The Profiteers

by Sally Denton

  Bechtel is part-and-parcel of what has been called the Corporate West—a community that throughout the twentieth century, and before, preached the gospel of the free market, although government stood as its primary business partner. The relationship began with the railroads, especially in California. In the twentieth century, the main pillars of the California economy followed this pattern: Agribusiness, Banking, Energy, and Transportation. Following World War II, the pattern continued with Defense construction that would ultimately spin off into the software industry centered in northern California. In many respects, Bechtel not only stood as the quintessential example of the Corporate West, but also spearheaded that path for others, where the West moved East, and then globally.

  Bechtel’s obscurity—the protection from public scrutiny its private corporation structure affords—allows it to operate below the radar. With no public stock, no public reports, and thus no public scrutiny of its operations or profits, the company enjoyed benefits that other public corporations in America do not share.

  Bechtel Group Inc. grew after the mysterious death in 1933 of its founding patriarch, Warren A. “Dad” Bechtel. Dad, who first determined to “break” the Colorado River as if it were a wild horse, and who, with primitive mastery of the steam shovel, had built the founding fortune, left no succession plan. His three sons—Warren Jr., Stephen, and Kenneth—vied for control of the family company. (Not unusual for the era, the only daughter, Alice Elizabeth, was not in the running, nor was her husband, Brantley M. Eubanks, even though he held an executive position with the firm.) After a string of legal machinations, the rival brothers settled on middle son “Steve,” who would later become known as “Steve Sr.” after the birth of his only son, Steve Jr. Senior would forge the company’s deep ties to national and international politics, and establish the close relationship between Bechtel, numerous American presidents, and the intelligence community—first through the Office of Strategic Services (OSS) and then its successor, the Central Intelligence Agency (CIA).

  In 1960 Steve Sr. turned over the business to Steve Jr., who doubled the size of the organization and oversaw the company’s worldwide expansion that transformed it into the geopolitical powerhouse it is today. In 1990 Steve Jr. relinquished control to his son, Riley, who remains chairman of the board. In August 2014 the sixty-one-year-old Riley turned over the presidency to his son, Brendan. At the time, Riley had a net worth of $3.2 billion, putting him among the fifty wealthiest people in America and making him the 127th richest person in the world.

  Specializing in what it calls “multiyear megaprojects,” Bechtel received $24 billion in new contracts during 2013. Its fifty-five thousand “employees”—most of whom are subcontractors—are divided among projects in six “markets”: civil infrastructure; communications; government services; mining and metals; oil, gas, and chemicals; and power. Its website lists dozens of “signature projects” that read like a roundup of nearly every high-profile undertaking throughout the world. The Channel Tunnel between London and Paris. The Dulles Corridor Metrorail Extension in Washington, DC. The Bay Area Rapid Transit (BART) system in California. The San Francisco–Oakland Bay Bridge. The Trans-Alaska Pipeline System (TAPS). Boston’s Central Artery/Tunnel Project known as the “Big Dig.” The construction of ninety-five airports throughout the world, including Hong Kong International, Gatwick in London, Doha in Qatar, and McCarran in Las Vegas. It has built 17,000 miles of roads, eighty ports and harbors, 6,200 miles of railway, a hundred tunnels, fifty hydroelectric plants, thirty bridges, and twenty-five entire communities, including the futuristic Saudi Arabian city of Jubail—a $20 billion project hailed as the largest project in construction history.

  The company has laid tens of thousands of kilometers of pipeline, enough to circle the earth twice, including plans for the Keystone from Canada to the United States, slated to be one of the longest crude oil pipelines in the world. A leader in the liquefied natural gas market, Bechtel has built a third of the world’s liquefaction capacity, not only throughout America but also in Australia, Egypt, Algeria, and Russia. The website describes the company’s involvement in many of the largest and most visible projects for the US Department of Defense (DOD) and the Department of Energy (DOE). Bechtel is building the nation’s massive radioactive-waste treatment plant in Hanford, Washington—a $12.2 billion contract courtesy of the DOE. Under contract with the US Navy and US Army, Bechtel has constructed more than thirty bases and airfields on numerous Pacific islands.

