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I. THE GEORGE W. BUSH SUCCESS STORY

A heartwarming tale about baseball, $1.7 billion, and a lot of swell friends

By Joe Conason

FORTUNE'S CHILD

As George W. Bush's wealthy admirers continue to pack cash into the largest presidential war chest in American history (at last count a staggering $58 million). perhaps the time is ripe to examine how the would-be president became rich himself--quite rich, in fact, if not by the standards of H. Ross Perot or Steve Forbes, at least by the measure of most Americans. Bush, who received $15 million for his share of the Texas Rangers franchise, would be the richest Democratic or Republican nominee since Lyndon Johnson. On the June 1998 day that the baseball team was sold, Bush told reporters, "When it is all said and done, I will have made more money than I ever dreamed ..."

Indeed. The sum represented an enviable 2,400 percent increase on the $606,000 investment Bush had made in the team nine years earlier, with borrowed money, and a considerable improvement on his own record of losing millions invested by others. Together with his elation about the windfall there may also have been a feeling of vindication for the eldest scion of the Bush family. Although twice elected governor of Texas (in 1994 and again in 1998), the son known as "Dubya" had lived through nearly two decades of business failures, embarrassing bailouts, and eyebrow-raising favors that had besmirched his family's reputation.

The money, coming late in Bush's life, at age fifty-one, is understood not to have corrupted him, and his handlers depict him as a man of religious faith and moral character who will cleanse a White House soiled by scandal; Bush, in their audience-tested Calvinistic fable, is a once-upon-a-time hard-drinking ne'er-do-well transformed into a well-to-do teetotaler. The fact that his political rise has been crowned with material rewards might, in the metaphysics of American capitalism, very well be deemed a sign of righteousness and divine favor.

But viewed in less sentimental terms, the history of George W. and his millions is a success story about a privileged young man who grew up in proximity to money and political power, appreciated the relationship between them, and so learned to live happily ever after with his wealth and his conscience. Not only does the story explain why Bush is so attractive to the corporate leaders and Washington lobbyists now staging his nomination for the presidency; it is also a textbook lesson in modern American civics. We who might soon elect Bush should hear this story, to know how he might act should he achieve the Oval Office. Although the immediate mechanics of the Rangers deal were well-documented by the media, the sale of the team was but a moment in the governor's long and still-unfolding political and financial relationships with certain fortunate personages--some of whom, it can reasonably be expected, might be appointed to positions of authority in a new Bush administration. The numbers are complicated, and many of the sums imponderably huge, but the power is real and the outcome as observable as, well, a brand-new baseball stadium.

A YOUNG MAN WITH A FUTURE

When his father was still in the White House, developments in the business career of George W. Bush were occasionally reported by the national media and sometimes scrutinized for evidence of influence peddling and conflicts of interest. His difficult sojourn in the oil business, for example, was documented in Texas newspapers as well as in Time magazine and the Wall Street Journal, and that period was examined more recently in the Washington Post as part of a biographical series on the Republican front-runner published last year. But considering Bush's present fame, the details of his early career are not widely known--and they must be revisited briefly here in order to identify the people who made possible his baseball bonanza.

From the outset of his career, George W. Bush exhibited an impatience that would have embarrassed his father, who underwent a long apprenticeship in the oil business. In 1978, only three years after graduating from Harvard Business School and returning home to Midland, Texas, he incorporated his own oil-drilling venture.

Almost simultaneously, he made an even more startling announcement. Again unlike his father and grandfather, who established their fortunes and reputations before running for public office, George W. declared his candidacy for Congress in 1978 from the district that included Midland. His name was his only political credential, aside from a year as president of the Delta Kappa Epsilon fraternity at Yale.

His candidacy seemed almost plausible, however, when he defeated a far more seasoned opponent in the Republican primary. He went on to lose badly in the general election to a Democrat who had mocked Bush's pretentious description of himself as an independent oilman. Actually, Bush didn't commence any operations of his oil firm, Arbusto Energy, until early in 1979.

With assistance from his uncle Jonathan Bush, a personable Wall Street financier, George W. assembled a limited partnership of two dozen investors. The Arbusto partners included George W.'s grandmother Dorothy Bush; Rite Aid drugstores chairman Lewis Lehrman, then a rising force in New York Republican politics; William Draper III, a corporate executive and family friend who was later appointed to head the Export-Import Bank; and James Bath, a mysterious Houston aircraft broker who appears to have been fronting for several Saudi Arabian sheiks.

About $3 million poured into Arbusto, producing little oil and no profits but expansive tax shelters. In 1982, George W. changed his company's infelicitous name to Bush Exploration Oil Co. His father by this time was vice president of the United States, but the new company name didn't improve the son's luck or alter the fact that petroleum prices were sinking while interest rates were rising. More than once, Bush's venture was near ruin when wealthy benefactors suddenly appeared with fresh cash. The most generous was Philip Uzielli, an old Princeton buddy of James Baker III, the family friend then serving as chief of staff in the Reagan White House. For the sum of $1 million, Uzielli bought 10 percent of the company at a time in 1982 when the entire enterprise was valued at less than $400,000.

Soon Uzielli's million was gone, too. But just as his company was heading toward failure, George W. met William DeWitt and Mercer Reynolds, a pair of Ohio investors with their own small oil firm, called Spectrum 7. DeWitt, who had graduated from Yale a few years earlier than Bush, happened to be the son of the former owner of the Cincinnati Reds, and he shared Bush's passion for baseball. After a quick courtship the Spectrum 7 partners agreed to merge with Bush Exploration, naming George W. as chairman and CEO and awarding him a substantial share of stock. Although the vice president's son helped Spectrum 7 to raise additional money, catastrophic losses continued. During a six-month period in 1986, Spectrum 7 lost $400,000, and the partners feared creditors would foreclose their remaining assets.

Once more George W. attracted a financial savior. That September, Spectrum 7 was acquired by Harken Energy Corporation, a medium-sized, diversified company. After Bush joined Harken, the largest stock position and a seat on its board were acquired by Harvard Management Company, the private firm that invests the university's endowment. The Harken board gave Bush $600,000 worth of the company's publicly traded stock, plus a seat on its board of directors and a consultancy that paid him up to $120,000 a year. His partners understood perfectly what had happened. As Spectrum 7's former president, Paul Rea, recalled later, the Harken directors "believed having George's name there would be a big help to them."

Thus ending his years as an oilman with a substantial income and minimal corporate duties, George W. in the spring of 1987 moved his family from Texas to Washington, where he served as "senior adviser" in his father's presidential campaign. Intense and sometimes volatile, he made appearances at fund-raisers and rallies, acted as an emissary to major campaign donors and leaders of the religious right, and occasionally bullied reporters whose publications he disliked. Those confrontations injured his own reputation, but his father rolled to victory over Democrat Michael Dukakis in one of the nastiest elections in decades.

Toward the end of the 1988 campaign, George W. heard from his former Spectrum 7 partner Bill DeWitt that the Texas Rangers were on the market. To make a successful bid, DeWitt would need Texas backers, and the son of the incoming president was perfectly situated to find them. George W. also had a powerful advantage in dealing with the team's owner, an aging Midland oil millionaire named Eddie Chiles, who had been a Bush friend since the 1950s.

Four George W., an ardent lifelong fan with no real job, DeWitt's proposal was a providential opportunity. His duties as a director of Harken Energy, though undemanding, offered little chance to improve his resume. His hopes of running for governor in 1990 had been squelched by incredulous party insiders, who complained that he had never "done anything." To acquire the Rangers and thus keep the franchise in Texas would be to do something of profound significance to Texans.

Baseball commissioner Peter Ueberroth was eager to help the son of the new president, but he was not so eager when George W. said the biggest investors in the proposed Rangers syndicate were his old Yale frat brother Roland Betts and Tom Bernstein, Betts's partner in a film-investment concern. Betts and Bernstein were from New York, not Texas.

The indispensable local money came from Richard Rainwater, formerly the chief financial adviser to the Bass brothers of Fort Worth. Little known to the general public, Rainwater was famous on Wall Street for growing the Bass inheritance from around $50 million in 1970 to more than $4 billion by the time he left in 1986 to manage his own investments.

Both Bush and Ueberroth met with Rainwater in early 1989 to persuade him to join the Rangers syndicate. Rainwater then took effective control of the deal, bringing along Edward "Rusty" Rose, a well-known Dallas investor, to oversee the franchise. Under an agreement worked out by Betts and Rainwater, the title of "managing partner" would be shared between Rusty Rose and George W.--but the president's son would operate under a tight rein. He would function as the new ownership's friendly public face while Rose ran the business.

