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January 19, 2006

How Halliburton Does It

I applaud the Wall Street Journal for picking up the rotten scent of cronyism at a time when most had left it for dead following the 2004 Presedential election. In an article on Tuesday, entitled Some Iraq Rebuilding Funds Go Untraced, Scot J. Paltrow notes that since the furor over no-bid contracts and wasted taxpayer money leading up to the election, virtually nothing has been done to recover the funds.

WASHINGTON -- More than 18 months after the Pentagon disbanded the Coalition Provisional Authority that ran Iraq, neither the Justice Department nor a special inspector general has moved to recover large sums suspected of disappearing through fraud and price gouging in reconstruction.

Earlier audits by the Special Inspector General for Iraq Reconstruction -- a post Congress created in late 2004 -- found that oversight of contractors by the Authority was so lax that widespread abuse was likely. An audit in April 2005, for example, found "significant deficiencies in contract administration," which meant that "there was no assurance that fraud, waste, and abuse did not occur in the management and administration of contracts" the U.S. awarded with Iraqi oil money administered by the United Nations.

Nevertheless, there hasn't been a concerted effort to trace what happened to the money and make recipients pay back any ill-gotten gains. The inspector general's office said it doesn't plan to ask the Justice Department to file lawsuits or to conduct widespread audits of individual contracts to look for fraud.

If you've been wondering how companies like Halliburton get away with it, this is how. They simply weather the political storm, knowing it is merely temporary, and they've been through it before. After things calm down, investigations are dropped, and life returns to normal. These companies are in it for the long haul, and they know that p0litical disfavor is temporal. Sad but true.

Halliburton Agenda Reviews

From The Globe and Mail:

This is a classic American love story of our time. Ambitious influential politician meets beautifully greedy corporation. They are made for each other. To the pounding of oil-pumping and war-making profits, they pursue their passion. Through the forbidding labyrinth of government contracts, they chart their destiny. In the glaring wilds of

Texas

and

Arabia

, in the discreet soft glow of suites from White House to Congress, they consummate their union. They grow gloriously rich and powerful, and live happily ever after.

Well, almost. There are awkward charges of obscenity in the affair. Obscene influence. Obscene profiteering. Nevertheless, the politician comes gallantly to the defence of their virtue, and he is a soothing sort who reassures friends, foils enemies and generally eludes even the obvious. He is hardly the company's first powerful consort. Every self-perpetuating Pentagon contractor needs a string of well-connected champions. In any case, they have little to fear from a political opposition equally compromised by the accepted culture of grasping. Their plunder is as American as apple pie and cost overruns.

Award-winning business journalist Dan Briody has written in The Halliburton Agenda a marvellous little primer on how things work at part of the darker, seedier business end of the

United States

' post-cold war imperium. As in his bestselling The Iron Triangle, an exposé of the furtive Carlyle Group of national security wheeler-dealers, Briody is showing us secrets that tend to lie in plain sight at every hand, at least for any reasonably sentient observer of

Washington

politics and governance beyond the civics-class public façade. It is a mark of the pervasive and cynical complicity he portrays, and of his distinction amid a sadly failed journalism, that what ought to be banal comes as revelation.

The star of the book, of course, the soothing courtier and politician in question, is Vice-President Dick Cheney, who became Halliburton's CEO in 1995, and after leading some of the most extraordinary rooting at the government trough in the history of crony capitalism, went on in 2000 to become George W. Bush's regent. Cheney took with him from a grateful corporation more than $30-million (

U.S.

) in a golden parachute and stock-option personal fortune, and a readiness, we now know, to enrich his old company still more in the punitive expedition to

Iraq

.

That the Vice-President also left behind a shroud of scandalous practices, from accounting manipulations and bribery of government officials to corrupt dealings with Saddam Hussein's Iraq and an eventual shareholder-shattering asbestos liability, was scarcely a secret at the time. But after the obligatory summaries of the "controversy," by which the mainstream U.S. media acquit their self-defined, nicely self-limiting professional obligation in such matters, that record -- who and what Halliburton really was, and what its essence said about Cheney -- never rose to the level of an election issue. So much, after all, was standard practice.

Only when the company's monopolization of potential billions in occupation contracts in

Iraq

became too egregious to be ignored did the subject reappear. Even now, however, watched closely but essentially unchecked by the media or politics, Halliburton goes on its highly profitable way in

Mesopotamia

and elsewhere, with no questions asked about the larger system that makes it all possible.

Briody's concise, well-written account gives us back a neglected history. It is a now charming, now maddening tale of how an obscure oil-field services business in 1920s

Texas

expanded, then exploded, to become an empire of its own as arguably the single most crucial and powerful private purveyor to the 21st-century

U.S.

military. Like the story of the

United States

' lost innocence, which it parallels and represents so strikingly, it was not always a matter of snatch and grab and glib evasion. Erle Halliburton, the roughneck who founded the company in 1919, was a tower of business rectitude who despised the profiteering and political influence with which his name would one day be synonymous.

