Bush Is No Good Trade

According to U.S. Securities and Exchange Commission records, on four separate occasions Gov. 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. Moreover, one key trade just a few weeks before Iraq invaded Kuwait -- but reported some eight months late after the Gulf War was over -- netted Bush close to $1 million in profit as he sold stock in Harken Energy, an oil company doing business in the Middle East wherein some of his father's largest contributors also maintained substantial positions.

The SEC under President Bush carried out an incomplete investigation of the younger Bush's pre-Gulf War trade in 1991 after key presidential advisor George Jr. claimed that he filed a report, but that the SEC had most likely lost it. (No one has really asked whether the governor bothered to use registered mail to verify receipt of the documents.)

According to an Oct. 28, 1991, Time Magazine report, SEC spokesman John Heine said, "as far as I know, nobody ever found the 'lost' filing." And, strangely, Bush refused comment to Time regarding either the incident or his involvement with Harken.

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.

That the mainstream media has refused to question Bush regarding what voters might consider a mockery of the criminal investigative process is a story in and of itself -- especially considering it concerns how a possible future president might enforce U.S. laws if he had also broken those statutes.

Consider that Americans who currently hold stocks or mutual funds would never -- by virtually no stretch of the imagination -- be able to obtain access to corporate insider information that could turn a million dollars profit. But reporters following Bush have not broached the subject during the campaign.

Most reports involving Bush's insider oil stock trades refer only to his highly controversial June 22, 1990, million dollar trade made six weeks before Gulf War hostilities broke out in Kuwait -- a trade which was reported eight months later. However, SEC documents between 1986 and 1993 show that Bush acquired 212,152 shares of Harken stock on Nov. 1, 1986, at the time he merged his Spectrum 7 company with Harken. But the future governor did not report the transaction until April 7, 1987 -- more than five months later.

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.

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.

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."

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.

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."

Bush Filing Given a New Explanation

Bush Name Helps Fuel Oil Dealings
Eight days after Bush's stock sale, Harken wound up its second quarter with operating losses from day-to-day activities of $6.7 million, almost three times the losses it reported for the second quarter of 1989.

The public didn't learn of this until Aug. 20, when the company, now known as Harken Energy, announced in a press release that its overall losses for the quarter, including non-recurring expenses as well as operating losses, totaled $23.2 million. Harken's stock had slipped to $3 a share earlier that month when Iraq's invasion of Kuwait stirred fears that it would endanger a potentially lucrative offshore drilling contract with Bahrain. On Aug. 20, the stock dropped to $2.37.

Did Bush know of the impending losses when he sold his stock in June? Federal securities law prohibits corporate "insiders" from trading "on the basis of" material information that is not publicly known.

Bush says he did not know, even though he had a seat on Harken's three-member audit committee as well as its eight-member board of directors. He said he had no idea Harken was going to get an audit report full of red ink until weeks after he had made the sale.

"I wouldn't have sold if I had," Bush said. "I got clearance by the lawyer [Harken general counsel Larry E. Cummings] to sell this stock. I was mindful that this transaction would be completely scrutinized. I knew the law and I sold at a time that I was cleared to sell."

Bush said he didn't seek a buyer, but was approached by a Los Angeles broker, Ralph D. Smith. Now retired, Smith said he had an institutional client who wanted a large bloc of Harken stock. Smith said he called other Harken officials before calling Bush on June 9, 1990.

"I had no takers until I got to him," Smith said. "It was just like a shot out of the blue."

Bush's lawyer, Robert Jordan, who also represented Harken in the SEC inquiry, said Bush and other board members were not informed until July 13, 1990, in a communication from Harken president Mikel Faulkner that "operating losses were incurred in the second quarter, which will be further quantified and explained." Even then, Jordan said, Faulkner did not provide details. Many companies project and announce expected profits and losses before the end of a quarter, but Jordan said this was not done at Harken.

Asked for a copy of the July 13 communique, or permission to inspect it, Jordan checked with company officials and said they would not allow it. He said Harken has "a policy of keeping internal documents private."

Before Bush's stock sale, Harken's audit committee – Bush, Watson(Stuart 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."

Before giving Bush clearance to sell his stock, Jordan said that company counsel Cummings "checked with Mr. Faulkner at least and maybe others" to see if there was "any material, undisclosed information out there that would prevent the sale." The answer was no, Jordan said.

Faulkner, a certified public accountant who used to work at Arthur Andersen and who has spoken frequently with reporters over the years, declined through Jordan to be interviewed. So did Cummings.

The SEC investigation was launched in April 1991 when it found that Bush apparently failed to submit notice of actual sale of the stock (as distinct from the separate "notice of proposed sale") until eight months after the deadline. Bush said he is sure he did, but the filing couldn't be found.

The inquiry became an issue in the 1994 governor's race when Richards, the incumbent Democrat, challenged its thoroughness, calling it "at best, incomplete, and at worst, a coverup."

Bush was prepared, having obtained a letter from a top SEC official, associate director for enforcement Bruce A. Hiler, a year earlier.
[NOTE: Bruce A. Hiler is the lawyer for Jeffrey Skilling of Enron]

Dated Oct. 18, 1993, three weeks before Bush announced his candidacy for governor, the carefully worded letter was addressed to Jordan and said 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."

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 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.

Dallas Attorney Named Ambassador To Saudi Arabia

He represented Bush in SEC case over sale of Harken Energy stock

The Dallas Morning News
By G. Robert Hillman
Article Source
July 21, 2001

WASHINGTON – President Bush has chosen as ambassador to Saudi Arabia a Dallas attorney who represented him against insider trading allegations arising from his sale of stock in Harken Energy Co. 11 years ago.

Robert Jordan, a founding partner of the Dallas law office of Baker Botts, represented Mr. Bush during a Securities and Exchange Commission inquiry into the allegations involving Mr. Bush's lucrative sale of stock in Harken, where he had been a director.

The SEC found no merit in the charges. Critics have noted that Mr. Bush's father was president during the investigation and a longtime supporter, Richard Breeden, was the commission's chairman.

Mr. Bush has said he needed to sell his 212,000 shares of Harken stock for nearly $850,000, which later plummeted in value, in order to finance his purchase of an interest in the Texas Rangers baseball club.

He invested about $600,000 in the team and earned nearly $15 million when it was sold in 1998.

If confirmed by the Senate, Mr. Jordan would represent the United States in the capital of one of its key allies in the Middle East.

"He understands the important relationship that exists between the United States and Saudi Arabia, and I am confident he will be an outstanding ambassador," Mr. Bush said in announcing his selection.

In a brief telephone interview Friday, Mr. Jordan said he was honored by the appointment, but could not discuss it in any detail until he is confirmed.

In the Senate, Allison Dobson, a spokeswoman for Sen. Paul Wellstone, D-Minn., whose foreign relations subcommittee will screen Mr. Jordan's nomination, said a staff review had just begun and any hearing was weeks off.

At the White House, deputy press secretary Scott McClellan said Mr. Bush has confidence in Mr. Jordan and foresaw no problems with his Senate confirmation.

"The president believes Mr. Jordan will do an outstanding job representing the United States," Mr. McClellan said.

Early in the new Bush administration, there have been reports of strained relations between the United States and Saudi Arabia over the continued violence between Israel and the Palestinians.

Just last week, it was reported that former President George Bush had called Saudi Crown Prince Abdullah to reassure him that his son was determined to "do the right thing" in the region.

Mr. Jordan, 55, is a director of the State Bar of Texas and a past president of the Dallas Bar Association.

He is a Navy veteran and a graduate of Duke University. He also has a master's degree in government and international relations from the University of Maryland and a law degree from the University of Oklahoma.

A corporate lawyer familiar with the courtroom, Mr. Jordan has handled a wide range of domestic and international cases. His Houston-based firm, Baker Botts, deals heavily with energy and technology issues and has a branch office in the Saudi capital of Riyadh.

James Baker, who was secretary of state in the administration of Mr. Bush's father and treasury secretary under President Ronald Reagan, also is a partner in the firm.

Although the White House has announced Mr. Jordan's selection, his nomination has not been formally submitted to the Senate. Mr. Jordan said he is still working on the voluminous personal and financial disclosures that are required for such appointments.

Decades In The Life of George W. Bush, George H.W. Bush and Saudi Arabia

The White House connection: Saudi `agents' close Bush friends

Bush advisers cashed in on Saudi gravy train

Our Friends the Saudis - Two Saudi princes had been paying, on behalf of the kingdom, what amounts to protection money to Osama bin Laden since 1995

Saudi Money Aiding Terrorist Bin Laden

Princely payments: Saudi royalty, it is claimed, make out like bandits on U.S. deals

Records Show What Bush Knew Before Stock Sale

Regulators Concluded in 1992 That He Did Nothing Improper

The Dallas Morning News
By Mark Curriden
September 7, 2000

Days before selling 212,000 shares of stock in a Texas oil company in 1990, George W. Bush received a memo as a company director estimating it might lose $4 million that quarter and faced serious problems refinancing its debt, according to documents made public Wednesday.

The records released by the Securities and Exchange Commission and Mr. Bush's lawyer show Mr. Bush didn't have any information that wasn't publicly available elsewhere. And, his lawyer said, the records were available to federal regulators who investigated Mr. Bush's stock sale and did not alter their 1992 conclusion that the he did nothing improper.

The internal corporate documents, provided by the SEC after Freedom of Information requests from The Dallas Morning News and The Associated Press, offer the most extensive details yet of Mr. Bush's knowledge of Harken Energy Corp.'s financial troubles when he sold his shares for $848,560 in June 1990.

Insider trading allegations have been raised during both Mr. Bush's run for governor and his presidential race. Mr. Bush has said he did not know that Harken was going to report a $22 million loss two months after he sold his stock.

"I absolutely had no idea and would not have sold it had I known," he told The News during his 1994 campaign for governor.

The records released Wednesday show Mr. Bush, a Harken board director and member of its audit committee, received a so-called "flash sheet" in early June 1990 estimating quarterly losses for the company would reach $4 million.

Other reports available to Mr. Bush disclosed that Harken faced a "liquidity crisis" regarding the refinancing of it's $43 million debt. Another told Mr. Bush the company was "in a state of noncompliance" with its lenders.

Those same documents also say the company expected to make a profit in subsequent quarters and that two of its largest stockholders had agreed to refinance its debt.

Federal law prohibits company insiders, such as corporate directors and consultants, from buying and selling stock based on private information they received as an officer of the company.

In separate internal SEC records obtained by the AP, federal investigators concluded in March 1992 that "Bush did not engage in illegal insider trading because it does not appear that he possessed nonpublic information or that he acted with wrongful intent when he sold the Harken stock."

Bush critics have noted that Mr. Bush's father was president at the time of the investigation and that a longtime Bush supporter, Richard Breeden, was then the SEC's general counsel.

Mr. Bush has said he received no special treatment and cited a letter from SEC associate director Bruce Hiler, 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."

Mr. Bush received the 212,156 shares of Harken stock in 1986 when he helped merge Spectrum 7, an oil company of which Mr. Bush was chairman and 15 percent owner. Mr. Bush has said he needed to sell his Harken stock to pay off a loan he got to invest in the Texas Rangers baseball club.

Mr. Bush's lawyer said Wednesday that the information, while new to the presidential campaign, is "old news.''

"The SEC did their job by the book, and this is old news," attorney Robert Jordan said. He said that "the company's financial situation was well-disclosed to the public" through filings at the time with the SEC.

"By the time Bush sold his stock, the cash crisis had been largely resolved," Mr. Jordan said. "By May 21, 1990, the major shareholders had agreed to a credit agreement which put $26 million into the company immediately. ...This stock sale was completely legal and proper."

The SEC investigators never interviewed Mr. Bush about what else he might have known about the company's financial situation before selling the stock.

The investigators said that Mr. Bush did not initiate the sale of his stock, that he was approached by a broker and checked with the company's general counsel about the propriety of the sale before carrying it out.

"We've had too many cases of people abusing their responsibilities, and people just need to know that the SEC [Securities and Exchange Commission] is on it, our government is on it,"
George W. Bush - Source - Insight Magazine.

"I am deeply concerned about some of the accounting practices that take place in America,"
George W. Bush - June 26, 2002 Source.

"There are some concerns about the validity of the balance sheets of corporate America, and I can understand why,"
George W. Bush - June 26, 2002. Source.

"There is a need for renewed corporate responsibility in America. Those entrusted with shareholders' money must -- must -- strive for the highest of high standards."
George W. Bush - June 26, 2002. Source.

"We will fully investigate and hold people accountable for misleading not only shareholders, but employees as well."
George W. Bush - June 26, 2002. Source.

"Off and on over the years, a few capitalists have done more to delegitimize capitalism than America's impotent socialist critics ever did or today's moribund left could hope to. It is the Republicans' special responsibility to punish such capitalists."
George Will - January 14, 2002 - Washington Post.

One time in America, the following was an outright lie, and with a little effort they threw your butt in prison. Now they elect you president.

Bush has said he did not know that Harken was going to report a $22 million loss two months after he sold his stock.

"I absolutely had no idea and would not have sold it had I known," he told The News during his 1994 campaign for governor.

"We will fully investigate and hold people accountable for misleading not only shareholders, but employees as well." George W. Bush - June 26, 2002.

Richard B. Cheney

Qwest Communications; Denver, Colorado (Oct-95)

Qwest Communications will continue to pay Mr. Cheney's deferred director's fees balance over a period of 5 years ending in Oct-04.

These director's fees were earned and deferred during the years in which Mr. Cheney served on the US West board of directors. Mr.Cheney resigned from the US West board of directors effective Oct-1-95.

