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 presunmably 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.
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The Candidate from Brown and Root
ROBERT BRYCE | OCTOBER 06, 2000 | FEATURES
Herman Brown’s huge bet on the Mansfield Dam just keeps paying off. It made Brown a rich man. It secured the future of his company. And it led to other big projects that provided the funds to elect Lyndon Johnson to the United States Senate in 1948 and the White House years later. Today, 63 years after Johnson helped secure federal funding for the dam, it appears that the modern descendent of George Brown’s Brown & Root may once again be propelling a Texas politico toward the White House. Call it fate, dumb luck, or clever politics.
Whatever it is, Brown & Root, arguably the most famous construction company in Texas, is once again near the center of a presidential race. And the company’s political connections are once again paying big dividends.
Brown & Root is a subsidiary of the Halliburton Company, the Dallas-based oil services conglomerate that, until July 25, employed Dick Cheney as chairman of its executive board and CEO. Like LBJ before him, Cheney has used his association with Halliburton and Brown & Root to enrich himself and gain political power. In August, Halliburton announced that it was giving Cheney a retirement package worth more than $33.7 million. That comes on top of more than $10 million Cheney has earned in salary, bonuses and stock options at Halliburton since 1995. In return for his pay, Cheney has helped the company attract government contracts worth hundreds of millions of dollars.
Johnson had it a little easier, as his symbiotic relationship with Brown & Root occurred before campaign finance laws required candidates to reveal the sources of their funding. Indeed, by Johnson’s own admission, according to his biographer Ronnie Dugger, much of the money he got from Brown & Root came in cash. In return, Johnson steered lucrative federal contracts to the company. Those contracts helped Brown & Root become a global construction powerhouse that today employs 20,000 people and operates in more than 100 countries.
"It was a totally corrupt relationship and it benefited both of them enormously," says Dugger, the author of The Politician: The Life and Times of Lyndon Johnson. "Brown & Root got rich, and Johnson got power and riches." Without Brown & Root’s money, Johnson wouldn’t have won (or rather, been able to steal) the 1948 race for United States Senate. "That was the turning point. He wouldn’t have been in the running without Brown & Root’s money and airplanes. And the 1948 election allowed Lyndon to become president," said Dugger, who recently ran for the Green Party’s nomination for the U.S. Senate in New York.
Cheney’s business dealings on behalf of Halliburton and Brown & Root have largely occurred in the public eye and have been scrutinized by the media. But Cheney’s dealings are just as questionable as those undertaken by LBJ. Indeed, in order to increase revenues for the company, Cheney has lobbied against sanctions that are considered part of America’s strategic interests. For instance, the man who is now the Republican candidate for the vice presidency has lobbied against sanctions against Iran — which could keep Halliburton from selling more products and services to that country. Meanwhile, Brown & Root has performed hundreds of millions of dollars worth of work for Libyan dictator Moammar Gadhafi, long suspected of sponsoring terrorism directed at the United States.
But before discussing that, a bit of history on Brown & Root’s dam work. It was 1937, and the Mansfield Dam project (then called the Marshall Ford dam) was in limbo. Brown & Root, which had been a small Belton-based road-building company, was working on the dam even though Congress had not approved the $10 million project. Even worse, the project was illegal because the Bureau of Reclamation, which was overseeing the project, didn’t own the land on which the dam was being built — a minor fact that, under federal law, should have prevented the project from getting under way. But Herman Brown pressed on. He had received $5 million and was betting that he could get the Federal approval and funding needed to finish the project. But he needed Johnson — then a newly elected Congressman — to get it. Johnson delivered. In July of 1937, with the backing of President Franklin Roosevelt, who made it clear he was doing it for "Congressman Johnson," the authorization and funding was approved.
That funding was the key to Brown & Root’s future. In his book on LBJ, Path to Power, Johnson biographer Robert Caro reports that Herman Brown and his brother George made "an overall profit on the dam of $1.5 million, an amount double all the profit they had made in twenty previous years in the construction business."
But Herman Brown wasn’t finished. He wanted another $17 million to make the dam higher by another 78 feet to make it function better for flood control. The Lower Colorado River Authority, which was to operate the dam, didn’t have the money. So once again, Johnson went to work. Of course, he got the money, a move that resulted in even more profit for the Browns. "Out of the subsequent contracts for the dam," writes Caro, "they piled, upon that first million, million upon million more. The base for a huge financial empire was being created in that deserted Texas gorge."
(In retrospect, building the dam higher was a wise choice. During the floods of 1991, Lake Travis crested at 710 feet, just four feet below the level of the spillway. Without the extra height demanded by the Browns, or another dam, parts of Austin would likely have been inundated.)
