-Caveat Lector-
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Date: Sat, 29 May 1999 21:31:51 -0500
From: Brenda C. Jinkins <[EMAIL PROTECTED]>
Subject: TAS: George's Road To Riches PART I
George's Road To Riches
by Byron York
TAS
June 1999
You've heard the stories about booze and women. But the real
issue in George W. Bush's past may be the way he made his money.
BYRON YORK
On April 15, Texas governor George W Bush, following the
traditional practice of the president, vice president, and many
of the nation's top politicians, made public his 1998 tax
returns. It's something Bush has done each year since his first
governor's race, but this time was different; the figures
contained in the returns were, at least to anyone unfamiliar with
Bush's recent business affairs, simply astonishing. The governor,
who had reported income Of $271,920 in 1997, estimated that he
made $18.4 million in 1998. His tax bill alone was $3.7 million.
"I never dreamt I'd write a check that big," Bush happily told
reporters in Austin. "Of course, I never dreamt I'd make that
much money, either."
Bush's income came from two main sources. The great majority-
nearly $15 million-came from his stake in the sale of the Texas
Rangers baseball team. An additional $3 million or so came from a
blind trust that manages his investments (the trust fared vastly
better in 1998 than it had the year before, when it reported
income of less than $2oo,ooo). The smallest component of Bush's
income was his salary as governor, $99121.
What was perhaps just as surprising as the size of the numbers
was that the national press did not seem particularly interested
in Bush's unusually good fortune. The New York Times devoted all
Of 137 words to the story; the Washington Post gave it 189. Other
papers didn't mention it at all. But they will. Should Bush
continue to run at the front of the Republican presidential pack,
the story of how he made his money might well become the story of
his campaign. Far more than tales of youthful drinking and
carousing, the record of Bush's rise to wealth reveals how he
became what he is today. It's a complicated tale of family
connections, hard work, and sweet deals, topped off by a
taxpayer-subsidized baseball bonanza that may leave some
Republicans feeling queasy about how their candidate got rich.
You Say Arbusto, I Say Ar-BUST-o
Bush started off in the oil business. It was a natural choice; he
grew up in Midland, Texas, after his father moved there in 1947
to begin a career that started in oil, led to politics, and
ultimately took him to the White House. Sent to school at
Andover, Yale, and Harvard, young Bush in 1975 followed his
father's example and returned to Texas to make a name for himself
He used $20,000 in trust fund money to start an oil and gas
exploration company which he named Arbusto - Spanish for "bush."
In the beginning, Bush was able to seek advice from a number of
family friends, people like James Allison, Jr., a newspaper
publisher and political strategist who had run Bush's father's
successful 1966 campaign for Congress, and Martin Allday, a
lawyer and businessman whom President Bush would later appoint
chairman of the Federal Energy Regulatory Commission. Allday
introduced Bush to Paul Rea, a geologist and oil executive who
would later play an important role in Bush's career. "George had
his business degree from Harvard, but he didn't really know that
much about the oil business," Rea remembers. Rea, Allday, and
others suggested Bush take a crash course to learn about
drilling, leasing, and the other basics of the industry. Bush
followed their advice and signed up for classes at the local
Permian Basin Graduate Center, an institute devoted to the
business.
But Bush went off on a detour before he really got started. In
1978 the House seat from his district opened up, and Bush decided
to jump into politics. He beat his opponent in the Republican
primary but lost the election to Democrat Kent Hance, who
successfully portrayed him as an Ivy League carpetbagger.
Debating Bush on trips around the district, Hance would point out
that "while my opponent was at Yale," he, Hance, was working hard
right down home in Texas. Bush didn't have a chance.
So he went back to the oil business. In starting Arbusto, Bush,
like other small entrepreneurs, financed his exploration by
forming limited partnerships. He looked for investors willing to
put money into the company and then rely on Bush's expertise to
make a profit. In the beginning, they weren't that hard to find.
Much of the money came from Bush's wide circle of family and
friends; in particular, Bush's uncle John, a New York
stockbroker, proved invaluable in the search for capital. "John
Bush called me one day and told me about his nephew George, who
was in the oil business recalls Russell Reynolds, Jr., an old
family friend who runs an international executive recruiting
company. "He asked me if I would be interested in investing. So
George W came to see me, and I thought he was an absolute star. A
very attractive guy. Being a great friend of the Bushes, I put in
a small amount of money in two of the partnerships."
