03-12-2003, 08:18 PM
From a website entitled realchange.org...
"Insider Business Deals
Bush Jr. has made a lot of money off of three business deals. In each one, his contribution is hard to perceive, yet he walked off with hundreds of thousands or millions of dollars in deals arranged by his father's political cronies. The deals were
1. the sale of Junior's struggling oil company,
2. Junior's sale of oil stock just before the Gulf War, and
3. getting a cheap slice of the Texas Rangers baseball team, which he sold in 1999 for a huge profit (he paid $600,000, and sold for $14 million).
The general pattern here is just as important as the details. Bush did no work in his business career that can clearly be called "excellent" or even "solid." The money he made is tangential to his efforts at best -- the oil companies lost a great deal of money during his tenure, and the Rangers cut a lot of corners -- which makes the cronyism that much more suspicious.
It's not just that one or two of Bush's deals look funky; every major business deal he has been involved with included wealthy supporters of his father, and many of those investors later received favorable treatment from either the federal government under Bush, Sr. or the current Texas administration of Junior.
Deal #1: The Oil Business: Rewarded for Losing Money
Like his dad, Junior struck out in Texas and founded an oil company, Arbusto Energy, Inc., with $20,000 of his own money. (Arbusto is the Spanish word for bush.) The company foundered in the early 1980s when oil prices dropped (and his dad was Vice President.)
The 50 investors, who were "mainly friends of my uncle" in Junior's own words, put in $4.7 million and lost most of it. Junior claims that investors "did pretty good," but Bush family friend Russell Reynolds told the Dallas Morning News: "The bottom line was there were problems, and it didn't work out very well. I think we got maybe 20 cents on the dollar."
As Arbusto neared collapse, Spectrum 7 Energy Corporation bought it in September 1984. Despite his poor track record, the owners made Bush, Jr. the president and gave him 13.6% of the parent company's stock.
Spectrum 7 was a small oil firm owned by two staunch Reagan/Bush Sr. supporters -- William DeWitt and Mercer Reynolds. These two were also owners of the Texas Rangers and allowed Bush Jr. to purchase a chunk of the team cheaply; he later sold it for over 24 times what he paid.
Within two years of purchasing Arbusto and making Bush Jr. president, Spectrum 7 was itself in trouble; it lost $400,000 in its last 6 months of operation. That ended in 1986, when Harken Energy Corporation bought Spectrum 7's 180-well operation.
Junior got $227,000 worth of Harken stock, and a lot more. He was named to the board of directors, made $80,000 to $100,000 a year well into the 1990s as a "consultant" to Harken, and was allowed to buy Harken stock at 40% below face value.
He also borrowed $180,375 from Harken at very low rates; the company's 1989 and 1990 SEC filings said it "forgave" $341,000 in loans to unspecified executives.
So what did Junior do for all this money? It's hard to say exactly, but things happened for Harken after Junior came on board:
it got a $25 million stock offering from an unusual bank with CIA ties,
it won a surprise exclusive drilling contract with Bahrain, a small Mideast country, and
an Arab member of its Board of Directors was invited to White House policy meetings with President George Bush and National Security Adviser Brent Scowcroft.
Easy Money From Odd Sources
The firm's $25 million stock offering was underwritten by Stephens, Inc., an Arkansas bank whose head, Jackson Stephens, was on President Bush's "Team 100." (That was a group of 249 rich persons who gave at least $100,000 each to his presidential campaign committee). Stephens placed the offering with the London subsidiary of Union Bank of Switzerland, which (according to the Wall Street Journal) was not known as an investor in small American companies.
Union Bank did have other connections; it was a joint-venture partner with the notorious BCCI in a Geneva-based bank, and was involved in a scandal surrounding the Nugan Hand Bank, a CIA operation in Australia whose executives were advised by William Quasha, the father of Harken's chairman (Alan Quasha.) Union Bank was also involved in scandals surrounding Panamanian money laundering by BCCI, and Ferdinand Marcos' movement of 325 tons of gold out of the Phillipines.
That wasn't the only financing connection Junior brought; after the company won its Bahrain deal (see next item), the billionaire Bass brothers of Texas offered to underwrite the drilling operation. Robert Bass is also a member of Bush's Team 100, and he and his kin gave $226,000 to Bush Senior between 1988 and 1992.
