by Sally Denton
At the same time, Bechtel executives were conspicuously promoting the sale of sixty F-15 warplanes to Saudi Arabia. The intensive lobbying of Congress by Bechtel, along with Saudi leaders and the educated and sophisticated Saudi lobbyists, sparked the attention of both the Israeli and American press. “The Saudis have thrown some of their most personable and articulate representatives, guided by ring-wise American political and public relations advisors, into this lobbying struggle,” the Washington Post reported Bechtel’s involvement in the incendiary debate.
With its international activities expanding, drawing more and more media attention as the company hired Helms and other former high-level foreign policy officials, rumors of Bechtel’s ties to the Central Intelligence Agency were ubiquitous. While whispers of such connections might have enhanced the company’s prestige twenty years earlier, by the late 1970s the CIA had been the subject of intense investigation on Capitol Hill, resulting in legislative reform (including a presidential ban of CIA assassinations of foreign leaders) and widespread exposure about illegal covert operations and allegations that the agency was in the service of multinational monopolies. In the post-Watergate congressional investigations of the CIA, to be linked to the agency was poison for an American company. “Despite its [Bechtel’s] prominent employees, the company shuns publicity,” wrote a Times reporter. “Nonetheless it has come forward to deny occasional reports of inappropriate cooperation between its international employees and the Central Intelligence Agency.”
The most explosive of the federal probes were the 1975–76 Church Committee hearings. Named for the investigative committee chaired by Senator Frank Church that uncovered the CIA abuses, the Senate Select Committee to Study Governmental Operations with Respect to Intelligence Activities had published fourteen reports labeled “the family jewels.” While some of the files had been splashed on the front page of the New York Times in an explosive article written by Seymour Hersh, nearly all of the several thousand pages of documents from the investigation were classified and hidden from public view for the next thirty-five years.
Meanwhile, Weinberger had become such a lightning rod in the Arab boycott controversy that the Bechtels and Shultz decided to bring in outside counsel, soliciting the help of one of Washington’s powerful law firms, Hogan and Hartson. Bechtel did not deny that it had complied with the boycott but argued that doing so did not violate federal law, and claimed that the company had been singled out.
Sharp disagreements permeated the discussions within Bechtel’s executive suite about how the company should handle the lawsuit. Steve Jr. and Steve Sr., who would have normally favored stonewalling the media, were persuaded by Shultz to be more cooperative. “With the benefit of hindsight, I recognize that my ‘penchant for privacy’ as an individual, along with the privately owned status of our company, made us targets,” Steve Jr. would reflect later. “Being more open and accessible earlier in our history might have alleviated some adverse publicity that we experienced.” In any case, to stave off the scrutiny that was anathema to the Bechtel family, Steve Sr., Steve Jr., and Shultz decided to settle the antitrust case out of court, agreeing to a consent decree stating that it would not participate in an Arab boycott. Later, Bechtel would try to change its position, arguing that it did not have to abide by the decree, and appealed the case to the US Supreme Court. The court refused to review the appeal.
CHAPTER SIXTEEN
The Pacific Republic
Sidelined, undermined, and overshadowed by Shultz at Bechtel, Weinberger stepped up his plotting for a return to government. His hopes for a Cabinet appointment in Ford’s second term had been dashed when the little-known former governor of Georgia, Jimmy Carter, narrowly defeated Ford in 1976. By the late 1970s, Weinberger had chosen Ronald Reagan as his most likely avenue back to Washington. He had known Reagan since 1958 and became California’s finance director during Reagan’s gubernatorial administration. The two were on friendly terms, both were staunch Cold Warriors, and Weinberger felt sure that if he got on board at the outset, Reagan would reward him with a Cabinet appointment—preferably the State Department.
