White House Watch: Credibility problem

NICHOLAS M. HORROCK, UPI Chief White House Correspondent

WASHINGTON, July 17 (UPI) -- As he often does, President George W. Bush took on a slightly pained expression Wednesday when a reporter asked him why he wouldn't release SEC documents about his $850,000 stock transaction at Harken Energy Company -- where he was investigated for failing to report the sale promptly to the government.

"As to a look at Harken," he told the inquiring reporter, "the SEC, as a result of Freedom of Information requests, has released the documents and the key document said there is no case."


Bush has been making this explanation with some minor variations since he first ran for governor of Texas nearly a decade ago. There is nothing to find in Harken, he always claims. It is a dry hole. Professional Securities and Exchange Commission investigators, government employees he stresses, not political appointees, made that determination and that should settle the matter.

But it never has.

Harken comes up again and again, now undermining the president's effort to reassure Americans about the economy and his administration's ability to discipline fraud and malfeasance in major corporations like WorldCom that revealed last month it had hidden $3.8 billion in debts.


WorldCom -- like Enron Corp., where Bush supporter Ken Lay was chief executive -- and a score of other major corporations have been accused of cooking the books over the last nine months, leaving thousands of employees out of work and millions of stockholders out of luck.

No matter how many times Bush tells his tale, there are always two questions unanswered: why won't Bush order the SEC to divulge the complete record on its Harken investigation and who bought the nearly $850,000 in stock 12 years ago?

The White House pooh-poohs reporter questions as being a nonsensical comparison with the billions manipulated at Enron and WorldCom, but to Bush, the Harken sale may have been on of the most crucial of his business career, clearing debts so he could invest in the Texas Rangers baseball team which led, in turn, to the $15 million windfall he got from the team's sale several years later.

It is with that windfall that Bush ran for governor and the rest -- as they say -- is history.

But was the SEC investigation arms length? The SEC in 1990 forced Harken to restate its financial statements and account for millions of dollars in losses that it had disguised as the sale of a subsidiary to a group of Harken insiders. If this sounds familiar, a little like Enron or WorldCom, it should. Arthur Andersen was Harken's auditor, the same Arthur Andersen that was convicted last month for obstruction of justice in the Enron case.


Bush almost certainly would have known about these difficulties because he was on Harken's board of directors and a member of the "audit committee," which had oversight over such matters. In the course of the larger investigation, Bush came under scrutiny for not filing to the SEC on time a report called an F-4 -- a notification that an insider had sold a large block of stock.

In April 1990, Harken signed a 35-year drilling contract with Bahrain, and its long-term prospects looked good. In May 1990, a Los Angeles stockbroker called Bush and said he had a buyer looking for a large block of Harken shares. Bush cleared with other company officials that selling would not adversely affect the firm and, on June 22, 1990, sold 212,000 shares for just over $4, about $850,000. The name of the purchaser has never been disclosed.

The move has been criticized on two grounds. The stock dropped precipitously after his sale because of unanticipated losses in the Hawaiian subsidiary, which might suggest to some that he unloaded it with foreknowledge of the loss. Bush said he had no idea there were difficulties ahead. (In fact the stock doubled later on the strength of the Bahrain contract.)


Another board member told newspapers at the time that he and Bush were kept up to date about losses, but Bush said the director's memory was flawed.

Bush filed an intention to sell on June 22, 1990, but did not file the subsequent F-4 disclosure until nine months later, on March 4, 1991.

On April 5, 1991, the SEC opened a preliminary inquiry into the sale. At that time, Bush's father was president of the United States and his closest political friend and Secretary of State was James A. Baker, III, son and grandson of two of Texas' most powerful lawyers, the Baker in the title of Baker & Botts.

Baker & Botts is and was one of the most influential law firms in the country.

The senior Bush had gone to Baker & Botts for two of the most influential jobs at the SEC, appointing senior partner Richard Breeden as chairman and John R. Doty as general counsel. Though neither directly supervised the case, they had, in fact, supervision of all enforcement decisions.

Young George Bush went to Baker & Botts for his defense lawyer, hiring Robert Jordan, former partner of Breeden and Doty, to represent him with the SEC. There is no indication that Breeden or Doty recused themselves from this case as a result.


SEC investigators never talked to Bush and the details of the steps the SEC took to look into the matter have never been officially made public. In 1993, as Bush was preparing to run for governor, he sought to learn the outcome of the inquiry.

On Oct. 18, 1993, Bruce A. Hiler, associate director of enforcement at the SEC wrote to Bush's lawyer:

"Please be advised 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." The SEC routinely notes that these letters "must in no way be construed as indicating that the party has been exonerated or that no action may ultimately result from the staff's investigation of that particular matter."

Should this, as President Bush says, be the end of it?

Consider the things that make many in the public question the story.

Doty was later to handle aspects of the sale of the Texas Rangers to Bush and his partners. James A. Baker was to take charge of George Bush's battle to secure the Florida election outcome. Robert Jordan was appointed ambassador to Saudi Arabia. Richard Breeden was recently appointed by District Court Judge Jed Rakoff in New York to be the "monitor" of WorldCom to make sure no documents are destroyed or big payouts made to the officers.


Judge Rakoff is the former law partner of Harvey Pitt, Bush's choice to be chairman of the SEC and the man now accused of being soft on big business. Harvey Pitt's SEC is investigating charges of manipulations of financial statements at Halliburton Energy Co. while Vice President Richard Cheney was chairman of the board from 1995 to 2000 and where another Bush One appointee, also a Secretary of State, Lawrence Eagleburger was on the board of directors.

How -- confronted with a list like this -- can an average person be assured there was objectivity in 1991 or now?

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