SEC Chief Says He Opposes Release of Files on Bush
Posted on 07/14/2002 6:52:09 PM PDT by RCW2001
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SEC Chief Says He Opposes Release of Files on Bush
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| July 14 — By John Whitesides WASHINGTON (Reuters) - Securities and Exchange Commission Chairman Harvey Pitt, under heavy fire as a wave of corporate scandals breaks, said on Sunday there was no need to release the files on a 1991 probe of President Bush's stock sales. Appearing on two television talk shows to answer charges that he is too cozy with corporate America to effectively regulate it, Pitt vigorously defended his agency's performance and said he will not resign. He accused Democrats of trying to score political points with calls for the release of the investigatory files on Bush's stock sales while he was a director of Texas-based Harken Energy Corp. "Unless there's a reason to re-open ancient history, we should move on," Pitt said on NBC's "Meet the Press." "Why can't we focus on WorldCom, on Enron, on Qwest, all these other companies where the American public is being injured? Why are we diverted for mere political gain?" he said, although he said he would release the files if Bush asked. The SEC investigated Bush for being up to 34 weeks late in reporting stock sales worth more than $1 million but concluded he did not engage in illegal insider trading. Bush's father was president at the time. "The matter is closed," Pitt said, but Democrats said Bush still needs to come clean about his past as a businessman. "The only way to clear the air is full disclosure," Connecticut Sen. Joseph Lieberman, a potential Democratic presidential candidate in 2004, said on ABC's "This Week." A bout of financial scandals have torpedoed investor confidence in publicly traded stocks and rocked financial markets, threatening to become a political liability for the president and Republicans heading into the November mid-term elections. CENTER OF STORM Pitt has been at the center of the Wall Street storm, with top lawmakers such as Senate Democratic Leader Tom Daschle and Arizona Republican Sen. John McCain calling for his resignation. Bush so far has backed Pitt. "I have absolutely no intention of stepping down," Pitt said on CBS' "Face the Nation." He said the SEC was more aggressive now than it had ever been. "Anybody who looks at what we've really done, what our record is, instead of these politically crass sound bites, will understand this is the most aggressive, most effective SEC that there has ever been in the 68 years of this agency," he said on NBC's "Meet the Press." Republican Rep. Billy Tauzin of Louisiana said Sunday that accounting irregularities at fallen telecommunications giant WorldCom Inc stretched back at least one year earlier than previously believed. Internal WorldCom documents show the company's then-chief financial officer rebuffed complaints from at least two employees that it was artificially inflating profits as far back as April 2000, Tauzin said on ABC's "This Week." Tauzin is chairman of the House Energy and Commerce Committee looking into the WorldCom scandal. Pitt said he supported the "thrust" of Democratic Sen. Paul Sarbanes' bill to create a tough, new oversight board for accountants and limits the consulting services accounting firms can provide their audit clients. He also praised a more modest bill passed by the House in April that has been criticized as weak by some investor advocates. Pitt, a former Wall Street lawyer with prominent clients including major accounting firms and corporations, finishes in August a one-year "cooling off period" in which he has recused himself from numerous cases involving former clients. But he said he will "make a case-by-case decision" on whether to start participating. "If I think there is an appearance issue or some other problem, I may still recuse myself," he said. He endorsed proposals to indict corporate chief executive officers whenever a corporation is indicted for a criminal matter under SEC jurisdiction. "We're going after these people. I frankly think, every one of them who is responsible for any of these defaultations should do hard time for their hard crimes," Pitt said. |
I wasn't aware that the Clinton Admin did that, I'm not suprised though. I noticed too that now the spin is they (the SEC) just couldn't "prove" Bush did anything wrong. Of course the implication is that he did something wrong and got away with it. Democrats are pathetic.
This is what, for some reason, really upsets the Rats. Bush's chief economic advisor a couple of weeks ago said the SEC hit the ground running with investigations when Pitt assumed leadership. About 6 to 8 months ago the SEC ramped up manpower. So what is really going on here? Who is the SEC getting close to? Evidently the Rats think they can intimidate Pitt into leaving and in doing so effectively send a message to anyone who would follow him.
The question the RNC should be publicly asking is "What are the Rats afraid of"?
Quote from the President's press conference on 7/8/02:
And I want to remind you all that I sold the stock at 4, and 14 months later -- the holding period for capital gains, I think, was 12 months in those days -- the person who bought my stock could have sold it for 8. Could have doubled his or her money.
I believe he didn't trade on insider information. He used the proceeds to pay off the loan he had undertaken to buy his share of the Rangers and the stock was the only liquid asset he really had at the time.
So, the fact that he had a compelling outside reason to sell combined with the fact that the stock didn't nosedive and actually rebounded quite nicely, suggests to me that this transaction was above board.
Also, his dad was president at the time and I really don't think W would do anything if he thought it would reflect poorly on his father. He is a very dutiful and loyal son.