Source:

Arthur Anderson letter to:

Federal Election Commission
Sept. 1,2000
To:
Jack McDonald esq.
Federal Election Commission
Office of the General Counsel
999 E. Street, N.W.
Washington D.C. 20463

Note: Ethics Act Report

Dear Mr. MacDonald,

Enclosed please find for filing the Financial Disclosure Report (SF 278) Richard B. Cheney.

Very truly yours,

ARTHUR ANDERSEN LLP
by William M. Jackson

JULY 05, 17:52 ET

Qwest Denies Federal Probe

By ROBERT WELLER

Associated Press Writer

DENVER (AP) — Qwest Communications International is hotly denying that it is under investigation by the Justice Department, a report that an analyst says is further evidence investors should steer clear of the telecommunications company.

``We have no reason to believe that we are the subject of any investigation by the U.S. Department of Justice,'' said Drake S. Tempest, Qwest executive vice president and general counsel.

``It's outrageous that we would learn about such an investigation through the media. We have disclosed everything asked of us and have cooperated fully with the Securities Exchange Commission and Congress,'' he said in a statement faxed to news media outlets.

Qwest spokesman Chris Hardman declined to answer questions about the report, including whether the company had contacted the Justice Department about the news reports. He said the company would have no comment beyond the statement from Tempest.

Jeff Dorschner, a spokesman for the U.S. attorney's office in Denver, declined to comment.

Analyst Drake Johnstone of Davenport & Co., said, ``It doesn't surprise me. I have had an issue for the past year about the behavior of Qwest management.''

Johnstone added, ``I think there is a potential risk of bankruptcy.''

He said top executives and shareholders of Qwest, including departed chief executive Joe Nacchio, had sold hundreds of millions of dollars of company stock while touting the company as the fastest-growing telecom.

``Qwest has this wide-range of issues with the Securities and Exchange Commission. We have seen what can happen with a wide-ranging investigation in the case of WorldCom,'' Johnstone said.

Analyst Vic Grover of Kaufman Bros. said he believes Qwest stock is undervalued and should be selling at $6 to $7 instead of the $1.82 it was selling at Friday when the market closed.

``I have been very negative on Qwest in the past, but lately we upgraded the stock to buy because I think the selling pressure has been overdone,'' he said.

In the past year, Qwest has faced a Securities and Exchange Commission inquiry into its accounting practices, a downgrade of its credit rating to junk status and a sinking stock price.

The main accounting issue is where Qwest overstated its revenue and profits through including in its income statements one-time revenue associated with capacity sales. Critics say the sales should have been recorded over a multi-year period.

Qwest is the local phone company for 14 states extending from Minnesota west to Washington and southwest to Arizona and New Mexico.

Shares of Qwest gained 12 cents, or 7 percent, to close at $1.82 Friday on the New York Stock Exchange.

"The SEC fully looked into the matter, they looked at every aspect of it ... and the people who looked into it said they have no case,"
George W. Bush - July 8, 2002 - Source

"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 or any other officers or directors of Harken."
The Washington Post - Bush Name Helps Fuel Oil Dealings - By George Lardner Jr. and Lois Romano - Friday, July 30, 1999; Page A1.

Richard C. Breeden - "who was SEC chairman under President Bush's father, former President George H.W. Bush"
Richard C. Breeden - "Serving as 'Assistant' to the President for President George H.W. Bush"
Ex-SEC chairman Richard Breeden named "WorldCom" monitor
James R. Doty - "From May 1990 through December 1992, Mr. Doty was the General Counsel of the United States Securities and Exchange Commission, Washington, D.C."
"As General Counsel, Mr. Doty was the chief legal officer of the Commission, responsible for advising the Commission and its staff with respect to interpretations involving questions of law, the conduct of administrative proceedings, the preparation of Commission comments to Congress on pending legislation and the drafting, in conjunction with the appropriate divisions and offices, of legislative proposals sponsored by the Commission."
James R. Doty - "who earlier represented Bush in his purchase of the Texas Rangers, made with the proceeds of his sale of Harken shares"
Harvey L. Pitt - Former Arthur Andersen Attorney

"I absolutely had no idea and would not have sold it had I known,"
George W. Bush - The News during his 1994 campaign for governor. - Source: The Dallas Morning News - By Mark Curriden - September 7, 2000 - Article: Records Show What Bush Knew Before Stock Sale.

Excerpt:

"The records released Wednesday show Mr. Bush, a Harken board director and member of its audit committee, received a so-called "flash sheet" in early June 1990 estimating quarterly losses for the company would reach $4 million.

Other reports available to Mr. Bush disclosed that Harken faced a "liquidity crisis" regarding the refinancing of it's $43 million debt. Another told Mr. Bush the company was "in a state of noncompliance" with its lenders.

Those same documents also say the company expected to make a profit in subsequent quarters and that two of its largest stockholders had agreed to refinance its debt.

Federal law prohibits company insiders, such as corporate directors and consultants, from buying and selling stock based on private information they received as an officer of the company."
Source: The Dallas Morning News - By Mark Curriden - September 7, 2000 - Article: Records Show What Bush Knew Before Stock Sale.

Bush Defends Stock Sale And Vows To Enhance SEC

By Elisabaeth Bumiller and Richard A. Oppel Jr.
July 9, 2002
Source

President Bush defended himself today against a barrage of questions about his own corporate stock dealings even as he vowed to take a tougher line in a speech in New York on Tuesday against corrupt corporate executives.

As pressures mounted today from Democrats in Congress, Mr. Bush repeatedly dismissed assertions that he had failed to properly disclose a 1990 stock sale, saying the criticism was nothing more than a political attack, although he acknowledged that he still did not know why the sale had not been disclosed as promptly as required by law.

"I still haven't figured it out completely," Mr. Bush said in a late afternoon White House news conference hastily announced after his return from a three-day vacation at his parents' summer home in Maine, and only 18 hours before what the White House has billed as a major presidential speech about corporate responsibility.

Asserting that a central element of his proposal is to strengthen the Securities and Exchange Commission, Mr. Bush said, "I'll call for a stronger S.E.C., more investigators and more budget."

As Mr. Bush and Senate Democrats vied to seize political advantage on the corporate responsibility issue today, former top executives of WorldCom invoked their Fifth Amendment rights against self-incrimination rather than answer questions on Capitol Hill about a $4 billion discrepancy in the company's books.

At his news conference, the president was also vague and dismissive about the accounting procedures at a company on whose board he served, the Harken Energy Corporation. Harken was subsequently required by the S.E.C. to restate its earnings.

"In the corporate world, sometimes things aren't exactly black and white when it comes to accounting procedures," Mr. Bush said, referring to Harken.

Seeking to upstage Mr. Bush before his speech on Wall Street — and emboldened by momentum created by fresh scandals at WorldCom and other companies — Congressional Democrats moved to gain the upper hand by trying to broaden significantly the corporate reform legislation that is to be taken up by the Senate on Tuesday.

While the current focus of the legislation is on accounting-related changes, Democrats want to expand the measure to make it simpler to prosecute securities fraud, aid plaintiffs who want to bring private securities fraud lawsuits against corporations, and make it easier for securities regulators to levy fines and impose other penalties on executives and directors who commit wrongdoing.

Mr. Bush also said at his news conference that he wanted to strengthen enforcement powers of the S.E.C. and expressed confidence in Harvey L. Pitt, the chairman of the regulatory agency, whose resignation has been called for by Democratic Congressional leaders in recent days.

The curious timing of the news conference, in the White House press briefing room, appeared intended to distract attention from a day that would have been dominated by news coverage of the beleaguered WorldCom executives. The event also seemed an attempt to place Mr. Bush back in command at the White House after three days of television and newspaper pictures of him fishing and golfing in Maine, many of them accompanied by reports of the president's own corporate stock dealings.

White House officials also seemed intent on getting questions about Mr. Bush's stock dealings out of the way before his speech, which his advisers hope will clear the way for a more straightforward handling by the media of his remarks on Tuesday. But they probably did not anticipate that Mr. Bush's meeting with reporters would be so dominated by questions about Harken.

The scandals in recent weeks at WorldCom, Tyco International and other companies have added so much energy to the drive for corporate reform that the Senate accounting bill, which was struggling just a month ago, is now expected to pass by a wide margin.

Democrats are trying to take greater advantage of that favorable political momentum by adding significant amendments to the bill — proposed by Senator Paul S. Sarbanes, Democrat of Maryland — that may not have had enough support to pass the Senate just weeks ago. Many of these provisions have the support of the Senate majority leader, Tom Daschle of South Dakota, aides said today.

"The Sarbanes bill is a strong bill and a great starting point, but there are a number of areas where it can be strengthened," said Senator Carl Levin, a Michigan Democrat who plans to offer several amendments.

Asked today about the Sarbanes bill, Mr. Bush said, "We share the same goals, and I'm confident we can get a good piece of legislation out of the Congress."

Mr. Bush added, "My concern on the Sarbanes bill is that there's overlapping jurisdiction, which will make it harder to enforce rules and regulations, not easier."

Mr. Bush insisted that the procedures at Harken were not similar to those at the bankrupt Enron Corporation, and that there was no malfeasance, saying, "There was an honest difference of opinion as how to account for a complicated transaction."

The most sweeping amendment to the Democrats' plan is a proposal by Senator Patrick Leahy, Democrat of Vermont. That proposal creates a new felony for any "scheme or artifice" used to defraud shareholders; increases penalties for shredding or other destruction of evidence; offers new protections to corporate whistle-blowers; and prevents executives who lose securities fraud lawsuits from using bankruptcy to escape fraud-related verdicts and settlements. Mr. Leahy, the chairman of the Judiciary Committee, has the strong support of Mr. Daschle; many Republicans are also backing most provisions of the measure.

The proposal would, however, also lengthen the amount of time plaintiffs have to file securities fraud lawsuits, a provision many Republicans have objected to. Also, Senator Richard C. Shelby, Republican of Alabama, is expected to offer another plaintiff-friendly amendment that would make it easier for investors to sue accountants, lawyers, investment banks and others who "aid or abet" securities fraud.

In another important amendment, three senators want to write into the law strict responsibilities for corporate lawyers. This proposal, by Mike Enzi, Republican of Wyoming, and Democrats Jon S. Corzine of New Jersey and John Edwards of North Carolina, requires corporate lawyers for publicly traded companies who receive credible evidence of material legal violations to bring the matter to the attention of management and, if ignored, the board.

Mr. Levin plans to offer an amendment that would empower the S.E.C., without first going to court, to ban "unfit" officers and directors from publicly traded companies; fine accountants, lawyers, companies, executives and directors who violate securities laws; and obtain records for financial investigations without disclosing the subpoenas.

Even with all the new political momentum, the Democrats have to be careful, as whatever they pass still faces a showdown in conference committee with a much different legislative package approved in April by the Republican-controlled House. If the Democrats put too many new items on their bill, that could undermine its support among some members and reduce the legislation's momentum.

It is unclear whether Mr. Bush's news conference will put the questions behind him, particularly because he offered less of an explanation today than he and his advisers have in the past for why he was eight months late disclosing his 1990 sale of Harken stock on a document called a Form 4.

In his 1994 race for governor of Texas, Mr. Bush said that he thought he had filed on time but that the S.E.C. had misplaced the proper disclosure forms. Last week, Ari Fleischer, the White House press secretary, attributed the late filing to a "mix-up" with Harken's lawyers. Mr. Bush said today, "As to why the Form 4 was late, I still haven't figured it out completely."

Mr. Bush repeatedly said that his stock sale and late filing were old news, and that it had been used against him by his political opponents for years. "People love to play politics," Mr. Bush said. Then he added: "That's nothing new. That happened in 1994. I can't remember if it happened in 1998 or not. It happened in 2000. I mean, this is recycled stuff."

At issue are 212,140 shares of Harken stock that Mr. Bush sold on June 30, 1990, for $4 a share, or $848,560, eight days before Harken finished its second quarter with a loss of $23.2 million. By August, the share price had fallen to $2.37. The S.E.C. investigated on suspicions that the transaction was conducted on the basis of insider information, a potential crime, but dropped the investigation in 1993, saying that "at this time no enforcement action is contemplated."

Today Mr. Bush said that by his accounting, he had actually lost money on the sale. "I sold the stock at 4, and 14 months later — you know, the holding period for capital gains I think was 12 months in those days — the person who bought my stock could have sold it for 8, could have doubled his or her money."

Aides to Senate leaders said they hoped that widening the scope of their bill would illuminate what they believe is a sharp contrast with a weaker plan by the Bush administration.

"I'm afraid he's going to try to blur the difference and get away with something without real teeth in it," said a senior aide to the Democratic leadership. "I think he's going to stand up there, with a great deal of hoopla, and deliver what sounds like a responsible position, but do nothing to support a responsible bill."

Bush to address corporate fraud in Wall Street visit

"The SEC fully looked into the matter, they looked at every aspect of it ... and the people who looked into it said they have no case,"
George W. Bush - July 8, 2002 - Source.

As I documented above the SEC was so tough that they, well, just, well, you know, didn't even interview George W. Bush. LOL! Even Ari Fleischer had to admit it. But it was a tough SEC investigation! Every stone was turned over, much like Janet Reno's talents. Hahahahaha!!!

Press Briefing by Ari Fleischer

For Immediate Release
Office of the Press Secretary
July 12, 2002
12:02 P.M. EDT
SOURCE

The James S. Brady Briefing Room

Partial Transcript:

Q Can you explain why you think it's appropriate that the President wasn't interviewed on the Harken -- by the SEC, on the Harken situation?

