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Harken Energy
Last Updated: October 13, 2008

If you had been watching George W. Bush at Harken Energy in the late 1980s, you would have seen Enron coming. And you’d have known why this country’s hands are tied when it comes to pressing Saudi Arabia on homegrown terror: Saudi money hasn’t just enriched George W. Bush…it saved his company from bankruptcy.

In 1978, George W. Bush’s uncle Jonathan Bush rounded up $3 million from investors to launch his nephew’s first oil company, Arbusto. George W. Bush’s Air National Guard pal James Bath pitched in $50,000 as well. Bath’s former business partner claims the money came from Khalid bin Mahfouz and Salem Bin Laden, though Bath denies it. (Bin Laden was the half-brother of Osama.)

Bin Mahfouz was director and 30 percent owner of BCCI, a Middle Eastern bank that later collapsed in what Manhattan District Attorney Robert Morgenthau called the “largest bank fraud in world financial history.”

Before BCCI’s collapse, the CIA used it to launder money for clandestine CIA activities related to Iran-Contra and the Soviet war in Afghanistan. Bath himself was briefly president of an aviation company later implicated in Iran-Contra scandal.) However, Bath represented the two men’s financial interests in the U.S. at the time.

A name change to “Bush Explorations” couldn’t keep Arbusto from the brink of insolvency, and in 1983 some of George H.W. Bush’s most generous supporters helped the company merge with Spectrum 7. But by September 1986, Spectrum 7, too, was nearly bankrupt. An oil company named Harken Energy absorbed it, and Bush joined Harken’s board . A month later, the endowment of George W. Bush’s business school alma mater, Harvard University, bought $2 million worth, or 30 percent , of Harken shares and invested $20 million in Harken projects . In 1987, with Bush on the board and Harvard’s infusion in its coffers, Harken put out a stock offering.

The most corrupt bank in the history of the world came calling. Arkansas banker Jackson Stephens brokered a $25 million bailout for Harken.t Stephens, (a top contributor toPresident Bill Clinton campaigns)), had helped BCCI get a foothold in the United States in 1987, working to arrange the sale of a Georgia bank to a BCCI-owned bank fronted by Ghaith Pharoan. (A wealthy Saudi businessman, Pharoan has been on the lam for his role in BCCI’s implosion since 1992.)

Stephens placed the Harken stock with a bank owned by BCCI partner Union Bank of Switzerland. When Swiss  banking rules forced Union to divest from Harken, Stephens sold most of Union’s Harken shares to a Saudi tycoon named Sheikh Abdullah Taha Bakhsh, who just happened to be a business associate of Ghaith Pharoan. Bakhsh has been accused of fraud several times, and he is also a major stockholder in Investcorp, a Bahraini company that has been sued for fraud and extortion and whose founder appears on the “Golden Chain,” a document found in Bosnia in 2002 that has been introduced in American courts as a list of Osama Bin Laden’s and Al Qaeda’s top 20 financiers. Bakhsh, like Bath, represented Mahfouz and Salem Bin Laden in the United States, and Bath’s relationship with Bakhsh spurred a federal investigation into whether Bath was helping Saudis to use their wealth to influence foreign policy.
    
In January 1990, Harken won its first foreign contract, an exclusive offshore drilling opportunity in Bahrain. In May 1990, National Security Adviser Brent Scowcroft received a classified State Department memo saying that Saddam Hussein was menacing his neighbors, which put Harken at risk of increased insurance and equipment costs. Talat Othman, whom Bakhsh had placed on the Harken board as his personal representative (and who now sits on the board of Amana Mutual Funds with Yacub Mirza, a central figure in the largest domestic terror financing investigation in U.S. history), met with President George H.W. Bush and National Security Adviser Brent Scowcroft three times during the first part of 1990. Othman sat on the audit board with George W. Bush, and in June 1990 — just a month after the State Department’s memo to Scowcroft — George W. Bush dumped his Harken shares and pocketed $850,000. In August 1990, Iraq invaded Kuwait, and Harken, after disclosing a loss of $23 million, watched its shares drop by 25 percent.

After the loss was disclosed, George W. Bush made a motion to negotiate with the Harvard endowment to offload $20 million in debt and $26 million in assets from Harken’s balance sheets into the endowment, thereby improving Harken’s cash flow. After the transaction took place in November, Harken’s stock price rose from $1.25 to $8, and Harvard unloaded shares to the tune of almost $7.5 million. In other words, the partnership created a bubble in order to sell its shares. If this sounds familiar, it should: The arrangement was similar those used by Enron to inflate earnings, and Enron’s finance committee chair Herbert “Pug” Winokur was on the board of Harvard’s endowment. (Winokur would also go on to invest in a subsidiary of Investcorp—Bakhsh’s eventual employer—along with Purnendu Chatterjee, an associate of George W. Bush’s brother Marvin Bush.)

In April 1991, Bush disclosed the sale of his Harken stock to the SEC. Eight months had passed since the sale, and SEC launched an insider trading probe. The SEC closed the probe in 1993 with a memo that said the end to the investigation should not be construed as an exoneration of Bush. Bush resigned as director and consultant in November 1993 so he could run for governor of Texas.

During his time at Harken, Bush earned close to $1 million while the company lost millions.

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