[7/13/21 Note from Robert Morrow. I am personal friends with Barr McClellan, who was a lawyer who for 10 years worked closely with LBJ’s criminal lawyer fixers, tax attorneys and money launderers Ed Clark and Don Thomas. Ed Clark and Don Thomas were two of LBJ’s absolute closest friends, as was George Brown. Ed Clark and Don Thomas told Barr McClellan that Ed Clark and LBJ were involved in the JFK assassination. George Brown was an old friend who Lyndon Johnson had enriched with decades of large government contracts for his company Brown and Root. In 2020, I asked Barr, “Even if George Brown was not involved in the JFK assassination, do you think he quickly figured out that Lyndon Johnson had just murdered JFK? Barr’s response was a burst of immediate laughter: of course George Brown knew!]
Lyndon Johnson calling
his tax lawyer to sell his Halliburton stock on the day of JFK’s assassination
LBJ makes call from Parkland
Hospital; JFK’s corpse was still warm at this point
[Russ Baker, Family of Secrets, p. 132]
QUOTE
Pat Holloway, former attorney to both Poppy Bush and Jack Crichton, recounted to me an incident involving LBJ that had greatly disturbed him. This was around 1PM on November 22, 1963, just as Kennedy was being pronounced dead. Holloway was heading home from the office and was passing through the reception area. The switchboard operator excitedly noted that she was patching the vice president through from Parkland Hospital to Holloway’s boss, firm senior partner Waddy Bullion, who was LBJ’s personal tax lawyer. The operator invited Holloway to listen in. LBJ was talking “not about a conspiracy or a tragedy,” Holloway recalled. “I heard him say: ‘Oh I gotta get rid of my goddamn Halliburton stock.’ Lyndon Johnson was talking about the consequences of his political problems with his Halliburton stock at a time when the president had been officially declared dead. And that pissed me off… It really made me furious.”
There are many other examples
of LBJ’s apparent unconcern after the assassination, though none so immediate.
For instance, on the evening of November 25, LBJ and Martin Luther King talked,
and LBJ said, “It’s just an impossible period – we’ve got a budget coming up.” That morning he
told Joseph Alsop that “the President must not inject himself into, uh, local
killings,” to which Alsop immediately replied, “I agree with that, but in
this case it does happen to be the killing of the President.” Also, on the
same day LBJ told Hoover, “We can’t be checking up on every shooting scrape in
the country.”
UNQUOTE
[Russ Baker, Family of Secrets, p. 132]
The Making of Halliburton
by Jeffrey St. Clair
[“The Making of Halliburton,” Jeffrey St. Clair,
Counterpunch, July 14, 2005]
https://www.counterpunch.org/2005/07/14/the-making-of-halliburton/
There’s no more pungent
symbol of the corrupt nature of the Bush administration’s invasion and
occupation of Iraq than Halliburton, the Houston, Texas-based oil services conglomerate, which has made
billions from the war even in the face of charges of massive overbilling,
shoddy work, official bribery and political influence-peddling.
The
remarkable thing is that Halliburton’s looting of Iraq and the US treasury
happened in broad daylight, right under the nose of the press, the Democrats
and Michael Moore, who made Dick Cheney’s former company the bete noir of his
film “9/11.” Nothing deterred the company from capitalizing on the war it
helped orchestrate.
Even
the Pentagon’s own team of auditors, who nailed Halliburton red-handed for
bilking the government for $108.4 million in overcharges for only “one task
order” of its work in Iraq, found their report languishing in a kind of
bureaucratic netherland for many months.
The damning investigation by the
Defense Contract Audit Agency was completed in early October of 2004 and
shipped up the line to Pentagon’s dark triumverate, Douglas Feith, Paul
Wolfowitz and Donald Rumsfeld. And there it sat. The Pentagon’s
civilian leadership mothballed the explosive report for more than five months,
until after the election, the inauguration, the State of the Union Address and
the Defense Department budget request had all safely transpired.
Even
congress was denied a peak at the report’s findings until mid-March 2005. The
Pentagon rejected 12 separate requests from Congressman Henry Waxman, the
California Democrat who has spearheaded the ad hoc congressional inquiry into
Halliburton’s contract abuse, seeking to examine the internal audits of
Halliburton’s $2.5 billion contract for fuel supplies and other services to the
US military and occupation government in Iraq.
Waxman charged that the Pentagon
withheld the damaging reports at the behest of the office of Vice President
Dick Cheney, the former CEO of Halliburton.
The
Halliburton audits were also concealed from a team of investigators from the
United Nations, which is probing profiteering from oil contracts in Iraq. More
than $1.5 billion of Halliburton’s $2.5 billion deal was funded by Iraqi oil
sales overseen by the UN.
“The
evidence suggests that the Pentagon used Iraqi oil proceeds to overpay
Halliburton,” says Waxman. “And then the company and the Pentagon sought to
hide the evidence of these overchages from the international auditors.”
Call
it the Oil-for-Contracts scandal. But you didn’t hear daily drumbeats about the
outrageous rip-off on FoxNews.
When
someone finally leaked the audit to Waxman’s office, the documents disclosed a
thick wad of Halliburton billings that the Pentagon bookkeepers deemed
“illogical.”
The most peculiar billing found in this
limited series of transactions was a $27.5 million charge for shipping cooking
gas and heating fuel that the Pentagon auditors valued at $82,000.
This single invoice amounted to an overcharge of more than 335 times the value
of the liquified natural gas delivered by Halliburton’s subcontractors.
The
auditors examined only a single task order in Halliburton’s scandal-plagued
contract with the Army Corps of Engineers, yet their report lambasted nearly
every aspect of the deal, from the no-bid award to the cost-plus nature of the
contract to the almost total lack of supervision of the work orders and the subcontractors.
From
May 2003 to March 2004, Halliburton sent the Corps of Engineers bills totalling
more than $875 million for supplies of fuel to US operations in Iraq. For this
task order alone, the Pentagon auditors estimated that Halliburton overbilled the
government by at least $108.4 million. That’s real money, even by Pentagon
standards.
But
that’s only a rough opening bid for the true scale of the looting, in large
part because the company’s indefatigable stonewalling. The auditor’s report
accuses Halliburton of misleading the government inspectors at nearly every
turn. For example, the auditors allege that Halliburton simply refused to hand
over any information on its subcontractors in Kuwait. “Halliburton failed to
demonstrate its prices for Kuwait fuel were ‘fair and reasonable'”, the
auditors wrote in their report.
