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Bush oil firm did Enron-style deal: report
( 2002-10-10 10:07 ) (7 )

President George W. Bush's former oil firm formed a partnership with Harvard University that concealed the company's financial woes and may have misled investors, a student and alumni group said in a report on Wednesday.

The partnership between Harken Energy Corp. and Harvard, created with Bush's approval, bore strong resemblance to the partnerships that helped disguise Enron's problems, the report's authors said.

The White House disputed that comparison.

HarvardWatch, an independent group of students and alumni that monitors the school's investments, said the partnership raised troubling questions about the university's involvement in Harken when Bush was a board member.

The deal, which HarvardWatch said improved Harken's financial position, also provided further evidence of improper corporate practices at Harken while Bush was a director, the group said.

A spokesman at the White House brushed aside the group's suggestions of malfeasance and its comparing of aspects of the Harken-Harvard partnership to Enron's so-called off balance sheet transactions.

"Harvard proposed and set the terms of the partnership," White House spokesman Scott McClellan said. "Independent reports note that it was fully disclosed and complied with accounting rules, so there really is no comparison."

"In addition, Harvard's relationship with Harken began before the president joined the board," McClellan said.

DEBTS REMOVED FROM BOOKS

Harvard Management Co., which oversees the school's $18 billion endowment, was the biggest shareholder in Harken when the two sides agreed to create the Harken Anadarko Partnership in late 1990, when Bush's father occupied the White House and was preparing to drive Iraqi President Saddam Hussein from Kuwait.

Over the next two years, the partnership allowed Harvard to bail out Harken's business by removing from its books a large percentage of the company's loss-generating assets and debts in the Anadarko region of Texas and Oklahoma.

Specifically, Harken turned over drilling operations worth $26.1 million and $20 million of bank debts and liabilities to the partnership, the report said.

The partnership was not required to report its finances, meaning details of Harken's oil and gas operations in the Anadarko region were hidden from public view, the report said.

The maneuver improved Harken's official financial position, leading to a gradual recovery in the oil firm's share price. Harvard profited from the upswing to unload some 1.6 million shares of the company.

Bush + who was both a board member at Harken Energy and worked as a consultant for the firm at the time, according to HarvardWatch + gave the deal his personal approval, according to minutes of Harken's Aug. 29, 1990 special board meeting.

Officials at Harken were not immediately available for comment. Harvard said its investments in Harken "were not inappropriate and were disclosed openly and properly."

Harvard said it sold its shares in Harken at a profit, consistent with its mission.

Bush, who received an MBA from Harvard, has faced questions surrounding his own sale of more than 200,000 shares Harken stock in June 1990, a few months before the partnership was formed.

Critics have said Bush, who served on Harken's board from 1986 until 1993, had insider knowledge of the company's woes when he sold the shares. Bush has denied any wrongdoing, and the SEC concluded that Bush did not engage in illegal insider trading.

HarvardWatch said key parts of Wednesday's report, including the minutes, were obtained by the Center for Public Integrity under the Freedom of Information Act. Other elements came from filings with the Securities and Exchange Commission.

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