Contract Sport
By Jane Mayer
The New Yorker
February 9th, 2004
What did the Vice-President do for Halliburton?
Vice-President Dick Cheney is well known for his discretion, but his official White House biography, as posted on his Web site, may exceed even his own stringent standards. It traces the sixty-three years from his birth, in Lincoln, Nebraska, in 1941, through college and graduate school, and describes his increasingly powerful jobs in Washington. Yet one chapter of Cheney’s life is missing. The record notes that he has been a ‘businessman” but fails to mention the five extraordinarily lucrative years that he spent, immediately before becoming Vice-President, as chief executive of Halliburton, the world’s largest oil-and-gas-services company. The conglomerate, which is based in Houston, is now the biggest private contractor for American forces in Iraq; it has received contracts worth some eleven billion dollars for its work there.
Cheney earned forty-four million dollars during his tenure at Halliburton. Although he has said that he “severed all my ties with the company,’ he continues to collect deferred compensation worth approximately a hundred and fifty thousand dollars a year, and he retains stock options worth more than eighteen million dollars. He has announced that he will donate proceeds from the stock options to charity.
Such actions have not quelled criticism. Halliburton has become a favorite target for Democrats, who use it as shorthand for a host of doubts about conflicts of interest, undue corporate influence, and hidden motives behind Bush Administration policy, in particular, its reasons for going to war in Iraq. Like Dow Chemical during the Vietnam War, or Enron three years ago, Halliburton has evolved into a symbol useful in rallying the opposition. On the night that John Kerry won the Iowa caucuses, he took a ritual swipe at the Administration’s “open hand” for Halliburton.
For months, Cheney and Halliburton have insisted that he had no part in the government’s decision about the Iraq contracts. Cheney has stuck by a statement he made last September on “Meet the Press”: “I have absolutely no influence of, involvement of, knowledge of in any way, shape, or form of contracts led by the Corps of Engineers or anybody else in the federal government.” He has declined to discuss Halliburton in depth, and, despite a number of recent media appearances meant to soften his public image, he turned down several requests for an interview on the subject. Cheney’s spokesman, Kevin Kellems, responded to questions by e-mail.
Representative Henry Waxman, a liberal Democrat from California and the ranking minority member of the House Committee on Government Reform, has argued aggressively that the Bush Administration has left many questions about Halliburton unanswered. Last year, for example, a secret task force in the Bush Administration picked Halliburton to receive a noncompetitive contract for up to seven billion dollars to rebuild Iraq’s oil operations. According to the Times, the decision was authorized at the “highest levels of the Administration.” In an interview, Waxman asked, ‘Whose decision was it? Was it made outside the regular channels of the procurement process? We know that Halliburton got very special treatment. What we don’t know is why.”
Halliburton has been accused of exploiting its privileged status. Last year, a division of the company overcharged the government by as much as sixty-one million dollars in the course of buying and transporting fuel from Kuwait into Iraq. Halliburton charged the United States as much as $2.38 per gallon, an amount that a Pentagon audit determined to be about a dollar per gallon too high. Although Halliburton has denied any criminal wrongdoing, the inspector general for the Department of Defense is considering an investigation.
Halliburton blamed the high costs on an obscure Kuwaiti firm, Altanmia Commercial Marketing, which it subcontracted to deliver the fuel. In Kuwait, the oil business is controlled by the state, and Halliburton has claimed that government officials there pressured it into hiring Altanmia, which had no experience in fuel transport. Yet a previously undisclosed letter, dated May 4, 2003, and sent from an American contracting officer to Kuwait’s oil minister, plainly describes the decision to use Altanmia as Halliburton’s own “recommendation.” The letter also shows that the Army Corps of Engineers, the federal agency that oversees such transactions, supported Halliburton’s decision to use the expensive subcontractor, which may explain why it has been reluctant to criticize the deal.
Scott Saunders, a spokesman for the Army Corps of Engineers, confirmed the authenticity of the letter, and acknowledged that Halliburton had picked Altanmia. “Halliburton told us that only Altanmia could meet our requirements,” he said.
