Chronicle of Higher Education - web daily - October 10, 2002
Harvard Management Co. Helped Energy Company Shroud $20-Million in Debt, Report Charges By AUDREY WILLIAMS JUNE
The company that manages Harvard University's endowment formed an "off the books" partnership with President Bush's former energy company that kept $20-million in debt off its financial records, according to a coalition of Harvard students and alumni that monitors the university's investments.
HarvardWatch, in a report whose contents were first revealed in The Wall Street Journal and The Boston Globe, says that the partnership between the Harvard Management Company and the Harken Energy Corporation, a Houston-based company, was created in 1990, when President Bush was a member of Harken's Board of Directors. The Harken Anadarko Partnership, as it was called, removed $20-million of debt from Harken's balance sheet.
The HarvardWatch report, which was widely released on Wednesday, also says that around the same time the partnership was formed, the Harvard Management Company made a $30-million investment in Harken, becoming its largest stockholder.
The partnership shrouded Harken's true financial condition, which triggered a rise in its stock price, the report says. With Harken stock at a historical high, Harvard then sold 1.6 million shares of the company's stock.
"We need to ensure that nothing like this ever happens again," said Roona Ray, a Harvard senior and a member of HarvardWatch.
Harvard, in a statement, denied any wrongdoing. "Harvard Management Company (HMC) investments in Harken Oil were not inappropriate and were disclosed openly and properly," the university said. "Harvard Management Company sold its Harken shares at a profit, consistent with its mission. The role of the Harvard Management Company is not to curry political favor but to invest well on Harvard's behalf. The performance of HMC in this regard speaks for itself."
The university also said that unlike many of the partnerships that sank the Enron Corporation, "Harken disclosed its transactions to investors and the SEC and complied with accounting rules."
Harken Energy did not respond to a request for comment.
HarvardWatch said the Harvard Management Company had an 84-percent stake in the partnership, with the remainder held by Harken -- which nevertheless exercised control over the partnership's oil and gas ventures. A White House spokesman, Scott McClellan, told The Boston Globe that the partnership was Harvard's idea.
"This is something that Harvard proposed, and Harvard set the terms of the partnership," Mr. McClellan said.
HarvardWatch is pushing for a more open and inclusive system of governance at Harvard. Earlier this year, the group alleged that Harvard's endowment profited from the university's ties to Enron. In a report issued in February, the group called for an inquiry into the ties between the overseers of Harvard's endowment, Enron, and a star hedge-fund manager who invests money for the university.