by Sally Denton
Private active ownership “eliminates the substantial distraction and costs of dealing with the Securities and Exchange Commission, the stock exchanges, security analysts, and dissident, uninformed shareholders,” Steve Jr. once wrote. “This arrangement also provides for much quicker and more thoughtful shareholder actions as they are needed.” That didn’t stop the firm from crowing. Its annual report acknowledged the gratifying income stream from the Iraqi construction and the windfall revenues that far surpassed those of its publicly traded competitors. “More powerful than the U.S. Army,” as one account described it, Bechtel’s prosperity flourished as the nation’s wartime spending sent America spiraling into a historic recession. All the while, it “maintained a cloak of secrecy rivaled only by modern-day monarchies,” Time reported.
As a high-profile and outspoken advocate for war against Iraq in 2003—a very public figure in a very private company—George Shultz sought to downplay the relaxed attitude toward Iraqi chemical weapon usage that he’d held twenty years earlier while serving as secretary of state. Just as he engaged in a moderating narrative about his complicity in coddling the “Butcher of Baghdad,” Shultz defended Bechtel against charges that it was a war profiteering colossus, portraying the company instead as a benign and patriotic workhorse. Asked if he thought it a conflict of interest to campaign for war while sitting on the corporate board of the company that would benefit most from the war, Shultz demurred.
“I don’t know that Bechtel would particularly benefit from it,” he said with stark naïveté, if not insincerity. “But if there’s work that’s needed to be done, Bechtel is the type of company that could do it. But nobody looks at it as something you benefit from.”
CHAPTER THIRTY-ONE
The Hydra-Headed American Giant
“Bechtel arrived in Iraq quietly,” wrote Dahr Jamail, among the relatively few unembedded journalists to report from occupied Iraq during the war and its aftermath. “Before Iraqi military resistance around Baghdad melted away in the face of the U.S. military onslaught, before a single armored vehicle rolled across the Iraq-Kuwait border, while the Pentagon polished war plans, and while America was engaged in an ostensible national debate on the very question of bringing war to Iraq, the Bechtel Corporation of San Francisco was already poised to take a leading role in the reconstruction of a presumptive postwar Iraq.”
On April 17, 2003, USAID, under the direction of Andrew Natsios, awarded Bechtel an eighteen-month contract worth up to $680 million. Less than six months later, the agency raised the contract’s ceiling to $1.03 billion for the massive reconstruction project. L. Paul “Jerry” Bremer III, a dapper patrician, and onetime manager of Henry Kissinger’s international consulting business, assumed the position of top administrator of the Coalition Provisional Authority (CPA). An “amateurish and vainglorious viceroy,” as New York Times columnist Maureen Dowd portrayed him, Bremer oversaw the US body that managed the projects by American contractors and administered postwar Iraq. One journalist described the CPA as a “policy engine for a wholesale privatization of Iraq’s state-owned entities.”
The terms of the USAID contract called for Bechtel to repair the water infrastructure in ten urban areas within the first month and to restore the potable water supply in forty-five urban centers throughout Iraq within a year. “Bechtel has positioned itself very well to transition its operations into a full-blown privatization of water services,” according to one report. “The company’s contract could easily be extended from the reconstruction of water and wastewater systems to include the ‘distribution of water,’ just as Halliburton’s was for oil.” A former CIA senior political analyst writing in the New York Times warned that America could alter the destiny of the Middle East for decades, “not solely by controlling Iraq’s oil, but by controlling its water.”
Bechtel’s representatives in Iraq were giddy at the company’s good fortune in helping to create a new nation-state. Iraq “has two rivers, it’s fertile, it’s sitting on an ocean of oil,” an ebullient Cliff Mumm, the head of Bechtel’s Iraq operation, said in pointing out the strategic value of the country. “Iraq ought to be a major player in the world. And we want to be working for them long term.” Installed at the contemporary Kuwait Sheraton, some fifty Bechtel engineers and managers, dressed in Bechtel-logoed golf shirts and no-press khakis, summoned dozens of British and American businessmen seeking the coveted subcontracts doled out by Bechtel. Experts estimated that 70 percent of the billions of Iraqi contract money would be paid out to subcontractors selected by Bechtel. The “hydra-headed American giant,” as the New York Times described Bechtel, was the unmistakable keeper of the “golden keys.”
