The Profiteers

by Sally Denton

  “The Hunting Horse,” as high-level Israeli officials reverentially called their valuable agent-in-place who had burrowed deep within the US intelligence apparatus, seemed destined to die in his North Carolina prison cell.

  Despite his best efforts to silence Pollard, Weinberger would not escape his own entanglement in the Iran-Contra conspiracy, for which he would ultimately face criminal charges. “History proved that in the midst of condemning Pollard’s conduct, the secretary of defense was illegally participating in a scheme to sell arms to Iran and divert the profits to rebels fighting a civil war in Nicaragua,” as one account described the hypocrisy. “While Weinberger crucified Pollard for breaking the law, he was doing so as well.”

  On the day in March 1987 that Pollard was sentenced to life, Reagan gave a speech denying that any of his presidential advisors, including Weinberger, had secretly and illegally covered up the Iran-Contra affair. “With my eyes shut and not fully aware of the consequences, I entered the territory of lies without a passport for return,” Pollard later wrote.

  CHAPTER TWENTY-FOUR

  A Tangled Scheme

  Called “the most dangerous breach of presidential authority since Watergate,” Iran-Contra was a labyrinthine conspiracy to trade weapons for seven American hostages kidnapped by Hezbollah, a fundamentalist Shiite Muslim group sympathetic to Iran, and being held in Lebanon. Despite his public vow not to negotiate with terrorists, Reagan initiated covert action to deal with them in exchange for the release of the seven hostages. The convoluted scenario called for selling arms to Iran—a country that George Shultz had officially designated as a sponsor of international terrorism in January 1983—to be used in its ongoing war with Iraq, which the United States was also secretly arming in violation of both the US arms embargo and stated policy. As the plot was conceived, the Iranian leaders would then pressure the terrorist kidnappers to release the hostages.

  “At the time,” according to Independent Counsel Judge Lawrence E. Walsh, who investigated the case for eight years, “the United States was vigorously urging its allies to present a united front in refusing to traffic with terrorists and hostage takers and to refrain from shipping arms to either Iraq or Iran.”

  As part of the bizarre plot, the proceeds from these illegal arms sales would be deposited in Swiss bank accounts and then diverted to Nicaragua to fund the paramilitary activities of the Contras—Reagan’s treasured “freedom fighters” who were a right-wing guerrilla insurgency group seeking to overthrow the social democratic government of that country. “One of the most complicated and intrigue-filled scandals in recent decades,” the Washington Post described the “grand scheme that violated American law and policy all around: arms sales to Iran were prohibited; the US government had long forbidden ransom of any sort for hostages; and it was illegal to fund the contras above the limits set by Congress.”

  To circumvent the ban on providing arms to Iran—and to dodge congressional oversight—the White House had enlisted Israel to act as a conduit for the weapons. The plan called for Israel to ship missiles to Iran from its own stockpile with its arsenal then to be replenished by the United States through Weinberger’s Department of Defense. At the same moment that America was arming Iran via Israel, top secret intrigues involving Bechtel, Israel, and Iraq were also under way—what BusinessWeek described as “a tangled scheme” surrounding the Bechtel pipeline project. In a continuing irony of strange bedfellows during that heightened season of espionage, covert arms trafficking, and foreign policy dissembling, Bechtel executives were pressing officials at the highest levels of the Israeli government to promise that Israel would not bomb the proposed Bechtel-built pipeline in Iraq.

  What grew into an international scandal had begun after Rumsfeld convinced Saddam Hussein to let Bechtel build the pipeline from Iraq’s Kirkuk oil fields to Aqaba on the Red Sea. But the Iraqi dictator was demanding that Bechtel and the Ex-Im Bank assume the responsibility for hundreds of millions of dollars in construction loans in the event that Israel destroyed the pipeline. “Saddam may have been born in a hut and he may show a peculiar fascination with romance novels, but he was more than an intellectual match for the plodding Rumsfeld,” wrote investigative journalist Jeffrey St. Clair. Hussein was reluctant to hand over $2 billion to Bechtel for a pipeline that ran so close to Israel.

