by Sally Denton
Government financing for the Bechtel-built plant capable of manufacturing chemical weapons, along with numerous other sensitive Iraqi projects, would become a scandal of such magnitude that it earned itself a moniker. Iraqgate left behind a trail of murky US government–backed financing through Italian and American banks, dummy corporations, criminal allegations, and an international cast of conspirators. Before it was over, a full-scale congressional investigation would expose the presidential administrations of both Reagan and his successor, George H. W. Bush, for their double-dealing policy of collaborating with foreign arms merchants in arming the loathsome Saddam while condemning such efforts publicly. The probe would find that BNL had funneled billions of dollars, some in US credits, to build Saddam’s formidable arsenal. Called “the mother of all foreign policy blunders” by Texas congressman Henry Gonzalez, in Iraqgate, US taxpayers turned a “run-of-the-mill dictator” into a Frankenstein monster. The BNL shell game was a case study of how the “executive branch, working with private business” ran an off-the-books foreign policy, according to one study that described it as a “deal with the devil.”
Such blurred lines between Bechtel and the US government raised few eyebrows in Congress, with only a handful of legislators questioning whether Bechtel was the corporate arm of America or if America was the government affairs arm of Bechtel. “When it comes to governmental relations, Bechtel goes both ways: it penetrates the government and the government penetrates it,” according to one account. This is not simply a question of conflict of interest, or the “fevered imaginings of a conspiracy,” journalist William Greider wrote, but about men “mixing their private interests with their public obligations . . . These men do not need telex messages from the Bechtel headquarters to tell them what to think about America and the world. They already think it.” They already think alike because they have all “slid back and forth through the door marked private money.” George H. W. Bush’s presidential victory in 1988—the campaign’s treasure chest swelled with money from Bechtel executives and employees—insured the company’s seamless interdependence and continuing influence with the government.
Saddam’s production of ethylene oxide—a chemical converted easily to thiodiglycol, which is used to make mustard gas—and the US government’s support of it, would spark outrage among his enemies in the Middle East. Shultz, having completed his term as secretary of state, had returned to California and reassumed his position on the Bechtel board of directors. Concerned about the looming BNL scandal, and later claiming to have been alarmed at how easily Saddam could convert the plant to a factory for weapons of mass destruction, he reportedly recommended that Bechtel withdraw from the project. His advice was ignored for several months, he said, until he became more forceful. At a board meeting in the spring of 1990, Shultz told his fellow board members that “something is going to go very wrong in Iraq and blow up, and if Bechtel is in it, it will get blown up too.”
Riley Bechtel, who had become the new president and CEO in 1989 when his father, Steve Jr., stepped down, listened to Shultz and decided to withdraw the company from the PC2 plant, although Bechtel workers would still be on the site a year later.
Bechtel auspiciously abandoned the project just as the BNL investigation burst onto front pages throughout the world. Congressional and media investigations exposed how billions of dollars of off-the-books loans and credits financed Iraq’s “world gray market in arms, and its plans to build viable nuclear, chemical, and biological weapons programs,” according to the National Security Archive—an independent, nongovernmental research institute located at George Washington University.
For years, both the Reagan and Bush administrations were willing to ignore Saddam’s brutality and use of chemical weapons while continuing to assist his regime. In just the five years from 1985 through 1989, the US government approved 771 licenses for exports of biological agents, high-tech equipment, and military items valued at $1.5 billion. “The United States spent virtually an entire decade making sure that Saddam Hussein had almost whatever he wanted,” Connecticut congressman Sam Gejdenson told a House Foreign Affairs subcommittee. In fact, as late as January 1990, President Bush overrode congressional objections and authorized a new Ex-Im line of credit worth nearly $200 million for Iraq. In July 1990, less than a month before Iraq invaded its neighbor Kuwait, setting in motion the events that would soon lead to the first Gulf War, Bush lobbied against a congressional amendment that would have restricted agricultural credits to Iraq.