The Mansfield project led to dozens of others. It also made the Browns believe in Johnson. "Herman Brown let Johnson know that he would not have to worry about finances in this campaign — that the money would be there, as much as was needed, when it was needed," writes Caro.
Johnson then steered all kinds of federal projects to Brown & Root — including airports, pipelines and military bases. During the Vietnam War, the company built roads, landing strips, harbors and military bases from the Demilitarized Zone to the Mekong Delta. But the company’s relationship with the government would continue long after LBJ was laid to rest along the banks of the Pedernales.
And Brown & Root enjoyed especially great success attracting military contracts during Cheney’s tenures, first as Secretary of Defense, then at Halliburton (see sidebar). Cheney also helped the company obtain federally subsidized loans, loan guarantees and insurance. In the five years prior to Cheney’s arrival, Brown & Root garnered about $100 million in loans and guarantees from the Export-Import Bank and the Overseas Private Investment Corporation, two government agencies that sponsor overseas development by American companies. Since 1995, the company has received $1.5 billion worth of assistance from those same two entities. Whether those loans would have come to Halliburton without Cheney’s presence is impossible to say. But some critics believe Cheney’s trips through the revolving door between government and business are improper.
"It’s always of concern to us when we see people in public service who catapult into positions of wealth and influence in the private sector because they can convert their contacts into wealth in the private sector," says Peter Eisner, managing director of the Center for Public Integrity, a Washington-based nonprofit that has issued a report on Cheney’s deals (www.public-i.org). "Securing government-guaranteed loans for Halliburton is troubling enough," says Eisner. "But now we find out that the same defense secretary will go through the revolving doors once more and be potentially the second most powerful person in the United States."
Before joining Halliburton, Cheney had no experience in the oil business. But that didn’t appear to be a handicap. "What Dick brought was obviously a wealth of contacts," new Halliburton CEO (and former president of the Brown & Root subsidiary) David J. Lesar, recently told The Baltimore Sun. "You don’t spend 20-some years in Washington without building a fairly extensive Rolodex."
Cheney’s Rolodex was particularly important to Halliburton in its efforts to work against the sanctions devised by Cheney’s Republican role model, former President Ronald Reagan. In 1986, Reagan said that the regime of Gadhafi represents a "unique threat to free peoples," and he described it as a "rogue regime that advances its goals through the murder and maiming of innocent civilians." The Reagan Administration pushed for — and got — economic sanctions against Libya after the country was implicated in numerous terrorist actions, including the bombing of Pan Am Flight 103 over Lockerbie, Scotland, in 1989.
But when Cheney became the CEO at Halliburton, his allegiance quickly shifted from geopolitical Reaganomics to economics. What was good for America was not good for Halliburton. In a 1998 speech, Cheney said the United States has "become sanctions-happy," and that it is "very hard to find specific examples where they [sanctions] actually achieve a policy objective." That same year, Cheney personally lobbied United States Senator Phil Gramm in an effort to get a waiver from the Iran Libya Sanctions Act, a Federal law passed overwhelmingly by Congress in 1996, which prohibits American interests from doing major business deals in those countries.
Cheney sought a way around the sanctions so that Halliburton could provide oil-field goods and services to Iran’s oil industry. He tried to craft innovative approaches for Brown & Root to operate more openly in Libya. Since the mid-1980s, Gadhafi’s "rogue regime" has paid Brown & Root more than $100 million to oversee engineering work on the Great Man-Made River Project, a massive, $20 billion pipeline project that will provide water for Tripoli and other Libyan cities. To get around the United States sanctions, Halliburton transferred the engineering work to Brown & Root’s overseas offices. But it still hasn’t escaped American law enforcement. In 1995, according to The Baltimore Sun, Brown & Root was fined $3.8 million for re-exporting United States goods through a foreign subsidiary to Libya — in violation of United States sanctions.
Given the United States’ stand on Libya, does Brown & Root’s work there subvert American foreign policy objectives? Dirk Vande Beek, Cheney’s spokesman, refused to comment and referred the issue to Halliburton’s press office. And what about Cheney’s stand on economic sanctions, which conflicts with Bush’s belief in their effectiveness? Cheney "is going to support what Governor Bush has been saying about them," says Vande Beek.
For Cheney, his latest role is just another in a series of political makeovers: from staunch Reaganite, where economic sanctions were a primary weapon, to chief of the United States military under George Bush, where he was an enforcer of economic and military sanctions against America’s enemies, to Halliburton, where sanctions were unprofitable, to vice presidential nominee, where sanctions are once again A-okay.
It’s the kind of flexibility that a businessman like Herman Brown would have appreciated.
Contributing writer Robert Bryce is a contributing editor at The Austin Chronicle, where a shorter version of this article originally appeared.
