HarkenGate, the File

(updated 16th August 2002)



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1. W. possibly built oil company and interests through favoritism or trading off his father's name (esp. Bahrain's naming of Harken as the oil company for the country's off-shore interests).


2. Harken's posted of phony financial statements, claiming incoming assets for a subsidiary it bought from itself. (A mere $8-12 million, a low-rent version of what Enron did a decade later.)


3. W.'s trading of stock based on possible knowledge of potential stock devaluation i.e., insider trading (2 possibilities):

–a. Knowledge of secret State Dept. memo claiming Hussain was ready to attack neighbors.

–b. Knowledge of Harken's dire straits as one member of a three-member "Fairness" (auditing) committee.


4. W's Harken stock mysterious buyer.


5. W.'s late filing of stock sales to SEC and variation in story as to reasons.


6. W's request for and acceptance of loans from Harken.


7. W's possible tax evasion when Harken forgave the loans.


8. Possible favoritism shown to Bush's business "indiscretions" by SEC through father's influence and/or

the possible reward to SEC investigator(s) by W. himself.





According, this first file breaks into these seven areas with hotlinks and clipping of the stories focusing on each issue. The second file provides the base of documents from which the first file was drawn in a manner that the reader might follow the progression of the story. Both files begin with BACKGROUND, citing Joe Conason's thorough and clear overview of the narrative of W.'s fortune. To Joe's credit, he brings up nearly all of the five issues (and sub-issues) listed above. Pizzo's article is also a good background piece.





–Charges/Questions by House Judiciary Democrats (a remarkably thorough pdf file):





--Joe Conason's "Notes on a Native Son," Harper's Magazine, Feb. 2000. (A thorough, given article parameters, overview of George W. Bush's fortune. Harken is covered primarily on pp. 4-6 of item. Due to this article, Conason has been frequently quoted on Bush's corporate dealings):




–An extraordinarily useable summary by the Center for Cooperative Research:




(Click on "George Bush and Harken Energy" in right frame.)



–Stephen Pizzo, "Bush Family Values," Mother Jones, Sept.-Oct. 1992 (another good example of early reporting on Bush's fortunes):




And Pizzo remains on the case, to our benefit, providing a handy, if sketchy, timeline and more background in this July 10, 2002, piece for CorpWatch:




Will Pitt's December 18, 2001 DU article, "King Midas in Reverse," also summarizes the major issues well and is a good read:




Deep background, Harken before Bush (the players are very interesting!):





Another good site with summaries of the issues:





HarkenGate for Dummies (but misses a number of the issues listed below):







Read Conason and Pizzi in Background.


This Village Voice piece nails down most of the impt. particulars and lists the major players in this favoritism run amok (taking a middle- management mentality on a roller-coaster ride from the an MBA with nothing to do into the multi-million range):





Kevin Sack's "George Bush the Son Finds That Oil and Blood Do Mix," NY Times, May 8, 1999 (another excellent background piece concerning W.'s acquisition of a fortune, but Sack's clearly draws the personal and familial connections):




William Walker, for the Ontario Star, July 21, 2002, makes the financing of W.'s first company, Arbusto, an interesting read (and also spells out W.'s drinking problem):





(you'll have to paste the address together to make work, but it's worth it as the following shows):




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.


. . .


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.


. . .


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 landaround 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.




I've quoted extensively, but there is much more . . . esp on Bahrain connection and much on how the Rangers stuck the town of Arlington for $146 million (!). A good article on favoritism shown W. from the late 70s on.



Tom Flocco, World Net Daily, laid it out clearly:






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.





Most recent story on the Bahrain factor, July 20, 2002, AP:






Five days after former President 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.


. . .


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."





Aside: Of course W. told us that he was opposed to the Bahrain deal, right? Why then do the records, recently obtained thru a FOIA by The Center for Public Integrity, show otherwise?






The minutes of the Dec. 6, 1989 board meeting, however, show that after a presentation from Monte Swetnam, president of the reviewed and discussed the background of the Bahrain transaction with the Board including the discussions and negotiations conducted in Bahrain on his several trips there. Mr. Swetnam further discussed with the Board the potential benefits which the Company could realize from this opportunity. The Board discussed and reviewed the matters raised by Mr. Swetnam concerning this foreign opportunity and after which discussion, the Board unanimously approved HEX's proceeding towards finalization of a formal agreement with the State of Bahrain…"


George W. Bush, then a director of Harken, attended the meeting. There is no indication that he did not vote to approve the Bahrain deal.





David Corn of The Nation details the real reason Harken bought Spectrum 7: political influence:






In 1986, Bush's own oil firm, Spectrum 7, was collapsing. Before it went belly-up, Harken purchased Spectrum for $2.25 million worth of Harken stock and made Bush a Harken director and consultant. That is, Harken saved Bush from ruin.


. . .


Later, when I saw the billionaire (George Soros) almost alone, I sidled up to him. "Nice offices," I said. "But can I ask you about some ancient history?" Sure, he said, with a good-natured smile. What was the deal with Harken buying up Spectrum 7? I inquired. Did Soros know Bush back then?


"I didn't know him," Soros replied. "He was supposed to bring in the Gulf connection. But it didn't come to anything. We were buying political influence. That was it. He was not much of a businessman."




But a spokesman for Soros is trying to back off the story:




(You'll have to paste the address back together to use.)


