Halliburton’s Army – LONG BONUS POST

The Bonus Book of the Week is “Halliburton’s Army, How a Well-Connected Texas Oil Company Revolutionized the Way America Makes War” by Pratap Chatterjee, published in 2009.

This slightly sloppily proofread volume was also slightly redundant and very disorganized. Nevertheless, it was extremely well-documented and detailed. The author personally visited various sites and personally interviewed various people– in addition to sourcing information from documents– about which and whom he wrote.

In the late 1930’s, president Franklin Roosevelt, Congressman Lyndon Johnson and the company Brown & Root (BR) formed a public-private partnership to build the Marshall Ford Dam in Texas. In the early 1940’s, the company built the naval air station Corpus Christi. Taxpayers way overpaid for those projects. The reason was partly because the sweetheart terms of its contract guaranteed it a profit.

BR also built warships for World War II. It allegedly financed Lyndon Johnson’s run for the U.S. Senate in 1948. It built military bases during the Vietnam War. In August 1966, U.S. Congressman Donald Rumsfeld contended that, due to conflicts of interest, the federal government had signed contracts with BR that were “illegal by statute.” Of course, Rumsfeld hated President Johnson.

In October 1966, Rumsfeld and Bob Dole reported that BR had refused to let any government officials see documents associated with a BR construction site. The company and its subcontractors had lost track of $120 million and had thefts of millions of dollars of equipment by the end of its ($1.9-billion-in-costs) ten-year contract.

After the First Gulf War, a company named Halliburton pioneered the user-friendly assembly of cheap, prefab structures on military bases that were comfortable for soldiers in global hotspots. In early 1998, Dick Cheney assisted with the creation of Kellogg, Brown & Root when M.W. Kellogg was added to BR. Then Halliburton took over the whole kit and caboodle.

Through the 1990’s, Halliburton finagled $167.7 million worth of contracts from the U.S. government in Rwanda, Haiti, Saudi Arabia, Kuwait and Italy. “But it’s hard to convince people that the company had no influence when your entire upper management once worked for the very agencies that awarded the contracts.”

Halliburton’s tentacles also reached into Somalian and Nigerian territory through bribery. It had fun in the Balkans with “… double-billing, inflating prices and providing of unsuitable products.” By the late 1990’s, thanks to Halliburton and Chevron, the previously unspoiled, tourist-filled beaches in Angola’s Cabinda province had turned black.

Donald Rumsfeld was named Secretary of Defense in the United States beginning in 2001. Just prior to 9/11, “Rumsfeld said that the Pentagon was wasting at least $3 billion a year.” In the next eight years, he proceeded to eliminate most of the military’s in-house operations, including payroll, warehousing and sanitation.

Rumsfeld was adding one more area of American life– the military– to the privatization trend of recent decades. It has already gained traction in education, prisons, government entitlements, student loans, spying and courier services. Curiously, healthcare is going in the opposite direction. Why is that?

Well, medicine has undergone a major cultural change in the last fifty years. The family doctor who made house calls used to be a trusted family friend who charged a reasonable rate for his services. Now depersonalized medicine whose costs are sky-high due to technology and specialization is the norm. Healthcare is a mature industry.

Some aspects of healthcare have become capitalism gone hog-wild, especially those that are a matter of life and death. They have become as out of control as Halliburton.

That is why Americans are welcoming the intervention of government regulation to stem the incompetence, fraud, abuse and waste that have inevitably resulted from too much capitalism. Yes, capitalism is good– up to a point.

Anyway, the George H.W. Bush administration initially signed a military-services contract of a few million dollars with Halliburton. Dick Cheney served as CEO of Halliburton from late summer 1995 through 2000.

In those years and beyond, Cheney successfully spurred specific American foreign policy initiatives to win more lucrative contracts for Halliburton. By January 2002, in one of several nefarious policy changes, he got President George W. Bush to lift economic sanctions against the Muslim country of Azerbaijan, human rights and environmentalism be damned. On Halliburton’s behalf, Cheney engaged in friendly dealings with such oil producers as Iran, Libya, Russia, Saudi Arabia, and prior to the war, Iraq.

Azerbaijan’s president, Azeri Aliyev came to the United States for prostate cancer surgery in February 2002. A year later, he ran for reelection and won. As a quid pro quo, in November 2003, President George W. Bush got him a World Bank loan for an oil pipeline.

Of course, in February 2003, the fix was in and Halliburton was automatically awarded the contract that spelled out the terms of the fait accompli restoration of Iraq’s oil fields after the fait accompli war, ethics be damned. To top it off, the contract guaranteed a hefty profit for Halliburton. The company argued that there was no time for a fair, sealed-bid process before the war.

The “… contract would effectively make Halliburton the biggest recipient of Iraq’s oil money, with no input from the Iraqi people.” More than half of the billings for Halliburton’s oil-related services that the U.S. government would presumably pay for, were actually paid with Iraq cash. In other words, the proceeds of Iraq oil sales were used to pay Halliburton.

