Cheney, the Halliburton CEO                                          

We have all read the headlines about how Halliburton may have profited from no bid contracts for work in Iraq. The dust has yet to settle, and we are in no position to assess with any certainty what Cheney may have done to help his old firm. However, the record of his previous involvement with Halliburton is reasonably clear.

Richard Cheney, a former congressman and Secretary of Defense, served as CEO of Haliburton Corporation for five years before becoming Vice President of the United States . Partly by capitalizing on his government contacts, CEO Cheney was to make Halliburton one of the largest engineering, construction, and energy companies in the world. As a reward, the Vice President left the firm with $35,000,000 and a six figure tax deferred salary.. Cheney repeatedly insisted that he had "no financial interest" in Halliburton after he took office, but he continued to hold stock options and receive deferred compensation

In 1998, Halliburton, like Enron, changed its accounting procedures to recognize immediately future income that would be realized when it successfully collected the proceeds of cost overruns from customers. Working with auditor Arthur Andersen, it claimed $100 million in anticipated revenue in order to conceal losses. The firm did not bother to inform the SEC. The SEC did not begin to investigate this problem until December, 2002. The SEC began looking into whether the accounting change was explained in statements so that people outside the firm could figure out that an important change had been made.

This ploy facilitated a merge with Dresser Industries in 1998. In 2002, the head of Halliburton said that Cheney was aware of the changes and that they were not illegal. This may well have become common business practice after Contract with America made it easier to codify accounting methods to massage statements of earnings. Cheney’s business ethics were reflected in other ways Halliburton failed to adequately inform shareholders of the great asbestos liabilities it was assuming by acquiring Dresser Industries in 1998 The Dresser acquisition resulted in the loss of 10,000 jobs but Cheney said during the 2000 campaign that he had been busy creating work for people

During Cheney’s tenure, Halliburton failed to adequately inform shareholders of the great asbestos liabilities it was assuming by acquiring Dresser Industries in 1998. Dresser thought it had gotten rid of most of its asbestos exposure when Harbison –Walker was spun off into a firm called Indresco in 1992. However, it was clear that if Indresco ( subsequently Global Industrial Technologies) had problems with the claims that Dresser would probably have to address the claims. Global Industries was having problems at the time of the Dresser take-over. Halliburton stockholders were not adequately warned of their exposure to asbestos claims and it is unclear whether the firms management explored the matter in any depth. Halliburton subsequently donated $150,000 to Congressmen who supported legislation limiting individual asbestos claims, and Cheney contributed $12,500 of his own funds. Cheney had other problems with asbestos liabilities which he resolved by selling off Highland Insurance, a wholly owned subsidiary, to some Halliburton shareholders in 1998. Highland was facing substantial losses due to asbestos health claims. Cheney did not informed the purchasers of this large exposure. Within the next three years, Highland was saddled with $80,000,000 in claims from people who had worked for Brown and Root, Halliburton’s construction subsidiary. In December, 2003, an asbestos claim settlement was finalized which resulted in a pay-out of $4.2 billion. It may force Halliburton to sell cash cow, Kellogg, Brown, Root.

That subsidiary was fined $3.8 million for re-exporting restricted goods to Lybia through a third party while Cheney ran Halliburton. From 1995 to 1999, under Cheney, the firm increased its overseas tax havens from 9 to 44 and managed to reduce its federal taxes from #302 million to an $85 million rebate. At the same time it enjoyed huge government contracts and $1.5 billion in government loan guarantees. In February, 2001 Halliburton paid the Department a $2,000,000 fine for failure to deliver required services on a previous contract

The firm was also doing business in Iraq, Iran, and Lybia. Halliburton subsidiary Dresser-Rand evaded the US ban on economic relations with Iraq by repairing Iraqi oil fields and selling equipment through a European subsidiary. Yet, Cheney flatly denied doing any business in Iraq during the campaign of 2000. In 1998 and 1999, it did $23.8 million worth of business with Iraq. The subsidiary was a new acquisition and the work represented completion of a previous contract. But the fact remains that Halliburton was doing business with a rogue state that Cheney was anxious to attack just two years later. During the campaign of 2000, Cheney insisted that he had a firm policy of not doing business with Iraq. U.N. documents later revealed that Halliburton subsidiaries did $73 million worth of business with Iraq while Cheney was CEO. Later, the French government investigated Halliburton subsidiary Kellogg, Brown, and Root for bribes involving efforts to get contracts in Nigeria while Cheney was CEO of the parent firm. The subsidiary had been in a consortium with a French firm at the time of the bribery. .

