Ever since he left Washington eight years ago, Dick Cheney has made it sound like he was well rid of the place. Just last week the GOP vice presidential nominee told the Republican National Convention, “I loaded a U-Haul truck and drove home to Wyoming.”
The self-portrait was of a man who had departed the capital for good with his wife, opting for “a new private life. There was time for fishing and grandchildren, and we were content,” as he told the delegates.
But the former defense secretary has been back in Washington, and not just to see the monuments. He returned in a role not mentioned during his acceptance address: that of big-time corporate executive, exploiting his strong Washington ties to benefit Halliburton Co., a $15-billion-a-year oil services giant.
It was all part of a life far from his beloved Wyoming trout streams, one in which he traveled the globe and helped revive a stagnant company, despite some initial suspicions that he was not up to the task.
As recently as last December, Cheney was hard at work at the Washington game, pressing the government and Congress to release a $292 million government-backed loan for Dallas-based Halliburton.
The company needed the government loan guarantees for a project in Siberia with a Russian partner, Tyumen Oil Co. But the deal hit a snag when oil giant BP Amoco, financier George Soros and others complained that Tyumen had bilked them out of millions of dollars in a complicated takeover deal involving a potentially lucrative Siberian oilfield.
The State Department froze the $292 million in financing from the U.S. Export-Import Bank, a government lending agency that helps finance U.S. exports.
As members of Congress, pressed by BP Amoco, wrote letters objecting to the loan, Cheney weighed in.
“He’s got a lot of clout up there,” said one of the parties involved in the fight. “A number of members told us they wouldn’t stand against Dick Cheney.”
Cheney also visited the State Department, where he met with Alan Larson, the undersecretary of state for economic, business and agricultural affairs. The subject was the loan guarantees.
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The department lifted its freeze in April, after Tyumen agreed to give back some of the Siberian oilfield rights it took from BP Amoco and Soros.
State Department officials say Cheney did not influence their ultimate decision. But his involvement clearly played a role in keeping the loan alive, according to participants in the dispute.
It thus points up the access and heavyweight Washington connections that helped make Cheney an attractive running mate to Republican presidential nominee George W. Bush. And he was a valuable business- and image-builder for Halliburton.
“Clearly Dick gave Halliburton some advantages,” said Bob Peebler, Halliburton’s vice president for e-business strategy and ventures. “There’s a lot of respect for Dick Cheney, both in the U.S. and around the world. From that perspective, doors would open.”
Since the former defense secretary was named chief executive officer of Halliburton Co. in August 1995, the firm’s revenues have tripled, to $15 billion last year. Profits have done nearly the same, soaring from $168 million in 1995 to $438 million last year.
Government contracts have also increased markedly. The Center for Public Integrity in Washington noted last week that Halliburton and its subsidiaries won $2.3 billion in government work since Cheney took over, up $1.2 billion from the five-year period before he arrived.
Cheney wins high marks among oil executives and analysts for his quiet, forceful management style, one that sets strategy and goals, and then allows subordinates the freedom to make those plans work.
“I’d almost forgotten how screwed up Halliburton was when Cheney took the job because it’s in such good shape today,” said Matt Simmons, whose Simmons & Co. International investment banking firm specializes in oil services companies.
For Republicans, Cheney’s oil industry ties present potentialpolitical risks. Bush, after all, has had his own experience in the Texas oil business, and his family has long ties to the business. Democrats have already criticized the GOP ticket as a tool of Big Oil.
Halliburton’s recent growth came while the oil industry was in the doldrums; a merger and downturn in oil prices had forced Cheney to lay off 10,000 people in 1998-99. Despite that, Cheney recently sold $5 million in Halliburton stock and holds options for $14 million more, according to the company’s public financial disclosures.
Cheney has run a White House staff (for President Gerald Ford), his own congressional office and the Pentagon. But until 1995, he had never had to answer to shareholders.
By the time Cheney joined Halliburton, the then-76-year-old company was at a low ebb. The bulk of its business was carried out by two divisions: energy services and Brown & Root, a heavy construction firm that built everything from power plants to offshore oil rigs.
Earnings were flat, expansion seemed difficult and the company had just pleaded guilty and paid more than $3 million in federal fines and penalties for illegally shipping oil drilling equipment to Libya, a move that violated U.S. sanctions against countries that support terrorism.
“These exports to Libya should not have happened,” Thomas Cruishank, the Halliburton CEO whom Cheney replaced, said in July 1995. “They were contrary to our company’s policies, then and now.”
The choice of Cheney was noteworthy both for its novelty and ambition. The company hoped an outsider would bring new energy. But it was initially viewed in oil industry circles as yet another bad move by Halliburton.
“I vividly remember a sort of skepticism, the sort of `Give me a break, a guy who has never run a company is going to come in here?'” said Simmons. “But the conventional wisdom was that, at least he’s going to fly around the world and wave the Halliburton flag, and that was something that was sorely needed.”
Just how effective that sort of campaigning could be was made apparent a few months after Cheney arrived, when the new CEO flew to the Middle East for an oil industry conference. Emirates and oil ministers, still grateful for Cheney’s leading role in the U.S.-led war against Iraq in 1991, gave the former defense secretary a hero’s welcome.
“That’s how he was treated,” recalled Jim Steenhagen, managing director of Petroleum Finance Co., a Washington consulting firm. “Every crown prince wanted to meet with him privately.
“Dick Cheney no doubt brought in a lot of business for Halliburton.”
With Cheney on board, the company went on an acquisition binge, one designed to modernize the company, expand its markets and offer start-to-finish services to companies searching for and drilling out oil. “The vision we had and the strategy we put in place was to become the premier oil service company,” said Dave Lesar, Cheney’s successor as Halliburton’s chief executive.