Experts in the Persian Gulf oil business say that the Altanmia deal looks suspicious. “There is not a reason on earth to sell gasoline at the price they did,” Youssef Ibrahim, the managing director of the Strategic Energy Investment Group, a consulting firm in Dubai, said. “Halliburton and their Kuwaiti partners made out like bandits.” A well-informed Kuwaiti source called the prices charged by Altanmia “absurd,” and said that Halliburton’s arrangement to buy Kuwaiti oil through a middleman, rather than directly from the government, was “highly irregular.” He added, “There is no way that this could have transpired without the knowledge and direction” of Kuwait’s oil minister, Sheikh Ahmad Al-Fahad Al-Sabah. Two sources told me that the oil minister’s brother, Talal Al-Fahad Al-Sabah, may have secret financial ties to Altanmia. (The brothers are also nephews of the Emir and the Prime Minister of Kuwait.) “There are calls in parliament to open an investigation,” the Kuwaiti source said. “It could shake the government.”
Halliburton, meanwhile, is contending with two new scandals. Last week, the Wall Street Journal reported that the company had overcharged the government by sixteen million dollars on a bill for the cost of feeding troops at a military base in Kuwait. And last month the company made an astonishing confession: two of its employees, it said, had taken kickbacks resulting in overcharges of $6.3 million, in return for hiring a different Kuwaiti subcontractor in Iraq. Halliburton said that the employees, whose names it declined to reveal, had been fired and the funds returned. The day after this disclosure, the Pentagon awarded yet another contract to Halliburton, worth $1.2 billion, to rebuild the oil industry in southern Iraq.
Defenders of Halliburton deny that it has been politically favored, arguing that very few other companies could have handled these complex jobs. As Cheney said last September on ‘Meet the Press,” “Halliburton is a unique kind of company. There are very few companies out there that have the combination of very large engineering construction capability and significant oil-field services.” Dan Guttman, a fellow at Johns Hopkins University, agrees with Cheney’s assessment, but sees Halliburton’s dominance as part of a wider problem, one that has reached a crisis point in Iraq. After years of cutting government jobs in favor of hiring private firms, he said, “contractors have become so big and entrenched that it’s a fiction that the government maintains any control.” He wasn’t surprised that Halliburton’s admission of wrongdoing in Kuwait had failed to harm its position in Washington. “What can the government say, ‘Stop right there’?” Guttman said of Halliburton. “They’re half done rebuilding Iraq.”
The Vice-President has not been connected directly to any of Halliburton’s current legal problems. Cheney’s spokesman said that the Vice-President “does not have knowledge of the contracting disputes beyond what has appeared in newspapers.” Yet, in a broader sense, Cheney does bear some responsibility. He has been both an architect and a beneficiary of the increasingly close relationship between the Department of Defense and an élite group of private military contractors, a relationship that has allowed companies such as Halliburton to profit enormously. As a government official and as Halliburton’s C.E.O., he has long argued that the commercial marketplace can provide better and cheaper services than a government bureaucracy. He has also been an advocate of limiting government regulation of the private sector. His vision has been fully realized: in 2002, more than a hundred and fifty billion dollars of public money was transferred from the Pentagon to private contractors.
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.”
In the spring of 2000, Cheney’s two worlds - commerce and politics - merged. Halliburton allowed its C.E.O. to serve simultaneously as the head of George W. Bush’s Vice-Presidential search committee. At the time, Bush said that his main criterion for a running mate was “somebody who’s not going to hurt you.” Cheney demanded reams of documents from the candidates he considered. In the end, he picked himself, a move that his longtime friend Stuart Spencer recently described, with admiration, as “the most Machiavellian fucking thing I’ve ever seen.”
One man who was especially pleased by Cheney’s candidacy was Ahmed Chalabi, the Iraqi dissident who was the leading proponent of overthrowing Saddam Hussein. Cheney had come to know Chalabi through conservative circles in Washington. “I think he is good for us,” Chalabi told a U.P.I. reporter in June, 2000.