THREE QUESTIONS
In the 1980s, Bush ran an energy company called Spectrum 7. By 1986, with the oil market in a deep slump, the firm was in serious financial trouble. That year, another company, Harken Energy, which specialized in buying distressed oil properties, purchased Spectrum 7. Harken's management wanted Bush on its team — his father was then vice-president, and he had extensive connections, as well as knowledge of the oil and gas business. But Harken's officers did not offer Bush an executive role, instead giving him a seat on the board, a chunk of stock worth at least $500,000 at the time, and a consulting contract.It was not a full-time job, and in 1987 and 1988 Bush devoted much of his energy to his father's presidential campaign. The next year, Bush got involved with a group of investors who were trying to buy the Texas Rangers baseball team. When the sale went through in March 1989, Bush borrowed $600,000 to purchase his stake in the team. At that time, his biggest single asset was his Harken stock, and he decided to sell the stock to pay off the baseball loan.
On June 22, 1990, Bush sold 212,140 shares of Harken at $4 a share, for a total sale of $848,560. Nearly two months later, on August 20, Harken announced a much larger than expected loss for the quarter that ended on June 30. In the months that followed, Harken's stock price drifted downward, hitting $1.25 per share by the end of 1990. When word of Bush's sale became public, Democrats charged that he had used inside information — he also served on the Harken board's audit committee — to sell the stock while he could still make a lot of money.
Bush denied any wrongdoing, but the allegations led to an SEC investigation. Commission experts looked into three questions: One, did Bush know in advance that Harken was going to post an abnormally large loss in August, 1990? Two, did Bush sell the stock with the intent of getting out while the getting was good? And three, did Harken's loss announcement lead to a stock downturn that hurt ordinary investors who had no inside knowledge of the company's workings?
According to several internal SEC memos written in 1991 and 1992 — they are available on the website of the public-interest group the Center for Public Integrity — investigators examined thousands of pages of documents given to them by Bush and Harken, interviewed several witnesses, and met with lawyers for Bush and the company (Bush waived attorney-client privilege to allow the SEC to interview the lawyers). On the first question, whether Bush knew in advance about the losses, the SEC investigators found that "the evidence establishes that Bush was not aware of the majority of the items that comprised the loss Harken announced on August 20." Most of that loss, according to the SEC, resulted from write-downs and expenses that occurred after Bush sold his stock — events that he did not know were coming. In addition, the investigators found that Bush played a "relatively limited role in Harken management." In that role, he usually did not receive what were called the Weekly Flash Reports on the company's financial condition; those reports were given only to the board of directors' executive committee. The result, according to an SEC investigative memo, was that Bush was not particularly up to date on the company's finances:
The staff's investigation indicates that, at most, Bush was aware that Harken was forecasted to lose approximately $4.2 million in the second quarter. [The actual loss eventually turned out to be more than five times that] Harken's financial reporting was on about a 45-day delay, so that in mid-June the numbers reflecting Harken's actual results in April would be available. Consequently, by June 22 (the date when Bush sold) no actual revenue or loss information was available for the second two months of the quarter ended June 30. Bush, however, did see the Weekly Flash Report for the week ended May 31, 1990, which reflected a projected net loss for April of $1,875,00, a loss for May of $2,029,000, and a loss for June of $327,000 (for a total of $4,231,000)....Flash reports for the first two weeks of June, which would have been in existence prior to June 22, were only circulated to the members of the Harken executive committee (of which Bush was not a member).
On the second question, whether Bush sold the stock deliberately to avoid losing money before bad news was made public, the SEC found that Bush made the sale after being contacted by a stockbroker who had an institutional client who wanted to buy a large block of Harken stock. When Bush decided to sell, he checked with Harken's in-house counsel, as well as the company's chairman, plus another director, and, finally, the company's outside counsel, to see whether there were any reasons the sale could not go through. No one raised any objections. "In light of the facts uncovered, it would be difficult to establish that, even assuming Bush possessed material nonpublic information, he acted with scienter or intent to defraud," the SEC concluded.
On the third question, whether the news of Harken's unexpectedly large loss hurt the company's investors, the SEC examined Harken's share price just before and just after news of the loss was made public. The announcement came at 9:34 A.M. on August 20, 1990. When the market opened that morning, according to the SEC, Harken's stock was selling at $3 per share. It stayed at that level until after noon, when it began a slow slide to $2.375 per share. The next day, however, it rebounded to $3 per share. If the loss announcement had been a bombshell, SEC investigators reasoned, the stock would most likely have fallen immediately and stayed down. "The conclusion of the Office of Economic Analysis is that, because the price of Harken did not immediately react to the earnings announcement and there is no news that explains Harken's return to its pre-announcement price of $3 on August 21, 1990, the earnings announcement did not provide investors with new material information," the SEC said. Furthermore, even though Harken stock moved down for the rest of 1990, it recovered its value — and more — the next year, when it hit $8 a share.
(... there still exist files over which to stonewall. He's not quite his father's son, is he? =)
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