CHAPTER THREE: The Ascendancy of George H. W. Bush
The social structure of the United States, of course, bore little resemblance to a monarchy like that of Saudi Arabia. But within the American context, George H. W. Bush was the nearest equivalent to royalty, a member of a patrician class that was able to pass on power in both the private and public sectors from generation to generation.
Most famously, while an undergraduate at Yale, Bush had become a member of Skull and Bones, the secret society to which his father, investment banker Prescott Bush, belonged. [i] With its baroque and mystifying preppie voodoo rituals, Skull and Bones was where bonds were forged by men who would run the old-line banks and white-shoe law firms, men who would become the Wise Men of Washington. This was the Eastern Establishment -- the Bundys, the Buckleys, the Harrimans, and the Tafts. Bonesmen counted among their ranks three presidents, several Supreme Court justices, U.S. senators, secretaries of state, national security advisers, the founders of Time, Inc., and the CIA, and more. 
And so, in 1948, when Bush took off for Texas with his wife, Barbara, and infant son, George W., he was not some poor immigrant striking out for the uncharted wilderness with nothing to fall back on. It was a long journey from the cosseted, leafy suburbs of Greenwich, Connecticut, where Bush grew up, to the land of barbecue and catfish, Dr Pepper and Lone Star beer, armadillos and the Texas two-step. But thanks to Neil Mallon, his father's best friend, Bush had already lined up a job in Odessa, Texas, with the International Derrick and Equipment Company (IDECO). Prescott Bush served on the board of directors of its parent company, Dresser Industries, had been instrumental in transforming Dresser into a public company, and was close to Mallon, its president, a fellow Bonesman and a man who was so intimate with the Bush family that he was known as Uncle Neil.  [ii] Young George H. W. Bush even named his third son Neil Mallon Bush.
Bush soon found other Ivy League immigrants and elite Texans who had gone east to school. In many ways, they were reenacting a domestic version of what the British did during the Raj in India, sending out the young sons of aristocrats to mine the resources of an underdeveloped colony. Texas, with its rich oil reserves, was like a third world country ripe for development by ambitious scions of East Coast wealth. The Spindletop gusher had given birth to the mythic Texas of oil barons and Giant, the sprawling James Dean epic. By the forties, the state had truly begun to shift from an agrarian economy to one based on oil. It was a land where rough-hewn wildcatters won and lost fortunes overnight. Here, Bush would develop an appreciation of oil as an important strategic resource, a characteristic he would later share with his Saudi friends.
By the time Bush got there, the Midland-Odessa area of West Texas was already an oil boomtown. Bush himself described it in his memoirs, Looking Forward, as "Yuppieland West."  An incongruous quasi-prep subculture began to emerge. Newly minted millionaires lived on streets named Harvard and Princeton.  Oilmen sent their sons north and east to prep at the Hill School, Lawrenceville, Choate, and Andover. Preppie clotheshorses shopped at Albert S. Kelley's, Midland's answer to Brooks Brothers.  Bush and his circle at the Petroleum Club constituted local society.
In 1953, Bush partnered with Hugh Liedtke to form a new independent oil company, Zapata Petroleum, backed by Bush's family connections. Bush's uncle, Herbert Walker, [iii] whose family helped found Brown Brothers Harriman, at one time the largest private investment firm on Wall Street, raised at least $350,000. Bush's father, Prescott Bush, put in $50,000. Washington Post publisher Eugene Meyer put in $50,000 and again that amount in the name of his son-in-law, Phil Graham, who later succeeded Meyer as publisher. 
Zapata drilled 128 wells in Texas in its first year without hitting a dry hole.  With the company's instant success, Bush moved to Houston in 1954 and the following year founded the Zapata Off-Shore Company, which he later ran himself after spinning it off from Zapata.
At Zapata Off-Shore, Bush learned firsthand about the interaction between business and government. Crucial to the company's future was a happy resolution to a political controversy that would determine whether Zapata, or any other company, could drill offshore in the Gulf of Mexico within the twelve-mile limit. Fortunately, Bush did not have to look far to find a friendly politician happy to enter the fray on his behalf. His father, Prescott Bush, had become a Republican senator from Connecticut. Having given up investment banking for a seat in the U.S. Senate, Prescott Bush led Senate Republicans in battling efforts to take federal control of mineral deposits within the twelve-mile limit.  As a result, the success of Zapata Off-Shore was preordained. Congress tabled its attempt to federalize those waters, and George Bush's Zapata Off-Shore was able to drill off the Mississippi coast in the Gulf of Mexico.
His early success notwithstanding, Bush had never been an insatiable, dyed-in-the-wool oilman. Accumulating money for its own sake was not and had never been the driving force in his life. His father was.
At six feet four inches, Prescott Bush Sr. was a commanding figure with Hollywood good looks and athletic grace. Imposing as his physical presence was, Prescott Bush loomed even larger in the imagination of his sons. According to Herbert S. Parmet's George Bush: The Life of a Lone Star Yankee, he was "a leviathan of a father," a man whom his children, George included, never dared challenge. His presence inspired words such as dignity, respect, duty, service, and discipline. At home, his sons wore coats and ties to the family dinner table each night.  "We had a father who taught us to ... put something back in, do something, help others," Bush told the Los Angeles Times.  [iv]
As managing partner of Brown Brothers Harriman, Prescott was a familiar figure in New York's moneyed class. He belonged to the best clubs and went on cruises with Averell Harriman, the former governor of New York, presidential adviser, and heir to the Union Pacific railroad fortune. He sang harmony on the porch after dinner with the Yalies. And yet, as much as Prescott was a part of the fabric of that world, he looked with disdain at the lives of the "economic royalists" around him whose only goal was the accumulation of money.
