The Nation

Editor's note: Below is David Corn's article, posted on March 4, 2002, that first broke news of the Bush-Enron oil deal. An update follows.

Did George W. Bush once have a financial relationship with Enron? In 1986, according to a publicly available record, the two drilled for oil together--at a time when Bush was a not-too-successful oil man in Texas and his oil venture was in dire need of help. Bush's business association with Enron, it seems, has not previously been reported.

In 1986, Spectrum 7, a privately owned oil company chaired by Bush faced serious trouble. Two years earlier, Bush had merged his failing Bush Exploration Company (previously known as Arbusto--the Spanish word for shrub) with the profitable Spectrum 7, and he was named chief executive and director of the company. Bush was paid $75,000 a year and handed 1.1 million shares, according to "First Son," Bill Minutaglio's biography of Bush. Under this deal, Bush ended up owning about 15 percent of Spectrum 7. By the end of 1985, Spectrum's fortunes had reversed. With oil prices falling, the company was losing money and on the verge of collapse. To save the firm, Bush began negotiations to sell Spectrum 7 to Harken Energy, a large Dallas-based energy firm owned mostly by billionaire George Soros, Saudi businessman Abdullah Taha Baksh and the Harvard Management Corporation.

The deal took months to work out. In September of 1986, Spectrum 7 and Harken announced they had reached an agreement. Spectrum 7 shareholders, under the plan, would receive Harken stock. Bush publicly said that Spectrum 7 would continue to operate in Midland, Texas, as a wholly-owned subsidiary of Harken and that he would become an active member of Harken's board of directors. As Minutaglio noted, the deal would give Bush about $600,000 in Harken shares and $50,000 to $120,000 a year in consultant's fees. It also would provide $2.25 million in Harken stock for a company with a net value close to $1.8 million.

As the details of the Spectrum-Harken acquisition--which Bush badly needed--were being finalized, Enron Oil and Gas Company, a subsidiary of Enron Corporation, announced on October 16, 1986, that it had completed a well producing both oil and natural gas in Martin County, Texas. An Enron Oil and Gas press release reported the well was producing 24,000 cubic feet of natural gas and 411 barrels of oil per day in the Belspec Fusselman Field, 15 miles northeast of Midland. Enron held 52 percent interest in the well. According to the company's announcement, 10 percent belonged to Spectrum 7. At that point, Spectrum 7 was still Bush's company. Harken's completion of the Spectrum 7 acquisition was announced in early November.

To spell it out: George W. Bush and Enron Oil and Gas were in business together in 1986--when Ken Lay was head of Enron. (Lay was named Enron chairman in February of that year.) How did this deal come about? Was this the only project in which Bush and Enron were partners? A call placed to the White House produced no response. Karen Denne, an Enron spokeswoman, says "I can't tell you anything about" that project, explaining Enron "sold all its domestic exploration and production assets about two years ago to EOG Reources" and probably did not retain records regarding that well. As for the possibility Spectrum 7 invested in other Enron ventures, she notes, "You're referencing something that happened in 1986. I can check, but we're pretty short-staffed now." Elizabeth Ivers, a spokeswoman for EOG Resources (formerly Enron Oil and Gas), says, "If we did have any records on that well, it would be nothing that we would share with the public. We do not disclose the details or specifics of who we have well interests with."

After the Enron affair began generating front-page headlines, Bush attempted to distance himself from Enron and Lay. In early January, the President claimed he and Lay had not always been close pals. "He was a supporter of [Texas Governor] Ann Richards in my run [against her] in 1994," Bush asserted, noting he did not get "to know Ken" and work with him until after he won that election. But campaign records show Lay donated three times as much money to Bush in that race as he did to Richards. Moreover, contacts between Lay and the Bush family pre-dated that campaign. In 1992, Lay chaired the host committee for the 1992 Republican convention in Houston, where Bush's father won his second presidential nomination. And Lay was a sleepover guest at the White House of President George H.W. Bush.

