Wall Street Journal                    September 27, 1999 by Micah Morison (c) 1999


In 1989, Harken's stock was trading at between $4 and $5 a share. That's when Mr. Bush put up his shares as collateral for the Rangers loan. In January 1990, with shares trading around $4.50, Harken announced that it had signed a potentially lucrative oil-exploration deal with the government of Bahrain. On June 20, 1990, Mr. Bush sold the bulk of his Harken stock for $848,000, at $4 a share, and paid off the Rangers loan. Eight days later, Harken finished the second quarter with losses of $23 million, and the stock went into a nosedive, losing nearly 75% of its value, finishing the year at a little over $1 a share.

Critics of Mr. Bush cried foul, charging that as a Harken director he was in a position to trade illegally on insider information before the stock's decline. Mr. Bush ultimately was cleared by the Securities and Exchange Commission. But suspicions of Mr. Bush's lucky timing had heightened at first, when the SEC, discovering that he had not filed the proper disclosure form, opened an investigation into the president's son. Mr. Bush claimed that he did file the correct form, but that it had been lost. He also said that he had cleared the stock sale with Harken's general counsel.

"At the time of the sale," explained Ms. Hughes, the Bush spokeswoman, "he did not know about the losses that would later be posted." Mr. Bush was not selling ahead of bad news, Ms. Hughes said, but into the good news that the Bass brothers, Texas billionaires with deep pockets and overseas drilling experience, were inking a joint-exploration pact with Harken in Bahrain. In October 1993, the SEC sent Mr. Bush's attorney a letter stating that "the investigation has been terminated into the conduct of Mr. Bush, and that, at this time, no enforcement action is contemplated with respect to him."

Harken's Bahrain deal was also a piece of exceptional luck. It raised oil-industry eyebrows when the government of that Persian Gulf state announced it had chosen tiny Harken to explore an offshore site for gas and oil. Harken appeared to have little to offer the Bahrainis. It had no overseas experience and no experience with offshore drilling. Bahrain officials have since said they had no idea President Bush's son was associated with Harken, a claim oil-industry sources ridicule. Former Harken exploration chief Monte Swetnam told the New York Times earlier this year that there "was never a question" that Bahraini officials knew about Mr. Bush and that they "were clearly aware that he was the President's son."

The Bahrain deal was brokered in part by Arkansas investment banker David Edwards, one of Bill Clinton's closest friends. Formerly an employee of Arkansas investment powerhouse Stephens Inc., Mr. Edwards now runs his own firm in Little Rock and has wide connections in the Middle East. At the start of President Clinton's first term, he brokered a $23 million Saudi contribution for a Middle East studies center at the University of Arkansas at Fayetteville.

While Mr. Edwards was at Stephens, one of his clients was Saudi financier Abdullah Taha Bakhsh. In 1987, soon after Mr. Bush joined Harken, Mr. Edwards brought Mr. Bakhsh together with the Texas firm. Harken was struggling with debt and in need of cash. Mr. Bakhsh bought a 17% stake in the company. His American representative, Chicago businessman Talat Othman, was given a seat on Harken's board. By August 1990, Mr. Othman was attending White House meetings with President Bush to discuss Middle East policy. Mr. Bakhsh and Mr. Othman did not respond to an interview request. But in 1995 an attorney representing both men told the Journal that Mr. Othman's visits to the White House were solely based on his "longstanding involvement in Arab-American affairs."

Mr. Bakhsh also was a co-investor in Saudi Arabia with Ghaith Pharaon, a front man for the corrupt Bank of Credit and Commerce International, which was shut down in 1991 with some $10 billion in losses following a global looting spree. Mr. Bakhsh's banker in Saudi Arabia was Khalid bin Mahfouz, head of the country's largest bank, National Commercial, and one of the key players in the BCCI scandal. Stephens Inc. also crossed paths with BCCI, handling an early, unsuccessful effort by figures later identified as BCCI front men to acquire Financial General Bankshares, a Washington, D.C., bank holding company. Stephens withdrew from the deal, but within a few years the same group of front men won Federal Reserve approval to buy Financial General.

In 1992, Mr. bin Mahfouz was charged by Manhattan District Attorney Robert Morgenthau and the Federal Reserve Board in separate actions with scheming to conceal BCCI's role in U.S. banking. He reached a settlement in which he paid $225 million in fines and restitution, with the understanding that he would not again seek a major role in U.S. banking. Mr. Pharaon has been permanently banned from the U.S. banking industry and fined $37 million for his role in the BCCI scandal. Mr. Bakhsh was never charged with any wrongdoing and his attorney told the Journal that the Saudi financier "was not involved in any way in any of the matters or transactions that constituted the BCCI scandal."