One Hundred Days of Cronyism

After 100 days in office George Bush's approval rating for handling of environmental issues is an abysmal 41%, the Los Angeles Times reported today. As Bush wined and dined members of congress at the White House in yet another superficial gesture of "bipartisanship" demonstrators across the street chanted "Protect the people, not the polluters." Others carried signs reading, "People, not profits," and "No more poison in our drinking water." The demonstrators appeared to reflect public sentiment as evidenced by the LA Times poll. 56% of those surveyed opposed Bush's decision to overturn the Clinton administration's regulation that would have reduced arsenic levels in drinking water by 80%. 59% opposed the administration's withdrawal from the Kyoto global warming treaty. 54% also opposed Bush's reversal of a campaign promise to reduce carbon dioxide emissions from power plants. Apparently unswayed by administration rhetoric that environmental decisions would now be based on "sound science" the LA Times poll suggests nearly half of the American public believes the administration moves are due to ties to the energy industry. Bush and Vice President Cheney were both oil industry executives (although Bush' business partner has admitted theirs was little more than a "dry hole business" providing tax shelter for investors).

The poll also documented strong public opposition to administration proposals to weaken protection of public lands and wildlife from commercial activities. 69% supported limiting commercialization of areas where wolves and grizzly bears live, and 65% opposed rolling back protection of national forests from activities like mining or logging.

Administration spokesmen have tried to characterize the blatantly pro-business environmental decisions as nothing more than a public relations gaffe. But the LA Times poll suggests the public sees the policies for what they are -- big business contributors being rewarded with a more favorable regulatory climate. The pro-business environmental policies are certainly no surprise to Texans. In Texas

heavily to Bush's gubernatorial campaign were rewarded by being allowed to police themselves for violations of environmental protection regulations. But the environmental decisions are just the publicly visible tip of the iceberg of interlocking cronyism that is likely to influence administration policy for the duration of Bush's term in office.

We should be prepared for entanglements and influence peddling beyond special treatment for polluters. For additional insight, we turn to events in Texas over ten years ago.

In 1990 Harken Energy, in which Bush maintained a financial interest had lost $40 million, and the company's CEO declared their financial statements "a mess." At the time, oil giant Amoco was negotiating with Bahrain concerning off-shore drilling rights. A former Mobil executive named Michael Ameen, who was working as a consultant in George H.W. "Poppy" Bush's State Department, put the Bahraini oil minister in touch with hitherto unknown Harken Energy. In an announcement that shocked oil industry analysts, Bahrain awarded exclusive offshore drilling rights to Harken. Harken was in such poor financial condition that they had to partner with the Bass brothers to even begin the project. They had also never drilled a well outside of Texas, Louisiana, and Oklahoma, and had never drilled undersea at all.

Harken stock rose $1 per share within a few weeks. George W. sold his two-hundred-thousand-some shares, grossing nearly $850,000. Two months later Saddam Hussein invaded Kuwait, and the share price of every oil company doing business in the Middle East dropped. Bush did not notify the Securities and Exchange Commission of his trade until eight months after the deadline. The SEC general counsel at the time had handled Bush's purchase of the Texas Rangers baseball team. The SEC investigation took no action against Bush.

The Texas constitution makes the position of governor notoriously weak, but one of the significant powers of the office is the ability to appoint members of the Board of Regents of the University of Texas. In 1995 Bush re-appointed Thomas Hicks, CEO of investment partnership Hicks, Muse, Tate & Furst, to the Board of Regents. Hicks had been appointed previously by Democratic Governor Ann Richards, but a post-election $25,000 contribution to the Bush campaign put any political differences in perspective. With Bush's support Hicks convinced the Board to invest in a series of private-equity partnerships. These highly risky ventures are usually undertaken only by wealthy individuals or firms that can tolerate substantial losses. The notion of stewards of public funds using such investments was unheard of, and arguably illegal. The Texas constitution directs regents to employ "the judgment and care which men of ordinary prudence, discretion, and intelligence exercise in the management of their own affairs, not in regard to speculation but in regard to the permanent disposition of their probably income therefrom as well as the probable safety of their capital." Millions in fees were paid up front to general partners such as Hicks & Muse, and that's before they take their share of any profits.