So to those who truly knew him, it was not surprising that Prescott Bush had gone to the Senate to serve the public; indeed, it was almost as if a Senate seat were preordained.  In 1962, however, for reasons of health, Prescott decided not to run for reelection. George resolved to follow in his father's footsteps -- and vowed that he would go even further. He confided to his friends that he entertained presidential ambitions.
And so, in 1966, Bush sold out his position in Zapata, then worth about $1 million,  and was elected to his first of two stints in Congress. In saying good-bye to Zapata, Bush was leaving behind a chance at truly great wealth. In 1963, partner Hugh Liedtke had merged Zapata with Penn Oil, in the process creating Pennzoil. Having mastered the art of the hostile takeover, he then used Pennzoil to eventually gain control of the United Gas Pipeline Company, a company five times larger than his. By 1986, Liedtke's stock had gone up in value by 10,000 percent. 
George Bush had forsaken great riches, but he clearly had a promising political future. By the time Bush was reelected to Congress in 1968, Richard Nixon had put the young congressman on his short list of vice-presidential candidates.  A Senate seat appeared to be within his grasp, and Bush thought that would be a stepping-stone to the White House. When he lost the 1970 Texas senatorial race to Lloyd Bentsen, however, he was devastated. "I feel like [General George] Custer," he told a friend, equating his campaign with Custer's disastrous loss to the Sioux Indians in the battle of Little Bighorn. 
Luckily, a Republican who appreciated Bush's fealty sat in the White House. In 1972, after his landslide reelection, President Nixon ordered a housecleaning based on one criterion -- loyalty. "Eliminate everyone except George Bush," Nixon told his domestic affairs adviser John Ehrlichman. "Bush will do anything for our cause." 
Then, after Bush's stints at the United Nations, the Republican National Committee,  [v] and heading the U.S. delegation to China, in 1976 President Gerald Ford asked him to be director of the Central Intelligence Agency.
With the CIA under fire for its excesses during the Vietnam era, [vi] however, being the nation's head spook was a political liability, not an asset. Bush reluctantly acceded to Ford's request to take the job, but he viewed it as a ruse by rival Republicans to keep him out of the White House. "Could that be what was happening?" Bush wrote in his memoirs. "Bury Bush at the CIA?" 
Bush had other liabilities as a national candidate. His loyalty to Nixon had paid off with high-level patronage positions, but in the aftermath of Watergate, being a protege of the disgraced president had serious drawbacks.
And Bush had been a very real beneficiary of the Republican campaign abuses. Specifically, during his failed 1970 Senate campaign, in what became known as Operation Townhouse, Bush, assisted by campaign finance chairman Bob Mosbacher, a wealthy New Yorker who had moved to Houston in 1948,  and Hugh Liedtke's brother William,  had received $106,000 in unreported campaign funds. The money had been funneled through no fewer than fourteen different Bush campaign committees to avoid detection. Two Nixon associates, Jack A. Gleason and Herbert W. Kalmbach, later pleaded guilty to running the illegal fund-raising operation. Bush himself never faced formal charges, but the Wall Street Journal termed the operation "a dress rehearsal for the campaign finance abuses of Watergate."  [vii]
So when Bush returned to Houston in 1978 to assess his chances for higher office, he found little enthusiasm among even his closest friends. Hugh Liedtke had warned him that the CIA job was political suicide.  John E. Caulkins, a banker friend from Detroit, was taken aback when he received a call from Bush saying he planned to run for the presidency.
"Of what?" Caulkins asked.
"The United States," said Bush.
"Oh, George," Caulkins replied. 
Nevertheless, in late 1978, Bush met with James Baker and Bob Mosbacher and put together groups to raise funds and assess his candidacy. In addition to his father's East Coast connections, the Yalies and Bonesmen, to his CIA colleagues and his patrons in Washington and on the Republican National Committee, Bush had assembled a significant new political network in Houston -- Big Oil.
For the House of Saud, of course, there was no difference between the public sector and the private sector. They owned the oil industry and ruled the country. But in the United States that was not the case, and Bush set about transforming capital from the oil industry into political power. With Baker and Mosbacher, he hit up executives from Pennzoil, Exxon, Houston Oil and Minerals, McCormick Oil and Gas.  He had oil industry contacts at the highest levels all over the world. During his days at the CIA, he had cultivated friendships with the "friendly royals" of the Middle East. In Houston, he entertained King Hussein of Jordan and Nelson Rockefeller and hung out at the exclusive Bayou Club. Bush's former partner Hugh Liedtke, as Pennzoil's president and CEO, had become an oil heavyweight in his own right. William Farish Jr., heir to the Humble Oil and Standard Oil (now ExxonMobil) fortunes, was, as Barbara Bush put it, taken in "almost like family" by the Bushes.  [viii]
Bush was also tied in with the power-broker attorneys at the great law firms of the oil industry in Houston, including but not limited to Baker Botts and Fulbright & Jaworski, who lobbied the powers that be in Washington, handled international mergers and acquisitions, and mapped out strategy for multibillion-dollar pipelines for virtually every major energy firm in the world.
This was a tightly knit world. The legal department of Pennzoil, for example, was closely linked to Baker Botts, the firm founded by James Baker's great-grandfather, and which today represents ExxonMobil, ARCO, Schlumberger, BP Amoco, Halliburton, and many more top energy companies. Baker Botts had long had a special relationship with the Bush family, representing Zapata in the fifties and later providing George W. Bush with a summer job as a messenger when he was a sixteen-year-old student at Andover. The firm also played a key role in what would become the most important friendship of Bush's life, a partnership with James A. Baker III that would last a lifetime. [ix]
Tall, trim, and athletic, Baker, who was forty-eight years old when Bush began to explore a run for the White House, brought a compelling blend of unlikely characteristics to the Bush team. He chewed Red Man tobacco and wore cowboy boots, but had polish and a certain sartorial elegance.  He mixed a steely-eyed toughness with an unflappable serenity. He was unyielding, but a realist -- the consummate negotiator. He was also the perfect partner for George H. W. Bush.