Similarly,
Halliburton kept the Pentagon investigators in the dark about the prices it
paid for purchasing fuel from Turkey and Jordan.
The
Defense Contract Audit Agency report comes on top of previous investigations
tagging Halliburton, and its Kellogg, Brown and Root subsidiary, for more than
$442 million in “unsupported” billings for its work in Iraq, including charges
for meals that were never served, $45 cases of pop, unnecessary heavy
equipment, tailoring fees and $152,000 for movie screenings. In all a report
prepared by the Democratic Policy Committee estimates that Halliburton’s
overcharges in Iraq alone exceed $1 billion.
Okay,
the Pentagon learned a billion-dollar lesson the hard way, right? Wrong. In
July, the Pentagon discreetly let slip that it had awarded Halliburton a fat
new contract for yet more logistics work in Iraq. How fat? Try $5 billion. In
fact, the contract was secretly handed to Halliburton in May, but the Pentagon
kept it underwraps for more than a month. Why? “The Army didn’t consider it
necessary” to reveal the terms of the deal, a Pentagon spokesman explained to
Reuters.
In
the ever-expanding universe of Pentagon contracting, cost is never the problem,
public exposure is.
* *
*
Halliburton,
the signature corporation of the Bush-Cheney onslaught on Iraq, didn’t start
its corporate life on the government dole. In fact, the company patriarch, Erle
P. “Red” Halliburton, despised the federal government. His distaste for Uncle
Sam was matched only by his ferocious hatred of Mexicans, blacks and labor
unionists.
In 1919, Red Halliburton started the
New Method Oil Well Cementing Company from his home in Wilson, Oklahoma, a
hardscrabble town in the oil patch. Halliburton’s big innovation was something
called the Cement Jet Mixer. When the oil boom hit Texas, the
wildcatters and other drillers quickly began experiencing problems with their
deep shafts. The steel pipe funneling the oil up from the Permian basin and
other reservoirs of crude would sooner or later develop cracks, allowing
groundwater to contaminate the crude. In some cases, the pipes would even
explode.
Halliburton’s solution, which he
unveiled in the oil town of Burkburnett, Texas, was to seal the well-pipes in a
sheath of concrete, protecting the pipes from corrosion and precious loads of
crude from contamination. He was soon in demand across the oil fields of Texas
and Oklahoma. Erle changed the name of the company to Halliburton and raked in
millions from his patent. Halliburton continues to garner millions from its drilling
technology, from Saudi Arabia to the Amazonian rainforest.
Meanwhile,
in that same crucial year
of 1919, the other half of Halliburton was also beginning to take shape as two
friends from San Marcos, Texas, Herman Brown and Dan Root, formed a road paving
company that would eventually become one of the world’s largest construction
firms. The Brown & Root Company shared Halliburton’s antipathy
toward organized labor, but realized early on that there was a fortune to be
made through outsourced government work.
Brown
& Root also understood that government contracts are a lot easier to get if
you have a politician on retainer.
* *
*
In
the late winter of 1937, the imperious Texas Congressman James P. “Bucky”
Buchanan, chairman of the House Appropriations Committee, suddenly died in
office. Buchanan departed the living with some unfinished business of extreme
importance to his political cronies. The congressman, who controlled the
federal purse, was in the midst of pushing through congress the Lower Colorado
River Project, a scheme to build a network of dams across the Texas hill
country that would bring water to the people and millions in federal funds to
favored contractors. The
centerpiece of this enterprise was the Marshall Ford Dam outside Austin and the
company that had won the contract to build the dam was none other than Brown
& Root.
The $10 million dam deal was the
biggest Brown & Root contract to date. But there were two
problems left by Buchanan’s ill-timed passing: the money for the dam hadn’t yet been approved by
congress and the land at the dam-site wasn’t owned by the federal government.
What had suddenly looked like a sure thing, now found Brown & Root on the unnerving verge of bankruptcy.
The company had gone into debt by more than $1.5 million in order to purchase
the equipment needed to build the dam.
Brown
& Root decided there was no turning back. They began construction on the
dam before getting any federal funds and before the feds had actually acquired
the land from the state of Texas.
But
the company had an ace in the hole in the shape of Lyndon Baines Johnson, the
lumbering former schoolteacher who was vying to replace the departed Buchanan. In the spring of that year,
young LBJ met several times with Herman Brown, vowing to make congressional
approval of the dam project his top priority. Brown sluiced cash into LBJ’s
campaign and he sailed to victory in a special election on May 13, 1937.
LBJ lived up to his obligations. A little more than a week after having arrived
in DC, the freshly hatched congressman had engineered congressional approval
for both the appropriation and the land purchase.
The
Marshall Ford Dam deal launched LBJ’s career a can-do politician without
parallel in American politics and it set Brown & Root on course to become
one of the federal government’s favorite contractors. The apex political fixer Thomas “Tommy the Cork”
Corcoran later observed that “LBJ’s whole world was built on that dam”. So too
was Brown & Root’s.
LBJ
had the good fortune to land on the congressional committee overseeing the operations of the US Navy as it
prepared for World War II. When LBJ’s fortunes rose on the Hill, so did Brown
& Root’s. As a brawny member of the Naval Affair Committee, the
ambitious congressman, a key southern supporter of FDR’s New Deal and therefore
confident of the backing of the White House for almost any pet project, steered
as many big contracts to his political financiers as possible.
It was courtesy of LBJ, and his
privileged position in the congress, that Brown & Root got into the
Pentagon contracting business in a big way. In 1940, the former road paving
firm won a huge contract to build the Corpus Christi Naval Air Station, a
complex of runways, hangars, barracks and command centers sprawling across
2,000 acres of swamp and scrubland on the gulf coast of Texas. It was a model for things to
come.
The Corpus Christi Naval Air Station
was one of the first “cost-plus” contracts, a sweet deal where the government
simply pays every bill the contractor submits. The initial price-tag was pegged
at $23.5 million, with Brown & Root guaranteed a profit of $1.2 million.
But within a year, the cost had soared to more than $45 million, with Brown
& Root pocketing more than $2.4 million in profits. It
was an early lesson in the demented logic of Pentagon contracting: the bigger
the cost-overruns, the juicier the profits. In the end, the Naval Air Station cost the Pentagon more
than $125 million.