Weinberger’s enthusiasm for Reagan was not shared initially at Bechtel corporate headquarters. Steve Jr. had already given millions in campaign contributions to Reagan’s leading challenger, former Treasury secretary and Texas governor John Connally. Bechtel’s lobbyist, Charls Walker, was Connally’s chief economic advisor. “Reputed to be the most powerful business lobbyist in Washington,” and credited as being the “grandfather of corporate coalition-building,” according to sociologist Nick Paretsky, Walker had served in the Treasury Department under the Republican administrations of both Eisenhower and Nixon. Walker, along with Connally, had spearheaded the formation of the Business Roundtable and was its chief tax lobbyist. He was also cofounder, with George Shultz and John McCone, of the Committee on the Present Danger, the influential militaristic lobbying group pushing for a reinvigorated military buildup to fight Soviet expansionism.
In their support of Connally, the Bechtels had joined the nation’s corporate elite backing the wheeler-dealer. The flamboyant Texan would later become known mostly for having been wounded as a passenger in the car with John F. Kennedy when the president was assassinated in 1963. “What John Connally stands for . . . is a glorification of strong centralized government working in partnership with large powerful corporations,” a Republican critic described the candidate who had raised more money than any other. Connally was so passionate about government and private partnerships that he once proposed to Nixon “we create a United States oil company. Buy half the reserves of Aramco in Saudi Arabia. Then when [the US] took over, Aramco could say, ‘Don’t talk to me, talk to Uncle Sam.’ ” The economic theories of the brash and arrogant Connally were described by a Texas magazine as “aimed mainly at befriending the top economic layer—sort of a warmed-over Trickle-Down theory with the government holding the spout.”
While the Bechtels found a natural affinity for Connally’s domestic agenda, they had an even stronger passion for his Middle East position—for which he had been dubbed the “candidate of the oil interests.” In a contentious speech at the National Press Club in Washington on October 13, 1979, Connally called for Israel’s withdrawal to its pre-1967 borders, to abandon the West Bank, the Gaza Strip, and relinquish its exclusivity in Jerusalem. The speech brought indignation from fellow Republican leaders and rival presidential candidates. Kansas senator Robert Dole said it “smacks of trading Israeli security for our oil savings,” calling it “more like an energy program than a peace plan.” Senator Howard Baker, Republican of Tennessee, said that Connally’s proposal “represents a fundamental shift from a political and moral base to an economic base,” adding that America’s oil supply “is not a bargaining chip for Mideast peace negotiations.” Israel’s supporters were outraged, charging Connally with “rehashing the stale arguments of the Arab potentates and dictators.”
For their part, the Bechtels were so enamored with Connally’s foreign policy vision that Shultz recruited Connally’s speechwriter, Samuel Hoskinson, as Bechtel’s manager for international corporate strategy. A former CIA analyst, Hoskinson had served as a Middle Eastern specialist on the National Security Council in the Nixon, Ford, and Carter administrations, working, respectively, for Kissinger, Brent Scowcroft, and Zbigniew Brzezinski. As it turned out, neither the American media nor the public was as taken with Connally as corporate America was. He won only one delegate vote at the 1980 Republican National Convention—for which he spent $11 million.
Once Reagan was the presumptive candidate, the Bechtels and Shultz got behind their fellow Californian and did everything within their power to insure his victory. Whatever reservations that they had about him—revolving mostly around his “supply-side” economic views—were mitigated partly when the former California governor appointed William Casey manager of his presidential campaign. Shultz and Casey had been close friends since the Nixon administration, when Ca
sey was first chairman of the Securities and Exchange Commission (SEC) and then undersecretary of state for economic affairs. The relationship continued after Shultz joined Bechtel, and Casey became head of the Ex-Im Bank under Ford, while also serving on the president’s select Foreign Intelligence Advisory Board.
Having been chief of secret intelligence in Europe for the OSS during World War II, the native New Yorker had returned to Manhattan, where he became a multimillionaire Wall Street lawyer. Casey made his first fortune by providing legal and economic intelligence information to corporate clients, and then became a venture capitalist before taking the SEC appointment in 1971. His intelligence background, his anti-Communist stridency, his stalwart Catholicism—all attributes reminiscent of McCone—influenced both Steve Sr. and Steve Jr., who recognized him as a fellow patriot capitalist.
