House of Bush, House of Saud, by Craig Unger

[admin]

PART 1 OF 2

CHAPTER FOUR: Three Dimensional Chess

The fortunes of newly elected presidents are always subject to the deeper forces of history, and the Reagan-Bush administration was no exception. By the time George Bush and James Baker moved into Washington in January 1981, a powerful wave of Islamic fundamentalism had already begun transforming the Middle East. The implications were staggering. The Islamic revolution threatened America's ability to slake its unquenchable thirst for oil, its support for Israel, and its geostrategic position in the Cold War vis-a-vis the Soviet Union.

The humiliation of America by the Shiite regime of Iran's Ayatollah Khomeini in 1979 was just the beginning. Islamic terrorism was an increasingly brutal reality. Each assertion of American and Israeli interests in the Middle East was parried by a dramatic, forceful, and violent response. Arab leaders too close to the United States now risked the same fate as the deposed Shah of Iran or worse.

In 1979, Egyptian president Anwar Sadat signed the historic Camp David Peace Accords with Israel. In October 1981, nine months after the Reagan-Bush administration had taken office, Sadat was assassinated by members of the Al Jihad movement. [1] [i] Israeli troops moved into southern Lebanon. In retaliation, Hezbollah, an Iranian-supported paramilitary group of Shiite militants, went into action. The militant Muslim Brotherhood, which had been banned since the fifties, continued to defy Egypt's West-leaning government. [ii] Islamic militants spread throughout the region, planting the seeds of the militant Hamas, to arise later on the West Bank and Gaza Strip, [2] and Al Qaeda, in Saudi Arabia.

By and large, the response of American politicians was to demonize Islamic fundamentalism and rally public opinion against the militants in Iran who had seized American hostages. Reagan and Bush owed their 1980 electoral victory to a campaign charging President Jimmy Carter with being "weak and vacillating" in dealing with Iran. [3] Bush said that the American people regarded Iran with "hatred." Then he added, "I feel that way myself." [4]

But the political realities were far too complex to lend themselves to such a reductionist approach. The United States was entering a bizarre and perplexing game of three-dimensional chess complicated by not one but two regional wars -- between the Soviet Union and Afghanistan, on the one hand, and between Iran and Iraq, on the other. In both cases, the United States played an enormous but low-profile role, waging covert war by proxy, and ironically, funding and financing Islamic fundamentalists whom, in other contexts, the U.S. government demonized. In the Afghanistan War, the United States supplied weapons, training, and billions of dollars to forces aiding the mujahideen rebels fighting the pro-Soviet Afghan government. In the Iran-Iraq War, short-term realpolitik considerations and factionalism within the administration led the United States to tilt toward Iran, then Iraq, back and forth again and again while secretly arming both sides.

***

A vital factor in these stratagems was that Saudi Arabia had begun to replace Iran as the United States's primary regional ally. The United States had long had "a special relationship" with Saudi Arabia, but with the Cold War still ongoing, and Iran no longer a friend, it became increasingly important in geostrategic terms as well. [5] [iii]

The subtext behind the new relationship could be explained in two words that are the eternal and defining pillars of American policy in the Middle East: oil and Israel. During OPEC's oil embargo in the aftermath of the 1973 Arab Israeli war, the United States had learned about the wrath of the Arab oil-producing countries when it leaned too far toward Israel. Now, by arming the Saudis, the United States would ensure the stable flow of oil at reasonable prices.

The process began with the sale of just five airplanes. Reagan had come into office with the reputation of being pro-Israel, but to the dismay of the Israeli lobby, one of his first decisions was to sell five AWACS (airborne warning and control system) planes to Saudi Arabia, as part of a $5.5-billion package with associated technology and infrastructure. [6] This was the first crucial foreign policy test of the Reagan era. Dashing young Prince Bandar, who, at thirty-two, had just earned his master's degree at Johns Hopkins University, led the Saudi lobby in a fierce battle against its Israeli counterpart by getting Vice President Bush to push Reagan on the arms sale, [7] and then dazzling senators with his wit and charm.

Behind that charm was a driving psychological need to succeed on a grand scale. Bandar was the grandson of Abdul Aziz, the founder of modern Saudi Arabia, and Hassa bint Ahmed al-Sudairi, one of the most honored and respected women in Saudi history. But he had little contact with his father, Prince Sultan, who was the governor of Riyadh and still in his early twenties at the time of Bandar's birth. The reason was that Bandar's mother, Khizaran, was a dark-skinned sixteen-year-old from southern Saudi Arabia and a commoner who, as Bandar himself put it, served as Prince Sultan's concubine. Bandar grew up living with his mother and hoping to legitimize himself in the eyes of his father. "It taught me patience, and a defense mechanism, if you want, to not expect anything," he told the New Yorker. "And the way I rationalized it to myself was if I don't expect anything and I don't get anything, I don't get disappointed. So nobody can hurt my feelings." [8] Bandar's great success in the AWACS lobbying effort not only enhanced his standing with his father and the House of Saud, it also won him the coveted position of Saudi ambassador to the United States, an extraordinarily powerful post.

Just before Congress was to vote on the package, the Pentagon told Washington Post reporter Scott Armstrong that the AWACS planes cost about $110 million each. When Armstrong first did the math, he mistakenly thought that five times $110 million must be $5.5 billion. Then he realized that a decimal point was misplaced, which meant that the AWACS sale was about far more than just five airplanes. [9] What had been announced as a small arms deal was the start of something big. Where was all the money going? "This was ... the linchpin to an elaborate electronic communications system that would be the equivalent of the heart of what we have in NATO, for example," Armstrong said in a PBS Frontline documentary. "It was creating a new theater of war." [10]

On October 28, 1981, the Senate narrowly approved the AWACS package, 52 to 48. [11] Four days later, Armstrong's front-page article in the Washington Post outlined a secret plan that had never been confronted in the congressional debate. [12] [iv] An unwritten agreement lay behind what had been framed as merely the sale of five airplanes. In return for an integrated package of highly sophisticated military technology, Saudi Arabia would build a massive network of naval and air defense facilities that could sustain U.S. forces should they ever be needed to protect the region or wage war against an aggressor. [13]

The Saudis had no problem footing the bill. By 1981, Saudi oil revenues had reached $116 billion a year. The Saudi monetary agency was charged with the task of investing nearly $320 million a day. [14] Over the next decade, the Saudis bought $200 billion in American arms and built nine major new ports and dozens of airfields all over the kingdom. A beneficiary of the military buildup was the Saudi Binladin Group, which built facilities for the Al Salaam Aircraft Company. [15] "They have now hundreds of modern American fighter planes and the capability of adding hundreds more," said Armstrong. [16]

More than a massive military buildup, the U.S.-Saudi alliance constituted a major shift in American foreign policy in the Middle East that took place with virtually no public debate in the press or in Congress. "It's absolutely phenomenal, a two-hundred-billion-dollar program that's basically put together and nobody's paying attention to it," said Armstrong. "... It is the ultimate government-off-the-books." [17]

Even more secretive was the new understanding that Saudi Arabia would become a U.S. partner in covert operations, not just in the Middle East but all over the globe. As a monarchy without the constitutional constraints that burdened the CIA, the Saudis had enormous flexibility to help the Reagan administration execute covert operations prohibited by Congress. Not long after the AWACS sale was approved, Prince Bandar thanked the Reagan administration for the vote by honoring a request by William Casey that he deposit $10 million in a Vatican bank to be used in a campaign against the Italian Communist Party. [18] Implicit in the AWACS deal was a pledge by the Saudis to fund anticommunist guerrilla groups in Afghanistan, Angola, and elsewhere that were supported by the Reagan administration. [19]

And so, Saudi-American relations were becoming an ever more complex web of international defense and oil deals, foreign policy decisions, covert operations, and potentially compromising financial relationships between Saudis and American politicians who shuttled back and forth between the public and private sectors.

Increasingly, Bandar, who was appointed ambassador in 1983 just after Fahd became king, was at the heart of these operations. He was learning to love politics. "When I first got to America, I didn't understand politics," he said. "I was confused by it. Then it became like a game, like a drug. I enjoyed the game. It was exotic and exciting. There was no blood drawn. It was physically safe, but emotionally tough." [20]

***

Officially, the United States was neutral in the Iran-Iraq War. But from the onset, two factions within the Reagan-Bush administration battled over which country posed the greater threat to U.S. interests. That struggle became the most acrimonious foreign policy conflict within the administration during the entire Reagan-Bush era. One bloc, which was led by National Security Adviser Robert "Bud" McFarlane and two members of his National Security Council staff, Howard Teicher and Oliver North, argued in favor of arming Iran. Their rationale was a variation on the old saw that the enemy of my enemy is my friend. In this case, since Israel's biggest enemy was Iraq, and Iraq's enemy was Iran, the McFarlane faction proposed moving toward Iran to enhance Israeli stability. As early as 1979, Teicher had written a highly classified study endorsing Israel's view that Saddam's Iraq, not Iran, would ultimately pose the greatest threat to the Gulf region. [21] [v] History would prove him right.

The other faction, led by Secretary of Defense Caspar Weinberger and Secretary of State George Shultz, was virulently opposed to Ayatollah Khomeini's fundamentalist regime in Iran. After all, failure to oppose it could allow Islamic fundamentalism to spread throughout the region, endangering pro West governments in Kuwait and Saudi Arabia, and thus America's oil supplies. "It was insanity," said Weinberger. "How could you send arms to the ayatollah when he was sworn to destroy us?" [22]

But if arming Iran to support Israel was insane, the flip side of the policy, in the long run at least, was truly demented: Weinberger and Shultz favored defending Saudi Arabia and the enormous U.S. oil interests there by secretly bolstering the brutal Iraqi dictator Saddam Hussein. As a result of their efforts, billions of dollars in aid and weapons were funneled to Saddam's regime.

From the outset, the Reagan administration had promised to take a tough, uncompromising policy against Islamic fundamentalists, and just eight days after it took office, Reagan's first secretary of state, Alexander Haig, spelled it out unequivocally: "Let me state categorically today that there will be no military equipment provided to the government of Iran." [23] Officially, Iran was a terrorist state and an arms embargo was in place.

Nevertheless, a secret strategy to arm Iran got under way almost immediately. Within a few months, Haig had told Israel that "in principle" it was okay to send weapons to Iran, but only for spare parts for F-4 fighter planes, an aging, technologically obsolete warhorse from the Vietnam era, and that the United States had to approve specific arms sales lists in advance.

By early 1982, however, the U.S. government was aware that Israel was providing U.S. arms to Iran that went far beyond that agreement. In the New York Times, Seymour Hersh later reported that "Israel and American intelligence officials acknowledged that weapons, ammunition, and spare parts worth several billion dollars flowed to Iran each year during the early 1980s." [24]

Ultimately, the secret arms sales to Iran became enmeshed with another covert policy of the administration -- its attempt to overturn the left-wing government of Nicaragua by subsidizing right-wing rebels known as the contras. This was the scandal known as Iran-contra. It was striking that in trying to shape the future of a tiny Latin American country, the Reagan-Bush administration would go to the other side of the world for help.

The Saudis had no particular interest in Nicaragua; they didn't even have diplomatic relations with this small country half a world away. But at the time, congressional opposition to the administration's policy was so strong that on December 8, 1982, the House of Representatives voted unanimously to prohibit the use of U.S. funds to overthrow the government of Nicaragua.

However, even the Boland Amendment, as the bill was known, was not an insurmountable obstacle to a National Security Council that was prone to macho covert operations, bravado, and cowboy-style adventurism. It considered a variety of options to fund the contras, including obtaining funds from other countries and skimming profits from arms deals with Iran. Finally, in the spring of 1984, National Security Adviser Robert McFarlane raised the possibility of approaching Prince Bandar for the money. If the Saudis were to accede to the request, clearly they would gain favor from the Reagan administration. On June 22, 1984, Bandar and McFarlane agreed that the Saudis would give $1 million a month to the contras.

But the gambit was like playing political Russian roulette and had to be approved by the White House before it could proceed. What would happen if Congress found out? On June 25, 1984, a special meeting of the National Security Planning Group was called to discuss the issue. The highest officials in the country were present -- Ronald Reagan, George Bush, George Shultz, Caspar Weinberger, William Casey, and Robert McFarlane, among others. According to minutes taken at the meeting, James Baker, ever the vigilant attorney, argued that actively soliciting money from third countries -- such as Saudi Arabia -- could be an impeachable offense.

But Vice President Bush took issue with that position and said there was nothing wrong with encouraging third parties to help the anti-Sandinistas so long as there was no explicit quid pro quo. "The only problem that might come up is if the United States were to promise these third parties something in return so that some people could interpret this as some kind of exchange," he said. [25]

Bush, after all, had been director of the CIA. The way to do it, he seemed to be saying, was for the United States to let the Saudis finance the contras. Afterward, the United States could then reward the Saudis for their loyalty, but the two events would have to happen without being explicitly tied to each other.

And so, Bandar deposited $8 million in a Swiss bank. Over time, the amount given by the Saudis to the contras reached $32 million. [26] [vi] No explicit promises had been made to the Saudis, so the administration could assert there was no quid pro quo, and therefore no impeachable offense had taken place. And yet the Saudis did not go away empty-handed. After all, tens of millions of dollars had changed hands. At the time, King Fahd and Bandar wanted several hundred Stinger missiles from the United States, which had put restrictions on the sale of such weapons. To help the Saudis out, President Reagan invoked emergency measures to bypass Congress and four hundred Stingers were secretly flown to Saudi Arabia. The Saudis had received their payoff. To put it baldly: in exchange for doing something that had been explicitly prohibited by the House of Representatives by a vote of 411 to 0, Saudi Arabia received lethal, state-of-the-art American weaponry it would not have been allowed under normal conditions. The Saudis had come a long, long way from their first few airplane deals with James Bath. But in many ways their dealings with the House of Bush had just begun.

***

The Reagan-Bush administration and the Saudis were not just helping the contras. Early on, the administration also used Prince Bandar as an intermediary to meet Saddam Hussein, and soon Bandar told the United States that Iraq was ready to accept American aid. [27] Even though Congress would never have approved arms transfers to Iraq, the Reagan administration secretly began allowing Saudi Arabia, Kuwait, and Egypt to transfer U.S. weapons, including howitzers, helicopters, and bombs, to Iraq. These shipments may have been in violation of the Arms Export Control Act. [28] [vii]

U.S. support for Saddam Hussein could be traced all the way back to 1959, when the CIA hired him as a twenty-two-year-old assassin to shoot Iraqi prime minister General Abd al-Karim Qasim. Saddam fired too soon, however, and as a result he killed Qasim's driver and only wounded the prime minister. [29] In the ensuing two decades, the Agency saw him as a cutthroat and a thug, but at least he was their thug -- one who could be called on to fight Soviet expansion in the Middle East. In 1963, that meant that CIA officers in Baghdad provided Saddam with lists of "communists" whom he then assassinated. [30]

In 1979, Saddam began his rule by purging his political opponents with a slew of show trials and executions designed to maximize terror and establish his authority. Meanwhile, thanks to the high price of oil in the seventies, Iraq had become relatively prosperous, and Saddam saw it as a propitious time to make a play for regional leadership. In September 1980, he invaded southwestern Iran, [31] hoping to keep the Shiite fundamentalist revolution in Iran from spreading to Iraq, which is largely Shiite. Initially supported by the United States, the Soviet Union, most of Europe, and many Arab countries, including Saudi Arabia, Saddam had plenty of backing for a long war.

The single most powerful reason for U.S. support of Saddam was to protect the Saudis and, of course, their oil reserves. Ayatollah Khomeini's Islamic fundamentalist revolution in Iran had repercussions throughout the entire Arab world and represented a grave threat to the House of Saud. Khomeini's appeal extended beyond his Shiite constituency. Other fundamentalist Muslim groups began emulating him, and the House of Saud was panicked. Rich with petrodollars but with no military to speak of, the Saudis could not risk confronting Iran directly. Instead, they bankrolled Saddam's war against Iran with $30 billion. [32] Likewise, the United States feared that a new, Middle East version of the domino theory was in play. Saddam would have to act as a bulwark against Shiite extremism to prevent the fall of pro-American states such as Saudi Arabia, Jordan, and Kuwait.

As the Iran-Iraq conflict wore on, evidence of Saddam Hussein's ruthless ways became increasingly apparent. Iranian diplomats came to the United Nations armed with horrific photos of Iranian soldiers whose bodies had been burned by chemical weapons. [33] Key members of the Reagan administration, including Vice President Bush and James Baker, repeatedly reacted to these revelations of Saddam's atrocities largely as if they posed a delicate public relations problem rather than a genuine moral issue. The Reagan administration knew that Iraq was using mustard gas, sarin, VX, and other poisons. In public, the United States condemned such actions. But privately, senior officials supported a covert program in which the Defense Intelligence Agency provided Saddam with detailed planning for battles, air strikes, and bomb-damage assessments. [34]

The architect of these covert operations aiding Saddam was William Casey, and according to Howard Teicher, a National Security Council staffer who leaned toward Iran, one of the people Casey confided in was Vice President Bush. As recounted in Spider's Web, a book by British journalist Alan Friedman about the arming of Iraq, Bush also made it clear that he was open to aiding Iraq. [35] "I attended meetings where Bush made clear he wanted to help Iraq," said Teicher. "His door was always open to the Iraqis. If they wanted a meeting with Bush, they could get it."

In fact, Bush had leaned toward Iraq from the start. [36] Early on in the administration, on June 7, 1981, Bush articulated his sympathy for Iraq when Israel bombed Saddam Hussein's nuclear reactor in Osirak. The power plant was considered Iraq's first step toward making a nuclear weapon. "Reagan went around the room and asked each of us to give our opinion on the Osirak raid," recalled Alexander Haig, who felt strongly that Israel had done the right thing. "I remember Bush and then Baker making it very clear that they thought Israel needed to be punished." [37]

By November 1983, a State Department memo confirmed Iraqi chemical weapons producers were buying materials "from Western firms, including possibly a U.S. foreign subsidiary," and added that "it is important that we approach Iraq very soon in order to maintain credibility of U.S. policy on CW [chemical weapons] as well as to reduce or halt what now appears to be Iraq's almost daily use of CW." [38]

But in another memo just three weeks later, the State Department decided not to press the issue because it did not want to "unpleasantly surprise" Iraq. As a result, the administration's policy against chemical weapons was confined to "close monitoring." [39]

***

One of the key people in carrying out U.S. policy toward Baghdad during this period was Donald Rumsfeld, who had been Gerald Ford's secretary of defense and later took the same post under President George W. Bush. In December 1983, when Iraq continued to use chemical weapons "almost daily," Rumsfeld traveled to Baghdad as a special presidential envoy to meet with Saddam and pave the way for normalization of U.S.-Iraqi relations. [40]

In 2002, Rumsfeld told CNN that during that visit "I cautioned [Saddam Hussein] about the use of chemical weapons." However, a "Secret" memo of that 1983 meeting, which has since been declassified, contradicts Rumsfeld and indicates that there was no mention of chemical weapons whatsoever during that discussion. [viii] Far from confronting Saddam, Rumsfeld warmly assured the Iraqi dictator that America's "understanding of the importance of balance in the world and in the region was similar to Iraq's." [41]

As the United States continued to criticize the use of chemical weapons, the administration wanted to make certain that Saddam knew such pronouncements were merely for public consumption. So in March 1984, Rumsfeld returned to Baghdad. According to a cable from Secretary of State George Shultz, Rumsfeld was to tell Iraqi foreign minister Tariq Aziz that the recent U.S. statement on chemical weapons, or CW, "was made strictly out of our strong opposition to the use of lethal and incapacitating CW." The cable added that the statement was not made to imply a shift in policy, and the U.S. goal of improving "bilateral relations, at a pace of Iraq's choosing" remained "undiminished." The cable further advised Rumsfeld, "This message bears reinforcing during your discussions." [42] In other words, Rumsfeld was to assure Saddam that U.S. concerns about chemical weapons were nothing more than posturing.

And so it went -- a double policy. Throughout the entire Reagan Bush era, the United States publicly denounced Iraq's use of chemical weapons, but secretly it supported Saddam. In an Apri1 5, 1984, "Top Secret" National Security Decision Directive, the Reagan administration condemned chemical weapons use, but also called for the preparation of "a plan of action designed to avert an Iraqi collapse." [43] As a result, the United States allowed programs to go forth that may have aided Iraq's development of biological and chemical warfare. Beginning in 1984, the Centers for Disease Control began providing Saddam's Iraq with biological materials -- including viruses, retroviruses, bacteria, fungi, and even tissue that was infected with bubonic plague. Among the materials that were sent were several types of West Nile virus and plague-infected mouse tissue smears. [44]

The exchange may have been initiated in the spirit of an "innocent" transfer of scientific information. But it is not difficult to argue against giving bubonic-plague-infected tissues to Saddam Hussein. "We were freely exchanging pathogenic materials with a country that we knew had an active biological warfare program," said James Tuite, a former Senate investigator. "The consequences should have been foreseen." [45]

***

Initially at least, Vice President Bush played a low-profile role in the Reagan administration, his position circumscribed by the stigma he bore from being perceived as the lone "moderate" in a conservative revolution. [ix] As he saw it, his mandate was to display his unfettered loyalty to Reagan. Even before he took office, in the fall of 1980, Bush's stated goal was to be as innocuous as possible. "I've thought a lot about it," he said. "I know I'm not gonna have much input on policy, nothing substantive to do at all. ... And I've decided I can be happy with that." [46] Over time, however, Bush played a bigger role, albeit an ambiguous one. Most figures within the Reagan Bush administration tilted to one side or the other with regard to Iran or Iraq. But Bush played both sides. "He was good at conducting diplomatic dialogue," said Teicher. "He knew the style, the diction. He was good at having diplomatic discussions. But he could be swayed by personal relationships with foreign leaders. Regarding Iraq, he and Casey both had great naivete, thinking you could be friends with Saddam Hussein, which was not unlike a lot of government officials at that time. And he saw the geostrategic logic in new relationships with Iran. Bush's goals were contradictory because our policy was full of contradictions. ... He thought talking to both sides was good." [47]

Such duplicity had always been characteristic of Bush and had long served his ambitions. As ambassador to the United Nations, Bush had observed Henry Kissinger, who as national security adviser kept him in the dark about his secret diplomacy. Now, in the morass of American foreign policy in the Middle East, Bush was a player. [48]

In 1984, that meant helping Iraq construct a new oil pipeline to the Jordanian port of Aqaba to circumvent the Iranian blockade of Iraq's ports in the Persian Gulf. [49] To support the Aqaba pipeline, the administration had to tacitly accept Iraq's ongoing use of chemical weapons, but it also had a second problem. The Export-Import Bank, a U.S. government agency that covers loans for American companies if foreign customers default, had determined that war-ravaged Iraq was not creditworthy enough to merit a loan for the pipeline. As a result, the Reagan administration had to lobby to get the bank to overlook its own guidelines. On June 12, 1984, Charles Hill, executive secretary to Secretary of State George Shultz, sent a confidential memo to Vice President Bush, suggesting Bush call William Draper, chairman of the Export-Import Bank, and pressure him to provide the okay for the loan. [50]

Bush was a logical choice for this task, not only because he had such a high office, but because Draper and he were old friends. Draper had been at Yale when Bush was there; he had been co-chairman of the Bush Financial Committee for the 1980 presidential race [51] and had invested in young George W. Bush's first oil company, Arbusto. [52]

The talking points that were prepared for Bush suggested he tell Draper that the loan affected America's vital interests and that America's goal in the Iran-Iraq War was "to bring the war to a negotiated end in which neither belligerent is dominant." [53] Almost immediately after the call from Bush, Draper reversed the previous position of the Export-Import Bank and agreed to provide the financing. [x] Bush's lobbying of the bank marked the point at which he began to take an active role in the covert policy to support Saddam Hussein's Iraq.

In November 1984, the Reagan-Bush team won reelection, and in Reagan's second term the internal struggle over the two covert strategies exploded. The United States had been trying a variety of policies including both incentives and punitive measures against Iran. Secretly, CIA director William Casey worked with Prince Bandar to execute the harshest measures of all toward Iranian-backed fundamentalists: assassination. As reported in Bob Woodward's Veil, in early 1985, Prince Bandar invited Casey to his home in Virginia just after the Iranian-supported Hezbollah had bombed American facilities in Beirut and kidnapped CIA station chief William Buckley. Casey and the Saudis agreed it was time to strike back. The target: Sheikh Fadlallah, leader of the Party of God, Hezbollah. Control of the operation was given to the Saudis. If anything went wrong, they would deny CIA involvement.

According to Woodward, the Saudis laundered $3 million through various bank accounts and found an operative from Britain's elite special forces to handle the operation. Vice President Bush was apparently left out of the loop. On March 7, 1985, he was in Sudan, meeting with Sudanese president Jaafar Numeiry to discuss the plight of starving refugees and whether the United States would resume food aid. The next day, a car packed with explosives blew up about fifty yards from Fadlallah's high-rise residence in Beirut. Eighty people were killed and two hundred injured. Fadlallah, however, escaped unharmed. To cover their tracks, the Saudis provided Fadlallah with incontrovertible information leading to the operatives they had hired. "You suspect me and I turn in my chauffeur and say he did it," Bandar explained. "You would think I am no longer a suspect." [54] The bombing was widely blamed on Israel.

Meanwhile, others in the administration argued vociferously that it was time to try a policy of incentives toward Iran. Perhaps the most forceful case was made by Graham Fuller, the CIA's national intelligence officer for the Middle East, in two memos he wrote in May 1985. "Our tilt to Iraq was timely when Iraq was against the ropes and the Islamic revolution was on a roll," Fuller wrote to CIA director William Casey in May 17, 1985. "The time may now have come to tilt back." Fuller argued that the United States should once again authorize Israel to ship U.S. arms to Iran. [55]

Fuller's rationale was the mirror image of the argument that Secretary of Defense Caspar Weinberger had made in favor of supporting Iraq three years earlier. To counter the effects of one covert policy, another one was needed. This time, however, another factor had to be taken into consideration. In the preceding year and a half, seven Americans had been taken hostage in Beirut by Hezbollah, the Shiite fundamentalist group backed by Iran. [56]

Meanwhile, the Iran-Iraq War escalated. A wave of Iranian assaults against which the Iraqis used chemical weapons left twenty thousand Iranians and fourteen thousand Iraqis dead. At roughly the same time, Hezbollah took two more American hostages in Beirut. President Reagan angrily charged that Iran was a member of a "confederation of terrorist states ... a new, international version of Murder, Incorporated." He pledged, "America will never make concessions to terrorists."

But secretly, the White House was already preparing to send weapons to Iran in an arms-for-hostages deal. [57] On June 11, 1985, just two days after Thomas Sutherland, a dean at the American University in Beirut, was kidnapped, the National Security Council drafted a presidential directive advocating that the United States help Iran obtain selected weapons. The opposing faction in the administration -- principally Secretary of State George Shultz and Secretary of Defense Caspar Weinberger -- was irate. "This is almost too absurd to comment on," Weinberger wrote in a memo. "It's like asking Qadaffi to Washington for a cozy chat." [58]

Nevertheless, on August 30, Israel sold more than five hundred U.S.-origin TOW missiles (Tube-launched, Optically tracked, Wire-command) to Iran. Just over two weeks later, on September 15, 1985, the Reverend Benjamin Weir, who had been kidnapped in Beirut more than a year earlier, was released.

The administration hoped that other hostages would be released, too, but none were. The problem: Iran didn't need more weapons. Now, something else had to be done.

Over time, Bush had begun to win over key members of the Reagan administration. Even William Casey, the brilliant spymaster who Reagan had named to head the CIA, had initially distrusted Bush, but grew to admire him. "Casey knew there was no one in government who could keep a secret better," says one former high-level CIA official. [59] "He knew that Bush was someone who could keep his confidences and be trusted. Bush had the same capacity as Casey to receive a briefing and give no hint that he was in the know."

That such qualities went hand in hand with Bush's patrician background won him the highest compliment of all from Count Alexandre de Marenches, the legendary godfather of French intelligence. A crusty Cold Warrior who had nothing but contempt for most players on the world stage, de Marenches found Bush to have the perfect pedigree for covert operations: he was a gentleman. All through Bush's political life, journalists and colleagues have spoken of him as if he were two people. One was the gracious and courtly George Bush who was so acquiescent to those who had higher rank and power. The other was George Bush the ruthless politician, who would go into campaign mode to do whatever it might take to win. Casey confided to his colleagues that he felt that the two sides of Bush were really one and the same. Bush had the capacity to act on the judgment of others, to live within the constraints of their agendas. This philosophy had served him well in the long line of appointive offices he had won. Casey, according to his colleagues, understood that Bush's compliant nature, like his merciless side, served a higher ambition. As a result, he chose Vice President Bush to carry out his secret mission to break the impasse that had stalled the release of the remaining hostages.

[admin]

PART 2 OF 2 (CH. 4 CONT'D.)

Casey, according to two aides who worked with him at the CIA, reasoned that if Iraq escalated the air war, Iran would have a renewed need for U.S. weapons and that would force it to conclude the stalled arms-for-hostages deal on acceptable terms. [60]

In the past, the United States had turned to the Saudis to help out on such matters. In February 1986, to induce Iraq to carry out more bombing operations, the Reagan administration had secretly authorized Saudi Arabia to transfer U.S.-origin bombs to Iraq and encouraged the Saudis to provide Saddam with British fighter planes as well. Later that month, according to classified reports, Saudi Arabia sent Iraq fifteen hundred MK-84 bombs, nonguided two-thousand-pound devices designed for operations where maximum blast and explosive effects are desired. [xi]

But to the dismay of U.S. officials, because the Iraqis were afraid to lose planes and sometimes did not even know where they should be striking, Saddam failed to make full use of the U.S. bombs. [61] Vice President Bush would have to intercede.

On Friday, July 25, 1986, Bush left for Israel and the Middle East to meet with the heads of state of Jordan and Egypt. More than a dozen reporters accompanied him. Bush said the purpose of the trip was to "advance the peace process," but exactly what that meant was unclear. The day before the trip, the Bush aide said, "I don't think it is sensible to talk in terms of dramatic initiatives. In fact, I would play that down." [62]

A Bush adviser discussed the agenda in terms that seemed to have been cribbed from Chauncey Gardner, the hero of Jerzy Kosinski's comic political novel Being There. "It's like tending a garden," he told the Times. "If you don't tend the garden, the weeds grow up. And I think that there are a lot of weeds in that garden." [63]

Once the trip got under way, in Israel alone there were thirty-five opportunities to shoot photos of the vice president as a world leader advancing the peace process in the Middle East. When Bush got to Jordan, aides tried to arrange to have a photo of him peering through binoculars at enemy territory -- until it was pointed out that the territory in question was Israel's. At one point, Bush turned to Jordan's commander in chief.

"Tell me, General, how dead is the Dead Sea?" the vice president asked.

"Very dead, sir," the general replied. [64]

Secretly, however, Bush was pursuing a very different agenda from the one written about in the media: the former CIA director was now actually working as an intelligence operative on a mission from William Casey to facilitate the arms-for-hostages deal with Iran and to set in motion the delivery of military intelligence to Saddam Hussein.

Now the feverish double-dealing began in earnest. On July 29, Israeli counterterrorism adviser Amiram Nir briefed Bush at the King David Hotel in Jerusalem and told him that Iran had agreed to release the American hostages in exchange for four thousand missiles. [65]

The next day, Bush went to Jordan to perform the most delicate part of his mission, initiating the transfer of military intelligence to Saddam. According to two Reagan administration officials, Bush told King Hussein that Iraq needed to be more aggressive in the war with Iran and asked that Saddam Hussein be urged to use his air force against targets inside Iran. [66]

A few days later, on August 4, Bush met in Cairo with President Hosni Mubarak and asked him to pass on to Saddam Hussein the same message he had given King Hussein of Jordan. Saddam had previously rejected U.S. advice to escalate the bombing, but now, because of the cost of the war, he desperately needed American money and weapons. In addition, CIA officials began directly providing the Iraqi military both with highly classified tactical intelligence and technical equipment to receive satellite intelligence so Iraq could assess the effects of its air strikes on Iran.

During the forty-eight hours after Bush's meeting with Mubarak, the Iraqi air force flew 359 missions. Over the next few weeks, Iraqi planes struck deep into Iran and bombed oil refineries, including for the first time the loading and storage facilities on Sirri Island, 460 miles from the border -- a daring feat for the Mirage pilots, who risked running out of fuel.

On August 5, Bush returned to Washington and was debriefed by Casey. "Casey kept the return briefing very close to his vest," one of his aides said. "But he said Bush was supportive of the initiative and had carried out his mission."

