Press Briefing by Ari Fleischer
For Immediate Release
Office of the Press Secretary
July 23, 2002 - 12:23 P.M. EDT
SOURCE
James S. Brady Briefing Room
Partial Transcript:
Q Ari, why won't the President ask the SEC to release all Harken documents?
MR. FLEISCHER: No change in anything on that, Holly. That question was asked yesterday, asked last week. No changes, as you're well aware of.
Q What is the reason why?
MR. FLEISCHER: Same reasons -- you can just check the transcripts from the last time you asked the same question.
Q I don't think I -- could you repeat it, possibly?
MR. FLEISCHER: It's in the transcripts.
[End of partial transcript]
Remarks by President Bush and President Kwasniewski of Poland in Press Conference
The East Room
For Immediate Release
Office of the Press Secretary
July 17, 2002
12:03 P.M. EDT
Partial transcript:
PRESIDENT BUSH: We'll answer some questions. We'll alternate between the American press and the Polish press, three apiece --
Q Mr. President, even while you're calling for transparency in corporate America, you refuse to ask the SEC to turn over documents from its investigation into Harken Energy Corporation, your old company. And the Vice President has answered few questions about his role at Halliburton, his old company, which is now under investigation by the SEC. Why not just clear the air, ask the SEC to release those documents and ask the Vice President to talk about Halliburton in a public forum?
PRESIDENT BUSH: Well, first, the Vice President -- I've got great confidence in the Vice President, doing a heck of a good job. When I picked him, I knew he was a fine business leader and a fine experienced man. And he's doing a great job. That matter will take -- run its course, the Halliburton investigation, and the facts will come out at some point in time.
Secondly, as to a look at Harken, the SEC, as a result of Freedom of Information requests, has released documents, and the key document said there is no case. It was fully investigated by career investigators. Some of you, I think, have talked to the head career investigator, and he's made it clear there was no case.
[End of partial transcript]
Press Briefing by Ari Fleischer
For Immediate Release
Office of the Press Secretary
July 16, 2002
Source
The James S. Brady Briefing Room
12:23 P.M. EDT
Partial Transcript:
Q Just to answer a lot of the questions that have been out there and to show, back-up your claims in the past that this is an open administration. Why not just ask the SEC to release all the documents behind the Harken investigation -- just to get it out there.
MR. FLEISCHER: Ron, you know, the SEC took a look at all the questions that were raised in the context of Harken and they have come to their conclusions. They have made their determinations and they made their judgments and they made their call. It's all been shared with you. And you have what they determined.
Q Why don't you want to have shared with us the basis that they used to come to that conclusion?
MR. FLEISCHER: Well, Ron, you know, the lesson in Washington, there's no end to that type of question. It doesn't matter that the SEC has already looked into this in its entirety, shared its finding, shared its results with you and come to the conclusion that there's no "there" there.
Q Let me follow-up --
MR. FLEISCHER: The premise that you're asking is any time we ask for anything, we want to have full access to everything in a file. And that's just the precedent that is lacking in sense or merit, and especially in a case here where you know the conclusions, you know the reasons, you have everything you need, and it's all at your disposal.
Q Can I ask one more question? The President's accountant said yesterday that a Texas bank freed up $130,000 -- 130,000 shares of Harken stock that were being pledged for the loan the President took out for the Texas Rangers. Do you happen to know what the President did to get the collateral free?
MR. FLEISCHER: No, Ron, I'm not the President's accountant.
Q On Halliburton, Ari, you said from the podium that the Vice President believes that the lawsuit against him is without merit. I realize you're not going to comment on an ongoing SEC investigation. But isn't it also true that because of these things that one of the most experienced former CEOs in this administration has become something of a political liability, in that at the time when you're cracking down on corporate responsibility, the Vice President is not heard from, he's not talking about these issues. He can't be used as a vital spokesman of the administration.
MR. FLEISCHER: I thought I saw him on TV just yesterday or the day before giving a speech about corporate governance. So I just differ with your findings and with your premise.
Q That was a fundraiser, right, and we'd all stipulate that those don't get a lot of coverage, right?
MR. FLEISCHER: I saw him on TV, so obviously he got covered.
Q Wait a second, is that your only answer?
