Turns out that this now infamous oil and gas company, which as you may remember was in
declining health when W. made his stock sale in 1990, is in even worse shape today. A little
digging reveals a company that has lost hundreds of millions of dollars over the past half
decade. Harken's stock, (ticker HEC-ASE) currently trades for just pennies. Its CEO, chief
accounting officer, and CFO, all worked in the energy audit division of Arthur Andersen, the
CFO as recently as the mid-90s. The COO was also an Andersen auditor. Continuing a
practice that was in place when W. was in residence, the company made loans (and forgave
at least one of them) to senior management and directors.
Now a tiny, highly leveraged company, Harken has dozens of operating subsidiaries and a
tangle of financial statements. Despite the company's notoriety, it's hard to find anyone who
follows Harken these days. "We dropped coverage [of Harken] two years ago," says Fadel
Gheit, senior energy analyst at Fahnestock & Co. "Because you get sick and tired of 'the
check is in the mail'. They promise but they don't deliver. You cannot have a company go to
investors and tell them just go to the next well and then the next well is dry and then they
say wait for the next one." The company did not return repeated calls for comment.
...
Harken, which is engaged in oil and gas exploration, development, and production in Texas
and the Gulf of Mexico, as well as in Colombia, Peru, Panama, and Costa Rica, soldiered on
after Bush left. CEO Mikel Faulkner and COO Bruce Huff, CPAs who have been with the
Harken since 1980 and 1990 respectively, pursued a variety of deals to jump-start its
operations. But without much luck. The company's Latin American operations in particular
were a drag, and Harken lost some $263 million over the past five years. And in a complex
series of transactions, Harken recently moved its South American operations into a British
company called Global PLC, of which Harken owns 92%. "It was always suspected that
something was fishy, but not because of the Bush connection," says Gheit of Fahnestock.
"That for a small company like Harken to be involved in foreign drilling operations getting
concessions from foreign governments, things just didn't add up. A lot of people had
suspected that this was a CIA front." That particular point, of course, is just a rumor.
Here are more facts: In November 2000, with its stock in a nosedive, Harken did a 1-10
reverse stock split. This maneuver reduces the number of shares outstanding by a factor of
ten and is intended to boost a company's stock price, which it did, for a while. Harken's stock
popped up from 50 cents to $5.00, but then resumed its descent, falling to a recent low of 38
cents. (Note that unadjusted for the reverse split, Harken's stock would now be trading for
3.8 cents!) Harken, which once had a market capitalization of hundreds of millions of dollars,
is now worth only $8 million. The company, which did $32 million in sales last year and
posted a net loss of $41 million, has $64 million in long-term obligations, most of it in the
form of convertible notes.
For such a wheezing pipsqueak, Harken has attracted a surprising number of big names
besides Bush. SEC documents show that in 1985, billionaire investor George Soros sold a
company he controlled named Consolidated to Harken for stock and joined its board. He
stayed until his stake was bought out by the company four years later. In the 1990s, Michael
Huffington, former Republican Congressman from California and ex-spouse of Arianna,
owned a company that was partner in a well with Harken in Colombia. And in 1999 an SEC
filing shows that a group of financial entities tied to Wall Street big shot Geoffrey Boisi
owned 5.4% of Harken's stock.
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