Very good New Republic piece. Audit This. You get the idea. But there's a lot of information in this piece, enough so that I gave up bolding....
CAMBRIDGE DIARIST
Audit This
by Martin Peretz
Issue date: 07.22.02
In 1986 George W. Bush received one of the lucky breaks that would characterize his business career, when Harken Energy bought his otherwise near-worthless oil company, Spectrum 7, for more than $2 million in stock. As part of the deal, Bush was named to Harken's board of directors and was designated a member of the board's audit committee. An ordinary director of a public company has rather vague responsibilities, and many directors simply doze through their periodic meetings and collect their annual fees. But a member of the audit committee has specific obligations. Among them is the obligation to ensure that the company's books are honest. In fact, members of the audit committee are the guarantors of the company's probity.
It was during Bush's term on the audit committee in 1990 that the Securities and Exchange Commission (SEC) forced Harken to revise its books and account for millions of dollars in losses it had disguised as profit through the $12 million sale ($11 million of which was in reality financed by a note from Harken itself) of a subsidiary to a posse of insiders. If this evokes the work of Arthur Andersen, it should: Andersen was Harken's accounting firm, its legal and ethical guide. In that sense, when Bush was supposed to be exercising fiduciary oversight over the company, Harken was pioneering the very tricks that Enron and WorldCom have now made famous. The White House does not like this comparison; according to the Associated Press, Communications Director Dan Bartlett harrumphed, "To compare a $12 million sale ... by Harken to a deliberate attempt to hide $3.8 billion in losses is ridiculous." So, as the old joke about the whore has it, we are now just haggling over the price.
In the ordinary course of business, members of the audit committee know more about a company's financial drift than do other directors, and they know it earlier. Which is to say they really do have insider information. The vagaries of the law permit directors to buy and sell during designated windows of opportunity even though they may be in possession of information--as Bush was--that other shareholders don't have. Bush took advantage of this window when he sold his Harken stock. Unfair, maybe. But as Michael Kinsley once wrote in these pages, "[T]he scandal isn't what's illegal, the scandal is what's legal."
Nonetheless, what makes this kind of selling legally acceptable (if not exactly morally correct) is the obligation to report in a timely fashion the sale (or purchase) so outsiders know what insiders are doing. But Bush didn't do that. As the SEC has found, he failed to notify the authorities (and, through that notification, other stockholders and the public) on a timely basis that he had, in fact, sold stock. The SEC nevertheless declined to press charges, a decision that becomes more interesting when you realize, as The Baltimore Sun has noted, that the Commission's then-general counsel, James R. Doty--the man who supervised the legal inquiry into Bush's behavior--was also the lawyer who had facilitated the sale of the Texas Rangers baseball team to George W.'s partnership. And Bush was selling his Harken stock to pay off his debt to the bank that had financed his share of the Rangers' purchasing price.
The June 22, 1990, transaction was for 212,140 shares sold at $4 per share, for a total of $848,560. Two months after the sale (but before Bush actually reported it), Harken announced an unprecedented quarterly loss of $23 million, of which George W. could not have helped but be aware--of which, in fact, he was legally obliged to be aware. An Associated Press dispatch reported that "[Bush] received memos in spring 1990 that referred in stark terms to the company's cash-strapped condition.... One document said that the company was in the midst of a `liquidity crisis' and another told Bush the company was `in a state of non-compliance' with its lenders." When the loss was made public, Harken stock fell to a shade above $2 and, by year's end, was down to $1. (As we go to press twelve years later, one share of Harken Energy is worth 45 cents.)
According to Adam Entous, a Reuters White House correspondent, Bush was late in informing the SEC of his sales not once but four times, and one of those times he was more than eight months late. When one of these latenesses became an issue in Bush's 1994 run for governor of Texas, he simply asserted that the SEC had lost Form 4, as the relevant document is called. But that claim was sheer invention. And when asked about the filing last week--in the shadow of WorldCom and Martha Stewart--White House press secretary Ari Fleischer, on information provided by his boss, changed the story and pinned responsibility for the reporting delay on Harken's lawyers.
Given the president's well-known distaste for lawyers, it's perhaps not surprising that he blamed his blunder on members of the bar. But not every Bush lawyer involved in the Harken affair has been made a scapegoat. Bush's personal attorney at the time, the man who defended him against the SEC, was a man named Robert W. Jordan, formerly a partner at Baker Botts LLP. The Baker referred to therein is none other than James Baker, secretary of state to Bush père and the tactician behind W.'s extra-legal victory in Florida. At W.'s inaugural, Baker Botts threw a private party for, among others, Saudi Ambassador Prince Bandar. Later that year Jordan, who knows almost nothing about the Middle East, was appointed U.S. ambassador to Saudi Arabia.
James Baker now has a very influential friend and full-time interlocutor in Riyadh whenever he goes there (which he does often) on behalf of the banking consortium called the Carlyle Group. As it happens, George H.W. is also a highly remunerated senior Carlyle trustee with special responsibilities for Arab and especially Saudi Arab clients. In fact, Bush père traveled to Saudi Arabia shortly after the 2000 election. Prominent among H.W.'s clients was the family of Osama bin Laden, the money of whom was quickly disentangled from Carlyle for purposes of public decency shortly after September 11. Which raises a few questions: Why were Osama's many siblings and cousins who were in the States on September 11 apparently allowed to slip out of the country so quickly and without questioning? Did Ambassador Jordan do anything to facilitate their sudden and surprising departure? Did Jordan call his old partner Jim Baker to facilitate the mass getaway? Or did he go to the pater-familias, who had his own interest in the bin Ladens not suffering any embarrassments? Or did Jordan simply talk directly to his boss? Maybe no one talked to anybody. Which leads back to the original question: Why were the bin Ladens not detained? These might be useful topics for a congressional committee, once it gets done with Harken Energy. |
