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President needs to explain the Texas Rangers deal

This spring and summer, we heard talk about the need for regime changes. The Palestinians, undoubtedly anxious for advice about their leadership from President Bush, were told that Yassir Arafat wasn't good for them because he wasn't democratic enough and his Palestinian Authority lacked "transparency." Arafat belongs in a designated category we might call "not quite a regime," but anyway the principle was clear. Wagging a finger at Arafat and speaking over his shoulder to the Palestinians, Bush was saying, "don't elect this man."

At the same time, we were hearing that Iraq needs a regime change so badly that the United States was making plans to launch its first-ever unprovoked large-scale attack to get rid of Saddam Hussein, the coalition that opposed him ten years ago, and Middle East stability, and to alienate whatever Arab countries were still hoping for warm relations with the United States. There was more loose talk ? why stop there ? about the need for regime changes in all the axis of evil countries (Iran and North Korea), and a careful ear could even hear Saudi Arabia mentioned.

At the same time, the stock market plunged under repeated reports of accounting fraud and insider trading. There were, it seemed, more high level corporate criminals than one could wag a finger at, but the President tried, threatening to get tough with people who use their positions within corporations to manipulate information and to profit from that manipulation. There was much less talk here about how to produce more democracy in corporations ? they are woefully undemocratic institutions ? or how to mandate "transparency" in them or even how to protect whistle blowers who could no longer hold their noses at what the bosses were doing.

Then articles appeared in the New York Times by Princeton economics Professor Paul Krugman outlining Mr. Bush's rise to financial success. In 1986, he owned Spectrum 7 Energy Corp., an oil exploration company that had found more debt than oil. Lucky for him, Harken Energy bought his failing company for $2 million, hoping to cash in on his connections. With the help of now-infamous Arthur Anderson accounting, a group of insiders then bought Harken subsidiary Aloha Petroleum with money borrowed from Harken itself. This is a favorite accounting trick of the Enron era. Create a dummy company to buy an asset at an inflated price with money borrowed mostly from the primary corporation so it looks like the sale produced a profit. This is a fictitious asset sale in which the sale, not the asset, is fictitious.

This ploy temporarily allowed Harken to post a $10-million phantom profit on the transaction and hide most of the company's 1989 losses. Mr. Bush was on Harken's audit committee but an SEC report stated he might not have known about the fictitious asset sale which artificially inflated Harken's stock price. If he didn't know, this could raise questions about his attention span. In any case, he benefited handsomely from both the sale and his ignorance. About two months before Harken's stock price nose-dived, Mr. Bush sold his shares, but then took 34 weeks, much longer than the law requires, before he reported the sale to the SEC. An internal SEC report concluded he had broken the law but no action was taken. Probably had nothing to do with the fact his father was president.

Mr. Bush received $848,560 for his Harken stock and invested $606,000 of that in the Texas Rangers baseball team, which he sold for $14.9 million two years ago. His initial investment is said to have been about two percent of the capitalization of the Rangers, but for reasons yet to be explained, he eventually received a 12-percent stake. The media in 2002 defined the story of possible impropriety in Mr. Bush's rise from failed oil explorer to multimillionaire major league baseball investor as a problem of late filing of the report on the Harken stock sale, but there are other troubling issues. How Mr. Bush's investment of $606,000 eventually came to be worth $14.9 million is a much more interesting story than that of his late filing of a possibly insider-traded stock sale.

Arlington, Tex., built the Rangers a new stadium, spending some $150 million in taxpayer money. Shortly thereafter, Mr. Bush ran for and was elected governor. As governor, he changed the rules governing the University of Texas' huge endowment so that government officials no longer were required to disclose what they were doing with the money. He then "privatized" $9 billion in endowment assets and turned this money over to a non-profit corporation, Utimco, chaired by a dealmaker named Tom Hicks. Under his management, at least $450 million was invested in private funds managed by his associates and by major Republican Party donors. These investments were hidden from public view through rules promulgated by Mr. Bush (remember the transparency issue?), and an employee of Utimco who blew the whistle was summarily fired. The investments appear to have done poorly and Mr. Hicks left Utimco in 1999 but Hicks then bought the Texas Rangers for triple the original price. It is reported that powers of eminent domain were used to secure valuable properties for the Texas Rangers. The documentation, which could explain the details of how the endowment moneys were handled, is not available to the public. However, any records or agreements which can explain the extraordinary generosity to Mr. Bush by his fellow owners of the Texas Rangers, cry for examination.

Mr. Bush could have expected to receive some $2.3 million for his $606,000 investment under these very favorable conditions, but he did much better than that. His partners voluntarily gave up some of their shares and Mr. Bush received 12 percent of the proceeds. This was a gift, Professor Krugman states, to a sitting governor, of $12 million. If Professor Krugman is correct, not only did Mr. Bush become wealthy entirely through patronage and connections, he may have left the appearance of use of the powers of public office to enhance his personal fortune.

John C. Mohawk, Ph.D., columnist for Indian Country Today, is an author and professor in the Center for the Americas at the State University of New York at Buffalo.