Bush's stake in the team, just under 2 percent, was among the smallest. He purchased his shares with a $500,000 loan from a Midland bank of which he had been a director and eventually scraped together another $106,000 to buy out two other limited partners. Rainwater, Rose, and their associates put up $14.2 million, while Betts and Bernstein invested about $6 million; the balance came from smaller investors, loans, and the equity of minority partners in the old Chiles partnership.

Two months after his father's inauguration, George W. Bush called a press conference in Arlington to announce that the Rangers sale had been successfully completed for a price that was later reported to be $86 million. Proclaiming that the new owners would share a "civic dividend" with Texas, he began to promote himself along with the team. While Rainwater, Rose, and all the other partners remained in the background, George W. behaved as if he were "the owner" of the Rangers. He attended every home game and even printed "baseball cards" bearing his own picture to hand out from his box.

Meanwhile, George W. maintained a financial interest in Harken Energy. He had been granted enough additional stock options, at a generous discount, to increase his holdings by more than half. By 1989, however, those shares were falling in value. A series of questionable decisions by chairman Alan Quasha had jeopardized the company's future, and its losses reached $40 million in 1990. Even the company's CEO admitted that its financial statements were "a mess."

Once more, however, the Bush name seems to have provided sudden deliverance--this time in the form of a contract with the emirate of Bahrain. Until 1989 the Bahraini oil minister had been negotiating an agreement for offshore drilling with Amoco, a huge energy conglomerate with decades of worldwide experience. Those talks were abruptly broken off, supposealy because the Bahrainis had decided that a smaller firm would give their project more attention. The Bahraini officials were put in touch with Harken through a former Mobil Oil executive named Michael Ameen. At the same time, Ameen also happened to be working as a consultant to the U.S. State Department, which had assigned him to brief Charles Hostler, the newly confirmed American ambassador to Bahrain (a San Diego real estate investor who had given $100,000 to the Republican Party for the 1988 election).

These several events culminated in a January 1990 announcement that astonished oil-industry analysts: the government of Bahrain had awarded exclusive offshore drilling rights to Harken. "It was a surprise," one top analyst told Time magazine with dry understatement. Quite apart from Harken's shaky financial condition, the company had never drilled a well anywhere but Texas, Louisiana, and Oklahoma, and had never drilled undersea at all. So depleted of cash and so deeply in debt was Harken that the company was forced to bring in the more experienced and solvent Bass brothers as equity partners, so that construction on the $25 million project could begin.

Only the presence of President Bush's oldest son could explain Bahrain's extraordinary decision. There was no question that the rulers of Bahrain were aware of his role. In addition to his Harken directorship, George W. sat on the company's "exploration advisory board," which meant that his name had been mentioned at least twice during initial discussions with Bahraini officials. "They were clearly aware he was the president's son," said Monte Swetnam, a former Harken executive who conducted the talks with the emirate's oil ministry.

George W. flatly denied any part in Harken's bid. "Ask the Bahrainis," he replied flippantly when journalists asked whether they had been enticed by his name. Harken has said that Bush was not involved in the Bahrain deal. Later, Bush claimed he had opposed the project because Harken was not "prepared."

However it was procured, the Bahrain contract pushed up the price of Harken stock from $4.50 to $5.50 in a matter of weeks. And on June 22, 1990, six months after the contract was announced, George W. quietly sold off 212,140 shares, or two thirds of his interest, which grossed him $848,560. He used most of the proceeds to pay off the bank loan he had taken a year earlier to finance his portion of the Texas Rangers deal. A few weeks later, in early August, Iraqi dictator Saddam Hussein invaded Kuwait. Saddam's aggression drove down the share prices of every oil company doing business in the Gulf, including Harken, whose shares fell to $3.12.

By the time George W. unloaded his Harken stock in late June, diplomatic alarms had been sounding in the Bush White House about Saddam's aggressive intentions. Although there is no evidence that the president's son was tipped off about the impending Gulf crisis, he certainly had reason to know that Harken was still in trouble. He served on the company's three-member audit committee and also on a special "fairness committee" appointed that spring to consider how a corporate restructuring would affect the value of the company's outstanding shares. Two months after Bush sold the bulk of his Harken holdings, the company posted losses for the second quarter of well over $20 million and its shares fell another 24 percent; by year-end Harken was trading at $1.25.

When Bush's stock dumping was first reported by the Houston Post in October 1990, there were no accusations of insider trading. Then in April 1991 the Wall Street Journal revealed that the Securities and Exchange Commission had not been notified of his timely trade until eight months after the legal deadline. The regulatory agency commenced an investigation that concluded in 1991 with no action against George W. It was hardly a surprise. The SEC chairman at the time, Richard Breeden, was an especially ardent Bush loyalist, and the agency's general counsel was the same Texas attorney who had handled the sale of the Rangers baseball team for George W. and his partners in 1989. Bush has insisted that he didn't know about the firm's mounting losses and that his stock sell-off had been approved by Harken's general counsel.

Although no wrongdoing was proved, the suspicions surrounding Harken Energy and other dubious enterprises associated with the president's sons --particularly Neil Bush's directorship of a crooked Colorado savings-and-loan--caused the family severe embarrassment during the 1992 election. George W. described the twelve months he spent on the futile Bush-Quayle reelection effort as "the most miserable year of my life."

But that unhappy interlude scarcely stalled his own quest for success. Soon after buying the Rangers, he and his partners realized that the franchise would never make money unless they replaced the team's old ballpark, badly outmoded in an era of luxury skyboxes. With the backing of billionaire Rainwater they could have built a new stadium themselves, of course, but that would have violated an important tenet of major league economics. The construction costs of new sporting facilities are provided by taxpayers, not club owners. But because few municipalities accept such fiscal burdens without coercion, Rangers management began to hint unsubtly that unless the city government of Arlington provided land and financing on favorable terms, they would have to move the team to nearby Dallas or Fort Worth.

Major league baseball's negotiating advantage almost invariably leads to "public-private" deals, in which public funds subsidize private profit with the justification that the presence of the team will stimulate wider economic activity. Even by those standards, however, the capitulation of Arlington mayor Richard Greene was uniquely abject. In October 1990, Mayor Greene signed a contract that guaranteed $135 million toward the stadium's estimated price of $190 million. The Rangers put up no cash but financed their share through a ticket surcharge. From the team's operating revenues, the city would earn a maximum of $5 million annually in rent, no matter how much the Rangers reaped from ticket sales and television (a sum that rose to $100 million a year). The most remarkable provision, however, permitted the franchise to buy the stadium after the accumulated rental payments reached a mere $60 million. The property acquired so cheaply by the Rangers included not just a fancy new stadium with a seating capacity of 49,000 but an additional 270 acres of suddenly valuable land.

This scheme predictably generated local opposition to "corporate welfare." But together with Mayor Greene, George W. convinced an overwhelming majority of Arlington voters to approve a sales-tax hike that would back the stadium bonds in January 1991. The referendum must have left an impression on Governor Ann Richards, who quickly signed legislation creating the Arlington Sports Facilities Development Authority--with power to issue bonds and exercise eminent domain over any obstinate landowners.

Never before had a municipal authority in Texas been given license to seize the property of a private citizen for the benefit of other private citizens. That is exactly what happened to a recalcitrant Arlington family that refused to sell a 13-acre parcel near the stadium site for half its appraised value. Their land was condemned and handed over to the Rangers. The ensuing lawsuit revealed that well before any of the enabling legislation had passed, the Rangers management had planned to wield condemnation as a weapon to drive down the price, and an outraged jury awarded more than $4 million to the Arlington family whose land had been expropriated.

Long before that verdict came down, however, the shiny new structure George W. had christened The Ballpark in Arlington was finished. It may have been no accident that the arena's outer walls were clad in reddish brick and pink granite that subtly echoed the appearance of the beautiful old state capitol in Austin. On November 8, 1993, with the stadium being readied to open the following spring, Bush announced that he would be running for governor. He didn't blush when he proclaimed that his campaign theme would demand self-reliance and personal responsibility rather than dependence on government.

ONE POPULAR FELLOW

When George W. was elected governor in November 1994, defeating Ann Richards 53 to 46 percent, he at last came into possession of power that was not a mere reflection of his father's prominence. With the machinery of state government at his disposal, his ability to reward those who helped him financially or politically became far greater than it had ever been before.

How he has used that power has received almost no attention from the national press. Washington journalists, after all, are unlikely to know much about the bureaucratic and political structures of Texas government. A few have discerned certain connections between Bush's views on environmental protection or health care and the desires of his most generous corporate contributors. But the continuous intertwining of Bush's personal financial interests with those of his partners and supporters--and the ways in which those mutual interests have been advanced by appointments he has made and legislation he has promoted--has been carefully examined only by a few reporters in Austin.