The Corpus Christi deal initiated Brown
& Root into the risk-free fraternity of favored Pentagon contractors.
The company that had prospered through the Great Depression thanks to federal
dam projects was poised to
make a killing from World War II, with most of the deal coming courtesy of the
US Navy and its congressional overlord LBJ and the powerful congressman from
Houston, Albert Thomas. Working together, LBJ and Thomas convinced the Navy to
give Brown & Root a lucrative shipbuilding contract, even though, as
investigative reporter Robert Bryce notes, up until that point the company “had
never built so much as a canoe.”
But over the next five years, Brown
Shipbuilding, a huge operation on the Houston Ship Channel, would build 355
ships for the Navy, specializing in sub chasers and escorts for destroyers. The
company made a cool $500 million from the deal.
As
the war drew to a close, Brown & Root went from building ships to melting more than 20,000 surplus
airplanes they bought on the cheap from the War Assets Administration. They
were soon one of the big players in the aluminum business, much of which they
sold right back to the feds, making tens of millions in profits. This neat
trick was followed by a huge cost-plus contract to build the US military base
on Guam in the south Pacific, a deal that started out with a price tag of $25
million but soon ballooned to more than $250 million.
Never
say that Brown & Root wasn’t grateful. They knew that their fortunes rode
on the backs of their political benefactors and they did their best to keep
them happy. Unlike many others in Congress during the 1940s, Johnson wasn’t
rich. He and Lady Bird fretted about money during the early years of their
marriage. Then, in the mid-1940s, opportunity came calling when KTBC, Austin’s
first radio station, went on the market. Using money from Lady Bird’s inheritance and generous
infusions of cash from Brown & Root, the Johnsons bought the station, made
major upgrades in its operations and squeezed federal broadcast regulators into
allowing it to expand its output and change its location to a more central
place on the dial. Soon the Johnsons were rich. As LBJ said, “Finally, I was a
millionaire”.
For
Johnson, money was the route to political power. From his early days running
the Texas branch of FDR’s National Youth Administration, LBJ had set his eyes
on landing a seat in the US senate. LBJ got the NYA position, at the age of 29, through the intervention of
Alvin Wirtz, the lead attorney for Brown & Root and a noted fixer.
As for LBJ, he later said that Wirtz was “like a daddy to me”. Brown & Root
harbored similar ambitions for their man. They owned a few congressmen, but an
obedient senator was the key to a higher order of riches.
LBJ’s
first shot at the senate came in 1941, after Texas Senator Morris Sheppard
keeled over from a brain hemorrhage. Running as a New Dealer and fueled by cash
from Herman Brown, Johnson embarked on a fabulously corrupt campaign against
the populist governor of Texas, W. Lee “Pass the Biscuits, Pappy” O’Daniel, a
flour magnate and the state’s most popular radio personality. He ran on an
anti-union and anti-FDR platform that appealed to rural Texas voters.
Ballot
boxes were bought by both campaigns. Johnson bought them in San Antonio and southern Texas, while O’Daniel,
called the greatest campaigner in Texas history, purchased them throughout east
Texas. With 97 per cent of the votes counted, Johnson led the race and
seemed assured of victory. Then more ballots mysteriously materialized, and
O’Daniel claimed victory by 1,311 votes. The final fix may have been made by a cabal of Texas oil
men and ranchers who wanted O’Daniel out of Austin. They figured he could do
them less damage in Washington.
Johnson
vowed to learn the lessons of his defeat. He shed much of his New Dealer image
and reemerged as a Southern populist, touting his votes against an anti-lynching bill, against
Truman’s bill to outlaw the poll tax, and for the union-busting Taft-Hartley
Act. He also courted cash from every corporation and mogul he could find,
promising to return their investment tenfold.
When
he ran again in 1948,
Johnson almost certainly lost the vote, but stole the election, abetted by
Brown & Root, the company’s lawyer Alvin Wirtz, and newspaper tycoon
Charles Marsh.
Once
again, Johnson faced a popular and reactionary governor for the Texas senate
seat, vacated when Pappy O’Daniel (grew bored of living in DC. This time his
opponent was Coke Stevenson, rancher, bigot and anti-communist. In the
Democratic primary, Stevenson steamrollered Johnson by more than 70,000 votes;
yet in a crowded field, the governor didn’t top 50 per cent, forcing a run-off
election in the fall. It would become the most expensive political campaign
waged in Texas until George W. Bush, underwritten by the descendents of LBJ’s
backers, defeated Anne Richards in the fierce 1994 gubernatorial campaign.
Stevenson was a wildly popular figure
in Texas, but LBJ had an equalizer: a nearly bottomless reservoir of campaign
money provided by Brown & Root and Wirtz’s client list of oil barons,
including H.L. Hunt and Sid Richardson. LBJ also enjoyed free access to a DC3,
courtesy of Brown & Root, which would rush him across the vast Texan plains
for as many as 10 appearances in a single day.
Fifty-two
years later, Halliburton offered its corporate jets for use by George Bush and
his campaign team during the 2000 campaign and subsequent tumultuous Florida
recount. For those flights,
the Bush campaign reimbursed Halliburton only the cost of one first class
ticket.
In 1948 it was also this same DC-3 that
made emergency flights to Austin and Dallas in search of cash from the accounts
of Brown & Root. The money was delivered in $100 bills stuffed into grocery
bags. The bagman was none other than John Connolly, the future governor of
Texas and Halliburton board member. Each haul would net between $40,000and
$50,000 for the Johnson campaign.
Johnson also prevailed upon the Bell
Helicopter Company, which would soon relocate to Texas, to loan him a chopper
for his campaign. One of the first politicians to use the newfangled machine,
Johnson would descend upon his campaign venues with the “Yellow Rose of Texas” blaring from
loudspeakers attached to the landing gear a prelude for the
Wagner-screaming choppers in Apocalypse Now.
All
of this got LBJ close, but quite not close enough, to assure him of an outright
victory. The 1948 election
needed to be both bought and stolen.
As
the polls closed in the Texas senate race of 1948, the margin was razor thin,
with Coke Stevenson running slightly ahead of LBJ. Over the next few days,
precincts across the vast state counted and recounted their votes. Five days after the election,
an amended return came in from Jim Wells County in the southern outback of
Texas. It seems that a certain Luis Salas, following the suggestion of a Brown
& Root lawyer, began scouring the courthouse for a missing box of ballots.
