Los Angeles Times
By WARREN VIETH, Times Staff Writer
July 12, 2002 Source
WASHINGTON -- In early 1989, George W. Bush and his fellow board members at Harken Energy Corp. were presiding over a company that was headed south in a hurry. The Dallas-based oil firm had lost millions of dollars placing bad bets on commodity futures. Debt was piling up; red ink was beginning to flow.
Harken's executives came up with a novel plan to ease the pain. They would sell a small chain of Hawaiian gas stations called Aloha Petroleum to a group of investors that included Harken's chairman and one of its directors. The buyers would pay $1 million up front, but the accountants would record an immediate $7.9-million profit, enough to erase most of Harken's losses for the year.
They made a point of seeking the approval of directors who were not participants in the investor group. Bush, a member of the board's audit committee, signed off on the deal, according to Harken documents. So did the company's outside auditor, Arthur Andersen & Co.
But the government challenged and ultimately overturned the accounting method used by Harken to post a gain on the sale. Aloha was sold a second time, and the new buyer extracted big concessions from the company. The initial profit recorded on the sale morphed into a big loss. In the midst of all the maneuvering, Bush sold most of his Harken stock in June 1990.
Based on a review of publicly released Securities and Exchange Commission filings, meeting minutes, memos and correspondence from that period, there is no evidence that Bush, or any of the other directors, raised objections or expressed concern about the Aloha deal.
Experts on corporate governance say that as an independent director and one of only three members of the audit committee, Bush was in a position to exercise an important oversight role but apparently failed to do so.
..Of the seven Harken directors who served on the board with Bush, five declined to discuss the deal or did not return calls seeking comment. Executives at Aloha, now a privately held company, also declined to comment. So did past and present officials at Harken, Arthur Andersen and the SEC.
Former director Talat M. Othman, who chaired the three-member audit committee, said he did not recall the details of the Aloha sale or the company's reasons for arranging it. "I'm not sure that our motivation was to create instant profits," said Othman, a Palestinian who represented Saudi investors who owned 13% of Harken's stock. "It was a normal part of the business to be buying and selling."
The third audit committee member, E. Stuart Watson, also said he didn't remember much about Aloha. "I don't know about that Hawaiian outfit because I was getting off the board about that time," Watson said.
I don't recall
Now, try not to laugh:
Donald Evans on Fox News Sunday
SNOW: Right now Congress is considering various pieces of legislation dealing with the latest accounting fraud scandals. What are the president's principles on this one? What does he want, what does he not want in the bill?
EVANS: Well, the first thing he wants is truth. I mean, there's not anything more important and simpler than just telling the truth, Tony. I mean, you know, you can put all the rules and all the laws and all the regulations in place you want to, but if people don't tell the truth, it won't work.
SNOW: There's a lot of news coverage right now to the president's past career, working for Harken Oil -- Harken Energy, and concern about when he sold his stock.
Now, the White House has said, "He's been investigated, he's been exonerated, we're not going to release records."
This is a president who, during the investigation, the SEC investigation, said, "Look, I've waived my legal rights, you can take a look at anything." So why not open it up right now and get this thing done with?
EVANS: Tony, this is nothing but political garbage that the American people are sick and tired of. I mean, I think this is a perfect example of what Americans say, "Look, we've got a serious problem in America, and let's go solve that problem in a bipartisan way."
...SNOW: Harvey Pitt is under fire, the Securities and Exchange Commission chairman. John McCain has asked for his resignation. President said he supports him. Is Harvey Pitt going to remain the SEC chairman?
EVANS: Harvey is doing a terrific job. Let me tell you, what I pointed out earlier, people seem to, kind of, lose sight of. The president called members of his Cabinet into the Oval Office in early January.....
...Soon after the collapse of Enron, what he did -- look, I know this president well. And I know when he's angry. And I know when he's not happy with behavior out there of a few.
EVANS: And he called a number of us into the Oval Office, early in January, to discuss the issue. He put a task force together to focus on pension reform for the small investors and for the employees. He put a task force together to focus on disclosure of financial statements. By early March, he presented a 10-point plan to the American people and to the Congress: These are the principles that ought to drive reforms, to deal with this serious issue that we're dealing with right now. Harvey Pitt followed up with that -- to that letter and presented to the president responses to all 10 points. It's those principles that are driving the debate today.
[End of Transcript]
Now, notice that Evans states that Bush called them in a meeting in early January to start taking care of all these serious problems with accounting scandals. Early January. Early January. Maybe Harvey Pitt was sleeping and forgot to take notes. Or worse, maybe Harvey wasn't even invited.
"There is nothing rotten in the accounting profession."
Harvey Pitt, Chairman of the Securities and Exchange Commission - January, 2002 - SOURCE.
"Now, notice that Evans states that Bush called them in a meeting in early January to start taking care of all these serious problems with accounting scandals. Early January. Early January. Maybe Harvey Pitt was sleeping and forgot to take notes. Or worse, maybe Harvey wasn't even invited."