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The Bush clan's family business In 1991, President Bush bristled
at a flurry of news accounts that questioned the business ethics of three of
his sons. "The media ought to be ashamed of itself
for what they're doing," Bush complained. "They [the boys] have a
right to make a living, and their relationships are appropriate," added
a White House spokeswoman in June 1992. Since George Bush has
raised "family values" as a campaign issue repeatedly, though, it
seems only fair to take a look at his own family. A computer search showed
that over the past five years stories have periodically surfaced chronicling
the individual business antics of the president's sons -- each riding
comfortably through life in the slipstream of his father's growing power and
influence. Although a handful of good
reporters for the New York Times, LA Times, Village Voice, and Wall
Street Journal have diligently been digging through business records for
months, something has been missing: an overview that "connects the
dots" in the myriad deals that have been examined, making it clear that
cashing in on influence has become a pattern of behavior extending through
the first family. Instead of criticizing
reporters, the president might more wisely begin listening to those in
government who have watched his sons with mounting worry. A year ago, I sat
across a desk from a Secret Service agent who had been assigned to
Bush-family security. I rattled off the names of a half-dozen questionable
characters who had found their way into business deals with the Bush boys.
How had these characters been allowed to get even close to the
president's sons? The agent slumped back in
his chair and sighed. "We warn them," he said in a whisper.
"But that's all we can do. We can't stop these kids from associating
with someone they want to be with. All we can do after warning them is to
sweep these guys with metal detectors when they come around." What follows is a
sourcebook of concerns about the president's three sons.
George W. Bush, Jr. None of George Bush's
offspring is more his father's son than George W. Bush. George Jr., or
"Shrub" as Molly Ivins refers to him,
began his own Many oil companies went
belly-up during that time. But Spectrum had one asset the others lacked --
the son of the vice-president. Rescue came in 1986 in the form of Harken Energy, just in the nick of time. Harken absorbed Spectrum, and, in the process, Junior got
$600,000 worth of Harken stock in return for his
Spectrum shares. He also won a lucrative consulting contract and stock
options. In all, the deal would put well over $1 million in his pocket over
the next few years -- even though Harken itself
lost millions. Harken Energy was formed in l973 by two oilmen who would
benefit from a successful covert effort to destabilize After the sale of Harken Energy in 1983, Alan Quasha
became a director and chairman of the board. Under Quasha,
Harken suddenly absorbed Junior's struggling
Spectrum 7 in 1986. The merger immediately opened a financial horn of plenty
and reversed Junior's fortunes. But like his brother Jeb,
Junior seemed unconcerned about the characters who were becoming his benefactors.
Harken's $25 million stock offering in 1987, for
example, was underwritten by a Little Rock, Arkansas, brokerage house,
Stephens, Inc., which placed the Harken stock
offering with the London subsidiary of Union Bank -- a bank that had surfaced
in the scandal that resulted in the downfall of the Australian Labor
government in 1976 and, later, in the Nugan Hand
Bank scandal. (It was also Union Bank, according to congressional hearings on
international money laundering, that helped the now-notorious Bank of Credit
and Commerce International skirt Panamanian money-laundering laws by flying cash out of the country in private jets, and that
was used by Ferdinand Marcos to stash 325 tons of Philippine gold
around the world.) Stephens, Inc., also helped introduce the BCCI virus into US banking in
1978 when it arranged the sale of Bert Lance's National Bank of If any of these
associations raised questions in the mind of George Bush, Jr., he had little
incentive to voice them. Besides getting Harken
stock through the deal, Junior was paid $80,000 a year as a consultant (until
1989, when his wages were increased to $120,000; recently they were reduced
to $45,000). He was also allowed to borrow $180,375 from the company at very
low interest rates. In 1989 and 1990, according to the company's Securities
and Exchange Commission filing, Harken's board
"forgave" $341,000 in loans to its executives. In addition, Junior
took advantage of the company's ultraliberal executive stock purchase plan,
which allowed him to buy Harken stock at 40 percent
below market value. Such lavish executive
compensation would suggest a company doing quite well indeed. But in reality,
Harken had little going for itself. Suddenly, in January 1990,
Harken Energy became the talk of the Junior has told
acquaintances conflicting stories about his own involvement in the deal. He
first claimed that he had "recused"
himself from the deal; "George said he left the room when Junior alternately
claimed, to reporters for the Wall Street Journal and D Magazine,
that he had opposed the arrangement. But the company insider says, to the
contrary, that Junior was excited about the Through the Did Junior or any of the
other Harken Energy executives
trade on the Bush name in these speculative business deals? None of the
principals will answer questions. But this much is known: after the Harken-Bahrain deal was settled, Othman was added to the
list of fifteen Arabs who met with President George Bush and National
Security Adviser Brent Scowcroft three times in 1990 -- once just two days
after The promise of hitting it
big in the oil-rich gulf was certainly critical for Harken.
