To: bonnuss_in_austin who wrote (278354 ) 7/20/2002 8:26:55 PM From: stockman_scott Read Replies (3) | Respond to of 769670 A project in Bahrain that Bush opposed as oil company director helped company's stock price By PETE YOST Associated Press Writer Saturday July 20, 8:12 pm Eastern Time WASHINGTON (AP) -- Five days after former President George Bush was inaugurated in 1989, an official from Bahrain set in motion a chain of events that allowed the Texas oil company where the president's son was a director to beat out Amoco for drilling rights with huge profit potential. George W. Bush was on the board at Harken Energy Corp. when the company won the right to drill for oil off the coast of Bahrain, a tiny Persian Gulf island. There is no evidence the country was trying to curry favor with his father's administration when it turned away from a major U.S. oil company in favor of Harken. Board member Bush opposed the deal. In the end, the project was a bust. But it helped keep Harken's stock price in reasonably good shape for a few years -- and in so doing, helped Bush when he came under investigation for insider trading. The Securities and Exchange Commission took no action against him. At the time of the Bahrain project, Bush sold most of his shares as Harken tried to weather financial problems. Bush's sale drew the SEC's attention because the trade was reported eight months late to regulators. Bush's years as a Texas businessman have come under renewed scrutiny recently as he tries to restore confidence in financial markets hurt by business scandals. Despite Harken's continuing financial losses in 1990, minutes of a Harken board meeting attended by Bush show that the company's investment banker, Chad Weiss of the firm Smith Barney, said the Middle East drilling venture would keep the company's stock price up. "The potential of the Bahrain prospect will be the primary driving force initially for the company's stock," according to the minutes of a May 1990 meeting. "With the prospect of Bahrain in the picture," the investment banker "did not see much downside for the price of the stock." Worried board members had asked the Smith Barney representative whether the stock price would be hurt in carrying out the drastic step of splitting Harken into three separate companies. Harken's stock price stayed strong, though volatile, despite an unprecedented $23 million loss two months after Bush sold 212,140 shares for $848,560. The SEC cited the stock's rebound after a one-day drop in deciding there was no case against Bush for possibly profiting from inside information. In the absence of a drop in the stock price, the SEC concluded other investors did not view the $23 million loss as important, making any advance knowledge of the loss by Bush irrelevant. The SEC also concluded Bush had little advance knowledge. Ten days after reporting the huge loss, Harken stock was selling for $4 a share, the same price Bush had sold it for two months earlier. In recent weeks, Bush has responded to criticism of his sale by noting that the stock price doubled a year later. A key factor in that showing was that Harken and a company owned by the billionaire Bass brothers of Texas were working on the Bahrain project amid high expectations. The Basses' was among 25 oil companies that Harken said lined up at its door after it won the Bahrain concession. Harken announced the good news that it was teaming up with Bass the month before Harken reported its $23 million loss. The Bahrain project literally landed in Harken's lap. On Jan. 25, 1989, Bahraini minister of development and industry Yousef Shirawi contacted a respected retired American oil executive, Mike Ameen, and asked him if there was a small American company interested in drilling off the coast of Bahrain. Amoco wanted to drill in the same area. Later, Ameen, who did not know about Harken, mentioned the Bahrain project to investment banker David Edwards of Little Rock, Arkansas. Edwards had worked with Harken for several years and suggested the Texas firm. Ameen helped negotiate a deal. The U.S. ambassador to Bahrain at the time, Charles W. Hostler, said Friday that "an important factor in this relationship is Mike Ameen, who knew well the key figures and spoke their language after a lifetime of activity in that part of the world in the oil business." Shirawi has said that he had not known Harken's name and that he did not find out until later that Bush was connected with the company. According to people familiar with the matter, Bush opposed the Bahrain venture because of Harken's total lack of experience in Middle East drilling. In a letter on Bush behalf written during the 2000 presidential campaign, his lawyer, Robert Jordan, wrote that "at no time" did Bush "discuss Harken's interests in Bahrain or any other Harken business with any member of the Bush administration. He did not favor Harken's decision to seek a drilling concession in Bahrain." Jordan is now U.S. ambassador to Saudi Arabia. After Bahrain awarded the concession, Amoco executives went to the U.S. Embassy in Manama to express their "puzzlement" over how they lost out to the much smaller Harken, according to a State Department cable from 1990 released under the Freedom of Information Act. "Amoco officials were apparently unaware of the role" that Ameen "played in securing the contract for Harken, although they had heard that there had been an unknown middleman involved," said the cable.