If they had never met, Baker would likely have been merely another successful corporate lawyer, and Bush a politician with a fabulous resume. But, like Fred Astaire and Ginger Rogers, they were more than the sum of their parts. Bush provided a genial, clubby exterior and contacts to power and capital at the highest levels in Washington and New York. Tough, decisive, and disciplined, Baker gave Bush the spine of steel he sorely needed.
Together, the two men masked their enormous ambitions under a genteel, Ivy-covered veneer that was a distinct break from the profane, cajoling, flesh-pressing, arm-twisting, bourbon-drinking Texas political style of the era dominated by Lyndon Johnson and Speaker of the House Sam Rayburn. It started, appropriately enough, as a partnership on the tennis court, with Bush's volley and net play complementing Baker's strong baseline game  so well that they twice took the doubles title at the Houston Country Club. 
Peggy Noonan, who later wrote speeches for Bush, eroticized their refined-but-ruthless ambition. "They're these big, tall, lanky, hot-as-a-pistol guys with ambition so strong it's like a steel rod sticking out of their heads," she told the New York Times. "But they always make a point not to show it. Steel with an overlay of tennis." 
Baker had captained the tennis team at the Hill School, then still a traditional private boys' school near Philadelphia, before moving on to Princeton, just as Bush had been a baseball captain at Andover before playing baseball at Yale. Likewise, Baker had been tapped by Princeton's most celebrated eating club, the Ivy, as Bush had been for Skull and Bones. 
The Bakers were the stuff of Texas legends. In 1872, Judge James A. Baker, Baker's great-grandfather, joined Gray & Botts  a major firm that went on to represent railroad magnates and bankers such as Jay Gould and E. H. Harriman.  The judge later became a name partner, and in 1900, his son, Captain James A. Baker, by then also a member of the firm, played a key role in an important part of Texas lore. He discovered that the will of a murdered client, millionaire William Marsh Rice, was fraudulent and succeeded in allowing the merchant's vast fortune to be used as intended -- to establish Rice University in Houston.  The Bakers were not of the East Coast Establishment, but in their very Texas way, their pedigree was every bit as refined as Bush's.
Yet for all their similarities, there were important differences in the two men. Bush seemed guileless, his face an open book, more concerned with politeness, civility, and accommodation than substantive issues and confrontation.  His cousin Ray Walker, a psychoanalyst, attributed that characteristic to Bush's relationship with his father. "He always placated his father," said Walker. "Then, later on, he placated his bosses. That is how he relates -- by never defining himself against authority." 
Bush's courtliness made for a certain protean charm. People saw in him what they wanted to see. But his agreeable exterior was so palatable to almost everyone that he risked being seen as uncertain as to his principles -- "a wimp."
In contrast, Baker was all smoothness and charm, the Velvet Hammer, always proper, but a man no one wanted to cross. "Baker holds you locked in his gaze and Southern Comfort voice, occasionally flashing a rather wintry smile," the New York Times said. " ... He is such a fox you feel the impulse to check your wallet when you leave his office." 
When it came to electoral politics, however, Bush and Baker had not had much success. After winning his congressional seat, Bush had lost races for the U.S. Senate in 1964 and 1970, and his name had not appeared on a ballot since. His son, George W., lost a 1978 bid for a congressional seat representing Midland, Texas. Bored by corporate law, Baker had been lured into politics by Bush, but was then relegated to relatively menial political jobs such as undersecretary of commerce in the Ford administration.  In 1978, he ran for attorney general of Texas, but lost to conservative Democrat Mark White.
In defeat, Baker learned a valuable lesson. Mark White, as secretary of state, had declined to extradite a murderer named Kleason, and during the campaign, an aide dug up the salacious details. "Baker was scared of [using the case] because it was so bad," the aide told the New Republic. "It seemed like we were making it up. It became a joke later. Baker would say, 'It's time to go with Kleason.'"  Baker refrained from smearing White and lived to regret it. But he was not the kind who made the same mistake twice.
By virtue of their friendship, it was a given that Baker would sign on as Bush's campaign manager -- a task he did not particularly relish. Baker had played the same role in Gerald Ford's failed 1976 presidential campaign and won enormous credit in the GOP for engineering a come-from-behind campaign that barely lost to Jimmy Carter. But Baker loathed playing second fiddle, being a mere handler. He would certainly be relegated to such a role in a Bush campaign, as he had been in Bush's earlier efforts. 
When the 1980 season got under way in January, Bush pulled off a stunning victory over Ronald Reagan in the Iowa caucuses. But before long the Reagan juggernaut was on. In February, the affable, fatherly Reagan defeated Bush by nearly two to one in New Hampshire. In early March, Reagan won in Vermont and South Carolina, then swept Florida, Alabama, and Georgia. Then Reagan won in Illinois. Throughout the spring, Bush frantically campaigned all over the country, even resorting to an uncharacteristically biting attack during the Pennsylvania primary in which he derided Reagan's tax-cut proposal as "voodoo economics." But by June, Reagan had won twenty primaries, and Bush had defeated Reagan only four times. Baker, seeing Reagan's inevitable victory, thought about how to bring his friend's campaign to a productive end. 
Bush won Michigan in May, but by then, Reagan had already locked up enough delegates for the Republican nomination. Baker sent Rich Bond, a young aide who later became chairman of the Republican National Committee, to California, where Bush was campaigning, with instructions to mislead both Bush and the press into thinking Bush still had an active campaign there. 
Meanwhile, Baker met privately with the press. He spoke to the reporters only on background. But he made it clear that there was no way the Bush forces could continue to campaign in California when they were broke.  Soon, it was all over the news: Bush was dropping out.
There was just one problem. Baker had told the media, but not Bush. In effect, Baker's close friend and partner learned that his campaign was over from the press. [ix] Later, Bush exploded at Baker. He told an associate that he had been "misserved." 
