The White House against the SEC? I guess its all about who you know.
Bush backed off-books deal for Harken
Dana Milbank The Washington Post
Friday, October 11, 2002
WASHINGTON When President George W. Bush served as a director of an energy company 12 years ago, he approved the creation of an off-balance-sheet partnership that reduced the company's debts and improved earnings in a transaction similar to those that led to the collapse of Enron Corp.
As a director of Harken Energy Corp. in 1990, Bush, who had sold his own oil business to Harken and been retained as a consultant, made the motion at a board meeting to negotiate the transfer of struggling assets of Harken into a partnership with Harvard University's investment arm, Harvard Management Co., documents indicate.
Unlike Enron, which used partnerships to conceal debts and unprofitable making operations, Harken followed accounting rules for its partnership and disclosed it to investors and regulators. Bush did not profit personally from the transaction because he had sold most of his shares earlier.
"There is simply no comparison" to Enron, a White House spokesman, Scott McClellan, said. "It was disclosed to investors, and it conformed to accounting rules."
News of the partnership was disclosed Wednesday in The Wall Street Journal and The Boston Globe after documents were gathered by HarvardWatch, a group that monitors the university's investments. It provided what to Bush was an unwelcome link between him and the accounting scandals that have weakened investor confidence this year.
After the partnership was created, the price of Harken's shares recovered as the company's financial situation appeared to improve, in part because of the removal of $20 million in debt.
According to board minutes of Aug. 29, 1990, obtained by HarvardWatch, Bush made the motion, which was approved, to "proceed in negotiations" toward "formulating a letter of intent" creating a "new entity." The entity, which became the Harken Anadarko Partnership, included oil and gas properties to be managed by Harken.
Harvard Management, which invests the university's endowment, was a major investor in Harken, at one point owning 30 percent of its shares. Its investments began at about the same time that Bush, whose father was then vice president, became a director of the company in 1986.
McClellan, the White House spokesman, said the ties between Harvard Management and Harken had nothing to do with connections to the Bushes because talks about a possible Harvard investment in Harken began before Bush became a director of the company. McClellan said that the off-balance-sheet partnership had been proposed by Harvard and that the university investors had "set the terms of the partnership."
Harvard said Wednesday that its investments in Harken "were not inappropriate" and that connections to the Bush family had not been a factor. "The role of the Harvard Management Company is not to curry political favor but to invest well on Harvard's behalf," its statement said.
A phone call to Harken executives seeking comment was not returned.
The partnership significantly improved Harken's fortunes. Its shares, which had fallen to $1.25 in late 1990 from a high of $6, climbed to $8 in 1991. The improvement came as Harken's debt and interest expenses fell because of the partnership. Harvard benefited from the higher stock price by selling 1.6 million shares between September 1991 and October 1992, HarvardWatch said.
By December 1992, Harvard Management had bought all of Harken's interest in the partnership. Harvard sold the venture in 1993 to Cabot Oil Gas Corp. for stock valued at $34.6 million, HarvardWatch said.
The partnership "bears striking resemblance to the partnerships Bush has condemned at Enron," HarvardWatch argued. "It was controlled by and transparent only to Harken insiders, and likely was used to artificially brighten the company's business prospects."
Copyright © 2002 The International Herald Tribune
Published on Saturday, March 13, 2004 by the Brattleboro Reformer (Vermont)
Little Martha and Big George
by Stephen F Minkin
On March 6, 2004, the New York Times published an editorial entitled “Courtroom Tales of Martha’s Lies…”. It states that her persecution “was not about unfairly targeting a celebrity defendant but about enforcing the transparency of the financial markets.” The Times also commented on how “the trial depicted a cozy world where insiders routinely use their wealth and connections to benefit from insider information.”
Isn’t that the American way? In June 1990, George W. Bush sold 200,000 shares of Harkin Energy stocks while he sat on the oil company’s board as a member of its audit committee. He unloaded his shares before the price plummeted and while outside investors were unaware of the company’s desperate situation. Mr. Bush later blamed his lawyers and the “loss of documents” by the Securities and Exchange Commission when it was discovered that he failed to disclose the $848,560 sale within the time required by law. He used most of the proceeds to pay off a loan he had taken out the previous year to buy a partnership interest in the Texas Rangers baseball team. The SEC, suspicious about the timing of these events, opened and then abruptly closed its investigation. A letter to his lawyers informed the future president that the decision to end the investigation should “in no way be construed” as exonerating him. George Bush Sr. was then president while the SEC Chairman was a family friend and sometime legal advisor.
Martha Stewart was convicted of an attempted cover-up. She had taken for granted the fact that American aristocrats now and then bend the rules governing insider-trading. Her crime, however, pales in comparison with what we already know about the President’s and his Vice President’s abuses of privilege for self protection and the pursuit of wealth. Mr. Cheney ran the Halliburton Corporation when the company reportedly bribed Nigerian officials for lucrative oil-related contracts. He continues to hide the minutes of the so-called “Energy Taskforce”, a convocation of plugged in, insiders who have chosen to remain anonymous.
It will be interesting to see if John Kerry and the media challenge Mr. Bush on Martha Stewart. Will they ask him to spell out how his activities at Harkin Energy differ legally and ethically from the insider-trading and attempted cover-up by the queen of image and good taste. Ms Stewart, according to the findings of a jury, attempted to conceal the truth about dumping ImClone stocks following an illegal tip from her broker that the president of the company was dumping his shares. If Mr. Bush as a board member knew the precarious nature of Harkin’s finances when he sold his shares, he would be guilty of defrauding clueless investors .
Ms. Stewart’s misfortunes are focusing attention on insider-trading. This may help shed light on the murky abuses of those who are not only rich and famous but also truly powerful. It is clear that the President, an insider, profited from the sale of his Harkin shares while outsiders who invested in the company lost millions of dollars. Even a Dick Cheney cannot hide these well known facts.
The burning question is, was George W. Bush also able to use the full force and power of the SEC chairman and/or his father’s presidency to save his own neck from prosecution? It is time for the SEC to release all documents pertaining to the agency’s decision to end the investigation of what the President knew before he unloaded his Harkin Energy shares. Otherwise we are left with a nearly palpable impression that, compared to the cover-up of the President’s insider-trading, Martha Stewart’s misdeeds are really small change.
Stephen F Minkin is currently writing “ White Plague: The Missing History of How AIDS Came to Africa.”
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