by Gerard Donnelly Smith
(Swans - January 31, 2005) Several weeks ago, I urged you to practice abstinence, give up smoking, grow your own food, buy a horse, get off the grid, move back to the country and start a commune or a co-op. Did you make much progress? No? Well, don't feel bad; I didn't either. That corncob was a bad idea too. Now to another war profiteer.
How does one boycott a corporation like Bechtel whose business is to build or rebuild damaged infrastructure like telecommunications, water, electrical (hydro and fusion generated) or transportation structures such as tunnels, bridges and airports? Imagine trying to boycott Bechtel by not using the public water system, turning off your electricity because it comes from Hoover Dam or driving only on bridges not built or rebuilt by Bechtel. Bechtel has even been involved in environmental restoration and currently holds the contract for cleaning up the Hanford nuclear waste facility. How does one boycott that? Virtually impossible.
Perhaps the only way would be to divest. So if you're serious about starving the hegemony, resisting those who profit from war, then sell your stock in Bechtel. Purge your 401K and make sure your TIA-CREF account is hegemony-free. Boycotting Bechtel for making huge profits from rebuilding war-ravaged Iraq might be a good reason to divest; there are others.
Yet one must be fair and balanced, before taking such drastic measures. One should listen to both sides of the issue.
Bechtel's media relations department claims that "Bechtel's actual earnings from its [Iraq] work are only a small fraction of contract totals. Bechtel's contract with USAID totals $680 million. That sum is certainly significant, and Bechtel is proud to do the job, but most of the work will be subcontracted and will go toward equipment and materials." The Center for Public Integrity (CPI) claims that Bechtel's campaign contributions help them garner favor with the current administration. To this charge Bechtel answers: "We are not a leading corporate contributor. According to Reuters (April 4, 2003): "Bechtel's donations look small compared with those of software giant Microsoft Corp., which gave $4 million during the past two years alone."
Who does one believe when authoritative voices disagree? Should we be skeptical of Bechtel because they wish to protect their corporate image, or should we be skeptical of the CPI that drew their conclusions from over 40 government documents they demanded through the Freedom of Information Act?
According to Daniel Drezner in his Slate attack on CPI, "Bush isn't really favoring Halliburton and Bechtel," because campaign contribution size and the size of the contract awarded do not provide sufficient evidence. He calls The Center for Public Integrity's argument flimsy. Drezner even provides links to the list of contracts won and the list of campaign contributions as his evidence that there is no connection. Drezner implies a "coincidental correlation" rather than a direct correlation.
Yet, one wonders what Drezner is missing. One can say practically anything about numbers, but the numbers do indicate something important, large contributions do correlate with large "non-bid" contracts. For example Bechtel donated $3,310,102 in campaign contributions from 1990 through 2002. Bechtel won contracts totaling $2,829,833,859 for reconstruction efforts in Afghanistan and Iraq. Similarly Kellogg, Brown and Root donated $2,379,792, and received contracts totaling $11,431,000,000.
Far from being a modest campaign contributor -- "ranked 189th out of 716 organizations" -- in 2002 for "soft" money, Bechtel's $3.3 million in contributions was given in order to buy influence despite their media department's claim. Why else would one contribute evenly between both political parties? According to Bechtel's own pr: "In the last three election cycles, construction industry PACs have leaned heavily in favor of Republicans, never closer than 74-26 for Republican candidates. Bechtel's PAC is more balanced; its spread was never more than 60-40."
Regardless of the above claim, corporations that give large campaign contributions -- totaling millions of dollars -- also earned contracts in the billions of dollars. One exception perhaps is GE which donated $8,843,884, yet only received $8,525,498 in Iraqi contracts. Well, they didn't quite break even on the Iraqi rebuilding contracts. Only if one doesn't consider that the Department of Defense granted General Electric $2.8 billion in contracts in 2003 alone. In other words, it pays to have friends in high places. In refutation, these corporations claim that they legally bid for contracts in the USAID process. However, if money didn't buy influence, then these corporations would not give money to the political parties. That is simple logic.
