Investigative Report
Bush Violated Security Laws
Four Times, SEC Report Says
By Knut Royce
(Washington, Oct. 4) George W. Bush violated federal securities laws at least four times when he was a director of a Texas oil firm in the late 1980s and early 1990s, according to an internal government report.
The document was prepared by the Securities and Exchange Commission in 1991 during its well-publicized investigation into whether Bush had benefited from insider information when he sold Harken Energy Corp. stock before its value plummeted, and then failed to promptly report the transaction to the SEC in violation of federal law. Bush’s stake in Harken helped make him a multimillionaire.
The internal SEC memorandum, prepared by the commission’s enforcement division and obtained by The Public i from sources, discloses what was previously not known--that Bush also had been tardy in reporting three other transactions involving stock in Harken, on whose board he sat as director.
(This report was prepared in collaboration with Talk magazine, whose article, "George W. Bush . . . And the Horse He Rode In On," appears in the magazine's November issue.)
The Securities and Exchange Act of 1934 requires company insiders to disclose publicly, in a report called a Form 4, all stock purchases and sales by the 10th day of the month following the transaction.
A former SEC official who asked not to be further identified said that he could recall at least one instance—involving the late stock manipulator Alexander Guterma, who began a three-year prison term in 1960 for a variety of securities offenses — where a prison sentence was imposed for failure to report a transaction. More commonly, he said, the SEC has obtained court injunctions barring frequent violators from repeating the offense. But he said that instances of insiders filing late disclosures were “fairly common’’ and that the SEC, with a limited staff, seldom pursued those cases.
The filing requirements are not a trivial matter. Insider transactions can sometimes alert outside investors that corporate officers or directors are nervous about the company’s earnings or growth. They can also alert the SEC that an officer or director benefited from information that only an insider could have known, a violation of securities laws.
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Bush, the SEC memo noted, had on four occasions filed late Form 4s involving Harken stock worth more than $1 million. The tardiest—34 weeks late—was his Form 4 report disclosing that he had sold $848,560 of Harken stock on June 22, 1990, just weeks before the company filed a quarterly report revealing that it had hemorrhaged $23 million during that period. Bush had sold his stock for $4 a share. By the end of the year it was trading not much above $1.
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