The Profiteers

by Sally Denton

  The end of the Cold War shifted how the nation maintained its nuclear arsenal, and Bechtel prepared for that transition. America was back in the bomb-making business, but this time with Bechtel, not the government, running the enterprise. “After initial US and Russian moves to reduce arsenals, dismantle weapons, secure fissile material, and downblend enriched uranium for civilian use, the heroic steps initiated by Soviet leader Mikhail Gorbachev to end the Cold War have been followed with only timid efforts to rethink the purpose of nuclear weapons in US national security policy,” wrote Kennette Benedict.

  Bechtel promised to improve efficiency and security at both labs, and formed two for-profit limited liability corporations. LANS, LLC, would operate the Los Alamos National Security lab—the massive, secret site in northern New Mexico—while LLNS, LLC, would manage its sister site, Lawrence Livermore National Security, in Berkeley, California. Partnering with Bechtel in both LANS and LLNS were Washington Group International (WGI), BWX Technologies (BWXT), and the University of California, with Bechtel the consortium’s unmistakable leader. “Bechtel leveraged what the University of California did well—science—with the company’s expertise in management,” said Todd Jacobson of the Bulletin of Atomic Scientists.

  In exchange for the multimillions in management fees, Bechtel promised DOE it would improve efficiency and security, transition the labs to industrial standards, capitalize on private sector expertise, and increase contractor accountability. But it wouldn’t work out that way. “Everybody thought that with privatization, we could save money and get more transparency,” said Peter Stockton, a senior investigator at the nonprofit Project on Government Oversight, who has studied the national laboratories since the 1970s. “It’s done pretty much the opposite.”

  In its drive to maximize profits, Bechtel would be widely criticized by numerous government, congressional, and watchdog investigations for its cost overruns, unfair employment practices, security violations, pattern of retaliation against whistleblowers, and massive reductions in its workforce through voluntary and involuntary layoffs. For instance, it promised to reduce Livermore “support costs” by 20 percent, equaling $150 million over the first three years of the contract. Instead, the $150 million cost reduction offset the increased costs of $130 million to $150 million to manage the labs, with a tenfold increase in management fees, which increased by $40 million annually. “Bechtel gets nuclear lab, taxpayers foot the bill,” wrote an employment lawyer in response to the lab’s restructuring.

  Hundreds of career employees were fired in the labs’ transition from public to private—“massive layoffs executed with the finesse of Donald Trump,” as one account described them. Bechtel’s elimination of the jobs—and high salaries—of older physicists generated more income for the LLCs, while also resulting in what industry observers described as a “brain drain” of the country’s best nuclear scientists. Union members and scientists argued that the profit motive driving the brain drain was not only bad public policy but also set a dangerous precedent that endangered the safety of the American public.

  A National Academy of Sciences investigation of the impact of privatizing the labs found that peer-reviewed articles—articles written by experts and reviewed by other experts in the same field as an indicator of accurate scholarship—dropped almost by half. The National Research Council reported that the privatized management had a negative influence on scientific experimentation and that a venerable tacit code had been violated. “There was a social contract,” as a California journalist covering Livermore put it. “ ‘You will never get rich in science, but we treat you as adults, respect you for your commitment, and in turn you can pursue science and have fun.’ ” Activist Frida Berrigan agreed, writing that nuclear laboratories “are no longer to be intellectual institutions devoted to science but part of a corporate-business model where research, design, and ultimately the weapons themselves will become products to be marketed. The new dress code will be suits and ties, not lab coats and safety glasses.”

