Bush's Aloha Connection

A couple of weeks ago, President Bush called the WorldCom scandal — the latest case of big business malfeasance, following Enron, Xerox and others — "outrageous." Today he's giving a speech on Wall Street in which he's expected to call for a crackdown.

His cries for corporate responsibility are ringing hollow for some, though, as a 1989 Bush business deal makes its way into the headlines. It involves a Texas company called Harken Energy, and a little subsidiary named Aloha Petroleum.

Aloha Petroleum, ostensibly a "kama'aina company," is turning up in the Washington Post, Houston Chronicle, and on CNN. Why? For many, it's Exhibit A in proving that Bush opposes fudging the numbers, except when it works in his favor.

Here's how it worked. Harken Energy had just bought out George W. Bush's failing oil company, likely more for his name and connections than its assets. Haken's own numbers weren't all that rosy, either, however. So a group of Haken insiders created a phony company — funded through a Haken loan — to turn around and "buy" Haken's little Aloha Petroleum at an exorbitantly high price. This sale, essentially to itself, let Haken claim a $10 million "phantom profit," balancing its books quite nicely.

Of course, the SEC was watching, and Haken could only play the shell game for so long. But weeks before Harken announced it had lost $23 million (and Haken's stock plummeted), Bush just happened to unload 212,000 shares of inflated Haken stock for over $848,000.

Not bad for a failed businessman.

The New York Times' Paul Krugman has been watching the story for a while now. (And the IHT syndicates the same pieces if you don't want to register at the NYT site.) Interesting stuff, eh?

Comments

Somewhat half-relevant: CNBC televised the WorldCom hearings this morning, which I caught briefly while I was hanging out at CoffeeCove in Waialae.

Every time I hear about Big Business getting caught up with the current Republican administration, I'm reminded of an old crack Tina Fey once made during the Enron hearings about how the Clinton-era Democrats always had scandals that "had words like intern and fondle and murder" - and then compare it to the scandals in the current administration, with all these campaign contributions, disappearing documents, unreported income, and "pleading the Fifth"...

If you heard his speech, that would be "malfeance," not "malfeasance." Neither the SEC nor English grammatical rules are in his portfolio, apparently.

From today's New York Post: Women of WorldCom and Andersen Next Up in Playboy.

"As soon as our 'Women of Enron' issue hit the newsstands, we started getting calls from female employees at both WorldCom and Arthur Andersen... They had read the Enron article in our current issue and immediately began expressing their desire to pose for Playboy as well."

Here's how it worked. Harken Energy had just bought out George W. Bush's failing oil company, likely more for his name and connections than its assets.

True enough

Haken's own numbers weren't all that rosy, either, however. So a group of Haken insiders created a phony company — funded through a Haken loan — to turn around and "buy" Haken's little Aloha Petroleum at an exorbitantly high price. This sale, essentially to itself, let Haken claim a $10 million "phantom profit," balancing its books quite nicely.

Note the term "Haken (Harken) insiders", no mention of Bush 43

Of course, the SEC was watching, and Haken could only play the shell game for so long. But weeks before Harken announced it had lost $23 million (and Haken's stock plummeted), Bush just happened to unload 212,000 shares of inflated Haken stock for over $848,000.

The future President didn't "happen to unload" those shares, nor were they "inflated". What he did do is notify the SEC of his intent to sell via the appropriate forms the mandatory time in advance of the sale. Mr. Bush needed to sell those stocks as there was a cash call on his bid to buy the Texas Rangers. He sold for $4/share and though they did drop to $2/share soon after, they were worth $8/share weeks later.

The deal was investigated by the SEC because there was some confusion as to whether or not the appropriate form was filed notifying the SEC after the sale was made (a mere formality as acknowledged by all). That investigation was handled by Bill McLucas, the SEC's head of enforcement and a liberal Democrat.

Not bad for a failed businessman.

Your mischaracterization is complete.

Note the term "Haken (Harken) insiders", no mention of Bush.

Bush was on Harken's audit committee, meaning (at least in title) that he was responsible for monitoring the company's accounting.

The future President didn't "happen to unload" those shares, nor were they "inflated". What he did do is notify the SEC of his intent to sell via the appropriate forms the mandatory time in advance of the sale.

He filed his notice 34 weeks late, but true, no action was taken. (Neither was the investigation formally closed.)

The stock was inflated, insofar as it was boosted by the Aloha Petroleum sale making a $12.6 million loss look like a $3.3 million loss.

And Texas rangers or not, you have to concede that unloading Harken stock (bought in part via a loan from Harken — an incestuous practice that only now Bush is taking a hardline against) two months before the company's announcement of a $23.2 million loss (and eight days before Harken announced a weak quarter) raises questions. It ain't a Martha Stewart day-before play, but it's still suspicious.

Your mischaracterization is complete.

I didn't know there was any question as to Bush's poor business acumen. The genesis of the present vortex was his merging of his failing oil company Arbusto (Spanish for "bush") into another in 1984, and then that combined company's buyout by Harken two years later.

Sure, his Texas Ranger deal (financed by his Harken sale) netted him $15 million, and there was that $80,000-a-year consulting contract...

But when, ultimately, you're capitalizing on your name and connections to make money, you're still not a good businessman. You're just a good politician.

For more "connect the dots" fun:

Harken Energy...Aloha Petroleum...James Ahloy...Alii Petroleum...Paradise Petroleum...Auto Fuel, Inc...Kukui, Inc...Kamehameha Schools/Bishop Estate...

To get the complete picture, visit 'THE CATBIRD SEAT'.

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