“No pain, no gain” is a common expression used to advise people in various scenarios. In the world of business, it implies that you must be willing to lose money even as you work towards making a profit. In large companies such as Halliburton, such losses sometimes come in the form of lawsuits, and the chief legal officer, Robb Voyles, knows all too well that stakes are high whenever they step into a courtroom. Whether it is losing a few hundred dollars or several billion dollars, no amount is too small in business. So far, this Houston-based company has had many charges brought against it and the biggest Halliburton lawsuits in the company’s history are as follows.
10. $275,000 for Hostile Environment Issues
In 2019, two Halliburton employees, Mir Ali and Hassan Snoubar accused the company of subjecting them to a hostile environment. Snoubar is of Syrian origin but is a US citizen. Upon being employed by Halliburton, he was regularly accused of being an ISIS member and terrorist by co-workers and supervisors. Ali received similar treatment and they both were called derogatory names. When Snoubar could not take it anymore, he raised the matter with the company’s human resource department. Unfortunately, he was fired in retaliation.
Luckily for the two victims, the US Equal Employment Opportunity Commission (EEOC) took up the case and charged Halliburton with the national origin and religious discrimination. Halliburton then agreed to pay $275,000 to Snoubar and Ali and provide training to the human resource and managerial employees regarding the national origin and religious discrimination. The company further agreed to report such discrimination complaints in the future to the EOCC and to post a notice of employees’ rights.
9. $7.5 Million for Accounting Practice Issues
According to The Baltimore Sun, when Dick Cheney was the vice president of Halliburton, the company secretly changed the accounting practices. As a result, Halliburton reported earnings in 1998 that were 46% higher than it would have, had it retained the accounting practices it had previously used. Additionally, the changes resulted in the company reporting a much higher profit in 1999.
Still, Cheney was not found guilty of improper conduct. Instead, two former financial officials, Gary V. Morris, the former chief financial officer, and Robert C. Muchmore, the former controller, were charged with misleading accounting records. Halliburton consequently agreed to settle the lawsuit by paying $7.5 million while Muchmore also agreed to pay $50,000.
8. $18.3 Million for Loophole Monetization
If ever there was a company that tried every loophole to maximize profits only to end up making losses, it has to be Halliburton. In 2013, an investigation began in Albuquerque regarding the pay practices at the oilfield services company. The U.S. Department of Labor took the initiative of conducting investigations into the labor practices in the oil and gas industry. The Department focused on the misclassification of Halliburton employees who were listed as salaried professionals yet were representatives, specialists, and advisers. By classifying them as salaried professionals, the company was exempted from paying the employees minimum wage and overtime.
Employees ended up working between 42 hours and 87 hours per week yet the average pay was $18,000, with a check for $5,000 being the least recorded between May 2013 and May 2015. The 1,016 employees incorrectly exempted from overtime pay were paid $18.3 million in back wages since under the law they were entitled to overtime pay for earning less than $455 weekly. The overtime compensation is also for employees who had few or no managerial duties because Halliburton has exempted them all without considering their job duties or incomes.
7. $29.2 Million vs. the FCPA
Even after locking horns with FCPA in 2009, Halliburton still did not learn from the $579 million it had to pay. The stubbornness cost the company more millions in 2017 when SEC charged Halliburton with violating books, records, and internal accounting controls provisions of the FCPA. The violations occurred as Halliburton made payments to an Angolan company, Sonangol, in the process of bagging lucrative oilfield services contracts.
The SEC disclosed that Halliburton had entered into contracts with Sonangol to meet local content requirements. Under the advisement of Sonangol’s officials, Halliburton partnered with other Angolan companies to satisfy the local content. However, Halliburton’s former vice president Jeannot Lorenz did not abide by the internal accounting controls during the bidding process of new oil company projects. Instead of determining the services offered and picking the company to supply them, Lorenz picked the Angolan company first, Lorenz was also found guilty of failing to conduct competitive bidding and avoiding internal controls that stated contracts worth at least $10,000 in countries prone to corruption must first be reviewed and proved by Halliburton’s special committee.
As a result, of failing to be objective, Lorenz contracted a company owned by a friend to a Sonangol official, the official then awarded Haliburton the contracts. The deals proved lucrative for Halliburton which profited by more than $14 million. SEC, therefore, ensured that Halliburton paid dearly for the violations and the settlement was for $14 million in disgorgement, an extra $14 million as a penalty, and $1.2 million in prejudgment interest.
6. $35 Million for Bribery
In a desperate attempt to win contracts worth $6 billion, Halliburton fell into the habit of dishing out bribes. The bribes quickly increased between 1994 and 2004, by which time they amounted to $180 million paid to senior Nigerian officials. At the time, former Vice president Dick Chesney was the CEO of Halliburton therefore he and nine other Halliburton executives were charged with distribution of gratification to public officials and conspiracy. The Halliburton lawsuit also incorporated Kellogg, Brown, and Root (KBR), its subsidiary that was trying to bag contracts for a Niger Delta liquified natural gas project.
