[A-List] US legitimation crisis: Harken Oil

["Michael Keaney" <michael.keaney@xxxxxx>]

Bush risks hypocrisy charge over Harken accounts

David Teather in New York
Thursday October 10, 2002
The Guardian

President George Bush was yesterday laid open to further allegations of
hypocrisy in his condemnation of the aggressive business practices of the
1990s when more details of his own dealings were published.

Harken Energy, the oil and gas company behind the US president's wealth,
used an off balance sheet entity to move poorly performing assets and debts
off its books, according to a report which draws comparisons with Enron.

The off balance sheet entity, a partnership with the investment arm of
Harvard University, was formed in 1990 at a critical time for the company's
finances.

HarvardWatch, an alumni and student group which monitors the university's
investments, likened the venture to those used at the disgraced energy firm
Enron to disguise debts before it collapsed.

Mr Bush was a director at Harken from 1986 to 1993 and at the time in
question was a $100,000 a year consultant. Minutes show that he personally
approved the deal.

"The partnership bears strong resemblance to the widely-condemned Enron
partnerships, controlled by insiders and disguising the dismal prospects of
the company," the watchdog said.

The venture enabled Harken to shift $20m (£13.1m) in debt and liabilities
off the balance sheet. Harvard's venture capital division, Aeneas,
contributed $64.5m of drilling assets to the partnership.

In return Harken received a much-needed injection of cash - $100,000 a month
in management fees, and drilling and services fees of more than $3m in the
first year.

The deals were disclosed at the time to the US regulator, the securities and
exchange commission and complied with accounting rules. It is the kind of
aggressive financial engineering that the president has strongly criticised.

Over the summer political rivals made capital of a 1991 insider dealing
investigation into the future president by the SEC. Mr Bush sold 212,140
shares for $849,000 two months before the company reported a $23.2m
quarterly loss but the SEC closed the case without taking action.

The White House dismissed any hint of wrongdoing. A spokesman said:
"Independent reports note that [the partnership] complied with accounting
rules, so there is no comparison with Enron."

There were also reports yesterday that New York prosecutors are considering
criminal charges against auditors at PricewaterhouseCoopers who failed to
report the alleged looting of Tyco by its former chief executive officer,
Dennis Kozlowski.