The Enron-George W. Bush connection goes back further than the President has suggested. But does that mean the relationship between the younger Bush and Lay stretches to the mid-1980s? The deal could have happened without contact between Lay and Bush. But most company heads would be interested to know that the son of the sitting vice-president had invested in one of their enterprises. If Lay had been aware of the partnership, that would not prove the two were pals or that Bush and Spectrum 7 had received undue consideration from Enron. But given Enron's penchant to use political ties to win and protect business opportunities, it is tough not to wonder if this Bush-Enron venture involved special arrangements. This is certainly one more Enron partnership that deserves scrutiny--especially since George W. Bush has yet to acknowledge it. The Spectrum-Enron deal is either an odd historical coincidence or an indication there's more to learn about the Bush-Enron association.

NOW FOR AN UPDATE ON THE BUSH-ENRON OIL DEAL:

On March 6, two days after this story was first posted, "The New York Times" ran on the front page of its business section a story headlined, "Bush Joined Unit of Enron In '86 Venture To Seek Oil." The article, written by Jim Yardley, essentially reported the facts noted above. Halfway into the piece, it noted, "A columnist in The Nation, the liberal political journal,...wrote about the deal this week in its online edition."

While the Bush White House did not respond to a request from "The Nation" for information, White House spokesman Dan Bartlett told the "Times" the President "has no recollection of this specific deal." Bartlett maintained that in 1986 Spectrum 7 was involved in more than 175 wells. Ted Collins Jr., who was president of Enron Oil and Gas at the time, told the newspaper that Bush did not have "a special relationship" with the company. Collins also asserted that Lay back then "wouldn't have known who Spectrum 7 was and that George W. Bush had anything to do with a company called Spectrum 7."

Since the story was originally posted, I have found records suggesting that Bush's Spectrum 7 had a second partnership with Enron. In May of 1985, a subsidiary of InterNorth, an Omaha-based energy company, announced the completion of a well in Martin County, Texas. According to "PR Newswire," the company said that Spectrum 7 owned an 18.75 percent interest in the well. (The rest was held by the InterNorth subsidiary.) The well, like the one mentioned above, was located at the Belspec Fusselman Field. That same month, InterNorth merged with Houston Natural Gas (HNG)--which gave birth to Enron. HNG/InterNorth changed its name to Enron in 1986, and the InterNorth subsidiary that had invested in the well with Spectrum 7 became part of Enron Oil and Gas. If Spectrum 7 and Enron Oil and Gas had retained their interests in the well, that would mean that Bush's oil company was in partnership with Enron before the deal reported above. Since Bush, according to his spokesperson, does not have a memory for such details and EOG Resources says it will not release any information about wells it has owned, it will be tough to confirm that the InterNorth-Spectrum 7 venture became an Enron-Spectrum 7 enterprise.

On another, more important, Enron-Bush point: Way back in 1994, I reported that Rodolfo Terragno, a former Argentine cabinet minister, had claimed that when he headed the Public Works and Services Department in 1988, George W. Bush, whom Terragno did not know, called him and pressured Terragno to award a pipeline contract worth hundreds of millions of dollars to Enron. (See http://www.thenation.com/doc.mhtml?i=20020204&s=corn.) Terragno, who said he resisted this and subsequent importuning, could not provide proof that the call had occurred. (How can you prove you were phoned by the son of the Vice-President?) Bush's aides denied Terragno's account. But it's worth taking a second look at those denials.

At the time I was pursuing the Terragno story, Bush was running for Texas governor, and I asked the campaign whether Bush had spoken to Terragno about the pipeline project and whether he had any business relationship with Enron. Bush aide Karen Hughes faxed me a terse statement: "The answer to your questions are no and none. Your questions are apparently addressed to the wrong person." An Enron spokesperson said, "Enron has not had any business dealings with George W. Bush, and we don't have any knowledge that he was involved in a pipeline project in Argentina."

The recent news about the 1986 Enron-Bush venture in the Belspec Fusselman Field undermines (to be polite about it) those 1994 statements from Bush and Enron denying any business relationship between the scion and the company. The existence of this oil partnership in 1986 (or one in 1985) has no bearing on the veracity of Terragno's tale. But it shows the credibility of the Bush gang and that of Enron deserve questioning when either one is talking about the other.

Did the United States recently engage in an illegal act of war?

