Family of Secrets: The Bush Dynasty, America's Invisible Government, and the Hidden History of the Last Fifty Years (51 page)

Given Bath’s customary deal with the Saudis—a 5 percent management fee for any Saudi dollars he invested—this fifty thousand dollars from Bath raises the possibility of a corresponding one million dollars of Saudi money invested directly in W.’s drilling ventures. It’s not possible to know for sure. But recall the million from Uzielli, who admitted the money was not his.

Remarkably, when
Time
reporters asked W. about his post-Guard relationship with Bath—for an article on Bush Sr.—he denied having one. The reporters were visiting Bill White in Houston at the time. When White told them that he had retained old financial statements showing that Bath had invested in Bush’s firm, the reporters called Bush and asked him about it. In their subsequent article, they noted:

The President’s son has denied that he ever had business dealings with Bath, but early 1980s tax records reviewed by TIME show that Bath invested $50,000 in Bush’s energy ventures and remained a stockholder until Bush sold his company to Harken in 1986.
¹⁹

In the light of this information, those widely published pictures of Bushes shaking hands with Saudi royals come into clearer focus. That some of the money invested in W.’s first business ventures may have come from the bin Laden family shows how prudent the Bushes were to stonewall inquiries into anything Bath-related. As noted in chapter 14, Bath confirmed in a legal proceeding his compensation arrangement with the Saudis—in which his small piece of the action was his compensation for arranging a larger Saudi piece. From that, and from Bath’s own limited resources, it appears that Bath’s involvement in any Bush enterprises may have translated into secret Saudi involvement as well.

A Broad Spectrum

When, despite this outside funding, W.’s company continued to slide into the red, yet more investors stepped in. The next chunk of capital came from Spectrum 7 Energy, an oil fund with Midland operations run by two Cincinnati money managers, William O. DeWitt Jr. and Mercer Reynolds III. Spectrum was just one of their ventures, started in better times, largely for tax shelter purposes. In September 1984, as Bush Exploration neared financial collapse, Spectrum 7 merged with it. George W. became chairman and CEO of the parent company, still called Spectrum 7, for which he was paid $75,000 a year.
²⁰
He also was given 1.1 million shares of Spectrum stock, worth about $150,000 in 2008 dollars.

The official version put forth during W.’s first presidential campaign is that in late 1983, DeWitt was too busy with other affairs and wanted someone to take over his oil enterprise. “He asked me to find someone in Midland who would be able to run the business down in Texas,” said Paul Rea, a DeWitt relative who had been in oil in Midland for years. Rea was an old friend of oil attorney Martin Allday, a longtime friend of Poppy Bush’s. The DeWitt family had owned the Cincinnati Reds baseball team and were major figures in Cincinnati.
²¹

According to the official account, Rea arranged a meeting with W., and DeWitt quickly decided that Bush was the ideal candidate. Since that explanation is so unlikely on its face, given W.’s track record as a businessman, other factors must be considered.

What those might be is suggested by DeWitt and Reynolds’s subsequent activities. These were of a complexion with which the reader is now familiar. In 1986, two years after the duo rescued W., DeWitt and Reynolds were on the ground floor of a new player in the lucrative and often tax-free offshore reinsurance business, a way for insurance companies to protect themselves against unnecessary risk.
²²

The firm, Midwest Employers Casualty Company (MECC), had an all-star cast, with names that figured in other Bush-related enterprises flavored with a hint of intelligence activity.
²³
The largest shareholders included Stephens Inc., the Little Rock–based investment bank whose owner had been involved in bringing Jimmy Carter’s aide Bert Lance into the fold of the criminal bank BCCI. There was also Schroder Venture Trust of New York, an affiliate of a London-based bank on whose board Allen Dulles once sat.

W.’s oil enterprises do not seem to have made his partners any money. Still, Reynolds in particular has collected large amounts for his political campaigns. He served as chief fund-raiser of W.’s presidential race in the crucial state of Ohio in 2000 and 2004. People in Reynolds’s zip code in the exclusive Indian Hills section of Cincinnati gave more to Bush’s reelection effort than did those in any other zip code except Manhattan’s Upper East Side. Ohio, of course, was the key to Bush’s close reelection victory over John Kerry.