By 1962, however, Halliburton acquired Kellogg Brown & Root, Texas's notoriously political construction company, in what soon proved a Faustian bargain for profit and expansion, KBR a poison draught extinguishing Halliburton's founding ethic. The ruthless political machine of George and Herman Brown was legend, owning politicians from Lyndon Johnson on down. Not having given his permission for Johnson to accept the vice-presidential nomination under John F. Kennedy in 1960, Brown first heard the news on the radio, and snarled typically to an aide, "Who told him he could do that?"

Briody adds little to the record of KBR's suborning. Setting it in the lineage of Halliburton, however, he has given us a telling reminder of the continuity of corruption and corrupting in the

U.S.

military-industrial oligarchy. He tolls quickly but graphically some of the horrendous cost -- from the destruction of Leland Olds, a promising

Texas

politician whose very different view of economic equity and corporate-government responsibility was swept aside by Johnson's KBR-programmed rise, to the

Vietnam

and Cold War profiteering that was the parent to today's looting.

Briody's most valuable service, though, is to trace clearly and succinctly the lineage of the Logistics Civil Augmentation Program, the Leviathan LOGCAP that has evolved into what he aptly calls "America's Super Contract" of military construction and services, grown out of the privatizing craze led by then-secretary of defense Dick Cheney in the wake of the first Gulf War in the early 1990s. How Halliburton-Brown & Root worked the system to gain that multibillion-dollar colossus, how it in effect designed its own contract, and how it has arrived at a de facto monopoly dominance the United States Government is unwilling to reject and unable to curb, is one of the more haunting sequences in U.S. history.

As Briody shows, there will be no early rescue from that descent. Cheney, the Bush Administration at large and the forces they represent may be a blatant, often crude exaggeration of some of the worst trends in government-business collusion, but they are only different in degree, not in kind. With the notable lonely exception of figures like Democratic Congressman Henry Waxman of

California

, the Democrats pose no real reform threat to the vastly corrupted system. Cheney, after all, enriched himself and his corporation with such impunity after 1995 not at the hand of a Republican regime but of Bill Clinton's. Halliburton's hold on the

United States

and the inner politics of corporate exploitation, Briody reminds us, are nothing if not bipartisan.

Roger Morris, whose Richard Milhous Nixon won a National Book Award Silver Medal, is the author of several works of U.S. history and presidential biography, and is completing a history of U.S. covert policy in Central Asia.

From Amazon.com
Despite their shared preference for keeping a low profile, Vice President Dick Cheney and Halliburton, his former employer, gained notoriety in the aftermath of the war in

Iraq

thanks to a series of lucrative government contracts awarded to Halliburton, for which they never had to bid. Business journalist Dan Briody sheds light on the history of the company and demonstrates how its present-day relationship with influential politicians is not anomalous but part of a time-honored yet ethically suspect tradition of doing business. Briody introduces Erle Halliburton, who was born into poverty but found great financial success with innovative oil well technology. And while Halliburton avoided getting close to elected officials or pursuing government contracts, the Brown brothers of Texas-based Brown & Root made the nurturing of "pet politicians" a top priority as they grew their construction business into one of the most powerful in the nation. The Halliburton Agenda details the mutually beneficial relationship the Browns shared with an up and coming Lyndon Johnson as money and influence flowed freely between the two. Halliburton acquired Brown & Root in 1962 and with it, Briody contends, plenty of questionable business practices that continue to this day. Dick Cheney looms ominously on the book's cover but he doesn't appear much in the book until fairly late in the Halliburton story. Still, because Cheney's early-1990s' appointment to the job of CEO (after no private sector experience) and departure to be Vice President in 2000 coincided with an upsurge in Halliburton revenues and controversies, there's plenty of material to examine. While many have questioned what sway corporations have in the George W. Bush administration, Briody's extended look at Halliburton's corporate culture and history provides enlightening perspective. --John Moe

From Publishers Weekly
Following hard on the heels of The Iron Triangle, an examination of international consultants the Carlyle Group, Briody turns his considerable investigative skills to the rise of the Halliburton Corp., its subsidiary Kellogg, Brown and Root and the transformation of the

U.S.

military establishment. With a blunt matter-of-fact tone, Briody describes the rise of the two companies from the dusty oil fields of west

Texas

to the marbled corridors of power in

Washington

,

D.C.

Briody contends that Halliburton and KBR have literally bought politicians, manipulated the contracting process and ridden the current wave of small wars to record profits. Small, detailed moments of intense private pressure and unscrupulous backroom deal-making dominate this story. While Briody seethes with indignation, there is a grudging respect for the skill with which the executives and politicians ply their trade and a bitter resignation at the reality of the ways of government contracting. Central to the Pentagon's post–Cold War strategy is outsourcing nonmilitary tasks to private contractors. One of the chief architects of this plan was Dick Cheney, defense secretary for the first President Bush. Briody argues that with Cheney now vice-president and Halliburton awarded a huge no-bid contract to reconstruct

Iraq

's oil fields, public outrage has grown. As the controversy simmers, Briody raises an important question: with Americans and Iraqis dying by the day, have military matters become so efficient and profitable for companies like Halliburton that war itself is easier to wage? At times the book is repetitive and has the feel of being rushed to press, but this urgency lends the book a certain gravity. Briody has his own agenda—brilliantly illuminating the increasingly crucial nexus of public need, private profit and war making.
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.

