WASHINGTON - Harvard University's financial relationship with President Bush's former oil company was deeper than previously understood, with the university's management fund creating a separate ''off the books'' partnership with Harken Energy Corp. that helped keep afloat the financially troubled company, according to a report to be released today.

HarvardWatch, a student-alumni group that monitors the school's investments, plans to issue the report and say that it has analyzed documents showing that the Harvard fund, an independent entity that manages the university's endowment, formed a partnership in 1990 with Bush's oil firm called the Harken Anadarko Partnership. The partnership effectively removed $20 million of debt from Harken's books, relieving the Texas company's short-term financial problems.

About the same time, the Harvard fund invested about $30 million in Harken, which also helped keep the firm afloat. The partnership has not been mentioned in recent accounts of Bush's financial dealings in the oil business.

William K. Black, a former federal banking regulator, said in a telephone interview that he has examined the Harken Anadarko Partnership and concluded the arrangement was a significant expansion of the Harvard fund's involvement in the company beyond the $30 million investment.

''Harvard had a dramatically larger financial stake and a much more interesting financial stake'' than was previously understood, Black said. ''It all serves as a partnership device to move money from Harvard to Harken. This is beyond nuts from an institutional investor's standpoint.''

The creation of the partnership was approved in a motion made by Bush, who was on the Harken board of directors and its audit committee, said Black, an assistant professor at the LBJ School of Public Affairs at the University of Texas in Austin.

White House spokesman Scott McClellan said the idea of the partnership came from the Harvard fund.

''This is something that Harvard proposed, and Harvard set the terms of the partnership,'' McClellan said yesterday. ''Harvard proposed the partnership because Harvard decided it wanted to get more involved in the energy sector and be more directly involved in operational aspects.''

Representatives of Harvard Management and Houston-based Harken Energy did not return phone calls seeking comment on the partnership.

In May 1990, Black said, the Harvard fund and another unnamed shareholder loaned Harken a total of $46 million. But with Harken still having a debt load, the fund and Harken formed the Harken Anadarko Partnership in December 1990. The partnership was ''off the Harken books,'' Black said, which he said means that Harken's stake in the partnership was reported but the financial details did not need to be revealed to the Securities and Exchange Commission.

Such a partnership was legal, he said.

According to Black, the partnership was set up to help Harken avoid bankruptcy and included $64.5 million worth of unrelated energy properties owned by the Harvard fund and $26 million of drilling operations from Harken - along with $20 million worth of Harken's debt and liabilities. Harken held a 16 percent stake in the partnership while the Harvard fund owned 84 percent, according to HarvardWatch. Nonetheless, the operation was run by Harken, which was paid $1 million per year to operate the partnership's oil and gas ventures, the report said.

Harken ''transferred an enormous amount of liabilities to the partnership,'' Black said. ''You don't see the Harvards of the world doing things like this.''

With so much debt removed from Harken's own books, Harken's stock price rose and the Harvard fund sold 1.6 million shares during this temporary stock bubble, the report says.

The formation of the partnership, coupled with the fund's purchase of Harken stock, kept the firm afloat financially, according to Black. Black's review of the partnership may add weight to the findings of HarvardWatch.

Black, a registered Democrat, is a well-known specialist in reviewing financial transactions; he was the deputy director of the Federal Savings and Loan Insurance Corp. during the Reagan and first Bush administrations and played a key role in investigating the ''Keating Five'' scandal that involved five senators. Black also played a role in the investigation that helped lead to the resignation of House Speaker Jim Wright, a Democrat. He said he has conducted financial reviews that make him unpopular among Democrats and said he did not examine the Harken partnership for political reasons.

It was 1986 when George W. Bush's struggling oil venture, Spectrum 7, was purchased by Harken. Harken gave Bush a seat on the board of directors and an annual paycheck of $120,000. At the time, Bush's father, George H. W. Bush, was vice president. It was around this same time that the Harvard fund began investing in Harken. The fund eventually poured $30 million into Harken and became the largest shareholder. A Harvard Management official, Michael Eisenson, was given a seat on the Harken board.

© Copyright 2002 Globe Newspaper Company

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