And it's even possible that some bin Laden money went to Bush's launching pad in the oil business (Arbusto) as the wealthy Saudi family sought to maintain favor with the Republican administration as Wayne Madsen reports in In These Times:







In 1979, Bush's first business, Arbusto Energy, obtained financing from James Bath, a

Houstonian and close family friend. One of many investors, Bath gave Bush $50,000 for a

5 percent stake in Arbusto. At the time, Bath was the sole U.S. business representative

for Salem bin Laden, head of the wealthy Saudi Arabian family and a brother (one of 17)

to Osama bin Laden. It has long been suspected, but never proven, that the Arbusto

money came directly from Salem bin Laden. In a statement issued shortly after the

September 11 attacks, the White House vehemently denied the connection, insisting

that Bath invested his own money, not Salem bin Laden's, in Arbusto.


In conflicting statements, Bush at first denied ever knowing Bath, then acknowledged

his stake in Arbusto and that he was aware Bath represented Saudi interests. In fact,

Bath has extensive ties, both to the bin Laden family and major players in the

scandal-ridden Bank of Commerce and Credit International (BCCI) who have gone on to

fund Osama bin Laden. BCCI defrauded depositors of $10 billion in the '80s in what has

been called the "largest bank fraud in world financial history" by former Manhattan

District Attorney Robert Morgenthau. During the '80s, BCCI also acted as a main conduit

for laundering money intended for clandestine CIA activities, ranging from financial

support to the Afghan mujahedin to paying intermediaries in the Iran-Contra affair.




And check out (potentially explosive if it checks out):






The Harken deal with Bahrain raises another troubling question: Did the Bahrainis and the BCCI-linked Saudi oil sheikhs. use the production sharing agreement with Harken to curry favor with the Bush administration and influence U.S.. policy in the Middle East? Talat Othman's sudden rise to prominence in Bush administration foreign policy circles is a. case in point. Othman, who sits on the Harken board as Sheikh Bakhsh's representative, didn't have access to. President Bush before Harken's Bahrain agreement. "But since August 1990, the Palestinian-born Chicago investor has. attended three White House meetings with President Bush to discuss Middle East policy," the Wall Street Journal. pointed out. "His name was added by the White House to a select list of 15 Arab-Americans chosen to meet with. President Bush, Sununu and National Security Adviser Brent Scowcroft in the White House two days after Iraq's. August 1990 invasion of Kuwait."








Asking what Bush is hiding, Frank Rich (in his NY Times column, July 20, 2002) speculates:






Most likely it (what Bush is hiding) involves the mystery first raised by The Wall Street Journal and Time in 1991. Back then, their

investigative journalists tried to break the cronyism code by which tiny Harken beat out the giant Amoco for a prized contract for drilling in Bahrain. They also tried to learn what various Saudi money men, some tied to the terrorist-sponsoring Bank of Credit and Commerce International, may have had to do with Harken while the then-president's son was in proximity




But the Basses are probably behind this and may well be behind much else concerning W.'s fortune as well. Perhaps the "Lee" mentioned on the stock broker's memo refers to Lee Bass, making Bass the angel for Bush when he wanted to sell stock to pay for his shares in the Rangers. Bass might have provided the grease here AND with Bahrain.


The bin Laden connection with Bush:








Here's one of the fullest articles showing the BCCI and Osama bin Laden connection as well as the connection to the rest of the family, other illegal money schemes, &c. Rick Wiles, in this item titled" Bush Family's Dirty Little Secret: President's Oil Companies Funded Bin Laden Family and Wealthy Saudis Who Financed Osama bin Laden," sounds a bit like a tinhatter, but his facts on straight:




Speculation is surfacing on why Harvard bailed out Harken:






(You'll have to paste 2nd address back together to go to source.)





Harken, which is engaged in oil and gas exploration, development, and production in Texas and the Gulf of Mexico, as well as in Colombia, Peru, Panama, and Costa Rica, soldiered on after Bush left. CEO Mikel Faulkner and COO Bruce Huff, CPAs who have been with the Harken since 1980 and 1990 respectively, pursued a variety of deals to jump-start its operations. But without much luck. The company's Latin American operations in particular were a drag, and Harken lost some $263 million over the past five years. And in a complex series of transactions, Harken recently moved its South American operations into a British company called Global PLC, of which Harken owns 92%. "It was always suspected that something was fishy, but not because of the Bush connection," says Gheit of Fahnestock. "That for a small company like Harken to be involved in foreign drilling operations getting concessions from foreign governments, things just didn't add up. A lot of people had suspected that this was a CIA front." That particular point, of course, is just a rumor.




Speculation on a Harken-CIA connection:






(Unclearly sourced.) "Two Harvard University officials who manage the investment of Harvard's endowment have themselves owned stock in one of the companies in the university's portfolio, raising questions of conflict of interest. Michael R. Eisenson and Donald D. Beane, partners in the Harvard Management Company, each owned shares of common stock in Harken Energy Corp., worth about $26,250 each, the Harvard Crimson reported. Harvard owns about $28 million of stock in Harken, a Texas oil and gas concern ... "




Curiouser and curiouser . . .



Harken's connection to BCCI, in an archived Wall Street Journal report:





Jerry Politex has focused on the webwork of contacts surrounding Harken:







Paul Krugman's July 7 column spells it out:






That's exactly what happened at Harken. A group of insiders, using money borrowed from Harken itself, paid an exorbitant price for a Harken subsidiary, Aloha Petroleum. That created a $10 million phantom profit, which hid three-quarters of the company's losses in 1989. White House aides have played down the significance of this maneuver, saying $10 million isn't much, compared with recent scandals. Indeed, it's a small fraction of the apparent profits Halliburton created through a sudden change in accounting procedures during Dick Cheney's tenure as chief . But for Harken's stock price — and hence for Mr. Bush's personal wealth — this accounting trickery made all the difference.


Oh, and Harken's fake profits were several dozen times as large as the Whitewater land deal — though only about one-seventh the cost of the Whitewater investigation.


