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Bechtel: Profiting from Destruction

Why the Corporate Invasion of Iraq Must be Stopped

by CorpWatch, Global Exchange, Public CitizenCollaborative Report
June 5th, 2003

´┐ŻMaj Fiil-Flynn

Introduction and Executive Summary

On March 20 and 21, 2003, two days after the U.S.-led invasion of Iraq, the people of San Francisco organized a massive protest to shutdown the world headquarters of the Bechtel Corporation. Many Americans may be unaware of the connection between the Bechtel Corporation and the U.S.-led war in Iraq. Bechtel employees like George Shultz not only used their political influence to help bring this war about, but key Bechtel board members and employees with advisory positions to the Bush Administration helped ensure that Bechtel would receive one of the most lucrative contracts for rebuilding what they had helped to destroy.

On April 17, Bechtel received one of the first and largest of the rebuilding contracts in Iraq. Worth $680 million over 18 months, the contract includes the rebuilding, repair and/or assessment of virtually every significant element of Iraq's infrastructure, from power generation facilities to electrical grids to the municipal water and sewage systems. The contract was granted in backroom deals without open and transparent bidding processes and the content remains hidden behind a veil of secrecy. The contract has not been publicly disclosed to American taxpayers, who will be paying the majority of the bill. While there is no doubt that Bechtel has experience in these areas, it is an experience from which the people of Iraq should be spared.

War profiteering and political cronyism is just part of this story.

This report provides case studies from Bechtel's history of operating in the water, nuclear, energy and public works sectors. These case studies reveal a legacy of unsustainable and destructive practices that have reaped permanent human, environmental and community devastation around the globe. Letters from "Bechtel affected communities" included here provide first-hand descriptions of these impacts, from Bolivia to Native American lands in Nevada. The report reveals a 100-year history spent capitalizing on the most brutal technologies, reaping immense profits and ignoring the social and environmental costs.

With Bechtel's new contract in Iraq, the opportunity for expansion throughout the region would be further advanced by a recently announced Bush Administration plan for a U.S.-Middle East Free Trade Area by 2013. Bechtel even had a role in this, with Riley P. Bechtel, the chairman and CEO, appointed in February to the President's Export Council - President Bush's advisory committee on international trade. Such an agreement would make the corporate invasion of the entire region a reality, and Bechtel, as usual, would be in the lead.

Two wars and over a decade of sanctions have crippled Iraq's infrastructure. It is imperative that the humanitarian needs of the Iraqi people - particularly the right to self-determination - take precedence in the rebuilding effort. Bechtel should be held accountable for its past and current destructive practices rather than made more profitable by being entrusted with Iraq's most valuable public resources and reconstruction. U.S. assistance should support Iraqi organizations and businesses, rather than provide lucrative contracts to promote U.S. business interests and expand U.S. markets in Iraq.

The military invasion of Iraq must not be followed by a corporate invasion.


Contents

Part A. Doing Business with Dictators: Bechtel's History in Iraq

As detailed in this report, Bechtel profited from the Hussein regime, and would have made a great deal more if they had had their way. From 1983 to 1988, Iraqi warplanes dropped between 13,000 and 19,500 chemical bombs on the people of Iraq and Iran. During this same time period, Bechtel and its allies in the Reagan Administration aggressively lobbied the Iraqi government to sign a contract with Bechtel to build an oil pipeline from Iraq to the Gulf of Aqaba in Jordan. Bechtel not only ignored the monumental humanitarian atrocities perpetrated by their Iraqi business associates, they took steps to ensure that their business deal would not be harmed by an official U.S. government condemnation of the Iraqi crimes. Bechtel also consulted in the construction of a petrochemical plant for Hussein that many fear was used by Iraq to build chemical weapons. There are even charges that Bechtel helped Iraq produce conventional arms. Bechtel profited off of the Hussein regime while they could. When the relationship soured, their employees and associates helped influence the decision to invade the country. Allowing this corporation to then profit from Iraqi reconstruction is immoral and unacceptable.

 

Part B. The Revolving Door: Bechtel's Friends in High Places

The Bechtel family made its fortune by perfecting the art of the revolving door. Bechtel has used its intimate relationships with Republican Administrations past and present to alter not only its own, but all of our destinies. Bechtel's use of these connections has most recently played out in their role as both instigators (through their board members and executives) and as profiteers of the war in Iraq. Some current examples of insider influence include: CEO Riley Bechtel, who is on the President's Export Council, which advises the President on trade issues; Bechtel senior counsel and board member, George Shultz, who is chairman of the advisory board of the Committee for the Liberation of Iraq, which has close ties to the White House; General (Ret.) Jack Sheehan, senior vice president at Bechtel, who is a member of the influential Defense Policy Board; Daniel Chao, another Bechtel senior vice president, who serves on the advisory board of the U.S. Export-Import Bank and Ross J. Connelly, a 21-year veteran of Bechtel, who is the executive vice president and chief operating officer for the U.S. Overseas Private Investment Corporation. More of an "open" than a "revolving" door, Bechtel uses these cozy relationships to the detriment of people and the planet

 

Part C. Bechtel Brings Water Woes Around the World

If Bechtel's contract in Iraq is extended to include "distribution of water," just as Halliburton's was for oil, the people of Iraq have much to fear. Bechtel is one of the top-ten water privatization firms in the world. After privatizing the water system in Cochabamba, Bolivia, a subsidiary of Bechtel made water so expensive that many were forced to do without. The government met public protests with deadly police force. Bechtel waited. Finally, the Bolivian government canceled Bechtel's contract. The company responded with a $25 million lawsuit for lost profits. This is but one such case study provided in this report that draws on community struggles against Bechtel from San Francisco, California to Sophia, Bulgaria. Each case demonstrates Bechtel's extreme disregard for the rights of its workers and the rights of communities to have access to affordable water.