An organization that studied the quality of Halliburton’s work in Iraq calculated that “… the potential revenue lost from reduced oil production and exports” was $14.8 billion. Gross incompetence, fraud, abuse and waste were not isolated incidents. The holding company’s entities had a few contracts whose epic failures were hushed up until their projects’ entire budgets were spent, at which time those contracts were cancelled.

For example, there were many inexcusable episodes of oil smuggling by corrupt Iraqi officials, right under the noses of U.S. contractors. Halliburton was supposed to be the party responsible for preventing those episodes until it was fired in mid-2005.

In early 2004, due to public outcry over the no-bid, rigged Halliburton contract, there was new bidding, which was still rigged. The military, politicians and top employees of Halliburton were all co-conspirators in the illegality.

Workers of Halliburton’s subsidiaries and its subcontractors have hailed from a range of nations, including but not limited to: Fiji, Uganda, Egypt, Sri Lanka, Saudi Arabia, the Philippines, Pakistan, Afghanistan, Kyrgyzstan, Bosnia, India and America. Both non-American and American hirees are lured by the promise of high pay.

But often that promise comes with a price; the workers are subjected to mean living quarters, do hard manual labor for long hours, such as twelve hours a day, seven days a week in dangerous conditions, get no health insurance and no paid time off, and might go for months with no pay.

If they’re non-American, workers can’t complain because they’ll likely be threatened with dismissal. They likely borrowed money to travel to their expatriate work in the first place. If they quit their jobs, they would be greatly indebted, and their families back home would be made even more impoverished.

Just a few of the kinds of functions the worldwide network of cheap labor fulfills include: food delivery, preparation and catering, lodging, golf course maintenance, civil engineering, motor vehicle transport of the United States Air Force, United States customs inspection and security.

Read the book to learn the details of numerous Halliburton-related outrages in addition to the aforementioned, and how in 2003 and later, the voices of the handful of people who might have had the power to stop the corruption were eventually drowned out by political actions imposed by the powers that were.

Indecent Exposure

The Book of the Week is “Indecent Exposure, A True Story of Hollywood and Wall Street” by David McClintick, published in 1982. This volume with the provocative but misleading title had nothing to do with sex. It actually consisted of a suspenseful, albeit long story seen mostly through the eyes of Alan J. Hirschfield, the CEO and officer at Columbia, the movie company. It was about how a lack of honesty, the power of propaganda, and clashing egos basically resulted in the redistribution of wealth among the wealthy. This sort of thing happens all the time.

In February 1977, then-famous actor Cliff Robertson received a document saying he owed taxes in connection with a check he never received. He later found out that the check had been forged and cashed in his name, by David Begelman, a high-level executive at the aforesaid Columbia.

It was common practice for Hollywood studios to send movie actors checks for thousands of dollars (usually unreported to the IRS) that defrayed a small portion of their promotion expenses for a new picture. The IRS had just then begun cracking down on that taxable income. Robertson’s reaction set in motion a series of consequences that affected thousands of people; mostly financially.

Columbia was a public company, and the bad publicity resulting from news of a serious crime committed by one of its executives was a serious public relations problem. Hirschfield, who was on the board of directors, was told by an attorney that he had a duty to inform the executive committee, corporate counsel and the SEC after an internal investigation had been conducted.

As has been the case since the discovery of journalism/tabloidism, (supposedly said by Mark Twain), “A lie can travel halfway around the world while the truth is putting on its shoes.” Begelman’s friends in the Hollywood community (of which the check forger had many) rushed to his defense, having heard only vague rumors that described his transgressions in euphemisms. They really had no clue that he had actually committed several felonies, it turned out. They didn’t want to know.

The friends planted tabloidy messages in the media making the excuse “Everybody Does It” because they took unethical liberties with their own expense accounts, and made Hirschfield the villain, saying he was a power-hungry, vindictive executive, as he technically did compete for power with Begelman in the company hierarchy. Hollywood’s and the public’s gullibility in automatically believing in Begelman’s innocence and Hirschfield’s treachery is human nature.

At the board meeting that initiated the long, heated discussion that would determine whether Begelman was fired, Begelman acted like a prisoner on death row who had suddenly found religion. He implied he might kill himself if removed from his primary job. But actually, anyone who knows this kind of person knows that he would be too arrogant to kill himself.

A preliminary inquiry into Begelman’s history yielded more than one serious crime during his Columbia tenure, and previous lying and other worse misdeeds. Hirschfield argued for termination, saying Begelman was unlikely to change his spots, as dishonesty was a lifelong habit with him. Over the next few years, the Hollywood community and the public, however, still having heard only distorted soundbites that minimized Begelman’s sins, fooled itself into believing they weren’t that bad, and continued to defend him.

Interesting sidenote: In 1982, in a joking context, Hirschfield exclaimed to a female friend who was high on the corporate ladder, in front of some colleagues: “Female executives suck!” She laughed. Clearly, if that was uttered in 2018, hilarity would NOT ensue.

Read the book to learn of the consequences of the stupid actions taken by most of the main characters of this entertaining saga.

Grand Delusions – BONUS POST

The Bonus Book of the Week is “Grand Delusions, The Cosmic Career of John DeLorean” by Hillel Levin, published in 1983. This volume described the adventures of a car company engineer and entrepreneur, not to mention swindler.

