The Profiteers

by Sally Denton

  Weinberger moved to head off any overtures Reagan might have been contemplating toward Shultz, planting the seed that it would be destructive to appoint two Bechtel executives to the nation’s foremost national security positions. He also passed along false information that Shultz had assured the Bechtels he had no intention of leaving the company for a Cabinet position. Some close to Reagan, such as his deputy chief of staff, Michael Deaver, thought that Reagan intended to appoint Shultz to State all along and had been disappointed to learn, incorrectly, that Shultz was not interested.

  Shultz was equally deflated and confused when, on Thanksgiving Day 1980, he received a phone call at his California home from the president elect. Expecting the appointment he so desired, Shultz was dispirited when Reagan said he “had heard” that Shultz was “very happy with his Bechtel job,” but hoped he would be able to help out in the administration in a part-time capacity if asked. Stunned, Shultz knew that the phone call was a polite way of telling him the post would go to someone else. He turned his attention back to Bechtel, which increased his salary to $600,000 and gave him more shares of the company stock. By the time Reagan came into office in 1981, Bechtel was “not really one company,” as a team of investigative journalists concluded after a three-year investigation. “It is many companies incorporated in different states of the U.S., and even in other countries, notably Panama. However, they are all controlled by one organization called the Bechtel Group of Companies, which has its own separate board of directors chaired by Stephen D. Bechtel, Jr. Various members of the Bechtel Group board are also ‘executive sponsors’ of operational functions in the other Bechtel corporations.” Shultz was both vice chairman of the Bechtel Group board and executive sponsor of the internal auditing division of Bechtel. In 1981 Bechtel employed 120,000 engineers, managers, and laborers at 111 major projects throughout the world, and would report $11.4 billion in earnings for that year. While Shultz was extolled and credited with the company’s great success, Weinberger disappeared from the Bechtel corporate façade.

  On an unseasonably warm Washington, DC, day in January 1981, while Ronald Reagan was being inaugurated as the fortieth president of the United States, the hostages held for 444 days were released. “Literally at the moment that Jimmy Carter handed over the reins of government,” as an author described it, the hostage taking by Iranian militants that had terrorized the American psyche for the previous fourteen months came to an end. The Iran hostage crisis had plagued, and then emasculated, the Carter administration, and had been the key campaign issue in the 1980 presidential race.

  In an oblique reference to Carter’s ineffectual weakness, Reagan waxed symbolic on the theme of military might and preparedness. His newly appointed secretary of defense, Weinberger, would manifest that theme as he presided over a colossal expansion of defense spending, all the while trumpeting Reagan’s good-and-evil view of the world. “In an administration that constantly harped on the need for more and better weapons,” wrote a historian, Weinberger was “the chief harper.” Nowhere would Weinberger’s imprimatur be plainer than the reversal of Middle East policy he brought to the Pentagon—a “pro-Arab disposition” that, if not born in the boardroom of Bechtel, was certainly nurtured there.

  As Bechtel’s general counsel, Weinberger had negotiated numerous contracts with Israel’s enemies throughout the Arab world, including Libya, Iraq, Syria, Egypt, Saudi Arabia, and Lebanon. So it was with apprehension that Israel greeted Weinberger’s appointment. Whether rooted in anti-Semitism or political ideology, Weinberger’s disdain for Israel was plain. He “seemed to go out of his way to oppose Israel on any issue and to blame the Israelis for every problem in the Middle East,” wrote Marine Lieutenant Colonel Oliver North. “Caspar Weinberger has reversed American policy in the Middle East,” Senator Joe Biden observed after Weinberger had been in the Reagan administration only one year. Even his deputy defense secretary, Lawrence Korb, thought “Weinberger had almost a visceral dislike of Israel’s impact on our policy.”

  Indeed, Weinberger’s “predilection to support Saudi Arabia to the extent that it’s in Bechtel’s interest” raised concerns on the US Senate Foreign Relations Committee. “Weinberger believes that what’s good for Bechtel is good for the US,” a senior staff member of the committee told the Los Angeles Herald Examiner. “Weinberger’s anti-Israel tilt was an underlying current in almost every Mideast issue,” according to a journalist. “Some people explained it by pointing to his years with the Bechtel Corporation. Others believed it was more complicated and had to do with his sensitivity about his own Jewish ancestry.”

