- On the eve of a much publicized speech to business executives
on Wall Street, George W. Bush held an impromptu press conference Monday
at which he was peppered with questions regarding his own dealings as a
board member of Texas-based Harken Energy more than a decade ago.
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- Even as he read a prepared statement pledging to take
a tough stand against corporate law-breakers, Bush could not suppress his
trademark smirk. Asked about the 1991 Securities and Exchange Commission
(SEC) probe into his sell-off of Harken stock only weeks before the company
reported massive losses, Bush continued to stonewall.
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- Nevertheless, he was clearly on the defensive. Bush's
most significant remark came in response to a question about the growing
wave of corporate scandals, which that very morning had hit yet another
major US company, Merck & Co. The Wall Street Journal reported Monday
that the drug giant had recorded $12.4 billion in revenue over the past
three years that it had never collected.
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- "[I]'m very worried about a country that could conceivably
lose confidence in the free enterprise system," Bush told reporters.
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- This admission was a stark expression of a growing sense
of crisis within the Bush administration, concerning not only the short-term
stability of the Republican White House, but also the long-term future
of the profit system itself. The fear that the exposure of corporate criminality
could fuel popular anger over the growth of social inequality and lead
to the emergence of a political movement against the so-called "free
enterprise" system is increasingly gripping the corporate and political
establishment.
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- It is one of the major factors behind the sudden proliferation
of press reports and commentaries on Bush's personal business practices.
White House spokesmen keep repeating that these are old issues that they
thought had been settled long ago. These questions have reemerged, however,
because the bursting of the stock market bubble and the collapse of corporate
empires based on the wild inflation of share values and various forms of
swindling and fraud have created a new climate of political crisis.
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- The attacks on Bush's business record by sections of
the media and influential economic commentators manifests a central aspect
of this crisis: the emergence of sharp divisions within the upper reaches
of the ruling elite over the policies of the Bush administration on a whole
host of questions. Behind the scenes, conflicts are raging over the reckless
and incendiary nature of Bush's initiatives, both at home and abroad.
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- Concerns are mounting over the dangerous implications
of Bush's military interventions, his increasingly provocative posture
toward Europe, and the domestic implications of his policy of removing
all restrictions on corporate profit-making. Powerful sections of the corporate
establishment fear that the policies of the administration could lead to
a crisis of catastrophic proportions. They have seized on Bush's personal
misdeeds as a means of waging this covert political war in the public arena.
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- This, however, does not diminish the intrinsic significance
of the corrupt business dealings that are being exposed. What is involved
in the record of Bush's corporate career is not some manufactured scandal,
like the Whitewater affair. That relatively small-time real estate venture,
which lost money, was seized on by right-wing opponents of the Clinton
administration as the pretext for a political conspiracy aimed at bringing
down the government.
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- Bush's insider trading, on the other hand, was a real
violation of securities laws, and it typified the type of practices that
have become synonymous with Enron, Global Crossing, WorldCom and a string
of other companies.
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- Bush goes to Wall Street to lecture executives on business
ethics under conditions in which a mountain of evidence demonstrates that
he and virtually every other leading member of his administration personify
in their own corporate careers the very methods he intends to denounce.
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- White House spokesmen have said the president will use
his Wall Street speech to reiterate his recent calls for corporate law-breakers
to be prosecuted and for the worst offenders to be sent to a jail. The
purpose of such statements is to placate growing popular anger over the
systematic looting of the economy by the corporate elite. The idea is to
make an example of a few swindlers, in order to divert attention from the
pervasive thievery that has come to characterize American "free enterprise."
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- If Bush were serious, he might begin with his own Army
Secretary, Thomas White, who was vice chairman of Enron Energy Services
when it concealed hundreds of millions of dollars in losses and plunged
California into a devastating energy crisis by manipulating the electricity
market. Next in line could be the lawyer he appointed to head the Security
and Exchange Commission (SEC), Harvey Pitt, who previously represented
the big accounting firms, including the convicted Arthur Andersen, and
the major investment houses. Not long ago Pitt held private meetings with
Xerox and KPMG executives while their firms were under investigation by
his commission.
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- Higher up is Bush's vice president Dick Cheney, the éminence
grise of the administration. Cheney's former firm, the Dallas-based energy
services company Halliburton, is under investigation by the SEC for falsely
reporting cost-overruns as revenues to the tune of $100 million. As chairman
and CEO of the company, Cheney oversaw the implementation of this particular
form of accounting fraud in 1998.
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- Bush's own business career exemplifies all of the features-greed,
dishonesty, recklessness, self-enrichment at the expense of shareholders,
employees and the general public-that characterized the stock-market-fueled
boom of the 1990s. In Bush, these are combined with ignorance and the worst
forms of nepotism and cronyism.
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- Bush's sale of two-thirds of his stake in Harken Energy
in June of 1990 for $848,000 has by now been widely reported, following
an accusatory piece July 2 by New York Times economics columnist Paul Krugman.
Bush's dumping of his own company's stock was a classic case of insider
trading.
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- As a director of the company and a member of its audit
board and a special restructuring committee, Bush was privy to information
that the firm faced mounting losses and the prospect of bankruptcy. He
had received memos that the company was facing a "liquidity crisis"
and was "in a state of non-compliance" with its lenders.
