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December 6, 1996

ENRON and Shell Win Bid

in Capitalization of YPFB'

Transportation Segment

Business Wire

LA PAZ, BOLIVIA – Enron Development Corp. and Shell International Gas Ltd. announced today that the government of Bolivia has named the companies the successful capitalizing company for the transportation segment of the state oil and gas company, Yacimientos Petroliferos...

March 30, 1998

The following is an excerpt from a 10-K SEC Filing, filed by TESORO PETROLEUM CORP on 3/30/1998:


A lack of market access has constrained natural gas production in Bolivia. With little internal gas demand, all of the Company's Bolivian natural gas production is sold under contract to the Bolivian government for export to Argentina.

Major developments in South America indicate that new markets will open for the Company's production. Construction of a new 1,900-mile pipeline that will link Bolivia's extensive gas reserves with markets in Brazil commenced in 1997 and is expected to be operational in early 1999.

The owners of the new pipeline include Petrobras (the Brazilian state oil company), other Brazilian investors, Enron Corp., Shell International Gas Ltd., British Gas PLC, El Paso Energy Corp., BHP, and Bolivian pension funds. When completed, the new pipeline will have a capacity of approximately 1 billion cubic feet ("Bcf") per day.

For more, see...

Googling for the Ghost of Ken Lay

Shell Oil: The Shell Game

The Story of Enron

Vultures Up to their Necks in Tesoro Petroleum

July 1, 2006

Bear Stearns: Let’s Throw in the Ace


The Bear Stearns Companies, Inc. is the parent company of Bear, Stearns & Co. Inc., one of the largest and best-known global investment banksand securities trading and brokerage firms in the world. The company was founded in 1923 and serves corporations, institutions, governments and individuals. The company's business includes corporate finance, mergers and acquisitions, institutional equities and fixed income sales, trading and research, private client services, derivatives, foreign exchange and futures sales and trading, asset management and custody services. Through Bear, Stearns Securities Corp., it offers global clearing services to broker dealers, prime broker clients and other professional traders, including securities lending.

The former CEO of Bear Stearns was Alan (“Ace”) Greenberg, currently chair of the board, and is the cousin of Maurice (“Hank”) Greenberg and part of the AIG group of course.


Bear Stearns was named one of the inside traders of 9/11. Their stocks were traded 60 times the usual amount as well.

Bush family

Bear Stearns, of course, is where the Bush family, the Cheney family, George Schultz, James Baker, etc. all do business. It is the leading brokerage firm of the great and all powerful Bushonian Cabal.

Harken Energy, Texas Rangers and Clear Channel

by Al Martin

The $7 million that Bush Jr. put into the deal came from the Harken Energy stock fraud. He and his father George Bush Sr. entered into a conspiracy with Bear Stearns and others to artificially manipulate the price of Harken Energy stock, wherein the Bush Family illicitly proceeded to trade their shares "against the box," through the Pilgrim Investment Trust, the Bush Family-controlled Panama-registered investment entity, wherein the price of Harken Energy stock was pumped up from 1-1/ 4 up to 7-3/8 and then dumped all the way back down again.

This whole round trip as it were was accomplished in only about 4 months time. By being long at the bottom through the Pilgrim Investment Trust with shares that they had borrowed from Bear Stearns -- by the way. They didn't even put up their own damn shares. It's one thing to commit a scam, but the Bushes added a new twist. They commit scams with Other People's Money. They take it one step further by using OPM to commit the scams. Thus they generate the money for nothing.

So then Bush Jr. takes the $7 million out of the Harken Energy Stock Swindle that he and his father orchestrated with their longtime ally Ace Greenberg, chairman of Bear Stearns. He then invests in a syndicate to buy the Texas Rangers sports franchise. Then Bush becomes part of the general management of the team and proceeds to run the team into the ground, financially speaking. Then he is allowed to sell his interest back to the syndicate, including his shares in Mays Hicks for 4 times what he paid for them. Despite the fact the franchise was worth only half of the purchase price since he had "managed" it . In order to bail the whole deal out, he as governor of Texas then authorizes the expenditure of $345 million of public monies in order to build the new stadium and surrounding complex for the Texas Rangers....

The syndicate was composed of the Hicks Muse crowd essentially. James Baker was an investor in it and so was Dick Cheney. Then how this ties in to Clear Channel Communications is that Hicks was the regent of the University of Texas, which is another whole scam. This is a scam within a scam. The regents of the University of Texas is an infamous scam....

Everybody promoted Clear Channel stock then, not only Bear Stearns, but Merrill Lynch and JP Morgan, and they ran it up. They got everybody to promote the stocks. so it got as wide as possible distribution. All these stocks were coming out of Clear Channel, and there was an enormous amount of money coming in with virtually no accountability as to how they have to spend that money. Then they can start paying 2 or 3 times what radio stations are worth just to own them. It was simply for the ownership of the market. It doesn't have anything to do with making any money. And yet the stock, which is now in the 40s, still trades in what is over a 35 P/E I think. It is still considered a high P/E stock....



July 23, 2002

Bush's Role in Corporate Fraud

by Bill Black and James Galbraith, Boston Globe

PRESIDENT George W. Bush has reassured us that ''From the antitrust laws of the 19th century to the S&L reforms of recent times, America has tackled financial problems when they appeared.''

But the savings & loan reforms came seven years and 150 billion taxpayer dollars late. Nor did that problem merely ''appear.'' It was created by a deregulation bill in 1982 overseen at that time by Vice President George Bush.

From 1981 to 1988, the Reagan-Bush administration covered up the S&L debacle. It forced reductions in S&L examiners and fought against the top federal regulator, Ed Gray, who sounded the alarm. Charles Keating, the felon who drove Lincoln Savings into the most expensive S&L failure in history ($3 billion) considered Vice President Bush an ally in his efforts to force Gray from office. Only after he was safely elected president did Bush propose to reregulate the S&L industry in 1989.

Meanwhile, Neil Bush, private citizen, was getting a ''loan'' from a business partner. The partner invested the loan for the president's son with the agreement that if the investment succeeded Neil would get all the profits and repay the debt, but if it failed he would not have to repay. Neil knew that this business partner was not creditworthy and yet was borrowing over $100 million from Silverado S&L, where Neil was a member of the board. Neil did not warn Silverado that the borrower was not creditworthy. When Silverado failed, the Office of Thrift Supervision proposed a minor enforcement action against Neil, which the Bush administration then attempted to block.

George W. Bush, private citizen, emulated his brother Neil. He became rich through a buyout of his interest in the Texas Rangers at a huge profit. How did he purchase that interest in the first place? He got a very large loan from a very friendly bank. How was the bank able to justify the loan? If at all, because of the market's valuation of Bush's shares in Harken. Why was he on Harken's board of directors and also a well-paid consultant? Because his name was Bush. Why was he able to sell his Harken shares for a profit? Because Harken committed a financial fraud that hid real losses and created fictional income.

What was the nature of that fraud? It was a variant on the Enron and Lincoln Savings frauds. Harken insiders formed a entity which ''purchased'' Harken's bad assets for a grossly excessive price. But Harken financed almost all of the sale. If the bad assets had stayed on the books, Harken would have had to report severe losses, threatening its survival and causing its stock values to plummet. George W. Bush is a wealthy man today because his business friends were willing to stoop to fraud to make him rich.

George W. Bush is in trouble, in part, because of his clumsy coverups of this fraud. Knowing of the severe problems at Harken, Bush sold around 200,000 shares of stock for around $4 a share. (We do not know who purchased Bush's shares, but was it the ever-friendly Harvard Management Corp., which had started buying Harken when Bush joined it and had, by 1990, become one of its largest holders?) He then failed to file required notice of these sales. When challenged on that point, he first claimed that the SEC ''lost'' his filing. His second story was to blame the failure on Harken's lawyers. But that won't wash. Bush was selling his own stock, and was therefore personally responsible for filing the documents.

Bush claims to see nothing wrong about Harken's frauds. However, the goal was to hide real losses and to book fictional income. The people who made the decision and the board of directors stood to gain directly from the fraud, and Bush did benefit - enormously.

Bush is also wrong on the accounting. This was a deliberately complicated transaction for the same reason that Enron's and Lincoln Savings's partnerships were complicated. Complexity makes it hard for regulators to discern fraud. While the transaction was complicated, the underlying fraud is so well known that the accounting rules governing such transactions are not vague. There was no ''honest dispute'' about accounting rules. There was a deliberate fraud structured in a complicated manner in order to claim that it wasn't really deliberate.

Now Bush tells us that the Securities and Exchange Commission needs to be strengthened. But he appointed an SEC head, Harvey Pitt, who as a lawyer for the accountants led the campaign to block the Clinton administration's effort to clean up the accounting profession. Back in Texas, then-Governor Bush was proud that he had made it extremely difficult for securities fraud victims to receive compensation through lawsuits. When the Enron scandal broke, Bush continued this line, suggesting that victims of fraud who bring suits are ''extort[ionists].'' He, and Republicans in the House, have fought vigorously to stop real accounting reform.

President George W. Bush is right to bring up the S&L debacle as an analogy. He is following in his father's footsteps: First, create the problem by taking actions that encourage fraud. Second, do nothing while the frauds become epidemic. Finally, when the scandal breaks, claim like Claude Rains in ''Casablanca'' that he is ''shocked, shocked'' that gambling is going on. In Bush's case, the winnings from gambling were safely pocketed long ago.

Bill Black and James Galbraith teach at the University of Texas at Austin. Black was counsel to the Federal Home Loan Bank Board in the early 1980s; Galbraith is an economist.

© Copyright 2002 Globe Newspaper Company


Oct. 28, 1991

A Mysterious Mover

of Money and Planes

By Jonathan Beaty

The Harken Energy folks are not the only Texas-based colleagues of George W. Bush with fortuitous, if not extraordinary, Arab connections. Another is the mysterious Houston businessman James R. Bath, a deal broker whose alleged associations run from the CIA to a major shareholder and director of the Bank of Credit & Commerce International.

The President's son has denied that he ever had business dealings with Bath, but early 1980s tax records reviewed by TIME show that Bath invested $50,000 in Bush's energy ventures and remained a stockholder until Bush sold his company to Harken in 1986.

Bath's penchant for secrecy has been frustrated by a feud with a former business partner, Bill White, who claims that Bath was a front man for CIA business operations. White contends that Bath has used his connections to the Bush family and Texas Senator Lloyd Bentsen to cloak the development of a lucrative array of offshore companies designed to move money and airplanes between the Middle East and Texas.

White, an Annapolis graduate and former Navy fighter pilot, claims it was Bentsen's son Lan who suggested that White go into the real estate development business with Bath, a former Air Force fighter pilot. The partners prospered together at first, but since their falling out they have dueled in five lawsuits in which Bath has kept the upper hand, White claims, by privately asserting to the court that he had "national security" connections.

White now claims in court that Bath wanted to borrow $550,000 from their real estate venture to cover funds that Bath had "misappropriated" from an aircraft company he controlled.

Bath, 55, acknowledges a friendship with George W. Bush that stems from their service together in the Texas Air National Guard, and says he is "slightly" acquainted with the President. But Bath vehemently denies White's accusations. "I am not a member of the CIA or any other intelligence agency," he says, describing White's portrayal as a "fantasy."

Even so, Bath, while insisting he is nothing more than a "small, obscure businessman," is associated with some of the most powerful figures in the U.S. and Middle East. Private records show, and associates confirm, that Bath is a "representative" for several immensely wealthy Saudi families, an unusual position for any small-time Texas businessman.

Bath got his start in real estate in 1973 by forming a partnership with Lan Bentsen. One purpose, sources tell TIME, was to find investments for the Senator's blind trust. Bath and Bentsen have said they have not been partners for years, but secretaries at Bath's office still answer the phone with a cheery "Bath Bentsen Interests." Bath says he simply hasn't got around to changing the name of his company.

