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WSWS : News & Analysis : North America
On eve of Wall Street speech
Bush�s past business dealings come back to haunt him
By Barry Grey
9 July 2002
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On the eve of a much publicized speech to business executives on Wall Street,
George W. Bush held an impromptu press conference Monday at which he was
peppered with questions regarding his own dealings as a board member of Texas-
based Harken Energy more than a decade ago.
Even as he read a prepared statement pledging to take a tough stand against
corporate law- breakers, Bush could not suppress his trademark smirk. Asked about
the 1991 Securities and Exchange Commission (SEC) probe into his sell-off of
Harken stock only weeks before the company reported massive losses, Bush
continued to stonewall.
Nevertheless, he was clearly on the defensive. Bush�s most significant remark came
in response to a question about the growing wave of corporate scandals, which that
very morning had hit yet another major US company, Merck & Co. The Wall Street
Journal reported Monday that the drug giant had recorded $12.4 billion in revenue
over the past three years that it had never collected.
�[I]�m very worried about a country that could conceivably lose confidence in the free
enterprise system,� Bush told reporters.
This admission was a stark expression of a growing sense of crisis within the Bush
administration, concerning not only the short-term stability of the Republican White
House, but also the long-term future of the profit system itself. The fear that the
exposure of corporate criminality could fuel popular anger over the growth of social
inequality and lead to the emergence of a political movement against the so-called
�free enterprise� system is increasingly gripping the corporate and political
establishment.
It is one of the major factors behind the sudden proliferation of press reports and
commentaries on Bush�s personal business practices. White House spokesmen
keep repeating that these are old issues that they thought had been settled long ago.
These questions have reemerged, however, because the bursting of the stock
market bubble and the collapse of corporate empires based on the wild inflation of
share values and various forms of swindling and fraud have created a new climate of
political crisis.
The attacks on Bush�s business record by sections of the media and influential
economic commentators manifests a central aspect of this crisis: the emergence of
sharp divisions within the upper reaches of the ruling elite over the policies of the
Bush administration on a whole host of questions. Behind the scenes, conflicts are
raging over the reckless and incendiary nature of Bush�s initiatives, both at home and
abroad.
Concerns are mounting over the dangerous implications of Bush�s military
interventions, his increasingly provocative posture toward Europe, and the domestic
implications of his policy of removing all restrictions on corporate profit-making.
Powerful sections of the corporate establishment fear that the policies of the
administration could lead to a crisis of catastrophic proportions. They have seized on
Bush�s personal misdeeds as a means of waging this covert political war in the public
arena.
This, however, does not diminish the intrinsic significance of the corrupt business
dealings that are being exposed. What is involved in the record of Bush�s corporate
career is not some manufactured scandal, like the Whitewater affair. That relatively
small-time real estate venture, which lost money, was seized on by right-wing
opponents of the Clinton administration as the pretext for a political conspiracy aimed
at bringing down the government.
Bush�s insider trading, on the other hand, was a real violation of securities laws, and
it typified the type of practices that have become synonymous with Enron, Global
Crossing, WorldCom and a string of other companies.
Bush goes to Wall Street to lecture executives on business ethics under conditions in
which a mountain of evidence demonstrates that he and virtually every other leading
member of his administration personify in their own corporate careers the very
methods he intends to denounce.
White House spokesmen have said the president will use his Wall Street speech to
reiterate his recent calls for corporate law-breakers to be prosecuted and for the
worst offenders to be sent to a jail. The purpose of such statements is to placate
growing popular anger over the systematic looting of the economy by the corporate
elite. The idea is to make an example of a few swindlers, in order to divert attention
from the pervasive thievery that has come to characterize American �free enterprise.�
If Bush were serious, he might begin with his own Army Secretary, Thomas White,
who was vice chairman of Enron Energy Services when it concealed hundreds of
millions of dollars in losses and plunged California into a devastating energy crisis
by
manipulating the electricity market. Next in line could be the lawyer he appointed to
head the Security and Exchange Commission (SEC), Harvey Pitt, who previously
represented the big accounting firms, including the convicted Arthur Andersen, and
the major investment houses. Not long ago Pitt held private meetings with Xerox and
KPMG executives while their firms were under investigation by his commission.
Higher up is Bush�s vice president Dick Cheney, the �minence grise of the
administration. Cheney�s former firm, the Dallas-based energy services company
Halliburton, is under investigation by the SEC for falsely reporting cost-overruns as
revenues to the tune of $100 million. As chairman and CEO of the company, Cheney
oversaw the implementation of this particular form of accounting fraud in 1998.
Bush�s own business career exemplifies all of the features�greed, dishonesty,
recklessness, self-enrichment at the expense of shareholders, employees and the
general public�that characterized the stock-market-fueled boom of the 1990s. In
Bush, these are combined with ignorance and the worst forms of nepotism and
cronyism.
Bush�s sale of two-thirds of his stake in Harken Energy in June of 1990 for $848,000
has by now been widely reported, following an accusatory piece July 2 by New York
Times economics columnist Paul Krugman. Bush�s dumping of his own company�s
stock was a classic case of insider trading.