He chanced upon the infamous Box 13 from the hamlet of Alice, Texas, which
contained 220 votes, all for Johnson, which was enough to push LBJ into the
lead by 87 votes. (A later analysis by Johnson biographer Robert Caro showed
that 220 names had been added to the voters’ list after the polls had closed.)
Stevenson
rushed to the courts for relief. He won round one. He got a state judge in
Texas to place an injunction against the ballots from Alice. Again, the race was ultimately
decided by the U.S. Supreme Court by the intervention of a single justice, Hugo
Black. Black was a New Dealer elevated to the high bench by FDR. With time
running out, LBJ’s lawyers Abe Fortas (whom LBJ ultimately rewarded by putting
him on the Supreme Court) and Alvin Wirtz, who was also Brown & Root’s lead
corporate counsel, arranged a secret meeting with Black in his chambers at the
Supreme Court. At this ex parte conclave, Wirtz impressed upon Black the
importance of LBJ’s election to the senate, saying that many New Deal programs
(he presumably did not
mention the gross topic of Pentagon contracts) hinged on the outcome.
On
September 29, 1948, Black came through. The justice issued an order overturning the state judge’s
injunction and also put the brakes on a parallel investigation into vote fraud
in Jim Wells County. LBJ was pronounced the winner of the primary by 87 votes
and then went on to crush his Republican opponent in November.
True
to form, Johnson never tried to conceal the role his corporate sponsors played
in securing the 1948 election. Indeed, he bragged about his prowess at securing
powerful and deep-pocketed backers, saying that his rise to the senate had been “Brown & Root funded.”
Once
again, it didn’t take LBJ long to pay back his political investors with
interest. In the spring of 1949, only months after claiming his senate seat, LBJ, the former New Dealer,
launched an assault on Leland Olds, the chairman of the Federal Power
Commission. Olds, a former muckraking reporter, was appointed by FDR to head
the commission, which set power rates and regulated natural gas prices. His
term expired in 1948, and Harry Truman had just announced his intention to
reappoint him to the position, enraging the oil and gas industry. On Olds’ advice, Truman had
vetoed a bill that would have deregulated the natural gas industry.
In addition to Brown & Root, the
Brown family also owned the Texas Eastern Transmission Corporation, then the
nation’s biggest natural gas pipeline company. The Browns were furious at
Olds’s rulings and pleaded with Johnson to defeat his renomination.
LBJ did more than that. He destroyed the man in a set of hearings that would
lay the groundwork for the show trials of the McCarthy era.
With the help of his pals Sam Rayburn
and Senator Robert Kerr, Johnson, a freshman senator, got himself appointed
chairman of the committee overseeing the Federal Power Commission.
From this position, he launched into an onslaught on Olds, smearing the former
supporter of Herbert Hoover as a “communist” who “travels with those who
proposed the Marxian answer.” LBJ, who only a few years earlier had used his political muscle to secure the
vast public hydropower projects on the Little Colorado with the goal of
providing cheap power to the citizens of the Hill Country, now accused Olds of
“plotting a course toward confiscation and public ownership”.
LBJ’s ambush of Olds was scripted by
none other than Brown & Root’s lawyer, Alvin Wirtz. After this grilling,
Olds was rejected by the senate on a vote of 53-15
and left the government a broken man. Johnson, however, flew back to Houston the night after
his destruction of Olds on a private jet owned by Brown & Root. A company
limousine met him at the airport and whisked away to the Brown & Root suite
at the Lamar Hotel, where a victory party was in full swing featuring whiskey,
women and the richest oil men in Texas men who were primed to get a lot
richer.
As the partnership between LBJ and Brown & Root propelled both the company and the politician to new heights of power and wealth, Halliburton was taking a different track: capitalizing on the globalization of the oil industry.
During World War II, Halliburton was
called upon to help build the infrastructure for the oil fields of Saudi
Arabia, launching a profitable relationship with the petro-kingdom that
persists to this day. While the US oil companies were later given the boot by
the Saudi royal family, Halliburton
continued to prosper, constructing pipelines, refineries and oil terminals.
Soon
there were other summonses from the Middle East. In late 1940s, Halliburton began doing business in
Bahrain, followed by an equally lucrative contract with the royal family of
Kuwait to manage that kingdom’s oil fields.
The big prize in the 1950s was Iran,
where Halliburton enjoyed tens of millions in contracts which were suddenly
placed in jeopardy with election of Mohammed Mossadegh, who had campaigned on a
pledge to nationalize Iran’s enormous oil reserves.
Needless to say, this prospect didn’t sit well with Halliburton and the
consortium of British and American oil companies exploiting Iran’s petroleum
wealth.
When
Mossadegh moved forward with his plans, the oil companies appealed to President
Eisenhower to intervene, who turned the matter over to his National Security
Council. As it happened,
Halliburton had a man on the inside to press its case in the person of Dillon
Anderson. Anderson was a partner in the Houston law firm of Baker Botts, the
family firm of James A. Baker, III, which had represented Halliburton for many
years. Soon after Eisenhower’s election, Anderson, who had funneled more than $200,000 into the
Eisenhower-Nixon campaign, was invited to join the administration as a
consultant to the National Security Council.
The NSC, with judicious prodding from
Dillon Anderson, quickly sanctioned a CIA plan, devised by Kermit Roosevelt, to
overthrow Mossadegh. And so it came to pass. On August 19, 1953, the CIA
launched its coup. Mossadegh was arrested and thrown in to jail and Reza
Pahlavi was re-installed on the Peacock Throne as the Shah of Iran.
In return, the Shah soon signed over
control of Iran’s oil resources to a consortium of western oil companies, lead
by Exxon, Mobil and Texaco. Halliburton was also back in Iran. Over the next 25
years, the company cashed in on more than $10 billion in contracts with Iran.
As for Dillon Anderson, Ike soon elevated
the Yale-trained lawyer from Texas to the position of National Security
Adviser, where he served until 1957.
In 1962, Herman Brown died and his brother, George, began searching for possible corporate suitors who might take over the company. In the summer of that year, George Brown worked out a strange deal with Halliburton, which was looking to diversify its operations. Halliburton agreed to acquire Brown & Root for the bargain basement price of $36.7 million, far below the market value of the company. But in exchange, Halliburton executives agreed to let Brown and his colleagues run the new Brown & Root subsidiary as a quasi-independent arm of Halliburton.