  In keeping with his confrontational personality, Weinberger clashed repeatedly over Israel with Alexander M. Haig Jr.—the former general and Nixon chief of staff who became Reagan’s secretary of state. The dispute between Weinberger and Haig reached a climax in early 1982 when, in the midst of delicate Middle East peace talks, Weinberger traveled to Saudi Arabia, Oman, and Jordan, omitting Israel from the itinerary. Despite efforts to downplay the conflict between the two Cabinet secretaries, it erupted into public view when remarks attributed to Weinberger while on his air force plane indicated that the United States was going to “redirect” policy away from Israel and toward the Arabs. That, coupled with his public announcement that he supported selling F-16 fighters and mobile antiaircraft missiles to Jordan, brought a public protest from Israel. The New York Times declared the dispute momentous because the administration’s two top national security officials “seem to have differing assessments of the importance of Israel to the United States.”

  Israeli prime minister Menachem Begin, a close ally of Haig’s and to whom Haig made assurances of America’s support for Israel, accused Weinberger “of being hostile to his country,” according to the New York Times. Weinberger was outspoken in his belief that the United States had “neglected its ties to friendly Arab countries because of being hostage to Israeli policy.” Writing in the New Republic, Morton Kondracke called Weinberger part of the “Bechtel oil group,” which is “further to the Arabist side than the traditional State Department Arabists.” Even Jeane Kirkpatrick, the US ambassador to the United Nations, with her own hard-core anti-Communist bona fides, accused him of slavish groveling to the Arab world. “Cap, you talk about [Palestinian leader] Yāsir ‘Arafāt as if he’s some kind of agrarian reformer. ‘Arafāt is a Soviet-backed international terrorist. You have lost your sense of perspective,” Kirkpatrick once told him.

  Weinberger pushed Congress to approve the sale of $8.5 billion worth of AWACS (Airborne Warning and Control System) reconnaissance planes to Saudi Arabia. Shultz, as head of Bechtel’s government-relations department, organized a Bechtel-led coalition of American corporations doing business in Saudi Arabia in a massive lobbying campaign in support of the sale. The effort appalled and alarmed Israel, which saw Bechtel’s unmistakable hand behind the machinations. Bechtel, which had $40 billion in contracts in Saudi Arabia, hired a Washington lobbyist to write a letter to every member of Congress stating, “The AWACS deal is vital to the national interest as well as to the stability of the Persian Gulf.” Despite Haig’s passionate refutation, the Senate voted to authorize the sale. As Haig saw it, Weinberger’s enmity toward Israel, and toward him, was undermining his efforts to negotiate an agreement between Israel and Egypt on Palestinian self-rule.

  Weinberger’s long-standing antagonism toward Israel had been further galvanized when, the previous summer, Israel carried out a surprise air strike destroying a nuclear reactor under construction in Iraq. With sixteen US-made bombers, the Israeli air force flew the longest mission in its history to destroy the Osirak facility that Iraq’s president, Saddam Hussein, claimed was intended for peaceful scientific research. Israel charged that it was designed to make nuclear weapons.

  Weinberger was especially infuriated that the reactor was attacked at a moment when the Reagan administration was secretively engaged in an effort to turn Saddam into a centerpiece of American foreign policy in the M
iddle East. “This was a policy in which . . . Weinberger had a personal stake,” wrote a senior staff member for the Senate Intelligence Committee. “The policy was building up Iraq, a policy to which Weinberger and much of the rest of the US government sacrificed real American interests during the 1980s.” Thanks to the lobbying by what critics called “the Bechtel Babies”—thirteen powerful Washington lobbyists now maneuvered on behalf of Bechtel—in 1982 the Reagan administration took Iraq off its list of countries that sponsored terrorism. By this time, Iraq was mired in a long war that it had waged since 1980 against Iran. The United States could transfer weapons and other high-tech material to Iraq denied to countries on the list. The Reagan administration wasted no time authorizing “the sale to Iraq of numerous items that had both military and civilian applications,” the Washington Post reported, “including poisonous chemicals and deadly biological viruses, such as anthrax and bubonic plague.”

