The Profiteers

by Sally Denton

  Back in the United States, Steve Jr. was becoming a behind-the-scenes powerbroker in the rise to the US presidency of a like-minded California politician: the anti-Communist and domino-theory devotee Richard Milhous Nixon. Since his defeat in 1960 at the hands of John F. Kennedy, Nixon had been developing his theme of the importance of the Pacific Basin to the stability of the United States. Like other political leaders before and after him, and at the behest of Steve Jr., Nixon floated his concept at the Bohemian Grove—the 2,700-acre retreat located in a private redwood forest seventy-five miles north of San Francisco. “The world’s most prestigious summer camp,” as Newsweek called it, the guarded retreat is “the country’s extension of San Francisco’s all-male ultra-exclusive Bohemian Club.”

  The Grove has hosted the nation’s corporate, political, and military elite every summer since 1880. Once described by President Hoover as “the greatest men’s party on earth” (a non sequitur apparently lost on Hoover, who was once described as “that swinging Bohemian . . . who was running for the presidency on a ‘dry’ platform”), the Grove is where emerging geopolitical trends are discussed in the privacy of 127 primitive camps. The most esteemed of these camps is Mandalay—named for the Kipling poem—where Steve Jr., like his father before him and his father’s partner, McCone, had been a member his entire adult life, following the patrilineal formation of the Grove. A “virtual personification of Eisenhower’s military-industrial complex,” author Joan Didion once pronounced Mandalay’s roster of members and guests.

  “Here, shielded from intrusion by a chain-link fence and the forces of the California Highway Patrol,” wrote Laton McCartney, “men like Justin W. Dart, William F. Buckley, George Bush, Edgar Kaiser, Jr., and Tom Watson could walk in the woods, skinny-dip in the Russian River, toast marshmallows over a fire, dress in drag for a ‘low jinks’ dramatic production, and, for a few days at least, hew to The Grove’s motto: ‘Spiders Weave Not Here.’ ” Its edict, taken from Shakespeare’s A Midsummer Night’s Dream, refers to a strict directive that prohibits Bohemians from explicitly conducting business at the Grove. So much as an exchange of a calling card could get one ejected, or so the pretense goes.

  “The all-maleness of the Club reaches back into a patriarchal past that saw women as inferior humans and encouraged the celebration of male superiority in private associational settings,” wrote California sociologist Peter Martin Phillips. Long a political networking headquarters for Republicans, the Grove has hosted every Republican president since Calvin Coolidge and nearly every other GOP presidential hopeful, including Herbert Hoover, Dwight Eisenhower, Barry Goldwater, Nelson Rockefeller, Richard Nixon, Gerald Ford, George H. W. Bush, Ronald Reagan, and George W. Bush, along with dozens of Cabinet members, military generals, astronauts, government scientists, and White House officials. “I knew that I was in Bohemia when I saw Eisenhower and Nixon pissing on the same tree,” a guest once remarked.

  It was at the Grove that Herbert Hoover had announced his presidential candidacy. Where Allen Dulles, as a guest of Steve Sr., had warned of the threat of Communism. Where Eisenhower, then an army general, had presaged armed conflict in a faraway place called Korea, and where he later gave a political address that set him on the path to the presidency. So it was in keeping with a long-standing tradition that in 1967 Nixon would unveil his Pacific Rim thesis at Bohemian Grove as a precursor to a presidential run. Energized from a recent trip to Asia, he recounted finding that some of America’s most stalwart anti-Communist allies were advocating a thawing of hostilities between the United States and the People’s Republic of China. Using the forum as the basis for a public speech he would give a few months later, “Nixon declared that most Americans did not understand the growing importance of the Pacific basin; the vital role of Japan; and, above all, how to deal with China,” according to authors Peter Wiley and Robert Gottlieb.

  At the Grove summit, Nixon stayed at the Bechtels’ Mandalay Lodge. It was there that one of the more legendary Grove meetings took place—decrees against deal making notwithstanding. Nixon met with a fellow guest, Ronald Reagan, California’s first-term governor who was his main rival for the upcoming Republican presidential nomination. Reagan’s hope of receiving the nomination in a brokered convention was known. But at the Grove that summer, over a drink and an informal chat, Reagan promised to stay out of the 1968 presidential race unless Nixon “faltered.”

