5 Questions for Bush about insider trading

This page is: http://www.skirsch.com/politics/Bush/insiderTradingQuestions.htm 

On July 2, 2002, an AP story reported the following reaction to a journalist who asked for Bush's reaction to New York Times columnist Paul Krugman, who said in Tuesday's newspaper that Bush's recent campaign against corporate malfeasance draws on ``firsthand experience of the subject.'':

``Everything I do is fully disclosed; it's been fully vetted,'' the president said as he paused to speak with reporters during a church appearance in Wisconsin. ``Any other questions?''

Well, yes, as a matter of fact, we do! We think it's important to the American people to be able to trust their leaders. The issue is not about the SEC form reporting of the stock sale (even though we now have 3 different versions of how that occurred). 

The big issue is about 1) whether it was legal to sell those shares in the first place (because the Aloha sale to insiders was concealed until much later), and 2) whether Bush believes that Harken mislead investors in the Aloha sale.

At a White House press conference on Jul 9, 2002 

Regarding the Aloha sale, Bush said, "There was no malfeance [sic] at all. This was an honest difference of opinion over accounting procedures" and that "In the corporate world, things aren't exactly black and white when it comes to accounting procedures." He said Harken re-stated their earnings, adding "There was no ...attempt to hide anything."

If there was no attempt to hide anything, why did they do the Aloha deal in the first place? And why did a senior partner from Ernst and Young say this was a  "very clear black and white" issue?

The one key question is this:

If the Aloha sale to Harken insiders which was seller financed and put on the books as an $8M profit is an "honest difference of opinion" then didn't you just open the floodgates saying that corporate "self dealing" to artificially inflate reported earnings is OK?

The key 5 questions are these:

  • Was the SEC correct in requiring Harken to restate the 1989 sale of 80% of Aloha Petroleum (a subsidiary of Harken) to IMR (a partnership of Harken insiders) in 1989 that was largely financed by Harken (the buyers gave Harken a note)?
  • Did you know about this deal? If not, then how is that possible since you were on the board and the audit committee?
  • What was the purpose of that transaction if not to defraud investors and make the financials look good? Why did Harken's press release mention an $8M value of the deal, but yet not mention it was seller financed by Harken, that it was sold to insiders, and why didn't it even mention the entity name it was sold to? [Harken press release]
  • Didn't you think the Aloha was a material fact that was not publicly disclosed until after you sold your stock? The SEC certainly thought it was material and not public since they required Harken to restate their earnings on Jan 23, 1991 and reverse $7.916M. 
  • Should we punish people corporate executives who engage in transactions that defraud investors such as this one?

No matter how he answers, Bush loses.

  • If he believes the Harken Aloha sale was misleading,  then Bush is saying he has personally engaged in the illicit behavior and should be punished. 
  • If he believes the Harken Aloha sale was proper, then what Enron did should not be punished either and we are left wondering if anything is punishable. He's apparently in this camp since he thought the Aloha sale was a gray area and that it could have gone either way.

See details at Investigative Report Bush’s Insider Connections Preceded Huge Profit on Stock Deal

We have 5 "other questions:"

