Bush Cronies Cash in on their Dirty Wars.
Divvying up the Iraq Pie
By Stephen Pizzo, misleader.com
October 7, 2003
Editor's Note: The following report is a detailed breakdown of the
small group of individuals and companies that are reaping the
benefits of the Iraq war reconstruction.
The Wall Street Journal describes it as "the largest government
reconstruction effort since Americans helped to rebuild Germany and
Japan after World War II." Just how much the rebuilding of Iraq will
cost American taxpayers is a figure still too elusive to capture. But the
President's request for an additional $87 billion in September, atop the
$3.7 billion a month we are already spending, indicates the final figure
will be, as one pundit described it, quite "an adult number." Recent
estimates now put the final figure somewhere between $200 billion to as
much as half a trillion dollars over the next ten years.
America's Iraq-sticker-shock may turn to anger when taxpayers
discover the small group of men and companies reaping the benefits of
President Bush's newly found appreciation for nation building. While
Vice President Dick Cheney's company, Halliburton, has attracted most
of press attention for its Iraq-related contracts, Halliburton is hardly the
whole story. Halliburton's share is but a slice of multi-billion dollar pie
being divided up among a brotherhood of unusually well connected and
economically related individuals and entities.
Science Applications International, Inc. (SAIC)
San Diego California
The Associated Press describes Science Applications International Inc.
(SAIC) as "the most influential company most people have never heard
of." The Asia Times calls it "the most mysterious and feared of the big
10 defense giants."
SAIC ranks among the top ten companies receiving defense contracts.
Founded in 1969 by former Los Alamos physicist, Dr. J.R. Beyster, the
company is the largest employee-owned company in the nation. The
company boosts in excess of $6 billion in annual revenues and 30,000
employees worldwide. Employees are encouraged to buy shares in the
company and are allowed to sell them to one another once a year at
prices set by the company's auditor. If they leave the company they are
required to sell their shares back to the company.
SAIC might best be described as
"the-company-of-what's-happening-now" in defense and intelligence.
If it's important and it's happening, it's likely that SAIC has piece of the
action. The company's ranks overflow with former or retired
government person, many from the military and intelligence agencies.
Much of SAIC's work is highly classified.
At any given point in time, SAIC's board of directors represents a
Who's Who of former military and intelligence officials. Retired Admiral
Bobby Inman has been a fixture on SAIC's board of directors for years.
Inman served as Director of Naval Intelligence, Vice Director of the
Defense Intelligence Agency, Director of the National Security Agency,
and finally Deputy Director of Central Intelligence.
SAIC's board changes to reflect the politics of the time. Gone from
SAIC's board are directors with expertise in Cold War and Iran/Contra
eras like former Nixon Defense Secretary Melvin Laird, Ex-CIA
Director Robert Gates, Secretary of Defense William Perry, and former
CIA Director John Deutch.
They have been replaced by people with more timely contacts, such as
SAIC director Gen. Wayne Downing, (US Army retired.) Before the
war Downing served as a lobbyist for the US-backed Iraqi National
Congress and its head, Ahmad Chalabi. Downing (along with Bechtel
director George Shultz) also served on the board of the Committee for
the Liberation of Iraq.
Long before the shooting began SAIC was already at work on Iraq.
The trail of contracts begins with William Owens, another former
high-level military officer who sits on the boards of five companies that
received millions in defense contracts last year. Owens also served as
president, chief operating officer and vice chair of SAIC. And, Owens is
a member of Defense Secretary Donald Rumsfeld's internal think-tank,
the Defense Policy Board.
Noteworthy: In 1995 the company was ordered to pay a
$2.5 million fine after a whistleblower charged SAIC had
cheated the Air Force on a contract to develop jet fighter
cockpit displays. (Hollis v SAIC, #93-CV-390)
To say the Defense Policy Board's membership tips to the right would
not be an overstatement. Among its members; Ken Adelman (who
made the rounds of network talk shows assuring Americans a war in
Iraq would be "a cake walk,") Newt Gingrich, Richard Perle, Dan
Quayle and Bechtel senior vice president, retired Army General Jack
Sheehan. The Center for Public Integrity reports that of the 30 DPB
members nine have ties to companies that have won more than $76
billion in defense contracts last year.
