David Corn :
The Nation, March 7, 2002
 

                                            W.'s First Enron Connection:
                                       Update on the Bush-Enron Oil Deal

 
               Did George W. Bush once have a financial relationship with Enron?

               In 1986, according to a publicly available record, the two drilled for oil together--at
               a time when Bush was a not-too-successful oil man in Texas and his oil venture was
               in dire need of help. Bush's business association with Enron, it seems, has not previously
               been reported.

               In 1986, Spectrum 7, a privately owned oil company chaired by Bush faced serious
               trouble. Two years earlier, Bush had merged his failing Bush Exploration Company
               (previously known as Arbusto--the Spanish word for shrub) with the profitable
               Spectrum 7, and he was named chief executive and director of the company. Bush
               was paid $75,000 a year and handed 1.1 million shares, according to First Son, Bill
               Minutaglio's biography of Bush. Under this deal, Bush ended up owning about 15
               percent of Spectrum 7. By the end of 1985, Spectrum's fortunes had reversed. With
               oil prices falling, the company was losing money and on the verge of collapse. To
               save the firm, Bush began negotiations to sell Spectrum 7 to Harken Energy, a large
               Dallas-based energy firm owned mostly by billionaire George Soros, Saudi
               businessman Abdullah Taha Baksh and the Harvard Management Corporation.

               The deal took months to work out. In September of 1986, Spectrum 7 and Harken
               announced they had reached an agreement. Spectrum 7 shareholders, under the
               plan, would receive Harken stock. Bush publicly said that Spectrum 7 would continue
               to operate in Midland, Texas, as a wholly-owned subsidiary of Harken and that he
               would become an active member of Harken's board of directors. As Minutaglio noted,
               the deal would give Bush about $600,000 in Harken shares and $50,000 to $120,000
               a year in consultant's fees. It also would provide $2.25 million in Harken stock for a
               company with a net value close to $1.8 million.

               As the details of the Spectrum-Harken acquisition--which Bush badly needed--were
               being finalized, Enron Oil and Gas Company, a subsidiary of Enron Corporation,
               announced on October 16, 1986, that it had completed a well producing both oil and
               natural gas in Martin County, Texas. An Enron Oil and Gas press release reported
               the well was producing 24,000 cubic feet of natural gas and 411 barrels of oil per day
               in the Belspec Fusselman Field, 15 miles northeast of Midland. Enron held 52
               percent interest in the well. According to the company's announcement, 10 percent
               belonged to Spectrum 7. At that point, Spectrum 7 was still Bush's company.
               Harken's completion of the Spectrum 7 acquisition was announced in early
               November.

               To spell it out: George W. Bush and Enron Oil and Gas were in business together in
               1986--when Ken Lay was head of Enron. (Lay was named Enron chairman in
               February of that year.) How did this deal come about? Was this the only project in
               which Bush and Enron were partners? A call placed to the White House produced no
               response. Karen Denne, an Enron spokeswoman, says "I can't tell you anything
               about" that project, explaining Enron "sold all its domestic exploration and production
               assets about two years ago to EOG Reources" and probably did not retain records
               regarding that well. As for the possibility Spectrum 7 invested in other Enron ventures,
               she notes, "You're referencing something that happened in 1986. I can check, but
               we're pretty short-staffed now." Elizabeth Ivers, a spokeswoman for EOG Resources
               (formerly Enron Oil and Gas), says, "If we did have any records on that well, it would
               be nothing that we would share with the public. We do not disclose the details or
               specifics of who we have well interests with."

               After the Enron affair began generating front-page headlines, Bush attempted to
               distance himself from Enron and Lay. In early January, the President claimed he and
               Lay had not always been close pals. "He was a supporter of [Texas Governor] Ann
               Richards in my run [against her] in 1994," Bush asserted, noting he did not get "to
               know Ken" and work with him until after he won that election. But campaign records
               show Lay donated three times as much money to Bush in that race as he did to
               Richards. Moreover, contacts between Lay and the Bush family pre-dated that
               campaign. In 1992, Lay chaired the host committee for the 1992 Republican
               convention in Houston, where Bush's father won his second presidential nomination.
               And Lay was a sleepover guest at the White House of President George H.W. Bush.