MR. FLEISCHER: I'm sorry, what was your next question?
...Q Thank you. Is the -- was he aware of circumstances or problems within Halliburton that could ultimately affect the financial position of the company prior to his selling of stock?
MR. FLEISCHER: As you know, these are issues that if the Securities and Exchange commission deems them appropriate to look into, they will look into.
...Q It was not on the wires, but it's all right. Next question. Does the President feel -- I know the President has been backing Harvey Pitt as president of the SEC -- does the President feel, though, that some of the criticism, some of the questions the Democrats have and John McCain have, does he feel some of those arguments are valid?
MR. FLEISCHER: No. The President listens to Arthur Levitt, for example. Arthur Levitt, the former Chairman of the Securities and Exchange Commission appointed by President Clinton has commended Harvey Pitt for the superb job he is doing at the SEC; for the enhanced number of corporate wrongdoers who Harvey Pitt has now banned from serving as members of board of directors of corporate companies or in corporate positions anymore; for the amount of money that Harvey Pitt has taken back from business executives who took that money as a result of filing phoney books.
He is receiving bipartisan acclaim from some of the best experts in the business, such as Arthur Levitt. And the President knows that Harvey Pitt is doing an excellent job, a superb job. And the President looks forward to him continuing in that good job.
"RELEASE THE DOCUMENTS" - John LeBoutillier - Former Conservative Congressman
Bush's Document Dilemma: Should he release the Harken SEC documents? Byron York Says Yes
Sen. Hatch Joins Dems in Call for Harken Documents
Senators: Release Records On Bush Stock Sale
Bush Should Release Documents - National Review - Byron York
The President vs. The Presidency - Jonathan Turley
SEC Chief Pitt Says He Opposes Release of Files on Bush
Bush Clamps Down On Records Disclosure
The Road to Perdition
"The president's self-contradictory defense of his past is to say he was "fully vetted" by the S.E.C. even though he still hasn't "figured it out completely" himself. But the S.E.C. never interviewed Mr. Bush during its investigation. The agency was then run by an appointee of his father, Richard Breeden, who recused himself from the case. Last Sunday, Mr. Breeden turned up on Fox News as a George W. defender. Yet when Tony Snow asked him twice if he could give the president "a clean bill of health, yes or no," Mr. Breeden pleaded ignorance and ducked. Perhaps that's why the White House has not asked the S.E.C. to release its Harken papers, even though Harvey Pitt last weekend said he would if it did. The president has also told the press that "you need to look back on the director's minutes" to answer questions about Harken — and then refused to provide those minutes or to instruct Harken to release them either. But yesterday Mr. Lewis's organization posted a pile of them at www.publicintegrity.org, and says that more documents are yet to come."
"The importance of protecting sensitive institutional, commercial, and personal interests that can be implicated in government records — such as the need to safeguard national security, to maintain law enforcement effectiveness, to respect confidentiality, to protect internal agency deliberations, and to preserve personal privacy."
John Ashcroft - Source.
"We believe in people. We’re of the people and by the people and for the people. That’s the motto of our campaign."
George W. Bush - Source: Remarks in Eau Claire, Wisconsin Oct 18, 2000.
Bush Flap Thrusts Harken Back Into the Spotlight
The Street.Com
By Melissa Davis
Staff Reporter
July 11, 2002 - 06:59 AM EDT
Source
Even in its glory days of rising sales and standing-room-only shareholder meetings, Harken Energy (HEC:Amex - news - commentary - research - analysis) wasn't what you'd call a blue-chip investment.
More than a decade ago, the Texas-based energy company was making a big bet on a fiercely competitive business in which it had little experience. A dozen years and numerous setbacks later, with its $10 million market cap and well-established knack for losing money, Harken is the sort of penny stock that rarely interests investors.
That is, until you throw the stock sales of a certain former director -- President George W. Bush -- into the equation.
Suddenly, it doesn't matter that Harken is a tiny exploration-and-production company with a scant $5.5 million in latest-quarter revenue. Now Harken is in the headlines because years ago, Bush reaped a profit by selling thousands of shares just months before the company was hit by bad news.
