<font color=brown> Part II<font color=black>
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newyorker.com
According to Peter W. Singer, a fellow at the Brookings Institution and the author of “Corporate Warriors,” published last year, “We’re turning the lifeblood of our defense over to the marketplace.” Advocates of privatization, who have included fiscally minded Democrats as well as Republicans, have argued that competition in the marketplace is the best way to control costs. But Steven Kelman, a professor of public management at Harvard, notes that the competition for Iraq contracts is unusually low. “On battlefield support, there are only a few companies that are willing and able to do the work,” he said. Moreover, critics such as Waxman point out that public accountability is being sacrificed. “We can’t even find out how much Halliburton charges to do the laundry,” Waxman said. “It’s inexcusable that they should keep this information from the Congress, and the people.”
Unlike government agencies, private contractors can resist Freedom of Information Act requests and are insulated from direct congressional oversight. Jan Schakowsky, a Democratic representative from Illinois, told me, “It’s almost as if these private military contractors are involved in a secret war.” Private companies, she noted, can conceal details of their missions from public scrutiny in the name of protecting trade secrets. They are also largely exempt from salary caps and government ethics rules designed to protect policy from being polluted by politics. The Hatch Act, for example, forbids most government employees from giving money to political campaigns.
Halliburton has no such constraints. The company made political contributions of more than seven hundred thousand dollars between 1999 and 2002, almost always to Republican candidates or causes. In 2000, it donated $17,677 to the Bush-Cheney campaign. Indeed, the seventy or so companies that have Iraq contracts have contributed more money to President Bush than they did to any other candidate during the past twelve years.
Sam Gardiner, a retired Air Force colonel who has taught at the National War College, told me that so many of the contracts in Iraq are going to companies with personal connections with the Bush Administration that the procurement process has essentially become a “patronage system.” Major Joseph Yoswa, a Department of Defense spokesman, denied this. He told me that multiple safeguards exist to insure that the department’s procurement process for Iraq contracts is free of favoritism. Most important, he said, career civil servants, not political appointees, make final decisions on contracts.
Gardiner remains unconvinced. “The system is sick,” he told me. Cheney, he added, can’t see the problem. “He doesn’t see the difference between public and private interest,” he said.
George Sigalos, a Halliburton executive, recently gave a speech at a conference in Washington for businesspeople who hoped to obtain government contracts in Iraq. Many in the crowd had paid nearly four hundred dollars to attend, drawn by descriptions of Iraq as “the next Klondike,” as James Clad, an official with the U.S. Overseas Private Investment Corporation, a federal agency, put it. Sigalos began by pointing out that private contractors supplied the bullets that the Continental Army used in the American Revolution. “This didn’t begin with Halliburton,” he said.
Halliburton’s construction-and-engineering subsidiary, Brown & Root Services, started working with the U.S. military decades before Cheney joined the firm. Founded in Texas, in 1919, by two brothers, George and Herman Brown, and their brother-in-law, Dan Root, the firm grew from supervising small road-paving projects to building enormously complex oil platforms, dams, and Navy warships. The company’s engineering feats were nearly matched by its talent for political patronage. As Robert A. Caro noted in his biography of Lyndon Johnson, Brown & Root had a symbiotic relationship with L.B.J.: the company served as a munificent sponsor of his political campaigns, and in return was rewarded with big government contracts. In 1962, Brown & Root sold out to Halliburton, a booming oil-well construction-and-services firm, and in the following years the conglomerate grew spectacularly. According to Dan Briody, who has written a book on the subject, Brown & Root was part of a consortium of four companies that built about eighty-five per cent of the infrastructure needed by the Army during the Vietnam War. At the height of the resistance to the war, Brown & Root became a target of protesters, and soldiers in Vietnam derided it as Burn & Loot.
Around this time, in 1968, Dick Cheney arrived in Washington. He was a political-science graduate student who had won a congressional fellowship with Bill Steiger, a Republican from his home state of Wyoming. One of Cheney’s first assignments was to visit college campuses where antiwar protests were disrupting classes, and quietly assess the scene. Steiger was part of a group of congressmen who were considering ways to cut off federal funding to campuses where violent protests had broken out. It was an early lesson in the strategic use of government cutbacks.
Instead of returning to graduate school, Cheney got a job as the deputy for a brash congressional colleague of Steiger’s, Donald Rumsfeld, whom Richard Nixon had appointed to head the Office of Economic Opportunity. The O.E.O., which had played a prominent role in Johnson’s War on Poverty, was not favored by Nixon. According to Dan Guttman, who co-wrote “The Shadow Government” (1976), Rumsfeld and Cheney diminished the power of the office by outsourcing many of its jobs. Their tactics were not subtle. At nine o’clock on the morning of September 17, 1969, Rumsfeld distributed a new agency phone directory; without explanation, a hundred and eight employee names had been dropped. The vast majority were senior career civil servants who had been appointed by Democrats.
The purging of the office was a mixed success. Bureaucratic resistance stymied Cheney and Rumsfeld on several fronts. But by the time Ronald Reagan became President the overriding principle that had guided their actions at the O.E.O.—privatization—had become a central precept of the conservative movement.