  Nixon did not falter. He secured the nomination on the first ballot and went on to win a close contest against Democrat Hubert Humphrey, the sitting vice president. Steve Jr. had bet on the right candidate. Between Nixon’s 1969 inaugural and his 1974 resignation, there followed a dizzying array of government projects directed to Bechtel—a period in which the company’s gross annual revenues jumped from $750 million to nearly $2 billion. And that was only the beginning.

  CHAPTER ELEVEN

  Covert Corporate Collaboration

  Comparisons to his father were predictable. Family successions inevitably generate anxiety and scrutiny, and the Bechtel leadership transition was no exception. Fewer than one in three companies survive through a second generation, and the odds plunge to one in ten among those that reach a third, according to USA Today research. “The biggest challenge is helping the younger generation take hold while helping the senior generation let go,” observed a business analyst. “You can’t put two fannies in a black leather chair.” Employees inevitably pondered the old adage that with family businesses, the first generation starts it, the second runs it, and the third ruins it. “It’s very unusual for one company to have this kind of dynastic continuity,” San Francisco historian Gray Brechin told the Los Angeles Times. “When you start getting a lot of descendants, they always squabble.”

  Dubbed “Junior” by his detractors within the company, Steve Jr. was slight, humorless, and dull, in stark contrast to his blustering, larger-than-life father. But what he lacked in charm and intellect, he made up for in energy and tenacity. “He was in a terribly difficult position, taking over from the largest builder in the world, and it had to leave scars,” a kindly employee told an interviewer. “Around the company, he was regarded as the not-so-smart, not-so-great, not-so-dynamic son of Steve senior. He could run a tight ship, be an excellent businessman and a good builder, but he didn’t have his father’s flair.” His modus operandi called for team management—a method he believed “permits common men to do uncommon things.” He grasped figures and analyzed data in ways his father had never been able to do. “Steve Sr. was imaginative, intuitive, instinctual,” said a company executive. “He was the best salesman who ever came down the pike, the best business development person the company ever had . . . But he never had the patience with numbers that Steve Jr. has.”

  Still, he matched his father in workaholism, traveling 250,000 air miles a year and regularly working sixteen-hour days. A plodder, he didn’t excel in high school but enjoyed math, science, mechanical engineering, and shop, and was a solid enough student in those subjects. Competitive by nature, Steve Jr. had been a victorious sailboat racer in high school, and he attributed his later success in life to the steadfastness of that experience, along with the way in which he personified the Boy Scouts credo. He thought the saying “steady at the helm” from his sailing ventures taught him to “function well under pressure,” just as the “scout oath and laws . . . helped clarify and confirm my personal values and beliefs,” he once wrote. While still in high school, Steve Jr. worked as a sweeper at a machine shop and then as a stake puncher—punching reference marks on survey stakes at his father’s shipyard. These experiences taught him the “value of a dollar.” He had enlisted in the Marine Corps Reserve in his senior year during World War II, and was called to active duty upon graduation. He went to the University of Colorado as part of officer training and later, according to his bio on the Bechtel company website, he transferred to Purdue where he earned his engineering degree in two and two-thirds years instead of four. The war ended without him seei
ng combat. In 1945 he returned to Oakland and married a girl he had known in high school, Elizabeth “Betty” Hogan, who was, by one account, “everything a Bechtel wife was expected to be: ever-supportive, low-keyed, pleasant-mannered.” Her hobby was collecting twine, according to one account.

  His father put him on the board of directors of the newly incorporated Bechtel Corporation, and Steve Jr. enrolled at the Stanford Graduate School of Business. This time he compressed a two-year MBA program into one-and-a-half calendar years, which would suggest a steadfastness and determination to compensate for an unremarkable intellect. He found the competition “fierce” but was gratified by the pride his father took in his accomplishment. Upon receiving his graduate degree, his parents took him and Betty on a three-month cruise around the world—a belated honeymoon—visiting Bechtel projects in Asia and the Middle East. His original thoughts of pursuing a real estate career evaporated once he saw Bechtel’s far-flung worldwide projects. As they were returning home, Steve Jr. learned that Bechtel had just received a contract for a new pipeline in Texas. He leaped at the chance to become a field engineer on the project, working for Perry Yates, one of his father’s most trusted colleagues. Over the next decade, he moved up the ranks, soon becoming Bechtel’s manager for all pipelining projects.

