from The Daily Enron
TIME TO EXHUME THE BODY?
SEC Harken Investigation Under Fire
While the President went fishing in Maine over July 4th, it was a working weekend for White House staffers. It seems that a scruffy flock of old Texas chickens came home to roost in the executive branch and staffers spent the weekend trying to round them up.
Long believed safely buried a decade ago, President Bush's Harken Energy stock deals now threaten to implicate the President in the very corporate misbehavior he was planning to criticize in a major policy address tomorrow.
So, supporters of the President fanned out to the weekend talk shows, talking points in hand, hoping to blunt the case against their boss. Harken was a bogus issue, they claimed. They offered three reasons why we should not worry ourselves over Bush's Harken Energy deals:
Not-to-Worry Reason #1 - Bush's failure to notify the SEC for 34 weeks that he had sold his Harken stock was a simple mistake.
But, was it a "mistake" with a purpose? Timely reporting of the stock sale might have raised some potentially embarrassing questions at the time:
Bush sat on Harken's audit committee, which had learned by May 1990 that Harken was in deep financial doo-doo. The company would have to report a large loss that fall.
The company had mitigated a $23 million loss by cooking up a phony $10 million "sale" of a Harken subsidiary to some of Bush's fellow Harken insiders. The "sale" was financed by money borrowed from the company itself. (Later, the SEC forced Harken to reverse the transaction and claim the full loss.)
It is likely that when Bush sold his Harken stock on June 22, 1990 that he was aware of his father's intention to attack Iraq in less than two months. At the time, the only deal keeping Harken's stock afloat were high hopes for Harken's exclusive contract to explore for oil in the soon-to-be war zone nation of Bahrain.
Curious journalists have a way of connecting dots that big when they involve a sitting President's son. By waiting 34 weeks before reporting his Harken stock, time and events would diminish the size of those dots, along with the curiosity to connect them.
Not-to-Worry Reason #2: Yes, Bush had served at the time on both Harken's board and its audit committee, but he was out of the loop. He was not aware that consultants at Smith Barney, who had been hired by the audit committee and were working for them, had discovered that the company was $150 million in debt and would lose $23 million that year.
Well, maybe if Bush had only held a seat on Harken's board this excuse would have some degree of plausibility since it might be argued that the audit committee's findings had not been presented to the board before Bush dumped his stock. But Bush also sat seat on Harken's audit committee, which had been tasked by the board earlier in the year to work on a restructuring plan for troubled Harken. As part of his service on the audit committee Bush would have certainly been privy to the earliest discussions and drafts of that report.
If Bush's excuse is that he was not paying attention, had not read the reports, or had not been consistently AWOL from audit committee meetings, how does that square with his current position holding board members accountable?
What is missing is testimony under oath - what did Bush know, and when did he know it before dumping his stock? (See chart in Featured Content on our homepage.)
Not-to-Worry Reason #3 - The SEC investigated the whole Harken matter in 1990 and found no reason to pursue it.
True, as far as it goes. But take a closer look and this reason loses all its luster.
At the time of the SEC investigation, Richard Breeden was SEC Commissioner. Breeden was appointed to his point by President George H. Bush. Then he was asked to investigate the boss's son. (Previously Breeden had served in the Reagan/Bush administration as deputy White House counsel for Vice President Bush.)
Breeden passed this hot potato to his deputy, James R. Doty, to investigate. In private life Doty had been the accused's attorney.Among other things, Doty had negotiated Bush's acquisition of the Texas Rangers baseball team. Letting Doty investigate this transaction was as if the Clinton administration had tasked then Deputy Attorney General Webster Hubble to investigate the Whitewater transaction.
Doty quickly slammed the coffin lid shut on the investigation - without interviewing a single Harken board member. And there it has lain buried ever since - case closed.
All this raises an inevitable question: Why shouldn't the Harken case be exhumed for a full independent autopsy?
Harken and Arthur Andersen - Kissin' Cousins?
It was all in the family for Harken Energy and Arthur Andersen. Harken drew its top layer of executives directly from Arthur Andersen.
Harken's CEO, Mikel D. Faulkner had been employed by Arthur Andersen in its energy audit division - the same division that later audited Enron. Anna M. Williams, Harken's Executive Vice President-Finance and Chief Financial Officer also worked in Andersen's energy audit division, as a senior auditor.
Bruce N. Huff, Harken's President, Chief Operating Officer, had worked in Andersen's audit division as had Wayne Hennecke, Harken's Senior Vice President-Finance and Chief Accounting Officer.
When Harken Energy had to select an outside auditor they selected Arthur Andersen. And it was Andersen auditors who sanctified Harken's books in 1989 when the company arranged the phony $10 million sale of a subsidiary to Harken insiders - financed entirely by a loan from the company.
So, it would seem that long before he became America's CEO, President Bush had enjoyed a front row seat from which to observe the very accounting problems he now condemns.