Halliburton Under Fire for Operations in Iran

The shareholders of Halliburton are trying to stop
state-sponsored terrorism, using the same economic leverage
that was effective against South African racism in the
1970's. Back then, shareholders used corporate resolutions
to stop companies from doing business in South Africa. The
tactic helped bring a peaceful end to an unpopular regime.
Today, shareholders are trying to stop companies from doing
business with "sponsors of terrorism".

Many Americans would be alarmed to learn that American
corporations are doing business with countries who are
linked to terrorism. U.S. law currently restricts trade by
American companies with states designated as "sponsors of
terrorism." Halliburton is an American company doing
business with two restricted nations - Iran and Syria. The
company circumvented the law by opening an office in Iran
under the name of Halliburton Products and Services Ltd,
its Cayman Islands subsidiary.

The U.S. government may not be able to stop the company
from using a subsidiary in this manner, but the company is
contending with an angry group of New York City Police and
Fire Department pension fund owners. On November 12, 2002,
the group submitted a shareowner resolution regarding
Halliburton's office in Iran. The resolution points out
that U.S. law restricts trade by American companies in
countries such as Iran, who are designated by the U.S.
State Department as "sponsors of terrorism." The company
believes that the operations of its subsidiaries in Iran
are in compliance with U.S. law. Halliburton may, in fact,
be operating legally in a technical sense. Some investors
are not satisfied.

According to William Thompson, the New York City
comptroller who oversees the $80 billion in pension funds
for all city workers, the oil revenue from the work the
company is doing may be underwriting or supporting
terrorism. In March of 2003, Halliburton agreed to fulfill
the terms of the resolution by establishing a Board
committee to review the potential financial and
reputational risks of its Iranian operations and submit a
report. Thompson subsequently withdrew the resolution.
However, Halliburton's report submitted in October of 2003
failed to address the concerns specified in the pension
funds' proposal. The report focused on financial and legal
risks, and said nothing about the reputational risk, or
potential public backlash against the company.

It's only a theory, but Halliburton may be reluctant to
address the issue due to the fact that the Vice-President
of the United States was in charge of the corporation when
the Cayman subsidiary was formed.

In any event, Thompson considered the report to be a breach
of Halliburton's promise to the Fire and Police pension
funds. In a letter to David J Lesar, CEO of Halliburton,
Thompson said "your counsel cannot excuse Halliburton's
complete failure to report on the reputational risks of
Halliburton's business activities in Iran by repeating, as
she does, your report's statement that Halliburton's
activities are technically within the letter of the law."
In closing he tells the company, "We continue to expect
Halliburton to honor its commitment, and to produce a full
and complete report that includes the Board's review of the
reputational risks of doing business with Iran."

On January 25, 2004 William Thompson made his case on the
CBS program "60 Minutes". The title of the segment was,
"Doing Business with the Enemy". 60 Minutes went to see the
Halliburton subsidiary in the Cayman Islands and found no
actual office there and no employees. When Halliburton
explained that the Cayman subsidiary is actually run out of
Dubai, 60 Minutes again went to see. In Dubai, they found
the subsidiary sharing office space with a division of its
U.S.-based parent company. This arrangement raised more
legal questions about the independence of the subsidiary.

If there is no agreement reached between now and the annual
meeting in May, there will be a proxy vote on the
resolution. When you own stock in a corporation you obtain
the right to vote on important matters concerning corporate
policies and governance. When you invest in a mutual fund
that holds stocks, you convey this important responsibility
to your mutual fund manager. Last year (2003) the SEC ruled
that mutual funds must disclose how they vote the proxies
in corporate-governance shareholder fights. If the
resolution comes to a vote in May, many large mutual fund
companies will be forced to vote either with the company,
or with the angry shareholders. We will be following this
story.

SUPPORTING STATEMENT from form 8-K:

According to the U.S. State Department, the Iranian
government has actively supported and funded terrorist
operations against innocent civilians outside its own
borders. These activities led to the imposition of
government sanctions that provide that virtually all trade
and investment activity with Iran by U.S. corporations, is
prohibited. We believe that Halliburton's use of its Cayman
Island subsidiary to establish operations in Tehran
violates the spirit, if not the letter of the law. It also
exposes the company to the prospect of negative publicity,
public protests, and a loss of consumer confidence, all of
which can have a negative impact on shareholder value.

The following is a list of the top mutual fund holders of
Halliburton reported as of 2003:

Growth Fund of America Inc
Van Kampen Comstock Fund
Fundamental Investors inc
Fidelity magellan fund inc
Lord Abbett Mid Cap Value Fund
Hartford Capital Appreciation Hls Fund, Inc
Putnam Fund For Growth and Income
Merrill Lynch Basic Value Fund
Vanguard 500 Index Fund
Washington Mutual Investors Fund

If you are interested in purchasing a share if Halliburton
(HAL)in order to vote on this resolution, click here, or
copy and paste this link to FOLIOfn into your browser
bar:
http://www.foliofn.com/wsjsp/lp/lp.fsp?id=CPVLRS00010304N

Please keep in mind that there is an ongoing dialogue
between the shareholders and the company, and the issue may
be resolved before it comes to a vote in May.