Bush's oil deals.
Like his dad, Junior struck out in Texas and founded an oil company, Arbusto Energy, Inc., with $20,000 of his own money. (Arbusto is the Spanish word for bush.) The company foundered in the early 1980s when oil prices dropped (and his dad was Vice President.)
The 50 investors, who were "mainly friends of my uncle" in Junior's own words, put in $4.7 million and lost most of it. Junior claims that investors "did pretty good," but Bush family friend Russell Reynolds told the Dallas Morning News: "The bottom line was there were problems, and it didn't work out very well. I think we got maybe 20 cents on the dollar."
As Arbusto neared collapse, Spectrum 7 Energy Corporation bought it in September 1984. Despite his poor track record, the owners made Bush, Jr. the president and gave him 13.6% of the parent company's stock.
Spectrum 7 was a small oil firm owned by two staunch Reagan/Bush Sr. supporters -- William DeWitt and Mercer Reynolds. These two were also owners of the Texas Rangers and allowed Bush Jr. to purchase a chunk of the team cheaply; he later sold it for over 24 times what he paid.
Within two years of purchasing Arbusto and making Bush Jr. president, Spectrum 7 was itself in trouble; it lost $400,000 in its last 6 months of operation. That ended in 1986, when Harken Energy Corporation bought Spectrum 7's 180-well operation.
Junior got $227,000 worth of Harken stock, and a lot more. He was named to the board of directors, made $80,000 to $100,000 a year well into the 1990s as a "consultant" to Harken, and was allowed to buy Harken stock at 40% below face value.
He also borrowed $180,375 from Harken at very low rates; the company's 1989 and 1990 SEC filings said it "forgave" $341,000 in loans to unspecified executives.
So what did Junior do for all this money? It's hard to say exactly, but things happened for Harken after Junior came on board:
it got a $25 million stock offering from an unusual bank with CIA ties,
it won a surprise exclusive drilling contract with Bahrain, a small Mideast country, and
an Arab member of its Board of Directors was invited to White House policy meetings with President George Bush and National Security Adviser Brent Scowcroft.
Easy Money From Odd Sources
The firm's $25 million stock offering was underwritten by Stephens, Inc., an Arkansas bank whose head, Jackson Stephens, was on President Bush's "Team 100." (That was a group of 249 rich persons who gave at least $100,000 each to his presidential campaign committee). Stephens placed the offering with the London subsidiary of Union Bank of Switzerland, which (according to the Wall Street Journal) was not known as an investor in small American companies.
Union Bank did have other connections; it was a joint-venture partner with the notorious BCCI in a Geneva-based bank, and was involved in a scandal surrounding the Nugan Hand Bank, a CIA operation in Australia whose executives were advised by William Quasha, the father of Harken's chairman (Alan Quasha.) Union Bank was also involved in scandals surrounding Panamanian money laundering by BCCI, and Ferdinand Marcos' movement of 325 tons of gold out of the Phillipines.
That wasn't the only financing connection Junior brought; after the company won its Bahrain deal (see next item), the billionaire Bass brothers of Texas offered to underwrite the drilling operation. Robert Bass is also a member of Bush's Team 100, and he and his kin gave $226,000 to Bush Senior between 1988 and 1992.
The Bahrain Contract
In January 1990, Harken was chosen out of the blue by the small Mideast country Bahrain for an exclusive offshore oil drilling contract. They beat out Amoco, an experienced and major international conglomerate, despite having no offshore oil drilling experience at all. As of March 1995, the most recent report we could find, they had found no oil.
Junior has denied that he was involved in the deal, and even told the Wall Street Journal that he opposed it. But a company insider told Mother Jones Magazine "Like any member of the board, he was thrilled. His attitude was 'Holy shit, what a great deal!'"
If he did oppose it, he wasn't much of a consultant. Charles Strain, an energy company analyst in Houston, told Mother Jones: "Harken is not hard to understand -- it's easy. The company has only one real asset -- its Bahrain contract. If that field turns out to be dry, Harken's stock is worth, at the most, 25 cents a share. If they hit it big over there, the stock could be worth $30 to $40 dollars a share." As of December 1998, Harken Energy Corp. (HEC on Amex) is trading at $2.69 a share.
Access to the President For Bush's Foreign Business Partner
The most troubling thing that happened to Harken after it bought George Bush Junior in, was that one of its Board of Directors members was suddenly admitted to the highest levels of United States foreign policy meetings. These were not Clintonesque meet-and-greet fundraisers, but actual working policy meetings during a critical period.
After the Harken-Bahrain deal was signed, Talat Othman was added to a group of Arabs who met with George Bush and National Security Adviser Brent Scowcroft three times in 1990 -- once just two days after Iraq invaded Kuwait.
Othman was the representative of Sheikh Abdullah Bakhsh, who purchased 10% of Harken stock and had several ties to the infamous BCCI bank. Bakhsh was a co-investor in Saudi Arabia with alleged BCCI front man Ghaith Pharaon. Bakhsh's banker, Khalid bin Mahfouz, was another BCCI figure and head of the largest bank in Saudi Arabia. Sheikh Kalifah, the prime minister of Bahrain, was a BCCI shareholder and played the key role in selecting Harken for the oil contract.
This is the crowd that gained entry to the President and the National Security Adviser of the United States after George Junior made his deal with Harken.
Deal #2: Selling Oil Stock Just Before Iraq Invaded
George Bush, Junior sold 60% of his stock in Harken Oil in June, 1990 for $848,560. That was brilliant timing; in August, Iraq invaded Kuwait and Harken's stock dropped 25%. Soon after, a big quarterly loss caused it to drop further.
A secret State Deparment memo in May of that year had warned that Saddam was out of control, and listed options for responding to him, including an oil ban that might affect US oil prices.
We can't be sure that the President or an aide mentioned these developments to his son, or that Harken's representative who was admitted to meetings with the President picked up something and reported back to Junior. But it is the simplest and most logical explanation. The Bushes acknowledge that George Senior and his sons consult on political strategy and other matters constantly.
Furthermore, Harken's internal financial advisers at Smith Barney had issued a report in May warning of the company's deteriorating finances. Harken owed more than $150 million to banks and other creditors at the time. George Bush, Jr. was a member of the board and also of Harken's restructuring committee, which met in May and worked directly with the Smith Barney consultants. He must have known of these warnings.
These are pretty clear-cut indications of illegal insider trading. The Securities and Exchange Commission, controlled at the time by President George Bush, investigated but chose not to press charges.
Junior also violated another SEC rule explicitly. He was required to register his sale as an insider trade by July 10, 1990, but didn't until March 1991, after the Gulf War was over. He was not punished or cited.
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