Dishonesty, Greed and Hypocrisy in Corporate America
[14:47] nearlyhorizontal: Later, although not before our tale is concluded, Harken itself would turn into a company with troubles of its own. But while it appeared healthy, Harken extended generous stock options to the son of President George H. W. Bush. Then the fancy accounting began. Paul Krugman has reported in the New York Times that it involved creating a dummy entity to serve as paper front to then purchase "some of the firm's assets at unrealistically high prices, creating a phantom profit that inflates the stock price, allowing the executives to cash in their stock."
[14:47] nearlyhorizontal: Here is Krugman's description of what happened at Harken Energy, a description which has subsequently been reported all over the nation. "A group of insiders, using money borrowed from Harken itself, paid an exorbitant price for a Harken subsidiary, Aloha Petroleum. That created a $10 million phantom profit, which hid three-quarters of the company's losses in 1989."
[14:47] nearlyhorizontal: Once Harken's stock price was inflated by means of this maneuver - significantly, Arthur Anderson was the accounting firm, and Mr. Bush was on Harken's audit committee - Mr. Bush was able to sell his shares at a large profit shortly before the price of Harken stock dropped substantially. To be specific, on June 22, 1990, Mr. Bush, a director of Harken, sold 212,140 shares for $4 a share, for a total of $848,000. Two months later, on August 20, Harken announced a loss of $23.2 million; on that day its share price dropped 20 percent to $2.375. It closed the year at $1 a share.
[14:48] nearlyhorizontal: This is from this nice article: http://www.commondreams.org/views02/0712-02.htm
No comments:
Post a Comment