Other family friends and supporters pitched in as well. According
to an analysis in the Dallas Moming News, Arbusto's early
investors included people like FitzGerald Bemiss, a childhood
friend of President Bush's who invested $8o,ooo; Bush's
grandmother Dorothy, who invested $25,000; George L. Ball,
chairmen of Prudential-Bache Securities, who invested $100,000;
financier Lewis Lehrman, who invested $47,500; and John Macomber
and William Draper, both later appointed to the Export-Import
Bank, who invested $172,550.
"Obviously George knew these folks prior to his starting in the
oil business says Michael Conaway, an accountant who served as
Arbusto's chief financial officer. "When George was getting
investors, he certainly called some friends of his dad," adds
Paul Rea. Indeed, especially after entering politics, Bush has
occasionally come under fire for relying heavily on family
connections to make it in business. "If his name was Joe Blow, it
wouldn't have happened," says David Rosen, a geologist (and
Democrat) in the Midland oil business. But all point out that oil
and gas exploration involves lots of money and lots of risk. "You
look wherever you can to put money together," Rosen says, "and if
you've got connections, you use them." Besides, says Michael
Conaway, the investors "understood its a high-risk business."
Which good thing, because Arbusto was soon in serious trouble.
Mr. Uzielli's $1 Million Check
The first well was dry. Then others didn't work out. Despite some
successes to go along with those failures, by the early 1980's
Arbusto's balance sheet was trending downward when the market
intervened to make things even worse. "The price of oil dropped
significantly in '82," Conaway remembers. "It became increasingly
difficult to raise money." Bush needed investors, but he had
already tapped many of the most obvious sources. So it was a very
fortunate day in January 1982 when he found his biggest single
benefactor in an international businessman named Philip Uzielli.
Now in his sixties, Uzielli attended college at Princeton where
he became friends with James A. Baker, the man who for many years
played an integral role in nearly every aspect of President
Bush's political life. It's not clear how Uzielli came to know
George W. Bush, whether it was through Baker or some other
person, because none of the main players is .willing to talk
about it. In a brief conversation, Uzielli refused to answer
questions. Baker did not respond to a request for an interview.
And a spokeswoman for Bush, Karen Hughes, told TAS she doesn't
know how the two men met.
However it started, Uzielli and Bush apparently became not only
business partners but friends, socializing together in both Texas
and New York. And when Arbusto got in a bind, Uzielli using money
from a Panamanian company owned by his family, came to the rescue
with a $1 million investment. The money bought Uzielli a
ten-percent interest in Arbusto, which raised eyebrows because
all of Arbusto, including the desks and the paper clips, was
worth less than $500,000 at the time. Why would a man invest $1
million to buy ten percent of a company that was worth less than
$500,000? "Obviously Uzielli thought his million bucks was worth
ten percent of the company," Michael Conaway says. "There were
not hard assets there, but Uzielli thought it was worth it."
Uzielli would ultimately lose nearly all his money.
About this time, Bush took another step to try to keep his
company going; he changed its name. Arbusto became Bush
Exploration. Company officials believed having "Bush" in the
title would attract more investors than a firm with an obscure
Spanish allusion to the owner's name. "Folks knew Bush but they
didn't know Arbusto, Conaway remembers. "The name was important,
so folks understood who the players were."
But even with the new name and the money from Uzielli, prosperity
was not at hand. The market wasn't helping, and the rest of the
fundraising picture was bleak. Conaway says Bush Exploration
decided not to try another limited partnership for 1983 "because
it didn't look like we could raise the money." By 1984 the
company's assets were dwindling away. As Bush faced disaster,
another friend stepped in-this time Paul Rea, the man Bush met
when he came home to Midland.
Rea was closely connected to an Ohio businessman named William
DeWitt Jr. DeWitt's family, best known for its ownership of
professional sports teams, was also involved in the oil business.
They owned a Texas exploration company called Spectrum 7; while
DeWitt handled the business end, Rea, the geologist, made the
drilling decisions. Rea says that by the early 1980's DeWitt had
become so busy with his other interests that he was looking for
an executive to handle Spectrum 7. "He asked me to find someone
in Midland who would be able to run the business down in Texas,"
Rea remembers.
