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Friends in High Places

Total Contracts in Iraq: $2,829,833,859 (Center for Public Integrity)

The heavy construction conglomerate Bechtel is a major player in the post-Iraq money pit. Sadly, Bechtel’s headquarters are based in my native Bay Area — San Francisco to be exact — often drawing those damn tree-huggin’, pot smokin’ California hippies. The company was started in 1898 by Warren A. Bechtel and is currently in its fourth generation of Bechtel leadership. It worked with other companies on a number of projects, including the Hoover Dam and the Bay Bridge, both completed in 1936, and several decades later, the Bay Area Rapid Transit (BART) rail system. (To make BART riders feel safe, this is the same company that, in 1977, constructed a nuclear reactor backwards in California.)

Bechtel is among the most politically connected companies in the country. It enjoyed ties to several prominent politicos, including two former presidents (Richard Nixon and Ronald Reagan), and two officials that served in both administrations (Caspar Weinberger and George Schultz), among many others. The company had a number of political connections into the Central Intelligence Agency through John McCone, a San Francisco native, who became CIA Director in 1961 under President Kennedy. Dr. Carroll Pursell wrote a book review that concisely showed the political ties outlined in the 1989 Laton McCartney work Friends in High Places: The Bechtel Story – The Most Secret Corporation and How It Engineered the World that appeared in the July 1989 issue of Technology and Culture, Volume 30, Number 3:

Bechtel was able to make these delicate arrangements because the family had "friends in high places," as the title has it. John McCone, for example, was a classmate of Steve Bechtel at the engineering school of the University of California. They were later business partners, and McCone, of course, became director of the Central Intelligence Agency. Henry Kearns, a former Pasdena car salesman, who was appointed president of the Export-Import Bank by President Nixon, introduced Bechtel (who was on the bank’s advisory committee) to other administration officials including Labor Secretary George Schultz and the director of the Office of Management and Budget, Casper Weinberger. Shultz, of course, became president of the Bechtel Corporation and Weinberger its general counsel. 

Another political ally of Bechtel is through the Bush family. After losing a senatorial bid to Lloyd Bentsen, George H.W. Bush was, what else, rewarded with an ambassadorship to the United Nations, and later headed the RNC during the Watergate scandal. Under Gerald Ford, Bush led the CIA for 355 days and, tell me if you’ve heard this before, is credited with "helping to restore morale at the CIA while director of the agency." I suppose his time as director was one of "transition." As Vice President during the Iraq-Iran War under Reagan, Bush, along with former Bechtel execs and Republican allies, tried to persuade the Ex-Im Bank to finance a pipeline that would, as a result, give the billion dollar contract to Bechtel. Jack Calhoun wrote in the May/June 1992 issue of Middle East Report, Number 176:

An Iraqi-proposed oil pipeline provides a specific example of how the Reagan administration mustered all forces, including Vice President Bush, to intervene with the Ex-Im Bank on Baghdad’s behalf. The Bechtel Corporation had secured a $1 billion contract to build the pipeline, which would have allowed Iraq to pump oil directly from Iraq to the Jordanian port of Aqaba on the Red Sea, thus bypassing war-damaged Iraqi oil terminals in the Persian Gulf. The Ex-Im bank refused to provide credit. Secretary of State George Schultz, a former Bechtel executive (as was then-Secretary of Defense Caspar Weinberger), wrote to the US Embassy in Baghdad in a March 25, 1984, telex saying, "We have urged EXIM to reconsider this policy in general . . . ." Then CIA director William Casey, Attorney General Edwin Meese and Vice President Bush all participated in the effort to lobby the Ex-Im Bank to finance the Aqaba pipeline project. The State Department prepared a background paper for Bush’s use in telephoning Ex-Im Bank head William Draper. One of the talking points in the June 12, 1984, paper emphasized the crucial role of the Ex-Im Bank in "our efforts in the region." The Ex-Im Bank board of directors succumbed to the administration’s pressure, approving a preliminary $484 million commitment for the Aqaba pipeline project at its June 19, 1984, meeting. A margin note in the meeting minutes indicated that "[u]nder normal peaceful circumstances, this project would not be economically viable."

Bush also pushed Ex-Im Bank to approve $200 million in 1987, and got it.

"Could it be that a call from the vice president could sway the Ex-Im Bank board into reversing its policy on Iraq?" Gonzalez asked. "Given the very severe doubts about Iraq’s financial condition it is hard to draw any other conclusion."

Friends in high places, indeed. Which brings us to Bush Junior and his misadventure in Iraq. In April 2003, CBS News reported that Bechtel received a major reconstruction contract worth as much as $680 million. The San Francisco Chronicle said it was the first major reconstruction contract in Iraq awarded. Bechtel subcontracted workers’ safety to two British firms – ArmorGroup and Olive Security – though details were not disclosed, reported the San Francisco Chronicle on April 30. The following month, the Chronicle reported that Bechtel hired an Iraqi firm as part of a transportation contract, joining American and British companies. In September, the San Francisco Chronicle reported that Bechtel’s contract was expanded by $350 million. The next month, the New York Times reported that Bechtel had garnered GOP support for tax breaks:

The Bechtel Corporation, which hired a former commissioner of the Internal Revenue Service to lobby on its behalf, has won support from House Republicans for what could be a generous new tax break. The tax break, which will be taken up on Tuesday by the House Ways and Means Committee, was originally intended to help shore up factory jobs in the United States by reducing the corporate tax rate for domestic manufacturers to 32 percent from 35 percent. But the bill now includes a provision sought by Bechtel, an engineering conglomerate that is also one of the biggest recipients of government contracts for Iraqi reconstruction, that would reduce taxes on "architectural and engineering services." The new provision would also benefit the Halliburton Company, whose previous chief executive was Vice President Dick Cheney and which now has a Pentagon contract to repair the Iraqi oil infrastructure. The Fluor Corporation, which recently won a $102 million contract to work on Iraq’s electrical system, would receive a tax reduction as well.

A story surfaced in December 2003 that Bechtel was accused of shoddy work as fluorescent lights were falling off the ceilings at Iraqi schools under a contract to build over 1,200 schools in three months. (I am not sure this is what Laura Ingraham had in mind when she complained that schools were not getting coverage.)

Three months later, Bechtel received a $1.8 billion contract, as reported in the January 7, 2004 article in the Boston Globe:

Under the new contract, Bechtel will continue work similar to what it is already doing with its other contract, for $800 million, in Iraq: repairing roads, power grids, water supplies, schools, and ports and airports. A USAID spokesman said $1 billion from the new contract would go to rehabilitate Iraq’s power networks, damage to which has led to chronic electrical shortages that inhibit coalition efforts to stabilize Iraq and rebuild its economy. Another $210 million will be spent on the country’s shattered water and sanitation facilities, and about $109 million will be earmarked for road repair.

It pays to have friends in high places, $2,829,833,859 to be exact.

[This article is cross-posted at The Great Society

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