Bath opened his own aircraft brokerage firm in 1976, but his Middle East connections first surfaced two years later, when he became a shareholder and director of Houston's Main Bank. His fellow investors were former U.S. Treasury Secretary John Connally; Saudi financier Ghaith Pharaon, an alleged B.C.C.I. front man; and Saudi banker Khaled bin Mahfouz, who subsequently became a major B.C.C.I. shareholder.

Pharaon later sold his Main Bank holdings and bought the National Bank of Georgia, allegedly on behalf of B.C.C.I. Unusual transactions involving Main Bank in the late 1970s came to light last year when a researcher discovered that the small community bank, at a time when it held only $58 million in deposits, had been buying $10 million a month in new $100 bills. Purpose: unknown.

Bath controlled a fleet of companies connected to his aircraft business, and he enjoyed unusual carte blanche to direct the U.S. investments of several wealthy Middle Easterners. Associates confirm that Bath has brokered more than $150 million in private plane deals in recent years, concentrated in sales and leases to Middle Eastern royalty and other influential figures. Pharaon is believed to have bought several expensive jets for his construction company.

One Bath entity, Skyway Aircraft, leased a $10 million Gulfstream II to the Abu Dhabi National Oil Co., which is controlled by Sheik Zayed bin Sultan an- Nahayan, the President of the United Arab Emirates and the current owner of B.C.C.I. Bath's partners in Skyway, one of four similarly named companies he controls, are artfully hidden. The firm that incorporated Bath's companies in the Cayman Islands is the same one that set up a money-collecting front company for Oliver North in the Iran-contra affair.

Even if Bath is a clandestine public servant, the U.S. may not always get a bargain. The Houston Post reported last year that the U.S. had spent millions of dollars more than necessary by fueling military aircraft, including Air Force One, at privately owned Southwest Airport Services at Ellington Field rather than using a government fuel station there.

Bath operates and holds a majority ownership stake in Southwest Airport Services, which the Post said was charging a markup of as much as 60% on the fuel. So far, the paper's charges have prompted no official investigations.


From AMERICAN DYNASTY - Aristocracy, Fortune, and the Deceit in the House of Bush, by Kevin Phillips:


As president, Bush senior gloried in the Gulf War and the 1989 invasion of Panama, both cast as strikes for democracy–even if the dictators attacked were former friends. Over a decade...his web of covert international relationships prompted charges of his participating in and covering up in three actual or alleged illegalities: the Republican Party’s October Surprise negotiations with Iran in 1980, supposedly undertaken to ensure that no hostages taken in Iran would be released before the election; the Iran-Contra scandal; and Iraqgate,” secretly arming Iraq from 1984 to 1990 before hurriedly changing course after Saddam Hussein took Kuwait. Two catchphrases recur in the family resume: arms deals and clandestine operations.” A third recurring association would becover-up.”

George W. Bush was a willing recipient of the inheritance–witness the CIA and BCCI ties of some who finance him, from Arbusto to Harken Energy a decade later. For example, James Bath, who invested fifty thousand dollars in the 1979 and 1989 Arbusto partnerships, probably do so as U.S. business representative for rich Saudi investors Salem bin Laden and Khalid bin Mahfouz (Osama bin Laden’s brother-in-law). Both men were involved with the Bank of Credit and Commerce International, the rogue bank and occasional CIA front known for financing arms deals – indeed, bin Mahfouz owned 20 percent of its stock.


* * * * *

Bush and Salem Bin Laden

* * * * *

Bath, who made his fortune investing for the two Saudis, was a colorful Texan – and then some. According to former Houston Post reporter Pete Brewton, Bath was “an asset of the CIA, reportedly recruited by George Bush himself” in 1976 to keep the Agency up to date on Saudi activities.

A decade later, Harken Energy, the company willing to handsomely buy out George W.’s crumbling oil and gas business, had its own CIA connections. Chairman Alan Quasha was the son of a Philippine lawyer connected to the Nugan Hand Bank, a notorious Australian bank closely linked to the CIA.

Equally to the point, 17.6 percent of Harken’s stock was owned by Abdullah Bakhsh, another Saudi magnate reported by some to be representing Khalid bin Mahfouz.

A U.S. Senate subcommittee investigating BCCI in 1992 reported on how the bank bought friendship and favors from politicians around the world; details of the investigation were published in two books: False Profits: The Inside Story of BCCI, the World’s Most Corrupt Financial Empire, by Peter Truell, and The Outlaw Bank: A Wild Ride into the Secret Heart of BCCI, by Jonathan Beaty and S.C. Gwynne. According to the latter, the story of the Bush involvement in the BCCI scandal involved the “trails that branched, crossed one another or came to unexpected dead ends.”...

As we have seen, Jeb Bush began his business career in Miami collaborating with Cubans tied to the CIA or to kindred intelligence agencies in pre-Castro Cuba. He socialized with Adbur Sakhia, BCCI’s Miami branch manager and later its top U.S. Official. Jeb Bush’s partners and early associates included a number of Cuban emigres with CIA, Nicaraguan ‘contra, or Batista-era Cuban intelligence connections.

To say that armaments, clandestine operations, and money-laundering banks recur in the history of the Walker-Bush family is no exaggeration at all. No other presidents have been so caught up in this kind of foreign policy. And the Bushes’ preoccupations are not clear until you consider the whole dynasty. It is the dynastic aspect that truly reveals the pattern – the clandestine behavior over multiple generations....

The Strange Death Of

bin Laden's Brother In Texas

By Bud Kennedy

Ft Worth Star-Telegram

SCHERTZ - One chapter in the enigmatic story of Osama bin Laden might lead to a Texas pasture, where his oldest brother died 13 years ago in an accident that is still something of a mystery.

What we do know is that Salem bin Laden, 42, and the oldest of Saudi Arabia's bin Laden brothers, was on one of his frequent visits to Texas when he and friends went out for a Sunday afternoon of fun - flying low-power ultralight aircraft at an air park north of San Antonio.

What we don't know is why Salem bin Laden took off in the tiny aircraft and turned toward a nearby row of high-power electrical towers. He climbed, but not high enough to clear the upper power line. The Sprint ultralight got tangled and crashed into the ground 115 feet below.

"Of everybody who was there, nobody could figure out why he tried to fly over the power lines," said Gerry Auerbach, 77, of New Braunfels, a retired pilot for Saudi Arabian Airlines and for the bin Laden brothers, multimillionaire builders who long ago disowned Osama.

"It was kind of a weird deal," said Schertz police Lt. Stephen Starr, at the time the city's acting police chief. "He just drifted up into the wires."

It has been turned into an even weirder deal by conspiracy theorists - with the unlikely help of the Public Broadcasting Service.

In the 2000 PBS Frontline special report, Hunting bin Laden, PBS reported that Salem bin Laden died in a 1988 Texas plane crash - not in a hobby-kit-type, one-man ultralight, but in a full-size British Aerospace BAC 1-11. The death "revived some speculation that he might have been 'eliminated,' " PBS reported, adding that an accident report was "never divulged."

That's news to Starr. He and officer Lori Flowers, now an officer in nearby Windcrest, wrote a report that remains public record.

On May 29, 1988, they were called to the Kitty Hawk Field of Dreams Ultra-Lite Flying Field on the edge of Schertz, a San Antonio suburb. Bin Laden had already been taken by ambulance to an Army hospital in San Antonio, according to the police report. Officers found the crumpled remains of a crashed ultralight.

No federal investigators came to the scene, Starr said. Federal investigators do not review ultralight or glider crashes.

Salem bin Laden was not wearing a helmet and died of head injuries from the fall, the Bexar County medical examiner concluded. The wind was blowing about 30 mph, usually too strong to fly an ultralight.

The Schertz officers interviewed several witnesses. Their report concludes simply: "Freak accident."

Now armed with the PBS misreport, some conspiracy writers think Osama bin Laden blames the United States for the death of his oldest brother, the family's leader throughout most of the 1970s and '80s after their father's death in 1967.

"I don't think so," Auerbach said. "I flew Salem everywhere, and I never met Osama. I think I saw him once."

That was in the 1970s. Osama bin Laden would have been a teen-ager. "He walked through the room," Auerbach said.

"Salem said: 'Oh, that's my brother. He's probably going to pray.' "

Several of the bin Laden brothers - not Osama - owned a fleet of aircraft and visited Texas often in the 1980s, Auerbach said. He chartered a Texas company named Binladen Aviation to manage part of the family fleet.

On that particular 1988 Sunday - over a drizzly and windy Memorial Day weekend - Salem bin Laden was visiting as a guest at the wedding of Auerbach's son, he said. Bin Laden had also planned to ask about having an older BAC 1-11 refurbished in San Antonio, Auerbach said. But he was simply out for fun with friends at the ultralight park that afternoon.

"He was outgoing, a little bit flamboyant - a nice guy," Auerbach said.

He was expecting bin Laden to come by the house later that day.

Now, Auerbach said he's "like everybody else in America - I'm shocked."

"The fact that one of his brothers might be involved doesn't make any difference," Auerbach said. "What matters is - there's a nut case out there somewhere on the loose."

Things are weird enough.

There's no reason to make a weirder story out of a tragic accident in Texas.




October 10, 1997

‘Most people would run for cover’ from...

Bishop Estate’s legal army

The estate employs a host
of well-connected, top attorneys

By Rick Daysog, Star-Bulletin

When it comes to its legal armament, few can match the arsenal that Kamehameha Schools/Bishop Estate can bring to the courtroom.

The $10 billion charitable trust -- the state's largest private landowner -- employs an army of well-connected attorneys that includes a former governor, two former state attorneys general and the former chairman of Hawaii's Republican Party.

The estate's outside legal team also lists House Judiciary Chairman Terrance Tom and Bill McCorriston, a former assistant U.S. attorney who has represented former Mayor Frank Fasi and was on the city Charter Commission.

"With this kind of legal cannon pointed at you, most people would run for cover," said Beadie Dawson, attorney for Na Pua a Ke Ali'i Pauahi, which has criticized trustees' management of Kamehameha Schools.

"They've (hired) every good litigation attorney in town."

The estate maintains that it hires attorneys for their expertise. Waihee and Tom were hired because they are good attorneys and not because of their political ties, the estate said.

McCorriston, who is representing the estate in Attorney General Margery Bronster's investigation of the trust, added that the trust is like any major corporation that hires lawyers to represent its diverse legal interests.

For instance, for leasehold and litigation matters, the estate relies on Mike Hare and the Cades Schutte Fleming & Wright law firm. The Verner Liipfert firm conducts much of its Washington, D.C., lobbying, while McCorriston's firm, McCorriston Miho Miller Mukai, has done mostly land-use work, McCorriston said.

Bishop Estate trustee Gerard Jervis considered joining the McCorriston Miho firm several months ago as an outside counsel. But Jervis said he decided against the move because of his heavy workload with the estate.

Jervis denied any conflict since he didn't join the firm.

Jon Miho, one of the firm's founders and a friend of Jervis', added that if Jervis had joined McCorriston Miho, it would have made it more difficult for the firm to do work for the estate.

Jervis also shares close political ties with Washington, D.C.-based Verner Liipfert through its local partner Waihee. Jervis served on the Judicial Selection Commission during the Waihee years.

Verner Liipfert -- whose mainland offices lists former U.S Treasury Secretary Lloyd Bentsen, former Republican presidential candidate Robert Dole and former Texas Gov. Ann Richards on its roster -- also employs prominent labor-relations attorney and former Hawaii GOP head Jared Jossem and Renton Nip, who served as state Land Use Commission chairman during the Waihee years, in its local office.

