HUGE BUSH STOCK SLEAZE SCANDAL!!!
LAWBREAKER-IN-CHIEF!
Dubya Broke Law Often, Reaped Big $$$
But Poppy's SEC Shut Down Probe
Cover Up Completed to Protect Dubya?
The Full Story Of Dubya's Rip-Off Scam
(WASHINGTON, D.C., July 2, 2000: Special to MWO) In a shocking new
development in the mounting corporate corruption scandals, it has
been revealed that George W. Bush violated securities regulations at
least four times in the 1980's and 1990's -- including one violation
that occurred while Bush was completing precisely the sort of stock-
dump swindle which his Enron executive buddies allegedly pulled off
last year.
The Securities and Exchange Commission discovered aspects of Bush's
rip-off at the time. An internal SEC report, dated April 9, 1991 and
later obtained and released by the Center for Public Integrity,
noted that Dubya had established a pattern of violating SEC reporting
regulations. The report also announced that SEC investigators had
opened an investigation into Bush's insider stock dumping the year
before.
But suddenly, under then-President George H.W. Bush's hand-picked SEC
chairman, the agency halted its probe of Dubya, brought no charges,
and deep-sixed the case.
Now, in light of George W. Bush's denunciation of exactly the sort of
practices that he himself used to build his fortune, the Bush
Administration is in deep crisis.
Washington political observers are saying that only a full-scale
probe of Bush's past corporate criminal activities -- and the
possible cover-up of those activities by his father's appointees --
can restore confidence in Dubya's shaken administration.
The case goes back to the younger Bush's involvement with the Harken
Energy Corporation twelve years ago.
Here's the full story:
Dubya and Harken Energy: The SEC Cites First Wrongdoing
In 1990, Bush was a member of Harken's board of directors and one of
two members of its audit, fairness and special committees. (Harken
had bought Bush's failing oil company, Spectrum 7, for $2 million in
stock, even though Spectrum was a big money loser.) Bush and another
director, E. Stuart Watson, served on Harken's "fairness committee"
to determine whether a restructuring of the company would adversely
affect ordinary shareholders.
Harken's annual report for 1989 showed a profit of $8 million on the
sale of its subsidiary, Aloha Petroleum. Aloha was sold to a
partnership of Harken "insiders" called International Marketing &
Resources (IMR) for $12 million -- $11 million of which was financed
through a note held by Harken.
When SEC accountants eventually discovered that Harken had concealed
its 1989 losses by claiming a profit on the sale (despite the fact
that Harken held the note on the sale) the Commission objected,
saying that the income could only be recognized when the principal on
the loan was paid.
The Arthur Andersen Connection
According to their SEC Proxy statement on May 1, 1991, Harken Energy
Corporation had employed Arthur Andersen & Co. for accounting
services since 1976 and the Harken audit committee, including Bush,
met with auditors from Arthur Andersen. The Proxy statement
stated, "Arthur Andersen & Co. has continuously served Harken as
independent auditors since 1976." A July 25, 1991 letter from the
Securities and Exchange Commission asked for Harken to "Identify the
representatives of Arthur Andersen & Co., Inc. present at the June
11, 1990 meeting of Harken's Audit Committee."
In a December 6, 1990 letter to Harken Energy Corporation, the SEC
asked why Harken and the company's independent auditors -- Arthur
Andersen -- qualified the sale of Aloha Petroleum as a capital
gain. The SEC letter asked Harken to provide additional information
about "The financial statement of IMR which were relied upon in the
Aloha transaction that enabled the Company and its independent
auditors to reach the conclusion that the collection of the note from
IMR was reasonably assured at the time of sale." The SEC also asked
for Harken to "Describe any plans, arrangements or understandings
which obligated Harken to provide financial support to Aloha on an
ongoing basis and the consideration that was given by Harken and its
independent accountants in determining that full gain recognition was
appropriate."
After the SEC discovered Harken's concealment of real losses, Harken
was forced to amend its 1989 annual report. The amended filing
declared that Harken's 1989 losses were actually $12,566,000, rather
than the $3,300,000 loss it had earlier declared.
What Did Dubya Know? Everything
When Did He Know It? In Plenty of Time
Harken director E. Stuart Watson said both he and Bush were aware of
Harken's finances. "You bet we were. ... We were both trying to keep
that company on the straight and narrow," Watson said. According to
the Dallas Morning News, Watson said, "they [Watson and Bush] were
kept current on the company's finances and knew that losses were to
be announced." Watson added that earnings reports at Harken "were
never a surprise to us." Watson said that, as members of the audit
committee, he and Bush were briefed by the company treasurer and the
inside and outside auditors.
