Slate continues its short features on the 2004 presidential candidates. Previous series covered the candidates' biographies, buzzwords, agendas, worldviews, and claims to fame. This series assesses the story that supposedly shows each candidate at his worst. Here's the one told by critics of George W. Bush—and what they leave out.
Charge: "In 1989 Mr. Bush was on the board of directors and audit committee of Harken [Energy]. He acquired that position, along with a lot of company stock, when Harken paid $2 million for Spectrum 7, a tiny, money-losing energy company with large debts of which Mr. Bush was C.E.O. Explaining what it was buying, Harken's founder said, 'His name was George Bush.' Unfortunately, Harken was also losing money hand over fist. But in 1989 the company managed to hide most of those losses with the profits it reported from selling a subsidiary, Aloha Petroleum, at a high price. Who bought Aloha? A group of Harken insiders, who got most of the money for the purchase by borrowing from Harken itself. Eventually the Securities and Exchange Commission ruled that this was a phony transaction, and forced the company to restate its 1989 earnings. But long before that ruling—though only a few weeks before bad news that could not be concealed caused Harken's shares to tumble—Mr. Bush sold off two-thirds of his stake, for $848,000. … Oddly, though the law requires prompt disclosure of insider sales, he neglected to inform the S.E.C. about this transaction until 34 weeks had passed. An internal S.E.C. memorandum concluded that he had broken the law, but no charges were filed. This, everyone insists, had nothing to do with the fact that his father was president" (Paul Krugman, New York Times, July 2, 2002).
Defense: Bush's conduct looks better or worse depending on which points in the timeline you emphasize. Krugman focuses on the SEC's order to restate Harken's earnings. He discounts the SEC's subsequent decision not to prosecute Bush. Bush sees it the other way around: Once the earnings were restated, the SEC had no case. On July 8, 2002, Bush said: "This was an honest disagreement about accounting procedures. And the SEC took a good look at it and decided that the procedures used by the auditors and the accounting firm … were not the right procedure in this particular case, or the right ruling, and, therefore, asked Harken to restate earnings, which it did." Krugman thinks the SEC's interim memo makes its decision not to prosecute fishy. Bush, on the other hand, thinks the decision not to prosecute makes the memo moot.
Krugman's statement that Bush "neglected to inform the S.E.C. … until 34 weeks had passed" refers to Bush's failure to file a document called Form 4. Bush focuses on a different document: "When I made the decision to sell [the Harken stock], I filed what's called a Form 144 … the intention to sell. That was the important document. … As to why the Form 4 was late, I still haven't figured it out completely. But nevertheless, the SEC fully looked into the matter … [and] said there is no case."
The question of financial gain also turns on which time period you examine. Krugman is right that Harken's stock tumbled after Bush sold his shares. But Bush pointed out, "I sold the stock at [$4 per share], and 14 months later … the person who bought my stock could have sold it for 8."
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