Bush Is No Good Trade

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

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

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

The governor also did not reveal the blatant conflicts of interest involved, since the chairman of the SEC was Richard Breedon, former lawyer with Houston firm Baker and Botts and deputy counsel to Bush's father when he was vice president. Breedon received his SEC appointment after the elder Bush became president.

The SEC investigation of George W. was led by general counsel James R. Doty who, according to a UPI report, mysteriously neglected to interview any of the Harken directors. Moreover, Doty had previously served as George W. Bush's personal lawyer in the deal involving his Texas Rangers purchase. So, in the end, the younger Bush was cleared of insider trade wrongdoing by his personal attorney and by his father's vice-presidential counsel, a virtual impossibility for the average U.S. citizen.

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

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

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

When Bush filed late on April 7,1987, SEC filings show he had purchased another 80,000 shares on March 10, 1987. But strangely, two weeks later, an April 22 filing noted that the 80,000-share purchase was backdated to Dec. 10, 1986. When questioned by the media, Bush's attorney said it was the same 80,000 shares but he could not explain the discrepancy regarding the purchase dates or why Bush even reported the trade two times.

Another SEC filing, this from June 6, 1989, showed that Bush purchased another 25,000 shares of Harken but again waited more than four months to report the transaction.

The Houston Post, recognizing Bush's late SEC filings, noted that he "took eight months to notify the government of his sale of stock in a company on whose board he served" and "also missed the filing deadline for reporting other insider trades involving Harken Energy."

Documents obtained by the Post showed "additional instances in which Bush ... ran afoul of the SEC rule requiring notification." And George W. described himself as a "small, insignificant" Harken stockholder; but news reports examining SEC documents identified Bush as the third largest non-institutional investor.

In October 1991, Time Magazine questioned why the tiny country of Bahrain would stake so much of its financial future on Harken Energy, which it labeled an "obscure, money-losing company with no refineries and no experience in offshore oil exploration." But the magazine also noted that oil-insiders speculated that Bahrain's rulers saw the arrangement as a way to gain influence with the Bush administration.

Mysteriously, primary reporters have also ignored what could point to a nexus regarding foreign policy and personal financial interests. Interestingly, the Village Voice in January 1991 reported that in 1990 the Bush administration signed an agreement with Bahrain that chose the small country as the permanent principal allied base in the Middle East, although it was some 200 miles away from the hostilities in Iraq and Kuwait.

The military-base deal came after Harken announced its Jan. 30, 1990, joint oil-drilling venture with Bahrain. So President Bush's key contributors and his son George W. were carrying on personal financial business with Bahrain at the same time decisions were being made regarding the possibility of a war in the Gulf.

And neither the president nor his adviser, George Jr., let the press know that Bahrain had been permitted to infuse $7.7 million in foreign cash to hire U.S. public relations firm Hill & Knowlton to lobby Congress and the American people; a stunning variety of opinion-forming devices and techniques were employed to inflame U.S. patriotic passions of war while personal financial interests were on the line.

On May 21, 1990, less than ten weeks before Saddam Hussein's troops invaded Kuwait to initiate the Middle East hostilities -- but just four weeks before Bush unloaded the bulk of his Harken stock -- a renegotiated corporate loan agreement featured an unusually high interest rate of 12 percent, less credit for acquisitions, a $750,000 debt fee and even requirements by some of Harken's major stockholders to guarantee $22.5 million in debt, according to Associated Press.

Did Bush know of impending losses when he sold his stock on June 22, 1990, since Federal securities law prohibits corporate insiders from trading "on the basis of" material information that is not publicly known? Bush denied the charge in spite of his positions on the Harken Energy board of directors, audit committee and stock restructuring panel. He added that he had no idea Harken was going to get an audit report full of red ink until weeks after he had made his stock sale.

But U.S. News & World Report said, "there is substantial evidence to suggest that Bush knew Harken was in dire straits. ... Harken's SEC filings make it clear that the company's directors knew radical steps were necessary." The magazine added that "one informed source says Harken's creditors had threatened to foreclose on the company if substantial debt payments were not made." Shortly thereafter, Bush cashed out of Harken.

The April 4, 1991,Wall Street Journal added that "Mr. Bush didn't return their phone calls seeking comment, and the Bush White House said 'it doesn't comment on the activities of the president's children.'"

According to the Washington Post, Harken's audit committee, of which Bush was a member, met with Mikel Faulkner and

auditors from Arthur Andersen & Co.