Meanwhile, the covert arms sales to Iraq almost came undone. Low-level American officials at the U.S. embassy in Riyadh had become aware of the Saudi transfer of U.S. MK-84 bombs to Iraq earlier that year. Unaware that the Reagan administration had secretly authorized the deal, the officials went so far as to question Prince Bandar, who assured them the transfer had been accidental and small. The White House forwarded a similar message to Republican senator Richard Lugar, chairman of the Senate Foreign Relations Committee. But in fact, fifteen hundred bombs had been sold to Iraq with the authorization of the Reagan administration, and Bandar had played a far bigger role than Congress realized. He had even played the middleman in making sure that Iraq obtained highly sensitive satellite information about Iranian troop movements from the CIA. [67]

If Bush's team seemed like characters in a Kosinski novel, perhaps it was because American Middle East policy had taken on such an astonishingly dark, surreal cast that was so utterly at odds with what was being reported in the American press. Bush's trip was widely touted as a peace mission. But in fact he had gone to the Middle East as a spy, an operative whose cover was that he was trying to advance the peace process. His real mission, however, was to give strategic military intelligence to a murderous dictator, Iraq's Saddam Hussein, so that he might kill more Iranians. After Iran had seized more American hostages and President Reagan had termed it "Murder, Incorporated," the United States had promised a harsh response. But instead the United States sold Iran four thousand missiles. And Bandar had asserted that he so loved the game of politics because "there was no blood drawn." But he had launched an operation that had killed eighty innocent people in Lebanon.

In November 1986, the Lebanese newspaper Al Shirra broke the story about the Reagan administration's arms sales to Iran. As the ensuing Iran-contra revelations unfolded, Robert McFarlane, Oliver North, and most of the key officials who had advocated tilting toward Iran left the White House in disgrace, giving their rivals a clear field. Consequently, the Reagan administration, in its closing days, leaned strongly toward Iraq.

When the Iran-contra disclosures broke, Bush told the Washington Post that he had not been aware that Shultz and Weinberger had raised serious objections to selling weapons to Iran. "If I had sat there and heard George Shultz and Cap express it strongly, maybe I would have had a stronger view. But when you don't know something, it's hard to react. ... We were not in the loop," he said.

On August 6, 1987, the day the Post story appeared, Weinberger telephoned Shultz, incredulous that Bush had denied knowledge. "He was on the other side," Weinberger said. "It's on the record! Why did he say that?" [68]

The answer may have lain in Vice President Bush's ambitions. By early 1988, he had been all but anointed Reagan's successor as the Republican presidential nominee and began positioning himself for a run against the eventual Democratic candidate, Michael Dukakis. [69] [xii] He was in an exceptionally strong position. Inflation had plummeted from 13.5 percent in 1980, the last year of the Carter administration, to about 4 percent in 1988. The price of oil now fluctuated between $15 and $20 a barrel, less than half its peak in the early eighties. [70] Gas was so cheap that Detroit auto manufacturers were reveling in the success of a new kind of car called the minivan, the precursor of the gas-guzzling SUV.

American participation in both the Iran-Iraq War and the Afghanistan War, taking place simultaneously, did not register at all on the radar screen of the American electorate. By contrast, the Vietnam War had led to more than fifty thousand American deaths, endless coverage on the nightly news, and a powerful antiwar movement that affected the course of national politics. To be sure, there were hundreds of thousands of deaths in each conflict. But these were wars by proxy, and in the United States, American participation was virtually invisible. Osama bin Laden was unknown to the American people. Only those few who followed the Afghanistan War closely might be aware that he had achieved a nearly heroic status among Islamic militants. As for Saddam Hussein, he was widely seen as a heavy-booted but reliable American ally in the fight against both the Soviets and militant Islamic fundamentalism. There was no domestic political pressure to change American foreign policy in the Middle East.

***

It might appear that the Saudis' role in the Iran-Iraq War was confined to their shared interest with the United States in protecting Saudi oil fields and participating in a few covert operations. But in fact they performed another function that was both highly secretive and utterly essential. BCCI had played a key role in American operations in Iraq since the early eighties, when CIA director William Casey met every few months at the Madison Hotel in Washington, D.C., with Hasan Abedi, the bank's founder. [71] Though Abedi was Pakistani, increasingly BCCI had become a Saudi operation with major investors such as Kamal Adham and Ghaith Pharaon. In fact, in the spring and summer of 1986, Khalid bin Mahfouz, the Saudi banker who had gone to Texas in the seventies, spent nearly $1 billion to become BCCI's biggest shareholder.

Because it offered many services not available at Citibank or Chase, such as providing phony documentation and letters of credit to facilitate the purchase of weapons, [72] BCCI was the bank of choice for illegal arms sales to Saddam Hussein's regime in Iraq as well as other CIA covert operations.

To understand BCCI, it is helpful to think of the institution as something other than merely a bank. Time once described it as "a vast, stateless, multinational corporation that deploys its own intelligence agency, complete with a paramilitary wing and enforcement units, known collectively as the Black Network." [73] The bank maintained relations with foreign countries through its own "protocol officers" and traded such huge amounts of commodities like grain, rice, coffee, and, of course, oil that it became a major factor in international markets.

In short, it was everything William Casey had ever dreamed of. "What [BCCI founder] Abedi had in his hand [was] magic -- something [Saudi intelligence chiefs] Kamal Adham or even Prince Turki didn't have," said a BCCI official. "Abedi had branches and banks in at least fifty third-world countries. The BCCI people ... were on a first-name basis with the prime ministers, the presidents, the finance ministers, the elite in these countries -- and their wives and mistresses."

If Casey wanted to know a political leader's secrets, the official continued, Abedi could tell Casey "how much he's salted abroad and how much money he gives to his girlfriend." [74] Meanwhile, the bank created a template with which to finance covert operations all over the world for an international network of terror. As a senior U.S. investigator put it, "BCCI was the mother and father of terrorist financing operations." [75] Not only were many of these BCCI deals illegal, at times they obscured the U.S. goal of solidifying its position in the Middle East.

Meanwhile, as the Iran-Iraq War continued, even Saddam's most brutal atrocities could not weaken U.S. support of Iraq, in part because the Iran-contra scandal had stirred a deep Saudi concern. The Saudis asserted that in selling arms to Iran the United States was not doing enough to support its ally Iraq, so the United States redoubled its efforts.

In March 1988, Saddam Hussein dropped chemical bombs on Halabja, an Iraqi town in Iranian-held territory, killing five thousand of his own people, Iraqi Kurds. [76] [xiii] "It was life frozen," said an Iranian photographer who came upon the scene. "Life had stopped. It was like watching a film and suddenly it hangs on one frame. It was a new kind of death to me." [77]

U.S. intelligence sources told the Los Angeles Times that the poison gas was sprayed on the Kurds from U.S. helicopters, which had been sold to Iraq for crop dusting. [78] The Halabja attack was condemned throughout the world and was later used as a reason by President George W. Bush to invade Iraq in 2003.

According to Peter W. Galbraith, the senior adviser to the Senate Foreign Relations Committee who exposed Saddam's gassing of the Kurds, two men who were key players in the Reagan Bush era and later became principal figures in George W. Bush's administration helped kill the Prevention of Genocide Act, a bill that would have imposed sanctions on Iraq for its genocidal campaign. The bipartisan bill passed the Senate unanimously just one day after it was introduced. But thanks to Colin Powell and Dick Cheney, it never became law. "Secretary of State Colin Powell was then the national security adviser who orchestrated Ronald Reagan's decision to give Hussein a pass for gassing the Kurds," Galbraith wrote. "Dick Cheney, then a prominent Republican congressman, now vice president and the administration's leading Iraq hawk, could have helped pass the sanctions legislation, but did not." [79]

On August 20, 1988, a cease-fire went into effect between Iran and Iraq. Just five days later, Saddam Hussein again staged poison-gas attacks against his own people in villages in Iraqi Kurdistan. None of this, however, changed the administration's policy.

By the time Bush became president in January 1989, the Iran-Iraq War had ended in a stalemate; there was no longer a reason to arm Saddam. [xiv] Nevertheless, BCCI's role in arming Iraq continued. Arms dealer Sarkis Soghanalian, who sold billions of dollars' worth of weapons to Saddam, [80] banked there. BCCI regularly loaned billions in short-term, often overnight, loans to the Banca Nazionale del Lavoro, an Italian bank that in turn backed Saddam.

But now that he was president, Bush overlooked BCCI's excesses and actually increased U.S. aid to Saddam in an effort "to bring him into the family of nations." [81] Incredibly, Bush's policy would facilitate Iraq's development of ballistic, chemical, and even nuclear weapons. Bush implemented it despite repeated warnings from his own administration about Saddam's massive military buildup, human-rights violations, use of chemical weapons, and continued support for terrorism. [xv]

In March 1989, State Department officials told Secretary of State James Baker that Iraq was working on chemical and biological weapons and that terrorists were still operating out of Iraq. In June, the Defense Intelligence Agency sent a Top Secret report to thirty-eight Bush administration officials, warning that it had uncovered a secret military procurement network for Iraq operating all over the world. [82]

That included the United States. In September 1989, the Defense Department discovered that an Iraqi front company in Cleveland was funneling American technology to Iraq's nuclear weapons program, but the Bush administration allowed the company to operate -- even after the invasion of Kuwait in August 1990, nearly a year later. On September 3, 1989, a Top Secret CIA assessment informed Baker that Iraq had a program to develop nuclear weapons.

In spite of all these warnings, on October 2, 1989, President Bush inexplicably signed a National Security Directive authorizing even closer relations with Iraq, giving Saddam yet more aid. Four days later, James Baker met with his Iraqi counterpart, Tariq Aziz, and promised that the Bush administration would not tighten restrictions on high-technology exports to Iraq. Baker gave these assurances despite the CIA warning he had received the previous month alerting him that some of the "dual-use" technology might be used in Iraq's nuclear weapons development program.

By this time, international bankers had cut off virtually all loans to the Iraqi dictator. But on October 31, 1989, James Baker called the secretary of agriculture, Clayton Yeutter, and pressed for a billion dollars in new agricultural loan guarantees for Iraq. State Department officials were aware that Iraq was diverting some of its dual-use technology to its nuclear weapons program, yet it decided not to tighten export licenses. In January 1990, President Bush waived congressional restrictions on Iraq's use of the Export-Import Bank and in doing so overlooked new evidence that Iraq was testing ballistic missiles and stealing nuclear technology.

All told, the Reagan and Bush administrations ended up providing Saddam Hussein with more than $5 billion in loan guarantees. In the end, American support had enabled the repressive dictator to become a major military force in the Persian Gulf. Saddam had chemical weapons and a nuclear arms program.

There were now a million men in the Iraqi army. Those members of the Bush administration who worried that Shiite revolutionaries would sweep through the Middle East could rest assured that such an event was highly unlikely. The United States had helped build Iraq into the strongest military force in the Middle East. Little did Bush and the Saudis dream that they would soon be at war with the man they had helped create.

_______________

[i] Thousands of suspected terrorists were rounded up and jailed, among them Sheikh Omar Abdel Rahman, who, in the wake of the 1993 World Trade Center bombing, was convicted of conspiring to blow up New York City landmarks, and Ayman al-Zawahiri, who became known as one of Osama bin Laden's two top lieutenants.
[ii] The fundamentalist Muslim Brotherhood's history in Egypt dated back to the twenties. For decades it had gone through various periods of acceptance and harassment, as it became increasingly militant.
[iii] Secret agreements between the Saudis and various U.S. presidents dated back to the early postwar era and continued into the twenty-first century. Thanks to a pact between President Harry Truman and King Ibn Saud in 1947, the United States vowed to come to Saudi Arabia's defense if it was attacked. Likewise, in 1963, President Kennedy sent a squadron of fighter jets to protect Saudi Arabia when Egypt's Gamal Abdel Nasser attempted to kill members of the Saudi royal family.
[iv] In late October 1981, four days before the Senate vote, Armstrong prepared an explosive article for the Washington Post asserting that the AWACS sale was just the beginning of a secret $50-billion plan to build surrogate military bases in Saudi Arabia.
But on Friday, October 23, just a few days before Armstrong's article was to run, Pentagon officials called the Post. As General Richard Secord recounted it, they said, "'You know, this guy's preparing this cockamamy story,' You know, 'You've got to give us a break on this. This is crazy,' you know? And that's why the story was published after the vote, not before."
[v] Some of the material in this chapter is adapted from "In the Loop" by Murray Waas and Craig Unger, which appeared in the November 5, 1992, New Yorker.
[vi] Salem bin Laden was said to be involved in this effort.
[vii] In some small measure, support for both Iran and Iraq may merely have been a continuation of a policy started by President Carter. According to classified documents uncovered by Robert Parry, a Washington, D.C., investigative reporter, after meeting with Prince Fahd, Alexander Haig briefed President Reagan in April 1981 that Fahd had explained that Iran was receiving spare parts for U.S. equipment from Israel. Haig's notes had another astonishing assertion: "It was also interesting to confirm that President Carter gave the Iraqis a green light to launch the war against Iran through Fahd." In other words, Haig had been told by the future Saudi king that Jimmy Carter had given clearance for Saddam to invade Iran and begin the Iran-Iraq War. According to former Iranian president Bani-Sadr, even though the United States did not officially have relations with Iraq, the Carter administration used Saudi channels to send Iraq secret information that exaggerated Iran's military weakness. By encouraging Iraq to attack, the United States hoped to set the stage for a solution to the Iranian hostage crisis with a possible arms-for-hostages deal.
[viii] Rumsfeld did raise the issue in his subsequent meeting with Iraqi official Tariq Aziz, but addressing the issue at a lower level was indicative of the administration's priorities.
[ix] Though he was often viewed with suspicion by Reagan conservatives as a "moderate," such perceptions were more a reflection of Bush's roots in the Eastern Establishment than of his own deeply held political convictions. As early as 1964, Bush had endorsed conservative Barry Goldwater for president over the liberal Republican candidate Nelson Rockefeller.
[x] Because of unrelated problems about obtaining insurance, the Aqaba pipeline was never built.
[xi] Ironically, during the Gulf War the United States delivered the same bomb to Iraq through other means. During Operation Desert Storm, the United States dropped more than twelve thousand MK-84s on Iraq.
[xii] One thing that was not easy for Bush during his successful presidential campaign in 1988 was his relationship with his longtime friend James Baker, who confided that when he traveled with Bush, he was at times left playing the role of the "goddamn butler." "Do you think I enjoyed leaving the office of secretary of treasury, being fifth in line to the presidency, to come over here to be called a handler?" he said. When he saw his picture on the cover of Time, under the headline "The Year of the Handlers," he told his aides he felt like retching.
[xiii] Various accounts have blamed the Iranians for the gas or have suggested that both Iran and Iraq were using chemical weapons at Halabja. But according to Joost R. Hiltermann in the International Herald Tribune, the U.S. State Department instructed its diplomats to blame Iran as well to mute the condemnation of Iraq for using chemical weapons. "The deliberate American prevarication on Halabja was the logical outcome of a pronounced six-year tilt toward Iraq. ... Sensing correctly that it had carte blanche, Saddam's regime escalated its resort to gas warfare, graduating to ever more lethal agents. Because of the strong Western animus against Iran, few paid heed. Then came Halabja. Unfortunately for Iraq's sponsors, Iran rushed Western reporters to the blighted town. ... In response, the United States launched the 'Iran too' gambit. The story was cooked up in the Pentagon, interviews with the principals show. A newly declassified State Department document demonstrates that United States diplomats received instructions to press this line with United States allies ... the UN Security Council['s] choice of neutral language (condemning the 'continued use of chemical weapons in the conflict between the Islamic Republic of Iran and Iraq' and calling on 'both sides to refrain from the future use of chemical weapons') diffused the effect of its belated move. Iraq proceeded to step up its use of gas until the end of the war and even afterward."
[xiv] According to Hadi Qalamnevis, director general of the Statistics and Information Department at the Islamic Revolution Martyrs Foundation, 204,795 Iranians lost their lives in the Iran-Iraq War, including 188,015 military and 16,780 civilians. Earlier, Mohsen Rafiqdust, the former head of the Iranian Revolutionary Guard Force, estimated that 400,000 were wounded during the war. According to Iranian health officials, about 60,000 Iranians were exposed to Iraqi chemical-weapons attacks during the war. More than 15,000 war veterans suffering from chemical-weapons syndrome reportedly died in the twelve years after the end of the Iran-Iraq War, according to Abbas Khani, the head of the Legal Office for War Veterans.
[xv] In May 2003, after the Iraq War, the magnitude of Saddam's crimes became more apparent when mass graves were found throughout the country. According to columnist Ureib Al-Rintawi in the Jordanian daily Al-Dustour, the remains of over fifteen thousand Iraqis were found on the outskirts of the city of Basra, making "the story of Halabja seem like a minor episode in the bloody game experienced by the Iraqi people under Saddam Hussein." Films were later discovered that showed the execution of victims by remote control with explosives stuffed into their pockets, followed by executioners applauding as the victims flew into the air. Columnist Hazem Saghiya wrote in the Arabic-language London daily Al-Hayat that the number of those murdered by Saddam was between 1 million and 1.5 million, and Arab observers began to say that Saddam's atrocities were on the level of the mass murders that took place in the killing fields of Cambodia under Pol Pot.

NOTES:

1. "Looking for Answers: Egypt," PBS Frontline, www.pbs.org/wgbh/pages/frontline/shows/terrorism/egypt/ .
2. U.S. Department of State, Patterns of Global Terrorism, 2001, May 2002, http://www.library.nps.navy.mil/home/tgp/hamas.htm .
3. Don Rothberg, Associated Press, July 18, 1980.
4. Murray Waas and Craig Unger, "In the Loop," New Yorker, November 2, 1992, p. 64ff.
5. Walter Pincus, "Secret Presidential Pledges Over Years Erected U.S. Shield for Saudis," Washington Post, February 9, 1992, p. A 20.
6. The entire cost of the package has sometimes been reported as $8.5 billion.
7. Bob Woodward, The Commanders, p. 200.
8. Elsa Walsh, "The Prince: How the Saudi Ambassador Became Washington's Indispensable Operator," New Yorker, March 23, 2003, p. 48.
9. Rory O'Connor, writer and producer, "The Arming of Saudi Arabia," PBS Frontline #1112, February 16, 1993.
10. Ibid.
11. One of the chief beneficiaries of the AWACS deal was the Bechtel Corporation, of which Reagan's secretary of state, George Shultz, and secretary of defense, Caspar Weinberger, had served as president and general counsel, respectively.
12. O'Connor, "The Arming of Saudi Arabia."
13. Ibid.
14. Ibid.
15. "Al Salaam Slow Down," Middle East Defense News, April 19, 1993.
16. O'Connor, "The Arming of Saudi Arabia."
17. Ibid.
18. Robert Baer, "The Fall of the House of Saud," Atlantic Monthly, May 2003, p.60.
19. Wayne King with reporting by Jeff Gerth and Wayne King, "Private Pipeline to the Contras: A Vast Network," New York Times, October 22, 1986, p. A 1.
20. Walsh, "The Prince," p. 48.
21. Waas and Unger, "In the Loop."
22. Ibid.
23. Ibid.
24. Ibid.
25. Theodore Draper, A Very Thin Line, p. 77.
26. Jane Mayer, "The House of bin Laden," New Yorker, November 12, 2001, www.newyorker.com/fact/content/011112fa_FACT3 .
27. Patrick Tyler, "Officers Say US Aided Iraq in War Despite Use of Gas," New York Times, August 18, 2002, p. 1.
28. Waas and Unger, "In the Loop"; Robert Parry, "Saddam's Green Light," consortium News, www.consortiumnews.com/archive/xfile5.html ; and Dilip Hiro, The Longest War.
29. Richard Sale, "Saddam Key in Early CIA Plot," UPI, Apri1 10, 2003.
30. Adel Darwish, Unholy Babylon, pp. 201-8.
31. F. Gregory Gause III, "Iraq and the Gulf War: Decision-Making in Baghdad," University of Vermont, www.ciaonet.org/casestudy/gaf01/#note22 .
32. Said Aburish, The Rise, Corruption and Coming Fall of the House of Saud, p. 52.
33. Elaine Sciolino, "Threats and Responses: The Iranians; Iraq Chemical Arms Condemned, but West Once Looked the Other Way," New York Times, February 13, 2002, p. A18.
34. Tyler, "Officers Say US Aided Iraq in War Despite Use of Gas," p. 1.
35. Alan Friedman, Spider's Web, p. 25.
36. Before the new administration took office -- in fact, the day after the November 1980 election Iraq began reaching out to Bush, with Iraqi deputy foreign minister Ismat Kittani, a good friend of Bush's from his days at the United Nations, flying especially to the United States to congratulate the vice president-elect and send him flowers.
37. Friedman, Spider's Web, p. 4.
38. "Iraq Use of Chemical Weapons," unclassified memo from Jonathan Howe to the secretary of state, November 1, 1983, National Security Archives, www.gwu.edu/~nsarchiv/NSAEBB/NSAEBB82/iraq24.pdf.
39. "Iraqi Use of Chemical Weapons," from Jonathan T. Howe and Richard Mur- phy to Lawrence Eagleburger, November 21,1983, National Security Archives, www.gwu.edu/~nsarchiv/NSAEBB/NSAEBB82/iraq25.pdf.
40. "U.S. Documents Show Embrace of Saddam Hussein in Early 1980s Despite Chemical Weapons," National Security Archives, www.gwu.edu/~nsarchiv/NSAEBB/NSAEBB82/press.htm.
41. Joyce Battle, ed., Shaking Hands with Saddam Hussein: The U.S. Tilts toward Iraq, 1980-1984 (National Security Archives Electronic Briefing Book no. 82, February 25, 2003), www.gwu.edu/~nsarchiv/NSAEBB/NSAEBB82/index.htm.
42. Dana Priest, "Rumsfeld Visited Baghdad in 1984 to Reassure Iraqis, Documents Show," Washington Post, December 19, 2003. Documents were originally obtained by the National Security Archives.
43. "Measures to Improve U.S. Posture and Readiness to Respond to Developments in the Iran-Iraq War," National Security Decision Directive (NSDD) 139 of April 5, 1984, National Security Archives, www.gwu.edu/~nsarchiv/NSAEBB/NSAEBB82/iraq53.pdf.
44. Dean Foust and John Carey, "A U.S. Gift to Iraq: Deadly Viruses," Business Week, September 20, 2002, www.businessweek.com/bwdaily/dnflash/se ... 0_3025.htm.
45. Ibid. After the Gulf War, a Senate investigation determined that the United States allowed the export of a wide range of disease-producing and poisonous biological material to Iraq during the eighties, thanks to licensing by the Department of Commerce of "dual-use" exports that could be used for chemical and biological warfare. According to the investigation, among the approved sales to Iraq was the often fatal anthrax bacterium; the botulinum toxin, which causes vomiting, constipation, thirst, general weakness, headache, fever, dizziness, double vision, dilation of the pupils, and paralysis of the muscles involving swallowing; and Histoplasma capsulatum, which can lead to pneumonia and enlargement of the liver and spleen and is often fatal; see Donald W. Riegle Jr. and Alphonse M. D'Amato, " A Report of the Committee of Banking, Housing and Urban Affairs with Respect to Export Administration, US Chemical and Biological Warfare-Related Dual Use Exports to Iraq and Their Possible Impact on the Health Consequences of the Persian Gulf War with Respect to May 25, 1994," www.gulflink.osd.mil/medsearch/FocusAre ... Capability.
46. Richard Ben Cramer, What it Takes, p. 15.
47. Waas and Unger, "In the Loop."
48. Ibid.
49. Ibid.
50. Ibid.
51. Herbert S. Parmet, George Bush, p. 292.
52. Joe Conason, "The George W. Bush Success Story," Harper's, February 2000.
53. Waas and Unger, "In the Loop."
54. Bob Woodward, Veil, p. 397.
55. Waas and Unger, "In the Loop."
56. On May 20,1985, Fuller wrote a Special National Intelligence Estimate (SNIE), a closely held memo that was circulated to the president. The memo became the basis for renewed arms sales to Iran and the ensuing Iran-contra scandal.
57. Waas and Unger, "In the Loop."
58. Ibid.
59. Ibid.
60. Ibid.
61. Ibid.
62. Ibid.
63. Ibid.
64. Ibid.
65. Ibid.
66. Ibid.
67. Woodward, The Commanders, p. 203.
68. Waas and Unger, "In the Loop."
69. Maureen Dowd and Thomas Friedman, "The Fabulous Bush & Baker Boys," New York Times, May 6, 1990, sec. 6, p. 34; and Sidney Blumenthal, "I, Baker," New Republic, November 2, 1992, p.17.
70. "World Oil Market and Oil Price Chronologies: 1970-2002," Energy Information Administration, Department of Energy, www.eia.doe.gov/cabs/chron.html.
71. The BCCI Affair: A Report to the Committee on Foreign Relations, United States Senate, by Senator John Kerry and Senator Hank Brown, December 1992, 102nd Cong., 2nd Sess. Senate Print 102-140. NB: This December 1992 document is the penultimate draft of the Senate Foreign Relations Committee report on the BCCI Affair. After it was released by the committee, Senator Hank Brown, reportedly acting at the behest of Henry Kissinger, pressed for the deletion of a few passages, particularly in chapter 20, "BCCI and Kissinger Associates." As a result, the final hard-copy version of the report, as pub- lished by the Government Printing Office, differs slightly from the committee's soft-copy version at www.fas.org/irp/congress/1992-rpt/bcci/llintel.htm.
72. Jonathan Beaty and S. C. Gwynne, The Outlaw Bank, p. 316.
73. Jonathan Beaty and S. C. Gwynne, "Not Just a Bank; You Can Get Anything You Want Through BCCI," Time, September 2, 1991, p. 56.
74. Peter Truell and Larry Gurwin, False Profits, pp.133-34.
75. Douglas Farah, "Al Qaeda's Road Paved with Gold," Washington Post, February 17, 2002, p. A 1.
76. Joost Hiltermann, "America Didn't Seem to Mind Poison Gas," International Herald Tribune, January 17, 2003; and Lee Stokes, "Iran Asks for UN Probe of Chemical Warfare," UPI, April 23, 1988.
77. Jeffrey Goldberg, "Wartime Friendships," New Yorker, April 14, 2003, p. 30.
78. Stuart Auerbach, "1.5 Billion in U.S. Sales to Iraq: Technology Products Approved up to Day before Invasion," Washington Post, March 11, 1991, p. A 1.
79. Peter W. Galbraith, "The Wild Card in Post-Saddam Iraq," Boston Globe Magazine, December 15, 2002.
80. The BCCI Affair, Senate Print 102-140.
81. Waas and Unger, "In the Loop."
82. Ibid.

[admin]

CHAPTER FIVE: The Double Marriage

Throughout the roaring eighties, the U.S.-Saudi marriage continued to thrive. It wasn't just that the United States got billions of dollars of reasonably priced oil and the Saudis were able to arm themselves with American weapons. In addition, the covert operations in Afghanistan and Iraq were beneficial to both parties. For all its success, however, there was just one problem with the arrangement: if one thought of the U.S.-Saudi activities as a steady relationship, Saudis were married to someone else.

More specifically, the House of Saud's political legitimacy was based on its allegiance to the sect of Sunni Islam known as Wahhabism and dated back three hundred years. It was at the core of kingdom's existence. Since many Wahhabis saw the United States as the Great Satan, that meant the Saudis had vital relationships essential to their survival -- a double marriage of sorts -- with partners who were mortal enemies.

Perhaps the Italian prime minister Giulio Andreotti best explained the Saudis' high comfort level with such extraordinary contradictions and duplicity. "For an Islamic person to be polygamous is not unusual," he once told Jimmy Carter. "They can have four wives, for example. So forget it when it comes to foreign policy." [1] [i] The ascendancy of the House of Saud's power dates to 1747, [ii] when the Arab clan of al-Saud established a rudimentary government in league with the family of Ibn Abd al Wahhab, the prophet of Wahhabism. Marriages between the two families cemented the alliance, and the two families agreed that power would be handed down from generation to generation. [2]

The piety of al Wahhab gave legitimacy to the dubious religious credentials of the al-Sauds, who were essentially a violent bandit tribe. Likewise, the political muscle of the al-Sauds gave al Wahhab a means to spread his unusual theological views. What emerged over the next 250 years has been characterized by neoconservative author Stephen Schwartz in The Two Faces of Islam as "a unique fusion of religious and political control, a system in which faith and statecraft would be run as a family business." [3]

Over time, the Wahhabi-Saudi alliance spread, in part out of conviction, in part out of fear. Those who accepted Wahhabism swore allegiance to the leadership of the alliance and were expected to fight for it and contribute zakat (an Islamic tax to the leader of the religious community). Those who resisted it risked raids that threatened their livelihood. [4]

Schwartz and many neoconservatives who are scathing critics of the House of Saud argue that this synthesis of religious and political control in service to these extreme beliefs gave birth to a new kind of totalitarian "Islamo-fascist" regime, a theocratic monarchy espousing a radical fundamentalist form of Islam. [5] Other scholars argue that the physical and intellectual environments that shaped Saudi Arabia -- an ancient and conservative desert culture imbued with Islam -- have produced a way of life that Westerners like Schwartz all too easily misinterpret. [6]

In many ways, the extremely puritanical teachings of Wahhabism broke sharply with more traditional Islam by promulgating a wide range of practices that were heresy to traditional Muslims. For example, Wahhabis downgraded the status of Muhammad. They condemned those who did not observe all the prescribed times of prayer. They believed in an anthropomorphic God. They insisted on various specific bodily postures in prayer. And they required that their adherents profess faith in Wahhabism in a manner not unlike the practices of born-again Christian fundamentalists. [7]

Whereas American democracy was predicated in part on the separation of church and state, Saudi Arabia was based on their unification. Such a notion is antithetical to Western culture, much of which has long characterized Saudi Arabia as a moderate Arab state. But the unification of this extreme Islamic sect with political power meant that the Koran and the teachings of the Prophet Muhammad were regarded as the country's constitution, that fundamentalist interpretations of Islamic law ruled civil life, that such laws were enforced by religious police, that militant clerics had enormous political power. Wahhabi clerics repeatedly issued fatwas that were not necessarily in keeping with traditional Islam. There were fatwas against women driving, fatwas opposing the telephone, fatwas declaring that the earth was a flat disk and ordering the severe punishment of anyone who believed otherwise. [8] [iii]

Some of the more puritanical Wahhabi practices led to violence and bloodshed. Shortly after Ibn Abd al Wahhab began his campaign to "reform" Islam, he staged the public stoning of a woman accused of "fornication." [9] During a hajj in the early nineteenth century, Wahhabi fighters slaughtered forty members of an Egyptian caravan to prevent them from defiling the holy sites with false idols. [10] In 1926, Wahhabi militia, who had never heard music before, were so inflamed by hearing pilgrims coming toward Mecca accompanied by musicians that they began gunning down the numerous "unbelievers" who played music or appeared to enjoy it. [11]

Even in recent times, extreme interpretations of Islamic codes have resulted in senseless tragedies. In March 2002, for example, at least fourteen students at a girls' public intermediate school in Mecca died in a fire. According to Human Rights News, several members of the Committee for the Promotion of Virtue and the Prevention of Vice obstructed rescue attempts because the fleeing students were not wearing the obligatory public attire (long black cloaks and head coverings) for Saudi girls and women. "Women and girls may have died unnecessarily because of extreme interpretations of the Islamic dress code," said Hallny Megally, executive director of the Middle East and North Africa division of Human Rights Watch." [12]

At the same time that the Wahhabi clerics were developing their extraordinary version of Islam, the al-Saud family, the more political half of the Wahhabi-Saud marriage, had begun a rich history of violence and brutality. As recounted in The Rise, Corruption and Coming Fall of the House of Saud, by Palestinian author Said Aburish, in 1902 Ibn Saud retook Riyadh by terrorizing the general population and decapitating many of his enemies, displaying their heads on the gates of the city. [13] Between 1918 and 1928, the al-Sauds repeatedly massacred rival tribes, executing hundreds of people, including women and children. Members of the al-Saud family personally beheaded many of them. [14]

These executions were only a small part of the al-Sauds' legendary reputation for brutality. In the Saudis' successful campaign to conquer the Arabian peninsula in the twenties, it was not unusual for the al-Sauds to execute all their enemies even after they surrendered, to amputate the arms of the poor for stealing bread, and to brutally settle old tribal scores. By the time they subdued the country, they had staged public executions of 40,000 people and carried out 350,000 amputations -- this in a population of 4 million. [15] [iv]

Decades later, with the influx of hundreds of billions of petrodollars, the al-Sauds' penchant for violence became just one ingredient in a rich stew that included extraordinary extravagance, unimaginable corruption, and fanatic religious fundamentalism all at levels unrivaled the world over. For all practical purposes, the House of Saud saw the kingdom's oil as a family business. Tens of billions of dollars were siphoned off into the al-Sauds' treasury. The top princes took as much as $100 million a year each -- this in an enormous extended royal family in which there were thousands of princes. (An ordinary prince, with two wives and ten children, was paid $260,000 a month. [16]) As a result, despite its huge oil income, the kingdom ran an increasingly big budget deficit and had a huge disparity between rich and poor. And with many princes having dozens of wives and scores of children, the situation could only worsen.