Former Attorney General Warren Price and his successor, Robert Marks, through their firm serve as outside counsels to Verner Liipfert and have conducted legal work for the estate.

To be sure, the legal work for the estate can be lucrative. According to its tax filings, the estate's nonprofit unit paid nearly $4.2 million in legal fees during the year ending June 30, 1996.

More than half, or $2.75 million, went to Cades Schutte, which does the legal work for the estate's leasehold conversions and some of its real-estate litigation.

Waihee's firm, Verner Liipfert, earned $844,245, while the Ching Yuen & Morikawa firm -- whose partners include longtime Waihee friend Bill Yuen -- was paid $580,603.

The estate paid McCorriston Miho $223,079 in legal fees for the fiscal year 1995 and another $235,050 for the 1993 fiscal year.

Randall Roth, University of Hawaii law professor and co-author of a scathing report that helped launch Bronster's investigation of the estate, criticized the large amount of legal fees that the estate pays each year -- especially since it is a nonprofit organization.

While the estate's attorneys are among the top in town, Roth believes that political connections probably play a key role in who gets selected for its legal work.

"This strikes me as an exorbitant amount of money for a charity to be spending on legal fees, especially when it has its own legal department," said Roth. "We can only wonder if the money is well-spent."

And the spending doesn't include legal bills wracked up by Bishop Estate's for-profit subsidiaries.

The estate declined to disclose the amount of legal fees that its for-profit units incur each year. But recent news reports said the estate spent $500,000 to defend an $86.7 million lawsuit that film producer Frederick Field filed in 1995 over soured real-estate investments on the mainland.

An estate subsidiary, Royal Hawaiian Shopping Center Inc., wracked up at least $500,000 in legal bills in the McKenzie Methane Corp. legal battle.

The estate sued the Houston-based natural gas company's founder Mike McKenzie in 1992, alleging that fraud and mismanagement led them to lose some $60 million in the venture.

The company filed for bankruptcy protection in 1994 and was sold to the estate, which now says it has been able to recoup much of its losses in McKenzie Methane.

McKenzie denied the estate's fraud allegations, saying its hardball tactics have made his life a legal nightmare.

He said the estate wrongly accused him of stealing money from Hawaiian children and that the estate's attorneys hired private investigators -- two former FBI agents -- to harass him.

"It's been five years of hell," said McKenzie.

"They've used their money, power and influence to beat the heck out of me."

~ ~ ~

Suer of estate finds it

tough to hire a lawyer

When Bobby Harmon filed a wrongful termination suit against Bishop Estate in February, he couldn't find a lawyer to take his case.

The former president of the estate's in-house insurance company, P&C Insurance Co., was turned down by eight local law firms because they either did business with the estate or wanted to, said John Goemans, Harmon's attorney.

Some were just afraid to oppose them, he said.

"The reality is that it's virtually impossible to take on the estate," said Goemans.

Harmon sued the estate after the estate sued him for releasing confidential information.

The estate said Harmon was fired for cause and that the firing was upheld by a state Department of Labor review, which denied him unemployment benefits.

Documents released by Harmon contained false and defamatory allegations, the estate has also said.

A Circuit Court judge recently ruled that Harmon violated a court order not to disclose estate information. The court also said that Harmon did not act in bad faith since he was acting on advice of his lawyer.

For Goemans, the Harmon case underscores the estate's clout in Hawaii's legal community and the difficulties of opposing it. Goemans said his client has run up about $20,000 in legal bills.

"Few have the capability of resisting a $10 billion behemoth with an unlimited supply of lawyers who have a clear modus operandi of deluging opponents with paper," Goemans said.


July 12, 2002

The Insider Game

By PAUL KRUGMAN, The New York Times

The current crisis in American capitalism isn't just about the specific details —— about tricky accounting, stock options, loans to executives, and so on. It's about the way the game has been rigged on behalf of insiders.

And the Bush administration is full of such insiders. That's why President Bush cannot get away with merely rhetorical opposition to executive wrongdoers.

To give the most extreme example (so far), how can we take his moralizing seriously when Thomas White —— whose division of Enron generated $500 million in phony profits, and who sold $12 million in stock just before the company collapsed —— is still secretary of the Army?

Yet everything Mr. Bush has said and done lately shows that he doesn't get it.

Asked about the Aloha Petroleum deal at his former company Harken Energy —— in which big profits were recorded on a sale that was paid for by the company itself, a transaction that obviously had no meaning except as a way to inflate reported earnings —— he responded, "There was an honest difference of opinion. . . . sometimes things aren't exactly black-and-white when it comes to accounting procedures."

And he still opposes both reforms that would reduce the incentives for corporate scams, such as requiring companies to count executive stock options against profits, and reforms that would make it harder to carry out such scams, such as not allowing accountants to take consulting fees from the same firms they audit.

The closest thing to a substantive proposal in Mr. Bush's tough-talking, nearly content-free speech on Tuesday was his call for extra punishment for executives convicted of fraud. But that's an empty threat. In reality, top executives rarely get charged with crimes; not a single indictment has yet been brought in the Enron affair, and even "Chainsaw Al" Dunlap, a serial book-cooker, faces only a civil suit. And they almost never get convicted. Accounting issues are technical enough to confuse many juries; expensive lawyers make the most of that confusion; and if all else fails, big-name executives have friends in high places who protect them.

In this as in so much of the corporate governance issue, the current wave of scandal is prefigured by President Bush's own history.

An aside: Some pundits have tried to dismiss questions about Mr. Bush's business career as unfair —— it was long ago, and hence irrelevant. Yet many of these same pundits thought it was perfectly appropriate to spend seven years and $70 million investigating a failed land deal that was even further in Bill Clinton's past. And if they want something more recent, how about reporting on the story of Mr. Bush's extraordinarily lucrative investment in the Texas Rangers, which became so profitable because of a highly incestuous web of public policy and private deals? As in the case of Harken, no hard work is necessary; Joe Conason laid it all out in Harper's almost two years ago.

But the Harken story still has more to teach us, because the S.E.C. investigation into Mr. Bush's stock sale is a perfect illustration of why his tough talk won't scare well-connected malefactors.

Mr. Bush claims that he was "vetted" by the S.E.C. In fact, the agency's investigation was peculiarly perfunctory. It somehow decided that Mr. Bush's perfectly timed stock sale did not reflect inside information without interviewing him, or any other members of Harken's board. Maybe top officials at the S.E.C. felt they already knew enough about Mr. Bush: his father, the president, had appointed a good friend as S.E.C. chairman.

And the general counsel, who would normally make decisions about legal action, had previously been George W. Bush's personal lawyer —— he negotiated the purchase of the Texas Rangers. I am not making this up.

Most corporate wrongdoers won't be quite as well connected as the young Mr. Bush; but like him, they will expect, and probably receive, kid-glove treatment. In an interesting parallel, today's S.E.C., which claims to be investigating the highly questionable accounting at Halliburton that turned a loss into a reported profit, has yet to interview the C.E.O. at the time —— Dick Cheney.

The bottom line is that in the last week any hopes you might have had that Mr. Bush would make a break from his past and champion desperately needed corporate reform have been dashed.

Mr. Bush is not a real reformer; he just plays one on TV....


* * *




As we go to press, George W. Bush was scheduled to give a speech on his administration's newfound probity toward business wrongdoing. His spin doctors are trying to present him as the reincarnation of Teddy Roosevelt, but his actions so far are not encouraging.

Bush shows no signs of clearing out an administration filled with people who succeeded in business by ignoring ethical boundaries, from Army Secretary Thomas White, the vice chairman of Enron Energy Services when it allegedly hid $500 million in losses and manipulated the California energy crisis, to Vice President Dick Cheney, who presided over the cooking of books at Halliburton (and also doing business with evildoer Iraq), White House counsel Alberto Gonzales, who was an attorney for Enron at Vinson & Elkins in Houston, and Securities and Exchange Commission Chairman Harvey Pitt, the former attorney for Andersen, KMPG and Merrill Lynch who started his term at the SEC by asking how he could make things easier for the securities industry.

Bush's own misdeeds as a director of Harken Energy are finally getting the attention of the mainstream press. As Paul Krugman wrote in the July 7 New York Times, Bush was a failed businessman in 1986 with a company losing money and heavily burdened with debt when he was rescued by Harken Energy, which bought his company at "an astonishingly high price" in return, one assumes, for Bush's connections to his father, who was then vice president.

Those connections opened doors for Harken, particularly after W's father became president. But Harken still lost money, although it concealed its failure "just long enough for Mr. Bush to sell most of his stake at a large profit -- with an accounting trick identical to one of the main ploys used by Enron a decade later," Krugman wrote.

A group of insiders, using money borrowed from Harken itself, paid an exorbitant price for a Harken subsidiary, Aloha Petroleum. That created a $10 million phantom profit, which hid three-quarters of the company's losses in 1989. (Yes, Arthur Andersen was the accountant.) Bush was on the company's audit committee, as well as on a special restructuring committee, so if he didn't spot the Aloha maneuver, he was at least "a very negligent director."

Krugman added that Harken's fake profits were several dozen times as large as the Whitewater land deal -- though only about one-seventh the cost of the Whitewater investigation. His father's SEC ignored the staff recommendation and decided not to prosecute young George.

The White House assured us that Bush's failure to file disclosures of his stock trades in Harken Energy until eight months after the deadline amounted to nothing more than driving 60 in a 55-mile-per-hour zone. "That will surely bring good cheer to those Harken shareholders who were left holding the stock that Mr. Bush sold, with no insider's knowledge, of course, just before it tanked," the Times' Frank Rich noted July 6. Bush sold his stock in June 1990 for $4 a share. By year-end it was trading for a little over $1.

Bush has dodged responsibility, claiming first that the SEC lost his papers. Then he blamed Harken's lawyers. Now he says the matter has been "fully vetted," although he won't let the SEC release its file on him. The Center for Public Integrity (www.publici.org) reported in October 2000 that an internal SEC memorandum, prepared by the commission's enforcement division in April 1991, disclosed that Bush also had been tardy in reporting three other transactions involving stock in Harken.

Despite the pattern of late disclosures, the SEC did not press charges against Bush. But the Dallas Morning News quoted a 1993 letter from the SEC to Bush's lawyer emphasizing that its decision "must in no way be construed as indicating that (Bush) has been exonerated."

Reforms that are needed, Rich wrote, include fully independent policing of accounting firms, the complete prohibition of conflicts of interest that encourage both accountants and stockbrokers to cut corners. "No off-balance-sheet or offshore entities, no shell corporations, no sham transactions," added Robert Morgenthau, the Manhattan district attorney, who is pursuing Enron more aggressively than the administration is.

Arthur Levitt, Clinton's SEC chairman whose attempts at reform were undermined by opposition from Republicans and business Democrats like Sen. Joe Lieberman, would increase the legal liability for investment bankers, lawyers and accountants who aid, abet and also profit from corporate Ponzi schemes.

And the SEC needs conflict-free commissioners. Pitt has pledged tough actions but he already has been meeting privately with Xerox and KPMG executives while their companies are under investigation.

"It's like the mob's consigliere running the FBI," Marshall Wittmann, a reform-minded conservative Republican, told Rich.


December 6, 1996

ENRON and Shell Win Bid in

Capitalization of YPFB's

Transportation Segment

LA PAZ, BOLIVIA – Enron Development Corp. and Shell International Gas Ltd. announced today that the government of Bolivia has named the companies the successful capitalizing company for the transportation segment of the state oil and gas company, Yacimientos Petroliferos...

Business Wire

March 30, 1998

The following is an excerpt from a 10-K SEC Filing, filed by TESORO PETROLEUM CORP /NEW/ on 3/30/1998:


A lack of market access has constrained natural gas production in Bolivia. With little internal gas demand, all of the Company's Bolivian natural gas production is sold under contract to the Bolivian government for export to Argentina.

