Family of Secrets: The Bush Dynasty, America's Invisible Government, and the Hidden History of the Last Fifty Years

by Russ Baker

  Money came in from Iranians and Saudis who claimed ties to their royal houses.26 Houston-based Gamal Gamal, an Egyptian native, told Klausmeyer that he had connections with the Saudi royal family. “His connections must have checked out because I remember attending a function in L.A. with [TV personality] Art Linkletter and Marion Gilliam when we were introduced to a ‘Saudi princess,’ ” recalled Klausmeyer. “Marion took me aside and laughed about her because he knew right away she was phony— as Marion knew all the royal family, who were clients of Schroder Bank.”27

  Despite its high-powered investors, Lucky Chance declared bankruptcy in 1982. Later, a company in which Gilliam owned stock received two hundred thousand dollars and five million Lucky shares for reorganizing the mining outfit.28

  W.’s entry onto Lucky Chance’s board came in 1984 via Walter “Del” Marting Jr., an undergraduate roommate at Yale and classmate at Harvard Business School.29 When Marting was asked to assume the presidency of Lucky Chance, he agreed—but only on the condition that George W. Bush be brought onto the board, according to Klausmeyer. It was a kind of quid pro quo, as Marting sat on the board of W.’s oil company, Bush Exploration. Thus, both Marting and Bush got salaries from their respective companies, and blocks of stock in their friends’ company. (Klausmeyer believes that Bush got about fifty thousand shares per meeting.)

  Bush served several years on the Lucky Chance board. He attended board meetings in various locales and visited the mines—until things got hot. For one thing, the other board members believed that Marting was investing funds in things they had not authorized. For another, the press had come calling.

  A Forbes magazine reporter wasn’t really focusing on Lucky Chance, nor on Bush’s role, when he stumbled into the scene. The reporter, Stuart Flack, was looking into offshore shell corporations, in particular ones arranged by Gilliam and Klausmeyer.30 The whole matter of using offshore entities to avoid U.S. taxes had come up before, at Dresser and Zapata. Now, it could be a big problem because attention was focusing on Lucky Chance itself. “Both Dave [Klausmeyer] and Gilliam had accounts in Bermuda,” said Ernest Lambert, a former board member. “They could sell their stock through Bermuda—through, I think, Schroder’s. They would sell it through their account in Bermuda, and brought back the cash in suitcases.”31

  Lambert, described by several former Lucky Chance figures as a rare person of rectitude in the enterprise, said the Bermuda bank was used by some to sell their Lucky stock after the restructuring, when it was as high as fifty cents a share. That’s compared with less than a penny during many periods; and in fact the stock later plummeted. Lambert sold his own shares, legally, for just a nickel apiece. Because he had been able to acquire the stock for even less, Lambert was still able to make a $180,000 profit on the sale.

  It was Klausmeyer who warned W. that a reporter was sniffing around. “I told George that Forbes magazine is doing this article,” Klausmeyer recalled when I visited him at his Houston home in 2006. “I said, ‘I think since your name was mentioned, if your father wants to be president, you probably should resign.’ And he said, ‘You’re right. I resign right now.’ ”

  Klausmeyer recalled the scene vividly: “[Marting] was practically on his knees saying, ‘Please, George, don’t leave me alone here. Please don’t resign.’ And Bush says, ‘No, Klausmeyer is right. You don’t know the press. They get a hold of something like this and they’ll blow it up all out of proportion. I’m out of here.’ He didn’t call anybody. He didn’t think about it more than [that]—as soon as the words were out of my mouth.”

  When I called Marting to ask him about this, he asked that I call him back later, but never responded to my messages.

  CHAPTER 16

  The Quacking Duck

  My pet belief, and I think it’s grounded in some

  good research and reality, is that George W.

  Bush would not be president of the United

  States today if not for that starting point of this

  controversial Harken sale.