MR. FLEISCHER: I think just as with any type of review of facts and of allegations, when the reviewers determine that the facts and the allegations don't hold up there's no need for an interview. The President would have been willing to have been interviewed if that was the case, he has said so. But I think it underscores exactly what has been discussed many times here, that there is no "there" there. It's all been looked into, the Securities and Exchange Commission has looked into this issue extensively and exhaustively and made the determination there was no "there" there.

Q But how do you react to the fact that the Securities experts say that this kind of lack of interview is highly unusual in this kind of case? I mean, if it had been someone else, there probably would have been an interview.

MR. FLEISCHER: I think it's all been looked at and explored by the Securities and Exchange Commission. And I think if that was the case, if somebody is suggesting that the actions of the Securities and Exchange Commission at the time they looked on this were somehow wrong actions, don't you think the administration that succeeded that administration might have looked at it differently if they had different people at the helm? Obviously, they made no changes to it because it was based on good judgment and the careful, considered judgment of the career people at the Securities and Exchange Commission. That's why in Washington you can go around in circles and circles and circles at a time when an old issue arises out of politics. And, again, there's no "there" there.

Q Ari? Ari?

Q Regardless of whether it was an old issue --

...Q Regardless of whether it was an old issue, Ari, the President did come out on Monday and field dozens of questions about the topic. We haven't seen the Vice President in the same way, come out and field those kinds of questions about his own accounting practices, his own stock practices. Is the President suggesting to him, regardless of whether it's old, it's been investigated, that he, too, come out, face the press, the American people and take questions on it?

MR. FLEISCHER: Let me put it to you this way. After a week of noise about nothing, people are seeing a scandal-seeking Washington that's out of touch with a solution-seeking nation. And that's what this President is focused on: solving the problems that have been created, that have been growing up for a considerable number of years as a result of the bubble in the markets and the corporate excesses that took place as a result of that; and targeting the wrongdoers and people who engage in fraud so that the country can have confidence in the free enterprise system and those people who are responsible in corporate America. And most of corporate America agrees with that, the American people agree with that. And that's where the President's focus is and shall be.

"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 or any other officers or directors of Harken."
The Washington Post - Bush Name Helps Fuel Oil Dealings - By George Lardner Jr. and Lois Romano - Friday, July 30, 1999; Page A1.

I thought the Bush-bots were just telling everybody that Bush and the SEC turned over ALL the documents. LOL!

DEVELOPING: Harvey Pitt, the nation's chief regulator of financial markets, said Friday he 'absolutely' will not resign and that he has the full support of President Bush. Pitt also said he had no plans to release SEC documents involving Bush's controversial sale of Harken Energy Co. stock in 1990... MORE...

SEC Chairman Pitt Says He Won't Resign

Atlanta Journal-Constitution
By MARILYN GEEWAX
July 12, 2002
Source

Harvey Pitt, chairman of the Securities and Exchange Commission, said Friday that he "absolutely" will not resign and that he has the full support of President Bush.

"I have a big job to do," said Pitt, the nation's chief regulator of financial markets.

Pitt spoke in an exclusive interview with Cox Newspapers, his first since a growing number of accounting scandals sparked calls for his resignation by high-profile lawmakers of both major political parties.

Pitt said he has no plans to release additional SEC documents involving Bush's sale of Harken Energy Co. stock in 1990.

Critics recently questioned whether Bush benefited from inside information before selling the stock. The president has acknowledged that lawyers at Harken belatedly filed paperwork with the SEC related to the sale.

Pitt said he didn't think the release to the public of all the documents would quiet questions about the president's business dealings at Harken.

"The reason is, first of all, I don't think the president's credibility needs to be increased," he said. "And second, this was thoroughly investigated a decade ago. It was meticulously done . . . so the issue at this juncture is political."

Just before Friday's interview at his SEC office, Pitt met with Bush at the White House to lay out strategies for a new anti-fraud task force, described by Bush as a SWAT team that will crack down on accounting fraud and other kinds of corporate wrongdoing.

The panel includes Pitt, Deputy Attorney General Larry Thompson, Attorney General John Ashcroft and FBI Director Robert Mueller.

Pitt said Bush's support for him "has been clear all along. . . . It has never wavered."

The president, Pitt said, knows he will be a tough crime fighter because Bush "is aware of what we are actually doing" at the SEC to enforce laws. "I am enormously grateful for his support."

In recent days, more critics have demanded Pitt resign, saying he is the wrong man for the job because he spent 23 years representing the accounting and securities firms he now must police.

On Thursday, Sen. John McCain (R-Ariz.) said the agency needs a new leader "whose background and record leave no question" about the SEC's independence and authority.

Senate Majority Leader Tom Daschle (D-S.D.) said Pitt's "cozy relationship" with accountants calls into question "whether or not he has the credibility to be the independent regulator he needs to be."

Attacks are 'political'

Pitt said such attacks are "political diatribes" that ignore facts, and he does not agree with those who say he has become a political liability to Bush and to Republicans running for office in November.

"If you look at the people who criticize, you'll notice that all of their criticisms are generic -- they're just sound bites," he said. "No one who sees what we have done could doubt that this is the most effective SEC in history."

Pitt said the SEC has stepped up its pace of enforcement actions and issued numerous new reporting rules and regulations.

"My obligation is to serve the public," he said. "After November, after all of the critics have moved on to the next issue, I'm still going to be here cleaning up the mess" in the accounting world.

Pitt is not daunted by the scope of that task, he said. "This is a historic period -- I want to be part of the solution."

He said he was devastated to learn of accounting irregularities at Enron, WorldCom, Xerox and other major corporations that have led to the loss of tens of thousands of jobs and hundreds of billions of dollars in retirement savings.

"You look at an Enron or a WorldCom, and to me it's devastating," he said. "I won't tolerate it. I will make certain that we do everything in our power to restore the integrity and quality of the accounting profession."

Throughout his career, first as a young SEC lawyer and then as an attorney in private practice, Pitt, 57, has been praised for his legal brilliance and diligent work habits.

But the events of his first year as SEC chairman have been daunting. By his own count, he already has faced four crisises: the economic fallout from the Sept. 11 terrorist attacks, the Enron accounting debacle, the felony conviction of accounting firm Arthur Andersen and a stock market plunge tied to the loss of investor confidence.

Pitt may have set himself up for criticism in October, just a month after taking office, when he made a speech to the American Institute of Certified Public Accountants. He promised a new era at the SEC, saying the commission "has not, of late, always been a kinder and gentler place for accountants."

That phrase has been used time and again to suggest he won't be tough enough on criminal conduct in the industry.

"People are misconstruing what I said," Pitt said Friday.

Accountants used to be reluctant to call the SEC for advice, he said. He was only suggesting that his staff would be more willing to sit down with companies and their auditors to explain the law, and be sure they are following it, he said. His words were taken "wholly out of context" because some people want "to make political capital."

Responsible or timid?

Critics have said Pitt is not aggressive enough, that he asked for a budget increase of $100 million for more staff, yet Congress since has made it clear it would give him about three times as much.

"I wasn't being too timid. I was being responsible" in asking for a modest amount in his first year in office, Pitt said. "I wanted to make a top-to-bottom study of our efficiency" to determine exactly what the budget ought to be.

"We are doing that now," he said. "It will be done by the end of the summer, at which point we may well ask for additional people. But at least our request will be scientific, not this, 'Let's see who can outbid whom and who can come up with the largest number.' "

"There is nothing rotten in the accounting profession."
Harvey Pitt, chairman of the Securities and Exchange Commission - January, 2002 - SOURCE

Hi, my name is Harvey Pitt, you'll have to excuse me, I'm a recovering Arthur Andersen attorney.

Who Bought Bush's Stock In Problem-Plagued Oil Company And Why?

Associated Press
By Pete Yost
July 12, 2002

WASHINGTON (AP) -- It is a stock market whodunit that has withstood a decade of scrutiny. Who bought George W. Bush's problem-plagued oil company stock just before its value dropped?

The 1990 transaction involving shares of Harken Energy Corp. allowed the future president to pay off a bank loan for his now-famous stake in the Texas Rangers baseball team. The identity of the buyer of the stock has escaped public disclosure.

Federal regulators who examined the deal as a possible insider trade never asked. President Bush says he doesn't know and the White House declines to ask the broker who handled the transaction. Reporters have fared no better in getting to the bottom of the mystery.

Was Bush's sale of Harken stock another instance of a helping hand from family friends? Or was it a simple case of a buyer trying to make a killing in a high-risk investment?

Corporate scandals and failures that have rocked Wall Street in recent months have renewed questions about Bush's own business dealings when he was a Texas oilman. The White House was put on the defensive again Thursday, as it faced questions about the fact that Bush borrowed $180,000 from Harken to buy some of its stock. The loans are a type of transaction that Bush now wants to ban as part of a crackdown on corporate wrongdoing.

In the 1990 stock sale, Bush collected $848,560 when he sold 212,140 shares he had gotten in the merger of his struggling oil company with Harken in 1986.

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 such a large amount of Harken stock into the open market, it undoubtedly would have driven the price far below the $4 a share he was paid.

Bush's oil industry career is a history of being bailed out of money-losing ventures. Among the businessmen who came to his rescue before Harken were Cincinnati businessmen Mercer Reynolds III and William O. DeWitt. They eventually invested in the Rangers with Bush, raised more than $3 million for his presidential campaign and served as co-chairmen of Bush's inaugural committee. Reynolds is now U.S. ambassador to Switzerland and Liechtenstein.

Bush's sale on June 22, 1990, was handled by California stock broker Ralph D. Smith, who says he got a call on 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 who owned Harken stock, including Bush.

The broker said there wasn't any arrangement ahead of time to bail Bush out of Harken.

"If there was a rigged buyer, why would he come" to a West Coast brokerage firm? said Smith, who worked for Sutro & Co. in California until his retirement.

The broker said that "if you wanted to do a favor for Bush, you just go to him directly, say here's $800,000 and we'll get this stock transferred."

The 1990 sale triggered an insider trading probe of Bush because he was eight months late in disclosing it to the Securities and Exchange Commission. White House press secretary Ari Fleischer defended the sale by saying Bush had notified the SEC in a timely manner that he intended to sell his shares. However, Bush failed to notify the SEC once the stock actually was sold, as required by law.

On Thursday, a Washington group, the Center for Public Integrity, posted internal SEC documents on the Internet showing that Harken initially was uncooperative in the insider trading probe. The company subsequently provided extensive cooperation to the SEC.

Uncovering little evidence to support an insider trading case, the SEC chose not to interview Bush.

SEC investigators interviewed Smith in the probe, but, according to Smith, they never asked the broker who bought Bush's stock.

Over the past two years, news organizations have tried to persuade Smith to ask the buyer to waive the cloak of confidentiality that surrounds the transaction, but the retired broker has declined.

"They're not going to find out the name of the buyer; it's none of their business," Smith said, adding that he had a professional responsibility not to identify the buyer.

On Thursday, White House spokesman Dan Bartlett said that "it isn't our place" to urge that the buyer step forward.

While Smith declines to name the purchaser, his difficult-to-read handwritten notes turned over to the SEC in the insider trading probe of Bush supply a clue.

The notes for June 9 appear to state that "Geo Bush will sell 212,010 shares in about 2 weeks." The June 22 entry on the day of the sale appears to state, "s/212,140 at 4 to Lee for Bush."

Smith declines to say whether the apparent word "Lee" refers to a person or an entity.

Bush's lawyers have said his investment in the Texas Rangers -- not any inside information about Harken's deteriorating financial performance -- was the motivating factor in selling his shares.

The stock Bush sold for $4 was selling for $3 two months later and fell to around a dollar by the end of 1990. It rebounded to nearly $9 a year after Bush sold. Today it sells for 44 cents a share.

Despite financial losses in 1990 and 1991, Harken's stock price was propped up by the company's highly publicized deal to drill for oil off the coast of Bahrain. The project, which came together while Bush's father was president, never struck any oil. Little Harken beat out major oil companies, including Amoco, for what at the time was thought might be an extremely valuable concession.

Bush's lawyers told the SEC that before the sale, his financial adviser "was bugging him to get liquid" to meet a financial obligation of $600,000 in connection with the Texas Rangers and to pay a tax bill of a couple of hundred thousand dollars. Bush paid off a bank loan he'd taken out for a share of the baseball team.

Bush's $600,000 stake in the Rangers in 1998 brought him $14.9 million when the team was sold.

On the Net: Center for Public Integrity:
www.publicintegrity.org/dtaweb/home.asp

THE HARVARD BOYS DO RUSSIA
"Anne Williamson, a journalist who specializes in Soviet and Russian affairs, details these and other conflicts of interest between H.I.I.D.'s advisers and their supposed clients-the Russian people-in her forthcoming book, How America Built the New Russian Oligarchy. For example, in 1995, in Chubais-organized insider auctions of prime national properties, known as loans-for-shares, the Harvard Management Company (H.M.C.), which invests the university's endowment, and billionaire speculator George Soros were the only foreign entities allowed to participate. H.M.C. and Soros became significant shareholders in Novolipetsk, Russia's second-largest steel mill, and Sidanko Oil, whose reserves exceed those of Mobil. H.M.C. and Soros also invested in Russia's high-yielding, I.M.F.-subsidized domestic bond market.