If the sale itself was exceptionally well-timed, the renewed interest in its details comes at an inopportune moment for the president. In the wake of wealth-destroying corporate scandals at Enron and WorldCom, to name two, Bush is promising to crack down on corporate misconduct. But with its echoes of recent scandals, the Harken case now threatens to undermine the president's offensive against unethical behavior.
The Herald Angels
It may be tough to imagine, given the company's current state, but Harken was once so popular that Bush had to fight for a seat at the annual shareholder meeting -- a fight he actually lost, leaving him standing at the back of the room.
In 1989, a huge crowd of Harken's nearly 10,000 shareholders poured into a Dallas airport hotel to hear about the company's promising future. During the three short years since it had brought Bush aboard by buying out his struggling company, Harken had exploded from a tiny operation with only $4 million in sales to one expecting more than twice that amount in profits.
In fact, Harken was then on its way to delivering $1 billion in annual sales for the first and only time in its history. And that was even before January 1990, when Harken landed a coveted Middle Eastern drilling contract, beating out the likes of Amoco and becoming one of the hottest gambles of the time.
It was with this backdrop that in the summer of 1990, Bush sold most of his Harken stock -- then his largest asset -- to pay off a $600,000 loan he had taken to invest in the Texas Rangers baseball team. At the time of the stock sale, Bush was a director of Harken and was serving on a two-member "fairness committee" formed to study whether a major company restructuring would hurt ordinary Harken shareholders. (He also served on Harken's audit committee.)
The timing of Bush's insider sale -- which reduced his stake in Harken by two-thirds -- proved impeccable on two counts. It barely preceded Harken's report of an unprecedented $23.2 million quarterly loss that punished the stock. And it came just before Iraq invaded Kuwait, potentially jeopardizing the exclusive drilling opportunity in nearby Bahrain that made Harken such an exciting gamble for investors.
| It's Curious, George Events surrounding President Bush's Harken stock sale* |
 |
| 1. September 1986: Bush sells his fledgling energy company for $600,000 in Harken stock and becomes a director and paid consultant. |
| 2. June 1989: Harken predicts it will achieve $1 billion in annual revenue -- and delivers that at year's end, along with a $12 million loss. |
| 3. January 1990: Harken signs an exclusive 35-year production-sharing contract with Bahrain. |
| 4. June 1990: Bush sells two-thirds of his stake in Harken for $835,807 -- but doesn't file a necessary disclosure form. |
| 5. August 1990: Harken reports a $23.2 million loss and major restructuring plan. |
| 6. October 1990: Bush mentions Harken stock sale in Dallas Morning News interview. |
| 7. April 1991: The SEC receives official notice of Bush's 1990 stock sale. |
| 8. Fall 1991: Harken reports revenues of only $5.35 million, and a $4.19 million loss, for the first nine months of 1991. |
| 9. December 1991: Harken's stock climbs to $7, more than double its price of five months earlier, as investors gamble on Bahrain bid. |
| 10. January 1992: Harken reports the failure of first drilling attempt in Bahrain. |
| 11. June 1992: Bush takes a leave of absence from Harken. |
| 12. February 1993: Harken strikes out on its second attempt in Bahrain and doesn't try again. |
| 13. November 1993: Bush resigns his board seat at Harken. |
| *Prices adjusted for November 2000 1-for-10 reverse split. |
Further raising eyebrows was the fact that a required filing with the Securities and Exchange Commission didn't reach regulators until more than eight months after the reporting deadline. Bush properly filed his intent to sell stock but failed to file the actual sale documents until later.
At least one newspaper reported the sale before the SEC got its document: In October 1990, the Dallas Morning News quoted Bush as saying he'd become a "small, insignificant" stockholder in Harken after selling 225,000 of his 345,426 shares in "June or July," at $4 a share. A White House spokesman said Bush sold the rest of his Harken holdings before becoming the Texas governor in 1995, but wouldn't be more specific.
(Unless otherwise noted, figures in this story reflect historical stock information. For the sake of clarity, share counts and prices haven't been recalibrated to account for a 1-for-10 reverse split the company effected in the fall of 2000 to boost its stock price.)
Changing Tunes
Further muddying the waters, Bush has given a variety of reasons for his delinquent stock sale notification. When the matter first arose in 1991 -- and again during his race for Texas governor in 1994 -- Bush blamed the SEC for misplacing his forms. He stood by that story two years ago during his campaign for president.