Bush the Inside Trader: Dubya Dumps His Harken Stock
On June 22, 1990, Bush sold 212,140 shares (66%) of Harken stock,
which was valued at $4 per share; two months before Harken announced
losses in its results for the June 30 quarter. The value of Harken's
stock fell to $2.37 per share immediately following the announcement
of losses and was trading at only $1 by the end of the year..
Before selling his stock, Bush was informed that the firm was
suffering a cash "crisis." According to the Associated Press, "As a
Harken director, he [Bush] 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 noncompliance' with its lenders.".
Dubya Tries To Hide Big Rip-Off Profit
Bush's sale of Harken stock returned nearly $850,000- a 200% profit,
but he failed to report the transaction until March of 1991, a
violation of SEC rules. Bush contended the SEC had misplaced the
report. According to SEC spokesman John Heine, "As far as I know,
nobody ever found the 'lost' filing." [Time, 10/28/91]
Responding to new documents that show Bush was aware of Harken's
financial "crisis," Bush lawyer Robert Jordan said, "By the time Bush
sold his stock, the cash crisis had been largely resolved. ... By May
21, 1990, the major shareholders had agreed to a credit agreement
which put $26 million into the company immediately." But Harken
needed a "cash infusion of $38 million... to maintain minimum
operational flexibility" - meaning that even with the $26 million
credit agreement, Harken still needed $12 million.
Internal Harken Energy documents noted that the company's immediate
cash needs [were] at a crisis "survivor" level in May 1990 - just
weeks before Bush dumped 212,000 shares of Harken stock. An internal
Harken Energy Corporation "Analysis of Cash Needs" dated May 4, 1990
and covering May 1 - July 31 indicated that Harken needed a cash
infusion of $30 million to "maintain survivor status, pay past due
payables of $2 million and rebuild working capital of $3 million."
In order to maintain "minimum operations," the company needed a "cash
infusion of $38 million ... to maintain minimum operational
flexibility."
The S.E.C. Investigates -- Then Stops
On April 9, 1991, SEC officials Herbert F. Jannick III, Lewis J.
Mendelson, and James B. Adelman filed a report, exposing Bush's
failure to comply with S.E.C. disclosure requirements not once but on
at least four occasions in the 1980's and 1990's.
The officials also announced that the SEC staff had undertaken an
investigation into Bush's windfall profit insider sale of 212,000
shares of Harken stock in July 1990, two months before Harken
publicly announced its huge losses.
What then occurred remains something of a mystery. Commonly, the SEC
seeks court injunctions against repeat disclosure violators, barring
them from repeating the offense. And the stock dump sale could have
lead to more serious criminal charges, along the lines currently
being discussed with regard to the directors of Enron and WorldCom.
But the SEC, then overseen by a George H.W. Bush appointee, neither
issued an injunction nor, it appears, followed up on the stock-
dumping probe. The entire matter was deep-sixed until the Center for
Public Integrity rediscovered it during the 2000 campaign.
George W. Bush, Lawbreaker: Before and After the Enron Scandal
Before: Bush failed to comply with SEC rules in reporting his June
1990 sale of Harken stock until March 1991. Bush contended the SEC
had misplaced the report. According to SEC spokesman John Heine, "As
far as I know, nobody ever found the 'lost' filing."
After: In March 2002, Bush outlines a ten point plan on corporate
reform. Bush said, "Corporate officers should not be allowed to
secretly trade their company's stock. Every time they buy or sell,
they should be required to tell the public within two days," Bush
said.
Before: Harken director E. Stuart Watson, a former executive for oil
giant Atlantic Richfield, calls Harken's deals 'convoluted' and
difficult even for industry veterans to grasp. Says Harken founder
Phil Kendrick, still a small shareholder: 'Their annual reports and
press releases get me totally befuddled. There's been so much
promotion, manipulation and inside dealmaking. It's been a fast
numbers game.' Some former executives charge the firm with routinely
inflating its assets to make its balance sheets look better.
Harken's longtime chief executive, Mikel Faulkner, insists the
operation is 'clean.' But Faulkner, an accountant, offers this
advice for those trying to decipher Harken's financial
statements: 'Good luck. They're a mess,'" according to Time magazine
After: In a statement further detailing his plan for corporate
responsibility, Bush said, "The SEC should ensure that public
companies are responsible for providing investors a true and fair
picture of themselves, and that this information is provided
in 'plain English.' A company should disclose information in its
control that a reasonable investor would find necessary to assess
the company's value, without compromising competitive secrets.
Today, disclosure practices have fallen behind the advanced
techniques of corporate finance, allowing some firms to conceal the
true risks faced by investors."