  • Will you release the complete SEC file on the investigation? Your statements that the information was fully vetted and that were you "fully exonerated" (Oct 1994 per the Washington Post article) are incorrect. The SEC dropped the investigation without explanation and without exonerating you. If you believe it was fully vetted and you were fully exonerated, then why not release the SEC files? If it was just an accounting problem that happens all the time as you said at the press conference on July 8, 2002, then why not release the SEC files since you have nothing to hide?
  • Why did the SEC drop the investigation of insider trading without reaching a determination? The SEC got thousands of documents from Harken, and talked with folks outside of Harken, but never to any officer or director of Harken. Why did the investigation stop? If the evidence provided was so compelling that talking to the principals was not necessary, then why wasn't Bush exonerated? On the other hand, if the evidence provided was inconclusive, then didn't SEC policy at the time dictate contacting the principals so that a determination could be made? The head of the SEC's enforcement division, William McLucas, went beyond the letter and stated publicly that "there was no case there." How could McLucas have known that if they never talked to any of the principals at Harken? What evidence did he have that convinced him? SEC associate director for enforcement Bruce A. Hiler was more cautious. His statement said it "must in no way be construed as indicating that the party has been exonerated or that no action may ultimately result from the staff's investigation."
  • Wasn't there a conflict of interest in the SEC investigation? At the time of the investigation, Bush's father was president of the United States and the SEC was run by one of his biggest political supporters, Richard Breeden, who Bush appointed into the job. The SEC's then-general counsel, James R. Doty, was another staunch presidential supporter who as a private attorney was George W. Bush's lawyer when he purchased his share of the Texas Rangers baseball team. Could there be an obstruction of justice here?
  • Why didn't the SEC punish or cite Bush for his late filing of the sale? Bush's late filing was an unambiguous violation of federal law. We now have 3 different versions of how and why this happened. Which version of they story is correct and how can we validate it is the correct version? Was it SEC policy to ignore infractions of the law? Could there be an obstruction of justice here? There were at least fouroccasions on which Bush failed to file the documents in a timely basis. He even back dated one by four months.
  • What evidence convinced the SEC that Bush didn't have "insider info" when he made the sale of stock on Jun 22, 1990? How is it possible that Bush did not know about the $23.2 million loss for the quarter that ended just a week after he sold? How could Bush also not have known about the sale of Aloha Petroleum (a subsidiary of Harken) to IMR (a partnership of Harken insiders) through a seller-financed loan to mask earnings that was done before he sold his stock? This was reported in the Harken annual report as a cash gain but the SEC later determined it was phony and forced the company to restate its 1989 losses from $3.3 million to a whopping $12.5 million How could Bush, who was on the audit committee and the board of directors, could not have known about this insider deal? This was not a simple "accounting error" as Bush portrayed it in his news conference on July 8, 2002. It clearly was material and not publicly disclosed at the time Bush made the sale. So if he knew about it, he's guilty of insider trading. How could he not have known? In an Oct. 11, 1994, UPI report, Bush claimed that he was not aware of Harken's poor financial condition when he sold the stock, but UPI said that the Dallas Morning News reported on the same day that a corporate official who served with Bush on the audit committee at Harken felt otherwise; Stuart Watson told the Dallas paper that he and Bush were constantly made aware of the company's finances. "You bet we were," said Watson. "We were both trying to keep that company on the straight and narrow." According to the Washington Post, Harken's audit committee, of which Bush was a member, met with Harken CEO Mikel Faulkner and auditors from Arthur Andersen & Co., Harken's accountants, on June 11, 1990 -- just 11 days before Bush sold his stock on June 22. When asked for a copy of the June 11 minutes or permission to inspect them, the company declined to make the records available. That he made the stock sale without knowing anything material stretches credibility. it is hard to believe, as an insider, that he had no inside info, that he just got "lucky". He has an MBA and was on the audit committee. 

Here are the facts:

  • Bush, in 1989, was on the board of directors and audit committee of Harken Energy.
  • On June 22, Bush sells his Harken stock at $4 a share, for a total of $848,560. He uses 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 for $600,000.
  • On Aug. 22, Harken files a second quarter report disclosing for the first time that it is hemorrhaging. Total losses for that quarter are $23.2 million. Stock plunges to $2.37 a share.
  • That fall the Securities and Exchange Commission discovers that Harken had effectively concealed earlier losses in its 1989 annual report, before Bush sold his stock, by claiming a capital gain on the Aloha sale even though it was financed through a loan. It directs Harken to recast its balance sheet for 1989. 1990 On Feb. 5, Harken files an amended 1989 report, asserting that after “discussions” with the SEC about its method of accounting, it was recasting its losses for that year from a modest $3,300,000 to a whopping $12,566,000. But by then Bush had already sold.The SEC also investigated Bush for insider trading after he sold nearly $850,000 of Harken stock shortly before its mounting debt was publicly disclosed. 
  • The SEC eventually closed its investigation of Bush without taking action against him, although The Dallas Morning News has quoted a 1993 letter from the SEC to Bush's lawyer emphasizing that its decision ``must in no way be construed as indicating that (Bush) has been exonerated.''
  • Republicans and the White House say Democrats are just desperate to make political hay in an election year. Translation: They can't win the argument on its merits.
  • The maximum statutory penalty for insider trading in violation of 15 U.S.C. § 78j(b), 15 U.S.C. § 78ff(a), and 17 CFR § 240.10b-5 is ten years imprisonment, a $1 million fine, and three years supervised release. The maximum statutory penalty for conspiracy to commit securities fraud in violation of 18 U.S.C. § 371 is five years imprisonment, a $250,000 fine, and three years supervised release.

References

Harken press releases
Shows they withheld a lot of significant details when announcing the Aloha sale.

Securities and Exchange Commission Documents at The Center for Public Integrity
Treasure trove of documents from the SEC posted at the Center for Public Integrity and links to the two articles they published about this. All the links on this page are a must read for any serious journalist, especially the SEC memo dismissing the charges.

Investigative Report Bush’s Insider Connections Preceded Huge Profit on Stock Deal 
Center for Public Integrity extensive timeline on the Bush Harken stock sale. Must reading.

Washingtonpost.com Bush Name Helps Fuel Oil Dealings (July 30, 1999)
This is part 6 of a multi-part series the Washington Post ran on Bush. Here are some choice excerpts:

Before Bush's stock sale, Harken's audit committee - Bush, Watson and another Harken director, Talat Othman - met on June 11 with Faulkner and auditors from Arthur Andersen & Co., Harken's accountants. Jordan, however, said the committee "did not discuss operating losses that might be coming up, because that would be in the realm of conjecture and speculation." The minutes of the meeting, Jordan said, "show that."