 

Part D. Bechtel and Nuclear Nightmares

Starting with the Manhattan Project that developed the atomic bomb and engineering the first reactor to generate electricity, Bechtel has been heavily involved in both commercial and military nuclear activities. These have included some of the most notable nuclear mishaps in U.S. history, from California's San Onofre reactor installed backwards, to the botched clean up of Three Mile Island. Now, while the legacy of environmental contamination and worker exposures continue to threaten public health and safety, Bechtel is finding ways to profit from the radioactive mess its projects have created.

 

Part E. Bechtel and Public Works: A History of Taxpayer Abuse

Bechtel is being entrusted with millions of dollars of U.S. taxpayer and/or Iraqi oil dollars in the reconstruction effort in Iraq. As detailed throughout this report, however, Bechtel has proven that it has little regard for the rights of taxpayers to protect their resources against Bechtel's abuses. In one particularly egregious example, Bechtel is the corporation behind the most costly civil engineering undertaking in U.S. history, the Boston Central Artery tunnel project, known as the "Big Dig." Bechtel originally estimated the federally-funded project at $2.5 billion in 1985. The cost has reached $14.6 billion and appears to be rising still. Congress has investigated this mass abuse of taxpayer money on charges of extreme mismanagement and blind profiteering. Bechtel's history of worker abuses goes back as far as the construction of the Hoover Dam in the 1930s. A representative of the Bechtel-led joint venture that built the dam bluntly stated at the time, "they will work under our conditions, or they will not work at all." Labor conditions were so horrendous that the Department of Labor charged Bechtel with 70,000 separate violations and fined the company $350,000 (Bechtel had the fine reduced to $100,000). Bechtel's disregard for the human rights of workers remains a constant point of contention in its projects throughout the world.

 

Part F. Bechtel and Unsustainable Energy

Bechtel has played a major role in construction for the fossil fuel economy and the mining industry. As the environmental costs of our fossil fuel addictions become clearer, and the limits of our natural resource base loom closer, Bechtel must be held responsible for the role it has played in moving our country toward further dependency on unsustainable energy practices. Bechtel boasts on its website of its involvement in more than 350 fossil-fuel power plants. It has built a vast network of oil pipelines in the U.S., Canada, the Middle East, Eastern Europe and Colombia. Bechtel is also involved in mining operations in Chile, Papua New Guinea, and other places where toxic waste has polluted land, water and caused deaths among the local population.

 

Part G. Conclusions and Recommendations

Bechtel has a shameful track record of reaping human, environmental and financial devastation in communities throughout the world-from Boston to Bulgaria to Bolivia. Rather than being rewarded for such behavior with control over many of Iraq's most valuable public resources, Bechtel should be held accountable for its past and current destructive practices and condemned by citizens of the world. If anything resembling ethical, transparent and accountable practices had prevailed in the contract decision-making process - such as open bidding practices, full public disclosure of the bidding documents, ensuring the corporation has a satisfactory record of integrity and business ethics - Bechtel would certainly be excluded from business activities in Iraq. This section makes concrete recommendations to stop the Bush Administration from doling out contracts to undeserving firms with which it has close ties, including Bechtel and Halliburton.


PDF Version of Report Bechtel: Profiting From Destruction
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Part A. Doing Business with Dictators: Bechtel's History in Iraq1

 

Bechtel's Contract in Iraq

Even before the military invasion of Iraq began, the corporate invasion was well underway. Weeks, if not longer, before the war began, the Bush Administration invited a select few of its oldest friends and closest allies to bid on the rebuilding effort - the largest since the Marshall Plan. High on the list was former Secretary of State George Shultz's current and long-time employer, the Bechtel Corporation of San Francisco.

According to the Wall Street Journal, the U.S. Agency for International Development (USAID) secretly sent a detailed "request for proposals" to a select handful of the nation's most politically connected firms.2 On April 17, Bechtel was awarded $34.6 million of an 18-month contract worth up to $680 million. According to USAID, the contract includes assessment and repair of power generation facilities, electrical grids, municipal water and sewage systems, rehabilitation or repair of airport facilities, the dredging, repair and upgrading of the Umm Qasr seaport; and may also include the repair and reconstruction of hospitals, schools, selected ministry buildings and major irrigation structures, as well as restoration of essential transport links.3 Tens of billions of either U.S. taxpayer and/or Iraqi oil dollars are expected to change hands before the rebuilding is through.

According to the New York Times, the contracts guarantee companies will be paid under a "cost plus fixed fee" deal.4 Once the cost of the project is established, the contractor is entitled to recover those costs plus a fee that is a fixed percentage of those costs. That percentage is generally eight to ten percent, although the New York Times reported that before signing the contract, Bechtel was seeking government insurance against claims for property damage, injuries or death while working in Iraq, a provision that could save them millions of dollars and increase the potential profits significantly.5

 

"Crony Capitalism"

Cries of political cronyism have been heard from the streets, the Congress and around the globe since the bidding process was first leaked, and understandably so. Bechtel's roots in current and past Republican administrations are provided in detail in this report. Needless to say, they are deep and wide.

Bechtel board members and employees will not only profit from the war with Iraq, but through a variety of government advisory positions, they seem to have played significant roles in ensuring that the war took place.

The most blatant example is George Shultz, former Secretary of State and Bechtel's current senior counsel and director. As described by Bob Herbert in the New York Times, Shultz "is also the chairman of the advisory board of the Committee for the Liberation of Iraq, a fiercely pro-war group with close ties to the White House. The committee, formed last year, made it clear from the beginning that it sought more than the ouster of Saddam's regime. It was committed, among other things, 'to work beyond the liberation of Iraq to the reconstruction of its economy."6

With Bechtel's new contract in Iraq, the opportunity for expansion throughout the region would be further advanced by a recently announced Bush Administration plan for a U.S.-Middle East Free Trade Area by 2013. Bechtel even had an apparent role in this, as Riley P. Bechtel, the chairman and CEO, was appointed in February to the President's Export Council - President Bush's advisory committee on international trade. Such an agreement would make the corporate and economic invasion of the entire region a reality, and Bechtel, as usual, would be in the lead.

While U.S. corporations continue to jockey for contacts and subcontracts in the lucrative business of post-war "reconstruction," a huge number of Iraqis remain without the basic services of water and electricity, struggling from day to day to piece together a livelihood.