Mr. Bush was on the company's audit committee, as well as on a special restructuring committee; back in 1994, another member of both committees, E. Stuart Watson, assured reporters that he and Mr. Bush were constantly made aware of the company's finances. If Mr. Bush didn't know about the Aloha maneuver, he was a very negligent director.




Krugman re wrote for Guardian:





The ploy works as follows: corporate insiders create a front organisation that seems independent but is really under their control. This front buys some of the firm's assets at unrealistically high prices, creating a phantom profit that inflates the stock price, allowing the executives to cash in their stock.


A group of insiders, using money borrowed from Harken itself, paid an exorbitant price for a Harken subsidiary, Aloha Petroleum. That created a $10m phantom profit, which hid three-quarters of the company's losses in 1989. White House aides have played down the significance of this manoeuvre, saying $10m isn't much, compared with recent scandals. Indeed, it's a small frac tion of the apparent profits Halliburton created through a sudden change in accounting procedures during Dick Cheney's tenure as chief executive. But for Harken's stock price - and hence for Mr Bush's personal wealth - this accounting trickery made all the difference.


Mr Bush was on the company's audit committee, as well as on a special restructuring committee; back in 1994, another member of both committees, Stuart Watson, assured reporters that he and Mr Bush were constantly made aware of the company's finances. If Mr Bush didn't know about the Aloha manoeuvre, he was a very negligent director.



An unattributed editorial in the St. Louis Post Dispach July 7, 2002, puts it succinctly:





(You'll have to bind http address together to go directly.)





...Harken sold a subsidiary to a group of its own insiders. It lent those insiders much of the money to make the purchase. Then Harken claimed a profit from the sale. It was almost as if the company were claiming profits for selling something to itself. Shades of Enron, Qwest and Dynegy, among others. The SEC cried foul. It forced the company to restate its earnings to show a much larger loss.


Did Mr. Bush approve of such accounting sleight of hand? After all, he was on Harken's audit committee. Or was he snoozing while management had fun with figures?




Mike Allen for the Washington Post, July 21, 2002, musters the data (esp. that released under a FIOA request by the Center for Public

Integrity, see below) to suggest that it is more than likely that W. knew that Harken's stock was going to plunge due to the bad financial news that had clearly crossed his desk. (A good story, designed to pressure W. to release all the documents in the case that the SEC is holding):






The documents show that four months before Bush sold most of his stake in Harken Energy Corp., he and other board members received a letter from management calling the previous year's profits disappointing and warning that the company would "continue to be severely limited in our activities due to cash constraints." The letter said that "as indicated at the December board meeting," the failue of a deal involving a subsidiary had "left the company with little cash flexibility."


. . .


The 150 pages of minutes and of the board documents released Friday tie Bush to the company's sale of Aloha Petroleum Ltd., which was recorded in such a way that Harken masked massive losses. . . .




much more. . .


A Jan. 9, 1991 letter from Bruce N. Huff, senior vice president of Harken Energy, to Edmund Coulson, chief accountant of the SEC in a obtained by the Center for Public Integrity. A pdf file. As the Center writes, "Huff describes in detail Harken's position on the Aloha sale, and how it was restructured. Huff notes that in April 1990, `The immediate focus of the Company was at that time redirected to raising cash.' He also notes, `By June, 1990, the Company was constrained by its worsening cash and credit situation.'" (Remember when Bush sold? June 1990.):




A recent Boston Globe Editorial by Bill Black and James Galbraith, both at UT Austin, claims Harken engaged in deliberate fraud:






Bush claims to see nothing wrong about Harken's frauds. However, the goal was to hide real losses and to book fictional income. The people who made the decision and. the board of directors stood to gain directly from the fraud, and Bush did benefit -enormously.


Bush is also wrong on the accounting. This was a deliberately complicated transaction for the same reason that Enron's and Lincoln Savings's partnerships were complicated. Complexity makes it hard for regulators to discern fraud. While the transaction was complicated, the underlying fraud is so well known that the accounting rules governing such transactions are not vague. There was no ''honest dispute'' about accounting rules. There was a deliberate fraud structured in a complicated manner in order to claim that it wasn't really deliberate.




Public Integrity went thru the documents obtained under FOIA and found that Bush probably had knowledge of the scam:




(You'll have to paste address back together to get to story)




. . . Bush chaired a special committee of board members set up to review the terms of a $12 million note held by Intercontinental Mining and Resources Ltd., which was set up by Harken insiders to purchase Aloha, according to an internal Harken document dated March 14, 1990 that was obtained by the Center for Public Integrity.


. . .


The documents the Center has obtained do not unambiguously resolve the question of what Bush knew about the sale of the Aloha subsidiary.


The March 14, 1990 Shareholders Notes and the March 14, 1990 minutes from the Board of Directors meeting suggest that Bush was aware of some of the details of the Aloha transaction; the decision to renegotiate the terms of the deal with Advanced Petroleum Marketing was unanimously approved by the board.




The Public Inquiry provides the documents.






Democrats hope to draw attention to a controversial deal by Harken to sell one of its subsidiaries, Aloha Petroleum, to a group of Harken insiders. The SEC later found that deal might have disguised at least $8 million in losses by Harken and asked the company to restate its 1989 earnings. Bush was on the audit committee of Harken's board at the time.




Another quick account, recounting the history of the story and the maneuverings by Bush and others to impede public knowledge of what exactly happened:






(2 possibilities):


The chart posted at CitizensLaw.net: (highly useful):









Pizzo lays out the case:






In May 1990, the U.S. State Department sent a chilling but still classified report to Scowcroft. The report warned that Iraqi president Saddam Hussein was out of control and was threatening his neighbors:


May 16, 1990


Attached is a paper containing a list of options for responding to recent actions and statements by the Government of Iraq. ...We ask that you pass this paper to Robert Gates for his review.


