Family of Secrets: The Bush Dynasty, America's Invisible Government, and the Hidden History of the Last Fifty Years (45 page)

To forestall any more such upheavals in the supply pipeline, the United States quickly struck a secret deal. Thanks to a covert agreement between the Saudi Arabian Monetary Agency (SAMA) and the U.S. Treasury, Saudi petrodollars would pour back into the United States in the form of investment in American businesses and prime real estate. In effect, the Saudis were using the gas being pumped into American tanks to buy America out from under the Americans. It was, to quote Saudi prince Fahd, “a new and glorious chapter in relations between Saudi Arabia and the United States.”

The United States would continue to serve as protector of the Saudi royal family—assuring its continued survival against domestic and foreign enemies— despite its authoritarian and anti-democratic foundations.
²⁸
U.S. companies, particularly Texas-based ones such as Bechtel and Brown and Root (later bought by Halliburton), would make vast fortunes by helping Saudi Arabia develop its infrastructure. This further benefited the royal family and (it was assumed) secured goodwill with the Saudi people. In return, the Saudis would agree to provide a stable oil supply and to invest a substantial percentage of their petroprofits in the United States. As noted by John Perkins, a former economic consultant who says he worked secretly for the National Security Agency, “What had initially appeared to be so negative [about the oil embargo] would end up offering many gifts to the engineering and construction businesses and would help pave the road to global empire.”
²⁹

Which brings us back to Poppy Bush and his special position at the nexus of oil and intelligence. The United States agreed—secretly, of course—to help develop the Saudi military and intelligence service, and to work closely with the latter. The United States also agreed to pass along intelligence gathered by the Israelis throughout the Arab world on radical Islamic elements.

As a result of the deal, not only did Saudi funding for unauthorized American covert operations increase, but Saudi money also flowed to American friends of the royal family. Law firms and others who secured the Saudis as clients significantly increased their role in raising and bundling political contributions while handling Saudi business.

There was also a calculated decision to use the Saudis as surrogates in the cold war. The United States actually encouraged Saudi efforts to spread the extremist Wahhabi form of Islam as a way of stirring up large Muslim communities in Soviet-controlled countries. (It didn’t hurt that Muslim Soviet Asia contained what were believed to be the world’s largest undeveloped reserves of oil.) The Democrats played a role in all this, too. Jimmy Carter’s national security adviser, Zbigniew Brzezinski, has proudly asserted that the unleashing of radical Islam played a crucial role in destabilizing the USSR and ending Communism as a dominant world force.

In retrospect, it was not among the more farsighted policies in American history. It elevated a radicalized element of Islam with military training over what had been largely a moderate and insular Muslim population, and it prepared the militants to play a significant role around the world as well-trained and well-financed terrorists.

In the two years leading up to the oil embargo, Poppy Bush had been United States ambassador to the United Nations. In this capacity, he had worked for the foreign policy czar Henry Kissinger. By the time of the oil embargo, Poppy was the chairman of the Republican National Committee, which of course was concerned with the political consequences of the embargo—in particular, the public anger over the long gas lines. On top of all this was his close relationship with Texas petroleum refiners, who not only were among the GOP’s top funders but also were staring at dwindling domestic reserves. The Texas oilmen were eager for both the crude and the petrodollars the former Bedouins had in abundance.
³⁰

The point man for weaving together the complex economic relationship with the Saudis was a little-known fellow by the name of Gerald Parsky. His grasp of U.S. tax laws enabled him to advise Arab countries how to benefit from IRS tax exemptions for foreign investment in real estate. Parsky’s enthusiasm and expertise landed him a slot as assistant to Treasury Secretary William Simon, who was often referred to as Nixon’s “energy czar.” Between 1974 and 1977, Assistant Secretary Parsky visited many oil-rich Gulf states—Saudi Arabia, Kuwait, the United Arab Emirates, and Qatar—and worked every angle to ensure that petrodollars would flow back to the United States. He soon became known as the “whiz kid” in the Treasury for his mastery of details related to the Arab countries—revenues, development plans, investment strategies, and the rest.
³¹
Parsky also developed a close relationship with the Bushes, and would later serve as one of W.’s top California fund-raisers.

