<html> This just in this morning, and IMHO Micah Morrison is a hell of an investigative journalist, judging by past performance.<br> <br> Wall Street Journal<br> September 28, 1999<br> <br> Commentary<br> <br> From Oil to Baseball<br> To the Governor's Mansion<br> <br> By Micah Morrison, a Journal editorial page writer.<br> <br> AUSTIN, Texas--In April, the office of Gov. George W. Bush released a<br> statement summarizing his 1998 taxable income. Mr. Bush had earned over<br> $18 million, the "vast majority" from the sale of the Texas Rangers baseball<br> team. The governor's share of the Rangers sale was $14.9 million, his biggest<br> payday ever.<br> <br> Mr. Bush played a significant role in putting together the<br> investment group that purchased the Rangers in 1989;<br> he later was named a general partner of the franchise.<br> Prior to his career in baseball, he had struggled for<br> more than a decade in the oil business. How Mr. Bush<br> parlayed a lackluster tenure in the oil patch into a $15<br> million home run and a seat in the governor's mansion is<br> a subtle morality tale about the highways and byways to<br> contemporary political power. Like Vice President<br> Albert Gore Jr., who will be the subject of an article on<br> this page tomorrow, Mr. Bush is the son of an influential<br> politician. Like Mr. Gore, Mr. Bush has crossed paths<br> with some of the seamier characters who gravitate<br> toward political power. And both men--while not without pluck and political<br> skills of their own--have profited from family connections.<br> <br> This two-part series is not a tale of smoking guns and indictable offenses. Yet<br> voters should know the financial connections of candidates, though they<br> probably will make their decisions on other grounds. And while the candidates<br> will not appreciate questions being raised about the murky areas of their<br> finances, the lessons of the Clinton era suggest that it is better to put matters on<br> the table early, lest they rise Whitewater-like to haunt a new administration.<br> <br> Mr. Bush's career with the Rangers<br> baseball team, for example, is likely to<br> come under intense scrutiny in the next 12<br> months. In 1989, when Mr. Bush brought<br> together his investment group to buy the<br> Rangers, the seller was Eddie Chiles, a<br> longtime friend and supporter of President<br> Bush. Mr. Chiles let the president's son<br> and his group go to the head of the line.<br> But in a pattern repeated through his<br> business career, Mr. Bush's play did not<br> quite make the grade. Baseball<br> Commissioner Peter Ueberroth stepped in, brokering a deal that brought Fort<br> Worth financier Richard Rainwater together with the Bush group. Mr.<br> Ueberroth's pitch to Mr. Rainwater was that he join the deal partly "out of<br> respect" for President Bush, a source close to the negotiations told the New<br> York Times.<br> <br> Mr. Bush ponied up $500,000 as his personal grubstake in the $86 million<br> purchase. He later invested another $106,000, bringing his share to 1.8% of the<br> team. For his organizing efforts, his new partners rewarded him with an<br> additional 10% interest. They also named him a managing general partner, a<br> move that assured Mr. Bush a series of benign cameos in the limelight as he<br> ramped up a run for Texas governor. Mr. Bush kept a low profile as his new<br> baseball partners aggressively and successfully lobbied for a special referendum<br> in which the voters of Arlington, Texas, approved a sales-tax increase to cover<br> the $135 million cost of a new stadium. Texas conservatives denounced the<br> measure as "corporate welfare."<br> <br> Mr. Bush borrowed the $500,000 for his stake in the Rangers from United<br> Bank of Midland, Texas, where he had served as a director from 1984 to<br> 1986. Karen Hughes, a spokeswoman for Gov. Bush, declined to detail the<br> terms of the loan. But she said it was a "fully collateralized, traditional loan, and<br> fully paid off."<br> <br> In fact, the loan was paid off through the sale of stock Mr. Bush had been<br> awarded in his only successful venture in the oil business, as a director of<br> Texas-based Harken Energy Corp. Barely afloat in the tough oil market in the<br> early 1980s, Mr. Bush joined Harken as a director in 1986. He was given<br> 212,000 shares of Harken stock, worth about $500,000, or $2.50 a share, at<br> the end of the year--although he had no daily management responsibilities. He<br> later acquired an additional 133,000 shares through special offerings to<br> company directors, and he was paid between $42,000 and $120,000 a year<br> for the next five years as a consultant.<br> <br> Prior to joining Harken, Mr. Bush's business record was not good. He started<br> his first firm, Arbusto Energy, in 1977, the headiest days of the oil patch, and<br> was buffeted along with all the others by the high interest rates and collapsing oil<br> prices of the next few years. Hoping to boost its fortunes, he changed Arbusto's<br> name to Bush Exploration, then merged it with Spectrum 7 Energy Corp. in an<br> effort to stay afloat. As the hard times continued, Spectrum merged with<br> Harken Energy.