by Sally Denton
—DWIGHT D. EISENHOWER
CHAPTER 13
Bechtel’s Superstar
“If I could choose one American to whom I would entrust the nation’s fate, it would be George Shultz,” Henry Kissinger wrote in his memoirs. Steve Sr. was equally impressed upon first meeting Shultz in 1967, when the outsize economist and academic—then dean of the University of Chicago School of Business—made a presentation to the board of directors of J.P. Morgan Bank. Steve Sr. was drawn to his like-minded conservatism. He would watch Shultz’s political rise over the next several years, as Shultz served in three Cabinet posts in the Nixon administration: first as secretary of labor, then as director of the Office of Management and Budget, and ultimately as Treasury secretary. Shultz gained a reputation as a workhorse, an unwavering free-trade proponent, and a loyal supporter of Nixon’s détente policy toward the Soviet Union.
As OMB director, Shultz pushed for the company’s privatized uranium enrichment scheme—“a Nixon-inspired boondoggle that eventually could have given Bechtel a world-wide monopoly on the sale of nuclear fuel,” as a magazine reported Shultz’s efforts. Even before his reelection in 1972, Nixon had announced his decision to reorganize the domestic side of federal government by appointing five “supersecretaries” who would be counselors to the president in addition to being Cabinet secretaries. Treasury Secretary Shultz became a White House appointee as well, with a staff in the White House and authority broader and deeper than that of Secretary of State. As a supersecretary, he took the lead on economic issues in the administration, outranking such high-level presidential advisors as Henry Kissinger and Bob Haldeman.
No less enthralled with Shultz than his father had been, Steve Jr. also observed Shultz closely in his dizzying rise to political power. “It was not Mr. Shultz’s government contacts alone that caught Mr. Bechtel’s eye,” the New York Times reported, “but rather Mr. Shultz’s familiarity with international economics, labor issues, and finance.” Steve Jr. admired the economist’s free-enterprise stance toward Russia, where Bechtel had ongoing and planned projects, and whose government officials Shultz had lobbied on behalf of Bechtel business interests. An outspoken advocate for opening the Soviet Union to American trade, in April 1973, as Treasury secretary, Shultz traveled to Moscow to arrange US credit for the gigantic $50 billion Yakutsk natural gas pipeline, to be built by Bechtel. “I understand through Secretary Shultz that the Nixon administration is doing all it can to encourage this development and to overcome existing obstacles,” Vasiliy Garbuzov, the Soviet minister of finance, reported Shultz’s visit to US Federal Reserve Chairman Arthur Burns, who followed up on Shultz’s trip one month later. “But of course the president has his own problems with Congress at this moment,” Garbuzov said, referring to congressional efforts led by Scoop Jackson to block the financing for the Bechtel deal. Echoing Shultz, Burns also sought to reassure the Soviets of the US intention to provide Ex-Im Bank funding for the Bechtel project. “The president is a very determined man—he does not depart from the path he has chosen,” Burns told his Russian counterparts. “And it is also true that not only the president, but the government of the United States has started on a new path. The cold war is over.” Nothing would have delighted both Shultz and the Bechtels more than for that to be true. But by the winter of 1973–74, Nixon was “mortally stricken by Watergate,” as his onetime national security advisor wrote. Facing possible impeachment and a collapsing regime, the US-USSR détente he had envisioned would soon, like the Yakutsk pipeline, be shelved, as an emboldened Cold War chauvinism took hold in the military, intelligence, and diplomatic realms of the US government.
Shultz’s desire to abandon the hemorrhaging administration was well known within political and personal circles, prompting an unprecedented offer from Steve Jr. to entice him to Bechtel as a principal executive. In May 1974, just three months before Nixon resigned the presidency and Vice President Gerald Ford succeeded him, Shultz assumed his position at Bechtel with a $400,000 salary—six times his income with the government—and stock options that would make him a multimillionaire. For the first time, an outsider was established at the top of the company structure where three generations of Bechtel family members and trusted directors had worked their way up the corporate ladder “one painstaking rung at a time,” as one account put it. But the amiable intellectual—“Buddha-like” in his gentle-giant demeanor and professorial deportment, as he was described by Bernard Gwertzman in the New York Times—was welcomed at his new corporate home.