In a Hyatt hotel ballroom in Jordan, Bechtel executives made a presentation to a thousand aspiring subcontractors. Appealing to what one member of the audience described as “every businessman’s fantasy: rebuilding a country,” a Bechtel representative defined the American role in Iraq as “institutional strengthening,” “self-sufficiency,” and “getting the government in shape.”
Bremer, as the civil administrator of Iraq, oversaw what has been described as slush funds comparable to those used to buy local support during the Vietnam War. He distributed some $20 billion of the Iraqis’ money in the first year of occupation alone. Bremer’s CPA was a disastrous enterprise staffed with neocon ideologues and “God-invoking Bushies.” Later critics, including its own inspector general, accused CPA under Bremer’s direction of condoning wide-scale corruption in the contracting process. “The Iraqi public has not been getting value for money, while myriad contractors, bureaucrats, and politicians—American and Iraqi—have been getting stonkingly rich, a situation that the CPA fostered,” wrote journalist and filmmaker Ed Harriman. An extensive investigation conducted by the British Sunday Herald described Garner as the overseer of a team of “military hardmen, diplomats, and Republican party place-men who will help the United States create ‘Free Iraq’—aided by exiles who are returning to get their share of the spoils.” This “new Gilded Age of Iraq Contractors,” as American journalist and blogger Tom Engelhardt put it, led to “an unbelievable amount of money sloshing around Washington and Baghdad, some of which is unaccounted for, and a percentage of which is going into Republican and Bush reelection coffers.”
A later audit of the CPA by the Office of the Special Inspector General for Iraq Reconstruction (SIGIR) would single out Bechtel, which had been contracted “on an urgent basis” to build two new generating stations near Baghdad with enough power to supply 1.5 million homes. But when Bechtel and the CPA discovered there was “insufficient fuel and no fuel delivery system of any kind in the Baghdad area,” they changed tack, focusing instead on collecting and transporting natural gas from the Mansuria gas fields sixty-five miles away, where there was no infrastructure in place to deliver it from the oil fields to the two $25 million gas turbine generators they had bought. Costs soared from $78 million to $381 million before CPA canceled the Bechtel project. Still, that was only one of the CPA boondoggles that favored Bechtel. In addition to the reconstruction contract, Bechtel received billions more for what was called “task and delivery orders,” which fell below the procurement radar screen, as the GAO reported, and were not open for bidding or available to Congress or the public.
When the SIGIR later began reporting to Congress its forensic audits of the major reconstruction contracts awarded to American firms in Iraq, the first of its investigations focused on Bechtel. The oversight agency found that Bechtel had completed less than half of $2 billion worth of engineering, procurement, and construction contracts. Of Bechtel’s twenty-four sewage, water treatment, and electricity projects, only eleven, according to SIGIR, had “clearly met their original objectives.” That did not hamper Bechtel from submitting its invoices—charging American taxpayers more than 40 percent of the contract value as “support costs” and claiming $250 million in “a large miscellaneous category” under the heading “Other.” Nor did it stop USAID from paying the in
voices, totaling $1.3 billion, within ten days. “Pity the poor Iraqis, who have seen a king’s ransom shoveled into Bechtel’s coffers in the name of ‘reconstruction’ of their basic utilities,” concluded one reporter. Among the jobs that Bechtel did not complete was a landfill in Baghdad, for which the company was paid $3.7 million, as well as a $24.4 million water treatment plant in Sadr City. Government auditors also found that much of the funds had been diverted, legally, toward Bechtel’s corporate infrastructure, to purchase “battalions of earth-moving equipment.”
Before the 1991 Gulf War, Iraq had one of the best health care services in the Middle East. But two decades of war and a decade of sanctions reduced it to rubble. A Bechtel-built maternal and children’s hospital in Basra—First Lady Laura Bush’s and National Security Adviser Condoleezza Rice’s favorite project—was to be the crowning symbol of American altruism. Despite scrutiny by congressional Democrats who questioned the need for a new, state-of-the-art pediatric hospital when existing hospitals throughout the country were in dire straits, USAID awarded Bechtel the $81 million contract. But two years later, after spending $150 million and estimating that another $98 million was needed, Bechtel was ordered to halt construction following SIGIR’s damning report on the project. Auditors concluded that “USAID had cooked the books and that the State Department had withheld details of delays and increased costs in its reports to Congress.” All had been done without competition or oversight. Bechtel was stung by the criticism, posting on its website a point-by-point refutation of the accusations against it, citing innuendo and the “undeserved reputation as a secretive company that succeeds through powerful friends in high places.”