  Saddam was “offended” by Rumsfeld’s offer for the US government to intervene with Israel to seek assurances regarding the security of the Bechtel pipeline. The “underlying hostility between Baghdad and Tel Aviv was so acute that US efforts came close to backfiring,” as a national security expert described the sensitivity of the subject. George Shultz’s State Department, working out of public view to get the pipeline built and to restore full diplomatic relations with Iraq, was alarmed at “the depth of Iraqi feeling about Israel.” That left the thorny dilemma of how Bechtel, long distrusted and despised by Israel, could entice it to pledge nonaggression. Given Bechtel’s historic schism with Israel, the proposition was dicey.

  The company sought a middleman and initiated a “global lobbying blitz,” as BusinessWeek described its efforts. “That’s where the intrigue began.” The man whom Bechtel hired as its go-between—joining Schlesinger and Clark—was a shady Swiss billionaire banker and oilman named Baruch “Bruce” Rappaport, a close personal friend and golfing partner of CIA head Casey as well as a longtime intimate of Israel’s prime minister, Shimon Peres. The Israeli-born Rappaport “surfaced in several of the most significant political events of the Reagan White House years, including the war between Iraq and Iran,” according to two renowned criminologists. “In a project where the lines between corporation and government were often obscure, Clark obliterated them,” wrote an analyst of the John le Carré–like drama. While on Bechtel’s payroll, via Rappaport, Clark misleadingly presented himself to the Iraqis as a government official.

  Rappaport succeeded in brokering a deal. Israel agreed to protect the pipeline if Bechtel would sell it oil at reduced rates for ten years—“a reduction worth $650 million to $700 million,” the New York Times reported. Rappaport also promised Israel that Bechtel would provide $70 million to go into the political coffers of Peres, then-leader of Israel’s Labor Party. “I am following with great interest the projected pipeline from Iraq to Jordan as a possible additive to introduce economic consideration to this troubled land,” Peres wrote to Meese on September 19, 1985. “Apparently an Israeli guarantee may help to pave the way to the construction of this p/l [pipeline]. I would go a long way to help it out. But then discretion is demanded on our part. I shall be in the USA in the middle of October, and I intend to talk it over with George Shultz, for whom I have the highest regard.” Bechtel would later deny having authorized Rappaport’s offer to Peres.

  Because such a payment to Peres would have violated the 1977 Foreign Corrupt Practices Act that prohibits US citizens, companies, or their agents from paying “anything of value” to foreign officials, governments, or political parties for help in obtaining business, reports of the deal prompted a federal criminal investigation. James C. McKay, an independent prosecutor, was appointed to investigate alleged financial improprieties of Meese, who, while attorney general, was also acting as a negotiator with Rappaport to establish a US-backed insurance fund to guarantee the security of the pipeline. At the same time, Independent Counsel Walsh was scrutinizing Meese’s involvement in Iran-Contra. Shultz detached himself from Meese as the investigation intensified, later describing perhaps the “most derided high official of the Reagan administration . . . a kind of unfathomable St. Patrick, talking the snakes out of their holes; what he would do with those snakes afterward, I was never sure.”

  George Lardner of the Washington Post wrote: “The twists and turns of the pipeline project . . . suggest how easy it can be for private entrepreneurs to get the support of US officials by waving the banner of national security over questionable transactions.” During the pipeline machinations—what was later called scornfully “
a protection racket” by advisors to the National Security Council—the White House bypassed usual foreign policy channels to pursue a construction project that furthered the corporate interests of Bechtel over the national security interests of the United States. In the process, the Reagan administration had set loose an unaccountable operation that was opaque to government oversight. The episode underscored the “use of under-the-table favors that have produced political or financial benefits for private citizens by skirting procedures designed to make policy on the basis of national interest, not personal gain,” as the Los Angeles Times described it. “The principal players in the pipeline deal—Iraq, Jordan, Rappaport, the giant construction firm Bechtel Group Inc., and a parade of bankers—had the money and expertise to stretch a steel pipe 590 miles across a desert in the middle of a potential Mideast war zone.” Rappaport ultimately admitted that he personally stood to make a staggering $200 million a year from the oil sales to Israel—what he called a “quid pro quo for a written security agreement” from Israel.