For months there has been a debate in Washington about when the Bush Administration decided to go to war against Saddam. In Ron Suskind’s recent book “The Price of Loyalty,” former Treasury Secretary Paul O’Neill charges that Cheney agitated for U.S. intervention well before the terrorist attacks of September 11, 2001. Additional evidence that Cheney played an early planning role is contained in a previously undisclosed National Security Council document, dated February 3, 2001. The top-secret document, written by a high-level N.S.C. official, concerned Cheney’s newly formed Energy Task Force. It directed the N.S.C. staff to coöperate fully with the Energy Task Force as it considered the “melding” of two seemingly unrelated areas of policy: “the review of operational policies towards rogue states,” such as Iraq, and “actions regarding the capture of new and existing oil and gas fields.”
A source who worked at the N.S.C. at the time doubted that there were links between Cheney’s Energy Task Force and the overthrow of Saddam. But Mark Medish, who served as senior director for Russian, Ukrainian, and Eurasian affairs at the N.S.C. during the Clinton Administration, told me that he regards the document as potentially “huge.” He said, “People think Cheney’s Energy Task Force has been secretive about domestic issues,” referring to the fact that the Vice-President has been unwilling to reveal information about private task-force meetings that took place in 2001, when information was being gathered to help develop President Bush’s energy policy. “But if this little group was discussing geostrategic plans for oil, it puts the issue of war in the context of the captains of the oil industry sitting down with Cheney and laying grand, global plans.”
The Bush Administration’s war on terror has became a source of substantial profit for Halliburton. The company’s commercial ties to terrorist states did not prevent it from assuming a prominent role. The Navy, for instance, paid Halliburton thirty-seven million dollars to build prison camps in Cuba’s Guantánamo Bay for suspected terrorists. The State Department gave the company a hundred-million-dollar contract to construct a new embassy in Kabul. And in December, 2001, a few years after having lost its omnibus military-support contract to a lower bidder, Halliburton won it back; before long, the company was supporting U.S. troops in Afghanistan, Kuwait, Jordan, Uzbekistan, Djibouti, the Republic of Georgia, and Iraq. Halliburton’s 2002 annual report describes counterterrorism as offering “growth opportunities.”
The Department of Defense’s decision to award Halliburton the seven-billion-dollar contract to restore Iraq’s oil industry was made under “emergency” conditions. The company was secretly hired to draw up plans for how it would deal with putting out oil-well fires, should they occur during the war. This planning began in the fall of 2002, around the time that Congress was debating whether to grant President Bush the authority to use force, and before the United Nations had fully debated the issue. In early March, 2003, the Army quietly awarded Halliburton a contract to execute those plans.
As it turned out, oil-well fires were not a problem. An Army War College study shows that of the fifteen hundred oil wells in Iraq’s two major oil fields, only nine were damaged during the war. Colonel Gardiner said he was puzzled by the Pentagon’s inability to predict this outcome. “Our intelligence before the war was good enough to know that,” he said.
After months spent trying to obtain more information about the classified Halliburton deals, Representative Waxman’s staff discovered that the original oil-well-fire contract entrusted Halliburton with a full restoration of the Iraqi oil industry. “We thought it was supposed to be a short-term, small contract, but now it turns out Halliburton is restoring the entire oil infrastructure in Iraq,” Waxman said. The Defense Department’s only public acknowledgments of this wide-ranging deal had been two press releases announcing that it had asked Halliburton to prepare to help put out oil-well fires.
The most recent budget request provided by the Coalition Provisional Authority in Iraq mentions the building of a new oil refinery and the drilling of new wells. “They said originally they were just going to bring it up to prewar levels. Now they’re getting money to dramatically improve it,” Waxman complained. Who is going to own these upgrades, after the United States government has finished paying Halliburton to build them? “Who knows?” Waxman said. “Nobody is saying.”
