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Salon.com
Friday, June 25th, 2004


 

Cronies: Oil, the Bushes, and the Rise of Texas, America's Superstate

by Robert Bryce

The United States of Texas

A review by Farhad Manjoo

Four years ago, in an otherwise utterly undistinguished vice presidential debate, Joe Lieberman got off one clean shot at Dick Cheney.

"I'm pleased to see, Dick, from the newspapers, that you're better off than you were eight years ago," the senator said. It was a nice dig at Cheney's immense wealth, but the response was better. With a self-satisfied grin that dominated the news for the next few days, Cheney shot back, "I can tell you, Joe, the government had absolutely nothing to do with it."

In Dick Cheney's version of the life story of Dick Cheney, Dick Cheney is a self-made man. During the 2000 debate, and countless times since, Cheney has credited his fortune to the magical powers of the "private sector"; for Cheney, the millions he earned as the CEO of Halliburton, the world's largest oil services firm, are completely unrelated to the close connections he forged with government officials during the decades he spent in public office. To hear Cheney describe it, becoming Halliburton's CEO was a testament to his own individualistic business savvy; just part of Dick Cheney's fulfillment of the American dream.

But on its face, Cheney's line is impossible to swallow. If we didn't know it in 2000, by now just about every voter in the land understands that Halliburton is an immensely successful federal contractor, and many of its biggest deals have involved government agencies. It's not just the war in Iraq — for more than half a century, Halliburton's fortunes, and especially the fortunes of Halliburton's construction subsidiary Brown & Root (which has received some of the largest contracts in Iraq), have tracked closely with the fortunes of the politicians it has chosen to get close to.

Two engaging new books by well-regarded journalists — The Halliburton Agenda: The Politics of Oil and Money, by Dan Briody, and Cronies: Oil, the Bushes, and the Rise of Texas, America's Superstate, by Robert Bryce — outline these symbiotic relationships in great detail. They paint a fascinating picture of a company that has been singularly successful in getting what it wants out of government. Halliburton's Brown & Root stands as the epitome of Texas-based crony capitalism. Despite what the vice president says, when it comes to Halliburton's success, the government had absolutely everything to do with it.

Yet in a broader sense, Cheney is not so wrong in his suggestion that there was something self-made in his and Halliburton's business success. Those who disparage cronyism tend to do so on the grounds that it's unfair, which is true, and that it's easy, which is not. If Brown & Root's history as outlined in these books teaches anything, it's that cronyism can be dicey as a business strategy. When you run your business, as Brown & Root has, on the basis of how well you can befriend important people (rather than on the basis of how well you can do important things), getting ahead can be tricky. What happens if you bet on the wrong horse? What happens when, as Brown & Root has done in the past, you cast your lot with the Shah of Iran, or Saddam Hussein? And what happens, if, as occurred with former President Lyndon Johnson, the president that you bankrolled embroils your country so deeply in an unpopular foreign war that he ends up bowing out of office?

For much of its history, Brown & Root did well because it made one early, prescient bet — that a Texas politician named Lyndon Johnson could, and would, eventually become a very important man. That bet turned out to be exactly right, and throughout the '40s, '50s and '60s, Brown & Root was well remunerated for its intimate relationship with Johnson. Halliburton has now hitched its wagon to the Bush administration's star, and so far, the collaboration has been good to the company. But Halliburton's reliance on Bush also highlights the risks to crony capitalism. What happens to Halliburton if its bet on George W. Bush doesn't pay off in November? If history is any guide, it won't be pleasant for Cheney's former employer.

The premise of Robert Bryce's Cronies comes off, at first, like a conspiracy theory — his idea that during the past half-century or more, a network of "crony" businessmen and politicians based in Texas have managed to push the state's interests to the forefront of the nation's agenda, allowing Texas to control American politics, culture and the economy. Bryce hit upon this notion while researching his previous book, Pipe Dreams, which chronicled the rise and fall of the last Texas legend, Enron. "Enron's political power, market power, and media power were indicative of something deeper," Bryce discovered — Texas' power.