  When Reagan’s new “activist CIA director,” William Casey, refused to show Israel the American spy satellite photographs of the bombed Osirak reactor and Baghdad’s air defenses, “the Israelis began to understand that the Reagan administration had a two-tier policy.” Few American companies were more vested in Iraq at the time than Bechtel, which was beginning secret and sensitive negotiations with Saddam to build a colossal crude oil pipeline that would double Iraq’s oil exports and bring hundreds of millions of dollars in profits to Bechtel.

  Meanwhile, Weinberger’s strife with Haig quickened, and in another behind-the-scenes twist from “the boys from Bechtel,” Shultz intervened to hasten Haig’s demise. Communicating through back channels at both the White House and the State Department, Shultz recommended the appointment of Philip C. Habib, a Bechtel consultant, to replace Haig as a special presidential envoy to Israel and Lebanon. A Lebanese American, Habib had been a career diplomat since the 1950s, and, at the time of his retirement, had held the number three job at the State Department. A celebrated Middle East expert, he was distrusted by the Israelis. Shultz lobbied on Habib’s behalf with William P. Clark, the president’s close friend and national security advisor. Shultz saw Haig’s pro-Israel policy as detrimental to Bechtel’s, and America’s, interests in the region. Shultz had lured Habib out of retirement, giving him a cushy contract with Bechtel. He thought that Habib, whom he described as a “tough-talking, explosive-tempered, arm-waving Brooklyn kid,” could help end the Lebanese civil war that was escalating the conflict between Syria and Israel.

  His displacement by Habib was a terminal setback for Haig, who submitted his resignation to Reagan on June 25, 1982. That same day, Clark called Shultz, who was in a Bechtel meeting in London, and said in confidence: “There may be a change in secretary of state. Would you be interested, George? I hope you are.”

  “Yes,” Shultz replied, “but I have to wait for Steve Bechtel to come out of Alaska from a fishing trip and talk to him about it.”

  “George, you have thirty-six hours,” said Clark.

  “Do you mind if I run it by my wife?” Shultz asked.

  A half hour later, Shultz received a call from Reagan, telling him that Haig had resigned and that he wanted to name Shultz as his successor. The president requested an immediate answer. “It’s not a good idea to leave a post like this vacant,” Reagan said, making clear he hoped to make the announcement at the same time that Haig’s resignation became public. Shultz talked it over with his wife and accepted the position within thirty minutes. He then attempted unsuccessfully to reach Steve Jr. in Alaska. As it turned out, a shaken and allegedly displeased Bechtel first heard the news on the radio. Steve Jr. cut short his vacation and hurried back to San Francisco.

  “I was shocked,” Steve Jr. told Newsweek later. “I just didn’t think it would happen. But,” he added, “I knew George well enough that I felt that if the president really wanted him, put the arm on him, George would go.”

  Shortly after Shultz’s appointment, President Nixon called Clark with a forewarning about Shultz. “Bill, I want you to tell President Reagan one problem with your new secretary of state . . . My experience was, and I’m sure you’re going to experience the same thing, a wonderful ability to, when things look iffy or are going wrong, he’ll contend he never heard about the issue and was never briefed and was not a part.” Clark recalled later that he never told the president of Nixon’s warning and wished that he had. But that would be years in the future, near the end of Reagan’s second term.

  It had been Weinberger’s irascibility that led to his rival Shultz coming on board as secretary of state. The tempestuous blustering that was undermining US foreign policy—the Weinberger-Haig feud that Nixon described as “sniping or guerrilla warfare”—would be replaced by an older, deeper antipathy. Shultz, as it turned out, whether by chance or design, had landed his dream job. The rancor between him and Weinberger would play out once again, but this time on an even larger stage of history—and with Bechtel never far from the drama. “Reagan seems to have had no inkling of the long rivalry between Shultz and Weinberger before they actually began arguing in front of him during cabinet meetings,” wrote a Reagan biographer. “As it turned out, the conflict between Shultz and Weinberger proved more enduring and certainly as damaging as Haig’s frequent skirmishes with Weinberger.”