Even more dubious, according to Williamson, was Soros's July 1997 purchase of 24 percent of Sviazinvest, the telecommunications giant, in partnership with Uneximbank's Vladimir Potanin. It was later learned that shortly before this purchase Soros had tided over Yeltsin's government with a backdoor loan of hundreds of millions of dollars while the government was awaiting proceeds of a Eurobond issue; the loan now appears to have been used by Uneximbank to purchase Norilsk Nickel in August 1997. According to Williamson, the U.S.assistance program in Russia was rife with such conflicts of interest involving H.I.I.D. advisers and their U.S.A.I.D.-funded Chubais allies, H.M.C. managers, favored Russian bankers, Soros and insider expatriates working in Russia's nascent markets."
NOTE: An Inconvenient History - The Russian Money Laundering Pyramid

The Buying Of The President
Indeed, once Bush signed on, business at Harken began to pick up.

"When Harken bought out Spectrum 7, the company was broke and desperately needed a cash infusion.. As the talks with Spectrum 7 progressed, Harken officials were lining up a major new financial backer: Harvard Management Company, Inc. The investment firm's only client is Harvard University; it manages the school's multi-billion dollar endowment.

A month after Bush came on board, Harvard Management agreed to invest at least $20MM in Harken. it would eventually come to own some ten millions shares of Harken's stock, making it one of the company's largest investors.

The Bush name may have helped seal the deal.

Michael Eisenson, a partner in Harvard Management Company, who sat on Harken's board of directors, said that he and other Harvard officials picked Harken after reviewing several proposals from energy companies. "Harken management seemed capable and honest," Eisenson said.

The Bush name certainly would have made an impression on Eisenson's boss, Robert Stone, Jr., who was one of Harvard Management's directors. Stone was the "driving force" behind Harvard's Southwest oil and gas investments, according to Scott Sperling, who worked with Eisenson at Harvard. Stone himself was a player in the Texas oil and gas industry; at the time, he was the chairman of Kirby Exploration, an oil and gas transportation company based in Houston. As a longtime resident of Greenwich, Connecticut, he also knew the Bushes. His father in law, Godfrey Rockefeller, had invested in George Bush's oil drilling ventures in the 1940's. Stone's brother, Galen L. Stone, was the US envoy to Cyprus during the first Reagan-Bush Administration. In 1980 and 1988 he contributed to the elder Bush's presidential campaign.

Harken was Harvard Management's first major investment in Texas wildcat operations, a part of the university's investment history it would rather forget. The investments in oil and gas would eventually generate nearly $200 million in loses for the endowment.

The university's commitment to Harken was suprising in view of the bad shape the company was in. "I took some time and looked at it and I went, God, I don't want to be anywhere near this," a prospective investor in Harken from the late 1980's told the Center. "This thing looks like a train wreck."

By Harken executives' own accounts, the company's financial statements were "a mess" and " a fast numbers game" But insiders insist that Harvard's money managers wouldn't have kept pumping money into Harken if they didn't thing it would become profitable.

For a time, they had reason to believe it would.

The Bahrain agreement, announced on January 30, 1990, seemed to justify Harvard's enthusiasm for Harken. (Note from Solari: See the book "False Profits" on the allegations surrounding the dropping of indictments by the Bush Administration against BCCI's Miami and Caribbean operations and Harken's first non domestic oil deal and alleged relations between the two investor groups).

One of the questions the SEC didn't answer was who bought Bush's stock.

In his statement of intent to sell, which Bush also had to file with the SEC, he said he was putting his 212,140 shares on the open market. That was nearly twenty times the daily volume of stock that traded on average during June 1990; without a buyer willing to absorb such a large block of stock, the share price would have plummeted.

Under questioning by SEC investigators, Ralph Smith, a Los Angeles broker with Sutro & Company, who handled the sale, said that he solicited the shares at the behest of an institutional investor, which he didn't name.

The available evidence suggests that the investor was Harvard. The university increased its holdings in Harken around the time. No new institutional investors appeared on the scene. At the bottom of a spreadsheet Smith used to record his calls to Bush was the name of Michael Eisenson, along with the telephone number of Harvard Management. (Eisenson did not return the Center's telephone calls).

Finally, nine years after its investment in Harken helped save Bush from financial ruin, Harvard Management Company got a deal on a piece of real estate it bought from the Texas Teachers Retirement System. In 1995 the Texas Teachers Retirement System sold the Anatole Hotel in Dallas to a partnership that included the Crow family, which owns a controlling interest in Trammell Crow Company, one of the nation's top real estate management companies, and Harvard Management. Without taking bids, the Texas Teachers Retirement reportedly sold the hotel for $27 million less than it had spent to make improvements on the structure."

Winokur to Join Harvard Corporation
Herbert S. Winokur Jr.

Born in Columbus, Ga., Winokur holds three degrees from Harvard: A.B. '65 ('64), A.M. '65, and Ph.D. '67. His doctoral degree is in applied mathematics (decision and control theory). Since 1987, Winokur has been chairman and chief executive officer of the investment firm Capricorn Holdings Inc., based in Greenwich, Conn. He is also managing general partner of three affiliated limited partnerships, Capricorn Investors, L.P., I, II, and III. The portfolio investments encompass companies with revenues of more than $2 billion and having more than 20,000 employees.

Winokur has maintained close ties to Harvard over the years. A member of the Committee on University Resources since 1989, he has also served since 1995 as a member of the board of directors of the Harvard Management Company. He serves on the advisory committee of Harvard's Mind/Brain/Behavior Initiative, as well as on the Technology and Education Planning Committee of the Faculty of Arts and Sciences. He is a member of the Committee to Visit the Weatherhead Center for International Affairs, and previously served on the FAS Planning Committee for Faculty Recruitment and Development. Co-chair of reunion fundraising efforts for the Class of 1965, he is a member of the New York Major Gifts Steering Committee.

An active board member in both the nonprofit and for-profit worlds, Winokur is an honorary director of the UCLA Medical Center, a former trustee of the Greenwich Academy, and a former co-chair of the New York Historical Society. He is on the board of Second Stage Theatre and until recently served on the board of Project 180, an organization that facilitates the restructuring of nonprofit institutions. He is a member of both the Council on Foreign Relations and the Woodrow Wilson International Center for Scholars Council, and he chaired the search for the Center's current director. His present and past corporate directorships span a wide range of industries, including information technology, energy, water management, and commercial real estate finance.

Before becoming chairman and CEO of Capricorn Holdings, Winokur served as senior executive vice president of the Penn Central Corp., and played a leading role in the corporation's major restructuring and cost reduction efforts. Previously, from 1974 to 1983, he held senior management positions at Pacific Holding Corp., Victor Palmieri and Co., and Pennsylvania Co., Penn Central's principal operating subsidiary.

From 1969 into the early 1970s, Winokur was co-founder and chairman of the Inner City Fund (later ICF Kaiser International), a management consulting firm specializing in policy planning for senior government and business officials, and which also focused on stimulating minority entrepreneurship. For the two preceding years, following the receipt of his Ph.D., he served as an officer in the U.S. Army, assigned to the Office of the Secretary of Defense.

Group Questions Harvard's Ties to Enron

Herbert "Pug" Winokur Jr. - Embattled Enron director to resign from Harvard Management Company

Winokur, a member of the committee that produced the report, has been a director since 1985. Winokur is also affiliated with the National Tank Co., an oil industry supplier, which in 2000 received $370,294 in sales from Enron, according to Enron's most recent proxy.

ENRON - June 6, 2002 - At a Board meeting today, the Board unanimously accepted the resignations, effective today, of the four remaining long-standing directors, Robert A. Belfer, Norman P. Blake, Dr. Wendy L. Gramm and Herbert S. Winokur, Jr.

"There is nothing rotten in the accounting profession."
Harvey Pitt, chairman of the Securities and Exchange Commission - January, 2002 - SOURCE

Secrecy Surrounds Bush Stock Deal

ASSOCIATED PRESS
July 12, 2002
Source

WASHINGTON- When George W. Bush's sale of oil stock attracted the attention of regulators a decade ago, the Securities and Exchange considered interviewing him about possible insider trading but never did.

The SEC won't say why it didn't talk with Bush, whose father was president at the time.

An SEC memo from 1991 shows that investigators raised the possibility of interviewing Bush about his sale of 212,140 shares in Harken Energy Corp. The investigators told Harken's lawyer that "we would promptly inform him whether we need to speak with Bush," the memo said.

The Harken attorney "volunteered that Bush would consent to a phone interview and/or voluntary testimony," the memo added.

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.

The SEC has declined to release some of the files from its investigation.

The White House has rebuffed repeated requests in recent days that it authorize the release of all the SEC's records on its inquiry, which was closed with no action against Bush.

In its limited number of interviews and extensive gathering of documents from Harken, the SEC uncovered little evidence of insider trading. Harken initially was uncooperative in the inquiry but subsequently provided extensive help to the SEC, waiving attorney-client privilege. The SEC interviewed Harken's in-house counsel who advised Bush concerning the stock sale.

The controversy surrounding Bush and his days as a Texas oilman continued Friday as Rep. Henry Waxman, D-Calif., urged the president to turn over any profits from his sale of Harken stock to a charity for displaced workers.

The stock sale allowed the future president to pay off a bank loan for his stake in the Texas Rangers baseball team.

The identity of the buyer of the stock has never been disclosed.

The SEC never asked. President Bush says he doesn't know and the White House declines to ask the broker who handled the transaction. Reporters have fared no better in getting to the bottom of the mystery.

Bush had gotten the stock in the merger of his struggling oil company with Harken in 1986.

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 stock broker Ralph D. Smith, who says he got a call on 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 who owned Harken stock, including Bush.

SEC investigators interviewed Smith in the insider trading inquiry, but, according to Smith, they never asked the broker who bought Bush's stock. Smith, now retired, says he has a professional responsibility to protect the confidentiality of the buyer.

White House spokesman Dan Bartlett says that "it isn't our place" to urge that the buyer step forward.

Smith's difficult-to-read handwritten notes turned over to the SEC supply a clue about the buyer.

The notes for June 9 appear to state that "Geo Bush will sell 212,010 shares in about 2 weeks." The June 22 entry on the day of the sale appears to state, "s/212,140 at 4 to Lee for Bush." Smith declines to say whether the word that appears to be "Lee" is a reference to a person or an entity.

"There is nothing rotten in the accounting profession."
Harvey Pitt, Chairman of the Securities and Exchange Commission - January, 2002 - SOURCE.

The Center For Public Integrity

http://www.publicintegrity.org/dtaweb/home.asp

Securities and Exchange Commission Documents

Because of a column by Paul Krugman that ran in the New York Times and a follow-up Washington Post story, there has been renewed interest in two reports the Center published on the Public i concerning George W. Bush's days as a director of Harken Energy. We published the first on Oct. 2, 2000 and the second on April 4, 2001.

As a public service, we are offering here in PDF format some of the documents we received from the Securities and Exchange Commission under the Freedom of Information Act.

PDF Format

December 14, 1990 Letter to Harken Energy
Written by Jerry Reidler of the SEC's Division of Corporation Finance, the letter requests additional information on Harken's Aloha sale, among other matters.

April 10, 1991 SEC Memorandum
Written by SEC investigators Herbert F. Janick 3d, Lewis J. Mendelson, and James B. Adelman for the SEC's files, the memorandum notes that Bush was late reporting his Harken stock sales. "Bush's Forms 4 [disclosing the sale of stock by an insider] were filed from 15 to 34 weeks late…"

April 16, 1991 Fax to Harken Energy
Written by Hebert Janick of the SEC's Division of Enforcement, the fax requests a chronology of events leading up to Harken's public announcement of a $23.2 million loss on August 20, 1990.

May 12, 1991 Harken Energy Chronology
Prepared by Harken Energy at the request of the SEC, the document describes "the events and circumstances leading up to the release of Harken's earnings for the period April 1, 1990 through June 30, 1990 …"

July 7, 1991 SEC Office of Economic Analysis Report
Written by Lisa Meulbroek for Janick, Mendelson, Adelman, and Paul Gerlach, the report analyzes the effect of Harken's Aug. 20, 1990 disclosure of its $23.2 million loss and the subsequent effect on the company's share price.

August 21, 1991 SEC Memorandum
Written by Janick, Paul Gerlach, and Adelman and addressed to Bruce Hiler, it traces the circumstances of Bush's sale of Harken stock. "The staff's investigation indicates that there is insufficient evidence to establish three necessary aspects of a possible insider trading case."

March 18, 1992 SEC Action Memorandum
Prepared by the Division of Enforcement, the memorandum summarizes the findings of the SEC investigation.

March 27, 1992 SEC Memorandum
Written by Janick for the file, this memorandum suggests that Bush was unaware of the magnitude of the impending loss at the time he sold his stock. "The vast majority of the [second quarter] loss was unknown to management, let alone Bush." It also notes that the Audit Committee, of which Bush was a member, was not privy to much of the financial information about the company.

April 20, 1990 Letter
From Mikel D. Faulkner, President of Harken Energy, to the board of directors. The letter notes that new conditions on a loan Harken sought “greatly intensifies our current liquidity problem and mandates the infusion of equity into the company.”

May 18, 1990 Letter
From Bruce N. Huff, senior vice president of Harken Energy, to the members of the company’s “special committee,” which included George W. Bush. The letter notes, “It is become evident that it will be necessary to reach a conclusion regarding the fairness of the proposal by the Major Shareholders before permanent waivers of various loan covenant violations and an extension of the due date for specific loan facilities can be obtained from our major banks. Such waivers and extensions will allow the Company to properly report the substantial portion of its debt facilities as long-term and thereby avoid any negative repercussions that might otherwise occur if the Company remains in a state of non-compliance with regard to loan covenants.”