  Like his parents, Steve Jr. and Betty lived an unpretentious existence that belied their affluence, though each had a taste for luxury. With his new title came an upswing in the family trappings. While passing the torch, his father surprised them with a generous gift—a spacious house in Piedmont, the posh community surrounded by Oakland—complete with a swimming pool, tennis court, and a dining room that could seat fifty. There Betty created a comfortable, quintessentially 1950s household of polite and mannered children, while Steve Jr. ruled the family with the same strictness that Bechtel employees had come to expect from him. His five children—daughters Shana, Lauren, and Nonie, and sons Gary and Riley—were prohibited from crying in his presence, and he seemed to be perpetually disappointed in all of them except for Shana, the conservative and conventional oldest girl. But the traditional sphere of child rearing was left to Betty, as the peripatetic young executive rushed into the world of multinational enterprise.

  It was a far different company from the one his father had inherited twenty-seven years earlier upon the completion of Hoover Dam, when Bechtel was but one entity in the Six Companies consortium. By 1960, it had become a corporate leviathan with more than two thousand completed projects in forty states, thirty countries, and on six continents. New forces and challenges were at play in the world, as Steve Jr. saw it—“environmentalism, globalism, economic upheaval, and intensified international competition”—and he was determined to overcome and exploit them as necessary. In the early part of the decade, Bechtel expanded and completed numerous endeavors around the globe, from the Chocolate Bayou petrochemical plant in Texas, to the prototype Dresden-1 nuclear plant in Illinois, to a commercial atomic power station in Tarapur, India, to a controversial pipeline in Libya.

  “Of all the business relationships the Bechtel Corporation entered into over the years, none was stranger—and few more lucrative—than its alliance in Libya with the international entrepreneur who shared his name with a baking soda,” Laton McCartney wrote of the provocative association between Bechtel and industrialist Armand Hammer. Bechtel had been operating in Libya since 1958, when it partnered with the corrupt former prime minister, Mustafa ben Halim, in a joint venture to build a pipeline from the Sahara Desert to the Mediterranean coast for Hammer’s Occidental Petroleum. “Although ben Halim was held in high disgrace by most Libyans,” journalist Mark Dowie wrote, “Bechtel was advised by the CIA that he was the man it would have to work with to build the pipeline.” Bechtel was one of the few companies willing to work in Libya through the volatile climate of the 1960s, at a time when newly discovered Libyan oil was crucial to the West and a revolutionary coup against the nation’s corrupt rulers seemed imminent. By 1967, Bechtel was the engineering and service arm for American firms producing oil in Libya that didn’t want to send their own executives into the politically explosive environment. They paid Bechtel an 18 percent handling fee to manage their affairs in the country. The Occidental pipeline project—with an estimated cost of $43 million—included a monthly retainer to ben Halim to guarantee his support. Occidental “used Bechtel to build the line and make payoffs to Libyan figures,” wrote former Bechtel employee and international oil industry consultant Christopher T. Rand in his 1976 exposé, Making Democracy Safe for Oil: Oilmen and the Islamic East. By the time Bechtel completed the pipeline, it had raked in $147 million in profits and lost fifteen men along the way.

  But it was with Nixon’s 1968 election that the financial floodgates opened for Bechtel, as the company became integrally tied with the president’s foreign policy and energy policy agendas. Nixon embraced Bechtel because the company could be useful to his Pacific foreign policy aims, especially in China. Nixon appointed both Steve Sr. and Steve Jr. to plum government posts that enhanced the company’s financial portfolio. Steve Sr. assumed a position with the advisory committee of the US Export-Import Bank—an entity that funnels below-market, risk-free, federally guaranteed loans to American corporations to enhance their competitiveness with foreign enterprises, and that would add billions to Bechtel’s assets over coming years. While Steve Sr. was on the advisory board, Ex-Im loans to Bechtel included $13.5 million for nickel production, $107 million for a nuclear plant in Brazil, $100 million for a pipeline in Egypt, and $439 million for fertilizer plants and liquefied natural gas projects in Algeria.

