Texas Money

In mid-July 2002 President Bush vowed to crack down on Enronstyle corporate crime. It was nice bit of theater. As a young Texan with a Harvard MBA and a gold-plated name, George W. Bush benefited from just about every favor, handshake loan and political consideration that came his way. He also took advantage of the federal tax code, government intervention and the wiggle room afforded by murky areas of accounting and SEC regulations. In short, he was a Texas businessman. He played the game by Texas rules--wheeling and dealing enough to get rich without ending up behind bars.

That's the way things are done in the Permian Basin oil fields of west Texas, where Bush, like his father before him, first tried to get independently rich. The business was, and still is, all about raising money.

During the late Seventies and early Eighties, Bush collected $4.7 million, mainly from investors who may have seen more profit in backing the son of a Washington heavyweight than in hitting oil. Half of the wells Bush drilled came up empty and his benefactors received more tax write-offs than cash--not an unusual turn of events in the oil business. His company changed its name, from Arbusto (Spanish for "bush") to Bush Exploration, as oil prices fell and its record tempted puns. His father also happened to be a sitting vice president by then. Cash had slowed to a trickle until Philip Uzielli, a wealthy Princeton classmate of Bush insider James Baker, generously provided $1 million for 10 percent of the company. Bush's prospects were probably no rosier than those of many in the oil patch, but his name paid dividends.

Still shaky four years later, Bush's company was forced to merge with Harken Energy, a Dallas company long on dreams and short on finances whose chairman was another Harvard MBA, Alan Quasha.

Bush's role at Harken was limited. His name shows up in the board minutes, but he spent most of 1988 involved in his father's presidential campaign and has always denied playing a role in what seemed like Harken's biggest coup, an exclusive offshore drilling rights deal with Bahrain in 1990, despite the fact that Harken had no international or undersea experience. The year before, things were so grim that Harken itself financed the loan for a sale of one of its subsidiaries, Aloha Petroleum, to insiders, declared it as earnings and fluffed up that year's balance sheet. As with Enron's shell games, this helped mask the company's instability. Temporarily, anyway.

Bush sold most of his Harken stock holdings for $848,560 in June 1990 to an institutional investor who remains unnamed. This was about five months after the contract with Bahrain and two months before Harken restated its earnings, which the Securities and Exchange Commission demanded it do after investigating the bogus Aloha transaction. Harken's adjusted quarterly loss came to $23.2 million. Many now argue that because he sat on an auditing committee, as well as on a special "fairness committee" that first met in May 1990 to evaluate how shareholders would be affected by corporate restructuring, Bush may have known there were icebergs ahead. He reported his stock dump eight months late. Eventually, the SEC investigated for insider trading, but chose to take no action.

The deal that would make George W. Bush wealthy came, like the others, through a family friend. William De-Witt Jr., a former Bush business partner, wanted to buy the Texas Rangers from owner Eddie Chiles, another old friend of the Bush family. Once again, Bush was in his favorite role as agreeable front man, a conduit for the reported $86 million needed to buy the baseball team. Only this time Bush put in real money himself. Of his $606,000 investment, $500,000 came from old friends at United Bank of Midland, where he had served as director. Bush got a loan from the bank based on his Harken stock, Newsweek reported, even though the shares may already have been pledged as collateral.

It was as managing general partner of the Rangers that Bush found the magic combination of government aid, influential friends and exquisite timing that made him truly rich. It meant ignoring, for a while, the conservative, promarket philosophy that he espoused in his political campaigns. But that's the way the game of professional ball is played.

After threatening to leave town, the new owners convinced the city of Arlington, a suburb between Dallas and Fort Worth, to come up with $135 million in stadium financing by raising the local sales tax by half a cent. It helped that a legislator, who together with a relative owned 45 acres of land near the stadium site, sponsored a bill to allow tax money to subsidize construction of the complex.

Bush and the new owners had the government create a public authority to cobble together acreage for the project. The authority lowballed prices on some plots and even condemned private land--despite the objections of the landowners--only to turn some of it over to the Rangers for future development. The Rangers committed $48 million, which they planned on raising by a $1-a-ticket surcharge.

Thanks to the publicly subsidized stadium deal, the Rangers paid off spectacularly for Bush and his investors. Bush received a bump in his two percent stake by an additional 10 percentage points under an incentive agreement between the limited and general partners. In 1998 the team was sold for $250 million to Dallas investor Tom Hicks, and Bush walked away with $15 million. In the oil business, all he could do was raise money and lose it for his investors. When he combined business with politics, Bush managed to come up with a cheap home run.

Half of the wells were dry and his backers received more tax write-offs than cash.

The deal that would make Bush wealthy came, like the others, Through a family friend.