Tensions between the supply-siders and the traditionalists had become “acute,” as Reagan biographer Lou Cannon described the battle of the economists. At the moment, the nation was reeling from high unemployment, high interest rates, and runaway inflation. Casey worried that Reagan’s vague understanding of the issues endangered his candidacy, and thought the support of Shultz and the Bechtels would be a decisive factor. Six years earlier, then-Governor Reagan had invited Shultz to lunch in Sacramento to pick his brain about “how the federal government worked, how the budget worked, what the process was, and what the problems were,” as Shultz later recalled of the meeting. While many economists of the era were contemptuous about Reagan’s intellect, Shultz thought him earnest in his desire to become informed. Then, in the spring of 1980, Casey summoned Shultz from the Bechtel boardroom to a meeting with Reagan in Los Angeles.
Shultz was only slightly more impressed than he had been at their earlier meeting in the state capital, but again he came away feeling optimistic about the candidate’s seriousness and thought him educable. Casey seized the moment, inviting Shultz to chair a coordinating committee to advise Reagan on economic affairs. Weinberger and Walker were also on the committee.
By late spring, it seemed possible that Reagan could defeat Carter. After a failed mission to rescue fifty-two American hostages being held by Iranian revolutionaries at the US Embassy in Tehran since the previous November, Carter’s ratings plummeted. Operation Eagle Claw, as it was known, was a humiliating disaster that resulted in the deaths of eight US servicemen. From that point forward, the Bechtels, Shultz, and Weinberger all played key roles in Reagan’s campaign strategy, even as both Shultz and Weinberger angled for the same Cabinet post: secretary of state. While Shultz had powerful behind-the-scenes lobbyists pushing for him, including former Federal Reserve chairman Burns and former defense secretary Melvin Laird, Weinberger’s long-standing friendship and devotion to Reagan trumped Shultz’s grasping. Steve Jr. lamented the possibility that Reagan would lure Shultz back to Washington, and he and his father hoped the president elect would tap Weinberger instead. They had no intention of firing Weinberger, an act that would only bring more unwanted attention to the company. But he had never fit in with the corporate culture and had few allies within the firm. “Cap’s being at Bechtel was like a heart transplant that just didn’t take,” Bechtel treasurer Raynal Mayman told an interviewer. “The system rejected him.”
Shultz, on the other hand, had been an extraordinary addition to Bechtel, ushering in major changes that insured the company’s success for years to come. During the previous three decades, there had been a bipartisan consensus that “Republicans as well as Democrats favored stronger regulation of business and industry to protect consumers and workers from the excesses of American capitalism,” as one account of the era put it. Consequently, by 1980, the company was reporting a decline in fortunes, characteristically blaming an overreaching government. “The lack of a US energy plan, a slowdown in the demand for electricity, and increased financial restraints led to an epidemic of project cancellations and delays,” according to official Bechtel publications. Increased government regulation, tougher environmental policies, and changing economic conditions both nationally and internationally demanded that the company shift direction. In response, Shultz effectively overhauled the company, reorganizing it toward a holding company structure for Bechtel Corporation’s three principal operating divisions, all managed by Shultz: the Bechtel Power Corporation, a construction company that was the nation’s largest builder of nuclear plants; Bechtel Petroleum Inc., which built refineries and other oil and gas industry facilities; and Bechtel Civil and Mineral, a builder of mass transit systems and other major infrastructures.
The Bechtel Corporation changed its name to the Bechtel Group, and Shultz assumed a formal role in developing megaprojects in newly industrialized countries. Under his guidance, the company evolved from a direct construction company into project management, engineering, and construction management, which, by 1980, accounted for two-thirds of its revenues. With Shultz’s leadership, Bechtel also diversified into financing and operational services—most notably acquiring an 80 percent interest in the prestigious Dillon, Read & Company investment firm. “We found ourselves with new owners whose operations were an integral part of the military and intelligence communities and who had demonstrated a rapacious thirst for drinking from the federal money spigot,” a Dillon, Read employee wrote later. “Unusual things started to happen that were very ‘un-Dillon-Ready-like,’ as the new management recommended expanding into merchant banking and participating in the leveraged buy-outs sweeping Wall Street at the time. Through Sequoia Ventures, the quasi-independent financial investment company owned mostly by the Bechtel family,” the firm held Dillon, Read, the family’s shares in Bechtel, and other parts of the organization’s assets. Shultz invested company profits, as well as his and the family’s personal wealth, in real estate and oil and gas leases—“little acorns,” he called them. “We can afford as a private company to make investments we can be patient with,” Shultz described his investment strategy to Forbes. Sequoia also offered a venue for Bechtel to marshal international venture capital for massive infrastructure projects worldwide.