  As the Iran-Contra affair and the Iraqi pipeline deal converged, the scandals’ respective independent counsels—Walsh and McKay—began sharing information in search of links between the two cases that involved several of the same figures. “What is clear is that . . . private citizens used their friendship with government officials to make money, and international policy was affected by business interests,” the Fort Lauderdale Sun-Sentinel concluded. Judge Walsh and a team of lawyers reviewed hundreds of thousands of documents, which led to the indictment of several of the administration’s highest-level national security officials, including Weinberger, in the Iran-Contra conspiracy.

  Meanwhile, McKay granted Rappaport immunity from prosecution in exchange for his cooperation with the Aqaba pipeline investigation and subpoenaed hundreds of Bechtel documents. “That unwelcome attention has the engineering and construction giant squirming,” reported the New York Times. “But its real difficulty these days continues to be the problem that got it involved in the Iraqi project to begin with—a dearth of large construction projects in the Middle East and elsewhere that had traditionally been Bechtel’s main source of income.” Saudi Arabia had also stopped construction of a $1 billion refinery Bechtel was building at Port Qasim, as conflicts in the region and oil company manipulation led to dwindling oil revenues.

  Meese resigned under a cloud of suspicion, for among other things, his unseemly role as intermediary between Bechtel and various collaborators in the scheme, “becoming an object of media ridicule and late-night jokes, depicting the pudgy prosecutor of public morality as the James Watt of the Justice Department.” Prior to his resignation, several top Justice officials quit in protest of Meese’s improper acts as the country’s top law enforcement officer. But the government’s bribery probe came to a halt when, after four expensive years of Bechtel’s strategizing, Saddam refused to trust the Israelis’ promises and began equivocating on the pipeline.

  “Though the pipeline might have had an important geopolitical context,” according to an examination of the case, “just about everyone else saw it as a private financial package that contained some fairly shady elements.” Despite the close ties between Rappaport, Meese, and high-level Bechtel executives—including Steve Jr. and his son and heir apparent, Riley—the company avoided charges, if not unwanted publicity. In 1988 the New York Times reported that Bechtel had not been accused of “any illegality in connection with the scuttled Iraqi pipeline project but is being scrutinized by the special prosecutor investigation of Attorney General Edwin Meese 3d.” Bechtel executives “tried to distance themselves from any potential illegalities,” according to the news report.

  A company spokesman denied that Bechtel was aware of any effort to pay off Israeli officials. Steve Jr. also sought to separate the company from its close associate and go-between Rappaport, who, “though rich and successful,” was thought by many who worked with him “to be a somewhat loathsome financial criminal, protected by the intelligence services of the United States and Israel.” For his part, Peres—“choking with rage”—denied that he or his party received bribes. “Israel agreed not to harm the pipeline . . . so there was no need to bribe anyone,” he told a radio interviewer in Jerusalem.

  Such global exploits by Bechtel had been pro forma for decades, if shrouded from unsolicited inspection. But the symbiosis between Bechtel and Reagan’s regime went beyond run-of-the-mill conflict of interest. So too did Bechtel’s long-standing relationship with Iraq. For years Bechtel “had been bending over backward to please his [Saddam Hussein’s] every whim,” according to an account of the company’s interactions with Iraq dating back nearly fifty years to when Bechtel executive George Colley was fatally bludgeoned and dismembered by an anti-American Iraqi mob. Undeterred by Colley’s murder, Bechtel had expanded its presence in the country and assisted Saddam’s corrupt regime in numerous projects. Bechtel was among what a 60 Minutes producer, Barry Lando, described as “American and foreign businessmen, leaders of agribusiness, oil tycoons, and arms merchants from across the globe who profited handsomely from doing business with Saddam Hussein while closing their eyes to what he was up to—or, in some cases, despite knowing full well.”

