As a businessman in 1990, George W. Bush was deluged with confidential information about the financial plight of a Texas oil company before he sold the majority of his holdings and triggered a federal investigation, according to Securities and Exchange Commission records.
President Bush has refused to authorize the SEC to open the full file on his investigation, but selected documents have been released under the Freedom of Information Act. The president's business dealings have come under more scrutiny as he tries to restore confidence in markets hurt by business scandals. Nearly half of 1,004 respondents in a Newsweek poll released yesterday said they thought Bush took advantage of the system for personal gain with the 1990 stock sale.
The documents show that four months before Bush sold most of his stake in Harken Energy Corp., he and other board members received a letter from management calling the previous year's profits disappointing and warning that the company would "continue to be severely limited in our activities due to cash constraints." The letter said that "as indicated at the December board meeting," the failure of a deal involving a subsidiary had "left the company with little cash flow flexibility."
A management letter to the board in July 1990, a month after Bush's $848,560 stock sale, portrayed the company as enduring months of turmoil. "Due to the nature of our tasks through this past quarter the stress level is beginning to show," the letter said.
The documents, released Friday by the nonpartisan Center for Public Integrity, show that analysts following Harken were shocked by the losses reported for the quarter that ended eight days after Bush's sale. Harken President Mikel D. Faulkner told board members that he had received many calls from brokers, shareholders and creditors and had provided "as positive a response as is possible."
The White House has said Bush knew the company would record losses but did not know how large they would be. Harken's stock price initially plunged, then recovered and rose.
The SEC's investigation of Bush was closed after officials determined he did not have enough insider information before his stock sale to warrant a case.
SEC Chairman Harvey L. Pitt said last week that he would release the records if Bush asked him to. In response to a question about whether he would ask the SEC to release the file, Bush replied Wednesday that "the key document said there is no case."
The 150 pages of minutes and other board documents released Friday tie Bush to the company's sale of Aloha Petroleum Ltd., which was recorded in such a way that Harken masked massive losses, leading critics to compare the accounting to methods used by Enron Corp. The SEC forced Harken to restate the transaction.
The documents show Bush was proposed as chairman of a special committee of the board with duties that included reviewing Aloha-related debt. An analysis by the Center for Public Integrity said the documents "do not unambiguously resolve the question of what Bush knew about Harken's reporting of the sale."
Reflecting growing White House concern about the impact on the fall elections of corporate wrongdoing and falling stock markets, Bush used his radio address yesterday to promise that his administration "will do everything in its power to ensure business integrity and long-term growth."