Bush’s Insider Connections
Preceded Huge Profit
On Stock DealIt has been widely reported that Texas Gov. George W. Bush made money over the years with a little help from his friends. But new details show that he served on an energy corporation’s board and was able to realize a huge profit by selling his stock in the corporation because an accounting sleight-of-hand concealed it was losing large sums of money. Shortly after he sold, the stock price plummeted. That profit helped make him a multimillionaire.
By Knut Royce
The Center for Public Integrity
(Washington, 4 April) The year 1986 was very good for George W. Bush.
After a decade of striking Texas brown dust instead of oil, his luck finally turned that year when go-for-broke Harken Energy Corp. bought his failing oil exploration firm for stock. Four years later the company concealed large losses just before the GOP presidential hopeful unloaded those securities for a nice profit. That, in turn, helped finance his stake in the Texas Rangers baseball club and catapult him into the ranks of multimillionaires.
And it was in 1986, too, that Harken’s CEO introduced Bush, the company’s new director and consultant—as well as son of then-Vice President George Bush--to a little startup health-care company. He put in a modest investment, and a few years later walked away with a six-figure windfall.
There also was a little benefit on the side. In 1994, when Bush was running for Texas governor, and scrambling for campaign cash, insiders in that health-care company, now known as Advance Paradigm, contributed $23,700.
Bush’s sale of the Harken stock in 1990 attracted the attention of regulators and the national media because he was tardy in filing the required public disclosure, and because the trade came shortly before the company reported for the first time that it was incurring huge losses.
Timeline
1986
George W. Bush and partners sell their failing Spectrum 7 Energy Corp. to Harken Energy Corp. Bush receives more than 200,000 shares of Harken stock and is made director and consultant to the company. Harken’s CEO, Mikel Faulkner, introduces Bush to an old business associate, David Halbert, who is raising seed money to start up Allied Home Pharmacy. Bush becomes one of 30 initial investors who put up a total of $250,000. |
1989
Harken sells a subsidiary, Aloha Petroleum, to International Marketing & Resources, a partnership of Harken insiders, through a seller-financed loan, but declares the profit in its annual report as a cash gain. This effectively masks big losses by the company that year. |
1990
At the beginning of the year, International Marketing & Resources in turn, sells Aloha to Halbert’s Advance Petroleum Marketing for no profit. Advance now must pay the Harken-financed loan.
On June 22, Bush sells his Harken stock at $4 a share, for a total of $848,560. He uses most of the proceeds to pay off a loan he had taken out the previous year to buy a partnership interest in the Texas Rangers for $600,000.
On Aug. 22, Harken files a second quarter report disclosing for the first time that it is hemorrhaging. Total losses for that quarter are $23.2 million. Stock plunges to $2.37 a share.
That fall the Securities and Exchange Commission discovers that Harken had effectively concealed earlier losses in its 1989 annual report, before Bush sold his stock, by claiming a capital gain on the Aloha sale even though it was financed through a loan. It directs Harken to recast its balance sheet for 1989. |
1990
On Feb. 5, Harken files an amended 1989 report, asserting that after “discussions” with the SEC about its method of accounting, it was recasting its losses for that year from a modest $3,300,000 to a whopping $12,566,000. But by then Bush had already sold. |
1994
On July 22, insiders of Halbert’s Allied Home Pharmacy, now called Advance Health Care, hold a fund-raiser for gubernatorial candidate Bush, chipping in $20,750. Other contributions from those insiders that year bring the total to $23,700. |
1996
Advance Health Care becomes a publicly traded company called Advance Paradigm. |
1998
Bush’s trust sells his Advance stock. In his financial disclosure statement last year, he declares a capital gain of up to $1 million on the sale. It also sells his $600,000 stake in the Texas Rangers for about $16 million. |
|
Hemorrhaging Concealed
But The Public i has found that Harken was bleeding profusely even before Bush unloaded his stock. Harken effectively concealed the hemorrhaging by selling a retail subsidiary through a seller-financed loan but recording the transaction in its 1989 balance sheet as a cash sale. Securities and Exchange Commission records suggest that Bush, a company director who sat on Harken’s audit committee and was a paid consultant to the firm, may nonetheless have been unaware of the sleight-of-hand accounting or, for that matter, other significant company actions Nevertheless, SEC accountants cried foul when it discovered Harken had recorded the 1989 sale as a capital gain.