  But the industry to which Bechtel is most closely linked is that of nuclear power and weaponry. Describing itself as a “global leader in design and construction of nuclear power plants for the past 80 years,” Bechtel completed the world’s first nuclear plant at Arco, Idaho, in 1951. The nation’s first experimental breeder reactor—called the National Reactor Testing Station—was the beginning of the nascent electric power generation industry that a decade later would lead to a worldwide expansion of nuclear power plants. The company made history when its nuclear fission plant supplied energy to generate electricity for the first time anywhere in the world. Then, four years later, Bechtel built America’s first major nuclear power plant in Dresden, Illinois. By the end of the 1960s, Bechtel had completed twenty-seven nuclear power plants in the United States, three thermonuclear plants in South Korea, and was consulting with numerous foreign governments about their nuclear programs. It then received contracts to clean up Three Mile Island in Pennsylvania and Chernobyl in the Ukraine after disastrous nuclear accidents at those facilities in 1979 and 1986, respectively.

  As part of President George W. Bush’s effort to privatize the country’s national nuclear warhead complex, the government solicited bids in the mid-2000s to transition “to industrial standards and capitalize on private sector expertise.” DOE received three bids and awarded the coveted multiyear, multibillion-dollar contract to a Bechtel-led partnership to manage the country’s premier national laboratories—Los Alamos in New Mexico and Lawrence Livermore in California—in addition to other key nuclear facilities in the country.

  Considered the crown jewels of what Bechtel describes as “the U.S. Nuclear Security Enterprise,” Los Alamos and Livermore are legendary for developing the atomic bombs dropped on Hiroshima and Nagasaki in 1945. The University of California had managed the labs as a public service since their inception more than a half century earlier. But Bechtel was in it for the money, and the transition to a for-profit venture resulted in a tenfold increase in management fees—costs that would be paid by taxpayers. The takeover of the labs by private industry prompted Republican congressman David Hobson to complain that they had become “a playground for political patronage.”

  Indeed, the succeeding generations of Bechtel men have navigated—if not designed—the powerful and profitable symbiosis between government and industry. Politically reactionary, the family has long been identified with the Republican Party. Like their archconservative corporate peers, they advocate a consolidated, freewheeling capitalistic, monopolistic economy unrestrained by government oversight or taxation. In 2013 much of the budget of Grover Norquist’s advocacy group, Americans for Tax Reform, came from just a few sources, including two private giants—the Bechtels and the Koch brothers. Throughout the decades of its existence, Bechtel leaders have nurtured and polished its image as “a deep-pocketed, well-wired member of the global power elite,” according to one published account, “an image referred to internally as the ‘mystique.’ ”

  Despite its fiercely antiregulatory, antigovernment stance, the Bechtel family owes its entire fortune to the US government, dating back to its first Depression-era construction projects in the western United States. The company tenet of free enterprise obfuscates the fact of its dependence upon government. “Bechtel espouses the standard free-market philosophy—get out of our way and let us build—while it simultaneously cultivates and manipulates government policy at home and abroad,” as one account described the company’s historic private-public
tango. “It uses government to secure new contracts and subsidies, to open new markets and to win protection against risks.” Somehow, the irony seems lost on them, as epitomized by Steve Jr.’s rebuff of an interview request by Newsweek: “There’s no reason for people to hear of us. We’re not selling to the public.”

  It seemed that Steve Jr. embraced the legend of Dad Bechtel’s Horatio Alger–like biography. The privately financed 1949 hagiographic tale of the so-called Bechtel achievement depicted the accomplishments of a self-made man who rose to greatness despite “frequent discouragements.” It was a narrative that “showed what men could do in the free air of America after the humblest of beginnings.” But this rags-to-riches arc belies the real Bechtel story: the creation of a regional corporate power in the American West subsidized by the US government. “The California settlement had tended to attract drifters of loosely entrepreneurial inclination, the hunter-gatherers of the frontier rather than its cultivators, and to reward most fully those who perceived most quickly that the richest claim of all lay not in the minefields, but in Washington,” wrote Joan Didion of the money and power in her native land.

