WASHINGTON -- President Bush and the White House on Wednesday again fended off questions about whether his record as a director of an oil company undermined his administration's push for corporate reform.
The latest controversy concerned the issue of companies locating overseas to escape U.S. taxes, which Bush says he opposes.
"We ought to look at people who are trying to avoid U.S. taxes. I think American companies ought to pay taxes here," Bush said Wednesday, one day after he signed legislation establishing stricter accounting standards for U.S. corporations.
Harken Energy Corp., on whose board of directors Bush served more than a decade ago, established a subsidiary in the Cayman Islands, a move that would have shielded profits from off-shore oil drilling operations that Harken was starting near Bahrain, an island nation in the Persian Gulf, if the work had produced oil.
Asked about the Harken subsidiary, Bush said he had opposed an "arrangement with Bahrain, a drilling venture there."
White House press secretary Ari Fleischer denied that the subsidiary was set up to avoid taxes. "Any oil that was produced in Bahrain and sold in the United States would have been taxable in the United States," Fleischer said. He added: "No oil was produced, so I think it's a moot question."
While taking a more aggressive stance against business corruption in recent weeks, Bush has been forced to defend his record as a Harken director.
He was tardy in reporting to the Securities and Exchange Commission his sale of nearly $850,000 worth of stock in Harken 12 years ago. Also, weeks after he sold the stock, its value tumbled. That prompted an insider trading inquiry by the SEC; the agency closed the investigation in 1991 after finding "insufficient evidence" to proceed.
These aspects of Bush's tenure with Harken have been aired publicly before, including during the 2000 presidential campaign. But they've drawn new attention during the push for the business reform bill that Bush signed into law Tuesday.
In the latest matter, minutes from Harken Energy's board of directors meetings in the fall of 1989 show that Bush and the company's seven other directors were briefed on details of the Bahrain venture, and all of them ultimately signed off on it.
But Bush strongly opposed the Bahrain deal when it first came before the board that year, said an official of the Harken subsidiary involved in the project. That opposition was based on reasons unrelated to off-shore corporate registrations and taxes.
Efforts by companies to register in foreign tax havens to avoid paying U.S. taxes has drawn increasing political attention in recent weeks. The Senate on Wednesday approved a measure that would prohibit companies from doing business with the Pentagon if they take such a step.
Democrats on Wednesday said the report of the Harken subsidiary demonstrated that as a business executive, Bush failed to follow the practices he is now advocating.
"If it is true, I think it gets harder and harder to take his position on corporate accountability seriously," said Senate Majority Leader Tom Daschle, D-S.D.
Many American multinational companies register subsidiaries that do business overseas in Caribbean island nations such as the Caymans to facilitate the movement of cash, as well as to insulate profit from U.S. taxation.
In the case of Harken Bahrain Oil Co., though, profit was never an issue.
The venture, which formally was signed in late January 1990 and gave Harken rights to any and all oil or gas discovered and produced off Bahrain's shores, drilled two dry holes before it was abandoned.
And in the end, Harken lost little of its own money. The big loser in the Bahrain venture was the Bass family of Fort Worth, Texas, which partnered with Harken to finance the drilling in Bahrain. The family spent more than $20 million from its privately held Bass Enterprises Production Co. on the venture in exchange for half of any future profit.
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