The United States of Enron
"Harvey Pitt, the Bush administration's chief at the S.E.C., was actually an 
Arthur Andersen lawyer. After this week's revelation that top Andersen executives knew of funny business at Enron as early as February 2001, you have to wonder whether Mr. Pitt should be a witness in an S.E.C. investigation rather than its overlord. Was he representing Andersen at the time it first detected Enron's misbehavior? Was he in the loop? The stonewalling may have already begun, since neither the S.E.C. nor Andersen, when queried late this week, could say just when Mr. Pitt was in the accounting firm's employ.
Whom can the country turn to for an honest investigation? Democrats and Republicans alike are so beholden to accounting-industry money that they scuttled an attempt by Arthur Levitt, the former S.E.C. head, to regulate conflicts of interest in companies like Andersen two years ago."
Hi, I'm Harvey L. Pitt, George Bush's S.E.C. chairman, and I'm a recovering Andersen lawyer.
George W. Bush - Seated on Harken's Board of Directors and audit committee, and large shareholder.
Harken Accountants: Arthur Andersen
Bush Violated Security Laws Four Times, SEC Report Says
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.
Insider Trading and George W. Bush
A U S T I N, July 1-- The Securities and Exchange Commission defines insider trading as "Corporate officers, directors, and employees who traded the corporation's securities after learning of significant, confidential corporate developments". Bush sold $848,560 worth of Harken Energy stock on June 22, 1990, just one week before the company posted spectacular losses and the stock plunged sharply. When the losses were reported to the public on August 20, 1990, the stock plummeted.
According to documents from a two year investigation by the SEC, Bush served on the board of directors of Harken Energy Corporation and his position on a special Harken committee gave him detailed knowledge of the company's deteriorating financial condition. The SEC received word of Bush's trade ten months late.
The SEC states, "Because insider trading undermines investor confidence in the fairness and integrity of the securities markets, the Commission has treated the detection and prosecution of insider trading violations as one of its enforcement priorities".
Bush supporters point out that the stock's value went back up, eventually, and if Bush had held the stock, it would have made him more money. But, knowing when to sell is the golden goose of stock trading and using inside information is insider trading. The SEC investigated but decided not to punish Bush. After all, his dad was President and all five SEC Commissioners are appointed by the President. Furthermore, the SEC's general counsel had actually represented George W. in the Texas Rangers negotiation. Any doubts?
Neil Bush
Silverado Savings and Loan Executive:
SIGNS POINT TO MOB INVOLVEMENT IN SAVINGS-AND-LOAN MESS
Neil Bush - Silverado Savings and Loan
"A failed Colorado savings and loan whose board of directors included a son of President Bush was part of an intricate web of federally insured financial institutions that had business links to organized crime figures and CIA operatives, The Houston Post has learned.
Four of the largest borrowers at Silverado Savings and Loan, a Denver thrift that collapsed in December 1988 at an estimated cost to the federal government of $1 billion, had connections to convicted Louisiana mob associate Herman K. Beebe Sr., or to Robert L. Corson, a Houston developer and alleged CIA operative.
Three of the four also had independent business relationships with Neil Bush, who was a member of the Silverado board from 1985 until he resigned in August 1988, a week after his father won the Republican presidential nomination.
The U.S. Office of Thrift Supervision in January issued orders barring five former Silverado officials from any future association with federally insured financial institutions.
Neil Bush was questioned by the OTS and was asked to sign a consent order by which he would agree to avoid conflicts of interest in any future relationships he might have with federally insured financial institutions.
Bush declined to sign the order, saying he had done nothing wrong.
Several sources close to Silverado and the federal investigation into its demise say Bush, because of his family connections, was used by his more sophisticated business associates to protect them from prosecution.
Other sources, however, said Bush fully understood what he was doing when he became involved in business deals with Silverado borrowers.
Reached at his Denver office Friday, Bush declined to answer questions. "I've talked about all that I want to talk about right now," he said."
O, Brother! Where Art Thou?
