As US President George W. Bush prepared to make a major speech on Wall Street next week about corporate responsibility, the White House found itself on the defensive again Wednesday over the kind of action for which Bush is assailing corporate executives -- his own failure in 1990 to disclose a stock sale as promptly as required by law.
Ari Fleischer, the White House press secretary, said Wednesday that Bush failed to promptly disclose the sale of stock 12 years ago because of a "mix-up" with his lawyers. In 1994, however, Bush blamed not his lawyer but the Securities and Exchange Commission (SEC) for misplacing the proper forms.
Fleischer could not completely explain the inconsistency, and he said he did not know when or why Bush changed his explanation. But he said that the stock sale had been examined by the media a dozen years ago and many times since, and that the president had done nothing wrong.
At issue are 212,140 shares of stock in the Harken Energy Corp, a Texas oil and gas company, that Bush sold for US$4 a share, or US$848,560, on June 22, 1990, when his father was president. Bush sold the stock to pay off a US$500,000 bank loan he had used to buy his share of the Texas Rangers.
Eight days after Bush sold the stock, on June 30, 1990, Harken finished the second quarter with a loss of US$23.2 million, more than eight times the loss it showed for the second quarter of 1989. When the second-quarter loss was publicly reported on Aug. 20, the share price fell to US$2.37.
Bush, who was on Harken's board of directors, has said that he quickly realized that the stock's slide would raise concerns that he had sold based on inside information, a potential crime. The suspicions grew when the SEC said that it did not have a document from Bush, a Form 4, that insiders must file when they sell stock. Bush did not file the Form 4 and officially report the sale until March 1991. But Bush had promptly filed another required document, a Form 144, disclosing his intent to sell the stock.
In 1994, when Bush was asked why he had not filed the Form 4, he said he thought he had and that the SEC must have misplaced it. But on Wednesday Fleischer said that the fault lay with a "mix-up, a clerical mistake" by lawyers for Harken.
The SEC dropped its investigation into the sale in 1993.
In a speech about corporate responsibility this spring, Bush proposed that corporate officers be required to disclose sales of company stock within two days. White House officials say that Bush would make stronger proposals in what they are billing as a hard-line speech about corporate responsibility next Tuesday to the Alliance for a Better New York.
Meanwhile, the Justice Department may create a task force of prosecutors to speed up fraud investigations of companies such as WorldCom Inc that are accused of misleading investors, government officials said.
The Washington-based team would work with the SEC, which lacks authority to bring criminal charges, the officials said. The approach would let the Justice Department combine fraud and related investigations of such companies as long-distance telephone carrier WorldCom and cable- television company Adelphia Communications Corp, they said.
Bush may outline details of the Justice Department task force in his speech on Tuesday, officials said.
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