Personal excess was unparalleled. King Fahd married one hundred women. His palace cost $3 billion. He regularly lost hundreds of thousands of dollars a night gambling and once, in 1962, dropped nearly $8 million in one night in Monte Carlo. [17] For decades, reports filled the tabloids about extravagant Saudi binges, partying with prostitutes, and other gross excesses. In the eighties, Fahd and his entourage spent up to $5 million a day on visits to the palace in Marbella, Spain. [18] On a private holiday, his fleet consisted of eight aircraft, including five Boeing 747s, and he brought with him four hundred retainers, two hundred tons of luggage, and twenty-five Rolls-Royces and limos. [19] In a PBS Frontline interview, Prince Bandar acknowledged that his family had misappropriated tens of billions of dollars. "If you tell me that building this whole country ... we misused or got corrupted with fifty billion, I'll tell you, 'Yes.' ... So what? We did not invent corruption, nor did those dissidents, who are so genius, discover it." [20]

Years later, the National Security Agency began electronically intercepting conversations of the royal family that specified exactly how corrupt they were. According to an article by Seymour Hersh in the New Yorker, in one call, Crown Prince Abdullah complained about billions of dollars being diverted by the House of Saud from a huge state-financed project to renovate a mosque. In another call, Interior Minister Prince Nayef told a subordinate not to give police a prostitute's client list that presumably included members of the royal family. [21] As recently as the fall of 2003, according to one of their retainers, members of the royal family and their entourage while on a trip to Los Angeles carried packets stuffed with ten thousand dollars, strippers and prostitutes. Corrupt, rich, and brutal, this was one of America's most powerful friends, the ally on whom much of the American economy depended.

Titillating as such reports of corruption might be, they did not represent a national security threat to the United States. If a peril was hidden in the alliance with the House of Saud, it had to do with the royal family's alliance with the Wahhabi clerics and their growing extremism. One elemental distinction between the Wahhabis and other Muslims was in the interpretation of the Islamic term jihad. In some contexts, jihad refers to the inner struggle to rid oneself of debased actions or inclinations, to achieve a higher internal moral standard. In the Koran, it also refers to a larger duty, outside the boundaries of the individual, "to enjoin good and forbid evil." [22] The Prophet Muhammad referred to both meanings of the term when he returned from a military campaign and is said to have told his companions, "This day we have returned from the minor jihad [war] to the major jihad [self-control and betterment]." [23]

Islam allows the use of force to fulfill these duties so long as there is no workable alternative. The more radical neo Wahhabis, however, especially those under the sway of the militant Muslim Brotherhood, strongly emphasized a much more extreme interpretation of jihad. Far from confining the meaning of jihad to the defense of Islamic territory, the Muslim Brotherhood advocated waging a holy war against the enemies of Islam. Not all Wahhabis were so radical, particularly those close to the House of Saud, which looked upon extreme militants as an aberration. Nevertheless, many Middle East scholars see Saudi Arabia as bearing considerable responsibility for the rise of such violence. According to F. Gregory Gause III, a University of Vermont professor and a member of the Council on Foreign Relations, "It is undoubtedly true that the extremely strict, intolerant version of Islam that is taught and practiced in Saudi Arabia created the milieu from which Osama bin Laden and his recruits emerged." [24]

***

As the House of Saud entered the modern era, there were bitter disagreements within the royal family on exactly how close to the West it was acceptable to be. But to even the most westernized Saudis, modernization -- incorporating new technology, becoming part of the global economy -- did not mean buying into secular, libertine Western culture. Even though their extravagant behavior may have suggested otherwise, as Wahhabis they were profoundly opposed to becoming "westernized."

That included even the most powerful and pro West branch of the royal family, the Sudairis. The Sudairis consisted of the descendants of the favored wife of the late king Abdul Aziz. Cosmopolitan and sophisticated world travelers who lived lavishly and loved the night life, they held the reins of power and most of the highest-ranking positions in the government and were known to favor engagement with the United States. Officially, they were rigorously observant of Islamic law, but as a result of their worldly ways many Islamic purists saw them as hypocrites -- munafaqeen. [25]

Bandar, whose father, Prince Sultan, was one of the Sudairi Seven, [v] was a case in point. He smoked cigars and sniffed brandy, had palatial estates in Aspen, in Virginia near the CIA, and in the English countryside. No one enjoyed the fruits of Western civilization more than he. [26] But in the end, Bandar knew as well as anyone that the House of Saud was a theocracy and must heed the call of Islam. He was fond of pointing out that the Iranian Revolution had shown that no regime could adopt secular Western customs without considering the consequences. He once told the New York Times an anecdote about the shah of Iran's writing King Faisal a letter before he was deposed in 1979, saying, "Please, my brother, modernize. Open up your country. Make the schools mixed, women and men. Let women wear miniskirts. Have discos. Be modern, otherwise I cannot guarantee you will stay in your throne." To which King Faisal responded, "Your Majesty, I appreciate your advice. May I remind you, you are not the shah of France. You are not in the Elysee, you are in Iran. Your population is ninety percent Muslim. Please don't forget that." [27]

History proved Faisal right. As Bandar explained, "Intangible social and political institutions imported from elsewhere can be deadly -- ask the shah of Iran. ... Islam for us is not just a religion but a way of life. We Saudis want to modernize, but not necessarily westernize." [28]

So as King Faisal called for Saudi Arabia to modernize -- that is, to import technology and renew the economy -- he also made clear that he did not mean the country should westernize, as, say, Turkey had. [29] As part of Faisal's "reforms," the ulema, the senior Islamic clerics, became civil servants, part of the state bureaucracy. If anything, the alliance between the House of Saud and Wahhabi fundamentalism became more formalized than ever before. Wahhabi Islam was still the most fundamental part of the Saudi identity. This was irrevocable policy at the highest level of the kingdom. When necessary, the House of Saud did what it had to do to placate the Wahhabi clerics. Always.

Meanwhile, from the eighties on, U.S. oil consumption grew from 15 million barrels a day to nearly 20 million a day. [30] Imported oil as a percentage of U.S. consumption continued to soar, and U.S. policy makers and oil executives alike overlooked the more disagreeable practices of their supplier.

That had always been the case. For decades, most of what Americans knew about Saudi Arabia came courtesy of Aramco, the Arab-American oil consortium that was granted the spectacularly lucrative long-term concession to bring Saudi oil to U.S. markets. As economic historian J. B. Kelly, the author of Arabia, the Gulf and the West, explained it, "Because there were no other sources of information about that country open to the American public, Aramco could put across its version of recent Arabian history and politics with almost insolent ease. ... Naturally, little prominence was accorded in Aramco's publicity to the fanatic nature of Wahabbism, or to its dark and bloody past." [31]

***

One family that lived with these contradictions was the bin Ladens. A devout Muslim who enforced strict religious and social codes in raising his children, Mohammed bin Laden, Osama's father, kept all of his children in one residence so he could preside over their discipline and religious upbringing. [32] He took pride in having fathered twenty-five sons for the jihad.

To Westerners, Mohammed's piety may have seemed incongruous in a cosmopolitan family of jet-setters with private planes, giant homes all over the world, and all the accoutrements of modern Saudi billionaires. But in the Saudi context, his great wealth and global business interests in no way contradicted his piety. [vi] Thanks to his private planes, on at least one occasion he fulfilled his dream of saying morning prayers in Jerusalem, midday prayers in Medina, and evening prayers in Mecca -- the three holiest cities in the Arab world. [33] He deeply supported the Palestinian cause. At one point, he even attempted to convert two hundred of his company's bulldozers into military tanks for the Palestinian insurgents. "He wanted to use them to attack Israel," Osama told a Pakistani journalist. "However, his technicians told him it would be impossible and he gave up the idea." [34]

Osama learned Islam at his father's knee and by the age of seven was studying with fundamentalist Islamic groups. [vii] He took enormous pride in his father's having rebuilt the holy mosques in Mecca and Medina. These were no ordinary mosques; they were the Islamic equivalents of Notre Dame and the Vatican. "Allah blessed him and bestowed on him an honor that no other contractor has ever known," Osama later told Aljazeera television. [35]

In 1968, Mohammed bin Laden was killed when his private jet crashed into the mountains of southern Saudi Arabia, leaving Osama, who was ten years old at the time, a fortune estimated at $30 million to $60 million -- roughly $200 million to $400 million in 2003 dollars. By the time he was a teenager, Osama was an unusually self-possessed and gentle young man. "He was singularly gracious and polite and had a great deal of inner confidence," recalled a man who taught English to bin Laden when Osama was about thirteen years old, around 1970. "[In his work, bin Laden was] very neat, precise, and conscientious. He wasn't pushy at all. ... If he knew the answer to something, he wouldn't parade the fact. He would only reveal it if you asked him." [36]

Older brother Salem, who took over the family business after Mohammed's death, bought huge homes in Texas and Florida, jetted around the globe, and flew private planes up the Nile. [37] Educated at the Millfield boarding school in Somerset, England, he married an upperclass Englishwoman, Caroline Carey, whose stepfather was the Marquess of Queensberry. [38]

But Osama led a more insular and ascetic existence. The only bin Laden child to be educated solely in the Middle East, he had far less contact with the West than his siblings and was perhaps the only one who did not travel to the United States. In 1971, Osama and twenty-two other members of the family went to Falun, Sweden, where the family had business with Volvo. But such jaunts to the West were rare for Osama. Given his family's high status, Osama was allowed to socialize with royalty, but even as a teenager, he preferred the company of the ulema. [39] Moreover, to the extent he related to the West, his antipathy was such that he pretended that he could not speak English -- even though several sources, his English teacher and journalists among them, say he learned the language fluently. [40] [viii]

As a teenager, Osama may have briefly strayed from the devout path he followed most of his life. Bin Laden, a controversial biography of Osama by the pseudonymous Adam Robinson, asserts that while he attended Broumanna High School in Lebanon, Osama played the part of a debonair Saudi playboy, driving a canary yellow Mercedes, wearing handmade suits, and drinking Dom perignon and Johnnie Walker Black Label at the Crazy Horse and the Casbah. [41]

But bin Laden was redeemed, the book says, in 1977 when he and his brother Salem joined the masses to perform the demanding series of rituals of the hajj near Mecca. Afterward, Osama visited the cave at Mount Hira, near Mecca, where Muhammad is said to have received the revelations from God. According to Robinson, Osama was profoundly moved by the experience, sold his Mercedes, grew a beard, and threw himself into Islamic studies as never before. [42]

At Jeddah's King Abdul Aziz University [ix] bin Laden's religious training began in earnest, at a time when thinking at the university was dominated by two of the leading voices of the Muslim Brotherhood, Egyptian scholar Sayyid Qutb, an intellectual hero and principal theoretician of the Islamist revolution, and Sheikh Abdullah Azzam, the creator of the First International Jihadist Movement, who was a stirring speaker and a powerful figure raising funds and recruiting for the jihad. [43]

Qutb had been a secular Egyptian scholar and literary critic -- he discovered Egyptian novelist Naguib Mahfouz, who was later awarded the Nobel Prize -- but a sojourn to the United States in 1949 left him appalled at American insensitivity to spiritual matters. [44] A student at what was then Colorado State Teachers College in Greeley, Colorado -- ironically, a conservative, religious town -- Qutb wrote about Greeley in his book The America I Have Seen as materialistic and soulless, finding evidence of America's greed in conventions and possessions that seem quite ordinary to most Americans, such as the green lawns in front of their homes. [45] Qutb attacked American jazz music and dress, and most of all, the American concern with sexuality, especially among women. "The American girl ... knows seductiveness lies in the round breasts, the full buttocks, and in the shapely thighs, sleek legs -- and she shows all this and does not hide it," he wrote.

Shocked when he witnessed a priest encourage young men and women to dance together at a party, Qutb saw a church social as evidence of America's debased attitude toward sexuality -- and wrote about it with the salaciousness of a romance novelist: "They danced to the tunes of the gramophone, and the dance floor was replete with tapping feet, enticing legs, arms wrapped around waists, lips pressed to lips, and chests pressed to chests. The atmosphere was full of desire ..." Qutb returned to Saudi Arabia a militant Muslim, determined to forge a vision of Islam purged of the vulgar influences of the West.

One of Qutb's books, Signposts Along the Road, [x] argued that Western civilization had led to "corruption and irreligion" and that jihad should be waged not just defensively to protect Islamic homelands, but offensively against enemies of Muslims. [46] Qutb asserted that the United States was especially dangerous precisely because, unlike the Saudis, the Americans insisted on separating church and state. As a result of this, he argued, the West was trying "to confine Islam to the emotional and ritual circles, and to bar it from participating in the activity of life." In the end, as he saw it, this amounted to "an effort to exterminate this religion." [47]

By the early sixties, Qutb had become the most prominent fundamentalist theoretician in Islam, and his suffering in prison in Egypt and his execution in 1965 became the stuff of legend. [48] The more moderate Islamists saw Qutb's analyses as valuable but flawed by his bitterness at having been jailed and tortured. Wahhabis influenced by the House of Saud scorned his followers as a sect they labeled Qutbites. [49]

Nevertheless, Qutb's ideas lived on. They were promulgated by both the militant Wahhabi scholar Sheikh Abdullah Azzam and Ayman al-Zawahiri, an Egyptian surgeon who later became notorious as the man behind Osama bin Laden. Azzam became particularly effective in persuading masses of Muslims all over the world to wage an international jihad. [50] By the late seventies, Osama, six feet five inches, lean, bearded, and dour, had imbibed such strong anti-American feelings from Azzam at the university that he began to boycott American goods. When Muslims bought American, they were contributing to the repression of Palestinians, he said. [51]

At the time, Islamic fundamentalism had begun spreading through Saudi Arabia, and Osama was not the only militant member of his family. Sayyid Qutb's ideas had become important to the organization now known as the World Assembly of Muslim Youth (WAMY), which had been founded by Abdullah bin Laden, a relative of Osama's, in 1972. Omar bin Laden, another relative, was also a director of WAMY. In addition, Mahrous bin Laden, one of Osama's older brothers, became friendly with Syrian members of the militant Muslim Brotherhood in exile in Saudi Arabia. [52] In late 1979, the Muslim Brotherhood asserted that the House of Saud had lost its legitimacy through "corruption, ostentation, and mindless imitation of the West." [53] Even though the bin Ladens were close to the royal family, Mahrous had become friendly enough with the Brotherhood that they were able to exploit their relationship with him in their most daring operation ever.

On November 20, just a month before the Soviet invasion of Afghanistan, more than a thousand members of the Muslim Brotherhood invaded Mecca and seized control of the Grand Mosque in a desperate attempt to rid the country of the House of Saud. The Grand Mosque, of course, is the spectacular place of worship to which 2 million Muslims make their pilgrimage during the hajj each year. It is the site of the Kaaba, one of the holiest icons in all of Islam, a rectangular stone room with black silk and cotton sheaths embroidered in gold with verses from the Koran.

At the time of the uprising, the Saudi Binladin Group was rebuilding the mosque, and its trucks carried permits allowing them to enter and depart without having to be inspected. An investigation by Saudi intelligence revealed that the militants had taken advantage of Mahrous to use the bin Laden family's trucks without his knowledge. [54] The episode, which became known as the Mecca Affair, was the most serious attack on the House of Saud in its three-hundred-year history.

The siege led to a two-week battle that left the Saudi Arabian National Guard (SANG), a praetorian guard of sorts whose primary mission was to defend the royal family, battling the fundamentalists to the death. One hundred twenty-seven Saudi troops and 117 rebels were killed. [55] Fighting was so fierce that the Vinnell Corporation, an American company that trained the Saudi National Guard, was called in to help out. [56] [xi]

The battle marked a rare moment in which both the covert nature of the Saudi-American relationship and the contradictions of the marriage between the House of Saud and militant Islamic fundamentalism erupted. To the Brotherhood, the House of Saud were nothing more than corrupt, pro-Western hypocrites -- munafaqeen -- who were paying lip service to the clerics while they were really in bed with the decadent Great Satan, the United States. As a result, the Brotherhood asserted that the Saudi regime had lost its legitimacy. [57]

Fortunately for Mahrous, the bin Laden family was so much a part of the fabric of the House of Saud that it was impossible to take strong punitive action against him. Other members of the Muslim Brotherhood suffered the ultimate penalty: no fewer than sixty-three rebels were publicly beheaded. Mahrous, though arrested, was released and later became manager of the Saudi Binladin Group's offices in Medina. [58]

The House of Saud's gentle treatment of Mahrous strongly suggests that the bin Ladens' ties to the royal family had paid off. However, this would not be the last time a member of the bin Laden family would be at odds with the House of Saud.

_______________

[i] Higher-ranking Saudis often had far more than just four wives. According to Said Aburish's The House of Saud, it is estimated that the forty-two sons of Abdul Aziz married more than fourteen hundred women, an average of more than thirty- three wives for each son.
[ii] Various texts differ on the date. According to Madawai Al-Rasheed's A History of Saudi Arabia, the alliance began in 1744.
[iii] In 1985, the blind Wahhabi imam Abdul Aziz bin Baz retracted his fatwa punishing people who believed the earth was round after a conversation with Prince Sultan bin Salman bin Abdul Aziz al-Saud, the grandson of Ibn Saud. The prince had just been a passenger in the American space shuttle Discovery and told the imam that having been in outer space, he could personally attest that the world was round.
[iv] Even in the modern era, the Saudi fondness for harsh punishment persisted. In June 2003, a BBC interview with Riyadh's leading executioner, Muhammad Sa ad al-Beshi, gave Westerners a taste of exactly how commonplace beheadings are in Saudi Arabia. "It doesn't matter to me: two, four, ten -- as long as I'm doing God's will, it doesn't matter how many people I execute," said Beshi, a forty-two-year-old father of seven children. Beshi said he kept his executioner's sword razor sharp and sometimes allowed his children to help him clean it. "People are amazed how fast it can separate the head from the body," he added.
[v] King Abdul Aziz, the founder of modern Saudi Arabia, had forty-three sons, and the Sudairi Seven refers to the seven sons by his favored wife. They include King Fahd, Defense Minister Prince Sultan, Riyadh governor Prince Salman, Interior Minister Prince Nayef, business leader Prince Abdulrahman, Prince Ahmed, and Prince Turki bin Abdul Aziz, who is not to be confused with onetime intelligence chief Prince Turki bin Faisal. It was Fahd who permitted U.S. forces to be stationed on Saudi soil during the Gulf War. Sultan's son Prince Bandar had, of course, been the most prominent Saudi in the United States for decades.
[vi] The Saudi Binladin Group was so comfortable with infidel culture that it actually played an important role in bringing Disney-like theme parks to the Arab world. In 1998, SBG contracted to build the Dreamland megamarket, a shopping complex of megastores adjacent to Dream Park, Cairo's answer to Disney World.
[vii] Reports differ as to the exact number of children sired by Mohammed bin Laden -- but it is generally agreed to be at least fifty-four. In addition, various accounts place Osama bin Laden as his seventeenth son while others say he was the last of twenty-five sons.
[viii] 1989, journalist Edward Girardet of the Christian Science Monitor encountered bin Laden in Afghanistan and had a heated forty-five-minute conversation with him in English. In addition, a man named Brian Fyfield-Shayler claims to have taught English to bin Laden and thirty other wealthy Saudis around 1970.
[ix] It is widely agreed that bin Laden attended King Abdul Aziz University, but there are conflicting reports as to when or if he graduated and which field he studied -- economics, engineering, or public administration.
[x] The title of the book, Ma'allim fi al-tariq, is sometimes also translated as Milestones.
[xi] Vinnell, which had trained the Saudi National Guard since 1975, was widely said to have been a CIA front. In the Vietnam era, the company did everything from construction of military bases to military operations, and a Pentagon source termed it "our own little mercenary army in Vietnam." When one of Vinnell's men in Riyadh was asked if he saw himself as a mercenary, however, he had a slightly different characterization. "We are not mercenaries because we are not pulling the triggers," he told Newsweek. "We train people to pull the triggers. Maybe that makes us executive mercenaries."

NOTES:

1. Alan Friedman, Spider's Web, p. 84.
2. Stephen Schwartz, The Two Faces of Islam, p. 74.
3. Ibid., p. 75.
4. Madawi Al-Rasheed, A History of Saudi Arabia, p.19.
5. Schwartz, The Two Faces of Islam, p. 105.
6. David E. Long, "Whither Saudi Arabia?" Jewish Daily Forward, September 5, 2003, www.forward.com/issues/2003/03.09.05/arts1.long.html.
7. Schwartz, The Two Faces of Islam, p. 69.
8. Ibid., p. 118.
9. Ibid., p. 73.
10. Daniel Benjamin and Steve Simon, The Age of Sacred Terror, p. 54.
11. Schwartz, The Two Faces of Islam, p. 106.
12. "Saudi Arabia: Religious Police Role in School Fire Criticized," Human Rights News, March 15, 2002, http://www.hrw.org/press/2002/03/saudischool.htm.
13. Said Arburish, The Rise, Corruption and Coming Fall of the House of Saud, p. 14.
14. Ibid., p. 24.
15. Ibid., p. 27; and "Saudi Executioner Tells All," BBC radio broadcast, June 6, 2003.
16. Arburish, The Rise, Corruption and Coming Fall of the House of Saud, p. 68.
17. Ibid., p. 55.
18. Robert Baer, "The Fall of the House of Saud," Atlantic Monthly, May 2003, p. 56.
19. Tina Marie O'Neill, "Sands Shift Under House of Saud," Sunday Business Post, August 11, 2002.
20. Seymour Hersh, "King's Ransom," New Yorker, October 22, 2001, p. 35.
21. Ibid.
22. "Jihad, About Islam and Muslims," www.unn.ac.uk/societies/islamic/jargon/jihad1.htm.
23. Jihad, About Islam and Muslims; Ibid.
24. F. Gregory Gause, "Be Careful What You Wish For," www.house.gov/international_relations/107/gaus0522.pdf .
25. Evan Thomas and Christopher Dickey, with Eleanor Clift, Roy Gutman, Debra Rosenberg, and Tamara Lipper, "War on Terror: The Saudi Game," Newsweek, November 19, 2001, p. 32.
26. Interview with Prince Bandar, "Looking for Answers," PBS Frontline, www.pbs.org/wgbh/pages/frontline/shows/ ... andar.html.
27. Elaine Sciolino, "Ally's Future," New York Times, November 4, 2001, sec. 1 B, p. 4.
28. Bandar bin Sultan, New York Times, July 10, 1994, p. 20.
29. Al-Rasheed, A History of Saudi Arabia, p. 124.
30. "U.S. Oil Consumption and Imports, 1973-2000," Office of Transportation Technologies, www.ott.doe.gov/facts/archives/fotw191.shtml .
31. Schwartz, The Two Faces of Islam, p.115.
32. Anonymous, Through Our Enemies' Eyes, p. 81.
33. Michael Field, The Merchants, p. 105.
34. Anonymous, Through Our Enemies' Eyes, p. 82.
35. Ibid.
36. Jason Burke, "The Making of the World's Most Wanted Man," Observer (London), October 28, 2001.
37. Interview with Dee Howard.
38. Peter Bergen, Holy War, Inc., p. 45.
39. Anonymous, Through Our Enemies' Eyes, p. 84.
40. Ibid., p, 83; and Edward Girardet, "A Brush with Laden on the Jihad Front Line," Christian Science Monitor, August 31, 1998, p. 19.
41. Malise Ruthven, A Fury for God, pp. 197-98.
42. Ibid.
43. Anonymous, Through Our Enemies' Eyes, p. 84.
44. Lawrence Wright, "The Man Behind Bin Laden," New Yorker, September 16, 2002, www.lawrencewright.com.
45. Robert Siegel, "Sayyid Qutb's America," All Things Considered, National Public Radio, May 6, 2003, www.npr.org/display_pages/features/feature1253796.html.
46. Anonymous, Through Our Enemies' Eyes, p. 85; and Gregory Palast, "FBI and US Spy Agents Say Bush Spiked Bin Laden Probes," Guardian (London), November 7, 2001.
47. Paul Berman, "Al Qaeda's Philosopher," New York Times Magazine, March 23, 2003, p. 27.
48. Wright, "The Man Behind Bin Laden."
49. Ismail Royer, e-mail correspondence.
50. Anonymous, Through Our Enemies' Eyes, p. 85.
51. Ibid., p. 85.
52. "Hunting bin Laden," PBS Frontline, www.pbs.org/wgbh/pages/frontline/shows/ ... amily.html.
53. Neil MacKay, "Family Ties: The Bin Ladens," Sunday Herald (Scotland), October 7, 2001, www.sundayherald.com/19047.
54. "Hunting bin Laden," PBS Frontline.
55. Robert Baer, Sleeping with the Devil, p. 166.
56. Kim Willenson, with Nicholas Proffitt and Lloyd Norman, "Persian Gulf: This Gun for Hire," Newsweek, February 24, 1975, p. 30; and William Hartung, "Bombings Bring U.S. 'Executive Mercenaries' into the Light," Orlando Sentinel, May 19, 2003.
57. MacKay, "Family Ties," p. 14.
58. Anonymous, Through Our Enemies' Eyes, p. 87.

[admin]

CHAPTER SIX: Another Frankenstein

While the United States was aiding Iraq throughout the eighties, the CIA's campaign in Afghanistan was also well under way, becoming the biggest and most successful covert operation in the Agency's history. The entire program cost virtually no American casualties and a mere $3 billion for American taxpayers. Yet it dealt a devastating blow to the Soviet Union and was deemed a major factor in winning the Cold War for the United States.

The seeds of the campaign had been planted even before the Reagan-Bush administration took office, through a bold but clandestine strategy designed by the Carter administration. Better known for his innocence and naivete than for audacious foreign policy ploys, president Carter nevertheless had a few tricks up his sleeve. On July 3, 1979, on the advice of his brilliant and hawkish national security adviser, Zbigniew Brzezinski, Carter signed the first directive to secretly aid Afghan rebels known as the mujahideen who were fighting the pro-Soviet regime in Kabul. Soon, the CIA began to provide weapons and money to the mujahideen through Islamic fundamentalist warriors. This was a war by proxy. The aid was intended to bait the Soviets into committing more troops and weapons to defending their newly embattled allies. If everything went according to plan, ultimately the Soviets would become ensnared in a brutal, expensive, futile, and endless war that would lead to the disintegration of their entire empire.

On December 26, less than five months later, the USSR took the bait, and Soviet troops marched into Afghanistan to confront their emboldened foes. To Brzezinski, the architect of the plan, the Soviet invasion offered the United States an unrivaled geopolitical opportunity. As soon as the Soviets crossed the border, he wrote President Carter, "We now have the opportunity of giving to the USSR its Vietnam War." [1]

The policy was a delicious new rendering of the so-called Great Game, made famous in Rudyard Kipling's novel Kim, in which the British used indigenous Islamic forces to keep the Russians out of Afghanistan. But now the Americans were updating it for the Cold War. On the grand global chessboard, Brzezinski's strategy was a gambit worthy of Kasparov, and when the Reagan-Bush administration took office, they eagerly embraced it. Soon, aid to the Afghan rebels was a centerpiece of what the administration called the Reagan Doctrine. The intention of the policy was to make Soviet support for third world governments too costly to be sustainable.

A student of the American Revolutionary War, CIA director William Casey said the key to the American victory in 1776 was that they used "irregular partisan guerrilla warfare." [2] That was the methodology of the Afghan mujahideen, and Casey liked it that way. Early on, he was buoyed by reports that covert aid to the mujahideen was paying off. According to a declassified CIA intelligence assessment in late 1982, the Agency believed that the rugged terrain of Afghanistan and the resourcefulness of the mujahideen would prevent the Soviets from winning. The report concluded that even an extra fifty thousand Soviet troops would be unlikely to break the logjam. [3]

By this time, Prince Bandar had become King Fahd's trusted point man in Washington. When William Casey approached Bandar about Saudi Arabia's funding an escalation of anti-Soviet forces, the two men flew to Jeddah with Bandar serving as Casey's translator for the meeting with Fahd. [4] Casey met a receptive audience. This campaign was uniquely appealing to the Saudis. Not only would it enable them to cement their ties to the United States, it would also help the royal family deal with domestic unrest. And so, the House of Saud eagerly joined in, matching "America dollar for dollar supporting the mujahideen," as Prince Turki, longtime head of Saudi intelligence, puts it. [5]

In the U.S. Congress, the Afghan rebels were championed by Democratic congressman Charlie Wilson, the colorful six-foot- seven inch, skirt-chasing, cocaine-snorting Texan whose role in America's biggest covert operation was celebrated in George Crile's book Charlie Wilson's War. At dinner parties in Houston and in Washington, Wilson would bring together the likes of Henry Kissinger, White House chief of staff James Baker, and Prince Bandar along with a glittering assortment of senators, astronauts, diplomats, Texas oil barons, and military men in celebration of the mujahideen.

"Allah will not be pleased if the king abandons his freedom fighters," Wilson teased Bandar. [6] To which Bandar replied, "Allah will soon be smiling, Charlie. You will see." For his part, Wilson played an important role in seeing to it that Congress provided the $3 billion in covert aid for the mujahideen. [7]

The Saudis were a key part of the equation. Thousands of young warriors calling themselves Afghan Arabs streamed out of Saudi Arabia, Jordan, Yemen, and all over the Middle East to aid the mujahideen. Neither the United States nor the Saudis seemed to mind that the crusading young Muslims could not have cared less about helping America win the Cold War. They were motivated by religious fervor and passion. This was a people's war, a noble crusade against an infidel superpower that had invaded Muslim lands, a fight to avenge the martyrdom of their Afghan brothers being crushed by Moscow. It was a time to demonstrate faith and courage. For many Muslims, the liberation of Afghanistan became a very personal jihad.

In sharp contrast to the Mecca Affair, the Afghanistan War was a mission that could be embraced by the gamut of Saudi society, from the wealthy merchant families and the House of Saud to the militant clerics and the fundamentalist masses. For the royal family, the war was not just part of the cornerstone of the burgeoning Saudi alliance with the United States, but served other purposes as well. Contributing to the war effort placated the militant clerics and helped accommodate the growing unrest and the more radical elements of society. In the wake of the Iranian revolution, there was a new determination on the part of Saudi Muslims to outdo their Iranian counterparts, to create a "new Islamic man." [8]

Instead of focusing their anger at the House of Saud or the United States, the militants could now zero in on the atheistic Soviets. A missionary zeal spread through every layer of society. "There was a sense that every penny you sent in made a difference," says Armond Habiby, an American lawyer who has practiced in Saudi Arabia for many years. "It was a very noble movement. The poor gave away prayer rugs, embroidered tablecloths. It established a monumental footprint that went across all levels of society." [9]

As the war got under way, with the United States, the Saudis, and the Pakistanis secretly supporting the Afghan rebels, the Pakistani Inter-Services Intelligence (ISI) hoped that Prince Turki bin Faisal, then head of Saudi intelligence and a member of the House of Saud, would bring an actual member of the royal family to the front to demonstrate the commitment of the House of Saud to the jihad. [10] But no Saudi prince wanted to or needed to brave the Afghan mountains. Osama bin Laden, a protege of Prince Turki's, was the next best thing.

At twenty-two, Osama bin Laden could easily have become a wealthy Saudi businessman, like his father, Mohammed, or his older brother Salem. Thanks to his family's vast fortune and close ties to the royal family, he was perfectly positioned to join the Saudi elite. Instead, incensed by the Soviet invasion, he went straight to Afghanistan. [11] "I was enraged and I went there at once," he said. [12] He arrived before the end of 1979, just a few days after Soviet troops had crossed the border.

