UQ Wire: Is Harken Energy Bush's Watergate?

The editorial, news and columnist commentary from the Washington Post and the New York Times over the Weekend is probably unprecedented in recent political history.

Bill Clinton’s Lewinskygate probably produced as much heat and light as the Harken Energy storm. But the subject matter was always very contentious and debateable, its prurience, and the "Clinton Star Factor" gave the story life, rather than any real dope or culpability. This was born out most clearly in Lewinskygate's political impact, Clinton’s poll ratings remained strong.

The Harken Energy storm by contrast has as much substance as Nixon’s Watergate, Poppy Bush’s S&L debacle and the Bush-Reagan Iran-Contra drama all rolled together.

Moreover this media typhoon is unravelling at three times the speed, thanks to the additional ingredient of the Internet into the media melee, forcing a lightning-like pace on the dissemination of new fact revelation..

The stories and links below show the level of pressure on President George W. Bush this weekend. While from the liberal end of the spectrum , these two papers together provide a very accurate temperature gauge to the level of interest in Bush’s financial affairs current now in the mainstream U.S. Media.

The challenge to President from the Washington Post and New York Times to:
a) sack his Securities and Exchange Chief Harvey Pitt;
b) properly investigate Vice President Dick Cheney’s role as the CEO of Haliburton;
and c)come clean on his own involvement in various insider transactions related to Harken Energy,
could be, only extremely kindly be described as intense and insistent.

Add in the crumbling stock-market, Bush's plunging poll ratings (a clear majority now consider he is not doing enough about the economy), and the continuity of this Bush Administration is looking seriously threatened.

In this news environment the obvious question has to be: Will the Pennsylvannia Avenue spin-crew try to head this media storm off at the pass with yet another terror/fear campaign?

As New York Times Columnist Frank Rich's trenchant column reproduced below argues, they can’t.

This dog is no longer be waggable. The John Lindh revelations and Homeland Security media blitzes of the past week were possibly at least two attempts to draw off the dogs. But the bait wasn’t even sniffed by the hounds.

In the political arena the question of what to do about corporate confidence, the stockmarket, white collar fraud and the economy has now eclipsed even the question of what to do about 911 and the pursuit of evildoers.

So as November's election campaign opens Harken Energy and the US Deficit, not 911, are providing the frame for the debate ahead.

Calls are rising for the $1.5 trillion 10 year programme of tax cuts for the super wealthy, passed by the Bush Administration with indecent haste prior to 911, to now be cancelled.

After all the official budget deficit projection has already risen past $165 billion for the current financial year alone.

And when this hazard is observed alongside Cheney and George's recorded history as financial managers - i.e. Dick's earnings inflations at Haliburton and George's off balance sheet debt-stuffing at Harken - it can probably be best described in econo-speak as a deficit projection that is “highly vulnerable to further revision”.

But of all these discordant tunes currently playing 24-7 in the U.S. media, one story sings out clearer than all the rest, namely the rapidly unravelling and very strange tale of Harken Energy.

Why? Because it is of personal and of comprehendible scale. And because it comes down, like Lewinskygate and Watergate, to a simple question of Presidential credibility and culpability. Is he lying to us?

The plot of the story so far runs broadly like this.

Rich-kid and lousy businessman George W. Bush Junior, would-be oil baron and Texan securities law breaker, is bailed out in possibly illegal ways by his dad's ever so shadowy friends, several times. George Bush in this story is at best a puppet, at worst a criminal.

Meanwhile anyone with their eyes open can see that many of his puppeteers, his so-called friends, (Cheney, White, Ken Lay, Herbert Winokur to name just three) are involved with fleecing millions of members of the public (shareholders) out of trillions of dollars of their savings.

To add insult to injury more people involved integrally in the thievery (SWAT team chief Larry Thompson, Worldcom investigator and Poppy Bush's buddy Richard Breeden, and Accountancy Lobbyist now SEC Commissioner Harvey Pitt, again just three of a long list) have been appointed by George W. Bush to protect us from being further ripped off further by unscrupulous insiders.

The savings bank has been robbed, the Mayor and police chief are closely tied to the principle suspects, and the local Mafia bosses have been hired to supervise the investigation.

- Scoop Editor Alastair Thompson

(In accordance with Title 17 U.S.C. Section 107, the following material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.)

Washington Post and NYT News links Follow...

EDITORIALS..

