Jo Fish of Democratic Veteran thinks an investigation of Junior’s old company, Harken, might make up the next round of media re-examination of Bush. Those of us who harped about Harken back in ’99 and were ignored would be gratified. The Harken episode shows graphically all the Bush characteristics with which we have become so familiar over the last three years–greed, hypocrisy. dissembling, and denial. Jo links to a detailed history of Harken compiled by the Center for Co-operative Research that may be an eye-opener for anyone who thought this was a tempest in a teapot.
To begin with, Junior was bailed out of failed businesses not once but twice before Harken. First came Arbusto Energy in 1979, an oil company founded by Shrub, that by 1984–a scant five years later–was in so much trouble financially (it owed some $3Mil+) that it was facing bankruptcy. Most of the investment money came from–do I have to tell you–“family friends”:
Before going into business, however, Bush took a quick detour into politics. In 1978, he ran for a seat in the U.S. House of Representatives. Bush lost the election, but he won the confidence of relatives and family friends who agreed to support Arbusto, his oil-exploration firm. From 1979 to 1983, dozens of investors poured millions into the company and its successor, Bush Exploration. Unfortunately for the investors Arbusto, however, turned out to be a financial failure. By April 1984, the company was $3.1 million in debt.
Riding to its rescue came another small oil company, Spectrum 7, run by a couple of speculators named William DeWitt and Mercer Reynolds. Despite the fact that their company was in only marginally better shape than the flea-ridden dog they were buying, DeWitt and Reynolds managed to secure the financing necessary to pay off Arbusto’s debts and purchase the company. There are two intriguing questions here: 1) Where did they get the money? The record isn’t clear. 2) Why did they do it? Spectrum wasn’t all that healthy to begin with, and purchasing a still unhealthier company carrying a heavy debt-load and no acknowledgable assets wouldn’t have seemed the best way to plan for financial success. Nor does the sweetheart deal Junior got from the acquisition make much sense.
As part of the deal, Bush was made president of Spectrum 7 and was given a 13.6 % stake in the company.
Pretty good for somebody who was selling a worthless company that was $$$millions$$$ in debt. And it was likely that debt that pushed Spectrum over the edge barely two years later. By 1986, Spectrum had accumulated another $2Mil in unpaid loans, making their financial position precarious at best. They needed another savior, and it was apparently Bush who found it: Harken Energy.
Harken Energy took over Spectrum 7 in 1986. In exchange for his equity in Spectrum 7, Bush received $2.25 million worth of stock in Harken and was hired as a “consultant.” During the course of his employment with the company and his tenure as a board member, he managed to acquire an additional $600,000 in Harken stock. In addition, he was paid between $42,000 and $120,000 a year. More than one critical observer has noted that the price Harken paid for Bush’s indebted company was “astonishingly high.” It was generally assumed that a premium had been paid for having George Bush Sr.’s “kid” on the board…
David Corn, in a short interview with George Soros who at the time was a part owner of Harken…asked, “[C]an I ask you about some ancient history? . . What was the deal with Harken buying up Spectrum 7?”
Soros answered, “I didn’t know him. He was supposed to bring in the Gulf connection. But it didn’t come to anything. We were buying political influence. That was it. He was not much of a businessman.”
Possibly the understatement of the year. Junior had no Gulf contacts. His father did but apparently failed to use them on his son’s behalf. Incidentally, according to The Center for Public Integrity, Junior got all those perks “even though he spent much of 1987 and 1988 working on his father’s presidential campaign.” Obviously, he wasn’t getting paid for his “expertise.” But the list of goodies he obtained from the Harken acquisition doesn’t end there. The CCR report notes:
While on the board, Bush had accepted two loans from Harken totaling $180,375. He received them in 1986 and 1988 at a below-market interest rate of 5%. Bush used the money to buy stock in Harken under an incentive plan for board members. He later converted his stock holdings into stock options. The White House stated that Bush never exercised the options. Not untypical to the Bush administration’s presumption of being above the law, Bush, in his recently proposed corporate anti-fraud agenda, denounced such loans.
An agenda, I might add, that was in response to the Enron debacle and was dropped the same day that Enron dropped from the headlines.
Harken’s owners at the time of the Spectrum 7 buy-out were Big-Time heavyweights. Besides Soros there was the Harvard Management Fund which came on-board with a $30Mil investment when Junior–a Harvard MBA–joined the Harken Board (which may have been a condition of the investment), and a Saudi real estate tycoon named Sheikh Abdullah Bakhsh who had serious connections to BCCI (the infamous Bank of Credit and Commerce International that was later outed as a front for govt money-laundering).
So what exactly did W do for all that money? He arranged a loan, that’s what.
In the spring of 1987, Harken Energy was in desperate need of cash. [Jeez, I wonder why?–m] Through George W. Bush’s connections, Harken was able to acquire a $25 million loan from Union Bank of Switzerland (UBS) with the help of Stephens, Inc., a large investment bank in Little Rock, Arkansas. In return for the loan, UBS received stock interest in Harken….
What a deal. UBS lays out $25Mil and gets in return stock in a company that’s busy going down the tubes because it makes questionable purchases of failing companies for waaaay too much money. What’s interesting about a lot of this is that Junior apparently never contributed one iota of legitimate, concrete value to any of the companies he was ever associated with. His sole ability seems to have been a talent for arranging loans that he never re-paid. Apparently this was considered an important skill by his employers. Certainly they paid him pretty well for it.
Harken’s end came in August of 1990. Despite landing a contract with Bahrain that “[gave] Harken the exclusive right to carry out exploration, development, production, transportation and marketing of petroleum throughout most of Bahrain’s Arabian Gulf offshore territories”, Harken found itself over $23M in the hole when the fields for which they had contracted turned out to be oil-less and its stock plunged. Junior, however, did alright–two months before that, he had cleared out.
Bush had unloaded two-thirds of his holdings on June 22, 1990, for $848,560. He used the money from the sale to pay for his share of the Texas Rangers
There is no evidence whatever that Bush had much to do with the Bahrain deal which was largely brokered through Sheikh Bakhsh, so we are forced to conclude that his one and only contribution to the company was that Swiss loan. For this single action he was paid an initial $2.5Mil in stock; an additional $600,000 in stock when he joined the Board which fortuitous timing turned into $850,000; a salary that over the four years of the company’s survival totaled another $400,000+, and two below-interest loans totalling nearly $200,000 that there is no evidence he re-paid (or was ever asked to re-pay). In all, nearly $4Mil.
Not bad for a lousy businessman whose entire “career” was spent in failing companies that never made a nickel while he was involved with them. How do I get a job like that?
Oh yeah, I have to arrange to get myself born into a rich and influential family. Rats. Too late now. Why didn’t I think of that earlier?