President Bush's corporate past returned to the headlines Wednesday thanks to two new stories that unearthed a previously unreported bailout of Harken Energy Corp. by Harvard University. The bailout came in the form of a little-noticed partnership created by Harvard and Harken that allowed Harken to shield much of its debt and thereby boost Harken's stock price, thanks to a loophole in accounting laws.
The stories, in the Wall Street Journal and the Boston Globe, make clear that while Harken engaged in some Enron-like accounting, it did, unlike the fallen energy giant, report the partnership to the SEC and acted within the boundaries of the law. Bush was on a special committee that approved the partnership, but did not profit from the deal since by then he had sold off most of his Harken stock.
White House spokesman Dan Bartlett told the Wall Street Journal the partnership was Harvard's idea and the school "basically dictated the terms of the investment," adding "the original relationship had nothing to do with President Bush."
Both the Globe and the Journal cited a memo by a group called HarvardWatch in their stories, which both refer to as "a student and alumni group." The group compiled a memo it says shows "improper financial maneuvers at Harken Energy during the Bush era."
HarvardWatch is primarily an e-mail list of scattered alumni, with a handful of active, dedicated undergraduates at its core. And the group's work on the Harken investigation was the work of two students -- sophomore Emma Mackinnon and senior Matthew Skomarovsky. Salon spoke to Mackinnon by telephone Wednesday.
What exactly is HarvardWatch?
It's like a student group, but we can't officially affiliate as a student group or else Harvard will crack down on us.
Crack down how?
There are regulations on student groups. They don't let you talk to media, they don't let you poster without their approval, so we meet as a kind of informal, unaffiliated group. We've been working that way for a while.
How long has the group been around?
We've been active basically just since January, though before that we did issue a statement on the presidential search committee on how the president was being selected. We started up with an Enron report on Harvard's investments in Enron, and the corresponding presence of Enron's finance director on the Harvard Corp. That corporation member stepped down after that report was issued.
How many members are in the group?
There is no particular firm membership. We have a supporters' e-mail list that's over 500 now, but then there's a core of five to 10 active members.
If you're not affiliated with the university, where do you get your funding?
We don't actually rely on funding that much, although we have some alumni donations.
We don't really have a budget. It's sort of just whatever comes in.
How did you become involved in the Harken story?
We were doing research over the summer, myself and Matthew, on Harvard's involvement in Harken Energy Corp, looking through SEC filings and stuff, and came upon this partnership. We produced most of the memo over the summer, and then we've been working on developing it with the Wall Street Journal since then. It's basically been an internal thing up until now. Because of the agreement we had with the Journal, we were trying to keep it quiet. We started talking to people at these other organizations once we came across this stuff in the SEC filings. We talked to the Center for Public Integrity, for one. But we just kind of happened upon it. The cooperation with the Journal came after we developed the memo. But we got in touch with them once we realized what we had.
How does the Harken story fit with your group's interests?
The way Harvard is structured is the main focus of HarvardWatch, and I think this case demonstrates a lot of the destructive power of Harvard's subservience to corporations, and the lack of accountability, the lack of transparency in the way they invest their money. Those are issues that we're still working on, and there's a lot of work we have to do in terms of getting the Harvard campus aware of this, particularly getting people mobilized around the greater governance issues behind it.
What changes would you like to see in the way the Harvard Investment Corporation does business?
As a short-term goal, we'd certainly like to see an investigation and significant reforms to Harvard's investment policies that make it more transparent, and make it more akin to a publicly spirited not-for-profit organization. In terms of our longer-term goals, they're often more vague but certainly relate a lot to student, alumni, faculty and worker representation in terms of who makes decisions about our lives here. That would either completely remove the Harvard Corp., or utterly change the way the corporation members are selected.
Harvard has a separate entity called the Harvard Management Company -- its board of directors is primarily composed of people on the Harvard Corp. -- that does all of its investing. It's basically completely closed off. When we called them over the summer and told them we were undergraduates interested in what our university was doing, they wouldn't answer any of our questions. They claim that's in our best interest, but it lets them do things like this. The people who are controlling Harvard's endowment are the same people who are running these corporations, the same people who are friends with Bush and other major corporate executives.
And what kinds of changes would you like to see in terms of the structure of the corporation?
Student and community representation on the corporation -- more than representation, control of the corporation -- is our primary goal. I think that would bring with it a significant change in the mind-set of the investing.
That's a pretty good chunk of change you're talking about.
The management corporation deals with the entire endowment, which at its peak was about $20 billion, but is now to about $17.5 billion.