, Harken's accountants, on June 11, 1990 -- just 11 days before Bush sold his stock on June 22. When asked for a copy of the June 11 minutes or permission to inspect them, the company declined to make the records available.

Bush's insider transaction yielding a profit of $848,560 -- some 250 percent profit on the stock's original value -- came a week prior to the end of a quarter in which the company lost $23 million. The quarterly report was released just a few days after Iraq invaded Kuwait and the Harken stock plummeted. However, as reported in a 1992 Mother Jones report, Bush attended a meeting regarding a revised stock offering in May 1990 working with Smith Barney's financial consultants concerning corporate restructuring.

In an Oct. 11, 1994, UPI report, Bush also claimed that he was not aware of Harken's poor financial condition when he sold the stock, but UPI said that the Dallas Morning News reported on the same day that a corporate official who served with Bush on the audit committee at Harken felt otherwise; Stuart Watson told the Dallas paper that he and Bush were constantly made aware of the company's finances. "You bet we were," said Watson. "We were both trying to keep that company on the straight and narrow."

On March 16, 1992, U.S. News echoed Watson's statement, reporting that "according to documents on file with the Securities and Exchange Commission, his position on the Harken (restructuring) committee gave Bush detailed knowledge of the company's deteriorating financial condition."

Chuck McDonald, spokesman for Texas Gov. Ann Richards' campaign, said that SEC chief counsel in the Bush investigation -- James Doty, George W.'s former attorney -- never talked to George W., Watson or other Harken officials in its 1991 probe. He said, "Was this a real investigation, or was it a whitewash of an insider stock sale by the son of the sitting president?" UPI, which reported McDonald's statement, went on to note that "while Bush claims the SEC investigation absolved him of illegal insider trading, he has refused to release the investigation files."

Harken founder, Phil Kendrick, noted that the company's "annual reports and press releases get me totally befuddled. There's been so much promotion, manipulation and inside deal making." And even Harken chief executive Mikel Faulkner, an accountant, offered advice for those trying to decipher the financial statements: "Good luck. They're a mess."

Press accounts note that Bush requested a letter from the SEC, issued in October 1993, The letter, signed by SEC Associate Director Bruce A. Hiler, said that "the investigation has been terminated as to the conduct of Mr. Bush and that, at this time, no enforcement is contemplated with respect to him." But the letter also stated that "it must in no way be construed as indicating that the party has been exonerated or that no action may ultimately result."

On Oct. 18, 1993, the Bush administration SEC said it would not bring a case against George W. Bush.

Gov. Bush speaks about his outstanding business record on the campaign stump; however, in 1989, U.S. News & World Report said, "Harken Energy lost over $12 million against revenues of $1 billion." Harken President Mikel Faulkner said that in addition to Bush's position as a director at $2,000 per meeting, stock options worth $131,250, 5 percent loans and 40 percent discounts on stock purchases, he was also a consultant to Harken for "investor relations and equity placement" at a salary of $80,000 per year from 1986 until 1989, when his salary jumped to $120,000.

The board was equally generous to Bush in 1990 as "the company lost another $40 million and shareholder equity plunged to $3 million -- down from more than $70 million in 1988." Faulkner declined to say what services George W. has performed as a consultant.

In March 1992, U.S. News said that "Despite repeated requests for interviews, George W. declined to discuss Harken or the reason for his stock sale, saying through an assistant that he 'does not want to read about himself.'" But some might ask whether American voters have a right to know whether a possible president would strictly enforce federal statutes or appoint lenient attorneys with suspect ethical standards leading to fixed politically sensitive investigations.

Moreover, should Bush -- a director of the corporation -- be accountable when huge losses are reported over a period of time, especially as a presidential candidate purporting to have an outstanding entrepreneurial business record at every presidential campaign stop? The answers have real implications regarding presidential character, morality and personal ethics.

Author and commentator Kevin Phillips offered a perceptive look at the Texas governor in the February 2000 issue of Harpers magazine when he said, "We can fairly ask whether George W. Bush is anything more than another scion who has made a decent governor during a period of prosperity and easy growth, and whether the United States can afford nominees who are to presidential politics what legacies are to college fraternities."

For Bush, Enron Saga Is Reminiscent Of Harken Tenure

The Wall Street Journal
By Jim Vandehei
April 3, 2002 Source

For President Bush, some parts of the Enron Corp. saga must seem uncomfortably familiar.

