by Lou Dubose
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 Islamist 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).
Once ILSA became law, Cheney lobbied a friend, Texas senator Phil Gramm, for a waiver for Halliburton so it could work in Iran, even as the federal government investigated the company. In October 1997, Halliburton Energy Services reached a $15,000 settlement with the Department of Commerce over charges that it had violated the U.S. Export Administration Act fifteen times between 1993 and 1994 involving transactions with Iran. As part of the agreement, the company admitted to no wrongdoing. While the violations had occurred prior to Cheney's tenure at the company, he wanted to avoid such settlements in the future.
At the 1998 Cato Institute conference, Cheney devoted much of his speech to Iran. "American firms are prohibited from dealing with Iran and find themselves cut out of the action, both in terms of opportunities that develop with respect to Iran itself, and also with respect to our ability to gain access to Caspian resources," he complained. "Iran is not punished by this decision. There are numerous oil and gas development companies from other countries that are now aggressively pursuing opportunities to develop those resources."
Having failed to change the Iran sanctions, Halliburton decided to work around them. The U.S. prohibition included a loophole that allowed foreign subsidiaries of U.S. companies to work in Iran as long as they were completely independent of their parent in America. In early 2000, while Cheney was CEO, a Halliburton subsidiary registered in the Cayman Islands opened an office in Tehran. In 2001, the Treasury Department began an investigation into more than $40 million worth of Halliburton projects in Iran. The investigation foundered. In 2004, a 60 Minutes report revealed that the Cayman office was nothing but a letter drop without employees. The subsidiary's actual address in Dubai shared offices and staff with Halliburton. Several months before, citing new leads, a federal grand jury subpoenaed Halliburton for more information about its dealings with Iran. Two years later, the investigation has yet to reach a conclusion—but with Cheney's special interest in Iran dating back to his work with USA Engage, it is unlikely that he wasn't fully aware of Halliburton's work in the country.
One of the few occasions when Cheney said that he agreed with sanctions was in connection with Iraq after the Gulf War. "I had a firm policy [at Halliburton] that we wouldn't do anything in Iraq, even arrangements that were supposedly legal," he told ABC News during the 2000 campaign.
Well, that wasn't entirely true. While Cheney was CEO of Halliburton, the company's subsidiaries signed $73 million worth of contracts with Iraq. And ironically, the Iraq sanctions regime, codified by the United Nation's Oil for Food program, was a textbook case of how not to do an embargo. Halliburton subsidiaries Dresser-Rand and Ingersol Dresser Pump Company sold spare parts and equipment to Saddam Hussein from 1997 to the summer of 2000 to help rebuild Iraq's oil infrastructure—which Secretary of Defense Dick Cheney had helped destroy. Since Halliburton went through France and complied with Oil for Food, the transactions were technically legal. But by the late nineties it was clear that the U.N. program was thoroughly corrupted. Saddam and his officials skimmed billions from profits destined to pay for medicine and food for ordinary Iraqis. When Cheney was pressed again as vice president about his former company's dealings with Iraq, a spokesperson explained it involved joint ventures in which he had no knowledge.
A year after joining Halliburton, Cheney did a cameo in a promotional video for the firm that handled his company's accounting work. "I get good advice from their people based upon how we're doing business and how we're operating—over and above just sort of the normal by-the-books auditing arrangement," he pitched gamely to the camera.
The promotional video was for Arthur Andersen. It would take another five years before the irony of Cheney's words would be fully evident. By then Enron had imploded, and Andersen, its handmaiden in fraud, was under federal indictment for shredding documents. (The Supreme Court would later overturn Andersen's conviction for obstruction of justice on a technicality, but the decision came too late to save the venerable firm.) Halliburton was Andersen's third biggest client, right behind Enron. Both Andersen and Enron were among the top campaign donors to the Bush-Cheney effort in 2000. By the time evidence of Halliburton's own accounting irregularities from that period surfaced, Cheney was already in the White House.
The trouble in this case began in 1997, when Halliburton simultaneously embarked upon several larger-than-usual construction projects throughout the world. The company took on many of these projects on a fixed-price basis, arranging to complete the job based on a set, agreed-upon fee that would cover all costs. The profit from such an arrangement comes from the margin by which the fee exceeds the contractor's expenses. A fixed-price contract can potentially be more lucrative for a contractor, if it can keep expenses down or somehow persuade its customer to pay more. In the past, Halliburton had mainly worked under safer "cost-plus" contracts, under which the company was guaranteed a certain profit regardless of the cost of the job.
Halliburton's fixed-price projects didn't work out as planned, and by 1998 the company was looking at more than $100 million in cost overruns. The extra expense couldn't have come at a worse time for Cheney and Halliburton. A recession in the oil industry had depressed an already volatile company stock. Investors had not been as excited about Cheney's deal with Dresser as he had. A one-time $1 billion charge against earnings for costs related to the merger didn't help.