Baker found the clash with his longtime friend distressing. "I'll never go through that again," he later said. "That was the worst experience in my life." 
But soon Bush realized, as Baker had all along, that the longer he campaigned, the more likely he was to alienate the eventual winner, Ronald Reagan. Baker and Bush finally made up. Eschewing tactics and rhetoric that might have offended the gentlemanly Reagan, mending fences after Bush's "voodoo economics" gibe, Baker had adroitly managed the entire primary campaign almost as if aiming for Bush to get the vice-presidential nod.
At the last minute, during the Republican National Convention in Detroit in July, former president Gerald Ford suddenly emerged as a potential running mate for Ronald Reagan. But that "dream ticket" also raised the specter of an unworkable co-presidency and soon fell through. Late at night on July 16, 1980, Reagan called George Bush in the Poritchartrain Hotel to offer him the number-two spot.  Finally, the Reagan-Bush campaign against Jimmy Carter and Walter Mondale could begin in earnest.
Now that he was on board as Reagan's vice-presidential candidate, a rarely seen side of George H. W. Bush emerged, at least to political insiders. In many ways, he was and would remain one of America's most misunderstood and underestimated politicians. With his genial disposition and verb-challenged, syntactical idiosyncrasies, Bush often played the amiable doofus who had an unerring instinct for the tone deaf remark. On the campaign trail, he listened distractedly to an underprivileged, black ghetto youth who didn't like homework, then responded with feigned concern, "Ah, comme ci, comme ca." 
Conventional wisdom had it that Bush lacked backbone. His positions on hot-button issues such as women's rights or giving formal diplomatic recognition to mainland China flip-flopped. James Baker was the real Texan who went duck hunting and chewed tobacco. Next to that, Bush's conspicuous acts to show that he was just one of the guys -- devouring pork rinds, for example -- were embarrassing contrivances designed for the media. As columnist Molly Ivins put it, real Texans do not use "summer as a verb. Real Texans do not wear blue slacks with little green whales all over them. And real Texans do not refer to trouble as 'deep doo-doo.'" 
But in fact, Bush's perceived weakness -- his accommodation to his superiors -- was not so much spinelessness as a powerful political weapon. He was a consummate pragmatist capable of changing positions when political demands called for it. As Reagan's running mate, he had shown how far he would go to be a team player, reversing his stands on Reagan's "voodoo economics" and on the Equal Rights Amendment.  Accommodation was a means of achieving goals. Bush got what he wanted.
However, Bush was not just flexible and open to compromise as all politicians must be. His genial disposition disguised it well, but when he engaged in combat, he could be cunning and devious. As early as 1960, the elder Bush won success for Zapata Off-Shore that was partially attributable to a dubious deal in Mexico in which Bush used third-party fronts to disguise his presence in the transactions.  [x]
During his tenure as U.S. representative to the United Nations, as chief of the U.S. liaison office in China, and as director of the Central Intelligence Agency, he had also mastered the arts of compartmentalization and secrecy, and some of the more unsavory practices of political combat.
As head of the Republican National Committee, Bush had served on the front lines during the Watergate scandal. He had benefited from the Republicans' scandalous campaign practices through Operation Townhouse, but did not suffer politically. At the CIA, Bush had not initiated the Agency's use of Panamanian president Manuel Noriega, but he was kept apprised of Noriega's role in narcotics traffic, met with the dictator,  [xi] and still continued to use him as an intelligence asset.  Bush's great talent was that he regularly employed such practices to their fullest, but managed to do so without leaving fingerprints. He always emerged unscathed.
Just a few years earlier, in the wake of Watergate and investigations into the overzealous practices of the CIA, Bush's credentials would have been a serious campaign liability. But in November 1979, Iran had seized fifty-two American hostages. With the crisis still ongoing and the theme of America held hostage an endless drumbeat dominating the news, it was a particularly propitious time for the Republicans to have someone with Bush's experience in intelligence on the ticket.
Certainly the CIA itself saw Bush as a favorite son. Jimmy Carter's appointment of Stansfield Turner as CIA director had angered hundreds of agents. In October 1977, Turner eliminated 820 surplus CIA personnel, many of whom had been counterintelligence officers. "You can't imagine the tremendous anger against the Carter administration in the military and intelligence apparatus," says Susan Clough, Carter's personal secretary. "Emotions had been boiling for years." 
Widely hailed as the most popular director of Central Intelligence since Allen Dulles, Bush had enormous support within the Agency. As the campaign got under way, Reagan-Bush posters appeared all over CIA headquarters in Langley, Virginia, many cut in the middle with only the right side, the Bush side, on display. 
During the campaign, Bush would allow the tradecraft of intelligence to work for the Republican ticket, again without leaving fingerprints. On July 15, 1980, while the Republican Convention was still taking place in Detroit, Reagan-Bush campaign manager William J. Casey announced that an "intelligence operation" was "already in germinal form" to monitor the Carter administration. 
Republican officials insisted that these efforts did not suggest "clandestine information gathering."  And many of the activities were simply aggressive but legitimate campaign practices, such as getting Jimmy Carter's schedule so that Reagan-Bush teams could spin the press at Carter's appearances. 
But a 1984 congressional investigation determined that the Reagan-Bush campaign's "information gathering efforts were not [emphasis in the original text] limited to seeking materials that could be acquired through public channels."  The report, sometimes referred to as the Albosta Report, after its chairman, Congressman Donald Albosta, a Democrat from Michigan, added that there was "credible evidence" that crimes had occurred.  Specifically, as the election approached, the Republican campaign operation attempted to get internal Justice Department documents on an investigation into the president's brother, Billy Carter, [xii] confidential reports on the Iranian hostage crisis from the Justice Department and Carter's National Security Council, and more.  The most famous of these Reagan-Bush operations later became known as Debategate and involved the apparent theft of Carter's briefing papers by Republicans before the October 1980 presidential debates.  [xiii]
On November 4, 1980, Reagan and Bush swept to a landslide victory over Jimmy Carter and Walter Mondale, winning the electoral vote by 489 to 49. In the two and a half months before the new administration took office, Bush spent his time putting together his staff and bolstering his relationships with Reagan's team. Reagan appointed Bush's Yale friend and Connecticut campaign chairman Malcolm Baldrige as secretary of commerce.