On December 6, 1994, one month after he defeated Ann Richards to become governor of Texas, George W. received a large but belated campaign contribution from an acquaintance named Thomas O. Hicks, whose support Bush had unsuccessfully solicited at the beginning of his campaign. Although neither man knew it then, each would considerably enhance the other's fortune. The tall, stocky Hicks, usually dressed in the expensive suits and handmade cowboy boots that signify success in Dallas, hardly looked different from dozens of Texas businessmen who supported Bush. Like many of them, he was a self-made multimillionaire with an interest in college football and quail hunting, a graduate of the University of Texas, and, like Bush, a former fraternity president. By 1994 Hicks had divorced and remarried a second, younger wife. Profiles in the business press often referred to his forceful and even "charismatic" personality.

It was a sign of Bush's new political maturity that he accepted the $25,000 check from Hicks, who earlier that same year had made the once unpardonable error of donating $25,000 to Richards. Not so long before, the younger George W. hadn't been quite so forgiving toward opportunists who supported both the Bushes and their Democratic opponents. Presumably the governor-elect understood that Hicks had merely done what was expected of any gubernatorial appointee. The previous January, in a gesture to the Texas business community, Richards had named Hicks to the University of Texas Board of Regents. Because the legislature convenes in Austin only every other year, however, his appointment had not yet been confirmed by the State Senate when she lost to Bush. He was therefore vulnerable to the new governor, who could have chosen to withdraw Hicks's name before the legislature opened for business in January 1995.

That wouldn't have been a very prudent decision, though, because Tom Hicks wasn't just any rich guy looking for a favor. Hicks was easily one of the wealthiest men in Texas, and, more specifically, he was the chief executive of Hicks, Muse, Tate & Furst, an investment partnership he founded ten years ago that is now among the largest in the country. Its voracious acquisitions of radio and television stations, food and beverage companies, and a wide variety of other media and industrial properties had made Hicks not only a multimillionaire but an important player in the leveraged-buyout game. He was not someone to be snubbed by an ambitious politician. So Bush amiably pocketed Hicks's $25,000 check and, instead of scratching off his name, kept Hicks on the lengthy roster of appointees to be sent up to the capitol after his inauguration--a list the State Senate quickly rubber-stamped.

Of the scores of appointments made by an otherwise weak governor under the Texas constitution, a seat on the University of Texas Board of Regents is among the most desirable. It carries significant prestige, opportunities for patronage, and preferred access to coveted season tickets (or luxury boxes) at Longhorn football games. For someone like Tom Hicks, however, being a regent provided something far more valuable than any such trifling tokens of status. The prolific Hicks had conceived an ambitious plan for the state university system's financial assets--more than $13 billion--that matched his own bold investment style, and, with the governor's support, he parlayed his appointment into a position of unprecedented control over the university funds. There was nothing illegal about any of this--but much that is instructive about how things are done at the commanding heights of the American political economy.

Among the largest sources of capital available to players in the private-equity sweepstakes are public pension funds and university endowments (as George W. Bush himself surely must have noticed during the 1980s, when the Harvard Management Company sank millions into Harken Energy's limited partnerships). While considerably more dangerous than ordinary stocks or mutual funds, these so-called alternative equity placements often promise much higher long-run returns. The University of Texas had done some private equity deals since 1987, averaging six a year. Caution had usually predominated in the handling of the university's legacy of oil wealth.(1)

Tom Hicks frankly believed that his alma mater had been far too cautious and conservative, and that a modern investment strategy demanded many more "alternative" investments. To observers without Hicks's professional prejudice, the downside of private equity investing was obvious. The time horizons of such investments are five or even ten years, and the judgments are highly subjective. There is the likelihood--indeed, the absolute certainty--that large sums of money will disappear when some deals simply don't work out as expected. New companies often fail, and even old companies sometimes don't "turn around" according to plan. That might be an acceptable risk for wealthy individuals or financial companies, but public fiduciaries overseeing university or employee retirement funds have a different kind of responsibility. The relevant passage in the state constitution directs the university regents to use "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 funds, considering the probable income therefrom as well as the probable safety of their capital."

The fees and expenses required to enter the leveraged-buyout game are often exorbitant --millions paid out from capital, off the top, to general partners such as Hicks, Muse. Performance may vary and money may be lost, but contractual obligations remain the same. Whether any particular partnership does well or poorly those annual fees are collected up front--cutting 1 percent, 2 percent, or more from the net rate of return earned by investors--and that is before the general partners take their substantial share of net profits.

Still, by 1995 Hicks had compiled a remarkable record of success with several highly publicized plays, including a merger of Dr. Pepper and 7-Up, when Hicks, Muse turned a $45 million investment into $700 million. The managers of major public pension funds such as the California Public Employees Retirement System (CalPERS)--the nation's largest fund, with almost $160 billion in assets--were impressed. All over the country, those managers were eager to turn over a portion of their funds to firms doing leveraged buyouts.

From Hicks's point of view, the chief obstacle in tapping those repositories of public treasure was that their activities were subject to scrutiny from a variety of interested parties, including legislators, newspaper reporters, and public interest organizations. So onerous did Hicks find such civic impediments that he eventually complained to a reporter for the Dallas Morning News: "The tough determination you've got to make is do you want to do it at all." Moreover, as he was learning firsthand in his role as regent, public funds were subject to myriad laws and regulations that invariably hindered rapid decision-making.

In fact, Hicks had discovered how frustrating it could be to deal with the university's investment bureaucracy long before Richards appointed him a regent. In 1990 he had attempted to interest the University of Texas in a limited partnership that Hicks, Muse had set up to acquire Healthco International, a dental-supplies company, for $250 million. As Hicks hinted in an October 1990 letter to an executive on the university's investment staff, he eventually grew impatient with the regents' cautious approach. Noting that the Healthco deal was scheduled to close in a few weeks, he wrote: "I hope your policy issues are settled in time for you to participate." Fortunately for the university, that particular deal closed before the regents could take action on the proposal. Three years later, Healthco went bankrupt.

That unfortunate episode did not discourage Hicks's fellow regents from entrusting him with considerable authority over the university's assets soon after he was appointed to the UT board by Governor Richards in 1994. By then he had completed many more successful deals and expanded the funds under his firm's control to more than $8 billion. In alliance with the professional staff that handled the university's money, Hicks began to press for more aggressive investment strategies. Speaking as one of the country's leading buyout and venture-capital experts, he convinced the other regents that falling revenues from the university's oil leases had to be offset by higher-risk, higher-return equities. The regents agreed to an ambitious new plan to commit an additional $1 billion to private equity investments rather than ordinary stocks, bonds, and mutual or index funds. The regents also brought in a Massachusetts consulting firm to recommend improvements in UT's investment procedures. In 1995, following the consultants' report, they adopted a rather radical innovation favored by Hicks and the professional staff. The plan featured a buzzword with great appeal to conservative Republicans such as the new governor: privatization. To compete more effectively in global markets, the university could "privatize" approximately $9 billion in financial assets by transferring all of its diverse holdings into a new nonprofit corporation. This entity, separate from the regents but still under their purview, was to be known as the University of Texas Investment Management Company, or UTIMCO.

Determined to secure passage of this far-reaching plan, Thomas Hicks met with Bush, Lieutenant Governor Bob Bullock, and legislative leaders. "I paid for a separate lobbyist to make sure that it was done, too," Hicks boasted last December. It was one of the most significant changes to the governance of Texas made during Bush's tenure in the statehouse and among the first important bills that he signed. With Bush's support and the sponsorship of legislators associated with the governor, the UTIMCO bill passed through the capitol in 1995 with very few questions asked.

The UTIMCO plan pleased the university's professional investment staff because it smoothed the way for higher salaries, closer to the huge sums earned by money managers in the private sector. It seemed to offer a more corporate, streamlined, and less cumbersome approach to investing than the old system of regents committees. And privatization would provide the confidentiality required to do deals with venture capitalists and limited partnerships.

What nobody in Austin seemed to realize when Bush signed the UTIMCO bill was that unlike the Board of Regents, this new outfit would not be subject to state laws that mandate open meetings and public records. The regents had always taken advantage of loopholes in those laws to shield their financial decisions behind a veil of privacy, but UTIMCO would be exempt from public scrutiny. The privatized corporation and its board would not even be listed in the official Texas State Directory. Nor would the non-regent appointees to the nine-member UTIMCO board be required to file personal financial disclosure documents like other appointees to state commissions and agencies.