Photo: Maj Fiil-Flynn

 

Will Bechtel Privatize Iraq's Water?

Bechtel is one of the top ten water privatization companies in the world.7 Globally, it is involved in over 200 water and wastewater treatment plants, in large part through its numerous subsidiaries and joint ventures such as International Water.8 Bechtel's record in providing this most precious of life's resources is often to sacrifice human needs for profit - a practice that should not be allowed to be replicated in Iraq.

Halliburton received a $77 million contract to repair Iraq's oil fields. In April, we learned that the contract also includes both the pumping and selling of Iraq's oil. On May 1, the Wall Street Journal revealed a Bush Administration paper outlining a "broad based Mass Privatization Plan" for Iraq including "the privatization of state-owned industries such as parts of the oil sector."9 Neither members of Congress nor the American public have seen this paper. There is reason to speculate, however that water privatization may well be included on Bush's privatization list.

Bechtel's contract includes rebuilding Iraq's water and wastewater systems. If their contract is extended to include "distribution of water," just as Halliburton's was for oil, the people of Iraq have much to fear.

The Bush Administration actually tried to impose a market-based water distribution system in Iraq already. U.S. Army Colonel David Bassert of the 354th Civil Affairs Brigade in Iraq told the New York Daily News that the Americans wanted to arrange for Iraqi contractors to sell water for a profit in Umm Qasr in order to nudge the Iraqis into free-market practices "so they don't get used to a welfare system."10 The British, on the other hand, wanted to provide the water for free, noting that a barter system for water had existed for generations in Iraq and there was no reason to alter the system now. The British won. But Bechtel was not then in Iraq. It is now.

The reason for concern goes beyond the immediate access of Iraqis to their water, however. Water is already the cause of wars in the Middle East and Iraq is home to the most extensive river system in the region, including the Tigris and Euphrates Rivers and the Greater and Lesser Zab Rivers. It also has a sophisticated system of dams and river control projects.

As Stephen C. Pelletiere, a former CIA senior political analyst on Iraq during the Iran-Iraq War, wrote in January in the New York Times, "America could alter the destiny of the Middle East in a way that probably could not be challenged for decades - not solely by controlling Iraq's oil, but by controlling its water. Even if America didn't occupy the country, once Mr. Hussein's Baath Party is driven from power, many lucrative opportunities would open up for American companies."11

 

Bechtel in Iraq: dealing with the dictator

Allegations of war profiteering are nothing new to Bechtel. The company made over $100 million off of World War II - a number high enough to attract the attention of Congressional investigators holding hearings on war profiteering.12 During the 1958 hearings to confirm Bechtel's wartime partner John McCone to become the Commissioner of the Atomic Energy Commission, Ralph Casey of the U.S. General Accounting Office criticized McCone and other World War II wartime manufacturers for making excessive profits during the war. Casey pointed out that "at no time in the history of American business, whether in wartime or in peacetime, have so many men made so much money with so little risk, and all at the expense of the taxpayers, not only of this generation but of generations to come."13 McCone's appointment was approved despite this condemnation.

Bechtel also has a long history of taking U.S. taxpayer money to subsidize partnerships with dubious governments at extreme social and environmental cost. Bechtel's intimate revolving door with the U.S. government facilitates access both to U.S. taxpayer money and insider deals with governments of strategic interests to the U.S.

As described in stunning detail by the Sustainable Energy and Economy Network/Institute for Policy Studies in a May 2003 report, the interplay between Bechtel, the U.S. government, dubious business partners, national security, high profits and extreme social harm are at their most blatant in Bechtel's dealings with the Iraqi government of Saddam Hussein.

 

The Aqaba Pipeline14

From 1983 to 1988, Iraqi warplanes dropped between 13,000 and 19,500 chemical bombs on the people of Iraq and Iran. During this same time period, Bechtel and its allies in the Reagan Administration aggressively lobbied the Iraqi government to sign a contract with Bechtel to build an oil pipeline from Iraq to the Gulf of Aqaba in Jordan. Bechtel not only ignored the monumental humanitarian atrocities perpetrated by their Iraqi business associates, they took steps to ensure that their business deal would not be harmed by an official U.S. government condemnation of the Iraqi crimes.

Then Secretary of State George Shultz orchestrated the initial discussions with Iraq in 1983 on behalf of his former employer, Bechtel. Between serving as President Richard Nixon's Secretary of Treasury and President Ronald Reagan's Secretary of State, George Shultz spent eight years as Bechtel's president and director. He is currently both a board member and senior counselor. Behind the scenes, Shultz composed Donald Rumsfeld's pipeline pitch to Saddam. At the time, Rumsfeld, officially, was special envoy on a peace mission to the Middle East.

Negotiations between the U.S. government, Bechtel and Iraq continued unabated as the U.S. government condemned Iraq's use of chemical weapons in the war against Iran. In fact, on March 24, 1984, just fifteen days after the official condemnation, Shultz warned Rumsfeld that he was worried about the impact of the condemnation on U.S.-Iraq relations and the pipeline deal. Two days later, Rumsfeld met with Iraqi Deputy Prime Minister Tariq Aziz in Baghdad to further discuss the pipeline.

Bechtel's cozy government relations have made it uniquely successful in securing U.S. taxpayer-funded subsidies for their building efforts and Iraq is no exception. In June 1984, Bechtel successfully secured $484.5 million in government loan guarantees from the U.S. Export-Import Bank for Iraq for the Aqaba pipeline. One month later, Bechtel itself applied for $85 million in political risk insurance from the U.S. government's Overseas Private Investment Corporation (OPIC). Then, in a move reminiscent of their current contract deal in Iraq, in June 1985, Attorney General Edwin Meese suggested that the National Security Council work to figure out a financing arrangement for the pipeline that would not require Congressional approval.

Ultimately, the deal was unsuccessful because of Iraqi concerns over the safety of the pipeline through Israel and in 1985 Hussein called off the deal. However, as late as 1987, Bechtel asked OPIC to continue its registration for the project.

