Halliburton 2015 Annual Report Download - page 79

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Regulatory action. In October 2011, the Bureau of Safety and Environmental Enforcement (BSEE) issued a
notification of Incidents of Noncompliance (INCs) to us for allegedly violating federal regulations relating to the failure to take
measures to prevent the unauthorized release of hydrocarbons, the failure to take precautions to keep the Macondo well under
control, the failure to cement the well in a manner that would, among other things, prevent the release of fluids into the Gulf of
Mexico, and the failure to protect health, safety, property, and the environment as a result of a failure to perform operations in a
safe and workmanlike manner. We have appealed the INCs, but the appeal has been suspended pending certain proceedings in
the MDL and potential appeals. The BSEE has announced that the INCs will be reviewed for possible imposition of civil
penalties once the appeal has ended. We understand that the regulations in effect at the time of the alleged violations provide for
fines of up to $35,000 per day per violation.
Loss contingency. During 2015, we made the second installment payment under our MDL Settlement in the amount of
$333 million. Accordingly, as of December 31, 2015, our remaining liability related to the Macondo well incident was $472
million, consisting of a current portion of $400 million related to our MDL Settlement and a non-current portion of $72 million
representing a loss contingency unrelated to that settlement, included within "Other liabilities" on our consolidated balance
sheets. Our loss contingency liability has not been reduced for potential recoveries from our insurers. See below for information
regarding amounts that we could potentially recover from insurance.
Subject to the satisfaction of the conditions of our MDL Settlement and to the resolution of the appeal of the Phase
One Ruling, we believe that the BP MDL Settlement, our MDL Settlement, the Phase One Ruling and our settlement with BP
have eliminated any additional material financial exposure to us in relation to the Macondo well incident.
Insurance coverage. We had a general liability insurance program of $600 million at the time of the Macondo well
incident. Our insurance was designed to cover claims by businesses and individuals made against us in the event of property
damage, injury, or death and, among other things, claims relating to environmental damage, as well as legal fees incurred in
defending against those claims. Through December 31, 2015, we have incurred approximately $1.5 billion of expenses related
to the MDL Settlement, legal fees, and other settlement-related costs, of which $403 million has been reimbursed under our
insurance program. Most of the insurance carriers that issued policies in the final $200 million layer of insurance coverage
relating to the Macondo well incident notified us that they would not reimburse us with respect to our MDL Settlement. During
the first and third quarters of 2015, we settled with two of the remaining insurance carriers. We have initiated arbitration
proceedings to pursue recovery of the remaining balance of approximately $118 million. Due to the uncertainty surrounding
such recovery, no related amounts have been recognized in the consolidated financial statements as of December 31, 2015.
Fair Labor Standards Act (FLSA) Claim
In 2014, the U.S. Department of Labor Wage and Hour Division (DOL) commenced an audit to determine whether
certain workers have been properly classified by us as exempt under the FLSA. In addition, litigation was commenced against
us alleging that certain field professionals were not properly classified. During 2015, upon completion of a detailed analysis of
the potential exposure involved and settlement with the DOL and of the pending litigation, we recorded corresponding loss
contingency liabilities.
Securities litigation
In June 2002, a class action lawsuit was filed against us in federal court alleging violations of the federal securities
laws after the Securities and Exchange Commission (SEC) initiated an investigation in connection with our change in
accounting for revenue on long-term construction projects and related disclosures. In the weeks that followed, approximately
twenty similar class actions were filed against us. Several of those lawsuits also named as defendants several of our present or
former officers and directors. The class action cases were later consolidated, and the amended consolidated class action
complaint, styled Richard Moore, et al. v. Halliburton Company, et al., was filed and served upon us in April 2003. As a result
of a substitution of lead plaintiffs, the case was styled Archdiocese of Milwaukee Supporting Fund (AMSF) v. Halliburton
Company, et al. AMSF has changed its name to Erica P. John Fund, Inc. (the Fund). We settled with the SEC in the second
quarter of 2004.
In June 2003, the lead plaintiffs filed a motion for leave to file a second amended consolidated complaint, which was
granted by the court. In addition to restating the original accounting and disclosure claims, the second amended consolidated
complaint included claims arising out of our 1998 acquisition of Dresser Industries, Inc., including that we failed to timely
disclose the resulting asbestos liability exposure.
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.