Shultz—a former Labor Department secretary—had another, “less often mentioned,” reason for creating a holding company: Bechtel had acquired a famously nonunion firm, Becon Construction of Houston. “Through the holding company, Becon can be kept well apart from the rest of the organization, which is covered by extensive union agreements,” as the Economist reported.
Shultz had also assumed responsibility for Bechtel’s unapproachable public affairs division, and he was credited for bringing the first semblance of transparency the firm had ever practiced. Under his direction, the company issued its first annual report, which included billings and current projects, and provided employees with a booklet on how the $7.6-billion-a-year organization was doing. “The booklet is long on generalisations, short on figures and the financial nuts and bolts,” the Economist described it. “An inquiry about profits to an otherwise charming Bechtel boss produces a sharp reminder to mind your manners. Such things remain the concern of the Bechtel family (who still own the vast majority of the stock) and a handful of top officers.” So essential had Shultz become to Bechtel that both Steve Sr. and Steve Jr. were overcome with concern that Reagan would appoint him secretary of state—a role that Shultz coveted.
In November 1980 Reagan defeated Carter in a landslide: 489 to 49 electoral votes. In what would become known as the “Reagan Revolution,” the election marked a historic conservative realignment, with the American Southwest the unmistakable new power center. The capital of this new economic and geopolitical region was California, christened the “Pacific Republic” by its then governor, Jerry Brown, with San Francisco the designated corporate headquarters. The Bechtels and other uberwealthy California businessmen who had made Reagan’s political victory possible—the coalition of reactionary, antigovernment, rugged-individualist western corporate titans—were now established as the New Right elite. “Ronald Reagan represented the triumph of the corporat
e West,” as one history of the region put it—an empire that Bechtel had essentially ruled for fifty years. “The West was Reagan country, the media proclaimed, a solid base from which he pursued his long quest for the presidency,” wrote Peter Wiley and Robert Gottlieb in their Empires in the Sun. “He was the candidate of the corporate boardroom, the hero of the Moral Majority, the gauleiter of the white middle class, the polished figurehead who preached the religion of free enterprise.”
In the aftermath of the election, speculation was rife that Reagan was going to name Shultz secretary of state. “Republican presidents have a smaller pool of talent from which to choose their teams than do Democrats,” the Economist proclaimed, “and Mr. Reagan’s advisers were noticeably short of experience of Washington.” The notable exceptions, of course, were Shultz and Weinberger, and, given the dire straits of the economy, Shultz seemed an obvious front-runner. His depth and breadth of experience in economic affairs were formidable. He had been Reagan’s chief economic advisor during the campaign and had served in three Cabinet posts dating back to 1969. But Weinberger was working at cross-purposes to make sure his nemesis would not outshine him again, as Shultz had done both within the Nixon administration and at Bechtel.
CHAPTER SEVENTEEN
The Bechtel Babies
Early in the interregnum between election and inauguration, Weinberger accepted Reagan’s offer to become secretary of defense—the largest department in the federal government, with over a million civilian employees. If disappointed that he wasn’t chosen for State, Weinberger was gratified to become the president’s chief military advisor at a time when the two men were unified in their zeal on national and international security issues. “When Reagan named his old buddy Weinberger to manage the largest peacetime military buildup in the republic’s history, the right went into a frenzy,” according to one account. Cap the Knife was known as “the hard-eyed budget director who prided himself on cutting” expenditures. But a closer look would have revealed his long-standing fanaticism about protecting the military budget coupled with paranoia about the Soviets’ arms buildup. “He is one of the few genuine anti-Communist Cold Warriors in Washington,” said Admiral Gene La Rocque. “He believes this [Cold War] stuff, and now he’s in a position to do something about it.”