On December 4, 2001, the Department of Defense awarded , Kellogg, Brown, and Root, a "cost-plus-award-fee" agreement that permits the Pentagon to send the firm anywhere in the world to maintain bases or carry out humanitarian activities. The original contract was mainly focused on restoring the oil fields Saddam was expected to destroy. Its value came to $10.8 billion. There is no evidence Vice President Cheney himself had anything to do with it, and reports that one of his staff attended the meeting where the meeting where the contract was settled arfe not true. It was established that his staff followed the process closely. Moreover, brecedent was broken when KBR was hired to draw up the specifications for the contract and a KBR representatives were permitted to attend the meeting at which the decision was made. Bunnatine Greenhouse, the civilian Corps of Engineers official who questioned the process was subsequently demoted .Halliburton’s role in Iraq was to include , the repair and upgrading of oil facilities, the feeding of American troops, various construction projects, and the use of the firms mercenary troops to guard US facilities. Halliburton was to receive a profit of between 2 and 7%, which would be assessed about the total amount spent. Since the contract was "cost-plus," some believe there was an incentive to waste money and overspend. There have been numerous stories about what seemed to be waste, but the greatest problems came from the subcontracts the firm entered. Subcontractors sometimes charge four to five times the anticipated cost, and some cynics believed that this "had to do with under-the-table payments." In addition to the Iraq contract, KBR is maintaining some of the new bases built in connection with the Afghan War.

Friday, February 18, 2005

Lt. George Bush in the Texas Air Guard

In the 2000 presidential campaign, only the Boston Globe thoroughly investigated George W. Bush’s Air National Guard career.1 In 2004, consideration of the subject was derailed when CBS aired unverified documents that seemed to confirm what many investigators had unearthed about the president’s career in the service. Dan Rather made a huge mistake in not carefully verifying those documents but most of the criticisms were made as though the documents contained information no one had ever heard before or suspected.

Bush’s experience with National Guard service yields insights on his character and the luck he has had in not being forced to answer difficult questions. George W. Bush made a six year commitment to the Texas Air National Guard in 1968. The sons of other prominent Texas families occupied had found this a convenient way to have stateside duty. Bush scored the minimal points on a qualifying test and with the help of Lieutenant Governor Ben Barnes was given one of two remain flying slots in a Guard Unit known as the "champaign unit." He was assigned to flying F102 interceptors. At the time there was a waiting list of over 100,000 people trying to get into the Air National Guard. 2 The papers of the late Colonel Jerry Killian indicate that Bush discussed with him ways to avoid regularly scheduled drills from May to November and to get around taking a physical examination in 1972 and that the colonel was pressured by superiors -one of whom was a legendary retired officer- too see that Bush received good ratings. Bush was ordered to take the annual physical examination but never did so and was removed from flight status for this infarction and other failures to meet standards. It is unclear where the documents came from, but CBS insisted it trusted their source. The Associated Press reported some of them were released by the White House. Right wing commentators said they were manufactured by the Democratic National Committee. CBS broke the story after having the documents checked for authenticity, but it refused name who gave the network these documents. Later, USA Today turned up another document in which Killian tried to find out if Bush ever took the physical examination. Colonel Killian’s former secretary said she did not type them but was certain their contents reflected the facts of the situation then and Killian’s frustration that Bush was defying him. Bill Burkett, a retired Guardsman, came forward and said he made repeated attempts to tell the Kerry campaign that he saw documents like them at in the trash at his base. He never got beyond a number of youthful workers, so he sent an e-mail to Senator Max Clenand. He said he was never contacted by anyone from the campaign. 4 Dan Rather later apologized for using the documents since it had become impossible to authenticate them. Colonel Burkett had given CBS the documents but had misled the network about where he got them.5 In 2004, the flap over CBS’s use of probably forged documents derailed any serious examination of whether the charges against Bush were true.

