Oil Firm Links Bahrain, BCCI, Bush Son
This article was prepared by staff reporters Thomas Petzinger Jr.,
Peter
Truell and Jill Abramson
12/09/1991
The Asian Wall Street Journal
PAGE 1
(Copyright (c) 1991, Dow Jones & Co., Inc.)
Two years ago, Talat Othman didn't have the president's ear. But
since
August 1990, the Palestinian-born Chicago investor has attended three
White
House meetings with President George Bush to discuss Middle East
policy.
Mr. Othman's political access coincides with the remarkable ascendance of
a
little Texas oil company on whose board he serves alongside George W.
Bush,
the president's oldest son. That company, Harken Energy Corp. -- though
it
had never drilled a single well overseas or in water -- recently won
the
rights to drill potentially lucrative offshore wildcat wells in a
contract
bestowed by the government of Bahrain.
When the Harken deal was announced in January 1990, it attracted only
perfunctory notice. More recently, a number of publications have
written
about the case, raising questions about whether Bahrain might have
chosen
Harken in part because a presidential son sat on its board.
Now, George W. Bush is emerging as a principal adviser to his father.
He
was a lead player in the campaign to oust White House Chief of Staff
John
Sununu, and was cited by his father last week as among those who will
play
"key roles in the re-election effort." Thus, the issues surrounding
the
Harken deal take on fresh importance.
The White House says there is nothing questionable in this story of
petroleum, politics and the presidential son. "There is no conflict
of
interest, or even the appearance of conflict, in these business
arrangements," says spokesman Marlin Fitzwater. The matters had been
reviewed and disclosed, he said, adding, "They are legitimate
business
undertakings."
Indeed, an investigation by The Wall Street Journal hasn't revealed
evidence of wrongdoing or influence-peddling by George W. Bush or
anyone
else connected to Harken. Yet what does emerge is a complex pattern
of
personal and financial relationships behind Harken's sudden good fortune
in
the Middle East, raising the question of whether Bahrainis or others in
the
Middle East may have hoped to ingratiate themselves with the White
House.
Even more intriguing, there are numerous links among Harken, Bahrain
and
individuals close to the discredited Bank of Credit & Commerce
International, a banking empire that used Mideast oil money to seek ties
to
political leaders in several countries.
The mosaic of BCCI connections surrounding Harken Energy may prove
nothing
more than how ubiquitous the rogue bank's ties were. But the number
of
BCCI-connected people who had dealings with Harken -- all since George
W.
Bush came on board -- likewise raises the question of whether they mask
an
effort to cozy up to a presidential son.
Among those relationships:
-- Sheik Khalifah bin-Salman al-Khalifah, the prime minister of Bahrain
and
a brother of the country's ruling emir, is identified on an October
1990
shareholder list as one of the 45 investors who own parent company
BCCI
Holdings (Luxembourg) SA. The emir played a role in approving the
Harken
transaction.
-- Sheik Abdullah Bakhsh, a major Harken shareholder represented by
Mr.
Othman on the company's board, has been a co-investor in Saudi Arabia
with
alleged BCCI front man Ghaith Pharaon, and used Khalid bin-Mahfouz,
until
recently a principal BCCI shareholder, as his banker.
-- Harken's investment bankers helped BCCI gain its foothold in
U.S.
banking, and they also arranged for a Swiss bank to help rescue
Harken from
its debt woes in 1987 -- a Swiss bank that was at the time a
joint-venture
partner with BCCI.
-- Harken's consultant on the Bahrain deal counts Kamal Adham, a
principal
owner of BCCI, as a close friend and has had a long acquaintance with
BCCI's Mr. Pharaon.
As a candidate and later in the White House, President Bush vowed to
avoid
even the appearance of any conflicts of interest in his administration.
He
instructed Secretary of State James Baker to cable all U.S. embassies
to
warn against the appearance of preferential treatment for Bush family
investments overseas. The president has also moved to distance himself
from
the BCCI scandal, denouncing a former aide who recently went to work as
a
lawyer for BCCI's Mr. Adham, and who resigned in the ensuing furor.
