NP "O ewe kid!"

[Doug Millison]

Monica, your puerile comparison might be more aptly applied to the
relationship between Bush, Jr. and the American people who adore him so
sheepishly.

http://www.nytimes.com/2002/07/07/opinion/07KRUG.html

Succeeding in Business
By PAUL KRUGMAN

On Tuesday, George W. Bush is scheduled to give a speech intended to put
him in front of the growing national outrage over corporate malfeasance. He
will sternly lecture Wall Street executives about ethics and will doubtless
portray himself as a believer in old-fashioned business probity.

Yet this pose is surreal, given the way top officials like Secretary of the
Army Thomas White, Dick Cheney and Mr. Bush himself acquired their wealth.
As Joshua Green says in The Washington Monthly, in a must-read article
written just before the administration suddenly became such an exponent of
corporate ethics: "The `new tone' that George W. Bush brought to Washington
isn't one of integrity, but of permissiveness. . . . In this
administration, enriching oneself while one's business goes bust isn't
necessarily frowned upon."

Unfortunately, the administration has so far gotten the press to focus on
the least important question about Mr. Bush's business dealings: his
failure to obey the law by promptly reporting his insider stock sales. It's
true that Mr. Bush's story about that failure has suddenly changed, from
"the dog ate my homework" to "my lawyer ate my homework - four times." But
the administration hopes that a narrow focus on the reporting lapses will
divert attention from the larger point: Mr. Bush profited personally from
aggressive accounting identical to the recent scams that have shocked the
nation.

In 1986, one would have had to consider Mr. Bush a failed businessman. He
had run through millions of dollars of other people's money, with nothing
to show for it but a company losing money and heavily burdened with debt.
But he was rescued from failure when Harken Energy bought his company at an
astonishingly high price. There is no question that Harken was basically
paying for Mr. Bush's connections.

Despite these connections, Harken did badly. But for a time it concealed
its failure - sustaining its stock price, as it turned out, just long
enough for Mr. Bush to sell most of his stake at a large profit - with an
accounting trick identical to one of the main ploys used by Enron a decade
later. (Yes, Arthur Andersen was the accountant.) As I explained in my
previous column, the ploy works as follows: corporate insiders create a
front organization that seems independent but is really under their
control. This front buys some of the firm's assets at unrealistically high
prices, creating a phantom profit that inflates the stock price, allowing
the executives to cash in their stock.

That's exactly what happened at Harken. A group of insiders, using money
borrowed from Harken itself, paid an exorbitant price for a Harken
subsidiary, Aloha Petroleum. That created a $10 million phantom profit,
which hid three-quarters of the company's losses in 1989. White House aides
have played down the significance of this maneuver, saying $10 million
isn't much, compared with recent scandals. Indeed, it's a small fraction of
the apparent profits Halliburton created through a sudden change in
accounting procedures during Dick Cheney's tenure as chief executive. But
for Harken's stock price - and hence for Mr. Bush's personal wealth - this
accounting trickery made all the difference.

Oh, and Harken's fake profits were several dozen times as large as the
Whitewater land deal - though only about one-seventh the cost of the
Whitewater investigation.

Mr. Bush was on the company's audit committee, as well as on a special
restructuring committee; back in 1994, another member of both committees,
E. Stuart Watson, assured reporters that he and Mr. Bush were constantly
made aware of the company's finances. If Mr. Bush didn't know about the
Aloha maneuver, he was a very negligent director.

In any case, Mr. Bush certainly found out what his company had been up to
when the Securities and Exchange Commission ordered it to restate its
earnings. So he can't really be shocked over recent corporate scams. His
own company pulled exactly the same tricks, to his considerable benefit. Of
course, what really made Mr. Bush a rich man was the investment of his
proceeds from Harken in the Texas Rangers - a step that is another, equally
strange story.

The point is the contrast between image and reality. Mr. Bush portrays
himself as a regular guy, someone ordinary Americans can identify with. But
his personal fortune was built on privilege and insider dealings - and
after his Harken sale, on large-scale corporate welfare. Some people have
it easy.