  —BILL MINUTAGLIO, TEXAS JOURNALIST

  AND AUTHOR OF THE BUSH BIOGRAPHY

  FIRST SON: GEORGE W. BUSH AND

  THE BUSH FAMILY DYNASTY, APPEARING

  ON ABC’S NIGHTLINE

  IF IT WALKS LIKE A DUCK AND TALKS like a duck, the saying goes, then maybe it really is a duck. Over at Harken Energy—George W. Bush’s next corporate home—the ducks were quacking plenty loud. Bush-connected enterprises were just not the kinds of businesses with which the rest of us are familiar. There always seemed to be something more going on: that overlay of peculiar money-moving, a general lack of profitability, the participation of foreign interests, and a hint of black intelligence operations.

  In September 1986, as oil prices continued to collapse and W.’s previous financial savior, the Cincinnati-based Spectrum 7 Energy, was itself failing, along came the Dallas-based Harken, a comparatively little-known independent oil and gas company, riding to the rescue. Harken snapped up Spectrum, put W. on its board, and gave him a handsome compensation package.1 In return, W. was allowed to go about his business—which at the time meant playing a crucial role in his father’s presidential campaign. But the Harken assist didn’t just benefit Poppy’s political fortunes. Profits from W.’s subsequent sale of his Harken stock would jack up his own political career. The Harken deal ultimately made it possible for him to become part owner and highly visible “managing director” of the pop u -lar Texas Rangers baseball team—a position that would enhance his modest résumé as a candidate for governor a few years later. Thus, the largesse of the figures behind Harken played a key role in George W. Bush’s quick march to the presidency.

  Virtually everyone who has looked at Harken over the years agrees that it is some strange kind of corporate beast, like a newly discovered species of manatee. The company’s books have never made any sense to outsiders— which might have had something to do with the fact that the only people who seemed to make any money were the insiders. In 1991 Time proclaimed Harken “one of the most mysterious and eccentric outfits ever to drill for oil.”2

  The Harken story reads at times like the stuff of an airport bookstore thriller. One finds figures associated with BCCI, gold caches, and an alphabet soup of secret societies appearing at critical junctures to bail out Harken, traveling to the White House to meet with President George H. W. Bush, then flying off to make deals with the likes of Saddam Hussein or the Chinese in the wake of the Tiananmen Massacre. In Harken we find the future president of the United States deeply involved in an enterprise whose every aspect raises questions about control of power in our country, because it draws our attention to complex and little-understood international alliances that bring America’s leaders, past and future, together with individuals and forces of dubious integrity and ambitions that appear far removed from the public interest. Harken also pulls the curtain back further on subjects we examined in past chapters—collusions and interferences in a broad range of institutions, from precious metals to the awarding of drilling contracts—and raises questions about a host of institutions, including even top universities. It shows us how very little we understand about power at the highest levels—and indicates how much more work needs to be done.

  One thing, though, is clear: The story of Harken fits in perfectly with our evolving exploration of the Bush family’s role in a globally reaching, fundamentally amoral, financial-intelligence-resource apparatus that has never before been properly documented.

  At one time, Harken Energy was not such an odd duck. For the first decade of its existence, Harken was a fairly conventional, and mostly profitable, oil exploration firm.3 But in 1983, things began to change. Having been in business for nearly a decade, and now suffering from the collapse of oil prices, founder Phil Kendrick traveled to Asia to consider potential buyers for his Australian subsidiary. One Singapore-based broker happened to bring up a name. “He told me about a guy named Quasha—said he was the man behind Marcos,” Kendrick r
ecalled. “He said he was the one who put him in power.” That may have been something of an exaggeration, but William Quasha was a man to know in the Philippines. An American citizen who had served there during World War II and stayed on to become a powerful lawyer in that country, he was head of the local expatriate group Republicans Abroad, and so well connected that he even played host to a Democrat, President Bill Clinton, when he came through the isles.