As a director of the company and a member of its audit board and a special
restructuring committee, Bush was privy to information that the firm faced mounting
losses and the prospect of bankruptcy. He had received memos that the company
was facing a �liquidity crisis� and was �in a state of non-compliance� with its
lenders.
Just two months after Bush sold off most of his company stock, Harken reported
quarterly losses of $23 million. Its share price nose-dived, falling from $4 at the
time
of Bush�s divestiture to little more than $2 a share. By the end of the year Harken
stock had plummeted to $1.
Under securities laws, Bush, as a company official, was required to file a report of
his
stock sale with the SEC within ten days of the transaction. It took him 34 weeks to
make the filing.
Harken exemplified the type of executive corruption and accounting tricks that have
since been exposed at Enron, WorldCom, Tyco and a string of other companies. In
1989 it concealed mounting losses by orchestrating the �sale� for $10 million of a
subsidiary, Aloha Petroleum, to a group of Harken executives, who borrowed the
money to pay for Aloha from the parent company, Harken. By means of this sleight-
of-hand, Harken was able to report an additional $10 million in revenues, and thus
cover up the real state of affairs from its shareholders and investors in general. In
January 1991, after �discussions� with the SEC over the Aloha Petroleum caper,
Harken announced that it was adding more than $9 million to its losses for 1989.
Bush personally borrowed $180,375 from the company�a loan that was later
�forgiven.� Such things, however, were not uncommon at Harken. In 1990 alone the
Harken board forgave $341,000 in loans to its executives.
Bush owed his position at Harken, and his lucrative stake in company shares, not to
any display of business acumen or personal merit, but entirely to his family
connections. In 1986 Bush�s tiny Texas oil firm, Spectrum 7, was losing money and
hopelessly in debt. But his father was vice president in the Reagan administration.
Harken bought Spectrum 7 for the grossly inflated price of $2 million and put Bush on
its board of directors and audit board because, in the words of Harken founder Phil
Kendrick, �His name was George Bush.�
By the time the SEC decided to investigate Bush�s insider trade of Harken stock,
following a Wall Street Journal expos� in April 1991, daddy was in the White House.
The SEC found that Bush had violated federal laws for reporting insider trades, but
decided not to prosecute the case.
Once again, family and insider connections stood Bush in good stead. Not only had
his father, the president, appointed the SEC chairman, Bush�s former personal
lawyer, James R. Doty, was the SEC general counsel. Moreover, the lawyer who
represented Bush during the investigation, Robert Jordan, was a former law partner
of Doty at the Baker Botts firm.
With the windfall Bush received from his timely sale of Harken stock, Bush paid off a
loan he had taken out to buy a stake in the Texas Rangers professional baseball
team. The lawyer who represented him in his Texas Rangers deal was�James R.
Doty.
In 1998 Bush�s trust sold his stake in the Rangers for $16 million, catapulting him
into
the ranks of multi-millionaires. Thus Bush parlayed his family connections into a
substantial fortune, with the help of friends in high places and the use of insider
information to make a killing at the expense of his own company.
Bush�s good fortune may well have received an even more direct boost from his
father�s tenure in the White House. Less than 30 days before Bush sold his Harken
stock, his father�s national security adviser, Brent Scowcroft, sent the president a
secret memo warning that hostilities between Iraq and Kuwait were likely. At that
time, Harken�s only pending contract was for a drilling project in Bahrain. The
outbreak of war in the Persian Gulf would therefore have ruinous implications for
Harken�s business prospects.
When hostilities in the Gulf broke out, less than two months after Bush sold his
shares, Harken stock plummeted. Its shares lost 25 percent of their value on the day
Iraq invaded Kuwait. Had Bush held onto his shares until then, he would have lost
nearly $250,000.
Bush�s case history is indicative of the rise to the top of American business of the
most reactionary and predatory elements. This is a social layer that has amassed
colossal wealth by using its position of corporate power to pilfer the assets of the
companies it heads, while defrauding investors, bankrupting pension funds, bleeding
dry 401K funds, slashing jobs and destroying the savings and livelihoods of tens of
millions of people.
These are not simply the practices of a handful of miscreants. Their root source is
not individual greed or personal immorality. Nor are they mere �excesses.� They are
bound up with a broader crisis of the capitalist system, and the attempts of the
corporate ruling elite in the US and internationally to mask and offset the crisis
through the creation of ever greater volumes of fictitious capital, combined with
increasingly brutal attacks on the living standards and democratic rights of the
working class.
Nor is corporate criminality a monopoly of the Republican Party and its business
backers. The orgy of stock market speculation and accounting fraud reached its
height under the Democratic Clinton administration. Democrats and Republicans
alike are, directly or indirectly, in the pay of big business. A recent study found
that
business provides $3 out of every $4 raised by Republicans, and $2 out of every $3
raised by Democrats. This helps explain why the Democrats are so terrified of
exposing Bush�s ties to Enron and so cowardly in their dealings with corporate CEOs.
The Bush administration, however, embodies precisely those social elements most
closely associated with the criminalization of American business. The present
government�a government of the political underworld�is their concentrated political
expression.
Copyright 1998-2002
World Socialist Web Site
All rights reserved
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