Global Intrigue: The Wackiest Rig in Texas

When Bahrain's rulers awarded a high-stakes oil deal to shaky Harken Energy, were they also trying to win favors from the White House?

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Harken began life in the late 1970s as an unprofitable collection of Texas oil wells for investors seeking tax write-offs. That strategy changed in 1984 when Alan Quasha, a lawyer and Harvard M.B.A., bought control and became chairman. Quasha proceeded to trade large chunks of Harken stock for sick oil companies, which owned not only wells but also pipelines and retail gas stations. Aiming to salvage or spin off the assets, Quasha generated a dizzying web of deals that would eventually push Harken's debt past $100 million and boost its revenues to more than $1.1 billion by the end of the decade.

/ Along the way Harken began to suffer from the collapse of oil prices, which depressed the value of assets it had acquired. Yet Quasha managed to attract a steady flow of investment capital from the likes of Harvard's endowment fund, Hungarian-born superinvestor George Soros and the South African liquor and tobacco barons, the Rupert family. Despite the company's sloppy bookkeeping and long-shot prospects, all except Soros continue to hold large blocks of stock. "Alan Quasha will charm your pants off," explains a former Harken executive. "You will take your wallet out and empty it into anything that he suggests."

George Bush Jr.'s affiliation with Harken began in the oil-bust year of 1986, when he and a group of partners received more than $2 million worth of Harken stock in exchange for his floundering 180-well Texas oil operation, Spectrum 7 Energy Corp., which had lost $400,000 in the six months before the sale. "His properties were pretty well encumbered," recalls director Watson. "The banks hadn't foreclosed, but that was in the wind." Not long after Bush joined Harken's board, he took charge of the Texas Rangers and shifted his attention largely to baseball. Yet he remains a Harken consultant, earning annual fees of $50,000 to $120,000.

The year after Bush came aboard, a reclusive Saudi named Abdullah Taha Bakhsh bought an 11% stake in Harken through a Netherlands Antilles shell company. The Saudi, a tycoon with global interests in oil, real estate and jewelry, hoped Harken could someday serve as a vehicle for moving Saudi crude into the U.S. But the strategy would never come to pass.

That year Quasha made one of his worst investments, paying $36 million (probably twice its real worth) for E-Z Serve, a stodgy owner of gas pumps at 900 rural service stations and convenience stores. It suffered every travail from management infighting to IRS audits to environmental disasters. Seven states have cited E-Z Serve for soil or groundwater contamination.

Harken's biggest flaw as a would-be Big Oil Company was its lack of a refinery. In 1989 Quasha made a $190 million bid for a publicly held refinery, Tesoro Petroleum. Tesoro never had any interest in merging -- its board wouldn't even respond directly to the offer -- nor did Quasha have any interest in carrying out a hostile bid. The debacle wound up costing Harken millions of dollars in expenses. The only party to make out handsomely was Quasha himself; his law firm has collected more than $1 million in fees since + 1988 by handling these and other Harken matters.

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