In the late 1980s and early 1990s, he was on the board of directors and audit committee for another Texas-based energy company, and was its well-paid consultant part of that time as well. Harken Energy Corp., in its 1989 public filings, greatly understated its financial losses. The Securities and Exchange Commission examined its accounting and contacts with an outside auditor -- then known as Arthur Andersen & Co. And the SEC also investigated Mr. Bush for insider trading, as it is investigating Enron officials now, based on his selling nearly $850,000 of Harken stock shortly before its mounting debt was made public.

"The parallels with Enron are slightly eerie," says Chuck Lewis of the nonpartisan watchdog Center for Public Integrity, which looked into Mr. Bush's Harken role during the 2000 campaign. "This president certainly has more familiarity with troubled energy companies and accounting irregularities than probably any previous chief executive."

Mr. Bush was found to have done nothing illegal or improper by the SEC. Democrats nonetheless tried to hang the episode around his neck during his 1994 run for Texas governor, and during the presidential campaign, with little success. Now that the Enron debacle is throwing a new light on his experience, they are recalling the story again. It "seems very Enron-esque, and shows that history is doomed to repeat itself unless Congress takes action," says Democratic National Committee Chairman Terry McAuliffe -- who himself has attracted attention recently for the millions in profit he made as an inside investor in Global Crossing Ltd., selling his stock before its slide.

Bush spokesman Daniel Bartlett said: "To draw any specific or general connections between Harken Energy and Enron is simply ludicrous." At Harken and elsewhere in business, Mr. Bartlett said, Mr. Bush "learned and valued the obligation and responsibility he had toward employees." A senior Bush aide boasts, in fact, that the president is well-equipped to deal with problems the Enron scandal has highlighted because of his familiarity with both corporations and SEC enforcement.

Mr. Bush staked a claim in West Texas's oil patch after graduating from Harvard Business School, but his business ventures went dry in the mid-1980s oil bust. He was forced to merge his first company to form a new one, Spectrum 7 Energy Corp., which in turn had to be rescued in 1986 by another company -- Harken -- that was happy to have the well-connected son of then-Vice President George H.W. Bush on its board.

Harken gave Mr. Bush 200,000 shares of stock and an annual $120,000 consulting fee. The job also gave him the time to become a behind-the-scenes player both in his father's 1988 presidential campaign and in the early days of the first Bush administration. For Harken, meanwhile, Mr. Bush helped raise cash to fuel its growth.

In 1989, company officials crafted a deal that would draw SEC scrutiny. Harken sold 80% of subsidiary Aloha Petroleum Ltd. to a partnership of Harken insiders called International Marketing & Resources for $12 million, according to SEC documents. Harken financed most of the loan the buyer needed.

The deal essentially allowed Harken to shield nearly $10 million in debt when it issued its 1989 annual report, by claiming the sale price as income, even though it held the outstanding note on the sale. After months of back-and-forth with the SEC, the company amended its report to show a much larger net loss, $12.6 million, than it had reported.

No evidence suggested Harken officials purposely tried to mislead investors -- as Enron insiders have charged that its executives did by creating outside partnerships to hide debt. Mr. Bush has been highly critical of Enron. "What I am outraged about is that shareholders and employees didn't know all the facts about Enron," he said on one occasion. He has endorsed investigations of Enron, and called on Congress to pass tougher accounting standards for companies and protections for employees' retirement savings.

The separate issue of Enron executives selling stock ahead of the company's meltdown holds another rough parallel to Mr. Bush's Harken experience. He sold 212,000 Harken shares, or 66% of his holdings in the company, on June 22, 1990, just months before it disclosed growing debt problems.

SEC documents show Mr. Bush knew of the financial crunch when he sold his shares at $4 each. After the company divulged its true debt, its stock price dropped to $2.27; by the end of the year, it had plummeted to $1. The SEC began investigating Mr. Bush's sale in April 1991, after The Wall Street Journal reported that he failed to report the transaction on time. Its focus: whether Mr. Bush knew the company planned to report a huge loss that would drag down its stock price.

He was cleared of any wrongdoing, but Democrats suggested he was getting favorable treatment from his father's administration. And so was Harken, they claimed. Their evidence: Shortly before Mr. Bush sold his stock, Harken won the rights to drill potentially lucrative offshore wells from the Middle East government of Bahrain -- even though the company had never drilled in water. Democrats claimed Bahrain picked Mr. Bush's company because of his White House ties.