The Bahrain Contract
In January 1990, Harken was chosen out of the blue by the small Mideast country Bahrain for an exclusive offshore oil drilling contract. They beat out Amoco, an experienced and major international conglomerate, despite having no offshore oil drilling experience at all. As of March 1995, the most recent report we could find, they had found no oil.
Junior has denied that he was involved in the deal, and even told the Wall Street Journal that he opposed it. But a company insider told Mother Jones Magazine "Like any member of the board, he was thrilled. His attitude was 'Holy #$%&, what a great deal!'"
If he did oppose it, he wasn't much of a consultant. Charles Strain, an energy company analyst in Houston, told Mother Jones: "Harken is not hard to understand -- it's easy. The company has only one real asset -- its Bahrain contract. If that field turns out to be dry, Harken's stock is worth, at the most, 25 cents a share. If they hit it big over there, the stock could be worth $30 to $40 dollars a share." As of December 1998, Harken Energy Corp. (HEC on Amex) is trading at $2.69 a share.
Access to the President For Bush's Foreign Business Partner
The most troubling thing that happened to Harken after it bought George Bush Junior in, was that one of its Board of Directors members was suddenly admitted to the highest levels of United States foreign policy meetings. These were not Clintonesque meet-and-greet fundraisers, but actual working policy meetings during a critical period.
After the Harken-Bahrain deal was signed, Talat Othman was added to a group of Arabs who met with George Bush and National Security Adviser Brent Scowcroft three times in 1990 -- once just two days after Iraq invaded Kuwait.
Othman was the representative of Sheikh Abdullah Bakhsh, who purchased 10% of Harken stock and had several ties to the infamous BCCI bank. Bakhsh was a co-investor in Saudi Arabia with alleged BCCI front man Ghaith Pharaon. Bakhsh's banker, Khalid bin Mahfouz, was another BCCI figure and head of the largest bank in Saudi Arabia. Sheikh Kalifah, the prime minister of Bahrain, was a BCCI shareholder and played the key role in selecting Harken for the oil contract.
This is the crowd that gained entry to the President and the National Security Adviser of the United States after George Junior made his deal with Harken.
Deal #2: Selling Oil Stock Just Before Iraq Invaded
George Bush, Junior sold 60% of his stock in Harken Oil in June, 1990 for $848,560. That was brilliant timing; in August, Iraq invaded Kuwait and Harken's stock dropped 25%. Soon after, a big quarterly loss caused it to drop further.
A secret State Deparment memo in May of that year had warned that Saddam was out of control, and listed options for responding to him, including an oil ban that might affect US oil prices.
We can't be sure that the President or an aide mentioned these developments to his son, or that Harken's representative who was admitted to meetings with the President picked up something and reported back to Junior. But it is the simplest and most logical explanation. The Bushes acknowledge that George Senior and his sons consult on political strategy and other matters constantly.
Furthermore, Harken's internal financial advisers at Smith Barney had issued a report in May warning of the company's deteriorating finances. Harken owed more than $150 million to banks and other creditors at the time. George Bush, Jr. was a member of the board and also of Harken's restructuring committee, which met in May and worked directly with the Smith Barney consultants. He must have known of these warnings.
These are pretty clear-cut indications of illegal insider trading. The Securities and Exchange Commission, controlled at the time by President George Bush, investigated but chose not to press charges.
Junior also violated another SEC rule explicitly. He was required to register his sale as an insider trade by July 10, 1990, but didn't until March 1991, after the Gulf War was over. He was not punished or cited.
Deal #3: A Big Slice of the Texas Rangers for a Little Money (and a Big Profit)
The third unusually easy deal for George Bush Junior was his involvement in the Texas Rangers baseball team. In a nutshell, he was offered a piece of this valuable franchise for only $600,000, by supporters of his dad who also bailed out his failing oil company. He sold his stake for $14 million - while Texas governor -- to a Texas millionaire with lots of businesses regulated by his administration. "When all it is all said and done, I will have made more money than I ever dreamed I would make," Bush told the Forth Worth Star-Telegram.