SAIC's Iraq contacts (at least those not classified) appear to begin
some time in February 2003, nearly two months before the war, when
the Pentagon formed the Iraqi Reconstruction and Development
Council (IRDC). Initially based in Virginia the group was composed of
a hastily assembled group of Iraqi dissidents. The IRDC was the first
attempt to "put an Iraqi face" on the US's postwar administration of
Iraq. While it had an Iraqi face, the IRDC had an American paymaster -
SAIC. IRDC members were on the SAIC payroll. (Ref. Middle East
Conference)
Today IRDC members hold key positions at each of the two-dozen
Iraqi ministries.
Another of SAIC's operations did not go quite as smoothly. In
mid-April the Pentagon launched the "Iraqi Indigenous Media
Netorwork" (IMN). SAIC was hired to oversee the project. The
company hired former Voice of America director Robert Reilly to direct
the new network. Reilly's conservative views were well known. During
the Reagan administration Reilly headed the White House information
operation backing the Nicaraguan Contras. (Ref: BBC World Trust
Audit Report)
But times had changed and Reilly's heavy-handed methods backfired.
He lasted less than two months as IMN staffers walked out in disgust.
"SAIC didn't have any suitable qualifications to run a media network,"
said Rohan Jayasekera, a media analyst for London-based Index on
Censorship. The Washington Post reported that under SAIC's
stewardship "Increasingly, the newscasts became irrelevant for Iraqis.
"Saddam Hussein is doing better at marketing himself through al-Jazeera
and al-Arabiya," said Ahamad Rikabi, a highly regarded Iraqi brought in
to help manage the project who later resigned in protest.
Just how much other of the Iraq-reconstruction pie SAIC has cornered
is impossible to determine. Some of the work is done under
subcontracts with other prime contractors. Other work is classified
secret. But a look at the company's web site showed SAIC job
openings in communications, engineers, protection security analysts,
database techs, recruiters and personnel screeners, and movement
control team leaders. All required a "secret" security clearance.
Noteworthy: Some of SAIC's work comes through
sub-contracts with defense firm, Vinnell Corp., a
subsidiary of TRW. One of those contracts involves
advising the Saudi Royal family on security matters. Vinnell
is a leader in training foreign military forces to U.S.
standards. Vinnell has been the contractor for training and
modernization of the Saudi Arabian National Guard. It
advertises for ex-soldiers able to train the Saudis in
battalion operations, the Bradley fighting vehicle, anti-tank
weapons and physical security to guard against terrorist
attacks. (Ref: Global Research)
Noteworthy: In March the General Services
Administration awarded SAIC the contract to upgrade the
GSA with telecommunications systems. SAIC Telcordia
Technologies subsidiary was awarded the three-year
contract (with five one-year options to renew). The
company will provide voice, data, video, wireless and
cable upgrades. The "Connections" contract was
described as a "indefinit-delivery/indefinit-quality" contract.
(Ref)
Finally, some SAIC trivia:
SAIC's venture capital arm funded the development of software
web-based collaboration software used by Halliburton and the
US Navy "to create a secure collaborative environment for
advanced materials development."
In August the US Office of Force Transformation released a
study that outlined what it had learned during Operation Iraqi
Freedom. That report was prepared for the OFT by SAIC.
Finally, there has been no small degree of hand wringing since the
2000 Florida vote-counting fiasco over well-connected
companies getting contracts to design the new generation of
computerized voting machines and the software that operates
them. Diebold Election Systems, a leading builder of e-voting
systems, has caused the biggest stir. Earlier this year a study by
researchers at Johns Hopkins University reported what they
called serious security flaws in Diebold's machines. The report
concluded "Diebold's electronic voting system did not meet even
the most minimal security standards. To quell fears that Diebold's
machines can be programmed to spit out desired results the
company hired SAIC to investigate.
Noteworthy: When former germ warfare scientist Dr.