George W. Bush, a managing partner of the Texas Rangers baseball
team,
declined to be interviewed. He did provide brief responses to written
questions through an intermediary. Asked whether his involvement with
the
Dallas energy company lent it added credibility in the Arab world, he
said
to "ask the Bahrainis."
Every individual involved denies any influence peddling. Mr. Othman,
George
W. Bush and people involved in setting up the White House meetings on
the
Mideast say the president's son had nothing to do with Mr. Othman's
being
included among the Arab-Americans invited. "Not by any stretch of the
imagination," Mr. Othman says.
And Harken investor Mr. Bakhsh rejects any suggestion that his links,
past
and present, to Messrs. Pharaon and bin-Mahfouz mean he is in any way
associated with BCCI. He says through his New York lawyer that he
bought
Harken stock (in 1987) because it looked like a good investment in a
depressed industry.
Harken officials say they resent any suggestion their company somehow
has
ties to BCCI. They dismiss the circumstantial links to it as purely
random
and say they were shocked to learn of them. And, in fact, BCCI has
proved
adept at insinuating itself into centers of influence without the
knowledge
of those occupying the seats of power.
Harken says it won the Bahrain drilling deal purely on merit, through
painstaking geological research and deft negotiating. It says Mr.
Bush
played no role in clinching the deal.
As for Bahrain, it says it chose tiny Harken partly because it didn't
believe a large company would be so fully committed to the project.
Other
Harken officials, while denying that the Bush name played any
specific
role, acknowledge that having him on their board is an asset. "You'd
have
to be an idiot not to say it's impressive," says Alan Quasha,
former Harken
chairman and its second-largest shareholder. (The largest, with 24.5%, is a
Harvard University investment
fund.)
Mr. Bush's affiliation with Harken came at the end of a failed attempt
to
follow in the footsteps of his father. Like him, George W. launched a
career in the oil business in Midland, Texas, and like his father he
chose
a Spanish name for it: Arbusto Energy Inc. "Arbusto" is Spanish for
"bush";
the president's company was Zapata Petroleum Co.
Among George W.'s investors was James R. Bath, a Houston aircraft
broker
who had a flourishing aviation business with sheiks of the Saudi
peninsula.
Mr. Bath owned a piece of a Houston bank in which Mr. Pharaon, the
BCCI
front man, had been a controlling shareholder.
Mr. Bath also invested money in the U.S. for Mr. bin-Mahfouz, the
Saudi
banker who would go on to become a leading shareholder in BCCI.
According
to Mr. Bath's personal financial statements, produced in unrelated
litigation, Mr. Bath invested $50,000 with George W. Bush, becoming a
5%
partner in Arbusto. Mr. Bush says he was aware that Mr. Bath was
representing Saudi investors but that at the time "had never heard of
BCCI."
In the oil-patch depression of the mid-1980s, Mr. Bush's company
merged
with another concern, becoming Spectrum 7 Energy Corp. But its
fortunes
didn't improve. "We lost a lot of money in the oil business," says
Philip
Uzielli, a director of Spectrum 7 and friend of Mr. Bush. "We had a lot
of
dry wells. . . . Things were terrible. It was dreadful."
Finding a buyer wasn't easy. But in September 1986, Harken Energy
swapped
some of its own shares for the shares of Spectrum 7. Mr. Bush's cut
was
worth roughly $600,000. "Getting Harken stock at that point turned out
to
be very good," Mr. Uzielli recalls. In addition to becoming a Harken
stockholder, Mr. Bush became a director and a consultant at $120,000
a
year, later reduced to $50,000. (In mid-1990, Mr. Bush sold two-thirds
of
his Harken holdings at a significant profit; his remaining stake
could
still be worth millions if Harken hits a gusher in Bahrain.)
What looked like a dull investment soon looked brighter. The company
needed
a cash infusion, and Mr. Bush, whose consulting contract listed
"equity
placements" among his duties, was there when Harken officials got
together
with Stephens Inc. of Little Rock, Arkansas, one of the largest
U.S.
investment banks outside Wall Street.
