Ray, these damn Republicans made such a big deal about Clinton "lying under oath" And now we have one of their own stealing, doing insider trading and screwing the American public. I hope the Americans boot these Republican suckers out in Nov. 2002
Bush squirms in sleaze scandal
Oil shares deal launched his political career
Ed Vulliamy in New York
Sunday July 14, 2002
The Observer
The tide of sleaze engulfing corporate America lapped closer to President Bush this weekend with the revelation that official documents appear to show he provided a misleading account of a controversial share deal.
The documents emerged at the end of a week in which Bush went to Wall Street to launch a crusade to clean up business and announce a package of reforms generally greeted as having more jawbone than backbone.
They relate to Bush's sale of stocks in an oil company of which he was a director in June 1990 - a transaction that catapulted him to massive wealth and on to the political stage in Texas and thereafter the world. The papers show that, despite his claims to the contrary, Bush was advised that the value of shares in his company, Harken Oil, were about to plummet. He sold them off just in time, reaping a profit of $835,807 (£553,514). It is a breach of US regulations to trade in stock with inside knowledge that its value is about to change.
He went on to use the profit from his sale to buy a stake in the Texas Rangers baseball team, which when sold later turned Bush into a multi-millionaire.
Bush's Harken share sale was investigated by the government regulatory body, the Securities and Exchange Commission, operating under the administration of his father, President George Bush senior - but no action was taken.
Harken had come to Bush's rescue after he had failed in a series of ventures in the oil business. It offered to buy out his sinking Spectrum 7 oil company, give him a seat on its board and a consultant's salary of $120,000. 'It helps to be the son of the President,' said the firm's founder, Phil Kendrick, explaining the otherwise senseless splash-out for Bush's Spectrum. 'He's worth $120,000 a year just for that.'
But Harken soon hit trouble with a series of disastrous bets on the commodities market. Bush maintained last week that he was unaware of the imminent collapse of Harken's share value, insisting he had 'sold into good news'.
The documents cast doubt on this claim. They were found during Bush's presidential election campaign by Knut Royce, former senior fellow with a non-partisan Washington research group, the Centre for Public Integrity, and published in its bulletin Public I.
The SEC concluded that in March 1990, months ahead of the share sale, Bush realised Harken faced loses of $4.2 million in the year's second quarter. And buried in the papers were memoranda written by Harken executives warning one another of a 'liquidity crisis' facing the company.
One was from company president Mikel Faulkner to the board of directors on which Bush sat. Dated 20 April - two months before Bush sold his stock - it warned of 'events which drastically affect Harken's current strategic plan with regard to seeking public funds'. One of Harken's leading banks, says Royce, was looking to withdraw its loan.
Two weeks before Bush moved to sell, on 7 June, Faulkner provided Bush with minutes of an executive committee meeting warning of a 'shutdown effective 30 June unless third-party funding is found'. Harken, it said, had lost $28.5m in trade credit since the start of the year. Bush sold on 22 June; on 20 August, Harken posted quarterly losses of $23.2m.
Although the SEC elected not to prosecute, an internal memo advised that the halt of the investigation 'must in no way be construed as indicating that the party has been exonerated or that no action may ultimately result'.
The SEC is entitled to be notified of all share trades; Bush failed to do this to deadline on four occasions - the main 1990 share deal being reported eight months late.
While campaigning for the governorship of Texas in 1994, Bush insisted he had correctly filed notice of his share sale to the SEC, but that it had lost the documents.
'That's what we remember him saying then and that's certainly not what he's saying now,' says Craig McDonald of the research group, Texans for Public Justice. 'One can only presume he changed his story because he knew there were people who could come forward and attest to the opposite.'
When it became clear last week Bush had not filed his documents, White House spokesman Ari Fleischer blamed 'a mix-up with the attorneys'. However, Robin Jordan, the leading lawyer concerned, went on to be appointed by Bush as ambassador to the oil kingdom of Saudi Arabia.
'Funny,' observed a former senior official in the Clinton administration, 'that the man at fault, instead of getting sanctioned, gets sent to a vital national security post by a President from Texas to an oil state and pivotal ally.'
There remains 'one great mystery', says Royce. 'Who was the "institutional client" who bought Bush's shares? Who the hell bought such a large block of crumby stock?' The broker of the deal, Ralph Smith, refuses to say. 'Someone out there was sure looking after George W,' says Royce.
Yesterday's Washington Post disclosed that deputy Attorney General Larry Thompson, leader of the task force briefed to prosecute company crime, was director of a credit-card company, Providian, which in 2000 paid out $400m to settle allegations of consumer and securities fraud. Thompson sold off his shares - worth nearly $4.2m - in the 'sub-prime' market company targeting low-income families when he took office last year to comply with ethics rules .
observer.co.uk |