More important, James Baker's adroit political footwork during the campaign and his success at getting Bush to bow out of the race before dealing any unseemly blows to Reagan had so impressed Ronald Reagan's circle that he was the surprise choice for the powerful position of chief of staff. Thanks in part to lobbying on his behalf from the new CIA director, Bill Casey, Baker was now gatekeeper to the president of the United States.
A new era was beginning. The juxtaposition was stark. The Carter administration had been characterized by economic stagflation, hostages being seized, and a period of national embarrassment and humiliation. Now, a glamorous Hollywood royalty was replacing the dowdy Georgia rubes. Nancy Reagan breezed into the White House wearing Reagan Red -- her own color -- in gowns by Galanos, Bill Blass, and Adolfo.  There was a sense of style not seen since the Kennedys. The inauguration was going to be a coronation.
On January 18, 1981, just two days before the Reagan inauguration, the Carter administration finally reached an accord with Iran about returning the fifty-two hostages, who had then been in captivity for 442 days. All that remained before signing the agreement was a final translation of the terms into three languages, English, French, and Farsi.  Senator Charles Percy, chairman of the Senate Foreign Relations Committee, said, "I'm certain a deal will be made public before we go to bed tonight."
President Carter desperately hoped he would be able to welcome home the released hostages before his administration ended. But the next day, as negotiators fiddled with the final wording of the translations, Tehran Radio asserted that Carter would not get his wish.  "He certainly will not have the opportunity to engage in such clowning acts, because he has to be present outside the White House tomorrow to hand over his shameful office to his successor."
There seemed no reason for the Iranians to delay -- except to further humiliate Carter. As January 20 approached, one of the Iranian negotiators bragged that "we have managed to rub the nose of the biggest superpower in the world in the dust." 
Two hours before sunrise on Inauguration Day, Carter at last announced the final agreement for the hostages to be released. As Carter left the White House, and Reagan took the oath of office, the television networks cut furiously back and forth from their inauguration coverage to images of the hostages returning. [xiv]
Meanwhile, the Saudis had been closely watching their connections climb the political ladder and had taken on the services of former secretary of defense Clark Clifford. That spring, Clifford began lobbying on behalf of a group of Arabs, led by Sheikh Kamal Adham, the former chief intelligence officer of Saudi Arabia, to acquire Financial General Bankshares, a Washington, D.C.-based bank holding company. 
In the banking world at least, the Saudis were moving up the ladder. In addition, the Saudis were now particularly visible in Houston. Just three months after Bush and Baker began to settle down in the nation's capital, the Washington Post published a long article by Dan Balz on "Houston as the Mecca for the Saudis."  The piece went on about how the Saudis had become Houston's number-one trading partner. It discussed the mysterious Khalid bin Mahfouz, living in his stone mansion in the exclusive River Oaks section, sealed off from the neighborhood by a daunting iron fence, a sea of azaleas, and a burly guard poised to ward off intruders. It mentioned John Connally's involvement with bin Mahfouz and Ghaith Pharaon in buying the Houston Main Bank.
Two prominent Houstonians, Vice President George Bush and White House chief of staff James Baker, however, were nowhere mentioned in the article. The Bush family had pretty much steered clear of the Saudis -- or so it seemed.
But indirectly, bin Mahfouz had managed to get closer to James Baker. According to his attorney, Cherif Sedky, bin Mahfouz and his brothers joined forces with Houston developer Gerald Hines in developing the Texas Commerce Tower, the seventy- five-story I. M. Pei-designed home of Texas Commerce Bancshares, which was completed in 1982.  [xv] The building (now known as J. .P Morgan Chase Tower) was under construction by the time Baker and Bush got to Washington.
Sedky says neither he nor bin Mahfouz recalls who the other partners were in developing Houston's tallest building. But, according to the American Banker, the other major partner was the Texas Commerce Bank itself,  which had been founded by James Baker's grandfather.  According to the New York Times, as of December 31, 1980, just before he became chief of staff, Baker owned or controlled 111,428 shares of the bank company, worth $7,242,820 at the time. When he entered the Reagan administration, Baker put his stock into a blind trust to avoid potential conflicts of interest. There is no reason to believe he engaged in wrongdoing. 
But from the Saudi side, bin Mahfouz had accomplished something of a coup. Just thirty-two years old, the young Saudi billionaire now had shared business interests with the chief of staff to the president of the United States, the gatekeeper to the White House -- something that was bound to win approval at the highest levels of Saudi royalty. "Bin Mahfouz is a shrewd banker. He is not a risk taker," says a Saudi analyst who knows the royal family. "When he did that transaction, he had to have the complete authorization of the Saudi royal family." (James Baker declined requests to be interviewed for this book.)
To many Americans, the Saudi investments with politicians seemed unsavory, though it was not always precisely clear why. The most obvious assumption was that the Sauds were trying to buy access to the White House or to influence policy toward Israel -- or rather against it.
But in fact, even the Texans who had met the bin Ladens and the bin Mahfouzes knew little about them. Few had been to Saudi Arabia. Few knew anything about the House of Saud. Few understood the nature of the Saudi monarchy and its hierarchy. Few knew anything about its culture, about what was taught in Saudi schools. They did not know that the kingdom was a theocratic monarchy, that there was no separation of church and state, nor did they understand the first thing about Wahhabi Islam and its fundamentalist and puritanical nature.
