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|WASHINGTON -- Two and a half months before
George W. Bush sold his stock in a struggling Texas energy company where he was a
director, he signed a letter promising to hold onto the shares for at least six months,
internal company documents show. The "lockup" letter Bush signed on April 3,
1990, for his shares in Harken Energy Corp. is now being compared with the account his
lawyers gave federal securities regulators who examined the stock sale as a possible
Bush's lawyers have maintained for more than a decade that he had a pre-existing plan to sell his stock in Harken and other companies to pay a tax bill and a loan debt he owed for his stake in the Texas Rangers professional baseball team. And they have said the sale wasn't motivated by Harken's deteriorating financial situation.
The letter Bush signed promising to hold onto the stock was released by the Securities and Exchange Commission under the Freedom of Information Act. At the time he signed it, Harken was considering a public stock offering to raise money to solve a cash flow problem.
"Dear George," said the April 2, 1990, letter from Harken secretary Larry Cummings. "As you are aware, Harken is contemplating a public common stock offering.
"In connection with such offering, the underwriters have requested that Harken obtain consents for all directors, officers and other affiliates to agree to not sell ... for a period of 180 days from the date our proposed public offering goes effective."
Bush signed and returned the letter the next day.
Bush's sale of his Harken stock for $848,560 has come in for renewed public scrutiny in recent weeks as he tries to restore investor confidence in the financial markets and calls for a crackdown on corporate wrongdoing.
White House spokesman Dan Bartlett said Monday the lockout letter was "made irrelevant and obsolete" by the time Bush sold his stock in summer 1990 because the public stock offering it affected never went through.
But a securities expert said the document calls into question his lawyers' account to the SEC.
"Bush's signing of the April 2, 1990, lockup agreement undercuts his lawyers' explanation for the early sale of his Harken stock," said Houston attorney Thomas R. Ajamie, an expert in securities law whose firm is advising companies that did business with the failed energy giant Enron.
"If his accountant told him that he needed to sell stock to pay a debt obligation for his interest in the Texas Rangers, it does not make sense that he would subsequently sign an agreement promising not to sell his shares of Harken stock for six months," Ajamie said. Harken scrapped the public stock offering a few weeks after Bush signed the letter because the company was plunged into a financial crisis when one of its bank lenders withdrew its support.
Bartlett said there was a general strategy to go forward in selling assets to pay off the debt and "I don't think they were looking for any magic time frame." Bush and his accountant had discussions in late 1989 and early 1990 about the plan, Bartlett said.
"The president sold his stock in order to retire the debt he incurred by purchasing the debt he incurred in the Texas Rangers baseball club," he said.
When the SEC examined the transaction more than a decade ago, Bush's lawyer offered an explanation of why the future president unloaded stock at a time when Harken was experiencing financial difficulties.
"According to his attorneys, these sales, and the Harken sale, were made to meet an obligation of approximately $600,000 in connection with the Texas Rangers and to pay a couple hundred thousand dollar tax bill," an SEC memo from the probe states.
"According to his attorneys, Bush made these sales at the urging of his financial adviser/accountant who was bugging him to get liquid," the memo states. The SEC did not interview Bush, so the only account of his sale came from what his attorneys told regulators.
One expert said even though Bush signed the lockup letter, it didn't represent a serious obstacle to selling.
It is fairly common for company insiders to sign such letters and then obtain permission to sell the stock anyway before the lockout period is up, said Carr Bettis, an associate research professor of finance at Arizona State University.
During public stock offerings, underwriters typically ask that company insiders not sell their own stock. Companies also typically make the same request of their executives, based on concerns over improper insider trading.
Bush sold his stock for $4 a share on June 22, two weeks after being approached by a California broker who said an institutional client wanted to buy a large block of Harken stock. The buyer has never been identified.
The stock's value declined to $3 two months later and to a little over a dollar a share by yearend. The following year, the stock rose to over $8 a share as Harken explored for oil in a potentially lucrative Middle East venture that never found any oil.
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