January 30, 1990, Platt's Oilgram News,
a respected trade journal of the petroleum industry,
reported that a subsidiary of a small, Dallas-based
independent oil company, Harken Energy Corporation,
had just signed an agreement with the government
of Bahrain. "Harken Bahrain Oil Company
signed a production sharing contract today,"
the article announced, "that gave the company
exclusive rights to carry out exploration, development,
production, transportation, and marketing of
petroleum throughout most of Bahrain's Gulf
That the government of Bahrain, and its state-owned
petroleum franchise, Bahrain National Oil Company,
or Banoco, should choose tiny Harken Energy
to explore for oil off its coast came as something
of a surprise to industry experts. Amoco, the
global oil giant, had also wanted the contract,
and Chevron Corporation, another multinational,
had advised the Bahraini government on choosing
an American company for the venture.
Harken Energy had fewer than a thousand employees,
and no experience whatsoever in international
oil production. The company had confined its
activities entirely to the domestic production
of oil, and to expanding itself through the
acquisition of troubled U.S. oil producers at
bargain-basement prices. And it was so cash
poor that it didn't even have enough capital
to drill for oil without bringing in well-heeled
partners to finance the exploration.
Even more surprising, Harken hadn't even actively
sought the deal.
was not our intention to seek out international
opportunities," Monte Swetnam, the president
of Harken Exploration Company, the Bahrain-based
subsidiary of Harken, told World Oil, another
industry trade publication. "However, we
were introduced to officials in Bahrain and
were able to present our credentials to them.
And from that, a relationship developed . .
. that has evolved into one of mutual respect,
ultimately resulting in signing the production-sharing
The relationship promised Harken more than respect.
The offshore fields were bordered on one side
by a Saudi Arabian deposit with proven reserves
of about 7 billion barrels, and a field belonging
to Qatar with 2 billion barrels. The Bahraini
offshore reserves had the potential to be enormous.
Harken Energy was in the right place at the
right time. But it had something else - the
right name. In January 1991 a global coalition
led by President George Bush had mobilized an
enormous military force to drive Saddam Hussein
and the Iraqi army out of Kuwait. Another George
Bush -- the son of the President of the United
States -- was a director and shareholder of
The few press reports about the deal questioned
the motives of the government of Bahrain for
making the deal with Harken Energy. Even the
Wall Street Journal, customarily reserved
on such matters, reported in a page-one analysis
of the contract in December 1991 that it "raises
the question of . . . an effort to cozy up to
a presidential son."
Bush says that he pulled no strings to win the
contract, and that he in fact opposed the deal,
but his presence may have been enough. According
to Swetnam, the Bahrainis knew that Bush was
on the company's board of directors and "were
clearly aware he was the President's son."
Alas for Harken, the Bush name wasn't magical
enough to ensure a strike off the coast of Bahrain.
The company drilled two dry holes. Bush himself
fared better. He sold off two-thirds of his
holdings in Harken for nearly a million dollars,
and bought a small share of the Texas Rangers,
a deal that ultimately netted him -- with a
helping hand from Texas taxpayers -- some $15
Which is all par for the course for the front-runner
for the Republican presidential nomination.
Whenever he's struck a dry hole, someone has
always been willing to fill it with money for
him. Throughout his long business career and
in his six years as governor of Texas, Bush
has relied on family connections, sweetheart
deals, and the inside track to build a fortune.
And Bush, both in private life and since he
became governor of Texas, has always been willing
to return the favors.
George W. Bush makes a lot of his Texas childhood.
He proudly boasts of his tenure at San Jacinto
Junior High School in Midland, Texas. But the
first place he ever lived was next door to the
president of Yale University.
Yale was like a second home for the Bushes of
Greenwich. Bush's grandfather, Senator Prescott
Bush, graduated from Yale. So did his uncles
Prescott Jr. and Jonathan. When Bush was born
in New Haven on July 6, 1946, his father, George
H.W. Bush, was finishing his college degree
Bush returned to Yale himself in 1964. He wasn't
quite the all around scholar-athlete his father
had been, but he was elected the president of
his fraternity18.2 and invited to join the exclusive
and secretive Skull & Bones Society.
