The president's new pitch
By William Walker
Washington bureau
The Toronto Star
Jul. 21, 2002. 01:00 AM
"I was a bulldog on the pant leg of opportunity."
— George W. Bush, on his career as Texas oilman and baseball owner
"He's not an entrepreneur. He's a welfare recipient."
— James Runzheimer, Texas lawyer and anti-tax activist
IN WASHINGTON LONG BEFORE he became president, George W. Bush was a popular figure with fellow oilmen at the Petroleum Club bar in Midland, Texas, chewing tobacco and telling tales over bourbon and beer.
It's how business got done, often on a drunken handshake.
"Y'all don't call the lawyers till the deal is done, they'll just screw it up," an old Texas oil patch saying goes.
Bush, the president, is trying to lead the charge toward "Corporate Responsibility." But Bush, the businessman who felt right at home in that Wild West world of wheeling and dealing, needed the weight of his family name to survive a series of questionable corporate deals that made him a small fortune and left investors holding a near-empty bag.
With a stock market in tatters, investors in a panic, the U.S. economy on the verge of a "double-dip" recession and corporate chieftains battling the image of lying, insider-dealing crooks, the president must try to restore confidence.
Americans who have watched their stock-market nest eggs shatter in the wake of the giant Enron and WorldCom accounting scandals could become angry voters in the November mid-term election. Heavy Republican losses in the Senate and House would weaken Bush's presidency as he eyes re-election in 2004.
He can always try to oust Iraq's Saddam Hussein to stop the slide in his public approval ratings. But, in the end, he knows from his father's experience that it's the economy that matters.
George Bush Sr. impressed Americans as their 41st president by winning the Persian Gulf War but still was turfed from office after one term because the country was in a recession.
The challenges George Walker Bush faces now are much different from the ones he took on when he returned to Midland, the dusty west Texas town where his father had come a generation earlier to get into the oil business, and where George W. spent his boyhood.
He came back in 1977, armed with a two-year M.B.A. degree from Harvard University, to try to get out from underneath his famous father's shadow.
He had drifted aimlessly since graduating in 1968 from Yale, the alma mater of both his father and grandfather. Most of those lost years were spent partying prodigiously in Houston, chasing women and living in the Chateau Dijon apartments, which, by all accounts, resembled a fraternity house.
Bush drove into Midland in a second-hand, dented Oldsmobile with $13,000 (all figures U.S.) in his pocket, money left over from an education trust fund from his parents.
He wasn't a pity case. The grandson of a senator, his first home was next door to the president of Yale University. Still, Bush wanted to make it on his own.
He knew that if he were to have his own career in politics, he had to accomplish something so voters wouldn't think he was just "riding on my daddy's coattails," as he once told a Texas reporter.
How Bush arrived in Midland with $13,000 and left with $15 million offers an illuminating glimpse into America's influential elites.
Bush doesn't drink any more, having quit after a painful hangover from his 40th birthday party, but when he returned to Midland he was still a wild man. He began hanging out with Don Evans (whom he nicknamed "Evvie"), another west Texas oilman who is now his commerce secretary, and pals Paul Rea, Dennis Grubb and Charlie Younger.
Bush gave Younger the nickname "Fingers" after what Younger did with two of his fingers one night after he'd had too much tequila and thought he'd better throw up. The group dubbed themselves "The Greyhounds," because when it came to drinking and partying, they felt like they could run like greyhounds at a racetrack.
Impulsively eyeing an empty west Texas congressional seat in the 1978 election, Bush decided to get his life in order, fast. Friends introduced him to Laura Welch, a 30-year-old librarian from Austin, and within five weeks they were married.
They set out on the campaign trail on the back of a flatbed truck trying to win the election. Bush lost.
The defeat made it even clearer to Bush that he needed to accomplish something on his own. The man who beat him in the 1978 election called him a "carpetbagger" and repeatedly referred to his Ivy League roots in Connecticut.
So Bush set up an oil company called Arbusto Energy Inc. (pronounced Ar-BOOST-oh, which is Spanish for "a bush"). He wanted to buy land rights in search of oil, but he didn't have any seed money.
Almost immediately, his father's friends proved more than happy to help someone who could be future presidential material, even if it meant risking losses.
Most of the early financing came from Connecticut, lined up by his financier uncle Jonathan Bush. One of those investors was Russell Reynolds, an East Coast multi-millionaire. "So George W. came to see me, and I thought he would be an absolute star," Reynolds told American Spectator magazine at the time. "A very attractive guy. Being a great friend of the Bushes, I put in a small amount of money."
Reynolds' contribution was about $25,000.
Other friends of the Bushes soon lined up. From 1979 to 1983, about 50 investors plowed $4.7 million into Arbusto.