  William Quasha’s ace in the hole was his relationship with the long-ruling president and strongman Ferdinand Marcos. And Marcos, accused of stealing billions of dollars from the public treasury of the poor country during his twenty-year reign, needed friends with connections abroad.4 Recalled Kendrick: “The word was, Marcos was trying to get money out of [the] Philippines—he had a lot of money—and place it in legitimate businesses.”

  In a curious coincidence, not long after Kendrick first heard the Quasha name, one of Harken’s investment bankers in New York mentioned a client looking to take a major position in an oil company, a New York lawyer named Quasha. He turned out to be William Quasha’s son, Alan.

  Phil Kendrick and Alan Quasha quickly struck a deal. “He wanted control of the board, so we sold our stock to him, and that gave him control,” Kendrick explained to me in what began as a phone conversation and ended up weeks later as a dinner at his country club in Abilene, Texas. With Quasha’s arrival, Kendrick stayed on as a consultant and as president of the Australian subsidiary, for which he had high hopes. Quasha assured him, Kendrick said, that he was going to make Kendrick’s stock options valuable.

  According to Kendrick, he did exactly the opposite. “I finally figured out what his game plan was,” Kendrick said. Kendrick alleges that this initially consisted of a press release that portrayed the company as a giant mess that needed to be fixed. “The stock just crashed; it went down to nothing—below a dollar.” Then, the new management announced a rights offering, which allowed people like Quasha to buy still more stock, at a heavily discounted price.

  This, of course, destroyed Phil Kendrick’s stock options while giving the newcomers even more control. Then the company instituted a one-for-ten reverse split, which brought the stock price up to a no-longer-embarrassing level.5 Meanwhile, management sold off the Australian subsidiary that Kendrick had been told he could run, and, according to Kendrick, pushed him out. (Kendrick, it should be noted, is a lifelong Republican who voted for George W. Bush in both 2000 and 2004.)

  The funding for all this was baffling. When Quasha bought Kendrick’s stock, the money came through an entity in Bermuda, a trust in the name of Quasha’s mother, with major blocks of shares taken by other members of the Quasha family.6 According to company filings, his father, William Quasha, bought 21 percent of Harken’s stock.

  Why did the Quasha family find this particular company so interesting? Kendrick couldn’t stop thinking about what he had heard about the Quashas and Marcos—and couldn’t help wondering whether the money going into Harken wasn’t really Marcos’s money—or, put another way, the money of the people of the Philippines. I had hoped to get some insight, at least a limited one, from Alan Quasha, but he has repeatedly ignored requests for an interview.

  School for Scandal

  With Kendrick out of the way, Harken began metamorphosing in strange and wondrous ways. As mysterious as the workings of the company was its allure for powerful figures and institutions—almost all of whom piled into the company after George W. Bush came on board in 1986.

  One of the oddest investors in Harken was the billionaire speculator, investor, and philanthropist George Soros, who first became involved shortly after Alan Quasha took over the company by swapping oil company stocks for Harken shares; Soros was a major shareholder in the first years following Quasha’s takeover, at one point holding one third of the stock.7 That George Soros held a big stake and served as a board member at the time George W. Bush was welcomed into the company that would make his fortune is rife with irony. Soros, a refugee from Communist Hungary, would found a variety of progressive philanthropies in the United States and abroad, whose causes included promoting democratic institutions, campaign finance, and drug policy reform. Eighteen years after George W. Bush joined him in Harken, Soros would become the leading financier of efforts to deny W. a second term as president.8 More consistent with Harken’s geopolitical texture is Soros’s longtime backing of Central and Eastern European democracy movements during the Soviet era. Though Soros exited Harken years ago, he continues to play tennis with Alan Quasha.

