Tuesday, July 09, 2002

I think the more interesting comparison to Harken Energy experience is with Hillary's treatment by the media, not Bill's. After all, they finally nailed Bill on something, but they've never gotten Hillary. But what if adultery, like corporate accounting, isn't exactly black-and-white?

Bush gets a bye on lucrative and questionable deal

East Valley Tribune, July 7, 2002

Let's imagine that Hillary Rodham Clinton, before becoming First Lady and while Bill Clinton was governor, became a director and shareholder of (let's call it) Arkansas Energy.

Arkansas purchased her company--call it Whitewater Petroleum--for $2 million, even though Whitewater was losing money and had millions in debt. Arkansas's CEO told a reporter he paid that much because he wanted Whitewater's prime asset: Hillary Clinton.

As an Arkansas director, Hillary served on its audit committee at a difficult time. Having just gotten listed on the New York Stock Exchange, Arkansas needed good news to attract investors. Unfortunately, despite contrary promises, the company actually was losing money.

So Arkansas turned its losses into gains by selling a subsidiary--call it Rose Oil--to corporate insiders, using mostly money advanced by Arkansas itself. Rose's sales price was $12 million, with Arkansas loaning the purchasers $11 million. Arkansas claimed an $8 million gain, which transformed its operating loss into a profit.

However, accounting rules say you can't make a profit by essentially selling something to yourself. Despite approval by Arkansas's auditors--and Hillary's audit committee--the Securities and Exchange Commission eventually forced Arkansas to restate its results. Arkansas couldn't book profits on the Rose sale until the insiders actually repaid the loan, which changed that reported profit back into a loss.

The SEC investigation took several months, and before the earnings restatement, Arkansas's stock--buoyed by those reported but phantom profits--stayed buoyant, too. Before the stock tanked, Hillary sold the majority of her shares for nearly $850,000.

When corporate insiders sell, federal law requires prompt reporting. But Hillary neglected to disclose her stock sales for some 34 weeks, until after the drop in Arkansas's stock price. The SEC staff concluded in an internal memorandum that Hillary had violated federal securities laws, but by this time--with (ahem) a close relative as president--the SEC did nothing. The agency closed the investigation, but made it clear that it wasn't an "exoneration" or decision on the merits.

The tardy failure to disclose her insider stock sales first surfaced back in a gubernatorial campaign, when Hillary said that she had filed the report but the SEC had lost it. But a few years later, with the national media suddenly interested, her tale changed; abandoning the "SEC lost my homework" excuse, Hillary then claimed that late disclosure of the insider stock sales was simply a meaningless oversight--and that everything was investigated at the time, and she was cleared, so go away, there's nothing new here.

If it were Hillary Clinton, The New York Times, much less The Wall Street Journal, Rush Limbaugh, and this newspaper, would stay on the story like white on rice. You'd have trouble counting the number of congressional committees investigating. But unless you read Paul Krugman's New York Times column, you've heard nothing about this tale, because it didn't involve Hillary Clinton; instead, it involves George W. Bush.

In 1989, as a director of Harken Energy, Bush sold his shares during the SEC accounting investigation, didn't disclose the sales until 34 months after the required date, saw the SEC (while his father was president) drop the investigation, and claimed during his 1994 campaign for governor that the SEC lost his report but is telling a different story now.

For Hillary, it would be a national scandal. For George Bush, nothing. Are federal securities laws less significant than Arkansas land deals? Do we hold George Bush to lower standards than Hillary Clinton because he's not as smart or something? Or do only women, or Democrats, have to make their money honestly?

Maybe I'm just partisan, looking for any excuse, no matter how old or flimsy, to attack George Bush. But all those GOP investigations of Hillary Clinton were principled and important.

Yeah, right.

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