Global Policy Forum

By Allan Sloan

Sometimes it's better to be lucky than smart. Consider Vice President Cheney. He's got to be one of the luckiest former corporate chieftains on the planet.

No, I'm not talking about managing to pull out the election in Florida. I'm talking about how he came out about $20 million ahead because, at least partly because of public criticism, he cashed in stock options that would now be underwater if he had kept them. And how, luckily for him, he had left the executive suite before the roof fell in at Halliburton, the big oil-services company that he used to run.

This same "better lucky than smart" principle applies to the Bush people who had to liquidate their Enron holdings to take big jobs in the administration. Some of them complained about the supposed injustice of having to make such a financial sacrifice. Poor babies. Of course, they've totally lucked out. Enron stock, $70 a share when Bush was sworn in, now goes for 25 1/2 cents.

Cheney's worth a closer look because he's the luckiest of the group. And because a deal he made as Halliburton's chief executive has come back to haunt the company -- big time, as he would say.

Let me give you some history and take you through Lucky Cheney's math.

In August 2000, you may recall, George W. Bush picked Cheney to be his vice-presidential candidate. Cheney, a longtime politician who had been at Halliburton all of five years, promptly stepped down. He said he would sell his stock before taking office if the Republicans won -- but he wouldn't commit to unloading his Halliburton options. That caused an uproar because owning Halliburton options would have given Cheney exactly the same ethical problem as owning Halliburton stock: He would have a substantial personal interest in Halliburton's stock price. The company traditionally has good years when oil prices are rising and not-so-good years when they're falling. The conflict is obvious.

Cheney cashed in all the options he could, clearing $19 million by my math. Since I can't read Cheney's mind and I couldn't get any comment from him or his associates, I don't know if he sold because of the public pressure or because he wanted to sell. Regardless, it sure worked out well for him. He got around $10 million more from selling the Halliburton shares he owned outright. Total: around $30 million. I'm a bit vague on the numbers because no one in Cheneyland would discuss them with me. So I'm relying on public documents, work by Thomson Wealth Management and my own analysis.

Flash forward to the present. At Halliburton's current price of around $17, Cheney's options would be out of the money, because their exercise prices ranged from $21 to $54.50. Someday, of course, Halliburton's stock price may soar. But for now, Cheney is $19 million ahead because he cashed the options in. (His $10 million of stock would currently fetch $3 million.)

I don't think for a minute that Cheney bailed out of Halliburton knowing that trouble lay ahead. I think he just got lucky. If he were still Halliburton's CEO, shareholders would probably be screaming for his head. That's because his biggest deal -- Halliburton's $8 billion purchase of Dresser Industries in 1998 -- infected Halliburton with an asbestos liability. Think of it as financial plague, and you get a sense of how nasty the problem is.

To give you the short version, Dresser once had a subsidiary, Harbison-Walker, that used asbestos in some products. Dresser made Harbison-Walker a separate company in 1992, and HW agreed to take over the entire asbestos liability. But the claims became so enormous that HW and a European company that subsequently bought it both ended up in bankruptcy. So the asbestos lawsuits, searching for deeper pockets, have migrated to Dresser and its new owner, Halliburton.

A Halliburton spokesman said the firm didn't know it was taking on a potential asbestos problem when it bought Dresser in 1998: "We believed they were indemnified," she said. Indeed, in the past year or so, asbestos liability has exploded, becoming a threat to companies that barely know how to spell asbestos.

Halliburton, which lost some big asbestos verdicts that it's now appealing, has taken an active role in HW's bankruptcy, trying to pull off a fancy maneuver to keep the asbestos problem confined to HW. We won't know for years how the game ends.

Meanwhile, Cheney isn't giving any of his stock and options profits back to Halliburton or its shareholders. He gets the blame for this fiasco because he was in charge. That's the way the world works. Big time.

Sloan is Newsweek's Wall Street editor. His e-mail address is This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

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