Under "options" the memo suggested: Ban Oil Purchases: The largest benefit Iraq receives from the US is through our oil purchases...

PRO -- A total ban on oil purchases would have some short-term impact.

CON -- Such action might also have an impact on US Oil prices.


Oil companies had learned, during the years of the long Iran-Iraq war, that trouble in the gulf hurts companies with oil interests because, for one thing, at the first sound of a rifle shot in the gulf region, Lloyds of London jacks up insurance rates on oil tankers and company installations. The "wartime" rates are very high and cut deeply into company profits and investor confidence. If things really get out of hand, pipelines are destroyed and waterways are mined.


The secret memo augured ill for Harken's fledgling venture.




(Memo is May, Bush sells in June!)


House Democrats mention this as a possibility as well:






. . . there are concerns that, as son of the President of the United States at a time when the White House, but no the general public, was well aware of the aggressive intentions of Saddam Hussein in thelead up to the Persian Gulf conflict, you may have been privy to this information. It was also well known that such a conflict would cause substantial disruptions in the oil industry.







The House Democrats on the Judiciary Committee are also extraordinarily thorough in their July 25, 2002 summary of allegations with fine time lines. This pdf file (the second, the first is the cover letter) especially concerns when Bush was informed about company matters and regulations, when he signed the lock-down agreement which is in direct variance with his claim that he had always intended to sell the stock, and how much a role he was said to have in company affairs (i.e., how knowledgeable was he?). Includes W.'s attempt to coverup insider trading violations and allegations of W. making "false statements under oath"! A great file:







Read Conason and Pizzi in Background.


Center for Public Inquiry has received a letter indicating Bush met with President of Harken, Mikel Faulkner, 15 days prior to his stock sale and was deeply involved in the company's "inner workings":



(then click on 1st letter, a pdf file):




I enjoyed the opportunity to visit briefly with you yesterday and to discuss several organizations and strategic matters. Your advise in these situations is beneficail to me. Upon reflection of our conversation, I realize the value of your perspective in these matters and in particual, the tremendous value associated with my being able to "council" with you from time-to-time on just such matters. I would like to schedule an hour or two sometime in the next several weeks to sit down and get your thought on several related matters.




The Reuter's story based on the above:





What didn't Bush know and when didn't he know it????


Well, the 4th letter in the above batch (another pdf file), is a confidential internal memo Bush may have seen (read: probably did) in late May of 1990 and it is evidence that Harken knew profound financial problems would plague its business for the remainder of the year.



And another letter (April 20, 1990 from the president of Harken to his board) shaken loose via a FOIA request by the Center for Public Integrity which, as the Center states: that new conditions on a loan Harken sought "greatly intensifies our current liquidity problem and mandates the infusion of equity into the company."





Last week's explosive news! That Bush had signed a letter not to sell his stock for 180 days some 75 days prior to selling! Pete Yost's AP story, July 16, 2002:











WASHINGTON (AP) - Two and a half months before George W. Bush sold his stock in a struggling Texas energy company where he was a director, he signed a letter promising to hold onto the shares for at least six months, internal company documents show.


The ``lockup'' letter Bush signed on April 3, 1990, for his shares in Harken Energy Corp. is now being compared with the account his lawyers gave federal securities regulators who examined the stock sale as a possible insider trade.


Bush's lawyers have maintained for more than a decade that he had a pre-existing plan to sell his stock in Harken and other companies to pay a tax bill and a loan debt he owed for his stake in the Texas Rangers professional baseball team.


And they have said the sale wasn't motivated by Harken's deteriorating financial situation.


. . .


`Bush's signing of the April 2, 1990, lockup agreement undercuts his lawyers' explanation for the early sale of his Harken stock,'' said Houston attorney Thomas R. Ajamie, an expert in securities law whose firm is advising companies that did business with the failed energy giant Enron.


``If his accountant told him that he needed to sell stock to pay a debt obligation for his interest in the Texas Rangers, it does not make sense that he would subsequently sign an agreement promising not to sell his shares of Harken stock for six months,'' Ajamie said.




The following is a posting on DU, 12 July 2002 by hlthe2b:


---------------begin post----------------------------------


Salon has the Memos: Bush knew of Harken's problems . . .


Memos: Bush knew of Harken's problems. Contrary to the president's statements, company memos show he knew the firm was headed for trouble.

- - - - - - - - - - - -

By Anthony York


When President Bush sold more than 200,000 shares in Harken Energy Corp. in June 1990, he said he did not know the company was in bad financial shape. ib]But memos from the company show in great detail that he was apprised of how badly the company's fortunes were failing before he sold his stock -- and that he was warned by company lawyers against selling stock based on insider information.




Company memos and SEC documents obtained by Salon offer more insight into what George Bush knew about the financial condition of Harken -- where he served on the board of directors and the audit committee-- in the weeks leading up to his sale of more than 212,000 shares in Harken stock. And clearly, not all of it was good news.


On April 20, 1990, just two months before Bush sold his Harken stock, Harken president Mikel Faulkner warned the board of directors, writing that "two events have occurred which drastically affect Harken's current strategic plan with regard to seeking public funds to reduce our debt and provide equity for current capital opportunities," and that the development "greatly intensifies our current liquidity problem."


much more.....




---------------end post----------------------------------


or check out the entire thread:




A good contemporary (July 14, 2002) account by the Guardian:







The SEC concluded that in March 1990, months ahead of the share sale, Bush realized Harken faced loses of $4.2 million in the year's second quarter. And buried in the papers were memoranda written by Harken executives warning one another of a 'liquidity crisis' facing the company.


