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 Procter & Gamble Co. 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 Haliburton 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.

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