Corporate corruption and academia: The Bush-Harvard-Enron connection

By Joseph Kay
wsws.org, 19 October 2002

EXCERPT...

One of these connections was to Harvard University, where Bush had received his MBA degree. Some months after Harken bought Spectrum 7, Harvard, together with the billionaire financier George Soros, poured money into Harken, which at the time was struggling to pay off loans to its main creditors, Bank of Boston and First City Bankcorp. First City agreed to refinance the loans, and, according to an article published in the Wall Street Journal on October 9, a key factor in the decision was the financial support provided by Harvard Management Corporation (HMC). HMC controls the university’s assets, valued at $20 billion.

Harvard quickly acquired a third of Harken’s stock. Between 1987 and 2000, representatives of the university held positions on the company’s board of directors, with seats on the executive and compensation committees. The university’s representatives were both heavily invested in the company personally, owning 10,000 shares of Harken each.

Harvard’s heavy investment in Harken is inexplicable except for the presence of Bush, who retained his position at Harken until 1993, when he became governor of Texas. Harken never sustained profitable operations, though it hoped to use Bush’s connections to improve its financial state. Over the next five years, HMC had to bail out Harken in order forestall a number of severe crises. HMC was controlled at the time by Robert Stone, an oil man and long-time supporter of the Republican Party and Bush’s father.

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The deal has many similarities with the sort of “structured finance” arrangements that were made at Enron. The basic idea is to shift debt off of a company’s balance sheet in order to improve reported earnings and elevate share values. Such partnerships were an important component of the accounting gimmicks widely used by American corporations during the stock market boom of the 1990s.

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Finally, there is Lawrence Summers, who replaced Rubin as treasury secretary in 1999. Kenneth Lay sent a gushing congratulatory note to Summers, who responded with a promise that “I'll keep my eye on power deregulation and energy-market infrastructure issues.” When Bush came to office, Summers left government to become president of Harvard University.

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http://www.wsws.org/en/articles/2002/10/hark-o19.html