"In 1990, Bush paid a $50,000 fine and was banned from banking activities for his role in taking down Silverado, which actually cost taxpayers $1.3 billion. A Resolution Trust Corporation Suit against Bush and other officers of Silverado was settled in 1991 for $26.5 million. And the fine wasn't exactly paid by Neil Bush. A Republican fundraiser set up a fund to help defer costs Neil incurred in his S&L dealings. Friends and relatives contributed -- but not then-President and Barbara Bush, which would have been unseemly.
...Bush wasn't just an average S&L exec drawing a big salary and recklessly pushing a federally insured institution beyond its lending limits. As a director of a failing thrift in Denver, Bush voted to approve $100 million in what were ultimately bad loans to two of his business partners. And in voting for the loans, he failed to inform fellow board members at Silverado Savings & Loan that the loan applicants were his business partners. Federal banking regulators later followed the trail of defaulted loans to Neil Bush oil ventures, in particular JNB International, an oil and gas exploration company awarded drilling concessions in Argentina -- despite its complete lack of experience in international oil and gas drilling. It probably helped that the Bush family had cultivated close ties with the fabulously corrupt Carlos Menem, former president of Argentina.
When JNB's rights and obligations were assumed by other investors, Neil tried to persuade another American oil and gas exploration company, Plains Resources, to invest in Argentina. Plains wasn't buying. But it was hiring, and picked up Neil as a consultant for its Argentine market -- because, as Plains executive Carlos Garibaldi told The New York Times' Jeff Gerth in 1992, Neil had "traveled [in Argentina] and played tennis with President Menem." Plains President J. Patrick Collins told Gerth at the time that Neil Bush "bent over backwards not to trade on his name."
That claim was hard to make in 1993, when Neil, Marvin, James Baker III, John Sununu, and Thomas Kelly (who had served as director of operations for the Joint Chiefs of Staff during the Gulf War) joined President Bush on a trip to Kuwait. Three months out of office, the elder Bush was traveling on a Kuwait Airlines flight to accept an honorary degree from the country's university and its highest honor from its leader: Emir Sheikh Jabir al-Ahmad al-Sabah. The rest of the Bush entourage was following along to exploit the market in a country that considered the ex-president its savior. Former Secretary of State Baker was doing deals for Enron (the Houston-based energy-related company and contributor to Bush the Elder and later a $525,000 donor to George W. Bush's two gubernatorial races in Texas). Marvin was representing U.S. defense firms selling electronic fences to the Kuwaiti Defense Ministry. And Neil was selling anti-pollution equipment to Kuwaiti oil contractors.
There is "no conflict of interest. ... We're just capitalizing on whatever good feelings exist," an executive from the company Neil Bush represented later told Seymour Hersh, who laid out the embarrassing story on the pages of The New Yorker in September 1993. Neil, according to Hersh, later returned to Kuwait and set up shop in the International Hotel in Kuwait City, where he tried to secure a management contract with Kuwait's Ministry of Electricity and Water. Neil's deal included foreign and Kuwaiti members of the Enron consortium, and would have had the Kuwaiti government paying a management fee to a Kuwaiti company that was owned in part by a private company set up in the Caribbean or some other tax haven. "The offshore firm would have various owners, in Europe and elsewhere, one of which would be a company in which Neil Bush had an interest," The New Yorker reported. The scheme was ingenious, a financial analyst told Hersh."If you looked at one of the contracts, how in the hell would you know that Bush was in it?" The whole deal was as unsavory and unpardonable as a round of golf with Hillary Clinton sibling Huey Rodham.
Ernst & Young Pays $400 Million To Settle Thrift Regulators
The Washington Post
By Susan Schmidt
November 24, 1992
Ernst & Young, one of the nation's largest accounting firms, yesterday paid the federal government $400 million to settle po- tential claims arising out of its audits of more than 300 failed savings and loans, including some of the country's most notorious institutions.
The firm's settlement was second in size only to the $500 mil- lion paid earlier this year by the investment banking firm of Drexel Burnham Lambert Group Inc. and its junk bond king, Michael Milken, and underscored the government's efforts to pursue claims against lawyers, accountants and other professionals involved with failed S&Ls.