  Dad Bechtel personified the caricatured mogul of the new western industrialism that blossomed during the Great Depression. Fashioning a fruitful coalition with the federal government, Bechtel and a handful of his peers shaped a resource-based empire that would dominate national affairs for decades to come. At its heart was the then largest civil contract ever let by the US government—the dam that remade the American West.

  “Western builders will build the Hoover-Boulder Dam, a Western project in the West for the West,” gloated the Pacific Builder in 1931 when a Bechtel-led California-based consortium won the historic US Bureau of Reclamation contract. Dad Bechtel’s “single most remarkable achievement up to that time was the invention of a folding toothbrush that fit neatly into a vest pocket.” Two years later, he would derive $2 million in profits (roughly $600 million in today’s terms), and his company would suddenly be one of the preeminent engineering and construction firms in the world.

  PROLOGUE

  The Spy with a Fan Club

  Shouting at Barack Obama, a young Israeli activist implored the president to free Jonathan Pollard—America’s most controversial Jewish prisoner. It was March 2013, during Obama’s first official trip to Israel, and the president was addressing a throng of students in Jerusalem when the Hebrew-speaking heckler interrupted. Pollard, who has served nearly thirty years in a federal prison in North Carolina for passing classified information to Israel during the early 1980s, has provoked sympathy, outrage, and extensive pleas for clemency. His lifetime sentence—unprecedented in its harshness, considering that he was charged neither with treason nor spying for an enemy state—has divided the Jewish community in the United States and beyond. Since Pollard’s 1985 arrest, the cause célèbre has inspired every Israeli prime minister—from Yitzhak Rabin to Benjamin Netanyahu—to petition every US president—from George H. W. Bush to Barack Obama—for his release.

  At the heart of what one journalist called “the endless Pollard intrigues . . . is one haunting question towering above all others: Just why has Jonathan Pollard been imprisoned so long?” His offense, spying for a friendly government, carries a median two-to-four-year penalty. In his plea agreement, Pollard admitted guilt to a single count of disclosing documents to an ally foreign government. He expressed remorse, apologized, agreed to cooperate with the US government in its damage assessment, and was promised by prosecutors he would have his sentence commuted to time already served. So in 1987 when a US District Court judge in Washington, DC, reneged on that promise—citing that Pollard’s interview with a journalist violated his plea agreement—Pollard was shocked by the double-cross. The courtroom on Constitution Avenue—teeming with dozens of reporters and Pollard friends and supporters—erupted with shrieks from stunned spectators when the life sentence was announced. He had received a more severe sentence than the numerous other spies arrested in 1985 in what the Federal Bureau of Investigation (FBI) christened the “Year of the Spy” for the numerous high-publicity espionage cases of the “last gasps” of the Cold War.

  The moment the sentence was pronounced, a “Free Jonathan Pollard” crusade was born. Hundreds of Jewish organizations mobilized, representing millions of members. Israel considered him a soldier for Zion, and efforts were mounted among both Israeli and American Jewish groups to seek his release. The groundswell spread through intellectual and celebrity circles, with dozens of movie stars and academics calling on US presidents to review the case. “The Spy with a Fan Club,” as Washingtonian magazine dubbed him, Pollard was emblematic of the post–Cold War shift in American intelligence and foreign policy in the run-up to the collapse of the Soviet Union. Caught in the crossfire between the diplomats of the State Department and the chauvinists in the military, between Arabists and Zionists, neocons and pragmatists, Pollard was the poster boy for the trampling of civil liberties under the guise of national security. “Whoever has studied the Pollard case keeps wondering what the government is hiding,” a venerable journalist described the “ ‘Catch-22’ Plight” of the imprisoned spy. Decrying the “bullying tactics” of federal prosecutors, the Wall Street Journal opined that “Even Pollard Deserves Better Than Government Sandbagging.”