For bin Laden, the war was not only a historic turning point during which he would emerge as a leader, it was also a momentous time in Muslim history. He and his fellow Afghan Arabs were stirred by the plight of Muslims from a medieval society besieged by a twentieth-century superpower. [13] "One day in Afghanistan," Osama said, "counted for more than a thousand days praying in a mosque." [14]

Bin Laden's action carried extraordinary weight in large part because of his family's unique place in Saudi society. [i] Their ties to the royal family were so crucial that both sides made certain the relationships transcended generations. Many of the twenty-five bin Laden boys attended school with the sons of King Abdul Aziz and his successor, Faisal, at Victoria College in Alexandria, where they had classmates such as King Hussein of Jordan, the Khashoggi brothers (of whom Adnan [ii] was the preeminent Saudi arms dealer of the Iran-contra era), and Kamal Adham, the billionaire who ran Saudi intelligence before Prince Turki. [15] The boys earned reputations as discreet chaperones for the young royals.

In 1968, when Mohammed bin Laden was killed in a plane crash, King Faisal said his "right arm" had been broken [16] and rushed to the support of the bin Ladens, who, at the time, did not have anyone old enough to take the helm of the family business. Faisal appointed the highly regarded head of his own construction company to make sure the Saudi Binladin Group was in good hands until Salem, Osama's older half brother, was old enough to take over. [17] Later, when King Fahd took the throne in 1982, Salem became one of his two best friends. [18]

***

Closely tied as they were to both the royal family and the United States, at this point the bin Ladens had only indirect connections to the Bush family and its allies. James Bath, the American business representative of Salem bin Laden, knew both George W. Bush and George H. W. Bush. Khalid bin Mahfouz, who was close to both the bin Ladens and the royal family, had helped finance the Houston skyscraper for the Texas Commerce Bank, in which James Baker had a significant stake. He also had ties to Bath.

But these Bush-bin Laden "relationships" were indirect -- two degrees of separation, perhaps -- and at times have been overstated. Critics have asserted that money may have gone from Khalid bin Mahfouz and Salem bin Laden through James Bath into Arbusto Energy, the oil company started by George W. Bush, but no hard evidence has ever been found to back up that charge. [iii]

More to the point, now, in the Afghanistan War, Vice President Bush's interests and Osama bin Laden's converged. In using bin Laden's Arab Afghans as proxy warriors against the Soviets, Bush advocated a policy that was fully in line with American interests at that time. But he did not consider the long-term implications of supporting a network of Islamic fundamentalist rebels.

Specifically, as vice president in the mid-eighties, Bush supported aiding the mujahideen in Afghanistan through the Maktab al-Khidamat (MAK) or Services Offices, which sent money and fighters to the Afghan resistance in Peshawar. "Bush was in charge of the covert operations that supported the MAK," says John Loftus, a Justice Department official in the eighties. "They were essentially hiring a terrorist to fight terrorism." [19]

Cofounded by Osama bin Laden and Abdullah Azzam, the MAK was the precursor to bin Laden's global terrorist network, Al Qaeda. It sent money and fighters to the Afghan resistance in Peshawar, Pakistan, and set up recruitment centers in over fifty countries including Egypt, Saudi Arabia, Pakistan, and even the United States to bring thousands of warriors to Afghanistan to fight the Soviet Union. [20]The MAK was later linked to the 1993 bombing of the World Trade Center in New York through an office in Brooklyn known as the Al-Kifah Refugee Center. It is not clear how much contact he had with bin Laden, but Sheikh Omar Abdel Rahman, the "Blind Sheikh," who masterminded the 1993 bombing of the World Trade Center, also appeared in Peshawar on occasion. [21]

Throughout the eighties in Saudi Arabia, Prince Turki oversaw bin Laden's efforts aiding the mujahideen. Prince Bandar also met bin Laden, but many years later said he was not impressed. "At that time, I thought he couldn't lead eight ducks across the street," he said. [22]

And yet Osama now played a vital role for the House of Saud. Not merely a trophy to show how committed the royal family was to this noble cause, he helped the House of Saud celebrate the American commitment to the mujahideen's efforts. "Bin Laden used to come to us when America ... [was] helping our brother mujahideen in Afghanistan to get rid of the communist, secularist Soviet Union forces," recalled Prince Bandar. " ... Osama bin Laden came and said, 'Thank you. Thank you for bringing the Americans to help us to get rid of the secularist, atheist Soviets.'" [23]

Between 1980 and 1982, bin Laden went back and forth repeatedly between Saudi Arabia and the front, bringing donations from the Saudis. In Jeddah, his family enthusiastically endorsed his commitment to the cause. [24] Working closely with Turki [25] and with Prince Salman, the governor of Riyadh, [26] bin Laden played a key role in financing, recruiting, and training Arabian volunteers.

Finally, in 1982, Osama settled in Peshawar, the command headquarters of the jihad near the Khyber Pass, known as the Dodge City of the Afghan rebels, bringing with him engineers and heavy construction equipment from the Saudi Binladin Company to build roads and depots for the mujahideen. "In those years, there was no Al Qaeda," says Prince Turki. "Bin Laden gave money, equipment, and construction material from his family's company." [27]

Abdullah Azzam, the professor-cleric-mujahid who had taught at the university in Jeddah when Osama was there, had by this time become a spiritual leader of the mujahideen. "Azzam was the man who developed the idea of jihad in a complete way," said Mukahil ul Islam Zia, a professor at the Islamic Center at Peshawar University. "Azzam enshrines the need for armed struggle as part of daily life. ["28] Azzam helped many Arabs just off the plane take part in the jihad by starting the Jihad Training University. With Azzam as his mentor, bin Laden began recruiting warriors for the jihad. "Osama would have been nothing without Azzam," said one expert on the Taliban. "Before he came to Peshawar, Osama was a kind of playboy, a dilettante, not serious, not what we see today."

Some Western publications have characterized bin Laden as merely having used his family fortune to bankroll the mujahideen. Given his wealth, it was tempting for critics to dismiss him as a "Gucci terrorist." But according to a Pakistani who fought with him, he "was a hero to us because he was always on the front line, always moved ahead of everyone else. He not only gave of his money, he gave of himself." [29]

***

All of which served U.S. interests at the time in a way the CIA had only dreamed of. In 1985, a CIA assessment estimated that there had already been ninety-two thousand combined Soviet and Afghan casualties -- more than twice that of the rebels -- and that the Soviets were "no closer than they were in 1979 to achieving their goals." The report concluded that the Soviets were "unlikely" to quell the rebels' insurgency. [30]

To CIA chief William Casey, the success was inspiring. A longtime Cold Warrior who believed not in containment of the communists but what in the late forties and early fifties had been called rollback, Casey saw that he could push all the way across the Soviet border by escalating the war. Casey had told John N. McMahon, the CIA's deputy director of operations, how he felt about Afghanistan. "This is the kind of thing we should be doing -- only more. I want to see one place on this globe, one spot where we can checkmate them and roll them back. We've got to make the communists feel the heat. Otherwise, we'll never get them to the negotiating table." [31]

And so, the United States escalated. By 1987, well into the second term of the Reagan-Bush administration, the United States began to provide the rebels with nearly $700 million in military assistance a year. In addition, the CIA began supplying the mujahideen with intelligence, training, and equipment that allowed them to make scattered strikes against factories, military installations, and storage depots that were actually inside the Soviet Union. They gave the Islamic rebels satellite reconnaissance data, intercepted Soviet intelligence, and provided sniper rifles, timing devices for tons of C-4 explosives for urban sabotage, antitank missiles, and other sophisticated equipment. [32]

Most coveted of all were the Stinger missiles, portable, shoulder-fired antiaircraft guided missiles with infrared seekers for downing low-flying helicopters and planes, [33] missiles so sophisticated that, as one CIA officer put it, "a nearsighted, illiterate Afghan could bring down a few million dollars' worth of Soviet aircraft." [34] With a hit rate of 89 percent, the Stingers downed an average of one plane every day. Soon, the Afghan air force was depleted, and for the Soviets, the cost of the war soared. [35]

Meanwhile, bin Laden built a major arms storage depot, training facility, and medical center for the mujahideen at Khost in eastern Afghanistan. Peshawar became the center of a burgeoning pan Islamic movement. More than twenty-five thousand Islamic militants, from the Palestinians' Hamas, from Egypt's Al Gama'a al-Islamiya and Al Jihad, from Algeria's Islamic Salvation Front, from the Philippines' Moro Liberation Front, from countries all over the world, made the pilgrimage through Peshawar to the jihad. [36]

"You can sit at the Khyber Pass and see every color, every creed, every nationality, pass," a Western diplomat said. "These groups, in their wildest imagination, never would have met if there had been no jihad. For a Moro [iv] to get a Stinger missile! To make contacts with Islamists from North Africa! The United States created a Moscow Central in Peshawar for these groups, and the consequences for all of us are astronomical." [37]

A new network of charities grew into a formidable infrastructure to support the growing pan-Islamic movement. Money flowed into the Services Offices in Peshawar. A new leadership emerged that included Sheikh Azzam and his best friend, the rotund, blind Sheikh Omar from Egypt. CIA forces in Peshawar saw him as a valuable asset, letting pass his militant anti Western sentiments because he was such a powerful force in uniting the mujahideen. [38]

Bin Laden became a leader himself. His identity was truly forged in this period. "If you really want to understand Osama, you have to understand Afghanistan in the 1980s," said his younger brother Abdullah bin Laden, who last saw Osama at the funeral of their brother Salem in 1988. "His views do not come from his childhood or upbringing, but from prolonged exposure to war against a non Islamic force.

"Look to that period of history for your answers. In the West, people do not understand the incensing brutality of the Soviet war in Afghanistan. It had a severe effect on him. It seemed to change him completely. I believe it fomented his radical feelings and it scarred him. At least, this is how I try to understand my brother and come to terms with what he has done." [39]

Arab journalists who covered him then spoke of him in dark, romantic terms. "He is a man that seeks the afterlife and who truly feels that he has lived more than enough," said Abd-al-Bari Atwan, editor of Al-Quds al-Arabi. "You feel there is a sadness in him -- which he did not express -- that he was not martyred when he was fighting the Soviet army. ... You feel like he's saying: Why am I alive?" [40]

Years later, bin Laden rhapsodized about those days as a great romantic spiritual adventure. "Those were the prettiest days of our lives," he said. "What I lived in two years there, I could not have lived in a hundred years elsewhere." [41]

Bin Laden was not the only one who could savor the bittersweet qualities of the war against the Soviets. In May 1984, Vice President George H. W. Bush visited the region and peeked across the border into Afghanistan from the Khyber Pass in Pakistan. Armed with a $14-million check for humanitarian relief, Bush told the refugees, "Across the border, a brutal war is being waged against the people of Afghanistan. I know your resistance will continue until the Soviets realize they cannot be able to subjugate Afghanistan." [42]

We do not know exactly where bin Laden was at that moment, but during this period he was nearby in Afghanistan and had begun working with Azzam to build up the Services Offices. [43] Chances are, this is the closest that Osama bin Laden and George H. W. Bush ever got physically. They were in the same region at roughly the same time. And most important, they were fighting for the same cause.

***

By February 1987, a CIA assessment reported that the war was crippling the Soviet Union. "General Secretary Gorbachev has referred to the war as a 'bleeding wound,'" the report read. It had led to censure of the Soviets within the UN, impinged on Soviet relations with China and nonaligned third world nations, caused domestic social unrest, and diverted energies from pressing economic problems. [44] What the report did not say, but the Soviets felt, was that tens of thousands of Soviet youths were dying on killing fields in a foreign land, fighting for a cause they didn't believe in, detested by the local populace they allegedly fought for, bleeding the crippled economy of their own country dry.

For the Americans, the Afghanistan policy was so successful that as the 1988 presidential election neared, Bush saw it as proof of his bona fides as a Cold Warrior during his campaign against Massachusetts governor Michael Dukakis. On October 18, 1988, Bush stopped at Westminster College in Fulton, Missouri, the site of Winston Churchill's 1946 historic speech warning that an "Iron Curtain" of communism was descending across the European continent. Bush seized the propitious occasion to comment on what Reagan had famously labeled "the evil empire."

It was Bush's most dramatic speech of the campaign, perhaps of his entire life, and it commemorated what was unquestionably the greatest accomplishment of the Reagan Bush era, the end of the Cold War. "The Iron Curtain still stretches from Stettin to Trieste," Bush said. "But it's a rusting curtain. Shafts of light from the Western side, from our side, the free and prosperous side, are piercing the gloom of failure and despair on the other side.

"The truth is being sought as never before," he added. "And the peoples of Eastern Europe, the peoples of the Soviet Union itself, are demanding more freedom, demanding their place in the sun."

Seventy years after the Russian Revolution, Bush said, Marxism is finally "losing its luster." At last, in the age of Mikhail Gorbachev's glasnost (openness) and perestroika (transformation), the Cold War was thawing and there was a sense of a new flexibility. One key reason for such historic changes, Bush said, was that "the price of aggression was too high, because we supported the mujahideen in Afghanistan." [45]

***

By the time George Bush moved into the White House in early 1989, having easily beaten Dukakis, the Soviet troops were already withdrawing from Afghanistan. At CIA headquarters, William Webster -- who had succeeded Bill Casey as director -- and his euphoric "Afghan Team" toasted the success of the multibillion-dollar covert operation to support the Muslim Afghan rebels. The Cold War was over. The Afghan campaign had been the coup de grace. [46]

As the Soviets withdrew, however, the many unintended consequences of the war became increasingly apparent. The arms pipeline set up by the CIA had unwittingly become a drug pipeline as well. As first reported by the Herald, an English-language magazine in Pakistan, the main conduit through which weapons reached the Afghan rebels was now one of the principal routes for the transport of heroin to Karachi for shipment to Europe and the United States.

"It is really very simple," the Herald reported in January 1987. "If you control the poppy fields, Karachi, and the road which links the two, you will be so rich that you will control Pakistan." The article added that the drugs came down by truck from Peshawar with "sacks [containing] packets of heroin. ... This has been going on now for about three and a half years." [47] [v]

An even bigger issue, however, was that the United States was still pouring billions of dollars in funding and sophisticated weaponry to build a vast pan-Islamist army. "During the war, if there was any thought of postwar complications from this stuff, it wasn't much expressed," says Frank Anderson, chief of the CIA's Afghan Task Force from 1987 to 1989. "Everyone was busy getting the Soviets kicked out of Afghanistan. The Muslim world was excited by this stuff, and at the time we knew nothing of these activities being related to terrorism." [48] "We set up the very system [of Islamist terrorism] we are now trying to dismantle," says a senior investigator who participated in the Senate probe into BCCI. "People forget that we invented this shit, that Bill Casey was getting the Saudi fundamentalists to assemble all these kooks and go out and kill the Russians. No one asked what would happen when it was over." [49]

Throughout the eighties most of the American media, with a few rare exceptions, such as Edward Girardet of the Christian Science Monitor, simply ignored the war in Afghanistan. And yet, as Steve Galster, project director of the National Security Archive's Afghanistan archives, has observed, "This was the longest war in Soviet history, the largest CIA paramilitary operation since Vietnam, and with one million dead Afghans, the bloodiest regional conflict in the world at the time." [50]

Even America's most heralded investigative reporters missed the story. In Veil, his 1987 account of the CIA's secret wars of that era, Bob Woodward devotes several pages to the Afghanistan operation, but he does not mention the mujahideen, Wahhabism, BCCI, or in any way suggest that billions of American dollars were going to arm and finance a global network of militant Islamic fundamentalists.

On rare occasions, starting as early as 1983, these concerns did make their way up the policy ladder in Washington. That year, the CIA suspected the mujahideen had gotten so many weapons that they were selling the extras to third parties, so they sent CIA deputy director of operations John McMahon out to investigate. When he got to Peshawar, McMahon brought together eight different mujahideen from eight different tribes who ran the supply operation and confronted them.

"Finally, I brought up our main concern," said McMahon. "We'd given them enough land mines to mine the whole goddamn country. So I just laid it out. I said, 'We have a feeling that all the weapons we're giving you aren't showing up on the battlefield. What's going on? Are you cashing them in?'"

A tribal chief named Khalis gave McMahon an unexpectedly candid response: "Yes, we are. We do sell some of your weapons. We are doing it for the day when your country decides to abandon us, just as you abandoned Vietnam and everyone else you deal with." [51]

For all that, Washington actually responded by sending more and more sophisticated weapons. By 1986, the Reagan administration was supplying hundreds of the sought-after Stinger missiles to the mujahideen. The two premises behind the decision were, one, that the transactions would remain secret and, two, that the Islamic rebels would not use them for terrorist activities. Soon enough, however, Reagan's decision was widely reported in the news, and one Republican aide on Capitol Hill pointed out the risks of arming the mujahideen.

"Some of these guys are a lot closer politically, religiously, and philosophically to [Iran's Ayatollah Ruholla] Khomeini than they are to us," the aide said. "There is concern that one of these guys could show up in Rome aiming a Stinger at a jumbo jet." [52]

Nor was that the only sign that the groundwork was being laid for a national security catastrophe. "In Saudi Arabia I was repeatedly ordered by high-level State Department officials to issue visas to unqualified applicants," Michael Springman, the head of the American visa bureau in Jeddah from 1987 to 1989, told the BBC. "People who had no ties either to Saudi Arabia or to their own country. I complained there. I complained here in Washington to Main State, to the inspector general, and to Diplomatic Security, and I was ignored.

"What I was doing was giving visas to terrorists -- recruited by the CIA and Osama bin Laden to come back to the United States for training to be used in the war in Afghanistan against the then Soviets." [53]

This was blowback. "Afghanistan provided a place where these guys could hang out in a subculture for people who wanted to be warriors," says the CIA's Frank Anderson. "It built up the craft of giving money to people like this that undoubtedly continued past when it should have." [54]

By the late eighties, the CIA finally approached the Saudis about whether the Muslims' enthusiasm for the battle was getting out of control. "The Saudis said, 'We can't modulate this,'" recalls Anderson. "They said, 'We can either turn [the flow of money] on-or off."'

By February 1989, the last Soviet soldier had left Afghanistan, but the pro-Soviet government continued to hold power in Kabul. On February 12, President Bush approved continuing U.S. military aid to the rebels resisting the Soviet-imposed government in Afghanistan. [55] With the prospect that the puppet government would soon fall, the United States was exuberant. At last, America had learned how to achieve its foreign policy goals without incurring massive casualties or costs. It was an extraordinary bipartisan achievement. Even a decade later one of the principal architects of the policy, Zbigniew Brzezinski, evinced few regrets. "What is most important to the history of the world?" he asked the French weekly the Nouvel Observateur. "The Taliban or the collapse of the Soviet empire? Some stirred-up Moslems or the liberation of Central Europe and the end of the Cold War?" [56]

Brzezinski and the Reagan-Bush administration were right about the extraordinary value of supporting the mujahideen. But they had resolved the past by endangering the future. They vastly underestimated the price America would pay in the long run. Thanks to the United States, Osama bin Laden had learned an important lesson: mujahideen warriors fighting for Islam could bring a superpower to its knees.

Not long after he took office in 1989, President Bush was warned about exactly this possibility by someone in a position to know. Displeased that the president continued to support extremist radical Muslims, Pakistani prime minister Benazir Bhutto let him know about the dangers. Arming the mujahideen might initially have been the right thing, she told Bush. But, she explained, "The extremists so emboldened by the United States during the eighties are now exporting their terrorism to other parts of the world to the extent that they use heroin trafficking to pay for their exploits."

It had gone too far, she said. By aligning the United States with the most extremist mujahideen groups, she told him, "You are creating a veritable Frankenstein." [57]

***

By this time, Bhutto's "Frankenstein" had set up a vast infrastructure capable of financing a global operation for years to follow. It was becoming known as Al Qaeda -- the Base. Osama bin Laden was now seen as a heroic figure in the Afghanistan War. Money poured into his operations from the mosques, the House of Saud itself, Saudi intelligence, the Saudi Red Crescent, the World Muslim League, various princes, and the kingdom's merchant elite. [58]

Perhaps the greatest insight into the origins of Al Qaeda came after a March 19, 2003, raid by Bosnian authorities on the Sarajevo offices of the Benevolence International Foundation, a multimillion-dollar Islamic charity, yielded a computer with a file marked "Tareekh Osama," Arabic for "Osama's History." [59] The contents included the key founding documents of Al Qaeda -- including photographs and scanned letters, some in Osama bin Laden's own handwriting. One 1988 document tells how Al Qaeda evolved from the Afghan resistance and how "we took very huge gains from the country's people in Saudi Arabia ... gathering donations in very large amounts." [60]

One document asserted, "The only solution is the continuation of the armed jihad." [61] Notes discussed training with Kalashnikov rifles and showed how the group began to take the battle that had begun in Afghanistan on to Chechnya, Bosnia, Sudan, and Eritrea. An extraordinary network of global terrorism was taking shape.

Probably the most noteworthy item discovered had a verse from the Koran "And spend for God's cause" -- followed by a list of twenty wealthy Saudi donors known as the Golden Chain. After each name, the translator had written a second name in parentheses, which, according to U.S. News and World Report, suggested who was the recipient of money from that particular donor. [62] One of the names, Usama -- Osama bin Laden -- appeared seven times.

The donors of the Golden Chain were not just wealthy Saudis -- they were the creme de la creme of the great Saudi industrial and merchant elite. Among them, they owned sixteen of the hundred biggest Saudi companies, [63] which had more than $85 billion in assets in 2003. [64] There were three billionaire bankers, a former government minister, and leading Saudi merchants and industrialists, including, not surprisingly, the bin Laden brothers who ran the Saudi Binladin Group. Banking moguls Khalid bin Mahfouz and Saleh Kamel were on the list, as were the Al-Rajhi banking family. [65] Bin Mahfouz, who contributed $250,000, was one of the seven donors on the list who had Osama bin Laden's name next to his. [66]

By this time, bin Mahfouz had taken over the National Commercial Bank from his father and effectively become the banker for the House of Saud, and the most powerful banker in Saudi Arabia. As a result, over the next decade, his name was on many, many wire transfers to Muslim charities that sent funds to Al Qaeda. "He was the banker for the royal family," says Robert Baer, a former CIA case officer in the Middle East, and the author of Sleeping with the Devil. "If someone in the royal family ordered money to be transferred, he would have no choice. That's the way the relationship works." [67]

In addition, by then bin Mahfouz had also become the biggest investor in BCCI. [68] Not only did BCCI finance arms deals in both the Afghanistan War and the Iran-Iraq War, it also continued to pursue U.S. political contacts, just as it had lured Bert Lance and Clark Clifford a decade earlier. In 1987, one company in particular that interested BCCI investors was a troubled Texas oil company called Harken Energy. Loaded with debt, having drilled dry hole after dry hole, beset by accounting irregularities, barely subsisting during a period in which the price of oil was plummeting, Harken seemed like a particularly unlikely investment for the Saudis -- especially in light of Saudi Arabia's vast oil riches. Nevertheless, Harken had one asset that BCCI truly knew how to appreciate: one of its investors and directors was a forty-one-year-old businessman named George W. Bush.

_______________

[i] Mohammed bin Laden was so close to the royal family that in the sixties, he played a vital role in persuading King Saud to abdicate in favor of his brother Faisal.
[ii] Adnan Khashoggi was also the uncle of Dodi Fayed, who died in a Paris automobile crash with Princess Diana in 1997.
[iii] Bath had fronted for Saudi billionaires Salem bin Laden and Khalid bin Mahfouz on other deals, but in this case he says, "One hundred percent of those funds were mine. It was a purely personal investment." Bin Laden and bin Mahfouz, he insists, had nothing to do with either the elder George Bush or his son. "They never met Bush," Bath says. "Ever. And there was no reason to. At that point Bush was a young guy just out of Yale, a struggling young entrepreneur trying to get a drilling fund."
[iv] The reference is to the Islamic separatist movement in the Philippines.
[v] At the time he visited the war-ravaged region in May 1984, Vice President Bush was also serving as the head of the National Narcotics Border Interdiction System, a national network designed to stop the flow of drugs into the United States. A vigorous critic of drug use, Bush later vowed to tell drug dealers, "Your day is over. You're history."
The CIA later insisted it had no knowledge of the heroin running. But according to the Financial Times, the CIA not only had knowledge, it actually started a special cell that "promoted the cultivation of opium and the extraction of heroin in Pakistani territory as well as in the Afghan territory under Mujahadeen control for being smuggled into the Soviet-controlled areas in order to make the Soviet troops heroin addicts."

NOTES:

1. Zbigniew Brzezinski, "For the Record: American Tragedy," New African, November 1, 2001, p. 6. Originally published by Le Nouvel Observateur in January 1998.
2. Bob Woodward, Veil, pp. 136-37.
3. Gordon Negus, "Afghan Resistance," November 5, 1982, National Security Archives, http://www.gwu.edu/~nsarchiv/NSAEBB/NSAEBB57/us3.pdf.
4. George Crile, Charlie Wilson's War, p. 238.
5. Interview with Prince Turki.
6. Crile, Charlie Wilson's War, pp. 239-40.
7. Steve Galster, "Afghanistan: The Making of US Policy, 1973-1990," October 9, 2001, National Security Archives, http://www.gwu.edu/~nsarchiv/NSAEBB/NSAEBB57/essay.html .
8. Edward Girardet: "Arab Extremists Exploit Afghan Jihad," Christian Science Monitor, February 23, 1989, p. 1.
9. Interview with Armond Habiby.
10. Ahmed Rashid, Taliban, p. 131.
11. Roland Jacquard, In the Name of Osama bin Laden, p. 21.
12. "Usama bin Laden: Islamic Extremist Financier," CIA memo, National Security Archives, http://www.gwu.edu/~nsarchiv/NSAEBB/NSAEBB55/ciaubl.pdf .
13. Yossef Bodansky, Bin Laden, p. 10.
14. Jacquard, In the Name of Osama bin Laden, p. 11.
15. "Hunting bin Laden," PBS Frontline, http://www.pbs.org/wgbh/pages/frontline ... amily.html .
16. Anonymous, Through Our Enemies' Eyes, p. 80.
17. Michael Field, The Merchants, p. 106.
18. Anonymous, Through Our Enemies' Eyes, p. 80.
19. Interview with John Loftus.
20. Federation of American Scientists, 216.239.39.100/search?q=cache:sXXKfWXrGUJ:www.library.cornell.edu/colldev/mideast/qaida.htm+MAK+and+Afghanistan&hl=en&ie=UTF-8.
21. Daniel Benjamin and Steven Simon, The Age of Sacred Terror, p.103.
22. Interview with Prince Bandar, "Looking for Answers," PBS Frontline, http://www.pbs.org/wgbh/pages/frontline/shows terrorism/interviews/bandar.html .
23. Ibid.
24. Rashid, Taliban, p. 132.
25. Jane Mayer, "The House of Bin Laden," New Yorker, November 12, 2001, http://www.newyorker.com/fact/content/?011112fa_FACT3.
26. Mary Anne Weaver, "Blowback," Atlantic Monthly, May 1996, http://www.theatlantic.com/issues/96may/blowback.htm .
27. Interview with Prince Turki.
28. Robert Marquand, with Jane Lampman, Scott Peterson, Ilene R. Prusher, and Warren Richey, as well as Sarah Gauch and Dan Murphy, "The Tenets of Terror, Part II," Christian Science Monitor, October 18, 2001.
29. Anonymous, Through Our Enemies' Eyes, p. 90.
30. "The Soviet Invasion of Afghanistan: Five Years After," a CIA Intelligence assessment produced jointly by the Office of Near Eastern and South Asian Analysis and the Office of Soviet Analysis, released as sanitized, 1999 CIA Historical review program, National Security Archives, http://www.gwu.edu/~nsarchiv/NSAEBB/NSAEBB57/us5.pdf .
31. Joseph Persico, Casey, p. 225.
32. Steve Coll, "Anatomy of a Victory: CIA's Covert Afghan War," Washington Post, July 19, 1992.
33. Federation of American Scientists, Military Analysis Network, "FIM-92A Stinger Weapons System: RMP & Basic," http://www.fas.org/man/dod-101/sys/land/stinger.htm .
34. Persico, Casey, p. 312.
35. Marin Strmecki, "Among the Afghans," Washington Quarterly, vol. 11, no. 3 (summer 1988), p. 227.
36. Weaver, "Blowback."
37. Ibid.
38. Ibid.
39. Charlotte Edwardes, "My Brother Osama," Sunday Telegraph (London), December 16, 2001.
40. Anonymous, Through Our Enemies' Eyes, p. 91.
41. Ibid.
42. William Claiborne, "Bush at the Khyber Pass," Washington Post, May 18,
1984, p. A23.
43. Anonymous, Through Our Enemies' Eyes, p. 99.
44. "The Costs of Soviet Involvement in Afghanistan," Directorate of Intelligence, prepared by the Office of Soviet Analysis, February 1987, National Security Archives, http://www.gwu.edu/~nsarchiv/NSAEBB/NSAEBB57/us8.pdf .
45. Gerald Boyd, "Bush Asserts 'Iron Curtain' Remains, but It's Rusting," New York Times, October 19, 1988, p. B6.
46. Galster, "Afghanistan: The Making of US Policy."
47. Lawrence Lifschultz, "Bush, Drugs, and Pakistan: Inside the Kingdom of Heroin," Nation, November 14, 1988, p. 477; and B. Raman, "Heroin, Taliban and Pakistan," Financial Times Asia Africa Intelligence Wire, August 10, 2001.
48. Interview with Frank Anderson.
49. Interview with former Senate investigator.
50. Galster, "Afghanistan: The Making of U.S. Policy."
51. Persico, Casey, p. 313.
52. Patrick Tyler, "Possible Diversion of Stinger Missile to Terrorists Causes Concern," Washington Post, April 8, 1986, p. A12.
53. Michael Springman, interview on British Broadcasting Corporation as reported in the Sydney Morning Herald, November 7, 2001, http://www.smh.com.au/news/0111/07/world/world100.html .
54. Interview with Frank Anderson.
55. "Bush OKs Military Aid for Rebels," Associated Press, February 12, 1989.
56. "Zbigniew Brzezinski: How Jimmy Carter and I Started the Mujahideen," interview with Zbigniew Brzezinski, Nouvel Observateur Jan. 15-21, 1998, p. 76; translated from the French by Bill Blum.
57. Meet the Press, NBC News Transcripts, October 14, 2001.
58. Weaver, "Blowback"; and Rashid, Taliban, p. 132.
59. David E. Kaplan, with Aamir Latif, Ilana Ozernoy, Laurie Lande, and Monica M. Ekman, "Playing Offense," U.S. News and World Report, June 2, 2003, p. 18.
60. Tony Barthelme, "King of Torts," Post and Courier (Charleston, S.C.), June 22, 2003.
61. Tony Barthleme, "Seized Bosnian Documents Link Saudis to Terror Funding, Lawyers Say," Post and Courier (Charleston, S.C.), March 19, 2003, p. 17.
62. Kaplan et al., "Playing Offense," p. 18.
63. Golden Chain List Analysis, http://www.investi.virtualave.net/Golde ... alyses.htm .
64. Barthleme, "Seized Bosnian Documents Link Saudis to Terror Funding, Lawyers Say," p. 17.
65. Glen Simpson, "List of Early al Qaeda Donors Points to Saudi Elite, Charities," Wall Street Journal, March 18, 2003.
66. Glenn Simpson, Wall Street Journal, online corrections and amplifications, updated March 18, 2003, 10:48 p.m., http://www.online.wsj.com/article/O,,SB ... 00.html#CX .
67. Interview with Robert Baer.
68. Interview with Cherif Sedky, attorney for Khalid bin Mahfouz.

[admin]

PART 1 OF 2

CHAPTER SEVEN: Friends in High Places

Breezily likable, seemingly uncomplicated, George W. Bush once said that the difference between him and his father was that his dad "attended Greenwich Country Day and I went to San Jacinto High School in Midland." [1] He was right.

Dubya, as he was known in Texas, shared much of his father's legacy -- Andover, Yale, Skull and Bones, Texas, and the oil business. But, culturally speaking, he was more of a real Texan than his dad -- much more. The elder George Bush was very much at home in the East Coast sanctums of Old Money. By contrast, Dubya was profoundly uncomfortable when he was surrounded by the "intellectual arrogance" he encountered at Yale and Harvard Business School at the height of the counterculture in the sixties and early seventies.