               The Enron-George W. Bush connection goes back further than the President has
               suggested. But does that mean the relationship between the younger Bush and Lay
               stretches to the mid-1980s? The deal could have happened without contact between
               Lay and Bush. But most company heads would be interested to know that the son of
               the sitting vice-president had invested in one of their enterprises. If Lay had been
               aware of the partnership, that would not prove the two were pals or that Bush and
               Spectrum 7 had received undue consideration from Enron. But given Enron's
               penchant to use political ties to win and protect business opportunities, it is tough not
               to wonder if this Bush-Enron venture involved special arrangements. This is certainly
               one more Enron partnership that deserves scrutiny--especially since George W. Bush
               has yet to acknowledge it. The Spectrum-Enron deal is either an odd historical
               coincidence or an indication there's more to learn about the Bush-Enron association.

               NOW FOR AN UPDATE ON THE BUSH-ENRON OIL DEAL:

               On March 6, two days after this story was first posted, "The New York Times" ran on
               the front page of its business section a story headlined, "Bush Joined Unit of Enron In
               '86 Venture To Seek Oil." The article, written by Jim Yardley, essentially reported the
               facts noted above. Halfway into the piece, it noted, "A columnist in The Nation, the
               liberal political journal,...wrote about the deal this week in its online edition."

               While the Bush White House did not respond to a request from "The Nation" for
               information, White House spokesman Dan Bartlett told the "Times" the President
               "has no recollection of this specific deal." Bartlett maintained that in 1986 Spectrum 7
               was involved in more than 175 wells. Ted Collins Jr., who was president of Enron Oil
               and Gas at the time, told the newspaper that Bush did not have "a special
               relationship" with the company. Collins also asserted that Lay back then "wouldn't
               have known who Spectrum 7 was and that George W. Bush had anything to do with a
               company called Spectrum 7."

               Since the story was originally posted, I have found records suggesting that Bush's
               Spectrum 7 had a second partnership with Enron. In May of 1985, a subsidiary of
               InterNorth, an Omaha-based energy company, announced the completion of a well in
               Martin County, Texas. According to "PR Newswire," the company said that Spectrum
               7 owned an 18.75 percent interest in the well. (The rest was held by the InterNorth
               subsidiary.) The well, like the one mentioned above, was located at the Belspec
               Fusselman Field. That same month, InterNorth merged with Houston Natural Gas
               (HNG)--which gave birth to Enron. HNG/InterNorth changed its name to Enron in
               1986, and the InterNorth subsidiary that had invested in the well with Spectrum 7
               became part of Enron Oil and Gas. If Spectrum 7 and Enron Oil and Gas had retained
               their interests in the well, that would mean that Bush's oil company was in
               partnership with Enron before the deal reported above. Since Bush, according to his
               spokesperson, does not have a memory for such details and EOG Resources says it
               will not release any information about wells it has owned, it will be tough to confirm
               that the InterNorth-Spectrum 7 venture became an Enron-Spectrum 7 enterprise.

               On another, more important, Enron-Bush point: Way back in 1994, I reported that
               Rodolfo Terragno, a former Argentine cabinet minister, had claimed that when he
               headed the Public Works and Services Department in 1988, George W. Bush, whom
               Terragno did not know, called him and pressured Terragno to award a pipeline
               contract worth hundreds of millions of dollars to Enron. (See
               http://www.thenation.com/doc.mhtml?i=20020204&s=corn.) Terragno, who said he
               resisted this and subsequent importuning, could not provide proof that the call had
               occurred. (How can you prove you were phoned by the son of the Vice-President?)
               Bush's aides denied Terragno's account. But it's worth taking a second look at those
               denials.

               At the time I was pursuing the Terragno story, Bush was running for Texas governor,
               and I asked the campaign whether Bush had spoken to Terragno about the pipeline
               project and whether he had any business relationship with Enron. Bush aide Karen
               Hughes faxed me a terse statement: "The answer to your questions are no and none.
               Your questions are apparently addressed to the wrong person." An Enron
               spokesperson said, "Enron has not had any business dealings with George W. Bush,
               and we don't have any knowledge that he was involved in a pipeline project in
               Argentina."

               The recent news about the 1986 Enron-Bush venture in the Belspec Fusselman Field
               undermines (to be polite about it) those 1994 statements from Bush and Enron
               denying any business relationship between the scion and the company. The
               existence of this oil partnership in 1986 (or one in 1985) has no bearing on the
               veracity of Terragno's tale. But it shows the credibility of the Bush gang and that of
               Enron deserve questioning when either one is talking about the other.

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