Ready to apologize?
<chortle>
Bush Filing Given a New Explanation
Finances: The 1990 sale of stock was reported late. The White House now blames a mix-up.
By EDWIN CHEN, Times Staff Writer
WASHINGTON -- As President Bush prepares for a major speech on
corporate responsibility, the White House offered a new explanation
Wednesday of why he did not report in a timely manner his 1990 sale of
nearly $850,000 worth of stock in a Texas-based energy company weeks
before its value plummeted.
Then a West Texas oilman, Bush was eight months late in filing a sales
report with the Securities and Exchange Commission because of "a mix-up
with the attorneys" for the energy company, White House Press Secretary
Ari Fleischer told reporters Wednesday.
Bush, in years past, has said that he had filed the required paperwork and suggested that the SEC had lost it.
The revised explanation comes as Bush readies the speech he plans Tuesday on business ethics, an address prompted by the rash of high-profile corporate scandals. Wednesday's developments are bound to raise questions about Bush's own actions as a businessman, and perhaps detract from his effort to respond to the corporate scandals.
In an interview, Fleischer emphasized that Bush, as required by law, had filed with the SEC a notice of
intent to sell on the day that he sold his 212,140 shares of stock in the Harken Energy Corp. in June
1990 at $4 a share. At issue is the filing of a second form, which is required after such a sale.
In discussing what he termed the "mix-up" in the filing of the second form, Fleischer argued that the
Harken attorneys bore responsibility for it.
But several former SEC officials said it was Bush's responsibility, not the company's, to make sure the
stock sale report was filed on time. Even so, they said they regarded the infraction as relatively
insignificant and the White House's revised version of events as believable.
Fleischer said the current focus on the tardy filing of the second form is misleading because "it makes it
look like he was trying to hide something." Bush's filing of the first form shows that he was not,
Fleischer said.
By the end of 1990, Harken's stock had dropped to close to $1 a share after its revelation that August
of a $23-million loss. Bush, a member of the Harken board of directors at the time, denied any
advance knowledge or inside information of the company's financial problems before his stock sale.
The SEC investigated the Bush transaction in 1991 and cleared him of any wrongdoing. According to
documents released by the White House on Wednesday, the agency concluded: "It appears that Bush
did not engage in illegal insider trading."
The SEC probe drew attention when it occurred because Bush's father was president at the time. It
gained additional press attention in Texas during Bush's first gubernatorial run in 1994.
The Harken transaction is coming under fresh scrutiny because of the burgeoning corporate scandals
involving insider trading and fraudulent accounting practices.
Bush in March proposed a 10-point "corporate responsibility" plan that would, among other things,
require corporate officers to disclose sales of company stock within two days. In his Tuesday speech,
which he plans to deliver on Wall Street, Bush may propose new or tougher criminal, as well as civil,
penalties for business executives guilty of misleading or defrauding stockholders, employees and the
public.
Fleischer on Wednesday suggested that Bush's sale of Harken stock is an old story now being fanned
by the president's political detractors.
"This is one of the most widely reported stories of the '90s," Fleischer said.
Bush himself was asked about the stock sale on Tuesday while visiting a church in Milwaukee. Clearly
annoyed, he snapped:
"Everything I do is fully disclosed. It's been fully vetted. Any other questions?"
The president's testiness and Fleischer's comments were the latest signs of how seriously the White
House is taking the potential political fallout from the spate of corporate scandals.
The issue also is energizing Democrats, who have been struggling for campaign issues against a popular
wartime president. And they wasted no time on Wednesday jumping into the fray.
"President Bush, Vice President [Dick] Cheney, and SEC Commissioner Harvey Pitt like to preach
CEO responsibility," said Terry McAuliffe, chairman of the Democratic National Committee. "But
when it comes to their own records, their motto is, 'The buck stops over there,' " he added, referring to
Fleischer's explanation about a lawyers' mix-up.
"The reality is that Bush and his administration have given the green light to unscrupulous CEOs by
helping to foster a business environment that says, 'If it feels good, do it' and when confronted with the
crisis they offer toothless reforms," McAuliffe said.
Washington-based political analyst Stuart Rothenberg doubted that the Harken stock sale will
mushroom into a greater controversy—barring fresh disclosures about the case.
As a young man who had earned a master's degree in business administration at Harvard University,
Bush went to West Texas, like his father earlier, to seek his fortune in the energy industry.
But after some ups and downs, and amid a collapse of the world oil markets in the mid-1980s, Bush
merged two of his companies, Arbusto and Bush Exploration, to form Spectrum 7 Energy Corp.
In 1986, Harken bought Spectrum 7, giving Bush hundreds of shares of stock and up to $120,000
annually in consulting fees. But Harken also did not weather the oil bust well.
On June 22, 1990, Bush sold 212,140 shares of his Harken holdings for $848,560—about two
months before Harken disclosed mounting debt problems.
The SEC later said he was required to report the sale by July 10, 1990—but did not do so until March
4, 1991.
The agency launched a probe that same April after the Wall Street Journal reported that Bush had
failed to file with the SEC a so-called Form 4, reporting the transaction.
Fleischer said Wednesday White House officials reexamined the case after a New York Times Op-ed
piece by Paul Krugman on Tuesday that criticized Bush's actions in the stock sale—and suggested they
may not be so different from allegations of insider trading now dogging Martha Stewart.
In his daily press briefing, Fleischer took pains to differentiate between SEC Form 144, the notice of
intent to sell, and SEC Form 4, the post-sale report.
"The president thought it [Form 4] had been filed at the time, and indicated so publicly," Fleischer said.
"What happened as a result was, it was a mix-up with the [Harken] attorneys dealing with the Form 4,
and it was filed later. But it was, indeed, filed."
White House communications director Dan Bartlett compared the eight-month delay to driving 60 mph
in a 55 mph zone. "These types of late filings are not out of the ordinary," he told the Washington Post
on Wednesday.
"From everything we're able to glean, that's absolutely right," Fleischer said in an interview.
He also asserted that Form 4 is "required to be filed by corporations, and so it was corporate
attorneys" who were at fault.
"The key issue is the public notification," Fleischer said. "The president believes very much that
corporate officers should disclose their sales, which is what the president did."
latimes.com |