January 9, 1991 Letter
From Bruce N. Huff, senior vice president of Harken Energy, to Edmund Coulson, chief accountant of the SEC. 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.”

April 12, 1991 Letter
From Herbert Janick, assistant director of the SEC Enforcement Division, to George W. Bush. The letter requests, “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.”

June 21, 1991 Fax
From Herbert Janick to Joseph A. Cialone 2nd, a Baker & Botts attorney who represented both George W. Bush and Harken Energy. “We appreciate Mr. Bush’s willingness to cooperate in the staff’s inquiry,” Janick wrote in the first paragraph. The fax requests that Bush “voluntarily provide” any documents in his possession received from Jan. 1, 1990 to June 30, 1990 related to, among other things, “unusual charges” stemming from the Aloha transaction.

June 21, 1991 Fax
From Herbert Janick to Joseph A. Cialone 2nd, a Baker & Botts attorney who represented both George W. Bush and Harken Energy. The fax requests that “Harken voluntarily provide copies of all documents concerning, referring, or relating to any policies or procedures of Harken, in effect during the period of January 1, 1990, to the date of Harken’s response to this request, concerning the purchase, sale or ownership of Harken securities by any officer or director of Harken.”

July 17, 1991, SEC Memorandum
From Herbert Janick and Paul Gerlach of the Enforcement Division, the memorandum notes “Harken has asserted attorney-client privilege and refused to produce documents concerning its policies covering the purchase, sale or ownership of Harken securities by officers or directors. Bush has produced a small amount of additional documents which provide little insight as to what Harken nonpublic information he knew and when he knew it.”

July 25, 1991 Fax
From Herbert Janick to Joseph A. Cialone 2nd, a Baker & Botts attorney who represented both George W. Bush and Harken Energy. The letter describes the material that the SEC had requested that Bush and Harken “voluntarily provide.”

To write a letter to the editor for publication, e-mail letters@publicintegrity.org. Please include a daytime phone number.

SEC Records Show Bush Had Some Idea Of Harken's Troubles

THE BOSTON GLOBE
By John Aloysius Farrell
July 13, 2002 - Saturday

WASHINGTON -- Harken Energy Corp. was in bad financial shape, facing restructuring, when George W. Bush sold some $850,000 worth of shares in the company in June 1990. Evidence in government files indicates he had at least partial knowledge of the company's troubles before he sold the stock.

Records from a Securities and Exchange Commission investigation indicate that Bush, who served on Harken's board of directors and was a member of a special committee to deal with the financial troubles, had been warned about the company's crisis by its president, Mikel Faulkner, and other officers before selling his stock.

On April 20, 1990, Faulkner wrote to the members of Harken's board that the company was facing a liquidity crisis and that crucial plans to sell new shares of stock were diminished, because of a slumping oil market. The firm was also facing pressure from its lenders, especially the Bank of Boston, which "greatly intensifies our current liquidity problem," Faulkner wrote.

On May 18, 1990, according to the SEC files, Harken's senior vice president, Bruce Huff, wrote to the special committee -- made up of Bush, Faulkner, and director E. Stuart Watson -- to alert it of the "negative repercussions" that could occur if they did not approve waivers and extensions of corporate loans.

The Bank of Boston refused to renegotiate its loans, and the stock sale had to be put off. In a 1991 letter to the SEC, Huff said that by June 1990, "The company was in the midst of the severe cash crisis."

Bush sold 212,140 shares of Harken stock on June 22, 1990, two months before Harken reported a $23.2 million quarterly loss that was tied, in part, to the restructuring efforts. The SEC investigated him over possible insider trading when the SEC learned of the sale the following spring, eight months after it was required to be reported. The SEC ended its investigation without charging Bush with violating securities laws.

In its last public disclosure preceding Bush's sale, Harken had announced only a $2 million operating loss for the first quarter. Bush says he did not know that Harken was about to post the whopping second-quarter loss that August, even though he was on Harken's three-member special audit committee, as well as its board of directors.

When closing the inquiry in 1991, SEC investigators concluded that Bush was not privy to the full extent of the financial problems facing Harken. They also believed, records show, that proving a case that Bush acted with intent to defraud would be difficult because he had openly consulted the firm's officers and lawyers before selling his stock.

Bush used the proceeds of the Harken sale to pay off a loan he took to buy his interest in the Texas Rangers baseball team. The SEC general counsel at the time Bush was investigated was James Doty, the same lawyer who represented Bush in the Rangers deal.

The Associated Press reported yesterday that a 1991 SEC memo showed the agency considered interviewing Bush when it investigated him but never did. The SEC won't say why it didn't talk with Bush.

1990 Deal Mystery: Who Bought Bush's Shares In Harken?

SEC Officials Didn't Ask; Stockbroker Won't Tell

Associated Press
July 14, 2002
Source

WASHINGTON - It is a stock market whodunit that has withstood a decade of scrutiny. Who bought George W. Bush's oil company stock just before its value dropped?

The 1990 transaction involving shares of Harken Energy Corp. allowed the future president to pay off a bank loan for his now-famous $600,000 stake in the Texas Rangers baseball team.

Federal regulators who examined the deal as a possible insider trade never asked. Bush says he doesn't know, and the White House declines to ask the broker who handled the transaction.

Was Bush's sale of Harken stock another instance of a helping hand from family friends? Or was it a simple case of a buyer trying to make a killing in a high-risk investment?

Corporate scandals and failures that have rocked Wall Street in recent months have renewed questions about Bush's business dealings when he was a Texas oilman. The White House was put on the defensive again Friday, as Rep. Henry A. Waxman of California wrote Bush a letter saying the president should donate the profits from the sale of his Harken stock to a charity that helps displaced workers.

In the 1990 stock sale, Bush collected $848,560 when he sold 212,140 shares he had gotten in the merger of his struggling oil company with Harken in 1986.

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 such a large amount of Harken stock on the open market, it would undoubtedly have driven the price far below the $4 a share he was paid.

Bush's oil industry career is a history of being bailed out of money-losing ventures. Among those who came to his rescue before Harken were Cincinnati businessmen Mercer Reynolds III and William O. DeWitt. They eventually invested in the Rangers with Bush, raised more than $3 million for his presidential campaign and served as co-chairmen of his inaugural committee. Reynolds is now U.S. ambassador to Switzerland and Liechtenstein.

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 made a couple of "cold calls" to people who owned Harken stock, including Bush.

The broker said there wasn't any arrangement ahead of time to bail Bush out of Harken.

The broker said that "if you wanted to do a favor for Bush, you just go to him directly, say here's $800,000 and we'll get this stock transferred."

The 1990 sale triggered an insider trading probe of Bush because he was eight months late in disclosing it to the Securities and Exchange Commission.

Uncovering little evidence to support an insider trading case, the SEC didn't interview Bush.

SEC investigators interviewed Smith, but, according to Smith, they never asked the broker who bought Bush's stock.

Over the past two years, news organizations have tried to persuade Smith to ask the buyer to waive the confidentiality that surrounds the transaction, but the retired broker has declined.

Smith's difficult-to-read handwritten notes turned over to the SEC in the insider trading probe of Bush supply a clue.

The notes for June 9 appear to state that "Geo Bush will sell 212,010 shares in about 2 weeks." The June 22 entry on the day of the sale appears to state, "s/212,140 at 4 to Lee for Bush."

Smith declines to say whether the apparent word "Lee" refers to a person or an entity.

Bush's lawyers have said his investment in the Rangers - not inside information about Harken's deteriorating financial performance - was the motivating factor in selling his shares.

The stock Bush sold for $4 was selling for $3 two months later and about a dollar by the end of 1990. It rebounded to nearly $9 a year after Bush sold. Today a share sells for 44 cents.

"There is nothing rotten in the accounting profession."
Harvey Pitt, Chairman of the Securities and Exchange Commission - January, 2002 - SOURCE.

Chairman Pitt Trys To Defend SEC Record

Harkening Back To Texas

The market’s tumbling, confidence is soft and Bush is facing questions about what he did and when he did it long ago. The battle to calm investors, rein in CEOs—and keep the past at bay.

Newsweek
By Howard Fineman
July 22, 2002 Issue
Source

It was what they call in west Texas “a short-fuse deal,” George W. Bush’s accountant recalls. In Midland parlance, Robert McClesky explained, that meant Bush—a boyhood buddy and longtime client—needed a hunk of fast cash.

IN APRIL 1989, he’d found the last clear chance of his sputtering business career, becoming drummer and door opener for a syndicate of rich guys lining up to buy the Texas Rangers. The group wanted to reward him by making him a co-managing general partner. His father, after all, was president of the United States. But Bush would still need to put up $500,000 (out of a purchase price of $86 million) for his stake.

Where was he going to get that kind of scratch? He was not a rich man (at least not by Texan standards). Nor was he “liquid,” as they say on Wall Street. Bush’s chief asset—317,00 shares of Harken Energy stock—was tied up as collateral on existing loans. But Bush was able to quickly free up some of the stock without, apparently, immediately doing the required paperwork. In that way, he could use it to get a $500,000 loan from the United Bank of Midland, where Bush had served on the board, and where he still was an “advisory director.”

It was all conducted in the old-fashioned west Texas way: honorable enough (Bush seems to have done the paperwork some six months later), but with friendly terms for an inside player and a laissez-faire attitude toward regulatory detail. Or, as Joe O’Neill, another Midland buddy, puts it: “We don’t call in lawyers till we wrap up a deal. They’ll just screw it up. You don’t call a lawyer until you have to.”

COZY DEALINGS

Well, we aren’t in Midland anymore, and everybody in Washington is busy calling the lawyers. Cozy is OK in west Texas, where you can judge a man by his handshake and his daddy’s name. And it worked when share prices were rising like rockets at Cape Canaveral. But not now, not in Washington. Eighty million Americans are invested in the stock market. A two-year price decline and a year of boardroom scandal changed everything. Suddenly, everyone—including President Bush—is demanding strict compliance with the letter of the laws. Many leaders—though not primarily Bush—are rushing to propose sweeping new statutes and regulatory agencies. The goal: to restore faith in corporate America—and protect Congress from the voters’ wrath this fall.

Now Bush and others on his team have to reconfigure an old Republican adage. The new version: do what we say now, not what we did then. In the case of Bush’s 18-year career in business, no one has found any evidence of unethical conduct, let alone what he calls “malfee-ance.” Yet some of the rules he now propounds he ignored when they applied to him, and some of the reforms he now proposes would eliminate perks he once enjoyed. White House aides don’t think his history limits his ability to be a reformer. “That’s like saying you couldn’t be for campaign-finance reform if you took contributions,” says White House communications director Dan Bartlett. “People learn from experience.”

Can the first M.B.A. president crack down on the world he comes from? He filled his team with an unprecedented number of CEOs, executives and lobbyists. When the markets were up, it made sense enough to bring a profit-margin mind-set to the capital. Even now, his aides argue, Bush’s business background enables him to suture the market’s ethics wounds without killing the patient. But voters may wonder if this CEO White House has the interests of average investors, employees and retirees in mind. The president’s widely panned Wall Street speech—tough in tone but containing few legislative specifics—was kept cautious on the advice of business-world alumni, among them Vice President Dick Cheney (late of Halliburton) and domestic-policy chief Joshua Bolten (of Goldman Sachs).

For Bush, there’s a profound family question lurking in the market numbers: is he destined to repeat the pattern of his father’s presidency? Like “41,” this Bush is adept as commander in chief. But he has yet to prove he’s more attuned than his dad to the emotional politics of the economy. He and his team, consumed by the Middle East and other matters, were slow to adopt a sense of urgency about corporate reform. Now, just like Dad’s team a decade ago, they think each new speech (there’s one this week) or photo op (there was one last Friday) will finally vault them “ahead” of the issue. In fact, they’re on the defensive, reacting to events. That’s evidently the view on Wall Street, where traders fear a worst-case scenario: more regulation, less inspiration.

WHISPERING ABOUT WHITE

Even Republicans think that the president could inspire the country by getting rid of Army Secretary Thomas White, who cashed out as an Enron executive with $31 million just before the company collapsed. Federal investigators are combing through the wreckage of Enron, including trading strategies used by White’s Enron unit to hike electricity prices in California in 2000 and 2001. He is scheduled to testify this week before a Senate committee. The White House has continued to back White, but Republicans on the Hill, NEWSWEEK has learned, are quietly passing the word that they’d prefer White to resign. If he testifies, they say, he will be forced to invoke his constitutional right not to respond. “How is it going to look when one of the guys leading the war on terrorism takes the Fifth?” said a leading GOP source on the Hill. “We’re betting that he’ll quit.” (White did not respond to a request for comment.)

The larger challenge for the president and the Congress is to end corporate abuse without turning every CEO and CFO into a ward of the state. Bush focused on using existing law to track down business malefactors, and proposed doubling the jail time for clear-cut crimes. The Senate, with rear-covering Republicans joining their Democratic colleagues, immediately went Bush one better, voting without dissent to make any “scheme to defraud” the public a crime. It would, in essence, apply the sweeping theory of racketeering law to top executives.

Bush remains popular, but bad Wall Street news, falling consumer confidence and perhaps word of a larger-than-expected federal deficit is chipping away at his standing. In the new news-week Poll, his approval rating dipped to 68 percent, 20 points below its post-September 11 peak. Voters approve of his response to the business scandals, but by a relatively weak 51-32 margin. They think he is better able to clean up the mess than the Democrats—but by only a 38-31 percent margin.

