Insider Deals Catch Up with Bush

by David Corn

Al Gore may be thinking, "hey, it's a little late for this." But Bush's record as a private businessman -- a subject few journalists bothered to explore during the 2000 campaign -- is now deemed relevant, as Corporate America (Bush's home district) turns ugly. One of Bush's fishiest moves as a businessman who failed upward in the oil industry occurred in 1990, when Bush was on the board of directors and the audit committee of Dallas-based Harken Energy. Harken had bailed out Bush four years earlier by buying his own down-and-almost-out oil venture. In that deal Bush received a hefty dose of Harken shares. In June 1990, Bush dumped over 212,000 shares and bagged $848,000. He did so at a time when Harken was slipping but had hidden losses by selling a subsidiary, more or less, to itself in a deal the Securities and Exchange Commission later ruled a phony transaction. Moreover, Bush failed to disclose his stock sale right away, as the SEC required, and, instead, notified the SEC eight months after the federal deadline.

Bush skated. An SEC investigation concluded without penalties or charges, but the SEC did unearth other instances of late filings by Bush. Those skeptical about these things might want to note that the SEC general counsel at the time, James Doty, had earlier represented Bush during his purchase of the Texas Rangers baseball teamÑa deal that Bush partly financed with the proceeds of his Harken stock dump. And during that SEC inquiry Bush was represented by Robert Jordan, who had been a partner of Doty at the Baker Botts law firm. Jordan is now Bush's ambassador to Saudi Arabia. Whether Bush broke any laws, the Harken deal stunk. (And there's more to it than the cursory description I've provided.)

If Bush had not engaged in insider trading, he certainly benefited as an insider. At the least, his financial ass was saved by Harken because of his DNA and his father's job (vice-president). Yet the Harken mess has never much haunted Bush in public. Until now. On July 2, New York Times columnist Paul Krugman recalled Bush's Harken ride and observed that Bush's Harken trade had netted him about four times the cash Martha Stewart saved via her suspicious transaction. Krugman went on to opine that Bush's "administration is uniquely well qualified to chase after corporate evildoers" because Bush has "firsthand experience of the subject."

Molly Ivins and others have been writing about Bush's Harken dealings for years. (I've been on the case for months.) But when a Times columnist throws such a punch, things happen. In response to Krugman's wallop, reporters asked Bush about Harken when he was traveling in Milwaukee. "It's been fully vetted," the President snapped. "Any other questions?" (It's amazing how quickly this down-home boy from Texas can start talking like a defense lawyer.)

Next, Bush's chief mouthpiece Ari Fleischer got into the act, claiming that the delay in Bush's filing with the SEC was due to a "mix-up" by Harken lawyers. The problem is, when Bush was running for governor in 1994, he explained the late filing by blaming the SEC for having lost the forms (the corporate executive's version of "the dog ate my homework"). So which was it? Lost forms or lousy lawyers? Or, to be less delicate, when was Bush not telling the truth?

In a delicious line, a Times news story reported, "Mr. Fleischer could not completely explain the inconsistency." At a press conference Fleischer, referring to Bush's 1994 response, said Bush was dealing with "the best explanation" available at the time. What a wonderful phrase. Next time you get caught engaging in shady business, make sure you describe your excuse as "the best explanation I have available at this time." (Are Martha Stewart's attorneys taking notes?)

This all came at a convenient time for Bush, for he was preparing to deliver a speech on Wall Street calling for (somewhat) tougher treatment of felonious corporate execs. But Bush already delivered a speech on corporate responsibility in March. That talk was a response to the Enron scandal. Since the March address did not do the trick in persuading Americans that Bush is as outraged by corporate misbehavior as Ralph Nader, he decided to share his anger once more. But in the run-up to the Wall Street speech, Business Week reported Bush was unlikely to okay a major boost in spending for corporate crime enforcement or to embrace stringent reforms, such as creating more distance between corporations and their auditors and separating investment bankers and analysts. He was, though, expected to repeat his call for corporate insiders to report their stock trades within two days. It does take chutzpah to be president. (Which reminds me: when is Bush going to talk again about privatizing Social Security?)

The bottom line of the recent business scandals is the old complaint that the rules ain't the same for corporate high-flyers as for everyone else. (Try selling part of your house to yourself in order to lower your mortgage payments.) And Bush is not a fellow well-positioned to deal with this problem. After all, he is president because of insider capitalism (in his case, call it nepo-capitalism). Harken rescued him from the market because he had political (not financial) worth. He was able to buy a baseball team -- and put a relatively small amount of money into the deal -- because of his inherited social and political connections. The team succeeded because Bush and his partners were able to convince friends in the state legislature to pass a measure establishing a sports authority that used the power of taxation and eminent domain to grab land and build a stadium for the Rangers. And managing that team was the only accomplishment Bush had to brag about when he ran for governor in 1994. Without insider connections, where might he be today?

The conceit of the business class in the 1990s -- or was it self-serving propaganda? -- was that with the expansion of 401(k)s and the increase of small investors playing a forever bullish market anyone could be an insider, in the sense that anyone could participate in (and profit from) the wonders of Wall Street. These days it's common for financial analysts on cable news shows to say that small investors are screwed, for there's no way for them to know if any particular corporation is cooking its books or being managed by executives who grab millions while they steer the business into the rocks.

Invest in what you know, they advise. Well, who in K-Mart-land knows what's really going on in the boardroom or accounting department of a transnational company? An average Joe or Josephine looking for an investment might find Martha Stewart sheets lovely and believe in her product line. But how can she or he learn what the lady of the house is really up to?

Over night, Stewart became a symbol of the me-first corporate executive. Because she may have traded on a social relationship to avoid a $200,000 loss in her holdings of ImClone, her own company lost a third of its value. But it's not just this one transaction for which she deserves a slap. Stewart managed to bill her company $2 million a year for using her homes in photo shoots, while the firm was eking out modest profits. But, then, why shouldn't corporate executives place their own well-being (and retirement plans) ahead of that of their stockholders and employees. Isn't that the market at work?

There is no way Bush can get a handle on a systemic corporate crisis of serious magnitude. His line, so far, has been that there are only a few "bad apples" out there. (Unfortunately, they just happen to include some of his closest supporters at Enron.) Perhaps all that is necessary is for Bush -- as he likes to do with foreign leaders -- to look into the soul of each Fortune 500 CEO and tell us whether he or she has a good heart. What might he see when he gazes into the eyes of Martha Stewart? That is, beyond the reflection of a fellow beneficiary of ruling-class rules. And would you believe him if he pronounced her a "fine person" and issued a buy order?