l statements were in doubt, and a former company accounting executive says they are.

Anthony Menendez, who was Halliburton's director of technical accounting research and training, has accused the world's second- largest oilfield-services company of using so-called bill-and-hold accounting and other undisclosed practices to "distort the timing of billions of dollars in revenue." In short, Menendez says this allowed Halliburton to book product sales improperly, before they occurred.

The allegations are part of a 54-page complaint Menendez filed against Halliburton with a Labor Department administrative law judge in Covington, La., who released the records in response to a Freedom of Information Act request. Menendez, who resigned last year and is seeking unspecified damages, says Halliburton retaliated against him in violation of the Sarbanes-Oxley Act's whistle-blower provisions after he reported his concerns to the Securities and Exchange Commission and the company's audit committee.

Halliburton has denied the allegations. A company spokeswoman, Cathy Mann, says Halliburton's audit committee "directed an independent investigation" and "concluded that the allegations were without merit." She declined to comment on bill-and-hold issues, and Halliburton's court filings in the case don't provide any details about its accounting practices.

Menendez, a 36-year-old former Ernst & Young LLP auditor, filed his complaint in December, shortly after a Labor Department investigator in Dallas rejected his retaliation claim. Mann says the company expects to prevail at trial.

Investors, of course, will care more about the reliability of Halliburton's numbers than whether Menendez wins. And a look at internal Halliburton documents Menendez filed with the court suggests there's reason for concern.

Here's how Menendez, who reported to Halliburton's chief accounting officer, summed up the bill-and-hold issue in his complaint:

"For example, the company recognizes revenue when the goods are parked in company warehouses, rather than delivered to the customer. Typically, these goods are not even assembled and ready for the customer. Furthermore, it is unknown as to when the goods will be ultimately assembled, tested, delivered to the customer and, finally, used by the company to perform the required oilfield services for the customer."

If true, that would violate generally accepted accounting principles. For companies to recognize revenue before delivery, "the risks of ownership must have passed to the buyer," the SEC's staff wrote in a 2003 accounting bulletin. There also "must be a fixed schedule for delivery of the goods," and the product "must be complete and ready for shipment," among other things.

Shortly after joining Halliburton in March 2005, Menendez says he discovered a "terribly flawed" flow chart on the company's in-house Web site, called the Bill and Hold Decision Tree. The flow chart, a copy of which Menendez included in his complaint, walks through what to do in a situation where a "customer has been billed for completed inventory which is being stored at a Halliburton facility."

First, it asks: Based on the contract terms, "has title passed to customer?" If the answer is no - and here's where it gets strange - the employee is asked: "Does transaction meet all of the 'bill and hold' criteria for revenue recognition?" If the answer to that question is yes, the decision tree says to do this: "Recognize revenue." The decision tree didn't specify what the other criteria were.

In other words, Halliburton told employees to recognize revenue even though the company still owned the product.

You don't have to be an accountant to see the problem.

"The policy in the chart is clearly at odds with generally accepted accounting principles," says Charles Mulford, a Georgia Institute of Technology accounting professor, who reviewed the court records. "It's very clear cut. It's not gray."

Bill-and-hold was at the heart of Sunbeam Corp.'s collapse in the late '90s, and later blowups at Qwest Communications International Inc. and Nortel Networks Corp.

It is possible to use bill-and-hold and comply with the rules. But it's hard. The customer, not the seller, must request such treatment. The customer also must have a compelling reason for doing so. Customers rarely do.

Menendez, who now works as a consultant, also accuses Halliburton of improper accounting for income taxes, off-balance-sheet entities and foreign-currency adjustments. Court records show he first alerted the SEC's enforcement division in November 2005, three months before he complained to Halliburton's audit committee.

In a Jan. 3 court filing, Halliburton said the SEC had closed its inquiry into the company's accounting practices.

Menendez told me, though, that he met with SEC investigators at the agency's Fort Worth, Texas, office as recently as March 28. He also shared a March 14 letter from an enforcement-division attorney there, which shows the travel itinerary the SEC arranged for him to attend that meeting. Mann, the Halliburton spokeswoman, declined to comment on whether the company has been notified of further SEC inquiries into Menendez's allegations.

Halliburton seemed to quell doubts about its books back in August 2004, when it paid $7.5 million to settle a two-year SEC investigation. The agency faulted Halliburton's disclosures, but not its accounting. As long as investors trust a company's profits, they generally don't care how the company earns them. If they begin to suspect they shouldn't, though, look out.