Washington Post Editorial
Friday, July 19, 2002; Page A26

PEOPLE SAY that Harvey Pitt, the chairman of the Securities and Exchange Commission, damages the president's post-Enron credibility. On Wednesday, however, it was the president who damaged Mr. Pitt's credibility. At a news conference with Poland's president, Mr. Bush was asked whether he was confident that the SEC's current investigation into Halliburton Co. would exonerate Vice President Cheney, who used to run that company. "Yes, I am," the president replied. This sort of comment is almost enough to kindle nostalgia for the old days when independent counsels investigated top government officials.
Mr. Bush probably just made a mistake. He had been asked about Mr. Cheney's role one time already in the news conference, and he gave a suitable reply: "I've got great confidence in the vice president, doing a heck of a good job. . . . The facts will come out at some point in time." But his second answer was not suitable. It appeared to prejudge the outcome of an ongoing SEC enforcement action. At best this was foolish; at worst it implied White House pressure on the SEC to back off the vice president.
Mr. Bush's mistake could not have come at a worse time. The SEC is already beset with questions about its ability to investigate accountants and other potential wrongdoers, since Mr. Pitt represented many of them in his previous career as a securities lawyer. Despite these questions about the SEC chairman, the president went out of his way to express confidence in him last week. The president's expression of equal confidence in the vice president's exoneration by Mr. Pitt's agency was ill-judged, to put it mildly.

http://www.washingtonpost.com/wp-dyn/articles/A28818-2002Jul18.html

New York Times Editorial
July 21, 2002
The Confidence Crisis

Wall Street's alarming dive in recent weeks, capped by the 390-point drop in the Dow on Friday, may just be another example of the irrationality that can sometimes grip the markets. The recovery, after all, has been progressing fairly well, and Alan Greenspan advised Congress last week that the economic outlook was reasonably promising. But economic fundamentals are being overrun by a host of uncertainties, which begin with doubt about America's corporate elite and end with concern about shaky leadership in Washington.
Although investors, watching their assets and retirement funds vanish, may wish that the Bush administration could end the market slide with a snap of the finger, everyone knows capitalism does not work that way. The president cannot simply add Wall Street bears to his list of evildoers and declare war on plunging equity prices. Still, it's hard to imagine an administration in a worse position to deal with the crisis of confidence in American business. Mr. Bush himself is a product of the cowboy end of the Sunbelt economy, and if Americans look at him and see the shadow of Enron ethics and WorldCom accounting, his effectiveness as chief executive will be undermined.
Yet so far, Mr. Bush has done little to separate himself from the excesses of some of his friends and campaign contributors. Vice President Dick Cheney continues to be mum about his role as chief executive of Halliburton. The secretary of the Army continues to be a former Enron executive whose attempts to vindicate his behavior as a businessman have been more embarrassing than convincing. The Securities and Exchange Commission continues to be run by the former lawyer for the accounting industry. Mr. Bush is a man who believes strongly in loyalty, and who as a result is able to run a White House that benefits from an extremely low level of public squabbling. But his current intransigence is not good for his administration or the nation.
The markets will not right themselves just because Army Secretary Thomas White is tossed to the dogs or the vice president finally agrees to discuss his business career. But Wall Street would certainly be soothed by some sign that Mr. Bush is firmly in control. The most chilling result in last week's New York Times/CBS News Poll was that 45 percent of the respondents said they thought "other people are really running the government" — exactly the same percentage as said the president was in charge. That is no way to run a White House when the nation's worst domestic problem is a lack of confidence in its economic and political leaders.
It has been repeatedly noted that Mr. Bush's economics team, led by Treasury Secretary Paul O'Neill and the chief economic adviser Lawrence Lindsey, does not have the stature that his foreign affairs advisers enjoy, or that Robert Rubin had when he held Mr. O'Neill's job. The very fact that everybody keeps saying it is one of the problems. When the public believes that an administration's underlings are really in charge, that administration is the last one that can afford to have lightweights in those positions.
Mr. Bush continues to enjoy the good will of the American people, but that will never be enough to stabilize the markets, especially if good will seems based in part on the perception that he is not really running the store. It is time for him to show that he's in control — by directing Mr. Cheney to talk about his financial past, by getting rid of obvious sore thumbs like Mr. White and by replacing appointees like Harvey Pitt at the S.E.C. with strong figures who have the confidence of the business community.

