In one of the largest settlements ever, Halliburton, the Houston-based oilfield services company that was once run by Vice President Dick Cheney, agreed to pay $4 billion to settle all present and future asbestos claims, allowing the $13 billion company to continue business as usual while providing for victims of asbestos exposure. The company also disclosed last week that it is under formal investigation by the Securities and Exchange Commission into disclosure and accounting practices during the vice president’s tenure as chief executive from 1995 to 2000.

The $4 billion asbestos settlement will include a prearranged bankruptcy plan for Halliburton subsidiaries DII Industries (formerly Dresser Industries Inc.) and Kellogg Brown & Root Inc. (KBR). According to the bankruptcy plan, Halliburton will retain 100% ownership of DII, KBR and all other subsidiaries. DII and KBR also will retain rights to the first $2.3 billion of any insurance proceeds related to the claims.

CEO Dave Lesar said the deal is “good news” for shareholders, customers and employees and will “resolve a major issue that has been clouding our future. Not only have we taken care to responsibly provide for those affected by asbestos, this settlement will allow us to concentrate all our efforts on increasing shareholder value, and our total focus can return to Halliburton’s core businesses. While I am pleased with the progress on the settlement we have made, I must caution that there is much work to be done.”

The agreement with asbestos claimants is still subject to a definitive plan covering additional details, acceptances of a plan of reorganization, financing, board approval, and court approval.

Lesar added that it will allow Halliburton and KBR to “remain financially strong and maintain their competitive position… There will be no employee layoffs resulting from the plan and all salaries and benefits, including retirement benefits, will remain unchanged. Finally, the plan should have no effect on any of KBR’s present or future projects. In other words, outside of the global asbestos settlement, it will be business as usual while the plan is implemented.”

The company expects that the plan filing will take place late in the first quarter of 2003 and should be concluded 90 days following the filing. After final and non-appealable court approval, payment will be made to a trust for the benefit of the present and future asbestos and other personal injury claimants.

Halliburton share prices rose briefly Wednesday to $23 after the settlement was announced but fell back to end the day at $19.55 and were trading in the $18.80s Friday after the company disclosed the SEC probe. Company shares had been as low as $8.60 in August.

Halliburton said U.S. regulators intensified a probe into disclosure and accounting practices during Cheney’s tenure as CEO. An informal investigation has been going on for months. The probe involves a change in accounting for cost overruns that occurred in 1998. The SEC launched an informal investigation in late May and issued a request on June 11 for documents related to cost overruns on construction projects at Halliburton. The company turned over about 200,000 documents to the agency in November. By launching a formal investigation, the SEC has power to subpoena documents related to Halliburton’s bookkeeping, including information from third parties.

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