July 3, 2002 — Because of a column by Paul Krugman that ran in The New York Times and a follow-up Washington Post story, there has been renewed interest in two reports the Center published concerning George W. Bush's days as a director of Harken Energy. We published the first on October 2, 2000 and the second on April 4, 2001.
As a public service, we are offering here in PDF format some of the documents we received from the Securities and Exchange Commission under the Freedom of Information Act.
The documents from the SEC inquiry show that Harken Energy engaged in questionable accounting practices as they attempted to stave off a financial crisis in 1989 and 1990. They also show that Bush was unaware of much of what was going on in the company. Ultimately, the SEC required the company to correct its financial reports, but concluded there was insufficient evidence to pursue an insider trading case against Bush.
The Center obtained these documents in 2000.
Written by Jerry Reidler of the SEC’s Division of Corporation Finance, the letter requests additional information on Harken’s Aloha sale, among other matters.
Written by SEC investigators Herbert F. Janick 3d, Lewis J. Mendelson, and James B. Adelman for the SEC’s files, the memorandum notes that Bush was late reporting his Harken stock sales. “Bush’s Forms 4 [disclosing the sale of stock by an insider] were filed from 15 to 34 weeks late”
Written by Hebert Janick of the SEC’s Division of Enforcement, the fax requests a chronology of events leading up to Harken’s public announcement of a $23.2 million loss on August 20, 1990.
Prepared by Harken Energy at the request of the SEC, the document describes “the events and circumstances leading up to the release of Harken’s earnings for the period April 1, 1990 through June 30, 1990 “
Written by Lisa Meulbroek for Janick, Mendelson, Adelman, and Paul Gerlach, the report analyzes the effect of Harken’s Aug. 20, 1990 disclosure of its $23.2 million loss and the subsequent effect on the company’s share price.
Written by Janick, Paul Gerlach, and Adelman and addressed to Bruce Hiler, it traces the circumstances of Bush’s sale of Harken stock. “The staff’s investigation indicates that there is insufficient evidence to establish three necessary aspects of a possible insider trading case.”
Prepared by the Division of Enforcement, the memorandum summarizes the findings of the SEC investigation.
Written by Janick for the file, this memorandum suggests that Bush was unaware of the magnitude of the impending loss at the time he sold his stock. “The vast majority of the [second quarter] loss was unknown to management, let alone Bush.” It also notes that the Audit Committee, of which Bush was a member, was not privy to much of the financial information about the company.