AUGUST 28, 2000
Herman Brown's huge bet on the Mansfield Dam just keeps paying off. It made Brown a rich man. It secured the future of his company. And it led to other big projects that provided the funds to elect Lyndon Johnson to the U.S. Senate in 1948 and the White House years later. Today, 63 years after Johnson helped secure federal funding for the dam, it appears that the modern descendent of George Brown's Brown & Root may once again be propelling a Texas politico toward the White House. Call it fate, dumb luck, or clever politics. Whatever it is, Brown & Root, arguably the most famous construction company in Texas, is once again near the center of a presidential race. And the company's political connections are once again paying big dividends.
Brown & Root is a subsidiary of the Halliburton Company, the Dallas-based oil services conglomerate that until July 25 employed Dick Cheney as chairman of its executive board and CEO. Like LBJ before him, Cheney has used his association with Halliburton and Brown & Root to enrich himself and gain political power. Last week, Halliburton announced that it was giving Cheney a retirement package worth more than $33.7 million. That comes on top of more than $10 million Cheney has earned in salary, bonuses, and stock options at Halliburton since 1995. In return for his pay, Cheney has helped the company attract government contracts worth hundreds of millions of dollars.
Johnson had it a little easier, as his symbiotic relationship with Brown & Root occurred before campaign finance laws required candidates to reveal the sources of their funding. Indeed, by Johnson's own admission, according to his biographer Ronnie Dugger, much of the money he got from Brown & Root came in cash. In return, Johnson steered lucrative federal contracts to the company. Those contracts helped Brown & Root become a global construction powerhouse that today employs 20,000 people and operates in more than 100 countries.
"It was a totally corrupt relationship and it benefited both of them enormously," says Dugger, the author of The Politician: The Life and Times of Lyndon Johnson. "Brown & Root got rich, and Johnson got power and riches." Without Brown & Root's money, Johnson wouldn't have won (or rather, been able to steal) the 1948 race for U.S. Senate. "That was the turning point. He wouldn't have been in the running without Brown & Root's money and airplanes. And the 1948 election allowed Lyndon to become president," said Dugger, who is currently running for the Green Party's nomination for the U.S. Senate in New York.
Cheney's business dealings on behalf of Halliburton and Brown & Root have largely occurred in the public eye and have been scrutinized by the media. But Cheney's dealings are just as questionable as those undertaken by LBJ. Indeed, in order to increase revenues for the company, Cheney has lobbied against sanctions that are considered part of America's strategic interests. For instance, the man who is now the Republican candidate for the vice presidency has lobbied against sanctions against Iran -- which could keep Halliburton from selling more products and services to that country. Meanwhile, Brown & Root has performed hundreds of millions of dollars worth of work for Libyan dictator Moammar Gadhafi, long suspected of sponsoring terrorism directed at the United States.
It was 1937, and the Mansfield Dam project (then called the Marshall Ford dam) was in limbo. Brown & Root, which had been a small Belton-based road-building company, was working on the dam even though Congress had not approved the $10 million project. Even worse, the project was illegal because the Bureau of Reclamation, which was overseeing the project, didn't own the land on which the dam was being built -- a minor fact that under federal law should have prevented the project from getting under way. But Herman Brown pressed on. He had received $5 million and was betting that he could get the federal approval and funding needed to finish the project. But he needed Johnson -- then a newly elected Congressman -- to get it. Johnson delivered. In July of 1937, with the backing of President Franklin Roosevelt, who made it clear he was doing it for "Congressman Johnson," the authorization and funding was approved.
That funding was the key to Brown & Root's future. In his book on LBJ, Path to Power, Johnson biographer Robert Caro reports that Herman Brown and his brother George made "an overall profit on the dam of $1.5 million, an amount double all the profit they had made in twenty previous years in the construction business."
But Herman Brown wasn't finished. He wanted another $17 million to make the dam higher by another 78 feet to make it function better for flood control. The Lower Colorado River Authority, which was to operate the dam, didn't have the money. So once again, Johnson went to work. Of course, he got the money, a move that resulted in even more profit for the Browns. "Out of the subsequent contracts for the dam," writes Caro, "they piled, upon that first million, million upon million more. The base for a huge financial empire was being created in that deserted Texas gorge."
(In retrospect, building the dam higher was a wise choice. During the floods of 1991, Lake Travis crested at 710 feet, just four feet below the level of the spillway. Without the extra height demanded by the Browns, or another dam, parts of Austin would likely have been inundated.)
The Mansfield project led to dozens of others. It also made the Browns believe in Johnson. "Herman Brown let Johnson know that he would not have to worry about finances in this campaign -- that the money would be there, as much as was needed, when it was needed," writes Caro.
