For President Bush, Harken Energy ( HEC) is like one of the villains in horror movies. No matter how many times he buries the miscreant, it keeps rising from the grave to haunt him. In every campaign he's been involved in, reporters and political opponents have raised the now-familiar story of Bush's dealings with the Texas energy exploration company. And in every campaign, Bush has managed to fend off the questions and put them to rest. But in his latest campaign -- the current initiative to alter the behavior of corporate insiders and restore investor confidence -- the Harken story may prove to be a real horror show. Bush's ineffectual speech on corporate responsibility fell remarkably flat on Main Street, on Wall Street and in Washington. Perhaps he wasn't tough enough, and he surely didn't provide action to back up the rhetoric. But I believe the speech failed because Bush simply lacks credibility on the issues of executive and insider behavior -- in part because of his personal experience on the Harken board all those years ago, and in part because of the way he has dealt with it in recent weeks. Let's stipulate up front that Bush was not guilty of insider trading. Let's further stipulate that if he had lost the election and remained governor of Texas, nobody would be talking about Harken today.
Rather than admit that he was lax and that, as a director, he should've taken pains to ensure that the proper forms were filed with the SEC -- these were major transactions for him, after all -- he has cast blame elsewhere. First, he offered the equivalent of the "dog ate my homework" excuse: He said the SEC lost the paperwork. Later, Bush spokesman Ari Fleischer blamed Bush's lawyers. (When all else fails, blame your lawyers.) "I still haven't figured it out completely," Bush said at a press conference last week. As for the loans, Bush and his spokespeople said they were appropriate because they were accepted practice at the time, and, in any case, he didn't profit from them. Again, that misses the point. If giving shareholders' money to executives to buy stock is not a sound practice today -- especially when the rich people taking the loans don't have to repay back them -- it wasn't a sound practice in the late 1980s. In fact, Harken didn't even come close to collecting the loans it made to Bush and other officers, and the shareholders ended up eating them. Bush also stumbled when discussing the Aloha transaction. Asked if he recalled discussing the deal as a member of the audit committee, Bush said, "You need to look back on the directors' minutes." And when asked why the audit committee didn't see that this Enronesque transaction would fail to pass regulatory muster, Bush responded, "In the corporate world, sometimes things aren't exactly black and white when it comes to accounting procedures." In short, Bush's responses sound familiar. The instinctive defensive crouch, the relentless passing of the buck, the denials -- this is exactly the sort of reaction we've seen from every CEO, director and official called to task about dealings at failed companies. The most infuriating aspect of the Enron-Tyco-Global Crossing-WorldCom-Andersen-etc. scandals is the utter lack of contrition, the refusal of anyone to take responsibility. Layer the Harken story on top of some of Bush's other reactions to the unfolding corporate scandals, and you begin to see why the speech was such a downer. While calling for zero tolerance for unethical behavior, Bush has inexplicably maintained his support for Army Secretary Thomas White. White formerly ran Enron's Energy Services division, which artificially inflated its earnings to the tune of hundreds of millions of dollars. What's more, Bush has stubbornly stood by SEC Chairman Harvey Pitt, whose past work forces him to navigate more shoals than a Mississippi River barge pilot. This loyalty, which in other times might seem admirable, now seems more pigheaded. Think how much more effective Bush's speech would have been if he had dealt honestly with his experience on the Harken board and used it as an object lesson. If he had expressed regret that investors fared poorly in a company on whose board he served. If he had conveyed an inkling that this experience has given him some particular insight into the importance of insider conduct, of the need to follow both the spirit and the letter of the law, of the need for directors to be more vigilant and of the need for executives to take responsibility for their actions, to admit when they have failed or done wrong, and not to blame somebody else. That would have been a speech worth listening to.