George L. Ball, CEO of Prudential Bache Securities, a stock market giant, invested $100,000. Lewis Lehrman, a New York millionaire and Republican supporter, put up $47,500. Fitzgerald Bemiss, a childhood friend of Bush's father, invested $80,000. George Ohrstrom, who went to private school with Bush's father in Connecticut, anted up $100,000. Philip Uzielli, a close friend of James Baker III, the senior Bush's political fixer and cabinet member, chipped in $50,000.
Bush started buying up land and drilling. Sometimes he struck oil; mostly he didn't. He never "bagged the elephant," as oilmen say — never or hit an oil find that would return huge profits to his investors.
As Arbusto floundered, his pals teasingly called it "Ar-BUST-o."
A frustrated Bush was now drinking heavily. It bothered some close friends, who worried it could be a political liability. It also bothered Laura Bush, who told him his personality was normally a "3" on the loudness scale, but when he drank it became a "10."
She told him she preferred him as a "3," as Elizabeth Mitchell documented in W: Revenge Of The Bush Dynasty.
Bush often had four bourbons just to "warm up." A friend asked if he knew when the last day was when he didn't have a beer. Bush was stumped.
The drinking continued throughout his business days. One night in 1986, at a fashionable restaurant in Dallas, Bush finished his dinner and spotted Wall Street Journal reporter Al Hunt at a nearby table.
Hunt, who was with his 4-year-old son and his wife, CNN anchor Judy Woodruff, had just predicted Jack Kemp would beat Bush's father for the Republican presidential nomination.
Bush went over to Hunt's table. "You f---ing son of a bitch," he said. "I won't forget what you said, and you're going to pay a f---ing price for it."
--------------------------------------------------------------------------------
Two years before, Arbusto had hit the skids, returning just $1.5 million to investors on their $4.7 million stake.
But Bush fared much better personally, making $362,000 on his investment of only $102,000 (which he had borrowed from a bank).
Hoping to raise more cash, he changed the company's name from Arbusto to Bush Exploration. It didn't help.
He was finally bailed out by an old Yale classmate, William DeWitt Jr., an oilman who owned Spectrum 7 Energy Corp.
By now, Bush's father was vice-president to Ronald Reagan. Later, in 1988, the wealthy Dewitt would become one of the biggest donors to Bush Sr.'s presidential campaign.
DeWitt bought Bush Exploration outright. Bush was named Spectrum 7's CEO, at $75,000 a year, and received 1.1 million shares in the company's stock, a practice many in Congress now want outlawed.
As world oil prices fell, Spectrum 7, with Bush at the helm, became a money loser.
By 1986, another bailout was needed. Enter Harken Energy, a mid-sized Texas oil company that gave Bush and his fellow Spectrum 7 owners $2 million worth of Harken stock for the debt-ridden company.
Bush's take was about $500,000 worth of stock. He was also named a company director and received $120,000 in consulting fees, even though he was off working on his father's presidential campaign through most of 1987 and 1988.
"His name was George Bush. That was worth the money they paid to him," said Harken founder Phil Kendrick, as reported by Charles Lewis of the Centre for Public Integrity, in his book, The Buying Of The President 2000.
One month after Bush came aboard, the company obtained a $20 million investment from Harvard Management Company Inc., which manages Harvard University's multi-billion dollar endowment.
This is where the Bush connection clearly paid off for Harken. "You just don't knock on the door of a major endowment, which Harvard certainly was, and say: `Listen, I've got a great idea' ... unless you have an in," said Bing Sung, a former Harvard Management Company investment manager.
One "in" was Robert Stone Jr., a former Houston oilman who served on Harvard Management's board of directors and was an old Bush family friend.
In 1990, Harken hit the big time. With Bush's father in the White House, the company beat out giants like Amoco and Chevron to make a deal with the government of Bahrain that gave the upstart exclusive rights to drill for offshore oil there.
Eyebrows were raised because Harken, a small player, had never been involved in international oil production.
With Bush's father set to mobilize a giant military force in 1991 to drive the Iraqi army out of Kuwait, many wondered about the Harken deal with Bahrain and the Bush connection.
"It raises the question ... of an effort to cozy up to a presidential son," the Wall Street Journal reported in a 1991 page-one analysis.
With the Harvard deal, Harken now needed even more capital to move into Bahrain. It came in the form of $25 million from Bass Enterprises, run by Fort Worth's Bass brothers, who were members of Team 100, an elite group of top Republican party donors.
All four Bass brothers — Sid, Robert, Edward and Lee — attended Yale University, just like the Bushes. The Bass family was the fifth-largest donor to Bush's campaign to become the governor of Texas.
Everything looked great, at least on paper. But Harken used up all its cash drilling at two offshore sites in Bahrain. No oil. No profits. The end result was big losses for investors like Uzielli, Harvard and the Bass brothers.
But not for Bush.
While Harken was still a going concern, he saw a chance to use his oil earnings to satisfy his first love — baseball — and fulfill a fantasy by owning a major league team.