http://www.nytimes.com/2002/07/21/opinion/21SUN1.html

NYT And Washington Post Coverage… Bush And Corporate Cofidence Issues…

NYT Column
The Road to Perdition
By FRANK RICH
July 20, 2002

Wagging the dog no longer cuts it. If the Bush administration wants to distract Americans from watching their 401(k)'s go down the toilet, it will have to unleash the whole kennel.
Maybe only unilateral annihilation of the entire axis of evil will do. Though the fate of John Walker Lindh was once a national obsession, its resolution couldn't knock Wall Street from the top of the evening news this week. Neither could the president's White House lawn rollout of his homeland security master plan. When John Ashcroft, in full quiver, told Congress that the country was dotted with Al Qaeda sleeper cells "waiting to strike again," he commanded less media attention than Ted Williams's corpse.
What riveted Americans instead was the spectacle of numbers tumbling as the president gave two speeches telling us help was on the way. For his first pitch, he appeared against a blue background emblazoned with the repeated legend "Corporate Responsibility." Next came a red backdrop, with "Strengthening Our Economy" as the double-vision-inducing slogan. What will be strike three — black-and-white stripes and "Dick Cheney Is Not a Crook"? Maybe this rah-rah technique helped boost the numbers back when George W. Bush was head cheerleader in prep school. But he's not at Andover anymore. Where his father's rhetoric gave us a thousand points of light, his lopped a thousand points off the Dow.
Once the market dissed him, the president waxed philosophical, if not Aristotelian, professing shock that his fellow citizens would care about something as base as money. Invoking Sept. 11, he said, "I believe people have taken a step back and asked, `What's important in life?' You know, the bottom line and this corporate America stuff, is that important? Or is serving your neighbor, loving your neighbor like you'd like to be loved yourself?"
Easy for him to say. It's hard to engage in lofty meditation about loving your neighbor if your neighbor is Kenneth Lay or Gary Winnick or Bernard Ebbers or any other insider in "corporate America stuff" who escaped with multimillions just before the corporation cratered, taking your job or pension or both with it.
Democrats celebrate the Republicans' travails as if it were Christmas in July. But the party's chief, Terry McAuliffe, was a Winnick crony who made his own killing before Global Crossing tanked, and its most visible presidential candidate, Joseph Lieberman, is fighting to the political death for loosey-goosey stock-option accounting. Just as the Harken-Halliburton stories gathered fuel, such tribunes of the people as Tom Daschle, Hillary Rodham Clinton and John Kerry boarded corporate jets supplied by companies like Eli Lilly and BellSouth to rendezvous in Nantucket with their favor-seeking fat cats.
But the hypocrisies of the Democrats, however sleazy in their own right, do not cancel out the burgeoning questions about this White House. Each time Mr. Bush protests that only a few bad apples ail corporate America, that mutant orchard inches closer to the Rose Garden. If there's not a systemic problem in American business, there does seem to be one in the administration, and it cannot be cordoned off from the rest of its official behavior. Compartmentalization, Republicans of all people should know, went out of style with the Clinton administration.
In the real world, everything connects. What is most revealing about Mr. Bush's much-touted antidote to the bad apples, his "financial crimes SWAT team," is how closely it mimics Enron's Cayman Island shell subsidiaries. It exists mainly on paper, as a cutely named entity with no real assets. It calls for no new employees or funds and won't even gain new F.B.I. agents to replace those whom the bureau reassigned from white-collar crime to counterterrorism after Sept. 11.
The SWAT team's main purpose is to bolster the administration's poll numbers as the Enron off-the-books partnerships did its corporate parent's stock price. And like its prototypes, it may already be going south. No sooner did the SWAT team's chief, Deputy Attorney General Larry Thompson, hold his first photo op than The Washington Post revealed that he was an alumnus of yet another bad apple, the credit-card giant Providian. Mr. Thompson had headed the board's audit and compliance committee and escaped with $5 million before the company threw thousands of employees out of work and paid more than $400 million to settle allegations of consumer and securities fraud.
Even the war on terrorism is not immune from Enron-style governance by this administration. Last weekend Jeff Gerth and Don Van Natta reported in The Times that the Halliburton unit KBR got a unique sweetheart deal with the Army last December, despite being a reputed bill-padder and the target of a criminal investigation. Why? Call it the perfect Halliburton-Enron storm. The company grabbing the deal is the former employer of the vice president. The government agency granting the deal, the Army, reports to the former Enron executive Thomas White, who is nothing if not consistent: he doesn't protect taxpayers' dollars any more zealously than he did his former shareholders'.
We still don't know the full extent of our Enron governance because we still don't have a complete list of former Enron employees hired by the Bush administration. (It hardly inspires confidence to know that one of them is its chief economic adviser, Lawrence Lindsey, who also offered such valuable wisdom to Ken Lay.) Nor, of course, do we know the full details of the president's past history at Harken Energy or the vice president's at Halliburton. Those details matter not so much because of any criminality they might reveal — we are rapidly learning that there is no such thing as a prosecutable corporate crime anyway — but because of what they may add to our knowledge of the ethics, policies and personnel of a secretive administration to which we've entrusted both our domestic and economic security.
What we know about Harken so far is largely due to the S.E.C. documents unearthed and posted since 2000 by the enterprising and nonpartisan Center for Public Integrity, also a leader in uncovering the Clinton administration's Lincoln Bedroom scandals. "It's Forrest Gump does finance," says Charles Lewis, the center's founder, in looking at the story line of the remarkable George W. Bush business career. "Every time he seemed to be in trouble, he would end up with a box of chocolates."
The president's self-contradictory defense of his past is to say he was "fully vetted" by the S.E.C. even though he still hasn't "figured it out completely" himself. But the S.E.C. never interviewed Mr. Bush during its investigation. The agency was then run by an appointee of his father, Richard Breeden, who recused himself from the case. Last Sunday, Mr. Breeden turned up on Fox News as a George W. defender. Yet when Tony Snow asked him twice if he could give the president "a clean bill of health, yes or no," Mr. Breeden pleaded ignorance and ducked. Perhaps that's why the White House has not asked the S.E.C. to release its Harken papers, even though Harvey Pitt last weekend said he would if it did. The president has also told the press that "you need to look back on the director's minutes" to answer questions about Harken — and then refused to provide those minutes or to instruct Harken to release them either. But yesterday Mr. Lewis's organization posted a pile of them at www.publicintegrity.org, and says that more documents are yet to come.
What is the president hiding? Clearly the story here is not merely a hard-to-prove case of insider trading, tardy stock-sale forms and Mr. Bush's knowledge of the sham transaction involving Aloha Petroleum. Most likely it also involves the mystery first raised by The Wall Street Journal and Time in 1991. Back then, their investigative journalists tried to break the cronyism code by which tiny Harken, which had never drilled a well overseas, miraculously beat out the giant Amoco for a prized contract for drilling in Bahrain. They also tried to learn what various Saudi money men, some tied to the terrorist-sponsoring Bank of Credit and Commerce International, may have had to do with Harken while the then-president's son was in proximity.
These questions, like the companion questions about Halliburton's dealings with Iraq on Mr. Cheney's watch, are not ancient history but will gain in relevance in direct proportion to the expansion of the war on terrorism and the decline of the Dow. Sooner or later George W. Bush will have to answer them, because even though he cares more about loving his neighbors than the bottom line, the rest of us are just irredeemably crass.