Drezner says "the flimsiness" of CPI's evidence is proof the Bush administration doesn't favor these companies. On the opposite end of the spectrum, Kroll Inc. won contracts totaling $95,200 while donating $100, and Logenix International L.L.C. donated $250 and won $29,000. Other examples bear out that if corporations donate large amounts that corporations earns large contracts totaling several million to several billion dollars. One can hardly call the CPI's evidence flimsy. To view CPI's documents follow these links to Contributions vs. Contracts.
Considering the revolving door policy between corporate boards and federal government positions, one can hardly claim the evidence for "conflicts of interest" as flimsy.
The collusion between Bechtel and the US Government begins with JFK, who hired John A. McCone, Stephen Bechtel's partner, as CIA Chief. Beginning in 1970, Bechtel began hiring ex-government officials, hoping to expand its global economic base. Among those hired were Secretary of Health, Education and Welfare, Casper Weinberger, Reagan's future Defense Secretary. Did Weinberger's influence help Bechtel gain access to government contracts? Bechtel also hired the former chief of the Atomic Energy Commission, Robert Hollingsworth, perhaps leveraging access to the Hanford Superfund cleanup. Possibly hoping to secure future government construction contracts in future war-ravaged countries, Bechtel hired rear-admiral John G. Dillon, who had retired as policy chief for the Pentagon's construction contracts. After serving as Nixon's Treasury secretary, George P. Shultz accepted the Executive VP position at Bechtel, and then in 1982, he became Ronald Reagan's Secretary of State. After retiring from the State Department, Shultz returned to Bechtel, joining its Board of Directors. See http://actagainstwar.org/downloads/BechtelInsidersFact.pdf.
According to Bechtel Response to Media Inaccuracies on USAID Iraq Infrastructure Reconstruction Program Contract:
Often-cited examples of Bechtel's "friends in high places" are specious or irrelevant.
Through endless repetition, rather than facts, Bechtel has gained an undeserved reputation as a secretive company that succeeds through powerful friends in high places. People who check our Web site, read our annual report and other publications, or call us with questions know that we are far from secretive. And the people who know us best-our customers-know that our reputation for excellence is grounded in a proven ability to get the job done well, along with an uncompromising commitment to integrity, honesty, fairness, and safety.
Over the years, we have certainly built good relationships with important people. We network like anyone in business or the professions. Bechtel executives have been international industry leaders for decades. Industry leaders know political leaders, the people who formulate development plans, control budgets, set the rules for contractors to enter and operate in their countries, examine credentials, authorize contracts, and pay the bills for services rendered. (http://www.bechtel.com/iraqresponse.htm)
While it is certainly true that the media relations department is quite open -- they answered all my inquiries -- to assume that they are unbiased would be hasty. Indeed, networking gives one access to privileged information. Despite claims that USAID contracts are awarded to the best companies, evidence of past abuse doesn't seem to disqualify contractors. According to the General Accounting Office, June 14, 2004, "All 14 of the contracts the GAO examined, including Halliburton's no-bid oil infrastructure contract and Bechtel's billion-dollar capital construction contract, were awarded with limited or no competition." The GAO concludes "that contracts worth billions of dollars were not awarded under full an open competition."
So much for Bechtel's claim that friends in high places don't really make a difference.
In a September 2003 letter to Joshua Bolton, Director of the Office of Management and Budget, Rep. Henry A. Waxman, after 6 months of research, details possible overcharges by Halliburton and Bechtel, concluding that "Despite the Administration's refusal to provide information, a picture is now beginning to emerge of waste and gold-plating that is enriching Halliburton and Bechtel while costing the U.S. taxpayer millions and imperiling the goal of Iraqi reconstruction. The problem is this: too much money appears to be going to Halliburton and Bechtel for too little work and too few opportunities for Iraqis."