Bush was allowed to buy 1.8% of the team for $600,000 of borrowed money, and was even made one of the two general managers. His qualifications for partial ownership? Several years working at failing oil companies, and his political connections through his father. It's hard to be sure, but we're guessing that latter was probably more important.
Junior tripled his investment, like the other owners, with the help of massive government intervention and subsidies. But his real wealth came from simply being given 10% of the team as a "bonus" for "putting together the investment team."
Even if he really had done that work, it's an absurd bonus ($12.2 million), but the fact is that he didn't add much. Cincinatti financier William DeWitt brought Bush in, not vice versa, shortly after George Bush Sr. was elected president. (DeWitt had also invested in Junior's oil companies.). The only investor Bush actually brought in was Roland Betts, a Yale fraternity brother, and that wasn't good enough.
Under Junior's management, the deal was about to fall apart until baseball commissioner Peter Uebberoth brought in another investment group led by Fort Worth Billionaire Richard Rainwater and Dallas investor "Rusty" Rose. Since the deal, both men have profited greatly from business with the Texas administration of George Bush, Jr. Rose personally invested $3.2 million and became the other general manager of the team. Under the team partnership agreement, Bush Junior couldn't take any "material actions" wihtout Rose's prior approval. There was also a method for removing Junior as a general partner, but no way to remove Rose. Yet Rose's "bonus" for his role in setting up the deal was less than half of Junior's.
What kind of owners would approve such a big payoff to Bush? In addition to Rose and Rainwater, men with business pending before Texas government, the owners included William DeWitt and Mercer Reynolds, major contributors to President Bush who had also purchased Junior's failing oil company through their Spectrum 7 Energy company.
If this deal doesn't smell bad enough already, consider Bush's blatant hypocrisy. The main value of the team is its new stadium (ranked by Financial World as the most profitable in baseball) and 300 acres of vacant land the team owns between the stadium and 6 Flags of Texas, which is next door.
Putting Tax Money into Bush's Pocket
The hypocritical part is, the private owners of this very valuable land didn't want to sell. Bush and his partners gave them only a lowball offer, and when it was rejected they arranged for a new government agency (the Arlington Sports Facility Development Authority, or ASFDA) to condemn it for them.
The agency foreclosed the land and paid the owners a very low price, later judged by a jury to be only 1/6th of its actual value. The agency also floated bonds, guaranteed and repaid by taxpayers, to finance the purchase. This amounted to a $135 million subsidy for Bush and partners, compared with the $80 million they paid for the franchise. Since they sold the entire franchise for $250 million, it's easy to see whose money Bush and friends pocketed.
The next time Junior talks about tax cuts, remember this: Arlinton had to impose a new 1/2 cent sales tax just to pay for the subsidy Bush and his partners received.
To add insult to injury, Bush and his partners continue to stiff the taxpayers for $7.5 million they owe under the terms of the agreement. It held that the team would pay all expenses over $135 million. The original owners of just 13 of the acres sued the City of Arlington, saying that the ASFDA had not paid a fair price for the land. The jury awarded them $7.5 million, but even though the project exceeded the $135 million limit, the partners have refused to pay. Given their huge taxpayer subsidy and $170 million profits, it seems absurdly selfish.
George Bush, Jr. has said in campaign speeches "I will do everything I can to defend the power of private property and private property rights when I am the governor of this state." Apparently this deal was not covered by that statement, since he wasn't governor yet.
He claims that he "wasn't aware of the details" of the land condemnations, even though he was the team's managing general partner and has bragged about personally getting the stadium built. But he told the Fort Worth Star-Telegram in October 1990 that "The idea of making a land play, absolutely, to plunk the field down in the middle of a big piece of land, that's kind of always been the strategy."
And the key to their land play was always the strong arm of government. A memo from Arlington real estate broker Mike Reilly to Rangers President Tom Schieffer dated October 26, 1990 - the day before Bush's comment about the land play - said "In this particular situation our first offer should be our final offer ... If this fails, we will probably have to initiate condemnation proceedings after the bond election passes."
On the first day of the 1993 campaign, Bush said "The best way to allocate resources in our society is through the marketplace. Not through a governing elite." Not through a private sports team buying in the President's son cheap, and then getting the government to hand them extremely valuable land. "
As I said, more to come on wonderful, moral, upstanding, bright man our president is.
