Bill White profited from troubled oil company

Former Houston Mayor and Democratic Texas gubernatorial candidate Bill White answers a question during a news conference Thursday, June 10, 2010 in Houston. White is denying he improperly benefited from an immensely profitable investment in an energy company hired to help with damages from Hurricane Rita five years ago when White was mayor of Houston. His opponent, incumbent Republican Gov. Rick Perry, has accused White of "profiteering" from the hurricane. (AP Photo/David J. Phillip)

July 18, 2010 4:36:09 PM PDT
Democratic candidate for governor Bill White, in his first public acknowledgment, has confirmed that he has made a profit from his investment in an oil exploration company he founded that ran into financial trouble after a central Asian republic demanded more of the revenue from its field. In a story in Sunday's edition of The Dallas Morning News, the former Houston mayor confirmed that he has made $1.7 million in capital gains and $1.1 million in net profit from the sale of more than 1.4 million shares of Houston-based Frontera Resources over a four-year period beginning in 2006. He still owns almost 96,000 shares, but resigned his chairmanship in 2001.

During his 2003 mayoral run, he told the Houston Chronicle that he hadn't "made a penny" on his investment in the oil and gas exploration company he founded in 1996. "I have some stock, but it is so subordinated to the other interests that I am told that it has little or no economic value."

Frontera focused its early activities on developing fields in the former Soviet republics of Azerbaijan and Georgia, oil-rich lands where White had cultivated influential contacts while serving as a deputy energy secretary during the Clinton administration. The company operated under production-sharing agreements with the two Caucasian republics.

However, the Azerbaijani fields produced quickly and that nation's government demanded a bigger cut of the revenue. That siphoned off a lot of Frontera's revenue, forcing the company into temporary default on a $60 million loan and to sell assets to pay off the loan.

As recently as June 21, White had told The Morning News that he thought he hadn't profited from the investment "very much because there were a lot of expenses."

However, federal tax returns released by White on June 8 and examined by The Morning News revealed the profits from the stock sales. The newspaper reports Frontera was able to float a public stock offering in 2005, which allowed White to sell his shares at an average price of more than $1 per share. The shares are worth 6 cents each now, the newspaper reported.

The campaign of White's Republican opponent, Gov. Rick Perry, seized on the disclosure.

"He is clearly hiding past business practice," Perry campaign spokesman Mark Miner told the newspaper. "He's become a habitual liar when it comes to business dealings."

White has a net worth overall of almost $8 million after spending $3.6 million on his own campaigns, according to the newspaper report.

Meanwhile, White's former boss at Houston's Susman Godfrey law firm, Steve Susman, says he was late in redeeming some of the $1 million investment he made in the Frontera startup. Susman said that after the company's fortunes "went into the ditch," he decided to give his shares to his son, Harry Susman.

"There was a short period of time when it looked like it might turn out OK," Harry Susman told The Morning News. "Unfortunately, we stuck with it. Now, it's almost worthless."

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