On September 29, 1972, the Air National Guard confirmed orders suspending Lt. Bush from flying status because he had not accomplished a medical exam. Years later, an aid to Governor Bush explained that he had decided to quit flying. This was at a time wheen the military started testing for drug use and insisting that the examinations be administered by military physicians. Bush had managed to arrange to meet his Guard obligations in Alabama, where he was involved in a Senate campaign. Linda Allison, widow of the campaign chairman, and others reported that they had kn knowledge that Bush wanted to participate in the campaign until several days before his arrival. She said, "Well, you have to know Georgie....He really was a totally irresponsible person. Big George called Jimmy [ her husband] and said, he’s killing us in Houston, take him down there and let him work on that campaign...." She said she thought he was using pot and "perhaps cocaine." It was said that Bush thrashed the house he rented in Montgomery and did not pay the damages. There is no record he ever appeared for drills there in 1972-1973. General William Turnipseed, who then commanded the Alabama Guard, said Bush did not appear for duty. He received two special orders instructing him to return to Texas for duty, and he did log 36 days of duty, beginning in July, 1973. In the Fall of 1973, he was demoted to assignment in the Obligated Reserve Section in Denver because he was unable to meet his obligations as a jet fighter pilot. Bush was released early from the Guard in return for his signing a promise that he would enter the Reserves, but he never kept the promise. In 1997, aids of the governor visited the archives of the Texas Guard at Camp Mabry and scrubbed them of much of the information about Governor Bush’s service according to Lt. Col. Bill Burkett. He reported hearing Joe Albaugh, Bush’s chief of staff, discussing with Adjutant General Daniel James the need to get rid of documents that could embarrass the governor. Several days later, Burkett saw several such documents in a trash can and read them. Lt. Bush’s discharge papers do not support his claim to having served in Arkansas. However, pay records that were later released showed that he made some effort to make up some service obligations while there working on a senatorial campaign. In September, 2004, it was reported that critical written reports on Bush’s service, though required to be preserved had either not been written or had somehow disappeared. Bush had missed his medical examination in `1972, but somehow the report on this incident was missing. He had clearly missed five months of drills and regulations required that he receive counseling after this infarction. Yet no information on these events were found in his files. . Questions about Bush’s military service were explored in some detail by the AP wire service, The Washington Post, Boston Globe, and other print media during the campaign of 2000. The television news programs did not deal with it then and it was not a major issue. 6

The issue briefly reappeared in early 2003. In February, 2004, the Bush White House tried to end the discussion of his Guard Service by making public hundreds of documents. They were mostly payroll records, but many key pieces of correspondence had somehow disappeared. The documents proved difficult to understand, and only independent Paul Lukasiak of Philadelphia bothered to study them. The president claimed he had "made up" all their monthly training exercises he had missed, but Lukasiak proved that five months had not been made up. Bush’s records showed he often took substitute training before scheduled monthly training but there was no proof Alabama Guard authorities authorized these substitutions. Moreover, his substitute training did not conform to Air Force regulations requiring it occur no more than 15 days before a scheduled Unit Training Assembly or 30 days after it. One John Calhoun claimed he was Bush at 8 or 10 of the assemblies, but Bush himself never claimed to be at more than one of the assemblies Calhoun mentioned. Nevertheless, Calhoun was featured on many right-wing talk and cable shows in 2004. At the same time, one Bob Mintz, until recently a Republican, came forward to testify that he had been looking for Bush at the base because he wanted to find another bachelor to chum around with but never found him. Retired Colonel and flight instructor Leonard Walls, who is non-political, also testified that he never met Bush at Dannelly Air National Guard Base in Montgomery. Lukasiak raised many other troubling matters, one of which was why Bush was stripped of flight status in 1973. 7

Funeral Home Scandal in George W. Bush's Texas

Monday, February 14, 2005

Bush the Oilman

As a young Harvard MBA, Bush founded Arbrusto Energy in 1979 and later changed the name of that unsuccessful company to Bush Exploration Oil Company. Arbusto 78 and Arbusto 79 were George W. Bush oil drilling ventures. The word "Arbusto" is Spanish for shrub or bush. Bush received some financing from James Bath, a Houston aircraft broker with CIA ties and who was also business representative of Salem bin Laden, one of the seventeen brothers of Osama bin Laden, and Khalid bin Mahfouz. Bath was in the Texas Air National Guard and managed a portfolio for Shiek Khalid bin Mahouz, a key figure in the shadowy Bank of Commerce and Credit International { BCCI]]. Khalid bin Mahfouz handled money for the bin Laden families and was an investor in the Carlyle Group, in which George H.W. Bush was also involved. BCCI had branches in 73 countries and did business with Manuel Noriega, Sadam Hussein, Golden Triangle heroin king Khun Sa, and the Medellen drug cartel. The CIA used BCCI to launder money that went to the Nicoraguan Contras and to send money to the Afghan mujahedin. The bank defrauded depositors of of about $10 billion in what New York District Attorney called the "largest bank fraud in world financial history."