The Men to Know

Meanwhile, other alliances were being forged that would play a significant role in the rising fortunes of the Bush dynasty. Bill White, Jim Bath’s onetime business partner, first met Ken Lay in the early 1980s when Lay was being trained to succeed Robert Herring as CEO of Houston Natural Gas Company. That company would become the energy trading giant Enron, whose spectacular collapse amid widespread fraud under Lay’s leadership would make headlines in 2001. In the early eighties Herring was dying of cancer. His socialite wife, Joanne, a hostess of Saudis and honorary ambassador to Pakistan at the time, is credited with bringing James Baker, Prince Bandar, and Congressman Charlie Wilson together to arm the mujahideen to fight the Soviets in Afghanistan. In the film
Charlie Wilson’s War
, Joanne Herring is played by Julia Roberts.

It is a little-known fact that Ken Lay played a central role in the new relationship between the United States and Saudi Arabia that developed in the 1970s.
³²
Lay did so as one of Gerald Parsky’s young colleagues in the Nixon White House energy operation. Lay had gone directly from college to senior economist and speechwriter for the chief executive of Humble Oil in Houston, the Texas subsidiary of the Rockefellers’ Standard Oil of New Jersey, which later became Exxon. His professor Pinkney Walker had been named by Nixon as vice chairman of the Federal Power Commission, the precursor to the Federal Energy Regulatory Commission, and he brought Lay with him as his aide.
³³
After less than two years, Lay was put in charge of coordinating government energy policies, as deputy undersecretary of interior (the Department of Energy did not yet exist).
³⁴

It happened that Lay was in charge of energy policies just when the oil embargo hit in 1973. In the Nixon administration, as would be true later with the Bush-Cheney administration, the person in charge of energy policy was in effect the point man to the industries he was expected to regulate. This of course was the energy industry so closely tied to Poppy Bush, who became the chairman of the Republican Party in 1973. Resolving the supply instability issue highlighted by the embargo was not just good policy. It was good politics.

Though the crisis created hardships for most Americans, it meant enormous opportunity for some: Lay left Washington in 1974 and eventually signed on with Houston Natural Gas (later called Enron). Citing the embargo, he began pushing for complete deregulation of the industry. By 1974, Aramco could see the power shift and moved its headquarters from New York to Houston.

Another person who would figure prominently in Bush-circle dealings with the kingdom, and who will resurface in subsequent chapters, was a young Saudi named Ghaith Pharaon. A soft-featured man with the requisite Vandyke beard, private jet, and French château favored by the Saudi elite— and like George W. Bush a graduate of Harvard Business School—he was the son of a political adviser to the Saudi royal family. In 1975, Pharaon became the first Saudi to purchase a controlling interest in a domestic American bank—Detroit’s ailing Bank of the Commonwealth, the biggest in Michigan, with assets of one billion dollars. The firm’s real value, though, was as a foot in the door of the American banking system and a potential stepping-stone for further acquisitions.

Pharaon soon turned his attention to Texas and established Houston as his base of operations.
³⁵
He created a holding company called Arabian services Corporation, quickly took control of a number of American firms, and eventually built a global corporate empire. His approach to business would be characterized by
Time
as a “tendency to leave many major decisions to others, combined with a rather offhand manner when discussing business and money.” One of his domestic companies, a Dallas-based contractor, would plead guilty to bribing foreign officials in the Carib bean.
³⁶

By 1976, Gerald Parsky was assistant secretary of the Treasury, the undisputed go-to man for the Saudis on oil and money. And by then Poppy Bush had been brought back from China and installed as CIA director. One reason, already mentioned, was to put a benign face on the controversial agency at a time when it was receiving harsh public criticism. But there was another reason. Poppy’s secret past with the agency and his powerful connections at the epicenter of the oil-money culture in Texas would help him to implement the growing secret relationship with the Saudis. In this, Poppy worked closely with his counterpart at the Saudi General Intelligence Division (GID), Kamal Adham, who was also head of the separate agency charged with protecting the Saudi royal family. Adham had a third important connection, his longtime friendship and business partnership with bin Mahfouz—the man who hired Jim Bath.

