"In the corporate world, some things aren't exactly black and white when it comes to accounting procedures."
-- George W. Bush
The reluctance of Congressional Democratic leaders to initiate impeachment proceedings against President Bush may be frustrating. But there's an upside. For anyone seeking to file charges against Bush in lieu of impeachment, it relieves the urgency and buys time to make their case that much more airtight. Henry Waxman's House Committee on Oversight and Government Reform alone is conducting 20 investigations.
We're also afforded the opportunity to arrange his crimes in chronological order, starting with the first. Remember Harken Energy Corporation and the charge that Bush used insider knowledge to make almost $850,000 selling his stock in the company?
Harken, on whose board Bush sat, was a Texas oil company engaging in oil and gas exploration, development and production. It's still in existence, but on June 6 it changed its name to HKN, Inc. It actually showed a profit at the end of the first quarter this year, as opposed to last. Yet it still felt compelled to announce a reverse stock split, which is considered either a gimmick to make a stock look more attractive to investors or a red flag that it's about to take a dive.
To refresh your memory, Harken's difficulties were more pronounced in 1990, when it was hoping for one last strike in Texas before the state was tapped out. As soon as Bush joined the board, another company came to its aid -- Harvard Management ("Harvard"). Why Harvard?
Not only had Bush obtained his MBA from Harvard, but a former Harken chairman of the board was also a Harvard alumni, while two Harvard Management Company officers owned substantial amounts of Harken stock. Besides, as a not-for-profit organization, Harvard had no shareholders to whom the principals need answer for questionable transactions.
As if that weren't enough, in November 1990, Harken formed an off-the-books partnership with Harvard in order to move debt and poorly performing assets off its books and onto those of Harvard. This helped disguise how much of a risk investing in Harken had become.
But it got a shot in the arm when, perhaps out of allegiance to Bush's Arab-friendly father and then president, the country of Bahrain awarded Harken an exclusive contract to explore a new oil field in the Persian Gulf despite its lack of international experience. The billionaire Bass brothers of Texas also chipped in, to subsidize the drilling.
As expected, Harken's stock, of which Bush Jr. owned a sizeable share, took off. Yet, in June 1990, though the ceiling seemed to be nowhere in sight, he decided to unload 212,010 shares ostensibly to buy a new house, though he used it instead to pay off a loan he'd taken out when buying a stake in the Texas Rangers baseball team.
Harken attorneys warned Bush that he was liable to be scrutinized for possession of "material non-public information." As a board member, he was not only privy to Harken's problems, he himself put forth the motion for the off-the-books partnership with Harvard. With characteristic defiance, Bush went ahead with the deal anyway. His insistence that the buyer remain anonymous didn't help allay suspicions.
Though unexplored by the SEC, there was another dimension to the insider trading charge –- the imminence of the Gulf War. Had the White House leaked news of its planned attack to Bush? Perhaps more to the point, could the White House not have let him in on it? Sure enough, when Iraq actually invaded Kuwait, Harken's shares, in part because of concern about the difficulties of drilling for oil during war-time, decreased 25%.
In any event, the Securities and Exchange Commission's investigation came to a premature end. Though no evidence of impropriety was found, it should be borne in mind that the SEC chairman at the time was a friend of the Bush family who had been nominated by Bush Sr. Still, the SEC said that closing the case "must in no way be construed" as an indication that "the party has been exonerated or that no action may ultimately result."
In retrospect, the SEC's statement resembles a cry for help from its rank and file. Will someone out there whose hands aren't tied please re-open the case? Ironically, it's in Harvard's SEC filing of its Harken transactions where evidence of Bush's wrongdoing can be found hiding in plain sight.
All that's known of the purchaser of Bush's stock is that it was institutional. Was it Harvard again? There's no mention in Harvard's SEC filing that it took Bush's Harken stock off his hands. And what if it did?
Since Harvard was already enmeshed with Bush and Harken, it would be difficult for it to claim it was unaware of Bush's rush to dump his stock before Harken's inevitable reversal of fortune. Harvard might then have been required to reveal that knowledge, thus not only hanging Bush out to dry, but also implicating itself in insider trading.