One was from company president Mikel Faulkner to the board of directors on which Bush sat. Dated 20 April - two months before Bush sold his stock - it warned of 'events which drastically affect Harken's current strategic plan with regard to seeking public funds'. One of Harken's leading banks, says Royce, was looking to withdraw its loan.


Two weeks before Bush moved to sell, on 7 June, Faulkner provided Bush with minutes of an executive committee meeting warning of a 'shutdown effective 30 June unless third-party funding is found'. Harken, it said, had lost $28.5m in trade credit since the start of the year. Bush sold on 22 June; on 20 August, Harken posted quarterly losses of $23.2m.




One by MSNBC and Boston Globe:






(You'll have to paste the last http address together to make it work.)


An industry newsletter covers this issue decently:






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.


Bush has said he had no knowledge the Texas-based company was going to report a $ 23 mm loss two months after he. sold his stock. "I absolutely had no idea and would not have sold it had I known," he said during his 1994 campaign for governor. SEC investigators concurred there was no evidence Bush knew that the loss would be of that magnitude. At most, the investigators found, Bush was aware of a projected $ 4 mm loss, which was "consistent with Harken's publicly reported trend" of losses, states an SEC investigative document obtained by AP. The same document projecting the $ 4 mm loss, Jordan noted, projected a profit for the fourth quarter. Bush sold his stock at $ 4 a share and by the end of that year, its value had sunk to slightly over $ 1. It returned to the $ 4 level and above in 1991. The Harken documents released under FOIA detail Bush's knowledge of the company's problems.


As a Harken director, he received memos in spring 1990 that referred in stark terms to the company's cash-strapped condition as banks demanded it pay down its debts. One document said the company was in the midst of a "liquidity crisis" and another told Bush the company was "in a state of non-compliance" with its lenders. Bush also was informed that a company plan to make a public stock offering to generate cash was being abandoned because one of its lenders objected.





Molly Ivins Feb. 15, 2002 Texas Observer article:






A month before Bush sold his stock, the Harken board appointed Bush and another company director, E. Stuart Watson, to a "fairness committee" determine how restructuring would affect ordinary stockholders.


Smith, Barney, Harris, Upham & Co., the financial consultants hired by Harken, told Bush and Watson only drastic action could save the company. So Bush sold his stock before the news became public. According to U.S. News & World Report, there was "substantial evidence to suggest that Bush knew Harken was in dire straits."




Daschle's desire to look into the SEC's 1991 investigation of Bush (mostly on late filings, but also on possible insider trading):







This is getting juicy!


If Bush would have sold his stocks in the normal fashion, he would have deflated their worth, so he was damned lucky to have a mysterious stranger come out of thin air, as it were. This AP story of July 13, 2002, shows just how lucky he was (remember, W. sells 212,000 shares!):






By the time of the sale, Harken's finances also were in the red. Daily trading activity in the stock was as little as 1,300 shares on the New York Stock Exchange. If Bush had tried to sell a large amount of Harken stock into the open market, it undoubtedly would have driven the price far below the $4 a share market price that he was paid.


Bush's sale on June 22, 1990, was handled by California stockbroker Ralph D. Smith, who says he got a call June 9 that year from an institutional client who wanted to buy a large block of Harken.


Smith said he then made a couple of "cold calls" to people whoowned Harken stock, including Bush.





Pete Yost, Associated Press story, "Who Bought Bush's Stock in Problem-Plagued Oil Company and Why?," July 12, 2002:






President (sic.) Bush says he doesn't know and the White house declines to ask the broker who handled the transaction.


. . .


The broker (Ralph D. Smith) said there wasn't any arrangement ahead of time to bail Bush out of Harken.


. . .


(Smith's) notes for June 9 appear to state that "Geo Bush will sell 212,010 shares in about 2 weeks." The June 22 entry of the day of the sale appears to state, "s/212.140 at 4 to Lee for Bush."




Speculation most ripe on Lee Bass.


Jeff Gerth and Richard Stevenson seem a bit too credulous in this July 10, 2002 NYTime article








The broker, Ralph D. Smith of Sutro & Co. in Los Angeles, said he was offering to take off Bush's hands his now unencumbered 212,000 shares of Harken Energy, which in previous months had suffered a series of financial setbacks.


. . .


But out of the public eye, there was some good news developing. The company was finalizing an agreement with the wealthy Bass family of Fort Worth to back a venture to drill for oil off the coast of Bahrain, a big opportunity to break into international exploration. Bush had been briefed on the pending financing agreement, which had not yet been disclosed to investors.


At the time, Bush wanted to pay off the loan he had taken to finance his stake in the Rangers, and the Harken stock was his biggest asset. But Harken stock was thinly traded; its average daily volume on the New York Stock Exchange was only about 10,000 shares. Until he contacted Bush on behalf of an anonymous buyer, Smith said in an interview this week, he could not find anyone willing to sell, either.


So it was in many ways a perfect match of buyer and seller, and two weeks later, after checking with lawyers at Harken, where he was a consultant as well as a director, Bush completed the deal.


. . .


A dozen years later, it is still not known who bought Bush's shares in the troubled company, or why the buyer made the offer at that time. Smith said he would not disclose the buyer's identity except to say that it was an institutional investor. He also said he was unaware of the pending Bass deal.


The White House said Wednesday that Bush never knew the identity of the buyer. Bartlett said it was "very far fetched" to assume that the buyer was knowingly helping Bush at a financially convenient moment for him.