Major developments in South America indicate that new markets will open for the Company's production. Construction of a new 1,900-mile pipeline that will link Bolivia's extensive gas reserves with markets in Brazil commenced in 1997 and is expected to be operational in early 1999.

The owners of the new pipeline include Petrobras (the Brazilian state oil company), other Brazilian investors, Enron Corp., Shell International Gas Ltd., British Gas PLC, El Paso Energy Corp., BHP, and Bolivian pension funds. When completed, the new pipeline will have a capacity of approximately 1 billion cubic feet ("Bcf") per day.

For more, see...

Googling the Ghost of Ken Lay

Shell Oil: The Shell Game

The Story of Enron

Vultures Up to their Necks in Tesoro Petroleum



From Texans for Public Justice

Name: Lee Bass
Occupation: President & Owner, Lee M. Bass, Inc.
Industry: Energy & Natural Resources
Home: Fort Worth, Texas
Net Worth: $3.9 Billion (53rd in the Fortune 400)

* * * * *

Lee Bass manages the inherited oil assets of this now-diversified billionaire family, which is Bush’s fifth largest career patron, according to the Center for Public Integrity.

When Bush’s ailing Harken Oil suspiciously won exclusive offshore drilling rights in Bahrain in ’90, the Basses bankrolled the venture. Two of Texas’ wealthiest Pioneer families, the Basses and the Wylys mobilized their lobbyists to kill a ’97 bill that would have taxed investment partnerships in Texas, with the Basses threatening to move their operations to another state.

Bush appointed Lee Bass chair of the Texas Parks and Wildlife Department (TPWD), which is in hot water for selling alcohol and tobacco ads for brochures distributed to park visitors.

In a controversial ’98 move, the agency privatized wildlife by granting permits that allow landowners to trap and breed “wild” deer that they can sell on the hoof to hunters who lease their land. Yale returned the $20 million that Lee Bass gave it in ’95 for a Western Civilization program. Bass wanted to control related faculty appointments; critics said he would use this power to exclusively promote ideas of “dead white European males.”


Example fraud:

Tri-Lateral Investment Group

Excerpt from Al Martin's book about
Bush's Harken Energy Fraud

From Demopedia

... The Tri-Lateral Investment Group, Ltd. is also one of the deals (one of the very few deals, perhaps only a few dozen deals in that era by this group of guys) that you could connect Jeb, Neil, George, Jr., Prescott, and Wally Bush.

All five you can put in the Tri-Lateral Investment Group, Ltd. You can put Neil in it vis-a-vis Tri-Lateral's dealings with Neil's Gulf Stream Realty.

Then you back up a step and put Neil Bush into Tri-Lateral Investment Group's dealings with the Winn Financial Group of Denver run by the infamous former Ambassador to Switzerland, Phillip Winn.

You can put George, Jr. in the deal vis-a-vis the Tri-Lateral Group Ltd.'s fraudulent relationship with American International Group (AIG), of which George, Jr. was a part through the same series of fraudulent fidelity guarantee instruments issued on behalf of Harken Energy from American International Group.

Tri-Lateral Investment Group then sold bogus oil and gas leases to AIG.

This is a direct fraud that George, Jr. profited to the extent of (not a lot) $1.6 or $1.7 million.

But it was a clear out-and-out fraud.


External links






May 4, 2005

Aloha Petroleum is buying former

Arco stations but the FTC

is scrutinzing the deal

By Rick Daysog Star-Bulletin

Aloha Petroleum Inc. said its purchase of 18 former Arco stations will likely close next month despite a joint anti-trust investigation by the Federal Trade Commission and the Federal Trade Commission.

Bob Maynard, president of Aloha Petroleum, said that such investigations are part of the "normal process" when it comes to the sale of oil industry properties and that he doesn't expect any delay in the deal.

Aloha Petroleum announced earlier this year that it was acquiring the stations from U.S Restaurant Properties Inc.

The company also is purchasing U.S. Restaurant's 50 percent interest in the 500,000-barrel Aloha Petroleum Fuel Storage Terminal at Barbers Point.

Aloha Petroleum owns the other 50 percent interest in the terminal facility.

In a filing with the Securities and Exchange Commission yesterday, U.S. Restaurant's successor company, Trustreet Properties Inc., said it received a letter from the Attorney General's Office last week informing it of an anti-trust investigation.

Trustreet said the Attorney General's Office asked that it voluntarily provide records relating to the sale of the stations and its interest in the terminal facility.

Both Aloha Petroleum and Trustreet said they intend to cooperate with the request....

U.S. Restaurant had been trying to sell its Hawaii stations after the previous station operators, BC Oil Ventures, filed for bankruptcy protection in 2000.

BC Oil had operated in Hawaii under the Arco brand.

Trustreet is an Orlando, Fla.-based real estate investment trust that was formed in February through the merger of U.S. Restaurant, CNL Restaurant Properties Inc. and 18 CNL income funds.

CNL was a landlord for national fast-food chains such as Jack in the Box and Wendy's.


January 18, 2001

State: Big oil firms tried to

cripple Aloha Petroleum

Attorneys for several firms dispute the allegations that
they conspired against Aloha's lower prices

By Rob Perez, Star-Bulletin

The major oil companies in Hawaii tried to cripple Aloha Petroleum in the 1990s because its lower gas prices undermined a scheme that produced high profits for the industry and high costs for consumers, the state alleges in court documents.

Aloha's pricing strategy prompted the other companies to boycott Aloha until it started importing gasoline, the state says in documents filed as part of a $2 billion antitrust lawsuit against the major companies. Aloha began importing in 1997.

Attorneys for several of the oil companies strongly denied the state's allegations.

"That's just nonsense," said Alan Grimaldi, a Washington, D.C., attorney representing Texaco Inc. "There's absolutely no evidence of that."...

Attorney John Myrdal, who represents Unocal Corp., likewise dismissed the state's allegations. "These are totally false," he said....

Had 20-year contract

Aloha also had a 20-year supply contract with BHP Petroleum, which used to own one of Oahu's two refineries, until 1997, Grimaldi said.

Few details of the state's allegations have been made public, and Spencer Hosie, the San Francisco attorney heading the state's case, did not respond to requests for comment. Aloha Petroleum also did not return phone calls seeking comment.

The allegations are briefly mentioned in an October 2000 federal court filing by Texaco, a defendant in the antitrust case.

One state document referred to in the Texaco filing said Unocal, also known as Union Oil, refused in 1993 to provide Aloha with fuel that could be obtained directly from Unocal's suppliers. Unocal at the time got its supply from BHP and Chevron, which owned the other Oahu refinery, in exchange for providing gas to the two companies elsewhere.

Unocal refused for the next two years to provide fuel or "terminaling" to Aloha, according to the state.

"This refusal confirms that Union had joined with its 'exchange partners' to control and cripple Aloha as a price competitor in the Hawaii market," the document said.

Chevron did not respond

A Chevron spokesman did not respond to a request for comment. A spokesman for Australia-based BHP, which sold its Hawaii refinery and gas stations to Tesoro Petroleum Corp. in 1998 and no longer is in the market, could not be reached for comment.

In the court document, the state said Unocal considered Aloha to be a price cutter whose marketplace conduct reduced profit margins for Unocal and its exchange partners....

But in a 1994 report on Hawaii's high gas prices, the state attorney general's office said Aloha claimed it could not obtain competitive exchange agreements with Chevron and BHP.

Yet the other companies that did not make gasoline here had exchange agreements with the two refinery operators.

The exchange agreements, the state alleges in the lawsuit, were only available to companies that would not compete on price, preserving high profit margins. Those agreements were used to allocate market share among the companies and to fix prices, according to the state.

Tim Hamilton, a mainland petroleum analyst who has studied Hawaii's market, said he wasn't surprised by the state's allegations.

'Common business practice'

In mainland markets where independent gas marketers aggressively cut prices to try to build volume, the major oil companies pressured the independents to retreat or face being driven out of business, Hamilton said.

"This has been found and shown and documented before," he said. "It's a common business practice."

Hamilton said Aloha likely was pressured into keeping its per-gallon prices within a few cents of the stations run by the oil companies. That way, Hamilton said, Aloha could not continue taking market share from the other companies.

Dealers at competing gas stations say Aloha, an $80 million company with roughly 15 percent of the Oahu market, does not price as aggressively today as it did in the early 1990s. Aloha stations, which are operated by the company instead of dealers, generally are in the low end of the price range on Oahu.

When the state filed its antitrust lawsuit in October 1998, Aloha was the only major gas company in Hawaii that was not named as a defendant.

Hosie at the time said Aloha was excluded because it initially wasn't part of the group that conspired to keep Hawaii prices artificially high.

When Aloha bought gas locally, it was charged a higher price than the other major suppliers that got fuel from Hawaii's refiners, Hosie said.

Once Aloha started importing less-expensive gas, however, it did not pass on the savings to consumers and benefited from the alleged conspiracy, Hosie said in the October 1998 interview.

The oil companies have denied the conspiracy charge. The lawsuit is scheduled to go to trial in September.





From Rule by Secrecy, by Jim Marrs

Copyright 2000

~ ~ ~

War is a racket.... War is largely a matter of money. Bankers lend money to foreign countries and when they cannot pay, the President sends Marines to get it.

– Marine Maj. Gen. Smedley D. Butler (1881-1940)

~ ~ ~


The Allied victory in the Persian Gulf war of 1991 was loudly trumpeted by the American mass media, but the actions leading to this conflict were sparsely reported throughout the coverage. These machinations involved people in secret societies and indicated a very different rationale for the war than the one presented to the public.

No one can argue that the United States military, with some assistance from British, French, and Arab forces, did not perform magnificently during this brief conflict. It took only between January 17 and February 28, 1991, for the coalition of Operation Desert Storm to soundly defeat the Iraqi forces of Saddam Hussein, then representing the fifth largest army in the world. This astounding military success was due primarily to the Allied forces’ superiority in both weaponry and training as opposed to Saddam’s conscripts who, through veterans of combat against Iran, had limited training and low morale.

This disparity created a lopsided war which resulted in more than 300,000 Iraqi casualties, both military and civilian, and 65,000 prisoners, compared to the extraordinary low Allied losses of 234 killed, 470 wounded, and 57 missing.

Primary leader of the war was U.S. President George Bush, a former CFR member, Trilateralist, and Skull and Bonesman.

As with most Middle East conflicts, the primary issue was oil. Both Bush and then Secretary of State James Baker were deeply involved in the oil business. Any Bush policy which increased the price of oil meant more profit to his companies, those of his oilmen supporters and, of course, to the Rockefeller-dominated oil cartel.

An added bonus was that any conflict which divided the Arab world would only strengthen the power of the U.S., Britian, and Israel in the region. A coalition of countries fighting for the United Nations could only advance the globalists’ plan for a one-world military force.

This “battle of the New World Order was some kind of manufactured crisis with a hidden agenda,” wrote conspiracy researchers Jonathan Vankin and John Whalen after study of the events leading to this conflict.

Bush and Saddam Hussein had had a close relationship for many years. In his role as CIA director, and later as vice president, George Bush had supported Saddam through his eight-year war against Iran following the ouster of the Shah in 1979.

By 1990 Saddam’s Iraq was a primary threat to the balance of power between Israel and its Arab neighbors, but Saddam was strapped for cash due to the Iraq-Iran War and couldn’t pay his bills. Under pressure from the international bankers for slow repayment of loans and from the Organization of Petroleum Producing Countries (OPEC), which refused to allow him to raise oil prices, Saddam turned his eyes to Kuwait as a source of income. At the time it was the third largest producer of oil next to Iraq and Saudi Arabia.

