Old Business in New Light
Mr. Bush spoke not long after Wall Street wrapped up another down day and as top executives from WorldCom appeared before Congress and invoked their Fifth Amendment right against self-incrimination — the president tried to brush aside the questions about his role at Harken as baseless and old.

Although Mr. Bush's tenure at Harken did receive some media attention in the 2000 campaign, it is not that surprising that in the current climate of accounting misdeeds, insider-trading accusations and bottom-line restatements that Mr. Bush's role as a director of the company, and his sale of about 212,000 shares of the company's stock, would draw renewed attention. Vice President Dick Cheney's role as a top executive of Halliburton, which is being investigated by the Securities and Exchange Commission, is also attracting renewed attention.

In an attempt to defuse the issue, Mr. Bush repeatedly told reporters today that his Harken stock sale in June 1990, not long before the company posted a big loss, was an old matter that had been carefully reviewed by the S.E.C., which took no action against him.

He also faced questions about whether Harken — of which he was a director and a member of the audit committee — had deliberately booked an improper profit on the sale of a subsidiary in 1989 to obscure the size of its operating losses.

The S.E.C. later forced Harken to restate earnings for 1989 substantially downward after disputing its accounting for the sale of the subsidiary.

Mr. Bush's involvement in Harken began in 1986, when he sold it a struggling energy company of his own, Spectrum 7 Energy. Mr. Bush received more than 200,000 Harken shares and a seat on its board.

The current focus on Mr. Bush's involvement with Harken centers on two issues that have some parallels to those raised by the more recent spate of revelations of corporate misconduct.

One is whether he profited from inside information in selling Harken stock in 1990, two months before it announced a loss that was much bigger than expected.

The other is Mr. Bush's role, as a director, in Harken's decision to book immediately a $7.9 million gain from the sale of its Aloha Petroleum subsidiary, even though the sale, to a group of Harken insiders, was largely paid for with a loan from Harken.

Mr. Bush never worked full time for Harken, though in addition to serving as a director he had a consulting contract that paid him $42,000 to $120,000 a year for five years. Not long after the merger with Harken, he moved to Washington to help his father's presidential campaign.

By 1989, Mr. Bush's business efforts were focused on acquiring and running the Texas Rangers baseball team. He began selling some of his other investments, and in June 1990, he received a call from a broker asking if he was interested in selling 212,140 Harken shares.

He did so on June 22, 1990, receiving $4 a share, or a total of $848,560.

At the time, Harken was struggling. It had had big trading losses, it was having trouble with its banks, its long-term debt had more than doubled, and it was trying to sell some of its assets.

In August 1990, Harken reported that it lost $23.2 million in the second quarter, a far worse performance than investors had expected. The stock plunged from $3 a share to $2.37 in a day before rebounding.

The next winter Mr. Bush filed — 34 weeks late — a required form with the S.E.C. about his sale of Harken stock. The commission then began investigating whether Mr. Bush had sold on the basis of inside information. It ultimately concluded that while he knew about many financial problems at Harken, he did not know at the time of the scale of the loss that would be announced two months after his stock sale.

By booking a $7.9 million profit from that sale, Harken was able to report a relatively modest loss of $3.3 million for 1989. But after the S.E.C. finished examining the accounting in early 1991, Harken was forced to restate its earnings, reporting that it actually lost $12.6 million for 1989.
http://www.nytimes.com/2002/07/09/business/09HARK.html