In many respects, UTIMCO had been empowered to write its own rules, which suited Tom Hicks fine. After UTIMCO officially took over from the regents' investment committees in early 1996, with Hicks as its first chairman, all of its business was done behind closed doors. The directors often gathered for their monthly board meetings at the lavish offices of Hicks, Muse, Tate & Furst in downtown Dallas rather than at UTIMCO's own more modest quarters in an Austin building named for Lady Bird Johnson. "It was a hell of a lot more convenient for all of us to meet there," Hicks noted. Largely freed from public accountability, UTIMCO embarked on a series of deals that raised serious questions about conflict of interest and political favoritism. Again, there was nothing unlawful about these decisions, all of which were vetted by the powerhous law firm of Vinson & Elkins; they merely reflect the way business is often done behind closed doors--even, or especially, when the public's money is at stake. Friends and long-time associates of Thomas Hicks, and his firm's past and future business partners--as well as major Republican contributors and political supporters of the Bush family--received hundreds of millions of dollars from the University of Texas investment funds.

In a certain sense, all this apparent favoritism was merely business as usual. It was and is, as they say, the corporate culture of the financial industry. The industry's corrupting influence on public pension funds has been a perennial scandal in state capitols across the country for well over a decade. Investment firms whose executives and lobbyists contribute generously to certain elected officials routinely have been rewarded with profitable contracts. In New York both the current state comptroller, a Democrat, and his Republican predecessor were plausibly accused of favoring major contributors with pension-fund investment deals. In California similar accusations erupted last year over the investment of public employee retirement funds. In Connecticut the former state treasurer pleaded guilty to racketeering and money laundering in a wide-ranging probe of what federal authorities have called "the shady world of bribes, kickbacks, and improper campaign contributions" connected with more than $500 million in state pension fund investments.

So unwholesome are the documented relationships between respectable financial firms and their political benefactors that by 1999 the Securities and Exchange Commission proposed to bar bankers and brokers from collecting fees from government clients for two years after making contributions "to an official of the government entity." The new rules, however, would not have prevented Hicks from enriching George W.'s supporters.

But the University of Texas presented a special case because, unlike most public pension or university funds, the UTIMCO board was chaired by a powerful private investor who was making deals for his own firm at a frantic pace while simultaneously overseeing the investment of public money, often with his firm's putative competitors. It was an arrangement that existed nowhere else in the country, and it provided Tom Hicks with some remarkable advantages.

Nothing could have been more useful to the chairman of Hicks, Muse than continuous access to confidential information concerning the other buyout firms, partnerships, and companies that approached UTIMCO seeking money. The otherwise unavailable details of who was involved in which deals and on what financial terms were provided to him routinely. And with that knowledge came the authority to award hundreds of millions in financing. The only real constraint on his power was the presence of the governor's other appointees to the Board of Regents. He had little reason to worry about them, however. Under his chairmanship of UTIMCO, nearly every vote on policy and asset management carried unanimously and rarely was any dissent heard. He also had considerable leverage over the senior staff that formally recommended investments to the board because, as chair of the board's compensation committee, he had raised their salaries by tens of thousands of dollars when they became employees of UTIMCO.

Joining Hicks as a regent in February 1995--and a year later on the UTIMCO board--was Tom Loeffler, a San Antonio lawyer and former Republican congressman who spent much of his time in Washington as a registered lobbyist for Hicks, Muse, among other clients. (His firm earned well over $280,000 in lobbying fees from the Dallas investment company.) Loeffler has long been a top national GOP fund-raiser and a substantial donor to the party and its candidates. He and his law firm, Arter & Hadden, have contributed more than $100,000 to George W. Bush's political ambitions since 1994.

Also named as a regent by Bush was perhaps his closest friend from Midland, Texas--oil company executive Donald L. Evans. A comparatively small but faithful donor to Republic an candidates himself, Evans has raised money for all of George W.'s political campaigns, beginning with the fledgling oilman's unsuccessful congressional race in 1978.

In fact, all of Bush's regent appointees were contributors to his own campaign and to the Republican Party. But giving lavishly to the governor and his party was a habit that Tom Hicks and his associates adopted rather suddenly themselves shortly after George W.'s election victory. Until then, as measured by his checkbook, Hicks's political sympathies had been bipartisan and even mildly Democratic, but after that initial $25,000 contribution to George W. in December 1994, Hicks and his brother, Steven (who runs CapStar Broadcasting for Hicks, Muse), eventually gave another $146,000 to the governor's election war chests. His partners have donated tens of thousands more. Together they are among the highest donors to George W. Bush since 1995.

During the same period, the Hicks, Muse firm has given $180,000 in soft money donations to Republican committees, while Hicks and his wife, Cinda, have given about $90,000 to various GOP candidates and committees in Texas and elsewhere. Contributions to the Republicans from him, his partners, his lobbyists, and his relatives total well over half a million dollars since his confirmation as a regent.

Even before UTIMCO officially opened for business, the newly aggressive investment policy spearheaded by Tom Hicks took effect. Within the first few months of Bush's inauguration in January 1995, the University of Texas commenced an ambitious schedule of private investment deals that dwarfed those made the year before. In all of 1994, the university had placed a total of $36 million in three limited partnerships; in February 1995 alone, it invested almost twice that amount. The regents' financial plan restricted new private equity commitments for 1995-96 to $144 million, or one fourth of the funded portfolio for the fiscal year. Yet according to a review by the Texas state auditor's office, the actual commitments made in 1995-96 nearly doubled that amount, reaching $285 million.

On what basis did Hicks and his fellow board members direct those rapidly increasing flows of money? No one outside UTIMCO really knows, because until the summer of 1999 they kept their deliberations secret. The "due diligence" reports prepared by UTIMCO employees to evaluate potential investments have never been available to the press and public, and the board meetings were closed until last fall. This obsession with secrecy mirrored the investment industry, in which the names of limited partners and their financial agreements are traditionally kept confidential and are often hidden behind generic corporate names and opaque offshore registrations. Until very recently, the citizens of Texas had no way to ascertain precisely where their largest public university's money had been invested and with whom. Even though considerably more information about UTIMCO's investments is now available, the identities of its limited partners remain hidden without an exhaustive search of SEC filings--and sometimes are impossible to discover even then. Remarkable as this arrangement might seem, it was perfectly lawful according to the Texas attorney general.

With most of those transactions and partnerships safely concealed behind thick corporate veils, it was not easy to discover that the regents--and a bit later, the directors of UTIMCO--were funneling millions of dollars from the university endowments to the friends and business associates of Thomas Hicks, and also to major Republican contributors (who were sometimes the same people). But gradually, under pressure from a few newspapers, public-interest organizations, and legislators, a smattering of names and figures were pried out of the UTIMCO files. The most persistent digging was undertaken by R. G. Ratcliffe of the Houston Chronicle; the task of forcing open UTIMCO's meetings was shouldered largely by Suzy Woodford, the executive director of Common Cause Texas, and State Representative Sylvester Turner, a Houston Democrat. And from that piecemeal information, a familiar pattern began to emerge.

Under the guidance of Tom Hicks, a growing portion of the university's investment choices had a decidedly Republican tinge. On March 1, 1995, the regents voted to place what would prove to be a comparatively modest $10 million with The Carlyle Group, a Washington-based merchant bank that is chaired by Frank Carlucci, the former secretary of defense in the Reagan Administration. The specific fund was Carlyle Partners II, described with exquisite delicacy on the firm's Web site as pursuing "an investment strategy focused upon the intersection of government and business." Among Carlyle's partners are numerous former Reagan and Bush administration figures, including Richard Darman, economic adviser to President Bush, and James Baker III, the polished former White House chief of staff, secretary of state, and Bush-Quayle campaign chairman.

That a firm run by his father's associates would be awarded an investment contract only weeks after George W. took office was unseemly at best. But the Texas governor had his own long-standing and lucrative ties to Carlyle that dated[ back almost a decade. Among his more obscure business activities was a corporate directorship at Caterair, one of the nation's largest airline-catering services, which was acquired by Carlyle in 1989. The next year, a seat on the company's board was arranged for George W. by the former Nixon White House aide and longtime Bush associate Fred Malek, who was then an adviser at Carlyle. Although Bush remained on the catering company's board until 1994, his earnings as a Caterair director are not specified on his personal financial forms filed with the Texas Ethics Commission.

