Cheney still has money ties to Halliburton

The BBQ Pit
41

Elegibility is not the question, it’s the ethics of taking someone’s money and then claiming that there is no conflict of interest or even appearance of same.

The squealing over Billary’s financial dealings was loud and prolonged, and perhaps should have been. Where is the Republican outrage over Cheney’s financials, and against the cronyism going on in the Bush administration?

It seems the latter part of your question about high offices being reserved for the wealthy is rhetorical. The answer sits in the White House and in most seats of Congress.

Thanks for the alternate cite. Yes: recession---->poverty increase. The question is: Bush+Pubbie legislature ---->recession---->poverty increase?

Oh, and the media have been asleep for the past three years and probably need to be alerted repeatedly with a cattle prod; at least they now seem to be slowly realizing they’ve been missing out on some great investigative journalism opportunities.

42

http://www.talkingpointsmemo.com/

Mr. Josh Marshall, whose blog site must be constantly monitored by anyone with even the slightest intent to stay informed, has not neglected these opportunities. Avail yourself, and learn how our Pharisee leaders have shown vigorous, red-blooded All-American entreprenuership in stepping up to get themselves a rare and juicy slice of Iraq.

As for Mr. Cheney, given the regiments of lawyers available to the Bushiviks, it is most unlikely that there is any chance that his arrangements are illegal. I would rather nail my pecker to a tree than go another ten pages with friend Scylla as to whether or not “unindictable” is equilalent to “innocent”. We should perhaps be grateful that our esteemed public servants shall not be a burden when they toddle off to their retirement and dotage in modest villas in Tuscany, or the South of France.

Let there be an investigation, if one is felt needed. I am content to await results until at least, say, Thanksgiving.

43

Well, according to him, he has assigned the options to charity.

He had “deferred compensation” which makes him an unsecured creditor of Halliburton. Except that he exchanged the compensation rights with an insurance company in exchange for fixed payments. So the insurance co. has the risk, not him.

So that’s how he can have no stake in the company.

44

I’m a little confused about something. Does Cheney NEED to have a direct financial stake in the company for him to be doing something unethical with this? For it to be illegal, perhaps it does, but surely not necessarily unethical? If not, why all this hullabaloo over whether he has that direct stake? To figure out if his actions step over the line to illegality?

45

For tax purposes, are the options considered “donated” at a set price that has already been deducted by Cheney as a chartiable contribution, or will they be considered “donated” and deducted at the eventual price they are excercised?

46

I think if I close my eyes tightly enough, I’ll see a thousand points of light.

Cheney has not avoided the appearance of wrongdoing. It is simply wrong to confuse the interests of the American public with that of some “enemy”.

A corporate jet is no big deal. An untendered contract looks extremely suspicious. If Cheney has completely severed his ties with a company which has benefited him enormously, why wouldn’t he do them a favour?

47

And he was wrong. His claims of no direct ties were rejected under federal ethics law. His scheme did not work- ok? That is the point of the whole Cite. Anything else is irrelevant, as the determination already has been made.

Further, he was the former CEO of the company, and said company has donated plenty of money to Bush’s campaign and the GOP. These are his cronies, and he rewarded them well. $1.22 Billion in No-Bid contracts and over 2 Billion overall. And how much more down the line.

If Clinton had done anything like this the far-right media machine and most of the GOP would be calling for impeachments, special prosecutors, congressional investions or public floggings. But seeing the GOP majority in Congress ensured that the Special Prosecutor provisions died when Bush took office, it looks like Cheney can just stonewall on the energy policy and halliburton scandles and get away with it.

:mad:

48

Well, if he says he has no direct financial interest in Halliburton, and what he did with the options and deferred compensation is true, then he’s RIGHT. No matter what anyone else says. If his financial position doesn’t change whether Halliburton the company becomes infinitely wealthy or goes bankrupt, then he has no “financial interest” in the company. The people commenting on it either didn’t know or are trying to win on a “letter of the law” type of thing, when the reality clearly says differently.

To argue otherwise is absurd. What is he supposed to do then, to have no financial interest? According to you, there is nothing he can do. No matter what he still has a financial interest.

As for the “No-bid” contracts. These are “cost plus” contracts. There is no direct bidding on them, because no one knows how much work needs to be done in the oilfields. So they get the cost of their work plus a 5 or 10% fee.

