Memo emerges to haunt president

by David Teather
guardian unlimited

George Bush quashed evidence in the insider dealing inquiry he faced a decade ago, it was claimed yesterday, further undermining White House efforts to restore some confidence in Wall Street.

A memo has emerged that was sent by lawyers in 1990 that warned executives of the energy firm Harken, for which Mr Bush was a director, against cashing in stock if they had any negative information about the company.

Harken was undertaking financial engineering to keep it afloat at the time.

A week later the president cashed in $848,000 of shares.

The sale triggered an inquiry by the Securities and Exchange Commission which ended in August 1991. No action was taken against the president who claimed to have been unaware of the problems facing the business.

The letter from Haynes and Boone was not given to the SEC until a day after the inquiry ended.

The president's aggressive stance against corporate and accounting chicanery has thrown the spotlight back on the share sale.

Democrats argue that his own business dealings and those of many in his government lay the administration open to charges of hypocrisy, if not financial wrongdoing.

The president was criticised last month when it emerged that Harken had used an off-balance sheet entity to rid its books of poorly performing assets and debts.

Although disclosed at the time, the ploy was compared to the practices at Enron, the disgraced energy firm.

Harken executives claimed client-attorney privilege for withholding the Haynes and Boone letter from the inquiry.

It was obtained by Michael Aquirre, a securities lawyer in San Diego, under the Freedom of Information Act. "This was a failure to deal with the most important piece of evidence," he told the Washington Post.

A White House spokesman said the timing of the letter's submission was immaterial as the SEC had the right to reopen the case at any time. "Whether it was a day after, or a week after, if prosecutors received information that was material or relevant, it's safe to say they would follow up on it."

The vice-president, Dick Cheney, has also come under scrutiny for his time at the oil services firm Halliburton. The Dallas company is being investigated by the SEC for an accounting change that flattered its profits.

Less than a week before congressional elections, the latest revelations come at an embarrassing time for the president. The SEC chairman, an appointee of the president, is also under pressure to quit over alleged mismanagement.

[Editor's note: SEC chairman Harvey Pitt resigned on November 5, 2002]

See also The Dubya Report's corporate corruption page.