"Insider Business Deals
Bush Jr. has made a lot of money off of three business deals. In each one, his contribution is hard to perceive, yet he walked off with hundreds of thousands or millions of dollars in deals arranged by his father's political cronies. The deals were
1. the sale of Junior's struggling oil company,
2. Junior's sale of oil stock just before the Gulf War, and
3. getting a cheap slice of the Texas Rangers baseball team, which he sold in 1999 for a huge profit (he paid $600,000, and sold for $14 million).
The general pattern here is just as important as the details. Bush did no work in his business career that can clearly be called "excellent" or even "solid." The money he made is tangential to his efforts at best -- the oil companies lost a great deal of money during his tenure, and the Rangers cut a lot of corners -- which makes the cronyism that much more suspicious.
It's not just that one or two of Bush's deals look funky; every major business deal he has been involved with included wealthy supporters of his father, and many of those investors later received favorable treatment from either the federal government under Bush, Sr. or the current Texas administration of Junior.
Deal #1: The Oil Business: Rewarded for Losing Money
Like his dad, Junior struck out in Texas and founded an oil company, Arbusto Energy, Inc., with $20,000 of his own money. (Arbusto is the Spanish word for bush.) The company foundered in the early 1980s when oil prices dropped (and his dad was Vice President.)
The 50 investors, who were "mainly friends of my uncle" in Junior's own words, put in $4.7 million and lost most of it. Junior claims that investors "did pretty good," but Bush family friend Russell Reynolds told the Dallas Morning News: "The bottom line was there were problems, and it didn't work out very well. I think we got maybe 20 cents on the dollar."
As Arbusto neared collapse, Spectrum 7 Energy Corporation bought it in September 1984. Despite his poor track record, the owners made Bush, Jr. the president and gave him 13.6% of the parent company's stock.
Spectrum 7 was a small oil firm owned by two staunch Reagan/Bush Sr. supporters -- William DeWitt and Mercer Reynolds. These two were also owners of the Texas Rangers and allowed Bush Jr. to purchase a chunk of the team cheaply; he later sold it for over 24 times what he paid.
Within two years of purchasing Arbusto and making Bush Jr. president, Spectrum 7 was itself in trouble; it lost $400,000 in its last 6 months of operation. That ended in 1986, when Harken Energy Corporation bought Spectrum 7's 180-well operation.
Junior got $227,000 worth of Harken stock, and a lot more. He was named to the board of directors, made $80,000 to $100,000 a year well into the 1990s as a "consultant" to Harken, and was allowed to buy Harken stock at 40% below face value.
He also borrowed $180,375 from Harken at very low rates; the company's 1989 and 1990 SEC filings said it "forgave" $341,000 in loans to unspecified executives.
So what did Junior do for all this money? It's hard to say exactly, but things happened for Harken after Junior came on board:
it got a $25 million stock offering from an unusual bank with CIA ties,
it won a surprise exclusive drilling contract with Bahrain, a small Mideast country, and
an Arab member of its Board of Directors was invited to White House policy meetings with President George Bush and National Security Adviser Brent Scowcroft.
Easy Money From Odd Sources
The firm's $25 million stock offering was underwritten by Stephens, Inc., an Arkansas bank whose head, Jackson Stephens, was on President Bush's "Team 100." (That was a group of 249 rich persons who gave at least $100,000 each to his presidential campaign committee). Stephens placed the offering with the London subsidiary of Union Bank of Switzerland, which (according to the Wall Street Journal) was not known as an investor in small American companies.
Union Bank did have other connections; it was a joint-venture partner with the notorious BCCI in a Geneva-based bank, and was involved in a scandal surrounding the Nugan Hand Bank, a CIA operation in Australia whose executives were advised by William Quasha, the father of Harken's chairman (Alan Quasha.) Union Bank was also involved in scandals surrounding Panamanian money laundering by BCCI, and Ferdinand Marcos' movement of 325 tons of gold out of the Phillipines.
That wasn't the only financing connection Junior brought; after the company won its Bahrain deal (see next item), the billionaire Bass brothers of Texas offered to underwrite the drilling operation. Robert Bass is also a member of Bush's Team 100, and he and his kin gave $226,000 to Bush Senior between 1988 and 1992.