Included in yesterday's settlement were claims arising out of the failure of four of the nation's biggest and most profligate S&Ls: Charles Keating's Lincoln Savings and Loan Association of California; Western Savings Association of Phoenix; Vernon Sav- ings and Loan Association of Dallas; and Silverado Banking Savings and Loan of Denver, where President Bush's son Neil served as a director. "It's a very important step forward toward the cleanup of the thrift industry," said Harris Weinstein, general counsel of the Office of Thrift Supervision, one of the three federal banking agencies to agree to the settlement. "It estab- lishes standards for audit work that should be done at financial institutions now and in the future."
...The accounting industry has been mounting a counterattack against federal officials, seeking to place limits on damages in liability awards. Lawrence Weinbach, chairman of Arthur Andersen & Co., has said that the nation's biggest firms - the so-called Big Six - spent 9 percent of their revenue last year on litiga- tion.
S&L audits that were covered by yesterday's settlement were con- ducted over a seven-year period by Arthur Young and Ernst & Whin- ney, which merged in 1989 to form Ernst & Young.
In addition to the financial settlement, one current Ernst & Young partner and two former partners have been permanently barred from auditing financial institutions, and seven others must take further training before doing such audits.
...One former partner barred for life is Jack D. Atchison, who did audit work for Lincoln Savings. Within days of a 1987 audit by the accounting firm, Atchison took a job with Keating, according to testimony in an Arizona civil trial.
...According to the government, Ernst & Young's audits were inade- quate in reviewing real estate appraisals, transactions with in- siders and improper recognition of income. An example of the latter cited in the charges was the firm's alleged failure to challenge Lincoln's fictitious sale of real estate, in which the thrift would provide all the financing.
Ernst & Young initiated settlement talks with the government eight months ago, around the time a federal judge here ordered the firm to comply with an OTS subpoena and produce more than 1 million pages of documents from 20 failed S&Ls.
FDIC General Counsel Alfred J.T. Byrne said that pursuing Ernst & Young in court on substantial claims that have arisen from a dozen thrifts would have cost at least $150 million.
The FDIC's share of the recovery is $271.7 million, and the RTC's share $128.2 million."
[End of Partial Transcript>
BUSH AND CO.
JONATHAN BUSH
President & Chief Executive Officer
STATE FINES BUSH'S BROTHER IN STOCK CASE
"Massachusetts securities regulators have fined the stock brokerage firm owned by President Bush's brother Jonathan $30,000 and barred it from trading with the general public for one year because the company and Bush violated state registration laws."
Jonathan Bush is the President and Chief Executive Officer of RIMCO. He also is the founder and current Chairman of J. Bush & Co., a subsidiary of Riggs Bank. He is a graduate of Yale University (BA) and New York University School (MBA).
Mr. Bush is a member of the Executive Committee and former Board Chairman of the United Negro College Fund. He chaired the capital campaign, which raised $280 million dollars for the 39 colleges and universities that comprise the UNCF. He holds honorary degrees from Bethune-Cookman College, St. Augustine's College and Stillman College.
Mr. Bush currently serves as a Director of Russell Reynolds Associates and is a board member of the Yale New Haven Hospital; Vista of Westbrook, Inc.; and the Emmannuel Church in Killingworth, Connecticut. He formerly served on theboards of Inwood House (home for unwed mothers), The Eye Bank for Sight Restoration, the Yale Alumni Fund, the Boys Club of New York and Miss Porters' School.
He is a former Chairman of the New York Republican State Finance Committee and member of the New York Republican Executive Committee.
He was an active fundraiser in all four of President George Bush's campaigns for national office.
He has served on the investment committee of the Hotchkiss School for the past 27 years.
Jeb Bush
Ideon Corporation
Jeb Bush - Board of Directors - Bush sat on Ideon's audit committee, the watchdog of financial and management integrity.
Cendant Employees Awake to Discover A 15% Average Loss On Their 401k Stake
Cendant - Jackson Hewitt Inc. And Arthur Andersen To Develop New Tax Software System
"Arthur Andersen will help us enhance our current core tax engine and upgrade our ProFiler system to be faster and much more efficient," said Jackson Hewitt Inc. President and COO, Dan Tarantin. "The new system will provide numerous benefits to our franchisees, including the option of preparing returns in either a forms-based method or via our traditional decision-tree interview."