In a now familiar pattern, years later, when Kamal Adham would be caught up in an explosive banking scandal, Poppy Bush would, improbably, deny even knowing him. It was implausible that the U.S. spy chief would not know his Saudi counterpart during that era, but that did not stop Poppy, who said, “I don’t know anything about this man except I’ve read bad stuff about him.”
³⁷
Indeed, when Adham was told that the White House press office had reconfirmed Bush’s disavowal, the Saudi expressed disbelief and even amazement, remarking, “It is not possible for the president to say that.”

For his end of the bargain, Poppy had quickly begun to put all manner of heightened protective measures in place on behalf of the Saudi leadership. The danger to the top Saudis was real. A mullah had issued an edict proclaiming the Saudi royal family corrupt. And in March 1975, at a conference, one of King Faisal’s nephews pulled a gun out of his
shumagh
(the traditional Saudi headdress) and shot the king dead. As rumors circulated that Faisal had been assassinated in a foreign plot, the CIA and Saudi security authorities launched an investigation. Meanwhile, the royal family moved swiftly to name his successor: Crown Prince Khalid would become king, and Fahd, known for his pro-Western views, would be his crown prince.

Three days after Faisal’s death, his successor, King Khalid, told the Beirut
Daily Star
that the killing had been “an isolated act by a deranged person without any foreign scheming.”
³⁸
The assassin was swiftly beheaded in public eighty-five days after Faisal’s death,
³⁹
and life went on in Saudi Arabia. But at the highest levels, the leadership knew that it could not trust many of their own relatives. Poppy is believed to have dispatched his former number-two man in the CIA, Vernon Walters, to work full time with the Saudi government to improve security.
⁴⁰

Trading on the Saudis’ fear, Poppy was in a position to ask for almost anything. And apparently he did. As we shall see, for many ensuing years almost everything that he, his friends, and his family members—including George W. Bush—were involved with was subsidized, mostly secretly, by the Saudis. The Saudis began to play a role comparable to that played earlier by the shah of Iran and the Philippine dictator Ferdinand Marcos as secret benefactors of Richard Nixon. In all, the relationship would result in more than $1.4 billion in investments and contracts passing from the wealthiest family in the world (and its surrogates) to the Bush apparatus over the course of two decades.
⁴¹

The House of Bath

“Bush was responsible for Bath’s relationship with the Arabs from the onset,” said Charles W. “Bill” White. Much of the Bath-Saudi story would not be known were it not for White, a former Navy pilot and Annapolis graduate who was recruited from the Harvard Business School in 1978 by Lan Bentsen, Bath’s real estate partner, to provide what Bentsen described as “pedigree” for Bath.

Bentsen was himself a graduate of the Harvard Business School and the son of Texas’s democratic senator Lloyd Bentsen, who had defeated Poppy Bush in the Texas Senate race in 1970. White told the Canadian Broadcasting Corporation,

When [Lan] found that I was a Navy fighter pilot, he said that there was an Air Force fighter pilot in Houston that I should meet—a pilot who the Bentsen family and the Bush families were already in business with. And he said that this fellow James R. Bath needed someone to run a series of real estate companies that would be grubstaked by not only the political families, but also by some foreign nationals—the Saudis. And so I came down for an interview and met Jim Bath.
⁴²

Bath interviewed White in his Rayalle Minerva V/STOL aircraft, which he kept at Houston’s Hobby field. During the interview, Bath actually landed this plane on a farmer’s field to relieve himself off the wing—a display of bravado presumably intended to impress White.