For most of the eighties, Cheney served in the House of Representatives. In 1988, after the election of George H. W. Bush, he was named Secretary of Defense. The end of the Cold War brought with it expectations of a “peace dividend,” and Cheney’s mandate was to reduce forces, cut weapons systems, and close military bases. Predictably, this plan met with opposition from every member of Congress whose district had a base in peril.
Cheney was widely admired for his judicious handling of the matter. By the time he was done, the armed forces were at their lowest level since the Korean War. However, a Democratic aide on the House Armed Services Committee during those years told me that “contrary to his public image, which was as a reasonable, quiet, soft-spoken, and inclusive personality, Cheney was a rank partisan.” The aide said that Cheney practiced downsizing as political jujitsu. He once compiled a list of military bases to be closed; all were in Democratic districts. Cheney’s approach to cutting weapons systems was similar: he proposed breathtaking cuts in the districts of Thomas Downey, David Bonior, and Jim Wright, all high-profile Democrats. The aide told me that Congress, which was then dominated by the Democrats, beat back most of Cheney’s plans, because many of the cuts made no strategic sense. “This was about getting even,” he said of Cheney. Cheney’s spokesman disputed this account, saying that the armed services had specified which bases should be cut, and “Congress approved it without changes.”
As Defense Secretary, Cheney developed a contempt for Congress, which, a friend said, he came to regard as “a bunch of annoying gnats.” Meanwhile, his affinity for business deepened. “The meetings with businessmen were the ones that really got him pumped,” a former aide said. One company that did exceedingly well was Halliburton. Toward the end of Cheney’s tenure, the Pentagon decided to turn over to a single company the bulk of the business of planning and providing support for military operations abroad—tasks such as preparing food, doing the laundry, and cleaning the latrines. As Singer writes in “Corporate Warriors,” the Pentagon commissioned Halliburton to do a classified study of how this might work. In effect, the company was being asked to create its own market.
Halliburton was paid $3.9 million to write its initial report, which offered a strategy for providing support to twenty thousand troops. The Pentagon then paid Halliburton five million dollars more to do a follow-up study. In August, 1992, Halliburton was selected by the U.S. Army Corps of Engineers to do all the work needed to support the military during the next five years, in accordance with the plan it had itself drawn up. The Pentagon had never relied so heavily on a single company before. Although the profit margins for this omnibus government contract were narrower than they were for private-sector jobs, there was a guaranteed profit of one per cent, with the possibility of as much as nine per cent—making it a rare bit of business with no risk.
In December, 1992, working under its new contract, Halliburton began providing assistance to the United States troops overseeing the humanitarian crisis in Somalia. Few other companies in the world could have mobilized as fast or as well. Halliburton employees were on the ground within twenty-four hours of the first U.S. landing in Mogadishu. By the time Halliburton left, in 1995, it had become the largest employer in the country, having subcontracted out most of the menial work, while importing experts for more specialized needs. (A mortician was hired, for example, to clean up the bodies of the slain soldiers.) For its services in Somalia, Halliburton was paid a hundred and nine million dollars. Over the next five years, the company billed the government $2.2 billion for similar work in the Balkans.
Halliburton’s efforts in the field were considered highly effective. Yet Sam Gardiner, the retired Air Force colonel, told me that the success of private contractors in the battlefield has had an unforeseen consequence at the Pentagon. “It makes it too easy to go to war,” he said. “When you can hire people to go to war, there’s none of the grumbling and the political friction.” He noted that much of the scut work now being contracted out to firms like Halliburton was traditionally performed by reserve soldiers, who often complain the loudest.
There are some hundred and thirty-five thousand American troops in Iraq, but Gardiner estimated that there would be as many as three hundred thousand if not for private contractors. He said, “Think how much harder it would have been to get Congress, or the American public, to support those numbers.”
After Cheney’s tenure at the Pentagon ended, in 1993, with the arrival of the Clinton Administration, he spent much of the next two years deciding whether to run for President. He formed a political-action committee, and crossed the country making speeches and raising money. He also became affiliated with the American Enterprise Institute, the conservative think tank. Records from the Federal Election Commission show that Cheney’s pac contributors included executives at several of the companies that have since won the largest government contracts in Iraq. Among them were Thomas Cruikshank, Halliburton’s C.E.O. at the time; Stephen Bechtel, whose family’s construction-and-engineering firm now has a contract in Iraq worth as much as $2.8 billion; and Duane Andrews, then senior vice-president of Science Applications International Corporation, which has won seven contracts in Iraq.
When Newt Gingrich helped bring the House of Representatives into Republican hands, in 1994, Cheney felt reassured that the country was back on the right track, alleviating his need to run. His pac hadn’t raised enough money, in any case. Equally important, colleagues said, Cheney had found that he didn’t enjoy being the center of attention. He preferred to work behind the scenes.
