The Profiteers

by Sally Denton

  Described as a “fiendishly hardworking, constantly traveling bunch,” most of the Bechtel partners had been with the company for decades. “Their big reward, often tens of millions of dollars, comes when they retire and cash in their shares at a price set by the company. They also collect annual payouts of profit, just like at a law firm. In good years, partners take home a small fortune. In tough times, they don’t.”

  Seventy-seven-year-old Steve Jr., who as emeritus had largely disappeared into a pheasant-hunting retirement, resurfaced. The sudden presence of the beloved patriarch was both comforting and disquieting. “The old boy is asking a lot more questions these days,” a longtime employee remarked. By the time 2003 rolled around, Riley had no choice but to inform family members and their top managers that the company had suffered devastating losses on BEn’s assets. He proposed a total restructuring that included cutting overhead by nearly 20 percent—a drastic slash that, according to one account, meant reducing the 1,100-member staff at the San Francisco headquarters to 50. He also notified this elite group within the firm that its regular dividends would be suspended, as well as the right to cash in Bechtel shares. But most alarming was the suggestion that top managers might be asked to invest $50 million to salvage the drowning empire.

  Throughout 2003, hundreds of employees were laid off or quit, as the company went into a protective mode and created a blackout designed to deflect both internal and external scrutiny. “Seemingly innocent disclosures can have consequences,” Adrian Zaccaria, Bechtel’s chief operating officer (COO), warned high-level partners. “Every time we slip . . . we increase our exposure, and a simple cocktail party discussion can have implications for us all . . . I am not worried about being able to explain or calm our key banks and customers. But I am concerned that our newer and smaller stakeholders will demand more from us.”

  Then came the Iraq War, saving Bechtel from its financial tailspin, reversing a three-year slide, and setting the stage for a decadelong comeback. The so-called Boys from Bechtel would be the architects of a government strategy that would lead to military action against Saddam Hussein in Iraq. The company would reap the spoils of that war.

  Within a week of the September 11, 2001, attacks on New York City’s World Trade Center and on the Pentagon by hijacked planes (one of which crashed in Pennsylvania but was presumed to be heading toward Washington, DC), President George W. Bush had focused his foreign policy on taking down Iraq. Given the lack of evidence linking Hussein to the terrorist attack, the war policy was controversial in the United States and abroad, and so much of its execution occurred outside of public view. In the eighteen-month run-up to the war against Iraq, there were “twin themes that drove the Bush administration,” Russ Hoyle wrote in his book Going to War. “The first was the presumption that Saddam possessed weapons of mass destruction. . . . The second—which perhaps began as little more than a presidential suspicion, or fig leaf for regime change—was that Saddam Hussein had somehow been involved with al-Qaeda in mounting the terror attacks on the United States.”

  Bechtel and the US government, both of which had been encouraging Saddam for the previous decade, had evolved from entrenched collaborators to strident adversaries. Coming full circle, it would be a core group of veteran Bechtel executives who would rally the cry for the United States to invade Iraq and topple their former cash cow Hussein. “The same men who courted Saddam in the 1980s while he gassed Iranians . . . helped plan and implement the invasion and assumption of control of Baghdad, ostensibly because Saddam harbored weapons of mass destruction,” a report from the Institute for Policy Studies concluded. The Bechtel family, corporation, and foundation had long supported right-wing front groups and think tanks—such as the Heritage Foundation and American Enterprise Institute—that generated the prodefense, proprivatization, and anti-government-regulation agenda traceable back to the Reagan era.

  Retired four-star general John J. “Jack” Sheehan, who managed Bechtel’s petroleum and chemical operations, was a former NATO supreme allied commander who sat on the Defense Policy Board: a secretive, federally appointed prowar group of civilians that advised Secretary of Defense Donald Rumsfeld—who himself once lobbied on behalf of a Bechtel pipeline in Iraq—on its members’ business interests. Bush 43 had also appointed Riley Bechtel to serve on his Export Council, which advises the president on international trade matters. The former head of Bechtel’s energy division, Ross J. Connelly, was appointed vice president of OPIC—the entity that provides financial guarantees for American companies doing business abroad. Bechtel senior vice president Daniel Chao also joined the Bush team, serving on the advisory board of Ex-Im.

