The Candidate From Brown and Root (Austin Chronicle)

Michael Pollak mpollak at panix.com
Sun Jul 21 14:17:46 PDT 2002


[One of the fun things about rummaging through the Hallburton files is that the major player is usually their construction subsidiary, Kellogg Brown & Root. Its predecessor firm, Brown & Root, change from a local roadbuilder into a government funded global player by investing in the mid 1930s in a newly elected local congressman named LBJ. Caro describes it wonderfully in the first volume of his LBJ biography. It was a make or break bet on a huge dam. If it hadn't paid off, they'd have gone under. Instead it paid off enormously for both of them. And now 60 years later here is Brown & Root's successor firms still skillfully playing the same game from the same home base in Texas.]

Austin Chronicle

The Candidate From Brown and Root

Bush Doesn't Know Dick

By Robert Bryce

AUGUST 28, 2000: 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 U.S. 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. Last week,

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 U.S. 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 is currently running 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.

Dam in Limbo

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.

Going Global

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.

In 1992, the Pentagon, then under Cheney's direction, paid Brown &

Root $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. Later in 1992, the

Pentagon gave the firm an additional $5 million to update its report.

That same year, the company won a five-year logistics contract from

the U.S. Army Corps of Engineers to work alongside American GIs in

places like Zaire, Haiti, Somalia, Kosovo, the Balkans, and Saudi

Arabia. According to data from the U.S. Army Corps of Engineers,

between 1992 and 1999 the Pentagon paid Brown & Root over $1.2 billion

for its work in trouble spots around the globe. In May of 1999, the

Army Corps of Engineers 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 Dept. to do a $100 million

security upgrade on American embassies and consulates around the

world.

When Cheney arrived at Halliburton, the company was doing less than

$300 million per year in business with the Defense Department. By last

year, according to the Baltimore Sun, that figure had grown to more

than $650 million. During that same time period, the amount of money

the company spent on lobbying soared. In 1996, Halliburton was

spending less than $300,000 per year on lobbyists. Last year it spent

$600,000.

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."

Dick and Moammar

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 U.S. 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 U.S. Sen.

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 U.S. 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 U.S. goods through a foreign

subsidiary to Libya -- in violation of U.S. sanctions.

Given the U.S. 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 Gov. 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 U.S. 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.

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