Not satisfied with the exorbitant fees from his investments on behalf of the University, Hicks conceived of a scheme that appealed to conservative Bush -- privatization. The plan was to "privatize" $9 billion by transferring holdings to a separate nonprofit corporation to be called the University of Texas Investment Management Company (UTIMCO). Hicks boasted of hiring a lobbyist expressly for the purpose of securing passage of legislation to establish UTIMCO. With the support of Bush and legislators allied with him the bill passed in 1995. Some of the bill's less publicized provisions exempted UTIMCO from state laws requiring open meetings and public records. Moreover any UTIMCO board members who were not regents did not have to file financial disclosure forms like other state appointees. As Joe Conason in Harper's Magazine, February 2000, the upshot was that millions of dollars flowed from University of Texas investment funds to "major Republican contributors and political supporters of the Bush family"

We would do well to recall this episode when we hear administration spokesmen touting the privatization of Social Security.

Bush's appointees to the Board of Regents were all contributors to the Republican party, and the Dubya's political campaigns. Hicks himself and his brother donated $146,000. Hicks & Muse partners count among the biggest Bush contributors since 1995. Conason estimates contributions from Hicks and those under his influence as totaling more than $500,000 since becoming a regent.

Despite being exempted from maintaining public records, the efforts of Suzy Woodford, executive director of Common Cause, Texas, and State Representative Sylvester Turner, a Houston Democrat, have revealed a pattern in UTIMCO investment decisions. One of the interesting investments was the somewhat modest $10 million invested in The Carlyle Partners II fund, described as "an investment strategy focused upon the intersection of government and business." Carlyle partners include "Poppy's" economic adviser, Richard Darman, and a figure familiar from the Bush presidential campaign in Florida, James Baker III. The group is chaired by former Reagan administration defense secretary Frank Carlucci. "Poppy" has also been a paid spokesman for the Carlyle Group since at least 1998. Dubya himself sat on the Carlyle board from 1990 till 1994.

To summarize, as Conason puts it, Bush's "political appointee oversaw the awarding of $10 million in public investment funds to a firm that not only had maintained a long-term business relationship with Bush, but later employed and compensated Bush's father as well."

The $10 million investment with the Carlyle Group was dwarfed by hundreds of millions invested with firms and individuals having close ties to the Republican party, including Henry Kravis, the Bass brothers, and the Wyly family -- all members of "Team 100" who each gave at least $100,00 to the Republican party in 1998 and 1999. At the same time UTIMCO invested similar amounts with associates of Hicks and his firm. The extent of Bush's knowledge of these activities is unclear. A spokesman for Bush during his term as governor stated that, "Neither the governor nor the governor's office" had taken part in decisions about U of T investments. Donald Evans, Bush's presidential campaign chairman, and now Secretary of Commerce -- ultimate dispenser of patronage -- was appointed to the Board of Regents in 1995, however, and was later chairman.

So the public perception that Bush administration decisions are influenced by business ties has some basis in his recent history and that of his family. From using the State Department to make business connections for relatives, polluters allowed to regulate themselves, and an investment charlatan given virtually free rein to dispense public funds, the picture that emerges is one of close-knit business associates who regard government as just another tool in the quest for personal gain.


Mohammed, Arshad "Bush Marks 100th Day; Environmentalists Protest" Reuters. 30 Apr. 2001

Barabak, Mark Z. " Bush Criticized as Fear for Environment Grows" Los Angeles Times 30 Apr. 2001

Conason, Joe. "Notes on a Native Son" Harper's Magazine Feb. 2000. 39 - 53.