The book’s first chapter was a summary of his entire career, suspense be damned. The section on his makeover and marriages was disorganized and redundant. One more criticism– the author interviewed only the book’s subject twice, and listed no notes, references or bibliography.

Anyhow, born in January 1925 in Detroit, DeLorean was the oldest of five sons. His father was an alcoholic Romanian; his mother, an Austrian. He kept busy while attending Lawrence Tech in Michigan. He wrote for the school newspaper and was on the student council. He joined a fraternity, danced in night clubs and drove a fast car.

DeLorean held a series of jobs including salesman, trainee in a special program at Chrysler, engineer at Packard, head engineer and then general manager of General Motors’ Pontiac division, and by the late 1960’s, general manager of its Chevrolet division.

After departing from his full-time job under murky circumstances, DeLorean and his sidekick Roy Nesseth posed as entrepreneurs who executed crooked business deals. Victims included an auto-parts patent holder, a farmer/rancher, and a financially struggling Cadillac dealership, among others. By the mid-1970’s, the pair had a bunch of business failures and lawsuits against them.

Journalists were suckered into writing about DeLorean’s past glory as a brilliant engineer. He “… must have learned that if he didn’t say too much, the reporter wouldn’t bother to check any further… They were still looking for dirt on General Motors, and the ex-executive was more than willing to give it to them… The maverick auto engineer was too compelling a character to be deflated with investigative journalism.” DeLorean fooled people just like Bernie Madoff did, although not on as grand a scale.

When he started his own car company, DeLorean let his attorney create a complicated network of sister companies to deliberately obfuscate financial and legal matters. It took the entire second half of the Seventies.

A boatload of fundraising was required to pay lavish executives’ salaries, design their offices, choose a manufacturing site, build the factory, sign up the car dealers, etc. The author erroneously used the term “comptroller” instead of “controller” when discussing the pesky bean-counter who complained about the arrogant, greedy DeLorean’s huge monetary outlays on all things for himself. “As Dewey [DeLorean’s first controller] predicted, the improprieties grew exponentially with the influx of money from the British government.”

DeLorean was the type of man who fancied himself as having some of the traits of James Bond. A man such as this, with a big ego, marries a model or actress at least a decade younger than himself. Like DeLorean, other James-Bond wannabes have assumed prominent leadership roles, and become international celebrities. The list includes but is far from limited to: Charlie Chaplin, Cornelius Vanderbilt IV, John F. Kennedy, Nelson Mandela, Elon Musk and of course, Ian Fleming.

Read the book to learn the details of the combination of honest ineptitude and premeditated, nervy criminality in which DeLorean and his accomplices engaged in the context of how not to become an automaker.

Dot Bomb

The Book of the Week is “Dot Bomb” by J. David Kuo, published in 2001. This ebook details the business dealings and the ensuing suspenseful power struggle at a dot-com company called Value America between 1996 and 2001.

The online retailer’s intended brand image was to boast maximum selection of merchandise shipped directly from sellers. This delivery-on-demand arrangement allowed the company to remain inventory-free, and thus minimize overhead costs. However, in reality, it needed to use resellers for many of the supposedly infinite products it sold.

Value America’s founder and leader, Craig Winn, was a charming megalomaniac who had grand plans to partner with various major corporations in order to attract investors and make the company worthy of an IPO. Unfortunately, Winn had planned to sell stock to the public just after the peak of the dot-com boom, when brokerages’ confidence in internet companies had started to wane.

After Value America went public, Goldman Sachs issued a report that Amazon.com was the internet retailer with the highest potential for success because it had high sales margins on its then-merchandise consisting only of books; a $30 billion valuation was not out of the realm of possiblity. Goldman went on to say Value America had the worst prospects, with sales margins of 1% and runaway costs. It would have to achieve revenues of billions of dollars in order to make any money.

Toward the end of the story, the author realized “Despite the hype, headlines, and hysteria, this was just a gold rush we were in… a lot of us were kin to those poor, freezing fools in Alaska who had staked everything on turning up a glittering chunk of gold.”

Read the book to learn the fate of the author, his family and the other Value America employees with dollar signs in their eyeballs.

God Is My Broker

The Book of the Week is “God Is My Broker” by Brother Ty, with Christopher Buckley and John Tierney.  It is a very funny satire.  The story starts with a man who made sufficient money on “Wall Street” to retire at a young age.  However, a mid-life crisis caused him to try the lifestyle of a Trappist Monk.

While swearing off material possessions at the monastery, “Brother Ty” still had the urge to gamble.  So he let a line of text in a religious tract dictate his course of action in the stock market.   The way Brother Ty interpreted the text turned out to be contrarian to most other traders’ advice and actions, but turned out to be extremely lucrative for him.

The humor of this book emerges when the monastery and the monastery’s abbot are revealed to be just as dishonest as Wall Street.   The monastery raised money through selling wine that was falsely advertised, and the abbot built himself an entertainment center with the ill-gotten gains. Read the book to vicariously experience the hilarity that ensues.