Asked for a copy of the June 11 minutes or permission to inspect them, the company, through Jordan, again declined to make the records available. Jordan said company officials felt that granting the requests would put them on "a slippery slope."

...

Bush took that as vindication. "The SEC fully investigated the stock deal," he said in October 1994. "I was exonerated." Supporting Bush, the head of the SEC's enforcement division, William McLucas, went beyond the letter and stated publicly that "there was no case there."

Hiler, however, was more cautious. His statement said it "must in no way be construed as indicating that the party has been exonerated or that no action may ultimately result from the staff's investigation."

How thorough the SEC inquiry was remains unclear. Jordan said Harken provided investigators with "thousands of pages" of documents, including the June 11 minutes and Faulkner's July 13 communique. Investigators interviewed Cummings, stockbroker Smith and a member of the Arthur Andersen auditing team, but they did not talk to Faulkner [the President] or any other officers or directors of Harken.

In an interview, McLucas said the investigation was handled "the same way we would handle any inquiry as to [insider] trading or delinquency in reports," but such matters are usually not accorded high priority.

Background information

When Bush filed late on April 7,1987, SEC filings show he had purchased another 80,000 shares on March 10, 1987. But strangely, two weeks later, an April 22 filing noted that the 80,000-share purchase was backdated to Dec. 10, 1986. When questioned by the media, Bush's attorney said it was the same 80,000 shares but he could not explain the discrepancy regarding the purchase dates or why Bush even reported the trade two times.

Another SEC filing, this from June 6, 1989, showed that Bush purchased another 25,000 shares of Harken but again waited more than four months to report the transaction.

The Houston Post, recognizing Bush's late SEC filings, noted that he "took eight months to notify the government of his sale of stock in a company on whose board he served" and "also missed the filing deadline for reporting other insider trades involving Harken Energy."

Documents obtained by the Post showed "additional instances in which Bush ... ran afoul of the SEC rule requiring notification." And George W. described himself as a "small, insignificant" Harken stockholder; but news reports examining SEC documents identified Bush as the third largest non-institutional investor.

Bush in Bahrain
In October 1991, Time Magazine questioned why the tiny country of Bahrain would stake so much of its financial future on Harken Energy, which it labeled an "obscure, money-losing company with no refineries and no experience in offshore oil exploration." But the magazine also noted that oil-insiders speculated that Bahrain's rulers saw the arrangement as a way to gain influence with the Bush administration.

Mysteriously, primary reporters have also ignored what could point to a nexus regarding foreign policy and personal financial interests. Interestingly, the Village Voice in January 1991 reported that in 1990 the Bush administration signed an agreement with Bahrain that chose the small country as the permanent principal allied base in the Middle East, although it was some 200 miles away from the hostilities in Iraq and Kuwait.

The military-base deal came after Harken announced its Jan. 30, 1990, joint oil-drilling venture with Bahrain. So President Bush's key contributors and his son George W. were carrying on personal financial business with Bahrain at the same time decisions were being made regarding the possibility of a war in the Gulf.

And neither the president nor his adviser, George Jr., let the press know that Bahrain had been permitted to infuse $7.7 million in foreign cash to hire U.S. public relations firm Hill & Knowlton to lobby Congress and the American people; a stunning variety of opinion-forming devices and techniques were employed to inflame U.S. patriotic passions of war while personal financial interests were on the line.

Jumping Ship
On May 21, 1990, less than ten weeks before Saddam Hussein's troops invaded Kuwait to initiate the Middle East hostilities -- but just four weeks before Bush unloaded the bulk of his Harken stock -- a renegotiated corporate loan agreement featured an unusually high interest rate of 12 percent, less credit for acquisitions, a $750,000 debt fee and even requirements by some of Harken's major stockholders to guarantee $22.5 million in debt, according to Associated Press.

Did Bush know of impending losses when he sold his stock on June 22, 1990, since Federal securities law prohibits corporate insiders from trading "on the basis of" material information that is not publicly known? Bush denied the charge in spite of his positions on the Harken Energy board of directors, audit committee and stock restructuring panel. He added that he had no idea Harken was going to get an audit report full of red ink until weeks after he had made his stock sale.

But U.S. News & World Report said, "there is substantial evidence to suggest that Bush knew Harken was in dire straits. ... Harken's SEC filings make it clear that the company's directors knew radical steps were necessary." The magazine added that "one informed source says Harken's creditors had threatened to foreclose on the company if substantial debt payments were not made." Shortly thereafter, Bush cashed out of Harken.