For the most part, Texans interpreted the Saudis in American terms, in terms they understood, ones that had to do with money and oil and huge homes and multimillion-dollar business deals. The Saudis were so rich they could fly their own private commercial-size jets halfway around the world to see famous heart surgeons like Denton Cooley and Michael DeBakey at the Houston Medical Center.
Even those who were somewhat more knowledgeable thought the new generation of Saudis appeared thoroughly westernized and that perhaps the rules had changed. "As Americans trying to do business in Saudi Arabia, we'd always had lots of problems," says one oil executive who had been going to Riyadh for decades and knew the royal family firsthand. "Back then, you had to wear Arab clothes. And the Wahhabis were always reluctant to do business with the infidel. But now they came over dressed in Western clothes and looked real good. They were good businessmen. They did due diligence and hired good people."
Yet enormous differences between the Saudis and the Americans lay hidden beneath the surface. The American pilots who flew for the bin Ladens and the bin Mahfouzes and saw how they lived in Jeddah were among the few who actually got to glimpse the Saudis on their home turf. On one occasion in the mid-seventies, Gerry Auerbach, a pilot from Texas who worked for Salem bin Laden, noticed a tall, lanky, rather dour teenage Saudi boy, who was one of Salem's many half brothers, and inquired who the young lad might be.
"Oh," he was told. "That's Osama. He's praying. " 
[i] Bush's son George W. also became a Bonesman.
[ii] Dresser was later taken over by Halliburton, which was run by another Bush colleague, Dick Cheney
[iii] The Walker family also oversaw the creation of Madison Square Garden, the Belmont Race Track, and the New York Mets, and lent their name to the Walker Cup, one of golf's most prestigious events. Walker Point in Kennebunkport, Maine, is the site of the estate to which President George H. W. Bush and his family often went for summer vacations.
[iv] Not everyone agreed that Prescott Bush ruled the Bush children. According to Bill Minutaglio's First Son, Barbara Bush once said that Dorothy Walker Bush had "ten times" as much influence on her sons as had Prescott.
[v] When Bush was chairman of the RNC, a Washington Post reporter asked him about a young man who had been accused of teaching political espionage and "dirty tricks" to college Republicans. According to First Son, a few months later, after the news stories had been forgotten, Bush hired the man, Karl Rove, as his special assistant. Part of his job was to make sure that George W. had a car whenever he came to town. Years later, Rove, of course, became known as the political strategist and image shaper behind George W. Bush.
[vi] One of the most egregious excesses of the CIA was the Phoenix program in Vietnam. According to Vietnam Information Notes, published by the U.S. State Department in July 1969, "The target for 1969 calls for the elimination of 1,800 VCI per month. ... The Phoenix program ... [has] served notice to Province Chiefs that their performance will in large part be measured by Phoenix results." In other words, under the program, the CIA required province chiefs to assassinate a quota of eighteen hundred Vietnamese per month.
[vii] When confronted with the allegations, Bush often told reporters that special prosecutor Leon Jaworski had found no evidence of illegal activities by Bush after investigating the Townhouse fund. As Newsweek noted, Bush was close friends with Jaworski, a partner at the huge Houston law firm Fulbright & Jaworski.
[viii] In 1964, Farish was the first person to whom Bush confided his presidential ambitions. A tennis partner of Bush's, he managed Bush's trust, and when Bush was elected president, Farish and his wife, Sarah, gave George and Barbara Bush a dog, Millie, that became known as the White House dog. In the election cycle of 1999-2000 alone, Farish contributed $142,875 to the Republicans. He was later appointed ambassador to Great Britain by President George W. Bush in 2001. James Baker was initially prohibited from working at Baker Botts because of an antinepotism rule at the firm. Eventually, the rule was changed, however, and Baker joined the firm.
[ix] In The Politics of Diplomacy, Baker recounts the episode: "I really had to wrestle with him to do the right thing for himself politically. 'George, it's over,' I told him. 'We're out of money, it's mathematically impossible to win the nomination, and to continue on through the last primaries would destroy any chance whatsoever you may be picked as Vice-President."'
[x] At the time, Mexican law required that all oil drilling contracts be controlled by Mexican citizens. But according to Barron's, in 1960 Bush and Zapata Off-Shore teamed up with a prominent Mexican businessman, Jorge Diaz Serrano, a longtime friend of Mexican president Lopez Portillo, to circumvent that law. Diaz Serrano later served five years in jail for defrauding the Mexican government of no less than $58 million.
The financial magazine reported that Bush and his Zapata Off-Shore colleagues owned about half the stock in Perforaciones Marinas del Golfo, better known as Permargo, but made it appear as if Permargo was 100 percent Mexican-owned. Zapata's shareholders were never told of the company's part ownership of Permargo. When asked why the American participation in the company was kept secret, Bush press aide Steve Hart said, "An American firm could not do business directly in Mexico without having Mexican partners."
After Bush became vice president in 1981, the Securities and Exchange Commission destroyed SEC filings for Zapata for 1960 to 1966, the years during which Bush was involved with Zapata and Permargo. According to SEC officer Suzanne McHugh, "The records were inadvertently placed in a session file to be destroyed. It does occasionally happen."
[xi] Noriega once boasted, "I've got Bush by the balls." He told the Washington Post's Lally Weymouth that Bush "is my friend. I hope he becomes president." Bush had been warned about using Noriega as an asset by the legendary head of French intelligence, Count Alexandre de Marenches, who warned him with regard to Noriega, "My own philosophy has always been that when you have something particularly dirty to do, you hire a gentleman to do it. If the gentleman is persuaded that what we are contemplating is an act of war, and by extension an act of patriotism, then we will find some very good people to work for us. By contrast, if we hire a thug, then eventually we will be compelled to kill the thug in one way or another because eventually we would be blackmailed by him."