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- Just two months after Bush sold off most of his company
stock, Harken reported quarterly losses of $23 million. Its share price
nose-dived, falling from $4 at the time of Bush's divestiture to little
more than $2 a share. By the end of the year Harken stock had plummeted
to $1.
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- Under securities laws, Bush, as a company official, was
required to file a report of his stock sale with the SEC within ten days
of the transaction. It took him 34 weeks to make the filing.
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- Harken exemplified the type of executive corruption and
accounting tricks that have since been exposed at Enron and other companies.
In 1989 it concealed mounting losses by orchestrating the "sale"
for $10 million of a subsidiary, Aloha Petroleum, to a group of Harken
executives, who borrowed the money to pay for Aloha from the parent company,
Harken. By means of this sleight-of-hand, Harken was able to report an
additional $10 million in revenues, and thus cover up the real state of
affairs from its shareholders and investors in general. In January 1991,
after "discussions" with the SEC over the Aloha Petroleum caper,
Harken announced that it was adding more than $9 million to its losses
for 1989.
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- Bush personally borrowed $180,375 from the company-a
loan that was later "forgiven." Such things, however, were not
uncommon at Harken. In 1990 alone the Harken board forgave $341,000 in
loans to its executives.
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- Bush owed his position at Harken, and his lucrative stake
in company shares, not to any display of business acumen or personal merit,
but entirely to his family connections. In 1986 Bush's tiny Texas oil firm,
Spectrum 7, was losing money and hopelessly in debt. But his father was
vice president in the Reagan administration.
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- Harken bought Spectrum 7 for the grossly inflated price
of $2 million and put Bush on its board of directors and audit board because,
in the words of Harken founder Phil Kendrick, "His name was George
Bush."
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- By the time the SEC decided to investigate Bush's insider
trade of Harken stock, following a Wall Street Journal exposé in
April 1991, daddy was in the White House. The SEC found that Bush had violated
federal laws for reporting insider trades, but decided not to prosecute
the case.
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- Once again, family and insider connections stood Bush
in good stead. Not only had his father, the president, appointed the SEC
chairman, Bush's former personal lawyer, James R. Doty, was the SEC general
counsel. Moreover, the lawyer who represented Bush during the investigation,
Robert Jordan, was a former law partner of Doty at the Baker Botts firm.
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- With the windfall Bush received from his timely sale
of Harken stock, Bush paid off a loan he had taken out to buy a stake in
the Texas Rangers professional baseball team. The lawyer who represented
him in his Texas Rangers deal was-James R. Doty.
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- In 1998 Bush's trust sold his stake in the Rangers for
$16 million, catapulting him into the ranks of multi-millionaires. Thus
Bush parlayed his family connections into a substantial fortune, with the
help of friends in high places and the use of insider information to make
a killing at the expense of his own company.
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- Bush's good fortune may well have received an even more
direct boost from his father's tenure in the White House. Less than 30
days before Bush sold his Harken stock, his father's national security
adviser, Brent Scowcroft, sent the president a secret memo warning that
hostilities between Iraq and Kuwait were likely. At that time, Harken's
only pending contract was for a drilling project in Bahrain. The outbreak
of war in the Persian Gulf would therefore have ruinous implications for
Harken's business prospects.
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- When hostilities in the Gulf broke out, less than two
months after Bush sold his shares, Harken stock plummeted. Its shares lost
25 percent of their value on the day Iraq invaded Kuwait. Had Bush held
onto his shares until then, he would have lost nearly $250,000.
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- Bush's case history is indicative of the rise to the
top of American business of the most reactionary and predatory elements.
This is a social layer that has amassed colossal wealth by using its position
of corporate power to pilfer the assets of the companies it heads, while
defrauding investors, bankrupting pension funds, bleeding dry 401K funds,
slashing jobs and destroying the savings and livelihoods of tens of millions
of people.
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- These are not simply the practices of a handful of miscreants.
Their root source is not individual greed or personal immorality. Nor are
they mere "excesses." They are bound up with a broader crisis
of the capitalist system, and the attempts of the corporate ruling elite
in the US and internationally to mask and offset the crisis through the
creation of ever greater volumes of fictitious capital, combined with increasingly
brutal attacks on the living standards and democratic rights of the working
class.
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- Nor is corporate criminality a monopoly of the Republican
Party and its business backers. The orgy of stock market speculation and
accounting fraud reached its height under the Democratic Clinton administration.
Democrats and Republicans alike are, directly or indirectly, in the pay
of big business. A recent study found that business provides $3 out of
every $4 raised by Republicans, and $2 out of every $3 raised by Democrats.
This helps explain why the Democrats are so terrified of exposing Bush's
ties to Enron and so cowardly in their dealings with corporate CEOs.
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- The Bush administration, however, embodies precisely
those social elements most closely associated with the criminalization
of American business. The present government-a government of the political
underworld-is their concentrated political expression.
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- ___
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- The WSWS invites your comments.
- Copyright 1998-2002
- World Socialist Web Site
- All rights reserved
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- http://www.wsws.org/articles/2002/jul2002/bush-j09.shtml
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