"Bushwhacked!"

Any time an officer of a publicly held corporation sells stock, we ought to know within two days. We ought to know. We being shareholders and employees.

-- George W. Bush on Wall Street, July 9, 2002

Harken's sham sale of Aloha was a shameful violation of shareholder trust, but it kept Harken's share value up long enough to let Bush sell his stock before the corrected profit-and-loss statements were released in August. The press seemed to prefer the stock-sale story because it is easier to explain than the Aloha deal. As reporters began to press harder on the issue, even the unflappable Ari Fleischer began to flap. "The SEC has been well aware of the issue and the SEC has concluded that this is not anything that's actionable," said Fleischer in early July. Bush too became testy, telling reporters that if they wanted more information they should get the minutes of Harken's board of directors' meetings. Harken refused to release the minutes. The story might have stalled there had it not been for the work of Charles Lewis and the Center for Public Integrity. The Washington, D.C.-based public-interest group obtained Harken board minutes and correspondence through a Freedom of Information Act request to the SEC. Then they did what both President Bush and his SEC chairman, Harvey Pitt, had refused to do: they made the documents public by putting them on the center's website (www.publici.org).

You don't need an accountant to interpret the Harken documents. The company was in desperate trouble. At a May 1990 meeting attended by Bush, board members discussed a stock offering they hoped would bring in enough money to keep the company solvent. Bush was named to the board's "Fairness Committee," which was to measure the effects of bankruptcy on small stockholders. Ever the populist, GeeDubya said at this meeting "that inherent in these principles must be the interests and preservation of value for the small shareholder of the company." A month later Bush left the small shareholders holding the bag; he dumped $848,560 of the stock without disclosing the sale to the SEC. The purpose of the SEC's disclosure rule is precisely to inform all shareholders that something may be wrong -- by letting them know when someone with inside information sells a large block of stock.

The Harken memos show just how much Bush knew about the company's dicey finances. By late May 1990, internal company memos warned that there was no other source of immediate financing, that a cash crunch was only days away, and that loans were slipping "out of compliance." Banks were demanding guarantees of sufficient equity to cover the notes. As chairman of the audit committee actually working with the accounting consultants called in by the board, Bush knew exactly how grim their conclusions were. He was warned, along with other directors, in a May 25 memo that it would be illegal to dump his stock. He sold in June to a private purchaser who has never been identified.

The company was kept afloat by investments from a small liberal-arts college in Cambridge, Massachusetts. This news was revealed only after a group of dogged and enterprising Harvard students at the nonprofit HarvardWatch dug into records there and turned their findings over to The Wall Street Journal in 2002.

Harvard's Harken bailout helped salvage Bush's last shaky oil company, at one time setting up a Harvard-Harken venture that moved $20 million in liabilities off Harken's books. It also cost the university's endowment more money than the young Bush ever earned in West Texas. Hooking up with Harken contributed to a record $200 million write-down for Harvard Management in 1991. Why did Harvard do it? Let us count the ways. Harvard Management exec Michael Eisenson sat on Harken's board with Dubya Bush. George Herbert Walker Bush was vice president of the United States -- and a Skull and Bones Yalie. His son held a Harvard Business School M.B.A. -- and was a Skull and Bones Yalie. After Poppy became president and tiny Harken somehow secured a huge drilling contract in Bahrain, Harvard kept pouring millions into the little Texas oil company in '89, '90, and '91.

In July 2002 the White House offered three explanations for Bush's failure to report his own Harken stock sale. The first was that the filing of the disclosure form was "the corporation's responsibility." A letter from Harken's general counsel dated October 5, 1989, gently reminds Bush that he had failed to file the same Form 4 when he exercised his director's option to buy 25,000 shares of Harken stock exactly one year before he unloaded it in June 1990. The "Dear George" letter from Harken's general counsel, Larry Cummings, made it clear to Bush that company lawyers or accountants couldn't file the forms because they required his signature.

Turns out Bush regularly failed to report insider dealings to the SEC. On two occasions before his June 1990 stock dump, Bush had sold as a board member and failed to file the disclosure forms.

There are countless subjects on which George W. Bush might have pleaded ignorance in 1990, but a failing oil business was not one of them. At the end of 1989 Harken president Mikel Faulkner told a reporter at the Petroleum Review that Harken would book more than $6 million in end-of-the-year profits. On August 22, 1990, Harken's second-quarter report predicted $23.2 million in losses. Once the news hit the street, the stock sank immediately from $4 to $2.37; it later bottomed out at twenty-two cents a share.

Eight and a half months later The Wall Street Journal reported that the president's son was under investigation for failure to report the stock sales. The chairman of the SEC was Richard Breeden, who had worked for Poppy Bush as an economic adviser. The walls of Breeden's office were so plastered with photos of Poppy and Barbara Bush that a New York Times reporter observed, "George Bush is Breeden's Mao." The general counsel at the SEC was James Doty, the same James Doty of the Baker Botts law firm, who represented GeeDubya when he bought his 2 percent interest in the Texas Rangers with the money he got from dumping his Harken stock. The Houston law firm was founded by the great-grandfather of James Baker III, secretary of state under Bush the Elder and the point man for Bush the Younger in Florida after the disputed 2000 election.

Breeden and Doty never asked for an interview with the subject of their investigation. Since 1993 Breeden, Doty, and other partners of Baker Botts have contributed $210,621 to GeeDubya's political campaigns, making the firm the president's number-fourteen career patron. They were beaten out for the number-thirteen spot by Arthur Andersen, at $220,557.

In a letter regarding "George W. Bush Jr.'s [sic] Filings," SEC investigators observed that Bush was familiar with the SEC's filing deadlines, having met them when he filed reports of dealings with three other companies in which he owned stock. But with Harken, Bush filed "four late Forms 4 reporting four separate transactions, totaling $1,028,935." During his first campaign for governor of Texas, Bush repeatedly told reporters he had been "exonerated" by the SEC, and Fleischer repeated the same line in the summer of '02. But the report issued by the SEC's enforcement division in 1993 specifically says the investigation "must in no way be construed as indicating that the party has been exonerated."

Just as Harken was selling itself its own subsidiary in Hawaii, it set up another corporation on another island. Harken Bahrain Oil company registered in the Cayman Islands in September 1989. The Caymans, like Bermuda, are a convenient offshore address for U.S. companies that want to do business at home but prefer not to pay U.S. taxes. After the furor over tax-dodging corporations broke, Bush made this ringing statement in August 2002: "We ought to look at people who are trying to avoid U.S. taxes as a problem." Corporate tax dodgers now cost the country seventy billion dollars annually, according to the IRS, all of which has to be made up by average citizens who can't acquire a mail drop in the Caymans. The Scourge of Corporate Misbehavior even daringly urged corporate tax-dodgers to "pay taxes and be good citizens." Then the White House had to acknowledge that Harken Energy had set up an offshore subsidiary to avoid taxes. Bad timing.

Next Page: Enron in the making

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