For the oil field fires the figures quoted in the media were 7 billion or 10 billion. Of course, no one knew how bad the fires would be so it was a little silly. That too, was a no bid, cost plus, contract. The total figure was a couple hundred million, I think.

I don’t know why or even if there weren’t more bidders. It may be that other companies weren’t interested, or didn’t have the worldwide reach that Halliburton does. It operates in 70+ countries and has annual revenues of 10+ billion dollars. It operates in all facets of the oil fields, whereas other companies usually specialize in one particular area. The only other company, that I can think of, that has a large global reach would be Schlumberger, which is a French company.

49

Dewey:

Actually, I am correct when I say that he’s hedged out on his options. I’m presuming he’s donated to a charitable remainder trust which will have the opportunity to sell them, and invest the proceeds. Cheney can then recieve a fixed stream of income immune to the vagaries of market action plus get a cushy tax break for the charitable gift.

Edward Scissorhands couldn’t design a better hedge.

Gaudere:

Again, assuming a charitable remainder trust for this, he gives the options to the trust at current market value as of the date of the gift, and any fluctuations afterwards are irrelevant to him.

50

I’m not a subscriber so I needed your quote.

Ok. Let’s see the report. Do you have a firsthand cite for this congressional research report.

At this point we need the original materials. Frankly, I’m not willing to accept a reportorial summary particularly on as complicated a manner of finance as this.

So let’s see the report.

I want to see the report. I doubt it actually says what both you and the reporter are saying.

Whatever. Link me the report.

Why don’t you take the time to do a little search and find out for yourself what I had to say about that topic before you start throwing innuendos around.

I am on record on this topic in the ten page Harkens thread on the matter of Whitewater.

Go see what I said and then come back with snide bullshit. Do your homework first you crummy backdoor cheeseway Danish-headed hack.

51

Ok. There are many ways to hedge risk. The goal of hedging is to fix your value so that you are immune to fluctuations both good and bad.

The first way to do this is through options.

Cheney’s stock options have a grant price, which is the price he is entitled to buy stock for. We’ll call this grant price “X.”

Presumably Halliburton is higher than X. The difference between current market price and X is pure profit.

However, Cheney cannot simply exercise these options (buy the stock for X) and then sell it because the options are not exercisable until some point in the future.

This means he’s stuck through ownership of these options with a financial interest in Halliburton. If the stock goes up between now and exercise date he makes money. If it goes down he loses.

The first path he can take to hedging this risk is by buying opposing options to the ones he has. He can buy options that go up as Halliburton goes down and down as it goes up. Thus his market value will be fixed.

The problems with this is that it’s and expensive pain in the ass, and there’s no guarrantee he can maintain a hedge through a long period of time. This strategy is best for approximate hedging of short-term risk.

So, Cheney has chosen a better path, probably with the professional advice of a guy like me.

Cheney has almost certainly taken advantage of a very nice little Financial planning tool known as a Charitable Remainder Trust.

These vehicles are great for hedgin highly appreciated or concentrated positions.

What happens is the Cheney gives the stock to a trust. What this trust does is either hold or sell the options, and Cheney recieves a fixed income stream in annuity format from the trust.

When the annuity or stream is up or Cheney dies the Remainder passes to Charity. For all legal and tax purposes Cheney no longer owns or controls these options. On the date he has gifted them to the trust he recieves a deduction for his gift to charity. This deduction is variable dependant on some complicated actuarial statistics and the size and potential duration of the annuity stream he has elected to receive from the trust.

In any event, Cheney no longer owns or makes any decisions about what is in the trust and his receipts from the trust are fixed and immutable. What ultimately goes to charity may be a pittance, or it could be many times the value of the original gift. It will depend on what Halliburton does as a stock and how good the manager of the trust is.

These things are not scams by the way. They’ve been around for a long time and they are great for the charities involved, and present them with huge amounts of income.

But hopefully you see how Cheney is hedged out of his Halliburton and has his income fixed irrelevant to the stock’s performance.

52

Nice try Huckleberry. Are you suggesting now that your so far as yet unseen research report is actually a ruling of “federal ethics law,” whatever the hell you think that means?

So?

What about everybody else that got contracts?

What about General Dynamics and Bechtel? Are they his cronies, too? What about L3 communications?

Halliburton is a company that the Federal government has ongoing contractual dealings with. Should those cease simply because a former executive has attained a position of power in the government?

