliburton's fortunes were on the rebound in October 1995 when Cheney arrived as chief executive. Halliburton's stock had been an underperformer for much of the late 1980s and early 1990s, but what the company called a round of "strategic actions," including payroll cuts and a restructuring of its basic businesses, substantially improved the company's results beginning in 1992. For the 31/2 years before Cheney became chief executive at the beginning of October 1995, Halliburton's stock rose 82 percent, well above the 65 percent gain recorded by an index of companies in the oil service industry. Cheney moved to build on that success. He put Lesar, a top executive at Halliburton's biggest subsidiary, in charge of daily operations. Cheney was viewed, from the beginning, as a man who was to use his worldwide contacts to produce new business. "When we brought Cheney in, it really wasn't to run operations," said his predecessor, Cruikshank. "It was to make the proper strategic decisions, and to establish relationships." Among Cheney's first initiatives were well-regarded mergers that helped the company master the new technologies reshaping the energy industry. The company also scored some victories in Washington under Cheney, winning a $1.1-billion Pentagon contract for support operations in the Balkans. A Pentagon official said there was no indication the former defense secretary had any role in sealing the deal, which expanded a contract Halliburton has held since 1992. Evaluating a chief executive's record is as much an art as a science. Vaughn, Halliburton's vice chairman, said Cheney should be judged on the performance of the company's stock, a standard benchmark. By that measure, Cheney's early years at Halliburton were more successful than his later ones, when the company performed less well than its peers. Overall, the Cheney years as chief executive saw Halliburton stock significantly underperform most stocks in its industry. From the time he became chief executive through the announcement he was leaving, Halliburton shares rose 110 percent, while the average oil service company share price rose 158 percent and the Standard & Poor's 500, an index of large company stocks, was up 151 percent. Arvind Sanger, an analyst at Donaldson, Lufkin & Jenrette, said Cheney did "an averagely decent job as CEO. I don't think he did an exceptional job. Cheney's candidacy is nevertheless strongly supported by almost all of the executives who worked with him, even those who disagreed with how he led the company. - New York Times staff writers Lowell Bergman, Richard A. Oppel Jr., Michael Moss and Michael Cooper contributed to this report.
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