Arbusto Energy failed in 1981 and was absorbed by Spectrum 7, of which he became chairman. Philip Uzielli, James Baker III’s college roommate and an associate of the Carlyle group, paid a high price for the failed exploratory firm. When Bush’s new oil company, Spectrum 7, failed, he and his two partners were bought out by Harken Energy in 1986. Bush and his partners received $2,000,000 from Harken in stock for a small firm that had lost a great deal in the last six months. According to the Texas Observer, Harken was connected to the drug trade, the manipulation of foreign currencies, and the CIA’s efforts to destabilize the government of Argentina. 2 Harken’s major owners were George Soros, the Harvard [University] Management Corporation, and Abdullah Taha Baksh, a Saudi investor. The latter arranged for Union des Banques Swisses, to invest $25,000,000 in the firm. The Swiss bank was connected to the corrupt banking conglomerate BCCI ( Bank of Credit and Commerce International), which collapsed amid scandal in 1992. BCCI has been called the most corrupt bank in modern times, having financed terrorists, drug dealers, and various covert operations. Harken was also helped by the Stephens investment bank of Arkansas. Later, Bill Clinton was inaccurately accused of having close ties with Stevens. In the early 1990s, George W. Bush developed other connections with dubious characters. He served as a director of Caterair International, a firm that ultimately collapsed due to the excess of junk bonds it issued.

Bush got an annual consulting fee of $120,000 from Harken, which was later trimmed to $50,000. Billionaire George Soros said the firm dealt with young Bush to obtain political influence and get into the Persian Gulf. Soros sold his interest in 1989, a year before Bahrain offered to let Harken drill off its coast. For some reason Bahrain chose Harken over Amoco though it had never drilled in the Persian Gulf. Young Bush later claimed he opposed the Bahrain deal because Harken was not prepared for off-shore drilling on a large scale. Harken announced its deal with Bahrain, and soon thereafter the U.S. Agreed to locate a permanent base there.
The future president’s business dealings were an example of crony capitalism, transactions that relied upon having the right connections so that what was important was that "good men" trusted and aided one another. Its main feature is government help for the well-connected and public financing of private business ventures.3 Often, this form of capitalism also depends upon blurring the line between public and private ventures .In 1999, he said "The invisible hand works many miracles," referring to invisible economic forces Adam Smith thought would regulate economic activity. Instead, the invisible regulator was often personal connections between business and political cronies that allowed the well placed to parlay political influence into lucrative business transactions.

As president of the United States, Bush condemned the practice creating "off the books" partnerships in order to conceal indebtedness. Yet, on August 29, 1990, director Bush offered a motion at a board meeting that permitted Harken Energy Corporation to create an off-balance-sheet partnership that hid $20,000, 000 in debt and liabilities. It was called Harken Anadarko Partnership, and the partner was Harvard Management Co., which handles the Harvard University endowment and was already a major investor in Harken from about the time Bush became involved in the firm. The partnership enabled Harken to collect $1,000,000 a year in operating expenses and encouraged A. Robert Abboud of First City Bancorp to rescue Harken from default on some loans by taking them over from another bank. Abboud had been a strong backer of Saddam Hussein.

The transaction rescued Harken from financial embarrassment, and temporarily share prices, enabling Harvard to unload 1.6 million shares while the bubble lasted. It was legal, and Harken even permitted the SEC to examine it, something the law did not required. HarvardWatch, an alumni and student group, noted that it "bears striking resemblance to partnerships Bush has condemned at Enron." Enough information was probably available for a really diligent investor to figure out what was going on, but, as HarvardWatch said, "It was controlled by and transparent only to Harken insiders, and likely was used to artificially brighten the company’s business prospects." It was a pretty shabby affair.

As a Harken consultant, Bush borrowed $130,000 in two separate loans from the firm to purchase its stock. This was a common practice then but one he, as president, wanted to ban in 2002. In April, 1989, he used most of his Harken stock to secure a $500,000 loan from United Bank, money he used to become a partner in the purchase of the Texas Rangers. It has been suggested that he pledged the same shares that were also used to secure the two Harken loans. There is no paperwork to prove otherwise; however there is a document dated October 5, 1989, indicating the terms of the Harken transactions had been changed. Harken would forgive $118,760 of Bush’s debt.