What exactly is the standard you are applying here?

Is Halliburton’s contract atypical or unusual compared to contracts it has received in the past and which other companies have recieved?

You need to answer these questions if you are going to allege wrongdoing.

As I said before, this is impossible. Clinton never worked in the private sector, IIRC.

Let me explain this to you and do the best to sincerely remove any partisan hat.

The closer you looked at Clinton with regards to Whitewater and Hillaries commodity dealings the fishier and more irregular they looked.

They looked sufficiently fishy and irregular that a special prosecuter was needed to examine it.

Ok so far?

As the prosecutor looked at some things cleared themselves up and some things did not. No proof of illegal activity surfaced, IMO, nor did any seem likely to. It was a dead end (pun intended.)

Again, IIRC, this took about four months . At this point, IMO, the investigation should have ended but continued for partisan political purposes and shifted towards a general muckraking expedition, with all the attendant bullshit and ill-feelings that are still reverberating today.

Then we ended up shifting from Whitewater and commodities to Linda Trip and interns.

It shouldn’t have happened the way it did. The Republicans were wrong to allow Ken Starr to continue past the point where it became clear that Whitewater and the commodities would produce no evidence of illegal activity.
This is a very different situation than with Cheney today. The situation only looks fishy to somebody who knows little about such things.

The closer you look at the situation the more regular and proper they seem. There is not a realistic hope of producing evidence of wrongdoing or illegal activity from what are to all appearances regular activities.

Because these activities are arcane and complex and interconnected, it is easy to make them look bad by playing the innuendo game.

What is happening to my eye is that their are some bitter types looking for payback over the whitewater excesses.

The original Whitewater investigation though seems to have been founded upon a legitimate concern even though it rapidly degenerated to abuse from that point.

I see no legitimate concern worthy of investigation with Cheney’s dealings with his Halliburton compensation, nor with subsequent dealings the Federal government has had with the Co. It seems apparent that the concerns are being manufactured, and not for the first time. We had an earlier round of this in the press about the time that the Harkens thing was also being manufactured.

As any Kindergardener knows, two wrongs don’t make a right, and just because somebody did something wrong doesn’t give you the right to do something worse.

The whole thing’s pretty fucking immature.

53

Ok. Found a link with what seems to be the germaine point from the report:

http://money.cnn.com/2003/09/25/news/companies/cheney/

The operative phrase here is “may.”

Apparently Lautenburg thinks “may” means “it is certain that.”

In any event it appears that what elf6c has said aobut the immutability of law defined by the report is completely incorrect.

These options may represent and interest. Since Cheney has completely hedged his interest in them, the also may not.

It is also clear from the article that Lautenburg who started this whole thing does not consider it a legal or ethical issue:

The mistake refers to this quote of Cheney’s

Now some, such as myself would consider the fact that since Cheney’s interest in Halliburton is hedged so that his fortune is in no way tied to the ongoing performance or even continued existance of the company that what Cheney said was factual.

Apparently some such as Lautenburg have an issue with the semantics. As best I can tell their point seems to be that since Cheney made money and had an interest in Halliburton in the past this is somehow a financial tie.

It seems to me that Cheney’s fortunes being totally independant on noncorrelated to the performance of Halliburton one would define this as having no financial interest.

But that’s just me.

54

Scylla, I would agree that if it is a delta neutral hedge matching the lifetime of the options with a European style expiration, then Cheney is in a neutral position vis-a-vis the share price performance.

However, Cheney needs to disclose exactly how he is hedged or he may still have a financial stake. Most likely his call options are american style (exercisable any time after vesting during the maturity of the option). Is his position delta/gamma neutral? If the position is not 100% hedged, then Cheney could easily have a direct financial incentive to see the share price go up.

55

Scylla, how does funding a charitable ramainder trust with the options affect Cheney’s interest in Halliburton? If the price of Halliburton were to fall below the option price, they would essentially become worthless, thus no income for the trust and no income for Cheney.

Are retirement options generally assignable? If not, these will provide no current income stream to Mr. Cheney.