But it was months after Bush’s June 1990 sale of the stock at $4 a share, for a total of $848,560, that the SEC directed Harken to recast its 1989 annual report and to publicly disclose the extent of its losses that year, according to records reviewed by The Public i.
It is unclear how a timely acknowledgement of the true losses would have affected the value of the stock when Bush sold. But most investors look at a company’s balance sheet, among other indicators of corporate well-being, before parting with their money.
Two months after Bush’s sale, Harken reported for the first time in a quarterly report that it was losing a lot of money, and the stock dropped to $2.37 a share. By the end of the year, it was trading at about $1.
Harken masked its 1989 losses when in mid-year it sold 80 percent of a subsidiary, Aloha Petroleum, to a partnership of Harken insiders called International Marketing & Resources for $12 million, $11 million of which was through a note held by Harken. By Jan. 1, 1990, IMR, in turn, sold its stake in Aloha to a privately held company called Advance Petroleum Marketing, and the Harken loan was effectively transferred to Advance, though garanteed by IMR.
‘George and I Became Friends’
Advance Petroleum was headed by a Texas entrepreneur, David Halbert, who had been a friend and business partner of Harken’s CEO, Mikel Faulkner. In 1986, Faulkner had introduced Harken’s newest director, Bush, to Halbert. Harken, in a stock swap, had just acquired the ailing Spectrum 7 Energy Corp., where Bush had been CEO and a significant shareholder.
“George and I became friends,’’ recalled Halbert in a telephone interview with The Public i. Halbert said that at the time Faulkner introduced Bush to him he had just formed a little home-health-care firm, Allied Home Pharmacy, and was in the process of raising $250,000 in seed money.
“Mikel said (to Bush), ‘Hey, you might want to invest in this,’” Halbert recalled. “I said fine. I don’t remember how many people we brought in, but it wasn’t that many. Maybe 25 or 30 . . . It was sort of friends and family, and George invested.’’ So did Faulkner. Halbert said Bush also put in a little more money in an offering to existing shareholders in 1991.
Halbert said he did not recall how much Bush invested in the company.
Allied Home Pharmacy became known as Advance Paradigm, one of the nation’s leading pharmacy benefits management companies, when it went public in 1996. Two years later, Bush’s trust sold his stock in the firm.
Public records give no precise amount of how much he earned on the Advance stock sale, but Bush’s financial disclosure form made public last year shows that he realized a capital gain, or profit, of as much as $1 million on the sale. Asked how much the Texas governor paid for the stock and how much he profited from the sale, spokesman Scott McClellan referred all questions to the manager of Bush’s blind trust, Robert McCleskey. McCleskey declined to discuss his client’s investment in the Advance stock. He said that under the terms of the Texas blind trust—a legal requirement for the governor but less rigorous than the blind trust that applies to federal executive branch officers—he cannot tell even Bush how much profit he made on the sale.
SEC Probe Was Limited
The SEC’s division of enforcement launched a probe of Bush’s sale of his Harken stock the day after the Wall Street Journal on April 4, 1991, reported that he had been eight months late in filing the required insider-trading form with the regulators. This investigation was separate from the earlier division of corporation finance probe that resulted in Harken’s recasting its 1989 balance sheet.
SEC enforcement investigators focused on whether Bush dumped his stock on June 22, 1990, because he knew that the company’s second-quarter report, announced on Aug. 20, would show a $23.2 million loss and depress the stock. Part of that loss was $7.2 million that Harken wrote off because it was being pressed by a nervous bank and renegotiated the Aloha sale to generate quick cash. Aloha’s buyer, Advance Petroleum, was a clear winner in the renegotiated deal.
The SEC probe was limited to whether Bush had inside knowledge of the red ink that would be reported in the August filing and concluded that he did not.
It is unclear whether Bush, who holds a master’s degree from the Harvard Business School, knew that the company, after five straight years of profits, began to bleed profusely in 1989, its first year of being traded on the New York Stock Exchange, though in its annual report for that year it had declared a net loss of only $3,300,000.
Even that small loss would have surprised readers of the January 1990 issue of National Petroleum News, a trade publication. Interviewed some time during the fourth quarter of 1989 for a lengthy and glowing article on Harken, company president Faulkner said that based on the strong earnings during the first three quarters, he expected that year to be the most profitable yet. “We made $6 million last year (1988) . . .We’ll certainly be ahead of last year.’’