"Given their extensive tax industry expertise, we’re excited to have Arthur Andersen’s assistance in the upgrading of our technology," said Tarantin. "Due to our tremendous growth over the last few years our customer base has doubled, and the newly enhanced ProFiler system will help to support our growing franchise base."
[end of partial transcript]
Jeb Bush joined board of company mired in trouble
"Kahn in early 1995 even wrote the former president: "First let me tell you how happy we are to have your son, Jeb, on our board of directors. . . . He is a great asset to the team."
Then there was the paycheck. Ideon paid directors a whopping $50,000 a year, plus $2,000 per meeting and $500 per telephone conference. That was the largest sum paid to directors of any major public company in Jacksonville, and possibly in all of Florida.
What's not to like? Everything, it turns out. Ideon already was in trouble when Bush joined the board in January 1995.
By 1996, Kahn was out. Ideon was then sold to CUC International. Ideon's directors faced lawsuits claiming stock manipulation. Now, more than two years later, Cendant -- the successor company to CUC -- is struggling to recover after discovering years of accounting fraud attributed, in part, to CUC's purchase of Ideon.
Politically, the Ideon aftermath worries the Bush campaign. In fact, Bush assembled a 15-page Ideon statement and visited major Florida newspapers to defend his role.
Kahn at first had grandiose plans for a quirky array of new services -- selling credit card perks for golfers, a "Family Protection Network" membership club to help find missing children and a line of Vatican-approved art objects. The services were never fully tested. They flopped and Ideon began gushing red ink.
Some of Kahn's ideas were a stretch. He wanted the pope's blessing to introduce a Catholic credit card. He also wasted a lot of company funds. Kahn once bought $10,000 place mats for the company jet. He hired consultants like convicted Wall Street felon Martin Siegel.
Bush said he was angry when he heard about Siegel. "I couldn't believe it," he said.
Despite a second-quarter 1995 loss of $46.7-million, Bush said Ideon's board initially accepted Kahn's free-spending ways. The directors counted on revenue growth. They did demand Siegel be fired. Bush said he pushed to dismiss Kahn and sell the company.
But lawsuits against Ideon directors, as well as the company's own regulatory filings, paint a different picture. As directors, Bush and his Republican fund-raiser friend Thomas Petway sat on Ideon's audit committee, the watchdog of financial and management integrity. Many of Bush's fellow outside directors -- who were supposed to represent shareholder interests -- had cut cozy business deals with Ideon. In some cases, they got six-figure consulting fees on top of their directors pay.
..By August 1996, Ideon was sold for $375-million to CUC. The sale included indemnification for directors against lawsuits. Good news, considering the lawsuits charge Ideon and its directors with stock manipulation. The cases were settled early this year for $15-million. Bush and the other directors paid nothing.
Kahn denied that board members were in the dark about company spending. "I was not alone," he told Business Week magazine last year. "The board knew about everything. . . . They set me up for being the fall guy, not that I'm without sin. I was hung out to dry."
[end of partial transcript]
A Pathological Probe of A Pool of Pervasive Perversion - By Abraham J. Briloff, Ph.D., CPA - Emanuel Saxe Distinugished Professor Emeritus - Baruch College, New York.
"On August 28, 1998, Arthur Andersen & Co. (“AA”) rendered its “Report to the Audit Committee of the Board of Directors of Cendant Corporation” reporting on its forensic audit of CUC International, Inc., in the wake of disclosures in mid-April that accounting irregularities had been discovered at CUC (which merged in December 1997, with HFS to form Cendant)."
President George H. W. Bush
George Bush: The Unauthorized Biography
"The name chosen for the new concern was Zapata Petroleum. According to Hugh Liedtke, the new entrepreneurs were attracted to the name when they saw it on a movie marquee, where the new release Viva Zapata!, starring Marlon Brando as the Mexican revolutionary, was playing. Liedtke characteristically explains that part of the appeal of the name was the confusion as to whether Zapata had been a patriot or a bandit.
...An interim director that year had been Richard E. Fleming of Robert Fleming and Co., London, England. Counsel were listed as Baker, Botts, Andrews & Shepherd of Houston, Texas; auditors were Arthur Andersen in Houston, and transfer agents were J.P. Morgan & Co., Inc., of New York City and the First National Bank and Trust Company of Tulsa.
