Halliburton 2011 Annual Report Download - page 113

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98
In April 2005, the court appointed new co-lead counsel and named the Fund the new lead plaintiff,
directing that it file a third consolidated amended complaint and that we file our motion to dismiss. The
court held oral arguments on that motion in August 2005. In March 2006, the court entered an order in
which it granted the motion to dismiss with respect to claims arising prior to June 1999 and granted the
motion with respect to certain other claims while permitting the Fund to re-plead some of those claims to
correct deficiencies in its earlier complaint. In April 2006, the Fund filed its fourth amended consolidated
complaint. We filed a motion to dismiss those portions of the complaint that had been re-pled. A hearing
was held on that motion in July 2006, and in March 2007 the court ordered dismissal of the claims against
all individual defendants other than our Chief Executive Officer (CEO). The court ordered that the case
proceed against our CEO and us.
In September 2007, the Fund filed a motion for class certification, and our response was filed in
November 2007. The district court held a hearing in March 2008, and issued an order November 3, 2008
denying the motion for class certification. The Fund appealed the district court’ s order to the Fifth Circuit
Court of Appeals. The Fifth Circuit affirmed the district court’ s order denying class certification. On May
13, 2010, the Fund filed a writ of certiorari in the United States Supreme Court. In early January 2011, the
Supreme Court granted the writ of certiorari and accepted the appeal. The Court heard oral arguments in
April 2011 and issued its decision in June 2011, reversing the Fifth Circuit ruling that the Fund needed to
prove loss causation in order to obtain class certification. The Court’ s ruling was limited to the Fifth
Circuit’ s loss causation requirement, and the case was returned to the Fifth Circuit for further consideration
of our other arguments for denying class certification. The Fifth Circuit returned the case to the district
court, and in January 2012 the court issued an order certifying the class which we have appealed. The case
is at an early stage, and we cannot predict the outcome or consequences thereof. As of December 31, 2011,
we had not accrued any amounts related to this matter because we do not believe that a loss is probable.
Further, an estimate of possible loss or range of loss related to this matter cannot be made. We intend to
vigorously defend this case.
Shareholder derivative cases
In May 2009, two shareholder derivative lawsuits involving us and KBR were filed in Harris
County, Texas, naming as defendants various current and retired Halliburton directors and officers and
current KBR directors. These cases allege that the individual Halliburton defendants violated their fiduciary
duties of good faith and loyalty, to our detriment and the detriment of our shareholders, by failing to
properly exercise oversight responsibilities and establish adequate internal controls. The District Court
consolidated the two cases, and the plaintiffs filed a consolidated petition against only current and former
Halliburton directors and officers containing various allegations of wrongdoing including violations of the
FCPA, claimed KBR offenses while acting as a government contractor in Iraq, claimed KBR offenses and
fraud under United States government contracts, Halliburton activity in Iran, and illegal kickbacks.
Subsequently, a shareholder made a demand that the board take remedial action respecting the FCPA
claims in the pending lawsuit. Our Board of Directors designated a special committee of independent and
disinterested directors to oversee the investigation of the allegations made in the lawsuits and shareholder
demand. Upon receipt of its special committee’ s findings and recommendations, the independent and
disinterested members of the Board determined that the shareholder claims were without merit and not
otherwise in the best interest of the company to pursue. The Board directed company counsel to report its
determinations to the plaintiffs and demanding shareholder. As of December 31, 2011, we had not accrued
any amounts related to this matter because we do not believe that a loss is probable. Further, an estimate of
possible loss or range of loss related to this matter cannot be made.
We have agreed in principle, subject to approval by the court, to settle the lawsuits. Under the
terms of the proposed settlement, we have agreed to implement certain changes to our corporate
governance policies and agreed to pay the plaintiffs’ legal fees.