Now Hussein is out and Bechtel is in - this time, pumping water instead of oil.

 

Arming the Dictator: Chemical Weapons in Iraq

Bechtel not only disregarded Iraq's chemical warfare atrocities, it may have helped create them.

Bechtel signed a contract in 1988 to manage the engineering and construction of a petrochemical plant near Baghdad. Many have worried that Iraq has used the plant to develop chemical weapons. Jim Vallette, Research Director of the Sustainable Energy and Economy Network, made the following findings:

"Bechtel Corporation signed a contract to consult in the construction of a petrochemical complex (PC-2) South of Baghdad, just four months after the Hussein government infamously "gassed the Kurds" with mustard gas. The Bechtel design involved "dual-use" technology. According to Middle East Defense News, "a key feature of the PC-2 project was the plan to manufacture ethylene oxide, a precursor chemical that is easily converted to thyodiglycol, which is used in one step to make mustard gas." When UN weapons inspectors arrived in 1991, they declared the industrial complex that PC-2 was a major part as the "smoking gun" that proved Iraq was pursuing a "Weapons of Mass Destruction"(WMD) program.

The U.S. Dept. of Agriculture's Commodity Credit Corporation (CCC) funded Bechtel's construction of the PC-2. The CCC is designed to create export markets for US farmers, but, in the 1980s, the Reagan-Bush Administrations used it as a "piggy bank" to covertly arm Iraq. The Atlanta branch of the Banca Nazionale del Lavoro (B.N.L.) used CCC guaranteed loan to fund Bechtel's construction of the PC-2 project, which was obviously not a grain purchase.

After the imposition of sanctions in 1990, Iraq defaulted on this loan. In other words, in 1990, US taxpayers paid for Bechtel's construction of an Iraqi chemical weapons factory, and, now in 2003, they are paying Bechtel $680 million to rebuild Iraq after the US destroyed and invaded the country under the pretext of preventing Iraq from developing WMD."15

Photo: Maj Fiil-Flynn

 

Arming the Dictator II: Conventional Weapons in Iraq

Two Iraqi reports to the United Nation from 1996 and 2002, list Bechtel as one of several U.S. corporations that had supplied Iraq with one or more of the following: "conventional weapons, military logistics, supplies at the Iraqi Ministry of Defense, and building of military plants." The reports were revealed on December 12, 2002 in the German newspaper Die Tageszeitung. British and American officials and weapons experts have since attested to the list's accuracy.16

Bechtel helped arm Iraq. It did so while the Hussein regime was being found guilty of some of the most horrendous human rights abuses imaginable. Bechtel made a profit from the Hussein regime, and would have made a great deal more if Hussein had not canceled the Aqaba pipelin deal in 1985. Bechtel's board members and employees influenced the decision to go to war against Iraq in the first place. They now seek to profit off of the destruction brought by Hussein and the U.S.-led war.

 

B. The Revolving Door:Bechtel's Friends in High Places

The Bechtel family made its fortune by perfecting the art of the revolving door. Bechtel has used its intimate relationships with Republican administrations past and present to alter not only its own, but all of our destinies. While Bechtel takes pride in being a family-run business of four generations, this privately held corporation is no humble mom and pop operation. Bechtel is a monolithic engineering and construction giant that operates on seven continents. In 2002 alone, Bechtel booked new work totaling $12.7 billion with gross revenues of $11.6 billion, involving some 900 projects in nearly 60 countries.17 Riley Bechtel, CEO of Bechtel for the last 13 years, was ranked as the one of the richest people in the world.18 According to Forbes Magazine he has an estimated fortune of $3.2 billion. According to the Center for Responsive Politics, Bechtel doled out $1,303,765 in contributions to federal campaigns and candidates between 1999 and 2002, 59% of which went to Republicans.19

Bechtel began when Warren A. Bechtel performed his first construction work in 1898 grading railroad beds. By 1906, Bechtel was building railroads along the Pacific Coast and in ensuing years expanded into roads, tunnels, bridges and dams. In the 1950s Bechtel capitalized on the nuclear age and solidified its position as the pre-eminent company building all things nuclear. In the U.S. alone, Bechtel has had a hand in the design and/or construction of 45 nuclear power plants in 22 states.20 In addition to nuclear plants, Bechtel's projects include petroleum and chemical plants, nuclear weapons facilities, oil pipelines, mining and metal projects, water management and privatization and a host of other construction works. Bechtel projects include the Hoover Dam, the Alaskan oil pipeline, and the Bay Area Rapid Transit System (BART).

Bechtel is also known for another type of building - building and nurturing of relationships with successive Republican administrations over the past six decades. Bechtel has been and remains one of the most politically well-connected corporations in the United States. Its current and past board members and top executives have had more of an "open" than even a "revolving" door with current and past administrations. Bechtel has used these cozy relationships to wield immense influence over public policy which has allowed it to amass a fortune at the expense of people and the planet.

Steve Bechtel Sr., former CEO and empire-builder of Bechtel, explained, "In this business, you get to know people, sit on their boards and one day when something comes up, they ask you to take on a project. One thing leads to another."21

Bechtel's Government Friends Grant Big Contracts

 

Export Import Bank:

The Ex-Im Bank's five biggest corporate beneficiaries this decade included Bechtel, AT&T, Boeing, General Electric, and McDonnell Douglas (which has been purchased by Boeing).22 A few of the loans and guarantees Bechtel received from the Ex-Im Bank include $444 million for the Quezon, Philippines power project, $250 million for a Croatian highway, $523 million for two Turkish power plants, among many others.23

 

US Agency for International Development (USAID):

The Iraq reconstruction contract is the latest result of a long relationship with USAID. Bechtel provided lumber to cover roof damage from the Kosovo war in 1999.24 It received a 30 year $25 million loan guarantee from USAID for a private integrated water and sewerage project at Tirupur in Tamil Nadu, India, 1999.25 The corporation received USAID funding to assist the Polish government in the deregulation of energy prices.26 Other recent USAID contracts to Bechtel have been awarded for work in Morocco, Bangladesh, Costa Rica and Jamaica.27

World Bank's International Finance Corporation (IFC):

In recent years the IFC granted a $50 million loan for the Bechtel joint venture, Manila Water Company, in the Philippines.28 Bechtel also received $80 million for the Aeropuerto Internacional Juan Santamaria in Costa Rica.29

In the Beginning.