There is a neat conclusion to this pas de deux: President George W. Bush named Reynolds as his ambassador to the banking havens Switzerland and Liechtenstein. As for William DeWitt, Bush appointed him to his Foreign Intelligence Advisory Board. Unless multimillionaire baseball team owners have special gifts for intelligence beyond scouting prospects and stealing signals, there could be something else going on.

W.’s Lucky Chance

During the 1980s, George W. Bush kept busy with other undertakings, most of them scrutinized little if at all in the years before he was elected president. In 1984, while his father was vice president, Bush was invited onto the board of a company called Lucky Chance Mining—whose name somehow evoked W.’s charmed life but which itself suffered a different fate. Lucky Chance was a penny stock—the category of investments in which individual shares usually can be bought for fractions of a dollar.

The main thing one concludes from a close look at Lucky Chance is that it

• was far more complicated than your average investment.

• involved figures connected with intelligence and with foreign money associated with regimes closely tied to the U.S. government.

• was not a venture of which W. was inordinately proud.

Lucky Chance was a small Arizona-based company that had cobbled together inactive gold and silver mines before Houston stock promoter David Klausmeyer took it over in the early ’80s. Klausmeyer was an old friend of Bob Gow’s. Gow had been both Poppy Bush’s lieutenant at Zapata Offshore and the employer of George W., in 1971 at Gow’s agricultural company, Stratford of Texas. Klausmeyer himself had worked as an in-house consultant at Stratford when George W. was there and also recalled meeting the elder Bush on numerous occasions. W. apparently asked him for career advice.

In a 2006 interview at his Houston home, Klausmeyer reconstructed for me his memories of those days. He recalled that he was looking for penny stocks from which he might be able to make some money. He was not particularly choosy; indeed he assigned his teenage son to scrutinize the so-called pink sheets that list these small-time companies. His son liked the name of the company, and that was that, he said.

The funding was arranged through Marion Gilliam, a pedigreed New York investment banker. In a telephone interview, Gilliam told me he vaguely recalled being approached by Klausmeyer to get involved with Lucky Chance. “It may very well have been that he once came on a totally unrelated matter, he mentioned that he had a client or a person interested in gold mining, and asked, did we have any people interested in investing in mining?”
²⁴
Gilliam worked in New York at Schroder Bank and Trust, a firm represented decades earlier by Allen Dulles that repeatedly shows up in connection with Bush-related ventures.
²⁵

Money came in from Iranians and Saudis who claimed ties to their royal houses.
²⁶
Houston-based Gamal Gamal, an Egyptian native, told Klausmeyer that he had connections with the Saudi royal family. “His connections must have checked out because I remember attending a function in L.A. with [TV personality] Art Linkletter and Marion Gilliam when we were introduced to a ‘Saudi princess,’ ” recalled Klausmeyer. “Marion took me aside and laughed about her because he knew right away she was phony— as Marion knew all the royal family, who were clients of Schroder Bank.”
²⁷

Despite its high-powered investors, Lucky Chance declared bankruptcy in 1982. Later, a company in which Gilliam owned stock received two hundred thousand dollars and five million Lucky shares for reorganizing the mining outfit.
²⁸

W.’s entry onto Lucky Chance’s board came in 1984 via Walter “Del” Marting Jr., an undergraduate roommate at Yale and classmate at Harvard Business School.
²⁹
When Marting was asked to assume the presidency of Lucky Chance, he agreed—but only on the condition that George W. Bush be brought onto the board, according to Klausmeyer. It was a kind of quid pro quo, as Marting sat on the board of W.’s oil company, Bush Exploration. Thus, both Marting and Bush got salaries from their respective companies, and blocks of stock in their friends’ company. (Klausmeyer believes that Bush got about fifty thousand shares per meeting.)

Bush served several years on the Lucky Chance board. He attended board meetings in various locales and visited the mines—until things got hot. For one thing, the other board members believed that Marting was investing funds in things they had not authorized. For another, the press had come calling.

