[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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