The New York Daily News reported on July 30 that Harken Energy Corporation set up a Cayman Islands subsidiary, the Harken Bahrain Energy Company, on September 1, 1989, in connection with the company's $25 million contract to drill for oil off the coast of Bahrain, an island nation in the Persian Gulf.
The Cayman Islands are a well-known offshore tax haven for both individuals and corporations. The Internal Revenue Service alleged, for example, that Halliburton Company used a Cayman Islands subsidiary, Halliburton Global Limited, to avoid payment of $38 million in taxes owed in 1990 and 1991. Vice President Dick Cheney became Halliburton’s CEO in 1995; during his tenure, the company fought the IRS’s findings in United States Tax Court. The Center for Public Integrity reported on Halliburton’s tax court case in our 2001 book, The Cheating of America.
The White House confirmed that Harken had set up the subsidiary, but argued that it provided no tax advantages. The Washington Post reported that administration aides said that Harken Bahrain Oil was formed primarily to limit the parent company’s legal liability that would result from an accident stemming from the company’s Bahrain operation. The Post added that, “Bush had opposed the deal and Harken never struck oil or made money, the White House said.”
The Center has obtained a computer record from the Cayman Islands showing the date of incorporation of Harken Bahrain Oil Company. Among the documents we obtained from the Securities and Exchange Commission under the Freedom of Information Act, we found the minutes of the September 13, 1989 board meeting, held two weeks after the subsidiary was set up. The minutes make no mention of the subsidiary or the Bahrain deal.
The minutes of the December 6, 1989 board meeting, however, show that after a presentation from Monte Swetnam, president of the Harken Exploration Company and the company’s point man on the Bahrain deal. “Mr. Swetnam reviewed and discussed the background of the Bahrain transaction with the Board including the discussions and negotiations conducted in Bahrain on his several trips there. Mr. Swetnam further discussed with the Board the potential benefits which the Company could realize from this opportunity. The Board discussed and reviewed the matters raised by Mr. Swetnam concerning this foreign opportunity and after which discussion, the Board unanimously approved HEX’s [Harken Exploration Company] proceeding towards finalization of a formal agreement with the State of Bahrain…”
George W. Bush, then a director of Harken, attended the meeting. There is no indication that he did not vote to approve the Bahrain deal.