Cheney was hired by Halliburton in 1995, not long after he went on a fly-fishing trip in New Brunswick, Canada, with several corporate moguls. After Cheney had said good night, the others began talking about Halliburton’s need for a new C.E.O. Why not Dick? He had virtually no business experience, but he had valuable relationships with very powerful people. Lawrence Eagleburger, the Secretary of State in the first Bush Administration, became a Halliburton board member after Cheney joined the company. He told me that Cheney was the firm’s “outside man,” the person who could best help the company expand its business around the globe. Cheney was close to many world leaders, particularly in the Persian Gulf, a region central to Halliburton’s oil-services business. Cheney and his wife, Lynne, were so friendly with Prince Bandar, the Saudi Ambassador to the U.S., that the Prince had invited the Cheney family to his daughter’s wedding. (Cheney did not attend.) “Dick was good at opening doors,” Eagleburger said. “I don’t mean that pejoratively. He had contacts from his former life, and he used them effectively.”
Under Cheney’s direction, Halliburton thrived. In 1998, the company acquired its main rival, Dresser Industries. Cheney negotiated the $7.7-billion deal, reportedly during a weekend of quail-hunting. The combined conglomerate, which retained the Halliburton name, instantly became the largest company of its kind in the world. But, in its eagerness to merge, Halliburton had failed to detect the size of the legal liability that Dresser faced from long-dormant lawsuits dealing with asbestos poisoning. The claims proved so ruinous that several Halliburton divisions later filed for bankruptcy protection. The asbestos settlements devastated the company’s stock price, which fell by eighty per cent in just over a year.
Cheney’s defenders have argued that no one could have anticipated the extent of the asbestos problem. Yet the incident presaged a current criticism of Cheney: that he can be blindsided by insular decision-making. Eagleburger, who was on Dresser’s board of directors before it merged with Halliburton, told me, “I can’t fault Cheney as such on asbestos, but somebody slipped up somewhere in the due diligence. Somebody should have caught it.”
The Dresser merger also raised ethical questions. The United States had concluded that Iraq, Libya, and Iran supported terrorism and had imposed strict sanctions on them. Yet during Cheney’s tenure at Halliburton the company did business in all three countries. In the case of Iraq, Halliburton legally evaded U.S. sanctions by conducting its oil-service business through foreign subsidiaries that had once been owned by Dresser. With Iran and Libya, Halliburton used its own subsidiaries. The use of foreign subsidiaries may have helped the company to avoid paying U.S. taxes.
In some ways, the Libya and Iran transactions were consistent with Cheney’s views. He had long opposed economic sanctions as a political tool, even against South Africa’s apartheid regime. During the 2000 campaign, however, Cheney said he viewed Iraq differently. “I had a firm policy that we wouldn’t do anything in Iraq, even arrangements that were supposedly legal,” he told ABC News. But, under Cheney’s watch, two foreign subsidiaries of Dresser sold millions of dollars’ worth of oil services and parts to Saddam’s regime. The transactions were not illegal, but they were politically suspect. The deals occurred under the United Nations Oil-for-Food program, at a time when Saddam Hussein chose which companies his government would work with. Corruption was rampant. It may be that it was simply Halliburton’s expertise that attracted Saddam’s regime, but a United Nations diplomat with the Oil-for-Food program has doubts. “Most American companies were blacklisted,” he said. “It’s rather surprising to find Halliburton doing business with Saddam. It would have been very much a senior-level decision, made by the regime at the top.” Cheney has said that he personally directed the company to stop doing business with Saddam. Halliburton’s presence in Iraq ended in February, 2000.
During the 2000 Vice-Presidential debate, Senator Joseph Lieberman teased Cheney about the fortune he had amassed at Halliburton. “I’m pleased to see, Dick, that you’re better off than you were eight years ago,” he said.
“I can tell you that the government had absolutely nothing to do with it,” Cheney shot back. In fact, despite having spent years championing the private sector and disparaging big government, Cheney devoted himself at Halliburton to securing government funds. In the five years before Cheney joined Halliburton, the company received a hundred million dollars in government credit guarantees. During Cheney’s tenure, this amount jumped to $1.5 billion. One alliance that Cheney worked hard to make was with the Export-Import Bank, in Washington; he won the support of James Harmon, a Clinton appointee and the bank’s chairman. Harmon agreed to make a four-hundred-and-ninety-million-dollar loan guarantee to a Russian company that was drilling a huge oil field in Siberia. It was the largest loan guarantee to a Russian company in the bank’s history, and a big chunk of it would facilitate the Russian company’s purchase of Halliburton’s services. There was a hitch, however: the Russian company, Tyumen Oil, was caught in a messy dispute with several competitors, all of whom accused the others of being corrupt.
Cheney was undeterred by these charges. But he almost lost the Export-Import loan when the State Department attempted to block it, on the ground that Tyumen was involved in illegal activity. According to a source who worked at the State Department at the time, Cheney personally lobbied the government in an effort to keep the deal alive. He was particularly incensed by the involvement of the Central Intelligence Agency, which sided with the State Department. According to a friend of Cheney’s, he was convinced that the C.I.A. had been duped by opposition research spread by Tyumen’s rivals. Eventually, the deal went through. By then, though, Cheney’s frustration with government had become profound. As he said in a speech in 1998, “The average Halliburton hand knows more about the world than the average member of Congress.” |