Again, no evidence surfaced to show he or Harken received favors, and Bush aides chafe at accusations otherwise. "There is one constant," says an exasperated Bush aide now. "Politics is politics. And that remains the same."

Files: Bush Knew Firm's Plight Before Stock Sale

Bush Was Warned of Harken Company Troubles
Government records show that President George W. Bush while in private business had confidential information in 1990 about financial problems facing a Texas oil company just months before he sold stock in the firm."

BUSH TOLD OF HARKEN WOE AHEAD OF SALE

Dubya Knew Oil Company Was In Trouble - Capitol Hill Blue
"Government records show that President Bush while in private business had confidential information in 1990 about financial problems facing a Texas oil company just months before he sold stock in the firm."

Files: Bush Deluged With Confidential Harken Info Prior To Sale Of Stock

Papers Show Bush Played Active Role at Harken

Bush, Cheney: Cheshire cats of reform - As private citizens, did they do what they now disavow?

Papers indicate Bush active in Harken deals

"There is substantial evidence to suggest that Bush knew Harken was in dire straits in the weeks before he sold the $848,560 of Harken stock."
US News and World Report - by Stephen J. Hedges March 16, 1992 - The Color of Money.

Q "Mr. President, you've said that you didn't know, when you sold your Harken stock, that the company was going to restate its earnings. As a member of its audit committee, how could you not know that its earnings had not been properly accounted for?

THE PRESIDENT: Because that fact, that fact came up "after" I sold the stock."
Source

"My administration will do everything in our power to end the days of cooking the books, shading the truth and breaking our laws."
George W. Bush - New York Stock Exchange - July 9, 2002.

THE SEC Says: "Insider trading is illegal when a person trades a security while in possession of 'material nonpublic information' in violation of a duty to withhold the information or refrain from trading."

Severe economic downturn could bring 1930s-style reform - The Wall Street Journal

George Bush is losing control of the American political agenda - The Economist

THE DOW CONGRESS - The Weekly Standard

STOCK CRASH AFTERMATH - Thomas Sowell

Bush Blames Lawyers' 'Mix-Up'
For His Tardy Stock-Sale Filing

The Wall Street Journal
By Jeanne Cummings
Staff Reporter
July 5, 2002
Source

WASHINGTON -- As public discontent over the ethics of corporate executives grows, President Bush is offering a new explanation for why he failed to meet a federal time limit for disclosing a lucrative 1990 stock sale. [George W. Bush]

White House spokesman Ari Fleischer said Wednesday the president's sale of Harken Energy Corp. stock -- shortly before the company reported a sharp loss -- wasn't disclosed in a timely fashion because of a "mix-up" between Mr. Bush, then a Harken board member, and his attorneys. When questions about the stock sale were raised during Mr. Bush's 1994 race for Texas governor, he had claimed the reports were filed on time but that the Securities and Exchange Commission had lost them.

The renewed interest in the stock sale comes at a particularly sensitive time for Mr. Bush, who is gearing up for a major address on corporate responsibility Tuesday in New York. Democrats seized on the latest explanation for the tardy disclosure as evidence that Mr. Bush and the Republican Party aren't serious about cracking down on corporations that mislead investors and employees about earnings.

"The reality is that Bush and his administration have given the green light to unscrupulous CEOs by helping to foster a business environment that says: 'If it feels good, do it,' " said Democratic National Committee Chairman Terence McAuliffe, a wealthy businessman who also has been criticized for his stock sales.

The controversy centers on Mr. Bush's sale of 212,140 shares of Harken stock at $4 a share, or $848,560, on June 22, 1990. Mr. Bush used the money to pay off a $500,000 bank loan he took to buy into the Texas Rangers baseball team, a position he used to gain important populist credentials before entering politics.

After Mr. Bush sold the stock, Harken posted a $23.2 million second-quarter loss. When that loss was made public in August, the stock price fell to just over $2.

Bush's Tenure as Harken Director Holds Parallels to Enron Saga
03/04/02

Before the sale, Mr. Bush had personally -- and properly -- filed a document disclosing his intent to sell the stock. But SEC investigators became suspicious about the transaction after The Wall Street Journal reported the late arrival of a second form required when corporate insiders sell stock. The second form, disclosing the actual sale, was filed in March 1991, nine months late. An investigation was launched a month later, but it later was dropped with no action taken.

