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U.S. Inquiry Found Halliburton Mishandled Some Pension Funds
By Mary Williams Walsh, New York Times
November 11, 2005
A federal investigation of Halliburton's pension plans has uncovered three violations of the law, including charging some costs of Halliburton's executive pension and bonus plans to the workers' pension fund, correspondence from the Labor Department shows.
The Labor Department concluded that Halliburton's actions violated federal pension law prohibitions against self-dealing and using pension money for the benefit of the company, as well as the requirement to handle pension money with "care, skill, prudence and diligence."
To correct its violations, Halliburton was required to pay more than $8.6 million. The company replenished funds that were improperly withdrawn from the pension fund, made the affected individuals whole and paid an undisclosed tax penalty, the documents show. Two of the violations began while Vice President Dick Cheney was the company's chief executive. But the third, which involved the largest amount of money, took place after he resigned in the summer of 2000.
Halliburton responded to an inquiry about the findings with a statement that said: "Halliburton cooperated extensively with the Department of Labor to identify and successfully resolve these issues on a voluntary basis. As the letter indicates, these issues have all been fully resolved."
In the largest violation, the Labor Department determined that Halliburton was supposed to distribute several million dollars in cash and stock to pension participants but instead kept the money for itself.
After investigators discovered the violation and asked about it, Halliburton sent the affected people their money, the correspondence states, and put the missing stock into the correct employee pension funds. In an Oct. 6 letter, the Labor Department advised Halliburton of its findings, but following its standard practice it has not notified the pensioners.
The Labor Department opened its investigation in response to an article in The New York Times about the complaints of a group of several hundred former Halliburton employees who contended that Halliburton had wrongly deprived them of part of their pensions.
The Labor Department found, however, that Halliburton's reduction of the benefits of the employees who spoke out, many of them from upstate New York, did not violate any rules.
Sorting out the case at Halliburton was unusually complicated because it involved several different pension plans and companies that were put together, reconfigured and split up again during a series of mergers, spinoffs and other transactions over a number of years.
An official of the Labor Department said that it was not unusual for investigators to look at a pension plan in response to a complaint and find violations of a completely different nature. In such complaints, he said, investigators often find that companies were using workers' pension money to pay corporate expenses, as Halliburton did.
"We have found this all over the country, in small plans and large plans," the official said. "That's why we look. We know it's very common." The official spoke on condition of anonymity because the Labor Department does not normally discuss its investigations.
Halliburton used pension money to pay the legal, actuarial and other costs of its executive pension and bonus programs from June 1, 1999, through Jan. 1, 2004, spending about $2.6 million in total. In August 2004, it put the $2.6 million back into the pension plan and paid a penalty to the Internal Revenue Service.
The largest violation occurred in December 2001 and July 2002, when Halliburton took payments of stock and cash from the Prudential Insurance Company of America. Years earlier, Prudential had entered into a contract with Dresser Industries, to pay Dresser's retirees the pensions they had earned until 1987.
But the money went to Halliburton, Dresser's corporate successor, and Halliburton kept the money - about $1.9 million in cash and $3.9 million in stock. The Labor Department official said the investigation did not uncover a motive or rationale.
In May and July 2003, Halliburton paid the $1.9 million to the retirees who were supposed to get it, and in April 2004 it distributed the stock to three employee pension funds, including one run by another company, Ingersoll-Rand, which had bought out Halliburton's stake in a Dresser joint venture, Dresser-Rand.
The third violation the Labor Department found happened in 1999, when Halliburton converted to a new payroll system, which erroneously deleted the payroll deductions of a number of employees who had been paying back loans they had taken from their retirement plan.
Halliburton remained unaware of the problem until 2003. Then it decided to address the situation by treating the defaulted loans as "deemed distributions" to the employees.
About 100 people were too young to receive distributions from a retirement plan, so the I.R.S. charged them a 10 percent withdrawal penalty. To correct that violation, Halliburton paid back $191,013 to the affected people in March 2004.
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