by Sally Denton
During the 1950s, he immersed himself in California politics. An early supporter of Republican congressman Richard Nixon, he was especially gratified when Nixon “defeated the radical Democrat Helen Gahagan Douglas” in the 1950 Senate race. That campaign would go down in the annals of political dirty tricks, in which Nixon had tagged Douglas “the Pink Lady” to impugn her as a Communist. She in turn would create the sobriquet “Tricky Dick”—a nickname that would haunt Nixon for decades.
Weinberger had his own lackluster political career, with three terms in the California Legislature—1952, 1954, and 1956—followed by an unsuccessful 1958 bid to become California’s attorney general. In 1960 he became campaign cochairman for Nixon’s presidential candidacy, pilfering Eisenhower’s slogan of “Peace, Prosperity, Progress.” After Nixon’s narrow defeat by JFK, Weinberger continued to practice law in San Francisco and bounced around California politics, serving as state finance director appointed by Governor Reagan. After Nixon was elected president in 1968, he brought Weinberger into the administration as chairman of the FTC, and then as deputy director of OMB under Shultz. Once Shultz went to Treasury, Weinberger became head of OMB and ultimately HEW secretary, where he remained until his retirement in 1975.
“On . . . my last day in office . . . I considered this the end of my government career,” Weinberger wrote later. “The main contribution I expected to make to the government from then on was to pay a large income tax.” A month later, he had accepted the position with Bechtel, and he and Jane had moved into a lavish white Tudor home in Hillsborough, twenty miles south of San Francisco. The house included a ballroom, a library, and “splendid redwood trees in an old garden.” In keeping with its penchant for privacy and security, Bechtel had the property surrounded with gated fencing before the Weinbergers moved in.
Steve Jr. installed Cap in a large corner office on the twenty-first floor of the twenty-three-floor Bechtel building in San Francisco’s financial district, where he was in close proximity to the ever-looming Shultz. “As seemed to be the case every time we worked together . . . we often had differing viewpoints,” Weinberger wrote with no hint of irony. “This was most evident when lawsuits were brought against the company, particularly large class-action suits . . . generally I would recommend that we fight rather than yield, but invariably George would want to settle.”
While things had been going superbly for Shultz during his first year with the firm, Weinberger’s arrival coincided with a downward spiral in Bechtel’s fortunes. The company was battling numerous lawsuits on grounds of sexism and racism. A sex discrimination case brought by 6,400 female employees claimed that Bechtel functioned “like a men’s club” that kept women employees—4,000 of whom were college graduates—in low-paying secretarial jobs. Meanwhile, 400 black employees who claimed they were victims of racial discrimination and harassment had filed a separate lawsuit.
As those two cases wound through the courts, Bechtel was also being pummeled by a sudden, unfamiliar, and relentless bout of bad publicity. The Washington Star had been running an investigative series of articles about Bechtel’s business practices, its ties to government agencies, and its uncanny ability to obtain no-bid contracts. Then there was the bribery scheme involving a pipeline right-of-way in New Jersey that led to the convictions of four Bechtel employees. The indictment of six Bechtel employees at the Calvert Cliffs, Maryland, nuclear plant, charged with extorting nearly a quarter million dollars, followed. Characteristically, Shultz and Weinberger disagreed on how the company should respond to these attacks: Shultz the golden boy conciliator versus the combative, scrappy Cappy.
Even larger woes were plaguing the company in its global nuclear power monopoly. The directors of Consumers Power in Michigan were suing Bechtel over the failure of the Palisades nuclear generator. Claiming that Bechtel had failed to warn the utility “about potential operating problems” that would have prevented “errors in design and manufacture of equipment and components,” the company sought $300 million in damages. A firestorm of controversy had also been set off when, during a panel discussion at a nuclear energy conference in Washington, an Atomic Energy Commission official remarked that “there is likely to be a major nuclear disaster in the world, and the prime candidate is Tarapur,” referring to a Bechtel-built nuclear reactor in India. The official, Dr. Stephen Hanauer, went even further, charging Bechtel with acting irresponsibly and against the best interests of the United States by failing to deal with the breakdowns, radioactive leaks, and unexplained deaths at the plant. Hanauer claimed that an AEC colleague had visited the plant located on the Arabian Sea sixty miles north of Bombay, and had witnessed Indian laborers using primitive bamboo poles to try to disperse radioactive waste. On the heels of the Palisades and Tarapur failures, Chicago’s Commonwealth Edison notified Bechtel that its Dresden-1 prototype was experiencing problems similar to those in Tarapur. The utility was estimating a cleanup cost of $30 million.
