Bush and Andersen's Texas Two-Step
George W. Bush must be feeling an acute sense of déjà vu these days, as the dubious dealings of the accounting firm Arthur Andersen, LLP take center stage in the Enron scandal. Because the last time Bush was entangled in charges of insider trading and influence-peddling--during the 1991 federal investigation of his sale of oil company stock--Andersen was right in the thick of things.
In June 1990 Bush sold his shares in Harken Energy Corporation, the "white knight" that had rescued his failing Spectrum 7 oil company in 1986. (Spectrum had itself stepped in to save Bush's failing Arbusto Energy Inc. in 1984.) Harken was selling at $4 a share at the time of the sale, which netted Bush $835,000, according to the Washington Post. He used the money to pay off the loan he had taken out to buy into the Texas Rangers--the deal that ultimately made him a multimillionaire in his own right.
Two months after Bush sold his shares, Harken announced unexpected second-quarter losses, and the stock price tumbled. This left Bush, a Harken director and member of the firm's audit committee, exposed to accusations of insider trading: dumping stock before the company's troubles became public knowledge. What's more, Bush failed to report the sale to the Securities and Exchange Commission until eight months after the required deadline. The SEC launched an investigation--a tricky business for a federal agency when the target happens to be the President's son.
Bush denied all charges of impropriety, and the probe ended ambiguously. The SEC declined to take any "enforcement action" against Bush, but the agency's associate director for enforcement, Bruce Hiler, noted that this "must in no way be construed as indicating that the party has been exonerated or that no action may ultimately result from the staff's investigation." (Of course, this has never stopped Bush from claiming that he was "exonerated" by the SEC.)
So where does Andersen come in? At a key juncture--just as in the Enron case. Bush sold his stock on June 22, 1990. Less than two weeks before, on June 11, he and the other members of the audit board (including Harken's president, former Arthur Andersen accountant Mikel Faulkner) met with Harken's accountants: Arthur Andersen. But according to Robert Jordan, Bush's lawyer during the SEC probe, neither the accountants nor the committee members discussed the company's budget woes at that meeting--despite the fact that Harken was about to take a hefty $23.2 million loss for the second quarter of the fiscal year, which was just ending at that time.
The minutes of the meeting would verify this claim of blissful (and profitable) ignorance, Jordan told the Washington Post, in a campaign profile of Bush in 1999. But Harken refused to release those records. As with Dick Cheney's energy panel, we simply have to take the assertions of integrity on faith.
Bush has maintained a cozy relationship with Andersen executives over the years. In fact, according to the Center for Public Integrity, Andersen's ties to the Bush Administration rival those of Enron. Andersen has given Bush more than $200,000 since 1998 alone. Stephen Goddard Jr., the managing partner of Andersen's Houston office--and supervisor of David Duncan, now being left to twist slowly in the wind for the firm's frantic shredding of documents--was part of Bush's inner circle of "Pioneers": big money men pledged to bring in $100,000 or more to Bush campaign coffers. Goddard has been relieved of his management duties in the wake of the scandal.
In all, Andersen has spent more than $8 million on lobbying, campaign contributions and "soft money" since 1998, says CPI. Some of that money went toward a special interest that Andersen shared with Enron, and with Bush: energy deregulation. Two of its Aandersen's former lobbyists, Nicholas Calio and Kirsten Chadwick, now work for the White House as part of Bush's Legislative Affairs Office.
It remains to be seen if Bush will back away from his Andersen connections as quickly as he has dropped his old pal and financial patron, "Kenny Boy" Lay, Enron's founder. (It's not for nothing that Bush's handlers have taken pains to have him photographed with a biography of Theodore Roosevelt lately. Teddy was infamous for courting the favor--and money--of the magnates of his day, then turning on them when the political winds shifted. "We bought him, but he didn't stay bought," the bosses used to say.)
But Bush's old pals and financial patrons at Harken were way ahead of the game. They severed their longtime relationship with Andersen on August 28, 2001--just two weeks after Enron CEO Jeffrey Skilling's sudden resignation on August 15 gave the first signal that something was rotten in the state of Texas.
Harken didn't need a weatherman to know which way the wind blows. Bush may be a bit slower on the uptake, but watch for him to tack sharply away from the Andersen shoals in the coming weeks. "Arthur Andersen? Never met the man. Isn't he that guy who ran against my dad back in 1980? He's no friend of mine."