http://www.nytimes.com/2002/07/20/opinion/20FRIC.html

NYT NEWS ANALYSIS
Investors Brace for Opening of New Week on Wall Street
By ALEX BERENSON

….
The Bush administration — including the president and his economic team — have had little success so far in their efforts to restore confidence. Despite the federal government's rising budget deficit, the president's main economic priority appears to be making permanent a tax cut that was conceived during a surplus and would favor the richest Americans.
Paul H. O'Neill, the Treasury secretary, carries relatively little weight on Wall Street or in Washington.
Meanwhile, Harvey L. Pitt, the chairman of the Securities and Exchange Commission, has become the focus of scorn among many investors for his ties to the accounting industry at a time when corporate accounting is in its worst shape since before the S.E.C. was created. To many investors, Mr. Pitt appears to have been slow to grasp the seriousness of the problem, and some of them say his proposed reforms have been weak.
Wall Street might greet a change at the top of the S.E.C. or the Treasury Department as a sign of the president's great concern about the market's slide.

http://www.nytimes.com/2002/07/22/business/22STOX.html

Files: Bush Knew Firm's Plight Before Stock Sale

By Mike Allen
Washington Post Staff Writer
Sunday, July 21, 2002; Page A07

As a businessman in 1990, George W. Bush was deluged with confidential information about the financial plight of a Texas oil company before he sold the majority of his holdings and triggered a federal investigation, according to Securities and Exchange Commission records.
President Bush has refused to authorize the SEC to open the full file on his investigation, but selected documents have been released under the Freedom of Information Act. The president's business dealings have come under more scrutiny as he tries to restore confidence in markets hurt by business scandals. Nearly half of 1,004 respondents in a Newsweek poll released yesterday said they thought Bush took advantage of the system for personal gain with the 1990 stock sale.
The documents show that four months before Bush sold most of his stake in Harken Energy Corp., he and other board members received a letter from management calling the previous year's profits disappointing and warning that the company would "continue to be severely limited in our activities due to cash constraints." The letter said that "as indicated at the December board meeting," the failure of a deal involving a subsidiary had "left the company with little cash flow flexibility."
A management letter to the board in July 1990, a month after Bush's $848,560 stock sale, portrayed the company as enduring months of turmoil. "Due to the nature of our tasks through this past quarter the stress level is beginning to show," the letter said.
The documents, released Friday by the nonpartisan Center for Public Integrity, show that analysts following Harken were shocked by the losses reported for the quarter that ended eight days after Bush's sale. Harken President Mikel D. Faulkner told board members that he had received many calls from brokers, shareholders and creditors and had provided "as positive a response as is possible."
The White House has said Bush knew the company would record losses but did not know how large they would be. Harken's stock price initially plunged, then recovered and rose.

