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.
OBVIOUSLY THERE IS NO BASIS FOR CRITICISM FOR HIS REMARK THAT HE DID NOT KNOW OF THE PROJECTED $22 MILLION LOSS.
That said, as always- I love your stuff.