These days it is the governor's father who benefits from the Washington investment firm's largesse. Since leaving the White House, George Herbert Walker Bush has been paid by Carlyle for speeches at events sponsored by the merchant bank. His spokesman, Michael Dannenhauer, was uncertain when, exactly, the speechmaking arrangement began. Dannenhauer declined to provide any further details: "We don't talk about his earnings or his investments or anything like that." Carlyle's spokesman did not return calls seeking information about the firm's relationship with the Bushes. It is known, however, that the ex-president joined up with Baker, Carlucci, and Darman on a more formal basis in early 1998 when he became a "senior adviser" to Carlyle Asia Partners (a fund set up to buy distressed businesses in the Far East). His speaking and consulting fees are reportedly reinvested with Carlyle, and a source close to the firm says that Bush Senior also has enjoyed a "carried interest" in one or more Carlyle partnerships--meaning that he was awarded a share of profits without putting up any of his own funds. Over the past two years he has delivered speeches in Asia, where he remains popular among politicians and government officials and where he was inevitably followed by representatives of Carlyle Asia.

This extraordinary circumstance underscores the question of probity that haunts the career of George W. Bush: his 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.

Tom Hicks said that he did not know of the connection between Governor Bush and Carlyle when the March 1995 investment was approved. "I knew Jim Baker was involved with them," he recalled. But, Hicks added, he had informally recommended against investing with Carlyle, although he couldn't remember whether he had voted against the deal. "I had hired two former Carlyle employees and I had insight that there were issues within that organization."(2)

In the following year, 1996, after UTIMCO took over the university's financial portfolio, its directors made an investment of $50 million in the KKR 1996 Fund, a new buyout partnership set up by Kohlberg Kravis Roberts. That firm's founding partner is Henry Kravis, the implacably acquisitive corporate raider who has consistently been among the largest Republican contributors in the country during the past decade. Kravis was a financial co-chairman of Bush-Quayle 1992, and he boasted to reporters that he was a personal friend and confidant of President Bush. Both he and his wife, Marie-Josee, are reliable donors of "soft money." In the spring of 1996 they gave $125,000 to the Republican National Committee.

As Republican donors, the Bass clan in Fort Worth rivals that of Kravis and his partners in its generosity. The oil-rich Basses are also old friends of the Bushes, enjoying a particularly close connection to George W. through Richard Rainwater, the billionaire financier behind the Texas Rangers deal, and through Harken Energy, which, it may be remembered, had brought in the Basses to save its unlikely deal in Bahrain. In April 1998, UTIMCO invested $20 million in a deal involving Bass Brothers Enterprises. The limited partnership operated under the generic, unrevealing name of Prime Enterprises II.

Later in 1998 UTIMCO placed the unusually large sum of $96 million with Maverick Capital, a relatively new partnership in Dallas. Among Maverick Capital's main investors and general partners are the Wyly family, the principal stockholders in Sterling Software and, again, long-time friends of the Bushes. Between 1993 and 1998, various Wyly family members gave well over $300,000 to Republican candidates and committees.

The making of so many deals suggests a Republican version of the Lincoln Bedroom sleepovers at the Clinton White House. Henry Kravis and his partner George Roberts; Robert Bass, his wife, Anne, and his brother Lee Bass; and the brothers Sam and Charles Wyly all were members of "Team 100," the elite corps of wealthy Bush backers who each gave at least $100,000 to the GOP in 1988 and 1992 (and who in turn were provided special access to the president, the White House, and Cabinet members). Among several national co-chairs of Team 100 was Tom Loeffler, who as a Texas regent and UTIMCO board member later voted on all of the deals involving the Basses, the Wylys, and Kravis.

UTIMCO, for its part, maintains that it "does not consider or inquire into the political affiliations of prospective managers or company management: because such matters are not factors in the due diligence process. In fact, management rarely has any knowledge of political connections of the principals involved in a private investment."

While the University of Texas invested hundreds of millions of dollars with Republican-linked partnerships under the guidance of Tom Hicks, it also placed hundreds of millions more with his friends and associates as well as with firms that did business with Hicks, Muse. Although Hicks recused himself from voting on several of those deals, the minutes of the UTIMCO board meetings do not show that he actually left a meeting in which his interests were potentially implicated.

The well-connected Texas law firm of Vinson & Elkins, which advised the regents and UTIMCO on financial and ethical issues, has never found that Hicks misused his position. Yet there was certainly a pattern of remarkable coincidences between Hicks's own interests and large investments of university funds. The $50 million UTIMCO investment in the Kohlberg Kravis Roberts 1996 Fund was followed fifteen months later by the announcement of an unprecedented joint venture between the Kravis firm and Hicks, Muse. The two investment giants, usually perceived as business rivals, had quietly put together a $1.5 billion takeover bid for the Regal Cinemas theater chain. KKR's share of the partnership came from the same KKR fund in which UTIMCO had recently invested. The UTIMCO attorneys decided there was no conflict, however, because Hicks had voted for the KKR deal before the joint venture was put together. "I had mixed feelings about it," Hicks said, noting that KKR is, after all, his own firm's largest competitor. "That's not a conflict, that's a gentlemanly gesture."

In another 1996 decision Hicks actually insisted on increasing UTIMCO's financial commitment to a company in which he would soon have an indirect but substantial interest. On June 10 the UTIMCO board met at the Hicks, Muse offices in Dallas with principals of the Beacon Group, a New York investment company that was then seeking investors for its newest partnership, known as the Focus Value Fund. After the Beacon Group presentation, the UTIMCO staff recommended that the university commit $15 million to the Focus Value Fund. According to the board minutes, Hicks then demanded to know why the recommendation was so small, and "added that ... a $25 million commitment would be more appropriate." The board unanimously agreed to increase the investment with Beacon.

A few months later Stratford Capital Partners--a company controlled by Hicks, Muse, with Hicks as a board member--announced that it would buy Hollywood Theaters, another moviehouse chain, in a $52 million deal with the Beacon Group. But before Beacon received actual funding for this deal from UTIMCO, the UTIMCO staff discovered the apparent conflict of interest with Stratford. As Hicks saw it, "The system worked. The staff saw the potential conflict, and they instructed Beacon that [UTIMCO] needed to opt out of that investment." The Hollywood Theaters deal went forward and closed in October.

Apparently, other seeming conflicts of interest were deemed moot by UTIMCO's attorneys if a period of several months elapsed between an investment by UTIMCO and a Hicks, Muse deal involving the same company--or vice versa. On January 27, 1997, the university placed $40 million with a New York investment bank called Evercore Partners Inc. (one of whose principals is former assistant treasury secretary Roger Altman). Then the following September Evercore assisted NBC in a joint $900 million takeover of several television stations with Hicks, Muse.

A strikingly similar series of events--except in reverse--also dates back to January 1997. That was when Hicks, Muse and its CapStar Broadcasting subsidiary announced the purchase of eleven radio stations from American Securities Partners for an undisclosed amount. Trade publications reported that "the transaction is expected to close by the fourth quarter of 1997." Several months later, on May 22, 1998, the UTIMCO board invested $30 million with American Securities Partners.

Two former classmates of Hicks' at the University of Texas also were awarded large investments by UTIMCO. One was his old fraternity brother Bruce Schnitzer, a New York insurance man who set up Wand Partners, which received more than $60 million in at least three separate deals with UTIMCO between 1996 and 1998. Schnitzer's record of success was mixed at best; his companies' rates of return lagged behind the Dow average. Nor was it reassuring that he had resigned in 1985 as the president of Marsh & McLennan, then the world's biggest insurance brokerage, after the company lost $165 million in unauthorized trading and was fined by the New York State insurance department.

Despite those problems, Schnitzer maintained close connections not only with Hicks, Muse but with Richard Rainwater and the Bass family. After quitting Marsh & McLennan he had done multimillion-dollar deals with all of them, including one of the first major partnerships put together by Hicks, Muse. Although Hicks later abstained from voting on some of the UTIMCO deals with Schnitzer, it was he who introduced Schnitzer to the UTIMCO staff in 1995. The other old college buddy of Hicks who got a substantial UTIMCO investment was W. McComb Dunwoody, the principal of an outfit known as Inverness Management. In December 1997, Dunwoody's venture received a commitment of $40 million. According to UTIMCO, "the fact that Messrs. Schnitzer and Dunwoody attended The University of Texas ... with Mr. Hicks was not a factor." And Hicks noted, "I disclosed all of that."

Did George W. Bush understand what his appointee Tom Hicks was doing with the Permanent University Fund? The Texas governor has always maintained a discreet silence about the university's controversial investment policies since he signed the original privatization bill. "Neither the governor nor the governor's office has taken any part" in the university's investment decisions, said Scott McClellan, a Bush spokesman. "I swear I didn't get into politics to feather my nest or feather my friends' nest," George W. told the Houston Chronicle in August 1998. "Any insinuation that I have used my office to help my friends is simply not true."