  Revelations in 2013 by former US National Security Agency contractor Edward Snowden that the United States had spied on at least two Israeli prime ministers brought new frostiness to Israeli-American relations—and new life to the “Free Jonathan Pollard” movement. A number of high-level US intelligence, diplomatic, and military officials joined the escalating campaign to protest the sentence and call for mercy.

  Then, anti-Pollard sentiments were inflamed when, in August 2014, Snowden revealed that “Israel has been caught carrying out aggressive espionage operations against American targets for decades,” an allegation denied by Israeli officials, who insisted that Jerusalem stopped spying on the United States after the conviction of Pollard in the late 1980s.

  At the heart of the complex case of Jonathan Pollard is the Bechtel corporation and the netherworld of espionage and national security it inhabited. Later events would show how Bechtel’s interests were served by the pro-Iraq, anti-Israeli foreign policy “tilt” of Ronald Reagan’s presidential administration, and how Pollard had threatened those interests. That world would be a maze of covert intervention and shifting alliances. In the middle of this world were the Bechtel executives turned Reagan Cabinet members—Caspar Weinberger and George P. Shultz.

  Weinberger especially went to great lengths to insure Pollard would never be free to tell his story—a story that would have included Bechtel’s long-standing business relationships with Israel’s enemies in the Middle East—especially Saddam Hussein.

  * * *

  PART ONE

  WE WERE AMBASSADORS WITH BULLDOZERS

  1872–1972

  * * *

  This extreme reliance of California on federal money, so seemingly at odds with the emphasis on unfettered individualism that constitutes the local core belief, was a pattern set early on.

  —JOAN DIDION, Where I Was From

  CHAPTER ONE

  Go West!

  A “tall, beefy man with a bull-like roar,” Warren Augustine Bechtel, whose legacy would be one of the greatest engineering achievements in American history, came into the world on September 12, 1872. The fifth in a family of eight children, he was raised on a hardscrabble farm near Freeport, Illinois. His parents—Elizabeth Bentz and John Moyer Bechtel—were descendants of pioneer Pennsylvania German families. When he was twelve, his parents moved to Peabody, Kansas, where they eked out a living “at a time when he saw many men missing an arm or a leg from service in the Civil War,” as one account described the setting.

  It was a backbreaking childhood that he fantasized about escaping from an early age. Because he was tasked with farm chores since he was a toddler, Warren’s schooling was confined to the w
inter months when the crops lay beneath frozen ground. Like many of his contemporaries, he hated farming as only a farmer’s son can, but he disliked the classroom with equal fervor. Still, his father, who was also a grocery store proprietor, insisted that he finish high school. In 1887 the first railroad came through the area, and during the summers, Warren hired himself out to the construction crews to learn grading and machinery. He also worked for neighboring ranchers, branding cattle and driving herds. But his passion was the slide trombone, which he practiced while roaming the land. He dreamed of playing the instrument professionally.

  Upon graduation at the age of nineteen, he hit the road with an ensemble of performers who called themselves the Ladies Band. He hoped music would spare him a future in farming. “Either the music of the ladies’ band was very bad or the Western audiences were lacking in appreciation,” the New York Times would later describe the venture. “The troupe came to grief in Lewiston, Ill., and the young slide-trombonist was stranded.” Disheartened, he returned home to the unwelcome plow to raise corn for livestock feed. He remained there until 1897, when he became infatuated with a slender brunette named Clara Alice West. She was visiting relatives in nearby Peabody. After a fleeting courtship that alarmed her affluent Indiana parents, the two married, and Warren ventured into the cattle business. He embarked on his scheme to fatten Arizona draught steers as they awaited slaughter in the Kansas stockyards. But the bottom dropped out of both the corn and cattle markets to record lows at the end of the nineteenth century, leaving the newlyweds bankrupt. With their infant firstborn son, Warren Jr., their personal possessions, a slip grader, and two mules, they struck out for Indian Territory, where the Chicago, Rock Island and Pacific Railway Company was putting new lines westward from Chickasha in what is now Oklahoma.