  The demoralized and disaffected scientists who managed to keep their jobs lived in fear of financial retaliation or termination if they raised concerns regarding lab practices, according to union representatives. Whistleblowers were once highly valued as the gatekeepers to security—with onetime secretary of energy Hazel O’Leary going so far as to declare “zero tolerance” for retaliation against them, citing that “these facilities are dangerous . . . I need whistleblowers.” But the Bechtel-led management cracked down on whistleblowers. The George W. Bush–era DOE began “using taxpayer dollars to pay litigation costs and settlements for contractors who fight retaliation claims through years of hearings and appeals, a practice that costs the public tens of millions of dollars annually,” according to one account. The suppression of scientists sent a clear message to workers tempted to expose safety and environmental dangers: “Keep your mouth shut.”

  By 2007, the DOE had become the most privatized federal department, with 94 percent of its budget going to contractors—and with Bechtel the agency’s top contractor. Of its two hundred thousand employees, fewer than fifteen thousand were government employees—the rest were private subcontractors. The NNSA was even more privatized. The separately organized agency within DOE outsourced a whopping 96 percent of its budget to private entities, with Bechtel topping that list as well. “In wars in Iraq and Afghanistan, Americans have gotten used to the idea of private firms supplying logistical support and even private security services to military troops,” as a nuclear expert put it. “But placing nuclear weapons design and maintenance—the US nuclear deterrent—in the hands of private business takes the outsourcing of government services to a new extreme.”

  As “powerful as one of its nuclear reactors,” wrote David Streitfeld of the Los Angeles Times, Bechtel had returned full circle to the industry to which it had been most entwined historically: nuclear energy and weaponry. Having built the world’s first nuclear plant in 1951, and dozens more throughout the country and the world, Bechtel’s nuclear business had been thwarted since 1978 when the US government stopped issuing licenses—a year before the Three Mile Island accident. Now, after nearly thirty years of lobbying, Bechtel’s efforts paid off. In the year 2007 alone, the Nuclear Energy Institute (NEI)—the lobbying group that sets policy in the industry, and of which Bechtel had been an active member since its inception in 1994—spent $1.3 billion petitioning the federal government.

  Of the more than one hundred lobbyists hired by Bechtel and the nation’s other top nuclear contractors, the majority were former members of Congress, former congressional staff, and former DOD and DOE officials. Senior government officials on Bechtel’s payroll between 1997 and 2004 included former secretary of agriculture Daniel R. Glickman, former New York Republican congressman Bill Paxon, former IRS commissioner Donald A. Alexander, and more. In addition to privatizing the labs, the Bush administration prepared to build as many as twenty-nine nuclear facilities throughout the nation, with Bechtel the leading American company to benefit from the $90 billion worth of planned projects, even though “none of the thirty-one nations that produce nuclear power has found a safe, permanent way to store the toxic byproducts of spent fuel, including plutonium,” as environmental scientist Ian Hore-Lacy of the World Nuclear Association told a reporter.

  DOE had mutated into a colossal agency that contracted out nearly all of its operations, with little oversight or regulation of its contractors, and with more classified programs than any other agency dealing with national security, intelligence, and the nuclear weapons complex. A lion’s share of its multibillion-dollar annual budget was now going to one behemoth, privately held, family-owned, multinational corporation that itself rivaled many government agencies in size, scope, and power. Most of the contracts that Bechtel received were overseen by a handful of congressional committees that routinely approved the appropriations without raising questions. The few legislators who sat on those committees received significant political contributi
ons from Bechtel and were constantly lobbied by highly paid influence peddlers from the six Washington, DC–based lobbying firms employed by the company.

  CHAPTER THIRTY-FIVE

  Nukes for Profit

  “Private interests have no business with nuclear weapons,” former secretary of state George Shultz testified before Congress during his 1982 nomination hearings. Like much of Shultz’s dissembling—or expedient mind changing—twenty-five years later, his newfound advocacy for the labs’ shift from nonprofit to for-profit was an about-face. But few in Congress or the media questioned this reversal on a policy certain to enhance Shultz’s Bechtel stock portfolio.

