NEW YORK (CNN/Money) -
President Bush borrowed money from oil company Harken Energy Corp. while he was a member of its board, a practice he condemned this week as part of his plan to curb corporate abuse and fraud, the White House acknowledged Thursday.
Bush took out low-interest loans totaling $180,375 from Harken in 1986 and 1988 and used the money to buy 105,000 shares of Harken (HEC: unchanged at $0.44, Research, Estimates) stock, part of a Harken program to encourage directors to buy stock, the White House said.
Democrats seized on the revelation, with the Democratic National Committee accusing the administration of "hypocrisy" and Senate Majority Leader Tom Daschle, D-S.D., arguing the loans put the president in a "difficult position to criticize others."
"He did criticize (the) effort in his speech and yet it appears that is what he did himself," Daschle told reporters.
The issue of corporate loans became a hot topic and a focus of Bush's ire after WorldCom Group (WCOME: Research, Estimates), which is under investigation by federal regulators after reporting $3.8 billion in expenses improperly, revealed it loaned former CEO Bernard Ebbers $400 million to buy company stock.
"I challenge compensation committees to put an end to all company loans to corporate officers," Bush said in his Wall Street speech Tuesday on corporate responsibility.
In the corporate world, sometimes things aren't exactly black and white when it comes to accounting procedures.
Bush advisers said his loans were legal, appropriate and fully disclosed at the time and that such loans have been common in companies around the country. They dispute any suggestion that Bush is being hypocritical, arguing that the situation has changed.
"It's become clear (the practice) can be abused, as we've seen in some recent cases," Claire Buchan, White House deputy press secretary, told CNN, saying Bush believes the practice "needs to be fixed."
Harken referred questions to the office of its CEO, Michael Faulkner, who did not return calls for comment.
Bush's loans were at 5 percent interest, compared with the 7.5 percent prime lending rate at the time, according to published reports, and Harken didn't require Bush to pay back the principal for eight years.
In a buyback program in 1993, Harken took Bush's 105,000 shares, canceled his debt and gave him options for 42,503 shares. Bush never exercised those options and left the company later in 1993.
Bush's speech this week came amid criticism and questions about other of his practices at Harken, questions that have surfaced periodically during the course of his political career.
First, Democrats have questioned a stock sale Bush made in 1990, when he sold 212,000 shares -- to a mysterious, unnamed buyer who sought him out, according to a New York Times report -- for $848,000.
Bush used the money to pay off the $500,000 loan he took to buy a share of the Texas Rangers, according to the Times -- a move that ended up being the best of his business career, solidifying his fortune and launching his career in politics.
Bush reported that stock sale 34 weeks later than SEC regulations required, and he's been unable to explain why.
He once said the SEC lost his reporting paperwork, then spokesman Ari Fleischer recently said Harken's lawyers lost the paperwork. Finally, in a press conference this week, Bush himself said that he wasn't sure what had happened.
Democrats also have questioned the ethics of a deal that took place in 1989, when Bush was on the company's audit committee and board of directors, in which Harken executives used money borrowed from Harken to buy a Harken subsidiary and artificially boost Harken's cash flow.
The SEC forced Harken to adjust its books after that, but it also found that Bush had done nothing wrong. Since his stock sale took place before Harken adjusted its books, the SEC also investigated him for possible insider trading in 1990, when his father was President, but took no action against him.
In his press conference this week, Bush called the Harken charges old news and said the SEC needed to be strengthened to separate normal business dealings like his from the malfeasance happening at other companies.
"In the corporate world, sometimes things aren't exactly black and white when it comes to accounting procedures," he said.
Bush joined Harken in 1986 after it bought his failing energy business, Spectrum 7. Harken gave him the 212,000 shares of stock as a result of that deal, and he became a director and a consultant for the company.
Senator Daschle again challenged Bush to ask the SEC to make records on the insider trading investigation public.
"The way to resolve it is simply for the SEC to release the file so that there isn't any more outstanding question, that there isn't any doubt about what happened and why," Daschle said.