Steven Hatfill became "a person of interest" to the FBI
following the October 2001 anthrax attacks, the feds did
not have to look far to find him. At the time Hatfill was
employed by SAIC where he was working on related
projects. The company promptly fired Hatfill, who has still
not been charged with anything. "Ironically, after they fired
me," Hatfill said, "they had me come back to finish work
on several projects I had going there at the time." (Ref:
From a public statement issued by Dr. Hatfill.)
Baker-Hughes
Houston, Texas
Another company in on the early planning for a post-war Iraq was
Houston oil services company, Baker-Hughes. In December 2002 the
Council for Foreign Relations (CFR) joined with former Bush I
administration Secretary of State, James Baker III to release an outline
for rebuilding post-war Iraq entitled "Guiding Principles for U.S.
Post-Conflict in Iraq." (Full report)
The committee that conducted the study was chaired by Edward P.
Djerejian, a director of the James A. Baker III Institute for Public
Policy. Djerejian is also a director and head of compensation committee
for Baker-Hughes. Among the conclusions of the Baker Institute's
report: "After two major wars and a decade of sanctions, Iraq's oil
industry is in desperate need of repair and investment."
Even before the report was made public investors were already picking
winners and losers. "On a longer-term basis, however, the (Iraqi oil)
fields have been long neglected and are in need of repair. Two U.S.
companies that are obvious beneficiaries are Halliburton (HAL), and
Baker Hughes (BHI)." (Bull & Bear Investors Report)."
While Baker-Hughes was not among the first to bag contracts in Iraq,
they are on the short list of those who will in the second, potentially
more lucrative wave of contracts to rebuild and operate Iraq's oil fields.
According to a recent report by petroleum industry publication, Platts
Global Energy Report, Iraq, oil reserves will exceed the 300-bil barrels
and over 110 trillion cubic feet of natural gas. With natural gas now
fueling a growing number of US power plants and prices on the rise,
Iraq's natural gas reserves may end up being the real prize.
Noteworthy: In March 1999 the Securities and Exchange
Commission accused Baker-Hughes and its accounting
firm, KPMG, of violating the Foreign Corrupt Practices
Act of 1995. The SEC alleged that the two companies
conspired to bribe foreign officials to gain contracts in
Indonesia, Brazil and India, disguising the bribes in its SEC
filings as normal business expenses. The company settled
with the SEC in 2001. (Ref: SecMail)
Noteworthy: Following accounting scandals KMPG
changed the name of its business-consulting arm to
BearingPoint. BearingPoint has been granted a $76 million
USAID contacts in Iraq to oversee and manage ,
"Economic Recovery, Reform and Sustained Growth in
Iraq." (Ref: USAID.)
Noteworthy: In August the SEC opened an investigation
into Baker-Hughes business practices in Nigeria, Angola
and Kazakstan. The investigation stems from a March
2002 complaint alleging that the company had actively
tried to bribe government officials. (Ref: Houston Business
Journal)
Baker-Hughes 1 Year Stock Price
As we sorted through the relationships that brought Baker-Hughes to
the table, we ran into a familiar name from earlier noteworthy events.
Djerejian shared authorship of the Baker Institute report with Frank
Wisner, Jr., a name that surfaced earlier among the ashes of Enron.
Wisner was appointed to Enron's board of directors in 1997 and was a
prime mover behind one of Enron's most notorious and controversial
projects, the Dabhol Power project in Dabhol, India. (Ref: Corporate
Watch)
Among those Wisner hired by Wisner to lobby India's leaders to back
Enron's various projects was James Baker, III. But the power plant
project blew up in Enron's face when India's press reported the terms of
the contract, which allowed Enron to grossly overcharge its Indian
clients for energy. When the deal erupted into a political scandal alleging
bribery and influence peddling, India tried to cancel the contract, only to
be confronted by intense political pressure from both Vice President
Dick Cheney and National Security Advisor Condolezza Rice. Both
Rice and Cheney pressured India to comply with the original terms of
the contract, threatening negative consequences if it did not do so.
(Enron's subsequent bankruptcy ended the project.)