Arthur Andersen offered a quick way to enhance Halliburton's bottom line. Historically, Halliburton would count payment for cost overruns in its financial statements only after the client paid them. Beginning in the second quarter of 1998, the company began to book revenue for cost overruns under the assumption that clients would pay at least some of it in the future. With the stroke of a pen, losses became gains. With the accounting change, for just 1998, Halliburton's pretax income was 46 percent greater than it would have been without the unapproved claims. But shareholders didn't know that. Halliburton didn't disclose this new accounting procedure to investors, even as the revenue it reported from uncollected claims grew from $98 million to $106 million in 2000, numbers first revealed in the March 2000 company report.
After a 2002 New York Times story raised questions about Halliburton's accounting, the Securities and Exchange Commission launched an
investigation. Cheney's handpicked replacement as CEO, David Lesar, who had worked for Arthur Andersen before coming to Halliburton, blamed politics and the media for the SEC investigation. Because the vice president was the company's former CEO, the media were covering Halliburton like a political story, not a business story, Lesar complained in a phone conference with analysts. The SEC disagreed, fining Halliburton $7.5 million and imposing minor fines on two company officials. The agency took no action against Cheney, who cooperated with the investigation.
Cheney's and Lesar's gamblers' affinity for fixed-price projects would lead to one of the future vice president's greatest debacles at Halliburton. Before leaving the company in 2000, Cheney signed a contract for a $2.5 billion fixed-price job for Halliburton to build the infrastructure for the Barracuda and Caratinga oilfields beneath about three thousand feet of water off the coast of Brazil. Costs for the project quickly spiraled out of control. By the project's completion in 2004, overruns had cost Halliburton $762 million.
On the presidential campaign trail in 2000, the Brazil disaster, like most of Cheney's Halliburton legacy, remained hidden. When he left the company, its stock price was at a five-year high, having increased 157 percent during his tenure at the company. Its $44 plunge was still two years off. The peak in the stock allowed Cheney to pocket $18.5 million when he exercised his stock options in 2000.
Still, without doubt Cheney had achieved one of the key objectives of his hiring: positioning Halliburton to win federal contracts. He did most of the work before even joining the company, as defense secretary in the late eighties, when the Pentagon awarded Halliburton a five-year contract to study how a private company could supply logistical support for troops in various deployment scenarios. Not surprisingly, because Halliburton designed it, Brown & Root won the first LOGCAP (Logistics Civil Augmentation Program) contract in the Balkans. And while it earned high marks for its work there, questions of cost overruns and poor supervision later surfaced.
Cheney's grand dream of transforming Halliburton into the one-stop-shopping place for oil services had proved unattainable. Rather than building on the Dresser merger, Halliburton entered a period of retraction, selling off some of its newly acquired subsidiaries almost immediately. In 2005, Halliburton put its construction division, Kellogg Brown & Root, on the block. Thanks to Cheney, the company had achieved a level of federal contracts that would have been the envy of the Brown brothers. But with it had come death, political liability, and small profit margins.
SEVEN
Lady MacCheney
If the premier power couple in Washington, D.C., are Bill and Hillary Clinton, Dick and Lynne Cheney come a close second. For more than forty years they've been a team, even serving together in the first Bush administration. Lynne is just as much a partner and counselor to Dick as Hillary was to Bill. Long before the media dubbed David Addington "Cheney's Cheney," Lynne had mat role. Those who know her say she is as ideological as her husband, if not more so, but while Dick has cultivated a gravitas that seductively whispers "calm and ready to govern," Lynne is all about the fight. It's the difference between the solemn pronouncements on Meet the Press and the rapid-fire slap-down of CNN's now defunct Crossfire, where Lynne was a host for four years. Yet unlike Hillary's effortless slide into public office, it's an open question whether Lynne, who has privately expressed interest in a political run, can escape her husband's shadow.
Lynne didn't always play second fiddle. In the beginning, she was the dazzling standout with the promising future, and Dick, the quiet but eager suitor who wasn't quite worthy. Back in Casper, many still believe that Dick would never have made it to the White House without Lynne's ambition fueling his ascent. They met for the first time shortly after the Cheney family moved to Casper from Nebraska. Lynne recalls seeing a fourteen-year-old Dick sweeping out the Ben Franklin five-and-dime where he worked after school. Nearly half a century later, on the presidential hustings, Dick Cheney would recall those early years. "Lynne talks about knowing me since she was fourteen years old, that's true, but she wouldn't go out with me until she was seventeen," he cracked.
Dick would credit their match to the 1952 victory of Dwight Eisenhower. When Ike reorganized the Agriculture Department, Cheney's father, an engineer who worked for the Soil Conservation Service, was transferred to Casper. The Cheney family's move and its consequences for Dick and Lynne's future would become a well-worn campaign joke, with more than a bit of truth. "If it hadn't been for Eisenhower's election victory, Lynne would have married someone else," Cheney would tell the audience, "and then he'd be Vice President of the United States."