Still, Bechtel continued pushing the sale of eight nuclear reactors to the Shah of Iran, was peddling a uranium diffusion plant to Brazil, pitching a nuclear power plant to Pakistan, and negotiating with Belgium and Greece for nuclear fuel enrichment facilities. Secretary of State Henry Kissinger shilled for Bechtel, pressing the Shah to invest in the Alabama diffusion plant, assuring him that a $275 million investment with the Bechtel consortium would guarantee Iran an endless supply of fuel for the eight reactors that Bechtel would build for him. Bechtel executives also sought financing from the Shah for a uranium enrichment facility in Japan. All the while, journalistic exposés brought a barrage of unwelcome coverage to the firm and a growing public awareness of the potential for catastrophe in the nuclear industry. Because Bechtel “doesn’t own the plants it builds, it doesn’t have to worry about being saddled with billions of dollars’ worth of obsolete and dangerous machinery,” reporter Mark Dowie wrote about the company’s business model. “Leaving that problem to its customers, Bechtel has quietly changed directions and set its sights where the smart new money in the energy business is: on coal.”
Indeed, with nuclear power waning as a growth industry and with American utilities continuing to get 60 percent of their electricity from coal, Shultz convinced Steve Jr. to diversify away from nuclear into coal. An engineer from the firm’s Scientific Development Department told a journalist that the company had a secret plan, directed by Shultz’s Metals and Mining Division, to increase its investment in coal technology and cut back on nuclear. After all, Bechtel had built the new technology that would change the economics of coal: the coal-slurry pipeline. “Bechtel sometimes likes to pioneer a new construction technology and get as much profit as it can out of it while no one else is around,” the engineer claimed. “Then when the competition gets stiff, as it is in nuclear power, it moves on to something else.”
Taking his personal axiom to heart—“a builder is measured by the length of his shadow”—Steve Jr. endorsed Shultz’s vision. “No longer would utilities have to build expensive railroads to transport coal to their new plants,” author Judith Nies wrote of Bechtel’s new and timely venture. Like its expansion in the nuclear industry, Bechtel sought an international coal market, especially in Russia, China, and South Korea. Shultz set his sights on Peabody Coal—a subsidiary of the Kennecott Copper Corporation, which was then America’s largest coal producer, with vast coal reserves in ten states. Kennecott Copper initially refused to sell Peabody. But when the FTC found Kennecott in violation of antitrust laws and ordered the company to divest itself of Peabody, Shultz was waiting patiently. When the timing was right, he orchestrated a $1.2 billion buyout by a Bechtel consortium—a private holding company that included its rival construction firm, Fluor Corporation, along with Newmont Mining Company, the Boeing company, and others.
Another profitable divergence, comasterminded by Shultz and Steve Jr., was Jubail: the largest civil engineering project in the world, located in the eastern province of Saudi Arabia. Unveiled by Bechtel in 1976, the $40 billi
on, nearly forty-year undertaking, would turn a provincial fishing village into a modern metropolis. Complete with four airport terminals, three runways of seventeen thousand feet, the world’s largest desalination and power plant, a golf course, a dozen shopping centers, a military base, a hospital and clinics, a mosque that would accommodate 8,000 people, factories, highways, oil refineries, and a sex-segregated swimming marina, its tiny population eventually swelled to over 370,000, according to the company website. “What you really need is a new city,” Steve Jr. had told King Faisal, planting the seed that led to the gigantic undertaking that would amount to $200 million in Bechtel profits every year for four decades, and would be the home of Saudi Arabia’s petrochemical industry.