Born an only child on December 13, 1920, in New York City and raised in Englewood, New Jersey, George Pratt Shultz graduated with an economics degree from Princeton University. Following a three-year stint as a combat colonel in the US Marine Corps during World War II, in 1949 he received a PhD in industrial economics from MIT, where he taught until joining the faculty at the University of Chicago Graduate School of Business in 1957.
An enduring collosus of the powerful Bechtel Group, Shultz was emblematic of modern Bechtel. Once out of government, he relished the perquisites of life with one of America’s wealthiest and more swaggering companies. At fifty-four years of age, he was in his prime. Delighted to have relocated to California, George and his wife of thirty years, Helena “Obie” O’Brien, and their five children lived in casual opulence on the stunning Stanford University campus. He maintained his academic ties, joining the Stanford faculty and teaching courses in management and public policy while heading up the Mining and Metals Division of Bechtel. Shultz moved up the ranks, putting even his most skeptical and competitive colleagues at ease with his genial, soft-spoken manner. Numerous high-level company engineers, assigned to educate the anomalous nonengineer, found him a quick study. Still, it would be the four members of the company’s finance committee—men who had worked so closely together for so many years that they could “just look at each other and know what the other guy was thinking,” as one of them recalled—who would feel threatened to have a former Treasury secretary at its helm. But even this tough foursome recognized the boon Shultz would be to the company. Emotionally detached with a forceful self-assurance just shy of arrogance and a good-natured side, as evidenced by the Princeton tiger tattoo on his buttocks, Shultz was difficult not to like.
His relationships in the East Coast financial world were imposing. But the synergy between him and Steve Sr. led to even more elite financial contacts, as Steve Sr. smoothed the way for Shultz to join several esteemed corporate boards, including General Motors; Sears, Roebuck; Morgan Guaranty Trust Company of New York; J.P. Morgan & Company; the World Bank; the Inter-American Development Bank; the Asian Development Bank; and Dillon, Read, the prestigious “WASP” Wall Street brokerage house long under the guidance of JFK Treasury secretary C. Douglas Dillon; as well as the International Monetary Fund. Perhaps more momentous than any other association was Shultz’s inclusion in the by-invitation-only Business Roundtable—the Business Council’s lobbying arm, which has been described as “the leading political organization of corporate America.” When Shultz joined the select group, there were approximately fifty members—each a CEO or president of the country’s largest corporations. While the Business Council—on which Steve Sr. sat—consults with the executive branch, the Business Roundtable lobbies the legislative branch.
The Roundtable was key during this period for spearheading a massive lobbying effort to roll back taxes, limit government intervention, weaken environmental and antitrust regulations, and thwart the power of organized labor, as it sought to block antibusiness legislation and consumer protection. In turn, the Council and Roundtable are associated with other key policy-planning organizations. The two organizations are “tightly interlocked with the foreign policy apparatus of the government,” as sociologist Nick Paretsky described the powerful government-business combine that interfaced with the Council on Foreign Relations (CFR) and the Trilateral Commission. The CFR, formed after World War I to support American capitalism’s international interests, has
long served as a major recruitment channel for the US Departments of State and Defense. Its complement, the Trilateral Commission, had been formed only recently, in 1973, to augment CFR’s international efforts with a domestic agenda “for reforming the institutions of US capitalism,” according to Paretsky. Bechtel was well represented on all four bodies. Shultz joined his old University of Chicago mentor, Milton Friedman, to become what former CIA agent and author Robert Baer once described as economists “who worship at the altar of deregulation.”