Christopher Caldwell, in New York Press, speculates:







An editorial on Harken in last week's Wall Street Journal noted "interesting Saudi connections on the finance side." One of Bush's early investors in Arbusto was James Bath, agent of Salem bin Laden (Osama's half-brother) in the United States. (This is not proof, as certain left-wing publications have implied, that Bath's money was the bin Ladens' to begin with.) In the months after Bush came onto the Harken board, according to a 1999 Journal report, a Saudi financier named Abdullah Taha Bakhsh bought a 17 percent stake in the company. Bakhsh's American representative Talat Othman was given a seat on the board and met with then-President Bush at the White House. And the "good news" into which now-President Bush claimed to be selling his Harken shares was an oil-exploration deal with the government of Bahrain–a total (but lucrative) flop that was arranged despite Harken's never having done any foreign oil exploration before. In fact, the ex-president's ne'er-do-well son appears to have been used by the Harken board as "Arab bait," much as Democrats sold the promise of photographs with Clinton family nobodies for cash from Asian businessmen.




Some fine threads on this at DU. The Bass bros. certainly seem to be "poppin' wood" over Harken in the summer of 1990, and in the process launch Bush into the Rangers and, eventually, into the governorship and his current residency in the White House. Could it be that Papa Bush calls his buddy Bass and says make some breaks for my kid? Then Bass is all of a sudden hot for Harken stocks.





Real problems are brewing in this area. Did you notice that the story changed again in the last week?? The initial story had been that the SEC had misplaced the filings. But that didn't wash (since nobody at SEC was willing to take the heat for W.'s incompetence in a high profile case). More recently the White House claimed that the hold up was due to Harken's lawyers. At Bush's Monday (June 8) press conference, however, he said that he not clear what happened. Why can't the previous story, that Harken's lawyers filed months late, stand up under scrutiny??



A July 4, 2002, NYTimes story by Elisabeth Bumiller succinctly provides details on W's changed story about late filing:




You'll have to paste address together and register to read, but a shortened version without NYTimes registration necessity at:






Ari Fleischer, the White House press secretary, said Wednesday. that Bush failed to promptly disclose the sale of stock 12 years. ago because of a ``mix-up'' with his lawyers. In 1994, however,. Bush blamed not his lawyer but the Securities and Exchange Commission for misplacing the proper forms.


Fleischer could not completely explain the inconsistency, and he said he did not know when or why Bush changed his explanation about the reason the sale was disclosed late.


. . .


Bush, who was on Harken's board of directors, has said that he quickly realized that the stock's slide would raise concerns that he had sold based on inside information, a potential crime. The suspicions grew when the SEC said that it did not have a document from Bush, a Form 4, that insiders must file when they sell stock. Bush did not file the Form 4, and officially report the sale, until March 1991.


But Bush had promptly filed another required document, a Form 144, disclosing his intent to sell the stock.


In 1994, when Bush was asked why he had not filed the Form 4, he said he thought he had and that the SEC must have misplaced it. But on Wednesday, Fleischer said the problem was a ``mix-up, a clerical mistake'' by lawyers for Harken.


``The best explanation is the attorneys thought the form had been filed, which is what led George W. Bush to say he thought it had been filed and the SEC had lost it,'' Fleischer said. ``That was not the case.''










Ari Fleischer who, if you read the. transcript of July 3, 2002's White House Press Briefing, craftily alleged. that Harken Energy's corporate attorneys were grossly incompetent. No, he didn't "say" they were grossly incompetent, but if you follow Fleischer's logic, you would have to conclude that this is what he meant. Apparently the attorneys neglected to read the deadline and filing instructions printed at the top of SEC Form-4: "This Form must be filed on or before the tenth day after the end of the month in which a change in beneficial ownership has occurred (the term "beneficial owner" is defined in Rule 16a-1(a)(2) and discussed in Instruction 4)." That is the tenth day after the end of the month . . .. Not 34 weeks.


. . .


I have never once worked with what I'd call an "upright" attorney who would dare miss a director's SEC filing deadline. In fact, if I were the assigned secretary to that lawyer, I would have been fired had I failed to note the deadline on my own working calendar.





This NYTimes item states that it was Harken's lawyers themselves that informed Bush BEFORE his stock sale that he would have to file the SEC forms in a timely manner:


Jeff Gerth and Richard W. Stevenson, "Bush Calls for End to Loans of a Type He Once Received," NY Times, July 10, 2002 . This item states that it was Harken's lawyers themselves that informed Bush BEFORE his stock sale that he would have to file the SEC forms in a timely manner and claims that although the forms are signed THEY ARE NOT DATED:





A recent Boston Globe Editorial by Bill Black and James Galbraith, both at UT Austin, indicate another way in which the lawyer story is a phony:






His second story was to blame the failure on Harken's lawyers. But that won't wash. Bush was selling his own stock, and was therefore personally responsible for filing the documents.





Opps. Another story falls apart.


The third change in the story, Chicago Trib:






Changing his response for a third time, Bush said he did not know why some of the forms he was required to file with the Securities and Exchange Commission about his 1990 sale of nearly $850,000 in Harken Energy Corp. stock were 34 months late reaching the SEC. He earlier had blamed the SEC for losing the documents, and then a "mix-up" by Harken's attorneys.





HERE"S A BIG QUESTION. We know that the 34-week-late-filed form was undated. WHY? Does its stamped date of receipt match the accession number given to it? (Do the accession numbers of other forms received on the same day correspond to Bush's form? None have the same number, do they?)


Could it be undated because it was actually sent after the April 12, 1991 letter from H. Jannick of the SEC investigation requesting "Copies of all Forms 3, 4 and 144, cover letters and attachments thereto that were transmitted by you, or on your behalf, to the Commission during the period September 1, 1986 through the present."