  Bechtel’s unmitigated decades-long wooing of Saddam would continue, including the relentless pursuit of the massive petrochemical plant to be built near Baghdad. The $2 billion project involved construction of a plant capable of producing 450,000 tons per year of ethylene and 67,000 tons per year of ethylene oxide. According to secret State Department cables that were later declassified, Bechtel was awarded the contract for the project. When the US Senate passed a genocide bill invoking economic sanctions against Iraq for its use of chemical weapons—a bill that prohibited American firms from selling the restricted technology—Bechtel assured Saddam it would find a way around the prohibition. In what one cable described as a “lengthy diatribe” about the US sanctions, Saddam’s nephew and son-in-law, Husayn Kamil, “fulminated” to Bechtel representatives that the Senate action was “part of a Zionist conspiracy to embarrass and undermine Iraq.” For one and a half hours, Kamil “vented his spleen,” according to Bechtel executives at the meeting.

  The Bechtel agents assured Kamil, who was also Iraq’s weapons procurement commander and who directed Iraq’s ballistic missile and chemical weapons programs, that if the act was signed into law, Bechtel would “turn to non-U.S. suppliers of technology and continue to do business in Iraq.” Stunningly, the company’s declared intention to move ahead with the project “regardless of the provisions” of the Senate act calling for strict economic sanctions against Iraq elicited no comment from US Ambassador April Glaspie, who related details of the meeting in a classified cable from the embassy in Baghdad to the State Department in Washington.

  The sanctions against Iraq were not enacted, thanks to vehement lobbying by Shultz and other members of the Reagan administration. Further, Shultz’s State Department refused to impose controls on the export of biological toxins to Iraq. Bechtel continued its dealings with Saddam, remaining optimistic about the pipeline long after the dictator had backed away from it.

  * * *

  PART THREE

  DIVIDING THE SPOILS

  1989–2008

  * * *

  War began last week. Reconstruction starts this week.

  —NEW YORK TIMES

  CHAPTER TWENTY-FIVE

  A Deal with the Devil

  Riley P. Bechtel, “by all accounts the ablest” of Steve Jr.’s children, acquired his corporate skills as the thirty-two-year-old intermediary in the gripping maneuvers among the Bechtel Group, Saddam Hussein, and Bruce Rappaport. If his role as fourth-generation company leader was ever in doubt, the skills he exhibited as managing director of Bechtel Ltd. in London during the seminal Reagan era solidified his position. Even though the pipeline deal had collapsed, Bechtel remained in Saddam’s good graces, and Iraq had contracted with Bechtel’s London office, headed by Riley, to build the PC2 ch
emical plant. “The U.S. embassy in Baghdad was pleased for Bechtel, as was the Department of Commerce in Washington, which encouraged Bechtel to go ahead,” according to a history of the US covert arming of Iraq. Bechtel, also pleased, “thought nothing of the request from Baghdad that they accept payment through letters of credit” from a tiny Atlanta, Georgia, branch of the Rome-based Banca Nazionale del Lavoro (BNL), Italy’s largest state-controlled bank. The US Department of Agriculture’s Commodity Credit Corporation (CCC)—a fund designed to create export markets for US farmers—was using BNL to funnel money to Saddam to avoid congressional scrutiny.

  Western intelligence agents later confirmed that much of the $3 billion that went from BNL to Iraq was used to finance that country’s development of unconventional weapons systems, including the Condor II ballistic missile, as well as nuclear, chemical, and biological projects. When details of BNL payments to Bechtel’s subsidiary in the United Kingdom came to light, Tom Flynn, a senior vice president at Bechtel, told the Financial Times of London that “the company never knew there was anything suspect” about the BNL funds. Flynn said Bechtel was encouraged directly by the Department of Commerce to build the plant, which he denied would be used to make chemical weapons.

  For more than a decade, Iraq was “able to acquire sophisticated U.S. technology, intelligence material, ingredients for chemical weapons, indeed, entire weapon-producing plants, with the knowledge, acquiescence and sometimes even the assistance of the U.S. government,” according to a long-running series of investigative reports on ABC News. As secretary of defense, Weinberger had been in the thick of weapons transfers to Iraq, even though, as former NSC official Howard Teicher put it, “There was no way that any casual observer who took any interest in Iraqi matters and the Arab-Israel situation, the Middle East situation, could but conclude that Iraq was an enemy of the United States.” Teicher had heard reports from both the Defense and State Departments about transfers to Iraq taking place illegally through Jordan—transfers that both Weinberger and Shultz denied.