Bringing Parker T. “Pete” Hart into the fold was a fortuitous addition to the corporate family as it negotiated with Saudi Arabia over the Jubail development—what Steve Jr. had taken to calling the company’s first “gigaproject.” Hart, a former assistant secretary of state, had been ambassador to Saudi Arabia, North Yemen, Kuwait, and Turkey. A huge expatriate labor force, more than 50,000 workers—transported by Bechtel from the Philippines, India, Taiwan, Korea, Algeria, and Indonesia, and often segregated by nationality—would move billions of cubic yards of earth, producing what one account described as “a myriad of closely held secrets developed, traded or brought to the company in the brains and files of more than 1,000 scientists raided from competitors and foreign countries.” At one point, Steve Sr. alerted the State Department that he intended to bring a foreign Muslim workforce into Jubail—specifically, Filipinos from Mindanao—according to a recently declassified State Department cable.
The Saudi port at Jubail would be the prototype for Bechtel’s next iteration—first the building of entire cities, then the industrial development of entire nations. It was Shultz who devised this new strategy, drawing on his analysis of international economics and capitalizing on the close friendships with Middle Eastern officials he developed while in the Nixon Cabinet. “In all the expansive sweep of civil engineering from the pyramids of the Nile to the construction of the Suez Canal, nothing so huge or costly as Jubail has been attempted,” Time magazine championed the venture.
Despite the financial bonanzas that Peabody Coal and Jubail were for Bechtel, the company’s problems and negative publicity only intensified. As it was, not surprisingly, the prickly Weinberger would find himself at the center of the storm—and would soon be seeking an out.
CHAPTER FIFTEEN
The Arab Boycott
Steve Sr. had created close business relations with the petroleum industry as far back as the 1930s through his association with SOCAL, including a decades-long association and friendship with the Saudi royal family. That long relationship with Saudi Arabia, as well as Bechtel’s ties with the leaders of Libya, Iraq, and Iran—Qaddafi, Hussein, and the Shah, respectively—had long sparked distrust among Israeli leaders.
Despite working with all of Israel’s neighbors on hundreds of projects in the region, Bechtel built nothing in Israel. The company had long been dogged by allegations of systemic, companywide anti-Semitism, due in part to its unwavering support of the anti-Jewish Arab boycott prohibiting trade with Israel. At a time when oil companies fostered a growing suspicion of Israel in response to its declaration of an independent state and its 1948 war with the Arabs, Steve Sr.’s remarks often included blatant anti-Jewish sentiment. He routinely referred to Jewish associates as “He’s a Jewish fellow, you know,” as if the distinction indicated a stereotyped trait. A former personnel manager once even claimed that the company “ran deep with Aryan blood.” Bechtel’s anti-Israel wariness was further galvanized by its early experience in Palestine. Steve Sr. blamed Israeli Zionists for forcing the company to abandon a major pipeline project in Haifa that had resulted in the loss of millions of dollars in investment and profits.
Steve Sr. had also once promised Saudi leaders not to hire Jewish elements—either Jewish-owned subcontractors or Jewish workers—in building the Saudi Arabian pipeline and the king’s railroad, and regularly assured other Arab clients, including the Egyptians, that Bechtel was not, and would not, operate in Israel. Careful not to offend King Faisal, “who repeatedly harangued Steve senior about the alleged perfidy of ‘Zionists,’ ” as Laton McCartney described it, Steve rejected all business opportunities that arose in Israel.
The boycott, which the Arab League established in 1945, was meant to isolate Israel and to thwart the rise of its military and economic power. Steve Sr.’s good friend Faisal was aggrieved “by the loss of old Jerusalem to the Jews,” according to a history of the era. “As guardian of Islam’s Holy Places, he felt a personal responsibility to recapture what had been lost, and his hatred of Israel went deeper than the antipathy and wounded pride common to all Arabs.”
For nearly thirty years, complying with the boycott presented no problem for Bechtel. The boycott prohibited Arabs from trading with Israel directly, from dealing with firms that traded with Israel, and from conducting any business with firms that had Jewish ownership. The League kept a blacklist of more than fifteen hundred firms—mostly American—which the Arab nations shunned. Because Bechtel was one of the few American companies to side with the League against Israel, its political and economic clout in the region rose. Bechtel’s anti-Israel stance went unchecked until the Arab League ratcheted up the stakes in the mid-1970s. It expanded the terms of the boycott, which drew the ire of the Anti-Defamation League (ADL) in the United States and spurred pressure on Congress and the White House.
