I Was Wrong, Novak
Jude Wanniski
September 6, 2000


To: Robert D. Novak
From: Jude Wanniski
Re: Dick Cheney's options

My apologies, Bob. When I bitched at you last week for your negative column on Dick Cheney's performance on the weekend talk shows, I really had not thought through his answers about the Halliburton options.

As you no doubt recall, I thought it unseemly of you to recommend that he give up $3.5 million in options that were now part of his personal assets. He had, after all, said he would do anything he could to make sure he would not profit during the period of service as vice president -- that he would either buy puts and calls to make sure it would not matter if Halliburton stock went up or down. Or, he said he would in advance announce that any appreciation of the options would be given to charity. That seemed sufficient to me when I read your column, yet you wanted him to give up the options as a good-will gesture.

We have so rarely had disagreements over the 30 years we've been friends that I was bothered by our difference of opinion and spent some time reading the news accounts and thinking it through. It finally dawned on me that the options have no value to Cheney until April of next year. That's when his compensation package would permit him to exercise the options if they are above the strike price, which they are now in the amount of $3.5 million. The news accounts indicate he also has a batch of Proctor & Gamble options, from his service on their board, but because the strike price is well above the market price, they obviously have zero value now.

The problem, then, is that from his inauguration as veep in January until April, Cheney would have a clear conflict of interest. In that three-month period, if the stock for any reason went down, yet there were policy decisions that had to be made by the administration which would tend to cause Halliburton assets to rise, the public would be left with greater doubts about the influence of Big Oil on the Bush administration than they otherwise would have. The idea of locking in the inferred value of the options in November would not remove those doubts, nor would a promise to give to charity any appreciated value over and above the $3.5 million. The fact is, any way you slice it, that the options had to be forfeited by Cheney and he did so when his own lawyers and his political advisers came to the same conclusion.

I do strenuously object to the Gore campaign hooting that Cheney was caught "with his hand in the cookie jar," as a Gore spokesman was quoted as saying in The New York Times. Cheney did get the options before he was being considered as Bush's running mate and in a real sense they are now a part of his personal assets, because the stock is above the strike price and he could lock in those gains with some tricky and expensive puts and calls. So he really is giving up $3.5 million -- or whatever amount will be inferred after the November elections. He clearly should not have to forfeit the options until after the elections, even if they drop below the strike price.

So, after all is said and done, Robert; you were right and I was wrong. My apologies for remonstrating with you about your column -- although I still think Cheney's performance on the talk shows was exemplary, that he is a great asset to the Bush campaign, and that he would make a terrific vice president. I've not known him as well as you, Bob, but I have known him a little longer than you, by perhaps a matter of months.