Organizations like Harvard Watch and Charles Lewis's Center for Public Integrity had already established that Harvard had become a dumping ground for Harken's stiff of a stock. But it took Massachusetts CPA Steve Rose, who once prepared charitable organization returns for one of Harvard's venture capital arms, Aeneas, to show that Harvard most likely bought Bush's shares as well.
Rose had discontinued working for Harvard because he was uncomfortable with its questionable business practices. When its Harken investments came to light, he decided to do what accountants call a reconciliation. Approaching it as a puzzle to be solved -- kind of like an advanced form of su doku -- he zeroed in on the SEC's website.
Corruption in Action
An SEC filing is a land where investigators and journalists fear to tread. Its sheer bulk and eye-glazing itemizing flag it as a text best steered clear of. But we're fortunate to have Rose scouting out this desolate terrain for us. He'll show us the guideposts indicating exactly how Harvard appears to have taken George Bush's Harken stock off his hands.
Now let's step into the badlands of Harvard's Aeneas Venture Corporation SEC Form 13D/A.
In March 1990, as part of its selfless campaign to offload Harken stock, Aeneas bought 868,450 shares. Then it transferred all those shares to another one of Harvard's affiliates, Phemus Corporation. Yet, despite divesting itself of those shares, Aeneas bought more -- exactly 50,000.
Stranger still, the sale of those 50,000 shares went unreported in the filing. Then how do we know it occurred? Because Rose did the math.
Why buy 868,450 shares and shuffle them along, only to buy 50,000 more shares from the same company? One can't help but wonder if the two sellers were different actors in the same company. Transferring the institutional-sized purchase might have been a sleight of hand by the buyer, Harvard, intended to obscure the personal-sized purchase. Especially if the 50,000 were bought from Bush and bore the stink of insider trading.
But Harvard was just getting warmed up for the shell game to follow.
Next, Rose bushwhacks his way through amendment five of the filing, in which he finds Aeneas increasing its Harken shares by 228,250. Again, there's no mention of the purchase. The numbers just kind of appear on the table. Bear in mind that when it wants to, Harvard is capable of itemizing that's as conscientious as it is scrupulous. (For an example, see Phemus's transactions on pages 87 and 88 of amendment five.)
But one can only gaze in awe at the audacity Harvard displays in slipping 228,250 shares -- unannounced -- into a SEC filing. Implicit in such an act are two assumptions, both dripping with arrogance: that the press finds SEC filings daunting and that the SEC doesn't bother to check the filings.<>
Other transactions also slipped in through the back door. In amendment five, the President and Fellows of Harvard College (the college itself) failed to mention its disposal of an armload of Harken shares, while another of Harvard Management's entities, Harvard Yenching Institute, added a handful.
Meanwhile, Michael Eisenson, who also owned shares under the umbrella of Harvard Management, must have thought the double life he led as a director for both Harvard and Harken wasn't enough of a red flag. He too left transactions unexplained, as did Donald Beane.
Now for the scene of the ambush. When Rose totals the unreported shares Aeneas bought between amendments four and five, he arrives at the number 212,750. Recall that Bush sold 212,140 shares during the same period. Only 610 shares separate what Aeneas bought and Bush sold! Your tolerance for coincidence has to be awfully high to ignore the obvious -- that Harvard bought Bush's shares.
As Rose is fond of repeating, "The devil is in the details."
Harvard Management's former CEO, Jack Meyer, wasn't concerned. He told The Boston Globe that, "Our [Harken] position increased 1.4 million shares in 1990." All, he maintained, were acquired by Harvard Management from Harken. "We didn't buy any of these shares from any shareholders." (Such as Bush.)
There's much more in these and subsequent filings that make Harvard Management look like it's trying to hide its unlawful acts behind Harvard University's ivied facade. But at a time when his former supporters are distancing themselves from Bush, there's nothing to stop Harvard too from hopping on the hawser and abandoning his sinking ship like yet another rat.
Since there's no expiration date for amending its amendments, Harvard can still come clean. With its endowment rising 16.7 percent in the last fiscal year to an eye-popping $29.2 billion, a settlement with the SEC would be painless.
As for Bush, indictment might give this president an actual legacy. Thanks to him, future presidential hopefuls will be forced to open his or her closet and watch as any financial skeletons hidden inside come clattering out.