(Obtained by the Center for Public Integrity thru a FOIA request.)



And the implications of the undated form: no lawyer working honestly would omit it (his legal secretary would not send without a date). Therefore it either 1.) Didn't go to a lawyer and Bush was lying when he said he thought that Harken's lawyers impeded the filing; or 2.) A lawyer knew he was working in the legal margins. There certainly seems like an intent to deceive with an undated form (esp. given W.'s track record: leaving the space blank that asked for past arrests on his jury duty form).



House Democrats on the Judiciary Committee, imply the late filing was part of a coverup:






(The omission of the date, compared to your other filings) appears to be an intentional effort to conceal the trade.





The Guardian provides a new detail on the lead Harken lawyer:






While campaigning for the governorship of Texas in 1994, Bush insisted he had correctly filed notice of his share sale to the SEC, but that it had lost the documents.


'That's what we remember him saying then and that's certainly not what he's saying now,' says Craig McDonald of the research group, Texans for Public Justice. 'One can only presume he changed his story because he knew there were people who could come forward and attest to the opposite.'


When it became clear last week Bush had not filed his documents, White House spokesman Ari Fleischer blamed 'a mix-up with the attorneys'. However, Robin Jordan, the leading lawyer concerned, went on to be appointed by Bush as ambassador to the oil kingdom of Saudi Arabia.




David Scheim, for Campaign Watch, summarizes the SEC's final disposition on Bush's sales:






. . . the SEC had not exonerated Bush. On October 18, 1993, Bruce A. Hiler, the SEC's associate director for enforcement, wrote a letter to Bush's lawyer stating that "the investigation has been terminated as to the conduct of Mr. Bush, and that, at this time, no enforcement action is contemplated with respect to him."7 Bush claimed he had been cleared, and the head of the SEC's enforcement division, William McLucas, went beyond the letter and stated that "there was no case there."8


Yet Hiler's official letter had added that 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 ."9



Why wasn't Bush interviewed????






Bush had many family connections to the investigation. The SEC's general counsel at the time was James R. Doty, who represented Bush in his purchase of the Texas Rangers. Doty recused himself. Bush was represented in the SEC case by Jordan, who had been law partners with Doty and now is Bush's ambassador to Saudi Arabia. The SEC chairman was Richard C. Breeden, nominated by Bush's father.


Several former SEC officials said they found it unusual that Bush and other board members were not interviewed during the inquiry. William R. McLucas, a Washington lawyer who was SEC enforcement director at the time, said he has no reservations about the process. "We were free to interview him — his counsel certainly made that crystal clear," he said. "If you determine that the information wasn't material, you can talk to somebody under the hot lights for 10 hours, what's it going to get you?"




Knut Royce's report for The Public i stresses the SEC connection:




and he follows it up with another:




Informational: Nederland posted this in DU July 8, 2002




Mr. Bush followed the law by informing regulators of his intention to sell stock in Harken Energy Corp., a Texas oil company, in 1990. But he conceded that because of a "mix-up, a clerical mistake" by Harken lawyers, Mr. Bush had not promptly reported the sale after it took place.


Link: http://www.cbsnews.com/stories/2002/07/03/politics/main514190.shtml



As I mentioned before, its the intention to sell (form 144) that is the important document. The document indicating that you actually sold your stock (form 4), is generally regarded as a formality.




and Nederland follows up with:




This form must be filed with the SEC as notice of the proposed sale of restricted securities or securities held by an affiliate of the issuer in reliance on Rule 144. Notice on the form is only required when the amount to be sold during any three-month period exceeds 500 shares or units or has an aggregate sales price in excess of $10,000. The sale must take place within three months of filing the form and, if the securities have not been sold, an amended notice must be filed.


Link: http://www.sec.gov/answers/form144.htm



As you can see, the form must be filed within three months of the sale, not in the "next couple of years" . . . .




The seriousness of late filings?? Frank Rich's "All the President's Enrons," NY Times (July 6) provides only a brief paragraph on Harken, but includes the sentence, "A Presidential spokesman assured us . . . that this infraction amounted to nothing more than driving 60 in a 55- mile-an-hour zone.")





Daschle's desire to look into the SEC's 1991 investigation of Bush (mostly on late filings, but also on possible insider trading):







Jeff Gerth and Richard W. Stevenson, "Bush Calls for End to Loans of a Type He Once Received," NY Times, July 10, 2002 (Pretty cut and dried but focuses on the need for the loan and Harken "relaxing the conditions," also mentioning that Harken's lawyers had informed him directly and in a timely manner about his need to file the SEC forms in a timely manner):





Mike Allen, "Bush Took Oil Firm's Loans as Director," Washington Post, July 11, 2002 (pretty cut and dried, also information on Bush's attempt to keep SEC documentation of investigation secret):




David Gross's "Did President Bush Profit on His Harken Loans?, _Slate_, July 11, 2002, focuses at the favoritism behind and the profit of these loans (A fine story making the financial case simple even for the econ-challanged):






In response to queries, Bush spokesman Dan Bartlett asserted that the loans "which Bush would now like to see banned"were "totally appropriate" and that, in anycase , Bush hadn't profited from them.


That depends on what your definition of profit is.


Bush used the loans to buy Harken stock. . . .


. . . Bush still received substantial benefits from his Harken loans. The loans "and the way they were unwound"allowed Bush to take financial positions without risk that ordinary investors have to pay for. And the loans were offered on terms that are unavailable to even the best credit risks.


. . .