The president has dismissed as politically motivated the recent interest in the 12-year-old stock sale. But Mr. Fleischer said Wednesday it wasn't until this week that Mr. Bush found out -- with certainty -- what actually transpired so long ago. This time, he placed the blame for the tardy document-filing on his lawyers.

"The president believed that all the forms were filled out properly by the attorneys and filed with the SEC because he knew that he filed his form with the SEC," Mr. Fleischer said. Apparently, that sense of confidence that all disclosure laws had been complied with is what led Mr. Bush, in the 1994 gubernatorial race, to blame the SEC for misplacing his document.

"Then, it turned out to be a mix-up with the attorneys" and the second document, in fact, hadn't been filed on time, Mr. Fleischer said. "We were able to ascertain that this week."

Write to Jeanne Cummings at jeanne.cummings@wsj.com

Bush Under Fire For Harken's Offshore Subsidiary

Reuters
Via Forbes.com
July 31, 2002 - 5:20 PM ET

WASHINGTON (Reuters) - While President Bush served on its board of directors more than a decade ago, Harken Energy Corp. set up an offshore subsidiary in the Cayman Islands, but the White House Wednesday denied it was a scheme to avoid paying taxes in the United States.

As part of its response to a wave of corporate scandals, the White House has railed against the corporate practice of setting up offshore subsidiaries in tax havens like the Cayman Islands and Bermuda to reduce U.S. tax bills. Bush called it "a problem," telling reporters: "We ought to look at people who are trying to avoid U.S. taxes."

Democrats seized on the revelation that Harken Energy set up a Cayman Islands subsidiary in 1989, saying it was further evidence that Bush as a businessman failed to practice the corporate policies he now preaches as president.

"If it is true, I think it gets harder and harder to take his position on corporate accountability seriously," said Senate Democratic leader Tom Daschle of South Dakota.

Lawmakers said the collapse of energy giant Enron Corp. underscored the need to crack down on corporate offshore activities. The Houston-based energy trader had hundreds of subsidiaries in tax haven countries, which critics said it used to avoid taxes.

But White House spokesman Ari Fleischer said Harken's subsidiary in the Cayman Islands, set up as part of an oil drilling venture with the government of Bahrain, was not designed to avoid paying U.S. taxes.

"Under this, any oil that was produced in Bahrain and sold in the United States would have been taxable in the United States," Fleischer told reporters.

In the end, no oil was produced by Harken in Bahrain. "So I think it's a moot question," Fleischer said.

Bush told reporters he "opposed" the Bahrain venture while serving on Harken's board, but offered no explanation why he did so.

Daschle renewed his call Wednesday for the White House to release records of Bush's tenure at Harken. Bush said, "We'll try to answer all your questions," but many Harken documents remained secret.

"Obviously, there are a lot of questions to be asked before we can come to any conclusions about what happened or what didn't happen," Daschle said. "We need to get the facts. ... The administration needs to lay the record straight."

In a letter to Bush, Rep. John Conyers, the ranking Democrat on the House Judiciary Committee, asked the White House to turn over the official minutes of Harken's board of directors meetings from 1989, during which time the creation of an offshore subsidiary in the Cayman Islands was discussed.

"Today's revelations concerning Harken's efforts to establish an offshore tax haven in 1989 appear at odds with many of our current leaders' positions on such efforts and your position," Conyers wrote.

Earlier this month, the White House acknowledged that Bush had received low-interest loans from Harken -- a practice banned under a law the president signed Tuesday cracking down on corporate wrongdoing.

The Securities and Exchange Commission in 1991 investigated Bush's 1990 sale of Harken shares, before the company reported large losses, and ended the probe without taking action.

Bush, Cheney Under Fire Over Offshore Subsidiaries

Reuters
By Adam Entous
July 31, 2002 - Wednesday - 9:07 pm Eastern Time
Source

In a practice now criticized by the White House and Republicans, U.S. President George W. Bush and Vice President Dick Cheney served in leadership positions at companies that set up subsidiaries in offshore tax havens, according to documents and an analysis of company records released on Wednesday.

Democrats said revelations of offshore subsidiaries created by Harken Energy Corp. (AMEX:HEC - News) while Bush served as a director and Halliburton Co. (NYSE:HAL - News) while Cheney was chief executive offered new evidence that the president and the vice president failed to practice the corporate policies they now preach.