For George H. W. Bush, it was always a stretch to make nice with the Republican Party's powerful Christian right, which, in turn, viewed him as suspect, an interloper who sometimes said the right things but didn't really believe them. By contrast, Dubya was a genuine born-again Christian who had "accepted" Jesus Christ as his personal savior in 1985 and read the Bible and prayed daily. The elder Bush loved the family's summer retreat on Walker's Point in Kennebunkport, Maine, and all that it suggested -- golfing, lobster, the rugged Maine shore, and a rich family heritage that was deeply embedded in the Eastern Establishment. By contrast, Dubya's home away from home was not Maine, the Hamptons, or Nantucket, but Crawford, Texas, in the hardscrabble dry plains near Waco. Located right in the middle of Texas's Baptist-dominated Bible Belt, its history was bereft of Yankee railroad barons and the like and was instead studded with Ku Klux Klan marches and incidents such as the FBI assault on David Koresh's Branch Davidians, who became martyrs of the right-wing militia movement. [2] Not exactly a likely oasis of choice for a scion of the East Coast elite.

Finally, Dubya had one political advantage over his father. The elder Bush so embodied the image of a spoiled and privileged son of the Eastern aristocracy that in 1988 when Ann Richards, who was soon to become governor of Texas, delivered her famous sound bite about the elder Bush at the Democratic National Convention, the words resonated throughout the United States and made Richards a national figure. "Poor George," she had drawled, "he can't help it. He was born with a silver foot in his mouth."

By contrast, Dubya cast a figure that could be powerfully evocative of the cowboys who once strode Texas's wide-open spaces. At a time when most Texans lived in air-conditioned suburbs, but still longed for its rich and powerful mythic imagery of wide-open spaces and the Old West, he understood and appealed to rural Texas archetypes that were an amalgam of male-bonding rituals forged on the ranch, in the oil fields, and in the locker room. These were ideals that celebrated the virtues of toughness, self-reliance, and neighborliness, all generously larded with Marlboro Country-type cowboy imagery. At their best, these values were democratic in the true sense of the word, recognizing no social barriers separating the ranch hand from the millionaire. This was in large part a source of Dubya's appeal that enabled him to win support that crossed class barriers.

But the reality was wildly at odds with the imagery. Dubya was still very much a child of privilege himself. He accepted his high station in life so unquestioningly that detractors often said he had been born on third base and thought he had hit a triple. After graduating from Yale, Bush returned to Houston to join the Texas Air National Guard in 1968. [3] In addition to aircraft broker James Bath, Bush's unit consisted of several members of the River Oaks and Houston country clubs, and Lloyd Bentsen III, a son of the Texas senator. According to the Washington Post, Bush's political connections helped him get into the unit, a highly sought-after refuge for young men seeking to avoid service in Vietnam. Dubya gained admission to the guard only after Ben Barnes, the powerful Speaker of the House in Texas, intervened to get him a pilot's slot. [4]

Even after he got into the guard, Bush's stint was marked by controversy. In 1972, orders had required Bush to report to a lieutenant colonel with a Dickensian name, William Turnipseed, in Montgomery, Alabama. But, according to Turnipseed, Bush "never showed up." [5]

In the end, Bush's National Guard record was something less than distinguished and it created issues that would haunt his electoral future. In 1972, Bush was suspended from flying for "failure to accomplish annual medical examination." [6] As it happened, that was the year drug testing became part of military medical exams, and political opponents later accused Bush of avoiding the exam so as to escape detection of cocaine use. [7] [i]

***

During his sojourn at Harvard Business School, Bush made it clear exactly where his heart was. Classmate Marty Kahn's first memory of Bush was "sitting in class and hearing the unmistakable sound of someone spitting tobacco. I turned around and there was George sitting in the back of the room in his [National Guard] bomber jacket spitting in a cup. You have to remember this was Harvard Business School. You just didn't see that kind of thing." [8] Coming as it did during the height of the Vietnam War, in hippie-infested Cambridge, Massachusetts, the East Coast epicenter of the tie-dyed, Birkenstocked, long-haired antiwar movement, chewing tobacco was a defiant fashion statement that loudly proclaimed George W. Bush would have absolutely nothing to do with the counterculture.

If Dubya received favored status in the National Guard as a result of his powerful father, it was nothing compared to the help he got in his business career. In 1977, Bush had decided to follow in his father's footsteps and moved to Midland, Texas, where his father had started out, to launch his first oil company, Arbusto Energy.

Arbusto, which means "bush" in Spanish, was founded as a one-man outfit that Bush hoped would grow into a company that could drill for oil all over the country. Thanks to help from his uncle Jonathan Bush, a Wall Street financier, and his grandmother Dorothy Bush, Dubya, then thirty-one, put together a $4.7-million partnership consisting largely of relatives and powerful family friends to launch Arbusto. There was venture capitalist William Draper [ii] and Celanese Corporation CEO John Macomber, each of whom would serve as chairman of the Export-Import Bank during the Reagan-Bush era; Prudential Bache CEO George Ball; multimillionaire New York Republican Lewis Lehrman; and George H. W. Bush fundraiser Russell Reynolds among others. [9] Also among the investors was Dubya's National Guard friend James Bath, who put up $50,000 for 5 percent of the stock.

According to the Washington Post, Bush immediately put Arbusto on his resume to use as a credential in his unsuccessful 1978 congressional race -- even though it didn't start operations until March 1979, several months after he lost the election. [10] When it did get going, Arbusto struggled financially, forcing Bush to seek new investors to save the day. In January 1982, just a year after his father had become vice president, Dubya managed to find such an angel, New York investor Philip Uzielli, a Princeton classmate [11] and longtime friend of James Baker's. What was particularly astonishing about Uzielli's participation in Arbusto was the exorbitant price he paid -- $1 million in exchange for 10 percent of Bush's tiny company. According to Time, the entire company was then worth only $382,000. [12] In other words, Uzielli had paid twenty-six times market value for his share of the company's equity.

Bush rationalized the high price by saying, "There was a lot of romance and a lot of upside in the oil business." But at the time, the international oil market was collapsing, with the price per barrel plummeting from $38 in 1981 to $11 in 1986. [13] The situation was so bad that Vice President Bush flew to Saudi Arabia to persuade King Fahd that the oil glut had made oil too cheap and was decimating West Texas oil companies. [14] Arbusto continued to drill one dry hole after another. Its name became such a subject of mockery -- with detractors derisively emphasizing the second syllable -- that Bush changed it to Bush Exploration.

In 1984, in need of more financing, Bush merged Arbusto into another oil company, Spectrum 7. But even that wasn't enough. In the rapidly deflating boomtowns of Houston and Dallas, this was the era of real estate busts, see-through skyscrapers, and so-called glass prairies -- gleaming, new skyscrapers built during that boom that were almost entirely empty because of the recession. Banks were folding. Oil giants faced huge layoffs. The prospect for small independent oil companies in West Texas was even worse. [15]

Bush's problem was not just that Spectrum had drilled too many dry wells. As the price of oil fell, even the value of its productive wells plummeted. Investors were nowhere to be seen. In 1985, Spectrum lost $1.6 million. Altogether, it owed more than $3 million, [16] and Bush had little hope of paying it off. "We lost a lot of money," said Philip Uzielli, who had become a director of Spectrum 7. " ...Things were terrible. It was dreadful." [17]

By this time, Bush's father, then vice president, was the odds-on favorite to be the next president of the United States. But Dubya, who was about to turn forty, had accomplished almost nothing. One by one, his oil companies in their various incarnations -- Arbusto, Bush Exploration, and Spectrum 7 -- slid toward the brink, even after getting generous help from his father's and James Baker's powerful friends. The normally optimistic Bush was despondent. "I'm all name and no money," he said. [18]

But, in 1986, another savior came to Bush's rescue. A Dallas-based energy firm owned partially by Harvard University and international investor George Soros, Harken Energy, then known as Harken Oil and Gas, gave Bush a spectacular deal and bought his failing company for $2.25 million in stock. Bush got roughly $600,000 out of the deal, [19] a seat on the board, and a consultancy paying between $50,000 and $120,000 a year. [20] Now he didn't even have to work full-time and could help his father pursue the White House, where he was rapidly becoming a trusted adviser to the president.

As for why his benefactors were so generous, Harken founder Phil Kendrick was to the point: "His name was George Bush. That was worth the money they paid him." [21]

"You'd have to be an idiot not to say [that's] impressive," added Alan Quasha, a Harken shareholder. [22]

Meanwhile, Harken had problems. Loaded with debt and a history of drilling dry wells, Harken had almost nothing going for it. In 1989, it lost more than $12 million. The next year, it lost $40 million. Even these losses vastly understated the gravity of Harken's crisis. New York Times columnist Paul Krugman has since charged that Harken created a front company that seemed independent but was really under Harken's control solely to concoct phony transactions and to buy some of the firm's assets at high prices -- all to falsely inflate revenues. [25] "Mr. Bush profited personally from aggressive accounting identical to recent scams that have shocked the nation," Krugman wrote, referring to the Enron and Arthur Andersen scandals.

Phil Kendrick, who had sold most of his stock but was still a small shareholder, best characterized Harken's incomprehensible business practices: "Their annual reports and press releases get me totally befuddled," he said. "There's been so much promotion, manipulation, and inside deal-making. It's been a fast-numbers game." [26]

And yet, with the Bush name now on its marquee, suddenly all sorts of marvelous things started to happen to Harken -- new investments, unexpected sources of financing, serendipitous drilling rights in faraway countries. All thanks to people who now found Harken irresistible -- many of them close to BCCI, the Saudi-dominated bank that had political connections all over the world and whose biggest shareholder was Khalid bin Mahfouz. It was a kind of phantom courtship.

Even if Harken had not had its liabilities, for Saudi billionaires, whose wealth came from the biggest oil reserves in the world, investing in Harken was at best truly a case of selling coals to Newcastle, ice to the Eskimos. "Think about it," explains Bush's friend and business partner James Bath. "It doesn't make sense. What we would consider a big oil drill here [in Texas] would be laughable to them."

"You had this terribly complicated dance," recalls a former senior Senate investigator into BCCI. "It was not just that the Saudis used BCCI to buy power. There were people in the United States who saw the opportunity to make scads of money. They weren't exactly raping the system. It was more like consensual sex."

Neither George W. Bush nor Harken, it should be said, had any direct contact of any kind with bin Mahfouz or BCCI. Bin Mahfouz professed no knowledge of any intention to create a special relationship with Bush or Harken [23] and, according to his attorney, "does not recall that the matter of BCCI's relationship with Harken" was brought up at BCCI board meetings or "in any other fashion." [24] Likewise, Harken officials, including George W. Bush, said they were unaware of their new investors' links to BCCI. On paper, there was no relationship whatsoever between the two institutions or their principals.

But like so much of what went on with BCCI, this elaborate dance often took place through convoluted financial transactions and third parties. It was not essential for the key players in this aspect of the Saudi-Bush drama even to know each other to have productive relationships. In fact, for many of the participants, the less they knew the better.

***

In particular, in later years George W. Bush would very much not want to know bin Mahfouz. According to his associates, bin Mahfouz was a moderately devout Muslim who eschewed excess -- at least by the standards of Saudi billionaires. [27] That meant that in addition to his Texas properties, he had, or would acquire, a large estate in Buckinghamshire, England, and homes in Jeddah, Cairo, New York, Paris, London, and Cannes. [28] Bin Mahfouz's greatest extravagance was his preferred mode of transportation. He flew his own Boeing 767, a Boeing 737, and in later years, a Bombardier Global Express, one of the hottest ultra-long-range, high-speed business jets on the market. [29] An observer who boarded one of his 767s in 2003 said that $40 million had been spent on the interior to outfit it with gold-plated bathroom fixtures, magnificent wood paneling, a drop-down movie screen with surround sound, and a bedroom with emergency medical equipment. [30]

In decades past, the Saudis had put constraints on the international ambitions of the bin Mahfouz family and National Commercial Bank, in part because Islamic tradition had outlawed the charging of interest. But with petrodollars flooding into the country and the globalization of the financial markets, such antiquated practices no longer made practical business sense. In addition, such strictures might interfere with the kind of political ties the Saudis could create through BCCI, as they had with Bert Lance and Clark Clifford when Jimmy Carter was in the White House. [31]

In 1987, when Vice President George H. W. Bush was positioning himself to succeed Reagan, several people close to BCCI began to approach Harken Energy. One of them was Arkansas investment banker Jackson Stephens, a principal in Little Rock's Stephens, Inc., one of the biggest investment banks outside of Wall Street. Stephens was so politically wired that he had access to the White House from the Carter administration through the Reagan-Bush era and into the Clinton administration. A classmate of Jimmy Carter's at the U.S. Naval Academy, Stephens was also an associate of Bert Lance, the first casualty of the BCCI scandal. But Stephens's political affiliations were not merely Democratic. Though he had been a contributor to Jimmy Carter, Stephens also gave $100,000 to George H. W. Bush's presidential campaign in 1988 and his company put in another $100,000. In addition, his wife, Mary Anne, was Arkansas cochairman of the Bush for President Campaign that year.

In the late seventies, Stephens had suggested to BCCI that it try to take over Washington, D.C.'s biggest bank, First American Bankshares, and he subsequently became a defendant in a suit aimed at preventing the takeover. He was the man who had introduced Bert Lance to BCCI founder Agha Hasan Abedi. His proximity to the corrupt bank notwithstanding, Stephens was seen as an innocent bystander or a victim in the BCCI scandal.

And so, not long after he joined forces with Harken, George W. Bush found himself in Little Rock with Jackson Stephens, who began to put a rescue plan in motion by raising $25 million from the Union Bank of Switzerland to invest in Harken in exchange for equity. What happened next was best reported in a 1991 article by Thomas Petzinger, Peter Truell, and Jill Abramson in the Wall Street Journal that detailed the links between BCCI and Harken after George W. Bush became a board member of the struggling oil company.

From the start, the deal Stephens put in play had two anomalies: For one thing, the Union Bank of Switzerland didn't ordinarily put money in small U.S. firms. For another, UBS was linked to BCCI through a joint-venture partnership in a Geneva-based bank. [32]

Before the deal could be finalized, however, the financing from UBS ran into unrelated difficulties and fell apart. As a result, still another financier was needed to rescue Harken. [33] This time, Stephens introduced Harken to a new investor, Abdullah Taha Bakhsh, a real estate magnate from Jeddah, whose subsequent injection of capital resulted in his ownership of 17.6 percent of Harken's stock.

A well-known Saudi investor, Bakhsh had been a founding member of the board of Investcorp, the enormous global investment group. [34] Bakhsh had had business dealings with the most prominent people in Saudi Arabia, including members of the Saudi royal family. [35] He also had at least two ties to BCCI. According to the Journal, he had been chairman of the Saudi Finance Co., a holding company partly controlled by BCCI shareholders. In addition, he was well acquainted with bin Mahfouz. [36]

All parties concerned -- bin Mahfouz, Bakhsh, and Harken -- have denied that Bakhsh's role in Harken had anything to do with BCCI or his relationship to bin Mahfouz. [37] "Mr. Bakhsh was not in any way representing Khalid bin Mahfouz's interests in any investment by Mr. Bakhsh in Harken Energy," says Cherif Sedky. [38]

Certainly, the Saudis could allow companies like BCCI to engage indirectly in major transactions while giving the principals plausible deniability about what was really going on. "In general, there are two sorts of investment mechanisms that wealthy Saudi businessmen do in the U.S.," says Saudi oil analyst Nawaf Obaid, "those in which they act on their own behalf, and those done on behalf of a group or consortium." [39]

Or, as the 1992 Senate investigation into BCCI put it, BCCI's principal mechanisms for doing business included "shell corporations, bank confidentiality and secrecy havens, layering of corporate structure, front men and nominees, back-to-back financial documentation among BCCI-controlled entities, kickbacks and bribes, intimidation of witnesses, and retention of well-placed insiders to discourage governmental action." [40]

In their group investments, the Saudis at times made the identities of their investors intentionally opaque. When Salem bin Laden and Khalid bin Mahfouz had first come to Houston in the seventies, they had taken on James Bath as their representative to do business deals in which they were not always visible as investors. Even if Bakhsh wasn't representing bin Mahfouz or BCCI, a knowledgeable Saudi source speculates that the Harken investment may have been part of the same strategy the Saudis had of investing in U.S. companies that were connected to powerful politicians.

Moreover, this serendipitous infusion of capital was not the only windfall for Harken that was tied to BCCI. In January 1990, by which time the elder George Bush had become president, Harken came into another stroke of unexpected good luck. The beleaguered oil company had had no offshore drilling experience whatsoever and had never even drilled outside the borders of the United States. Nevertheless, tiny Harken stunned industry analysts by beating out giant Amoco to win exclusive offshore drilling rights in Bahrain -- thanks to yet another BCCI stockholder, the prime minister of Bahrain, Sheikh Khalifa bin Salman al Khalifa.

By all accounts, George W. Bush was against the Bahrain deal and argued that Harken was too inexperienced to undertake such a costly and sophisticated venture on the other side of the globe. [41] "I thought it was a bad idea," he said, adding that he "had no idea that BCCI figured into Harken's financial dealings." [42]

But because he was the son of the president of the United States, people were lining up to do business with him. In the end, the Harken board found the prospects irresistible. Bush went along with it when the final vote came. Striking oil was never a sure thing, but if Harken got lucky, the payoff could be enormous. "This is an incredible deal, unbelievable for this small company," Houston energy analyst Charles Strain told Forbes. [43]

No one in the oil industry doubted that the Bahrain deal happened solely because Bush's father was president. Moreover, George W. Bush was one of its greatest beneficiaries and profited handsomely from it. Harken was hemorrhaging money at the time and the prospects of the Bahrain deal kept the stock price reasonably high. And since George W. had a far more grandiose business deal on his mind, the timing could not have been more fortuitous. On May 17, 1990, Bush attended a special meeting of the Harken board of directors that was called during a crisis. According to internal documents from Harken obtained by the Boston Globe, the board was told that Harken was expected to run out of money in just three days. [44]

At the time, one of Harken's biggest investors, the endowment fund of Harvard University, had engineered a plan to stave off bankruptcy by spinning off two of Harken's most troubled divisions. [45] [iii] According to a Harken memo, if the plan did not go through, the company had "no other source of immediate financing." [46]

Five days later, on May 22, Harken issued an announcement about the plan to spin off its divisions, but it expressly stated that terms of the offering were still being formulated. Meanwhile, Bush had taken out a $500,000 loan to buy into the Texas Rangers baseball team -- an investment that would later bring him $15 million and was thinking of selling his Harken stock to pay off the loan. In early June, he asked Harken's general counsel for advice. [47] In response, Bush was given a nine-page memo dated June 15, 1990, and titled "Liability for Insider Trading and Short-Term Swing Profits."

It explicitly cautioned Bush about trading so soon after the meeting the previous month: "The act of trading, particularly if close in time to the receipt of the inside information, is strong evidence that the insider's investment decision was based on the inside information. ... The insider should be advised not to sell." [48]

On June 22, just a week after the memo was written, Bush ignored the warnings given to him in it and sold 212,140 shares of stock for $848,560. It was just in time: about two months later, Harken announced soaring losses for the second quarter of $23 million. Before the year was out, the stock had plummeted from $4 to $1.25.

Not long afterward, the Securities and Exchange Commission began to consider whether to bring insider-trading charges against Bush. According to a July 1991 SEC memo, Bush declined to turn over many documents to the SEC, claiming they were private correspondence between him and his lawyer. "Bush has produced a small amount of additional documents, which provide little insight as to what Harken nonpublic information he knew and when he knew it," the memo said. [49]

On August 21, 1991, however, the SEC ruled that it would not charge Bush with insider trading. Not until the next day did Bush's attorney finally turn over the memo warning Bush against insider trading. [50] California securities lawyer Michael Aguirre told the Boston Globe that he was surprised the SEC did not probe more deeply into the case. "It appears that Mr. Bush had insider information," he said, "that he was told that such insider information could be considered material, [and] was given express warnings about what the consequences could be."

However, it is not difficult to make a case that the SEC may have been lenient because it had close ties to the Bushes. At the time, Bush's father was president of the United States. The chairman of the SEC was Richard Breeden, a former lawyer from James Baker's firm, Baker Botts, and a good friend of the Bush family's who had been nominated to the SEC by President George H. W. Bush. [51] In addition, the SEC's general counsel at the time of the investigation was James Doty, another Baker Botts attorney, who had represented George W. Bush earlier when he negotiated to buy an interest in the Texas Rangers. [52] (Doty recused himself from the investigation.) Bush himself was represented in the SEC case by Robert Jordan, who had been law partners with both Doty and Breeden at Baker Botts and who later became George W. Bush's ambassador to Saudi Arabia. [53] Insider-trading allegations aside, Harken was also under fire because of its ties to BCCI. Criticism went all the way to the Bush White House, which repeatedly denied that anything underhanded was going on. "There is no conflict of interest, or even the appearance of conflict, in these business arrangements," said presidential press secretary Marlin Fitzwater. [54]

The younger Bush was not the only figure close to the president who appeared to benefit from BCCI. In August 1991, President George H. W Bush's political director, Ed Rogers, was leaving the White House. Rogers, who had only briefly practiced law, accepted a $600,000 contract to be a lawyer for BCCl's American representative, Sheikh Kamal Adham. [55] Likewise, the deputy manager of the 1992 Bush reelection campaign, James A. Lake, won a lucrative contract as an adviser with another BCCI -- associated company. [56] One by one, BCCI hired government officials, federal prosecutors, and Federal Reserve attorneys. [iv]

The elder George Bush deftly deflected charges about BCCI. "I would suggest that the matter is best dealt with by asking [Ed Rogers] what kind of representation he is doing for this sheikh," he told a press conference. "But it has nothing to do, in my view, with the White House."

Yet there is evidence that Saudi favors to Bush interests had begun to payoff. In August 1990, Talat Othman, a Chicago investor of Arab descent who represented the interests of Abdullah Taha Bakhsh on the board of Harken Energy, was granted unusual access to the president and attended White House meetings with him to discuss Middle East policy -- at a time of crisis during which the Gulf War was brewing. [v] The White House, George W. Bush, and Harken all denied that Othman's presence was related to Bakhsh's investment.

In addition, according to the 1992 Senate BCCI investigation, the Bush Justice Department went to great lengths to block prosecution of BCCI. The Senate probe determined that federal officials repeatedly obstructed congressional and local investigations into BCCI, and for three years thwarted attempts by Manhattan district attorney Robert Morgenthau to obtain critical information about the bank.

The Senate investigation concluded that in 1990 and 1991 the Bush Justice Department, with Assistant Attorney General Robert Mueller [vi] leading the way, consistently put forth the public impression that it was aggressively moving against BCCI. But, in fact, the Senate probe said the Justice Department was actually impeding "the investigations of others through a variety of mechanisms, ranging from not making witnesses available, to not returning telephone calls, to claiming that every aspect of the case was under investigation in a period when little, if anything, was being done." [57]

Specifically, among other charges, the Senate report alleged that a federal prosecutor lied to Morgenthau's office about important material; that federal prosecutors failed to investigate serious allegations that BCCI laundered drug money; and that Justice Department personnel in Washington, Miami, and Tampa actively obstructed and impeded congressional attempts to investigate BCCI in 1990, and this practice continued to some extent until William P. Barr became attorney general in late October 1991.

There were many possible explanations for the Justice Department's failures -- bureaucratic rivalries and ineptitude among them. But BCCI had also shown it could undermine the judicial process in many countries. In the media, the Washington Post, Time, and many others speculated that that was exactly what was happening in the Bush Justice Department.

Given the international scope of BCCI's crimes, however, even the White House could not keep investigators away from BCCI forever. On July 5, 1991, in Great Britain, the Bank of England finally shut the bank down, letting it collapse under $12 billion of debt, and opening the way for charges in the United States and Europe against bin Mahfouz and his associates.

On July 1, 1992, Morgenthau indicted bin Mahfouz for allegedly having fraudulently obtained $300 million from BCCI depositors. BCCI's Ponzi schemes and unorthodox accounting procedures had created an insolvent bank that had defrauded depositors of between $5 billion and $15 billion. It was the biggest fraud in banking history. In England, the Observer described it as "the Gulf sheikhs' version of Robin Hood: robbing the poor to help the rich." [58]

A spokesman for bin Mahfouz says the indictment was "completely unwarranted." [59] Nevertheless, bin Mahfouz immediately resigned his position as chief operating officer of the National Commercial Bank in Saudi Arabia. To settle the charges against him, in 1993 he paid $225 million in restitution and penalties. As part of the settlement agreement, bin Mahfouz was forbidden to engage in banking in the United States in perpetuity. He also later paid an additional $253 million to settle claims with BCCI creditors. "It was a very painful experience," bin Mahfouz said, "... I'm glad it's nearly over. You are an example of your family. You have to be strong in front of your customers and in social life, but inside you are personally shattered."

As for BCCI's links to the Bush family, when political opponents suggested something was amiss, as Ann Richards's campaign did in the 1994 Texas gubernatorial race, it often blew up in their faces. "George W. Bush did not take proper precautions in choosing his business partners," says Jason Stanford, a former aide to Ann Richards, who lost the gubernatorial race to Bush. "Your average small-town preacher had better sense. These BCCI guys had some pretty bad criminal problems at the time, so there was a hint of trying to buy favors. Maybe they were hoping for a pardon -- who knows?" [60]

However, when the Richards campaign attacked Bush on the issue, they were assailed as conspiracy nuts. "Ann Richards has dragged her campaign into the gutter," said Bush spokeswoman Karen Hughes. "We have no response to silly conspiracy theories." [61]

[admin]

PART 2 OF 2 (CH. 7 CONT'D.)

The strongest critique of the Bush family's relationship with BCCI came from the 1991 Wall Street Journal. "An investigation by this paper has not revealed evidence of wrongdoing or influence-peddling by George W. Bush or anyone else connected with Harken," the Journal reported. "Yet what does emerge is a complex pattern of personal and financial relationships behind Harken's sudden good fortune.

"The mosaic of BCCI connections surrounding Harken Energy may prove nothing more than how ubiquitous the rogue bank's ties were. But the number of BCCI-connected people who had dealings with Harken -- all since George W. Bush came on board -- likewise raises the question of whether they mask an effort to cozy up to a presidential son." [62]

With regard to this tantalizing but murky relationship between the Bushes and the Saudis, the Journal could not possibly have known two things. One was that bin Mahfouz, the biggest stockholder in the most corrupt financial institution in history, would later be seen by U.S. counterterrorism analysts as the owner of one of the key conduits for the growing global terror network. And the other was that George W. Bush would become far more than just another presidential son.

_______________

[i] According to Bill Burkett, a former lieutenant colonel in the Texas National Guard, when Bush was governor of Texas and beginning plans to run for the presidency in 2000, his aides visited National Guard headquarters "on numerous occasions" to make sure that public records about his military service squared with his official autobiography's version of his service in the guard. Bush's military records read, somewhat mysteriously, "Not rated for the period 1 May 1972 through 30 April 1973. Report for this period not available for administrative reasons." A website at http://www.awolbush.com/ offers readers many of the relevant documents.
[ii] Readers may recall that as head of the Export-Import Bank in 1984, Draper, in response to lobbying from Vice President George H. W. Bush, reversed bank policy and guaranteed loans to Saddam Hussein's Iraq.
[iii] For decades, the most influential person overseeing Harvard's endowment was Robert Stone Jr., an oilman who has been described as "the driving force behind its energy investments." The Wall Street Journal reported that it was not clear if the Bush and Stone families were friends, but they were politically aligned and both had been residents of Greenwich, Connecticut, and Houston, Texas. "Mr. Stone was a financial supporter of the senior Mr. Bush when he ran for president in 1979, as were his father, siblings, and executives at his oil and gas company," the Journal reported. "Mr. Stone and his wife, Marion, also contributed to the senior Mr. Bush's successful 1988 run."
[iv] According to the Senate investigation, other high-level Washington officials hired by BCCI and its various fronts were a former secretary of defense (Clark Clifford), former senators and congressmen (John Culver, Mike Barnes), former federal prosecutors (Larry Wechsler, Raymond Banoun, and Larry Barcella), a former State Department official (William Rogers), and former Federal Reserve attorneys (Baldwin Tuttle, Jerry Hawke, and Michael Bradfield). In addition, BCCI solicited the help of Henry Kissinger, who chose not to do business with BCCI but made a referral of BCCI to his own lawyers.
[v] In 2002, during the presidency of George W. Bush, Othman again won access to the White House and met with Secretary of the Treasury Paul O'Neill to discuss U.S. government raids on Muslim charities that were allegedly funding terror.
[vi] Mueller became the director of the FBI under President George W. Bush.

NOTES:

1. Molly Ivins and Lou Dubose, Shrub, p. xxi.
2. Michael Lind, Made in Texas, pp. 7-9.
3. Bill Minutaglio, First Son, p. 121.
4. George Lardner Jr., "Texas Speaker Reportedly Helped Bush Get into Guard," Washington Post, September 21, 1999, p. A4. In 1999, a spokesman for Bush, who was then governor of Texas, said, "Governor Bush did not need and did not ask anybody for help."
5. Chris Williams, "Did Bush Serve? Claims He Was in Alabama Guard, but There's No Record," Associated Press, June 25, 2000.
6. Francis S. Greenlief, Major General, Chief, National Guard Bureau, September 29, 1972, http://www.talion.com/suspension.html.
7. "Not rated for the period 1 May 1972 through 30 Apri1 1973. Report for this period not available for administrative reasons," http://www.talion.com/admin.html.
8. George Lardner, Jr. and Lois Romano, "George Walker Bush," Washington Post, July 30, 1999, p. Al.
9. Ivins and Dubose, Shrub, pp. 22,23.
10. Lardner and Romano, "George Walker Bush," p. A 1.
11. Ibid.
12. Eric Pooley, Time, June 14, 1999, http://www.www10.cnn.com/ALLPOLITICS/ti ... roove.html .
13. "World Oil Market and Oil Price Chronologies: 1970-2002," Energy Information Administration, Department of Energy, http://www.eia.doe.gov/emeu/cabs/chron.html .
14. "The Bush-Saudi Axis," Time, September 15, 2003, http://www.time.com/time/covers/1101030915/# .
15. Minutaglio, First Son, p. 208.
16. Lardner and Romano, "George Walker Bush," p. A 1.
17. Thomas Petzinger Jr., Peter Truell, and Jill Abramson, "Family Ties: How Oil Firm Linked to a Son of Bush Won Bahrain Drilling Pact," Wall Street Journal, December 6, 1991, p. A 1.
18. Lardner and Romano, "George Walker Bush," p. A 1.
19. Petzinger, Truell, and Abramson, "Family Ties," p. A 1.
20. Pooley, Time.
21. Ibid.
22. Petzinger, Truell, and Abramson, "Family Ties," p. A 1.
23. Interview with Cherif Sedky, attorney for Khalid bin Mahfouz.
24. E-mail correspondence with Cherif Sedky.
25. Paul Krugman, "Succeeding in Business," New York Times, July 7, 2002.
26. Richard Behar, "The Wackiest Rig in Texas," Time, October 28, 1991, p. 78.
27. Interviews with James Bath and Cherif Sedky.
28. Interview with Cherif Sedky.
29. Ibid.
30. Interview with source who boarded bin Mahfouz's planes.
31. Bin Mahfouz's attorney, Cherif Sedky, says that even though bin Mahfouz had invested nearly $1 billion in BCCI, he was little more than a passive figure in its operations. "You have to take everything in scale and context," says Sedky. "A billion is a lot of money, but it is not out of scale when I say 'passive.'" In an e-mail, Sedky added, "To the best of [Khalid bin Mahfouz's] present and unrefreshed recollection, he attended no more than three meetings of the board." "Outlaw Bank," Financial Times, July 13, 1992; and Douglas Farah, "Al Qaeda's Road Paved with Gold," Washington Post, February 17, 2002, p. A 1.

Al Qaeda's Road Paved With Gold
Secret Shipments Traced Through a Lax System In United Arab Emirates

By Douglas Farah
Washington Post Foreign Service
Sunday, February 17, 2002; Page A01

DUBAI, United Arab Emirates -- Just as the United States and its allies swept toward Afghanistan's main cities last autumn, the ruling Taliban and Osama bin Laden's al Qaeda network sent waves of couriers with bars of gold and bundles ofdollars across the porous border into Pakistan.

In small shops and businesses along the border, the money and gold, taken from Afghanistan's banks and national coffers, were collected and moved by trusted Taliban and al Qaeda operatives to the port city of Karachi, Pakistan, according to sources familiar with the events.

Then, using couriers and the virtually untraceable hawala money transfer system, they transferred millions of dollars to this desert sheikdom, where the assets were converted to gold bullion. The riches of the Taliban and al Qaeda were subsequently scattered around the world -- including some that went to the United States -- through a financial structure that has been little affected by the international efforts to seize suspected terrorist assets.