Not every US company can boast such high-octane contract
negotiators. But then, Frank Wisner Jr., is no ordinary corporate
executive. He spent much of his adult life in upper echelons of
government serving in a succession of posts; U.S. Ambassador to India,
Under Secretary of Defense for Policy, Under Secretary of State for
International Security, Ambassador to the Philippines, Ambassador to
Egypt, Deputy Secretary for African Affairs and Ambassador to
Zambia. (Wisner's father was a legendary CIA official running
propaganda operations for the CIA in Eastern Europe from 1947 until
his suicide in 1965.)
His brush with scandal left Wisner unscathed. He is now vice chairman
of international insurance giant, AIG, which donated over $1 million to
Republican candidates and the Republican Party during the 2002
election cycle and itself has an eye on post-war Iraq.
"In the long run, financial services institutions like AIG are very
interested in the Iraq market," Wisner told reporters last month, "but we
recognize there has to be a political authority, a regulatory environment.
These rules do not today exist. When they do, we will come in."
Noteworthy: This September the Securities and Exchange
Commission slapped AIG with one of the largest penalties
in its history, $10 million. The commission accused AIG of
conspiring in an accounting fraud to hide loses at a
troubled cell phone company by providing a phony $12
million asset in return for a secret $100,000 fee and for
providing false responses during the investigation. (Ref)
Fluor International Corp.
Aliso Viejo, California
Fluor may sound French but it's an all-American company now based in
California but with roots in Houston, Texas. Fluor Corporation is one of
the world's largest, publicly owned engineering, procurement,
construction, and maintenance services organizations with deep
involvement in military logics.
Fluor spokesman Jerry Holloway wouldn"t disclose the total potential
value of the Iraq contracts when asked by reporters, but published
reports have put the dollar figure at $900 million; one expert said it
could easily go higher. (Ref)
Even before bagging nearly a billion dollars in Iraq contracts Fluor had
already been enjoying tens of millions of dollars in contracts in
Afghanistan.
While Fluor bills itself as an "environmental services company"
environmentalists might differ. Fluor manages the government's Hanford
Nuclear Reservation in Washington, one of the most heavily polluted
sites in North America. Since Fluor took over the site in the mid-1990s,
workers and local citizens have charged the company with cost cutting
measures that have created potential environmental and health concerns.
The company responded by firing whistleblowers and shutting down the
Hanford Joint Council, a public forum established eight years ago to
air employee and local government concerns over plant safety. (Ref:
Gov. Accountability Project)
Noteworthy: On March 10 of this year, the United States
Supreme Court rebuffed an effort by Fluor to block a suit
by eleven Hanford pipe fitters who claimed they were
either terminated or harassed for complaining about safety
issues. The pipe fitters worked at the high-level nuclear
waste tank farms at the Hanford Nuclear Site.
Fluor's Hanford contract was set to expire at the end of 2001 but the
Department of Energy has extended Fluor Hanford's contract through
2006. The six-year contract is worth approximately $3.8 billion, with
incentives for Fluor to earn up to about $168 million in profit. (Ref)
Noteworthy: In August lawyers in Sasolburg, South
Africa filed a $1 billion claim against Fluor alleging the
company discriminated against its black workers during
apartheid. The suit, which the lawyers say will be filed in
California courts, alleges that Fluor paid blacks less than
whites and that the company helped repress black workers
during a 1987 strike in which two strikers were killed.
Plaintiffs' attorney Ed Fagan also charged Fluor aided
apartheid by helping the country evade UN oil sanctions.
The company has denied the accusations. (Ref)
But, like all other large defense contractors, sometimes it's just cheaper
to pay a fine and move on to the next contract. In 1994 Fluor paid a
$3.2 million fine for 'submitting heavily padded repair bills for work on
Navy bases after hurricane Hugo; in 1997 it was charged with
"violations of the False Claims Act" when the company sought
government reimbursement. The company settled for $8.4 million; same
year, it was charged with "failure to effectively complete corrective
actions" on a DOE project and fined $10,000; in 1998 it was fined
$140,625 for safety violations on a DOE project; in 1999 it was fined
$30,000 for "multiple and recurring failure to adequately and fully
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