  Not surprisingly, former Bechtel president Shultz joined the ranks of the arch interventionists, chairing the Committee for the Liberation of Iraq: a pressure group formed to mobilize public support for the war and the overthrow of Hussein. Shultz was also a patron of the neocon think tank the American Enterprise Institute. “I would be surprised if Saddam Hussein’s fingerprints were not in some ways on this,” Shultz said, referring to 9/11. The man whose State Department underlings negotiated with the dictator on behalf of Bechtel’s pipeline while Hussein was using chemical weapons on his own citizens suddenly thought an “Iraq ruled by Saddam Hussein is basically a Kmart for terrorist weapons.” Shultz’s hawkish committee was “committed to moving beyond the political liberation of the oil-rich country to the conveniently profitable ‘reconstruction of its economy,’ ” according to columnist Bob Herbert of the New York Times.

  Weinberger also rallied with his fellow neoconservatives in stumping for war. “People will say there will be chaos,” he told Congress in support of the US invasion of Iraq. “I disagree, but I must confess frankly that even chaos would be better than Saddam.” This from the man who, as general counsel, had facilitated multibillion-dollar construction contracts between Bechtel and Saddam. “The more we gave Saddam, the more dangerous he got, and ultimately we had to go to war to destroy what we sold him,” wrote a nuclear proliferation expert. The Mafia has a term for that: “create to alleviate.”

  The saber rattling by Bechtel principals gave the company what Herbert described as “a license to make money”—putting “Bechtel in the driver’s seat for the long-term reconstruction of the country.” Penning an op-ed article for the Washington Post in 2002, Shultz headlined that “The Danger Is Immediate: Saddam Hussein Must Be Removed.” He went on to write that a “strong foundation exists for immediate military action against Hussein and for a multilateral effort to rebuild Iraq after he is gone.” Advocating a preemptive attack against Iraq, Shultz drew the analogy that “if there is a rattlesnake in the yard, you don’t wait for it to strike before you take action in self-defense.” Shultz neglected to disclose to his readers that he was a member of the board of directors of Bechtel, which was positioned to make billions of dollars in postwar reconstruction contracts. “Since his role was at arm’s length from the administration, he was able to whip up hysteria about the imminent danger posed by Saddam, entirely free from any burden of proof or fact,” wrote Naomi Klein, author of Shock Doctrine: The Rise of Disaster Capitalism.

  Nor were the riches now flowing limited to Iraq. Bechtel landed the contract to “remove the remains of the twin towers” after the terrorist attack on the World Trade Center. But the fact that Bechtel was also considered for the billion-dollar ground zero cleanup barely made the headlines.

  CHAPTER THIRTY

  More Powerful Than the US Army

  “Every so often Bechtel emerges a little into the limelight, blinks, and then retreats,” a writer for the Economist observed about the world’s largest construction firm. One of the country’s richest privately held companies, among the top US defense and energy contractors, and one of the most mysterious and politically connected businesses in the developed world, Bechtel had managed for its nearly eighty-year history to keep a low profile. But when, after the 2003 American-led invasion of Iraq, the George W. Bush administration
gave Bechtel the first massive Iraqi reconstruction “mother contract,” worth more than $1 billion, the company could no longer avoid the spotlight. Many news reports accused Bush of favoritism, pointing to Bechtel’s close ties to Republicans. Some critics charged that Bechtel’s win as the lead company in the restoration of Iraq hinged on its agreement to hire only subcontractors from countries that had supported the war. This directive was in keeping with President Bush’s famous “You’re either with us or against us” challenge to America’s allies to join in a “coalition of the willing” against Iraq—or what a satirist called the coalition “of the billing.”