This account of the flight of the Taliban and al Qaeda treasure from Afghanistan is based on dozens of interviews in Pakistan, the United Arab Emirates, Europe and the United States. The gold trail was described by intelligence officers, law enforcement officials, gold brokers, and sources with direct knowledge of some of al Qaeda's financial movements, but not by Taliban or al Qaeda operatives.

The interviews offered a tantalizing glimpse into the critical yet mysterious role played by gold in the finances of al Qaeda, both before and after the Sept. 11 attacks. Gold has allowed the Taliban and bin Laden to largely preserve their financial resources, despite the military attack that battered their forces in Afghanistan, investigators and intelligence sources said.

Al Qaeda also used diamonds purchased in Sierra Leone and the Democratic Republic of Congo, tanzanite from Tanzania and other commodities to make money and hide assets. But gold played a uniquely important role in the group's financial structure, investigators and intelligence sources said, because it is a global currency.

"Gold is a huge factor in the moving of terrorist money because you can melt it, smelt it or deposit it on account with no questions asked," said a senior U.S. law enforcement official investigating gold transactions. "Why move it through Dubai? Because there is a willful blindness there."

Exempt from international reporting requirements for financial transactions, gold is a favored commodity in laundering money from drug trafficking, organized crime and terrorist activities, U.S. officials said. In addition, Dubai, one of seven sheikdoms that make up the United Arab Emirates, has one of the world's largest and least regulated gold markets, making it an ideal place to hide.

Dubai is also one of the region's most open banking centers and is the commercial capital of the United Arab Emirates, one of three countries that maintained diplomatic relations with the Taliban until shortly after Sept. 11. Sitting at a strategic crossroad of the Persian Gulf, South Asia and Africa, Dubai has long been a financial hub for Islamic militant groups. Much of the $500,000 used to fund the Sept. 11 attacks came through Dubai, investigators believe.

"All roads lead to Dubai when it comes to money. Everyone did business there," said Patrick Jost, who until last year was a senior financial enforcement officer in the Treasury Department's Financial Crimes Enforcement Network.

32. Petzinger, Truell, and Abramson, "Family Ties," p. A 1.
33. Ibid.
34. Larry Gurwin and Adam Zagorin, "All That Glitters," Time, November 6, 1995, p. 52.

Monday, Nov. 06, 1995

ALL THAT GLITTERS...

By LARRY GURWIN AND ADAM ZAGORIN

FOR YEARS, GUCCI HAD BEEN descending from Riviera swank to Jersey gaud. Its overlicensed double-G appeared on everything from coffee mugs to ashtrays. Fake versions of its handbags were sold on urban street corners everywhere. Then, suddenly, it found a shoe that fit: a sexy, backless clodhopper that became the must-have of devotees of high style in 1993. Gucci went on a winning streak. By March 1995 its designer, Tom Ford, was electrifying the fashion world with a revival of '60s rebellion. Soon celebrities like Madonna were in head-to-toe Gucci. At the company's London boutique this fall was a waiting list 100 chic names long for the new, $325 velvet hip-huggers. At Bergdorf Goodman in Manhattan, 256 women await a reshipment of $295 high-heel pumps. The fever has hit Wall Street. Last week Gucci was the red-hot initial public offering. At $22 a share, the once unhip, money-losing 72-year-old Florentine company was worth $1.3 billion.

No one is as happy about that turnaround as Nemir Kirdar, 59, the Iraqi-born founder and president of Investcorp, the Arab investment boutique that engineered Gucci's turnaround. Shod in black reptile-skin Gucci loafers, Kirdar sat confidently in his company's New York City office--occupying the entire 37th floor of a Park Avenue high-rise--contemplating Gucci's renaissance. After Investcorp bought the company in the late 1980s, Gucci lost so much money some feared it would go bust. "There was a time," says Kirdar, "when--in the minds of several of our clients as well as some of our own professionals--Gucci was a write-off." But during the first half of this year, Gucci posted a $24.8 million profit, five times the figure for the same period last year.

Gucci is only one of many jewels in Kirdar's crown. In 1984 Investcorp bought Tiffany & Co.--and sold it in a 1987 public offering for six times its purchase price. In 1990 Investcorp bought Saks Fifth Avenue. Since its founding in 1982, Kirdar's bank has arranged more than 50 acquisitions in the U.S. and Europe, valued at more than $7 billion. Such deals have spawned press accounts praising the bank's "gold-plated reputation" and Kirdar as "the banker to billionaires...a legend in financial circles." Says G. William Miller, a former Treasury Secretary: "Investcorp [has] shown a tremendous ability to buy, develop and sell businesses."

A close look at Investcorp's record, however, indicates its reputation may not be entirely deserved. Many Investcorp acquisitions have turned into costly disappointments. The bank stands accused of serious misconduct in two court cases that have received almost no public attention. Moreover, former executives of a prestigious jewelry firm under Investcorp control have told TIME they believe the firm has engaged in misleading accounting practices. Investcorp has a cozy relationship with officials in Bahrain, where the company is based and where the government is responsible for regulating it.

Although Investcorp calls itself a merchant bank, it is more like a leveraged buyout firm, the Arab world's answer to Kohlberg Kravis Roberts. Kirdar rounds up brand-name companies and repackages them for sale to deep-pocket clients in the Persian Gulf. At the right moment, Investcorp and its partners "cash out" by selling off acquisitions at a profit--through a private sale or a public stock offering. Investcorp certainly spends money like a billionaires' bank. An eight-story headquarters in Bahrain (Investcorp House) is complemented not only by the premises on New York's Park Avenue but also by posh offices in London's Mayfair district. White-uniformed butlers glide around serving executives catered gourmet lunches at their desks. Many clients receive annual invitations to conferences like one held in July at New York's Waldorf-Astoria. In 1992, on the occasion of its 10th anniversary, Investcorp threw a lavish party at London's Victoria and Albert Museum. Guests nibbled on caviar served from ice sculptures and strolled under garlands of peonies adorned with caged songbirds. When major deals are in the works, senior executives zoom across the Atlantic on the Concorde. "They fly the Concorde if they want a salami sandwich," jokes a former bank adviser. "I've never seen anybody throw money around like Investcorp."

Before launching Investcorp, Kirdar worked for Chase Manhattan Bank, where he was in charge of operations in the Persian Gulf. (Many of his senior executives are Chase alumni.) He was there at the height of the oil shocks of the 1970s and forged close ties with some of the richest men in the region. Abdul-Rahman Al-Ateeqi, a former Oil Minister and Finance Minister of Kuwait, has been Investcorp's chairman since the beginning. The vice chairman, Ahmed Ali Kanoo, heads a family with a net worth estimated at $1.5 billion.

In 1983, just a year after the bank was launched and when Kirdar and his colleagues were doing business from rented space in a Holiday Inn in Bahrain, he boasted that he was putting together a bank "like something J.P. Morgan envisaged." Thanks to Kirdar's connections, Investcorp was able to raise $50 million in start-up capital and four years later another $50 million. Investcorp's list of founding shareholders reads like a Who's Who of the gulf, including the names of dozens of leading businessmen and members of the region's ruling families, among them Sheik Ahmed Zaki Yamani, the former Oil Minister of Saudi Arabia, and seven members of the Saudi royal family. The vips generated tremendous interest, and when the new bank sold a large chunk of its stock to the public, prospective buyers in Bahrain queued up at dawn.

The bank has reported healthy profits year after year. (In 1994 it posted a net profit of $51 million, down from record earnings of $67.3 million in 1993.) Its stock, listed on the Bahrain Stock Exchange, has quadrupled in price since the bank's founding. But for Investcorp clients who participate in takeovers arranged by the bank, it has not always been smooth sailing. Many deals have been duds. Dellwood Foods, a troubled New York dairy acquired in 1985, languishes unsold in Investcorp's portfolio. Also unsold is Chaumet, a world-famous French jeweler, which has racked up millions of dollars in losses. Other flops include the Carvel ice-cream chain and New York Department Stores of Puerto Rico, disposed of last year at a substantial loss. A huge disappointment has been Color Tile, America's largest chain of floor-covering stores. The company lost $46.3 million last year and was close to bankruptcy until Investcorp and other investors pumped in $30 million in August. Kirdar acknowledges that many deals have not worked out as hoped, but cites the bank's willingness to work with troubled companies over the long haul, nursing them back to health.

Investcorp's biggest deal ever was the 1990 takeover of Saks Fifth Avenue. When Investcorp bought the prestigious chain, it was evidently hoping to repeat its triumph with Tiffany. Investcorp certainly promoted Saks to its clients that way. A 1990 private-placement memo to Arab clients obtained by TIME contains an extremely bullish forecast on the first page: Saks was expected to produce an investment return of 25.9% a year, and was likely to be sold within four years. One reason Investcorp failed to repeat its Tiffany coup with Saks is that the $1.6 billion purchase price was $200 million to $300 million too high, according to several sources, including a former Investcorp executive with direct knowledge of the deal. "Kirdar wanted it badly," recalls this source, "and he said, 'Let's just do a bid that'll knock everybody out.'" During the two years after the takeover, Saks reportedly lost $398 million, and Investcorp and its clients were forced to invest an additional $300 million in the company. More than five years have passed, and there has been no public offering. Investcorp says Saks has rebounded, but it declines to provide details or predict when the company will go public.

How has Investcorp managed to raise billions of dollars when its track record is so uneven? Its sales force is based in Bahrain, about an hour's flight from most of the bank's clients. Scores of Arabic-speaking marketers travel throughout the region, offering deals and updates on past transactions. It's a level of "expensive, personalized service," says Kirdar, that Investcorp's competitors can't match. Investcorp's success in the Middle East may also be due to its marketing documents, which are not overseen by Western regulatory agencies. The contrast is striking between an Investcorp private-placement memorandum and a prospectus approved by the Securities and Exchange Commission. The SEC-approved prospectus for Gucci is filled with warnings and disclaimers, including a section on "risk factors" that runs 3 1/2 pages. A Saks private-placement memorandum circulated to mostly Arab investors discusses risk factors in less than a page and the language is much less blunt.

Cultural factors also help explain Investcorp's marketing success. When the bank got started in the early 1980s, many of its Arab clients were unschooled in Western business practices. Kirdar was their bridge to the West. He spoke their language, sprang from their culture, yet was Western educated (he has an M.B.A. from New York's Fordham University) and had trained in a big U.S. bank. Kirdar understood his clients' taste in brand names. One reason Investcorp bought Gucci, says an Arab banker, is that "the Arabs wear the shoes." Many were happy to hand millions of dollars to Kirdar with few strings attached.

Now, a younger generation of wealthy Arabs tends to be more sophisticated--and less willing to let Investcorp managers stuff their portfolios with shares of uncertain value. An adviser to an Arab family with a net worth between $500 million and $1 billion told Time his clients have become disenchanted. "If you hit on one of their big deals like Tiffany, the rewards can be spectacular. But a whole string of others have been very disappointing, and all they do is send you fancy reports with Investcorp's latest solution for a turnaround and very little numerical analysis. You have no recourse."

The questions about Investcorp go beyond its dealmaking record. Two former executives of Chaumet, which the bank took over in 1987, accuse it of engaging in accounting gimmickry. The elegant French jeweler, with headquarters in Paris' Place Vendome, was acquired for $45 million in a court-supervised sale after its previous owners were charged with fraud and forced into bankruptcy. Investcorp then sold chunks of the company to clients. Later, as part of a turnaround strategy, seasoned French jewelry executive Charles Lefevre was installed as chairman, working under Investcorp's close supervision.

Despite Lefevre's efforts, Chaumet lost about $24 million in 1992. Early the next year, Investcorp held a board meeting in Paris, and Lefevre was invited to meet the directors. In view of the losses, Lefevre was bracing himself for criticism--or at least some tough questions. Instead, he recalls, "they said, 'Congratulations--for the first time you're showing a profit.'"

DURING HIS TENURE AT CHAUMET, Lefevre says, he uncovered many questionable accounting practices--an observation shared by another former executive. For example, Lefevre discovered that in 1990 Chaumet had sold about $4 million worth of jewelry to a customer in the gulf. The supposed sale, says Lefevre, was a sham. He claims that they "sent worthless merchandise" and that the bill was not paid. But the existence of the invoice made it possible to book $4 million in extra revenue for that year, enabling Chaumet nearly to break even. (Investcorp insists Chaumet never engaged in such practices.)

Lefevre also says Chaumet sold watches and jewelry at inflated prices to a shell company in Switzerland called Lausanne Investments; he says the sales allowed Chaumet to get poorly selling merchandise off its books without showing a loss. (Thousands of watches were later sold to dealers in the U.S. at a fraction of their inventory value, according to sources with direct knowledge of the transactions.) Chaumet's 1993 and 1994 financial statements, filed in a French commercial court, refer to the company's transactions with Lausanne but do not reveal who owned or controlled it.

Lefevre says he protested what he regarded as improper accounting and left the company in early
1993. The remainder of his contract was paid off in full via a wire transfer from a bank in the Cayman Islands. Curiously, Lefevre notes, the money was wired not by Chaumet or even Investcorp but by Lausanne Investments.

Investcorp denies it ever misinformed Chaumet's shareholders about the company's performance and says they knew Chaumet lost money in 1992. The bank acknowledges that clients do not receive complete financial statements (unless they ask for them) but only "investment reports" showing operating income (before interest and taxes) rather than net income. Since clients agree to receive information in this form, says Investcorp, there is no problem. That ignores a critical factor: Chaumet's sales of inventory to Lausanne at inflated prices. If it had not been for those sales, Chaumet would have reported much higher losses in 1993 and 1994.

And who owns Lausanne Investments? "Investcorp does not own Lausanne Investments," a bank spokesman declared. When TIME pursued the issue, the spokesman changed his answer. Lausanne, he said, was owned by the same investors who own Chaumet--a group led by Investcorp. This means Investcorp controlled the seller and the buyer and used that control to slash Chaumet's losses. While there is nothing odd about a jeweler's disposing of excess stock this way, Lausanne's ownership is not disclosed in Chaumet's publicly filed financial statements, which means anyone who read them would get a distorted impression of the company's performance. Investcorp insists its own clients were informed, but declines to provide documentation. "We give our clients what they need," says Kirdar. "We do not mislead them."

Moreover, if you believe the plaintiffs in two civil suits against Investcorp, the company doesn't always play straight. When Investcorp took over the Circle K convenience-store chain in 1993, it did so through a vehicle called CK Acquisitions. That shell company has now been sued by rival bidders for allegedly making false statements to a bankruptcy-court judge who had to approve the bid. The complaint alleges that CK Acquisitions failed to disclose that Circle K management would own stock in the retailer after the takeover. (That was an important point because it could help explain why management endorsed the offer.) The plaintiffs are seeking $30 million in actual damages and $200 million in punitive damages. Investcorp's law firm managed to get the action dismissed, but last spring a judge reinstated it, saying the issues were too complex and important to be decided without a trial. Investcorp partner Savio Tung denies the allegations in the complaint. Says he: "We did not do anything wrong."

Another little-noticed case involves even more serious charges. The complaint, filed in Manhattan federal court, accuses Investcorp and five of its board members, as well as other defendants, of fraud and extortion. According to the complaint, the defendants tried to loot the Saudi European Bank, an Arab-owned institution in Paris. The lawsuit was filed by the bank's former parent company, headed by Syrian-born banker Jamal Radwan. The complaint charges that several defendants concocted a scheme for Investcorp to take over Saudi European Bank. In addition, Kirdar allegedly threatened to persuade other banks to stop doing business with Radwan's. Some of the individuals named in the complaint are also accused of trying to bribe and threaten Radwan to get him to approve "uneconomic and illegal loans and business transactions for their personal benefit." A few of these individuals drained money out of the bank, the complaint alleges, "by making fraudulent statements and presenting false and misleading financial information," leading to bad loans. In 1989 Saudi European nearly collapsed, and in order to avert a financial crisis, French authorities arranged for an investment group to take it over. According to the lawsuit, fraudulent borrowing and other misconduct by the defendants had crippled the bank. Investcorp and several other defendants have filed motions to dismiss the complaint. A number of them are also plaintiffs in continuing litigation against Radwan in which they accuse him of swindling them out of several million dollars. (In fact, Radwan conceived his own lawsuit as a "counterattack.") He denies the allegations.

The Saudi European suit, according to Investcorp general counsel Lawrence Kessler, is "completely without merit, and we expect to see it dismissed." (Other defendants deny all charges). When TIME asked Kirdar to comment on the litigation, he not only rejected the charges but also said he barely knew Radwan and doubted he had ever spoken more than "15 words" to him. Both men, however, worked for Chase Manhattan in the Middle East in the '70s and, says Radwan, both attended management meetings. Radwan supplied Time with a photograph of himself with Kirdar taken in Switzerland in 1988.

Whatever the merits of the complaint, it highlights the intriguing background of a key Investcorp insider: Abdullah Taha Bakhsh, a Saudi tycoon who has served on Investcorp's board since the bank was founded and who helped persuade other rich Saudis to invest. (Like Investcorp, Bakhsh filed a motion to dismiss the Saudi European action, and his lawyer expects it to be granted.) The complaint points out that Bakhsh was a major shareholder of Paris-based Al Saudi Banque, which collapsed in 1988, and accuses him of looting that institution. One of Bakhsh's other holdings is the First Commercial Financial Group, a commodities futures firm in Chicago that has been sanctioned repeatedly by regulators. In a court ruling in 1990, a judge held that First Commercial failed to raise "a single credible defense" to a customer's allegations that the firm had defrauded him. "The case," wrote the judge, "establishes once more that there are virtually no limits to greed, or the ingenuity of men in devising schemes to cheat." First Commercial is still having run-ins with regulators. Last May the Commodity Futures Trading Commission accused it of engaging in a check-kiting scheme to mislead regulators about its financial condition. The firm is fighting the charges.

The issue of bank regulation is a vital one in the wake of scandals at Britain's Barings Bank and Japan's Daiwa Bank. The biggest debacle of recent years was the 1991 collapse of the Bank of Credit and Commerce International, which cost depositors billions of dollars. Much of the blame was placed on regulators who seemed oblivious to B.C.C.I.'s frauds. No one is suggesting that this is another B.C.C.I. case in the making. When questioned about Investcorp's practices, its officials noted that the bank is licensed in Bahrain and is well supervised. "It's a very strong regulatory agency," says Kessler.

But questions remain. Investcorp has thrived in the Bahraini environment, perhaps because some of the most powerful businessmen in the tiny island state are directors and major shareholders. When the bank was founded, it was granted an extraordinary privilege by the Bahrain government. At the time, foreigners were barred from buying stock in publicly traded companies unless they were citizens of Bahrain or of one of five neighboring countries in the Gulf Cooperation Council. The Bahrain authorities allowed Investcorp to sell 25.8% of its stock to a company owned entirely by citizens of Iraq (a non-gcc country), including Kirdar. Another clue to the bank's status in Bahrain appears in an SEC filing by Sports & Recreation Inc., a Tampa, Florida-based firm that sells sporting goods through Sports Unlimited shops. When Investcorp took the firm public in 1992, the prospectus said one of its largest shareholders was a shell company owned by Bahrain's Ministry of Finance. This would be roughly equivalent to the U.S. Treasury Department's putting money into a takeover arranged by a Wall Street buyout firm.

In the Middle East, where business deals are often driven by personal ties, Kirdar enjoys a warm relationship with Bahrain's Prime Minister, Sheik Khalifa bin Sulman al-Khalifa, a brother of the ruling Emir. Last year Sheik Khalifa met with Investcorp's board and commended the bank on its success. A press report on the meeting failed to mention that the ruling family may have a considerable personal stake in that prosperity: millions of shares were sold to members of the clan when the bank was founded. As for the Prime Minister, he may not be the best judge of banks. He used to own stock in B.C.C.I.

--With reporting by Ginia Bellafante/New York

35. Petzinger, Truell, and Abramson, "Family Ties," p. A 1.
36. E-mail correspondence with Cherif Sedky.
37. Ibid.; and Petzinger, Truell, and Abramson, "Family Ties," p. A 1.
38. E-mail to author from Cherif Sedky.
39. Interview with Nawaf Obaid.
40. The BCCI Affair: A Report to the Committee on Foreign Relations, United States Senate, by Senator John Kerry and Senator Hank Brown, December 1992, 102nd Cong., 2nd Sess., Senate Print 102-140.
41. Interview with Harken source.
42. Micah Morrison, "Who Is David Edwards?" Wall Street Journal, March 1, 1995, p.14.
43. Toni Mack, "Fuel for Fantasy," Forbes, September 3, 1990, p. 37.
44. Michael Kranish and Beth Healy, "Board Was Told of Risks Before Bush Stock Sale," Boston Globe, October 30, 2002, http://www.boston.com/dailyglobe2/303/n ... ale+.shtml .
45. Glenn Simpson, "Harvard Was Unlikely Savior of Bush Energy firm Harken," Wall Street Journal, October 9, 2002, http://www.online.wsj.com/article-email ... 96,00.html.
46. Kranish and Healy, "Board Was Told of Risks Before Bush Stock Sale."
47. Ibid.
48. White House spokesman Dan Bartlett pointed out that the memo was addressed to the Harken board and did not mention Bush by name. "This is a general memo that goes through the perfunctory guidelines of a rights offering," Bartlett said. "It was not specific to the transaction that the president was contemplating": ibid.
49. Kelly Wallace, "Senators: Release Records on Bush Stock Sale," CNN Washington Bureau, July 16, 2002, http://www.cnn.com/2002/ALLPOLITICS/07/ ... tock.sale/ .
50. Kranish and Healy, "Board Was Told of Risks Before Bush Stock Sale."
51. Mike Allen and George Lardner Jr., "Harken Papers Offer Details on Bush Knowledge," Washington Post, July 14, 2002, p. A 1.
52. Bennett Roth, "Clerical Mix-up Blamed in Bush Stock Sale Filing," Houston Chronicle, July 4, 2002, p. A 1.
53. Allen and Lardner, "Harken Papers Offer Details on Bush Knowledge," p. A 1.
54. Petzinger, Truell, and Abramson, "Family Ties," p. A 1.
55. The BCCI Affair, Senate Print 102-140.
56. Ibid.
57. Ibid.
58. Laurence Marks and Barry Hugill, "The BCCI Scandal," Observer, July 21, 1991, p.19.
59. Interview with Cherif Sedky.
60. Interview with Jason Stanford.
61. Associated Press Worldstream, November 3, 1994.
62. Petzinger, Truell, and Abramson, "Family Ties," p. A 1.

[admin]

CHAPTER EIGHT: War Drums

Given that James Baker and George H. W. Bush later compared Saddam Hussein to Adolf Hitler, why did they support the Iraqi dictator for more than seven years after they first learned of his atrocities? In his 1995 memoirs, The Politics of Diplomacy, a somewhat chagrined James Baker looks back on his years as secretary of state and attempts to explain his role in forging this munificent policy toward such a brutal monster. The strongest argument Baker makes is that initially the United States needed Saddam's Iraq to contain the emerging threat of Iran's Islamic fundamentalism. He also asserts, less persuasively, that Iraq was "a potentially helpful Arab ally" in the Middle East peace process. [1] Even less convincingly, Baker argues that giving Saddam incentives might "stem nuclear proliferation, bring economic benefits, and enhance prospects for Arab-Israeli peace." [2] Finally, Baker cites banal domestic economic and political considerations. The Department of Agriculture loan guarantees to Iraq, he says, were extremely popular with American agricultural interests. If the Bush administration had not supported these programs, Baker adds, "we would surely have been castigated" by Democratic congressmen.

By the late eighties, however, neoconservative Republican policy makers such as Richard Perle and Paul Wolfowitz had begun voicing their discontent with the Bush administration's pro-Saddam policies. A militant hawk sometimes referred to by critics as the Prince of Darkness, Perle was a fellow at the American Enterprise Institute, later chaired the Defense Policy Board, and was often a supporter of policies endorsed by the Likud, Israel's largest right-wing political party. Even during the Iran-Iraq War, Perle had been uncomfortable with supporting Saddam and felt that "the right course immediately after the end of that war would have been to say to Saddam, now we've had enough of you too, and we're not gonna tolerate it." [3]

By the spring of 1990, Saddam Hussein's love affair with the White House had survived ten years of the Reagan-Bush era, but thanks to Saddam's overreaching, Richard Perle was about to get his wish. As a rule, in the Arab world it didn't hurt to lash out at Israel. But on April 2, Saddam made the kind of slip of the tongue of which diplomatic catastrophes are borne, boasting that he had chemical weapons and would use them to "make fire eat up half of Israel." [4] James Baker's State Department immediately issued a statement saying the remarks were "inflammatory, irresponsible, and outrageous." [5]

Saddam was so stunned by the angry reaction from Washington that he promptly got on the phone to King Fahd of Saudi Arabia and demanded that Fahd send someone to Iraq immediately to act as a go-between with the United States. The best man for the job was Fahd's nephew Prince Bandar. [6]

It was the kind of task at which Bandar excelled. By now a specialist in back-channel operations, Bandar had so assiduously cultivated the powers that be in Washington that he lived in a realm far above any other mere "diplomat." Bandar was close to James Baker, National Security Adviser Brent Scowcroft, Secretary of Defense Dick Cheney, and Chairman of the Joint Chiefs of Staff Colin Powell. [7] Between 1984 and 1987, he met or talked to Defense Secretary Caspar Weinberger at least sixty-four times. [8] Colin Powell noted with distress that the Saudi billionaire functioned as if he were a cabinet officer within the Bush administration. [9] Even that was an understatement: Bandar was free from the congressional oversight that constrained cabinet officers.

But his relationship with President Bush was what truly set Bandar apart. During Reagan's first term, Bandar had lunched with Vice president Bush several times a year. In 1985, when Bush was just beginning to be derided as a wimp by the media, Bandar staged a huge party for him with entertainment by singer Roberta Flack. [10] Bandar said he regarded the president "almost like a buddy." [11]

The relationship went both ways. From the administration's point of view, Bandar was important because he was both a confidant of King Fahd's and had had close contact with Saddam Hussein. As reported by Bob Woodward in The Commanders, on April 5, just after Saddam's remarks about Israel, Bandar flew to Iraq in his own private jet. When Bandar sat down with Saddam, the Iraqi dictator insisted that he had been misinterpreted. "I want to assure President Bush and His Majesty King Fahd that I will not attack Israel," he said. [12]

Four days later, Bandar met with Bush in the Oval Office and relayed news of the conversation. Bush was stunned. If Saddam didn't mean to attack Israel, then why had he said it? Even though Bush was skeptical about trusting Saddam, he resumed his generous policies toward Iraq. The Commerce Department tried to stop the flow of U.S. technology to Iraq, but its efforts were stymied by the White House. In May 1990, the Bush administration continued to share military intelligence with Saddam. In July, the White House pushed for additional agricultural loans to Iraq and rebuffed efforts by the Defense and Commerce departments to restrict the export of dual-use technology. And at the end of July 1990, Bush opposed congressional efforts to impose sanctions on Iraq -- all in an effort to bring Iraq "into the family of nations." [13] Bush and Saddam had kissed and made up.

Or so it seemed. Meanwhile, the State Department joined Defense and Commerce in becoming increasingly concerned about Saddam. On July 19, State sent a memo to Baker advising stricter controls because Saddam was developing chemical and biological weapons and was working on nuclear weapons. "Iraq has been attempting to obtain items to support these proliferation activities from U.S. exporters, in some cases successfully," said the memo, which was initialed by Baker to acknowledge that he had read it. [14] According to the memo, a review had uncovered seventy-three export licenses for goods sent to Iraq that were "probably proliferation related," including seventeen licenses for bacteria that could be used with biological weapons and computers for chemical and weapons programs.

Finally, Baker changed course. On July 25, he asked Commerce secretary Robert Mosbacher for new controls over exports. "Iraq's extraordinarily aggressive weapons proliferation efforts make this situation urgent," wrote Baker.

That same day, the U.S. ambassador to Iraq, April Glaspie, [i] was summoned to a rare meeting with Saddam Hussein. For years, Iraq had nursed a grudge with Kuwait concerning the oil-rich border shared by the two countries. Earlier that month, Iraq had accused Kuwait of stealing Iraqi oil and engaging in an "imperialist-Zionist plan" to depress oil prices through overproduction. [15] According to Al Jumhuriya, a government-controlled newspaper in Baghdad, Kuwait had seized Iraqi territory and stolen $2.4 billion of oil from disputed oil fields along their border. [16]

On July 27, 1990, Bandar told the administration that Saddam had assured Arab leaders that he was not going to invade Kuwait. [17] But Saddam was lying. By then he had already sent thirty thousand troops to the Kuwaiti border. By July 31, the number had risen to one hundred thousand. [18] On August 1, a CIA assessment reported, "Baghdad almost certainly believes it is justified in taking military action to reclaim its 'stolen' territory and oil rights." [19] The very next day, Iraqi troops invaded Kuwait. By the middle of August, the total number of Iraqi troops in Kuwait and the nearby region was more than two hundred thousand. [20] Worse, the Iraqis were within striking distance of Saudi Arabia. According to Dick Cheney, another forty thousand Iraqi soldiers had been deployed in southern Iraq, near Saudi Arabia. [21]

This was Bush's worst nightmare. To defend the biggest oil fields in the world, he had helped build Saddam into a powerful military force as a bulwark against the Islamic fundamentalist threat. But now Saddam himself had become the threat. Iraq already had enormous oil reserves. If he won the Saudi oil fields as well, with the oil from Iraq, Kuwait, and the Saudis, Saddam would control about 40 percent of the world's known oil reserves. [22] To President Bush, also an oilman, such a prospect was horrifying. Saddam would be able to manipulate oil prices at will and would have the American economy at his mercy. The Reagan and Bush administrations had created a monster.

Now the Bush team dramatically switched course. On August 5, President Bush stepped off Marine One on the White House lawn and, referring to the Iraqi invasion, uttered the most famous words of his presidency: "This will not stand, this aggression against Kuwait."

The spontaneous remark meant one thing: war. [23] But before that could happen, the United States had to build an international coalition; it had to make sure the Saudis would allow the use of American troops on Saudi soil; and it had to build domestic support. As the United States began to deploy forces to the Middle East, James Baker brought the Soviets on board, worked the United Nations Security Council, and lined up $15 billion each in promises from the Saudis and Kuwait.

That was just the beginning. On November 3, 1990, Baker left Washington and visited twelve countries on three continents over the next three weeks. According to his memoirs, the day after Thanksgiving, "I had set a personal record with a thirty-seven-hour day that took me from Jeddah, Saudi Arabia, to Bogota, Columbia, to Los Angeles, then home to Houston. ... I met personally with all my Security Council counterparts in an intricate process of cajoling, extracting, threatening, and occasionally buying votes." A coalition was coming together. [24]

But Saudi cooperation was still an open question. Close as Bush was to them, he could not be certain what course of action they might take. In fact, Bush and Bandar had wildly different views about Kuwait. Bush's relationship with Kuwait went back thirty years. When he was head of Zapata Off-Shore, he had built Kuwait's first offshore oil well with the approval of the ruling al-Sabah family of Kuwait. [25] The Kuwaitis were his benefactors and he was forever indebted to them. By contrast, Bandar had only contempt for Kuwait, which he derided at every opportunity, even stooping to bathroom humor. When Bandar excused himself to go to the men's room, he was known to say, "I've got to go to Kuwait." [26]

In addition, the royal family was divided. On the one hand, the House of Saud was outraged by Saddam. "[Saddam] doesn't realize that the implications of his actions are upsetting the world order," Fahd told Bush. "He is following Hitler in creating world problems ... I believe nothing will work with Saddam but the use of force." [27] On the other hand, the House of Saud would face fierce opposition from puritanical Islamic clerics if American "infidels" used the holy lands to attack Iraq. [28]

As a result, it was essential that the House of Saud see that Saddam was an imminent threat to their survival. On August 3, Cheney called Bandar to his office for a meeting with Colin Powell, Undersecretary of Defense Paul Wolfowitz, and National Security Council staffer Richard Haass. The purpose was to convince Bandar that Saddam intended to attack the House of Saud as well. Cheney and Powell took out overhead photos that showed three Iraqi divisions moving through Kuwait, one of them directly toward the Saudi border. [29] The other divisions might follow, and Riyadh was just 275 miles away. When Cheney arrived in Saudi Arabia a few weeks later and asked permission for American troops to use Saudi bases, King Fahd had clearly gotten the message. The Saudis "didn't just want (Saddam) ejected from Kuwait, they wanted him destroyed," said Secretary of State James Baker. "For them, the only solution was an American-led war that would annihilate Saddam's military machine once and for all." [30]

Having convinced the House of Saud, the Bush administration still had to win the hearts and minds of Americans. In the United States, one of the most effective lobbyists was Bandar. Again and again, he persuaded even the most unlikely allies in the United States -- thanks to an approach that was extraordinarily ecumenical for one of the preeminent custodians of an Islamic theocracy that reviled the West. At a memorable private breakfast in late October 1990, one could enjoy the spectacle of the most prominent Arab in America wooing over the capital's staunchest supporters of Israel, including Representatives Stephen J. Solarz of New York, Tom Lantos of California, and Robert G. Torricelli of New Jersey. [31] Bandar even sent out Christmas cards to influential Washingtonians with a very non-Muslim message: "Behold, the angels said: 'O Mary, God giveth thee glad tiding of a Word from Him: his name will be Christ Jesus, the son of Mary, held in honour in this world and the Hereafter and of [the company of] those nearest God." [32]

Winning over the public at large, however, required more convincing. The problem was no matter how evil Saddam may have been, Americans seemed to find him more palatable than Iran's Ayatollah Khomeini, who referred to the United States as the "Great Satan." True, as villains go, Saddam was straight out of central casting. He had killed hundreds of thousands of Iranians, thousands of his own citizens, used chemical weapons, and committed atrocity after atrocity. But because Saddam had long been an ally of the Reagan and Bush administrations, such heinous crimes had gotten little attention in the media and few Americans thought of him as a dangerous enemy.

