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Bush and Lay: A Common Pattern of Stock Dumps? | The Nation

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Capital Games

 Washington: a city of denials, spin, and political calculations. The Nation's former DC editor David Corn spent 2002-2007 blogging on the policies, personalities and lies that spew out of the nation's capital. The complete archive appears below. Corn is now the DC editor at Mother Jones.

Bush and Lay: A Common Pattern of Stock Dumps?

I had hoped to be reporting in this space today the answers of disgraced Enron CEO Ken Lay to a host of impolite questions. As you might have heard, Lay was scheduled to make his first appearance before a Congressional committee this morning--and I had planned to join the gawkers at the press tables. But yesterday, Lay canceled, claiming that recent remarks from members of Congress had led him to conclude that an anti-Lay bias had set in on Capitol Hill. Which meant that a lawyer finally had managed to talk some sense into Lay. Since he is the potential subject of criminal investigations and civil lawsuits, it would not have been wise for Lay to subject himself to wide-ranging questions from members of the Senate Commerce, Science and Transportation Committee. Consequently, I--and you--did not get to see him respond to such questions as:

* What did you expect in return for the hundreds of thousands of dollars you donated to George W. Bush over the years?

* Did you or anyone else at Enron ever try to exert influence over a regulatory matter of the US government? If so, could you please run us through all the details?

* Did you pull strings to replace the chairman of the Federal Energy Regulatory Commission last year? Did campaign contributions come in handy in such an endeavor?

* Why did you find it useful to retain as lobbyists high-level GOP operatives, such as Ralph Reed and Ed Gillespie? Did Enron place Reed on its payroll as a favor to the Bush campaign, as has been reported (but denied by Reed)?

* Did your donations to the Democratic party during the Clinton years help Enron win highly-coveted seats on trade missions led by Commerce Secretaries Ron Brown and Mickey Kantor?

* What did Enron officials and the staff of Vice President Dick Cheney's energy task force talk about?

I am presuming the Senators would have dared to ask such direct questions. But Lay is lying low, and these and other mysteries will remain for the time being.

As a public service, then, let me put to good use the space otherwise reserved for the Lay testimony.

A few days ago, the inimitable Molly Ivins called me. There was a slight dire tone in her voice, which is unusual. Molly gets dire about few things. What had riled her was a quote put out by the White House. In yet one more attempt to distance Bush from his (previously) good friend Lay (once known to Bush as "Kenny Boy"), a White House aide had told reporters that Bush was outraged that Lay and other executives had sold hundreds of millions in Enron stock before the company collapsed and the stock plummeted. The aide quoted an angered Bush as saying, "I thought the captain was supposed to be the last one off the sinking ship, not the first one."

This was hypocrisy, Molly noted. See my book, she said, and you'll see why. As soon as I could, I found my copy of "Shrub: The Short But Happy Political Life of George W. Bush" (cowritten with Lou Dubose), and located the relevant passage. (For those of you playing at home, pages 27 to 33.)

This section of the book covered the years before Bush entered electoral politics, the time when he was a failing-upward oil man. When W.'s father was president of the United States, George the Younger was a major shareholder in a sinking oil venture called Spectrum 7. But before Spectrum 7 sank completely, the Harken Energy Corporation, which was run by a GOP funder, bailed out the company. Bush got about $500,000 in Harken stock for his piece of Spectrum 7, and Harken signed him up as a consultant. Harken went on to win a 35-year exploration contract with the emirate of Bahrain in the Persian Gulf--an odd deal, since the company had no previous experience in international or offshore drilling. Some observers wondered if Harken's Bush connection had been a factor. But that's not the part of the story we care about at this moment.

In June of 1990, Bush sold two-thirds of the Harken stock he had received in the Spectrum 7 deal--and collected $318,430 more than it was worth when he first obtained it. Get low, sell high? Anything wrong with that? The month before this sale, Harken appointed Bush to a committee to determine, as Ivins and Dubose put it, "how restructuring [of the firm] would affect ordinary shareholders." According to Ivins and Dubose, who note the previous reporting work of "U.S. News and World Report," when Bush served on this committee, he was privy to information indicating the company was in trouble. He then dumped his stocks before this news became public. "U.S. News" concluded that at the time of the sale there was "substantial evidence to suggest that Bush knew Harken was in dire straits."

Bush claims he had merely sold at an opportune time, when word of the Bahrain deal was bolstering the company's position. But he then neglected to notify the Securities and Exchange Commission of his stock-dump, as he was required to do. Is that the tip-off something was amiss? (He filed the appropriate paperwork eight months after the deadline.) In the meantime, two months after he sold his shares, Harken stock dropped 25 percent, and it would sink further in the months ahead. As Ivins and Dubose note, "three years later, during his 1994 race against [Texas Governor] Ann Richards, he claimed he had filed the required report and that the SEC must have misplaced it. SEC spokesman John Heine told 'Time' that no one at the agency ever found any lost document."

Did Bush, one of the captains of Harken, jump that sinking ship because he had inside information the vessel was foundering? The chronology is suspicious. Yet now he is shocked, shocked that his close friend Ken Lay engaged in the same pattern of behavior. Perhaps if Ken Lay ever does permit himself to be questioned by a Congressional committee an additional query ought to be added to the list above: Did George W. Bush ever offer you advice on how to betray the shareholders of your own company by selling stock in response to bad-news known only to insiders?

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