[xii] In the scandal that became known as Billygate, President Carter's brother, Billy, registered as a Libyan agent and accepted $220,000 from Libya, thereby precipitating a congressional investigation.
[xiii] For a detailed look at Debategate and the intelligence operation behind the Reagan-Bush campaign in 1980, see note 60.
[xiv] According to Heinrich Rupp, a pilot who worked for Salem bin Laden, at the behest of Vice President-elect George Bush, one of the bin Laden planes, a BAC-111, was made available to pick up the hostages in Tehran and take them back to the United States. "When they were liberated, he [Salem bin Laden] offered it, and he had the airplane. I was sitting in Tehran airport [as the plane's pilot] when we got called off." Rupp is a highly controversial source whose credibility has been questioned by a congressional investigation. The author has been unable to corroborate or refute Rupp's account.
[xv] When it was founded by Captain James A. Baker, it was known as South Texas Commercial Bank. NOTES:
1. Ron Rosenbaum, New York Observer, Apri1 23, 2001, p. 1.
2. Ed Vulliamy, "Dark Heart of the American Dream," Observer (London), June 16, 2002, p. 22; Herbert S. Parmet, George Bush, p. 25; and Elizabeth Mitchell, W: Revenge of the Bush Dynasty.
3. George Bush, Looking Forward, p. 56.
4. Parmet, George Bush, p. 78.
5. Daniel Yergin, The Prize, p. 753.
6. Parmet, George Bush, p. 81.
7. "Bush's Energy Policy Is No Policy at All," Atlanta Journal and Constitution, February 26, 1991, p. 12.
8. Parmet, George Bush, p. 83.
9. Ibid., pp. 30-31.
10. Barry Bearak, "His Great Gift, to Blend In; Team Player Bush: A Yearning to Serve," Los Angeles Times, November 22, 1987, p. 1; and Bill Minutaglio, First Son, p. 218.
11. Richard Ben Cramer, What It Takes, pp. 86-88.
12. George Lardner Jr. and Lois Romano, "George Bush: A Texas Childhood," Washington Post, July 26, 1999, p. Al.
13. Parmet, George Bush, p. 85.
14. Ibid., p. 135.
15. Walter Pincus and Bob Woodward, "George Bush: Man and Politician, Part 2," Washington Post, August 8, 1988, p. Al.
16. John Loftus and Mark Aarons, The Secret War Against the Jews, p. 369.
17. Minutaglio, First Son, pp. 166-67.
18. Bush, Looking Forward, p. 153.
19. Historic Houston website, www.neosoft.com/~sgriffin/houstonhistor ... y11hof.htm
20. Parmet, George Bush, p. 140.
21. Jill Abramson and Thomas Petzinger, Wall Street Journal, June 11, 1992; and "Periscope," Newsweek, September 29, 1980, p. 19.
22. Parmet, George Bush, p. 189.
23. Bob Woodward, "To Bones Men, Bush Is a Solid 'Moderate,'" Washington Post, August 7, 1988, p. A 18.
24. Parmet, George Bush, p. 209.
25. Vulliamy, "The Dark Heart of the American Dream."
26. Maureen Dowd and Thomas Friedman, "The Fabulous Bush & Baker Boys," New York Times, May 6, 1990, sec. 6, p. 34.
27. James A. Baker III, The Politics of Diplomacy, p. 18.
28. Dowd and Friedman, "The Fabulous Bush & Baker Boys."
31. Jacob v. Lamar, "The Cool Texan: Master of the Game," Time, October 3, 1988, p.21.
32. Kenneth J. Lipartito and Joseph A. Pratt, Baker & Botts in the Development of Modern Houston, p. 17.
33. Burt Solomon, "The President's Peer," National Journal, January 7, 1989, p. 6.
34. Dowd and Friedman, "The Fabulous Bush & Baker Boys."
35. Bearak, "His Great Gift," p. 1.
36. Dowd and Friedman, "The Fabulous Bush & Baker Boys."
37. Harry F. Rosenthal, Associated Press, March 4, 1980.
38. Sidney Blumenthal, "I, Baker: George Bush's Final Gambit," New Republic, November 2, 1992, p. 17.
39. Ibid.; and Dowd and Friedman, "The Fabulous Bush & Baker Boys."
40. Blumenthal, "I, Baker," p. 17.
42. Parmet, George Bush, p. 235
43. Blumenthal, "I, Baker," p. 17.
45. "Hour by Hour: The Deal That Got Away," U.S. News & World Report, July 28, 1980, p. 22.
46. Clarence Page, "Here's Who'll Help Bush," Chicago Tribune, July 20, 1988, p. 20.
47. Solomon, "The President's Peer"; and "Molly Ivins Discusses New Collection of Columns," CBS News Transcripts, This Morning, October 3, 1991.
48. Bill Peterson, "For Bush, a Potential for the Spotlight," Washington Post, January 20, 1981, p. 16.
49. Jonathan Kwitny, "The Mexican Connection: A Look at an Old George Bush Business Venture," Barron's, September 19, 1988.
50. Alexandre de Marenches and David Andelman, The Fourth World War, pp. 253-54.
51. Parmet, George Bush, pp. 204, 289.
52. Interview with Susan Clough.
53. Gary Sick, October Surprise, p. 24.
54. "Unauthorized Transfers of Nonpublic Information During the 1980 Presidential Election," report prepared by the Subcommittee on Human Resources of the Committee on the Post Office and Civil Service, May 17, 1984, pt. 1, p. 10.
55. Ibid., p. 34.
56. Craig Unger, "October Surprise," Esquire, October 1991.
57. "Unauthorized Transfers," Committee on the Post Office and Civil Service, May 17, 1984, pt. 1, p. 35.