All of that would change, as the well-placed Shultz predicted it would. Whether driving or following American foreign policy, Bechtel joined the US government to become united in a hard-line stance against the tyrant, whom President Bush took to calling “Hitler revisited,” when Saddam decided to reject the Aqaba pipeline. Iraq’s refusal to approve the lucrative Bechtel pipeline signaled a drastic and irreversible schism in US-Iraqi relations. “Many trace the breakdown in negotiations over the pipeline as the beginning of the end of U.S. relations with Iraq,” wrote investigative journalist Antonia Juhasz.
The investigation of BNL officials and the collapse of the US-supported backdoor financing of Iraq’s military arsenal led a desperate Saddam to invade Kuwait on August 2, 1990. “American officials tolerated Hussein’s despotism because they viewed his regime as a secular bulwark against the Islamic fundamentalist revolution spawned by the Iranian revolution,” wrote journalist Jim Crogan. “That is, until Iraq invaded oil-rich Kuwait in 1990.”
The abrupt foreign policy tilt from Iraq would have ramifications for Bechtel, which would lose billions in long-anticipated profits from the now lifeless pipeline and PC2 projects. The promoters of the Bechtel pipeline, including Shultz, Weinberger, Meese, and Rumsfeld, who had courted and supported Saddam—all the while overlooking the dictator’s murderousness and brutality in pursuit of the vast oil resources he controlled—now urged President Bush to attack him.
One of Iraq’s first acts within days of invading Kuwait was taking 109 Bechtel employees in Iraq hostage, many of them construction workers on the PC2 plant and on oil refineries and rigs in the Persian Gulf. Rounded up from five different hotels and other locations, the employees were housed around Baghdad. Untold numbers of employees and their family members sought refuge in their respective embassies, while still more found sanctuary in the nearby lavish estate of Ambassador Glaspie. The Bechtel hostages lived “in ways far removed from privations of hostage life elsewhere,” the New York Times reported. At the British Embassy, sixty-five of them lived in “tents on a corner of the broad lawn that stretches in front of Britain’s Ottoman-era chancery. On weekends, the men play cricket on the lawn. With the pillared porticoes of the embassy as a backdrop, the setting seems like something out of Rudyard Kipling or Somerset Maugham stories.” Across the city, in the diplomatic quarter of Masbah, another twenty-three employees lived in a diplomatic residence guarded by an Iraqi soldier. “Within, in gardens graced by willowy palm trees and a pool, the Americans pass their days reading, watching videos, and talking.”
Bechtel’s official account of the hostage taking was vague regarding details but boasted of Riley’s masterful negotiation for his employees’ rescue. “Riley Bechtel essentially camped out in his office for the duration. He had little choice but to keep a low profile and quietly organize activities to help the Bechtel employees held hostage.” Somehow, “every Bechtel person was safely out of Iraq” before Bush launched Operation Desert Storm on January 17, 1991. While US and allied forces were conducting a series of assaults throughout Iraq and Kuwait, and while Bush was pressing the Iraqi people to overthrow Saddam, Bechtel officials were meeting “quietly with Kuwaiti officials in London to lay plans for the restoration of their economic engine,” as company reports portrayed its lobbying effort to rebuild Kuwait. “As the Desert Storm offensive took shape in nearby Saudi Arabia,” Bechtel’s three-person advance team prepared to land in Kuwait within hours after the swift forty-two day war ended in March.
Not surprisingly, the well-placed, well-connected Bechtel obtained the coveted contract for that war-torn country’s reconstruction. “The destruction that confronted them was beyond imagination,” Bechtel spokesmen reported. “Before retreating, Iraqi troops had methodically devastated Kuwait’s prized oil fields—750 wells were damaged, and 650 of those blazed ferociously. An estimated 70 million barrels of thick crude spewed onto the desert floor, forming lethal lakes.” Bechtel pocketed $2.5 billion for putting out the fires before obtaining the reconstruction contracts. The company restored the same Kuwaiti oil refineries that it had built nearly fifty years earlier, and also rebuilt the country’s upstream oil and gas installations—doing so in record time and at great physical risk to Bechtel employees. After an antitank device wounded six workers and blew up part of a building, a Bechtel executive “walked across the zone to convince workers it was safe,” according to a Los Angeles Times report. “The wells were extinguished months, if not years, earlier than forecast, at a savings to the Kuwaitis of more than $1 billion—and considerable profit to Bechtel.”
