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Copyright © 2002 The International Herald Tribune | www.iht.com
A businessman named George W. Bush Paul Krugman The New York Times Lucrative shenanigans This pose is surreal, given the way top officials like Secretary of the Army Thomas White, Vice President Dick Cheney and Bush himself acquired their wealth. Bush profited personally from aggressive accounting identical to the recent scams that have shocked America. In 1986, one would have had to consider him a failed businessman. He had run through millions of dollars of other people's money, with nothing to show for it but a company losing money and heavily burdened with debt. But he was rescued from failure when Harken Energy bought his company at an astonishingly high price. There is no question but that Harken was basically paying for Bush's connections. Despite these connections, Harken did badly. For a time it concealed its failure - sustaining its stock price, as it turned out, just long enough for Bush to sell most of his stake at a large profit - with an accounting trick identical to one of the main ploys used by Enron a decade later. (Yes, Arthur Andersen was the accountant.) The ploy works as follows. Corporate insiders create a front organization that seems independent but is under their control. This front buys some of the firm's assets at unrealistically high prices, creating a phantom profit that inflates the stock price, allowing the executives to cash in their stock. At Harken, a group of insiders, using money borrowed from Harken itself, paid an exorbitant price for a Harken subsidiary, Aloha Petroleum. That created a $10 million phantom profit, which hid three-quarters of the company's losses in 1989. White House aides have said $10 million isn't much compared with recent scandals. Indeed, it is a small fraction of the apparent profits that Halliburton created through a sudden change in accounting procedures during Dick Cheney's tenure as chief executive. But for Harken's stock price, and hence for Bush's personal wealth, this accounting trickery made all the difference. Bush was on the company's audit committee, as well as on a special restructuring committee. In 1994, another member of both committees, E. Stuart Watson, assured reporters that he and Bush were constantly made aware of the company's finances. In any case, he certainly found out what his company had been up to when the Securities and Exchange Commission ordered it to restate its earnings. So he can't really be shocked over recent corporate scams. His own company pulled the same tricks, to his considerable benefit. Of course, what really made Bush a rich man was the investment of his proceeds from Harken in the Texas Rangers - a step that is another, equally strange story. The New York Times Copyright © 2002 The International Herald Tribune |