The April 4, 1991,Wall Street Journal added that "Mr. Bush didn't return their phone calls seeking comment, and the Bush White House said 'it doesn't comment on the activities of the president's children.'"

According to the Washington Post, Harken's audit committee, of which Bush was a member, met with Mikel Faulkner and auditors from Arthur Andersen & Co., Harken's accountants, on June 11, 1990 -- just 11 days before Bush sold his stock on June 22. When asked for a copy of the June 11 minutes or permission to inspect them, the company declined to make the records available.

Bush's insider transaction yielding a profit of $848,560 -- some 250 percent profit on the stock's original value -- came a week prior to the end of a quarter in which the company lost $23 million. The quarterly report was released just a few days after Iraq invaded Kuwait and the Harken stock plummeted. However, as reported in a 1992 Mother Jones report, Bush attended a meeting regarding a revised stock offering in May 1990 working with Smith Barney's financial consultants concerning corporate restructuring.

In an Oct. 11, 1994, UPI report, Bush also claimed that he was not aware of Harken's poor financial condition when he sold the stock, but UPI said that the Dallas Morning News reported on the same day that a corporate official who served with Bush on the audit committee at Harken felt otherwise; Stuart Watson told the Dallas paper that he and Bush were constantly made aware of the company's finances. "You bet we were," said Watson. "We were both trying to keep that company on the straight and narrow."

On March 16, 1992, U.S. News echoed Watson's statement, reporting that "according to documents on file with the Securities and Exchange Commission, his position on the Harken (restructuring) committee gave Bush detailed knowledge of the company's deteriorating financial condition."

Firewalls Or Stonewalls?
Chuck McDonald, spokesman for Texas Gov. Ann Richards' campaign, said that SEC chief counsel in the Bush investigation -- James Doty, George W.'s former attorney -- never talked to George W., Watson or other Harken officials in its 1991 probe. He said, "Was this a real investigation, or was it a whitewash of an insider stock sale by the son of the sitting president?" UPI, which reported McDonald's statement, went on to note that "while Bush claims the SEC investigation absolved him of illegal insider trading, he has refused to release the investigation files."

Harken founder, Phil Kendrick, noted that the company's "annual reports and press releases get me totally befuddled. There's been so much promotion, manipulation and inside deal making." And even Harken chief executive Mikel Faulkner, an accountant, offered advice for those trying to decipher the financial statements: "Good luck. They're a mess."

Press accounts note that Bush requested a letter from the SEC, issued in October 1993, The letter, signed by SEC Associate Director Bruce A. Hiler, said that "the investigation has been terminated as to the conduct of Mr. Bush and that, at this time, no enforcement is contemplated with respect to him." But the letter also stated that "it must in no way be construed as indicating that the party has been exonerated or that no action may ultimately result."

On Oct. 18, 1993, the Bush administration SEC said it would not bring a case against George W. Bush.

To The Manner Born: A Princeling Legacy?
Gov. Bush speaks about his outstanding business record on the campaign stump; however, in 1989, U.S. News & World Report said, "Harken Energy lost over $12 million against revenues of $1 billion." Harken President Mikel Faulkner said that in addition to Bush's position as a director at $2,000 per meeting, stock options worth $131,250, 5 percent loans and 40 percent discounts on stock purchases, he was also a consultant to Harken for "investor relations and equity placement" at a salary of $80,000 per year from 1986 until 1989, when his salary jumped to $120,000.

The board was equally generous to Bush in 1990 as "the company lost another $40 million and shareholder equity plunged to $3 million -- down from more than $70 million in 1988." Faulkner declined to say what services George W. has performed as a consultant.

In March 1992, U.S. News said that "Despite repeated requests for interviews, George W. declined to discuss Harken or the reason for his stock sale, saying through an assistant that he 'does not want to read about himself.'" But some might ask whether American voters have a right to know whether a possible president would strictly enforce federal statutes or appoint lenient attorneys with suspect ethical standards leading to fixed politically sensitive investigations.

Moreover, should Bush -- a director of the corporation -- be accountable when huge losses are reported over a period of time, especially as a presidential candidate purporting to have an outstanding entrepreneurial business record at every presidential campaign stop? The answers have real implications regarding presidential character, morality and personal ethics.

Author and commentator Kevin Phillips offered a perceptive look at the Texas governor in the February 2000 issue of Harpers magazine when he said, "We can fairly ask whether George W. Bush is anything more than another scion who has made a decent governor during a period of prosperity and easy growth, and whether the United States can afford nominees who are to presidential politics what legacies are to college fraternities."

In an Oct. 11, 1994, UPI report, Bush also claimed that he was not aware of Harken's poor financial condition when he sold the stock, but UPI said that the Dallas Morning News reported on the same day that a corporate official who served with Bush on the audit committee at Harken felt otherwise; Stuart Watson told the Dallas paper that he and Bush were constantly made aware of the company's finances. "You bet we were," said Watson. "We were both trying to keep that company on the straight and narrow."