On February 19, "The New York Times" placed on its front page a story headlined, "In a Shift, U.S. Uses Airstrikes To Help Kabul." As reporter John Burns wrote, "American forces appear to have opened a new phase in the war in Afghanistan with two bombing raids over the weekend that Afghan commanders in the area said were aimed at clashing militia forces rather than the Taliban or Al Qaeda." The article noted that the U.S. Central Command had issued a statement declaring that U.S. aircraft had dropped precision-guided bombs when "enemy troops" struck forces loyal to the government of Hamid Karzai near Khost. The Pentagon said the pro-government forces had requested the U.S. airstrikes after being attacked by rival troops. Local Afghan commanders reported that the clash involved two tribal militias--but details were murky. Burns noted, "the bombing raids seemed to have placed the United States for the first time in a position of using American air power in defense of the [Karzai] government."

In other words, the U.S. is taking sides in a civil war within Afghanistan. Perhaps that is not bad policy. Perhaps it is in the interest of the United States and good for Afghans for the U.S. military to come to the rescue of the secular, coalition government of Hamid Karzai, which has recently been shaken by the assassination of a Cabinet member and non-stop factionalism. Still, there's a problem. Who gave George W. Bush and the Pentagon permission to wage this sort of war in Afghanistan? Not Congress.

On September 14, Congress passed a joint resolution authorizing Bush to go to war in response to the horrific events of September 11. The resolution did not identify a specific target for Bush. Instead, Congress agreed to a broad but specific definition:

"The President is authorized to use all necessary and appropriate force against those nations, organizations, or persons he determines planned, authorized, committed, or aided the terrorist attacks that occurred on September 11, 2001, or harbored such organizations or persons, in order to prevent any future acts of international terrorism against the United States by such nations, organizations or persons."

Nothing in the resolution allows the United States to use force to protect one militia (be it pro-Karzai or not) from another militia. This appears to be unconstitutional mission creep.

It's unclear whether these bombing raids were a one-time exception or the start of a new pattern of warfare. Karzai has said he will not hesitate to ask for security assistance in order to preserve his government. It certainly looks as if he is going to need such help, and he may well deserve protection and military support. But Bush should not guide the United States into fractious fighting in Afghanistan without first consulting Congress. He is authorized to go after terrorists and their collaborators, not to blast warlords.

Though it did send in the bombers to aid forces allied with Karzai, the Bush Administration has been loath to participate in the peacekeeping force being established in Afghanistan, essentially saying, "That's not our job." But if the White House and the Pentagon want to use force to preserve Karzai's administration, it has two choices. Sign up with the U.N. peacekeeping mission or ask Congress to okay the unilateral use of American troops and bombers on behalf of the current Afghan government. Yes, abiding by the Constitution during wartime can be a pesky task. (And asking questions about the conduct of the war in Afghanistan can be a lonely endeavor. See the two posts below. More information keeps coming out about civilian deaths caused by U.S. airstrikes in Afghanistan. For example, look at the front-page story in today's "Washington Post," which reports that villagers outside of Kandahar say more than 100 civilians were killed during U.S. bombing raids in their area. But what political or opinion leaders have publicly raised concerns regarding the bombing campaign in Afghanistan?)

The joint resolution also poses a problem for the get-Iraq crowd in the Bush White House. So far there is no evidence Saddam Hussein was a party to the crimes of September 11. There is no indication Iraq harbored or aided the perps. Consequently, there is no authorization for a strike against Iraq. (The same would apply to the rest of the "axis of evil"--Iran and North Korea). If Bush does want to attack Iraq--with all the conflicting hints coming out of the administration, it is hard to assess how serious he is in this regard--he will have to do what his father did before the Gulf War in 1991: seek approval from Congress.

But recent events in Afghanistan should give Bush some pause when he ponders assaulting Iraq. It seems that booting a government may be much easier than putting together a government. The Karzai government, after only weeks in office, is endangered by in-fighting and out-fighting. In Iraq, the United States might be able to de-Saddamize the regime. But what kind of government would follow?