...The Liedtkes were also nailed for insider trading in buying 125,000 Pennzoil shares just before the stock went up as the news of the $100 million transfer became known on Wall Street; they had to cough up $108,125 in profits thus realized, and they were obliged to sign a consent decree that they would never repeat a caper of this sort.
...During the late 1970's, the Liedkte brothers would receive an entree into the People's Republic of China thanks to the personal connections acquired there by their former business partner and lifetime crony, George Bush.
...Bush nevertheless created a network of subsidiaries which was suspiciously complex. This topic is difficult to research because of the very convenient disappearance of the Zapata Offshore filings with the Securities and Exchange Commission in Washington for the year 1960-1966 which were "inadvertently" destroyed by a federal warehouse. This is the kind of convenient tampering with official records from which Bush has benefitted again and again over his career, from the combat report on the San Jacinto in 1944 to the disappearance of the Hashemi-Pottinger tapes and the shredding of Iran-contra documents more recently.
...Bush was clearly dishonest in that the annual reports of Zapata Offshore do not mention this deal with Permargo, which created a company that was in direct competition with Zapata Offshore itself, much to the detriment of that "shareholder value" which Bush professed to hold sacred whenever his clique of cronies was on the track of a new leveraged buyout. Bush may also have illegally concealed his dealings from the government. The Zapata Offshore filings with the SEC between 1955 and 1959 are cryptic, and the SEC files on Zapata Offshore between 1960 and 1966, when Bush had exclusive control of the company, were destroyed by the SEC either in 1981, when Bush had just become vice president, or somewhat later, in October, 1983, according to various SEC officials."
Accountants in BCCI
"That case was settled in September 1998, with £117 million being paid to Deloittes by Price, along with Ernst & Young (which audited part of BCCI until 1987) and the former majority shareholder of BCCI, the Sheikh of Abu Dhabi. With the case closed, the path is clear for the JDS to begin its investigation. JDS chief Chris Dickson is expected to ask the court to lift the injunction some time this month."
ARTHUR ANDERSEN - Crooks-R-us
- Enron executives accused of fraud, insider trading
"Arthur Andersen LLP, the company's auditor, is also named as a defendant." - Colonial Realty scandal
"Arthur Andersen and its insurers coughed up an estimated $100 million in fines and settlements as a result of the Colonial Realty scandal. Colonial was a firm in Hartford, Connecticut, that raised money syndicating real estate tax shelters partly on the strength of financial projections prepared by Andersen. Colonial went bust in 1990. An investigation by Connecticut's state attorney general found that Colonial had corrupted an Andersen executive with up to $200,000 in cash, a Mediterranean cruise, three cars and help in getting bank loans." - DeLorean Motor Scandal
"Andersen also spent about $60 million settling claims over DeLorean Motor, the would-be auto manufacturer that collapsed in 1982. A big embarrassment to Andersen in that case: a candid internal memo that reportedly surfaced in a lawsuit brought against Andersen by the bankruptcy trustee for DeLorean. The Andersen memo indicates that its auditors knew the company had illegally diverted $17.6 million to a dummy corporation in Panama, some of it for John DeLorean's use. If the truth came out, the memo noted, "the scandal will be out in the open" and "the game will be up."There was no wall between auditing and consulting in this assignment, according to sealed court documents that were recently leaked. Andersen's auditors put together the DeLorean company's profit figures then audited their own work. In addition to that violation of SEC rules, Andersen effectively became a part of DeLorean's management, seeking investment capital and negotiating with Ireland and Northern Ireland over a new factory. Meanwhile, the firm's consultants won a contract to design and install a computerized accounting system.
The conflicts ran deeper. When the SEC raised objections to DeLorean's financial filings, Andersen drafted a detailed response to the agency on DeLorean's letterhead, the records show. And when a reporter from the London Sunday Telegraph started nosing around, Andersen and DeLorean tried to throw her off the trail by showing her sham paperwork for a shell company set up to perpetrate the fraud. Richard Measelle, a former Arthur Andersen managing partner, later opined in a confidential memo that "the great advantage of showing her [the reporter] the contract was that it kept her from going around" and doing more digging, the records say."