Then, last week, a Bush spokesman suddenly shifted the blame to Harken attorneys for committing a "clerical error" that delayed the filing. Since then, Bush has simply claimed ignorance, saying he really doesn't know what caused the supposed foul-up.
The timing of the disclosure aside, questions have long swirled about what Bush knew when he sold the stock. In the early 1990s, U.S. News & World Report concluded that Bush had had "substantial evidence" to determine that Harken was in dire straits and needed to make radical changes to recover. Bush has consistently denied any allegation that he improperly enriched himself through insider trading, or that he tried to hide transactions.
Bruce Day, a securities attorney with a background in both federal and state securities regulation, said he's not convinced Bush did anything terribly wrong. If Bush simply failed to file a Form 4 stock sale registration late -- even eight months late -- his misstep was a minor one, he said. As for the insider-trading questions, "I'm not aware that that really happened," Day said.
Whatever happened, Harken's stock took a hard hit in the months following Bush's sale. The stock finished 1990 at $1.25 -- down 76% for the year.
As it turns out, Bush could have actually profited more by selling his Harken stock at its real peak nearly 18 months later.
After dipping to its low of $1.25 in 1990, the stock took flight in mid-1991, against incredible odds. By then, Harken had spun off its most valuable assets, including a retail gasoline chain that once generated about 90% of revenue. That left nearly all of Harken's assets tied up in its wildcat drilling project off the coast of Bahrain. Harken had no experience drilling wells either overseas or in the water. In fact, some people believed the company landed the Bahrain contract only because Bush was the president's son.
But investors had just watched Triton Energy score big on its own highly speculative overseas project. And they didn't want to miss out again.
So they overlooked Harken's dismal numbers, including revenues that had trickled to a measly $5.35 million during the first nine months of 1991, and a $4.19 million loss for the same period. They gobbled up the stock, sending it to $7 a share.
And they held their breath and waited.
Dry Hole
The following year, Harken's shareholder meeting attracted only 11 people, including three from the media and four from the company itself. Bush, who'd just begun a leave of absence days earlier, was nowhere around.
The meeting started late, at 5 p.m. in a hotel near Chicago's O'Hare airport, and lasted just under 10 minutes. The company's prospects in Bahrain were barely mentioned.
Harken's first drilling expedition off the shore of Bahrain had ended in a dry hole. The company's second -- and final -- try in the area would meet the same fate the following year.
On the day the second failure was announced, in February 1993, Harken's stock plummeted 29% to $1.50 a share. It was the sixth most heavily traded stock on the American Stock Exchange.
Seven months later, Bush ended his profitable eight-year stint with the company by officially resigning from his seat on the board.
Salary and Perks
At the height of Bush's Harken career in 1989 -- when the company pushed past $1 billion in revenue -- Bush raked in $121,000 as a paid consultant and $131,250 worth of stock options. Like other directors and officers, he was allowed to exercise his options at a 40% markdown from market prices, using low-interest company loans to boot.
Despite 1989's milestone in sales, Harken lost $12 million by year's end. It lost $40 million in 1990 -- when shareholder equity plunged to $3 million, down from $70 million just two years earlier. But even then, Harken's generous executive compensation remained virtually unchanged.
As the losses mounted, Bush's consulting salary finally dropped to $50,000 in 1991 and $42,000 in 1992. Still, by 1993 -- the year Bush exited the company -- he had amassed a personal net worth of more than $4 million.
Except for a brief rebound in 1997-98, Harken's stock traded mostly in the low single digits following the company's failures in Bahrain. This year has been among Harken's worst, with its stock failing to fetch much more than $1 a postsplit share and slipping below 50 cents this week.
Due to low energy prices, Harken has curtailed much of its exploration and production activity. It still has operations in the U.S. and abroad, but it is now seeking to grow through mergers and acquisitions.
Sixteen years have passed since Harken adopted a similar strategy, snatching up companies -- including Bush's -- on the path to its brief moment as a $1 billion company. In exchange for his company, near foreclosure at the time, Bush received Harken stock valued at $600,000.
He collected $835,807 for the sale of two-thirds of that stock less than four years later. At today's prices, the stock would be worth just over $10,000.