But how much Bush knew about UTIMCO's investments is not clear. Donald Evans, the governor's best friend and trusted adviser, was appointed to the Board of Regents in 1995, later was elected chairman, and was privy to UTIMCO's activities from the very beginning.

In the meantime, Tom Hicks's approach to the investment of public money came under intense scrutiny not in Texas but in California. CalPERS, the state's employee pension fund, invested $100 million with Hicks, Muse in 1997 after a positive recommendation from an outside consultant, Christopher J. Bower. A furor arose after it was revealed that Hicks had also purchased a yacht for $300,000 from Bower. That price was $45,000 more than Bower had originally paid for the used 47-foot boat, and Hicks had paid the higher price without ever actually seeing the vessel.

Fortunately for Hicks, the giant California pension fund's lawyers took an indulgent view of the matter. They ruled that there was no serious conflict, because the boat sale had taken place nine months after Bower's recommendation and twelve months before a second $100 million investment was approved by the CalPERS board. Federal investigators took a dimmer view, and the FBI briefly examined the circumstances of the transactions. The investigation was inconclusive, however, and no charges were brought. As always, Hicks insisted that he had conducted himself with the utmost integrity.

Hicks's chairmanship of UTIMCO coincided with a period of frenetic growth for his investment firm, and with that growth came expanding ambitions. Although he continued to pursue all sorts of deals, Hicks devoted much of his energy to the creation of an empire of sports franchises and broadcasting outlets in his home state, like those owned by Rupert Murdoch in Los Angeles and Ted Turner in Atlanta. Hicks already controlled dozens of radio and television stations in the Lone Star State, and he had also acquired the Dallas Stars, a National Hockey League team. He had tried and failed to buy the Dallas Mavericks, a struggling NBA franchise--but at least Hicks and the successful bidder, Ross Perot Jr., had subsequently agreed to cooperate in building a new indoor arena for their teams.

One of the minority owners of the Mavericks happened to be Richard Rainwater, George W.'s main partner in the Texas Rangers baseball franchise. Under a contract with Perot Jr., Rainwater's Crescent Real Estate Equities Company would earn a $10 million special commission after construction of a new home for the two teams. Just as the Rangers' baseball park in Arlington had been built almost entirely with public funds, the owners of the Dallas teams expected local taxpayers to put up most of the money for their showplace. In June 1997 Bush promoted their plan by signing legislation that permitted Texas cities to impose new taxes for the financing of sports facilities. Within months, the citizens of Dallas approved construction of a $230 million hockey and basketball arena.

That deal increased the value of Hicks's hockey team and certainly profited Richard Rainwater's real estate company. But it was Hicks's next acquisition that brought an enormous and unexpected windfall not only for Rainwater but for George W. Bush. Hicks wanted the Texas Rangers, and he was willing to pay a premium price.

A MAN IN FULL

When the Rangers deal was completed in 1998, Bush s fourth year in office, Hicks paid about $250 million for the team, or more than three times the price paid by Bush and his partners in 1989. The other members of the Rangers partnership fattened Bush's payout six times over, by awarding him additional shares in the team at the time of the sale that brought his 1.8 percent share up to 12 percent. Without that extra consideration, his investment would have earned far less. For Bush, the windfall must have been sweetened by a sense of vindication. This time, no one denied that George W.'s contributions to the Rangers had helped to build the franchise. As the team's charming promoter and front-office man, he had played a role in its success, especially in the stadium deal that increased both its revenues and the value of its real estate holdings. In the celebrations of the sale that appeared in newspapers and magazines, his role was universally praised. According to his partners, who notably included some of the richest businessmen in and beyond Texas, their generosity to George W. was motivated solely by fairness. They owed him not only for helping to organize the original Rangers deal but for doing his job as a general partner so admirably. What went unmentioned during the celebration of the governor's sudden good fortune were the public benefits conferred upon some of those same businessmen during Bush's tenure in the capitol. Hicks had enjoyed dominion over some $13 billion of the University of Texas investment portfolio, putting some $1.7 billion in private investments.

Another year would pass before UTIMCO would begin to draw criticism from Texas newspapers, public interest groups, and legislators. Growing concern about UTIMCO's secretive, high-risk strategies forced the board to disclose more information about its investments, including rates of loss and profit. This data is listed by UTIMCO under the heading of "IRR," meaning "internal rate of return," a measure whose accuracy is disputed by some financial analysts. In March 1998 Forbes magazine pointed out that "there is no standard way of calculating IRR, so returns are easily manipulated.... In just about every case, investors must rely on the general partner's say-so in valuing illiquid investments that are not publicly traded."

With that caveat in mind, it should be noted that Carlyle Partners is credited by UTIMCO with having an annual IRR of more than 40 percent. The Kohlberg Kravis Roberts fund did poorly, however, showing an IRR of only 12 percent since 1996, which is far lower than the Standard & Poor's Index. And Prime Enterprises II, the Bass-related fund, has shown a total loss of more than 40 percent on the money actually invested so far since 1998.

The investments placed with Tom Hicks's friends haven't performed well either. Bruce Schnitzer's Wand Equity Portfolio II shows a small loss since 1996, while his Wand Secondary Interests fund shows an IRR of about 9 percent since 1997, again well under the Standard & Poor's Index. Dunwoody's Inverness fund did still worse, with a total loss of 8 percent since 1997. The Beacon Group's Focus Value Fund has likewise been a failure, losing more than 3 percent in value annually. Theoretically, some of these assets will increase rapidly in value and provide substantial returns, five or ten years after their initial losses. Bat the University of Texas experience with these "alternative equity" plays is not encouraging to date. The annual IRR from nearly $600 million worth of investments committed in 1995 and 1996 averages around 16 percent --nowhere near the gain recorded by the stock market during the same period.

Perhaps not altogether coincidentally, Hicks quit the UTIMCO chairmanship after his term as regent expired last February, even though he had previously mentioned that he might stay on. He didn't seek reappointment. His lobbyist Tom Loeffler left the UTIMCO board around the same time, saying that he planned to focus on raising money for the Bush campaign.

When George W. Bush declared his candidacy for president in 1999, hundreds of his wealthiest supporters pledged to raise at least $100,000 each for his campaign. For a time their names were kept confidential, but eventually the Bush campaign--meaning finance chairman Donald Evans--released the names of the first 115 "Pioneers" to meet its fund-raising quota, even as hundreds more unnamed backers were reportedly trying to do so. Listed among the founding group of successful Pioneers were R. Steven Hicks, the brother of Tom Hicks; Tom Loeffler; three partners in Vinson & Elkins, the law firm that serves as counsel to UTIMCO; and former Texas Rangers partners Mercer Reynolds, William DeWitt, Rusty Rose, and Roland Betts. Also joining the Pioneers were Adele Hall, Charles Wyly, and Lee Bass, whose partnerships had received investments from UTIMCO; and Wayne Berman, the lobbyist and consultant who represents Carlyle Partners.

This vast agglomeration of monied influence is what has made George W. Bush both a rich man and a potential president. Knowing how he became what he is, it's difficult to imagine Bush cleansing the soiled hem of democracy, as his advertising promises he will do. He professes a compassionate conservatism, but his true ideology, the record suggests, is crony capitalism.

(1) The money to create one of America's largest and best public university systems has flowed from the Permanent University Fund, an entity established by the state more than a century ago with 2 million acres in west Texas land grants. The fund's lease income grew slowly until 1923, when oil was discovered beneath its sprawling estate. According to the state constitution, the billions in revenue produced since then must be invested in securities; only the dividends, interest, and other income from those securities are permitted to be spent on construction of university facilities.

(2) Lately, the prestigious political connections used by Carlyle's management have brought some unwanted attention. The firm is now under pressure from federal prosecutors who are investigating the alleged abuse of Connecticut's state pension fund. The FBI is reportedly interested in determining whether millions of dollars were illicitly steered from the Connecticut fund to Carlyle in 1998 through Park Strategies, a Washington lobbying and consulting firm. The director of Park Strategies is Wayne Berman, former assistant secretary of commerce in the Bush Administration and one of the Republican Party's top national fund-raisers. Last year Berman was one of the first George W. Bush supporters to qualify as a "Pioneer" by raising more than $100,000.

Joe Conason is a political columnist for The New York Observer and Salon.com. He is the author, with Gene Lyons, of The Hunting of the President: The Ten Year Campaign to Destroy Bill and Hillary Clinton, to be published in March by St. Martin's Press.