White House strategists are convinced that there is no danger to Bush in questions about his business career, in which 50 percent of voters think he “behaved responsibly.” Still, Democrats seem determined to press the issue. And though most of the topics have been examined before—in his father’s 1992 campaign and in his own campaigns of 1994 and 2000—new details and questions keep surfacing, given added drama by the current scandals elsewhere.

NO EXCEPTIONS?

Last week, for example, new details surfaced about the stock-option awards Bush and other directors got from Harken. The company twice loaned him money at cheap rates so that he could buy bunches of bargain-priced Harken stock. On Wall Street, Bush suggested that corporations should ban that very type of loan. In the Oval Office two weeks ago, the president and his aides debated—and rejected—carving out any exceptions. Bush’s personal experience didn’t come up.

Bush also called for a renewed commitment to vigilance on the part of all corporate directors, but he didn’t always have the time to be that way himself. He joined the Harken board in 1986, when he sold the interest in his oil-exploration company for 212,000 Harken shares. (He left the Harken board in 1993 when he launched his campaign for governor.) He was a diligent director, but wasn’t always engaged, especially when he was helping run his father’s 1988 presidential campaign and, later, the Rangers baseball team. “You can only put so many hours in a day,” said Harken founder Phil Kendrick, “and he was doing a lot of other stuff.”

When it came time to find the $500,000 he needed for the Rangers deal, Bush couldn’t turn to Harken for help. The optioned stock couldn’t be used as collateral. And, apparently for tax reasons, he’d chosen in 1986 to pledge the rest of his stock (his original 212,000 shares) as extra collateral on one of his Harken loans. So Bush did what he’d done in the past: he went back to Midland. Bush contacted leaders of United Bank, which came through on April 17, 1989, agreeing to give him a one-year personal loan of $500,000, secured by 159,105 shares of his Harken stock. Four days later, he helped announce the Rangers purchase.

According to McClesky and Bartlett, Bush was able to pledge stock he’d previously chosen to use as collateral elsewhere by electing in April to change the terms of his first stock-purchase loan from Harken. (He narrowed the first loan’s terms to free the stock for use as collateral on the second.) As evidence that the terms of the first loan had changed, McClesky points out that United Bank took custody of Bush’s Harken stock certificates. If the certificates had contained notations that they were being used for collateral elsewhere, McClesky argues, the bank would not have accepted them. Still, by last weekend, no documents had surfaced to prove directly that Bush had, in fact, changed the terms of the loan before pledging the stock a second time. Indeed, the only document known to exist, a letter from Harken’s general counsel, indicates that Bush did not change the terms officially until Oct. 5, 1989—five months late.

Bush wasn’t done wheeling and dealing. In March 1990 his buddies at United Bank agreed to renew the loan on even more favorable terms: a two-year note with no collateral at all. That freed the stock for sale. And none too soon: Bush, like other shareholders and directors, was receiving repeated warnings that spring about the company’s precarious finances. He sold in June, to a still unidentified investor. With the proceeds, he paid off the bank. But, typically, Bush filed the proper notification of the stock sale eight months late (Bartlett blames the lawyers at Harken). When Bush finally filed the form, he was investigated (but not charged) by the SEC for insider trading. At the time, the SEC’s general counsel was an attorney named James Doty, who earlier had helped him on the Rangers deal. Doty recused himself, and later said he took no part in the case. But even though he was the subject of the probe, Bush never was interviewed. As they say in Midland, you don’t call a lawyer until you have to—and they don’t call you until they have to.

With Martha Brant and John Barry in Washington and Seth Mnookin in Dallas

"There is nothing rotten in the accounting profession."
Harvey Pitt, Chairman of the Securities and Exchange Commission - January, 2002 - SOURCE

"Pitt said he has no plans to release additional SEC documents involving Bush's sale of Harken Energy Co. stock in 1990."
Atlanta Journal-Constitution - By MARILYN GEEWAX -July 12, 2002 - Source.

SEC Chief Says He Opposes Release of Files on Bush

Reuters
By John Whitesides
July 14, 2002 03:27 PM ET
Source

WASHINGTON (Reuters) - Securities and Exchange Commission Chairman Harvey Pitt, under heavy fire as a wave of corporate scandals breaks, said on Sunday there was no need to release the files on a 1991 probe of President Bush's stock sales.

Appearing on two television talk shows to answer charges that he is too cozy with corporate America to effectively regulate it, Pitt vigorously defended his agency's performance and said he will not resign.

He accused Democrats of trying to score political points with calls for the release of the investigatory files on Bush's stock sales while he was a director of Texas-based Harken Energy Corp.

"Unless there's a reason to re-open ancient history, we should move on," Pitt said on NBC's "Meet the Press."

"Why can't we focus on WorldCom, on Enron, on Qwest, all these other companies where the American public is being injured? Why are we diverted for mere political gain?" he said, although he said he would release the files if Bush asked.

The SEC investigated Bush for being up to 34 weeks late in reporting stock sales worth more than $1 million but concluded he did not engage in illegal insider trading. Bush's father was president at the time.

"The matter is closed," Pitt said, but Democrats said Bush still needs to come clean about his past as a businessman.

"The only way to clear the air is full disclosure," Connecticut Sen. Joseph Lieberman, a potential Democratic presidential candidate in 2004, said on ABC's "This Week."

A bout of financial scandals have torpedoed investor confidence in publicly traded stocks and rocked financial markets, threatening to become a political liability for the president and Republicans heading into the November mid-term elections.

CENTER OF STORM

Pitt has been at the center of the Wall Street storm, with top lawmakers such as Senate Democratic Leader Tom Daschle and Arizona Republican Sen. John McCain calling for his resignation. Bush so far has backed Pitt.

"I have absolutely no intention of stepping down," Pitt said on CBS' "Face the Nation." He said the SEC was more aggressive now than it had ever been.

"Anybody who looks at what we've really done, what our record is, instead of these politically crass sound bites, will understand this is the most aggressive, most effective SEC that there has ever been in the 68 years of this agency," he said on NBC's "Meet the Press."

Republican Rep. Billy Tauzin of Louisiana said Sunday that accounting irregularities at fallen telecommunications giant WorldCom Inc stretched back at least one year earlier than previously believed.

Internal WorldCom documents show the company's then-chief financial officer rebuffed complaints from at least two employees that it was artificially inflating profits as far back as April 2000, Tauzin said on ABC's "This Week."

Tauzin is chairman of the House Energy and Commerce Committee looking into the WorldCom scandal.

Pitt said he supported the "thrust" of Democratic Sen. Paul Sarbanes' bill to create a tough, new oversight board for accountants and limits the consulting services accounting firms can provide their audit clients.

He also praised a more modest bill passed by the House in April that has been criticized as weak by some investor advocates.

Pitt, a former Wall Street lawyer with prominent clients including major accounting firms and corporations, finishes in August a one-year "cooling off period" in which he has recused himself from numerous cases involving former clients.

But he said he will "make a case-by-case decision" on whether to start participating. "If I think there is an appearance issue or some other problem, I may still recuse myself," he said.

He endorsed proposals to indict corporate chief executive officers whenever a corporation is indicted for a criminal matter under SEC jurisdiction.

"We're going after these people. I frankly think, every one of them who is responsible for any of these defaultations should do hard time for their hard crimes," Pitt said.

"The SEC fully looked into the matter, they looked at every aspect of it ... and the people who looked into it said they have no case,"
George W. Bush - July 8, 2002 - Source.

George W's daddy, George H.W. Bush was President.
Richard C. Breeden - "who was SEC chairman under President Bush's father, former President George H.W. Bush"
Richard C. Breeden - "Serving as 'Assistant' to the President for President George H.W. Bush"
Ex-SEC chairman Richard Breeden named "WorldCom" monitor
Robert Jordan, a founding partner of the Dallas law office of Baker Botts, represented Mr. Bush during a Securities and Exchange Commission inquiry into the allegations involving Mr. Bush's lucrative sale of stock in Harken, where he had been a director. Robert Jordan, is now ambassador Saudi Arabia.
James R. Doty - "From May 1990 through December 1992, Mr. Doty was the General Counsel of the United States Securities and Exchange Commission, Washington, D.C."
"As General Counsel, Mr. Doty was the chief legal officer of the Commission, responsible for advising the Commission and its staff with respect to interpretations involving questions of law, the conduct of administrative proceedings, the preparation of Commission comments to Congress on pending legislation and the drafting, in conjunction with the appropriate divisions and offices, of legislative proposals sponsored by the Commission."
James R. Doty - "who earlier represented Bush in his purchase of the Texas Rangers, made with the proceeds of his sale of Harken shares"
James R. Doty was a law partner with Robert Jordan.
Harvey L. Pitt - Former Arthur Andersen Attorney

Hi, my name is Harvey Pitt, and you'll have to excuse me, I'm a recovering Arthur Andersen(AA) Attorney.

"There is nothing rotten in the accounting profession."
Harvey Pitt, Chairman of the Securities and Exchange Commission - January, 2002 - SOURCE

Papers Offer Info on Bush Knowledge

WHAT'S UP IN JAKARTA

Masters Head Wary of Media Stephens relieved to survive limelight PAT SULLIVAN The San Francisco Chronicle SPORTS; Pg. D3; PAT SULLIVAN ON GOLF APRIL 25, 1992, SATURDAY, FINAL EDITION

T WO WEEKS ago, in the Masters, a nervous man sat in front of about 100 members of the media. His name was Jackson Stephens, new chairman of Augusta National and the tournament.

After Stephens' news conference, all about golf, he openly expressed relief at surviving his minutes in front of the media. At the time, his uneasiness seemed unwarranted. But now it's clear that he had reason to be wary of questioning.

...the Wall Street Journal has reported that Stephens' Arkansas-based investment bank played a critical role in fund raising for Harken Energy, a small Texas company whose board of directors includes George W. Bush...

According to the PBS show ''Frontline,'' which aired Tuesday night, Stephens has been linked to past deals involving the Bank of Credit and Commerce International, a rogue bank on whose behalf a guilty plea was entered in January on a federal racketeering charge.

And the Wall Street Journal has reported that Stephens' Arkansas-based investment bank played a critical role in fund raising for Harken Energy, a small Texas company whose board of directors includes George W. Bush, the president's son, and which won a potential billion-dollar contract to drill for oil in Bahrain....

Go up and read through reply #167. And then read this:

"When Harken needed an infusion of cash, Bush turned to family friend and investment banker Jackson Stephens of Little Rock, AK. The firm of Stephens Inc. was at the time one of the largest investment banks outside Wall Street. (The Stephens family was also active in Republican circles: Jackson Stephens would later contribute at least $200,000 to the Bush for President campaign, and his wife would become the Arkansas campaign chair.) Stephens rescue plan was to obtain $25 million in investment capital from Union Bank of Switzerland -- a joint venture of BCCI and the Banque de Commerce et de Placements in Geneva. UBS did not normally invest in small U.S. companies, but it made an exception in this case.

As originally structured, the deal apparently did not comply with U.S. banking regulations, according to the Asian Wall Street Journal. In the course of restructuring the deal, UBS decided to sell its shares as soon as possible, and Stephens obligingly found a new buyer: Sheikh Abdullah Bakhsh, a Saudi Arabian real-estate magnate. Bakhsh's representative is Talat Othman, a Palestinian born Chicago investor.

For several years Bakhsh was chairman of Saudi Finance Co., a holding company based in Luxembourg that operated French and Swiss financial enterprises. Bakhsh sold his interest in Saudi Finance Co. in 1983, although it is not clear to whom. By 1989 the firm was under partial control of the Gokal family of Pakistan -- shipping magnates who were BCCI shareholders. Bakhsh conducted business with the most prominent people in Saudi Arabia, reportedly including two oil ministers and members of the Saudi royal family. Among his notable co-investors was Ghaith Pharaon; Khalid bin Mahfouz was Bakhsh's banker. Bakhsh's stake in Harken was 17.6% in 1991, making him the third largest shareholder. The first, with 24.5%, is a Harvard University investment fund.

Jackson Stephens was identified by the Kerry committee as possibly "BCCI's Principal U.S. Broker," having facilitated BCCI's first acquisitions of U.S. banking concerns National Bank of Georgia and its former parent, Financial General Bankshares.

Ghaith Pharaon is still wanted by the FBI for wire fraud and racketeering conspiracy, according to the Justice Department's Interagency International Fugitive Lookout. (Incidentally, the DOJ site lists him as 93 inches tall, although "of short stocky build….") Pharaon's own web site relates that he is the son of the personal physician and advisor to former King Ibn Saud of Saudi Arabia. He attended the Colorado School of Mines and Stanford University, graduating with a degree in petroleum engineering. In 1965 he received an MBA from Harvard Business School, as his web site says. "a degree and training which became common to a number of other Saudis and Middle Easterners who later rose to prominence in government, business and commerce in the area," -- not to mention George W. Bush."

The Hijackers of Harvard: Herbert S. (Pug) Winokur - By Catherine Austin Fitts

Hold the line: Harvard Watch's "Trading Truth: A Report on Harvard's Enron Entanglements" - By Catherine Austin Fitts

"Harvard would never be so irresponsible as to make multimillion investments based on a personal connection, Harvard would like every investment to come out ahead, but they don't."
Joe Wrinn, spokesman for the university. Boston Globe - By Richard Kindleberger - April 30, 1991.

"The head of Harvard University's $5 billion endowment defended yesterday one current and one former employee of Harvard Management Co. against suggestions of a conflict of interest. Jack R. Meyer, president of Harvard Management, said he is persuaded that partner Michael R. Eisenson behaved appropriately in owning stock in a company that is part of the university's portfolio. Meyer said he has no reason to believe that Donald D. Beane, formerly with Harvard Management, did anything wrong ... "

"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 10,000 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 ... "
Anthony Flint, Boston Globe - April 29, 1991.

