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Political analysis and other daily rants on the state of the nation

Wednesday | July 03, 2002

Corporate scandals reach Bush

Paul Krugman's latest column has ignited a political firestorm that may well inform the outcome of the 2002 elections.

Krugman chronicles the story of Harken Energy, which is like a 'mini-me' version of Enron. Back in the mid-80's, Bush ran a failing energy company called Spectrum 7. Despite being a money-losing venture, the company was bought by Harken Energy for $2 million. Harken's CEO admitted he bought Spectrum 7 only to get Bush on his company's board of directors.

Harken was also losing money, but hid its loses by including profits from the sale of a subsidiary, Aloha Petroleum. Who bought Aloha? Harken insiders who financed the purchase through a loan from, who else, Harken. The SEC ruled the transaction was illegal, and forced Harken to restate its profits.

But here's the kicker:

[L]ong before that ruling -- though only a few weeks before bad news that could not be concealed caused Harken's shares to tumble -- 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 S.E.C. about this transaction until 34 weeks had passed. An internal S.E.C. 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.
Ironically, the Harken Energy story was first reported back in early March by the Wall Street Journal. The Center for Public Integrity ran a more in-depth analysis of the deals, along with a great timeline in early April. But it was Krugman's column, in context of the Enron and WorldCom debacles, that finally attracted media notice.

And Bush has taken the bait. Check out this lead from a story in today's Washington Post: "President Bush defended in a snappish tone Tuesday his own business experience with a corporation accused of fishy accounting."

Refusing to address the issue in depth, Bush merely said (in his snappish tone): "Everything I do is fully disclosed; it's been fully vetted. Any other questions?" Bush's short temper betrays his fear. The media is starting to sniff something big, and yes, there will be other questions.

The media doesn't have too dig deeply. It's all in the public record. As Media Whores Online has pointed out in its in-depth look at the issue (a must-read), The SEC reported that Bush violated SEC rules at least four times (link is a PDF). Yet the SEC was apparently ordered to back off Dubya after his father became president of the US.

The Associated Press has already picked up on the CPI report and discrepencies in the administration's spin. While Bush previously said government regulators "lost" his insider trading paperwork, propaganda mouthpiece Ari Fleischer now blames it on a "clerical error" by Harken lawyers. The article also has this gem:

Bush filed Form 4s late on four occasions, according to an internal Securities and Exchange Commission finding that was reported by a nonpartisan watchdog group, the Center for Public Integrity. Those sales involved stock worth more than $1 million.

On the largest sale, Bush sold his stock for $4 a share, just before the company filed a quarterly report revealing it had lost $23 million during the period. By the end of the year, the memo says, it was trading at around $1.

The Democrats smell blood, and the Republicans are running scared. Bush's famous sense of humor has deserted him. And, he can't claim he was snappy from jet lag (as he did when snapping at a US reporter in France). While Bush expresses outrage over corporate evildoers, it turns out that he and Cheney have both fed from that trough.

So now we have Ari saying, "If there are any bad players in our free-enterprise system, they will be held accountable by this administration and by the government."

Hopefully Democrats will take Fleischer at his word and begin investigating Bush and Cheney's corporate evildoings.

Posted July 03, 2002 09:54 AM | Comments (2)


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