[Webmistress Note: Because this article has expired off of Yahoo News, I have posted this article below]
Interesting. But I really think the SEC shrugged and said, Ah, it's the President's son, let's give it a pass. Little did they suspect that the president's son would decide to become the president himself or that there would be a paper trail. Too bad.
Secrecy Surrounds Bush Stock Deal
Fri Jul 12,12:42 PM ET
By PETE YOST, Associated Press Writer
WASHINGTON (AP) - It is a stock market whodunit that has withstood a decade of scrutiny. Who bought George W. Bush's problem-plagued oil company stock just before its value dropped?
The 1990 transaction involving shares of Harken Energy Corp. allowed the future president to pay off a bank loan for his now-famous stake in the Texas Rangers baseball team. The identity of the buyer of the stock has escaped public disclosure.
Federal regulators who examined the deal as a possible insider trade never asked. President Bush ( news - web sites) says he doesn't know and the White House declines to ask the broker who handled the transaction. Reporters have fared no better in getting to the bottom of the mystery.
Was Bush's sale of Harken stock another instance of a helping hand from family friends? Or was it a simple case of a buyer trying to make a killing in a high-risk investment?
Corporate scandals and failures that have rocked Wall Street in recent months have renewed questions about Bush's own business dealings when he was a Texas oilman. The White House was put on the defensive again Friday, as Rep. Henry Waxman ( news, bio, voting record), D-Calif., wrote Bush a letter saying the president should donate the profits from the sale of his Harken stock to a charity that helps displaced workers.
"Given the unique position of moral authority you hold, you would be sending an unmistakable signal to all executives that actions — not just words — are needed at this critical time," wrote Waxman, the ranking Democrat on the House Government Reform Committee ( news - web sites). Waxman also said Vice President Dick Cheney ( news - web sites) should donate profits from his stock options at Halliburton and that Army Secretary Thomas White should donate his income from bankrupt Enron Corp. for 2001.
In the 1990 stock sale, Bush collected $848,560 when he sold 212,140 shares he had gotten in the merger of his struggling oil company with Harken in 1986.
By the time of the sale, Harken's finances also were in the red. Daily trading activity in the stock was as little as 1,300 shares on the New York Stock Exchange ( news - web sites). If Bush had tried to sell such a large amount of Harken stock into the open market, it undoubtedly would have driven the price far below the $4 a share he was paid.
Bush's oil industry career is a history of being bailed out of money-losing ventures. Among the businessmen who came to his rescue before Harken were Cincinnati businessmen Mercer Reynolds III and William O. DeWitt. They eventually invested in the Rangers with Bush, raised more than $3 million for his presidential campaign and served as co-chairmen of Bush's inaugural committee. Reynolds is now U.S. ambassador to Switzerland and Liechtenstein.
Bush's sale on June 22, 1990, was handled by California stock broker Ralph D. Smith, who says he got a call on June 9 that year from an institutional client who wanted to buy a large block of Harken.
Smith said he then made a couple of "cold calls" to people who owned Harken stock, including Bush.
The broker said there wasn't any arrangement ahead of time to bail Bush out of Harken.
"If there was a rigged buyer, why would he come" to a West Coast brokerage firm? said Smith, who worked for Sutro & Co. in California until his retirement.
The broker said that "if you wanted to do a favor for Bush, you just go to him directly, say here's $800,000 and we'll get this stock transferred."
The 1990 sale triggered an insider trading probe of Bush because he was eight months late in disclosing it to the Securities and Exchange Commission ( news - web sites). White House press secretary Ari Fleischer ( news - web sites) defended the sale by saying Bush had notified the SEC in a timely manner that he intended to sell his shares. However, Bush failed to notify the SEC once the stock actually was sold, as required by law.
On Thursday, a Washington group, the Center for Public Integrity, posted internal SEC documents on the Internet showing that Harken initially was uncooperative in the insider trading probe. The company subsequently provided extensive cooperation to the SEC.
Uncovering little evidence to support an insider trading case, the SEC chose not to interview Bush.
SEC investigators interviewed Smith in the probe, but, according to Smith, they never asked the broker who bought Bush's stock.
Over the past two years, news organizations have tried to persuade Smith to ask the buyer to waive the cloak of confidentiality that surrounds the transaction, but the retired broker has declined.
"They're not going to find out the name of the buyer; it's none of their business," Smith said, adding that he had a professional responsibility not to identify the buyer.
On Thursday, White House spokesman Dan Bartlett said that "it isn't our place" to urge that the buyer step forward.
While Smith declines to name the purchaser, his difficult-to-read handwritten notes turned over to the SEC in the insider trading probe of Bush supply a clue.
The notes for June 9 appear to state that "Geo Bush will sell 212,010 shares in about 2 weeks." The June 22 entry on the day of the sale appears to state, "s/212,140 at 4 to Lee for Bush."
Smith declines to say whether the apparent word "Lee" refers to a person or an entity.
Bush's lawyers have said his investment in the Texas Rangers — not any inside information about Harken's deteriorating financial performance — was the motivating factor in selling his shares.
The stock Bush sold for $4 was selling for $3 two months later and fell to around a dollar by the end of 1990. It rebounded to nearly $9 a year after Bush sold. Today it sells for 44 cents a share.
Despite financial losses in 1990 and 1991, Harken's stock price was propped up by the company's highly publicized deal to drill for oil off the coast of Bahrain. The project, which came together while Bush's father was president, never struck any oil. Little Harken beat out major oil companies, including Amoco, for what at the time was thought might be an extremely valuable concession.
Bush's lawyers told the SEC that before the sale, his financial adviser "was bugging him to get liquid" to meet a financial obligation of $600,000 in connection with the Texas Rangers and to pay a tax bill of a couple of hundred thousand dollars. Bush paid off a bank loan he'd taken out for a share of the baseball team.
Bush's $600,000 stake in the Rangers in 1998 brought him $14.9 million when the team was sold.
Return to the Patriots of Truth Speak Out Main Page