II. THE PROSPECT OF A BUSH RESTORATION

By Kevin Phillips

The event we are poised to witness in this country has occurred only twice in Western history and never before in our proud republic: an authentic political restoration. Embarrassed by the last seven years of petty betrayal, the citizenry appears ready to restore the preceding presidential family to the White House by electing the exiled leader's heir apparent. The prince, George Walker Bush (also known as W.), folksy governor of Texas and eldest son of former president George Herbert Walker Bush, is being cast in an unaccustomed starring role. By most indications, he is headed for the Republican nomination and--barring the turnaround of likely Democratic nominee Al Gore's campaign--the White House in 2000.

Our sixth president, John Quincy Adams, also won the office held earlier by his father, John Adams, but he did so only after twenty-four years, after serving in Washington as secretary of state, and as a member of a different party. A Bush reinstatement after eight years could hardly be more different. In electing him, as the polls currently predict we will do, the American people would elect an inheritor more than a candidate, obeying a set of unusual and precarious tendencies that have little to do with George W.'s five uneventful years as the governor of Texas and everything to do with the current political psychology of the United States.

During the first Bush years, a decade ago, commentators occasionally suggested that U.S. politicians had begun to exploit what fashion marketer Ralph Lauren had been tapping for years: a popular nostalgia for the solid, traditional upper-class America of Princeton clubs and Groton rowing teams, summer cottages in Kennebunkport, tennis matches and starched manners. Bush was seen as half-epitomizing and half-caricaturing these gray-flannel halcyon years with his preppy watchbands, his penchant for phrases like "deep doodoo," and his explanation for why he was outscored in the 1987 Iowa straw poll. That, the peeved vice president told a reporter, was because his supporters were "off at the air show, they were at their daughters' coming-out parties, or teeing up at the golf course for that all-important last round."

Nostalgia for a lost upper class tends, of course, to exaggerate an idealized way of life. But today it is an understandable reaction to recent cultural and political disillusionment. As dumb and off-putting as then Vice President Bush's idiosyncrasies might have seemed a decade ago, seven years of watching the Ozark Casanova in the White House have transformed our collective memory of George Senior from yesterday's tinny irrelevance into a model of dignity and gentlemanly behavior, a man who never should have been ejected in favor of an Arkansas governor given to using the state police as an escort service. The elder Bush's job approval rating has risen steadily during the last seven years from its low point of 29 percent, in the summer of 1992, and now stands in the low to mid-70s, an extraordinary election-year gift for George W.

Such a reversal of popular favor, however, is not without its risks, whether in the present-day United States or in the monarchies of mid-seventeenth-century England and early-nineteenth-century France, the two societies that can be said (for now) to have undergone the only Western restorations recognized by most historians. We can treat the claim for an imminent American Restoration lightly, but the parallel is real, and it hints at a high degree of national confusion. True, no executioners were involved in the Bush overthrow of 1992; in a modern republic, the process of condemning a leader to political death is less bloody. George H. W. Bush was decapitated not under the guillotine or the axe but at the polls.

The essence of political restoration is neither republican nor monarchical. It depends upon the delusionary psychology of a political class willing to let its memory grow more and more clouded until it sees fit to reinstate something second-rate, after that something's replacement has become even less acceptable. This is why restorations contain an element of farce. Both Charles I and Louis XVI, whose kingly failures began the two previous restoration cycles, were as widely disdained as the senior Bush. And the interlopers who came along to revolutionize their countries' respective governments--Oliver Cromwell and his son Richard ("Tumble-down Dick") in England in the 1650s, and Maximilien Robespierre and then Napoleon in late-eighteenth- and early-nineteenth-century France--also made themselves unwelcome, especially in the final days of their regimes. In both countries the political elites came to prefer the return of an inexperienced heir. Charles II was called back to England in 1660; Louis XVIII, to a reestablished throne in 1815.

The man who has provoked our own potential restoration, then, is obviously the first president to use the Oval Office as a venue for being sodomized by a White House intern. Or to have his DNA tested for an (unconnected) paternity suit. Or to have his foreign policy both previewed and satirized in a Hollywood comedy, Wag the Dog--William Jefferson Clinton, formerly known in Arkansas as just plain Bill.

Even though most Americans did not want Clinton impeached last winter, many began to express disdain for him as a person. Yet the unsavory side of the man should have come as no shock. He may have grown up in a town--Hot Springs, Arkansas--with a strong reputation for loose law enforcement, loose cash, and loose women, all biases that he absorbed. But over the last thirty years, as conservative Republicanism grew in strength, the only way that the Democrats could win the White House was to follow what one might call the Good Ole Boy script. The party's northern liberal candidates regularly flopped, from Hubert Humphrey and George McGovern to Walter Mondale and Michael Dukakis. Presidential victory could be obtained only by countering Republican appeal below the Mason-Dixon Line with the Democrats' own more populist and progressive--but culturally Bubba-sensitive --brand of Southerner: Lyndon Johnson in '64, Jimmy Carter in '76, and Bill Clinton in '92.

If Clinton, especially in the climactic moments of the Lewinsky unveiling, represents the zenith of the Dogpatch White House, the process of putting him there began much earlier. Lyndon Johnson, who bestowed upon both of his daughters and his dog the same (his own) initials, was fond of giving audience to Cabinet officers while sitting on the toilet. And then there was his black-sheep brother, Sam Houston Johnson. Bad Good Ole Boy brothers, in fact, have turned out to be a hallmark of late-twentieth-century Democratic White Houses. Their clown prince was Jimmy Carter's ne'er-do-well brother, Billy, who took money from Libya and had a beer named after him: Billy Beer.

That Clinton, too, has a Bad Brother, Roger, who'd done time on a drug charge and who seized on his brother's fame for his own spotlight, probably should have been a signal. But it is Clinton's own demeanor in the Oval Office that has probably rung down the curtain on Democratic Bubba acts forever, at least at the national level. He seems to have particularly infuriated three types of Americans: Christian Rightists and Catholics on moral or mock-moral grounds, and at a different level of class and caste disdain the mainstream upper-middle-class gentry, who would prefer that the world look like Farmington, Connecticut, and that those in the White House look and behave like George and Barbara Bush. These people, it stands to reason, are not only turning their backs on Clinton but running to the opposite persona.

Bush the Younger is classic restoration material, a fact that more or less requires his being de minimus White House talent. Not a few observers have described him as cocky, lazy, and arrogant (like Charles II), and intellectually undistinguished (a perfect late Bourbon). These comparisons are not yet proven, of course, but for the first time in U.S. history the qualifications of a front-runner for the presidency are converging with those of the Prince of Wales: heredity and birth.

All these sentiments--a longing for traditional values and elites, the tarnishing of an incumbent low-caste president, and the parallel recasting of America's memories of the mediocre-to-incompetent Bush Administration--converge to create the arithmetic now at work in the opinion polls. The truly unsettling thing is that this is taking place in a U.S. politics increasingly akin to that of Lilliput, where the emperor had only to be a nail's breadth taller than his court to "strike an awe into the beholders." If the pollsters can be believed, Bush's middle-of-the-road supporters don't care a bit that he can't name the prime minister of India; or that as governor he has allowed over a hundred executions in a state with a notoriously loose judicial system; or that his own mother once made him sit at the opposite end of the dinner table from the Queen of England, for fear of what he might say, when he was forty-four years old; or that his four years at an Ivy League university have left him untroubled by the inclusion of creationism in our nation's public school curriculum. These pesky details pale beside his winning smile, reassuring name, and comfort in his own skin.

This careless mood could last through November; but then again, any crisis--military, economic, or financial--could sponsor a national plea for competence and, by extension, an outcry against the politics of inheritance. In any event, and especially if Bush wins, it is possible that our need for a qualified leader will be even more serious in 2004, for restorations have always been failures. The weaknesses of the deposed family recur in its heirs, and people remember why they sent for the tumbrels in the first place. The Stuarts, after being restored to the English throne in 1660, were kicked out again in 1688. James II pursued many of the same unpopular interests his father had floundered on: Catholic sympathies, Irish plots, and authoritarian ambitions. The French Bourbons, if anything, were worse. After the death of the restored Louis XVIII in 1824, his reactionary brother, the Count d'Artois (who ruled as Charles X), was driven into exile by the revolution of 1830. Each time, the past was prophecy.

Which brings us to the question of how ready Americans really are for a restoration of the Bush White House. In the summer of 1992, as it became more and more plain that President George Bush would be defeated, three voter perceptions--now largely forgotten--were wrapped around his campaign like crime-scene tape. One was that he didn't understand the extent to which the economic downturn of 1990-91 continued to worry middle-class voters. A second was that the Gulf War, his supposed triumph, had been botched by our failure to destroy or capture Saddam Hussein. The third, more personal complaint, was that the president was a whiny-voiced preppy from the Grand Old Party's country-club wing. This triangulation of criticisms sent George Senior's job-approval numbers through the floor. And what the voters dished out in November was even more disdainful: Bush's share of the total vote dropped from 54 percent in 1988 to 38 percent four years later. For an incumbent president, such a drop is extraordinary, the stuff of a watershed rebuke.

