US: Bush Sr.'s Ties to Global Crossing
President Bush had good reason to take an interest in Enron's demise. Aside from his close personal ties to the Houston energy giant, nearly three dozen of his senior appointees owned Enron shares upon arriving at the White House last year.
But was the president also paying unusually close attention to Global Crossing, the telecom pioneer that followed Enron into bankruptcy court and, like Enron, was subsequently accused of accounting fraud?
The connection in this case is a bit more indirect, and it goes back to Tokyo in early 1998.
That's when the other George Bush, the president's father, was appearing on Global Crossing's behalf at an event in the Japanese capital. His normal fee for such gigs was $100,000.
But Bush was intrigued by Global Crossing's prospects. During a breakfast with the company's co-chairmen, Lodwrick Cook (an old Bush chum and former head of Atlantic Richfield Co.) and Gary Winnick, Bush agreed to take his compensation in Global Crossing stock.
According to reports of the meeting, he was so impressed, he even accepted a cut in pay, taking $80,000 worth of shares instead of the full $100,000 he was owed.
This was six months before the company went public. Once Global Crossing, a provider of fiber-optic networks for high-speed data transmission, hit the market, the company's shares predictably soared in value.
And in short order, Bush's $80,000 stake was worth more than $14 million.
Of course, that's no longer the case. Bush's stake in the now-bankrupt company is today worth little more than $2,000 -- but that assumes he's still a Global Crossing shareholder. It's hard to say whether he is or not.
Now, I'm not suggesting that there was any wrongdoing on Bush's part, although it sure stinks that a former president of the United States was receiving cut-rate, pre-IPO tech shares when ordinary investors were forced to buy in at much, much higher levels.
I guess what worries me here is the fact that Bush senior is known to speak with Bush junior at least once a week. And when it comes to Papa Bush's investments, you have to wonder about potential conflicts of interest.
I have the same concerns about the Carlyle Group, a defense-oriented investment firm in which Bush senior is a prominent shareholder.
There's nothing to indicate that Global Crossing received any preferential treatment from the government. On the other hand, it wasn't being scrutinized very closely when, as a former executive has charged, it allegedly inflated its financial results to keep its stock at an artificially high level.
It was reported Friday that the U.S. Securities and Exchange Commission and the FBI are finally looking into Global Crossing's business practices.
A whole lot of investors might have saved a whole lot of money if the government had cracked down earlier. But the same applies to Enron, and look at how messy that's gotten.
If nothing else, the Enron and Global Crossing bankruptcies point to the dire need for greater transparency in the financial world.
And if they lead as well to the president and his staff and immediate family having fewer ties to scandal-plagued businesses, well, that'd be a good thing too.
- 185 Corruption
- 192 Technology & Telecommunications