Bechtel blamed its failures on the insecurity and violence in the country. “Had Iraq been a calmer place while we were there, amazing things could have been done,” said Bechtel’s Mumm. The spokesman seemed to have remarkably little understanding of the alienating effect the US subjugation had on the Iraqi people. While Bechtel and the Bush administration had hoped to turn Iraq into a “corporate-friendly Middle East Mecca,” according to one account, it was not working out that way. In fact, an American columnist concluded, the invasion triggered the rise of Al Qaeda in Iraq, which “drew from an insurgency of Sunni soldiers angry about being thrown out of work” by Paul Bremer. The Iraqis knew that Bechtel and other American companies were receiving billions of dollars for reconstruction, that “Iraqi companies had been rejected, and that the country was still without basic services. The result was increasing hostility, acts of sabotage targeted directly at foreign contractors and their work, and a rising insurgency.” Bechtel had warned its potential subcontractors that only the toughest should apply. “If you’re going to Iraq, it tells subs, you’re hiring your own security, providing your own Kevlar vests and communications gear, lining up your own workers’ comp, Medivac, and property insurance,” USA Today reported. Terry Farley, a legendary Bechtel executive who embodied the company’s “hero culture in action for his role with Bechtel in dousing the 650 burning oil wells in Kuwait, had become famous for his pep talks nicknamed “Eat Dirt and Die for Bechtel.”
Deep inside the Green Zone, Bechtel’s camp was set in a former garden along the Tigris River. “Resembling over-wide house trailers, the prefabricated units are roomy and nicely cool,” the Los Angeles Times described the encampment. “Their wood paneling evokes suburban family ‘rec’ rooms from the early 1970s. There’s a special trailer with a pool table and exercise machines, and an admonition taped to the wall: ‘Drinking will occur only at the end of the day.’ ”
Less than three years after receiving its first contract—and after losing fifty-two workers and having another forty-nine wounded as Iraq dissolved into sectarian violence—Bechtel bailed from the country. “Bechtel—which charged into Iraq with American ‘can-do’ fervor,” as the San Francisco Chronicle put it, “found it tough to keep its engineers and workers alive, much less make progress in piecing Iraq back together.” Bechtel had hired a team of elite Gurkha guards from Nepal, as well as British ex-soldiers bearing MP5 machine guns to protect its employees. But Mumm, who directed the company’s projects from a Baghdad trailer, faced volatile conditions, as his employees and subcontractors were maimed and killed, some kidnapped, others marched out of their offices and shot, and dozens of project supervisors fled to avoid assassination. It was the greatest loss of life Bechtel suffered during any job in its nearly century-long history, the company claimed. “The pretexts given by Bechtel to the Iraqi government to justify its failure . . . are untrue and unacceptable, especially the ones regarding the rise in security expenses,” said a high-level Iraqi leader. Western engineers were rarely at the site, he claimed, where Bechtel’s “complex chain” of Jordanian subcontractors oversaw the work being done by Iraqis. Bechtel had reneged on its promise to hire primarily Iraqi subcontractors, incurring the wrath of a disenfranchised native labor force.
The children’s hospital was under especially vicious and unrelenting attack. The hospital’s site security manager was murdered. Another manager resigned amid death threats, and a senior Bechtel engineer quit after his daughter was kidnapped. Twelve employees of a subcontractor working on the hospital’s electricity and plumbing were killed in their offices. But abandoning the project was “tricky politically,” as an international newspaper described it, “because of the high-profile support of Laura Bush and Rice.” In its 2010 report, SIGIR drew the final imprecation, calling the Iraq reconstruction a “legacy of waste.” The $50 million hospital in Basra had swelled to a final cost of $171 million, and even though Laura Bush had officially “opened” it in 2004, by the decade’s end, it had never seen a patient.