He needed no introduction to Jackson Stephens, having known him since
the
1980 Reagan-Bush campaign. Mr. Stephens's wife, Mary Anne, would soon
become Arkansas co-chairman of the Bush for President campaign, while
Mr.
Stephens would donate $100,000 to Team 100, a Republican group that
collected money for the campaign. Stephens Inc. kicked in another
$100,000
to the Bush dinner committee last May.
But on that spring day in Little Rock, cash for Harken was the topic.
Ultimately, Stephens put a rescue plan in motion: Union Bank
of
Switzerland, which ordinarily didn't invest in small U.S.
firms, would make
an exception, giving Harken $25 million in exchange for a stock
interest.
At the time, UBS was a joint-venture partner with BCCI in a
Geneva-based
bank. And although Harken officials, including Messrs. Bush and Quasha,
say
they were unaware of it, Mr. Stephens was also well acquainted with
BCCI.
In fact, he suggested to BCCI in the late 1970s that it try to take
over
what is now Washington, D.C.'s biggest bank company, First American
Bankshares Inc., according to court records produced in connection with
the
takeover attempt. Mr. Stephens was among the defendants in that suit,
aimed
at preventing a First American takeover by BCCI founder Agha Hasan
Abedi,
BCCI principal Kamal Adham and Abdullah Darwaish, chief financier
for the
royal family of Abu Dhabi. Mr. Stephens declined to be
interviewed for this
article.
The Harken financing Stephens was arranging hit a last-minute snag.
To
comply with U.S. banking laws, the deal assumed a complex new
structure,
and UBS decided to unload its shares to a third party at the first
chance,
according to Mr. Quasha. UBS says it planned to sell the shares all
along.
In any case, Stephens brought in a new patron: a real-estate
magnate from
Jedda, Saudi Arabia, who bought most of Union Bank's Harken shares.
He was
Abdullah Bakhsh.
Mr. Bakhsh for several years was chairman of Saudi Finance
Co., a
Luxembourg-based holding company for Swiss
and French financial
enterprises. He sold his interest in 1983. Who
bought it isn't clear, but
corporation records in Geneva show that by 1989, it had come partly
under
the control of the Gokal family, Pakistani shipping magnates
who were early
BCCI shareholders and who, according to BCCI's auditors, have failed
to
service more than $700 million of borrowings from BCCI.
Mr. Bakhsh has had business dealings with some of the most prominent
people
in Saudi Arabia, including, according to a friend, former Saudi oil
minister Ahmed Zaki Yamani and current oil minister Hisham Nazer. One
of
his co-investors in the U.S. says he believes the sheik has also
invested
with members of the Saudi royal family.
But Mr. Bush, Mr. Quasha and other Harken officials evidently knew
little
about their new partner. Mr. Quasha did a background check and says
he
found that Mr. Bakhsh was a very private person of great integrity who
had
already received regulatory approval for other U.S. investments.
Mr. Bakhsh, though listed as Harken's third-largest stockholder
with a
17.6% stake, has met with company officials on only a few occasions,
and
George W. Bush says through his intermediary that he has never spoken
to
him. Instead, Harken officials deal with him through Mr.
Othman, who sits
on the Harken board.
In the wake of the company's new Persian Gulf backing came a much
bigger
Gulf breakthrough. It might be called the Dream Deal.
Bahrain, a small emirate with strong ties to Saudi Arabia, hadn't made
a
significant new oil find since 1932. But high-tech seismic surveys
detailed
a large geological formation under the sea, between two of the greatest
oil
and gas fields on the planet. The company picked to drill exploratory
wells
would have to put up a lot of cash -- $12.7 million just for the first
of
several wells. But it would get a lucrative share of any oil found.
The
payoff could total in the billions.
