January 6, 2009
-- by Dave Johnson
A component of the current financial collapse is loss of confidence due to fraud resulting from inadequate regulation. In an op-ed in Sunday's New York Times, The End of the Financial World as We Know It, Michael Lewis and David Einhorn wrote,
Created to protect investors from financial predators, the commission has somehow evolved into a mechanism for protecting financial predators with political clout from investors. (The task it has performed most diligently during this crisis has been to question, intimidate and impose rules on short-sellers — the only market players who have a financial incentive to expose fraud and abuse.)To repeat: Instead of protecting investors from fraud the Bush/Republican SEC protects predators from investors. How did it get to be that way?
This might be a good time to remind people of a scandal that was developing before the 9/11 attacks removed everything else from the news.
Summary of the Bush/Harken scandal: George W. Bush was on the Board of Directors of Harken Energy Company and owned stock that had been purchased with a loan from Harken. In 1989 Harken used an Enron-like scheme to conceal losses by selling most of a subsidiary to an off-the-books entity that was controlled by company insiders. This caught up to them and in June, 1990, the Directors were warned that the company was about to report a big loss. The Directors were also warned that it would be illegal for them to sell any stock because they had insider information. Bush promised he would hold the stock and then sold his stock for more than $800,000. (It has not been disclosed who the buyer was.) Soon after Bush's sale the company announced the loss and the stock price dropped. Bush also did not file required forms with the SEC. When this came to light Bush was quietly investigated by the SEC - with his father as President of the United States. The SEC never interviewed Bush, and of course they did not file any charges even after finding significant wrongdoing. It also appears that Bush may not have paid any taxes on the stock sale or on loans he received from Harken and never repaid.
Boston Globe: Board Was Told of Risks Before Bush Stock Sale
Salon: Memos: Bush knew of Harken's problems.
Democrats.com: Did George W. Bush Evade Income Taxes on His Harken Loans?
Here is the BuzzFlash Bush/Harken Insider Trading Collection.
UK Guardian: Bush and Harken Energy
And, about that SEC, June, 2005: Bush S.E.C. Pick Is Seen as Friend to Corporations
Oh, and about that Harken: June, 2008: Indicted Saudi investor in Harken Energy gets $80 million Pentagon contract
Posted by Dave Johnson at January 6, 2009 2:06 PM
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