  Nixon appointed Steve Jr. to the Treasury Department’s Labor-Management Advisory Committee—a banal-sounding board that was among the most elite bodies in the new administration. “Anyone on that committee had no trouble getting his views to the President,” an engineering trade publication defined its influence. The company then extended its reach into development, finance, and investment, launching Bechtel Enterprises Holdings Inc., and Steve Sr. was no less a prevailing force than his son, making deals in South Africa, Chile, Spain, Indonesia, and Canada. Soon Bechtel was the leader in efforts to mobilize international venture capital for infrastructure projects worldwide—a position that would put it on a par with nation-states in its financial influence and autonomy.

  It was a precarious moment in international affairs. America was bogged down in Vietnam, and virulent anti-American sentiment was roiling. In response, President Nixon initially continued the previous administrations’ use of the CIA to meddle covertly in troublesome countries, such as LBJ’s (and McCone’s) 1965 agency-backed coup against Indonesia’s leftist president Sukarno. The longtime leader had become forcefully anti-imperialist, nationalizing US business interests and threatening Bechtel’s massive industrialization projects, which included an oil pipeline through the jungles of Sumatra. General Suharto replaced him and opened the country’s vast natural resources to Bechtel, which would become the state-owned oil company’s chief contractor not only for all oil projects but also for its liquefied natural gas operations. With Sukarno removed, Bechtel would receive millions in contracts to build one of the world’s most complicated telecommunications networks in Papua New Guinea, as well as to develop a gigantic copper mine on the Indonesian part of New Guinea. Bechtel then hired the US ambassador to Indonesia, Francis J. Galbraith, as an international consultant. “The Indonesian Affair,” as two American academics described it later, was one of “spies, lies, and oil.”

  On September 1, 1969, Nixon’s CIA supported a coup to oust the Libyan government, which it considered too cozy with Moscow, and installed a young revolutionary leader named Mu’ammar Qaddafi. The young man had promised to protect “all Western interests, including the pumping of oil.” Seeing Qaddafi as a stalwart against Soviet encroachment into Arab oil fields, the United States embraced him—until, in one of the first acts of his regime, he shut down the British and American military bases. But Bechtel, which had
been operating in the country for over a decade, would ramp up its construction of refineries and pipelines, and stay on, sporadically, for decades to come. (The company would still be working with Qaddafi at the time of his capture and gruesome death during an American-sponsored 2011 coup.) After the rise of Qaddafi, and his challenge to American interests, other major oil-producing countries, led by Venezuela and Saudi Arabia, began pushing for OPEC’s increased power in the international oil-pricing system. Iran, Libya, and Saudi Arabia began demanding that the major American firms share control of production with state oil companies.

  While oil was a main catalyst in the rising Arab nationalism, a wider sentiment of anticolonialism was also spawning revolts throughout the world—uprisings aimed at nationalizing resources that had long been enriching American conglomerates while the indigenous populations languished in poverty. This radical nationalism—“meaning independent nationalism not under U.S. control,” as Professor Noam Chomsky of the Massachusetts Institute of Technology (MIT) wrote—was sweeping across the Middle East, Asia, and Latin America.

  Particularly disturbing to the Nixon administration was Chile, where socialist president Salvador Allende had threatened to nationalize International Telephone and Telegraph (ITT)—the most prominent American corporation invested in the country, with a 60 percent ownership of the Chilean telephone company that was worth $225 million to ITT. At the instigation of John McCone—former CIA director, Bechtel consultant, and member of the board of directors of ITT—the CIA orchestrated a coup. In an unprecedented “covert corporate collaboration,” as a national security expert described it, McCone offered $1 million in back-channel, untraceable dollars to the CIA to depose Allende. The scheme to destabilize the Allende government, and McCone’s role in it, was first exposed in a series of syndicated columns written by Jack Anderson in 1972. Appearing on CBS Morning News, Anderson “hammered home the ‘fantastic’ story of how the CIA and ITT plotted to ‘interfere in the domestic affairs in Chile.’ ” Allende died during the September 11, 1973, coup that brought to power General Augusto Pinochet—a brutal dictator who protected ITT and other American companies, including Bechtel, and copper mining companies that were operating in the country. His military junta killed and tortured thousands of its political opponents.