58. Ibid., p. 3.
59. Howard Kurtz, "Reagan '80 Campaign Sought Data on US Probe of Billy Carter," Washington Post, May 24, 1984, p. 16.
60. One of the key figures in Casey's operation had been Bush's national policy director, Stefan Halper. Halper, the son-in-law of CIA deputy director Ray Cline, set up a complex in Arlington, Virginia, that used former CIA operatives to monitor the Carter administration. All of the men working under Halper later denied participating in covert operations for the Reagan-Bush campaign. And Halper said that the existence of an intelligence network spying on the Carter administration was "absolutely false." Nevertheless, sensitive documents from the Carter- Mondale campaign repeatedly came into their possession. Halper told congressional investigators that he did not know how that could have happened.
In September 1980, however, Halper sent three memos to Ed Meese, the campaign's chief of staff, who later became attorney general. The memos indicated that Halper had sources inside the Carter administration or the Carter-Mondale campaign. Each memo was accompanied by materials from the Democrats. Halper was not the only one close to Bush who had moles inside the Carter organization. In the latter days of the campaign, Bush's brother, Prescott Bush Jr., wrote three letters to James Baker about Herb Cohen, a consultant to the Justice Department and the FBI. The letters asserted that Cohen had reliable sources on Carter's National Security Council and was ready to expose the administration's handling of the hostage situation. Cohen later objected to the way he was characterized in these letters.
The pilfered papers consisted of a black loose-leaf notebook that had been in the office of Zbigniew Brzezinski, Carter's national security adviser. The Albosta Report concluded, "The presumption, therefore, is that these materials were improperly taken for use by the opposition campaign." This apparent theft must have created a special problem for James Baker. As a lawyer in Houston, Baker had a reputation as a model of probity. It was said that he gave up litigation early in his career because of the unsavory practices it entailed. At the same time, part of Baker's job was to supervise people who prepared the debate briefing books for Reagan. The Albosta Report found that at least thirteen members of the Reagan-Bush team either received the Carter debate material or saw it at one time or another. One was Baker himself, who, in an affidavit, admitted that he had in his possession "materials apparently intended or designed to be used in the preparations of briefings for President Carter." Baker said he passed the material on to other staffers.
And how did Baker get them? "My best recollection is that I received the material ... from William Casey," he explained.
And where did Casey get them? Baker said he did not know. For his part, the perpetually disheveled Casey, who mumbled so much during his congressional testimony that many could barely understand him, said he did not recall giving any such materials to Baker. The Albosta Report concluded that both Baker and Casey could not be telling the full truth. But that left the essential questions unanswered.
As the investigation neared its unsatisfactory conclusion, Congressman Albosta considered upping the ante by calling for a special prosecutor a la Watergate. But a young Republican congressman from Wyoming dropped by Albosta's office -- the same man whom Albosta suspected of giving the papers to Casey. It was Dick Cheney.
"Cheney came over to my office and pleaded with me not to investigate any- more," said Albosta. "I was at the end where I was going to drop it anyway. The reason he gave was the nice-guy reason -- him being a nice guy and he didn't want to get involved.
"There were suspicions in my mind about him. The papers were supposedly in Cheney's hands, in Bill Casey's hands, and Casey handed them to Baker. But he was one of the people I had to work with and I didn't want to make waves anymore. If I had done any more, I think he would have been teed off with me." And so, the Albosta investigation sputtered to a halt with his committee unable to get the Justice Department to appoint a special prosecutor to investigate. Many of Bush's men appeared to have played key roles in a sophisticated intelligence operation directed against the Carter campaign, but Bush himself emerged entirely unscathed.
As it turned out, the Republicans were already so teed off at Albosta's investigation that they had resolved to make sure he was defeated that fall. "I was the number-one house member they [the Republicans] targeted in the elections," recalls Albosta. "They labeled me the number one to get rid of." As the November election approached, President Reagan himself went to Albosta's district in rural Michigan to campaign against him, as did Vice President George Bush, Secretary of Commerce Malcolm Baldrige, Agriculture Secretary John Block, and other high-level cabinet members.
"They put in more than a million dollars in soft money against me. They bought up every minute of television time for advertising," Albosta added. He lost to Republican Bill Schuette in the November election and later retired to a farm in rural Michigan.
Sick, October Surprise, p. 24; "Unauthorized Transfers," Committee on the Post Office and Civil Service, pt. 1, pp. 36, 39, 55, 100, 102, 124, 1086, 1105; United Press International, July 24, 1983; Laurence I. Barrett, Gambling with History, p. 383; and Donald Albosta, telephone interview.
61. Nina Hyde, "Having Designs on the First Lady," Washington Post, January 18, 1981, p. A 9.
62. Barry Schweid, "US, Iran Close to Hostage Accord," Associated Press, January 18, 1981.
63. United Press International, January 19, 1981.
64. Richard Harwood and T. R. Reid, "U.S. Announces Resolution of Dispute Blocking Return of Hostages from Iran," Washington Post, January 20, 1981, p. A 1.
65. E, J. Dionne, "Albany Plea on Arab Bank Bid," New York Times, May 13, 1981, p.D3.
66. Dan Balz, "The Saudi Connection: The Next Best Thing to Mecca Is Houston; Houston as the Mecca for the Saudis" Washington Post, April 19, 1981, p. C 1.
67. Cherif Sedky, interview by e-mail, September 7, 2002.
68. American Banker, December 24, 1985.
69. James Conaway, "The Texas Connection: James Baker and George Bush Rep resent a New Kind of Lone Star Politician in the White House -- the Texas Preppie," Washington Post Magazine, December 13, 1981, p. 18; and Alexander Stuart, "Texan Gerald Hines Is Tall in the Skyline," Fortune, January 28, 1980, p.101.
70. Thomas Friedman, "Baker Selling His Stocks to Avoid Any Conflict in State Dept. Role," New York Times, February 15, 1989, p. A 1.
71. Interview with Gerry Auerbach.