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Charlie Cray

Charlie Cray

Posted: August 31, 2006 06:08 PM

Who's Making a Killing?


When we talk about "War Profiteers" we usually think of Halliburton, Bechtel and other companies that received those lucrative no-bid contracts in Iraq -- companies that will be the focus of Robert Greenwald's forthcoming movie, "Iraq for Sale."

But from Custer Battles to Duke Cunningham, from Lockheed Martin to David Brooks a lot of people seem to be making a killing these days off the war -- directly and indirectly, both legally and illegally.

Others who make the list include top neocons like Dick "Daddy Warbucks" Cheney, James Woolsey, and Doug Feith.
Even a few members of the Bush family have gotten in on the action, such as W's brother Neil ($60,000/year from Crest Investment Corp to work three or four hours a week on "miscellaneous consulting services") and his Uncle, "Bucky Bush," who earned $450,000 in stock options from ESSI, which manages a global military supply chain.

That's no surprise: The Bushes have a family war profiteering tradition that extends as far back as grandfather Prescott Bush's involvement with a bank that was ultimately seized under the Trading With the Enemy Act during World War II because of its ties to Fritz Thyssen, the German industrialist who helped bankroll Hitler's rise to power, according to Fox News.

As Barbara Bush once said, "family means putting your arms around each other and being there." Yeah, being there when the opportunity to cash in arrives.

Since I'm on the topic of arms and oiligarchs, I might as well put a plug in for Executive Excess 2006, the annual CEO pay report just released by United for a Fair Economy and the Institute for Policy Studies, which makes it clear that these days the big bucks are being made by the big defense contractor CEOs and Big Oil's top execs.

CEOs of the top 34 defense contractors were paid on average 108 percent more in 2005 than they were in 2001 (CEOs at other large U.S. companies rose just 6 percent during the same period), while the top 15 executives in Big Oil received 2.8 times the amount that their peers in similarly sized large companies earned last year, including a 50 percent raise between 2004 and 2005, when they averaged $32.7 million.

Of course with Americans paying twice the amount for gas that they paid in 2000 ($1.55/gal.) the big oil companies have done well enough under the "war president" to make more than their CEOs happy. According to Public Citizen, the top five U.S. oil companies recorded $342.4 billion in profits since Bush came in office (through the first quarter of 2006).:

ExxonMobil: $118.2 billion
Shell: $82.3 billion
BP: $67.8 billion
ChevronTexaco: $43.1 billion
ConocoPhillips: $31.1 billion

And, well, what about Halliburton -- the number one brand in war profiteering?

I laughed the other day when someone sent me a link to an article in the Houston Chronicle which claimed that "Halliburton hasn't been making out like a bandit", because they reported earning just $74 million in profit on about $2.4 billion in revenue for the first half of the year in Iraq -- a margin of about 3 percent.

What they didn't say: the "cost-plus" contracts (in which the company gets reimbursed by the government for all of its costs, plus a fixed percentage of their costs as profit) guaranteed the company that 3 percent no matter what, i.e. even if they charged taxpayers $40/case of soda, and $100 to wash a 15 lb bag of laundry.

In fact, it's the company's own employees who have been most critical of the company, largely because they've seen the waste and enormous costs up close. As one former employee told Congress, after questioning the company's failure to seek out competitive bids from subcontractors, he was told "Don't worry about price. It's cost-plus." Congressman Henry Waxman concluded after quizzing a few of these Halliburton whistleblowers that the company adopted the policy because "the higher Halliburton's costs are, the larger its profits will be" - even if they stay the same as a fixed percentage.

So while it may be true that Halliburton makes a fixed profit off its logistics work in Iraq, such numbers as CEO David Lesar knows quite well, can be very deceiving. BTW, Lesar, a former partner at Arthur Andersen (Enron's old firm) himself pocketed $26.6 million last year.

It's worth recalling that while Lesar was making about $12,500/hr to grouse and gripe about the company's low skim rate, he declared that he would "jack the margins up significantly" if the company's monopoly logistics contract were broken up and the company was forced to rebid. In fact that's exactly what is happening.

Of course, Halliburton's critics wouldn't have been able to harp on them so much if the company were only making an honest dollar helping repair Iraq's infrastructure and providing essential services to U.S. troops, but that has obviously not been the story. Not only have taxpayers been gouged by an enormous variety of abuses, but the company botched the reconstruction of a pipeline (causing it to lose that part of its contract) and served contaminated water to U.S. troops.

And that's the point with most of the war profiteers and gas gougers. They aren't making an honest living.

So what do we do?

First, we need a fresh Congress willing to crack down on the war profiteers.

Today's Republican-led Congress has held only a handful of official hearings into contractor abuses and fraud in Iraq. The House Committee on Government Reform has held only four full committee hearings into the matter since the war began while the Senate has held only one hearing. In other words, Congress has delegated nearly all of its oversight responsibilities required by the Constitution to officials at the Pentagon.

At Halliburton Watch, we found four separate occasions where the U.S. Congress has voted down a proposal to establish an investigative committee on Iraq modeled after the committee that Harry Truman used to give the war profiteers hell during World War II. This committee's sole purpose would have been to investigate military contractors in Iraq and Afghanistan.

According to Taxpayers for Common Sense, the Truman Committee was launched with just $15,000, but saved an estimated $15 billion during the wars with Germany and Japan. The Truman Committee is often described as the most successful government investigation effort in U.S. history. And it was led by a Senator whose party was in power.

"I have never yet found a contractor who, if not watched, would not leave the government holding the bag. We are doing him a favor if we do not watch him," Truman once told his fellow Senators.

Second, we need a windfall profits tax on the big oil companies, who seem willing to use their money for everything but a significant investment in clean energy (which would reduce our reliance on oil and help guide us away from the destructive drive towards climate calamities -- both significant national security priorities). Instead, they are using the money to pay themselves enormous salaries and other benefits, to buy their own stock back, and manipulate the markets.

Ultimately, the gas gougers and war profiteers make a killing at the expense of our collective security and national interest. If we don't put these two corporate cabals on the defensive, they will drive us further into certain disaster.