Of
course, the acquisition of Brown & Root had another great advantage for
Halliburton. The fiercely Republican oil services company, which prospered
under Eisenhower, now found many familiar doors in Washington shuttered under
the Kennedy administration.
Brown & Root, though, was riding
higher than ever thanks to its old political fixer, LBJ, now Kennedy’s vice
president. At the time of the merger, Brown & Root had just been handed one
of its biggest federal contracts, the multi-billion dollar deal to build NASA’s
Manned Space Center outside Houston-a complex that would later be renamed the
Johnson Space Center.
But the most majestic profits, as
always, were to be made during wartime and LBJ gave them a big one. During
World War II and Korea, Brown & Root made billions building bases and ships
in the US. But Johnson’s Vietnam War forever changed the role of Pentagon
contractors, and Halliburton’s Brown & Root subsidiary lead the way.
For
the first time, the Pentagon began to privatize construction and logistics
operations during wartime in the war zone. In 1965, Halliburton formed a
consortium with the Idaho-based firm Morrison-Knudsen to manage big
construction projects for the Pentagon in Vietnam. Over the next five years, the contracts would
fatten to more than $2 billion. They also followed a familiar contour: the
contracts were awarded without competitive bidding and on a cost-plus basis
with a guaranteed profit built-in.
Soon Halliburton employees were a
common sight across South Vietnam– digging wells, building latrines, managing
commissaries, excavating harbors and constructing barracks– from Da Nang to Cam
Rahn Bay.
The biggest project by far was its $220
million contract to build the mammoth Air Force Base at Phan Rang, which
Halliburton constructed on top of some the most beautiful Cham temple complexes
in Vietnam. Phan Rang, from which US bombers pounded North Vietnam and
later Cambodia, gained a little notoriety in December 1967, when Bob Hope
brought his Christmas show there featuring a sultry performance by Raquel Welch
that nearly caused a riot on the base.
The
cost overruns in Vietnam quickly swelled and soon caught the attention of
auditors with the General Accounting Office. In 1967, a GAO report on
Halliburton’s operations in Vietnam skewered the company for abandoning “normal
management controls” and for wasting millions of dollars. The GAO disclosed that
Halliburton “could not account for the whereabouts of approximately $120
million worth of materials which had been shipped from Vietnam to the United
States.”
The
GAO audit should have given the company a black eye and caused the government
to reconsider the outscourcing of wartime logistics work, but the prophetic report was
buried by the Pentagon and ignored by the press. As a result, Halliburton flourished. Over the
course of the Vietnam war, Halliburton’s annual revenues nearly tripled and it
emerged from the war as the world’s second largest construction firm, trailing
only Bechtel.
In the fall of 1979, the Iranian revolution led to the expulsion of Halliburton from the lucrative sinecure it had enjoyed under the Shah’s dictatorship.
Not
to worry. Halliburton quickly moved to replace those revenues with an equally rich stream from Iran’s
neighbor and blood enemy, the Baathist republic of Iraq, now under the
grip of Saddam Hussein.
Like
many other US companies that choose to turn a blind eye to the regime’s more
sanginary manifestations, Halliburton had been working in Iraq since the early
1970s, even though the Ford and Carter administrations had both refused to
recognize the socialist government.
In 1973, Halliburton won a $120 million
contract to build Iraq’s two mammoth oil terminals in the Persian Gulf off the
coast from Umm Qasr. This
contract was to prove immensely profitable over the next three war-plagued
decades. For one thing, those big terminals, the Mina al-Bakr and the
Khor al-Amaya were inviting targets. With the outbreak of the prolonged
Iran/Iraq, those oil terminals, Iraq’s main source of getting its crude to
global markets, were hit time and time again by Iranian saboteurs. Each time
they were bombed, Halliburton was called in to repair the damage. Then thirty
years after they were constructed, Halliburton was hired by the Pentagon to
take control of the two terminals and get them into working condition in the
earliest days of the US invasion.
Because
the offshore terminals were such easy targets for Iranian gunboats, in 1981 Saddam signed a $2.5
million contract with Halliburton to build a feeder pipeline from the terminals
out into the Gulf where the crude oil could be safely sluiced into wary
tankers.
Two
years later Saddam hired Halliburton once again. This time the Iraq government
contracted with the Houston firm to build a long oil pipeline, that would skirt Iranian bombs,
running from Basra to Yanbu on the Red Sea in Saudi Arabia. The deal was worth
$2 billion. The pipeline won the approval of the US Undersecretary of State
Lawrence Eagleburger, who would later land a spot on the Halliburton board.
Halliburton
would continue to work on a variety of projects in Iraq right up until the
first Gulf War. Indeed, a few weeks before Saddam sent his tanks into Kuwait,
the Iraqi government had paid Halliburton $57 million for its work on the Mina
Al-Bakr terminal and a seismographic project to help the Iraqi Oil Exploration
Company enhance its exploration technology.
In 1990, Halliburton was picked by the Pentagon to put out 300 oil well fires in Kuwait, while its subsidiary, Kellogg, Brown & Root, grabbed the big contract to reconstruct the ravaged buildings of Kuwait City.
In
1992, Halliburton won a $3.9 million contract from the Pentagon in the waning
days of the George H.W. Bush administration to a develop a scheme for
outsourcing to private corporations much of the logistics and construction work
previously handled by the US Army Corps of Engineers. The plan came to be known
as LOGCAP and Halliburton soon got an additional $5 million to flesh out the
details.
The LOGCAP deal was sanctioned by none
other than Secretary of Defense Dick Cheney. Under the initial contract,
Halliburton established a plan for housing and feeding 20,000 troops in various
hot spots around the globe. In a scenario that would be reprised in the Iraq
war, Halliburton soon won the contract to implement the LOGCAP plan that it had
devised. First stop Somalia, where Halliburton set up shop providing fuel,
food, laundry services and even morticians for US troops.
Then in 1995, at the same time Cheney
was taking over the reins at Halliburton, the Pentagon handed the company a
$550 million contract to provide logistical support for US and NATO’s IFOR
forces in Bosnia, Croatia and Hungry. Halliburton won another
$6.3 million contract to service US troops stationed at the air base in Aviano,
Italy, from which US jets launched bombing raids on Yugoslavia.