News of the But even well-heeled
friends like the Bass brothers could not protect Harken
from the troubles of the world. Just four months after the
Under "options"
the memo suggested: Oil companies had learned,
during the years of the long Iran-Iraq war, that trouble in the gulf hurts
companies with oil interests because, for one thing, at the first sound of a
rifle shot in the gulf region, Lloyds of London jacks up insurance rates on
oil tankers and company installations. The "wartime" rates are very
high and cut deeply into company profits and investor confidence. If things
really get out of hand, pipelines are destroyed and waterways are mined. The secret memo augured
ill for Harken's fledgling venture. To compound
matters, that same month, Harken's own financial
advisers at Smith Barney produced a hand-wringing report voicing alarm at the
company's rapidly deteriorating financial condition. (A former company
official told Mother Jones that Harken owed
more than $150 million to banks and other creditors at the time.) Since Harken wasn't producing anything, it was hard to find a
revenue stream, unless you count the river of fees, stock options, and
salaries running into the pockets of Junior and other top Harken
executives. Junior, as a member of Harken's
restructuring committee, could not have been ignorant of the report, since
the board had met in May and worked directly with the Smith Barney
consultants. In June 1990, Junior
suddenly unloaded the bulk of his Harken stock --
212,140 shares -- for a tidy $848,560. A former business associate says that
Junior's motivation was his desire to buy an expensive new house in Then, in August, Iraqi
troops marched into Were government secrets discussed, directly or
indirectly, that would have given Harken Energy a
leg up in exploiting the The folks at Harken Energy weren't the only ones in Junior doesn't deny that
being a Bush has helped him become a millionaire. "I recognize what my
talents are and what my weaknesses are," he told Junior might have been
thinking that among the minuses were questions about his role at Harken. As this article was being prepared -- and in the
midst of extensive interviewing of former and current Harken
business associates -- Junior announced a six-month leave of absence as a
consultant and member of the Harken board. His role
in the presidential campaign, the statement said, precluded Junior's active
involvement at Harken through the remainder of
1992. In any case, Junior is
stepping away from a company in deep trouble. Harken
stock is trading near its all-time low. Recently, test wells in
John Ellis ("Jeb") Bush After graduating from In the next few years,
financial support flowed to Jeb through Jeb and Armando Codina The $4.56 million loan,
from Broward Federal Savings in As Jeb's
father was finishing his second term as vice-president and running for the
presidency, federal regulators had two options: to get Jeb
Bush and his partner to repay the loan, or to foreclose on their office
building. But regulators came up with a third solution. After reappraising
the building, regulators decided it wasn't worth as much as was owed for it.
The regulators reduced the amount owed by Bush and his partner from $4.56
million to just $500,000. The pair paid that amount and were
allowed to keep their office building. Taxpayers picked up the tab for the
unpaid $4 million. After the Broward Savings
deal was revealed, Jeb described himself and his
partner as "victims of circumstances." Jeb and Camilo Padrera Like so many of those who
would attach themselves to the Bush sons over the years, Padreda
brought some hefty luggage with him. In 1982, four years before teaming up
with Jeb, Padreda, along
with another right-wing Cuban exile, Hernandez Cartaya,
was indicted and accused of looting Jefferson Savings and Loan Association in
Soon after the indictment,
FBI officials got a call from someone at the CIA warning the agents that Cartaya was one of their own -- a veteran of the failed
Bay of Pigs invasion -- according to a prosecutor who worked on the case. In
short order, the charges against Padreda were
dropped and the charges against Cartaya were
reduced to a single count of tax evasion. (Assistant U.S. Attorney Jerome
Sanford was furious and filed a demand with the CIA, under the Freedom of
Information Act, for all documents relating to the agency's interference in
his case. The CIA, citing national-security reasons, denied In 1989, Houston Post reporter
Pete Brewton wrote about Jefferson Savings and Cartaya
in a series of stories alleging that CIA operatives and contractors had
systematically misused at least twenty-six savings and loans during the 1980s
as part of a secret program to fund illegal "off-the-shelf" covert
operations, particularly those aiding the Nicaraguan contras. (CIA officials
denied the charge, but admitted to the House intelligence Committee in 1990
that former CIA operatives had been working at four of the S&Ls named in Brewton's article. A CIA spokesman
claimed that agency operatives had done nothing illegal.) The Jefferson Savings
affair occurred four years before Jeb Bush met Padreda, and it is possible he missed earlier reports.
But he could hardly have passed over the next batch of stories involving Padreda's questionable practices, because they were
spread across the front pages of Miami's papers in 1985, just months before
the two teamed up. These stories, in Jeb's hometown
paper, alleged that Padreda had improperly
influenced a local politician -- the Yet the 1985 scandal did
not seem to lessen Jeb's enthusiasm for Camilo Padreda. Jeb enthusiastically accepted the task of finding tenants
for Padreda's empty HUD-financed office building. Padreda, the government officials involved, and Jeb all refused to answer questions about the scandal.