It is so complicated to secure an Iraq contract from the United States government that several big Washington law firms have gone into the business of shepherding applicants through the process. More than twenty billion dollars has been set aside for Iraqi relief and reconstruction projects, with work contracts being awarded by the Defense, State, and Commerce Departments, and by the U.S. Agency for International Development, in coördination with L. Paul Bremer, the head of the Coalition Provisional Authority. There’s an additional five billion dollars sitting in the Development Fund for Iraq, also administered by the C.P.A. Officials at the C.P.A. say that contracts are awarded on the basis of competitive bidding, but rumors proliferate about political influence. When asked if connections helped, an executive whose firm has received several contracts replied, “Of course.” One businessman with close ties to the Bush Administration told me, “Anything that has to do with Iraq policy, Cheney’s the man to see. He’s running it, the way that L.B.J. ran the space program.”
Cheney’s spokesman confirmed that the Vice-President speaks “on occasion” with officials at the C.P.A., and refers inquiries to the authority from third parties “expressing interest in getting involved in Iraq.” The businessman offered an example of Cheney’s backstage role. He said that Jack Kemp, the former Republican congressman and Secretary of Housing and Urban Development, got help from Cheney with a venture involving Iraq. Last summer, the businessman said, Kemp had Cheney over for dinner, along with two sons of the President of the United Arab Emirates. In an interview, Kemp confirmed the event, and his business plans, but denied receiving any special assistance from Cheney. “It was just social,” Kemp said. “We’re old friends. We didn’t talk about business.” He acknowledged, however, that Cesar Conda, who until last fall was Cheney’s domestic-policy adviser, was helping him with a study on how to fashion a public-private partnership plan to develop the Iraqi economy.
Kemp said that he is working on two business ventures in Iraq. He described the first project, a company called Free Market Global, as “an international company that trades in gas, petroleum, and other resources.” Although Kemp provided only vague details about the project, he said, “I can tell you that General Tommy Franks has joined the advisory board of Free Market Global.” Last year, General Franks commanded the invasion of Iraq.
Franks’s lawyer, Marty Edelman, confirmed his client’s participation: “That is correct. But it is my understanding that he won’t be dealing with Iraq or the military for a year” (to comply with government ethics rules). Asked how Kemp and Franks had joined forces, Edelman said, “It seems like everyone on that level knows each other.” Edelman himself is now on the advisory board of Free Market Global.
Kemp’s second project, in which he said he would play an advisory role, is something called al-Ruba’yia. He describes it as a two-hundred-million-dollar fund to be invested in various ventures in Iraq, from energy to education. He is trying to attract American investors. Kemp is well positioned for this task: his political organization, Empower America, counts among its supporters some of the current Bush Administration’s top figures. Donald Rumsfeld, for example, is a former board member. “It’s like Russia,” the businessman said. “This is how corruption is done these days. It’s not about bribes. You just help your friends to get access. Cheney doesn’t call the Defense Department and tell them, ŒPick Halliburton.” It’s just having dinner with the right people.”
So far, other than the irregularities at Halliburton, there has been no evidence of large-scale corruption in the rebuilding of Iraq. But a number of friends of the Administration have landed important positions, and others have obtained large contracts. For instance, Peter McPherson, who took a leave from his job as president of Michigan State University to serve as Paul Bremer’s economic deputy in Iraq, has been friends with Cheney since they both served in Gerald Ford’s White House. The head of private-sector development at the C.P.A., one of the most powerful posts in Iraq, is Thomas Foley, a Connecticut-based business-school classmate of President Bush, who later became finance chairman for Bush’s Presidential campaign in Connecticut. Foley was a “pioneer,” meaning that he raised more than a hundred thousand dollars for Bush.