  If Bechtel’s fortunes had wavered in the decade leading up to the Iraq War, if its symbiotic relationship with the American government had ever been tenuous, the two were now entangled in the US Nuclear Security Enterprise. First with Iraq, and then with Katrina, Bechtel had raked in record revenues in the years after 2007. Riley and his father, Steve Jr., shared the rank of the world’s 292nd richest billionaires, each with a net worth of $2.5 billion. But those revenues, the largest in the company’s history, would not compare with Bechtel’s future income from controlling the nation’s nuclear empire. With the labs run at a profit, and with the cost-plus, risk-free business model invented by Steve Sr. and John McCone in the late 1930s to build pipelines in the Middle East, Bechtel’s 30 percent guaranteed management fee and indemnification from liability would give it a monopoly on the country’s nuclear stockpile.

  “From Los Alamos to Kwajalein [the Bechtel-built Ronald Reagan Ballistic Missile Test Site in the Marshall Islands] to Iraq, war, preparing for war, and profiting from war’s devastation are all profit centers for Bechtel,” concluded an investigation by the Western States Legal Foundation—a thirty-year-old organization that provides legal assistance to nonviolent environmental activists. Operational costs at the labs soared in the aftermath of the Bechtel takeover, with American taxpayers shelling out $40 million more per year for Livermore alone. Fees paid to LANS and LLNS to administer Los Alamos and Livermore jumped by 850 percent and 600 percent, respectively. Executive salaries also swelled, with the Los Alamos director’s salary shooting from $348,000 to $1.1 million—more than double that of the US president.

  All the while, the private partnership led by Bechtel continued to receive taxpayer dollars of more than $1 billion annually. Through the first seven years of its creation—2000 to 2007—NNSA’s budget jumped to one and a half times what the nuclear weapons budget had been at the height of the Cold War. Calling it “the ultimate white-collar welfare,” Republican Congressman David Hobson of Ohio derided the agency. Even a former general counsel of NNSA publicly stated, “Profits and nuclear weapons don’t mix,” and Tyler Przybylek, acting head of NNSA, would describe the “creeping privatization” as “unwise.” The labs were now run by outsiders from private industry who reflected a different ethos than that of the traditional scientists.

  Nowhere was Bechtel’s corporate culture and leadership style more starkly exhibited than in the very first week of its management of Livermore. A senior Livermore employee described Bechtel’s management style of LLNS as a combination of “the worst aspects of the Department of Motor Vehicles and Goldman Sachs.” In May 2008, just months after Bechtel took over, LLNS laid off 430 career employees, whose average age was well over forty, and most of whom had been employed by Livermore for two decades or more. In thirty years, there had not been a single layoff at Livermore. “Bechtel and its partners immediately began planning to get rid of employees in order to secure their profit margin,” according to a renowned wrongful termination and employment discrimination attorney, who would eventually litigate against LLNS. “Almost before they even took over, they began implementing the planned layoff,” said J. Gary Gwilliam, an attorney in Oakland. “In the classic slash-and-burn fashion of corporate takeovers, Bechtel came in to trim the sails and cut the gray hair,” said one fired employee.

  The key “hatchet man,” as Gwilliam described the Bechtel executive vice president who, in the corporate downsizing manner of actor George Clooney in the film Up in the Air, oversaw the swift and unsympathetic firings, was Frank Russo. The architect of the layoff, Russo was one of forty employees who came from Bechtel corporate headquarters to work for the lab. Russo had begun his career twenty-five years earlier, working for Bechtel’s domestic and international nuclear projects. With the official title of assistant director for operations and business, Russo directed armed guards to escort the career employees off the grounds as he gutted the workforce.

  Russo and his Bechtel colleague Steven B. Liedle referred to themselves as the “kitchen cabinet,” and claimed to be under orders from DOE to reduce the workforce because of a budget crisis—a claim challenged by Gwilliam, who would eventually amass more than three hundred thousand documents and depose more than fifty witnesses. Bechtel, “through their limited liability corporation, really mistreated many employees and frankly lied to Congress about the reason they had to lay off long-term loyal workers,” Gwilliam said. An independent consultant hired by Gwilliam who reviewed DOE documents related to the lab takeover determined that the budget crisis was invented, and that LLNS “intentionally overstated its budget problems,” and had sufficient funds to avoid any involuntary layoffs but were motivated by profit. “At OMB [Office of Management and Budget] we called this tactic ‘Washington Monumenting’ their budget problems,” said Dr. Robert Civiak, a former OMB examiner, “an analogy to Interior Department threats to close the Washington Monument when their budget is tight.” Civiak claimed further that LLNS used the “phony budget shortfall as an excuse to lay off hundreds of workers for reasons not related to the budget.”

  Marian Barraza, one of the most senior workers at the lab, began her career in 1969 as a seventeen-year-old high school graduate. She felt like a criminal the day she was ushered off campus. Bechtel corporate agents gave her a few minutes to pack the belongings from her office before marching her out under the watchful eyes of security guards. “The sheriff was there,” she recalled of the humiliating moment, “and the undercover security agents were carrying guns.” After thirty-eight years of loyal service, she cried alone in the parking lot.

  All former University of California employees of the lab were suddenly on the payroll of the Bechtel-led LLC. The associate director of human resources for the lab described it as the “corporate takeover” of the weapons laboratory. The National Ignition Facility (NIF), which was the crown jewel of Livermore, was the single largest project in the NNSA budget. As the largest laser-based fusion research device in the country, NIF was the most potentially profitable lab program. Because of its high value, NIF was excluded from the layoffs, and the LLNS corporate consortium focused its considerable energy and resources into developing nuclear fusion for civilian use. “LLNS put everything into NIF,” said Gusterson, “starting at $1.2 billion and mushrooming up to $4 billion.” The New York Times described NIF’s “stadium-sized laboratory that contains 192 lasers trained on a target the size of a BB. The goal is to generate temperatures of more than 100 million degrees to fuse hydrogen atoms and release nuclear energy.” A spokesman for the National Resources Defense Council estimated that NIF was the most expensive experimental facility ever built in US history.

  Inspired by the idea that NIF would revolutionize nuclear power, Bechtel was staking its future on that laser program, constantly upping its budget estimates to Congress. Seduced by LLNS’s promise that “an era of carbon-free power could dawn,” key congressional figures embraced the “revolution,” according to the Times, and readily approved escalating appropriations. Lab director George Miller met with congressional oversight committees and DOE officials several times a month. At one point, under questioning by legislators dubious about the privatized entity, he attempted to assuage their concerns by describing LLNS as more an arm of the government than a private contractor. Rather than submit bids to the US government, “[w]e are assigned missions,�
�� Miller once testified. “We are assigned work by the federal government. And for a substantial fraction of the funding of the laboratory . . . they say what the government wants done, and we tell them, ‘This is what it will cost.’ ”

  Miller focused his attention on four committees: the two defense-authorizing committees in the Senate and the House, and the two Energy and Water committees in both bodies. “So those four committees plus parallel committees for the Department of Homeland Security,” he said. NIF, housed in a ten-story building the size of three football fields, is described by LLNS as the cornerstone of NNSA’s stockpile stewardship program. The government claims that its temperatures of 100 million degrees allow it to create the same states of high-energy-density matter that exist in stars and planets. Among its chief missions, according to NNSA, the fusion device would provide a clean source of energy security for America—hence its national security component.

  Critics saw the LLNS budget to NIF as a slush fund for a government research program geared to benefit private industry, especially Bechtel. But the crucial factor of ignition eluded the project, rendering the “giant array of lasers designed to fuse hydrogen atoms” effectively impotent. Cynical scientists mocked LLNS as an acronym for Lasers, Lasers, Nothing but laserS, seeing NIF as a boondoggle more beneficial to Bechtel’s bottom line than to America’s energy or national security needs.