Riley had proven his corporate mettle. When he succeeded his father, Bechtel was facing a slump, having lost the giant Aqaba and PC2 projects and moving into a worldwide construction downturn. The Kuwaiti reconstruction program would signal the next phase of the company in a new world of globalization and privatization brought on by the 1991 fall of the Soviet Union. It would be the thirty-nine-year-old Riley, already one of the richest men in the world, who would lead the company toward its highest pinnacle of money and power yet: nation building around the globe.
CHAPTER TWENTY-SIX
The Giant Land of Bechtel
“The white hope, the brains of the family,” as he was once described, Riley had been elected president of Bechtel just two weeks after his grandfather Steve Sr. died at the age of eighty-eight. In keeping with company policy, Steve Jr. had retired at sixty-five but stayed on as chairman emeritus, as his father had before him. Steve Jr. had passed over his oldest son, Gary, to groom young Riley to take over the company. While Gary had worked several years for the family firm, he and his father were estranged because Gary had divorced his wife—the Bechtels disdained broken families—and Gary left Bechtel to work for its largely nonunion subsidiary, Becon Construction.
Like the generations before him, Steve Jr. overlooked his daughters as candidates for succession. Oldest daughter Shana’s husband, Clint Johnstone, joined the company and ascended the corporate ladder. Lauren, who had rebelled against her parents’ bourgeois values during the tempestuous 1960s, alienated them further when she became engaged to Alan Dachs—a liberal New Yorker with degrees from Wesleyan University and New York University. “Not only was he an outspoken left-wing activist,” according to one account, “he also was Jewish.” Steve Jr. threatened to disinherit her if she went through with the marriage, but following the mediation efforts of her adoring grandfather Steve Sr., Laurie and Alan were accepted into the patriarchal fold. Smart and ambitious, with a masters in business administration from NYU, Alan became an executive in the firm, and Lauren, who graduated from Stanford with a degree in psychology, would go on to work for the family foundation. Nonie, the youngest daughter, graduated from Berkeley and married Sheldon Ramsay, the blue-blooded son of an affluent California family.
From the start, though, it was Riley, born in 1952, whose mind and assertive personality caught the attention of his father, grandfather, and other Bechtel managers. Riley studied psychology and political science as an undergraduate. After receiving his law degree from Stanford, he gained a little experience working for Bechtel’s longtime outside counsel, the prestigious national law firm of Thelen, Marrin, Johnson & Bridges. But with less than two years of seasoning, in 1981 he decided that practicing law was not for him, and he came on board at Bechtel, where he focused initially on learning the nuances of the LNG industry. Riley’s early assignments included a stint as an area superintendent at the Pertamina LNG plant that Bechtel was building in Indonesia, followed by a 1983 move to New Zealand to oversee a synthetic-fuels plant. There, at just age thirty-one, Riley was already what he described as “number three dog on the site.” His boss, a longtime Bechtel project manager, was not pleased. His rapid-fire rise continued, with a promotion to the top position at Bechtel Ltd. in London.
Bechtel’s London office was the hotbed of the company’s vast Middle East dealings—including the negotiations with Iraq, but increasingly focused as well on Qatar, the site of the largest natural gas reserve in the world. Riley secured a deal with the sheikdom of Qatar for a massive LNG development contract. A natural gas that has been compressed by refrigeration to a temperature of minus 161 degrees Celsius, the liquid occupies six hundred times less space than natural gas in its gaseous state, making it easier to transport. Sealing up Qatar positioned Bechtel to become the worldwide leader in construction of liquefaction facilities, and Riley’s reputation inflated from son-of-the-boss to boss in his own right. Now he was seen as the legitimate heir to the legacy of his great-grandfather, Warren “Dad” Bechtel.