A
Forbes
magazine reporter wasn’t really focusing on Lucky Chance, nor on Bush’s role, when he stumbled into the scene. The reporter, Stuart Flack, was looking into offshore shell corporations, in particular ones arranged by Gilliam and Klausmeyer.
³⁰
The whole matter of using offshore entities to avoid U.S. taxes had come up before, at Dresser and Zapata. Now, it could be a big problem because attention was focusing on Lucky Chance itself. “Both Dave [Klausmeyer] and Gilliam had accounts in Bermuda,” said Ernest Lambert, a former board member. “They could sell their stock through Bermuda—through, I think, Schroder’s. They would sell it through their account in Bermuda, and brought back the cash in suitcases.”
³¹

Lambert, described by several former Lucky Chance figures as a rare person of rectitude in the enterprise, said the Bermuda bank was used by some to sell their Lucky stock after the restructuring, when it was as high as fifty cents a share. That’s compared with less than a penny during many periods; and in fact the stock later plummeted. Lambert sold his own shares, legally, for just a nickel apiece. Because he had been able to acquire the stock for even less, Lambert was still able to make a $180,000 profit on the sale.

It was Klausmeyer who warned W. that a reporter was sniffing around. “I told George that
Forbes
magazine is doing this article,” Klausmeyer recalled when I visited him at his Houston home in 2006. “I said, ‘I think since your name was mentioned, if your father wants to be president, you probably should resign.’ And he said, ‘You’re right. I resign right now.’ ”

Klausmeyer recalled the scene vividly: “[Marting] was practically on his knees saying, ‘Please, George, don’t leave me alone here. Please don’t resign.’ And Bush says, ‘No, Klausmeyer is right. You don’t know the press. They get a hold of something like this and they’ll blow it up all out of proportion. I’m out of here.’ He didn’t call anybody. He didn’t think about it more than [that]—as soon as the words were out of my mouth.”

When I called Marting to ask him about this, he asked that I call him back later, but never responded to my messages.

CHAPTER 16

The Quacking Duck

My pet belief, and I think it’s grounded in some
good research and reality, is that George W.
Bush would not be president of the United
States today if not for that starting point of this
controversial Harken sale.

—BILL MINUTAGLIO, TEXAS JOURNALIST
AND AUTHOR OF THE BUSH BIOGRAPHY
FIRST SON: GEORGE W. BUSH AND
THE BUSH FAMILY DYNASTY
, APPEARING
ON ABC’S
NIGHTLINE

I
F IT WALKS LIKE A DUCK AND TALKS like a duck, the saying goes, then maybe it really is a duck. Over at Harken Energy—George W. Bush’s next corporate home—the ducks were quacking plenty loud. Bush-connected enterprises were just not the kinds of businesses with which the rest of us are familiar. There always seemed to be something more going on: that overlay of peculiar money-moving, a general lack of profitability, the participation of foreign interests, and a hint of black intelligence operations.

In September 1986, as oil prices continued to collapse and W.’s previous financial savior, the Cincinnati-based Spectrum 7 Energy, was itself failing, along came the Dallas-based Harken, a comparatively little-known independent oil and gas company, riding to the rescue. Harken snapped up Spectrum, put W. on its board, and gave him a handsome compensation package.
¹
In return, W. was allowed to go about his business—which at the time meant playing a crucial role in his father’s presidential campaign. But the Harken assist didn’t just benefit Poppy’s political fortunes. Profits from W.’s subsequent sale of his Harken stock would jack up his own political career. The Harken deal ultimately made it possible for him to become part owner and highly visible “managing director” of the pop u -lar Texas Rangers baseball team—a position that would enhance his modest résumé as a candidate for governor a few years later. Thus, the largesse of the figures behind Harken played a key role in George W. Bush’s quick march to the presidency.

Virtually everyone who has looked at Harken over the years agrees that it is some strange kind of corporate beast, like a newly discovered species of manatee. The company’s books have never made any sense to outsiders— which might have had something to do with the fact that the only people who seemed to make any money were the insiders. In 1991
Time
proclaimed Harken “one of the most mysterious and eccentric outfits ever to drill for oil.”
²

The Harken story reads at times like the stuff of an airport bookstore thriller. One finds figures associated with BCCI, gold caches, and an alphabet soup of secret societies appearing at critical junctures to bail out Harken, traveling to the White House to meet with President George H. W. Bush, then flying off to make deals with the likes of Saddam Hussein or the Chinese in the wake of the Tiananmen Massacre. In Harken we find the future president of the United States deeply involved in an enterprise whose every aspect raises questions about control of power in our country, because it draws our attention to complex and little-understood international alliances that bring America’s leaders, past and future, together with individuals and forces of dubious integrity and ambitions that appear far removed from the public interest. Harken also pulls the curtain back further on subjects we examined in past chapters—collusions and interferences in a broad range of institutions, from precious metals to the awarding of drilling contracts—and raises questions about a host of institutions, including even top universities. It shows us how very little we understand about power at the highest levels—and indicates how much more work needs to be done.