In the 1940s, Bechtel began what would prove to be a fruitful relationship with the U.S. Central Intelligence Agency (CIA). Close ties developed between the CIA's deputy director, Alan Dulles, and Steve Bechtel's financial advisor, John Simpson. Steve Bechtel also served as the CIA's liaison with the Business Council and other organizations linked with the CIA.30 These connections allowed Bechtel to further its business deals, notably in Saudi Arabia and then throughout the Middle East. In fact, in 1947 Bechtel built what was then the longest pipeline in the world through Saudi Arabia.

At the birth of the nuclear era, Bechtel used its political connections to bring commercial nuclear power into the world. John A. McCone, Steve Bechtel's World War II ship-building associate and close friend became chairman of the Atomic Energy Commission under President Eisenhower. (McCone then moved on to become CIA director under Kennedy and Johnson). Later, under the Reagan administration, Bechtel's own former vice-president W. Kenneth Davis, was appointed Deputy Secretary of the U.S. Department of Energy from 1981 to 1983.

The list goes on and on and reads like a "how to" book on wielding political and corporate influence in the United States and around the world. However, for the sake of brevity, we will jump ahead to the Reagan Administration and list the players in Bechtel's "open door" with the U.S. government.

William Casey, who served in three Republican administrations (Chairman of the Security and Exchange Commission under Nixon, as head of the Export-Import Bank under Ford, and as campaign manager and head of the CIA under Reagan) served as a consultant for Bechtel.31

Caspar Weinberger, Secretary of Defense in the Reagan Administration, was Bechtel's general counsel and served on the company's board from 1975 to 1981.

George Shultz, Bechtel board member and senior counsel. Between serving as Nixon's Secretary of Treasury and Reagan's Secretary of State, he spent eight years as Bechtel's president and director. He returned to Bechtel after his term as Secretary of State ended. Shultz also served a stint (appointed Winter 2002) on the Defense Policy Board, an elite group that advises Secretary of Defense Donald Rumsfeld on matters including the war against Iraq.

Shultz is also the chairman of the advisory board of the Committee for the Liberation of Iraq, a fiercely pro-war group with close ties to the White House. The committee formed last year, made it clear from the beginning that it sought more than the ouster of Saddam's regime. It was committed, among other things, 'to work beyond the liberation of Iraq to the reconstruction of its economy."32 He strongly advocated for war on Iraq in a September Washington Post opinion piece entitled "Act Now; The Danger is Immediate."

Riley Bechtel, CEO of Bechtel was appointed in February 2003 to the President's Export Council which advises the President on international trade issues. Soon after Riley Bechtel's appointment, Terry Valenzano, director of Bechtel's construction business in Saudi Arabia, flew to Kuwait City to meet with Jay Garner, the initial official appointed by the Pentagon to oversee "reconstruction" in post-Hussein Iraq. Also shortly after Riley's appointment, President Bush announced plans for a U.S.-Middle East Free Trade Area by 2013. With Bechtel's new contract in Iraq, the opportunity for expansion throughout the region would be greatly advanced through such an agreement.

Terry Valenzano, director of Bechtel's construction business in Saudi Arabia, flew to Kuwait City to meet with Jay Garner, the initial official appointed by the Pentagon to oversee "reconstruction" in post-Hussein Iraq. Also shortly after Riley's appointment, President Bush announced plans for a U.S.-Middle East Free Trade Area by 2013. With Bechtel's new contract in Iraq, the opportunity for expansion throughout the region would be greatly advanced through such an agreement.

General (Ret.) Jack Sheehan, a senior vice president at Bechtel, who manages their petroleum and chemical operations, is a member of the influential Defense Policy Board (described above.)

Daniel Chao, another Bechtel senior vice president, serves on the advisory board of the U.S. Export-Import Bank, a taxpayer-funded agency that is the official export credit agency of the U.S. government. The Ex-Im Bank is a major source of loans, guarantees and insurance for American corporations operating overseas. In the 1990s Bechtel was one of the largest recipients of financing from the Export-Import Bank.33

Ross J. Connelly, a 21-year veteran of Bechtel Group, is the executive vice president and chief operating officer for the U.S. Overseas Private Investment Corporation (OPIC), another federal aid program for U.S. corporations operating abroad. OPIC provides political risk insurance and loans to U.S. corporations operating overseas.

Photo: Maj Fiil Flynn

Secretary of Defense Donald Rumsfeld. According to the May 2003 report by the Sustainable Energy and Economy Network/Institute for Policy Studies discussed in detail in this report, Rumsfeld lobbied on behalf of Bechtel during two trips to Iraq in the 1980s.34 In 1983 and 1984, Rumsfeld traveled to Iraq as a special envoy of the Reagan Administration and met with members of Saddam Hussein's government. The main topic of discussion was a proposed pipeline to carry Iraqi crude oil through Jordan to the Red Sea port of Aqaba which Bechtel hoped to build.

Andrew Natsios, the administrator of US AID, the agency awarding reconstruction contracts in Iraq, is a former Bechtel project supervisor. Just two years ago, in his position as Chairman of the Massachusetts Turnpike Authority, he oversaw Bechtel's work on Boston's "Big Dig" project, a project notorious for its mismanagement and cost overruns.

Bechtel board member, George Schultz, used his political connections to lobby on behalf of a military invasion of Iraq. Bechtel received a request to bid on the reconstruction of Iraq before the invasion even began in a secret, undemocratic process. The contract itself has still not been seen by the Congress, much less the American public. Bechtel has once again used its revolving door to benefit itself and its friends at the expense of the majorities of the world's people and the planet.