But of allegations that Padreda engaged in illegal
behavior, there remains no doubt. In 1989, he pleaded guilty to charges that
he defrauded HUD of millions of dollars during the 1980s. Jeb and Miguel Recarey IMC was run by
Cuban-American Miguel Recarey, a character with a
host of idiosyncrasies. He carried a 9-mm Heckler & Koch semiautomatic
pistol under his suit coat and kept a small arsenal of AR-15 and Uzi assault
rifles at his Recarey's brother, Jorge, also had ties to the CIA. So it was
no surprise that IMC crawled with former spooks. Employee résumés were
studded with references to the CIA, the Defense Intelligence Agency, and the
Cuban Intelligence agency; there was even a fellow who claimed to have been a
KGB agent, An agent with the U.S. Office of Labor Racketeering in Recarey also surrounded himself with those who could
influence the political system. He hired Jeb Bush
as IMC's "real-estate consultant." Though
Jeb would never close a single real-estate deal,
his contract called for him to earn up to $250,000 (he actually received
$75,000). Jeb's real value to Recarey
was not in real estate but in his help in facilitating the largest HMO
Medicare fraud in Jeb phoned top Health and Human Services officials in Jeb admits lobbying HHS for the waiver, but denies
talking to Secretary Heckler -- and denies as well the charge that his call
won the HHS exemption. "I just asked that IMC get a fair hearing,"
said later. After the IMC scandal broke in 1987, Heckler left the country,
having been appointed In any case, the highly
unusual waiver by federal officials allowed IMCs
Medicare patient load to swell -- to 80 percent -- and the money poured in.
At its height in 1986, IMC was collecting over $30 million a month in
Medicare payments; in all, the company would collect $1 billion from
Medicare. (Jeb would not discuss the IMC affair
with Mother Jones. But in an opinion piece he wrote for the Miami
Herald last May, he insisted that he had worked hard for IMC, looking for
real-estate deals, and had earned his $75,000 in commissions. While
acknowledging making a telephone call to one of Heckler's assistants on IMC
Is behalf, he claimed the waiver was not granted on his account. The
allegation of a connection, Jeb wrote, "is
unfair and untrue.") Despite Jeb's involvement, trouble began brewing for IMC when a
low-level HHS special agent in But Weinstein kept digging
and in 1986 renewed his investigation of Recarey
and IMC -- and again his HHS superiors blocked the probe. " Weinstein dug in his
heels. "I had them this time. I told my superiors I would fight this
time because I had nothing to fear. I had just reached retirement age. They
immediately backtracked," he says. Weinstein was allowed to continue his
investigation -- though HHS still took no formal action against Recarey. Eventually Weinstein turned to Congressmen
Barney Frank (D-NY) and Pete Stark (D-CA) with his information, sparking
congressional hearings into the scandal. Had it been up to HHS, Recarey would still be running his Medicare racket. But
by chance, the now-disbanded U.S. Miami Organized Crime Strike Force was also
investigating Recarey. (Recarey
was bribing union officials in order to get them to sign workers up as
patients at IMC, apparently so that IMC could meet its reduced non-Medicare
patient requirements of 20 percent.) "We didn't know anything about the
HHS investigation," former Organized Crime Strike Force special attorney
Joe DeMaria says. "Recarey
was bribing union officials.... But HHS never contacted us or told us
anything." Before Recarey's
trial on bribery charges began, DeMaria's
investigators also caught Recarey using his former
spooks to wiretap IMC employees in an effort to discover who was talking to
federal agents. DeMaria had Recarey
indicted a second time, for the illegal listening devices. During Recarey's trial on the bribery charge, a lawyer who
handled the bribe money testified that the money IMC gave him was not bribe
money but "commissions" he had earned while doing work for the
company. "See, that commission thing was Recarey's
MO. They didn't call them bribes, they called them commissions," DeMaria explains. After he was convicted, Recarey resigned from IMC and was immediately replaced by
John Ward. (Ward had been law partner to Reagan-Bush campaign manager John
Sears. And Sears had also been a lobbyist for IMC.) But Recarey's
Medicare scam would never get to a public courtroom airing. Before his trial
on the wiretap charge, Recarey skipped the country.