Alas, a year later, in an amended 1989 annual report filed on Feb. 5, 1991, the company reported that after “discussions” with the SEC, which insisted that Harken use the traditional “cost recovery’’ method of accounting, it was revising its declared 1989 net loss of $3,300,000 fourfold--to $12,566,000. Harken also filed an amendment to its third quarter report for 1989 revealing that over the first nine months of that year it had lost nearly $4 million, rather than the $4.6 million profit it had declared.
Faulkner, now Harken’s chairman, did not return repeated calls from The Public i seeking comment on the Aloha sale and the subsequent public filings.
Company Directed to Correct Reports
The SEC can prosecute company officers for willfully filing fraudulent reports. But in the Harken case, as in most similarly questionable filings, the investigation was conducted by the agency’s accounting staff, which did not believe there was intent to defraud and therefore did not refer the matter to the SEC’s enforcement division. Instead, the agency directed the company to publicly correct its reports, according to a retired SEC official familiar with aspects of the case.
It is also clear that Harken did not draft the misleading 1989 annual report, filed with the SEC on April 16, 1990, merely to buttress the value of Bush’s stock. The filing date was two months before the company reported it became aware that Bush wanted to sell.
In its 1989 annual report, Harken recognized a profit of $8 million on the sale, which allowed it to limit its declared losses to only $3,300,000 for the year. But the SECobjected, saying that the income can be recognized only as the principal of the loan is reduced—that is, when real cash comes in.
A corporate accountant interviewed by The Public i agreed with the SEC’s claim, saying he found it “unusual’’ for a company to declare an earning on the sale when it is contingent on a loan. The accountant, who asked to not be further identified, said he knew of no other instance when a company declared full gain on a sale based on a loan.
Why Harken initially sold to IMR is unclear. But a senior tax lawyer who works for a leading auditing firm told The Public i after reviewing portions of the SEC filings that he believes Harken wanted to show a cash infusion to mitigate the 1989 losses.
“It looks like the sale was done (to IMR) in order to show a book gain of $7 or $8 million,’’ said the attorney, who also asked not to be further identified. “That would have eliminated a good part of their loss during that time. Given the fact that the sale was to a related entity, I would guess they were just trying to show a better financial statement at that time.’’
Advance’s Halbert said that he believes IMR bought, and then quickly sold, Aloha because of a sudden change of heart. “I think it had something to do with IMR wanting to own it [Aloha] but there was some concern about the affiliate relationship [between Harken and IMR],’’ he said.
The SEC, too, was curious about the transaction, according to agency records obtained under the Freedom of Information Act.
Six weeks before Harken publicly announced in January 1991 that it was revising its 1989 losses upward, the SEC asked the company to explain “whether the sale of Aloha to Advance was contemplated at the time IMR purchased Aloha from Harken.’’ In a letter, it also asked Harken to explain why the company and its independent accountants concluded it could declare a capital gain on the sale.
The SEC declined to provide Harken’s responses to The Public i.
Conflicting Accounts Offered
In its public filings to the SEC, Harken gave conflicting accounts of who sold Aloha, who bought it, and even when the sale occurred.
In its 1989 annual report, for example, it declared that it sold Aloha to IMR on June 30. In one passage of the report, it says that IMR then sold Aloha to Advance on Jan. 1, 1990; in another it says IMR sold on March 30.
But in its 1990 report, Harken declared that it was its subsidiary E-Z Serve Holding Co. that sold Aloha to IMR.
Adding to the confusion, E-Z Serve, which shortly after the transaction was spun off as a separate publicly traded company, claimed in its 1991 annual report that it had sold Aloha to Advance Petroleum—not IMR—in 1989.
Harken was notorious during that period for filing confusing reports. In 1991, Harken founder Phil Kendrick told Time magazine that the company’s annual reports “get me totally befuddled.’’Quoted in the same article, Faulkner had this advice to those trying to figure out the company’s financial statements: “Good luck. They’re a mess.’’
The corporate fog did not, however, obscure the fact that by the time the SEC directed Harken to recast its 1989 report, Bush already had already sold his stock in the company.
The bulk of the $848,560 went to pay off a bank loan he had taken out in 1989 to buy a partnership interest in the Texas Rangers for $600,000. He received nearly $16 million for his stake when the team was sold two years ago.
Bush’s run of financial good luck starting in 1986 is in stark contrast to the woeful performance of his previous oil ventures, which he had launched in 1977. Though he had little difficulty in rounding up investors for his Arbusto, Bush and Spectrum 7 oil exploration firms, they were all money losers.