When Bush graduated in 1968, he faced the prospect
of being sent to Vietnam, but avoided combat
by joining the National Guard. At the time,
the Guard had 100,000 applicants on its waiting
list. But Bush was sworn in as a member of the
147th unit of the Texas Air National Guard the
same day he applied. Ben Barnes, who was then
the Speaker of the Texas House of Representatives,
recently said under oath that he secured a spot
in the guard for the young Bush at the urging
of Sid Adger, a Houston businessman and close
friend of Bush's father, then a U.S. Representative
from Houston. Bush wasn't the only son of a
prominent Texan in his unit. Others included
the sons of Senators Lloyd Bentsen (a Democrat)
and John Tower (a Republican), and at least
seven members of the Dallas Cowboys football
The only battle Bush fought during those years
was on the home front. He says that he struggled
to establish an identity separate from his famous
father, who went on to become the chairman of
the Republican National Committee, chief of
the U.S. Liaison Office in China, and director
of the Central Intelligence Agency under President
Ford. Young George's identity crisis reportedly
reached its climax one night in Midland when
he was confronted by his father for taking his
brother Marvin, then fifteen, out drinking.
Bush, the story goes, challenged his father
with the words, "Do you want to go mano
a mano right here?"
But there was never really any doubt that Bush
would hew to the family path. At that point,
he was already talking to friends about running
for the Texas statehouse. After being rejected
from the University of Texas law school, he
enrolled in Harvard Business School. Two years
later, MBA in hand, he returned to Midland to
find his own fortune in the oil fields,25.5
just as his father had done twenty-seven years
earlier. Bush had no experience, but he had
$13,000 in seed money from his parents and a
network of well-heeled family friends, who became
the principal financiers of his oil ventures.
Before going into business, however, Bush took
a quick detour into politics. In 1978, he ran
for a seat in the U.S. House of Representatives
from Midland after hurriedly assembling all
the trappings of a candidate. In one year, he
started a business, Arbusto Energy, Inc. (Arbusto
is Spanish for Bush); married Laura Welch, a
librarian who grew up in Midland; and bought
a house in the district of retiring Representative
George Mahon. Don Evans, his best friend and
fellow Texas oil man, ran the campaign.
Bush lost the election, but won the confidence
of relatives and family friends who agreed to
gamble on Arbusto. Owing to the huge losses
its limited partners sustained, Bush's wildcat
operation doubled as a tax shelter.
From 1979 to 1983 some fifty individuals pumped
at least $4.7 million into Arbusto and its successor,
Bush Exploration. Among them were some of his
father's most durable political supporters,
who guaranteed that the shaky company stayed
afloat. John Macomber, the chief executive officer
of Celanese Corporation, invested $79,500, and
William Draper III, a venture capitalist, put
in $93,000. Macomber, a friend of Bush's uncle
Jonathan Bush, would go on to serve as the president
of the Export-Import Bank of the United States
under President Bush, the same job Draper had
held under President Reagan.
George Ohrstrom and his wife invested $100,000
in Arbusto. Ohrstrom had attended Greenwich
Country Day in Connecticut with Bush's father.
Ohrstrom was a business partner of Philip Uzielli,
a wealthy investor and the owner of Executive
Resources, a company based first in the Dutch
West Indies and later in Panama. Uzielli put
$50,000 into one of the early Arbusto partnerships.
In January 1982, his company bought ten percent
of Arbusto's stock for a cool $1 million. The
investment made Uzielli Arbusto's largest benefactor,
a privilege he paid well for. The million-dollar
purchase price was at least three times more
than the stock he bought was worth. Uzielli,
incidentally, had another connection to the
Bush clan besides Ohrstrom. He'd been a close
friend of James Baker III, who was intimately
involved in the elder Bush's political career,
ever since the two had been classmates at Princeton
University. Baker managed Bush's presidential
campaign in 1980 and was Secretary of State
during Bush's sole term as President.