The loans to Bush bore 5 percent interest rates, and the principal didn't have to be paid back for eight years. Now, even if you're rich, most financial institutions won't lend you money for the entire amount of a stock purchase. And they certainly won't lend it to you at 5 percent. To buy stocks on margin, even wealthy investors must generally put down 50 percent of the purchase price in cash, pay an interest rate above prime, and assume the risk of being forced to sell if the stock plummets.


But Bush put no money down and received an interest rate that was far below prime. In December 1986, the prime rate was 7.5 percent, and in June 1989, it was 11.07 percent, according to the Federal Reserve Bank of Dallas.


Even if we make the extremely generous assumption that Bush could have borrowed on his personal credit at the prime rate, the lower rates offered by Harken saved him at least $2,400 a year in interest on the 1986 loan, and $5,121 per year in interest on the 1989 loan.


. . .


Bush may not have turned a direct profit on his Harken loan. But he got an awful lot of valuableā€"and potentially valuableā€"stuff for free as a result of those loans. Bush essentially borrowed $180,000 in stockholders' cash to bet on Harken stock. When the bet soured, the debt was forgiven and he was given new chips to play with.





much more!





The question of Bush's 1993 and 1994 tax returns including as income forgive loans from Harken has been raised for some time, but only recently has it been given the scrutiny it deserves, especially by Bob Fertik for Democrats.com:





(go ½ way into article for loan/tax issue):




as happened at every point in his life, Mr. Bush got a special break available only to well-connected insiders. Mr. Bush was a member of Harken's board, so in 1989 Harken simply changed the terms of Mr. Bush's 1986 loan. According to the NY Times,


In 1989, Harken relaxed the terms of the 1986 loan to remove any "personal liability to yourself," the company's lawyer wrote to Mr. Bush on Oct. 5 of that year. The change had the effect of freeing Mr. Bush's original 212,000-share block of Harken stock, which he sold the next year.


Thus, Mr. Bush got his cash and moved on to his high-profile role with the Texas Rangers. . . .,


But what ever happened to the $96,000 loan?


Democrats.com commissioned a team of financial experts to conduct a thorough investigation of Mr. Bush's stock options.


. . .


So the question we ask is this: did George W. Bush report the full value of his forgiven Harken loans as income on his 1993 tax return?




This article includes a summary of the financial dealings and a link to the detailed analysis as well as a readable simplified example to explain how Bush owes taxes on $118,760.


The memo from the CPA Democrat.com consulted:







According to CitizensLaw, all five of the SEC Commissioners in 1991 were appointed by W.'s father:




Tom Flocco for World Net Daily put it well last Feb.:






The governor also did not reveal the blatant conflicts of interest involved, since the chairman of the SEC was Richard Breedon, former lawyer with Houston firm Baker and Botts and deputy counsel to Bush's father when he was vice president. Breedon received his SEC appointment after the elder Bush became president.


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. Moreover, Doty had previously served as George W. Bush's personal lawyer in the deal involving his Texas Rangers purchase. So, in the end, the younger Bush was cleared of insider trade wrongdoing by his personal attorney and by his father's vice-presidential counsel, a virtual impossibility for the average U.S. citizen.





Bush says the matter was "fully vetted." "FULLY vetted"??? Without the STANDARD interview?? Associated Press, July 13, 2002:







There is no explanation as to why an interview wasn't pursued in thousands of pages of material released by the SEC over the years in the Bush inquiry.




Never mind that they interviewed the broker of the stock transaction, Ralph D. Smith, they simply didn't interview the principle of their investigation. Makes perfect sense, right?



Even W.'s lawyer profits:





What will we ever know? (SEC keeping the documents out of public record.):






The SEC has released some records on its insider trading probe of Bush, but has withheld others. The White House is declining to authorize the SEC to release all documents.




Meanwhile, of course, SEC denies any sense of pressure or favoritism:







The Securities and Exchange Commission lawyer who investigated President Bush for insider trading more than a decade ago said on Tuesday that no pressure was put on him to drop the investigation even though Bush's father was president at the time.





House Democrats on the Judiciary Committee in their 24 July 2002 letter mention this as well:





A number of misc. letters included here from SEC investigators to Bush and his lawyers during 1991. The letter indicate that W. was not forthcoming with documentation requested:







How has Harken faired on the market?:




Harken employs offshore tax-haven ruse during Bush's tenure:






Was Harken trying to avoiding taxes or hiding money? Do the Cayman Island banks allow scrutiny by US officials? (If Harken was hiding money, this item could be explosive.)


But the President claims no knowledge of Harken's use of the Cayman Islands as a tax dodge:




Recent records acquired by the Center for Public Integrity indicate he HAD to have known, unless he attended meetings with his Walkman blaring:







The Center has obtained a computer record from the Cayman Islands showing the date of incorporation of Harken Bahrain Oil Company. Among the documents we obtained from the Securities and Exchange Commission under the Freedom of Information Act, we found the minutes of the Sept. 13, 1989 board meeting, held two weeks after the subsidiary was set up. The minutes make no mention of the subsidiary or the Bahrain deal.


The minutes of the Dec. 6, 1989 board meeting, however, show that after a presentation from Monte Swetnam, president of the reviewed and discussed the background of the Bahrain transaction with the Board including the discussions and negotiations conducted in Bahrain on his several trips there. Mr. Swetnam further discussed with the Board the potential benefits which the Company could realize from this opportunity. The Board discussed and reviewed the matters raised by Mr. Swetnam concerning this foreign opportunity and after which discussion, the Board unanimously approved HEX's proceeding towards finalization of a formal agreement with the State of Bahrain…"


George W. Bush, then a director of Harken, attended the meeting. There is no indication that he did not vote to approve the Bahrain deal.





A sweet little contemporary overview, from the San Francisco Chronicle: