The New Confessions of an Economic Hit Man

by John Perkins

  Although the Saudis reserved the right to provide input regarding the general nature of these projects, the reality was that an elite corps of foreigners (mostly infidels, in the eyes of Muslims) would determine the future appearance and economic makeup of the Arabian Peninsula. And this would occur in a kingdom that had been founded on conservative Wahhabi principles and run according to those principles for several centuries. It seemed a huge leap of faith on their part, yet under the circumstances, and due to the political and military pressures undoubtedly brought to bear by Washington, I suspected that the Saud family felt they had few alternatives.

  From our perspective, the prospects for immense profits seemed limitless. It was a sweetheart deal with potential to set an amazing precedent. And to make the deal even sweeter, no one had to obtain congressional approval — a process loathed by corporations, particularly privately owned ones like Bechtel and MAIN, which prefer not to open their books or share their secrets with anyone. Thomas W. Lippman, an adjunct scholar at the Middle East Institute and a former journalist, eloquently summarizes the salient points of this deal:

  The Saudis, rolling in cash, would deliver hundreds of millions of dollars to Treasury, which held on to the funds until they were needed to pay vendors or employees. This system assured that the Saudi money would be recycled back into the American economy. . . . It also ensured that the commission’s managers could undertake whatever projects they and the Saudis agreed were useful without having to justify them to Congress.4

  Establishing the parameters for this historic undertaking took less time than anyone could have imagined. After that, however, we had to figure out a way to implement it. To set the process in motion, someone at the highest level of government was dispatched to Saudi Arabia — an extremely confidential mission. I never knew for sure, but I believe the envoy was Henry Kissinger.

  Whoever the envoy was, his first job was to remind the royal family about what had happened in neighboring Iran when Mossadegh tried to oust British petroleum interests. Next, he would outline a plan that would be too attractive for them to turn down, in effect conveying to the Saudis that they had few alternatives. I have no doubt that they were left with the distinct impression that either they could accept our offer and thus gain assurances that we would support and protect them as rulers, or they could refuse — and go the way of Mossadegh. When the envoy returned to Washington, he brought with him the message that the Saudis would like to comply.

  There was just one slight obstacle. We would have to convince key players in the Saudi government. This, we were informed, was a family matter. Saudi Arabia was not a democracy, and yet it seemed that within the House of Saud there was a need for consensus.

  In 1975, I was assigned to one of those key players. I always thought of him as Prince W., although I never determined that he was actually a crown prince. My job was to persuade him that the Saudi Arabian Money-Laundering Affair would benefit his country as well as him personally.

  This was not as easy as it appeared at first. Prince W. professed himself a good Wahhabi and insisted that he did not want to see his country follow in the footsteps of Western commercialism. He also claimed that he understood the insidious nature of what we were proposing. We had, he said, the same objectives as the crusaders a millennium earlier: the Christianization of the Arab world. In fact, he was partially right about this. In my opinion, the difference between the crusaders and us was a matter of degree. Europe’s medieval Catholics claimed their goal was to save Muslims from purgatory; we claimed that we wanted to help the Saudis modernize. In truth, I believe the crusaders, like the corporatocracy, were primarily seeking to expand their empire.

  Religious beliefs aside, Prince W. had one weakness — for beautiful blonds. It seems almost ludicrous to mention what has now become an unfair stereotype, and I should mention that Prince W. was the only man among many Saudis I have known who had this proclivity, or at least the only one who was willing to let me see it. Yet, it played a role in structuring this historic deal, and it demonstrates how far I would go to complete my mission.

  CHAPTER 16

  Pimping, and Financing Osama bin Laden

  From the start, Prince W. let me know that whenever he came to visit me in Boston, he expected to be entertained by a woman of his liking, and that he expected her to perform more functions than those of a simple escort. But he most definitely did not want a professional call girl, someone he or his family members might bump into on the street or at a cocktail party. My meetings with Prince W. were held in secret, which made it easier for me to comply with his wishes.

  “Sally” lived in the Boston area. I knew the prince would be attracted to her blond hair and blue eyes. Her husband, a United Airlines pilot who traveled a great deal both on and off the job, made little attempt to hide his infidelities. It seemed to me that Sally had a cavalier attitude about her husband’s activities. She appreciated his salary, the plush Boston condo, and the benefits a pilot’s spouse enjoyed in those days. She agreed to meet Prince W. on one condition: she insisted that the future of their relationship depended entirely upon his behavior and attitude toward her.

  Fortunately for me, each met the other’s criteria.

  The Prince W.–Sally Affair, a subchapter of the Saudi Arabian Money-Laundering Affair, created its own set of problems for me. MAIN strictly prohibited its partners from doing anything illicit. From a legal standpoint, I was procuring sex — pimping — an illegal activity in Massachusetts, so I needed to find a way to pay for Sally’s services. Luckily, the accounting department allowed me great liberties with my expense account. I was a good tipper, and I managed to persuade waiters in some of the most posh restaurants in Boston to provide me with blank receipts; it was an era when people, not computers, filled out receipts.

  Prince W. grew bolder as time went by. Eventually, he wanted me to arrange for Sally to come and live in his private cottage in Saudi Arabia. This was not an unheard-of request in those days; there was an active trade in young women between certain European countries and the Middle East. These women were given contracts for some specified period of time, and when the contract expired, they went home to very substantial bank accounts. Robert Baer, a case officer in the CIA’s directorate of operations for twenty years, and a specialist in the Middle East, sums it up: “In the early 1970s, when the petrodollars started flooding in, enterprising Lebanese began smuggling hookers into the kingdom for the princes. . . . Since no one in the royal family knows how to balance a checkbook, the Lebanese became fabulously wealthy.”1

  I was familiar with this situation and even knew people who could arrange such contracts. However, for me, there were three major obstacles: Sally, the payment, and the fact I was doing something illegal and morally reprehensible. I was certain that Sally was not about to leave Boston and move to a desert mansion in the Middle East. It was also pretty obvious that no collection of blank restaurant receipts would cover this expense.

  Prince W. took care of my financial concerns by assuring me that he expected to pay for his new mistress himself; I was only required to make the arrangements. It also gave me great relief when he went on to confide that the Saudi Arabian Sally did not have to be the exact same person as the one who had kept him company in the United States. I made calls to several friends who had Lebanese contacts in London and Amsterdam. Within a couple of weeks, a surrogate Sally signed a contract. My worries around the legal issues were eased by brokering the deal through people in England and the Netherlands. I tried to assuage my conscience by telling myself that everyone involved was a mature adult, making his or her own decision. Who was I to judge?

  Prince W. was a complex person. Sally satisfied a corporeal desire, and my ability to help the prince in this regard earned me his trust. However, it by no means convinced him that SAMA was a strategy he wanted to recommend for his country. I had to work very hard to win my case. I spent many hours showing him statistics and helping him analyze studies we had undertaken fo
r other countries, including the econometric models I had developed for Kuwait while training with Claudine, during those first few months before heading to Indonesia. Eventually he relented.

  I am not familiar with the details of what went on between my fellow EHMs and the other key Saudi players. All I know is that the entire package was finally approved by the royal family. MAIN was rewarded for its part with one of the first highly lucrative contracts, administered by the US Department of the Treasury. We were commissioned to make a complete survey of the country’s disorganized and outmoded electrical system and to design a new one that would meet standards equivalent to those in the United States.

  As usual, it was my job to send in the first team, to develop economic and electric load forecasts for each region of the country. Three of the men who worked for me — all experienced in international projects — were preparing to leave for Riyadh when word came down from our legal department that under the terms of the contract, we were obligated to have a fully equipped office up and running in Riyadh within the next few weeks. This clause had apparently gone unnoticed for more than a month. Our agreement with Treasury further stipulated that all equipment had to be manufactured either in the United States or in Saudi Arabia. Because Saudi Arabia did not have factories for producing such items, everything had to be sent from the States. To our chagrin, we discovered that long lines of tankers were queued up, waiting to get into ports on the Arabian Peninsula. It could take many months to get a shipment of supplies into the kingdom.

  MAIN was not about to lose such a valuable contract over a couple of rooms of office furniture. At a conference of all the partners involved, we brainstormed for several hours. The solution we settled on was to charter a Boeing 747, fill it with supplies from Boston-area stores, and send it off to Saudi Arabia. I remember thinking that it would be fitting if the plane were owned by United Airlines and commanded by a certain pilot whose wife had played such a critical role in bringing the House of Saud around.

  The deal between the United States and Saudi Arabia transformed the kingdom practically overnight. The goats were replaced by two hundred bright yellow American trash compactor trucks, provided under a $200 million contract with Waste Management Inc.2 In similar fashion, every sector of the Saudi economy was modernized, from agriculture and energy to education and communications. As Thomas Lippman observed in 2004:

  Americans have reshaped a vast, bleak landscape of nomads’ tents and farmers’ mud huts in their own image, right down to Starbucks on the corner and the wheelchair-accessible ramps in the newest public buildings. Saudi Arabia today is a country of expressways, computers, air-conditioned malls filled with the same glossy shops found in prosperous American suburbs, elegant hotels, fast-food restaurants, satellite television, up-to-date hospitals, high-rise office towers, and amusement parks featuring whirling rides.3

  The plans we conceived in 1974 set a standard for future negotiations with oil-rich countries. In a way, SAMA/JECOR was the next plateau after the one Kermit Roosevelt had established in Iran. It introduced an innovative level of sophistication to the arsenal of political-economic weapons used by a new breed of soldiers for global empire.

  The Saudi Arabian Money-Laundering Affair and the Joint Commission also set new precedents for international jurisprudence. This was very evident in the case of Idi Amin. When the notorious Ugandan dictator went into exile in 1979, he eventually was given asylum in Saudi Arabia. Although he was considered a murderous despot responsible for the deaths of between one hundred thousand and three hundred thousand people, he retired to a life of luxury, complete with cars and domestic servants provided by the House of Saud. The United States quietly objected but refused to press the issue for fear of undermining its arrangement with the Saudis. Amin whiled away his last years fishing and taking strolls on the beach. In 2003, he died in Jeddah, succumbing to kidney failure.4

  More subtle and ultimately much more damaging was the role Saudi Arabia was allowed to play in financing international terrorism. The United States made no secret of its desire to have the House of Saud bankroll Osama bin Laden’s Afghan war against the Soviet Union during the 1980s, and Riyadh and Washington together contributed an estimated $3.5 billion to the mujahideen.5 However, US and Saudi participation went far beyond this.

  In late 2003, US News & World Report conducted an exhaustive study titled “The Saudi Connection.” The magazine reviewed thousands of pages of court records, US and foreign intelligence reports, and other documents, and interviewed dozens of government officials and experts on terrorism and the Middle East. Its findings include the following:

  The evidence was indisputable: Saudi Arabia, America’s longtime ally and the world’s largest oil producer, had somehow become, as a senior Treasury Department official put it, “the epicenter” of terrorist financing. . . .

  Starting in the late 1980s — after the dual shocks of the Iranian revolution and the Soviet war in Afghanistan — Saudi Arabia’s quasi-official charities became the primary source of funds for the fast-growing jihad movement. In some 20 countries the money was used to run paramilitary training camps, purchase weapons, and recruit new members. . . .

  Saudi largess encouraged US officials to look the other way, some veteran intelligence officers say. Billions of dollars in contracts, grants, and salaries have gone to a broad range of former US officials who had dealt with the Saudis: ambassadors, CIA station chiefs, even cabinet secretaries. . . .

  Electronic intercepts of conversations implicated members of the royal family in backing not only Al Qaeda but also other terrorist groups.6

  After the 2001 attacks on the World Trade Center and the Pentagon, more evidence emerged about the covert relationships between Washington and Riyadh. In October 2003, Vanity Fair magazine disclosed information that had not previously been made public, in an in-depth report titled “Saving the Saudis.” The story that emerged about the relationship between the Bush family, the House of Saud, and the bin Laden family did not surprise me. I knew that those relationships went back at least to the time of the Saudi Arabian Money-Laundering Affair, which began in 1974, and to George H. W. Bush’s terms as US ambassador to the United Nations (from 1971 to 1973) and then as head of the CIA (from 1976 to 1977). What surprised me was the fact that the truth had finally made the press. Vanity Fair concluded:

  The Bush family and the House of Saud, the two most powerful dynasties in the world, have had close personal, business, and political ties for more than 20 years. . . .

  In the private sector, the Saudis supported Harken Energy, a struggling oil company in which George W. Bush was an investor. Most recently, former president George H. W. Bush and his longtime ally, former Secretary of State James A. Baker III, have appeared before Saudis at fundraisers for the Carlyle Group, arguably the biggest private equity firm in the world. Today, former president Bush continues to serve as a senior adviser to the firm, whose investors allegedly include a Saudi accused of ties to terrorist support groups. . . .

  Just days after 9/11, wealthy Saudi Arabians, including members of the bin Laden family, were whisked out of the US on private jets. No one will admit to clearing the flights, and the passengers weren’t questioned. Did the Bush family’s long relationship with the Saudis help make it happen?7

  PART III: 1975–1981

  CHAPTER 17

  Panama Canal Negotiations and Graham Greene

  Saudi Arabia made many careers. Mine was already well on the way, but my successes in the desert kingdom certainly opened new doors for me. By 1977, I had built a small empire that included a staff of around twenty professionals headquartered in our Boston office, and a stable of consultants from MAIN’s other departments and offices scattered across the globe. I had become the youngest partner in the firm’s hundred-year history. In addition to my title of Chief Economist, I was named manager of Economics and Regional Planning. I was lecturing at Harvard and other venues, and newspapers were soliciting articles from me about current event
s.1 I owned a sailing yacht that was docked in Boston Harbor next to the historic battleship Constitution, “Old Ironsides,” renowned for subduing the Barbary pirates not long after the Revolutionary War. I was being paid an excellent salary, and I had equity that promised to elevate me to the rarefied heights of millionaire well before I turned forty. True, my marriage had fallen apart, but I was spending time with women on several continents.

  Bruno came up with an idea for an innovative approach to forecasting: an econometric model based on the writings of a turn-of-the-century Russian mathematician. The model involved assigning subjective probabilities to predictions that certain specific sectors of an economy would grow. It seemed an ideal tool to justify the inflated rates of increase we liked to show in order to obtain large loans, and Bruno asked me to see what I could do with the concept.

  I brought a young MIT mathematician, Dr. Nadipuram Prasad, into my department and gave him a budget. Within six months he developed the Markov method for econometric modeling. Together we hammered out a series of technical papers that presented Markov as a revolutionary method for forecasting the impact of infrastructure investment on economic development.

  It was exactly what we wanted: a tool that scientifically “proved” we were doing countries a favor by helping them incur debts they would never be able to pay off. In addition, only a highly skilled econometrician with lots of time and money could possibly comprehend the intricacies of Markov or question its conclusions. The papers were published by several prestigious organizations, and we formally presented them at conferences and universities in a number of countries. The papers — and we — became famous throughout the industry.2