Russell Reynolds, Jr., the founder of his own
executive search firm, Russell Reynolds Associates,
put up $23,250. H. Leland Getz, who co-founded
the firm, invested twice as much - $46,500.
"These are all the Bushes' pals,"
Reynolds once said of Arbusto's backers. "This
is the A-Team."
Reynolds knew whereof he spoke. He'd gone to
Yale with George W.'s uncle Jonathan Bush, an
investment manager and New York Republican Party
official who lined up most of Arbusto's backers.
Many of them were already clients of his, and
he charged his usual commission for recruiting
them. Jonathan Bush, who tapped Reynolds for
a turn with Yale's a capella group, the Wiffenpoofs,
would later take a turn on the board of directors
of Russell Reynolds Associates. Reynolds, a
former finance chairman of the Connecticut Republican
Party, also raised $4 million for Vice President
Bush's 1988 presidential campaign. "In
Greenwich," he told an interviewer last
year, "the Bush family are is absolute
Investing in Arbusto, however, turned out to
be the absolute pits. By April 1984, Arbusto
had drilled ninety-five holes, with forty-seven
yielding oil, three yielding natural gas, and
forty-five that were dry. The company had returned
only $1.5 million to its investors. "The
bottom line is it didn't work out very well
with Arbusto," Russell recalled. "I
think we got maybe twenty cents on the dollar."
Philip Uzielli tried to shore things up by buying
another ten percent stake for $150,000, but
to no avail. "We lost a lot of money in
the oil business," Uzielli told a reporter
for the Wall Street Journal in 1991. "We
had a lot of dry wells. . . . Things were terrible.
It was dreadful."
But the A-Team was willing to take a bath to
help out a Bush. "We wrote the money off
the minute we invested," said Stephen Kass,
a classmate of Bush's at Harvard Business School.
Trying to capitalize on that sentiment, Bush
changed the name of the company from Arbusto
to Bush Exploration in 1982. His father had
been Vice President for more than a year at
But the name change didn't help. The world price
of oil was collapsing, and even the savviest
of the independent oil companies were hard hit.
The less savvy were going bankrupt. By 1984
the only way Bush could save his business was
to find yet another well-heeled partner. This
time he turned to an old Yale classmate of his,
William DeWitt, Jr., who owned Spectrum 7 Energy
Corporation, an Ohio oil exploration company.
DeWitt came from a wealthy background; his father
once owned the Cincinnati Reds baseball club.
DeWitt and his investment partner, Mercer Reynolds,
later became donors to the elder Bush's 1988
presidential campaign and to the Republican
The two men also took care of the son. Rather
than invest in Bush Exploration, they bought
it out. And they didn't just pay for the office
furniture. As part of the deal, Bush became
Spectrum 7's chief executive officer, at an
annual salary of $75,000, and got 1.1 million
shares of the company's stock. Unfortunately
for DeWitt and Reynolds, Bush turned Spectrum
7 into a money-losing enterprise. Two years
after the merger, in 1986, world oil prices
fell even further. Bush needed another bailout,
and fast. He found a willing savior in Harken
Oil and Gas, an oil exploration company headquartered
in Dallas, Texas.
Despite the fact that Spectrum 7 had posted
losses of $400,000 just six months earlier and
carried $3 million in debt, Bush and his partners
received $2 million worth of Harken stock. Bush's
cut was worth about $500,000. Bush also became
a director, and he was paid as much as $120,000
in consulting fees plus $131,250 in stock options.
even though he spent much of 1987 and 1988 working
on his father's presidential campaign. That
was fine with Harken; unlike DeWitt, Bush's
new benefactor wasn't interested in having him
run the company.
name was George Bush," Phil Kendrick, Harken's
founder, said. "That was worth the money
they paid him."