Richard C. Breeden Biography

Richard C. Breeden is chairman, president and CEO of Equivest Finance Inc., and is the past chairman of the U.S. Securities and Exchange Commission.

Equivest Finance Inc. is a publicly traded company in the travel and leisure industry with annual sales exceeding $160 million, approximately 2,000 employees and a compound annual growth in earnings per share of more than 40 percent per year over the past four years. Since 1996, Breeden also has been bankruptcy trustee of The Bennett Funding Group Inc., of Syracuse, N.Y., a leasing company that failed as a result of a multibillion-dollar fraud. Breeden also is president of Richard C. Breeden & Co., which handles turnarounds of troubled companies, as well as consulting on international capital markets.

A graduate of Stanford University and Harvard Law School, Breeden began his career practicing law in New York City specializing in acquisitions and corporate finance. For almost four years he served in the White House as a senior economics and financial adviser to George Bush (both as president and vice president), during which time he was responsible for defusing the savings and loan crisis and modernizing U.S. financial regulation. From 1989 to 1993 he served as chairman of the U.S. Securities and Exchange Commission, following appointment by former President Bush and unanimous confirmation by the U.S. Senate. During a portion of that time, Breeden also served as president of the International Organization of Securities Commissions and worked actively with many of the emerging markets around the world. After leaving government service in 1993, Breeden served until 1996 as the chairman of the worldwide financial services practice of Coopers and Lybrand LLP, where he consulted on risk management systems, internal controls and securities offerings in the United States by foreign companies.

Breeden serves as a director and member of the audit committee of eSpeed Inc., operator of the world's largest electronic trading network. ESpeed completed its Initial Public Offering in December 1999 and is one of the leading forces in creating a fully electronic, ultra-high speed, global trading network in securities, energy, telecommunications and other types of tradeable assets. Breeden also is a director and member of the audit committee of Claritybank.com, a startup retail Internet bank, and W.P. Stewart & Co. Ltd., one of the largest privately owned investment managers for high-net-worth individuals, as well as institutions in the United States, Europe and Asia. He is a frequent guest commentator on financial issues with Fox News.

Bush Digs Himself Into A Hole And Keeps Digging

Pressure mounts over Bush and Cheney business deals

Growing Scrutiny Of Bush Business Record

The Christian Science Monitor
By Ron Scherer
July 12, 2002
Source

Actions as private citizen include taking a company loan, late reporting of stock sale.

In June 1990, oil prices were bumping along at $17 a barrel and there was so much crude sloshing around that inventories hit an eight-year high. As any Texan knew, it was not a good time to be in the oil and gas exploration business, but that's where George W. Bush had staked his future. He was a director and consultant to Harken Energy, a Dallas gasoline retailer and wildcatter struggling to stay afloat. Two months before the firm reported a big loss, Mr. Bush sold his shares, but it was 34 weeks – far longer than 31 days or less required by law – before regulators and other investors learned of the sale.

Now, even as the president puts new emphasis on corporate ethics, the administration itself is coming under close scrutiny. On Wednesday, Judicial Watch, a conservative group, sued Vice President Dick Cheney for what it claimed was past inflation of revenues by Halliburton, a company Mr. Cheney chaired from 1995 to 2000. Cheney and the company deny the charge. The White House insists there is nothing to the charge. Reporters are also now looking at Bush's own brush with the Securities and Exchange Commission (SEC) which apparently examined his Harken deals.

Bush, for his part,insists this ground has been covered, and nothing untoward found.

The media sleuthing comes only a few days after President Bush outlined a much tougher approach to wrong-doing by CEOs. The White House has shrugged off reports that show Bush himself engaged in some of the things for which he has castigated CEOs. For example, he took a company loan, a practice he is decrying. And he wants CEOs to disclose on a timely basis when they buy or sell their shares – which he did not do.

Private-citizen Bush had become an investor in Harken in the mid-1980s as his own oil company, Spectrum 7 Corp., was scraping along in debt. After investing $500,000 in Harken, Bush received $131,250 in stock options. By June of 1990, Bush had dumped most of his Harken stock, clearing $848,560. Just two months later, the firm reported a much larger loss than expected, and the stock dropped to $2 a share from where Bush sold it at $4.

After Harken's 1989 annual report came out in 1990, the SEC looked at it and saw a red flag. The firm had sold a subsidiary to its own management and booked it as a capital gain. "It's not an arms-length transaction when management is on both sides," says Chris Bebel, a former SEC attorney and federal prosecutor. "Related-party transactions are viewed with great suspicion," says Mr. Bebel, now at Shepherd, Smith & Bebel in Houston.

For Harken, this meant restating its earnings – similar to what WorldCom and Enron have had to do. Instead of reporting a loss of $4 million, the red ink swelled to several times that amount and the stock plunged. When he ran for governor of Texas, Bush was asked about the sale of the stock. Did he know in advance that the company was going to have a much larger loss? Was he trading on inside information? "I absolutely had no idea and would not have sold it had I known," he said during his 1994 campaign for governor.

If done today, such a sale would spark an SEC inquiry, prosecutors and attorneys say. "A large sale two to three months before very bad news ... will be looked at hard today by the SEC and the exchanges," says Christian Bartholomew, a former SEC senior trial counsel, now a litigator at Morgan Lewis in Miami.

When trying to decide if insider trading has occurred at a company, government attorneys look at what they call the "fact pattern." Are there memos that make passing reference to sensitive information that might lead a prosecutor to think a trader did more to find out what was in the memo? Was there a board meeting to discuss the information? What did the trader say to his or her broker?

"It's very much like a mosaic that you put together from small pieces of evidence from different sources," says Mr. Bartholomew. "There is very rarely a smoking gun. When there is, the cases are over very quickly."

To get this information, prosecutors go to all the sources, especially looking for discrepancies, says Tom Carlucci, a former assistant US attorney in San Francisco and now a white-collar crime specialist at Foley & Larnder. After all the interviews, the attorneys then go back to the person being investigated. "You confront them with the factual information you know – 'Look, these three people said you knew this. If you didn't, can you prove they are mistaken?' "

Shifting explanations

In Bush's case, he's changed his story about why he was so late in notifying the government about the sale of the Harken stock. In 1994, he said that the government had lost the information. More recently, he has said his lawyers had been late in making the filing.

The SEC apparently did look into Bush's stock sale, but the extent of the probe is unknown. The SEC's general counsel at the time was James Doty, who represented Bush in private practice. So far, the SEC has released only a few files relating to the investigation. "Inquiries into insider trading are kept secret," says Bartholomew.

But many attorneys in this field believe the event today would have resulted in a much more in-depth type of investigation. "It would have warranted serious review," says Kirby Behre, a former assistant US attorney, now with the Washington law firm Paul, Hastings. "Today is a different environment, a different level of inquiry."

From article above:

"After all the interviews, the attorneys then go back to the person being investigated. "You confront them with the factual information you know – 'Look, these three people said you knew this. If you didn't, can you prove they are mistaken?' "

Unless of course you're George W. Bush. Then the SEC doesn't even interview George, or, Harken president Mikel Faulkner, who by the way was a CPA for, yes, you guessed it, Arthur Andersen. The SEC didn't even interview any officers or directors of Harken. None. Zip, nada. When SEC enforcement official Bruce A. Hiler stated this "must in no way be construed as indicating that the party(George W. Bush) has been exonerated or that no action may ultimately result from the staff's investigation," he must of had a good chuckle, knowing that the SEC didn't even interview George W. Bush, the president of Harken, or any officers or directors of Harken. Not to mention that George W. Bush's dad is sitting in the White House looking at his watch. Not to mention that Richard C. Breeden was the SEC Chairman, nominated by George H.W. Bush and a special assistant to George H.W. Bush, and now a monitor to oversee WorldCom(chuckle, chuckle). Not to mention that Robert Jordan, George W. Bush's personal attorney who represented Bush during the SEC so-called investigation is now the ambassador to Saudi Arabia. Saudi Arabia is connected to the Harken deal. Ghaith Pharaon, Khalid bin Mahfouz and Jackson Stephens must be mumbling I had a dream. Oh, and Robert Jordan was a law partner with James R. Doty. James R. Doty was the SEC General Counsel for the SEC during the Harken fraud. You know, the guy that advises the SEC and its staff with respect to "interpretations" involving questions of law. I guess he couldn't find any interpretations. And of course James R. Doty was George W. Bush's attorney who represented Bush in the purchase of the Texas Rangers, of course made with the proceeds of his sale of Harken shares. Oh, and Harvey Pitt, the bulldog now heading the SEC. Yeah, well in January of 2002, he stated "There is nothing rotten in the accounting profession.". But, you know, at the White House, and here at FR, well, this is normal and above board, and there's no there there." Bill Clinton is a virgin.

As A Board Member Bush Ok's A Deal Like Enron's

Los Angeles Times
By WARREN VIETH, Times Staff Writer
July 12, 2002 Source

WASHINGTON -- In early 1989, George W. Bush and his fellow board members at Harken Energy Corp. were presiding over a company that was headed south in a hurry. The Dallas-based oil firm had lost millions of dollars placing bad bets on commodity futures. Debt was piling up; red ink was beginning to flow.

Harken's executives came up with a novel plan to ease the pain. They would sell a small chain of Hawaiian gas stations called Aloha Petroleum to a group of investors that included Harken's chairman and one of its directors. The buyers would pay $1 million up front, but the accountants would record an immediate $7.9-million profit, enough to erase most of Harken's losses for the year.

They made a point of seeking the approval of directors who were not participants in the investor group. Bush, a member of the board's audit committee, signed off on the deal, according to Harken documents. So did the company's outside auditor, Arthur Andersen & Co.

But the government challenged and ultimately overturned the accounting method used by Harken to post a gain on the sale. Aloha was sold a second time, and the new buyer extracted big concessions from the company. The initial profit recorded on the sale morphed into a big loss. In the midst of all the maneuvering, Bush sold most of his Harken stock in June 1990.

Based on a review of publicly released Securities and Exchange Commission filings, meeting minutes, memos and correspondence from that period, there is no evidence that Bush, or any of the other directors, raised objections or expressed concern about the Aloha deal.

Experts on corporate governance say that as an independent director and one of only three members of the audit committee, Bush was in a position to exercise an important oversight role but apparently failed to do so.

..Of the seven Harken directors who served on the board with Bush, five declined to discuss the deal or did not return calls seeking comment. Executives at Aloha, now a privately held company, also declined to comment. So did past and present officials at Harken, Arthur Andersen and the SEC.

Former director Talat M. Othman, who chaired the three-member audit committee, said he did not recall the details of the Aloha sale or the company's reasons for arranging it. "I'm not sure that our motivation was to create instant profits," said Othman, a Palestinian who represented Saudi investors who owned 13% of Harken's stock. "It was a normal part of the business to be buying and selling."

The third audit committee member, E. Stuart Watson, also said he didn't remember much about Aloha. "I don't know about that Hawaiian outfit because I was getting off the board about that time," Watson said.

Remaining Article

I don't recall

Now, try not to laugh:

Donald Evans on Fox News Sunday
SNOW: Right now Congress is considering various pieces of legislation dealing with the latest accounting fraud scandals. What are the president's principles on this one? What does he want, what does he not want in the bill?

EVANS: Well, the first thing he wants is truth. I mean, there's not anything more important and simpler than just telling the truth, Tony. I mean, you know, you can put all the rules and all the laws and all the regulations in place you want to, but if people don't tell the truth, it won't work.

SNOW: There's a lot of news coverage right now to the president's past career, working for Harken Oil -- Harken Energy, and concern about when he sold his stock.

Now, the White House has said, "He's been investigated, he's been exonerated, we're not going to release records."

This is a president who, during the investigation, the SEC investigation, said, "Look, I've waived my legal rights, you can take a look at anything." So why not open it up right now and get this thing done with?

EVANS: Tony, this is nothing but political garbage that the American people are sick and tired of. I mean, I think this is a perfect example of what Americans say, "Look, we've got a serious problem in America, and let's go solve that problem in a bipartisan way."

...SNOW: Harvey Pitt is under fire, the Securities and Exchange Commission chairman. John McCain has asked for his resignation. President said he supports him. Is Harvey Pitt going to remain the SEC chairman?

EVANS: Harvey is doing a terrific job. Let me tell you, what I pointed out earlier, people seem to, kind of, lose sight of. The president called members of his Cabinet into the Oval Office in early January.....

...Soon after the collapse of Enron, what he did -- look, I know this president well. And I know when he's angry. And I know when he's not happy with behavior out there of a few.

EVANS: And he called a number of us into the Oval Office, early in January, to discuss the issue. He put a task force together to focus on pension reform for the small investors and for the employees. He put a task force together to focus on disclosure of financial statements. By early March, he presented a 10-point plan to the American people and to the Congress: These are the principles that ought to drive reforms, to deal with this serious issue that we're dealing with right now. Harvey Pitt followed up with that -- to that letter and presented to the president responses to all 10 points. It's those principles that are driving the debate today.
[End of Transcript]

Now, notice that Evans states that Bush called them in a meeting in early January to start taking care of all these serious problems with accounting scandals. Early January. Early January. Maybe Harvey Pitt was sleeping and forgot to take notes. Or worse, maybe Harvey wasn't even invited.