The Bahrain Contract
In January 1990, Harken was chosen out of the blue by the small Mideast country Bahrain for an exclusive offshore oil drilling contract. They beat out Amoco, an experienced and major international conglomerate, despite having no offshore oil drilling experience at all. As of March 1995, the most recent report we could find, they had found no oil.
Junior has denied that he was involved in the deal, and even told the Wall Street Journal that he opposed it. But a company insider told Mother Jones Magazine "Like any member of the board, he was thrilled. His attitude was 'Holy #$%&, what a great deal!'"
If he did oppose it, he wasn't much of a consultant. Charles Strain, an energy company analyst in Houston, told Mother Jones: "Harken is not hard to understand -- it's easy. The company has only one real asset -- its Bahrain contract. If that field turns out to be dry, Harken's stock is worth, at the most, 25 cents a share. If they hit it big over there, the stock could be worth $30 to $40 dollars a share." As of December 1998, Harken Energy Corp. (HEC on Amex) is trading at $2.69 a share.
Access to the President For Bush's Foreign Business Partner
The most troubling thing that happened to Harken after it bought George Bush Junior in, was that one of its Board of Directors members was suddenly admitted to the highest levels of United States foreign policy meetings. These were not Clintonesque meet-and-greet fundraisers, but actual working policy meetings during a critical period.
After the Harken-Bahrain deal was signed, Talat Othman was added to a group of Arabs who met with George Bush and National Security Adviser Brent Scowcroft three times in 1990 -- once just two days after Iraq invaded Kuwait.
Othman was the representative of Sheikh Abdullah Bakhsh, who purchased 10% of Harken stock and had several ties to the infamous BCCI bank. Bakhsh was a co-investor in Saudi Arabia with alleged BCCI front man Ghaith Pharaon. Bakhsh's banker, Khalid bin Mahfouz, was another BCCI figure and head of the largest bank in Saudi Arabia. Sheikh Kalifah, the prime minister of Bahrain, was a BCCI shareholder and played the key role in selecting Harken for the oil contract.
This is the crowd that gained entry to the President and the National Security Adviser of the United States after George Junior made his deal with Harken.
Deal #2: Selling Oil Stock Just Before Iraq Invaded
George Bush, Junior sold 60% of his stock in Harken Oil in June, 1990 for $848,560. That was brilliant timing; in August, Iraq invaded Kuwait and Harken's stock dropped 25%. Soon after, a big quarterly loss caused it to drop further.
A secret State Deparment memo in May of that year had warned that Saddam was out of control, and listed options for responding to him, including an oil ban that might affect US oil prices.
We can't be sure that the President or an aide mentioned these developments to his son, or that Harken's representative who was admitted to meetings with the President picked up something and reported back to Junior. But it is the simplest and most logical explanation. The Bushes acknowledge that George Senior and his sons consult on political strategy and other matters constantly.
Furthermore, Harken's internal financial advisers at Smith Barney had issued a report in May warning of the company's deteriorating finances. Harken owed more than $150 million to banks and other creditors at the time. George Bush, Jr. was a member of the board and also of Harken's restructuring committee, which met in May and worked directly with the Smith Barney consultants. He must have known of these warnings.
These are pretty clear-cut indications of illegal insider trading. The Securities and Exchange Commission, controlled at the time by President George Bush, investigated but chose not to press charges.
Junior also violated another SEC rule explicitly. He was required to register his sale as an insider trade by July 10, 1990, but didn't until March 1991, after the Gulf War was over. He was not punished or cited.
Deal #3: A Big Slice of the Texas Rangers for a Little Money (and a Big Profit)
The third unusually easy deal for George Bush Junior was his involvement in the Texas Rangers baseball team. In a nutshell, he was offered a piece of this valuable franchise for only $600,000, by supporters of his dad who also bailed out his failing oil company. He sold his stake for $14 million - while Texas governor -- to a Texas millionaire with lots of businesses regulated by his administration. "When all it is all said and done, I will have made more money than I ever dreamed I would make," Bush told the Forth Worth Star-Telegram.
