Press coverage during Week 2 of the Bush/Harken energy controversy will likely determine whether the uproar surrounding the president's past business dealings continue to dog the White House or simply fade away.
You would be hard-put to find anybody inside the administration who thinks the press has gone easy thus far on Bush and the question of whether he used insider information to dump his Harken stock 12 years ago. Questions about Harken dominated last Monday's press conference as the president, looking annoyed, continued to suggest the matter was "old news." And for a few days, at least, media outlets appeared to be moving aggressively on the story.
But much of the coverage, especially in the early days of the controversy, simply explored the political difficulties Bush faces as he urges corporations to act responsibly when he himself has come under past scrutiny. Most press reports noted the U.S. Securities and Exchange Commission investigated Bush's actions and in 1992 determined not to pursue a prosecution. The subtext: Bush faces political heat today for appearing hypocritical, but since the SEC looked into all of this, he does not face any substantive charges of wrongdoing regarding his stock or trying to interfere with the investigation.
As the week ended, more stories were pressing for details about the SEC investigation. But if reporters and editors do not press that inquiry exhaustively -- after spending years chasing a similarly arcane financial transaction known as Whitewater involving President Bill Clinton, a Democrat -- they will have to answer their own questions about hypocrisy.
Let's recap: Looking to raise money to pay off his investment in the Texas Rangers baseball team, Bush sold two-thirds of his Harken stock on June 22, 1990, for $4 a share, pocketing $848,560. Harken soon after announced that, for the quarter ending June 30, 1990, it lost $23 million, dwarfing the company's previous largest loss. Soon after Bush sold, Harken stock was trading for just $1. Critics wondered whether Bush, a member of Harken's three-person audit committee, sold his stock knowing the company was about to announce huge losses. Adding to his troubles, Bush then waited 34 weeks before filing forms with the SEC notifying it of his insider stock sales. Bush did promptly file forms back in June 1990 notifying the SEC of his intent to sell.
The troubled transaction became a minor story in Bush's 1994 campaign for governor of Texas, and an even more minor story during his run for presidency. In the wake of June's WorldCom collapse though, and widespread accusations of fraudulent behavior among corporate officers, Bush for the first time is facing sustained queries about his Harken stock sales.
During Whitewater reporters often refused to accept any explanation or official inquiry that exonerated Clinton, and were obsessed with apparent conflicts of interest and relatively small sums of money. Today, it's tough to look back at the SEC probe of Bush and not notice the lingering questions. And they're not much different from the types of questions that were pursued relentlessly during Whitewater.
Why was Bush himself never interviewed as part of the SEC "voluntary" investigation? And did Bush waive his attorney-client privilege, allowing the SEC to interview his attorneys, specifically so he wouldn't have to be questioned by SEC investigators? Did the SEC ever interview the investor or investor group that purchased Bush's stock to determine if they were trying to bail Bush out as he was trying to pay off his baseball investment? Why did one Harken board member, Stuart Watson (reminiscent of Whitewater's Jim McDougal), publicly contradict Bush's claim that he did not know the energy company was about to announce a major loss just days before Bush dumped his stock? And why wasn't Watson ever interviewed by the SEC? Why, in a reportedly rare gesture of goodwill, did the SEC come to Bush's aid during his 1994 campaign for governor by writing a letter stipulating that no prosecution would be filed against him regarding the Harken case? How conclusive was the SEC probe, considering the fact the commission's chairman and general counsel were close Bush family friends and associates? Did the SEC chairman ever discuss the politically sensitive probe with anyone inside the White House when Bush's father was president? After all, Clinton's deputy treasury secretary, Roger Altman, was dismissed after he created a political firestorm by giving top White House aides a briefing on the possible civil case against the Whitewater-related savings and loan, Madison Guaranty. During the administration of Bush pere, did the White House ever receive a similar heads-up regarding the SEC probe?
Much of the current controversy stems from the fact that in 1994 while running for governor of Texas and trying to explain why it took him 34 weeks to file forms with the SEC regarding his Harken stock sale, Bush told reporters the commission had lost the paperwork. On July 3 this year, White House spokesman Ari Fleischer changed that explanation and said it was in fact a "mix-up" by Harken attorneys, not the SEC clerks.
But if Bush thought the SEC had lost his form, wouldn't that have been addressed during the 1991/1992 SEC investigation? And if during that investigation Bush's attorneys blamed the SEC for losing the key documents, what was the SEC's reaction? In other words, was the SEC surprised in 1994 when Bush publicly blamed the commission for fouling up his paperwork? And if Bush and his attorneys didn't confront the SEC about losing his form during the initial investigation, than why did Bush start blaming the SEC during his 1994 campaign, only to revise his story this summer? And specifically which Harken attorney failed to file the forms on time?
Most of those queries could be answered if Bush allowed all the relevant documents to be released, including the minutes of Harken board meetings where future losses were discussed. But after eight years and three elections (two for governor and one for president), Bush refuses to let the public and reporters take a look.
During Whitewater, the Clinton administration was held to a standard requiring complete and unfettered access to documents. But thus far in the brief life of the Harken controversy, the reaction on editorial pages has been much more tempered. The Washington Post, on Friday, called Harken a "distraction" and said the threads of the Harken story are not "compelling."