Kuwait had been carved out of Iraq by Britain, who in 1899 took control of Kuwait’s foreign policy under an agreement with the dictatorial Sabah family. The Sabahs had produced a series of ruling sheikhs since assuming control of the area’s nomad tribes in 1756. Kuwait became a British Protectorate in 1914 when German interest suddenly gave the area strategic importance. British dominance was solidified by sending British troops to the area in 1961 after Iraq sought to reclaim it.

The Pentagon had known that Iraqi troops were massing along the Kuwait border since mid-July 1990. On July 25 Saddam sought advice from the United States on his intentions to reclaim Kuwait. He met with U.S. ambassador April Glaspie, who told him, “I have direct instructions from President Bush to improve our relations with Iraq. We have considerably sympathy for your quest for higher oil prices, the immediate cause of your confrontation with Kuwait....

“I have received an instruction to ask you, in the spirit of friendship not confrontation, regarding your intentions: Why are your troops massed so very close to Kuwait’s borders?”

According to transcripts released long after the war, Hussein explained that, while he was ready to negotiate his border dispute with Kuwait, his design was to “keep the whole of Iraq in the shape we wish it to be.” This shape, of course, included Kuwait, which Saddam considered still a part of Iraq.

“What is the United States’ opinion on this?” he asked.

“We have no opinion on your Arab-Arab conflicts, like your dispute with Kuwait,” replied Glaspie. “Secretary Baker has directed me to emphasize the instruction, first given to Iraq in the 1960s, that the Kuwaiti issue is not associated with America.”

“Shortly after this, April Glaspie left Kuwait to take her summer vacation, another signal of elaborate American disinterest in the Kuwait-Iraq crisis,” noted authors Tarpley and Chaitkin in George Bush: The Unauthorized Biography.

On July 31, Bush met with GOP congressional leaders but said nothing about the Gulf situation.

The crisis escalated on August 2, when Iraqi troops moved into Kuwait. Bush froze all Iraqi assets in the United States, adding to Saddam’s money woes, which had worsened in 1990 after international bankers refused him further loans. Glaspie was prohibited from speaking out by the State Department, so the American public could not learn of Bush’s duplicity.

In later testimony before the Senate Foreign Relations Committee, Glaspie pointed out that the July 25 conference was her first and only meeting with Saddam, who had not met with any foreign ambassador since 1984, the midpoint of his war with Iran.

But if Saddam had not met with U.S. diplomats, the same could not be said of American businessmen. Economist Paul Adler noted, “It was known that David Rockefeller met with the Iraqi leader on at least three known occasions after the Chase Manhattan consortium became the lead banker in a number of major Iraqi credit syndications.”

It was also reported that Alan Stoga, a vice president of (Henry) Kissinger Associates met with Iraqi leaders during a two-year period preceding the Gulf conflict.

“Saddam began to realize that he could not get what he wanted from the striped-pants set. He began doing business with the people who mattered to him – foreign businessmen, defense contractors, technologists and scientists, occasionally even visiting newsmen,” reported the Washington newspaper, The Spotlight.

Following the money trail of such non-diplomatic contacts which led to the Gulf War, Congressman Henry Gonzalez, chairman of the House Committee on Banking, Finance and Urban Affairs, discovered that almost $5 billion in loans had been passed to Saddam Hussein in the 1980s through the Atlanta, Georgia, branch of Italy’s government-owned bank, Banca Nazional del Lavoro (BNL).

The branch manager, Christopher Drogoul, was finally brought into federal court, where he pleaded guilty to approving this huge cash transfer without the approval of BNL’s head office in Italy. However, the whole investigation was put on hold during the Gulf War.

Most observers disblieved that Drogoul could have conducted such a massive transaction without the knowledge of his superiors. Bobby Lee Cook, one of Drogoul’s several defense attorneys, argued that his client had been made the patsy in “a scheme orchestrated at the highest levels of the U.S. Government.”

In court, BNL official Franz von Wedel testified that his boss Drogoul had acted on the advice of the bank’s consultants, Kissinger Associates.

In both 1989 and 1990 the Bush Justice Department had quashed indictments against the BNL by the Atlanta Attorney General’s office following an FBI raid on the bank on August 4, 1989. Action against the bank managers was held up for more than a year. Indictments were finally handed down one day after Bush declared a cease-fire in the Gulf War.

This scandal – dubbed “Iraqgate” – prompted Gonzalez to prepare a House resolution called for the impeachment of Bush Attorney General William Barr for “obstruction of justice in the BNL scandal.” House Judiciary Committee Chairman Jack Brooks called on Barr to appoint a special prosecutor in the case.

In a classic case of who-will-watch-the-watchers?, Barr said he could find no evidence of wrongdoing on his part and refused to appoint a special prosecutor. It was one of the only times that an attorney general had failed to appoint a special prosecutor when asked to do so by Congress.


The clincher of this sordid story of financial scheming and official malfeasance was that not only had most of the $5 billion been used by Saddam to buy weaponry to be used against American servicemen, but the U.S. taxpayers picked up the tab.

Gonzalez said $500 million of the loans to Saddam came through the government-backed Commodity Credit Corporation (CCC) and had been intended to purchase grain from U.S. farmers. However, grain shipped though the port of Houston had gone to then-Soviet bloc nations for weapons, while the remainder of the grain purchase had freed Saddam’s limited cash reserves to buy more military materials.

The Bush administration had pledged taxpayer guarantees should Saddam default on the loans, which he did after sending troops to Kuwait. According to at least one public source, more than $360 million in American tax money was paid to the Gulf International Bank in Bahrain which was owned by seven Gulf nations including Iraq. This amount was only the first of an estimated $1 billion to be paid to ten banks by the CCC to cover the $5 billion of Saddam’s defaulted loans.

“The $1 billion commitment, in the form of loan guarantees for the purchase of U.S. farm commodities, enabled Saddam to buy needed food on credit and to spend his scarce hard currency on the arms buildup that brought war to the Persian Gulf,” wrote author Russell S. Bowen.

Even after the Iraqi invasion began on August 2, Bush publicly appeared strangely noncommittal. Asked by reporters if he intended any intervention in the Gulf crisis, Bush said, “I’m not contemplating such action....”

His attitude apparently changed drastically that same day after meeting with British prime minister Margaret Thatcher, a regular attendee of Bilderberg meetings who had been implicated with Bush in both the Iran-Contra and October Surprise scandals.

After meeting with Thatcher, Bush began to describe Saddam as a “new Hitler” and said “the status quo is unacceptable and further expansion [by Iraq] would be even more unacceptable.”

Despite assurance from Saddam that Kuwait was his only objective and with no concrete evidence to the contrary, Bush nevertheless personally telephoned the leaders of Saudi Arabia and warned that they would be the next target of the “new Hitler.” Panicked, the Saudis handed over as much as $4 billion to Bush and other world leaders as secret payoffs to protect their kingdom, according to Sabah family member Sheik Fahd Mohammed al-Sabah, chairman of the Kuwait Investment Office.

Long after the Persian Gulf War, when audits found this money had been diverted into a London slush fund, anti-Sabah elements in Saudi Arabis criticized the payoff. They were told by al-Sabah, “That money was used to buy Kuwait’s liberation. It paid for political support in the West and among Arab leaders – support for Desert Storm, the international force we urgently needed.”

Whether this money played any role or not, Bush soon drew a “line in the sand” to block further Iraqi intrusion. It is interesting to note that this line was located between the Iraqi forces and oil interests owned by his son, soon-to-be Texas governor George W. Bush.

Bush, the president’s eldest son, was a $50,000-a-year “consultant” to and a board member of Harken Energy Corp. of Grand Prairie, Texas, near the home of the Texas Rangers baseball team of which the younger Bush was a managing general partner.

In January 1991, just days before Desert Storm was launched, Harken shocked the business world by announcing an oil-production agreement with the small island nation of Bahrain, a former British protectorate and a haven for international bankers just off the coast of Saudi Arabia in the Persian Gulf. Bahrain was listed among the top forty countries of the world with the highest per capita Gross Domestic Product in 1996.

Veteran oilmen wondered aloud how unknown Harken, with no previous drilling experience, obtained such a potentially lucrative deal. Furthermore, it was reported that “Harken’s investments in the area will be protected by a 1990 agreement Bahrain signed with the U.S. allowing American and ‘multi-national’ forces to set up permanent bases in that country.”

The younger Bush, in October 1990, told Houston Post reporter Peter Brewton that accusations that his father ordered troops to the area to protect Harken drilling rights were “a little far-fetched.” He further claimed he sold his Harken stock before the Iraqi invasion, but Brewton cold find no record of the sale in the files of the Securities and Exchange Commission (SEC).

Records of Bush’s Harken stock sale finally turned up in March 1991, eight months after the July 10, 1990, SEC deadline for filing such disclosures. One week after Saddam’s troops entered Kuwait, Harken stock had dropped to $3.03 a share. The tardy SEC records revealed that by some good fortune, Bush had sold 66 percent of his Harken stock on June 22, 1990 – just weeks prior to Iraq’s invasion – for the top-dollar price of $4.00 a share, netting him $848,560.

Despite locating productive wells in South America, the drop in oil prices in early 1999 caused Harken stock to remain about $4.00 per share.

Stock purchases, oil and grain deals, arms sales, loans and guarantees, the weakening of the Arabs to benefit Israel, the movement toward a global army and government created a mind-numbing entanglement.

“It is doubtful whether the ‘real’ reasons why the United States went to war in the Persian Gulf will ever emerge,” wrote Vankin and Whaley.

“Unlike in Vietnam, where the ambiguous outcome elicited natural suspicions, in the Gulf the decisiveness of victory has buried the reality deeper than any Iraqi or American soldier who went to a sandy grave.”

The duplicity didn’t end with the fighting. Throughout the Clinton administration there have been periodic air forays into Iraq, ostensibly to punish Saddam for preventing UN inspection of his development centers for biological and nuclear weaponry. However, this time there was a big difference – probing questions were raised by both a suspicious public and a few less timid members of the news media.

Following missile and bombing strikes in late 1998, a letter writer to a national news magazine asked, “By using weapons of mass destruction to deter Iraq from manufacturing weapons of mass destruction, would America not be doing the very thing we’re warning Iraq not to do?”

Others raised the question of why we attacked Iraq for refusing UN inspection of its sensitive military installations when President Clinton also had refused to allow such inspections in the United States a refusal greeted with general approval by the public.

Scott Ritter, a member of the United Nations Special Commission (UNSCOM) created to locate and eliminate Saddam Hussein’s secret weapons caches, resigned in August of 1998 and accused the U.S. government of using the commission to justify an attack on Iraq.

Ritter said that before his resignation he disbelieved Baghdad’s minister of defense when he told him the UNSCOM team was being used by to “provoke a crisis,” but he slowly came to agree with the charge.

Ritter’s superiors scoffed at the allegation, claiming Ritter’s knowledge of the situation was “limited.”

However, in early 1999 it was reported that Washington had used UNSCOM to plant electronic bugs in the Ministry of Defense (Iraq’s Pentagon) and other U.S. officials confirmed much of Ritter’s accusations.

“The relationship between the United States and the inspection commission...has long been a subject of debate,” wrote U.S. News reporter Bruce B. Auster.

“The issue is sensitive because UNSCOM is an arm of the UN Security Council, not an agency of the United States, although it does rely on the United States for intelligence and personnel.”

On December 15, 1998, after stockpiling cruise missiles in the Persian Gulf during the fall, the U.S. launched a much-delayed air strike against Baghdad.

But with Christmas nearing, most Americans couldn’t get too worked up over civilian casualties halfway around the world. And any doubts about U.S. involvement in the Persian Gulf – except among those unfortunates have to deal with Gulf War Syndrome caused by lethal combination of oil fires, biological agents, and radioactive uranium-tipped artillery and tank shells – had been thrown away, along with the yellow ribbons which had proudly displayed the total support of the uninformed....