Bush was allowed to buy 1.8% of the team for $600,000 of borrowed money, and was even made one of the two general managers. His qualifications for partial ownership? Several years working at failing oil companies, and his political connections through his father. It's hard to be sure, but we're guessing that latter was probably more important.
Junior tripled his investment, like the other owners, with the help of massive government intervention and subsidies. But his real wealth came from simply being given 10% of the team as a "bonus" for "putting together the investment team."
Even if he really had done that work, it's an absurd bonus ($12.2 million), but the fact is that he didn't add much. Cincinatti financier William DeWitt brought Bush in, not vice versa, shortly after George Bush Sr. was elected president. (DeWitt had also invested in Junior's oil companies.). The only investor Bush actually brought in was Roland Betts, a Yale fraternity brother, and that wasn't good enough.
Under Junior's management, the deal was about to fall apart until baseball commissioner Peter Uebberoth brought in another investment group led by Fort Worth Billionaire Richard Rainwater and Dallas investor "Rusty" Rose. Since the deal, both men have profited greatly from business with the Texas administration of George Bush, Jr. Rose personally invested $3.2 million and became the other general manager of the team. Under the team partnership agreement, Bush Junior couldn't take any "material actions" wihtout Rose's prior approval. There was also a method for removing Junior as a general partner, but no way to remove Rose. Yet Rose's "bonus" for his role in setting up the deal was less than half of Junior's.
What kind of owners would approve such a big payoff to Bush? In addition to Rose and Rainwater, men with business pending before Texas government, the owners included William DeWitt and Mercer Reynolds, major contributors to President Bush who had also purchased Junior's failing oil company through their Spectrum 7 Energy company.
If this deal doesn't smell bad enough already, consider Bush's blatant hypocrisy. The main value of the team is its new stadium (ranked by Financial World as the most profitable in baseball) and 300 acres of vacant land the team owns between the stadium and 6 Flags of Texas, which is next door.
Putting Tax Money into Bush's Pocket
The hypocritical part is, the private owners of this very valuable land didn't want to sell. Bush and his partners gave them only a lowball offer, and when it was rejected they arranged for a new government agency (the Arlington Sports Facility Development Authority, or ASFDA) to condemn it for them.
The agency foreclosed the land and paid the owners a very low price, later judged by a jury to be only 1/6th of its actual value. The agency also floated bonds, guaranteed and repaid by taxpayers, to finance the purchase. This amounted to a $135 million subsidy for Bush and partners, compared with the $80 million they paid for the franchise. Since they sold the entire franchise for $250 million, it's easy to see whose money Bush and friends pocketed.
The next time Junior talks about tax cuts, remember this: Arlinton had to impose a new 1/2 cent sales tax just to pay for the subsidy Bush and his partners received.
To add insult to injury, Bush and his partners continue to stiff the taxpayers for $7.5 million they owe under the terms of the agreement. It held that the team would pay all expenses over $135 million. The original owners of just 13 of the acres sued the City of Arlington, saying that the ASFDA had not paid a fair price for the land. The jury awarded them $7.5 million, but even though the project exceeded the $135 million limit, the partners have refused to pay. Given their huge taxpayer subsidy and $170 million profits, it seems absurdly selfish.
George Bush, Jr. has said in campaign speeches "I will do everything I can to defend the power of private property and private property rights when I am the governor of this state." Apparently this deal was not covered by that statement, since he wasn't governor yet.
He claims that he "wasn't aware of the details" of the land condemnations, even though he was the team's managing general partner and has bragged about personally getting the stadium built. But he told the Fort Worth Star-Telegram in October 1990 that "The idea of making a land play, absolutely, to plunk the field down in the middle of a big piece of land, that's kind of always been the strategy."
And the key to their land play was always the strong arm of government. A memo from Arlington real estate broker Mike Reilly to Rangers President Tom Schieffer dated October 26, 1990 - the day before Bush's comment about the land play - said "In this particular situation our first offer should be our final offer ... If this fails, we will probably have to initiate condemnation proceedings after the bond election passes."
On the first day of the 1993 campaign, Bush said "The best way to allocate resources in our society is through the marketplace. Not through a governing elite." Not through a private sports team buying in the President's son cheap, and then getting the government to hand them extremely valuable land. "
As I said, more to come on wonderful, moral, upstanding, bright man our president is.