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In 1992 when Clinton was President, the Pentagon paid a Halliburton subsidiary, Brown & Root Services, $3.9 million to produce a classified report detailing how private companies — like itself — could help provide logistics for American troops in potential war zones around the world. Brown & Root specializes in such work. From 1962 to 1972, for instance, the company worked in the former South Vietnam building roads, landing strips, harbors and military bases. Later in 1992, the Pentagon gave the company an additional $5 million to update its report. That same year, Brown & Root won a five-year logistics contract from the United States Army Corps of Engineers to work alongside American GIs in places like Zaire, Haiti, Somalia, Kosovo, the Balkans and Saudi Arabia.
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KBR needs to cut Iraq work force, audit says
By Richard Lardner - The Associated Press
Posted : Sunday Nov 1, 2009 10:58:43 EST
http://www.armytimes.com/news/2009/11/ap_kbr_iraq_110109/
WASHINGTON — Pentagon auditors are warning the Army’s primary support contractor in Iraq, responsible for everything from mail and laundry to housing and meals, to cut its work force there or face nearly $200 million in penalties for keeping thousands too many on the payroll.
According to an internal Defense Department audit, Houston-based KBR Inc. has increased employee levels while U.S. troops steadily leave the country after more than six years of war. As a result, the U.S. government is paying far more in labor costs in Iraq than it should as military resources are shifted to Afghanistan.
“Each day that passes without taking action results in continued overstaffing and inefficiency,” the report from the Defense Contract Audit Agency says.
The Oct. 26 audit, obtained by The Associated Press, opens a window into a behind-the-scenes battle over KBR’s billing and management practices. The company provides crucial battlefield services under a $33.8 billion, 10-year deal signed in 2001.
There have been serious disagreements between KBR and defense auditors, who have challenged billions of dollars in charges as questionable. And KBR’s critics, many of them Democrats on Capitol Hill, have accused the company of gouging the government during a time of war instead of being a responsible steward of public money.
The report from the audit agency, the military’s first line against waste and fraud, is sure to reinvigorate KBR’s detractors. The audit also reveals a confrontational approach that a congressional oversight committee has said the agency uses too sparingly when dealing with contractors.
Last week, director April Stephenson was forced out of her job following unflattering reviews of the agency’s performance. Stephenson, whose last day as director is Friday, is scheduled to appear Monday at a hearing held by the independent Commission on Wartime Contracting on the management of contractors in Iraq and Afghanistan.
KBR officials reviewed the audit before it was finalized and their responses are included in the 26-page report. They disagree with many conclusions, saying the company has planned to cut employee levels in Iraq. But these efforts have been slowed while KBR waited for formal guidance from the military on the drawdown, they said.
In an e-mailed statement, KBR spokeswoman Heather Browne said the company is reviewing the final audit and is closely engaged in the military’s drawdown planning. She said the company’s work in Iraq “is being conducted in the ever-changing environment of a war-zone which brings its own daily challenges and priority tasks.”
But KBR’s planning consists of a series of “disjointed processes” and weak accounting procedures when a detailed, forward-looking strategy is needed for dealing with a drawdown that was announced nearly a year ago, the report says. A small company might be excused for such a shortcoming, it says, but KBR should not be.
“A large corporation with nearly 17,000 direct hire employees in Iraq can not effectively communicate a consistent strategy at all levels of management without a formal written plan,” the audit states.
KBR had 17,034 employees in Iraq in January 2008, when there were about 160,000 American forces there to quell a growing insurgency, the audit says. Yet as of this Sept. 1, there were 17,095 KBR employees in Iraq even though troop levels had dropped to about 130,000, bases had closed and the services KBR provides were being scaled back.
Current plans call for the number of U.S. troops in Iraq to fall to 50,000 by August. All American forces are scheduled to be out of the country by December 2011.
Although KBR already should have made significant reductions, the report proposes giving KBR until Jan. 1 to put in place a plan that would trim 2,857 employees identified in the audit as excess. Each full-time KBR employee earns about $8,425 a month in pay and benefits, the audit says, so the employee cuts will produce nearly $193 million in labor costs between the first of January and the end of August, the audit says.
The auditors say if KBR does not make the recommended changes or take even more aggressive steps, the agency will challenge future costs for the excess staff as being “unreasonable,” which means the company may not be paid by the government.
The final call, however, on whether to implement the audit’s recommendation and withhold any payments rests with the contract managers at Army Sustainment Command in Rock Island, Ill.
The command said late last week it has not completed its analysis of the audit. Lee Thompson, a senior command official, is scheduled to testify at the contracting hearing Monday.
Michael Thibault, co-chairman of the commission, said contractors have an obligation to reduce costs without being told to do so by the government.
“I would hope that the Army is going to be all over this,” he said.
http://www.armytimes.com/news/2009/11/ap_kbr_iraq_110109/
