5 of diamonds
do these signs mean?)
story of Harken is a cautionary tale ignored by too
many Americans. Had it been paid attention, this country
would have been saved enormous suffering, a considerable
amount of which is still ahead of us. Badly managed,
with CEO George W. Bush
benefiting from the sleaziest of corporate manipulations,
had he been anyone but a President's son, Bush very
likely would have ended up in the slammer on insider
trading charges. The story of Harken demonstrates the
character, or rather, lack of character, of the man
currently in the White House, his inability to plan
competently, his eagerness for others to pay the price
of his mistakes rather than accepting responsibility
himself, and his basic greed. This latter quality is
perhaps the defining hallmark of the Bush administration.
The chief difference between Bush in charge of Harken
and Bush sitting in the Oval Office is that then only
that small percentage of citizens who were shareholders
got ripped off. Today it is all of us, and generations
yet to come.
first oil company, Arbusto (aptly named) produced little
oil, no profits, and big tax shelters. In 1982 the name
was changed to the "Bush Exploration Oil Company."
A new name was no substitute for competence. The company
continued needing to be bailed out by family friends
and allies. Spectrum 7 then merged with Bush Exploration,
named GWB chairman and CEO, and gave him a lot of stock.
Big losses continued.
Energy Corporation then purchased Spectrum 7. The company
gave Bush $600,000 in stock and a seat on its Board
of Directors. It was apparently interested in the Bush
name and connections rather than the value of Bush's
company, which was next to nothing. This is how crony
capitalism replaces free market capitalism competence
is trumped by connections.
Harken also paid Bush a consulting fee initailly of
$80,000 annually, later increased to $120,000 per year.
It is barely possible Bush believes this enormous sum
was in recognition of his expertise. But given his track
record, the best use of his advice would to have been
to do the opposite. Mother Jones reports "He
was also allowed to borrow $180,375 from the company
at very low interest rates. In 1989 and 1990, according
to the company's Securities and Exchange Commission
filing, Harken's board "forgave" $341,000
in loans to its executives. In addition, Junior took
advantage of the company's ultraliberal executive stock
purchase plan, which allowed him to buy Harken stock
at 40 percent below market value."
fell on hard times by 1989 even with its political
connections. Its chairman Alan Quasha had amply proved
that George Bush was not the only poor manager of other
people's money, and by 1990 Harken's losses reached
$40 million. Connections stepped in at this point, to
bail the company out.
1990 the Arab country of Bahrain broke off negotiations
with Amoco in order to award Harken exclusive off shore
drilling rights. Unlike Amoco, Harken had never drilled
under the sea. Nor had it previously drilled overseas.
In fact it had to bring in outside experts to do the
job. But it did have GW, son of the President of the
United states, on its Board of Directors.
months after the Bahrain contract, Bush sold 212,140
shares, netting himself $848,560. He used the bulk of
his money to pay off the loan he had taken out to buy
the Texas rangers baseball team.
the story gets even more interesting. Bush was on the
company's audit committee, and knew its finances were
bad. This gave him the opportunity to engage in insider
trading on a scale that dwarfed what Martha Stewart
has been accused of. Compare $848,000 with $40,000.
Despite appearances, nothing was done until the SEC
realized it had not been notified of the stock trade
until 8 months after the legal deadline. It began an
investigation that concluded, in 1991, with no measures
against GWB. We should not be surprised, given who was
President at the time Further, the SEC's general
council, James Doty, handled the sale of the Texas rangers
for Bush in 1989.
Bush had been warned against insider trading by Harken's
lawyers, just before he sold his shares. But then, flouting
the law by well connected rich boys was a practice with
which Bush had plenty
of previous experience. No legal action was
ever taken, even though two months after Bush raked
in his insider profits, Harken posted losses of over
$20 million, and its stock fell 24%. Harken now sells
for under $1/share.
SEC investigation did uncover the fact that from 1989
and 1990, Harken "forgave" Bush some $341,000
in loans, precisely the same type of loan that Bush
now criticizes corporate executives for taking. Bush
himself was a recipient of such a loan, worth $180,375
at very low interest.
the corporate scandals leading up to his attack on Iraq,
Bush's shady dealings involving Harken were repeatedly
raised. He claimed he had been exonerated by the SEC
but steadfastly refused to allow the records
of its investigation to be made public. Secrecy and
connections are the MO of this man. Yet he could tell
the American people in a speech on Wall Street: "I
challenge compensation committees to put an end to all
company loans to corporate officers." Apparently
it is more of a matter of "do as I say and not
as I do."
Jones story cited in this article and Joe Conason's
Big Lies give far more details, and put this sordid
story into more complete contexts. We recommend both.