The Harken Energy scandal refers to a series of transactions entered into during 1990 involving Harken Energy. These transactions are alleged to involve either issues relating to insider trading, or influence peddling. No wrongdoings were found by any investigating authorities although the matter generated political controversy.
Spectrum 7 purchase
George W. Bush ran an energy company called Spectrum 7 during the 1980s. In the mid 1980s the oil market was in a terrible slump, with prices going lower daily. The firm was in serious financial trouble until, that year, another company, a distressed oil properties specialist Harken Energy, purchased Spectrum 7. Part of the attraction for Harken's management to buy Spectrum 7 was having Mr. Bush on its team — his father was then Vice-President, he had extensive "connections," and knowledge of the oil and gas business. Harken Energy offered Mr. Bush a seat on the board of directors along with stock worth about $500,000 at the time. Additionally, Mr. Bush received a consulting contract worth between $80,000 and $120,000 annually.
In 1987 and 1988, George W. Bush dedicated himself (and much of his efforts) to the presidential campaign of George H.W. Bush, his father. Fortunes turned for Mr. Bush, and the following year he invested in the Texas Rangers. To help pay for the investment in the baseball team, he borrowed a sum of $600,000 dollars; to pay off the loan, he sold his stock in Harken Energy. That investment paid off handsomely for him, not only monetarily. As team owner, the popularity derived from his public persona lead to the invitation to run for governor of Texas and ultimately, two terms as President.
Bush's stock sale
George W. Bush sold 212,140 shares of Harken Energy at $4 a share on June 22, 1990, for a grand total of $848,560. Two months later, August 20, Harken announced a larger than expected loss for the previous quarter. Surprisingly, the price of the company's stock shares barely went down at first, following these two negative, or "bearish," events. In the ensuing months, Harken's stock price did drift ever downward to $1.25 by the end of the year. The stock price then recovered its value and more the following year, however. Strange behavior for the stock. The sale of the large block of shares had become widely publicized and allegations of the use of insider information and improper stock transactions were leveled at Mr. Bush.
Mr. Bush has denied any wrongdoing. Nevertheless, an investigation by the United States Securities and Exchange Commission (SEC) was initiated. The investigation focused on three questions surrounding the transaction and the president's actions - Was there prior knowledge of the loss reported in August? Did Mr. Bush attempt to avoid the loss of value of his property based on insider's information? And, did the August announcement of a bigger than expected loss lead to a loss of value of property for investors in the company?
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