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USA: Memo Cited Bush's Late SEC Filings

by Mike AllenWashington Post
July 3rd, 2002

An internal Securities and Exchange Commission memo from 1991 says President Bush repeatedly failed to file timely reports of his business interests and transactions before his election as Texas governor.

The memo said that when Bush was a director of a Texas-based oil and gas exploration firm called Harken Energy Corp., he had filed reports up to eight months late for four stock transactions totaling $1 million.

Bush brushed off a question about the transactions yesterday. "Everything I do is fully disclosed, it's been fully vetted. Any other question?" he said as he toured a church in Milwaukee.

The memo, provided to The Washington Post after it was the subject of a column yesterday in the New York Times, offers new details about Bush's rocky career as a Texas businessman before he turned to politics and was elected governor in 1994.

Bush's political opponents have often tried to make an issue of an insider-trading inquiry by the SEC into a large stock sale he made shortly before Harken reported massive debt and its stock price plunged. The SEC ended the inquiry and Bush was not penalized or charged with a crime.

Bush's brushes with the SEC have new resonance now that he is preparing to respond to the wave of accounting scandals by proposing tough restrictions on corporate officials during an address on Wall Street next week. His economic team has recommended criminal penalties for officers and directors who file intentionally misleading SEC reports.

Bush last week began chastising chief executive officers for breaching the trust of their investors and employees. "We will fully investigate and hold people accountable for misleading not only shareholders but employees, as well," Bush said Wednesday in Canada.

The SEC memo was supplied by the Center for Public Integrity, a nonpartisan group specializing in government accountability. The group published information about Bush's transactions on its Web site during Bush's presidential campaign but attracted little attention.

Charles Lewis, founder of the Center for Public Integrity, said the memo shows the nation has a president "whose company has been under investigation by the SEC, who has been involved one way or another in controversial transactions."

The memo said Bush sold 212,140 shares of Harken stock on June 22, 1990, for $848,560, before Harken's announcement on Aug. 20, 1990, that it had lost $23.2 million in the quarter ending June 30. The SEC said the announcement caused Harken's stock to drop by more than 20 percent, and called Bush's stock sale a "matter under inquiry."

At the time, Bush was a member of Harken's audit committee. The stock sale was reported by Bush on March 4, 1991, about 34 weeks late, the memo said. Dan Bartlett, Bush's communications director, said that was the result of a miscommunication between Bush's lawyer and the Harken counsel's office.

"These types of late filings are not out of the ordinary," Bartlett said. "It would be like doing a 60 [mph] in a 55."

The White House provided the first four pages of an SEC memo from 1992 which said, "Based upon our investigation, it appears that Bush did not engage in illegal insider trading because it does not appear that he possessed material nonpublic information." Bartlett said the information about the losses at issue was available only to Harken's executive committee, of which Bush was not a member.

In addition to the tardy reporting of the stock sales, the memo raises questions about disclosures concerning three other businesses where Bush had a seat on the board:

  • Bush was a director of a Harken subsidiary, Tejas Power Corp., for which no directors had filed required forms, the SEC said.

  • Bush was three days late disclosing in 1984 that he was a director and stockholder of Lucky Chance Mining Co.

  • SEC records showed Bush was a director of three motion picture-financing partnerships for which the required ownership forms had not been filed. The filings related to Silver Screen Management Inc., founded by Roland Betts, who was Bush's fraternity brother at Yale University and remains a close friend. The memo said it was "uncertain" whether Bush was required to file the forms.

The memo was addressed to "The Files" from three SEC lawyers and was dated April 9, 1991. The memo said Bush became a Harken director in November 1986, and said he filed late reports for four transactions totaling $1,028,935.

The memo gave these details about the other three tardy disclosures by Bush: On April 17, 1987, 17 weeks late, he reported the acquisition of 212,152 shares in an exchange offer in November 1986. On April 22, 1987, 15 weeks late, Bush reported the exercise of options in December 1986 for $96,000. And on Oct. 23, 1989, 15 weeks late, Bush reported the exercise of options in June 1989 for $84,375.

Staff writer Kathleen Day contributed to this report.





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