And Brown & Root enjoyed especially great success attracting military contracts during Cheney's tenures, first as Secretary of Defense, then at Halliburton.
In 1992, the Pentagon, then under Cheney's direction, paid Brown & Root $3.9 million to produce a classified report detailing how private companies -- like itself -- could help provide logistics for American troops in potential war zones around the world. Later in 1992, the Pentagon gave the firm an additional $5 million to update its report. That same year, the company won a five-year logistics contract from the U.S. Army Corps of Engineers to work alongside American GIs in places like Zaire, Haiti, Somalia, Kosovo, the Balkans, and Saudi Arabia. According to data from the U.S. Army Corps of Engineers, between 1992 and 1999 the Pentagon paid Brown & Root over $1.2 billion for its work in trouble spots around the globe. In May of 1999, the Army Corps of Engineers re-enlisted the company's help in the Balkans, giving it a new five-year contract worth $731 million. On top of that, the company was recently hired by the State Dept. to do a $100 million security upgrade on American embassies and consulates around the world.
When Cheney arrived at Halliburton, the company was doing less than $300 million per year in business with the Defense Department. By last year, according to the Baltimore Sun, that figure had grown to more than $650 million. During that same time period, the amount of money the company spent on lobbying soared. In 1996, Halliburton was spending less than $300,000 per year on lobbyists. Last year it spent $600,000.
Cheney also helped the company obtain federally subsidized loans, loan guarantees, and insurance. In the five years prior to Cheney's arrival, Brown & Root garnered about $100 million in loans and guarantees from the Export-Import Bank and the Overseas Private Investment Corporation, two government agencies that sponsor overseas development by American companies. Since 1995, the company has received $1.5 billion worth of assistance from those same two entities. Whether those loans would have come to Halliburton without Cheney's presence is impossible to say. But some critics believe Cheney's trips through the revolving door between government and business are improper.
"It's always of concern to us when we see people in public service who catapult into positions of wealth and influence in the private sector because they can convert their contacts into wealth in the private sector," says Peter Eisner, managing director of the Center for Public Integrity, a Washington-based nonprofit that has issued a report on Cheney's deals (www.public-i.org). "Securing government guaranteed loans for Halliburton is troubling enough," says Eisner. "But now we find out that the same defense secretary will go through the revolving doors once more and be potentially the second most powerful person in the United States."
Before joining Halliburton, Cheney had no experience in the oil business. But that didn't appear to be a handicap. "What Dick brought was obviously a wealth of contacts," new Halliburton CEO (and former president of the Brown & Root subsidiary) David J. Lesar, recently told the Baltimore Sun. "You don't spend 20-some years in Washington without building a fairly extensive Rolodex."
But when Cheney became the CEO at Halliburton, his allegiance quickly shifted from geopolitical Reaganomics to economics. What was good for America was not good for Halliburton. In a 1998 speech, Cheney said the U.S. has "become sanctions-happy," and that it is "very hard to find specific examples where they [sanctions] actually achieve a policy objective." That same year, Cheney personally lobbied U.S. Sen. Phil Gramm in an effort to get a waiver from the Iran Libya Sanctions Act, a federal law passed overwhelmingly by Congress in 1996, which prohibits American interests from doing major business deals in those countries.
Cheney sought a way around the sanctions so that Halliburton could provide oil-field goods and services to Iran's oil industry. He tried to craft innovative approaches for Brown & Root to operate more openly in Libya. Since the mid-1980s, Gadhafi's "rogue regime" has paid Brown & Root more than $100 million to oversee engineering work on the Great Man-Made River Project, a massive, $20 billion pipeline project that will provide water for Tripoli and other Libyan cities. To get around the U.S. sanctions, Halliburton transferred the engineering work to Brown & Root's overseas offices. But it still hasn't escaped American law enforcement. In 1995, according to the Baltimore Sun, Brown & Root was fined $3.8 million for re-exporting U.S. goods through a foreign subsidiary to Libya -- in violation of U.S. sanctions.
Given the U.S. stand on Libya, does Brown & Root's work there subvert American foreign policy objectives? Dirk Vande Beek, Cheney's spokesman, refused to comment and referred the issue to Halliburton's press office. And what about Cheney's stand on economic sanctions, which conflicts with Bush's belief in their effectiveness? Cheney "is going to support what Gov. Bush has been saying about them," says Vande Beek.
For Cheney, his latest role is just another in a series of political makeovers: from staunch Reaganite, where economic sanctions were a primary weapon, to chief of the U.S. military under George Bush, where he was an enforcer of economic and military sanctions against America's enemies, to Halliburton, where sanctions were unprofitable, to vice presidential nominee, where sanctions are once again a-okay.
It's the kind of flexibility that a businessman like Herman Brown would have appreciated.
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