  The selection process also drew the ire of congressional Democratics who called for an investigation of the contracting process. “The rush to secure contracts to rebuild Iraq and the awarding of the first wave of deals is causing as much debate as the decision to wage war,” reported the Financial Times of London. The US Agency for International Development (USAID) had sent a secret, detailed request for proposals to seven of the country’s most politically connected multinational corporations, including Bechtel, inviting them to bid on contracts worth hundreds of millions of dollars that would be paid by the government and include a 10 percent guaranteed cost-plus profit. Of the seven invitees, only two—Bechtel and Kellogg Brown & Root (KBR)—were somehow deemed “competitive.” Although those contracts were rebid in open competitions, Bechtel and KBR had an obvious inside advantage.

  The structure of the cost-plus contracts provided “incentive for corporations to bloat expenditures,” as one report described them. Under the aegis of national security, USAID waived competitive bidding, in what resembled a twenty-first-century gold rush. “It’s a relatively small club that has both guided US military, energy, and Middle Eastern policies over the past three decades and then run the corporations that benefit from those policies,” wrote Dan Baum of the New York Times about Bechtel and the other select companies solicited by the government. “And it’s a club that had a long history with Saddam Hussein.”

  Critics questioned whether the federal government got the best free-market deal by limiting the bidding to a handful of American companies. The nonpartisan Washington-based Project on Government Oversight (POGO) expressed concern “that the government seems to be handpicking their buddies for these contracts.” Of course, Bechtel had a four-decades-long work history of lucrative USAID contracts, building hydroelectric, power, and telecommunications projects throughout the Middle East, Central and Eastern Europe, Asia, and Africa.

  Andrew Natsios, administrator of USAID, had also been the project supervisor for Bechtel’s Big Dig project in Boston at a time when criminal action against the company was being considered. He bristled under critical questioning by ABC News reporter Ted Koppel. “I ran the Big Dig after the scandals took place,” he told Koppel, who asked pointedly, “It is charged that they [Bechtel] had excessive charges of over a billion dollars here. Doesn’t that give you some pause in going to Bechtel?” Bechtel was “in charge of the biggest infrastructure project in the history of America, and they screwed it up,” Danielle Bryan of POGO told the Los Angeles Times.

  Natsios defended the Bechtel Iraqi contract, claiming the company had the highest score and lowest bid—a claim that could not be verified independently, given the classified nature of the process. “Only a handful of companies in the whole world have the capacity to spend that much money responsibly,” Natsios contended. “So we went to the largest and best construction and engineering companies in the world.” He claimed that the fact that Bechtel already had a thousand employees in the Middle East further justified the decision. Natsios repeatedly assured Koppel that the cost to the American people for rebuilding Iraq would be no more than $1.7 billion—a cost that would swell to over $2 trillion before it was over.

  As for criticisms from lawmakers, Natsios derided them as uninformed. “I think some senators and congressmen, because they’re under severe stress, have not maybe gone into the details of this,” he said dismissively, “but their staffs have been briefed.” Congress was offended not only by the mystery that surrounded the bidding but also was embarrassed to have learned about the Bechtel contract by reading about it in the newspaper after secret documents were leaked to the Wall Street Journal.

  “Perhaps Bechtel’s institutional knowledge was a plus,” wrote Los Angeles journalist Jim Crogan, “given its status as a major player in Hussein’s Iraq—during the time when doing business with Hussein was endorsed by U.S. policy. At the very least, Bechtel’s ties to the old regime are not being held against it.” For its part, Bechtel admitted having “legitimate commercial and industrial contracts” with Iraq before the war, but denied having helped Saddam’s military buildup. Despite its denials, Bechtel was listed by the UN as one of two dozen US corporations that supplied Iraq with “conventional weapons, military logistics, supplies at the Iraqi Ministry of Defense, and building of military plants.”