The White House, in response to a wave of accounting scandals at major U.S. corporations, has railed against the practice of setting up subsidiaries in tax havens like the Cayman Islands and Bermuda to sidestep disclosure rules and avoid paying U.S. taxes.

Bush called it "a problem" and said, "We ought to look at people who are trying to avoid U.S. taxes."

The Democrat-led Senate voted on Wednesday to deny lucrative defense contracts to U.S. companies that incorporated offshore this year to avoid taxes. U.S. companies incorporated offshore hold at least $2 billion in federal contracts, including defense contracts.

Lawmakers said the collapse of energy giant Enron Corp. (Other OTC:ENRNQ.PK - News) underscored the need to crack down on corporate offshore activities. The Houston-based energy trader had hundreds of subsidiaries in tax-haven countries, which critics said it used to avoid taxes.

While Bush served on Harken Energy's board of directors in 1989, the company set up an offshore subsidiary in the Cayman Islands, the White House acknowledged. But spokesman Ari Fleischer denied it was a scheme to avoid paying taxes in the United States.

"If it is true, I think it gets harder and harder to take his position on corporate accountability seriously," Senate Democratic leader Tom Daschle of South Dakota said of Bush.

Halliburton, which Cheney ran before becoming vice president, was even more aggressive in its use of offshore tax havens, according to an analysis of company filings with the Securities and Exchange Committee by Citizen Works, a nonpartisan group founded by consumer advocate Ralph Nader.

The number of Halliburton subsidiaries incorporated in offshore tax havens rose from 9 to 44 while Cheney served as chief executive between 1995 and 2000, the group said.

The analysis was distributed by congressional Democrats, who hoped to use it to their political advantage in the November elections. Democrats have seized on the Harken transactions and Cheney's tenure at Halliburton to paint the Bush administration and its Republican allies in Congress as compromised by insider deals and close business connections.

WHITE HOUSE ON DEFENSIVE

Cheney's spokeswoman, Jennifer Millerwise, had no comment on Halliburton's offshore subsidiaries and other business practices. The SEC is currently investigating how Halliburton accounted for cost overruns on construction jobs. Millerwise said the SEC has not contacted Cheney as part of that inquiry.

Fleischer said Harken's subsidiary in the Cayman Islands, set up as part of an oil-drilling venture with the government of Bahrain, was not designed to avoid paying U.S. taxes.

"Under this, any oil that was produced in Bahrain and sold in the United States would have been taxable in the United States," Fleischer told reporters.

In the end, no oil was produced by Harken in Bahrain. "So I think it's a moot question," Fleischer said. Bush said he had "opposed" the Bahrain venture.

Democrats have called on the White House to release all records of Bush's tenure at Harken, including the minutes of company board meetings. So far, the White House has refused.

Earlier this month, it acknowledged that Bush had received low-interest loans from Harken -- a practice banned under a law the president signed on Tuesday cracking down on corporate wrongdoing.

Fleischer said Bush did nothing wrong at Harken. In 1991, the Securities and Exchange Commission investigated Bush's 1990 sale of Harken shares before the company reported large losses. The SEC ended the probe without taking action.

President Discusses Economy, Middle East Following Cabinet Meeting

Remarks by the President in Photo Opportunity with the Cabinet

For Immediate Release
Office of the Press Secretary
July 31, 2002
Source

The Cabinet Room

11:34 A.M. EDT

Partial Transcript:

Q Mr. President, what's your position on American companies moving their headquarters to foreign tax havens? Should it be outlawed? Did Harken do this while you were a director?

THE PRESIDENT: Moving their headquarters?

Q Yes, to foreign tax --

THE PRESIDENT: I don't recall Harken moving their headquarters. I think there was an issue over a arrangement with Bahrain, a drilling venture there, which I opposed, as you may recall, when I was a director of the company.

Q Should the practice be outlawed now?

THE PRESIDENT: I think we ought to look at people who are trying to avoid U.S. taxes as a problem. I think American companies ought to pay taxes here, and be a part -- good citizens. But as far as the Harken issue, we'll try to answer all your questions on that.

Press Briefing by Ari Fleischer

For Immediate Release
Office of the Press Secretary
July 31, 2002
Source

James S. Brady Briefing Room

1:28 P.M. EDT

Partial Transcript:

Q I have some questions about the President's time at Harken Energy. Can you confirm for us that when he was on the board of directors at Harken, that the company set up an overseas subsidiary in the Cayman Islands, which many companies use as a tax haven?