Even as Harken in late 1989 and early 1990 appeared to be trying to minimize its losses, its bankers were clamping down because the company was having trouble meeting its loan payments.That led to a renegotiated loan agreement in May 1990, which required Harken to come up with fresh cash, raised the interest rate, required new guarantees from major shareholders and featured stricter terms overall.
“After closure (on the sale of Aloha) Harken discovered they had trading losses on gasoline purchases and they came back to us and said, ‘We really need some cash,’” Halbert recalled.
Cash Raised in Nick of Time
Halbert said he was able to raise the cash in the nick of time—just three days before Iraq invaded Kuwait, setting in motion huge gasoline-price increases that drove numerous small distributors out of business.
Under the original contract, Harken had given Advance an option to purchase the remaining 20 percent of Aloha, or 60,000 shares, for $50 each, or a total of $3 million.
By the time the contract was renegotiated in August, Advance agreed to pay off the $10 million note by the following year, which it did, instead of in March 1993 as stipulated in the original contract.It also relieved Harken from picking up the cost of fixing leaking underground tanks to meet environmental standards.
In turn, Advance got the $3 million of Aloha stock for $1. Harken also forgave $5 million in loans it had made to Aloha and about $1 million in interest payments.
The renegotiated contract reduced Harken’s bottom line, and the SEC clearly believed the write-off might have helped depress the stock. During its investigation of whether Bush benefited from insider information when he sold his stock, the SEC on July 25, 1991, asked both Bush and Harken to disclose when the company’s officers and directors “first became aware . . . that the Advance note . . . was going to be renegotiated; and that Harken intended to write down its investment in Aloha.’’
Unaware of Magnitude
After the SEC ended its investigation, according to one of its memos, the regulators concluded that Harken and Bush were unaware of the magnitude of the write- downs until at least mid-July, or after Bush’s stock sale.
While the renegotiated contract clearly hurt Harken’s bottom line, Halbert admits it clearly was beneficial for Advance Petroleum.
Meanwhile, Bush was generating admirers among Advance Paradigm’s insiders, the limited number of shareholders.
In 1994, when the company was known as Advance Health Care and Bush was making his first run for Texas governor, those insiders gave him $23,700 for his first gubernatorial run, including $14,500 from Halbert, his brother, Jon, their father and their wives. Virtually all the money came on the same day, July 22.
“That was his first time around, and he was trying to raise money any way he could,’’ recalled Halbert.
And, as has been the case throughout Bush’s career, a long-time friend of the family came to his aid.
This time it was Benno C. Schmidt, the pioneering venture capitalist and partner in J. H. Whitney & Co. in New York. Schmidt, who died last October at age 86, had been a director of Advance Health Care, and J. H. Whitney had provided the firm with much needed capital in 1993.
“Benno was an old friend of the Bush family. He called me one day and said, ‘David, I think we ought to do something for young George,’” Halbert recalled. “He said, ‘I think we ought to have a fund-raiser.’”
So after a board meeting on July 22, Bush spoke at a private little dinner attended by the directors and their wives and walked away that night with $20,750.
Knut Royce is a senior fellow at the Center for Public Integrity.
HARKEN ENERGY CORPORATION (HEC)Form 8-K
Item 4. Changes in Registrant's Certifying Accountant
(a) On August 28, 2001, Harken Energy Corporation (the "Company") dismissed 
Arthur Andersen LLP ("Arthur Andersen") as the Company's independent accountants. The Company has engaged Ernst and Young LLP ("Ernst & Young") as its new independent accountants effective immediately. The decision to change the Company's independent accountants was made by the Company's Audit Committee of the Board of Directors.
(b) Arthur Andersen's reports on the Company's consolidated financial statements for the years ended December 31, 2000 and 1999 did not contain an adverse opinion or disclaimer of opinion, nor were such reports qualified or modified as to uncertainty, audit scope, or accounting principles.
(c) During the two years ended December 31, 2000 and the subsequent interim period preceding the decision to change independent accountants, there were no disagreements with Arthur Andersen on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement(s), if not resolved to the satisfaction of Arthur Andersen, would have caused the former accountant to make a reference to the subject matter of the disagreement(s) in connection with its reports covering such periods.
