Thou hypocrite, first cast out the beam out of thine own eye.
The Gospel according to St. Matthew
Whew! For a minute there it looked kind of bad. Until you read the explanation. That's how things usually are in the Bush administration. Things look bad until you get the explanation and then they are just fine. That is what explanations are for.
Mr. Bush's Harken dealings need constant explanation because the facts have a way of moving around, as facts often do in the Bush administration. The first and most important explanation is that the SEC did not prosecute Mr. Bush and that takes care of all the unfriendly facts. Even the ones produced by the Boston Globe on July 13, 2001, that revealed Mr. Bush was told a lot more than he knew.
The Boston Globe reported that as a board member and member of a special committee to deal with Harken's financial troubles, Mr. Bush had been warned about the company's financial crisis by its president, Mikel D. Faulkner. On April 20, 1990, two months before Mr. Bush sold his stock to great and good advantage, Mr. Bush and other board members received a letter from the president of the company warning that the company was facing a liquidity crisis and plans to sell new shares of stock to investors were in jeopardy because of slumping oil prices. On May 18, 1990, the special committee received another letter alerting it to the "negative repercussion" that could occur if it failed to approve a series of waivers and extensions of corporate loans. In June 1990, Bruce N. Huff, Harken's senior vice president, wrote the SEC, "The company was in the midst of the severe cash crisis."
It was during those troubled times that an informed, but unaware, future president, George W. Bush, sold 212,140 shares of Harken stock. The sale occurred June 22, 1990. On April 3, 1990, Mr. Bush had signed a letter agreeing to hold his shares for at least six months. He probably had crossed his fingers when signing that letter. Two months after the sale, the company reported a $23.2 million quarterly loss. Mr. Bush explained that he did not know that Harken would be posting the loss. The fact that he was on a special committee charged with knowing about such things was of no moment.
The same day as the Globe story appeared, another appeared in the Washington Post. It was about Larry D. Thompson. It, too, benefitted from an explanation.
Mr. Thompson is a deputy attorney general and the head of a new multi-agency corporate-crime task force. He won unanimous confirmation to that post on May 10, 2001. On May 9, 2001, he was the chairman of the audit and compliance committee of Providian Financial Corp. He held that post from June 1997 until his confirmation.
Providian is a company that sells credit in the "subprime market." People in that market are those who can't get credit cards from the major companies. They are people with low incomes and bad credit histories. Providian is doing them an enormous favor by permitting them to get credit that they can't afford to have at interest rates they can't afford to pay. The APR rates charged by Providian can be as high as 29.9 percent.
In a March 1999 memorandum obtained by the San Francisco Chronicle, the then president of the company, Andrew Kahr, asked company executives about its customers: "Is any bit of food too small to grab when you're starving and when there is nothing else in sight? The trick is charging a lot, repeatedly, for small doses of instrumental [sic]credit." Although the extended credit makes the borrower poorer than before the credit was extended, it had the opposite effect on officers and directors of the company. It made them conspicuously wealthier. David Alvarez, former president of the integrated-card unit made a $12.2 million profit selling his stock before the company disclosed that it was in deep trouble. Mr. Thompson sold all his stock having a value of approximately $4.7 million following his confirmation hearing and a short time before Providian's financial problems became public information and the stock price plummeted.
The bad news that became public information after Mr. Thompson left was that while Mr. Thompson was the chairman of the compliance committee and a board member, Providian was charging consumers excessive fees and engaging in other practices that state and federal regulators said broke consumer-protection rules. On the surface this looks bad. The explanation was helpful.
Mark Corallo, the person who talks for Mr. Thompson when he doesn't feel like talking, told the Washington Post that: "The deputy attorney general is proud of his service on the board of Providian. He only became aware of the [fraud] issues when regulators began to make inquiries. He then personally took the lead in making the company do the right thing and it was his personal efforts that were a driving force in the company settling over $400 million and in implementing internal reforms and compliance measures." It is good to know that Mr. Thompson, acting as head of the audit and compliance committee of Providian was sensitive to fraud issues as soon as regulators pointed them out to him.
Given the huge staff that the new multi-agency corporate-crime task force will
undoubtedly have, we can be sure that although Mr. Thompson may not recognize
corporate fraud in others when he couldn't see it in his own company, staff members
will point it out to him as soon as they spot it and he will be quick to take
remedial action. His appointment is a brilliant stroke by a president who doesn't
always seem so.
Christopher R. Brauchli is a Boulder, Colorado lawyer and writes a weekly column for the Knight Ridder news service.
Copyright 2002 The Daily Camera