As teenagers, the two seemed remarkably compatible. They shared similar backgrounds. Both came from north European frontier stock. Civil War veterans and Indian fighters numbered among their ancestors. Lynne's father, Wayne, also worked for the government as an engineer. Both of their mothers were strong, independent women in the western mode. Lynne's mother, Edna, was a deputy sheriff (she had a badge, but had clerical, not law enforcement, responsibilities). They loved to read, and logged countless hours at the Carnegie-built public library in Casper. Dick favored military histories. Lynne's scholarly appetites, even then, were more wide-ranging.
"There is nobody else like Dick Cheney, except for Lynne," says John Perry Barlow, who knew the couple years later in Wyoming. "She's like Dick, wicked smart, highly motivated, and, as with Dick, without much empathy."
Natrona County High School yearbook pictures of Lynne show a plain and petite blonde, her hair coiffed in Sandra Dee waves. Her face is too asymmetrical to be called pretty, but what sets her apart is a strong chin and full lips fixed in a determined half-smile. It's the face of someone who hungers for something beyond what a small and insular 1950s town in Wyoming can offer.
Lynne was a straight-A student, and in her senior year was elected Mustang Queen, a position chosen by, among others, the football team, of which Cheney was co-captain. He was also senior class president and a desirable catch for any girl—only they were both already attached to others. That abruptly changed when, with the prom only months away, Lynne's beau ended their relationship. At the time, her friend Joan Frandsen had been seeing Dick for three and a half years. "She has a real competitive edge, our girl does," Frandsen told the San Francisco Chronicle in 2004. "She had to get a boyfriend real quick."
Despite a friendship with Frandsen that dated from the first grade, Lynne made a play for Dick, the boy who seems to have pined for her for years. Cheney promptly dumped Frandsen. The very next day he took Lynne home to his parents for his birthday dinner.
Lynne dominates Casper memories of the couple. An oft-repeated story involves Lynne's victory at the state championship in baton twirling, one of the few competitive sports available to women at the time. The winning routine featured flaming batons. Dick stood in the wings with a coffee can filled with water, ready to douse the ends when Lynne completed her performance.
After high school, the couple maintained a long-distance relationship as college pulled them in opposite directions. Lynne had introduced Dick to Thomas Stroock, a Casper oilman and Yale alumnus. Impressed by the young football player, Stroock made a few calls and obtained a scholarship to Yale for Dick. While Lynne had demonstrated more intellectual promise, she had to settle for Colorado College. When Dick flunked out of Yale and returned to Wyoming to work as a lineman for the power company, Lynne was none too pleased. The blue-collar life was not the one she had envisioned for herself. It probably didn't help that Dick had started to drink heavily. She refused to marry him unless he sobered up and returned to school. Lynne's prodding—combined with the Vietnam draft—focused Dick and helped persuade him to enroll at the University of Wyoming in Laramie. The couple married on August 29, 1964. Lynne was already on her way to a master's degree in English at the University of Colorado. They both moved on to the University of Wisconsin to pursue advanced degrees. While Dick opted to shelve his doctorate in political science for the real thing, Lynne fi
nished a weighty dissertation on the influence of Immanuel Kant's philosophy on the Victorian poet Matthew Arnold.
By the time the couple moved to Washington, D.C., they had a young daughter and another on the way. Dick soon fortuitously found a patron in Donald Rumsfeld. As her husband's career began its meteoric rise, Lynne was stuck as a housebound mother. Homemaker was not a role for which Lynne was suited by either temperament or skill. Dick would later joke that for the first year of their marriage, they would pretend that she could cook, and that he liked it. Once they got over that fiction, he handled all the serious cooking. Lynne had hoped to find work as a college professor, but the opportunity wasn't there. "I got my Ph.D. in 1970 and discovered that I was unemployable," she told Fox News in 2002. "There was a glut on the market that year. And this was before people were enlightened about women, and married women in particular."
Lynne turned to writing in part to escape the boredom of domesticity. To date she has written or co-authored eight books. In many ways, her three forays into fiction are the most interesting, for what they unintentionally reveal about the author. Lynne's first effort, Executive Privilege, published in 1979, is perhaps her most remarkable work, not for the writing, which is pedestrian at best, nor the convoluted plot, which some reviewers described in an excess of enthusiasm as "a political thriller." What makes Executive Privilege a page-turner in 2006 is how nakedly autobiographical it is. It's obvious that Dick's pillow talk and Lynne's life and fears as a White House widow provided the fodder for her tale.
The tortuous narrative begins with one of Dick Cheney's all-consuming passions: a White House leak. In this case—reminiscent of the tactics of Ford's senior staff—a fictional vice president leaks a week's worth of the daily presidential schedule, hoping that the leak will incite his supporters. The log shows that the president has cut him out of decision-making, in much the same way that Ford, with Cheney's help, marginalized Vice President Nelson Rockefeller. Instead, the media seize on details in the log involving the president's daily meetings with an adviser who is a psychiatrist. Is President Zern Jenner scheduling therapy sessions in the Oval Office? He refuses to comment. It turns out the psychiatrist is really a secret envoy to Filipino guerrillas seeking to overthrow Ferdinand Marcos. To reveal the true topic of the meetings would spike the revolution.