Given that Saddam's atrocities against Iran and the Kurds had not stirred the American populace, why should his invasion of Kuwait cause more than a ripple? Few Americans even knew where the tiny emirate was. Even if they did, why should Americans go to war over this particular border dispute? If this was about defending democracy, Kuwait certainly didn't make the cut. Only sixty-five thousand people out of a population of about 2 million were given the privilege of voting -- males who could prove Kuwaiti ancestry dating back to 1920. [33] Women had no political rights whatsoever. Executive power was in the hands of the emir, who was chosen by and was a member of the ruling al-Sabah family. Senator Daniel Patrick Moynihan had described Kuwait as "a poisonous enemy of the United States" famous for its "singularly nasty" anti-Semitism. [34]

And since most Americans thought oil was not a good enough reason to go to war, both Bush and Baker floundered for a rationale to put soldiers in harm's way. "If you're [trying] to get me to say that low gasoline prices are worth American lives, it's not something I'm going to say," said Baker. [35]

"The fight isn't about oil," Bush asserted. "The fight is about naked aggression that will not stand."

All of which meant that Americans suddenly had to buy into the notion of Saddam's villainy, even though it was a villainy their government had secretly supported for many years. To that end, the Kuwaiti government swiftly poured millions of dollars into twenty public relations agencies, lobbying groups, and law firms to rally U.S. public opinion against Saddam. [36] On August 11, just nine days after the invasion, Hill & Knowlton agreed to represent Citizens for a Free Kuwait, a front group funded almost entirely by the Kuwaiti government. [37] [ii] The vast majority of the budget of Citizens for a Free Kuwait went to Hill & Knowlton.

Hill & Knowlton was not just the world's largest PR firm, it was also the most politically wired firm in the country. The firm's chairman, Robert Gray, had been a key aide in both of Ronald Reagan's presidential campaigns. On the Democratic side, the firm relied on Vice Chairman Frank Mankiewicz, who had worked for both Robert F. Kennedy and George McGovern.

In this case, however, the most important politico on the Hill & Knowlton staff was the man running its Washington office, Craig Fuller, a friend of President George H. W. Bush's who had served as his chief of staff when Bush was vice president. With Fuller on the Kuwaiti account from day one, [38] Hill & Knowlton went into overdrive, putting 119 executives in twelve offices across the country on it. According to Second Front, John R. MacArthur's account of U.S. censorship and propaganda during the Gulf War, Hill & Knowlton organized a Kuwait Information Day on twenty college campuses on September 12. On Sunday, September 23, churches across the country observed a national day of prayer for the embattled emirate. The next day, Americans celebrated Free Kuwait Day. There were tens of thousands of bumper stickers and T-shirts, as well as media kits on Kuwaiti history. Hill & Knowlton's Lew Allison, a former news producer for CBS and NBC, created two dozen video news spots about Kuwait for the evening news. [39] All over the country, there were full-scale press conferences showing torture by the Iraqis. As the end of 1990 approached, the American media, which had largely ignored Saddam's atrocities against Iran and the Kurds when they took place, again and again broadcast reports of his mayhem.

Then, on October 10, Hill & Knowlton was granted a forum to present its evidence against Iraq before the congressional Human Rights Caucus. Their chief witness was a fifteen-year-old Kuwaiti girl who was aid to have firsthand knowledge of Iraqi atrocities. She went only by her first name Nayirah. Her last name was withheld, presumably in the interests of preventing reprisals against her or her family. [40]

As recounted in Second Front, Nayirah cried as she testified about her time as a volunteer at the al-Addan hospital. "While I was there, I saw the Iraqi soldier come into the hospital with guns and go into the room where fifteen babies were in incubators," she said. "They took the babies out of the incubators, took the incubators, and left the babies on the cold floor to die." [41]

After the hearing, Congressman Tom Lantos said that "we have never had the degree of ghoulish and nightmarish horror stories coming from totally credible witnesses that we have at this time." President Bush said that he was happy that the atrocities in Kuwait had been highlighted on CNN. [42] Bush referred to the incubator story at least five more times during the next five weeks. [43] Amnesty International published the story with only a minor qualification, saying that over three hundred premature babies had been left to die. [44] Repeated again and again, it spread quickly across the globe.

As MacArthur pointed out, it is difficult to overstate the significance of the incubator story. Saddam had done many horrible things, but Nayirah's testimony suddenly enabled the press to compare him to Hitler. Here you had a guileless teenage girl's tearful account of a dictator so depraved he would have his soldiers kill innocent babies. Even though he had long supported Saddam, President Bush himself fueled the Hitler analogy, asserting that Saddam's troops had performed "outrageous acts of barbarism. ... I don't believe that Adolf Hitler ever participated in anything of that nature." [45]

Over the next three months, the "baby killer" story made its way along the media food chain. I t was referred to again and again in speeches by President Bush and Vice President Dan Quayle. It was in the New York Times and the Sunday Times of London, on CBS and CNN, in Time, on the wires and in countless newspapers across the country from the Los Angeles Times to the St. Louis Post-Dispatch. But it wasn't true.

While the story was in the news, Middle East Watch, a New York based human rights organization, was also following up on it, but unlike most of the American press, it did not simply repeat previously published reports without verifying them. It sent an investigator named Aziz Abu-Hamad to hospitals in Kuwait, where he found many doctors who refuted the incubator story. In a January 6, 1991 memo, less than two weeks before the war began, Abu-Hamad noted, "I have yet to come across the name of one family whose premature baby was allegedly thrown out of an incubator." He added that while he could not irrevocably refute the charges about the incubators, he had found many bogus stories about Iraqi atrocities in Kuwait. "Many prominent Kuwaitis had been reported dead before I left for Saudi Arabia, but I was surprised to find them alive and well." [46]

On March 15, 1991, after the Gulf War was over, ABC News's John Martin finally sorted out the mess. In his news report, he quoted Dr. Mohammed Matar, the director of Kuwait's primary health care system, and his wife, Dr. Fayeza Youssef, chief of obstetrics. "No, (the Iraqis] didn't take [the babies] away from their incubator. ... To tell the truth ... no nurses to take care of these babies, and that's why they died." [47]

Martin again specifically asked if Iraqi soldiers had left the babies on the floors to die. "I think this is something just for propaganda," replied Matar. Even Amnesty International, the highly respected human rights organization that had helped publicize the story, now issued a retraction of sorts, asserting that its team had "found no reliable evidence that Iraqi forces had caused the death of babies by removing them or ordering their removal from incubators." [48]

How had such a false but provocative story become part of the conventional wisdom that created the war-frenzied support of the Gulf War? For that, one must go back to the original source of the story, Nayirah, the fifteen-year-old Kuwaiti girl who had testified before Congress. After all, what better source for reporters across the country than congressional testimony, even though it was not under oath, from a tearful teenage girl even though she declined to give her full name.

But who really was Nayirah? At the time of her testimony, her full name had been kept secret to protect her family from reprisals in occupied Kuwait. But, as John MacArthur revealed a year after the war was over, there was a better reason to keep her name secret. She was the daughter of the Kuwaiti ambassador to the United States, Saud Nasir al-Sabah. "Such a pertinent fact might have led to impertinent demands for proof of Nayirah's whereabouts in August and September of 1990, when she said she witnessed the atrocities, as well as corroboration of her charges," MacArthur wrote. [49]

It is worth adding that Nayirah was not just the ambassador's daughter, but as such was a member of the ruling family of Kuwait, the same family that had granted oil concessions to George H. W. Bush's Zapata Off-Shore company thirty years earlier.

***

At the same time that Nayirah was telling Americans about Iraqi atrocities, the Pentagon began telling Americans about the looming Iraqi military threat. By mid-September, even before Nayirah's testimony, the Bush administration claimed that 250,000 Iraqi troops were in Kuwait and the surrounding region. But there was compelling evidence that the Iraqi military threat to the Saudis had either been vastly overstated by the United States or that Iraq had withdrawn its troops. In August, a Japanese newspaper approached Peter Zimmerman, a fellow with the U.S. Arms Control and Disarmament Agency, with photos of Kuwait taken by a Soviet commercial satellite company. Zimmerman showed the photos to various other experts and "all of us agreed we couldn't see anything in the way of military activity." [50]

The media, however, was too cautious to run with a story saying that the Pentagon had exaggerated the Iraqi military threat. Nevertheless, ABC News pursued the story and bought a set of five Soviet satellite pictures of eastern Kuwait and southern Iraq, which were taken on September 13, at a time during which the United States asserted that the Iraqi military force was at full strength. [51] According to Zimmerman, the photos were "astounding in their quality." [52] But when he reviewed them with another expert, both of them were shocked not by what they saw, but by what they didn't see. "We turned to each other and we both said, 'There's nothing there,' " said Zimmerman. Nothing suggested an Iraqi military presence anywhere in Kuwait. "In fact," Newsweek reported, "all they could see, in crystal-clear detail, was the U.S. buildup in Saudi Arabia." [53] Where were the Iraqi soldiers? The evidence strongly suggested that Cheney's presentation to Prince Bandar six weeks earlier vastly overstated the Iraqi threat -- or that the Iraqis had retreated.

ABC News, however, had neglected to obtain a photo showing one thirty-kilometer strip of land in Kuwait. Perhaps all the Iraqi troops were hiding in that sector. But an enterprising reporter in Florida named Jean Heller got her newspaper, the St. Petersburg Times, to purchase the missing photo. It too showed no sign of the missing Iraqi troops. "The Pentagon kept saying the bad guys were there, but we don't see anything to indicate an Iraqi force in Kuwait of even twenty percent the size the administration claimed," Zimmerman told Heller. [54]

As the story spread, the Pentagon's PR machine shifted into damage-control mode. A spokesman said the military "sticks by its numbers," then went to work discouraging ABC, CBS, and the Chicago Tribune from pursuing the story. ABC News's Mark Brender explained that the network dropped it partly because the photos were inconclusive, but also because there was "a sense that you would be bucking the trend. ... If you're going to stick your neck out and say that the number of Iraqi forces may not be as high as the administration is saying, then you better be able to say how many there are." [55] One of the few major newspapers to suggest that Iraq never really showed up for battle en masse was Newsday, which, after the Gulf War was under way, reported that American troops had encountered a "phantom enemy." It noted that most of the huge Iraqi army, which was said to have half a million troops in Kuwait and southern Iraq, simply was nowhere to be seen. In addition, as if foreshadowing the Iraq War of 2003, Saddam Hussein's supposed chemical warfare never materialized.

One senior American commander told a Newsday reporter that the information about the Iraqi defenses put out before the war was highly exaggerated. "There was a great disinformation campaign surrounding this war," he said. [56]

***

Later, after America's overwhelming military superiority quickly defeated Iraq, only one serious criticism of George H. W. Bush's triumphant policy emerged -- and that came from within his own administration. Why on earth had he not allowed American troops to march all the way to Baghdad?

In A World Transformed, the book he and his national security adviser Brent Scowcroft published in 1998, Bush explained that he allowed Saddam to stay in power because "trying to eliminate Saddam ... would have incurred incalculable human and political costs. Apprehending him was probably impossible. ... We would have been forced to occupy Baghdad and, in effect, rule Iraq. ... There was no viable 'exit strategy' we could see, violating another of our principles. Furthermore, we had been self-consciously trying to set a pattern for handling aggression in the post-Cold War world. Going in and occupying Iraq, thus unilaterally exceeding the United Nations' mandate, would have destroyed the precedent of international response to aggression that we hoped to establish. Had we gone the invasion route, the United States could conceivably still be an occupying power in a bitterly hostile land." [57]

That response was persuasive, but it did not satisfy everyone, particularly Paul Wolfowitz, the rising young policy maker in the neo-conservative camp who was then undersecretary of defense. In 1992, just after the Gulf War but while Bush was still in office, Wolfowitz oversaw the drafting of a policy statement on America's mission in the post-Cold War era. Called "Defense Planning Guidance," the forty-six-page classified document, which was coauthored by I. Lewis Libby, who later became Vice President Dick Cheney's chief of staff, circulated at high levels in the Pentagon. After it was leaked to the press and met a hostile reaction, the White House ordered Secretary of Defense Dick Cheney to rewrite the highly controversial document. The policy paper was never implemented during the administration of George H. W. Bush, and soon Bill Clinton was in office.

Nevertheless, a decade later, Wolfowitz's original draft became extraordinarily relevant. It outlined several scenarios in which U.S. interests might be threatened, focusing specifically on North Korea and Iraq, where the greatest dangers were the proliferation of weapons of mass destruction, terrorism, and a sudden shock to the global supply of oil. The policy paper also asserted, somewhat patronizingly, that coalitions of the type Bush and Baker had put together for the Gulf War "hold considerable promise," but that in the end they were not necessarily the answer. The United States, Wolfowitz insisted, would have to be prepared to take unilateral military action. [58] Wolfowitz's policies suggested a new sort of militaristic idealism in which preemptive strikes were justifiable if they took out a brutal dictator. If such actions alienated America's longtime allies, he seemed to be saying, so be it. That was the price we must be prepared to pay. As to whether the new policy might commit the United States to enormous costs both in terms of human life and in dollars, or whether it might lead to even greater dangers, Wolfowitz had no answer.

_______________

[i] Glaspie was widely criticized for supposedly leaving Saddam with the impression that the United States was giving a green light to his invasion of Kuwait. But Tariq Aziz, who was present at the meeting between Saddam and Glaspie, told ABC TV's Good Morning America that she did nothing of the kind. "No, she didn't do that," said Mr. Aziz. "... We didn't have that false illusion that the United States would watch and would not react severely to any move towards Kuwait." He said Iraq knew before the invasion that there would be serious repercussions, including a harsh American reaction. "We knew that there would be a conflict."
[ii] The Kuwaiti government channeled $11.9 million dollars to Citizens for a Free Kuwait, whose only other funding totaled $17,861.

NOTES:

1. James A. Baker III, The Politics of Diplomacy, pp. 262-63.
2. Ibid., p. 264.
3. "Richard Perle: The Making of a Neo-Conservative," transcript, interview with Ben Wattenberg, Public Broadcasting System's Think Tank, www.pbs.org/thinktank/transcript/017.html .
4. Baker, The Politics of Diplomacy, p. 268.
5. Bob Woodward, The Commanders, p. 200.
6. Ibid.
7. Ibid., p. 213.
8. Stephen Engelberg, "U.S.-Saudi Deals in 90's Shifting Away from Cash Toward Credit," New York Times, August 23, 1993, p. A 1.
9. Evan Thomas, with John Barry, Thomas M. Defrank, and Douglas Waller, "The Reluctant Warrior," Newsweek, May 13, 1001, p. 18.
10. Woodward, The Commanders, p. 200.
11. David B. Ottaway, "Been There, Done That; Prince Bandar, One of the Great Cold Warriors, faces the Yawn of an Era," Washington Post, July 21, 1996, p. Fl.
12. Woodward, The Commanders, p. 202.
13. Murray Waas and Craig Unger, "In the Loop," New Yorker, November 2, 1992, p. 64ff.
14. Douglas Frantz, "Bush Denial on Iraq Arms Aid Challenged," Los Angeles Times, September 24, 1992, p. A 24.
15. Carlyle Murphy, "Iraq Accuses Kuwait of Plot to Steal Oil, Depress Prices; Charge Seen as Part of Gulf Power Move by Saddam Hussein," Washington Post, July 18, 1990.
16. Caryle Murphy, "Iraq Takes Hard Line as Talks Open; Baghdad Press Insists That Kuwait Accede to Demands," Washington Post, July 31, 1990, p. A 14.
17. Woodward, The Commanders, p. 232.
18. Murphy, "Iraq Takes Hard Line as Talks Open," p. A 14.
19. "CIA Support to the US Military During the Persian Gulf War," Persian Gulf Illnesses Task Force, Director of Central Intelligence, June 16, 1997, National Security Archives, www.gwu.edu/%7Ensarchiv/NSAEBB/NSAEBB63/doc6.pdf .
20. Molly Moore, "Bush Stresses Saddam's Isolation After the Arab League Vote," Washington Post, August 12, 1990, p. A 21.
21. R. Jeffrey Smith, "Iraqis fortify Defense in Kuwait; Ground Battle Would Result in Significant U.S. Casualties, Officials Warn," Washington Post, August 21, 1990, p. A 1.
22. Woodward, The Commanders, p. 226.
23. Herbert S. Parmet, George Bush, p. 458.
24. Baker, The Politics of Diplomacy, pp. 304-5.
25. Kevin Philips, "Bush's Worst Political Nightmare," Los Angeles Times, January 13, 1991, p. M4; and Anthony Kimery, "A Well of a Deal," Common Cause, Spring 1991.
26. Woodward, The Commanders, p. 214.
27. George Bush and Brent Scowcroft, A World Transformed, p. 320.
28. Ibid., p. 321.
29. Woodward, The Commanders, p. 243.
30. Baker, The Politics of Diplomacy, p. 289.
31. Evans and Novak, November 8, 1990.
32. John Elvin, "Inside the Beltway," Washington Times, December 14, 1990, p. A6.
33. John R. MacArthur, Second Front, p. 43.
34. Ibid., p. 44.
35. David Hoffman, "Gulf Crisis Tests Baker as Diplomat," Washington Post, November 2, 1990, p. A 1.
36. John Stauber and Sheldon Rampton, Toxic Sludge Is Good for You (Common Courage Press, 1995), web version from PRWatch.org.
37. Ibid.
38. O'Dwyer's FARA Report, vol. 5, no. 1 (January 1991), pp. 8, 10.
39. MacArthur, Second Front, p. 150.
40. Ibid., pp. 57-58.
41. Ibid., p.58.
42. Ibid., p. 60.
43. Ibid., p. 65.
44. Ibid., p. 66.
45. Ibid., p. 70.
46. Ibid., pp. 68-69.
47. Ibid., p. 73.
48. Ibid., p. 74.
49. John MacArthur, "Remember Nayirah, Witness for Kuwait?" Seattle Post Intelligencer, January 12, 1992, p. D 1.
50. MacArthur, Second Front, p. 173
51. Ned Zeman, "Periscope," Newsweek, December 3, 1990, p. 6.
52. MacArthur, Second Front, p. 174.
53. Zeman, "Periscope," p. 6.
54. Jean Heller, "Photos Don't Show Buildup," St. Petersburg Times, January 6, 1991, p. A 1.
55. MacArthur, Second Front, p. 174.
56. Ibid., pp. 177-78.
57. Bush and Scowcroft, A World Transformed, p. 489.
58. "The War Behind Closed Doors," PBS Frontline, www.pbs.org/wgbh/pages/frontline/shows/ ... /wolf.html.

[admin]

CHAPTER NINE: The Breaking Point

For all their anti-Americanism, even the most militant Islamists agreed that something had to be done about Saddam Hussein, a secular ruler who was seen as bent on destroying Islam. Immediately after Iraq invaded Kuwait in August, one of their leaders went to Riyadh to meet with Defense Minister Prince Sultan and to present him with an alternative way of going after Saddam without having to rely on the U.S. military. That militant leader was Osama bin Laden.

By this time a battle-hardened thirty-three-year-old, bin Laden told Sultan that the kingdom did not have to allow American infidels on Saudi soil to fight Saddam's troops. [1] Fresh from driving the Soviets out of Afghanistan, Osama was ready to take on another superpower. Armed with maps and a detailed ten-page plan, he asserted that his family's construction and engineering equipment could be used to quickly build fortifications. [2] Thanks in part to U.S. support for the Afghanistan campaign, bin Laden already had a global network of Islamic warriors ready to bolster Saudi forces. If the Islamic forces could defeat a true superpower like the Soviet Union, he argued, they could certainly take on Saddam Hussein. As Muslims, Iraqi soldiers could not possibly be deeply committed to someone as secular as Saddam and would not resist the jihad.

Stunned by bin Laden's proposal, Prince Sultan warned Osama that Saddam had four thousand tanks. "There are no caves in Kuwait," he said. "You cannot fight them from the mountains and caves. What will you do when he lobs the missiles at you with chemical and biological weapons?" [3]

"We [will] fight him with faith," bin Laden replied. He said he could lead the fight himself and promised to put together one hundred thousand former warriors from the Afghanistan War. [4] Still devoted to the House of Saud, bin Laden warned the royals that if they allowed U.S. soldiers near the holy mosques of Medina and Mecca, militant Islamists, not just in Saudi Arabia but throughout the entire Muslim world, would not overlook "Riyadh's transgressions of the sacred principles of Islam." [5] In its search for military security, he said, the royal family risked losing its religious legitimacy.

According to one report, for reasons that are unclear, bin Laden left his meeting with Prince Sultan thinking that the House of Saud agreed with him and was going to accept his offer. [6] But soon, he received the news that would transform his life: King Fahd was going to allow U.S. forces into the kingdom. [7]

To bin Laden, this development was "a backbreaking calamity." For decades, the secretive House of Saud had maintained its two different realities. In the West, it proudly paraded its alliance with the United States as evidence of its security and the Saudi entry into the modern world. But within Saudi Arabia, the House of Saud had downplayed any ties to the United States so as not to provoke militant Islamists. Now, however, the double marriage between the two mortal enemies was out in the open. When King Fahd asked the senior Islamic clerics who oversaw the Saudi judiciary to endorse the idea of allowing U.S. troops in Saudi Arabia, at first they refused. [8] Allowing American soldiers on sacred Saudi soil was so abhorrent that it called into question the very legitimacy of the House of Saud as the custodian of Islam. Throughout all of Saudi Arabia, Islamists could talk of nothing else but the schism between the royal family and the ulema.

Meanwhile, on August 7, 1990, the United States began sending the most sophisticated and powerful fighting machine in the history of the world into the ancient desert kingdom of Saudi Arabia. First, there were paratroopers of the 82nd Airborne Division; then F-15 fighter jets and B-52 bombers. [9] The Saudi port town of Khafhi on the Persian Gulf near the Kuwait border was transformed overnight into a bustling garrison. Transport planes laden with soldiers and equipment arrived every ten minutes.

Tens of thousands of American soldiers -- blacks, Asians, Christians, Jews, even women made their way into a tribal, male- dominated Arab culture that had never seen anything of the like. Soon, the most awesome display of high-tech aerial firepower ever assembled straddled the entire Islamic world from east to west. There were aircraft carrier battle groups in the Indian Ocean and the Red Sea. Radar-dodging Stealth F-117 bombers moved into the area. F-111 bombers headed for Turkey and B-52s to the Indian Ocean island of Diego Garcia, both within striking distance of Iraqi targets. There were F-15 Eagles armed with Sparrow and Sidewinder missiles; the F/A-18 Hornet with missiles, laser-guided bombs, and cluster bombs; the A-10 Thunderbolt and A-6 Intruder ground-attack planes, armed with Hellfire missiles; and the AH-64 Apache missile and cannon-bearing helicopter.

To Americans, the imminent war had the makings of a patriotic but antiseptic spectacle that carried no more risk than a video game. In addition, the Saudi and American leadership had never been on better terms. When George and Barbara Bush visited American troops in Saudi Arabia during the Thanksgiving holiday in 1990, the New Yorker reported, Bush called Bandar, who was in the country at the time. The Bushes were staying in the royal palace, and when Bandar arrived at their quarters, the president told him how much his recently divorced daughter, Dorothy, appreciated the friendship of Bandar's family. Dorothy had been alone at the White House with her children when Princess Haifa, Bandar's wife, invited her and the rest of the family over for Thanksgiving. The gesture so deeply touched the president that he was moved to tears. [10] The first lady began to call him Bandar Bush.

But poignant as the friendship was between Bandar and Bush, within the Arab world at large there was little warmth toward the United States. True, James Baker had forged a coalition that had significant backing from the leadership of the Arab world. [11] But on the so-called Arab "street," the arrival of U.S. troops ripped open bitter wounds within the Islamic world that dated back to the Crusades. As hundreds of thousands of U.S. troops began flooding into Saudi Arabia in August, fundamentalists in Iran called for a boycott of the hajj so long as U.S. forces were in Saudi Arabia. [12] In November, a Saudi F-15 pilot defected to Sudan with his aircraft in protest of the U.S. military presence. [13] A sermon in the Grand Mosque in Mecca by a prominent academic asserted that a U.S. "occupation" of the region was part of a long-range plan. The message was stark: "If Iraq has occupied Kuwait, then America has occupied Saudi Arabia. The real enemy is not Iraq. It is the West." [14] Tape recordings of it circulated throughout the kingdom. For millions of Muslims, the U.S. presence was a humiliation of Islam that called forth visions of invading Christians and Jews.

A rising tide of anti-Americanism and animus against the House of Saud swept through the kingdom. Repeatedly using language that evoked images of the medieval holy war against Islam, bin Laden asserted that King Fahd had "sided with the Jews and Christians" and had committed an "unforgivable sin." [15] "The American government has made the greatest mistake in entering a peninsula that no religion from the non-Muslim states has entered for fourteen centuries," he said. He declared that the arrival of U.S. troops constituted a grave and unprecedented threat to Islam, a Crusader attack that marked "the ascendance of Christian Americans over us and the conquest of our lands." [16] For the first time since the annunciation of the Prophet Muhammad, bin Laden said, the three most sacred places of Islam - Mecca, Medina, and Jerusalem -- were "under the open and covert control of non-Muslims." [17]

Still, bin Laden refrained from challenging the House of Saud directly, as many militant Islamists did, and directed his anger toward the United States. He called for a boycott of all American products. "When we buy American goods, we are accomplices in the murder of Palestinians," he said, asserting that American tax dollars ended up funding Israel, which then killed Palestinians. [18] But this was just the beginning. He and his acolytes were prepared to go much further.

***

Early in the evening of November 5, 1990, in New York City, it became clear exactly how far bin Laden and his associates were prepared to go. Three months had passed since bin Laden's meetings with Prince Sultan and a huge invading armada of American soldiers and materiel had landed in Arab lands, poised for attack. Rabbi Meir Kahane, the fiery founder of the militant Jewish Defense League, was appearing at a meeting at the New York Marriott Hotel on West Forty-Ninth Street in Manhattan. Kahane, who referred to Arabs as "dogs" and whose slogan was "Every Jew a .22," had been characterized by author Robert I. Friedman as a "Pied Piper of confused Jewish youth" who had "a knack for convincing youngsters that violence in the name of Greater Israel or Soviet Jewry is heroic in the tradition of the Bible." [19] Elected to the Knesset, the Israeli parliament, in 1984 by advocating the expulsion of all Arabs from Israel, Kahane had subsequently been barred from elective office in Israel after a new law banned parties that had racist platforms. As Kahane took questions from the audience, a man of Arab descent with an odd smile on his face suddenly approached and shot Kahane dead with a silver-plated .357 handgun. [20]

The man who pulled the trigger, El Sayed Nosair, was a thirty-four-year-old New York City air-conditioner repairman originally from Egypt. Nosair was just one of dozens of young Arabs who spent time at the Al-Kifah Refugee Center in Brooklyn, New York, [21] where the CIA had once recruited prospects to join the cause of the mujahideen in the Afghanistan War in the eighties. [i] It was there that Nosair had become mesmerized by Abdullah Azzam, the hypnotic Islamic orator, scholar, and colleague of bin Laden's who frequently left Peshawar to raise funds in the United States for the mujahideen. [22] [LC]

At Nosair's apartment, police discovered bomb-making materials and instruction manuals on special warfare. They also found a list of potential assassination targets, and maps and photos of many of New York's landmarks -- including the World Trade Center. [23] Some of the materials tied Nosair to the famous Blind Sheikh from Egypt, Omar Abdel Rahman, who preached jihad against America, and who, it was later revealed, had ordered Nosair to kill Kahane. [24] Nosair, it became clear, stood at the center of an Islamist cell intent on waging war against America.

But thanks to bungling from both the CIA and the FBI, a serious investigation was not in the cards. The Blind Sheikh had been tied to the 1981 assassination of Egyptian president Anwar Sadat, but later in the eighties the CIA saw him as a recruiting tool for the mujahideen and may have protected him so that his shady past did not set off alarms among U.S. authorities. [25] According to Peter Bergen's Holy War Inc., even though the Blind Sheikh was known to be a leader of Egypt's militant Islamic Group, he had been issued a visa in 1987 and again in 1990. [26]

On the night of the Kahane assassination, Edward Norris, a detective with the New York Police Department's Seventeenth Precinct, thought two Arab cabdriver friends of Nosair's might be involved. But after briefly detaining the two men, the police were ordered to release them. "They really were anxious at that time to get on to the press and say, 'We have a murder. We have a gunman. The case is solved. There's no reason to be afraid,'" said John Miller, coauthor, with Michael Stone and Chris Mitchell, of The Cell. [27] [ii]

FBI officials also insisted "that Mr. Nosair had acted alone and was not part of a larger conspiracy." [28] Worse, they didn't even bother to examine the contents of Nosair's filing cabinets thoroughly once they took them from the police. When they finally got around to translating the Arabic documents in the files more than two years later [29] -- after the 1993 bombing of the World Trade Center -- they found that the papers included a sermon urging Muslims to attack America and "blow up their edifices." There were videotapes of the electrifying speeches of Abdullah Azzam. [30] They even discovered a document that appears to be one of the very first bearing the name of bin Laden's new organization: Al Qaeda.

The relevance of that term would, of course, later become clear. But at the time, Kahane's murder appeared to have been an isolated event, an assassination of one extremist by another. America was poised to go to war with Saddam Hussein and was alive with patriotic fervor. When the Gulf War began on January 16, 1991, much of the country stood behind President Bush. Night after night, millions of people were spellbound by the high-tech spectacle on CNN, unaware that Osama bin Laden's jihad against America had begun. In Meir Kahane, Al Qaeda had already claimed its first casualty on American soil.

***

As bin Laden's popularity grew, the House of Saud became increasingly threatened by him. At first, Saudi officials warned that they would seize his property and take punitive measures against the Saudi Binladin Group. [31] Soon, relations between bin Laden and the royal family reached the point where he had to leave the country. In Apri1 1991, after the end of the Gulf War, he first traveled to Pakistan [32] and later to Sudan, a paradise for militant fundamentalists ruled by a former member of the Muslim Brotherhood, the Sorbonne-educated Hassan al-Turabi. [33] Arriving with about $30 million from his inheritance, bin Laden launched a series of businesses to provide a cash flow for terrorist operations. There was the Islamic al-Shamal Bank, the al-Hijra construction company, a bakery, a tannery, a cattle-breeding firm, and several other companies. [34] He also built a coalition with the local jihadists.