In 1996, Halliburton paid $557 million for Landmark Graphics Corp., a company that offered state of the art software that engineers and seismologists use to plot oil fields. The next year, it bought an oil-drilling technology company, Numar, for $434 million.
Peebler, who was running Landmark at the time, said he approached Halliburton about a possible merger on a Thursday, met with Lesar and other Halliburton executives on Saturday and with Cheney for most of a Sunday.
“We went through fairly active conversations for three or four hours, then he spent some time with his own people and came back and said, “I’d really like to figure out how to do a deal with you guys.” A week later the deal was done.
Landmark had 1,200 employees, and Peebler was worried that his small company–and its talent pool–would be swallowed by a giant like Halliburton. He expressed that concern to Cheney.
“Dick said, `Let’s talk about that. How do we make sure Landmark’s still Landmark?”‘ Peebler recalled. “We sat down and came out with some really simple principles, and we’ve actually benefited from the merger.”
With the purchase of two companies for a total of less than $1 billion, Halliburton had dramatically modernized its oil services offerings. But its boldest move was yet to come.
In February 1998, the company announced it was buying a direct competitor, Dresser Industries Inc., for $8.5 billion. The merger pushed Halliburton’s share of the oil equipment business past Schlumberger Ltd., then the industry leader. It was viewed by analysts as a shrewd merger, one that signaled the full revival of a once smart, aggressive company.
“It created a powerhouse,” said Lesar.
Just what role Cheney played in directing the remake of once-moribund Halliburton is open to question.
Some view Lesar, a company veteran, as the man running the company day to day, with Cheney acting as a famous face and rainmaker. But those who watch the company say that Cheney acted much as would any CEO–delegating routine and daily decisions, and worrying more about the company’s strategic position and emerging markets.
“They needed someone with an international reputation to basically help them open the doors of state oil companies in different countries,” said Fred Mutalibov, vice president for research at Southwest Securities Inc. in Dallas. “Dick Cheney may not be involved in the day-to-day decisions, which I believe were run very much by Dave Lesar. But I would say he was involved in all the strategic decisions, very much involved. He was full-time.”
While the industry has largely applauded Halliburton’s renewal, the company’s purchase of Dresser came just as oil prices were plummeting to near $10 a barrel. Production slowed, and so did new business.
“I think a lot of the individual benefits we thought we would get, we didn’t get,” Lesar said of the company’s purchase of Dresser, and the market’s impact. “The reality is both companies and the industry were in a free-fall at the time.”
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Halliburton posted a $15 million loss in 1998, and some 10,000 employees lost their jobs. “Dick was as sick as anyone at having to lay anyone off,” Lesar said.
The sagging market made finding new business even more vital, and more difficult. But Cheney proved adept at creative dealmaking.
One promising prospect, both for Halliburton and Dresser, lay in western Siberia, on the dormant Samotlor oil field. Tyumen Oil Co. held the rights to half of the field.
In July 1999, the U.S. Export-Import Bank approved $500 million in loan guarantees for refurbishing the oilfield. About $200 million would go to ABB Lummus Global Inc., a worldwide building firm, to restore a refinery. Halliburton, Dresser, Tyumen and nearly 30 other companies would receive $292 million to get the wells running again.
But the deal turned sour when Tyumen took over the assets of another Russian oil firm, one owned in part by BP Amoco and financier Soros. Both questioned Tyumen’s manipulation of Russian bankruptcy law to obtain the assets of Chernogornaft, which included the rights to the rest of the Samotlor oilfield.
The Clinton administration froze the loan in December and opened its own investigation. So did Russian bankruptcy officials. An Export-Import Bank spokeswoman said that Cheney discussed the loans guarantee with bank Chairman James Harmon, but that Cheney “in no way applied any pressure” to keep the deal alive.
Cheney and Halliburton were no strangers to the Export-Import Bank. Cheney was the keynote speaker at the bank’s annual conference in 1997, and his company has received more than $1.5 billion in government loan guarantees since he took charge, according to the Center for Public Integrity.
Examination of Tyumen ended abruptly in January, when the company agreed to return assets to Amoco, Soros and other investors.
Halliburton’s Lesar says the flap was all for naught.
“We clearly supported it,” he said. “At the end of the day, it was the State Department and [the bank] that made that loan.”
More questions have been raised over work Dresser has done recently to aid Iraq, the nation that Cheney, as secretary of defense, helped wage war against in 1991. Under a United Nations resolution, Iraq is exempted from international sanctions to sell limited quantities of oil to pay for food and medicine.
The Washington Post reported this year that Dresser was one of the companies that helped Iraq keep its oil production up. Kurdish leaders and U.S. intelligence officials say that Iraq is flagrantly exceeding the limits on oil and diesel fuel sales, and using the proceeds to help equip the brutal regime of President Saddam Hussein.
A Halliburton spokesman has said the subsidiaries of Dresser have sold oil-pumping equipment to Iraq through European agents, but that those subsidiaries have since been sold.
Halliburton has found business opportunities in other war zones as well. Last year, its Brown and Root division won large portions of the more than $1 billion in Pentagon contracts for support services for U.S. troops in the Balkans and at the Incirlik air base in Turkey. U.S. fighter jets patrolling the northern no-fly zone over Iraq are stationed there. The firm also was awarded a $100 million contract to improve security at U.S. Embassies worldwide.
Lesar says Cheney had nothing to do with getting the government contracts, and that foreign governments, such as England, have also given the company business.
“When a contract would come along, we would bid very aggressively,” Lesar said. The idea that Dick Cheney “would run in and turn us on to people giving us the work–that is not the case.”