"There is nothing rotten in the accounting profession."
Harvey Pitt, Chairman of the Securities and Exchange Commission - January, 2002 - SOURCE.

'Reformer' Not In Bush's Job Description

By PAUL KRUGMAN
SYNDICATED COLUMNIST
Copyright 2002 New York Times News Service
Monday, July 15, 2002
Source

The current crisis in American capitalism isn't just about the specific details -- about tricky accounting, stock options, loans to executives and so on. It's about the way the game has been rigged on behalf of insiders.

And the Bush administration is full of such insiders. That's why President Bush cannot get away with merely rhetorical opposition to executive wrongdoers. To give the most extreme example (so far), how can we take his moralizing seriously when Thomas White -- whose division of Enron generated $500 million in phony profits and who sold $12 million in stock just before the company collapsed -- is still secretary of the Army?

Yet everything Bush has said and done lately shows that he doesn't get it. Asked about the Aloha Petroleum deal at his former company Harken Energy -- in which big profits were recorded on a sale that was paid for by the company itself, a transaction that obviously had no meaning except as a way to inflate reported earnings -- he responded, "There was an honest difference of opinion ... sometimes things aren't exactly black and white when it comes to accounting procedures."

And he still opposes both reforms that would reduce the incentives for corporate scams, such as requiring companies to count executive stock options against profits, and reforms that would make it harder to carry out such scams, such as not allowing accountants to take consulting fees from the same firms they audit.

The closest thing to a substantive proposal in Bush's tough-talking, nearly content-free speech on Tuesday was his call for extra punishment for executives convicted of fraud. But that's an empty threat. In reality, top executives rarely get charged with crimes; not a single indictment has yet been brought in the Enron affair, and even "Chainsaw Al" Dunlap, a serial book-cooker, faces only a civil suit. And they almost never get convicted. Accounting issues are technical enough to confuse many juries; expensive lawyers make the most of that confusion; and if all else fails, big-name executives have friends in high places who protect them.

In this as in so much of the corporate governance issue, the current wave of scandal is prefigured by Bush's own history.

An aside: Some pundits have tried to dismiss questions about Bush's business career as unfair -- it was long ago, and hence irrelevant. Yet many of these same pundits thought it was perfectly appropriate to spend seven years and $70 million investigating a failed land deal that was even further in Bill Clinton's past. And if they want something more recent, how about reporting on the story of Bush's extraordinarily lucrative investment in the Texas Rangers, which became so profitable because of a highly incestuous web of public policy and private deals? As in the case of Harken, no hard work is necessary; Joe Conason laid it all out in Harper's almost two years ago.

But the Harken story still has more to teach us, because the SEC investigation into Bush's stock sale is a perfect illustration of why his tough talk won't scare well-connected malefactors.

Bush claims that he was "vetted" by the SEC. In fact, the agency's investigation was peculiarly perfunctory. It somehow decided that Bush's perfectly timed stock sale did not reflect inside information without interviewing him, or any other members of Harken's board. Maybe top officials at the SEC felt they already knew enough about Bush: His father, the president, had appointed a good friend as SEC chairman. And the general counsel, who would normally make decisions about legal action, had previously been George W. Bush's personal lawyer -- he negotiated the purchase of the Texas Rangers. I am not making this up.

Most corporate wrongdoers won't be quite as well connected as the young Bush; but like him, they will expect, and probably receive, kid-glove treatment. In an interesting parallel, today's SEC, which claims to be investigating the highly questionable accounting at Halliburton that turned a loss into a reported profit, has yet to interview the CEO at the time -- Dick Cheney.

The bottom line is that in the past week any hopes you might have had that Bush would make a break from his past and champion desperately needed corporate reform have been dashed. Bush is not a real reformer; he just plays one on TV.

Speaking of manipulation, fraud, cooking the books and insider trading:

Plunge Protection Team

The Washington Post
By Brett D. Fromson
Washington Post Staff Writer
Sunday, February 23, 1997; Page H01

It is 2 o'clock on a hypothetical Monday afternoon, and the Dow Jones industrial average has plummeted 664 points, on top of a 847-point slide the previous week.

The chairman of the New York Stock Exchange has called the White House chief of staff and asked permission to close the world's most important stock market. By law, only the president can authorize a shutdown of U.S. financial markets.

In the Oval Office, the president confers with the members of his Working Group on Financial Markets -- the secretary of the treasury and the chairmen of the Federal Reserve Board, the Securities and Exchange Commission and the Commodity Futures Trading Commission.

The officials conclude that a presidential order to close the NYSE would only add to the market's panic, so they decide to ride out the storm. The Working Group struggles to keep financial markets open so that trading can continue. By the closing bell, a modest rally is underway.

This is one of the nightmare scenarios that Washington's top financial policymakers have reviewed since Oct. 19, 1987, when the Dow Jones industrial average dropped 508 points, or 22.6 percent, in the biggest one-day loss in history. Like defense planners in the Cold War period, central bankers and financial regulators have been thinking carefully about how they would respond to the unthinkable.

An outline of the government's plans emerges in interviews with more than a dozen current and former officials who have participated in meetings of the Working Group. The group, established after the 1987 stock drop, is the government's high-level forum for discussion of financial policy.

Just last Tuesday afternoon, for example, Working Group officials gathered in a conference room at the Treasury Building. They discussed, among other topics, the risks of a stock market decline in the wake of the Dow's sudden surge past 7000, according to sources familiar with the meeting. The officials pondered whether prices in the stock market reflect a greater appetite for risk-taking by investors. Some expressed concern that the higher the stock market goes, the closer it could be to a correction, according to the sources.

These quiet meetings of the Working Group are the financial world's equivalent of the war room. The officials gather regularly to discuss options and review crisis scenarios because they know that the government's reaction to a crumbling stock market would have a critical impact on investor confidence around the world.

"The government has a real role to play to make a 1987-style sudden market break less likely. That is an issue we all spent a lot of time thinking about and planning for," said a former government official who attended Working Group meetings. "You go through lots of fire drills and scenarios. You make sure you have thought ahead of time of what kind of information you will need and what you have the legal authority to do."

In the event of a financial crisis, each federal agency with a seat at the table of the Working Group has a confidential plan. At the SEC, for example, the plan is called the "red book" because of the color of its cover. It is officially known as the Executive Directory for Market Contingencies. The major U.S. stock markets have copies of the commission's plan as well as the CFTC's.
Click Here For Remaining Article

THE PLUNGE PROTECTION TEAM

Securities and Exchange Commission Approves New Circuit Breaker Levels

FOR IMMEDIATE RELEASE

April 10, 1998

Source

Washington, D.C., April 10, 1998 -- The Securities and Exchange Commission late yesterday approved new circuit breaker trigger levels for one-day declines in the Dow Jones Industrial Average (Dow) of 10%, 20% and 30%. The new levels, which go into effect April 15, 1998, were proposed by the securities exchanges and the NASD to modify their rules regarding coordinated, cross-market trading halts during periods of extraordinary market volatility.

The new trigger levels will be converted into point values at the beginning of each calendar quarter, using the average closing value of the Dow for the previous month. The new levels also better reflect the original intent of the circuit breakers: that they only be triggered during a severe one day decline of historic proportions. The Commodities Future Trading Commission also approved substantively identical rules for the stock index futures markets.

The rule changes also modify the late-in-the-day trading halt procedures for circuit breakers.

Ten Percent Decline: The halt for a 10% decline will be one hour if triggered before 2:00 p.m. EST. At or after 2:00 p.m. EST but before 2:30 p.m. EST, the halt will be for one-half hour. At or after 2:30 p.m. EST, the market will not halt at the 10% level and will continue trading.
Twenty Percent Decline: The halt for a 20% decline will be two hours if triggered before 1:00 p.m. EST. At or after 1:00 p.m. EST but before 2:00 p.m. EST, the halt will be for one hour. If the 20% trigger value is reached at or after 2:00 p.m. EST, trading will halt for the remainder of the day.
Thirty Percent Decline: If the market declines by 30%, at any time, trading will be halted for the remainder of the day.
Previously, the circuit breakers were triggered when the Dow Jones Industrial Average declined 350 points (thirty minute halt) and 550 points (one hour halt) from the previous day's close.

THE MOB ON WALL STREET

Something Is Rotten Behind Economic Scene
INSIGHT MAGAZINE
Jamie Dettmer
December 7, 2001
During the first week of December, Bush officials started briefing journalists to the effect that the White House was aware that it needed to focus more attention on America's blighted economy.
The underlying thrust of what they were saying was that this president wouldn't get caught out like his daddy did in 1992 and appear aloof from the everyday concerns of Americans struggling with harsh economic times. In short, there will be no embarrassing photo opportunities at supermarkets featuring a president apparently bewildered by checkout scanning technology. But the timing of the economy briefing from Bush aides was interesting, coming as it did on the back of the abrupt collapse of Enron Corp., the energy trader with close ties to Bush and whose executives were singled out to assist in developing the president's energy policy.
Of course, it doesn't take a political genius to see that the White House hardly can ignore the bleak economy. For all the debate about whether this is a Clinton recession or a Bush one, come 2004, if the good times aren't rolling, the buck is going to stop with the guy sitting in the Oval Office.
That isn't the only reason the Bush White House is feeling nervous about possible political fallout from the economy. There are signs ordinary Americans are beginning to get mad. Not so much because of the recession but because of the disturbing things the recession is throwing up about Wall Street, investment banks, the big auditing firms and the politicians they are close to, at least in terms of chucking campaign dollars at them and securing favorable legislation.
The evidence that a head of steam is building is coming in many forms. For one, the National Association of Securities Dealers is on track to receive a record number of formal complaints filed by investors against brokers and analysts: By the end of the year the total likely will exceed by a thousand the record of 6,058 set in 1995.
The current onslaught of complaints has Wall Street worried. And as more details emerge of dubious practices, ranging from conflicts of interests to bad investment advice, from lack of due diligence by brokerages and securities firms to churning by brokers determined to build up fees, Wall Street has cause for anxiety.
In 1998 Americans were taken aback at the revelations of crony capitalism in the Tiger economies of Asia: the kickbacks, nepotism, corruption and lack of transparency in banking and dealing. Now it's "physician cure thyself," as the recession is highlighting serious crony capitalism here.
The Enron bankruptcy is one example of the existence of something rotten. Why didn't auditors and investment banks raise an early alarm about the massive off-the-books debt of Enron? Where was the Securities and Exchange Commission?
The second example is the dot-com mania of the late 1990s and the cronyism and lack of due diligence that now is beginning to emerge in the allocation of shares in initial public offerings (IPOs). When the dot-com bubble burst investors faced huge portfolio losses. And up to a point they had only themselves to blame for taking risks and boosting the notion that the market would go up forever.
But did the securities firms and brokerages and underwriters talk up the market in 1998 and 1999 when they knew problems were looming? Did they in fact do even worse?
On Dec. 4, dozens of high-powered lawyers gathered on the 48th floor of One Penn Plaza in New York City to discuss how to deal with nearly 1,000 class-action lawsuits filed against the underwriters of IPOs. Virtually all the major securities firms are defendants in these suits: Morgan Stanley, Citibank, Merrill Lynch, Goldman Sachs, Credit Suisse First Boston, etc. Chairing the meeting was Mel Weiss, the New York attorney Wall Street fears the most. His New York law firm helped recover $800 million for investors in the investigation of junk-bond king Michael Milken.
Known for his tenacity and bare-knuckled approach, Weiss says the NASDAQ boom wasn't just the result of "irrational exuberance" but a glaring case of market manipulation and fraud by the underwriters, who used kickback schemes, secret profit-sharing agreements with selected clients and price-fixing to inflate the value of IPOs.
Weiss argues that the underwriters required select clients who wanted IPO share-allocations to buy a certain number of shares after launch at predetermined prices, "not for investment purposes but to generate momentum." That process is known as "laddering." The smell of gold was intense. "Greed has always been a growth industry, but it became a supergrowth industry," Weiss says.
He adds: "Investors were blinded by an illusion that was very carefully orchestrated by the investment banks. Our investigations are revealing that the securities firms knew there was a problem. People from the investment banks are telling us that they would sit around the table and ask, 'Why the hell are we bringing this or that company public? This looks like it is a dead-bang nothing.' And then they would walk into the next room to the analysts and they would give a glowing report."
Some Wall Street lawyers estimate that it will take $6 billion to $10 billion to settle the class-action lawsuits. The cost could be even higher in terms of the credibility of the investment banks and brokerages. And pressure is likely to grow for some major reforms to stop the cozy relationships that underpinned the dot-com mania.
Jamie Dettmer is a senior editor at Insight magazine.

Why P/E Matters for the Dow
"The market hasn't corrected at all for the sad truth that the New Economy's underlying assumptions turned out to be mistaken, and we're back in the same Old Economy with uniquely cruel business cycles, booms and busts. Just to give you an idea of how far out of historical whack the stock market is, consider this: Profits rise over the long term by about 4% a year, with immense deviations around the mean. If the earnings depression ends tomorrow and profits rise at 4% a year again, it will take roughly 14 years (not months, years) for the Dow's P/E to reach historical norms -- even if the Dow doesn't rise 1 point in those 14 years. Or, to look at it another way, the Dow would have to fall by about half for it to resume historical P/E behavior."

"One of the best bankers in this country, John Medlin, told me that these are the worst credit standards he had ever seen in 40 years of banking. If we have a downturn in the economy, these debt burdens could present a real crisis for us."
U.S. Senator Lauch Faircloth (R-NC) - Hearing on the Federal Reserve's First Monetary Policy Report to Congress for 1998 - February 25, 1998.

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