56

I beleive that Cheney has disclosed exactly the nature of his hedge (though I’m not going to go looking for it.) Nonvested stock options are generally unassignable, though I beleive exceptions have occured in the past. Failing this, they may simply be pledged, that is Cheney has already signed and filed a legal affidavit directing that the options be excersized cashlessly and the proceeds donated.

blainer:

The trust is under no compulsion to continue to hold the options. As the options are vested they will generally be diversified into other instruments. But, let’s assume that the trust holds onto all of them, Halliburton goes belly up and the trust tanks. This shouldn’t happen because the first responsibility the trustee has is to hedge his positions in the trust, but let’s just say it fails anyway.

I’m not at my office right now, but I can double-check for sure tomorrow. What I beleive happens is that since Cheney’s tax-deductions are predicated by the stream of income he draws from the trust if those streams cease than the deduction increases exactly offsetting it.

57

With respect to the options, he said he donated the “after tax proceeds” to charity. Irrevocably.

I doubt there is a trust involved, as he might then still have an interest. The more money made available to the trust, then the more he is able to draw out, in a lifetime payout ‘living remainder trust’ or whatever it is called. So that would be a no-no.

Most likely he did something so that when exercised the charity gets all the money after taxes. Here’s a question: does Cheney get a tax deduction for the charitable contribution? If so then he STILL has in interest in them technically.

One way around this is if he’s donated the options to charity already. That way he already would have taken a deduction for the ‘market value’ of the options (of course there is no market value as they’re not traded).

But whatever. Cheney is probably worth $20 or $30 million. Do you really think he’d bother with futzing around with this to get another couple million out of it?

58

**

Yes. I read that. Tht’s why I suggested the two possibilities.

**

It’s called a charitable remainder trust. It’s a pretty airtight way of divulging yourself of an interest. Trust me on this. As a matter of fact, trust me in all things, but I digress.

Once he grants them to the tust, he no longer owns them or is tied to them in any way. They are not his. What he will receive back in terms of income and deductions is fixed and immutable (for purposes of our discussion here.)

Contrary to being a no-no, it would be a great thing. The only catch is he might not be able to change the ownership of the options, in which he case they would simply be pledged pending exercise.

Either way is pretty tight.

(If he’s a swell guy, he does it the second way. If he wants income and deductions he does it the former way.)

We’re getting pretty tricky here, but you make a good point. If he gifts them to the charity in the future, the size of his charitable deduction is variable which would still leave him with an interest in the performance.

While these particular options would not trade or be transferrable, they do in fact have an intrinsic value assuming they exercise below current market value. They would also have a time value.

Their current value can be calculated though, so his pledging them and taking the deduction and eliminating his interst is not a problem.

Of course not. The value to be had here is in the accusation being made against Cheney, in attempting to create a scandal.

Most people won’t bother to understand the complexities of the situation and get the facts.

It doesn’t have to be true, it just has to make Cheney look bad. That’s why this is happening.

Look how quickly the accusers in this thread cut and run as soon as it starts to become clear their accusations are without merit.

59

What method is there of finding out whether he is doing things the first or second way?

It is my concern that he has some way of influencing the deductions he could make. This would most definitely represent a conflict of interest.

Again, Scylla, are you totally unable to see how this represents a seeming conflict of interest?

Also, while making direct accusations of this would be specious, nonetheless there is simply the obvious possibility that his buddies at Halliburton can compensate him via other indirect ways later on (i.e., hiring friends, insider information, etc.) I know it is a presumption of guilt to do so (ergo labeling this as “specious”), but the glaring possibility of favoritism still remains. Are you completely immune to these potentialities in your assessment that everything is on the up-and-up?

For myself, the good old boy network is far too much of a reality to be able and sit back with even a slight degree of confidence in this matter. Again, why weren’t giants like Fluor given a shot at the contract? I’ll willingly dismiss Schlumberger, if only for the anti-French animosity factor, but any political analyst with an IQ above room temperature could have seen this one coming down the pike, almost before it happened.

That the administration carries on as if nothing out of sorts has happened, is not in the least reassuring to me, or (I’m sure) to a lot of other people as well. Wishing to get re-elected while nonetheless permitting such a dubious transaction to occur are distinctly at odds with each other. It is impossible to fathom the thinking processes (or lack thereof) in this particular case.

60

Zenster:

Whichever way it’s done, it’s done. After the fact I don’t think there’s much chance for tampering. Again though, it behooves those making the accusation to look into it and figure out what’s going on before throwing around specious innuendo.

As for the good 'ole boy network, sure. Nobody’s immune to the possibility of a kickback. Every politician has this possibility. Why single out Cheney without a positive indication that it’s happened?