  What was shocking, as one California journalist saw it, was “the relative routineness of the transaction.” Upon becoming the lead contractor for the US government, Bechtel quickly dispatched a 146-member team to Iraq. Hussein’s formerly opulent Republican Palace—“once party central for son Uday”—became home “to a squadron of Bechtel engineers camped out Beverly Hillbillies–style,” who were accompanied by armed guards from a British security firm. Retired lieutenant general Jay Garner was appointed commander of the reconstruction effort, reporting directly to the Centcom commander, US general Tommy Franks. “Rumsfeld has sat in Abu Ghurayb Palace in Baghdad as viceroy Jay Garner receives Bechtel,” a Democratic congresswoman complained, calling the Iraqi reconstruction “old men’s oil wars” and an “oil bonanza even Hitler coveted.” The Abu Ghurayb presidential grounds that had housed Saddam’s notorious torture and execution chambers became a US military prison, where American soldiers brutalized Iraqi captives. Photographs and videos taken by soldiers of the abuses at Abu Ghurayb conducted by American GIs were broadcast on CBS’s 60 Minutes II and exposed in an explosive series written by Seymour Hersh for the New Yorker.

  The administration essentially hired Bechtel as its contracting arm to build bridges, roads, power plants, water treatment projects, hospitals, and schools, as well as repairing airports and irrigation structures. “A motley assortment of retired Republican operatives, US businessmen, and Iraqi exiles with dubious histories and doubtful motives were the first recipients of the largesse,” wrote journalist and author T. Christian Miller. News that Bechtel had received a secret invitation to bid on the lucrative contracts drew public outrage at the privatization of nation building. “We should have a separation between the state and corporations. Instead, they’re acting more like partners,” said a research director for a nonpartisan Washington-based think tank. “The U.S. comes in and destroys [Iraq’s] infrastructure and then pays Bechtel to rebuild it,” a protestor told the San Francisco Chronicle, prompting a response from Bechtel’s head of operations in southern Iraq. “I mean, Bechtel isn’t a charitable organization,” said Dennis Dugas, “but we’re not an exploiter. Somebody’s going to build it, and Bechtel’s well qualified to do it.”

  “Within hours of the United States military’s invasion of Iraq, San Franciscans of a certain political bent went on the offensive against one of the city’s home-grown businesses: the Bechtel Group Inc.,” wrote Lisa Davis in SF Weekly. Protestors decrying “the corporate invasion of Iraq” descended on Bechtel’s headquarters at Beale and Market Streets. More than fifty were arrested when they tried unsuccessfully to shut down the building. As a precaution, the company left crowd control barriers erected in front of the building for weeks after the protestors dispersed. “Also vocal have been antiglobalization groups that accuse Bechtel of destructive environmental practices, human-rights abuses, and war profiteering,” reported USA Today. At a Bechtel conference in London, protestors heckled the company’s suppliers with chants of “Vulture! Vulture!”

  The demonstrations had littl
e impact beyond a brief and mostly localized flurry of negative publicity, with Bechtel spokesman Jonathan Marshall calling them nothing more than an inconvenience. Bechtel vice president Jim Illich tried to convince reporters that the company was sorely misunderstood. “We are a tiny, tiny part of a highly fragmented industry,” he told a journalist. “This business is as tough as a night in jail.” Postings on the company’s website chastised journalists who criticized or scrutinized the postwar contracts. “Executives forcefully reject descriptions of Bechtel as a sort of malign behemoth,” the Los Angeles Times reported. “Everyone says Iraq is a gravy train,” a company principal complained to a reporter, asserting that the truth was more complicated. “Even for Bechtel, nothing is a sure thing.”

  What was a sure thing was that Bechtel’s privatized occupation of Iraq turned the company around, bringing profits not seen since the 1960s and its construction of American military bases for the war in Vietnam. By the end of 2003, Bechtel claimed to have earned a record $16.3 billion—though there are no public filings, since, as usual, the privately held status of the company precluded outside verification of its revenue. Some construction industry rivals complained that Bechtel used its private standing to hide from public scrutiny. Bechtel’s envious publicly traded competitors saw a devastating revenue drop during the same period that Bechtel was blossoming. “If a project goes financially wrong, then Bechtel can keep this to itself,” a competitor told the Independent of London. “No current or future client ever need know if there have been problems. Couple this with its formidable network of contacts at the very top of the political tree, and it isn’t hard to see why Bechtel was the first company the US government turned to for the rebuilding of Iraq.”