He needed $500,000 to join a group that was buying the Texas Rangers from owner Eddie Chiles, another friend of the Bush family. Bush borrowed the $500,000 from the United Midland Bank, where he had once been a board member, using the Harken shares as collateral.
Then he sold the shares — for almost $850,000 — and paid off the bank and other debts.
The sale in June, 1990, violated a six-month no-sell agreement. Two months later, Harken posted its largest quarterly loss ever, $23 million.
Bush had been warned the losses were piling up, records show. He served on Harken's internal audit committee.
The Securities and Exchange Commission investigated Bush's sale, including the fact he was 34 weeks late filing the paperwork required by law. But it found no wrongdoing. Bush was never even interviewed by the SEC.
The watchdog's chairman at the time was Richard Breeden, who had been economic adviser to Bush's father at the White House.
The Bush camp says the stock was sold to avoid continuing high interest charges on the loan. Critics say the stock was sold because Bush knew Harken would report the $23 million loss in two months, driving down the stock price and making it impossible to cover the loan.
Bush's $500,000 bought him only 1.8 per cent of the team, but the big investors wanted him for his name recognition and political power.
The other owners named him managing partner, making him their leader in negotiations with the city and with Major League Baseball.
All together, Bush and his partners — the largest being Fort Worth financier Richard E. Rainwater, a major contributor to the presidential campaigns of Bush's father — paid Chiles $86 million for the team.
But that's just the beginning of the story.
The Rangers played in a dilapidated, minor-league stadium in Arlington, a prosperous suburb of Dallas. It had no luxury skyboxes or other modern amenities needed to bring in enough cash for the team to compete in MLB's multi-million dollar free-agent player market.
Bush concluded that his great achievement before entering politics would be a spanking new baseball stadium.
But the partners didn't want to spend their own cash. Instead, they threatened to move the Rangers from Arlington. That was enough to galvanize the Arlington city council, which agreed to fund the $135 million stadium through a tax increase.
Arlington began an advertising campaign to persuade residents to support a referendum on the subject. It passed by a 2-to-1 margin.
The city promised voters that the Rangers' owners were spending $50 million of their own money on the new park, but the owners passed that cost along to fans through a ticket surcharge.
In the end, the stadium, known as The Ballpark at Arlington, came entirely free to Bush and company. Today, many Arlington taxpayers say the deal was "a theft."
The Rangers' owners also wanted some huge tracts of land surrounding the stadium for parking and possibly to profit on future land speculation. Bush told Texas reporters at the time that part of his plan was to obtain a large parcel of land around the new stadium as a potential revenue stream.
The city agreed to create something called the Arlington Sports Facilities Development Authority, which was given the power to "condemn" land around the proposed stadium and seize it.
The land in question was anything but derelict, Arlington being one of Dallas' poshest suburbs. When landowners refused to sell at prices Bush and his partners were offering, the sports authority stepped in, condemned the land and seized it.
Several lawsuits ensued and courts granted landowners a total of $11 million they should have been paid. But even that cost wasn't borne by the Rangers' owners.
Since it was court-ordered to the sports authority, an arm of the city, taxpayers were on the hook once again.
Jim Runzheimer, an anti-tax campaigner in Arlington who led public protests against the stadium deal, remains bitter about it to this day. Some of the lawsuits that resulted from the land seizures described the deal as a "sordid and shocking tale" of theft of private property.
"It was basically a $200 million transfer to Bush and the Rangers' owners," Runzheimer told reporters.
After the new stadium was in place and Bush felt he had made a mark that would allow him to stand outside his father's shadow, it was time to run for governor of Texas. So, in 1994 he put his financial holdings into a blind trust — all except for one.
Bush had decided to sell his stake in the Texas Rangers. Having some small personal fortune has become almost a prerequisite for American politicians and Bush still wasn't flush with cash.
Enter Tom Hicks, the chairman of Hicks, Muse, Tate and Furst Inc., a Texas company specializing in leveraged buyouts. Later, Hicks would become Bush's fourth-largest political donor, giving the future president more than $290,000.
Hicks bought the Rangers for $250 million, including the stadium and land around it. It was almost three times what Bush and his partners paid.
Bush was by now in the governor's seat and already being touted as a future president. With 1.8 per cent of the team, he should have been due about $2.3 million from the sale. But the other owners, impressed by his shrewdness in the stadium deal, boosted his take to $14.9 million.
It was that $14.9 million that ultimately gave Bush the financial security to leave Texas after two terms as governor and run for the presidency.
Insider trading? Company stock options to directors? Leveraged buyouts? Consulting fees? Cooked accounting practices? Abuse of taxpayers and investors?
All in all, it was quite a journey for the young man who returned to Midland in 1977 with $13,000 in his pocket — and for a president who is challenging Corporate America to pull up its socks.
thestar.com |