The Special Investigations page of the Committee on Government Reform, Minority Office provides current information about Iraqi contracting noting multiple contract abuses by Halliburton. As yet, Bechtel hasn't been formally investigated.
See http://democrats.reform.house.gov/investigations.asp?Issue=Iraq+Contracting
Still, precedents make one skeptical. As Reagan's Secretary of State, Schultz sent Donald Rumsfeld, then a diplomatic envoy, to Iraq where he met with President Saddam Hussein. Rumsfeld was sent to help secure the construction of a pipeline to the Port of Aqaba in Jordan.
Again Bechtel's media relations department offers this counter argument:
In the mid-1980s, Iraq and Jordan considered (and then rejected) hiring Bechtel to manage construction of a pipeline to carry oil from Iraq to Aqaba on the Red Sea, avoiding dangerous shipping lanes in the Gulf. Bechtel held numerous discussions with U.S. government officials to ensure alignment with administration policy and to seek loans from the U.S. Export-Import Bank. Aiming to safeguard U.S. economic security, the administration backed several alternative pipelines, not just the Aqaba proposal. Secretary of State George Shultz, former president of Bechtel, properly recused himself from the matter and at no time promoted the Aqaba pipeline, contrary to recent reports based on a demonstrably mistaken reading of the documentary record. There is no connection between the Aqaba proposal and the recent Iraq reconstruction project. (http://www.bechtel.com/iraqresponse.htm)Though, the pr department claims there is no connection, the admitted practice of "networking" with political leaders and the evidence uncovered by the GAO certainly call into question the claims that Shultz or another Bechtel VP do not promote the company using "friends in high places" and "large" campaign contributions.
Indeed, government departments such as the Department of Education have recently paid journalists such as Armstrong Williams to support their policies. Common sense might conclude that the money buys influence. Moreover, according to Jonathan Marshal, Bechtel Media Relations Manager: "Along with other directors, [VPs] William Dudley and Tom Hash collectively exercise general supervisory control over the business. As senior officers, Mr. Dudley manages day-to-day operations of the Oil, Gas & Chemicals business unit and Mr. Hash manages the operations of our government business unit."
In other words, while Bechtel claims that the revolving door policy does not have anything to do with contracts, a current VP manages the government business unit. I specifically asked the Mr. Marshal whether Schultz as former Bechtel president had a similar role, to which I received no reply.
Having entrenched itself firmly within the Washington D.C. bureaucracy by a revolving-door hiring policy, Bechtel assures future government contracts. According to The Center for Public Integrity:
In April 2003, the U.S. Agency for International Development announced that Bechtel won a cost-plus-fixed-fee contract worth up to $680 million to rebuild Iraqi infrastructure such as schools, roads and sewers, as well as perform "institutional capacity building" to maintain the improvements and create "roadmaps for future longer term needs and investments." The contract had been awarded after Bechtel and five other companies, including Louis Berger Group, Parsons and Halliburton's Kellogg, Brown & Root were privately selected by the agency to bid... In September 2003, USAID announced that, due to the poor infrastructure and deteriorating stability in Iraq, Bechtel would receive an additional $350 million on the contract, raising the contract's potential ceiling to $1.03 billion. (Dec. 30, 2004)
So, what should a good consumer-good investor make of such information? Well, if you're planning to boycott the hegemony, you'll have to divest. On the other hand, investors in the stock market may wish to note who has given millions of dollars to the political parties as we draw closer to the mid-term elections. It seems highly probable that those corporations just might win millions, even billions, in government contracts. So if you want to guarantee an immediate return on your investment, watch how much Halliburton, Bechtel and GE donate to the political parties. Moreover, keep track of who sits on the Board of Directors.
For those who think we're done with Bechtel, please don't think we're letting them off the hook. Next time: Bechtel, Drinking Water and Nuclear Waste.