According to the Washington Post, Harken's audit committee, of which Bush was a member, met with Mikel Faulkner and auditors from Arthur Andersen & Co., Harken's accountants, on June 11, 1990 -- just 11 days before Bush sold his stock on June 22. When asked for a copy of the June 11 minutes or permission to inspect them, the company declined to make the records available.

Bush's insider transaction yielding a profit of $848,560 -- some 250 percent profit on the stock's original value -- came a week prior to the end of a quarter in which the company lost $23 million. The quarterly report was released just a few days after Iraq invaded Kuwait and the Harken stock plummeted. However, as reported in a 1992 Mother Jones report, Bush attended a meeting regarding a revised stock offering in May 1990 working with Smith Barney's financial consultants concerning corporate restructuring.
Here are some interesting tidbits (from http://www.bushnews.com/bushtwo.htm):
 
BUSH KNEW OF HIS COMPANY'S CRISIS BEFORE SELLING STOCK
Also Violated SEC Rule, 8 Months Late in Reporting Transaction

Before selling his stock in a Texas oil company, a transaction that prompted an insider trading inquiry, George W. Bush was informed as a company director that the firm was suffering a cash "crisis," newly released records show. The internal corporate documents, released by the Securities and Exchange Commission, provide the most detailed view yet of Bush's knowledge of Harken Energy Corp.'s financial problems when he sold his shares for $848,560 in June 1990. Bush's lawyer said Wednesday the information, though new to the presidential campaign, was provided to the SEC as part of its investigation a decade ago and contributed to the agency's finding that Bush's trading was appropriate..... Insider trading allegations have been an issue in both Bush's run for governor in Texas and his presidential bid. The SEC in the last month released several hundred pages of corporate documents from its investigation under the Freedom of Information Act.... At the time of the investigation, Bush's father was president of the United States and the SEC was run by one of his biggest political supporters, Richard Breeden. The SEC's then-general counsel, James R. Doty, was another staunch presidential supporter who as a private attorney was George W. Bush's lawyer when he purchased his share of the Texas Rangers baseball team." --AP, 9/7/00

"George Bush, Junior sold 60% of his stock in Harken Oil in June, 1990 for $848,560. That was brilliant timing; in August, Iraq invaded Kuwait and Harken's stock dropped 25%. Soon after, a big quarterly loss caused it to drop further. A secret State Deparment memo in May of that year had warned that Saddam was out of control, and listed options for responding to him, including an oil ban that might affect US oil prices. We can't be sure that the President or an aide mentioned these developments to his son, or that Harken's representative who was admitted to meetings with the President picked up something and reported back to Junior. But it is the simplest and most logical explanation. The Bushes acknowledge that George Senior and his sons consult on political strategy and other matters constantly. Furthermore, Harken's internal financial advisers at Smith Barney had issued a report in May warning of the company's deteriorating finances. Harken owed more than $150 million to banks and other creditors at the time. George Bush, Jr. was a member of the board and also of Harken's restructuring committee, which met in May and worked directly with the Smith Barney consultants. He must have known of these warnings. These are pretty clear-cut indications of illegal insider trading. The Securities and Exchange Commission, controlled at the time by President George Bush, investigated but chose not to press charges. Junior also violated another SEC rule explicitly. He was required to register his sale as an insider trade by July 10, 1990, but didn't until March 1991, after the Gulf War was over. He was not punished or cited." --Skeleton Closet
 

 

CORPORATE PIETY AND THE BUSH BOOMERANG
 
  7/3/02 
   
 

Matt Miller's latest column,

FYI

CORPORATE PIETY AND THE BUSH BOOMERANG

For release 07/03/02

By Matthew Miller

Tribune Media Services

Aides describing the president's outrage over CEO behavior - set to peak next week in a big speech on Wall Street - say Bush feels "betrayed by his class." If so, one thing is certain: It's the first time he's had cause to feel this way!

Bush's muscular new piety on corporate ethics means the press has the hook it needs to re-examine his cozy Texas business history. And that means we may finally get beyond fawning accounts of Bush's first-president-with-an-MBA-management style to reminders that, among other remarkable facts, (1) Bush is the first president to have been investigated by the SEC for insider trading, and (2) Bush seems to have received an unusual $12 million dollar gift while governor of Texas that accounts for his fortune.

Now, before everyone starts screaming, "how dare you sully the name of our commander in chief with some dirty, lowdown truth-telling," let's be clear. Unlike, say, the Vast Right Wing Conspiracy, I'm playing fair. Bush is putting this issue in play of his own volition. Or, more precisely, because his pollsters tell him that not getting out front here is a certain risk, whereas the chance the press will broadcast damning facts from Bush's business past is less certain.