Still, all was not hopeless for Bechtel in its retreat from Iraq. The company’s support of the Bush-created Middle East Free Trade Area (MEFTA)—a vehicle for trade agreements with the countries that had joined the administration’s so-called coalition of the willing—insured Bechtel’s continuing commercial primacy in the region.
“It is a simple fact of life these days that, owing to a deliberate decision to downsize government, Washington can operate only by paying private companies to perform a wide range of functions,” wrote Donald L. Barlett and James B. Steele, an investigative reporter team. Most of this work is done outside the public eye and with little government oversight or scrutiny. “The unhappy business practices of the past few years in Iraq—cost overruns, incompetence, and corruption on a pharaonic scale—have made the American public keenly aware of the activities of mega-contractors such as Halliburton and Bechtel.”
Although the privatized war-zone reconstruction was an ultimate letdown for the company, a “parallel disaster economy” was commencing, and Bechtel—with its battalions of bulldozers—was ready to capitalize. First stop: Hurricane Katrina. “The world is a messy place, and someone has to clean it up,” Rice remarked unguardedly at a private Georgetown dinner.
Might as well be Bechtel.
CHAPTER THIRTY-TWO
Profiting from Destruction
In keeping with Bechtel’s sometimes being “there too early, but rarely too late,” as a journalist once described the company’s ubiquitousness, it would now be in on the ground floor of the burgeoning market of “disaster capitalism.” The last public policy recommendation of neocon mentor Milton Friedman—the “grand guru of the movement for unfettered capitalism and the man credited with writing the rulebook for the contemporary, hypermobile global economy”—was to turn the tragic 2005 New Orleans hurricane into a financial bonanza for a handful of corporations. One of the deadliest hurricanes in American history, Katrina was the catastrophe that “Uncle Miltie,” as his powerful followers called the famous ninety-three-year-old economist, had been seeking for decades.
In one of her groundbreaking and controversial books, The Shock Doctrine: The Rise of Disaster Capitalism, Naomi Klein described the free-market global economic strategy that the Friedmanites had been perfecting since the 1970s: “waiting for a major c
risis, then selling off pieces of the state to private players while citizens were still reeling from the shock, then quickly making the ‘reforms’ permanent.”
Katrina formed in the Gulf of Mexico in August 2005, causing severe destruction in the Bahamas and along the Gulf Coast. When the Category Five hurricane dissipated, more than 1,800 were left dead—with the majority of those fatalities occurring in New Orleans, where the levee system failed and caused catastrophic flooding. While the entire nation mourned the tragedy, the Friedmanites—including Riley Bechtel—were embracing the opportunities created by the disaster. “Within weeks, the Gulf Coast became a domestic laboratory for the same kind of government-run-by-contractors that had been pioneered in Iraq,” according to one account. The very day the hurricane struck, the US government’s Federal Emergency Management Agency (FEMA) contracted with Bechtel to provide mobile homes for a hundred thousand people in the Gulf region who had been displaced by the storm. Bechtel’s immediate no-bid contract—one of $62 billion of “indefinite delivery–indefinite quantity contracts” doled out to the same handful of American companies rebuilding Iraq—was a boon. Only days after the storm, it was as if “Baghdad’s Green Zone had lifted off from its perch on the Tigris and landed on the bayou,” wrote Klein.
FEMA was under attack at the time for failing to respond quickly to the devastation in the Gulf. Described by a Washington Post reporter as a “hollowed out” agency being run by Bush political appointees with no disaster-management experience, FEMA became the poster child for the outsourcing of government that had begun escalating during the Clinton administration. Many of FEMA’s top civil servants—including two former FEMA directors from the Clinton and Bush administrations—had left the agency to consult with the private contractors who were “rushing to cash in on the unprecedented sums to be spent on Hurricane Katrina relief and reconstruction,” as journalist John Broder reported. “They are throwing money out, they are shoveling it out the door,” a former president of the American League of Lobbyists told the New York Times. “I’m sure every lobbyist’s phone in Washington is ringing off the hook from his clients. Sixty-two billion dollars is a lot of money—and it’s only a down payment.” Indeed, the government was spending relief money at a rate of more than $500 million a day.