Adding to the insult, two White House aides --Deputy Assistant Charles Kolb and speechwriter John Podhoretz--published books describing the essential mediocrity of the Bush Administration. Other observers singled out Cabinet members as particularly underwhelming: Treasury Secretary Nick Brady and Commerce Secretary Robert Mosbacher, both long-standing chums of Bush. It was rumored that foreign visitors, after meeting Brady, commonly reported home that they hadn't been able to believe they were speaking with the American secretary of the treasury. Brady was, however, a loyal friend who had given Bush a seat on the board of his family company, Purolator Courier, in 1976.

Rather surprising, given the drubbing George Senior took in 1992, is how quickly the Republican Party of the late 1990s has rallied back to the Bush standard. It all seems to have started after the '94 elections, when the Republicans captured Congress and strutted like peacocks instead of recognizing the anti-Clinton dynamic largely responsible for their victories. George W.'s win as governor of Texas, where Democrats had mistakenly dismissed him as "the shrub," was also seized upon as proof of the comeback. The Bush name was rebounding, and with it the Bush family legacy. Indeed, once Dole lost to Clinton in 1996, most of the Republicans pegged as possible 2000 nominees were members of George Senior's actual or political family: his vice president, Dan Quayle; his chairman of the Joint Chiefs, Colin Powell; his labor, education, and HUD secretaries Elizabeth Dole, Lamar Alexander, and Jack Kemp; and his son, the governor of Texas. Clearly, a broader rebound was taking shape well before the movement for a final Bush Restoration began in early 1999.

But it's George W. who has the "Big P" in his pocket--his father was the president. And this riles some of those whose genealogies aren't quite so impressive. Before Dan Quayle dropped out, his wife, Marilyn, told the Arizona Republic that George W. was "the guy that never accomplished anything, everything he got daddy took care of." And Alan Keyes, a candidate for the Republican nomination, clearly had Bush in mind during a debate last December when he spoke about those who owe their success to family connections.

Republican graybeards, in turn, remember that much the same thing was said about George Senior. He was the "resume candidate" who got appointed to things. Or, in the words of Texas populist Jim Hightower, "He was born on third base and thinks he hit a triple." After World War II and Yale, when he went out to Texas, his family arranged his job, and his uncle on the Walker side got him the money to start his own company. He did win a traditionally Republican House seat, the argument goes, but that's it. He lost two Senate races. Then Nixon appointed him U.S. ambassador to the U.N. because he knew how to pluck a watercress sandwich from a silver platter. More appointments followed, as U.S. ambassador to China and director of the CIA. Finally, Ronald Reagan picked him as vice president.

The irony now, when similar populist complaints are being leveled at Bush fils, is that the family's patrician image has been eroding for years. Of greater concern is the deterioration evident in the family's ethical code. It's true that both former president Bush's father and his grandfather were upright figures and highly successful investment bankers--the one a well-known sportsman for whom golfs Walker Cup is named, and the other a U.S. senator from Connecticut--and they seem to have possessed the high-minded character now reduced to the shop-window displays of Ralph Lauren's ersatz Old Money Green and Yacht Club White. But it is far from clear that we can say the same thing for the two Bush generations represented by the former president and the Texas governor. The chance that George W. will restore the decorum and probity of yester-year bears comparison to the hope that Clinton will ignite a "Holding Out for Marriage" movement among the nation's teens.

A New York Times reporter, writing in April of 1992, infuriated the then-president's family by outlining the various marginal business dealings entered into by the Bush males. Presidential brother Prescott had been an adviser to a Tokyo investment firm identified by Japanese police as a mob front. George W. flirted with an SEC insider-trading violation, and W.'s brother Neil was fined a relatively small amount for his conflict-of-interest involvement as a director of the failed Silverado Savings and Loan. The column also jabbed at W.'s brother Jeb, now governor of Florida, for his involvement in a loan default that contributed to the failure of a Florida S&L. This was the silver side of the Bad Brother coin--no urinating in the Rose Garden, but a clear case of family efforts to profit from a close relationship with power.

Yet there is no doubt that the Bush family's overall patrician image has helped to bolster the popular assumption that George W. has foreign policy in his genes. If so, this would be an unprecedented asset in a governor of Texas. The sort of national and foreign issues only remotely felt in Austin may pose the weightiest challenge for his campaign. A Lone Star State governor has never made it to the White House, and this is no doubt one of the reasons. Thus, for W., one might assume that this challenge would act as a spur to intense study and the cultivation of personal gravitas. Evidently not. The New York Times last August 22 devoted a lengthy Sunday review to the observation that George W., at fifty-three, is essentially a perpetual adolescent, forever mugging for the cameras, making wisecracks, and "entertaining people with his impression of Dr. Evil, the campy villain from Austin Powers: The Spy Who Shagged Me."

Some Republicans are indeed concerned that they are gambling on a callow American equivalent of the Prince of Wales. But the current reverie for the Bush era has been gathering force for several years now, and it seemed to set in concrete during the summer and early autumn, with George W.'s accession as nominee-in-waiting. The party bet may no longer be recallable.

The Republican Party, let us remember, is nominally decorous and eminently hierarchical. Adulterous leaders may have to resign, just as House Speaker-designate Bob Livingston did last year; seniority and ancestry are next to godliness. Nominees get chosen when it is "their turn," though there has been a Bush or a Dole on every ticket since 1976. Exceptions to this rule, like the Goldwater nomination in '64, have turned out badly enough to reinforce the party's predilection against interlopers. Hence the partywide appeal of a family ticket for 2000: George W. and Elizabeth Dole. In another few years GOP presidential and Cabinet selections could start to resemble British Conservative cabinets circa 1900, in which most of the members were related to one another.

This is not to suggest, however, that the rise in political inbreeding is restricted to the Republican side. The recent loss of John F. Kennedy Jr. was treated as the death of a royal prince. Moreover, in addition to George W. this year, we have Prince Albert Gore, the son of a U.S. senator. We even have, in former New York governor Mario Cuomo's son Andrew, an ambitious secretary of housing and urban development who has married a Kennedy, uniting two clans. And on the distaff side, this past year brought a first: the wives of the two '96 presidential nominees--Hillary Clinton and Elizabeth Dole--began running for office in their own right.

All this is grist for W.'s moment in history, a real American Restoration. Superficially, at least, a victory for George Junior will put the GOP in clover. They would have the Oval Office and probably keep Congress. But history practically shrieks a warning. If we can judge by the English and French examples, restoration governments ride into office on an arrogant, memory-driven dynamic that quickly leads to mistakes and failure. A restored Bush presidency would almost certainly revisit some of the lower points of 1988-92 (George II has already trotted out "compassionate conservatism" as a successor to his father's "kinder and gentler nation"). Both Bushes, father and son, have friends and connections among Middle East oil producers, Asian business leaders, and other frequently demanding interest groups, which heralds another round of family-interest internationalism. And each branch of the Bush family tree is so laden with investors and deal-makers that W., as president, would find himself bound to replay some version of his father's endless pleading for capital gains tax reductions.

When the restored James II fell in 1688, that was the end of the Stuart kings. When the restored Bourbons followed suit in 1830, that was the end of their house. Should a Bush Restoration implode on its own whir of cocky inadequacy, that could be a similar last hurrah not simply for the family's power but for the Republican Party. In addition to the obvious dangers of ineffectual domestic policy, the Bushes--father and son--precipitate major intraparty splits. It is almost impossible to imagine Pat Buchanan, or Ross Perot, jousting with Eisenhower, Nixon, or Reagan, but there is something about a Bush that brings it on.

Winston Churchill, in a moment of candor, once described Neville Chamberlain--like W., the son of a famous political father--as someone who would have made a good lord mayor of Birmingham in a bad year. And when he served as prime minister from 1937 to 1940, Chamberlain's leadership was a disaster. We can fairly ask whether George W. Bush is anything more than another scion who has made a decent governor during a period of prosperity and easy growth, and whether the United States can afford nominees who are to presidential politics what legacies are to college fraternities. And if (on a good day) that's all there is to W., then why are the Republicans, and the United States, even messing around with him?

Kevin Phillips is an author and commentator. Among his books are The Emerging Republican Majority (1969) and, most recently, The Cousins' Wars: Religion, Politics, and the Triumph of Anglo-America (Basic Books, 1999).

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COPYRIGHT 2000 Gale Group

People get the politicians they deserve, for in office the average person would behave like them.