Minding their own business at the White House
Bush and his administration have a string of links to the companies at
the heart of the scandals rocking America
David Teather in New York
Tuesday July 9, 2002
The Guardian
If the approval polls are correct then George Bush has done an adept job
of fashioning himself as a champion of the people during the "war on
terrorism". Today he will attempt to build on that image in a keynote
speech portraying himself as the scourge of corporate corruption, the
man to save capitalism by bringing in tougher measures against
executives who have committed fraud.
But opponents of his administration are trying to present an altogether
different picture of the president - that of a friend to the corrupt,
cash-soaked businessmen and women wrenching corporate America apart.
The president's political rivals scent blood. As he prepares his
address, Democrats have drawn attention to a 1991 insider dealing
investigation of the president while he was a director of a
Houston-based oil group, Harken Energy.
Senator Tom Daschle, the Democratic leader, pressed at the weekend for
details of that investigation to be released. "Just let everyone see
what is there," he said. The administration, he added, "from top to
bottom", had been characterised by "too much of a permissive atmosphere"
when it came to business regulation.
The astonishing $3.8bn (£2.5bn) fraud uncovered at telecoms company
WorldCom, which carries about 70% of emails in the US, followed swiftly
by the accounting missteps at Xerox, provided the catalyst for Mr Bush
to seize the moral high ground. Using language normally reserved for his
"axis of evil" he has, in recent weeks, repeatedly vowed that those
responsible will be punished.
What might not otherwise feature as a populist issue has begun to weigh
more heavily as it dampens the economic recovery in the US. The White
House's links to big business could leave it looking severely exposed.
The administration's links to Enron, the US energy firm that went bust
at the end of last year, remain under intense scrutiny.
Questions are being asked about accounting practices at the oil company
Halliburton during the tenure of the vice-president, Dick Cheney, as
chief executive. At the time he appeared in a promotional video
extolling the virtues of his auditor, the now almost defunct Andersen,
which was found guilty of obstructing the investigation into the Enron
scandal by shredding documents.
The top military chief in the White House, Thomas White, is a former
Enron vice-president and sold $12m in Enron shares between June and
November last year. The stock sales are under investigation but Mr White
has resisted pressure to quit. He claims to have been privy to no inside
information.
With an administration packed with former businessmen, the White House
looks increasingly vulnerable. Paul O'Neill, the treasury secretary, was
formerly the chief executive of aluminium business Alcoa; Mitch Daniels,
the budget director, was vice-president of drugs company Eli Lilly; and
Donald Rumsfeld, the defence secretary, was chairman of two technology
companies.
The investigation by the US financial watchdog, the securities and
exchange commission (SEC), into Harken involved Mr Bush's sale of
212,140 shares for $849,000. He sold them just two months before the
company reported a $23.2m quarterly loss, news that would depress the
price.
The SEC closed the investigation without taking any action. But
Democrats have injected new life into the issue with the fresh detail
that some of the paperwork to disclose the share sale was filed eight
months late. White House spokesman Ari Fleischer blamed the oversight on
bungling lawyers. Mr Bush's lawyer, Robert Jordan, is now the
government's ambassador to Saudi Arabia.
In 1994, when the issue arose as Mr Bush was campaigning for Texas
governor, the story was a little different. He blamed the SEC for losing
the forms. He reacted angrily to questioning by reporters last week and
said: "Everything I do is fully disclosed."
The Bush administration's links to Enron, the trigger for the present
wave of scandals, are labyrinthine. Enron, based in Mr Bush's home state
of Texas, was his biggest backer during his campaigns for governor and
president, donating more than $800,000. He was also a friend of the
company's former chief executive Kenneth Lay, whom he referred to
affectionately as "Kenny boy".
Robert Zoellick, the US trade representative, served on Enron's advisory
council. Lawrence Lindsey, the president's top economic adviser, was a
former paid consultant to Enron.
Attempts to prove that a series of contacts between the energy firm and
the administration in the months before the company fell into bankruptcy
were less than above board have been fruitless. There is no evidence
that any favours were granted. But the White House could be snared by an
investigation that was already ongoing before Enron's collapse - an
audit of the formation of the administration's energy policy, which
provided $33bn in tax breaks to energy firms.
The policy enraged environmentalists by giving permission to drill for
oil in the Arctic National Wildlife Refuge (since blocked by the
Democrats). In the formation of that policy, Mr Cheney repeatedly met
with representatives of the energy industry, including Enron, but
excluded conservationists. One man who was present was Karl Rove, chief
political adviser to Mr Bush, who owned Enron stock.
What is clear is that Enron liberally spread its largesse among both
Republicans and Democrats - and not only in the current administration.
Attorney general John Ashcroft was forced to excuse himself from the
investigation into Enron's affairs because of a donation of $58,000. His
deputy, Larry Thompson, represented Enron at a private law firm but is
still heading the justice department investigation.
Schmoozing
Nor is Enron the only company that has spent freely on schmoozing
politicians before being shaken by scandal. WorldCom, whose directors
were yesterday being grilled by investigators, spent more than $7.5m on
campaign financing in the past decade, including a $41,000 donation to
Mr Bush's election campaign in 2000. The accounting industry, its
reputation in shreds, has spent heavily on the Senate banking and
finance committee.
Republican senator Phil Gramm (married to an Enron board director), who
has led the fight against the auditing reform bill, has received $49,000
from the industry in the current election cycle, according to the centre
for responsive politics.
Mr Cheney is perhaps looking the most vulnerable of any in the
administration. Halliburton, where Mr Cheney was chief executive between
1995 and 2000, admitted in May that it was the subject of an SEC
investigation.
The inquiry is focusing on the way the company treated revenues from
construction work on pipelines and the like - particularly its booking
of revenues when the company knew it might not get paid.
The red flag was raised by a change in policy that allowed Halliburton
to book the revenues on projects that had run over budget and were in
dispute. The change of accounting policy came at a critical time for the
company, which was suffering heavy losses from some of its long term
contracts.
The company argues that the change was approved by Andersen, but with
the auditing firm already on its knees, that defence will not go far.
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