– Copyright 2000, by Jim Marrs

For more, GO TO > > > APCOA: Vultures in the Parking Lot; BCCI; Investigating Investcorp; Nests in the Pentagon; The Nuclear Nests; The Peregrine Fund; The Peregrine Gallery; Uncle Sam’s Guinea Pigs

July 12, 2002

As a Board Member,

Bush OK’d a Deal Like Enron's


By WARREN VIETH, Los Angeles Times


WASHINGTON -- In early 1989, George W. Bush and his fellow board members at Harken Energy Corp. were presiding over a company that was headed south in a hurry. The Dallas-based oil firm had lost millions of dollars placing bad bets on commodity futures.

Debt was piling up; red ink was beginning to flow.

Harken's executives came up with a novel plan to ease the pain. They would sell a small chain of Hawaiian gas stations called Aloha Petroleum to a group of investors that included Harken's chairman and one of its directors. The buyers would pay $1 million up front, but the accountants would record an immediate $7.9-million profit, enough to erase most of Harken's losses for the year.

They made a point of seeking the approval of directors who were not participants in the investor group. Bush, a member of the board's audit committee, signed off on the deal, according to Harken documents. So did the company's outside auditor, Arthur Andersen & Co. But the government challenged and ultimately overturned the accounting method used by Harken to post a gain on the sale.

Aloha was sold a second time, and the new buyer extracted big concessions from the company. The initial profit recorded on the sale morphed into a big loss. In the midst of all the maneuvering, Bush sold most of his Harken stock in June 1990.

Based on a review of publicly released Securities and Exchange Commission filings, meeting minutes, memos and correspondence from that period, there is no evidence that Bush, or any of the other directors, raised objections or expressed concern about the Aloha deal.

Experts on corporate governance say that as an independent director and one of only three members of the audit committee, Bush was in a position to exercise an important oversight role but apparently failed to do so.

An audit committee's primary responsibility is to ensure that the company's outside auditors conduct a thorough examination of the financial records without interference from officers and employees.

The White House on Thursday declined to comment on the SEC documents pertaining to Bush's actions as a director.

As the president tries to respond to the wave of accounting scandals sweeping corporate America, the events of 12 and 13 years ago have come back to haunt him.

The Aloha sale was so similar to what Enron Corp. did to hide its losses that Harken could have served as a model for the now-disgraced company, one accounting expert said.

"The people at Enron could have gone to school on this thing," said Alfred King, former managing director of the Institute of Management Accountants, vice chairman of Milwaukee-based Valuation Research Corp. and former advisor to the Financial Accounting Standards Board.

"They sold to themselves and recorded a profit," King said.

"That's exactly what Enron did on a number of those off-balance-sheet transactions. On this one transaction at least, it's almost identical."

Bush rejects the comparison to Enron, a far larger Texas energy firm that cooked its books on a scale never before seen. He insists his actions at Harken were thoroughly investigated by the Securities and Exchange Commission.

"In the corporate world, sometimes things aren't exactly black and white when it comes to accounting procedures," Bush said when asked in general about Aloha at a news conference this week.

It's up to the SEC, Bush said, "to determine whether or not the decision by the auditors was the appropriate decision. And they did look, and they decided that the earnings ought to be restated, and the company did so immediately."

Bush's father was vice president in 1986 when Bush's previous company was purchased by Harken and he became a member of the board. Bush's sale of his Harken stock in 1990 was an issue in his 1994 gubernatorial campaign and 2000 presidential bid.

But Harken's sale of Aloha received little public attention until Enron's spectacular collapse and parallels were noted between the Aloha deal and Enron's practice of inflating its earnings and shoring up its balance sheet by hiding massive amounts of debt in partnerships consisting of company insiders.

The magnitude of Enron's collapse is many times greater than Harken's financial travails. Moreover, Enron's top officers are facing criminal charges for their actions. Although the SEC required Harken to revise its financial results for 1989, it did not refer the case to its enforcement division for prosecution.

"If the division of corporate finance had believed the purpose of the [Aloha] transaction was to generate a phantom profit, there is little question that it would have made a referral," said Jacob S. Frenkel, a former SEC enforcement attorney who heads the white-collar crime group at the Gambrell & Russell law firm in Washington.

Still, accounting experts, security law specialists and political analysts say there is enough similarity between events at Harken and Enron to keep Bush on the defensive about his own actions a decade ago and undermine his credibility as a corporate reformer.

Indeed, Bush would not have been allowed to serve on Harken's audit committee if the reform proposals he outlined this week had been in effect then. The president says audit panel membership should be limited to outside directors. Besides sitting on Harken's board, Bush had a consulting contract with the company. According to accounting experts, that qualifies him as a corporate insider.

"Hiding losses in partnerships, playing games with accounting, not reporting forthrightly transactions as a potential inside trader--it's all eerily reminiscent of Enron," said Charles Lewis, executive director of the Center for Public Integrity, a Washington research group....

Another transaction at Harken would have violated Bush's reform proposals as well: On Thursday, the White House confirmed that Harken made two loans to Bush while he served on the board of directors, a practice that Bush now wants publicly held companies to prohibit.

The loans, totaling $180,375, were made in 1986 and 1988 at a below-market interest rate to enable Bush to purchase Harken stock under an incentive plan for board members. They were later converted into stock options that Bush never exercised, the White House said.

Suspicions about the Aloha Petroleum deal have been fueled by the fact that most of the principals refuse to talk.

Of the seven Harken directors who served on the board with Bush, five declined to discuss the deal or did not return calls seeking comment. Executives at Aloha, now a privately held company, also declined to comment. So did past and present officials at Harken, Arthur Andersen and the SEC.

Former director Talat M. Othman, who chaired the three-member audit committee, said he did not recall the details of the Aloha sale or the company's reasons for arranging it.

"I'm not sure that our motivation was to create instant profits," said Othman, a Palestinian who represented Saudi investors who owned 13% of Harken's stock. "It was a normal part of the business to be buying and selling."

The third audit committee member, E. Stuart Watson, also said he didn't remember much about Aloha. "I don't know about that Hawaiian outfit because I was getting off the board about that time," Watson said.

Aloha dispensed gasoline at 40 or so service stations, convenience stores and mini-marts on Oahu and Hawaii. The little chain traced its history to J. Paul Getty, who installed the island's first gas pumps.

Harken acquired Aloha in 1986 when it bought a multi-state gas retailer called E-Z Serve. When it announced its plan to sell 80% of Aloha in 1989, it said Hawaii was too far away from its other gasoline markets and required too much management attention.

But the new owners looked an awful lot like the old owners. The buyers were an investor group controlled by the family of Harken Chairman Alan G. Quasha. The sales price was $12 million, of which $11 million would come in the form of a loan from Harken, with no payments due for several years.

Although the company received only $1 million, it recorded a $7.9-million profit on the sale.

Harken reported a net loss of $3.3 million for that year. It was bad news for shareholders, but it could have been much worse. Harken's commodity trading losses had reached $16.6 million by year's end. Without the Aloha profit, the 1989 shortfall would have been a real shocker.

The Aloha transaction raised eyebrows at the SEC, which spent several months reviewing the relationship between Harken and the buyer group and the accounting procedures that produced the big profit.

In the end, the agency forced Harken to restate its earnings for 1989. The $3.3-million loss ballooned to $12.6 million.

In the meantime, Aloha had changed hands a second time. Quasha's investor group sold the chain to a firm headed by David Halbert, a business associate of Harken President Mikel D. Faulkner and a friend of Bush.

Once again, it was not a clean break. When Harken sold Aloha to Quasha's group, it had agreed to retain liability for any environmental problems associated with the chain.

In early 1990, it discovered that the commitment would cost it dearly. Aloha's new owner had 20 gas outlets tested and found that 11 had leaky underground tanks requiring expensive repairs.

There were 21 sites still awaiting tests.

Meanwhile, Harken was experiencing a severe cash flow crisis and needed to raise money fast. Acknowledging in internal memos that it was negotiating from weakness, the company agreed to forgive $7.2 million of the money it was owed by Halbert for the Aloha purchase and related transactions in exchange for accelerated payments of the remaining debt.

King, the accounting expert, said the initial sale to the insider group and the subsequent concessions to the second buyer no doubt contributed to the SEC's conclusion that Harken had no business booking a profit....

 April 4, 2002

Bush’s Insider Connections Preceded

Huge Profit On Stock Deal

It has been widely reported that Texas Gov. George W. Bush made money over the years with a little help from his friends. But new details show that he served on an energy corporation’s board and was able to realize a huge profit by selling his stock in the corporation because an accounting sleight-of-hand concealed it was losing large sums of money. Shortly after he sold, the stock price plummeted. That profit helped make him a multimillionaire.

By Knut Royce, The Center for Public Integrity

WASHINGTON - The year 1986 was very good for George W. Bush.

After a decade of striking Texas brown dust instead of oil, his luck finally turned that year when go-for-broke Harken Energy Corp. bought his failing oil exploration firm for stock. Four years later the company concealed large losses just before the GOP presidential hopeful unloaded those securities for a nice profit. That, in turn, helped finance his stake in the Texas Rangers baseball club and catapult him into the ranks of multimillionaires.

And it was in 1986, too, that Harken’s CEO introduced Bush, the company’s new director and consultant—as well as son of then-Vice President George Bush--to a little startup health-care company. He put in a modest investment, and a few years later walked away with a six-figure windfall.

There also was a little benefit on the side. In 1994, when Bush was running for Texas governor, and scrambling for campaign cash, insiders in that health-care company, now known as Advance Paradigm, contributed $23,700.

Bush’s sale of the Harken stock in 1990 attracted the attention of regulators and the national media because he was tardy in filing the required public disclosure, and because the trade came shortly before the company reported for the first time that it was incurring huge losses.



George W. Bush and partners sell their failing Spectrum 7 Energy Corp. to Harken Energy Corp. Bush receives more than 200,000 shares of Harken stock and is made director and consultant to the company.

Harken’s CEO, Mikel Faulkner, introduces Bush to an old business associate, David Halbert, who is raising seed money to start up Allied Home Pharmacy. Bush becomes one of 30 initial investors who put up a total of $250,000.


Harken sells a subsidiary, Aloha Petroleum, to International Marketing & Resources, a partnership of Harken insiders, through a seller-financed loan, but declares the profit in its annual report as a cash gain. This effectively masks big losses by the company that year.


At the beginning of the year, International Marketing & Resources in turn, sells Aloha to Halbert’s Advance Petroleum Marketing for no profit. Advance now must pay the Harken-financed loan.

On June 22, Bush sells his Harken stock at $4 a share, for a total of $848,560. He uses most of the proceeds to pay off a loan he had taken out the previous year to buy a partnership interest in the Texas Rangers for $600,000.

On Aug. 22, Harken files a second quarter report disclosing for the first time that it is hemorrhaging. Total losses for that quarter are $23.2 million. Stock plunges to $2.37 a share.

That fall the Securities and Exchange Commission discovers that Harken had effectively concealed earlier losses in its 1989 annual report, before Bush sold his stock, by claiming a capital gain on the Aloha sale even though it was financed through a loan. It directs Harken to recast its balance sheet for 1989.


On Feb. 5, Harken files an amended 1989 report, asserting that after “discussions” with the SEC about its method of accounting, it was recasting its losses for that year from a modest $3,300,000 to a whopping $12,566,000. But by then Bush had already sold.


On July 22, insiders of Halbert’s Allied Home Pharmacy, now called Advance Health Care, hold a fund-raiser for gubernatorial candidate Bush, chipping in $20,750. Other contributions from those insiders that year bring the total to $23,700.


Advance Health Care becomes a publicly traded company called Advance Paradigm.