C. BECHTEL BRINGS WATER WOES AROUND THE WORLD

Bechtel is one of the top ten water privatization companies in the world.35 Globally, it is involved in over 200 water and wastewater treatment plants, in large part through its numerous subsidiaries and joint ventures such as International Water.36 Bechtel's record in providing this most precious of life's resources, is one of sacrificing human needs for profit - a model that should not be allowed to be replicated in Iraq.

Bechtel's contract includes rebuilding Iraq's water and wastewater systems. As the following case studies make clear, if their contract is extended to include "distribution of water," just as Halliburton's was for oil, the people of Iraq have much to fear.

Misuse of taxpayer money and fear of privatization

California: Concerns over what privatization would mean for Iraq start in Bechtel's own hometown of San Francisco, California. In 2002 the San Francisco Board of Supervisors phased-out a contract with Bechtel for the management of the upgrade of the city's water systems before its completion date.37 In public reports, Bechtel was charged with doing unnecessary and overpriced work and charging the city for tens of thousands of dollars of personal expenses, including travel.38 Local unions complained that Bechtel was receiving taxpayer money to take over work already being done by more experienced and qualified city employees. Local citizens and their elected officials were also deeply concerned that the management contract was just the first step towards a privatization of the water system by Bechtel. The intense local opposition eventually culminated in Bechtel being forced out of water system.

Photo: Maj Fiil-Flynn

Bechtel creates a humanitarian crisis

Bolivia: After privatizing the water systems in Cochabamba, Bolivia in 1999, Aguas del Tunari, a subsidiary of Bechtel, implemented massive price hikes. Families earning a minimum wage of $60 per month faced water bills of $20 per month overnight. Rate increases of 100 percent were the most common, while increases of as much as 300 percent were reported around the city. Water was so expensive that many, particularly the poorest users, were forced to do without. After attempts at discussion with both the company and the government fell on deaf ears, the citizens rose in organized protest, eventually shutting down the city with a general strike. The Bolivian government defended Bechtel's right to privatize the water with deadly force - killing at least one 17 year-old boy and wounding hundreds more. But the people would not back down and the government was forced to cancel Bechtel's contract. Not to be undone by the will of half a million people, Bechtel responded with a $25 million lawsuit for lost profits in a case still pending at a World Bank court.39

Consumer rate hikes and allegations of embezzlement

Bulgaria: In 2000, Bechtel's joint venture, International Water, was awarded a concession contract to operate Sofiiska Voda, the private water company in Sofia, Bulgaria. Since then, there have been on-going labor, consumer and environmental problems with the company as well as allegations of impropriety and embezzlement. Labor unions have reported major problems, including Bechtel's refusal to transfer employment, and wanting to put permanent employees on fixed-term contracts. Bechtel was constantly postponing negotiations and refusing to sign a collective agreement protecting workers pay and conditions, while continuing to cut jobs. As for water prices, in 2001, an injunction was issued to stop Bechtel from charging increased water rates when their contract explicitly stated that rates would not be changed in the first three years. Water rates had been raised despite worsening water quality and no visible investment in the network, even though the company promised that it "would replace and upgrade some 100 km of the town's water-and-sewerage network per year." Reportedly, Bechtel even has plans to reduce the water supply pressure in the whole city, leaving people on upper floors in flats without water, unless they purchase specially designed pumps made by the company.40

In December 2000, the European Bank for Reconstruction and Development (EBRD) approved a 31 million loan to Sofiiska Voda.41

The funds were to help the company improve maintenance of the city's pipe system and enhance customer service and billing procedures. There have been allegations that major parts of the EBRD loan were diverted abroad. After the resignation of the CEO of Sofiiska Voda in April, the new CEO confirmed that the majority of the first and second tranches of the 31 million EBRD loan had been transferred abroad. The PARI Daily ran the headline "Responsibility Required for the Embezzlements in Sofiiska Voda." (April 2, 2002.) The CEO, however, claimed the transfers were not a breach of contract.

Abuse of workers

Ecuador: The process of water privatization in Guayaquil, Ecuador began in 1994. The Inter-American Development Bank provided a loan to the Government of Ecuador that included a requirement to privatize the public water company Empresa Cantonal de Agua Potable y Alcantarillo de Guayaquil (ECAPAG). International bids were solicited and Bechtel's joint venture, International Water, whose local subsidiary is named Guayaquil Interagua C. Ltda., won a thirty-year contract to operate in Ecuador. The contract stipulated that the privatization would mean the termination of all the workers of ECAPAG. The hiring of workers had been left to the discretion of the Bechtel local subsidiary. However, the company immediately faced a demand by the workers to maintain their jobs. To appease the workers, the company began a process of negotiation and agreed to contract with the majority of the workers of ECAPAG. However, the initial promises of the company were never fulfilled. The privatization process moved forward without hiring back the majority of the ECAPAG workers. The workers have taken legal action saying that they were deceived because the Bechtel subsidiary has not hired the majority of the workers as they had promised. According to leaders of the workers, fewer than 20 percent of ECAPAG workers have been re-hired. The struggle is ongoing.42

Photo: Maj Fiil-Flyn

Profits Over People

Estonia: In January 2001, Bechtel's joint venture, International Water, acquired a 50.4% stake in Tallinna Vesi, the Estonian water company that provides services for the capital city of Tallinn. Bechtel originally planned to raise water prices 50% by 2005, but enough opposition emerged to that plan that they had to revise it. The new plan would still raise prices, but do so over a longer time period - rising prices 54% by 2010.43 At the same time prices are being raised on life's most vital resource, the company is making huge profits for its shareholders. In May 2001 the supervisory council of Tallinna Vesi recommended that the shareholders get $10.3 million in dividends from the company's existing profits. One company board member said the reason for the large dividend payment was "the large amount of idle money in the bank account."44 In 2001, the company experienced a 700% rise in profits, and paid out 80% of this as dividend, leaving only $2.2 million for investment. While the Bechtel joint venture has managed to extract $37.8 million from this deal in just two years, the citizens of Tallinn, Estonia (unless they happen to be company shareholders) have painfully little to show from it all other than the promise of continually rising water rates through 2010. Meanwhile, investment in the city's water and sewage system, insofar as it takes place, continues to be financed primarily by the European Bank for Reconstruction and Development, not the company.45