  By far the biggest—and ultimately the most improbable—of Harken shareholders was Harvard University.9 Harvard, currently the second wealthiest private institution in America after the Bill and Melinda Gates Foundation, entered the picture in October 1986, right on the heels of George W. Bush.10 Through its investing arm, Harvard Management Company, it agreed to buy 1.35 million shares of Harken for two million dollars and invest another twenty million dollars in Harken projects—eventually pumping fifty million dollars into the company and owning 30 percent of its stock.11 Harken, in fact, was one of the largest investments the university ever made. “It was not typical,” one former member of Harvard Management Company’s board of directors told the school’s newspaper.12

  Harvard’s initial purchase of Harken shares worked like a booster rocket. The next month, Harken began trading on the NASDAQ exchange. The month after, the firm scooped up E-Z Serve Inc., a chain of nine hundred rural convenience stores and gas stations, in its largest acquisition to date.

  In this period, George W. Bush acquired options for eighty thousand additional shares of the company’s stock. And no wonder. The company was about to turn from an ant into an anteater—and a particularly voracious one at that. In 1986, it had a total revenue of four million dollars. In 1989, thanks to a flurry of acquisitions and infinitely complicated transactions, revenue would exceed a billion dollars. Yet few outside investors made any money. Which might have raised more than a few eyebrows about where all that cash was coming from and going to.

  Equally mysterious is how and why the financial whizzes at Harvard chose to bankroll the apparent clunker. In 2002, when the Boston Globe asked for an interview on the subject of Harvard and Harken, Michael Eisenson, managing director and CEO of the Harvard Management Company, who sat on the Harken board with George W. Bush, declined.13 The university’s motto—Veritas—apparently does not apply to its financial dealings.

  The truth about Harvard’s involvement begins to open a window on something that does not appear in the university’s brochures, nor in the U.S. News & World Report rankings of America’s top colleges.

  Sly and the Family Stone

  In 2002, the Boston Globe, seeking to understand the local school’s involvement with Harken, spoke with Robert G. Stone Jr., the longtime chairman of the seven-member Harvard Corporation, the university’s highest governing board. Stone sought to distance himself from the matter.

  “I never recommended Harken. I didn’t know anything about them,” Stone said in a telephone interview from his New York City office in what appears to be his first interview about the matter. “I don’t tell them what to invest in.” He said that at the time of Harvard’s investment, he knew then-Vice President George H.W. Bush “very, very slightly.”

  “I was at Harvard the same year he was at Yale. I met him a few times, and that was that,” Stone said. “I had nothing to do with his administration.”14

  As for Bush’s son, a graduate of Harvard Business School, Stone said, “I don’t know the current president at all.”15

  It was an artful answer, and also disingenuous. Records show that in 1979, Stone, a resident of the Bush hometown of Greenwich, Connecticut, was—along with his brother David—an early donor to Poppy Bush’s Republican primary race against Ronald Reagan. In 1982 Robert and David Stone again supported a Bush campaign: this time Poppy’s brother Prescott Bush Jr.’s unsuccessful and quixotic 1982 U.S. Senate campaign in Connecticut against Lowell Weicker
.16

  Despite Stone’s efforts to distance himself from the Bushes and from Harvard’s entry into Harken, Stone himself turns out to have both oil and CIA connections—or, perhaps it can be said, CIA-oil connections. Most intriguingly, Stone turns out to have been in business with the “former” CIA officer Thomas J. Devine. That’s the same Thomas J. Devine who purportedly retired from the agency in order to help Poppy Bush start up Zapata Offshore.

  In 1950, the same year that Dresser Industries relocated to Dallas and the whole Dallas intelligence complex was coming together, Stone started Stonetex Oil Corporation, a Dallas-based oil company. Some years later, Devine became Stonetex’s treasurer. (When I asked Devine about his association with the Stone family, he explained that the same ground rules applied as with the Bushes before he could speak to me: “That makes two families I need to get clearance from.” He apparently never did get that clearance.)

  Part of the mystery of the Bush connection turns out to once again revolve around old relationships. Stone came from a powerful old Boston family and married the daughter of a Rockefeller. His in-laws, it turns out, were close personal friends of Prescott Bush and his wife, Dorothy, George W. Bush’s grandparents. And his father-in-law, Godfrey Rockefeller, had his own CIA ties.17