In short, Bush and Harken look as if they were guilty of precisely
the irresponsible and possibily illegal activities that Bush now says
he wants to eliminate.
As a result of those activities, Bush parlayed his Harken profits in
order to buy the Texas Rangers baseball team -- an acquisition that
eventually made him a multi-millionaire. All of which would have
been impossible without his apparent participation in the insider
Harken pump-and-dump scheme.
The Bottom Line:
-- In 1991, the SEC found a pattern of repeated securities laws
violations by George W. Bush in the 1980's and 1990's.
-- The SEC also began an investigation into Bush's insider "pump-and-
dump" Harken scheme, which eventually made Bush a multi-millionaire.
-- The SEC, for reasons still unknown, sought no injunction against
Bush for the disclosure violations and shut down its probe about his
Harken stock sale.
Questions for Congress and the Press
As a result of these revelations, a number of monumental questions
have arisen about the possible stock crimes of George W. Bush -- and
the possible cover-up of those crimes by his father's administration.
But the really big question at the moment is -- will Congress and the
press pursue these grave and disturbing questions?
In 1994, Congress and the press jumped into an alleged scandal known
as Whitewater, involving a relatively piddling amount of cash -- a
story instigated by the accounts of a disgraced Bill Clinton hater
named Hale and a drug-addicted con-man and former Clinton associate
named McDougal.
The land deal in question dated back to the late-1970's -- more than
fifteen years prior to the investigation's start.
When the "scandal" was proved to be an utter phony in the Resolution
Trust Corporation report in 1996, the press, led by the Washington
Post, suppressed the news, and the Whitewater investigation
continued.
After tens of millions more of the taxpayers dollars were wasted,
after a partisan-led impeachment drive, after countless thousands of
fake news stories (many based on leaks from Clinton's chief
persecutor, Kenneth Starr), the final report on Whitewater proved the
entire affair was baseless.
But now, we have a corporate scandal involving, by comparison, vast
amounts of money -- the foundation of George W. Bush's multimillion-
dollar personal fortune. Now we have evidence of truly illegal
dealings that date back barely a decade. Now we have evidence
provided not by grifters, con men, and political partisans, but by
the members of the staff of the Securities and Exchange Commission in
1991, as well as by former executives of the Harken Energy
Corporation. Now we have the possibility that a cover-up of those
findings took place in order to protect the then-President's son.
It's not simply a matter of hypocrisy, as an excellent report by
Anthony York in Salon asserts, in light of Dubya's sanctimonious
reaction to the Enron and WorldCom fiascos, and related scandals.
It's a matter of corporate immorality and lawbreaking by the current
resident of the White House -- and of possible efforts by that
resident's father, former President Bush, to hide and then bury his
son's crimes.
Until and unless the proper authorities, along with the press,
investigate these serious matters with the same zeal that they
investigated the patently phony Whitewater allegations, the public
can have no confidence, either in them or in the Bush Administration.
Accordingly, MWO demands that current SEC Chairman Harvey Pitt be
compelled to re-open immediately the SEC's investigation into George
W. Bush's violations of disclosure requirements in the 1980's and
1990's and his involvement in the Harken stock-dumping scheme of 1990.
We also demand that the Senate Banking Committee and the Senate
Finance Committee immediately undertake investigations into the
allegations about Bush's Harken dealings, his non-disclosure problem,
and the possible cover-up of these charges by members of the first
Bush Administration.
Finally, we demand that the news media independently investigate all
of these matters, committing at least as many resources (and here,
the Washington Post and New York Times should take special note) as
they did to the phony Whitewater scandal.
Email Senator Paul Sarbanes
(D-MD), Chairman of the Senate Banking Committee
Email Senator Max Baucus
(D-MT), Chairman of the Senate Finance Committee
Politely but firmly demand that their respective committees begin an
official inquiry, with public hearings, on George W. Bush's
infractions and possible infractions of securities laws while he was
a director of Harken Energy Corporation, as well as of the possible
cover-up of those infractions and improper cessation of the SEC's
original investigation into these matters in 1991.
Sources:
Time, 10/28/91
Wall Street Journal, 12/6/91
Dallas Morning News, 5/7/94, 10/11/94
Washington Post, 7/30/99, 1/23/02
Associated Press, 9/6/00
SEC Proxy Statement, Harken Energy Corporation, 5/1/91
Securities and Exchange Commission, Division of Corporation Finance,
Correspondence with William R. Hayes, 12/6/90
Securities and Exchange Commission, Enforcement Division,
Correspondence
with Joseph A. Cialone, 7/25/91
Center for Public Integrity
Salon
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