One thing, though, is clear: The story of Harken fits in perfectly with our evolving exploration of the Bush family’s role in a globally reaching, fundamentally amoral, financial-intelligence-resource apparatus that has never before been properly documented.

At one time, Harken Energy was not such an odd duck. For the first decade of its existence, Harken was a fairly conventional, and mostly profitable, oil exploration firm.
³
But in 1983, things began to change. Having been in business for nearly a decade, and now suffering from the collapse of oil prices, founder Phil Kendrick traveled to Asia to consider potential buyers for his Australian subsidiary. One Singapore-based broker happened to bring up a name. “He told me about a guy named Quasha—said he was the man behind Marcos,” Kendrick recalled. “He said he was the one who put him in power.” That may have been something of an exaggeration, but William Quasha was a man to know in the Philippines. An American citizen who had served there during World War II and stayed on to become a powerful lawyer in that country, he was head of the local expatriate group Republicans Abroad, and so well connected that he even played host to a Democrat, President Bill Clinton, when he came through the isles.

William Quasha’s ace in the hole was his relationship with the long-ruling president and strongman Ferdinand Marcos. And Marcos, accused of stealing billions of dollars from the public treasury of the poor country during his twenty-year reign, needed friends with connections abroad.
⁴
Recalled Kendrick: “The word was, Marcos was trying to get money out of [the] Philippines—he had a lot of money—and place it in legitimate businesses.”

In a curious coincidence, not long after Kendrick first heard the Quasha name, one of Harken’s investment bankers in New York mentioned a client looking to take a major position in an oil company, a New York lawyer named Quasha. He turned out to be William Quasha’s son, Alan.

Phil Kendrick and Alan Quasha quickly struck a deal. “He wanted control of the board, so we sold our stock to him, and that gave him control,” Kendrick explained to me in what began as a phone conversation and ended up weeks later as a dinner at his country club in Abilene, Texas. With Quasha’s arrival, Kendrick stayed on as a consultant and as president of the Australian subsidiary, for which he had high hopes. Quasha assured him, Kendrick said, that he was going to make Kendrick’s stock options valuable.

According to Kendrick, he did exactly the opposite. “I finally figured out what his game plan was,” Kendrick said. Kendrick alleges that this initially consisted of a press release that portrayed the company as a giant mess that needed to be fixed. “The stock just crashed; it went down to nothing—below a dollar.” Then, the new management announced a rights offering, which allowed people like Quasha to buy still more stock, at a heavily discounted price.

This, of course, destroyed Phil Kendrick’s stock options while giving the newcomers even more control. Then the company instituted a one-for-ten reverse split, which brought the stock price up to a no-longer-embarrassing level.
⁵
Meanwhile, management sold off the Australian subsidiary that Kendrick had been told he could run, and, according to Kendrick, pushed him out. (Kendrick, it should be noted, is a lifelong Republican who voted for George W. Bush in both 2000 and 2004.)

The funding for all this was baffling. When Quasha bought Kendrick’s stock, the money came through an entity in Bermuda, a trust in the name of Quasha’s mother, with major blocks of shares taken by other members of the Quasha family.
⁶
According to company filings, his father, William Quasha, bought 21 percent of Harken’s stock.

Why did the Quasha family find this particular company so interesting? Kendrick couldn’t stop thinking about what he had heard about the Quashas and Marcos—and couldn’t help wondering whether the money going into Harken wasn’t really Marcos’s money—or, put another way, the money of the people of the Philippines. I had hoped to get some insight, at least a limited one, from Alan Quasha, but he has repeatedly ignored requests for an interview.

School for Scandal

With Kendrick out of the way, Harken began metamorphosing in strange and wondrous ways. As mysterious as the workings of the company was its allure for powerful figures and institutions—almost all of whom piled into the company after George W. Bush came on board in 1986.