Amoco Corp., vitally interested, started negotiating with the Bahrainis
in
1987. (Three other companies also entered into talks, according to
Bahrain,
which didn't identify them.) As negotiations advanced, Amoco grew
hopeful
of a contract. Then, in January 1990, it heard startling news: The
contract
had just been awarded to tiny Harken. "We were disappointed," says
Patricia
Wright, an Amoco spokeswoman. "We thought we might get this one."
Why did Harken get it instead? "It was not some sort of fix," says
Mr.
Quasha, the former Harken chairman.
Harken says George W. Bush didn't play any role in clinching the deal,
and
even expressed doubts that Harken had the financial resources for it.
Mr.
Quasha also points out that all the connections in the world won't
help
Harken find oil in Bahrain, which the Bahrainis know as well as anyone.
"I
don't see where they gain from dealing with a relative of George Bush's
who
futzes up."
Bahrain says the Bush connection couldn't have been a factor. "We were
not
aware when Harken was chosen of any prominent American or Arab who
was
connected with the company," says Bahrain's oil minister, Yousuf
Shirawi.
However, Monte Swetnam, Harken's exploration chief, says, "I'm sure
they
were aware" of Mr. Bush's involvement with the company. "I talked about
our
exploration advisory board and our board of directors. George's name
comes
up twice. It wasn't a secret."
Harken officials, in extensive interviews, maintain that Bahrain wanted
a
small company that would devote full attention to the project, a
point
Bahraini Oil Minister Shirawi confirms. To find one, he turned to a
longtime friend, Michael Ameen, a Houston oil consultant who had
worked in
the Mideast for Mobil Corp. and Arabian American Oil
Co.
Mr. Ameen represents yet another BCCI notation in the Harken story. As
the
head of government relations for Aramco, he says he had
close dealings for
years with the Saudi royal family and its advisers, including Mr.
Adham,
the BCCI principal, who is also a former Saudi intelligence chief.
Mr.
Ameen was close enough to the Pharaon family that he recalls meeting
a
young Ghaith on his graduation from college.
Mr. Ameen had been a friend for 25 years of Mr. Bakhsh, the large
Harken
shareholder. But he says that when faced with having to recommend to
Bahrain one small oil company out of the hundreds to choose from, he
chose
Harken out of pure serendipity. Within 10 minutes of discussing the
matter
by phone with Bahrain's oil minister, Mr. Ameen says, he got a call
from
one of Harken's investment bankers at Stephens in Little
Rock.
Before long, Mr. Ameen was leading Harken delegations to London
and
Bahrain, where, according to the company, Harken officials
displayed keen
knowledge of the region's geology and disarmed the Bahrainis with
their
open negotiating style.
In the midst of Harken's talks with Bahrain, Mr. Ameen --
simultaneously
working as a U.S. State Department consultant -- briefed the incoming
U.S.
ambassador to Bahrain, Charles Hostler. Mr. Ameen ultimately received a
fee
of about $100,000 from Harken.
Ambassador Hostler, a San Diego realestate investor who is a $100,000
Republican contributor, says through an embassy official that he
never
discussed the Harken deal with authorities in Bahrain. Harken officials
say
they met with him only after their contract was secured. Mr. Hostler
does
say that he has long known, and from time to time given financial
counsel
to, Mohammad Hammoud, who was described in recent Senate testimony as
a
"flexible front for BCCI." Mr. Hammoud is also listed as a significant
BCCI
shareholder.
Once negotiated, the Harken contract was reviewed and approved by
several
Bahraini officials, including, lastly, Sheik Isa bin-Sulman
al-Khalifah,
the ruling emir. His younger brother, Prime Minister Sheik Khalifah
bin-Sulman al-Khalifah, appears in BCCI records as a shareholder,
along
with Mr. Adham, several members of Persian Gulf royalty, and others.
"His highness the emir has no personal opinions" about Harken or
anyone
else associated with the transaction, says Mr. Shirawi, the oil
minister.
"There is a possibility he's a shareholder, but we never heard of it,"
a
Bahrain Embassy spokesman says. If the prime minister does have BCCI
holdings, the spokesman points out, the shareholding isn't large.