While we're on the subject of Iraq, here's a reminder: When Dick Cheney was head of Halliburton, two of the company's subsidiaries did business with Iraq. As "The Washington Post" reported last June, those two ventures "signed contracts to sell more than $73 million in oil production equipment and spare parts to Iraq while Cheney was chairman and chief executive officer." When that story came out, Cheney's spinners tried to distance him from the transactions, which were legal. But executives involved in these deals said Cheney was in a position to be aware of them. By the way, Cheney has long been critical of U.S. sanctions against such countries as Iraq, Iran and Libya, maintaining they punish American companies. In fact, a few months prior to September 11, the Bush Administration was asking the U.N. to end an 11-year embargo on the sale of certain goods--including oil-related equipment to Iraq.

Before September 11, Iraq was a fine place for U.S. firms, like Cheney's Halliburton, to do business. Afterward, Iraq was first among equals in an "axis of evil." Shifting aims in Afghanistan, shifting aims in Iraq. War is slippery business.

Like last year's freewheeling Senate debate on the McCain-Feingold campaign finance reform bill, this week's debate on the House version of McCain-Feingold, the Shays-Meehan bill, provided an all-too-rare display of what an engaged Congress might look like.

Not only did the reform coalition break through the barricades erected by the House Republican coalition to win an unexpectedly wide 240-189 vote, it sparked a debate worthy of what is, after all, supposed to be a deliberative body.

For the most part these days, Congressional debates are defined by both their brevity and their vapid nature. Consider the embarrassingly abbreviated discourse over providing George W. Bush with the authority to respond to the September 11 terrorist attacks -- not exactly an inconsequential matter -- and it is easy to understand why so many Americans doubt whether this Congress is capable of a serious discussion.

During the marathon debate over Shays-Meehan, which stretched through the day Wednesday and into Thursday morning, however, there were flashes of intellect, passion and even humor. Yes, of course, Republican attempts to derail the reform movement by repeatedly attempting to slip "poison-pill" amendments into the carefully blended Shays-Meehan compromise were comically cynical. But they provided an opening for dramatic clashes of honor. One of the most amazing of these came when conservative Republicans -- many of them white southerners with dubious track records on issues of racial justice -- attempted to attach an amendment that would have lifted restrictions of last-minute attack ads if the messages concerned civil rights issues.

The Republican expressions of concern about for fostering a dialogue about civil rights held little water with Rep. John Lewis, D-Ga. The veteran of the civil rights era, who took to the microphones several times during the day and night of debates, ripped the hypocritical attempts of southern Republicans to present themselves as tribunes of the black freedom struggle. "I did not march across the bridge at Selma on March 7, 1965, and almost lose my life to become part of a political system so corrupt that it pollutes the very idea of what we marched," a clearly angered Lewis told the hushed House of Representatives."There is too much money in politics," Lewis argued. "Political candidates should not be up for sale to the highest bidder. Too many of us spend too much of our time dialing for dollars. We should not be elected this way. This should not be the essence of our democracy."

Lewis was not alone in pushing the debate beyond the picayune toward broader dialogue about the very character of American democracy. "At issue is the shape of American democracy; at issue also is the shape of our political parties. There is a question of balance of power between the parties, but shape matters too. Do we want our parties dependent on the big and powerful or the individual citizen?" declared Iowan Jim Leach, one of the last of the chamber's genuine old-school Republican moderates. "The system needs reform; so do the parties. In a new-fangled world, what is needed is old-fashioned politics, old-fashioned political parties, old-fashioned people-oriented representation."

The debate actually featured verbal wrestling matches over core principles of "old-fashioned" politics and governance, as when California Republican David Dreier, one of the chambers most consistent foes of reform, began quoting from James Madison and other framers of the Constitution to defend the role of special-interest groups in American politics. "In Federalist No. 10, James Madison talked about political faction, how the opportunity for people to come together and demonstrate their interests is something that is a fact of life. In fact, he said in Federalist No. 10, ‘Faction is to governing like air is to fire,'" Dreier asserted.

Those remarks brought Massachusetts Democrat Marty Meehan to the floor to deliver what may have been the most effective of his many defenses of the bill he and Connecticut Republican Chris Shays guided through the House. To Dreier's attempt to claim the favor of the founders for his position, Meehan replied, "Mr. Chairman, if James Madison could see the $4 million in unregulated soft money that went from Enron to both political parties, if James Madison could see that 70 percent of the soft money from Enron since 1995 went to both political parties, if James Madison could see the $1.7 million in the last election cycle, he would be rolling over in his grave."