In any event, intimidating reporters into backing off negative stories about the boss is (pardon the phrase) a war this White House knows how to fight. The day one strategy, after Paul Krugman launched the first salvo in his New York Times column, was for Bush to say dismissively, "It's been fully vetted." This Krugman-to-reporters-to-Bush exchange made page A12 in the Times and A4 in The Washington Post.

A start, yes - but not nearly good enough!

News outlets inclined to say, "We looked into that during the campaign," have to acknowledge that we're in a new era. After Enron, WorldCom, Tyco, Arthur Andersen, and countless earnings restatements, it's clear that facts about Bush given a once-over in the heat of a campaign may not pass the smell test in this transformed climate. And that's before we get to all those new facts waiting to be discovered now that business behavior really matters!

A good place to start is Joe Conason's underappreciated February 2000 piece in Harper's magazine. In 10,000 words Conason tells a true Texas version of "How to Succeed in Business Without Really Trying." Among the disturbing highlights:

- The "investigation" of Bush's fortuitous dumping of Harken Energy stock in 1990 was conducted by an SEC headed by a pal of Bush's father whom dad appointed to his job. The SEC's general counsel then was the Texas attorney who had handled the sale of the Texas Rangers for W and his partners in 1989. In the third world, given such circumstances, we'd say the fix was in (kinda like the Supreme Court's intervention in Florida). Anyone for an independent look this time?

- When the Texas Rangers were sold in 1998, while Bush was governor, his partners, Conason reports, "fattened his payout six times over by awarding him additional shares in the team at the time of the sale that brought his 1.8 percent share up to 12 percent." This boosted Bush's return on a borrowed $600,000 investment from around $2.5 million to $15 million. What swell partners! Anyone think it's time to better understand what (BEGIN ITAL) that (END ITAL) was all about?

If Democrats who'd made fortunes from Bush-like patterns of crony capitalism were in the White House during a crisis of corporate integrity, does anyone doubt that Richard Scaife would have scrambled the jets months ago and bankrolled mountains of American Spectator exposes?

Luckily, this area of inquiry is all so legitimate - no sex, no trumped up lawsuits, no Linda Tripp (thank goodness) - that the regular media can do it all by themselves!

And do it they must. Beyond the importance of knowing whether these and other deals crossed the line, Bush's business history underscores the massive hypocrisy of his avowed public philosophy. How dare this man preach "self-reliance" and "personal responsibility," how dare he rail against "dependence on government," when his fortune was won via a gift from rich pals as payback for persuading Texas taxpayers to approve a sweetheart stadium deal for the Rangers.

Over to you, New York Times. Take it away, James Carville.

XXXXX

Note to editors: Matt Miller would greatly appreciate it if you would consider running his e-mail address, mattino@worldnet.att.net, at the bottom of his column. Editors can feel free to note Matt Miller's academic affiliation if it suits their tagline format: Columnist Matt Miller is a senior fellow at Occidental College in Los Angeles and host of "Left, Right & Center" on KCRW-FM in Los Angeles.

ATTENTION EDITORS: Matt Miller is a syndicated columnist with Tribune Media Services. To purchase his column on a weekly basis or a spot basis, please contact Doug Page, TMS, 800-245-6536 x8647 or dpage@tribune.com.

© 2002 MATTHEW MILLER
DISTRIBUTED BY TRIBUNE MEDIA SERVICES, INC.
 

Matt Miller
 

 


E-mail: mattino@att.net

 
 

 

Insider Trading and George W. Bush
A U S T I N, July 1-- The Securities and Exchange Commission defines insider trading as "Corporate officers, directors, and employees who traded the corporation's securities after learning of significant, confidential corporate developments".  Bush sold $848,560 worth of Harken Energy stock on June 22, 1990, just one week before the company posted spectacular losses and the stock plunged sharply.   When the losses were reported to the public on August 20, 1990, the stock plummeted. 

According to documents from a two year investigation by the SEC, Bush served on the board of directors of Harken Energy Corporation and his position on a special Harken committee gave him detailed knowledge of the company's deteriorating financial condition.  The SEC received word of Bush's trade ten months late. 

 
The SEC states, "Because insider trading undermines investor confidence in the fairness and integrity of the securities markets, the Commission has treated the detection and prosecution of insider trading violations as one of its enforcement priorities". 

Bush supporters point out that the stock's value went back up, eventually, and if Bush had held the stock, it would have made him more money.   But, knowing when to sell is the golden goose of stock trading and using inside information is insider trading. The SEC investigated but decided not to punish Bush.  After all, his dad was President and all five SEC Commissioners are appointed by the President.  Furthermore, the SEC's general counsel had actually represented George W. in the Texas Rangers negotiation as reported in Rolling Stone magazine's August 5, 1999 issue.  Any doubts? 

