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

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.

Kirt Hill is a graduate of the University of Michigan. He founded CapitalValues.com in 2004 to support socially responsible investing.

pres@capitalvalues.com