Stuart Watson, who was a member of Harken's
board of directors at the time of the Spectrum
deal, echoed that view in a 1994 interview with
a reporter for the Dallas Morning News. "George
was very useful to Harken," Watson said.
"He would have been more so if he had had
funds, but as far as contacts were concerned,
he was terrific."
Indeed, once Bush signed on, business at Harken
began to pick up.
When Harken bought out Spectrum 7, the company
was broke and desperately needed a cash infusion.
As the talks with Spectrum 7 progressed, Harken
officials were lining up a major new financial
backer: Harvard Management Company, Inc. The
investment firm's only client is Harvard University;
it manages the school's multibillion-dollar
A month after Bush came on board, Harvard Management
agreed to invest at least $20 million in Harken.
It would eventually come to own some ten million
shares of Harken's stock, making it one of the
company's largest investors.
The Bush name may have helped seal the deal.
Michael Eisenson, a partner in Harvard Management
Company who sat on Harken's board of directors,
said that he and other Harvard officials picked
Harken after reviewing several proposals from
energy companies. "Harken management seemed
capable and honest," Eisenson said.
The Bush name certainly would have made an impression
on Eisenson's boss, Robert Stone, Jr., who was
one of Harvard Management's directors. Stone
was "the driving force" behind Harvard's
Southwest oil and gas investments, according
to Scott Sperling, who worked with Eisenson
at Harvard. Stone himself was a player in the
Texas oil and gas industry; at the time, he
was the chairman of Kirby Exploration, an oil
and gas transportation company based in Houston.
As a longtime resident of Greenwich, Connecticut,
he also knew the Bushes. His father-in-law,
Godfrey Rockefeller, had invested in George
Bush's oil drilling ventures in the late 1940s.
Stone's brother, Galen L. Stone, was the U.S.
envoy to Cyprus during the first Reagan-Bush
Administration. In 1980 and 1988 he contributed
to the elder Bush's presidential campaigns.
And like Bush's uncle Jonathan, Stone had been
on the board of directors of Russell Reynolds
Associates. (Stone did not return the Center's
In a recent interview, Scott Sperling told the
Center that he doesn't recall Harken as "an
investment that had come specifically recommended
by any board member."
But according to Bing Sung, who was an investment
manager at Harvard Management Company until
1986, "You just don't knock on the door
of a major endowment, which Harvard certainly
was, and say, 'Listen, I've got a great idea
and I want to present it to the board,' . .
. unless you have an in."
Harken was Harvard Management's first major
investment in Texas wildcat operations, a part
of the university's investment history it would
rather forget. The investments in oil and gas
would eventually generate nearly $200 million
in losses for the endowment.
The university's commitment to Harken was surprising
in view of the bad shape the company was in.
"I took some time and looked at it and
I went, god, I don't want to be anywhere near
this," a prospective investor in Harken
from the late 1980s told the Center. "This
thing looks like a train wreck."
By Harken executives' own accounts, the company's
financial statements were "a mess"
and "a fast numbers game." But insiders
insist that Harvard's money mangers wouldn't
have kept pumping money into Harken if they
didn't think it would become profitable.
For a time, they had reason to believe it would.
The Bahrain agreement, announced on January
30, 1990, seemed to justify Harvard's enthusiasm
for Harken. While Bush said he had no role in
securing the deal, and added that he had argued
against it, his wealthy patrons certainly ensured
that Harken could pull it off.
Bass Enterprises Production Company put up $25
million to finance the drilling. After Bass
Enterprises invested in the Bahrain operation,
paying for the exploration that would eventually
produce two dry wells, Harvard Management upped
its stake in Harken to 30 percent.
Bass Enterprises is part of the financial empire
of the Bass brothers of Fort Worth, two of whom
became members of Team 100, an elite club of
big donors to the Republican National Committee,
during the elder Bush's 1988 presidential campaign.
