July
3, 2002 12:25 p.m. The
Democrats’ Latest Hit Job
They're
trying to portray George W. Bush as a corrupt corporate CEO.
espite intense efforts, Democrats in recent weeks have had little success
in their effort to inflict political damage on George W. Bush by tying
him to corrupt corporate CEOs. Now they're trying another approach, accusing
Bush of being a corrupt corporate CEO.
On Tuesday, New
York Times columnist Paul Krugman discussed Bush's 1989 sale of stock
in Harken Energy, a company which had bought Bush's oil and gas company
and placed Bush on the Harken board of directors. In 1989, Harken was
struggling financially. "Only a few weeks before bad news that could
not be concealed caused Harken's shares to tumble," Krugman wrote,
"Mr. Bush sold off two-thirds of his stake, for $848,000. Just for
the record, that's about four times bigger than the sale that has Martha
Stewart in hot water. Oddly, though the law requires prompt disclosure
of insider sales, he neglected to inform the Securities and Exchange Commission
about this transaction until 34 weeks had passed. An internal SEC memorandum
concluded that he had broken the law, but no charges were filed. This,
everyone insists, had nothing to do with the fact that his father was
president."
Thursday morning,
the Washington Post followed up on Krugman's column with a story
headlined "Memo Cited Bush's Late SEC Filings; White House Dismisses
Suggestions of Wrongdoing in Bush's Time in Oil Business." Reporter
Mike Allen wrote that "Bush's brushes with the SEC have new resonance
now that he is preparing to respond to the wave of accounting scandals
by proposing tough restrictions on corporate officials during an address
on Wall Street next week." The SEC memo that had been cited by Krugman,
Allen wrote, was not a new revelation but had in fact been part of a large
amount of information published by the Center
for Public Integrity, which posted the SEC memo on its web site in
October, 2000 (much of the Center's research was done in collaboration
with the now-defunct Talk magazine, which published a story on Bush's
finances). The SEC memo, in Allen's words, "attracted little attention."
While it is perhaps
news to Krugman and Allen, in fact the Harken story has attracted quite
a lot of attention over the years. Political opponents of the first President
Bush tried to use it to tarnish the White House. George W. Bush's political
adversaries in Texas tried to make it an issue in his campaigns for governor.
They tried again when he ran for president.
And now, they are
trying yet again. "Democrats sense in the corporate scandals an issue
that might finally dent Mr. Bush's approval ratings," the New
York Times reported Wednesday. "They are making a case that Mr.
Bush and Mr. Cheney, during their time in the corporate world, would not
have been able to live up to the policies they are advocating now."
Indeed, talking points released Tuesday by the Democratic National Committee
said, "If it's corporate penalties the president prefers, perhaps
he should take a look in the mirror."
But the problem for
the president's opponents is that the charges, at least as far as Harken
Energy is concerned, have simply never amounted to much. In 1999, I examined
Bush's business career in some detail for an article in The American
Spectator magazine. Bush's sale of Harken stock was part of that story,
and I spoke to a former Harken director and a former Bush partner, as
well as to William McLucas, who headed enforcement at the SEC at the time
of the sale (McLucas is still in the news today, having been retained
by WorldCom to investigate its accounting scandal). All the evidence available
at the time — and all that is available now — suggested that
Bush did not, as Krugman implies, engage in insider trading or other wrongdoing.
This is what I wrote about the transaction in the June 1999 issue of The
American Spectator:
[Bush's] largest
single asset was the chunk of Harken stock he had received in the merger.
Through the first half of 1990, the stock price was quite consistent,
moving between $4 and $5 a share. In June 1990, Bush sold two-thirds
of his stake — 212,000 shares — at $4 for a total price of
$848,000. At the time of the sale, Harken was moving into a period of
financial difficulties. In the months following Bush's sale, the company
announced a quarterly loss and the stock price went into a long, slow
decline; by the end of 1990, it was $1.25 a share. Since Bush was not
only a member of the board of directors but was also on a committee
assigned to study Harken's financial situation, his decision to sell
a few weeks before the slide began led to accusations that he used insider
knowledge to get out when the getting was good.
Bush denies any
wrongdoing and has often said he was unaware of the difficulties within
Harken. "He thought he was selling into good news," spokeswoman
Karen Hughes told TAS, adding that if Bush had waited to sell
the stock he could have earned considerably more than he got. That would,
however, have required his waiting at least a year; it was not until
June 1991 that Harken got back up to $4 a share. By September 1991 it
briefly hit $8 a share.
In 1991 the Securities
and Exchange Commission investigated the sale and took no action against
Bush or anyone else. "I don't remember a lot about it, other than
there wasn't a lot about it," says William McLucas, who was the
SEC enforcement chief at the time. "The facts just didn't support
any judgment that this was something that would result in a serious
enforcement proceeding." Nevertheless, Democrats brought the issue
up in 1992, as President [George H.W.] Bush was running for re-election;
it became part of several news stories recounting alleged business improprieties
by Bush family members. Texas governor Ann Richards revived the story
during the 1994 gubernatorial campaign and also suggested, without evidence,
that President Bush had rigged the SEC investigation, which commission
officials denied.
As far as Bush's
reporting the sale late to the SEC, it is not precisely clear what happened.
Hughes told me in April 1999 that Bush believed he reported the sale earlier
than SEC records indicated; she suggested the forms might have been lost,
either inside Harken or the SEC. But whatever the reason, the fact that
the report was filed late is not particularly damning in the absence of
any underlying wrongdoing that a late filing might have been intended
to conceal. And the SEC did not find anything that suggested such wrongdoing.
Since the president
began his political career, there have been a number of meticulous examinations
of the Harken sale, first in Texas newspapers, then in the Washington
Post, the New York Times, and other national publications.
None have come up with evidence that Bush did anything wrong in the Harken
matter. Now, there will undoubtedly be more investigations of the same
material. Democrats can hope, but it's unlikely they'll find what they're
looking for.
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espite intense efforts, Democrats in recent weeks have had little success
in their effort to inflict political damage on George W. Bush by tying
him to corrupt corporate CEOs. Now they're trying another approach, accusing
Bush of being a corrupt corporate CEO.