The drilling deal went through even though Harken admitted it
couldn't
begin to finance the exploration on its own. Bahrain agreed to let
Harken
bring in a partner. It was the hottest ticket in town; two dozen oil
companies expressed interest in coming into the deal. Harken chose
Bass
Enterprises Production Co. of Fort Worth, Texas, a company
controlled the
politically active billionaire Bass family. Members of the Bass
family have
contributed more than $200,000 to the Republican Party in recent
years. A
Bass company official declines comment.
At the signing ceremony in January 1990, a celebratory delegation
from
Harken traveled to Bahrain, including Mr. Quasha, Mr. Othman and
another
Harken executive. The first well broke ground last month and is
scheduled
for completion by the end of January.
Within six months Mr. Othman saw his political status, as well as his
company's position, enhanced. His name was added by the White House to
a
select list of 15 Arab-Americans chosen to meet with President Bush,
Mr.
Sununu and National Security Adviser Brent Scowcroft in the White House
two
days after Iraq's August 1990 invasion of Kuwait.
Mr. Othman and others involved in setting up the White House meeting
say
his three invitations are explained by his membership in the
Arab-American
Council on the Middle East, a group of business and political leaders
who
are close to ousted Chief of Staff Sununu. "Talat was recommended to us
by
many people in the Arab-American community," says one administration
official. Mr. Othman was most recently present at a White House
gathering
last month of President Bush and Arab-American leaders.
"George W. Bush has nothing to do with it," Mr. Othman says of the
White
House meetings. "This is an invitation from the White House."
--- Who's Who in the Harken Deal
AT HARKEN
ABDULLAH TAHA BAKHSH -- A Saudi investor who controls about 17% of
HArken's
stock, he has extensive business interests in Saudi Arabia and the
U.S.
GEORGE W. BUSH -- The President's eldest son, he is a director,
consultant
and shareholder in Harken Energy. Runs the Texas Rangers baseball club
and
may play a role in father's re-election campaign.
TALAT OTHMAN -- Middle Eastern-born director and shareholder in Harken,
he
helps manage investments for Sheik Abdullah Bakhsh, a major Harken
shareholder, and is a member of the Arab-American Council on the
Middle
East.
ALAN QUASHA -- A Harvard-educated lawyer and corporate restructuring
expert, he controls about 20% of Harken's stock and served as chairman
from
1983 until last February.
MONTE SWETNAM -- Harken's exploration chief, he led the team that
developed
the winning drilling program for Bahrain.
DEAL MAKERS
MICHAEL AMEEN -- A Houston oil consultant, he forged close
associations
with wealthy Arabs while serving as top Mideast official for Mobil
Corp.
and Aramco. Received a $100,000 fee from Harken.
JACKSON STEPHENS -- Arkansas-based investor whose Stephens Inc. played
a
critical role in fund raising for Harken. Former Stephens staffers
also
represented Harken in Bahrain deal, earning a $100,000 fee.
IN BAHRAIN
CHARLES HOSTLER -- The U.S. ambassador, he met with Harken officials
after
they clinched the drilling contract.
YOUSUF SHIRAWI -- Minister of industry and development for the island
nation, he has responsibility for Bahrain's oil industry.
KHALIFAH BIN-SULMAN AL-KHALIFAH -- Prime minister of Bahrain and
younger
brother to the island's ruling emir, he is a BCCI shareholder.
SAUDI MONEY MEN
KAMAL ADHAM -- A shareholder in BCCI and former Saudi intelligence
chief,
he is also listed as a borrower from BCCI.
KHALID BIN-MAHFOUZ -- A bank owner in Saudi Arabia who previously held
a
significant stake in BCCI.
GHAITH PHARAON -- Alleged BCCI front man in secret dealings in U.S.
and
elsewhere.
Jackson Stephens, a name often linked with America�s super-secret
National Security Agency, has been an influential presence for several
decades in the tiny town which served as port of entry into U.S. flight and
even military training for the terrorist cadre implicated in the Sept 11
attack....