In the most general terms, Bryce's theory holds that Texas, through its size and its geology, is an intrinsically powerful piece of land. "Texas has oil. Therefore, Texas has power." But lots of places in the world are rich in natural resources; what's special about Texas, Bryce says, is that it's rich in cronies — businessmen and politicians who recognize the power of oil and who are willing to blur the lines between their professions in order to promote a common, Texas-oil-focused agenda.

Who are these cronies? George W. Bush, naturally, is at the top, along with everyone else in his family. There's Halliburton, of course, "with its ongoing business dealings in the Persian Gulf and its long, lucrative ties to Saddam Hussein." Then there's the Saudi royal family, whose members have long been close to the Bushes. And finally there's James Baker, the former secretary of state and secretary of the treasury. Baker is depicted as the state's über-crony, a "consigliere" to the Bushes and head of Baker Botts, the Baker family law firm that sits at the center of the Texas Republican network.

One's feeling that this constellation of cronies is the product of half-baked conspiracy theory passes quickly, however. Bryce tells his tale in a way more admiring than alarmist; he doesn't sound like a conspiracy nut, he sounds like a guy who just loves a good yarn involving a lot of bad guys. The reader will have no doubt that Bryce harbors contempt for the characters he profiles, but it's a contempt leavened by good humor and even a kind of subtle respect. For instance, here's how Bryce introduces H.L. Hunt, one of the richest early Texas oilmen: "Looking back, one of the few good things that can be said about H.L. Hunt was that he was rich. Other than that, he was a son of a bitch."

Bryce's theory that Texas dominates American politics is also bolstered by the evidence. When it comes to Congress and the White House, Texas does dominate American politics. Since the New Deal, Texans have enjoyed extraordinary sway on Capitol Hill, with representatives from the state holding five of the last 16 terms for speaker of the House. And "although Texas may not own the White House outright, it definitely has a working set of keys," writes Bryce. Texans have held either the presidency or the vice presidency for 24 of the 44 years since 1960. Does anyone need to point out that the three men responsible for almost every bit of Democratic bellyaching these days — George W. Bush, Karl Rove and Tom DeLay — are all from Texas?

How Texas got to be so influential is a long and, in Bryce's telling, entertaining story, but much of the tale can safely be condensed into two words, Brown & Root. The business that became the Brown & Root construction empire began one day in the early 1900s, when Herman Brown, a young entrepreneur near Temple, Texas, inherited some dilapidated road-building equipment from a contractor who'd decided to quit the business. According to Dan Briody's account in The Halliburton Agenda, road building in Texas was a difficult and politically charged industry at the time, with state and local officials constantly struggling over the control of projects. This turned out to be an atmosphere in which Herman Brown could thrive. Brown picked up his very first road contract on the strength of his charm, after walking into a county commissioner's office and chatting with the official in charge. "No one knows exactly what took place in that fateful meeting between Herman Brown and the county commissioner," Briody writes, "but whatever it was, it went far beyond the open and competitive bidding process that was supposed to be taking place."

Briody — a former Red Herring reporter whose previous book, The Iron Triangle: Inside the Secret World of the Carlyle Group, prepared him well for his current subject — offers a more straightforward narrative of Texas cronyism than does Bryce. Briody's tone is more serious, but paradoxically, also a little less responsible. Where Bryce might joke about the motivations of his subjects (writing that George H.W. Bush "knew exactly why America had to throw Saddam Hussein out of Kuwait, and it wasn't because Kuwait exported broccoli"), Briody offers bold, dark declarations on the mindset of the people he writes about. This is a problem, since he appears to rely primarily on secondary sources. Briody does not know, for instance, that to Herman Brown "it probably felt good and right" to earn his road contracts in an underhanded way. But that's what he writes.

Still, Briody's book complements Bryce's nicely, by filling out the picture of some of the key personalities at Brown & Root. In particular, we learn about the deft and brilliant Brown brothers, Herman and George, and the lessons they learned in their early days of business. The main lesson, Briody says, was the one Herman Brown picked up on his first road contract. It's a lesson that lives on at Brown & Root and its parent company Halliburton: "Politics is business, and business is politics."