The Bass family has been generous to the son
as well; they rank No. 5 among Bush's career
patrons, having contributed more than $273,000
to him. All four Bass brothers -- Sid, Robert,
Edward, and Lee -- attended Yale, as did their
father, Perry Bass. Edward was enrolled at the
Ivy League school at the same time as George
In August 1990, Harken posted a $23 million
loss from its consolidated operations, sending
its share price down from $3 to a year-end low
of $2.37. Bush, however, avoided the downturn
in the company's fortunes. Two months earlier,
on June 22, 1990, he had unloaded 212,140 shares,
or about two-thirds of his holdings, for $848,560.
As a director of the company, Bush was required
to promptly report the stock sale to the Securities
and Exchange Commission. He did -- eight months
late. Bush later claimed he had indeed reported
the transaction in a timely manner, but that
somehow the paperwork had been lost. Whatever
the case, the eight-month delay attracted the
attention of SEC investigators. The timing of
the transaction seemed too good to be true.
As a member of Harken's audit committee, Bush
was familiar with the company's finances and
was aware that it was about to restructure its
debt - a move that would depress its share price.
In addition, he may have been alerted that the
company was about to post a huge loss. In April
1991 the SEC launched an insider-trading investigation
of Bush. The outcome of the probe raised more
questions than it answered.
When the investigation began, the chairman of
the SEC was Richard Breeden, who had been appointed
by President Bush. Before joining the SEC, Breeden
had for several years been the President's economic
policy adviser. Bush even thanked Breeden by
name in several speeches. Breeden's office at
the SEC was adorned with so many pictures of
President and Mrs. Bush that a reporter for
the New York Times observed, "George
Bush is Breeden's Mao." Before going to
the White House, Breeden had been a partner
in Baker & Botts, the law firm started by
the grandfather of James A. Baker III, President
Bush's Secretary of State.
The SEC's general counsel at the time, who would
be ultimately responsible for any litigation
the commission would initiate, was James Doty.
Doty had also worked at Baker & Botts, where
he represented the younger Bush in business
related to his stake in the Texas Rangers baseball
addition to collecting reams of documents, investigators
for the SEC interviewed Harken's lawyer as well
as the broker who'd sold Bush's stock. Then,
in 1993, the agency dropped the investigation.
William McLucas, the director of the SEC's enforcement
division, said "there was no case there."
(McLucas had been promoted to the job of being
the SEC's top cop by Breeden.) But in a letter
to George W. Bush announcing the agency's decision,
McLucas's deputy, Bruce Hiler, wrote that the
end of the probe "must in no way be construed
as indicating that the party has been exonerated
or that no action may ultimately result from
the staff's investigation."
Bush, who by then was running for governor of
Texas, gave the letter his own spin. "The
SEC fully investigated the stock deal,"
he said in October 1994. "I was exonerated."
Since 1993, Breeden, Doty, and other lawyers
at Baker & Botts have given Bush $182,050,
making the firm his No. 13 career patron.
One of the questions the SEC didn't answer was
who bought Bush's stock.
In his statement of intent to sell, which Bush
also had to file with the SEC, he said he was
putting his 212,140 shares on the open market.
That was nearly twenty times the daily volume
of stock that traded on average during June
1990; without a buyer willing to absorb such
a large block of stock, the share price would
Under questioning by SEC investigators, Ralph
Smith, a Los Angeles broker with Sutro &
Company, who handled the sale, said that he
solicited the shares at the behest of an institutional
investor, which he didn't name.
The available evidence suggests that the investor
was Harvard. The university increased its holdings
in Harken around that time. No new institutional
investors appeared on the scene. At the bottom
of a spreadsheet Smith used to record his calls
to Bush was the name of Michael Eisenson, along
with the telephone number of Harvard Management.
(Eisenson did not return the Center's telephone
If Harvard was the institutional investor that
bought Bush's stock, it would be the second
time in his career that Bush was bailed out
by his alma mater. Bush needed the money from
the sale to secure his stake in the Texas Rangers
baseball team, an investment he believed would
propel him into politics, and that would ultimately
bring him $15 million.