MR. FLEISCHER: Yes. I've looked into this issue that was raised this morning, and let me tell you what I've found about it, because just as I suspected, it's not quite as earlier described. And this, again, deals with one of the most complicated provisions of the tax code where the details matter the most and the facts are found in these details of the tax code.

In the case of this subsidiary, where the parent corporation, located in Houston, Texas, set up a subsidiary in the Cayman Islands dealing with an oil arrangement in Bahrain, under this any oil that was produced in Bahrain and sold in the United States would have been taxable in the United States.

Q Wait, can I follow up?

MR. FLEISCHER: Go ahead, Campbell.

Q I'm confused, then. Why -- I mean, the President's point this morning was that he opposed the deal. And that's not what Dan Bartlett said yesterday, because he was quoted in this article as saying that there was no money made from the oil exploration and, therefore --

MR. FLEISCHER: This is not inconsistent. The President, as a member of the board, did oppose this arrangement with Bahrain. That's a matter of public record.

Q Why did they set up the subsidiary, then, if they were going to be taxed on the oil?

MR. FLEISCHER: Right. Because there are other factors beyond the tax consequences. And that's why I was answering the question you asked about taxes. There are issues involving the assets of the parent company in the event that there was some type of liability action that was brought involving the operations located in Bahrain, in order to make certain that all liability claims were dealt with by the subsidiary responsible for operations in Bahrain. It was a project in the Cayman Islands dealing with those liability issues.

On the tax side of it, though, it's exactly as I thought, and this is covered by what's called Sub-part F of the Internal Revenue Code. Under Sub-part F in this specific example, if they had produced any oil in Bahrain and sold it in the United States, it would, of course, been taxable in the United States.

Q But if he had sold it anywhere else?

MR. FLEISCHER: If it was sold in Bahrain, it would not have been taxable, of course.

Q So they could have sold anywhere in the world and then they would not have had to pay tax on it because they --

MR. FLEISCHER: I don't know about anywhere in the world, but under the tax code, under Sub-part F --

Q So there's only an exemption for the United States? If they would have made profit by selling oil anywhere else, Bahrain included, they would have been tax-exempt because they set up a subsidiary in the Cayman Islands?

MR. FLEISCHER: Well, again, the rest of the world -- I couldn't give you that indication. I don't know the answer to that. But it clearly was produced in Bahrain. If you produce a product based in Bahrain, and it was sold in Bahrain, therefore it was not sold in the United States, it would have had a different tax consequence. That part's correct.

Q So there's a tax benefit to setting up a subsidiary in the Cayman Islands.

MR. FLEISCHER: Well, in this specific example, no oil was produced, so I think it's a moot question, we won't know.

Q Going back to Harken, you say you are not sure whether there were tax benefits to this offshore operation, but it's moot because there were no profits. But the question goes to intent. Do we know what the intent of the directors was and what the President's position, as a board member, George Bush's position was then?

MR. FLEISCHER: Well, again, the President, as I indicated, he opposed the original decision to begin this operation in Bahrain. But I do not have information about any projections about how much of the oil they generated -- they thought might be able to generate would have been for sale in Bahrain or for sale in the United States. I do not have that.

Q Can you help us with the Harken people on this? We've asked this question before. On this particular instance, the President himself said in the Cabinet Room this morning you'd provide more to us. Can you help us on this?

MR. FLEISCHER: Yes, I've given you everything I've got now. We'll continue to try to ascertain any other questions that you've got about it. We'll be more than happy to try to find out. We'll talk to the Harken people or others and try to get it for you. But the point remains the same about the tax treatment for anything sold in the United States. And this is an American company we're talking about.

Q Ari, the Senate Majority Leader said today, relating to Harken, called again for the administration to lay the record straight to "ask the SEC to open its records to let the American people know exactly what happened relating to Harken," that the President's credibility on the corporate accounting responsibility issue is at stake. Why not, if the President said today, we'll try to answer all your questions relating to Harken, why not ask the SEC to release them?

MR. FLEISCHER: Well, actually I don't know that there's any connection between a subsidiary operation. And anything the SEC has looked at, as you know, the SEC was involved in something totally separate from this. So it's really two different issues.

Q But more generally, this goes back to the question since the President held that first news conference about Harken. Why not ask the SEC --

MR. FLEISCHER: More generally, there's nothing different.