His getaway was remarkable: just in time for his flight, the normally
tight-fisted IRS expedited a $2.2 million income-tax refund, which Recarey claimed he had coming. The tax refund was a
windfall for Recarey. "Yeah, that was his
getaway money," says a former IRS investigator who worked in the Recarey's last act before becoming a fugitive was an attempt
to wire $30,000 into the bank account of Whistle-blower Leon
Weinstein retired in disgust from HHS and tried to get the IMC case before a
judge by filing a Qui Tam suit. Such suits allow a private citizen to sue to
recover money for the government in return for a share of any settlement. In
his case, Weinstein named IMC and Recarey as
defendants. But HHS continued to fight Weinstein, first challenging his right
to bring such a suit and later accusing him of stealing HHS documents before
leaving his job. When the courts supported Weinstein, HHS then stepped in,
took over his lawsuit, and shouldered him out. The case remains in the courts
and is still unresolved. HHS officials now pursuing
the litigation claim that Recarey defrauded the
Medicare system of at least $12 million. Leon Weinstein says the government
is lowballing the loss and that Recarey's
take from his IMC scam could easily be many times that figure. Since skipping In May, following
inquiries from Mother Jones, Congressman Pete Stark, who sits on the
powerful Jeb and the Contras An entry in North's diary
reads: (Rodriguez was a former
CIA official who advised Vice-President Bush's national-security adviser,
Donald Gregg, currently Veteran CIA operative Jose
Basulto told the Wall Street Journal in 1987
that he had personally attended meetings at IMC headquarters in Jeb and "Manny" Diaz At the same time Diaz was
palling around with Keating, Jeb, then serving as Did Jeb
know about Diaz's business association with Charles Keating? Did he have
reason to believe Diaz was qualified for the
Neil Bush In the March/April issue
of Mother Jones, I detailed Neil Bush's activities and therefore only
sketch his involvement here. Neil served as a director of Silverado Banking,
Savings and Loan in Federal regulators determined
that, while Silverado was pumping loans to Neil's two associates, Neil was
completely dependent on the two men for his income. The failure of Silverado
-- its closure delayed until after the 1988 election -- cost taxpayers about
$1 billion. After almost two years of hand-wringing had passed, an expert
hired by regulators declared that Neil suffered from an "ethical
disability," and he was required to pay a $50,000 fine for his ethical
lapses at Silverado. Neil's estimated $250,000 in legal bills generated by
the scandal are reportedly being paid for him by a
banking-industry lobbyist who is fighting to get banks deregulated. After Silverado failed,
Neil started a new oil company, Apex Energy. This time, his money came from a
$2.35 million loan through a Small Business Administration program, a loan
arranged by an old family friend. When news of this reached the press in
March 1991, the SBA discovered that the companies through which the loan was
approved were technically insolvent, and it gave them up to thirty months to
"self-liquidate." This meant that Apex would have to repay its
SBA-guaranteed loans. Neil took this as his cue to move on, and he left Apex
-- and its debts -- for others to worry about. If Apex Energy can't be sold
for more than it owes, the SBA, and ultimately the taxpayers, will be stuck
with the difference. The last time we checked, Apex's only known asset was an
oil lease, which the company had purchased from Neil for $150,000 before he
bailed out. That means taxpayers could get stiffed for another $2.2 million
as a result of Neil Bush's wheeling and dealing. The public won't learn the
precise outcome until later this year, though. The SBA allowed thirty months
for liquidation of the SBA investment in Apex, putting the resolution date
just past the 1992 general election. President George Bush
claims that only a return to traditional family values can cure the
"poverty of spirit" that plagues places like our decaying inner
cities. But after a closer look, particularly at his adult children, one
cannot help but wonder about the values that matter to his own family. Bush says he is proud of
his sons. One of them rented himself out to a crooked developer who scammed
HUD and helped pry millions out of Medicare to fuel a giant health-care scam.
A second may have profited from an insider stock transaction in a gulf oil
deal at the very time that When President Bush speaks
of the lack of family values he, of course, is referring to broken marriages,
single mothers, and inner-city kids who join gangs and sell dope. But are
these the only villains -- or the most important ones -- responsible for the
shredded social fabric? What about well-to-do white boys
who trade on family connections, welsh on loans, run with con men, and leave
financial ruin in their wake as they line their own pockets? What about grown
men, with access to the most powerful public office in the land, who
participate in scandal but show no remorse for any of it -- and who take no
responsibility for the consequences of their own actions? It's certainly reasonable
for candidate Bush to engage the public in a discussion of family values, to
use his office as a bully pulpit on modern morals. But what of George Bush's
inability or unwillingness to grasp the crisis of values festering within his own family? The pattern of behavior by the president's
three sons raises questions -- about them and their father. These issues have
yet to get the prime-time exposure of fictional Murphy Brown's fictional
fatherless child. Stephen Pizzo is author of Inside Job: The Looting of America's Savings and Loans. Research assistance by Peter Willmert
and Chris Rosché. This article has been made possible by the Foundation for National Progress, the Investigative Fund of Mother Jones, and gifts from generous readers like you. © 1992 The Foundation for National Progress |