- Baptist Foundation of Arizona - Half-Baked Bean Counters
"The state accused Andersen, which had revenues of $7 billion in 1999, of committing fraud by covering up and participating in the Baptist Foundation of Arizona's Ponzi scheme, in which 13,000 investors lost $590 million." - Sunbeam - Andersen Pays $110 Million In Sunbeam Settlement
Andersen - "Among the employees notified of possible disciplinary action are Andrew S. Benjamin, formerly head of the company's private-client services unit, which caters to wealthy individuals and hedge funds; George W. Coleman, an executive who has been responsible for the firm's global stock trading; and Thomas E. Fusco, an institutional salesman whose clients included hedge funds, according to the paper, which says it is citing regulatory records." - Andersen Settles With SEC - Andersen's audits of Waste Management, Inc. from 1992 to 1996
"Those financial statements, on which Andersen issued unqualified or "clean" opinions, overstated Waste Management's pre-tax income by more than $1 billion, according to the Commission. According to the complaint, "Andersen knowingly or recklessly issued materially false and misleading audit reports on Waste Management's annual financial statements."
"Andersen knowingly or recklessly issued materially false and misleading audit reports on Waste Management's annual financial statements." - Aviation Distributors, Inc. (ADI) - Dept. of Justice Press Release
"ADI's director of quality assurance has also agreed to plead guilty to criminal charges. James J. Goulet, 39, of Lake Forest, has agreed to plead guilty to one count of conspiracy to commit securities fraud and bank fraud, and one count of falsifying ADI’s books and records. As part of his plea agreement, Goulet has admitted that he carried out a variety of fraudulent practices at the direction of Osamah S. Bakhit, ADI’s founder, former CEO and former chairman of the board.A federal grand jury in Los Angeles on Tuesday named Bakhit in a 21-count indictment that accuses him of conspiracy, securities fraud, making false statements in ADI’s registration statement, making false statements to ADI’s auditors, making false statements in ADI’s quarterly reports, falsifying the company’s books and records, and circumventing its internal accounting controls. Bakhit, a 51-year-old Mission Viejo resident who now acts as a consultant to the company, held 100 percent of ADI stock before the public offering. As a result of ADI’s sale of additional shares through its IPO, Bakhit’s ownership interest was diluted to approximately 55 percent of the common stock.
The indictment against Bakhit alleges that he orchestrated the scheme and that he directed Goulet and others to engage in a number of fraudulent accounting practices, including creating false invoices for submission to Far East National Bank in order to obtain cash under ADI's lines of credit. Many of the false and improper invoices were recorded in ADI's books and records.
Consequently, ADI filed with the SEC a registration statement and prospectus in connection with its IPO which misstated ADI’s revenues, net income, assets, and other financial data to the investing public. ADI also filed false and misleading quarterly reports for the first and second quarters of 1997.
As a result of the fraudulent practices, ADI overstated its net income for 1996 by more than $1 million.
The national accounting firm of Arthur Andersen LLP acted as ADI's independent public accountant."
Attorney General John Ashcroft Picks Arthur Andersen For FBI Review
"The Justice Department has selected Andersen to conduct a comprehensive review of the FBI, including its antiquated computer systems. This study by a firm of Andersen's caliber will provide valuable information to enhance the institutional integrity and performance of the FBI."
Administration Ties to Arthur Andersen Nearly as Tight as Those to Enron
Federal Government and Congress To Lower Boom On Enron - Criminal, Fraud, Waste, Accounting Methods
"The president thinks that it is vital for the Department of Justice to pursue this wherever it goes, to whoever it goes and to do whatever it takes to investigate any criminal wrongdoing,"
Ari Fleischer - White House spokesman - January 16, 2002."We’re going to go after all crime, and we’re going to make sure people get punished for the crime."
George W. Bush - Presidential Debate at Wake Forest University - Oct 11, 2000"It is not possible to 'take care that the laws be faithfully executed' while deliberately violating the law.."
John Ashcroft - Aug. 1, 1998 (Washington Post).
Arthur Andersen