One of the oddest investors in Harken was the billionaire speculator, investor, and philanthropist George Soros, who first became involved shortly after Alan Quasha took over the company by swapping oil company stocks for Harken shares; Soros was a major shareholder in the first years following Quasha’s takeover, at one point holding one third of the stock.
⁷
That George Soros held a big stake and served as a board member at the time George W. Bush was welcomed into the company that would make his fortune is rife with irony. Soros, a refugee from Communist Hungary, would found a variety of progressive philanthropies in the United States and abroad, whose causes included promoting democratic institutions, campaign finance, and drug policy reform. Eighteen years after George W. Bush joined him in Harken, Soros would become the leading financier of efforts to deny W. a second term as president.
⁸
More consistent with Harken’s geopolitical texture is Soros’s longtime backing of Central and Eastern European democracy movements during the Soviet era. Though Soros exited Harken years ago, he continues to play tennis with Alan Quasha.

By far the biggest—and ultimately the most improbable—of Harken shareholders was Harvard University.
⁹
Harvard, currently the second wealthiest private institution in America after the Bill and Melinda Gates Foundation, entered the picture in October 1986, right on the heels of George W. Bush.
¹⁰
Through its investing arm, Harvard Management Company, it agreed to buy 1.35 million shares of Harken for two million dollars and invest another twenty million dollars in Harken projects—eventually pumping fifty million dollars into the company and owning 30 percent of its stock.
¹¹
Harken, in fact, was one of the largest investments the university ever made. “It was not typical,” one former member of Harvard Management Company’s board of directors told the school’s newspaper.
¹²

Harvard’s initial purchase of Harken shares worked like a booster rocket. The next month, Harken began trading on the NASDAQ exchange. The month after, the firm scooped up E-Z Serve Inc., a chain of nine hundred rural convenience stores and gas stations, in its largest acquisition to date.

In this period, George W. Bush acquired options for eighty thousand additional shares of the company’s stock. And no wonder. The company was about to turn from an ant into an anteater—and a particularly voracious one at that. In 1986, it had a total revenue of four million dollars. In 1989, thanks to a flurry of acquisitions and infinitely complicated transactions, revenue would exceed
a billion dollars
. Yet few outside investors made any money. Which might have raised more than a few eyebrows about where all that cash was coming from and going to.

Equally mysterious is how and why the financial whizzes at Harvard chose to bankroll the apparent clunker. In 2002, when the
Boston Globe
asked for an interview on the subject of Harvard and Harken, Michael Eisenson, managing director and CEO of the Harvard Management Company, who sat on the Harken board with George W. Bush, declined.
¹³
The university’s motto—
Veritas
—apparently does not apply to its financial dealings.

The truth about Harvard’s involvement begins to open a window on something that does not appear in the university’s brochures, nor in the
U.S. News & World Report
rankings of America’s top colleges.

Sly and the Family Stone

In 2002, the
Boston Globe
, seeking to understand the local school’s involvement with Harken, spoke with Robert G. Stone Jr., the longtime chairman of the seven-member Harvard Corporation, the university’s highest governing board. Stone sought to distance himself from the matter.

“I never recommended Harken. I didn’t know anything about them,” Stone said in a telephone interview from his New York City office in what appears to be his first interview about the matter. “I don’t tell them what to invest in.” He said that at the time of Harvard’s investment, he knew then-Vice President George H.W. Bush “very, very slightly.”

“I was at Harvard the same year he was at Yale. I met him a few times, and that was that,” Stone said. “I had nothing to do with his administration.”
¹⁴

As for Bush’s son, a graduate of Harvard Business School, Stone said, “I don’t know the current president at all.”
¹⁵

It was an artful answer, and also disingenuous. Records show that in 1979, Stone, a resident of the Bush hometown of Greenwich, Connecticut, was—along with his brother David—an early donor to Poppy Bush’s Republican primary race against Ronald Reagan. In 1982 Robert and David Stone again supported a Bush campaign: this time Poppy’s brother Prescott Bush Jr.’s unsuccessful and quixotic 1982 U.S. Senate campaign in Connecticut against Lowell Weicker.
¹⁶