In April 1937, in a special election to fill the seat of a lawmaker who had died of a heart attack, the 28-year-old Lyndon Johnson won his first public office, as a congressman in Texas' 10th District. Almost immediately after the election, he went to work for Brown & Root, whose first large construction project with the federal government, the Marshall Ford Dam, faced the possibility of a shutdown for technical, legalistic reasons. (The land it was being built on was not owned by the federal government but by the state of Texas, which was forbidden by charter from handing it to the feds.) Johnson correctly saw the possibility of helping Brown & Root as an opportunity to gain untold future rewards. Just 11 days after winning office, Johnson managed to pull some strings in the Roosevelt administration in order to let Brown & Root's dam project go forward. "Thereafter," writes Bryce, "the Browns bankrolled Johnson every step of the way."

In a short time, the relationship between the Browns and Johnson got to a point at which each couldn't live without the other. In an era of few election finance rules, Johnson, who faced increasingly tough races during the course of his career — for the Senate and then for the White House — constantly needed the Browns' deep pockets. And the Browns had no choice but to keep pumping money into Johnson, not only because of what they wanted him to do for their business interests but also because they feared the consequences of a Johnson loss. If any opponent ever beat Johnson, they thought, he'd have an interest in making things very bad for Johnson's longtime benefactor, Brown & Root. On this point, both Briody and Bryce mention an interview that Ed Clark, a Brown & Root attorney, once gave to the Johnson biographer Robert Caro: "The Browns had to win this. They had to win this," Clark said of Johnson's 1948 Senate primary race against Texas Gov. Coke Stevenson. "Stevenson was a man of vengeance, and he would have run them out of Washington. Johnson, if he lost, he was going back to being a nobody. They were going back to being nobody."

Money from the Browns and from a host of Texas oilmen "flowed to Johnson like an inexhaustible river," Bryce writes. "While Stevenson traveled the state in an old Plymouth, Johnson was in the air, flying on Brown & Root's DC-3s between multiple Texas cities on a single day."

When the polls closed on Aug. 28, 1948, Johnson had won the count against Stevenson by a razor-thin margin of just 87 votes, less than a tenth of a percent of all the votes cast. But a statewide battle over allegations of election fraud ensued. In a precinct controlled by a Johnson ally, an investigation revealed that 202 names had been added to the voter list after polls had closed. Thus, writes Bryce, "Johnson was ahead, but the winner wouldn't be determined by the voters. The winner would be the candidate who was able to muster more supporters, more money, more legal muscle, more influence." In an uncanny parallel to the kind of luck that would help out another well-connected Texas man 50 years later, Johnson was eventually declared the winner when his side managed to press Supreme Court Justice Hugo Black to put a halt to an investigation of vote fraud in one Texas county.

What would Brown & Root get in return for all its support of Johnson? Over the years the company would enjoy contracts galore — awards to build naval bases and space centers, Army bases and ships. There is no indication that the government was dissatisfied with Brown & Root's work; usually, the company produced quality work, though, as Briody notes, its projects would often balloon in cost. It was during the Vietnam War, when Johnson was America's vice president and then president, that Brown & Root saw its greatest successes. In that war, for the first time, Brown & Root began to function as it does in today's military — as a contractor that not only builds equipment for the government but also maintains services on a day-to-day basis. This work made Brown & Root very successful: In 1947, it was the 47th largest construction company in the nation, Briody says. By 1965, it was No. 2. In 1969, just after Johnson left the White House, Brown & Root was No. 1, with sales of $1.6 billion.

The years following the Johnson administration were not the best of times for Brown & Root. After Richard Nixon came to office, the company — which had been purchased by Halliburton in 1962 but functioned as a completely autonomous unit for many decades — saw a sudden decline in its political access. Briody notes that the company had not planned it this way; indeed, in the 1960s, it had placed a bet on John Connally, a Democrat who had served as Johnson's campaign director for many years, as Texas governor (he was in the front seat of the car in which John F. Kennedy was shot in 1963) and, eventually, as Nixon's treasury secretary. After Watergate, Connally was talked about as a possible replacement for Vice President Spiro Agnew, but eventually Nixon picked Gerald Ford. When Nixon resigned in disgrace, Connally's fortunes burst. "Brown & Root's horse had exited the race," Briody writes, "brought down by one of the strangest political controversies in American history."