<br> <br> Harken viewed Mr. Bush's famous name as an important asset, oil industry<br> executives close to the deal have said. Harken officials will not comment about<br> Mr. Bush, but records show that the company's stock began to climb right after<br> the Spectrum merger was announced, hitting $6 a share within a year before<br> falling back. Mr. Bush was philosophical about losing his management role in<br> the oil business but retaining profit. "I try to talk up Harken whenever I can," he<br> told Forbes magazine in June 1987, "and I'd feel a lot worse if the stock hadn't<br> tripled."<br> <br> In 1989, Harken's stock was trading at between $4 and $5 a share. That's<br> when Mr. Bush put up his shares as collateral for the Rangers loan. In January<br> 1990, with shares trading around $4.50, Harken announced that it had signed a<br> potentially lucrative oil-exploration deal with the government of Bahrain. On<br> June 20, 1990, Mr. Bush sold the bulk of his Harken stock for $848,000, at<br> $4 a share, and paid off the Rangers loan. Eight days later, Harken finished the<br> second quarter with losses of $23 million, and the stock went into a nosedive,<br> losing nearly 75% of its value, finishing the year at a little over $1 a share.<br> <br> Critics of Mr. Bush cried foul, charging that as a<br> Harken director he was in a position to trade illegally<br> on insider information before the stock's decline. Mr.<br> Bush ultimately was cleared by the Securities and<br> Exchange Commission. But suspicions of Mr. Bush's<br> lucky timing had heightened at first, when the SEC,<br> discovering that he had not filed the proper disclosure<br> form, opened an investigation into the president's son.<br> Mr. Bush claimed that he did file the correct form,<br> but that it had been lost. He also said that he had<br> cleared the stock sale with Harken's general counsel.<br> <br> "At the time of the sale," explained Ms. Hughes, the Bush spokeswoman, "he<br> did not know about the losses that would later be posted." Mr. Bush was not<br> selling ahead of bad news, Ms. Hughes said, but into the good news that the<br> Bass brothers, Texas billionaires with deep pockets and overseas drilling<br> experience, were inking a joint-exploration pact with Harken in Bahrain. In<br> October 1993, the SEC sent Mr. Bush's attorney a letter stating that "the<br> investigation has been terminated into the conduct of Mr. Bush, and that, at this<br> time, no enforcement action is contemplated with respect to him."<br> <br> Harken's Bahrain deal was also a piece of exceptional luck. It raised<br> oil-industry eyebrows when the government of that Persian Gulf state<br> announced it had chosen tiny Harken to explore an offshore site for gas and oil.<br> Harken appeared to have little to offer the Bahrainis. It had no overseas<br> experience and no experience with offshore drilling. Bahrain officials have since<br> said they had no idea President Bush's son was associated with Harken, a claim<br> oil-industry sources ridicule. Former Harken exploration chief Monte Swetnam<br> told the New York Times earlier this year that there "was never a question" that<br> Bahraini officials knew about Mr. Bush and that they "were clearly aware that<br> he was the President's son."<br> <br> <font color="#FF0000">The Bahrain deal was brokered in part by Arkansas investment banker David<br> Edwards, one of Bill Clinton's closest friends. Formerly an employee of<br> Arkansas investment powerhouse Stephens Inc., Mr. Edwards now runs his<br> own firm in Little Rock and has wide connections in the Middle East. At the<br> start of President Clinton's first term, he brokered a $23 million Saudi<br> contribution for a Middle East studies center at the University of Arkansas at<br> Fayetteville.<br> <br> </font>While Mr. Edwards was at Stephens, one of his clients was Saudi financier<br> Abdullah Taha Bakhsh. In 1987, soon after Mr. Bush joined Harken, Mr.<br> Edwards brought Mr. Bakhsh together with the Texas firm. Harken was<br> struggling with debt and in need of cash. Mr. Bakhsh bought a 17% stake in the<br> company. His American representative, Chicago businessman Talat Othman,<br> was given a seat on Harken's board. By August 1990, Mr. Othman was<br> attending White House meetings with President Bush to discuss Middle East<br> policy. Mr. Bakhsh and Mr. Othman did not respond to an interview request.<br> But in 1995 an attorney representing both men told the Journal that Mr.<br> Othman's visits to the White House were solely based on his "longstanding<br> involvement in Arab-American affairs."