Called “Bechtel’s superstar” by the San Francisco Examiner, Shultz took full advantage of his formidable government connections, continuing to advise President Ford and other Cabinet members in the new administration—a quid pro quo that benefitted Bechtel’s business pursuits. Shultz lobbied Ford relentlessly about privatizing uranium enrichment, and Ford followed Nixon’s precedent in trying to facilitate Bechtel’s commercialization of the government’s top secret nuclear technology—lobbying efforts that Shultz would later downplay to Congress. Steve Jr. worried briefly that Shultz’s high profile in Washington would bring unwanted public attention to the company—scrutiny focused on Bechtel’s high-level ties to the agencies charged with its regulation. But Shultz was proving so gifted at cultivating powerful government allies, while also nurturing Bechtel’s Middle Eastern clients and bringing a financial acumen to the boardroom, that Steve Jr. was determined to keep him. Thanks to Shultz’s impeccable petitioning, President Ford accepted an invitation to address a huge Bechtel-sponsored World Energy Conference in Detroit, the thrust of which was to promote a nationwide nuclear power plant construction blitz, with Bechtel as the primary contractor.
In an extraordinary gesture, Steve Jr. invited Shultz to become a member of the family’s Mandalay Lodge at the Bohemian Grove. Never before had a Bechtel employee been given membership in the exclusive family compound. The nod was unmistakable evidence of Shultz’s position as heir apparent. Indeed, just one year after joining the company, in May 1975 Steve Jr. nominated Shultz to be president of the Bechtel Corporation, which the board of directors approved unanimously. Of the three companies constituting Bechtel at the time—Bechtel Corporation, Bechtel Power Corporation, and Bechtel Inc.—Bechtel Corporation was the most powerful. From the start, it was clear that Steve Jr. was readily sharing power with Shultz. But there was another figure on the scene, eager to derail and surpass the affable superstar—a feisty Cold War ideologue ready to settle a score. “An echo of long, bitter feuds within previous administrations,” as Hedrick Smith described the infamous, often embarrassing, hostility between Shultz and Caspar “Cap” Weinberger. The Shultz-Weinberger clashes were “collisions at the tips of bureaucratic icebergs.”
Often compared with bickering spouses who seem oblivious to how uncomfortable their constant infighting makes others feel, the two had been combatants since working together at the Office of Management and Budget in 1970. Shultz had been director and Weinberger his deputy director. “Shultz and Weinberger were long-distance runners,” wrote White House correspondent Lou Cannon, “exceptionally well matched as adversaries and experienced in the competitive ways of Washington. Both were capable, intelligent, opinionated, energetic, and turf-conscious. Both had tempers that could unexpectedly erupt when they felt slighted or betrayed.”
The two men could not have been more different, both temperamentally and physically. Where Shultz was pedantic and appeasing, Weinberger was excitable and unyielding. While Shultz was hulking and measured, Weinberger was angular and manic. It was “difficult to tell from Shultz’s dull demeanor and careful record, not to mention a face as blank as a slot machine’s, what he felt about anything,” wrote Edmund Morris, biographer of Ronald Reagan. “One inserted one’s coin and waited for the spools to spin.” In contrast, Weinberger was a confrontational partisan who thrived on debate and agitation. Wiry and sharp-tongued, tenacious to the point of self-destruction—“arguing with him is like Chinese water torture,” a coworker said once—he left a wake of depleted colleagues. Weinberger’s approach, said Colin Powell, who worked for him as the senior military assistant before becoming Reagan’s national security advisor, was “all sails up, full speed ahead, where is the brick wall—I wish to run into it now, sir.”
That their ad hominem vitriol would play out in the Bechtel boardroom revealed as much about the company’s hard-nosed corporate culture as it did about either man.
CHAPTER FOURTEEN
Cap the Knife
Cap Weinberger had shown up at corporate headquarters just six weeks after Shultz became president of Bechtel. Lured to the company by retiring general counsel Willis Slusser, the Bay Area native who had been Nixon’s secretary of HEW was eager to return to California. He had stayed on for several months in the Ford administration, but after stints as OMB director, Federal Trade Commission (FTC) chairman, and HEW secretary, he was ready to return to the private sector. The $200,000-a-year salary (approximately half of what Shultz was earning) and what Weinberger described as “valuable shares of Bechtel stock” were alluring, and his wife, Jane, had long been ready to escape Washington politics. When he came on board as vice president, special counsel, and director, Weinberger’s government tenure had overly prepared him for a corporate position that seemed mundane by comparison.