Bechtel's broken promises

The 25-year lease agreements in Manila were the biggest water privatizations in the world when they took place in 1997. The Metropolitan Waterworks and Sewerage System (MWSS) granted the rights to operate and expand water and sewerage service to Manila Water, a company co-owned by Bechtel and the Ayala family; and Maynilad Water, co-owned by Ondeo/Suez and the Lopez family. The marriage between the major global corporations and the elite families of the Filipino oligarchy has not brought clean water to the millions of needy families in Manila. When Bechtel and Suez entered Manila in 1997 it was with a promise to lower rates, reduce leakages, and expand the water infrastructure to the millions of households in urban Manila.46

After five years, the two companies claimed that more than 2 million more people were connected to the water system, but government regulators dispute that number.47 Civil society groups have criticized the non-democratic and non-transparent nature of the privatization process, the rate hikes, the unmet promises of rehabilitation and expansion of water services (especially to the urban poor), continual allegations of corruption, and weak regulatory and oversight practices. In an attempt to impose rate hikes, the Bechtel joint venture has spent millions on legal disputes with the local regulatory body. Yet, the promises to address the serious daily problems with access to clean and affordable water faced by the roughly 11 million Filipinos residing in urban Manila have not been kept.48

D. Bechtel and Nuclear Nightmares

Bechtel has a long and tangled history of involvement in the continuing legacy of radioactive contamination from U.S. nuclear projects. Exposed as the man behind the curtain in the well-rehearsed Atoms for Peace charade, Bechtel has profited handsomely from both commercial and military nuclear activities in the U.S. Bechtel's nuclear divisions specialize in the niche market of lucrative public contracts for clean-up of the radioactive mess that the company's own construction projects create.

In the beginning

In the early 1940s, Bechtel was involved in the Manhattan Project, the U.S. government program that developed the atomic bomb. The subsequent bombing of Hiroshima and Nagasaki presented investment opportunities for Bechtel, and the company was one of the contractors to build the "Doomsday Town" in the Nevada desert that was designed to be blown up by the Atomic Energy Commission to assess what would happen if a small nuclear device detonated in a mid-sized U.S. city. Bechtel went on to work its connections in the Atomic Energy Commission to secure various U.S. government nuclear contracts.49

Bechtel was on the scene when the first nuclear reactor to generate electricity made its debut on Dec. 20, 1951, ushering in the troubled age of atomic energy. Bechtel engineers held the government contract for this project, at what is now the Idaho National Environment and Engineering Laboratory (INEEL), in Idaho Falls, Idaho - a lead government nuclear lab that since October 1999 Bechtel BWXT Idaho, LLC (composed of Bechtel National, Inc. and BWX Technologies) has been managing and operating on behalf of the Department of Energy (DOE).

As the company proudly trumpets on its Web Site, "Since the earliest commercial nuclear reactors a half-century ago, Bechtel has played a pivotal role in every phase of the industry's development."50 Bechtel built and/or designed more than half of the commercial nuclear power plants in the U.S. 51

Nuclear Nightmares

Bechtel's nuclear power plants routinely release radiation into the air and water. Their cooling systems wreak havoc on aquatic environments by sucking in huge quantities of plankton, fish, and other marine life, then discharging water as much as 25 degrees Fahrenheit warmer.52 These daily environmental assaults - legal, under NRC's lax regulations - go largely unchecked, Bechtel's fingerprints are also all over some of the U.S. commercial nuclear industry's more notable mishaps.

Consumers Energy of Michigan sued Bechtel for $300 million in 1974 when its Palisades plant broke down shortly after it started operation. Bechtel agreed to a $14 million settlement. 53

The Humboldt Bay reactor in California - built by Bechtel - had to be permanently shut down in 1977 because it sat directly on top of an earthquake fault. 54


In 1977, Bechtel installed the reactor vessel of California's San Onofre Unit 2 reactor 180 degrees backwards, a detail that went undiscovered for seven months.55 In 1992, the reactor was finally shut down and now its owner, Southern California Edison, is looking for a way to dispose of this unwanted Bechtel memento. The latest plan is to barge the 950-ton reactor all the way around the world in a 20,000-mile journey to the Barnwell nuclear dump in South Carolina except that port officials in Charleston have already suggested that they may deny entry to this radioactive cargo. Meanwhile, several former employees at San Onofre who developed cancer have sued Bechtel and Southern California Edison for exposure to radiation.56

After the melt-down at Pennsylvania's Three Mile Island reactor, Bechtel North American made the worst nuclear disaster in U.S. history worse by mismanaging clean-up operations. According to the Nuclear Regulatory Commission's (NRC) Office of Investigations, it was Bechtel's idea not to repair certain parts of the plant and improperly classify them as "not important to safety" to thwart regulatory controls. When employees complained that Bechtel was deliberately circumventing safety procedures, they were harassed and intimidated. In 1985, the NRC cited the reactor's owner, GPU with safety violations as a result of Bechtel's abuses and assessed a $64,000 fine (GPU contested the fine and eventually paid just $40,000).57 Likewise a Labor Department investigation into the case upheld charges that Bechtel employees who blew the whistle on safety violations at Three Mile Island were illegally harassed by management.58 A 1985 series in the Philadelphia Inquirer also implicated Bechtel in a number of worker health and safety violations during Three Mile Island clean-up operations. According to these reports, workers were sent into radioactive sections of the plant without adequate protective clothing or respirators and routinely given clothing that was already contaminated. Equipment intended to detect radiation hazards often malfunctioned.59

Portland General Electric sued Bechtel for $32 million after severe leaks in the steam generator tubes of its Trojan nuclear plant shut it down, and the discovery that it did not meet earthquake standards set by the NRC. Bechtel counter-sued, and an out-of-court settlement was reached in 1981.60

The Bechtel-built Davis-Besse reactor in Ohio delivered the closest brush with catastrophe since Three Mile Island, when leaks in its cooling system resulted in an acid deposit that ate a hole nearly all the way through the stainless steel lid of the reactor vessel. The reactor was shut down in 2002. Now the plant's owner, FirstEnergy, wants to restart it which presents Bechtel with an opportunity to profit from the Davis-Besse debacle: The company has secured the contract to replace the damaged reactor lid.61

Bechtel's Radioactive Waste Problem

The proliferation of nuclear power plants in the U.S., in which Bechtel boasts a leading role, has generated a growing stockpile of high-level radioactive waste. More than 45,000 metric tons of this deadly garbage has piled up at reactors across the country62 and there is no known way to safely dispose of it.