(d) During the two years ended December 31, 2000 and the subsequent interim period preceding the decision to change independent accountants, there were no "reportable events" (hereinafter defined) requiring disclosure pursuant to Item 304 (a) (1) (v) of Regulation S-K. As used herein, the term "reportable events" means any of the items listed in paragraphs (a) (1) (v) (A) - (D) of Item 304 of Regulation S-K.
(e) Effective September 5, 2001, the Company engaged Ernst & Young as its independent accountants. During the two years ended December 31, 2000 and the subsequent interim period preceding the decision to change independent accountants, neither the Company nor anyone on its behalf consulted Ernst & Young regarding either the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company's consolidated financial statements, nor has Ernst & Young provided to the Company a written report or oral advice regarding such principles or audit opinion.
(f) The Company has requested that Arthur Andersen furnish it with a letter addressed to the Securities and Exchange Commission stating whether or not it agrees with the above statements. A copy of the letter from Arthur Andersen dated August 31, 2001 is filed as Exhibit 16.1 to this Form 8-K.
HARKEN ENERGY CORP.
HARKEN ENERGY CORP's SEC filings By Name
Neil Bush
Silverado Savings and Loan Executive:
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.
Jeb missed that junket, but the current governor of Florida isn't above taking the family name abroad to make a buck. In 1989, Bush and his wife traveled to Nigeria with a executives of M&W Pump, a Florida-based company that had been selling agricultural pumps to Nigeria. Jeb and Columba Bush were received by Nigerian President Ibrahim Babangida and celebrated by tens of thousands of Nigerians who turned out to see the son of the U.S. president. President Babangida expressed his interest in visiting the White House -- a request Jeb promised to pass along to his father -- and by 1992 the Florida pump company had secured $74 million in financing from the Export-Import Bank of the United States. It was by far the largest Ex-Im deal M&W had ever done in Nigeria -- a country Ex-Im loan officers considered a bad risk. "I didn't get paid for the Nigeria business," Bush told The Palm Beach Post in 1994. "I have not made a dime on business with Nigeria." Yet the Post found tax records that revealed Bush had earned at least $300,000 through his association with the owner of the same company for which he had done a pro-bono sales trip to Nigeria. Bush-El, a 50-50 partnership with the owner of M&W, paid Bush at least $300,000 for his participation in a separate venture, marketing agricultural hand pumps. Why would Bush suddenly find himself involved with a company selling agricultural hand pumps around the world? the Post asked. "I know how to sell things," responded Bush. "I know international sales. I know how to get people to put together tenders because I financed a lot of them when I was working at Texas Commerce Bank."
Jeb Bush
Ideon Corporation
Jeb Bush - Board of Directors
"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)."
Let's roll.
George H.W.Bush Set A Serial Terrorist Free
Click to scroll to commentary.
Posted on 9/30/01 8:10 AM Pacific by liberallarry
WALL STREET JOURNAL: BUSH SR. IN BUSINESS WITH BIN LADEN FAMILY CONGLOMERATE THROUGH CARLYLE GROUP
FAMILY HAD RENOUNCED TIES TO TERRORIST SON BUT FAMILY STILL UNDER FBI INVESTIGATION
FATHER OF PRESIDENT SHOULD PULL OUT OF INTERNATIONAL CONSULTING FIRM
(Washington, DC) Judicial Watch, the public interest law firm that investigates and prosecutes government corruption and abuse, reacted with disbelief to
The Wall Street Journal report of yesterday that George H.W. Bush, the father of President Bush, works for the bin Laden family business in Saudi Arabia through the Carlyle Group, an international consulting firm. The senior Bush had met with the bin Laden family at least twice. (Other top Republicans are also associated with the Carlyle group, such as former Secretary of State James A. Baker.) The terrorist leader Osama bin Laden had supposedly been “disowned” by his family, which runs a multi-billion dollar business in Saudi Arabia and is a major investor in the senior Bush’s firm. Other reports have questioned, though, whether members of his Saudi family have truly cut off Osama bin Laden. Indeed, the
Journal also reported yesterday that the FBI has subpoenaed the bin Laden family business’s bank records.
Judicial Watch earlier this year had strongly criticized President Bush’s father’s association with the Carlyle Group, pointing out in a March 5 statement that it was a “conflict of interest (which) could cause problems for America’s foreign policy in Middle East and Asia.” Judicial Watch called for the senior Bush to resign from the firm then.
“This conflict of interest has now turned into a scandal. The idea of the President’s father, an ex-president himself, doing business with a company under investigation by the FBI in the terror attacks of September 11 is horrible. President Bush should not ask, but demand, that his father pull out of the Carlyle Group,” stated Judicial Watch Chairman and General Counsel Larry Klayman.