Rea immediately thought of George W. Bush. He set up a lunch
meeting between the two men, and a deal was born. "DeWitt had
gone to Yale and Harvard, and I thought maybe George might be a
good one to invite to lunch," Rea says. "They had mutual friends
from the Ivy League." DeWitt decided that Bush was the man. "It
was a good fit," DeWitt told TAS. "He had a good operating group
in the area, and we were in Cincinnati and had a lot of
interested investors." DeWitt soon okayed a plan to have Spectrum
7 buy Bush Exploration.
Not that Bush's company was all that attractive a purchase. "It
wasn't because we wanted to buy Bush Exploration or anything like
that," Rea says. "It was that we wanted a business manager." In
February 1984 the deal was done; Bush became chairman and CEO of
Spectrum 7, and Paul Rea became president.
The first year was a great improvement from the last days of Bush
Exploration. Oil prices recovered and Spectrum 7 made some money.
But things never went very well for very long. By 1985, trouble
was again on the horizon, and this time the oil business was
headed for a real disaster. "We could see the downturn coming,"
Rea remembers. "In late '85, people stopped investing."
Once again, Bush's company was in trouble. What to do? Bush and
Rea hoped to merge Spectrum 7 with a bigger company in hopes of
surviving the collapse in the price of oil. They wanted to take
over the management of whatever new company might result, but
were not able to find a suitable partner to make that happen. As
it turned out Harken Energy, a Dallas-based company that was
aggressively taking over troubled oil firms, came knocking.
Although Harken might have been interested in Spectrum 7 in any
event, the deal was not terribly enticing; Spectrum, after all,
didn't have much on the positive side of the ledger. But it still
had a very valuable resource. "One of the reasons Harken was
interested was because of George's name," Rea remembers. "They
wanted to get George on their board."
"George was very useful to Harken former Harken director Stuart
Watson told the Dallas Morning News in 1994. "He could have been
more so if he had had funds, but as far as contacts were
concerned, he was terrific .... It seemed like George, he knew
everybody in the U.S. who was worth knowing." Watson also told
the paper that the Spectrum 7 acquisition was "not too good a
proposition" for Harken, suggesting that Bush was the real reason
for the deal. Watson now says his words were taken out of
context. "I was very much for George," he told TAS in a recent
interview. "I thought he was a fine man, a good addition to the
board. And he did know everybody."
But Harken wanted Bush on the board and not running the company.
In spite of that, Bush accepted. The deal, finished in September
1986, brought him a large amount of Harken stock, worth at least
$ 5oo,ooo at the time, plus a consulting contract that paid him
as much as $120,000 a year. It was the end of Bush's career as a
chief executive in the oil business, but it made possible the
beginning of a new, and vastly more lucrative, line of work.
Ranger George
In 1987 and 1988, while still a consultant to Harken, Bush took
time out to help in his father's successful campaign for the
White House. When President Bush was elected, George W returned
to Texas to contemplate his next move. That same year, 1988, a
Fort Worth oilman named Eddie Chiles, who had owned the Texas
Rangers for many years, began to think about selling the club.
When word of that got out, one of the first people to hear was
none other than William DeWitt, Jr., the Ivy Leaguer who clicked
with Bush at the lunch that led to the Spectrum 7 deal. DeWitt,
whose family until recently had owned the Cincinnati Reds
baseball team, began to put together a group of investors to buy
the Rangers.
But Major League Baseball Commissioner Peter Ueberroth had
problems with the lack of local money in DeWitfs group.'We met
with Ueberroth and he said, 'You've got a goo group, ut why don't
you get more Texas investors,"' DeWitt recalls. "It was clear at
the time, as it is now, that the control person needs to be a
resident of the city or area where the team is located." So
DeWitt undertook to enlist some Texans in the deal -and he
immediately thought of Bush. "We were close friends throughout
the period," DeWitt says. "George was a great baseball fan. We
used to go to games together when we'd be on the road."
(continued in Pt II of 2)
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Kaddish, Kaddish, Kaddish, YHVH, TZEVAOT
FROM THE DESK OF: <[EMAIL PROTECTED]>
*Mike Spitzer* <[EMAIL PROTECTED]>
~~~~~~~~ <[EMAIL PROTECTED]>
The Best Way To Destroy Enemies Is To Change Them To Friends
Shalom, A Salaam Aleikum, and to all, A Good Day.
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