Meehan was a tireless performer across almost 16 hours of debate, arguing philosophically and strategically. As one point, he took to the microphones to bluntly explain why the legislation -- so long opposed by Republican leaders, including George W. Bush -- might actually become law. Following House passage and what backers hope will be quick action by the Senate to essentially renew its support of McCain-Feingold, Meehan said, "Then we are going to send it over to the President, and the President has made it very clear to the Republican leadership and anyone else in this House, ‘do not count on me to veto this bill.' Why is it the President made it clear? Because this President knows what we all know, that there is a cloud over the Capitol and the White House because of this Enron scandal, and the American people are demanding that that cloud be removed by removing this soft money system that has had such a corrupting influence on the decisions that we make day in and day out, making good people do bad things. They want this removed and the President wants this removed, I am sure. I am sure that is why he will sign this bill."

But can a bill that George W. Bush would sign represent real reform?

Some long-time reformers were frank about the fact that, in the words of Iowa's Leach, Shays-Meehan "is too little, too late, too compromised." Said California Democrat Pete Stark, "In my opinion, we should do away with our private campaign financing system altogether and publicly fund political campaigns. This would level the playing field so that anyone could participate in the political process." While he admitted that "the Shays-Meehan bill doesn't go that far," Stark added: "This bill has several important provisions to improve our campaign finance laws: it bans soft money from national parties; it reins in campaign advertisements which claim to be 'issue advocacy' ads; it enhances disclosure of political expenses; and it provides the Federal Election Commission with stronger tools to enforce campaign finance laws. By passing this bill today, we as leaders can finally recognize what the American public has known for years: there is too much money in politics."

Stark's realistic remarks were in marked contrast to the over-the-top pronouncements of Shays-Meehan backers like Minority Whip Nancy Pelosi, D-Cal., who identified Shays-Meehan as "a valentine for the America people" and declared, "This beautiful city in which we serve 200 years ago was built on a swamp and a swamp it is again today, a swamp of special interest money. Today we have the opportunity to drain that swamp."

If some members could not quite control their flights of rhetorical fancy, others used humor to return the debate to the basic point that any move that removes special-interest money from politics is a move in the right direction. "Did my colleagues hear the story about the lobbyist who gave a million dollars to a political party in soft money donations and demanded absolutely nothing in return?" asked Texas Democrat Lloyd Doggett. "Well, neither has anyone else."

Two months ago, I wrote a piece for the "The Los Angeles Times" proposing that Afghan civilians who had lost relatives, limbs, homes and businesses due to errantly-targeted U.S. bombs receive compensation from Washington. The article was reprinted; I talked up the idea on television and radio. And never have I received more hate mail, with my assailants virulently accusing me of being anti-American and pro-terrorists. Bill O'Reilly bashed me for demanding the United States pay "reparations." But my point simply was that when the United States accidentally inflicted damage upon civilians (such as one young boy who lost his right arm, his left hand and his sight when U.S. bombs struck his home near Tora Bora), it should try to help those harmed. Now, I am happy to note, the C.I.A. is on my side, for the Agency in the past few days has been handing out cash to relatives of Afghan soldiers mistakenly slaughtered by the United States.

On January 24, U.S. Special Operations troops attacked two small compounds in Haraz Qadam, a town 100 miles north of Kandahar. At least eighteen people were killed. Twenty-seven were captured, and the Pentagon announced its prisoners were Taliban and al Qaeda fighters. The daring operation was front-page news. But days later, media reports, based on interviews with local residents, undermined the official account. The townspeople said one of the compounds was being used as a weapons depot for a local disarmament drive and that the Afghans killed and snatched by the Americans were not Taliban or al Qaeda but troops loyal to the interim government of Kabul. According to local Afghans, the bodies of two individuals had their hands tied behind their backs. About a week later, C.I.A. officers were in the field working with tribal leaders to pay $1000 to the family of each Afghan wrongfully killed.