“This has the potential of making ‘Billygate’ (Jimmy Carter’s brother’s dealings with Libya) look like small potatoes,” added Judicial Watch President Tom Fitton.
See "Bin Laden Family Could Profit From a Jump In Defense Spending Due to Ties to U.S. Bank," by Daniel Golden, James Bandler, and Marcus Walker, The Wall Street Journal, 9/28/01 (
www.wsj.com, subscription required).
Presto, like magic, a couple phone calls later, and:
Click to scroll to commentary.
AP | Published: Oct 26, 2001 | By Marcy Gordon The Associated Press
Posted on 10/26/01 12:30 PM Pacific by Theresa
Source: Bin Laden's Family Cutting Ties With Carlyle Investment Firm in U.S.
WASHINGTON (AP) - Osama bin Laden's wealthy family in Saudi Arabia is cutting its financial ties with the Carlyle Group, a politically-connected U.S. private investment firm, by mutual agreement, a source familiar with the relationship said Friday.
The bin Laden family decided to sell its investment worth $2.02 million back to the firm mainly because of public controversy over its stake in a Carlyle fund that invests in buyouts of military and aerospace companies, said the source, who spoke on condition of anonymity. The source was confirming a report in Friday's editions of The New York Times.
There had been criticism in Saudi Arabia after the Sept. 11 terror attacks that the family, which disowned exiled Islamic militant Osama bin Laden years ago, might profit from increased military spending in the U.S. war against terrorism.
The family, whose construction company is one of the largest in the Middle East, also has invested with a number of other investment funds and financial institutions around the world, reportedly including U.S. financial services giant Citigroup, Deutsche Bank of Germany and the Dutch bank ABN Amro.
Carlyle has some $14 billion in assets under management. Its chairman is Frank Carlucci, a former U.S. defense secretary. Former President George Bush, former secretary of state James Baker and Arthur Levitt, who had been chairman of the Securities and Exchange Commission through most of the Clinton administration, are senior advisers to the firm.
Now, try not to be shocked, ok?
The Carlyle Group
Executive Biography
John F. Harris
Managing Director and CFO
Mr. Harris is a Partner and Managing Director of The Carlyle Group and is based in Washington, DC. He serves as Carlyle’s Chief Financial Officer with overall responsibility for the firm’s investor reporting, internal controls and financial management. Prior to joining Carlyle in April 1997, Mr. Harris was a Vice President with Golub Associates, a private equity firm, where he focused on middle market principal investment transactions. Previously, Mr. Harris was a Senior Manager with Arthur Andersen, LLP. Mr. Harris is a graduate of the University of Virginia and is a CPA.
Source: The Carlyle Group, 2001
Enron unleashes more US horror
The amount of gimmickry and outright fraud dwarfs any period since the early 1970s, when major accounting scams such as Equity Funding surfaced, and the 1920s, when rampant fraud helped cause the crash of 1929 and led to the creation of the SEC, he says.
Enron paid Andersen, its auditor, $US27 million in fees unrelated to auditing and $US52 million in total fees last year, according to Enron's proxy statement.
Last year, Arthur Levitt, then chairman of the commission, tried to restrict the consulting work that accounting firms could do, but he backed down in the face of strong opposition from the firms. Mr Levitt, now a senior adviser at the Carlyle Group, did not return calls for comment."
[end of partial transcript]
Just making a dishonest buck or two
"Last but not least, I must look at another company, this one prospering more than ever. Founded in 1987, it is called the Carlyle Group and is now thought to be worth around $12.5bn. It is run by Frank Carlucci, Ronald Reagan's defence secretary and a close chum of Donald Rumsfeld (they used to wrestle together at Princeton). It specialises in buying defence companies that are performing indifferently, and injecting them with new blood. One such typical company was United Defense Industries, a firm that manufactures the $20bn, 42-ton Crusader Advanced Field Artillery System - a system about to get the chop when Bill Clinton left office, but restored by Rumsfeld.
Carlyle's reach is staggering: until it speedily divested itself last October, its investors included the Binladin Group, the $5bn family business run by Osama's half-brother Bakr. And on its payroll you will find such luminaries as George Bush I, James Baker, the former secretary of state, and John Major: it helps, you see, if a chap trying to beef up the defence business has a little governmental star pulling power. Bush I and Major went to Saudi Arabia last year on behalf of Carlyle, I am told (when Bush II, lest we forget, was already US president); Bush I netted $17m in his first coup for Carlyle and has probably now accrued around $50m. The current President Bush, apparently, sees nothing wrong with what Dad is now doing.
