Bush's Failed To File SEC Forms In Three Other Harken Transactions

FEATURE STORY | Special Report

Bush and Harken
by Jason Leopold

Last week, while Bush spoke to Wall Street about corporate malfeasance, he was beset by questions about the timing of his sale of stock twelve years ago while he served as a director of Harken Energy. Bush sold the Harken stock about two months before the company reported huge losses and shortly before Iraq invaded Kuwait, leaving many asking whether the President had benefited from inside information. In addition, Bush was tardy in filing the appropriate sale-related forms with the SEC. Bush has said he filed the proper documents with the SEC on time--even though it arrived thirty-four weeks late--and suggested the agency must have lost the file. Last week, White House press secretary Ari Fleischer said there had been a "mix-up" by the Bush lawyers who handled the paperwork.

While SEC reporting requirements may seem like a minor issue, it's crucial information for the average investor because it allows them to determine whether insiders have received undisclosed information about the company's financial condition. The Securities and Exchange Act of 1934 requires company insiders to disclose publicly, in a report called a Form 4, all stock purchases and sales by the tenth day of the month following the transaction.

This week, as President Bush's own business acumen is being called into question, additional SEC documents show that Bush violated federal securities laws on three other occasions during his tenure at Harken by missing the deadline for filing documents about his stock transactions with the SEC.

Army Sec Thomas White To Testify About Enron Debacle

White out?
As Army secretary Tom White prepares to testify before Congress, Democrats predict the former Enron executive will be the first Bush administration casualty in the growing uproar over corporate sleaze.

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By Jason Leopold



July 15, 2002 | For seven months now, Democrats on Capitol Hill have been trying to find out what, if anything, Secretary of the Army Thomas White knew about Enron's suspect accounting practices while he was vice chairman of that company's retail unit. Specifically, they want to know if he was aware that Enron used manipulative trading tactics to take advantage of California's electricity market.

We may find out Thursday, when White -- the highest-ranked administration official to do so -- will testify about his role with Enron.

Or will he?

In a Newsweek report released Sunday, Republican sources are cited as saying that they wish White would resign rather than testify and also that White will invoke the Fifth Amendment and not answer questions if he does appear before the Senate Commerce Committee. That prompted Rep. Billy Tauzin, R-La., who heads the House Energy and Commerce Committee, to suggest that White might deserve a pink slip. "If you're going to do that, maybe you ought to find another job," Tauzin said on ABC's "This Week."

But on Monday, Pentagon spokesman Maj. Mike Halbig told Salon that White would testify and would not take the Fifth. Later, in a statement to the Associated Press, White said that not only would he testify, but also that he had no intention of resigning his post.

If he does testify, White will face some senators who appear to have made up their mind about him. The Army secretary has become a regular whipping boy for Democrats since last fall, when his job at Enron was first spotlighted. There was White's failure to sell off his $12 million in Enron stock until October, five months after he took his job with the Bush administration. There was his statement to a congressional committee that he had had 29 contacts with his former colleagues at Enron, when that number proved to be 84. And, most controversial, there was his role as vice chairman of Enron Energy Services, the scandal-plagued unit responsible for providing electricity services to large and small businesses.

White rose to head the division during 11 years at Enron. But Energy Services has been accused of using bookkeeping sleight-of-hand to turn multimillion-dollar losses into multimillion-dollar profits. For example, Enron whistleblower Sherron Watkins told Congress that White's retail division shifted losses totaling a half-billion dollars to his wholesale division, allowing retail to show a $105 million profit. But with his bonuses tied to performance, White raked in more than $30 million last year.

White's performance before the committee will be made even more difficult by its timing. According to a Senate source, a morning hearing will precede White's testimony and focus on corporate responsibility. It will include testimony from former Sen. Howard Metzenbaum (now with Consumer Federation of America), and Joan Claybrook, director of corporate watchdog Public Citizen, a dogged White critic.

Stacked deck or not, some members of Congress already have firm beliefs about White. According to sources close to Sen. Barbara Boxer, D-Calif., and Rep. Henry Waxman, D-Calif., both have concluded from interviews with former Enron employees that White is unfit to be secretary of the Army.

"Either Secretary White was an out-to-lunch executive while he was vice chairman of Enron or he knew about the company's high jinks," said a deputy counsel to one key Democratic lawmaker. "Either way, based on those two scenarios, he's screwed. He's certainly not fit to be secretary of the Army."

White has maintained that while he was at Enron he was unaware of any of the company's shady business practices.

But aides to Waxman and Boxer told Salon that they have spent the past month phoning more than two dozen former executives and salespeople of Enron Energy Services.

The questions posed to the former Enron employees: Was Thomas White familiar with Enron's accounting practices? Did he take part in meetings where the company's accounting practices were discussed? Did Thomas White ever tell you to use mark-to-market accounting when showing profits? What were White's and EES's roles in the gaming of the California electricity market?

Some employees told investigators that White -- whom everyone referred to as "the general" -- was unaware of Enron's off-the-books partnerships and manipulative trading tactics. And other former colleagues contacted by Salon agreed.

California Screwed: Federal Energy Commission Says No To $8.9B In Power Refunds

California payback may fall billions short
Gov. Gray Davis wants $8.9 billion refunded from energy companies. But Bush regulators tell Salon they'll recommend just a fraction of that -- and Democrats are ready to cry foul.