Last month, an inspector general was appointed for the C.P.A., as required by Congress when it approved the President’s eighty-seven-billion-dollar supplemental budget for Iraq last year. Rather than choosing a nonpartisan outsider for this watchdog role, as most government agencies do, the Administration selected Stuart Bowen, Jr., who spent two years as White House counsel in the Bush Administration. According to The Hill, a Washington newspaper, L. Marc Zell, a former law partner of Douglas Feith, the Under-Secretary of Defense for Policy, is helping with international marketing for a concern called the Iraqi International Law Group. Billing itself as a group of lawyers and businessmen interested in helping investors in Iraq, the venture is run by Ahmed Chalabi’s nephew Salem, who doubles as a legal adviser to Iraq’s governing council, of which his uncle is a member.
Tom Korologos, a well-connected Republican lobbyist in Washington, recently took a temporary assignment as a senior counsellor to Bremer. Korologos acknowledged that Washington lobbyists are scrambling to solicit business in Iraq. “By definition, it’s going to boom, because of the numbers,” he said. “The question is who’s going to get the contracts. There’s a lot of money. Somebody’s got to build the bridges and roads.” He added that talk of political influence over the process was “bullshit.”
Yet a look at one prominent defense contractor, Science Applications International Corporation, based in San Diego, suggests the importance of connections. One of its board members is Army General Wayne Downing, who commanded the Special Forces in the first Gulf War and ran counterterrorism in the Bush White House for the better part of a year after September 11th. During that time, he accompanied Cheney on visits to the C.I.A. to discuss U.S. intelligence on Iraq. For years, Downing has been an unpaid adviser to Ahmed Chalabi and the Iraqi National Congress, and he was an early advocate of armed insurrection against the old Iraqi regime. S.A.I.C.’s seven Iraq contracts are worth fifty million dollars.
It is unclear what special expertise S.A.I.C. brings to several of its contracts. One company executive, who asked not to be named, said that its chief credential for setting up what was supposed to be an independent media for Iraq, modelled on the BBC, was military work in “informational warfare”, “signal jamming”, “perception management,” and the like. Some of S.A.I.C.’s government contracts require that specific individuals, referred to as “executive management consultants”, be paid more than two hundred dollars an hour. One contract cites a man named Owen Kirby as someone who will advise Iraqis on the process of building democracy. Kirby is a program director of the International Republican Institute, an organization devoted to promoting democracy abroad. In October, 2001, the group gave its Freedom Award to Dick Cheney. Before that, it gave the award to Lynne Cheney.
It is not surprising that Cheney, after five years of running Halliburton, a company that considers war as providing “growth opportunities,” regards winning the peace in Iraq as a challenge for private enterprise as well as for government. Yet it is reasonable to ask if Cheney’s faith in companies like Halliburton contributed to his conviction that the occupation of Iraq would be a tidy, easily managed affair. Now that Cheney’s vision has been shown to be overly optimistic, and Iraqis and American soldiers are still getting killed ten months after Saddam’s overthrow, critics are questioning the propriety of a reconstruction effort that is fuelled by the profit motive. “I’m appalled that the war is being used by people close to the Bush Administration to make money for themselves,” Waxman said. “At a time when we’re asking young men and women to make perhaps the ultimate sacrifice, it’s just unseemly.” Many of those involved, however, see themselves as part of a democratic vanguard. Jack Kemp’s spokesman, P. J. Johnson, told me, “We’re doing good by doing well.” Joe Allbaugh, Bush’s former campaign manager, who has established New Bridge Strategies, a firm aimed specifically at setting up for-profit ventures in Iraq, makes no apologies. “We are proud of the leadership the American private sector is taking in the reconstruction of Iraq,” he said.
Another top Republican lobbyist in Washington, Charlie Black, told me that his firm, BKSH & Associates, has plans to help Iraqis set up their own affiliated public-relations and government-relations firm; the company would become perhaps the first lobbying shop in Baghdad. Black is excited by the opportunities in Iraq, but he, too, has complaints. “The problem in Iraq so far is it’s slow, and very confusing for people to figure out how to do business there,” he said. “One week you go to Baghdad, and they say the decisions are being made at the Pentagon. Then you go to the Pentagon, and they say the decisions are being made in Baghdad. Only Halliburton is making money now!” He laughed. “Is there too much cronyism? I just wish I could find the cronies.”
(In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.)