In response, President Ford asked the Justice Department to conduct an investigation into the alleged conspiracy to restrain trade, and his tough-minded prosecutor, Edward Levi, seized the opportunity to take on Bechtel. A son and grandson of rabbis, Levi was the first Jewish US attorney general. Not only was he aware of Bechtel’s anti-Israel bias, but also he had some historic animus with Shultz, dating back to 1968, when he was president of the University of Chicago and Shultz was the dean of the business school. The two men had clashed over the handling of Vietnam War protestors on campus, with Shultz taking a less tolerant stance than Levi toward the demonstrators.
While Levi couldn’t prosecute the Arabs, he determined that Bechtel’s compliance with the boycott was a violation of the Sherman Antitrust Act. Although there were nearly a dozen American firms adhering to the boycott, Levi targeted Bechtel because of its high-profile image, with two former Cabinet members as executives, combined with additional complaints from the ADL about ongoing discrimination against Jewish employees, both in the United States and abroad. Ford administration officials pressured Levi and his assistants intensely not to file charges against Bechtel, although Ford personally maintained a hands-off approach—fearing a backlash from Justice lawyers, who were already suffering a morale crisis following the Watergate scandal. The Jewish community was also monitoring the case, especially coming as it did during the presidential election season. But Ford’s proxies, Treasury Secretary William Simon and Secretary of State Kissinger, bombarded Levi—Simon with public opprobrium and Kissinger with private cajoling. “It will do grave damage to our foreign policy,” Kissinger said to Levi in a phone call on January 6, 1976, trying to dissuade him from pressing charges against Bechtel. “It comes with bad grace from the US, which is conducting boycotts itself.”
The next day, Kissinger called the president and warned him, “The Jews would oppose you in an election unless it looks like you will win,” adding that the “Jews are trying to so embroil us with the Arabs that we are paralyzed . . . all [Bechtel] is doing is obeying the law of the country.” Ford replied, “It amazes me that such a tiny people can raise so much havoc here.”
The Washington Post, in a lead editorial, took up Kissinger’s and Bechtel’s cause, reporting that the State Department had tried to block the suit for fear it would alienate Saudi Arabia, interrupt American oil supplies, and cost American companies billions of dollars throughout the Arab world. A Bechtel spokesma
n told the newspaper that its Arab business was conducted “in areas and in ways compatible with US foreign policy goals.” Both Simon and Kissinger would later serve as Bechtel consultants.
Despite the intensive petitioning by Simon and Kissinger, the Justice Department filed suit against the company on January 16, 1976, charging that Bechtel and four of its divisions or subsidiaries had refused to subcontract work in the Middle East to American companies blacklisted by the Arab League as part of their economic boycott of Israel. While Shultz distantly defended Bechtel’s role with the League, Weinberger bore the brunt of the criticism. As general counsel, he had approved the company’s compliance with the boycott. Unwilling or unable to restrain his pro-Arab partiality, he advocated a bellicose confrontation with the Justice Department.
The bad publicity in the middle and late 1970s was taking its toll, threatening to bring unwanted attention to the massive Jubail project, which was just getting under way, as well as expose Bechtel’s escalating Iranian nuclear operations under the direction of its new consultant, former CIA head Richard Helms. A close look at Bechtel would also have bared the company’s relationship with Prince Mohammad Bin Fahd. In line to become king, Fahd and fellow members of the royal family were demanding exorbitant “commissions” from Bechtel in exchange for letting it do business in Saudi Arabia. At the time, Bechtel was competing for contracts to build a second industrial city at Yanbu, with a price tag of $1 billion, as well as a $3.4 billion international airport in Riyadh. But Mohammad was muscling Bechtel financial executives, demanding a 10 percent fee from the projects. When Steve Jr. and Shultz agreed to let the University of California–educated prince become a shareholder in Saudi Arabian Bechtel Company, some company executives—including Weinberger—feared that the formal association with the playboy could cause embarrassment for the firm. (Bechtel would ultimately obtain the contracts for both Yanbu and the Riyadh International Airport.)