The Halliburton lawsuit was settled when the company agreed to pay $35 million and consequently all the charges against Halliburton and its subsidiary would be withdrawn. Nigerian officials also agreed to not charge the companies with any criminal or civil claims any further. However, the $35 million was significantly lower than what Nigeria’s Economic and Financial Crimes Commission anticipated in the settlement. It is, therefore, no wonder that despite the agreement to settle the Halliburton lawsuit, the commission still reopened the bribery case in 2016.
5. $54 Million for Inflating Price Points
In 2002, Halliburton was sued by a group of investors who claimed the company inflated its share price resulting in misrepresentation that caused economic losses to the plaintiff. Halliburton had mispresented its potential liability in asbestos litigation, the benefits it accrued from a merger, and the revenues it expected from several construction contracts. The investors claimed that they experienced financial losses when the company’s share price dipped and wanted to be compensated.
The case dragged on for fourteen years and finally, justice was served when Halliburton agreed to settle for $100 million. The company would only pay $54 million of the $100 million while the rest would be covered by the company’s insurer. It was quite a blow for Halliburton since it had already forked $7.5 million in 2004 to settle the Securities Exchange Commission probe in the revenue from construction contracts.
4. $579 Million vs. KBR
The bribery charges against Halliburton and KBR set back the company millions of dollars because it seemed like the case would never end. Before the $35 million settlement in 2010, Halliburton and KBR had already forked out $579 million. According to Frontline World, the companies had been involved in bribery for at least ten years and the US Department of Justice had been conducting multi-jurisdiction investigations for over five years. The various governments involved in the multi-jurisdiction investigations included British, French, Nigerian, American, and Swiss.
After being dragged into the courtrooms for years, Halliburton and KBR finally agreed to atone for their sins by digging deep into their reserves. The parent company even foresaw the amount they would pay by predicting a settlement of at least $500 million. It was an informed prediction because KBR pled guilty and agreed to pay $402 million to cover the criminal fines while the two companies would join hands in paying $177 million to the SEC for forfeited profits though they never pled guilty to this civil action against them. The Foreign Corrupt Practices Act (FCPA) forbids bribing foreign government officials to retain or obtain foreign business thus Halliburton’s fine set the record as the largest ever for a US Company.
3. $1.1 Billion vs. BP
In 2010, BP contracted Halliburton to cement the Deepwater Horizon rig in Macondo in the Gulf of Mexico. However, the cement job by Halliburton was a disaster waiting to happen as the company used faulty cement thus the rig blew out. BP consequently blamed Halliburton for the poor job whereas Halliburton claimed that BP was to blame because it was its responsibility to conduct a cement bond log test. The back and forth continued for years with BP insisting that both Halliburton and Transocean, the owner of the rig, had to share the cost of cleaning up the oil spill and any other costs incurred relating to the oil spill.
According to Reuters, the co-owner of the Deepwater Horizon rig, Anadarko Petroleum Corp, agreed to pay $4 billion to indemnify BP the costs incurred in cleaning up the oil spill. Halliburton on the other hand reached a $1.1 billion settlement with those who suffered loss from the ill-fated rig.
2. $3.5 Billion over A Merger
Halliburton and Baker Hughes had been in talks regarding their merger for over one and half years. It would have cost Halliburton around $43 billion to acquire Baker Hughes and their lawyer, Voyles, said that a lot of hard work had gone into ensuring the transaction went through. However, their optimism came to a standstill when regulators began fighting back claiming that once the two oil giants merged, they would have too much control of the market. As the New York Times further explained, both companies hoped to reap numerous benefits not just for the shareholders but for the customers as well. For instance, the profits would go up significantly since they would alleviate the costs involved in operations as well as research and development.
Unfortunately, the Justice Department did not see eye to eye with the giant firms. The Department of Justice, therefore, filed a Halliburton lawsuit in the District of Delaware seeking to block the merger. The department raised concerns regarding the two companies merging because it would result in reduced competition, lower innovation in the oilfield services industry, and higher prices. In efforts to ensure that the free market and fair deals prevailed, the Justice Department fought hard to block the merger and it won the anti-trust lawsuit it had filed on April 6, 2016.
Halliburton had a lot to lose too if the deal failed so once the merger was blocked, it reached deep into its reserves to pay a breakup fee of $3.5 billion. The company announced that it would pay Baker Hughes the breakup fee by May 4, 2016. For Voyles, that failed transaction became the biggest disappointment in his entire career as Halliburton’s lawyer.
1. $5.1 Billion and Asbestos
Although Halliburton was founded primarily to be in the oilfield services industry, it has dipped its hands in several income-generating ventures including asbestos production through acquisitions. However, the company seems not to have fully considered the implications that came with asbestos production, especially the health complications caused by exposure to asbestos. As a result, its woes regarding asbestos litigation began in 1976 when the first asbestos Halliburton lawsuit was filed. The legal issues continued to the early 2000s and between those three decades, Halliburton had gone at a loss of over $900 million in settlements for asbestos litigation.
The final straw came in 2005 when, according to CNN, the asbestos litigations ended up costing the company $5.1 billion. The amount was so high that Halliburton nearly shut down but it filed for bankruptcy in 2003 and awaited approval. Fortunately, the bankruptcy claim was approved so Halliburton had to create a $5.1 billion trust fund to settle the asbestos lawsuits.