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January 18, 2006

Reviews of Iron Triangle

From the New York Times:

A trusted adviser to the Pentagon stands to make $725,000 for advising a company seeking a deal that the government opposes on national security grounds. When the country is at war, no less.


This very recent tale, of Richard N. Perle, who was chairman of the Defense Policy Board, a voluntary citizens advisory body, but thought nothing wrong of his arrangement, shows that few topics could be more timely than the web of government, business and military interests that lobbyists and bureaucrats call the iron triangle.


Now a first-time author, Dan Briody, has come along with "The Iron Triangle: Inside the Secret World of the Carlyle Group" (Wiley, $24.95), which aspires to tell the ultimate tale of private interests trampling on public trust. Carlyle is the

Washington

buyout firm that has made the most of its unusual political connections to complete some rarified deals. As the author warns in his preface, "the scandal here is not what's illegal but what's legal."


The firm and the world in which it operates have been the subjects of previous profiles, most memorably a 1993 article by Michael Lewis in The New Republic. He called Carlyle the "neat solut ion f or people who don't have a lot to sell besides their access, but who don't want to appear to be selling their access." Mr. Briody himself wrote about the firm in December 2001 in Red Herring magazine.


And therein lies the problem. The book is one-stop shopping for anyone who wants a laundry list of accusations against Carlyle since its inception in 1987. But in the year or so that the author was researching and writing the book, he did not unearth enough hard proof of self-dealing to sustain 210 pages. It feels padded, even without the 50 pages of addenda.


Clearly, with a Bush back in the White House, Mr. Briody and his publisher must have been expecting that Carlyle's connections to the Bush family would sell the book. But even if Carlyle's deals eventually enrich the current president and his father, the former president, that does not mean that their every action was for that reason.
Readers might also ask if it is surprising that a firm like Carlyle, which has long made its living in the military industry, would be making big money now that the country is obsessed with security. A book of this ambition ought to be able to weed out apparent conflicts of interest from actual ones and coincidences from conspiracies.


The chapters in which the author comes closest to finding conflicts involve instances in which public officials awarded contracts, gave favorable treatment or turned over public money to Carlyle before leaving office. Then, in a blink, they turn up working for the firm or companies associated with it.


Certainly, permissive laws that rely on former politicians' own sense of shame about capitalizing on connections have helped buoy Carlyle's fortunes. As of June 2002, the firm had $13.5 billion "under management," as they say on Wall Street.


What makes Carlyle so utterly different is its pedigree. It was started by Stephen L. Norris, a former tax whiz for Marriott, and David M. Rubenstein, a onetime aide to President Jimmy Carter. What brought them together initially was a tax break that let Eskimos sell their business losses to outsiders for cash. The two teamed up to broker those tax breaks, earning $10 million in fees and costing the government $1 billion in taxes from profitable companies.


In September 1988, Carlyle started hiring a string of other

Washington

insiders, starting with Frederic V. Malek, a former aide to President Richard M. Nixon who also had undeniable connections to the Bush family, Saudi royals and others worth knowing, the author writes.


The all-star cast grew to include Frank C. Carlucci, a former defense secretary and former deputy director of the C.I.A., and John Major, the former British prime minister.


It even hired a former oil man to serve on the board of one of its companies. That director, George W. Bush, is now president.


CARLYLE'S purchase of a company called Vinnell in 1992 confirms the author's worst suspicions. He argues that it illustrates the perils of the iron triangle "in one neat utterly secretive package." Vinnell trained foreign armies, and the book quotes an unidentified former board member as saying the company was a front for the C.I.A. But much of the intrigue that is recounted here happened before Carlyle bought the company. It sold the unit to TRW in 1997.


Certainly, the stakes grew when James A. Baker III joined Carlyle in 1993. Here was a man — chief of staff for two presidents, Mr. Reagan and the elder Mr. Bush, as well as a former Treasury secretary and a former secretary of state — who could provide influence globally the way Mr. Carlucci, with his 32 corporate board seats, had done at home.


One of Mr. Briody's more fascinating revelations is at the end of the book, and one only wishes he had made more of it. He argues that because state pension funds plow money into Carlyle, bigwigs inside the Beltway aren't the only people who stand to become rich. That also explains, perhaps, why the public does not have much incentive to shut the crony capitalists down. (The New York Times,

Sunday, April 13, 2003

)

"...Undoubtedly, the story of the Carlyle Group is fascinating...a book worth reading..." (Professional Investor, June 2003)

"...useful reading for anybody interested in American politics today..." (Economist,

28 June 2003

)

"...conspiracy theorists will love this investigation in to the Carlyle Group..." (EN Magazine, July 2003)