The contract was another of the
notorious cost-plus deals, where Halliburton simply faxed over receipts to the
Pentagon and got fully reimbursed, along with a guaranteed 1 percent profit and
performance bonuses that went as high as 8 percent of the total costs.
It’s the contract that keeps on giving.
While
Defense Secretary, Cheney defended this kind of military outsourcing as an
efficient way to control spiraling costs. In reality, of course, the
privatization of military logistics operations was neither cost-conscious nor
particularly efficient. But it was politically expedient since it allowed
civilian officials in the Pentagon
to steer billions into the coffers of favored contractors, such as Halliburton,
Lockheed and DynCorp. Far from being the path toward a leaner military,
the General Accounting Office pegged the LOGCAP program as an adventure in
“high risk government spending.”
In
1997, the renewal of the LOGCAP contract was finally put up for competitive bid
and, lo and behold, DynCorp snatched the golden egg of Pentagon contracts away
from Halliburton. But even the Clinton administration showed mercy to the
Republican firm. It cushioned the blow by awarding Halliburton a $405 million
no bid deal to provide support for US troops in Bosnia. Two years later,
Halliburton won the 5-year renewal of this deal, valued at $180 million.
Then in 1999 Halliburton struck gold
once again in the Balkans when Clinton went to war against Serbia over Kosovo.
Halliburton got a $200 million cost/plus contract to work in Kosovo.
But before the year had ended that contract, covering everything from road
construction, vehicle maintenance and power generation to food services,
latrines and mail delivery, had generated nearly a billion dollars in revenues
for Halliburton.
Of
course, the deal had sublime benefits for the Clinton administration as well.
By outsourcing most of the logistics work in Kosovo, the Pentagon was able to
reduce its deployment by around 8,000 troops, helping Clinton and Albright to
sell an unpopular war at home.
The company’s Kosovo operations were
rife with fraud. Halliburton charged the US Army $85.98 for each sheet of
plywood it used in construction projects during Clinton’s war on Serbia and its
aftermath. A later probe found that the company had bought the plywood for $14
per sheet. A GAO investigation also revealed that Halliburton was billing
the Pentagon for cleaning offices in US bases the Balkans four times a day. One
former Halliburton employee said that the company had inflated costs on 224 different
projects in Kosovo.
There
were also numerous allegations of human rights violations by Halliburton
workers, including mounting claims of racial discrimination and sexual
harassment in the Balkans. Halliburton, which employed thousands of foreign-born
subcontractors, even went so far as to operate segregated dining facilities and
“Americans Only” bathrooms.
In
Iraq, LOGCAP would be a recipe for rampant fraud over the basic of services.
For example, Halliburton sent the Pentagon a bill for $240 million in dining
hall charges for feeding 4,700 troops each day. But a review by Pentagon
auditors found that the bill was inflated by nearly 200 percent, since the
company never served more than 2,500 soldiers on any single day.
The
Clinton years were very good to Halliburton right to the final days. In the fall of 2000, Halliburton
won a $300 million contract to build a massive prison at Guatanamo Bay in Cuba.
This prison, which serves as the torture and interrogation center for Bush’s
wars, was originally designed to hold Haitians and, according to some sources,
Cubans, in the event of the collapse of the Castro government. Two years later,
Halliburton would land the contract to build the other big torture center at
Bagram Air Base in Afghanistan.
In 1995, Halliburton hired Dick Cheney as its CEO. Cheney swiftly announced two goals for the company: make it the top Pentagon contractor and greatly expand its contractual relationships with foreign governments. Speaking of Halliburton’s logistics work for the Pentagon in the Balkans, Cheney said, “the first person to greet our soldiers as they arrive and the last one to wave good-bye is one our employees.” Halliburton: the Alpha and Omega of Pentagon contractors.
Cheney
didn’t have much experience in the corporate world before becoming
Halliburton’s chieftain and his tenure there shows it. But Cheney was no mere
figurehead. At least he didn’t see himself that way. Almost immediately, Cheney
began poking his fingers into the Halliburton corporate machine, with, it must
be said, less than glamorous results. Old hands at Halliburton remember Cheney as arrogant and
inept, a clumsy autocrat.
Of
course, Cheney did deliver some morsels for the shareholders. Most notably,
Halliburton’s US government contracts bulged from $1.2 billion to $2.3 billion
under Cheney’s reign as CEO. Moreover, US government financing for Halliburton
projects in the Third World soared soon after the Wizard of Wyoming took
control of the company, ballooning from $100 million in the five years prior to
Cheney’s arrival to more than $1.5 billion during his time at the helm.
Of
course, Cheney didn’t wrest these deals from the feds alone. When Cheney went to Halliburton
he took along some of his old pals at the Pentagon with him, most notably Admiral
Joe Lopez, a top Cheney aid during the Bush I regime. In 1999, Cheney urged
Lopez to leave the Pentagon and join Halliburton. He rewarded him with the plum
position of vice president for governmental operations-in other words,
Halliburton’s top lobbyist.
Another
Cheney veteran worked along side Lopez to keep the government contracts flowing
to Houston. Dave Gribbin,
one of Cheney’s closest aides, left his position as Assistant Secretary of
Defense for Legislative Affairs for a slot as one of Halliburton’s top
lobbyists. He later served as a key figure on the Bush-Cheney transition
team.
Yet,
even the most forgiving analysis of the Yale dropout’s leadership of
Halliburton must admit that the Cheney years were marked by a series of staggering false moves and
financial missteps that nearly crippled the company. Indeed, it’s fair
to say that the only life-support for the company during those five years was
the nearly inexhaustible
tide of cash coming from Halliburton’s Pentagon contracts. Nearly every other venture
racked up huge levels of debt and legal liabilities
Witness
Cheney’s disastrous decision to acquire Dresser Industries, another oil
services and engineering company. Cheney pursued a company that no one else really wanted and to compound
his blunder he paid an outrageous price for it. Halliburton acquired Dresser
for $7.7 billion, which proved to be at least 16 percent more than the
company’s actual value. In the end, Dresser’s workers paid the price. In the
immediate wake of the Dresser acquisition, Cheney fired 10,000 of the company’s
employees.
There
was an even uglier problem with the Dresser deal that somehow escaped Cheney’s
notice. When Halliburton bought Dresser, it also acquired the company’s enormous asbestos
liability, a burden which Cheney assured company stockholders would be resolved
“without material effect.” It’s the kind of casual lie covering a metastasizing
problem that would become a Cheney signature as vice president.