The editorial page of the New York Times, meanwhile, recently boasted that during Whitewater it had "urged the Clintons to cooperate so often that it became the editorial version of shouting oneself hoarse." To date, all the editorial page has done is limply urge Bush "to speak much more frankly" about the Harken matter.
Yet are Whitewater and Harken really that different? Looking back on Whitewater, a 2002 Times editorial insisted: "Missing files, destroyed documents and unanswered queries still float around the history of the former president and first lady." While there's no indication thus far of destroyed Harken documents, the case is rich with unanswered queries and files that are missing from the public debate.
True, the SEC found no reason to prosecute Bush, and clearly both the White House and conservative pundits are using that as their ace in the hole in explaining why the Harken story is old news. But in 1995, during the Whitewater frenzy, the government's Resolution Trust Corp. commissioned the top-drawer law firm of Pillsbury, Madison & Sutro to conduct an investigation. The probe cost $3.8 million, and it exonerated the Clintons. "The evidence is unequivocal that, concerning almost all of the fraudulent transactions, the Clintons were unaware of McDougal's criminal conduct," it found. "The Clintons' investment in Whitewater was financially unsuccessful. They invested a substantial amount of personal funds and realized no profit from the venture."
Yet for years the press continued to demand to know how much the Clintons knew about McDougal's criminal activities, and whether or not they made money on their Whitewater investment. If the Pillsbury report was simply tossed aside, why would the SEC probe be taken as the final word on the Harken subject? Especially when the SEC investigation appears to have been overseen by a cadre of Bush supporters? And especially when Bush and Harken refuse to turn over all the documents?
Just look at three key attorneys who were at the center of the SEC investigation and who, in theory, were on different sides of the issue. They included SEC Chairman Richard Breeden, SEC general counsel James Doty, and Dallas attorney Robert Jordan, who represented both Harken and Bush during the "voluntary" inquiry. To suggest the three lawyers enjoyed a close working relationship with one another, as well as with Bush, would be an understatement.
Breeden has known the senior George Bush for 20 years, and worked with him for nearly 10 before then-president Bush appointed him as SEC chairman. That choice in 1989 surprised many Wall Street experts since Breeden, just 39 at the time, had virtually no firsthand knowledge of the financial markets. "What do we know about Richard Breeden?" Hardwick Simmons, vice-chairman of Shearson Lehman Hutton Inc., asked Business Week at the time. "Not much," answered the magazine.
A key quality Breeden did possess, however, was Bush loyalty. Breeden was "a devoted admirer of President Bush," according to a New York Law Journal profile at the time of Breeden's nomination. (The Journal noted one of Breeden's three sons shared a Bush family name, Prescott.) One friend told the magazine Breeden's admiration for Bush was "something of a passion for him," adding, "He would have done just about anything for the vice president's chances of becoming president."
At the time of his nomination, one White House official echoed that sentiment to the New York Times, saying Breeden was considered "family" by the Bush administration. Business Week described Breeden as a Bush loyalist.
In subsequent years, Breeden has assured reporters that the SEC's investigation into Bush's Harken stock sale was done by the book. And there's certainly no evidence an inquiry was obstructed. But is it really possible that the SEC chairman, so closely aligned with Bush, did not once pick up the phone and give the president, or anybody else inside the White House, an update about the politically sensitive investigation? During Whitewater, the press deemed those types of communications as sinister meddling.
Before becoming SEC chairman, Breeden spent time working in the Washington office of the influential Texas law firm, Baker Botts, home of James Baker, who served as secretary of state for Bush senior. A founding partner in the firm's Dallas office was Robert Jordan, who represented Bush during the SEC investigation. Did Jordan and Breeden ever discuss the investigation?
Because it appears that during one crucial juncture of the SEC's inquiry, Jordan was able to receive special treatment from the agency. That came in October 1993, when the SEC, in an unusual move, wrote Jordan a letter confirming that the commission had looked into the matter and decided not to prosecute. Three weeks later Bush announced he was running for governor of Texas.
One year later, when the letter became public, Jordan told the Dallas Morning News, "George was getting ready to run for governor and wanted to be sure there was nothing out there that could be of concern." But the paper described the SEC's move to essentially provide cover for Bush with a written letter as "a rare action by the agency." Did Jordan ever discuss the need for such a letter with Breeden?
Did Jordan ever discuss the need for such a letter with Doty? He's yet another prominent Baker Botts attorney featured in the Bush/Harken drama. At the time of the SEC's inquiry, Doty was the commission's general counsel. But in private practice two years earlier, Doty was Bush's personal attorney when he negotiated the purchase of the Texas Rangers. (Doty says he recused himself from the SEC investigation into Bush, but today is out in public defending both the SEC probe as well as Bush's actions, reflecting his dual allegiances.)
Doty and Bush remain close to this day. According to 2000 press accounts, Doty was among the leading candidates to become chairman of the SEC if Bush were to win the election. Bush eventually chose a former accounting industry lobbyist, Harvey Pitt, for the position.
Jordan and Bush are also close. A corporate defense attorney by trade, Jordan last year was named ambassador to Saudi Arabia. He arrived for duty just weeks after Sept. 11 and at an absolutely critical juncture in U.S.-Saudi relations, without having ever set foot in the country before.
It seems there are still plenty of Harken questions for the press to explore in the days and weeks ahead.