The Candidate from Brown and Root
See also “Cheney Makes a Bundle Off War,” below this article
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.
Cheney Makes a Bundle Off War
By Robert Bryce
As Secretary of Defense, Dick Cheney learned how to make war. As CEO of Halliburton, he learned how to profit from it. While working at the Pentagon, Cheney helped command hundreds of thousands of troops for the invasion of Kuwait and Iraq. The Gulf War also allowed Cheney to launch one of the largest privatization efforts in the history of the Pentagon, steering huge military logistics contracts to private contractors. Then, in 1995, just two-and-a-half years after Cheney left his federal job, he went to Halliburton and began cashing in on the very contracts he helped initiate.
In 1992, 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.
In the pre-Cheney days, Brown & Root was effective at garnering military contracts. But when Cheney parachuted into Halliburton’s executive suite, he put Brown & Root’s tanks into overdrive. According to The Baltimore Sun, when Cheney started at Halliburton, the company was doing less than $300 million per year in business with the Defense Department. By last year, the amount had grown to more than $650 million. According to the United States Army Corps of Engineers, between 1992 and 1999, the Pentagon paid Brown & Root more than $1.2 billion for its work in trouble spots around the globe. In May of 1999, the Corps re-enlisted the company’s help in the Balkans, giving it a new five-year contract worth $731 million. On top of that, the company was recently hired by the State Department to do a $100 million security upgrade on American embassies and consulates around the world.
There are many advantages to using private companies to do soldiers’ work. Contractors like Brown & Root allow the military to have more soldiers armed with M-16’s instead of spatulas. “It doesn’t take a soldier to do what Brown & Root does for the Army,” explains Jan Finegan, a spokesperson for the Army Materiel Command, who points out that the active-duty force of the United States military has declined by about 25 percent over the past decade. Hiring a private contractor to take out the garbage, do the laundry and take care of the dining halls “frees soldiers up to do what they are trained to do,” she said. While outsourcing some Pentagon jobs makes sense, some critics believe Cheney’s behavior is a classic example of revolving-door politics. “Over the years, we’ve tried to slow the revolving door to make sure decision-makers don’t benefit from decisions they make while they are in office,” said Tom Smith, the Texas state director of Public Citizen, a non-profit consumer group. “You have to question whose interests Cheney is looking after, and whether privatization has really benefited the Department of Defense, or the defense contractors like Brown & Root.” Cheney clearly benefited from his stint at Halliburton. During his tenure at the company, he collected more than $10 million in salary and stock payments. And his going-away present from the company was a stock and cash package worth some $33 million. Cheney has since relinquished some of the stock options that he held with the company to avoid the appearance of impropriety.
The American press has paid lots of attention to Cheney’s pay. But it has given little coverage to Brown & Root’s sometimes troubled relationships with its foreign employees. In 1994, at the end of its engagement in Somalia, where American troops had attempted to quell the country’s ongoing civil strife, Brown & Root dismissed its Somali workers. The disenchanted workers then staged a protest at the United Nations compound in Mogadishu until they were scattered by UN troops armed with batons and tear gas. Three people were reportedly injured in the melee. In 1996, in Hungary, where Brown & Root had set up shop to support American troops stationed in the former Yu
oslavia, the company ran into more controversy. Shortly after American forces moved in, Hungarian officials ruled that Brown & Root was subject to the country’s value-added tax, and that company employees were subject to Hungarian income tax, just like any other private corporation. The Pentagon insisted that the company was part of the American military and therefore exempt from the tax. Ultimately, the company paid the Hungarian government $18 million in taxes — for which it was reimbursed by the Pentagon. The company was also accused of sexual harassment by several female workers who claimed that Brown & Root employees had fondled and propositioned them. One of the women who complained, a 22-year-old cook named Csaba Horvath, told the Associated Press in 1996 that the Brown & Root contractors “do with us as they please.” She added that the company is “a state within a state” and that the United States military was too lax in overseeing its operations.
While those complaints are difficult to prove, Cheney’s impact on Halliburton’s bottom line has been unmistakable. And the company made sure to spread some of that wealth around. Halliburton has contributed a quarter-million dollars to the Republican Party so far this election cycle. And Cheney’s company made sure it had access to decision-makers. In 1996, Halliburton was spending less than $300,000 per year on lobbyists. Last year it spent $600,000. Given Cheney and Halliburton’s success at getting federal money, it looks like that money was well spent. –R.B.