To face what Riley saw as the demands of the new global economy, with the Bechtel footprint spreading ever farther around the world, he organized a senior team he dubbed “One Bechtel” to coordinate the company’s various sectors and markets. Worried that the company could be spread too thin in an increasingly competitive marketplace, with hundreds of projects under way in dozens of countries on six continents, Riley revisited the Bechtel mission: the commitment to the “closed-cycle process,” as first pronounced by his grandfather. “An emphasis on reexamining and sharpening Bechtel’s continuous improvement methodology,” a public description opaquely and inarticulately expressed the company’s vision for the 1990s.
The company flourished during the Bush Sr. presidential administration, beginning with the $2.3 billion Kuwait reconstruction project. Massive government contracts flowed, from construction of what the company described as “the world’s most sophisticated launch facility” for NASA’s Mars Observer probe at Cape Canaveral to a solar energy prototype in the Mojave Desert to a hazardous-waste cleanup job for the US Navy.
In a 1991 joint venture with Parsons Brinckerhoff, a hundred-year-old multinational engineering design firm, Bechtel received a massive federally funded transportation development project in Boston. The consortium would receive more than $16 billion to build the Central Artery/Tunnel Project designed to streamline traffic on one of the most congested highways in the United States. The “Big Dig,” as it came to be known, called for replacing an overhead highway with seven and a half miles of underground tunnels and bridges. It would be the largest public works project in American history, and before it was over, would become the subject of a criminal fraud investigation by the US attorney in Boston for delays, leaks, and the tragic death of a young mother whose car was struck by falling concrete slabs. Other Massachusetts lawmakers also probed the mismanaged undertaking, with allegations from the state inspector general that “Bechtel engineers for years covered up $4 billion in costs by low-balling their projections,” and accusations that the company was in collusion with top officials at the State Turnpike Authority. “There is no way that a bridge and a couple of tunnels is worth $14.6 billion, in my opinion and the opinion of most taxpayers,” a state senator said in a national radio interview. “This is a pretty small job for us,” a Bechtel engineer remarked in contrast.
The Big Dig would take twenty years and become the most expensive urban highway redevelopment in US history. “If total expenditures are adjusted for inflation, it cost more than the Panama Canal,” according to author Judith Nies. Originally budgeted at $2.8 billion when the congressional bill passed, its final cost in 2009 would be $16 billion. Massachusetts congressman Barney Frank captured the attitude of many Bostonians when he quipped, “Rather than depress the expressway, wouldn’t it be cheaper to raise the city?” Public sentiment became increasingly critical of Bechtel, as Boston was “having the eq
uivalent of open-heart surgery—streets torn up everywhere and huge holes all over the city.”
The Boston Globe undertook an explosive, yearlong probe scrutinizing Bechtel’s role in the Big Dig. “With a cadre of lobbyists and lawyers on Beacon Hill and Capitol Hill, Bechtel has cemented bonds with policy makers to protect its profits, renew its contracts, and deflect questions about the quality of its management,” the paper reported, going on to reveal that Gary Bechtel, Riley’s older brother, served as the liaison between the company and Massachusetts public officials, and that George Shultz’s oldest daughter, Margaret, managed human resources for the project.
Strikingly, “as the costs of the Big Dig were clicking up in hundred- million-dollar increments like a taxi meter out of control,” wrote Nies, the responsible officeholders were rewarded with plum US government appointments rather than censure, in what Nies described as “a remarkable run of Massachusetts politicians’ adventures in international affairs.” The city’s mayor, Raymond Flynn, received an appointment as ambassador to the Vatican. The state’s Republican governor, Boston Brahmin William Weld—who didn’t consider it a conflict of interest that his chief campaign fund-raiser was a Bechtel lobbyist—resigned to become ambassador to Mexico as a Clinton appointee. Beleaguered taxpayers embraced Weld’s successor, the moderate Republican Mitt Romney, when he announced that he was removing Bechtel as project manager amid the swirling allegations of malfeasance. But following a closed-door meeting with Riley, who flew in on his private jet for a conference with the governor, Romney changed his mind about replacing Bechtel. (A decade later, the Bechtels would be major donors to Romney’s presidential campaign.)