What is interesting is how the Pentagon at first tried to deny a tragedy had taken place. When Craig Smith of "The New York Times" wrote a story questioning the raids on January 28--after interviewing dozens of local folks whose testimony was compelling--the Pentagon, in automatic-pilot fashion, defended the operation. "We take great care to ensure we are engaging confirmed Taliban or Al Qaeda facilities," Maj. Bill Harrison, a U.S. Central Command spokesman, told the newspaper. "As a result of this mission, we detained 27 individuals, and believe that our forces engaged the intended target."

Three days later, after Afghan officials kept insisting innocent troops had been killed, the Pentagon announced it was reviewing the episode. But General Tommy Franks, the Central Command chief, said the Pentagon had no information to suggest friendly forces had been killed. (Guess he doesn't have time to read the papers.) Two days after that, "senior military officials" told the Associated Press that some of those killed, but not all, might have been loyal to the new government and that the individuals captured and killed including persons of mixed political loyalties. Slowly, the Pentagon was backtracking.

On February 4, Defense Secretary Donald Rumsfeld finally acknowledged that "friendly" Afghan forces might have been killed during the raid. Forty-eight hours later, the Americans released the 27 Afghans it had grabbed at the compounds, and the Pentagon announced that not one was a Taliban or al Qaeda fighter. By now, U.S. officials were confirming the C.I.A. was arranging compensation payments. Still, Maj. Ralph Mills, a spokesman for Central Command, maintained, "The release of the detainees isn't an admission that we made a mistake." He asserted that during the raid the U.S. forces had been shot at by "people who weren't in uniform."

This was a weak defense. What did the Pentagon expect? Its commandos hit a compound of soldiers in the middle of the night--a target apparently chosen on the basis of lousy intelligence--and the people attacked shouldn't shoot back? Were the targets first supposed to have asked the Americans to identify themselves? The Afghans probably did not have the chance to do so before being wiped out. Craig Smith reported that a farmer who claimed to have witnessed the attack said he heard people in one compound screaming, "For God's sake, do not kill us. We surrender." And an AP report quoted Afghan witnesses who maintained that no one fired back during the raid. Moreover, these witnesses said that during the attack two local government-appointed officials were handcuffed and shot in a schoolyard by U.S. Special Forces.

The Pentagon cannot yet admit this raid was a massive screw-up--even as the C.I.A. doles out compensation money. (A thousand dollars may go far in Afghanistan, but the Pentagon is getting off cheap.) The U.S. military says that its ongoing inquiry will take another two weeks.

It is worth noting that it took a lot of pressure--from media reports and Afghan officials--to force the Pentagon to concede there may have been a problem with this raid. Recall that the Pentagon's first reply was, we hit the intended target--which is always its first reply when a military action is questioned. Even after Afghan leader Hamid Karzai recently stated that a U.S. airstrike in December that killed twelve people had actually hit a convoy carrying tribal elders supporting his government, the Pentagon still maintains that particular strike was legitimate. Karzai said the Americans had been "misled"--presumably by a local warlord--into believing the vehicles were carrying Taliban. There are indications that the Americans were similarly duped regarding the January 24 raid.

Which raises questions about the performance of U.S. intelligence on the ground. When C.I.A. director George Tenet appeared before the Senate intelligence committee for a rare public hearing on Wednesday, Senator Bob Graham, the Democratic chairman of the committee, said, "I think one of the lessons that we've learned since September 11th is just how good our intelligence agencies are." But a senator could have asked, if they are so good, why are C.I.A. people dispensing cash to relatives of Afghans slain on the basis of faulty intelligence reports? At the hearing, though, none of the Senators raised this issue.

Still, the C.I.A.'s better-than-nothing, hard-money response to the Haraz Qadam tragedy can serve as the foundation for a more humane and just approach to wartime accidents. There are hundreds of Afghan civilians--perhaps more--who have been killed or harmed by U.S. bombs. Rumsfeld has said, "we mourn every civilian death." If that is true, then the Bush Administration should build upon the C.I.A.'s latest program in Afghanistan and compensate all civilians who have been the victims of Pentagon errors. If the C.I.A. supports restitution, how unpatriotic can it be?