For the complete story, read the US News and World Report story from March 16, 1992

 

According to SEC records, on four separate occasions President George W. Bush disregarded federal statutes by failing to file insider stock trade reports on a timely basis, back-dating one trade by some four months. (Harken Energy SEC Abstract Filing, transaction date: 6-22-1990; Oil stock sale made 41 days prior to Iraq's attack on Kuwait -- $848,560 profit, filing date: 3-4-1991- 8 1/2 months late and reported to the SEC two days after Gulf War was over on 3-2-1991; Harken Energy SEC Abstract Filing, transaction date: 6-16-89, filing date: 10-23-1989 -- 17 weeks late.) [Sources: Wall Street Journal, 4-4-1991 and 9-28-99; Time, 10-28-1991; U.S. News, 3-16-1992; Associated Press, 10-28-94; Houston Post, 10-18-1994.]

The younger Bush denied the charge of insider trading in spite of his positions on the Harken Energy board of directors, audit committee, and stock restructuring panel. He added that he had no idea Harken was going to get an audit report full of red ink until weeks after he had made his stock sale.

During December, 1999 into January, 2000, journalist Tom Flocco’s former research associate, Mario Calabrese, repeatedly called the SEC requesting copies of George W. Bush’s original Harken Energy stock filings. After some 3 1/2 weeks of calls made during the critical Florida Supreme Court and U.S. Supreme Court arguments deciding the Bush-Gore election, SEC representative Linda Thompson called Mr. Calabrese on January 14, 2001 to confirm that all original Bush SEC documents had been destroyed. Thompson said that "the dates you requested have all met their (6 year) retention time." It is possible that copies are still available via major search engines. It's also possible that the people who worked on those reports are still alive and know what was in them.

The future president completed his key insider trade eight days before Harken announced a $23 million second quarter corporate loss and about six weeks before the invasion. Having just profited by nearly $1 million--representing a 200 % insider windfall--George Jr. watched Harken stock take a nosedive on the bad news. Thus, Harken Energy, a Houston oil company doing business in Bahrain, wherein some of his father’s largest contributors also maintained substantial stock positions, made George W. his first million which served as seed money for his upcoming Texas Rangers deal.

The April 4, 1991 Wall Street Journal added that "Mr. Bush did not return their phone calls seeking comment, and the Bush White House tersely said ‘It doesn’t comment on the activities of the president’s children.’" Moreover, the SEC also declined to comment, according to The New York Times. [3-9-92]

Neither the younger Bush nor the media made much of the blatant conflicts of interest since the chairman of the SEC was Richard Breedon, former lawyer with Houston firm of Baker and Botts. Breedon had served as deputy counsel to Bush 41 when he was Vice President under Ronald Reagan.

Moreover, the SEC investigation of George W. was led by general counsel James R. Doty who, according to a UPI report, mysteriously neglected to interview any of the Harken directors --including the younger Bush -- regarding "enforcement" oversight. Moreover, Doty had previously served as George W. Bush’s personal lawyer Bush 43’s purchase of the Texas Rangers baseball franchise.

So, in the end, a future president--George W. Bush -- was cleared of insider trade wrongdoing by his personal attorney and by his father’s counsel. That said, the Bush Administration is currently keeping a low profile regarding campaign contributors at Enron Corporation which participated in insider stock sales that bankrupted the corporation while Enron employees were prohibited from cashing in their Enron stock-based 401K plans as their value plummeted.

BUSH IN BAHRAIN - PUBLIC AND PRIVATE

In October 1991, Time Magazine questioned why the tiny country of Bahrain would stake so much of its financial future on Harken Energy, which it labeled an "obscure, money-losing company with no refineries and no experience in offshore oil exploration." The magazine also noted that oil insiders speculated that Bahrain’s rulers saw the arrangement as a way to gain influence with the Bush Administration.

In January, 1991, The Village Voice reported a potential nexus regarding foreign policy and personal financial interests as in 1990, the Bush Administration signed an agreement with Bahrain that chose the small country as the permanent principal allied base in the Middle East, although it was some 200 miles away from the hostilities in Iraq and Kuwait.

The military base deal came right after Harken announced its January 30, 1990 joint oil-drilling venture with Bahrain, suggesting that the elder Bush’s contributors and his son, the future President of the United States, were involved in personal financial business involving Harken, while also making decisions - including dispatching Ambassador April Glaspie to tell Saddam Hussein that its actions vis a vis Kuwait were none of the U.S.’s business - that led directly to the Gulf War.

And neither Bush let the press know that they had permitted Kuwait and Bahrain to infuse $19.6 million in foreign cash to hire U.S. public relations firm Hill & Knowlton to lobby Congress and the American people into a war frenzy against Iraq.