During his tenure as director, the firm sold Aloha Petroleum, a subsidiary, in 1989 to a group of Harken partners. The partners used money borrowed from Harken to buy Aloah at a vastly inflated price. The transaction created a false profit of $10, allowing Harken to hide most of its losses. It improved the balance sheet enough to push up the price of Harken stock and allow the directors to unload some of their stock. The SEC reviewed the transaction and made Harken restate its earnings. In 1990, Bush was on the firms audit and special restructuring committees. He heard from consultants Smith, Barney, Harris, Upham & Co. that Harken was in deep trouble. Bush served on the firms audit committee. He sold two-thirds of his stock at a tidy profit sixteen days after receiving the report about Harken’s financial problems. The law requires that trades by insiders be reported immediately, but he waited eight months to file the transaction with the SEC. Little was written about Bush’s problems with the SEC while he was a director and stockholder in Harken Energy Company, failed four times to meet SEC deadlines for reporting insider trading. Before Bush sold the stock, the firms lawyers, Haynes and Boone, sent a letter to the firm’s directors and executives arguing that selling stock at that time could constitute insider trading violation. While this trade was being probed, Bush’s attorney was a former partner of SEC attorney investigating the matter. One day after the SEC concluded the investigation of Bush, his lawyer gave the agency a copy of this memorandum. The Boston Globe observed that "The SEC investigation apparently never examined a key issue raised in the memo: whether Bush’s insider knowledge of a plan to rescue the company from financial collapse by spinning off two troubled units was a factor in his decision to sell." These events occurred while his father occupied high office in Washington, D.C. The SEC never bothered to even interview him about these infractions of the law. In many cases like this, people are fined, and jail time is meted out on rare occasions. In the last transaction, on June 22, 1990, he dumped two-thirds of his stock for $850,000. In a move aimed at maintaining its stock price, Harken lawyers sent a letter to its executives and directors suggesting they should not sell stock if they had access to negative information about the firms finances. Bush sold his stock anyway, claiming later had no idea the firm had financial problems. The lawyers letter was turned over to the SEC one day after it closed its investigation of the Bush transaction.

At that time he clearly had access to information that the firm was in deep trouble. He maintained that he was not aware of this, which suggests he was not a good listener or reader. In was in possession of a memo stating that the firm was about to run out of money, and other documents possessed more critical information. A few months later the value of the stock dropped 75%. This was the fourth Harken transaction that was reported three or more months late. The information he had in June, SEC investigators concluded, should have led him to see a Harken shortfall of $4,300,000 rather than the $23,000,000 that was eventually reported. This was their justification for not going farther with the matter. Around the time that questions emerged about Bush Sr.’s involvement with Permargo Oil of Mexico, the SEC "inadvertently destroyed" the files of his company for the years 1960-1966.

Bush had signed a [lockup] letter two and a half months ( April 2, 1990) before selling the stock. The letter was an agreement not to sell Harken stock for six months so that a planned stock issue would not be injured. A few weeks after Bush signed the letter, Harken president Mikel Faulkner told the board the firm was in financial trouble. The anticipated stock issue was not to occur because Harken’s creditors objected. Bush’s lawyers have maintained for more than a decade that he had a pre-existing plan to sell his stock in Harken and other companies to pay a tax bill and a loan debt he owed for his stake in the Texas Rangers. A securities expert said the document calls into question his lawyers' account to the SEC. However, the existence of the letter, signed on the April 2, 1990, undercuts his lawyers' explanation for the early sale of his Harken stock. Houston attorney Thomas Ajamie observed, "If his accountant told him that he needed to sell stock to pay a debt obligation for his interest in the Texas Rangers, it does not make sense that he would subsequently sign an agreement promising not to sell his shares of Harken stock for six months." Bush’s lawyers said the SEC investigation cleared him, but the investigator’s letter said that their inaction in the matter "must in no way be construed as indicating that the party has been exonerated or that no action may ultimately result." John R. Doty was general counsel for the SEC at the time the SEC decided not to act. He had been the lawyer who made it possible for Bush and his associates to purchase the Texas Rangers.

The matter came to light in the mainstream press in July, 2002, two years after the campaign. After information surfaced in 2002 that Harken Energy Corporation lawyers had warned directors about selling stock on the basis of still-confidential information, the press showed some interest in the matter. At President Bush’s third conference, most its thirty-six minutes were taken up with this question. The subject was not generally a matter of national attention, yet Atlantic editor and outspoken conservative Michael Kelley noted that "Bush’ s Harken past had been the subject of increasingly breathless press coverage and Democratic attacks for days."
While Bush was a director of Harken, the firm was involved in a bloody alliance with death squads in Columbia. While there is no evidence to assume he was directly involved in their operations, director Bush must have known of the involvement. Harken became involved in Columbia when Rodrigo Villamizar, an old Bush friend, became director of Columbia’s Bureau of Mines and Mineralsh, which handled oil concessions. Earlier, Bush had helped Villamizar obtain a job on the staff of the Texas senate Economic Development Committee and, still later, state Public Utilities Commission. Most of the concessions were in the Magdalena Valley, were it was necessary to work with the death squads that had been formed by the military, drug traffickers, and military. These units killed human rights activists and union leaders, while forcing peasants to abandon valuable land. Villamizar was later convicted of corrupt practices and became a fugitive from justice.