Bush’s trust sells his Advance stock. In his financial disclosure statement last year, he declares a capital gain of up to $1 million on the sale. It also sells his $600,000 stake in the Texas Rangers for about $16 million.

Hemorrhaging Concealed

But The Public i has found that Harken was bleeding profusely even before Bush unloaded his stock. Harken effectively concealed the hemorrhaging by selling a retail subsidiary through a seller-financed loan but recording the transaction in its 1989 balance sheet as a cash sale.

Securities and Exchange Commission records suggest that Bush, a company director who sat on Harken’s audit committee and was a paid consultant to the firm, may nonetheless have been unaware of the sleight-of-hand accounting or, for that matter, other significant company actions Nevertheless, SEC accountants cried foul when it discovered Harken had recorded the 1989 sale as a capital gain.

But it was months after Bush’s June 1990 sale of the stock at $4 a share, for a total of $848,560, that the SEC directed Harken to recast its 1989 annual report and to publicly disclose the extent of its losses that year, according to records reviewed by The Public i.

It is unclear how a timely acknowledgement of the true losses would have affected the value of the stock when Bush sold. But most investors look at a company’s balance sheet, among other indicators of corporate well-being, before parting with their money.

Two months after Bush’s sale, Harken reported for the first time in a quarterly report that it was losing a lot of money, and the stock dropped to $2.37 a share. By the end of the year, it was trading at about $1.

Harken masked its 1989 losses when in mid-year it sold 80 percent of a subsidiary, Aloha Petroleum, to a partnership of Harken insiders called Intercontinental Mining Resources, Limited for $12 million, $11 million of which was through a note held by Harken.

By Jan. 1, 1990, IMR, in turn, sold its stake in Aloha to a privately held company called Advance Petroleum Marketing, and the Harken loan was effectively transferred to Advance, though guaranteed by IMR.

‘George and I Became Friends’

Advance Petroleum was headed by a Texas entrepreneur, David Halbert, who had been a friend and business partner of Harken’s CEO, Mikel Faulkner. In 1986, Faulkner had introduced Harken’s newest director, Bush, to Halbert. Harken, in a stock swap, had just acquired the ailing Spectrum 7 Energy Corp., where Bush had been CEO and a significant shareholder.

“George and I became friends,’’ recalled Halbert in a telephone interview with The Public i. Halbert said that at the time Faulkner introduced Bush to him he had just formed a little home-health-care firm, Allied Home Pharmacy, and was in the process of raising $250,000 in seed money.

“Mikel said (to Bush), ‘Hey, you might want to invest in this,’” Halbert recalled. “I said fine. I don’t remember how many people we brought in, but it wasn’t that many. Maybe 25 or 30 . . . It was sort of friends and family, and George invested.’’ So did Faulkner. Halbert said Bush also put in a little more money in an offering to existing shareholders in 1991.

Halbert said he did not recall how much Bush invested in the company.

Allied Home Pharmacy became known as Advance Paradigm, one of the nation’s leading pharmacy benefits management companies, when it went public in 1996. Two years later, Bush’s trust sold his stock in the firm.

Public records give no precise amount of how much he earned on the Advance stock sale, but Bush’s financial disclosure form made public last year shows that he realized a capital gain, or profit, of as much as $1 million on the sale.

Asked how much the Texas governor paid for the stock and how much he profited from the sale, spokesman Scott McClellan referred all questions to the manager of Bush’s blind trust, Robert McCleskey.

McCleskey declined to discuss his client’s investment in the Advance stock. He said that under the terms of the Texas blind trust—a legal requirement for the governor but less rigorous than the blind trust that applies to federal executive branch officers—he cannot tell even Bush how much profit he made on the sale.

SEC Probe Was Limited

The SEC’s division of enforcement launched a probe of Bush’s sale of his Harken stock the day after the Wall Street Journal on April 4, 1991, reported that he had been eight months late in filing the required insider-trading form with the regulators. This investigation was separate from the earlier division of corporation finance probe that resulted in Harken’s recasting its 1989 balance sheet.

SEC enforcement investigators focused on whether Bush dumped his stock on June 22, 1990, because he knew that the company’s second-quarter report, announced on Aug. 20, would show a $23.2 million loss and depress the stock. Part of that loss was $7.2 million that Harken wrote off because it was being pressed by a nervous bank and renegotiated the Aloha sale to generate quick cash. Aloha’s buyer, Advance Petroleum, was a clear winner in the renegotiated deal.

The SEC probe was limited to whether Bush had inside knowledge of the red ink that would be reported in the August filing and concluded that he did not.

It is unclear whether Bush, who holds a master’s degree from the Harvard Business School, knew that the company, after five straight years of profits, began to bleed profusely in 1989, its first year of being traded on the New York Stock Exchange, though in its annual report for that year it had declared a net loss of only $3,300,000.

Even that small loss would have surprised readers of the January 1990 issue of National Petroleum News, a trade publication. Interviewed some time during the fourth quarter of 1989 for a lengthy and glowing article on Harken, company president Faulkner said that based on the strong earnings during the first three quarters, he expected that year to be the most profitable yet. “We made $6 million last year (1988) ... We’ll certainly be ahead of last year.’’

Alas, a year later, in an amended 1989 annual report filed on Feb. 5, 1991, the company reported that after “discussions” with the SEC, which insisted that Harken use the traditional “cost recovery’’ method of accounting, it was revising its declared 1989 net loss of $3,300,000 fourfold--to $12,566,000.

Harken also filed an amendment to its third quarter report for 1989 revealing that over the first nine months of that year it had lost nearly $4 million, rather than the $4.6 million profit it had declared.

Faulkner, now Harken’s chairman, did not return repeated calls from The Public i seeking comment on the Aloha sale and the subsequent public filings.

Company Directed to Correct Reports

The SEC can prosecute company officers for willfully filing fraudulent reports. But in the Harken case, as in most similarly questionable filings, the investigation was conducted by the agency’s accounting staff, which did not believe there was intent to defraud and therefore did not refer the matter to the SEC’s enforcement division. Instead, the agency directed the company to publicly correct its reports, according to a retired SEC official familiar with aspects of the case.

It is also clear that Harken did not draft the misleading 1989 annual report, filed with the SEC on April 16, 1990, merely to buttress the value of Bush’s stock. The filing date was two months before the company reported it became aware that Bush wanted to sell.

In its 1989 annual report, Harken recognized a profit of $8 million on the sale, which allowed it to limit its declared losses to only $3,300,000 for the year. But the SEC objected, saying that the income can be recognized only as the principal of the loan is reduced—that is, when real cash comes in.

A corporate accountant interviewed by The Public i agreed with the SEC’s claim, saying he found it “unusual’’ for a company to declare an earning on the sale when it is contingent on a loan. The accountant, who asked to not be further identified, said he knew of no other instance when a company declared full gain on a sale based on a loan.

Why Harken initially sold to IMR is unclear. But a senior tax lawyer who works for a leading auditing firm told The Public i after reviewing portions of the SEC filings that he believes Harken wanted to show a cash infusion to mitigate the 1989 losses.

“It looks like the sale was done (to IMR) in order to show a book gain of $7 or $8 million,’’ said the attorney, who also asked not to be further identified. “That would have eliminated a good part of their loss during that time. Given the fact that the sale was to a related entity, I would guess they were just trying to show a better financial statement at that time.’’

Advance’s Halbert said that he believes IMR bought, and then quickly sold, Aloha because of a sudden change of heart. “I think it had something to do with IMR wanting to own it [Aloha] but there was some concern about the affiliate relationship [between Harken and IMR],’’ he said.

The SEC, too, was curious about the transaction, according to agency records obtained under the Freedom of Information Act.

Six weeks before Harken publicly announced in January 1991 that it was revising its 1989 losses upward, the SEC asked the company to explain “whether the sale of Aloha to Advance was contemplated at the time IMR purchased Aloha from Harken.’’ In a letter, it also asked Harken to explain why the company and its independent accountants concluded it could declare a capital gain on the sale.

The SEC declined to provide Harken’s responses to The Public i.

Conflicting Accounts Offered

In its public filings to the SEC, Harken gave conflicting accounts of who sold Aloha, who bought it, and even when the sale occurred.

In its 1989 annual report, for example, it declared that it sold Aloha to IMR on June 30. In one passage of the report, it says that IMR then sold Aloha to Advance on Jan. 1, 1990; in another it says IMR sold on March 30.

But in its 1990 report, Harken declared that it was its subsidiary E-Z Serve Holding Co. that sold Aloha to IMR.

Adding to the confusion, E-Z Serve, which shortly after the transaction was spun off as a separate publicly traded company, claimed in its 1991 annual report that it had sold Aloha to Advance Petroleum—not IMR—in 1989.

Harken was notorious during that period for filing confusing reports. In 1991, Harken founder Phil Kendrick told Time magazine that the company’s annual reports “get me totally befuddled.’’

Quoted in the same article, Faulkner had this advice to those trying to figure out the company’s financial statements: “Good luck. They’re a mess.’’

The corporate fog did not, however, obscure the fact that by the time the SEC directed Harken to recast its 1989 report, Bush already had already sold his stock in the company.

The bulk of the $848,560 went to pay off a bank loan he had taken out in 1989 to buy a partnership interest in the Texas Rangers for $600,000. He received nearly $16 million for his stake when the team was sold two years ago.

Bush’s run of financial good luck starting in 1986 is in stark contrast to the woeful performance of his previous oil ventures, which he had launched in 1977. Though he had little difficulty in rounding up investors for his Arbusto, Bush and Spectrum 7 oil exploration firms, they were all money losers.

Even as Harken in late 1989 and early 1990 appeared to be trying to minimize its losses, its bankers were clamping down because the company was having trouble meeting its loan payments. That led to a renegotiated loan agreement in May 1990, which required Harken to come up with fresh cash, raised the interest rate, required new guarantees from major shareholders and featured stricter terms overall.

“After closure (on the sale of Aloha) Harken discovered they had trading losses on gasoline purchases and they came back to us and said, ‘We really need some cash,’” Halbert recalled.

Cash Raised in Nick of Time

Halbert said he was able to raise the cash in the nick of time — just three days before Iraq invaded Kuwait, setting in motion huge gasoline-price increases that drove numerous small distributors out of business.

Under the original contract, Harken had given Advance an option to purchase the remaining 20 percent of Aloha, or 60,000 shares, for $50 each, or a total of $3 million.

By the time the contract was renegotiated in August, Advance agreed to pay off the $10 million note by the following year, which it did, instead of in March 1993 as stipulated in the original contract. It also relieved Harken from picking up the cost of fixing leaking underground tanks to meet environmental standards.

In turn, Advance got the $3 million of Aloha stock for $1. Harken also forgave $5 million in loans it had made to Aloha and about $1 million in interest payments.

The renegotiated contract reduced Harken’s bottom line, and the SEC clearly believed the write-off might have helped depress the stock. During its investigation of whether Bush benefited from insider information when he sold his stock, the SEC on July 25, 1991, asked both Bush and Harken to disclose when the company’s officers and directors “first became aware ... that the Advance note ... was going to be renegotiated; and that Harken intended to write down its investment in Aloha.’’

Unaware of Magnitude

After the SEC ended its investigation, according to one of its memos, the regulators concluded that Harken and Bush were unaware of the magnitude of the write- downs until at least mid-July, or after Bush’s stock sale.

While the renegotiated contract clearly hurt Harken’s bottom line, Halbert admits it clearly was beneficial for Advance Petroleum.

Meanwhile, Bush was generating admirers among Advance Paradigm’s insiders, the limited number of shareholders.

In 1994, when the company was known as Advance Health Care and Bush was making his first run for Texas governor, those insiders gave him $23,700 for his first gubernatorial run, including $14,500 from Halbert, his brother, Jon, their father and their wives. Virtually all the money came on the same day, July 22.