During the 1970s and 1980s, Brown & Root languished. In 1976, four of its executives died in a plane crash in Alaska. The next year, Foster Parker, the company's president, facing a federal indictment in a price-fixing scheme, committed suicide. In the late 1970s, Brown & Root and other units of Halliburton seemed to bet the future of the company on work in Iran, where the profligate Shah had pledged to spend more than $9 billion on a giant deepwater port along the Gulf of Oman. But after writing checks of just a few hundred million, the Shah was ousted from Iran by the Ayatollah Khomeini's Islamic revolution.

With the blessing of the Reagan administration, Brown & Root then switched its sights to Saddam Hussein in Iraq, which offered the company lucrative contracts to work on its oil infrastructure. Brown & Root employees were working on Iraq's Mina al-Bakr oil platform right up until Aug. 2, 1990, when Saddam Hussein invaded Kuwait. This was, temporarily, bad for business; not only did Iraq still owe Brown & Root more than $17 million for services rendered at Mina al-Bakr, but once again, the company seemed to have bet on the wrong political horse.

It was only after the first Gulf War that Brown & Root began to find its fortunes once again. First, the company won a host of contracts to rebuild oil infrastructure damaged by the war, and then, in 1992, the Pentagon (which at the time was headed by Dick Cheney) selected Brown & Root to develop a secret plan to demonstrate how a private contracting firm could provide logistics support for the military. Cheney was impressed with Brown & Root's plan, so he made it a reality, asking a host of private contractors to submit bids for what would be the nation's first umbrella logistics contract, called LOGCAP and worth many billions of dollars. Brown & Root, which had drawn up the contracting plan, was eventually awarded the deal it designed.

Dan Briody quotes sections of the Code of Federal Regulations that seem to indicate that it's illegal for a firm to design a contract and then be awarded that very same contract. "It would be safe to say that the contract was awarded under highly questionable circumstances," Briody says. "Brown & Root clearly had a competitive advantage in addition to proprietary knowledge and should never have been allowed to compete for the contract. As they had done so many times before, the company had worked the system to perfection, and scored a contract that has netted the company more than $2.5 billion since it was first enacted."

The LOGCAP contract has thus become extremely valuable to Halliburton, as were the many other contracts that Dick Cheney helped to bring in during his tenure at the firm. In the five years preceding Cheney's term at Halliburton, Briody says, Brown & Root received $1.2 billion in government contracts. During Cheney's five years as CEO, it received $2.3 billion in contracts. Before Cheney came to Halliburton, the firm received $100 million in government-secured loans from the U.S. Export-Import bank — during his time there, the government backed $1.5 billion in Halliburton's loans.

Cheney accomplished these feats, Briody says, by "hiring a handful of his pals from the Beltway." These included David Gribbin, Cheney's former chief of staff, who lobbied for Halliburton in Washington, and a Navy admiral, Joe Lopez, who became Brown & Root's "governmental operations expert." Since Cheney joined the Bush administration, things have only gotten better for Halliburton's government-contracting business. Not only has it been awarded about $2 billion in contracts for work in Iraq, it has also been tasked to work on various other projects in the worldwide war on terrorism — for instance, building the prisons in Guantánamo Bay.

What this all means, of course, is that Halliburton is hitched to Cheney and Bush in much the same way that Brown & Root was once tied to Lyndon Johnson. The company may suffer some P.R. damage for its close association with the administration, but it has no choice but to support Bush. John Kerry regularly criticizes Halliburton during his speeches. "This president has an open hand for his friends at Halliburton, but he has turned his back on our friends and neighbors," the senator said on the night he won in Iowa. One imagines that a Kerry administration would be a very hostile place for George and Herman Brown's Texas company.

Halliburton and all its Texas pals will no doubt pull every string, therefore, to support Bush for the remainder of the current campaign. That support will be both obvious — through political donations — and subtle. In 2000, members of the Bush campaign flew on corporate jets 367 times, and many of those jets were provided by Halliburton and Enron, Bryce notes. That's exactly what Brown & Root did for Lyndon Johnson in 1948.

For Democrats, though, there may be some consolation. Lyndon Johnson, after all, was only elected to one term as president. And it was his bad decisions relating to a costly, deadly, far-off war that brought him down.


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