Harvard's Enron-Style Partnership With Harken
For Immediate Release
Contact: Emma Mackinnon (646) 623-7998
Ben McKean (213) 804-3346
October 9, 2002 -- Harken's largest shareholder, Harvard University, used its endowment to bail out the failing company under Bush's watch, misleading investors; HarvardWatch calls for full disclosure of the partnership, launches reform campaign.
The Harken Anadarko Partnership, formed by the ailing Harken Energy Company and its thenlargest shareholder, Harvard University, propped up the troubled company with endowment money and may have deeply misled investors, students found and today's Wall Street Journal and Boston Globe reported. HarvardWatch has announced a new campaign to reform Harvard's ties to the corporate world. As a first step, it is calling upon the university to disclose all information related to its investment in Harken.
"When you have the California legislature investigating Harvard's ties to Enron, the Justice Department suing Harvard for fraudulent management of development aid to Russia, and now this, you know something's rotten in Cambridge," said Roona Ray, a Harvard senior. "We need to ensure nothing like this ever happens again." The partnership, created with George W. Bush's express approval, bears strong resemblance to the widely-condemned Enron partnerships, controlled by insiders and disguising the dismal prospects of the company. Students' findings prompted stories in the Wall Street Journal and Boston Globe, and students and alumni are now calling on Harvard President Laurence Summers to open an investigation.
HarvardWatch, an independent group of Harvard students and alumni promoting more transparent and accountable governance of their university, points to the partnership as further evidence of improper corporate practices at Harken Energy while President George W. Bush was a director.
The new details raise the most troubling questions to date about the university's involvement in the Texas oil company during Bush's tenure on the board.
In late 1990-at a point when Bush held three high-level positions at Harken Energy-Harken and its largest shareholder, Harvard University, created the Harken Anadarko Partnership (HAP).
According to minutes of Harken's August 29, 1990, board meeting, Bush gave the deal his personal approval. Over the next two years, the partnership allowed Harvard to bail out Harken's struggling business by effectively shouldering a large percentage of the company's loss-generating assets and debts in the Anadarko region of Texas and Oklahoma. This maneuver transformed the public perception of Harken's financial state: the company's reported losses and liabilities were drastically reduced over the next two years. The brighter financial figures allowed Harken's stock price to temporarily reverse its precipitous decline and reach its historical high in 1991, indicating that the Anadarko partnership misled investors about the future profitability of the company. Harvard used this bubble as an opportunity to sell 1.6 million Harken shares.
Members of the Harvard community, already concerned with recent reports of unethical business practices at Harken, as well as Harvard's heavy investment in the company immediately after Bush became a director, reacted with dismay. "As a citizen, I'm deeply disappointed in the President-as a student, I'm ashamed of Harvard," said Cliff Ginn, a third-year law school student. Others compared the news to earlier revelations of the university's role in the Enron scandal. "Harvard's involvement in the Enron scandal was disturbing enough, but this tops it all," said Stephen Smith, a Harvard graduate. "It's hard to imagine a worse use of the Harvard endowment."
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