<br> <br> Mr. Bakhsh also was a co-investor in Saudi Arabia with Ghaith Pharaon, a<br> front man for the corrupt Bank of Credit and Commerce International, which<br> was shut down in 1991 with some $10 billion in losses following a global<br> looting spree. Mr. Bakhsh's banker in Saudi Arabia was Khalid bin Mahfouz,<br> head of the country's largest bank, National Commercial, and one of the key<br> players in the BCCI scandal. Stephens Inc. also crossed paths with BCCI,<br> handling an early, unsuccessful effort by figures later identified as BCCI front<br> men to acquire Financial General Bankshares, a Washington, D.C., bank<br> holding company. Stephens withdrew from the deal, but within a few years the<br> same group of front men won Federal Reserve approval to buy Financial<br> General.<br> <br> In 1992, Mr. bin Mahfouz was charged by Manhattan District Attorney Robert<br> Morgenthau and the Federal Reserve Board in separate actions with scheming<br> to conceal BCCI's role in U.S. banking. He reached a settlement in which he<br> paid $225 million in fines and restitution, with the understanding that he would<br> not again seek a major role in U.S. banking. Mr. Pharaon has been<br> permanently banned from the U.S. banking industry and fined $37 million for<br> his role in the BCCI scandal. Mr. Bakhsh was never charged with any<br> wrongdoing and his attorney told the Journal that the Saudi financier "was not<br> involved in any way in any of the matters or transactions that constituted the<br> BCCI scandal."<br> <br> It wasn't long after introducing Mr. Bakhsh and his money to Harken Energy<br> that Mr. Edwards again surfaced with another lucrative deal. In 1988, the<br> government of Bahrain had retained Houston oil consultant Michael Ameen, a<br> former head of governmental relations for Aramco and an old friend of Mr.<br> Bakhsh, to handle the search for a company to explore a possible new oil and<br> gas field offshore. Mr. Edwards, who by then had left Stephens, learned of the<br> Bahrain contract from Mr. Ameen and soon was representing Harken with the<br> Bahrainis. Harken quickly beat out the big boys for the oil-exploration<br> franchise; Bahraini officials have explained that they were looking for a small<br> company that would devote full attention to them. Mr. Edwards did not<br> respond to an interview request.<br> <br> A wide-ranging 1991 team report by Wall Street Journal reporters Thomas<br> Petzinger Jr., Peter Truell and Jill Abramson revealed many of the BCCI links<br> to Mr. Bush and Harken, but found no evidence of improbity by anyone<br> connected to the company. "The mosaic of BCCI connections surrounding<br> Harken Energy may prove nothing more than how ubiquitous the rogue bank's<br> ties were," the article noted. "But the number of BCCI-connected people who<br> had dealings with Harken--all since George W. Bush came on board--likewise<br> raises the question of whether they mask an effort to cozy up to a presidential<br> son."<br> <br> Mr. Bush told the Journal in 1994 that he had been "against the Bahrain deal"<br> and he had "no idea that BCCI figured into" Harken's financial dealings. Harken<br> officials refuse to release any documents, such as board minutes, that might<br> support Mr. Bush, though two company executives have publicly stated he<br> opposed the Bahrain operation. The Bahrain oil project resulted in two dry<br> holes and Harken Energy abandoned the project. Mr. Bush had pretty much<br> cashed out by then, and in November 1993 he resigned from Harken's board.<br> He was replaced by the well-connected Mr. Ameen.<br> <br> The international oil business has produced a rich set of ties between Saudi<br> Arabia and Texas. To this day, Mr. bin Mafouz of National Commercial Bank<br> and BCCI maintains a palatial home in Houston. He has also had a long and<br> varied business association with James Bath, an aircraft broker and friend of<br> George W. Bush from their days together in the Texas Air National Guard. Mr.<br> Bath invested $50,000 in Mr. Bush's first company, Arbusto Energy. In 1978,<br> Mr. Bath became a director of Houston's Main Bank. Among his fellow<br> investors was Mr. bin Mahfouz, the Saudi banker and BCCI principal; Mr.<br> Pharaon, the BCCI front man; and former Treasury Secretary and Texas Gov.<br> John Connally. Main Bank was absorbed into larger banks in a series of<br> industry mergers in the 1980s.<br> <br> Mr. Bath's interesting connections to Saudi Arabia go back to at least 1976. It<br> was then, according to a report in the Houston Chronicle, that Salem bin<br> Laden, heir to one of the largest building companies in the Middle East, signed<br> a trust agreement appointing Mr. Bath his Houston representative. (Salem bin<br> Laden's half-brother, Osama bin Laden, has in recent years gained world-wide<br> notoriety as a funder of fundamentalist terrorism, though he has reportedly<br> broken with his family in Saudi Arabia). Court documents show that Mr. Bath<br> purchased an airfield in south Texas, Houston Gulf Airport, in 1978 on behalf<br> of Salem bin Laden.<br> <br> Mr. bin Laden died in a plane crash near San Antonio in 1988, and his interest<br> in the airfield passed to Mr. bin Mahfouz, according to the Chronicle. Mr. Bath<br> also founded Southwest Airport Services to manage Houston Gulf Airport and<br> to provide fueling service at another Houston-area airport, Ellington Field,<br> where the company fueled military aircraft.<br> <br> </html>
