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Volume 2, Number 25              July 28 - August 3,  2002            Quezon City, Philippines

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Bush and the Billionaire: How Insider Capitalism Benefited W.


The Nation


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It's awfully tough to be Mr. Corporate Responsibility after you have profited from the actions of an irresponsible corporation that engaged in a shady deal. George W. Bush is finding that out, for as he tries desperately to stay ahead of the assorted corporate scandals, his own past as a failed oil man has emerged as an issue for reporters, columnists, and the cable-news crowd. What's drawn the most attention is Bush's handling of his 1990 Harken stock deal. Much of that story was public during the presidential election of 2000 (and it had been a minor issue when Bush first ran for governor of Texas in 1994). But two years ago, few seemed to care that Bush had made a bundle through his association with an oil company that employed phony accounting, that he benefited by selling shares in this troubled company (in which he happened to be a director) before these problems became known publicly, and that he failed to meet the federal deadline for disclosing this stock dump (as well as several others).

Now, reporters jump on any new factoid they can unearth. A few days ago, it was reported Bush had received a "flash report" in early June 1990--sixteen days before he sold his Harken holdings--that might have indicated the company was facing a huge loss. The White House says Bush believed the company was going to lose $9 million that quarter--not $23 million, as the losses turned out to be. The latest news, courtesy of Associated Press, is that Bush signed a "lockup" letter on April 3, 1990, pledging not to sell his Harken stock for six months after a proposed public stock offering. Yet two months later, he cashed out his Harken shares for nearly $850,000--a transaction that bolstered his financial position at a crucial time, for he had to cover a loan he earlier used to purchase the Texas Ranger baseball team.

With the public offering unconsummated at that point, perhaps Bush had a loophole to slide through. But here's another question: who bought his Harken securities? Supposedly, an institutional investor that has not been identified. The White House maintains it is in no position to release the minutes of Harken board meetings from this period, but it has not explained what prevents Bush from publicly requesting that Harken disclose these records or that the institution that purchased his stock identify itself.

At the end of two weeks of Harken-ish news (and don't forget Vice President Dick Cheney's troubles, as Halliburton, the company he once chaired, faces investigation for accounting irregularities), conservative journalist William Kristol was left saying (hoping?) it was unlikely Bush would suffer political repercussions, for the recent details did not prove the Harken deal was illegal. (Remember when conservatives scoffed at an it-wasn't-illegal standard for the president?)

Details, of course, matter. But the story is already complete enough to justify a judgment, for the issue isn't merely the legality of Bush's Harken stock sale. It's Bush's record as a beneficiary of insider capitalism. Whether he sold his Harken stock due to insider knowledge or not, he was only in a position to conduct this transaction because Harken had rescued his sinking oil business. In 1986, Bush's own oil firm, Spectrum 7, was collapsing. Before it went belly-up, Harken purchased Spectrum for $2.25 million worth of Harken stock and made Bush a Harken director and consultant. That is, Harken saved Bush from ruin.

Why? It wasn't Bush's record as an oil man. He had run two oil companies into the ground. Could it have been Bush's insider credentials as the son of a vice president?

At the time, Harken was owned by global billionaire George Soros, the Harvard Management Corporation, and others. A few weeks ago, I was at the opening of the new Washington offices of the Open Society Institute, a nonprofit policy and advocacy organization founded by Soros. OSI reflects the left-of-center beliefs of Soros. In the United States and overseas, it promotes campaign finance reform, government openness, drug policy reform, abolition of the death penalty and many other issues. At the party, practically the entire liberal policy community of the capital was present. Well-wishers (and grant-seekers?) were eagerly congratulating Soros. While chatting with one of his employees, I said to her, "One day, you should ask Soros what he knew about the Harken deal and why his company took on Bush." She blanched and mumbled that she could never raise that with Soros.

Later, when I saw the billionaire almost alone, I sidled up to him. "Nice offices," I said. "But can I ask you about some ancient history?" Sure, he said, with a good-natured smile. What was the deal with Harken buying up Spectrum 7? I inquired. Did Soros know Bush back then?

"I didn't know him," Soros replied. "He was supposed to bring in the Gulf connection. But it didn't come to anything. We were buying political influence. That was it. He was not much of a businessman."

Then my time with the billionaire was up. If Soros--who disagrees with most Bush policies--is telling the truth, it means Bush only survived in the corporate jungle because of his surname and connections. Yes, that hardly comes as a surprise. But it does render Bush a purebred embodiment of the central issue of the current business scandals: those on the inside play by a different set of rules than the rest of Americans (including workers and small investors). The market works for Bush--as well as for Martha Stewart and the execs of WorldCom and Enron--in ways others can only imagine, or read about, once in a great while, in an indictment.

Had it not been for Soros and his Harken partners, what might have become of George the Younger? Because a liberal billionaire and his corporate allies sought political juice in 1986--for they knew the business world is no meritocracy--Bush's corporate career was artificially inflated. Consequently, he was able to enter politics, citing his business experience, and land in a position where he could implement policies that make Soros gag. (O. Henry would enjoy this turnabout.)

Even if Bush did not trade on inside information, he fully exploited insider capitalism. If it takes a crony to bust up crony capitalism, the nation has the right man for the job.

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