As most of you know, companies,
such as Harken Energy, that set up subsidiaries in offshore
tax havens like the Cayman Islands,
do not do it to avoid paying taxes.
Thank you, goodnight, and God bless America.

Bush Co. Went Offshore

Harken Energy Set Up Caymans Subsidiary In '89

The New York Daily News
By Timothy J. Burger
DAILY NEWS WASHINGTON BUREAU
July 31, 2002
Source

WASHINGTON - Harken Energy Corp. set up an offshore subsidiary in the Cayman Islands tax haven while President Bush sat on Harken's board of directors in 1989, the Daily News has learned. The revelation comes as Republican lawmakers are roundly criticizing the practice of U.S. companies setting up offshore subsidiaries, usually to skirt American disclosure laws or corporate income taxes on foreign income.

Even White House spokesman Ari Fleischer condemned the tactic yesterday, saying, "The President is concerned about corporations in America who take advantage, set up operations outside of America, in an effort to lower their taxes."

A spokesman for Bush said the offshore company did not save any taxes because it failed to find oil or make a profit.

Harken registered Harken Bahrain Oil Co. on Sept. 1, 1989, according to Cayman Islands government documents.

It was formed as the Texas-based Harken sought a $25 million contract with the Bahrain government to drill in the waters off the Arab islands.

Harken filings with the Securities and Exchange Commission say the Bahrain contract was run "through its newly-formed, wholly-owned subsidiary, Harken Bahrain Oil Co."

Records show that Harken Bahrain was paid at least $2 million by 1993 for its Bahrain operation, which never did strike oil.

Bush was on Harken's board of directors and a paid consultant from 1986 to 1993.

It is unclear whether Bush had a role in approving the formation of the Caymans subsidiary.

'General practice'

White House communications director Dan Bartlett said, "As a general practice at that time ... international contracts like this one were done through a subsidiary to contain liability. ... In order to save money [on taxes], you would have to make money, and they didn't make any. They found no oil."

Critics said the transaction - which is legal - raises new questions about Harken's governance while Bush was part of its management.

Bush's sale of Harken stock shortly before the price dropped in 1990 was investigated by the SEC. Bush also filed papers on the sale several months later than what was legally required. The SEC concluded there was no evidence of insider trading.

"It is reminiscent of Enron," said Chuck Lewis of the Center for Public Integrity, a Washington-based government watchdog. "Here is a controversial, on-the-edge company investigated by the feds, sham transactions where they have to restate their earnings and - oh, yeah - they have a Caymans account. What's wrong with this picture? ... What else don't we know?"

GOP members of Congress also hammered the tactic of creating subsidiaries in tax havens.

"It's not illegal, but it is immoral," Sen. Charles Grassley of Iowa, the top Republican on the Senate Finance Committee, said yesterday. "I think it's also a case of patriotism."

Asked what he thought of Bush's involvement in an offshore subsidiary, Grassley said, "I'm not aware of it so I can't comment on it."

Treasury Secretary Paul O'Neill blasted the practice this year.

"When we have a tax code that allows companies to cut their taxes on their U.S. business by nominally moving their headquarters offshore, then we need to do something to fix the tax code," O'Neill said in May.

John Felderhof, former vice president in charge of exploration, said in a statement released from his "Cayman Islands" home that he was unaware of the tampering.

Mounties stumped in Bre-X scam
"Bre-X, valued at its peak at more than $6 billion on the stock market, became worthless and was pushed into bankruptcy.

"International laws protect witnesses who reside outside of Canada from being compelled to testify," Alberta RCMP assistant commissioner Don McDermid said in a release.

The RCMP announcement came a day after former Bre-X senior vice-president John Felderhof -- believed to be in his Cayman Islands mansion -- was charged with eight counts of violating Ontario securities laws.

But those charges of insider trading and releasing false news are not Criminal Code counts and are not extraditable offences, which means Felderhof can't be forced to return to Canada."

TAX MAGICIANS -- A special report. Sham Shelters for Business Flourish as Scrutiny Fades

A Retreat on Tax Havens

US May Ease Stance On Money Laundering

Senate Tries To Stop Administration's Review Of Money Laundering Rules

Former I.R.S. Chiefs Back Tax Haven Crackdown

Offshore Banking Arrives in U.S.

Milton Friedman Asks President Bush To Dump OECD

Senate Moves Against Tax-Haven Companies

Bush Criticized by Lawmakers on Corporate Governance

Bush Admits Tax Haven Problem

Let's just do away with money. Need a mark?

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