A former U.S. ambassador to Bahrain, Sam Zakhem, funneled $7.7 million in advertising and lobbying dollars through two front groups: Coalition for Americans at Risk (a former front group for the contras in Nicaragua) and Freedom Task Force. The Iran-Contra front group prepared and placed TV and newspaper ads and had 50 speakers available for pro-war rallies and publicity events; however, neither disclosed Bahrain as the source of the money. [Source: O'Dwyer's Foreign Agent Registration Act Report, October, 1991 and "Flacking for the Emir," by Arthur E. Rowse, The Progressive, October, 1991]

AN ILLEGAL PRIVILEGE TO “NOT” RELEASE DOCUMENTS

On March 16, 1992, U.S. News & World Report said that "according to documents on file with the Securities and Exchange Commission, Bush 43’s position on the Harken (restructuring) committee gave him detailed knowledge of the company’s deteriorating financial condition."

Spokesmen from Texas Gov. Ann Richards’ campaign said "Was this a real investigation, or was it a whitewash of an insider stock sale by the son of the sitting president?" UPI noted that "while Bush claims the [conflicted] SEC investigation absolved him of illegal insider trading, he has refused to release the investigation files."

It has been noted that the government apparently has spent more time and money chasing Microsoft’s Bill Gates than in capturing bin Laden. According to The Houston Chronicle, Salem bin Laden named Bath his business representative in Texas shortly after the senior Bush was named CIA director by appointed President Gerald Ford in 1975. It was the Bush family, particularly Jeb and Neil, who were involved in the savings and loan debacle from 1989 to 1993 that cost taxpayers more than $500 billion. Through a tangled web of Texas oilmen, wealthy Saudi sheiks and unscrupulous bankers connected to BCCI, the younger Bush eventually gained a sizable interest in a new oil company called Harken Energy. Two months before Saddam Hussein sent Iraqi troops into Kuwait, Bush sold two-thirds of his Harken stock, netting himself nearly a one million dollar profit. The stock dropped when the Iraqi invasion began.

from the New York Times,  July 10, 2002

The Corporate Scandals: Coming Clean

When George W. Bush speaks about corporate misbehavior and self-dealing by business insiders, he perches on a platform much weaker than the one from which he launched the war on terrorism. Instead of the sense of resolve and determination he showed after Sept. 11, the president is still struggling to prove that his past business dealings have not made him a product of the very system he now denounces. The president dismisses criticism of his record as political. But if he expects to restore confidence in corporate America, he needs to get his own house in order first.

On Monday the president attempted to explain why the methods he employed as an oil company executive years ago are different from the insider trading and creative accounting now undermining the credibility of corporate America. He made the disastrous mistake of arguing that in his case, accounting rules were "not always black and white." For a president whose foreign policy, and entire political outlook, is based on the idea that the world can indeed be divided into good and bad, black and white, nothing could have sounded worse.

The president needs to speak much more frankly about the money he made in selling his faltering oil company to Harken Energy of Texas — and later selling Harken shares shortly before the company's stock price collapsed. Harken also engaged in questionable bookkeeping practices while Mr. Bush served on its board. While the S.E.C. has found no illegalities, he would be a more persuasive advocate of reform if he found a way to acknowledge that this deal, the foundation of his personal fortune, is not a shining example of the stern code of responsibility he now demands that executives follow.

The most sensitive spot in Mr. Bush's résumé has always been the strong suspicion that his success as a businessman was due in the main to his family connections. That becomes relevant if it means that the president places too much emphasis on personal loyalty and team spirit. It is not enough for Mr. Bush to declare that someone in his administration is a good man. He needs to show that he understands that good men sometimes do bad things when they are entrusted with power, and that it is the government's job to keep them accountable.

Mr. Bush has repeatedly failed to make tough personnel decisions about people he regards as part of the team. It is inexcusable that Tom White, a former Enron executive, is still holding his job as Army secretary. And any clear-sighted administration would realize that Harvey Pitt, a former lawyer for the accounting industry, is not the right advocate as chairman of the Securities and Exchange Commission for tough new accounting standards long opposed by the industry.

The administration was overly permissive when it came to demanding that cabinet members follow the rules for divesting themselves of their personal stock holdings. And Mr. Bush sees nothing wrong with the fact that Vice President Dick Cheney's energy task force still refuses to release the names of the businessmen who advised the administration on its energy policy. Now Mr. Cheney's former company, Halliburton, is being investigated by the S.E.C. for practices carried out while he was in charge. The public needs some frank explanations, but Mr. Cheney has declined to comment.

It's far too late for Mr. Bush to go back and demonstrate that he could have been a successful businessman even if his name were George Walker. What we need is a president who sets an example of the standards he wants corporate America to adopt. If he can't do that, his critics will have grounds to poke at that tender spot in his personal history again and again.

 

 

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