  CHAPTER EIGHTEEN

  The Reaganauts

  “There are too many people from Bechtel in this administration.” Republican senator Larry Pressler drew the conclusion felt by many of his colleagues on Capitol Hill.

  Secretary of State designate George Shultz had been calming but vague during his 1982 nomination hearings before the Senate Foreign Relations Committee, “providing artful nonanswers to the senators’ fuzzy questions on every aspect of foreign policy,” as one observer saw it. Then the characteristically unflappable Shultz lost his temper when grilled about the giant and secretive multinational corporation that he had served as president—“a company with a long history of feeding at the public trough and with involvements in the Arab world,” wrote Peter Wiley and Robert Gottlieb.

  “I . . . took some jabs that caused the temperature to rise a bit,” Shultz described his mood during the two days of often contentious hearings. He suspected he would be in for some tough questions related to his eight years with Bechtel and had hired the high-powered establishment lawyer Lloyd Cutler to help prepare him. A Democrat who had been White House counsel to Carter, Cutler advised Shultz to resign from all his business organizations, to put his financial holdings—now in the millions, thanks to Bechtel—in a blind trust, to disassociate from Bechtel, and to set up a recusal process within the State Department regarding all matters relating to Bechtel. It was all well and good in theory, but senator after senator honed in on Bechtel’s business ties to the Arab world. “A hot issue was my Bechtel association and a presumed pro-Arab tilt,” Shultz wrote later. The supposed bias was underscored by a remark Shultz had made to a reporter in 1980 while Reagan was campaigning as a resolute friend of Israel. “If I have any differences with Reagan, it’s about Middle Eastern policy,” as set forth in a speech Reagan had made before the Jewish community service organization B’nai B’rith. Pressler of South Dakota was unrelenting, pressing him for details about his role in Bechtel’s intensive lobbying campaign for the AWACS. “We did not go around twisting arms,” a defensive Shultz replied, denying that Bechtel had “an organized, systematic campaign of any sort”—an assertion that belied the sophisticated letter-writing operation undertaken by Bechtel lobbyists.

  As committee members cross-examined Shultz about the role Bechtel played in the Middle East, the bantering became testy. Shultz could barely contain his contempt for Congress. California senator Alan Cranston interrogated Shultz about his personal feelings regarding Bechtel’s adherence to the Arab boycott, implying unethical, if not illegal, behavior on the part of the company.

  The tough questions did not end with the Middle East. As one of the largest builders of nuclear power plants around the world, Bec
htel was singled out by antinuclear activists for its global proliferation without regard for American national interests. In a feisty exchange, Cranston accused Bechtel of secretly offering to sell Brazil “ ‘the entire gamut’ of nuclear enrichment and fuel-processing technology” at the moment that President Ford and Secretary of State Kissinger were trying to convince West Germany not to traffic sensitive nuclear technology to that Latin American country. Not only did Cranston see Bechtel’s role as undermining US efforts to “curb the spread of nuclear bomb making,” but he also accused Bechtel of making its own foreign policy that undercut the US government and “weakened our diplomatic efforts.” Bechtel had close ties with the Brazilian government, for which it had built the largest-capacity long-distance iron-ore slurry pipeline in the world.

  Cranston’s insinuations maddened Shultz, provoking him to interrupt the senator. “Cranston took me on, attacked my association with Bechtel, and implied that Bechtel was in some way reprehensible and unprincipled,” Shultz recalled of the interchange that left him feeling like he had to “stand up” for himself. Shultz popped off that he resented Cranston’s “smear against Bechtel,” and as Cranston continued, Shultz cut the senator short. “Well, now, wait a minute. You had your say. Let me have my say.” He went on to describe Bechtel as a “marvelous company, an honorable company, a law-abiding company that does credit to our country here and all over the world,” a company that would never, “ever . . . undercut the policies of the United States.”