His zeal for cutting costs in his various government jobs had earned him the nickname “Cap the Knife”—an expertise that would serve him well in his new position. His decision to join Bechtel was no doubt part and parcel of other shrewd calculations as well. The position would put him “on the same political fast track trodden by so many who shuttled between corporate America and government postings,” as one account put it. Indeed, he and his archrival Shultz would compete on this track, biding their time through the Ford lame-duck presidency followed by the unwelcome victory of Democrat Jimmy Carter in November 1976. All the while, both men honed their political skills and cultivated crucial allies in preparation for their reemergence on the national stage.
Hiring Weinberger had been Slusser’s idea, not Shultz’s. But when Slusser campaigned for Weinberger, coming on strong with both Steve Sr. and Steve Jr., his sway carried weight. Not only was the popular Slusser one of the most veteran and beloved of the employees, he was practically family—a loyalty the Bechtels took seriously, dating back as it did to the scandalous 1961 extramarital affair that Steve Sr.’s brother Kenneth had had with Slusser’s then wife, Nancy. “The recruiting process had been flatteringly intense,” Weinberger recalled. He received Steve Jr.’s job offer while driving with Slusser to attend the annual encampment at Bohemian Grove, where Weinberger was only in his second year of membership at the Isle of Aves Lodge.
It was not without hesitation that Steve Jr. hired Weinberger. On one hand, he worried about bringing in another Cabinet member so close on the heels of Shultz. But even more, he worried about how his Arab clients would respond to a Bechtel executive named “Weinberger,” Cap’s strident denial of his Jewish heritage notwithstanding. His father was the son of immigrant Jews, but Cap was raised in the Episcopalian tradition of his mother, and he flaunted his Christianity. “On religious matters, many people assumed that I was brought up in the Jewish faith,” Weinberger explained, “but I was not, and neither was my father. Two or three generations back, in Bohemia, there had apparently been some kind of quarrel in his family over various factions in the Jewish synagogues.”
He was born in 1917 in his parents’ San Francisco home—“the year the United States reluctantly joined ‘the war to end all wars,’ ” as Weinberger recalled his historic birth year that also ushered in “the world’s first Communist state, the USSR.” As it turned out, both World War I and Communism would shape the man he was destined to become. The younger of two sons born to Herman Weinberger and Cerise Carpenter Hampson of Boulder, Colorado, he claimed to have been naturally endowed with a “sunny, optimistic nature.” His father got his law degree from the University of Colorado, and, with his violinist wife, moved t
o San Francisco to practice law. The boy was a sickly, shy child who suffered from frequent mastoid infections. He found solace in reading and conducting elaborate mock battles with tin soldiers. His close-knit family valued education and culture, and “Cappy,” as he was called by his father after a fictional California skipper, would shorten his nickname to Cap in young adulthood. He graduated magna cum laude in 1938 from Harvard University. He got his law degree there three years later. At Harvard, “he suffered from being a public-school boy, a Westerner, and most conspicuously, the bearer of a Jewish surname,” as one account described the discrimination he faced, enduring anti-Semitic slurs and threatening notes. He became known for his right-wing editorials in the Harvard Crimson.
Weinberger volunteered for the army in 1941 and ended the war on General Douglas MacArthur’s intelligence staff. His intellectual interests drew his attention to Europe, especially Great Britain, where he watched politics and international relations with a special admiration for Winston Churchill and memorized lengthy passages from Shakespeare. Steeped in politics from an early age, one of his first memories was listening to the radio coverage of the infamous 1924 Democratic convention, which took 102 ballots to pick John Davis as its nominee. A relatively obscure conservative ex-congressman from West Virginia, Davis had lost that election to White House incumbent Calvin Coolidge. Inspired by an early campaign rally for Herbert Hoover, Weinberger became a lifelong Republican. Franklin Roosevelt’s New Deal expansion of government—his “alphabet soup of programs”—solidified Weinberger’s view that the “best government was the least government.”