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By Jason Leopold



July 11, 2002 | LOS ANGELES -- Now that President Bush has promised to hold corporations and CEOs accountable for corporate malfeasance, how will his appointees on the Federal Energy Regulatory Commission handle the thorny issue of $8.9 billion in refunds California says it is owed by energy companies that manipulated power prices in the state in 2000 and 2001?

According to one FERC commissioner, "the energy companies are going to get a slap on the wrist."

"I am not looking forward to breaking the news to Governor Gray Davis," one of the FERC's four commissioners told Salon. "We just can't justify granting California $9 billion in refunds. There's just not enough proof to support the claim."

Despite mounting evidence that shows how companies such as Enron, Reliant Energy, Dynegy Inc. and Williams Companies exploited loopholes in the state's flawed power market to inflate revenues, FERC is gearing up to release an eagerly anticipated report that says California is owed no more than $1.2 billion, according to two FERC commissioners and an administrative law judge working on the issue.

When called for comment, Sen. Dianne Feinstein, D-Calif., said the FERC has turned a blind eye on California for too long. "How much more evidence do they need?" Feinstein said. "California was ripped off."

Feinstein has sponsored legislation that would increase regulation of the multibillion-dollar market for such energy derivatives and give the Commodity Futures Trading Commission, which regulates the derivatives market, authority to ensure that energy markets were free from fraud and manipulation. The CFTC, however, is split on the need for such regulation. A similar measure was narrowly defeated as an amendment to the Senate energy bill. But many lawmakers said the collapse of Enron and increasing evidence of corporate wrongdoing have added urgency for congressional action to restore business and consumer confidence.

The FERC probe involved energy companies that sold power in California and 10 other Western states during 2000 and 2001. The companies filed sworn affidavits with the FERC, most of which said the corporations did not engage in manipulative trading practices. One FERC commissioner said most of the trading practices appear to be manipulative, but are entirely legal. But Congress is looking to give the FERC broad powers to impose civil and criminal penalties to deal with the issue of market manipulation in California.

The FERC commissioners, however, said their decision is also based on the possibility that forcing energy companies to refund billions of dollars could put some of the companies permanently out of business and wreak havoc on the already volatile energy market.

"Simply put, some of these companies, like Reliant, Williams and Dynegy, are facing a financial crisis," one FERC commissioner said. "They have to borrow money just to stay in business. How are they going to refund money that doesn't exist?"

The stocks and bonds of Williams, Reliant, Dynegy and at least a dozen other energy companies have been hammered since the collapse of Enron in December and continue to fall while new allegations surface almost daily about the companies' financial machinations.

Steve Fleishman, an energy analyst with Merill Lynch in New York, agrees that the energy companies' stocks are under pressure, and says that if a large refund were ordered by the FERC it could cause some of those corporations to collapse. "Clearly the energy merchants and independent power-producer companies are under severe financial stress and a large refund will certainly not help," Fleishman said. "On the other hand, we've also never seen the basis for a refund that's been alleged."

Recently, FERC released documents that showed how some of those companies engaged in manipulative trading practices in California that resulted in skyrocketing power prices and led the state's largest utility, Pacific Gas & Electric Co., to file for bankruptcy protection because it could no longer afford to buy power for its customers.

But now, according to an FERC commissioner, executives at Dynegy and Williams have taken the unprecedented step of handing over financial documents to the commission just to prove that their companies face a cash crunch. "I'm not an accountant but it doesn't take a genius to figure out that these guys don't have any money in their checking account," the FERC commissioner said.

And the FERC administrative law judge said the agency's decision was also based on a report released last month by the General Accounting Office that reports that California's electricity crisis was caused by demand outstripping supply, along with a downturn in the economy.

Representatives for the Williams, Reliant, Dynegy and Mirant companies would not comment for this story, citing the ongoing FERC investigation. But Democrats said the statements by the FERC commissioner prove their point that President Bush's close ties with big business -- specifically giants in the energy industry -- have had an impact on his administration's ability to make sound policy decisions.

Steven Maviglio, press secretary for Davis, said it would be "inconceivable" for the FERC to order a refund of anything less than the full $8.9 billion. "After the recent reports of market manipulation and collusion among generators, it is inconceivable to Governor Davis that FERC would give California anything short of the full $8.9 billion in refunds," Maviglio told Salon. "What it determines will be whether the agency does indeed have teeth or if it will revert to being a lapdog for the power industry."

Since Davis was elected governor in 1998, he has spent much of his time in office deflecting criticism of his handling of the state's energy crisis. His critics say he acted too late and spent too much time vilifying out-of-state energy companies and pointing fingers rather than taking proactive steps to deal with the issue.

The state spent $43 billion on electricity contracts at the height of the power crisis, but revelations about market manipulation by Enron and others led Davis to file a complaint at FERC to abrogate the deals.

California now faces a massive budget deficit because of money the state spent buying electricity on behalf of the customers of the state's three largest utilities. And for Davis, in the middle of a reelection campaign, winning substantial refunds from FERC remains, for many reasons, an urgent priority.


salon.com

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About the writer
Jason Leopold is finishing a book on the California energy crisis.