“That was his first time around, and he was trying to raise money any way he could,’’ recalled Halbert.

And, as has been the case throughout Bush’s career, a long-time friend of the family came to his aid.

This time it was Benno C. Schmidt, the pioneering venture capitalist and partner in J. H. Whitney & Co. in New York. Schmidt, who died last October at age 86, had been a director of Advance Health Care, and J. H. Whitney had provided the firm with much needed capital in 1993.

“Benno was an old friend of the Bush family. He called me one day and said, ‘David, I think we ought to do something for young George,’” Halbert recalled. “He said, ‘I think we ought to have a fund-raiser.’”

So after a board meeting on July 22, Bush spoke at a private little dinner attended by the directors and their wives and walked away that night with $20,750.

Knut Royce is a senior fellow at the Center for Public Integrity.


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March 16, 1992

The Color of Money


by Stephen J. Hedges, US News and World Report

The president‘s eldest son and his ties
to a troubled Texas firm

George W. Bush shares more than a name with his father. The president’s eldest son has followed closely in his father’s footsteps, trading Yale for Texas, working his way up from the dust and dry oil wells of West Texas to carve out his own piece of the Lone Start dream. Today he runs the Texas Rangers baseball team, sits on the boards of several companies and is rising start in the state s Republican Party.

As George Bush the president glides to victory in the Texas primary this week, George Bush the son will be a center stage with his father. Some say he the president’s most influential advisors. It was George W. Bush, after all, who was called upon to tell John Sununu that powerful Republicans wanted him to resign as the White House chief of staff. Sununu was gone soon afterward.

In one important respect, however, George W. Bush has less in common with his father than with his younger brother Neil, who sat on the board of Denver’s now infamous Silverado Savings & Loan. When the thrift failed in 1988, with $1 billion in losses, Neil Bush said he didn’t understand Silverado’s complex deals.

George W. Bush has also benefited from some questionable but less well-known business associations. A U.S. News examination of one of his principal investments, in the Dallas-based Harken Energy Corp., found that:

Bush sold $828,560 worth of Harken stock just one week before the company stock posted unusually poor quarterly earnings and Harken stock plunged sharply. Shares lost more than 60% of their value over 6 months.

When Bush sold his shares, he was a member of a company committee studying the effect of Harken s restructuring, a move to appease anxious creditors. According to documents on file with the Securities and Exchange Commission, his position on the Harken committee gave Bush detailed knowledge of the company’s deteriorating financial condition. The SEC received word of Bush’s trade eight month’s late. Bush has said he filed the notice but that is was lost.

Despite Harken’s small size and poor performance in recent years, it continues to provide Bush and its other directors and executives with unusually generous pay and perquisites. In 1989, for instance, Harken suffered losses of more than $12 million against revenues of $1 billion. That same year Bush received $120,000 as a company consultant ans stock options worth $131,250; other Harken executives also drew six-figure salaries and five figure bonuses.

The next year, Harken s board was equally generous, even though the company lost $40 million and shareholder equity plunged to $3 million - down from more than $70 million in 1988.

Harken has been characterized by a pattern of financial deal making so burdened with debt and tangled stock swaps that its largest creditors threatened to shut the company down and oil-industry analysts have all but given up on tracking it.

"It s a lot of jiggery-pokery," says analyst Barry Sahgal. "I want to be an analyst, not a speculator."

George Bush - Member of the Skull and Bones Society

Despite repeated requests for interviews, Bush declined to discuss Harken or the reason for his stock sale, saying through an assistant that he "does not wish to read about himself." Harken executives say the company s practices are proper.

Harken Energy today is a very different company from the gutsy start-up outfits that President Bush and his father once ran. In 1983, Harken was purchased by a group of investors led by Alan Quasha, an aggressive young lawyer from New York. Quasha and his colleagues transformed Harken overnight, playing the oil game like high-stakes poker. They spent money, they made money - and most recently, they have lost money. The company s annual reports now speak little of oil and gas production but volumes about share offerings and renegotiated debt.

George W. Bush arrived in the Texas oil fields in the mid-1970s. Within a few years, he had founded his own exploration company. His partner, Mike Conaway, says they "made some money and lost some money." But by 1983, the oil market was in trouble, and so was Bush Exploration. Relief came from two Cincinnati investors who had their own small oil firm, Spectrum 7.

William DeWitt was the son of the former owners of the Cincinnati Reds baseball team. Mercer Reynolds was his business partner. A DeWitt family relative and old oil hand, Paul Rea, ran Spectrum 7. Rea met Bush when he first arrived in Texas. The two became friends.

Enter Quahsa.

The son of an affluent American lawyer in the Phillipines, Alan Quasha brought Harken some impressive financial backers. They included money manager George Soros, who would come to hold a 30.4 percent stake; Harvard Management Co., who would control another 30.4 percent share, and Abdullah Taha Bakhsh, a Saudi investor with 21.4 percent. Harken bought Spectrum out in 1986, trading stock for Spectrum assets. Bush received $600,000 in Harken shares, but his stake would actually be worth much more.

Harken is a small oil company, but it pays big league benefits. Estimates based on company documents show that Quasha and Harken President Mikel Faulkner each received compensation worth more than $400,000 a year between 1986 and 1990, including stock options.

In addition, Faulkner has borrowed $1.1 million from Harken, using stock as collateral. Quasha has borrowed $631,270 from the company, and Harken has paid his law firm $1.3 million in fees since 1988.

At least three other Harken executives had six-figure compensation when Harken posted its $40 million loss. Faulkner says the compensation is based on "incentives and performance." He does not consider Harken ‘s pay excessive.

In addition to his $600,000 stake in Harken, George W. Bush has profited handsomely. As a consultant to the company for "investor relations and equity placement," Bush was paid $80,000 a year until 1989, when his salary jumped to $120,000. With the company suffering, Bush received only $50,000 last year and $42,000 this year. He also receives $2,000 for each board committee meeting and in 1989 was granted, with other directors, options for 25,000 shares of Harken stock. Faulkner declines to say what services Bush has performed as a consultant.

Sweet Deals.

As is the case with many executive compensation packages, the key to Harken’s is the stock options. But very few companies offer terms as sweet. For starters, Harken offers select executives, including Bush, eight year loans at 5% interest. The loans may be used by the company brass to exercise options to purchase Harken shares. Bush has borrowed $180,375.

At Harken, loans are sometimes forgiven. The board forgave $72,000 in non-interest-bearing loans to employees in 1989, and $269,000 in 1990.

The deal gets sweeter still.

Harken allows select executives and directors like Bush, who exercise their options, to purchase stock at a 40 percent discount; most U.S. companies allow executives to purchase their companies stock at current market value. Harken says it is because the stock is not registered and therefore cannot be traded. But in March 1990, Harken registered 1.8 million option shares.

"Unusual," says Paula Todd of Towers Perrin, a compensation consulting firm, when asked about Harken compensation. "This definitely is not a cookie-cutter plan." Graef Crystal, a vocal critic of excessive executive pay, has harsher words: "This is a tremendous package for a little tiny company. Their stock has been growing at 4.9% per year when the market is growing at 15 percent. That is rotten performance."

Given Harken s troubles, it might appear that owning its stock isn t much of a bargain. However, Harken s liberal option program makes it profitable. On June 22, 1990, for instance, Bush sold $848,560 worth of stock, which was trading at $4 a share. Even with a $180,375 loan to pay back, Bush realized $668,185 on the sale. He still owns 105,012 Harken shares.

Harken has launched several deals involving its largest shareholders. The most complex was a major reorganization through the sale of two subsidiaries, E-Z Serve, a chain of gas stations, and Tejas Power, a natural-gas supplier.

First, companies tied to Alan Quasha and Harvard Management lent Harken $46 million. Harken used $15 million of that money to retire E-Z Serve debt. It spent $28 million more on capital improvements at E-Z Serve and Tejas stock. Harken kept the remaining $3 million.

The company then gave its shareholders rights to buy E-Z Serve and Tejas stock. An agreement stipulated that any stock not purchased by the shareholders could be bought at a discount of at least 3 percent by two companies affiliated with Quasha and Harvard. But Quasha and Harvard controlled 55.6 percent of Harken stock. By not exercising the rights to buy it immediately, they effectively gave themselves the built-in discount. Harvard Management declines to discuss the deal.

There is substantial evidence to suggest that Bush knew Harken was in dire straits in the weeks before he sold the $848,560 of Harken stock. For one, Harken’ s board has appointed Bush and another director, E. Stuart Watson, as a "fairness committee" to determine whether the restructuring would adversely affect ordinary shareholders.

The committee, which first met in May 1990, worked closely with financial advisors from Smith Barney, Harris Upham & Co., which had concluded by that time that only drastic action could save Harken.

Even before then, however, Harken’s SEC filings make it clear that the company s directors knew radical steps were necessary. One informed source says Harken’s creditors had threatened to foreclose on the company if substantial debt payments were not made. Harken s treasurer, Dale Brooks strenuously denies any suggestion that creditors were poised to seize the company.

Today, Harken is letting it all ride on one all-or-nothing bet. Two years ago, it won the rights to look for oil and gas off the coast of Bahrain, a coup that shocked the industry. The first of the wells came up dry last month, giving analysts new reason to wonder if Harken itself isn t a dry hole.

For George W. Bush, however, Harken remains a good deal. He is still a director and consultant and has Harken shares worth about $400,000. A Bahrain gusher will mean all the more profit. If luck isn t with him, he has still done well with Harken.

It may be, though, that Harken has benefited most from Bush s board service. That s the view of some Texas oil people and analysts, including founder Phil Kendrick, the oil man who founded Harken and sold out to Quasha a decade ago.

"It’s obvious why they kept George Bush," Kendrick says.

"Just the fact that he’s there gives them credibility. He’s worth $120,000 a year to them just for that."...

August 24, 1989

Harken Makes Bid for Tesoro

The New York Times

The Harken Energy Corporation, an energy development company, today offered to acquire the Tesoro Petroleum Corporation of San Antonio for $11.75 a share, or about $190 million, in cash.

Tesoro's board has turned down several other, higher offers to sell the company, whose major asset is considered to be its Alaska-based refining and marketing business.

The chairman of Harken's board, Alan G. Quasha, said in an interview that he felt confident that the Tesoro board would be willing to consider an offer at this time.

He said he believed that the company's three major shareholders, which control about 40 percent of the shares, would also support the sale.

The Metropolitan Life Insurance Company, which controls 25 percent of Tesoro's shares and has two members on Tesoro's board, indicated earlier this year that it wanted to sell its stake.

G. Bryan Dutt, an oil and gas industry analyst at the Howard Weil Corporation in New Orleans, said Harken's offer was substantially lower than the breakup value of the company, which he placed at $15 a share.

Tesoro's share price rose 1.25 today, to $10.875, in New York Stock Exchange trading.

February 28, 1990

Harken Withdraws Offer for Tesoro

The New York Times

The Harken Energy Corporation withdrew its offer to acquire the Tesoro Petroleum Corporation for $11.75 a share, or about $190 million, in cash. Harken's chairman, Alan G. Quasha, said in a letter to Tesoro's chairman, Dr. Richard V. West Jr., that Harken had concluded the San Antonio-based oil refining and marketing company's board was not interested in maximizing shareholder value.

It was unclear whether Harken, a diversified energy company, would now make a hostile offer for Tesoro, whose largest operations are in Alaska. The Metropolitan Insurance Company, which holds about one-fourth of the company's shares, indicated previously that it was interested in divesting itself of its shares.

Tesoro shares closed today at $8.75, down 62.5 cents, or 6.7 percent, in New York Stock Exchange trading. Harken fell 37.5 cents, or 6.8 percent, to $5.125....



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