http://www.washingtonpost.com/wp-dyn/articles/A38246-2002Jul20.html

Economic Anxiety Worries Politicians
As Elections Approach, Voters May Be Looking For Someone to Blame
By William Booth
Washington Post Staff Writer
Sunday, July 21, 2002; Page A01

Americans are suffering from a serious bout of anxiety over the free fall of the stock market and its effect on the economy -- and voters might start looking for a politician or a party to blame, according to recent surveys, coupled with dozens of interviews around the country.
George Weston made a deep sucking sound and paused before answering the question. "You want to know how the economy will influence my vote in November?" repeated the 47-year-old account executive from Dallas. "Well, I tell you this: If the market tanks? If things get worse? Somebody is going to pay."
This is the kind of free-floating pique that makes campaign consultants for incumbent officeholders reach for the Extra Strength Tylenol. Call it Vox Vexed. Because the market is indeed tanking, and things could get worse before happy days are here again.

….

There is growing angst, but voters do not seem sure what to do with their nervous energy.
Throw the bums out? Stay the course? Blame the Republicans? Say it's Clinton's fault?
"I handle the finances for the family. I've made some bad choices. I don't know who to blame," said Joan Frechette, 72, a retired homemaker in Miami Shores, Fla., who spends her days watching the Dow Jones ticker flicker across the bottom of her cable news shows. "If you were to ask me 'Where is the problem,' one day I am mad at the Democrats and the next day I'm mad at the Republicans."
Those interviewed share the same woes, as about half the nation is invested in Wall Street. Right now, personal portfolios stink. Salaries are stagnant. For the 42 million Americans who have 401(k) plans, peeking at their statements requires a stiff drink. Companies have hiring freezes. Then there are book-cooking scandals involving such companies as Arthur Andersen and WorldCom Inc. and greedfests featuring such household names as Martha Stewart.
It's a Big Gulp of potential trouble for campaigning politicians. Democratic strategists are excited at the prospect of clubbing Republicans with the issue. Republicans are sanguine that the public considers their party the better shepherd of the economy. However the issue is framed, there is no shortage of numbers showing it is moving to the forefront of people's minds.

http://www.washingtonpost.com/wp-dyn/articles/A36544-2002Jul20.html

WASHINGTON POST OP-ED COMMENT
To Regain Confidence
By Robert E. Rubin
Sunday, July 21, 2002; Page B07
The writer was head of the National Economic Council from 1993 to 1994 and secretary of the Treasury from 1995 to 1999. He is now director and chairman of the executive committee of Citigroup Inc.

…
In my view, we need to restore the sound, broad-based strategy that was so central to the prosperity of the '90s. More specifically, I would focus especially on the following:
1) Virtually the entire $5.6 trillion surplus projected by the nonpartisan Congressional Budget Office in January 2001, including $2.5 trillion of Social Security surplus, has now been dissipated. I wrote when last May's 10-year tax cuts were being debated that their direct cost -- later estimated by the CBO as $1.7 trillion including debt service -- and even more important, their indirect cost in undermining political cohesion around fiscal discipline, threatened the federal government's long-term fiscal position. And that is precisely what has happened.
Long-term fiscal discipline and a sound long-term fiscal position contribute substantially, over time but also in the short term, to lower interest rates, increased consumer and business confidence, and to attracting much-needed capital from abroad to our savings-deficient country. In addition, a sound long-term fiscal position would far better enable us to meet our long-term Social Security and Medicare commitments.
The portion of the 10-year tax cut that occurred in the short-term may well serve a useful expansionary purpose at a time of economic weakness. But the great preponderance of this tax cut occurs in outer years. Moreover, nobody is talking about a tax increase; the question is whether the cuts enacted for later years should be canceled. In my view, all matters pertaining to taxes and spending should be on the table, with a commitment to reestablishing a sound long-term fiscal position for the federal government.
…

http://www.washingtonpost.com/wp-dyn/articles/A35086-2002Jul19.html

(In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.)

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