Halliburton,Under,Fire,for,Ope business, insurance Halliburton Under Fire for Operations in Iran

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The shareholders of Halliburton are trying to stopstate-sponsored terrorism, using the same economic leveragethat was effective against South African racism in the1970's. Back then, shareholders used corporate resolutionsto stop companies from doing business in South Africa. Thetactic helped bring a peaceful end to an unpopular regime.Today, shareholders are trying to stop companies from doingbusiness with "sponsors of terrorism". Many Americans would be alarmed to learn that Americancorporations are doing business with countries who arelinked to terrorism. U.S. law currently restricts trade byAmerican companies with states designated as "sponsors ofterrorism." Halliburton is an American company doingbusiness with two restricted nations - Iran and Syria. Thecompany circumvented the law by opening an office in Iranunder the name of Halliburton Products and Services Ltd,its Cayman Islands subsidiary. The U.S. government may not be able to stop the companyfrom using a subsidiary in this manner, but the company iscontending with an angry group of New York City Police andFire Department pension fund owners. On November 12, 2002,the group submitted a shareowner resolution regardingHalliburton's office in Iran. The resolution points outthat U.S. law restricts trade by American companies incountries such as Iran, who are designated by the U.S.State Department as "sponsors of terrorism." The companybelieves that the operations of its subsidiaries in Iranare in compliance with U.S. law. Halliburton may, in fact,be operating legally in a technical sense. Some investorsare not satisfied. According to William Thompson, the New York Citycomptroller who oversees the $80 billion in pension fundsfor all city workers, the oil revenue from the work thecompany is doing may be underwriting or supportingterrorism. In March of 2003, Halliburton agreed to fulfillthe terms of the resolution by establishing a Boardcommittee to review the potential financial andreputational risks of its Iranian operations and submit areport. Thompson subsequently withdrew the resolution.However, Halliburton's report submitted in October of 2003failed to address the concerns specified in the pensionfunds' proposal. The report focused on financial and legalrisks, and said nothing about the reputational risk, orpotential public backlash against the company. It's only a theory, but Halliburton may be reluctant toaddress the issue due to the fact that the Vice-Presidentof the United States was in charge of the corporation whenthe Cayman subsidiary was formed. In any event, Thompson considered the report to be a breachof Halliburton's promise to the Fire and Police pensionfunds. In a letter to David J Lesar, CEO of Halliburton,Thompson said "your counsel cannot excuse Halliburton'scomplete failure to report on the reputational risks ofHalliburton's business activities in Iran by repeating, asshe does, your report's statement that Halliburton'sactivities are technically within the letter of the law."In closing he tells the company, "We continue to expectHalliburton to honor its commitment, and to produce a fulland complete report that includes the Board's review of thereputational risks of doing business with Iran." On January 25, 2004 William Thompson made his case on theCBS program "60 Minutes". The title of the segment was,"Doing Business with the Enemy". 60 Minutes went to see theHalliburton subsidiary in the Cayman Islands and found noactual office there and no employees. When Halliburtonexplained that the Cayman subsidiary is actually run out ofDubai, 60 Minutes again went to see. In Dubai, they foundthe subsidiary sharing office space with a division of itsU.S.-based parent company. This arrangement raised morelegal questions about the independence of the subsidiary. If there is no agreement reached between now and the annualmeeting in May, there will be a proxy vote on theresolution. When you own stock in a corporation you obtainthe right to vote on important matters concerning corporatepolicies and governance. When you invest in a mutual fundthat holds stocks, you convey this important responsibilityto your mutual fund manager. Last year (2003) the SEC ruledthat mutual funds must disclose how they vote the proxiesin corporate-governance shareholder fights. If theresolution comes to a vote in May, many large mutual fundcompanies will be forced to vote either with the company,or with the angry shareholders. We will be following thisstory. SUPPORTING STATEMENT from form 8-K: According to the U.S. State Department, the Iraniangovernment has actively supported and funded terroristoperations against innocent civilians outside its ownborders. These activities led to the imposition ofgovernment sanctions that provide that virtually all tradeand investment activity with Iran by U.S. corporations, isprohibited. We believe that Halliburton's use of its CaymanIsland subsidiary to establish operations in Tehranviolates the spirit, if not the letter of the law. It alsoexposes the company to the prospect of negative publicity,public protests, and a loss of consumer confidence, all ofwhich can have a negative impact on shareholder value. The following is a list of the top mutual fund holders ofHalliburton reported as of 2003: Growth Fund of America IncVan Kampen Comstock FundFundamental Investors incFidelity magellan fund incLord Abbett Mid Cap Value FundHartford Capital Appreciation Hls Fund, IncPutnam Fund For Growth and IncomeMerrill Lynch Basic Value FundVanguard 500 Index FundWashington Mutual Investors Fund If you are interested in purchasing a share if Halliburton(HAL)in order to vote on this resolution, click here, orcopy and paste this link to FOLIOfn into your browserbar:http://www.foliofn.com/wsjsp/lp/lp.fsp?id=CPVLRS00010304N Please keep in mind that there is an ongoing dialoguebetween the shareholders and the company, and the issue maybe resolved before it comes to a vote in May. Article Tags: Doing Business