At
the time of the takeover, Dresser was facing more than 66,000 claims for asbestos-related health problems
from its subsidiary Harrison-Walker. These claims eventually totaled something
on the order of $5.5 billion, an amount that threatened to bankrupt
Halliburton.
Yet,
instead of firing of Cheney for this calamitous mistake, the Halliburton board,
now ornamented by the rotund
figure of former Secretary of State Lawrence Eagleburger, awarded its chieftain
a $1.5 million bonus for his decisive role in the doomed acquisition.
Cheney
also approved a legally dubious scheme to set up dozens of offshore shell
corporations designed to exploit Enron-style accounting hijinks in order to
make Halliburton’s bottom line seem more robust than it really was. These scams
didn’t lead to an indictment of Halliburton executives, but the SEC did ding
the company with a $7.5 million fine for its deviant accounting practices–a slap on the wrist, to be
sure, but a black eye for the moral hypocrite Dick Cheney.
Evidence
of the systematic accounting fraud at Halliburton during the Cheney years has
now been marshaled into a class action suit by Halliburton shareholders that
may even yet doom the company.
But
those off-shore subsidiaries weren’t merely a way of hiding money from
corporate auditors, the SEC and the IRS. They were also designed to help
Halliburton evade government prohibitions against US-based companies doing
business with unsavory regimes.
In 1995, the State Department hit
Cheney’s Halliburton with a $3.8 million fine for violating the trade embargo
with Libya. A similar investigation by the Department of Justice was launched
in 2004 into Halliburton’s operations in the second-leg of the axis of evil,
Iran. Using a subsidiary corporation set up in Cheney time in the Cayman
Islands, Halliburton had been doing business with the Mullahs of Iran since
1997, in flagrant violation of the US trade embargo.
In
a way then, it’s not surprising that Cheney’s official biography, posted on the
White House’s website, forsakes
all mention of his career as the commander-in-chief of Halliburton. But
Cheney does have the quaint habit of taking this modesty too far. In 2003, he
was asked about his financial ties to Halliburton. The vice president demurred,
as if the very name of the company was unfamiliar to him. “I have no financial interests
in Halliburton of any kind,” Cheney said flatly. In fact, at that precise
moment Cheney enjoyed options on 43,300 shares of Halliburton stock and was
pocketing $162,392 a year in deferred compensation from the company.
On February 26, 2003, less than a month before the invasion of Iraq, a meeting was convened in the inner sanctum of the Pentagon. The purpose of this conclave was to devise a project that would come to be known as RIO or Restore Iraq Oil. Gathered around that table just down the hall from the office Douglas Feith were ranking officials from the State Department and the US Agency for International Development (USAID), as well as the Pentagon. The meeting was chaired by Lt. General Carl Strock, a ranking official at the US Army Corps of Engineers.
The
top priority on that February morning was to decide which US company would
receive the juicy contract to put out the expected oil field fires and to
rebuild and manage Iraq’s oil infrastructure, from the wellheads to the
pipelines to the big oil terminals off the coast near Basra.
In
a way, this meeting in the bowels of the Pentagon was all for show, a kind of
mating ritual between the government and its favorite contractor. There was
little doubt about who was going to land the deal. So little doubt, in fact, that a Halliburton
executive had been invited to attend the secret conclave.
Indeed, a few months earlier
Halliburton had already been paid $1.9 million to draft a plan for how to
implement RIO. The company had essentially written its own job description, a
scenario that would make that initial payment mushroom into the billions.
There
were several other companies that could have done the job that was given to
Halliburton. Fluor-Daniel,
Parsons and GSM Services were all were just as qualified for the task. Yet, none of these firms were
invited to submit a bid or a plan of action. Instead, Lt. General Strock
steered the cost-plus contract into Halliburton’s hands without the faintest
whiff of competition. When his own contract auditors objected, Strock
sought to silence them by saying he had determined that “the compelling emergency” in Iraq dictated
swift and unilateral action.
Of
course, this decision had been set in motion much earlier and by figures far
loftier in the power hierarchy of the Bush administration than lowly Lt.
General Strock from the bureaucratic outback of the Corps of Engineers.
An
Army Corps of Engineers email, uncovered by Time Magazine, disclosed that the initial decision to
have Halliburton draft the RIO plan had been “coordinated” with the office of
Vice President Dick Cheney. Over the course of the fall of 2002 and the
early winter of 2003, Halliburton executives met on several occasions with
Cheney’s staff at the White House and at the Pentagon.
At an October 2002 meeting, Michael
Mobbs, an assistant to Undersecretary of Defense Douglas Feith, parlayed with
Cheney’s chief of staff Lewis “Scooter” Libby to personally deliver the
jubilant news that Halliburton had gotten the RIO planning contract.
Cheney,
as is his natural inclination, continues to deny any involvement, direct or
implicit, in the Pentagon deals that have sent billions in no bid contracts to
his former company, at the very same time Halliburton continued to sweeten his
bank accounts with more than $140,000 a year.
There
was another curious hitch to the Halliburton RIO deal. Instead of being
administered by Douglas Feith’s office at the Pentagon (as were almost all of
the other Iraq contracts), the Halliburton RIO contract was pawned off on the
Corps of Engineers, a remote outpost of the Pentagon known, to the extent that
it is known at all, for the management of locks and dams on American rivers.
Then
an unexpected thing happened. Despite a lot of baiting from the US military and
the most bellicose voices of in Bush administration, Saddam didn’t ignite the
Basra oil fields.
For
a moment, it looked as if Halliburton might be left out in the cold. But no. As
if they were rerouting an river in the Smokey’s, the quick-fix generals at the
Corps of Engineers simply reconfigured the terms of the Halliburton contract,
changing it from putting out oil well fires to hauling fuel for US military
operations.
When it came time to select a space for its corporate offices to oversee the new Iraq contracts, Halliburton decided not to bunker down inside the Green Zone in Baghdad. Instead, the company opted for posh offices at the Khalifa resort on the beaches of the Persian Gulf a few miles from Kuwait City. The spot was sunny, safe and expensive. Halliburton spent more than $73 million a year just to house its executives in Kuwait–that’s $73 million a year billed to the Pentagon, plus a two percent profit tacked on for good measure.
It
turns out that there wasn’t much for these managers from Houston to manage.