Initially, the U.S. government worked hand-in-hand with Bechtel to pursue a vision of nuclear waste alchemy known as reprocessing. Costly and messy reprocessing technologies separate out weapons-usable plutonium from nuclear waste, for potential re-use in reactors as fuel. Bechtel designed the only commercial reprocessing plant to have operated in the U.S. at West Valley, N.Y.63 This facility was a dismal failure in the 6 years it operated (1966-1972), and left behind 600,000 leaking tanks of liquid radioactive waste, a legacy of worker exposures, and environmental contamination. In 1999, DOE projected the cost to clean up the mess at West Valley, New York to be $4.5 billion, with an estimated completion date of 2041. This estimate is #3.5 billion more and 51 years longer than DOE's 1978 estimate.64 Since 1980, US and New York taxpayers have spent about #2 billion at West Valley, on efforts to clean up and prevent further environmental damage at the eroding and deteriorating site. That comes out to around #100 million per year from taxpayer pockets.65

Since abandoning the West Valley fiasco, the government has turned to the concept of "geologic disposal" and set its sights on Yucca Mountain in Nevada as the location for the world's first repository for irradiated nuclear fuel. Once again profiting from a problem it helped to create, Bechtel SIAC (consisting of Bechtel National Inc. and Science Applications International Corp) was awarded a 6-year $3.2 billion management contract for the project in 2000.66 Widely opposed by the Western Shoshone, environmental and public interest advocates, as well as the State of Nevada, the proposed nuclear dump is plagued by numerous scientific, environmental, and policy problems and has all the ingredients for a radioactive boondoggle in the making. Also, Bechtel's operations a Yucca Mountain violate a Native American sacred site and implicate the company in the Western Shoshone's longstanding dispute with the U.S. government over these lands.

Indeed, Bechtel and the nuclear industry in general appear to be the only beneficiaries of the misguided Yucca Mountain project that costs taxpayers hundreds of millions of dollars each year. In March 2003, problems uncovered by a DOE quality assurance audit resulted in the agency placing a stop-work order against project work procedures that Bechtel was revising.67

Expanding Nuclear Power Globally

More than 90 percent of Bechtel's commercial nuclear work is in the U.S.68 but the company is also involved in a few infamous nuclear projects abroad. For instance, Bechtel International Systems Corp. leads the international consortium with the management contract for containing the damaged Chernobyl reactor and its intense radioactivity. Bechtel is also involved in a project to build two reactors in North Korea69, where nuclear issues recently came into the spotlight following the decision of the country's leadership to begin reprocessing commercial nuclear waste to support a nuclear weapons program.

Another example is the Tarapur nuclear plant in India built by Bechtel. The plant emitted high levels of radioactivity directly into the Arabian Sea, and large quantities of radioactive material including open drums of radioactive waste were found strewn around the facility. In one area, 3,000 to 4,000 gallons of radioactive fuel were leaking per day. In 1974, the Indian government used plutonium produced by the Tarapur reactor to detonate an atomic bomb.70

Nuclear Relapse

Over the past two decades, commercial nuclear construction in the US has sensibly ground to a halt, but the always adaptable Bechtel has expanded its operations into other aspects of nuclear power operations. In addition to its Yucca Mountain work, the company services nearly two-thirds of the operating nuclear power plants in the U.S.71, contracts in support of industry efforts to seek extensions of reactor operating licenses, and, ironically, decommissions to shut down reactors.

Bechtel is also on the forefront of a troubling industry initiative to promote a nuclear power expansion in the U.S. - as if the safety, security, and waste problems associated with the existing 103 reactors aren't bad enough. When public support for nuclear power in the U.S. dropped to an all-time low after the Three Mile Island disaster, Bechtel spearheaded an industry lobbying initiative known as the United States Committee for Energy Awareness to pressure Congress for a renewed commitment to nuclear power.72 This group later became the Nuclear Energy Institute (NEI), which is now the nuclear industry's principal lobbying organization. Bechtel's Kennon G. Hess, president of the company's nuclear power division, currently sits on NEI's board of directors.73

In both the Bush Administration and the Republican-dominated 108th Congress, NEI's expensive lobbying campaigns appear at last to be paying off. The controversial Bush energy policy specifically plugs "pebble bed modular reactors," a dubious design concept that Bechtel is involved in. Energy legislation currently before the U.S. Senate would promote the construction of new nuclear reactors and offset the prudent disinterest of investors by offering federal financing that could leave taxpayers liable for an estimated $30 billion. If this ill-conceived program is approved by the Congress, Bechtel would presumably be a leading candidate for design and construction contracts for new government-subsidized reactors.

Bechtel's Weapons of Mass Destruction

With the future of the commercial nuclear industry uncertain, Bechtel has not left all its atomic eggs in one basket. The company is also a major government contractor on the military side of the nuclear coin. It is ironic, in fact, that Bechtel has been awarded a contract in connection with the Iraq war - fought ostensibly to rid Iraq of weapons of mass destruction; because back home in the U.S., Bechtel Nevada (a team consisting of Bechtel Nevada Corporation; Johnson Controls Nevada, Inc.; and Lockheed Martin Nevada Technologies, Inc.) has received $1.9 billion to date to manage the Nevada Test Site74, where the federal government has exploded 1,000 nuclear bombs.75 Now Bechtel Nevada is helping the government to conduct sub-critical nuclear tests (i.e. atomic explosions in which the detonation does not reach the climax of a self-sustaining chain reaction) and other nuclear weapons activities at the site. Opponents contend that these activities threaten