Roundup: Bush's Past Stock Sale Overshadows Ethics Drive

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Last updated at: (Beijing Time) Wednesday, July 10, 2002

Roundup: Bush's Past Stock Sale Overshadows Ethics Drive

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As United States President George W. Bush vowed Tuesday to get tough on corporate misconduct, his own stock sale as a businessman a decade ago has aroused controversy in the country and cast a shadow on his ethics drive.

In a speech to the Wall Street leaders in New York, Bush, trying to seize the initiative on an issue that could dent his political standing, pledged that his administration would boost criminal penalties for corporate abuses and beef up the Securities and Exchange Commission (SEC). He also promised to create a new corporate fraud task force by executive order.

"With strict enforcement and higher ethical standards, we must usher in a new era of integrity in corporate America," Bush said in response to a wave of accounting scandals which have shaken market confidence.

However, Bush's credibility as a reformist could be undermined by renewed scrutiny of a SEC investigation of potential insider trading by the president when he was a Texas energy company director, observers said.

At a White House press conference Monday, Bush was bombarded by questions about his own business dealings a dozen years ago as a director at the Harken Energy Corp. in Texas.

At issue are 212,140 shares of Harken stock that Bush sold on June 30, 1990, for 4 dollars a share, or 848,560 dollars, eight days before Harken finished its second quarter with a loss of 23.2 million dollars. By August, the share price had fallen to 2.37 dollars. Bush filed a form with the SEC about his sale of Harken stock eight months later than required.

The SEC investigated on suspicions that the transaction was conducted on the basis of insider information, a potential crime, but dropped the investigation in 1993, saying that "at this time no enforcement action is contemplated."

Bush also faced questions about whether Harken, of which he was also a member of the audit committee, had deliberately booked an improper profit on the sale of a subsidiary in 1989 to obscure the size of its operating losses.

The SEC later forced the company to restate its earnings to reflect millions of dollars in losses that had been hidden by the sale of the subsidiary to a group of insiders.

It is still unclear whether Bush's news conference will put the questions behind him, particularly because he offered less of an explanation than he and his advisers have in the past for why he was eight months late disclosing his stock sale.

Previously, Bush had said he thought regulators lost the documents. Last week, the White House called it a mix-up by lawyers.

"I still haven't figured it out completely," Bush said when asked why he did not disclose the stock transactions as promptly as required.

Bush repeatedly said that his stock sale and late filing were old news, and that it had been used against him by his political opponents for years. "People love to play politics," he said.

Democrats are obviously eager to find parallels from Bush's business career before he ran for governor of Texas to revelations about Enron, WorldCom and the growing list of companies under scrutiny for accounting scandals.

They are trying to portray the administration as soft on corporate crime, a strategy primarily designed to boost the party's chances in the fall congressional elections, analysts said.

Senate majority Leader Tom Daschle has challenged the SEC to release the file to the public to prove that Bush had not sold his shares with the knowledge that the share price was about to plummet.

The Democrat Party assailed Bush's address to Wall Street as long on rhetoric and short on action to stem company wrongdoing, saying Bush did not go far enough to restore trust in markets.

"I though the president spoke loudly, but he offered a very, very small stick," Daschle said shortly after Bush's address.

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