Records reveal Bush sold Harken Energy's stock during cash 'crisis'

Sep 07, 2000 02:00 AM

Before selling his stock in a Texas oil company, a transaction that prompted an insider trading inquiry, George W. Bush was informed as a company director that the firm was suffering a cash 'crisis,' newly released records show. The internal corporate documents, released by the Securities and Exchange Commission, provide the most detailed view yet of Bush's knowledge of Harken Energy's financial problems when he sold his shares for $ 848,560 in June 1990.
Bush's lawyer said the information, while new to the presidential campaign, was provided to the SEC as part of its investigation a decade ago and contributed to the agency's finding that Bush's trading was appropriate.
"The SEC did their job by the book, and this is old news," attorney Robert Jordan said. The Bush lawyer added that "the company's financial situation was well-disclosed to the public" through filings at the time with the SEC. "By the time Bush sold his stock, the cash crisis had been largely resolved," said Jordan. "By May 21, 1990, the major shareholders had agreed to a credit agreement which put $ 26 mm into the company immediately."

Insider trading allegations have been an issue in both Bush's run for governor in Texas and his presidential bid. The SEC in the last month released several hundred pages of corporate documents from its investigation under the Freedom of Information Act.
Bush has said he had no knowledge the Texas-based company was going to report a $ 23 mm loss two months after he sold his stock. "I absolutely had no idea and would not have sold it had I known," he said during his 1994 campaign for governor.
SEC investigators concurred there was no evidence Bush knew that the loss would be of that magnitude. At most, the investigators found, Bush was aware of a projected $ 4 mm loss, which was "consistent with Harken's publicly reported trend" of losses, states an SEC investigative document obtained by AP.
The same document projecting the $ 4 mm loss, Jordan noted, projected a profit for the fourth quarter. Bush sold his stock at $ 4 a share and by the end of that year, its value had sunk to slightly over $ 1. It returned to the $ 4 level and above in 1991. The Harken documents released under FOIA detail Bush's knowledge of the company's problems.

As a Harken director, he received memos in spring 1990 that referred in stark terms to the company's cash-strapped condition as banks demanded it pay down its debts. One document said the company was in the midst of a "liquidity crisis" and another told Bush the company was "in a state of non-compliance" with its lenders.
Bush also was informed that a company plan to make a public stock offering to generate cash was being abandoned because one of its lenders objected. Bush served on three committees inside the company and also was paid as a consultant. Even after his stock sale, Bush remained on the company's board of directors until 1993.

Source: Dow Jones via Energy24
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