George W. Bush insider trading allegations
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Allegations of insider trading have been made against George W. Bush, later elected President of the United States, for his 1990 sale of stock in Harken Energy Corporation, of which he was a director. The sale raised the issue of whether it constituted illegal insider trading.
In House of Bush, House of Saud, Craig Unger asserts that at the time of Bush's sale, Harken Energy "was expected to run out of money in just three days" (p. 123). In a last-ditch attempt to save the company, Harken was advised by the endowment fund of Harvard University to spin-off two of its lower-performing divisions–"According to a Harken memo, if the plan did not go through, the company had 'no other source of immediate financing.'" Bush had already taken out a $500,000 loan and sought Harken's general counsel for advice. The reply was explicit: "The act of trading, particularly if close in time to the receipt of the inside information, is strong evidence that the insider's investment decision was based on the inside information... the insider should be advised not to sell." This memo was turned over by Bush's attorney the day after the U.S. Securities and Exchange Commission (SEC)ruled that it would not charge Bush with insider trading. Bush's motivation for selling was his desire to pay down the debt incurred funding the purchase of his interest in the baseball team.
On June 22, Bush sold his 236,140 shares of stock anyway for a net profit of $848,560. The very next quarter, Harken announced losses of $56 million, which continued to the end of the year when the stock "plummeted from $4 to $1.25."
The subsequent SEC investigation ended in 1992 with a memo stating "it appears that Bush did not engage in illegal insider trading," [1]but noted that the memo "must in no way be construed as indicating that the party has been exonerated or that no action may ultimately result" [2]. Critics have contended that the SEC's makeup may have influenced the conclusions of the investigation, although no evidence of impropriety has been found. The chairman at the time was Richard Breeden, a good friend of the Bush family who had been nominated to the SEC by George H. W. Bush and had been a lawyer in James Baker's firm, Baker Botts. The SEC's general counsel at the time was James Doty, who would represent George W. Bush 9 months afterwhen he sought to buy into the Texas Rangers (although Doty recused himself from the investigation). Bush's own lawyer was Robert Jordan, who had been "partners with both Doty and Breeden at Baker Botts and who later became George W. Bush's ambassador to Saudi Arabia."
As President, Bush has refused to authorize the SEC to release its full report on the Harken investigation. When the Rangers franchise was sold for $259 million in 1998, at a total profit of $170 million, Bush personally received $13.9 million for his $600,078 investment[3].
[edit] References
- ^ Kelly Wallace (July 3, 2002). White House defends Bush handling of stock sale. CNN.
- ^ Anthony York (July 12, 2002). Memos: Bush knew of Harken's problems. Salon.
- ^ Robert Bryce. Governor Deadbeat. The Auston Chronicle.