The shenanigans of Enron, meanwhile, are now being investigated by six Congressional committees, the labour department, the justice department (from which Ashcroft has recused himself) and the Securities and Exchange Commission. Arthur Andersen, which destroyed key documents during its audit of Enron, is now the subject of a criminal investigation. But where was Arthur Levitt, chairman of the SEC and crusader against "greed and arrogance" while the Enron mayhem was unfolding? Er, we don't know. Where is he now? Working for Carlyle, that's where."
[end of partial transcript]
Apteka-Holding, established in late 1997, is ranked among the top five distributors of pharmaceutical products in Russia. In 1999 the international investment fund The Carlyle Group became a partner and shareholder of Apteka-Holding.
"At the request of The Carlyle Group the business processes of the company were surveyed at the first stage of the project by the specialists of Arthur Andersen, one of the Big Five consultancies."
[End of partial transcript]
The CIA's Role in the Anthrax Mailings
"The preceding year (September 1998), Bioport Corporation took over a failing anthrax vaccine business from state-owned Michigan Biologic Products Institute. Less than a month later, the company landed an exclusive $29 million contract with the Department of Defense to "manufacture, test, bottle and store the anthrax vaccine." Admiral William J. Crowe, Jr., a former Chairman of the Joint Chiefs of Staff and close personal aid to President Clinton, with no financial investment of his own, received 22.5% of Bioport's stock to promote, secure, and manage military anthrax vaccine contracts.(14)
3. Bioport's principal investor was Saudi business man Fuad El-Hibri-a close friend of the bin Laden family, and a previous merger and acquisitions manager for the Rockefeller-linked Citigroup in New York.(14,15)
According to some investigators,(16) additional Bioport shares were believed to be held by The Carlyle Management Group-America's 11th leading defense contractor largely directed by past CIA director Frank Carlucci, James Baker III, George H.W. Bush, and former British Prime Minister John Major.
4. According to the Associated Press, Past President George H.W. Bush acts as a business agent for the Carlyle Group and wealthy Saudi families including the bin Ladens.(17)"
[end of partial transcript]
Papers on BioPort [Anthrax Vaccine Maker] found in office of terrorist suspects
Bin Laden Family Could Profit From a Jump In Defense Spending Due to Ties to U.S. Bank
"If the U.S. boosts defense spending in its quest to stop Osama bin Laden's alleged terrorist activities, there may be one unexpected beneficiary: Mr. bin Laden's family. Among its far-flung business interests, the well-heeled Saudi Arabian clan -- which says it is estranged from Osama -- is an investor in a fund established by Carlyle Group, a well-connected Washington merchant bank specializing in buyouts of defense and aerospace companies.
Through this investment and its ties to Saudi royalty, the bin Laden family has become acquainted with some of the biggest names in the Republican Party. In recent years, former President Bush, ex-Secretary of State James Baker and ex-Secretary of Defense Frank Carlucci have made the pilgrimage to the bin Laden family's headquarters in Jeddah, Saudi Arabia. Mr. Bush makes speeches on behalf of Carlyle Group and is senior adviser to its Asian Partners fund, while Mr. Baker is its senior counselor. Mr. Carlucci is the group's chairman.
...A Carlyle executive said the bin Laden family committed $2 million through a London investment arm in 1995 in Carlyle Partners II Fund, which raised $1.3 billion overall. The fund has purchased several aerospace companies among 29 deals. So far, the family has received $1.3 million back in completed investments and should ultimately realize a 40% annualized rate of return, the Carlyle executive said.
But a foreign financier with ties to the bin Laden family says the family's overall investment with Carlyle is considerably larger. He called the $2 million merely an initial contribution. "It's like plowing a field," this person said. "You seed it once. You plow it, and then you reseed it again."
The Carlyle executive added that he would think twice before accepting any future investments by the bin Ladens.
[end of partial transcript]
President Bush has invited representatives of the most radical, pro-terrorist Islamic groups in America to pray with him at the National Cathedral, to pray with him at the Washington, D.C., mosque, to sit near Mrs. Bush at the big speech to Congress and to hold hands with him at the White House.
BioPort - The military's guinea pigs