That’s because nearly all of Halliburton’s work in Iraq was farmed out to subcontractors.
The tricky part was trying to find the right subcontractor. Not necessarily the company that
would do the best job, but the one that would charge the most for the work,
since Halliburton’s built-in profits came as a fixed percentage of the costs.
The higher the costs, the bigger the profits.
Several
of the subcontracts in Iraq were doled out accompanied by the judicious
application of cash bribes. Even here Halliburton benefited. As Halliburton executives and
managers dispensed and received millions in kickbacks, the company
itself simply wrote the dispensations directly onto the invoices submitted by
the subcontractors. Often these bills exceeded the true costs of the projects
by 300 or even 400 percent–with Halliburton snagging a built-in profit from the
bribe-bloated contracts.
Apparently,
Halliburton views these kickbacks and bribes as a kind of a priori cost of
doing business across the globe. A pungent example: A team of French
investigators unearthed a robust Swiss bank account harboring $5 million, which
reportedly derived from bribes involving Halliburton contracts in Nigeria. In
June 2004, the company eased out Jack Shanley, chairman of its Kellogg, Brown
& Root subsidiary, for having received “improper benefits” from this very
account.
A
Department of Justice investigation charged that Halliburton bribed the
Nigerian officials in order to win a billion-dollar construction contract.
Halliburton later discreetly disclosed that it may have paid upwards of $180
million in bribes.
A
parallel probe was launched by the Securities and Exchange Commission into an
admission by Halliburton that one of its managers slipped $2.4 million into the
pockets of another Nigerian official in order to secure illegal tax-breaks for
its business in the impoverished African nation.
* *
*
In
southern Iraq, much of Halliburton’s logistics work ended up in the hands of a
Kuwaiti firm called La Nouvelle, which handled meals, sanitation facilities and
laundry. Before La Nouvelle picked up the subcontract to do the laundry at a US
military base near Basra, the monthly cleaning bill had averaged around
$62,000. A few months after La Nouvelle took over, the tab soared to $1.2
million a month. La Nouvelle billed $108 for each 15-pound bag of laundry at
this base, $80 a bag more than the very same company charged at another base.
Pentagon
auditors concluded that La Nouvelle was overbilling for its laundry services
alone by at least $1 million a month, with Halliburton enjoying its slice of
the profits without even having had to break a sweat. They were quite literally
laundering money.
While
millions were splurged on opulent accommodations for its executives, bribes and
kickbacks and scandalously inflated laundry bills, Halliburton skimped on the
maintenance of its vehicles, which were transporting fuel and supplies on the
dangerous desert roads from Kuwait to the US bases in Iraq. Only six months
into the occupation of Iraq, Halliburton’s fleets of trucks began to breakdown
due to lack of spare parts and shoddy upkeep. The result was not just a slow
down in the delivery of fuel and military supplies, but a greatly enhanced risk
to the lives of Halliburton’s drivers, who were becoming easily identifiable
targets for the growing insurgency in Iraq. By the end of March 2005, more than
65 Halliburton employees had been killed in Iraq and more than 200 injured–the
most of any private contractor in the war zone.
Much
of the fuel those Halliburton drivers were carrying into Iraq came courtesy of
a company called Altanmia, a Kuwait firm with cozy ties to the country’s royal
family.
Altanmia
charged Halliburton a hefty $2.65 per gallon, roughly the price charged at the
pump in Washington, D.C. But this rate was nearly three times the 97 cents per
gallon that the Iraqi Oil State Marketing Organization was paying to buy oil
from Jordan and Turkey.
Halliburton
never uttered the meekest protest about the grossly inflated fuel prices. With
good reason. It simply passed the bills on to the Pentagon and cashed its
reimbursement checks, complete with the 4 percent government gratuity.
In
the first six months of the war, Pentagon auditors estimated that Halliburton
had overcharged the US Treasury by at least $61 million for its fuel
deliveries.
Ironically,
Altanmia executives griped that they were forced to charge that hefty amount in
order to cover the kickbacks and bribes they were forced to pay to Halliburton
officials in order to secure the contract. In an email documenting a meeting
between Altanmia executives and officials at the US embassy in Kuwait City an
Altanmia manager is quoted as saying that “anyone visiting their [i.e.,
Halliburton’s] seaside villas at the Kuwaiti Hilton who offers provide services
will be asked for a bribe.”
When
the price gouging by Altanmia began to draw the attention of Pentagon auditors,
the US Army Corps of Engineers, which was responsible for overseeing the
implementation of the contracts, came up with an elegant solution. It informed
Halliburton that the company no longer had to submit a public record of the
fuel purchases.
This
bizarre and secret waiver of standard Pentagon accounting practices was signed
by the Corps’ top contracting officer, Gordon A. Sumner, on December 19,
2003–stymieing the pending congressional and Pentagon investigations in
contract fraud by the company.
* *
*
In
February 2005, the State Department finally weighed in with a damning report on
Halliburton’s work to rehabilitate the oil fields in southern Iraq. The
unusually frank assessment accused Halliburton of undocumented cost overruns
totaling tens of millions of dollars and generally “poor performance.”
The
State Department report pointed out that Iraqi oil production at the beginning
of 2005 was lower than it had been during the previous fall. The situation had
gotten so dire that the US Embassy in Baghdad, then under the command of John
Negroponte, issued what is known as a “Cure Notice,” a stark warning to
Halliburton executives that if the company’s performance didn’t improve the
$1.2 billion contract would be terminated.
Negroponte
followed up his threat by recruiting the Parsons Corporation, Halliburton’s
archrival, to “execute some of the remaining work in the south.” Parsons had
previously been awarded the $800 million contract to repair and manage the oil
fields around Kirkuk in northern Iraq.
As
far as the Pentagon was concerned all of this was written off to carping from
the sidelines by busy-bodies and tightwads at the State Department. In the
spring of 2005, the Bush administration over-ruled its own auditors and awarded
Halliburton a $9.4 million bonus for its work in Afghanistan and Kuwait,
operations which the Pentagon described as “excellent.”
With
the bulk of the Pentagon contracts cashed in and government investigators
closing in on all fronts, Halliburton placed Kellogg, Brown & Root on the
market, looking to squeeze one final payout from its golden goose.
So who says crime doesn’t pay?
This
is an excerpt from JEFFREY ST. CLAIR’s forthcoming book, Grand Theft
Pentagon (Common Courage, 2005).
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