Having defeated the Soviet Union, the Afghan Arabs saw themselves as triumphant warriors who were now immersed in one international struggle after another. The disintegration of Yugoslavia that year led to the killing of thousands of Bosnian Muslims. Ironically, one of the seminal moments in bin Laden's campaign against the United States would come in reaction against what was probably the most altruistic foreign venture by the administration of George H. W. Bush. In December 1992, U.S. troops landed in Somalia to work with the United Nations humanitarian mission to provide relief in the famine- ravaged country. No U.S. foreign venture was more devoid of ulterior motives. But as bin Laden saw it, "famine relief" was merely a pretext for an American attempt to control not just Somalia, but Sudan, Yemen, and Eritrea -- the entire Horn of Africa. [35]

In a rare interview, however, bin Laden denied that he had any plans for a global jihad. "The rubbish of the media and the embassies," he said. "I am a construction engineer and an agriculturalist. If I had training camps here in Sudan, I couldn't possibly do this job." [36] But in fact bin Laden had already decided that Al Qaeda should take on U.S. forces in Saudi Arabia, Yemen, and Somalia. [37]

One by one the attacks began. On December 29, 1992, a bomb exploded in a hotel in Aden, Yemen, where U.S. troops had been staying before going on to Somalia. The U.S. soldiers had left already, and two tourists were killed. [38]

In February 1993, in Jersey City, New Jersey, Ramzi Ahmed Yousef began assembling a host of restricted chemicals such as lead nitrate, phenol, and methylamine with magnesium, aluminum, ferric oxide, and nitric acid into a fifteen-hundred-pound bomb. [39] On February 26, Yousef, who was said to have been a houseguest of Osama bin Laden's in Pakistan, [40] and Ismail Najim, an associate who had flown up from Texas to take part in the operation, drove a rented white Ford Econoline van to the World Trade Center and parked it in the B-2 level of the underground garage. [41]

At 12:17 p.m., the device exploded. It killed six people and injured more than a thousand others, but failed to accomplish its intended mission of knocking down both of the Twin Towers. The terrorist cell behind the bombing included Kahane's assassin El Sayed Nosair [iii] and his accomplices, Mohammed Salameh and Mahmoud Abouhalima -- the two men who had briefly been detained by police but then released after the Kahane murder. [42] Also involved was the Blind Sheikh, Omar Abdel Rahman. [43] The Al-Kifah Refugee Center in Brooklyn was not just a hub for the conspirators, it was now the New York outpost of Osama bin Laden and Al Qaeda's operation. [44]

THE WORLD TRADE CENTER 1993: THE FBI SET IT UP AND LET IT HAPPEN

The bomb detonated in the underground parking garage at the World Trade Center on February 26, 1993 killed six people, resulted in injuries to a thousand more, and threw lower Manhattan into chaos. At the center of the terror cell was a bombmaker who had been in the Egyptian army. He was also a paid informer and provocateur for the FBl. Other participants in the terror operation had entered the country with the connivance of the CIA, despite the fact that normally they would not have been allowed in. The FBI was aware of every phase of the plot, but refused to exploit numerous opportunities to stop it. The first WTC bomb of 1993 went off with the full complicity of the FBl, which tried repeatedly to pass off the blame to the Sudanese mission to the United Nations. The Kean-Hamilton Commission has nothing to say about this.

A detailed narrative of these events has appeared under the title The Cell. It is a coverup, written by participants in the operation. This book ignores the central and most dramatic event of the entire affair, which was the publication of the tapes secretly made by FBl provocateur Emad Salem of his own conversations with his FBI controllers -- tapes which he wisely surmised he might need later as an insurance policy. Salem appears to have been passed from British intelligence to the FBI.

Even without the Salem tapes, The Cell presents a story of criminal incompetence within the FBI. The story starts with the November 1990 assassination in New York City of Rabbi Meir Kahane, an Israeli terrorist leader who had founded the Jewsih Defense League several decades earlier. The accused assassin of Kahane was El Sayyid Nosair, an Egyptian fanatic. But Nosair was not just a drifting fanatic: when the police searched his apartment, "there were training manuals from the Army Special Warfare School at Fort Bragg. There were copies of teletypes that had been routed to the Secretary of the Army and the Joint Chiefs of Staff. How had Nosair come up with those? Clearly, he had a source in a sensitive position in the US military." (Cell 45) Much more likely, his terrorist controller occupied a sensitive position in the US military, as any fool can see.

Nosair's Arabic-language files were said to contain the detailed plan of a series of future terrorist acts, including the 1993 WTC bombing. But the FBI was not interested in having these documents translated; it simply put them into storage and ignored them until it was too late. This vital evidence, according to our authors, "entered a black hole."

-- 9/11 Synthetic Terrorism Made in USA, by Webster Griffin Tarpley

Seven months later, in October 1993, came the episode that inspired the movie Black Hawk Down. Relying on Yemenite "Afghan Arabs" who had fought with him against the Soviets, and financing the operation with businesses he owned in Yemen, bin Laden backed the ambush that killed eighteen U.S. Army Rangers who were trying to capture two aides to a Somali warlord. By early 1994, bin Laden had set up at least three Al Qaeda training camps in northern Sudan with Islamic rebel trainees from six countries. In June 1995, bin Laden tried, unsuccessfully, to assassinate Egyptian president Hosni Mubarak. [45]

Now that bin Laden's jihad was under way, even his own family finally took action against him. In February 1994, Bakr bin Laden, who had succeeded Salem as head of the extended bin Laden family, sought to dissociate himself, his family, and the Saudi Binladin Group from his terrorist half brother. He sent a faxed message to the Saudi press that expressed the family's "regret, denunciation, and condemnation of all acts that Osama bin Laden may have committed, which we do not condone and which we reject." [46] Two months later, the Saudi government moved to revoke bin Laden's citizenship and freeze his Saudi assets because of his militancy. His passport was seized. In 1994, there was even a botched attempt by the Saudis to assassinate bin Laden. [47]

In many ways, the Saudis appeared to be taking aggressive action against bin Laden and the growing terrorist threat. But mere bureaucratic measures against bin Laden carried little weight against a demographic time bomb that was inexorably ticking away. In the early seventies when it was first awash in petrodollars, the Saudis had imported millions of foreign workers to do low-level jobs that most Saudis thought beneath them. By the mid-nineties, however, immigrants filled nearly 70 percent of all jobs in Saudi Arabia, [48] and unemployment in the kingdom had risen to 25 percent. [49] At the same time, the soaring birthrate meant that a growing population of Saudi youths was joining the labor market with few technical skills or employment options. To strengthen its frayed relationship to the ulema, the House of Saud funded the madrassas, schools with a strong Islamic fundamentalist ideology scattered throughout Muslim countries in the Middle East. The schools taught a new generation that Allah turned Jews and Christians into apes and pigs, that Judgment Day will not come "until the Muslims fight the Jews and kill them." As a result, many Saudi graduates had training that was more appropriate for joining Al Qaeda than for entering the professional world. [50]

At the same time, per capita income in Saudi Arabia had dropped to just one-third of what it had been during the oil boom of the seventies. [51] Even that understated the problem. Since many princes had scores of wives and even more children, the House of Saud itself was growing at a fantastic rate. Now thousands of princes expected huge monthly stipends. Given the grotesque disparity between the wealth of the royal family and the unemployed masses, it was not surprising that increasingly thousands of Saudis saw bin Laden as a powerful voice articulating the anger against the House of Saud and the United States.

***

The rise of militant Islam was just one factor in shaping a new era in U.S.-Saudi relations. In 1992, Bill Clinton won the presidency from George H. W. Bush. Bandar took Bush's defeat as a personal loss. The night before the election, at two in the morning, he wrote a letter to Bush expressing his feelings. "You are my friend for life, one of my family. Tomorrow you win either way. If you win, you deserve it, and if you lose you are in good company," he wrote, referring to Winston Churchill's having lost reelection after winning the war. [52]

When the results came in, Bandar was so despondent he told King Fahd that he wanted to resign. "It was like I lost one of my family, dead," he said. [53] But he stayed on and took solace in adding onto his thirty-eight-room home in McLean, Virginia, [54] with one extravagant addition after another to the house. An ardent fan of professional football, Bandar also followed the fortunes of the Dallas Cowboys, who were having an excellent season, and whose owner, Jerry Jones, had hosted Bandar at Cowboys' games. [55] [iv]

Now that the House of Bush had been remanded to the private sector, the Saudis did not forget its members. Prince Bandar was quite candid about how the game was played. "If the reputation then builds that the Saudis take care of friends when they leave office," he said, "you'd be surprised how much better friends you have who are just coming into office." [56]

The Saudis were also taking the long view. They reasoned that sooner or later, the Republicans would be back in office and one of the promising sons of George H. W. Bush or his allies might be elevated to power. In the meantime, there was money to be made. As it happened, the Carlyle Group, a new private equity firm in Washington, D.C., was becoming a home away from home for some of the leading figures of the Reagan-Bush era. It was just the kind of place where the Saudis would be able to give them their due.

_______________

[i] Despite the testimony of several eyewitnesses who said he pulled the trigger, Nosair was acquitted of shooting Kahane in a verdict that Judge Alvin Schlesinger said was "devoid of logic and common sense." The judge sentenced Nosair to seven and one-third to twenty-two years in jail for shooting two men and trying to hijack a taxi after the murder.
[ii] In the late nineties, Miller went to Afghanistan and became one of the few American journalists to interview bin Laden. He opened his conversation with the master terrorist by telling the translator, "For a guy who comes from a family known for building roads, he could sure use a better driveway up this mountain."
[iii] Astonishingly, Nosair had been acquitted of Kahane's murder in a state trial. Only later was he convicted of the crime in a 1995 federal terrorism case.
[iv] Bandar's relationship with the Dallas Cowboys football team and their head coach was one of the most bizarre but revealing episodes in the Americanization of this sentinel of Wahhabi Islam. Having been trained as a jet fighter pilot in Texas in 1970, Bandar grew to love American football and immediately became a devoted fan of "America's Team," as the Dallas Cowboys were known. After the Cowboys won the Super Bowl in 1993, to cement his close friendship with team owner Jerry Jones, Bandar gave Jones a platinum-and-sterling-silver Dallas Cowboys football helmet in a display box, inscribed, "You said you would do it, and you did it." It was signed, "Bandar."
An independent oilman from Arkansas, Jones no doubt was aware of Bandar's role in the royal House of Saud. Certainly, he also saw that Bandar was close friends with President George H. W. Bush. To the dismay of Cowboys coach Jimmy Johnson, Jones treated Bandar accordingly. At a time when Johnson had led the Cowboys from a 1-15 record to the Super Bowl championship, Jones became so attached to Bandar that he gave the prince the rare privilege of being allowed on the team's sidelines during the game, even though he had as many as thirty bodyguards. Johnson was irate. When Bandar was allowed into the team's locker room as well after the game, that only made matters worse between Jones and his coach.
In December 1992, after the Cowboys fumbled the ball in a game against the Chicago Bears, Coach Johnson looked up to see Bandar and his entourage nearby on the sidelines. Enraged by the distraction, Johnson marched up to the owner's box and erupted at Jones for allowing the Saudi prince to intrude on his turf. A year later, a similar event happened. After beating the Washington Redskins, Johnson closed the locker room and kept both Jones and Prince Bandar waiting outside. When they finally gained entrance, Johnson left as fast as possible. A month later, the Cowboys won their second consecutive Super Bowl with Johnson as coach. But by then the relationship between Johnson and Jones was frayed so badly that Johnson was forced out and resigned -- even though he had won two consecutive championships. Jerry Jones repeatedly denied that his friendship with Bandar had been a factor, but it was widely reported as a major irritant between the two men. In any case, for the Dallas Cowboys, the Jimmy Johnson era was over.

NOTES:

1. Douglas Jehl, "Holy War Lured Saudis as Rulers Looked Away," New York Times, December 27, 2001, p. A 1.
2. Yossef Bodansky, Bin Laden, p. 29.
3. Jehl, "Holy War Lured Saudis as Rulers Looked Away," p. A 1.
4. Ibid.
5. Bodansky, Bin Laden, p. 29.
6. Anonymous, Through Our Enemies' Eyes, p. 114.
7. Bodansky, Bin Laden, p. 29; and Arnaud de Borchgrave, "Osama's Saudi Moles," Washington Times, August 1, 2003, p. A 19.
8. Bodansky, Bin Laden, p. 30.
9. Robert Mackay, "U.S. Sending Aircraft, Troops to Saudi Arabia," UPI, August 7, 1990.
10. Elsa Walsh, "The Prince: How the Saudi Ambassador Became Washington's Indispensable Operator," New Yorker, March 24, 2003, p. 48.
11. Arab supporters of the U.S. military action in the Gulf War included Syria, Egypt, Bahrain, Saudi Arabia, the United Arab Emirates, Oman, and Qatar.
12. Tehran TV, November 18, 1990, Gulf/2000 archives.
13. New York Times, November 20, 1990, p. 12.
14. Judith Caesar, "Rumblings Under the Throne," Nation, December 17, 1990, p.762.
15. Anonymous, Through Our Enemies' Eyes, p. 115.
16. Ibid., p. 114.
17. Bodansky, Bin Laden, p. 250.
18. Ibid., p. 30.
19. Michael Specter and Laurie Goodstein, "Thousands of U.S. Jews Mourn Militant Kahane," Washington Post, November 7, 1990, p. 18.
20. Sam Donaldson, ABC Nightline, November 5, 1990.
21. Evan Thomas et al., "The Road to September 11," Newsweek, October 1, 2001, p. 38.
22. John Miller, Michael Stone, and Chris Mitchell, The Cell, p. 49.
23. Michael Daly, "Terror Clues in '90 Killing," Daily News (New York), May 29, 2002, p. 5; and Simon Reeve, "Blind Sheikh Behind New Terror Wave," Scotland on Sunday, November 23, 1997, p. 17.
24. Arieh O'Sullivan, "Osama bin Laden's Links to the Palestinians Widening," Jerusalem Post, September 13, 2001, p. 6; and John Miller, interviewed by Terry Gross, Fresh Air, National Public Radio, August 21, 2002.
25. Thomas et al., "The Road to September 11," p. 38.
26. Peter Bergen, Holy War, Inc., p. 67.
27. Miller, Fresh Air; and John Miller, "The Esquire Timeline," Esquire, October 2003, p. 80.
28. James C. McKinley, "Suspect in Kahane Slaying Kept List of Prominent Jews," New York Times, December 1, 1990, p. 29.
29. Daly, "Terror Clues in '90 Killing," p. 5.
30. Daniel Benjamin and Steven Simon, The Age of Sacred Terror, p. 235.
31. Bodansky, Bin Laden, p. 30.
32. Anonymous, Through Our Enemies' Eyes, p. 118.
33. Benjamin and Simon, The Age of Sacred Terror, p. 109.
34. Ibid., p. 111.
35. Bodansky, Bin Laden, p. 70.
36. Robert Fisk, "Anti-Soviet Warrior Puts His Army on the Road to Peace," Independent (London), December 6, 1993, p. 10.
37. "Osama bin Laden, a Chronology of His Life," PBS Frontline, http://www.pbs.org/ wgbh/pages/frontline/shows/binladen/etc/cron.html.
38. There was another terrorist attack on American soil as a result of U.S. policy toward the Muslims, though it was never tied to bin Laden or Al Qaeda. On January 25, 1993, just five days after Bill Clinton was sworn in as president, a man with an AK-47 got out of his car near CIA headquarters in McLean, Virginia, and fired ten times at vehicles lined up to get into the agency. The gunman, a Pakistani named Mir Aimal Kansi, killed two agency employees and wounded three others. Kansi was executed in 2002 for the murders.
39. Miller, Stone, and Mitchell, The Cell, pp. 91-92.
40. Ibid., p. 123.
41. Ibid., p.94.
42. Miller, Fresh Air.
43. Miller, Stone, and Mitchell, The Cell, p. 123.
44. Colum Lynch and Vernon Loeb, "Bin Laden's Network: Terror Conspiracy or Loose Alliance?" Washington Post, August 1, 1999, p. A 1.
45. "Osama bin Laden," PBS Frontline.
46. February 19, 1994, Associated Press.
47. Charles Richards, "Times Have Changed for Terrorists Today," Ottawa Citizen, August 16, 1994, p. A 2.
48. "Unemployment Will Cause Unrest in Gulf," Reuters, February 5, 1995.
49. "Gulf Citizen, No Qualifications, Seeks Well-Paid Job," Economist, April 12, 1997, p. 41.
50. Lisa Beyer et al., "After 9/11: The Saudis: Friend or Foe," Time, September 15, 2003, p. 38; and interview with Richard Clarke.
51. Howard Schneider, "Rote Schooling in Saudi Arabia Leaves Students Ill-Suited to Work," Washington Post, June 12, 1999, p. A 13.
52. Walsh, "The Prince," p. 48.
53. Ibid.
54. Patricia Dane Rogers, "A Princely View: A Bird's-Eye Tour of the Saudi Ambassador's Residence," Washington Post, September 8, 1994, p. T 12.
55. David Whitford, "Entrepreneur of the Year," Inc., December 1993, p. 102.
56. Robert G. Kaiser and David Ottaway, "Oil for Security Fueled Close Ties; But Major Differences Led to Tensions," Washington Post, February 11, 2002, p. A 1.

[admin]

CHAPTER TEN: Masters of the Universe

Today, the Carlyle Group is such a well-known player in global commerce, boasting a roster of talent studded with world leaders, that it is easy to forget that the company was once merely a prescient idea. On a bright summer afternoon in 2003, David Rubenstein, the creator of that idea, sits behind his desk at 1001 Pennsylvania Avenue in Washington. [1] As founding partner and managing director of Carlyle, one of the world's biggest private equity firms, the fifty-two-year-old Rubenstein works out of an elegant but Spartan office. A scale model of a fancy corporate jet someone is trying to sell him occupies an otherwise barren and nondescript conference table. But it has been left there as an oversight, not to impress. Rubenstein's office is a study in anonymity. It has virtually no personal effects on display -- not even the requisite photos of his wife and three children. He inhabits it, and his somewhat rumpled pin-striped suit, as a driven man, an ascetic workaholic. He does not golf. He works. The Carlyle Group is not just his job. It is his life.

Rubenstein is now rich and powerful -- though he bristles at such notions -- but in some ways he has not changed much since he was a lowly $48,000-a-year domestic policy adviser in Jimmy Carter's White House. Back then, Rubenstein was the subject of one profile after another in which he was consistently characterized as the archetypal Beltway grind who was legendary for putting in eighteen-hour days and subsisting on vending-machine cuisine. He still uses his most famous quote from back then with reporters today: "Machine food is underrated." [3]

But the days of being a poorly paid, junk-food-ingesting policy wonk are long gone for Rubenstein. [4] For more than a decade, he has been consorting with multibillionaires and world leaders daily. In some measure, geography is metaphor, and as a result Rubenstein is deeply chagrined about the location of Carlyle's Washington offices midway between the White House and the Capitol, close to the center of power of the Western world. The reason is simple. Carlyle, a company that didn't even exist until 1987, in an industry that, in this form at least, is relatively new, has gone from zero to $16 billion in assets under management, making it one of the fastest-growing companies in the world. The people tied to Carlyle as partners, advisers, counselors, or directors of its companies have included the most powerful people in the world: former president George H. W. Bush, former secretary of state James Baker, former prime minister John Major of Great Britain, former secretary of defense Frank Carlucci, and former head of the Office of Management and Budget Richard Darman. There are or have been former heads of state from the Philippines, South Korea, and Thailand, former cabinet officials, ambassadors, heads of government regulatory agencies such as the Securities and Exchange Commission and the Federal Communications Commission, directors of stock exchanges, and the like. Even the current president of the United States, George W. Bush, was a director of a Carlyle company at one time.

All of which has led critics to conclude what may seem woefully obvious: Carlyle is spectacularly well-connected politically. Yes, the firm has made lots of smart business decisions, but ultimately it is Carlyle's seemingly unfettered access to power that makes it so distinctive. Carlyle has what everyone wants: the luxury of being able to make decisions -- multibillion-dollar decisions, at that -- with a reasonable certainty that it knows the outcome of its decisions in advance. If defense companies are on sale at depressed prices, for example, Carlyle knows there is a good chance that it can line up billions of dollars of military contracts for them. As a result, it can parlay its political connections into vast amounts of equity.

That's the conventional wisdom about the Carlyle Group. David Rubenstein abhors it. And when he meets the press, he goes to Herculean lengths to put that conceit to rest. Rubenstein once even invited a Washington Post reporter into the wood- paneled den of his Bethesda, Maryland, home and fairly shouted at him, "We're not that well connected!" At the time, Rubenstein was surrounded by candid photos of himself and his buddies, including one of him on a plane with George W. Bush; another of him with former president George H. W. Bush and his wife, Barbara; another with Mikhail Gorbachev; with Jimmy Carter; and of course, Rubenstein with his close personal friend the pope. [5]

On this particular day, however, Rubenstein tries a softer sell. "By focusing on Bush, James Baker, and John Major, the press has missed the real story about Carlyle," he says. "They would have you believe that James Baker is sitting in his office calling the chairman of General Motors and saying Carlyle wants you to buy this or buy that. It just doesn't happen that way."

What has really happened and continues to happen merits a chapter somewhere in the history of capitalism and the darker arts of influence peddling. Before Carlyle came along, the so-called revolving door in Washington worked something like this: As every new administration moved into Washington, a coterie of powerful Beltway politicians would move out from the public sector into the private sector, where they cashed in by renting their access to power for $500,000 a year or so as lawyers or lobbyists at huge law firms like Williams & Connolly or Akin Gump Strauss Hauer & Feld, and PR firms like Hill & Knowlton. Everyone did it -- Democrats and Republicans alike.

But after laboring over multibillion-dollar defense contracts, certain politicians began to realize that they could do rather better than a mere half million dollars or so a year. Much better. In an era of trillion-dollar federal budgets, half a million was chump change, proverbial shoe-shine money. How come the guys on Wall Street were Masters of the Universe when the men on Capitol Hill managed so much more money?

As a result, through Carlyle, the most powerful figures of the Reagan-Bush era decided not just to rent their access to the White House, to the Pentagon, to the regulatory agencies, but to transform it into corporate assets -- real equity in publicly held corporations -- stocks worth hundreds of millions of dollars. Carlyle was on its way to perfecting the art of what might be called "access capitalism." [6] [i]

To pull it off, Rubenstein first assembled a critical mass of great international icons in the eighties to form a shadow government of sorts that gave it political clout that was unparalleled among investment firms. These politicians who had forged political power out of capital, particularly in the energy and defense sectors, now could reverse the process and transform their political clout into capital. [ii]

Named after the elegant hotel on New York's fashionable Upper East Side, the Carlyle Group began modestly enough in 1987. Its first success was referred to half-jokingly as the Great Eskimo Tax Scam. At the time, an unusual tax loophole allowed companies in Alaska that were owned by Eskimos to sell their losses to other U.S. companies needing tax write-offs. According to the New Republic, in less than a year Carlyle "shuffled between $1 billion and $2 billion of dubious Eskimo losses into profitable American companies," taking fees of between $10 million and $20 million. [7]

But Rubenstein had more on his mind than Eskimo tax losses. This was the go-go era of leveraged buyouts, and for a couple of years in the late eighties, he participated in the zeitgeist of the LBO frenzy with mixed results. Ultimately, his real goal was far more grandiose -- to create a world-class merchant bank in Washington that could compete with the big Wall Street firms such as the Blackstone Group, Kohlberg Kravis Roberts, and ultimately, even the legendary Goldman Sachs.

As Rubenstein saw it, Carlyle would be different from the flash-and-dash of the eighties leveraged-buyout firms. It would be an institution. For the most part, the LBO firms of that heady era were run by men afflicted with the Master of the Universe Syndrome, men whose egos had become inflated after doing too many $10-billion deals, men who chortled with delight over having their own private Gulfstream G5 jets, or in being a member of Augusta National, the legendary Georgia golf course where the Masters is played each year.

Moreover, many of these firms were almost completely dependent on two or three superstars, but they tended to disintegrate once those stars left. "Most people who start these firms are essentially deal-doers who are not building institutions that will survive them," says Rubenstein. "So most private equity firms don't outlast the founders. We want to build an institution that would survive. Then, we will have created something significant."[8]

In terms of its distinctive corporate culture, Rubenstein admired the intensely competitive white-shoe firm of Goldman Sachs, whose ethos of sobriety and level headedness had helped it avoid some of the excesses of the eighties. But Rubenstein wanted to take Carlyle a step further than Goldman Sachs. His idea was to create a great reputation like Goldman's, a brand, but then to do something Goldman Sachs had never done, to market its brand and put its label on other funds.

It could create real estate, venture-capital, and high-yield funds, then do the same in Europe and Asia. This had been done with mutual funds, but never in the world of private equity. Carlyle would be the first. In the end, it assembled an astoundingly diverse international empire consisting of seventy thousand employees at 165 companies worth $16 billion. It created buyout, venture, and real estate funds in Asia, Europe, and North America. It had investments in aerospace and defense, energy and power, telecommunications and media, financial services and technology. Carlyle owned hotels, soft drink companies, trucking, health care, and real estate. There were holdings in Air Cargo, Inc., the Chicago Marriott hotel, Dr Pepper beverages, United Defense, Vought Aircraft, and much, much more. In defense and aerospace alone, it completed twenty-seven transactions worth $5.8 billion. [9]

Carlyle's first step was to hire former government officials who could help the firm make its reputation in sectors that were tied to the federal government. A company brochure put it best: "We invest in niche opportunities created in industries heavily affected by changes in governmental policies." [10] Its investment strategy was to focus "on industries we know and in which we have a competitive advantage," in particular "federally regulated or impacted industries such as aerospace/defense." [11] Later, once the company made its name, it would move into automotive, health care, transportation, technology, and other industries.

One of Carlyle's first big hires, at a time when it was still a tiny firm with about ten people, was Fred Malek. [12] A classic Washington insider, Malek had met the elder George Bush when Bush was a congressman in 1970. They became close when Bush ran the Republican Party during the Watergate scandal, [13] Malek worked as an aide to President Nixon at a time when the paranoid president suspected a Jewish cabal was working against him in the Labor Department. At Nixon's request, he had counted up the number of Jews employed in the Bureau of Labor Statistics. Malek had worked on George H. W. Bush's presidential campaign in 1988 but was forced to resign when the Jew-counting scandal finally became public. Malek then became part owner of the Texas Rangers baseball team with, among others, George W. Bush, who had just sold his interest in Harken Energy.

Malek's relationship with the elder Bush had lasted more than twenty years, and Bush stood by Malek even through the Jew- counting scandal, speaking to him several times a week. Through Malek, Carlyle began to bring in people who had real political connections.

The strategy of bringing in politically connected businessmen didn't always work. In 1989, Carlyle acquired Caterair, an airline catering company. [14] "[Malek] came to me and said, 'Look, there is a guy who would like to be on the board,'" Rubenstein told a group of Los Angeles investors. "'He's kind of down on his luck a bit. ... He'll be a good board member and be a loyal vote for the management.'" [15]

Rubenstein was not particularly impressed by Malek's friend, but as a favor, he agreed to put him on the board anyway. The new board member came to meetings for about three years and told a few corny jokes, but showed no interest whatsoever in the company. Finally, Rubenstein confronted him. "I'm not sure this is really for you," he said. "Maybe you should do something else. ... You don't know that much about the company."

"I'm getting out of this business anyway," the board member replied. "And I don't really like it that much. So I'm probably going to resign from the board." Rubenstein thanked him and didn't expect to see him again. His name was George W. Bush. [16] [iii]

Carlyle had better luck when another Republican colleague of Malek's came on board, former secretary of defense Frank Carlucci, who had served during the Reagan administration. Carlucci had one of the most wildly mixed reputations in all of Washington. As the Times of London put it, he was regarded by some Beltway insiders ''as honest, loyal, and extraordinarily efficient ... and by others to be a cunning, devious former CIA operative who was involved in lots of Third World skullduggery." [17] He told the reporter that he had been accused of plotting the 1961 assassination of Patrice Lumumba, who won independence for the Congo; the overthrow of Chilean president Salvador Allende; coups in Brazil and Zanzibar; and numerous other covert actions. Carlucci has denied all the accusations and none have been proven.

As detailed by reporters for the Wall Street Journal and the New York Times, Frank Carlucci, the director of Carlyle, as well as other former Bush administration officials, such as former Secretary of State James Baker who is also on the Carlyle payroll, have "made repeated pilgrimages to the bin Laden family's headquarters in Jeddah, Saudi Arabia. ... As commercial jets slammed into the World Trade Center, Frank Carlucci, James Baker, and others associated with Bush, were celebrating at the Ritz Carlton hotel in Washington, DC with members of the Bin Laden family (11). ... The Bush and bin Laden family, the Saudi royal family, Prince Bandar, as well as Frank Carlucci, James Baker, et al., as part of the Carlyle Group, would earn hundreds of millions of dollars because of the 9/11 attack.

-- America Betrayed, by R. Joseph, Ph.D.

James Baker visited the bin Ladens in 1998 and 1999 with [then] Carlyle CEO Frank Carlucci. ... Armitage and Carlucci are both board members of the influential Washington think-tank, the Middle East Policy Council. [This is the same Middle East Policy Council that receives funding from the bin Laden family.]

-- Crossing the Rubicon, by Michael C. Ruppert

Mr. Baker visited the bin Laden family in both 1998 and 1999, according to people close to the family. In the second trip, he traveled on a family plane. Mr. Baker declined comment, as did Mr. Carlucci, a past chairman of Nortel Networks Corp., which has partnered with Saudi Binladin Group on telecommunications ventures.

-- Aftermath of Terror -- Bin Laden Family Could Profit From a Jump in Defense Spending Due to Ties to U.S. Bank, by Daniel Golden, James Bandler and Marcus Walker

Associated with Meridian's Robert Booth Nichols in a Middle Eastern operation called FIDCO, a company that ran arms into and heroin out of Lebanon's Beqaa (Bekaa) Valley, was Harold Okimoto, a high-ranking member of the Yakuza. Okimoto had longed worked under Frank Carlucci (who served as Secretary of Defense and Deputy Director of the CIA before becoming Chairman of The Carlyle Group). Okimoto owned food concessions in casinos around the world—Las Vegas, Reno, Macao, and the Middle East. (Free drinks and anthrax while you play blackjack, anyone?)

-- When Osama Bin Laden Was Tim Osman, by J. Orlin Grabbe

Still on the Iran-contra list was Gen. Colin Powell, whom Bush appointed as Chairman of the Joint Chiefs of Staff. After Vice Admiral John Poindexter and Oliver North had departed from the Old Executive Office Building in November, 1986, Reagan had appointed Frank Carlucci to lead the NSC. Carlucci had brought along Gen. Powell. With Colin Powell as his deputy, Carlucci cleaned up the stables of Augeias of the OEOB-NSC complex in such a way as to minimize damage to Bush. Powell was otherwise a protege of the very Anglophile Caspar Weinberger, and of Carlucci, a man with strong links to Operation Democracy and to the Sears, Roebuck interests.

-- George Bush: The Unauthorized Biography, by Webster G. Tarpley and Anton Chaitkin

NED Board of Directors: Frank Carlucci, Chairman Emeritus, The Carlyle Group

-- NED Officers and Directors, by ned.org

As will be shown later, the National Endowment for Democracy is not only corporatist, but its board of directors is intended to function as a kind of informal Grand Council of Fascism in the totalitarian one-party state that Project Democracy seeks to create in the United States.

-- Project Democracy's Program, The Fascist Corporate State, by Webster Griffin Tarpley

Carlucci is affiliated with the Project for the New American Century, or PNAC, the neo-conservative thinktank.

-- Frank Carlucci, by NationMaster

The Process of Transformation is Likely to Be a Long One, Absent Some Catastrophic and Catalyzing Event Like a New Pearl Harbor

-- Rebuilding America's Defenses, by The Project for the New American Century

With the outbreak of war, Roosevelt appointed Batt vice-chairman of the War Production Board, whose chairman was Sears, Roebuck's Donald Nelson.

-- Trading With the Enemy, by Charles Higham

On June 10, 1954, Bush received a letter from Connecticut resident H. Smith Richardson, owner of Vick Chemical Company (cough drops, Vapo-Rub):

" ... At some time before Fall, Senator, I want to get your advice and counsel on a [new] subject--namely what should be done with the income from a foundation which my brother and I set up, and which will begin its operation in 1956....'' [fn14 ]

This letter presages the establishment of the H. Smith Richardson Foundation, a Bush family-dictated private slush fund which was to be utilized by the Central Intelligence Agency, and by Vice President Bush, for the conduct of his Iran-Contra adventures.

The Bush family knew Richardson and his wife through their mutual friendship with Sears Roebuck's chairman, Gen. Robert E. Wood. General Wood had been president of the America First organization, which had lobbied against war with Hitler Germany. H. Smith Richardson had contributed the start-up money for America First and had spoken out against the U.S. "joining the Communists'' by fighting Hitler. Richardson's wife was a proud relative of Nancy Langehorne from Virginia, who married Lord Astor and backed the Nazis from their Cliveden Estate.

-- George Bush: The Unauthorized Biography, by Webster Tarpley & Anton Chaitkin

At Charles Lindbergh’s suggestion, Douglas Stuart, Jr. asked General Robert E. Wood (Chairman of the Board of Sears, Roebuck & Co.) to lead America First.

-- Outline/Notes of "Sabotage! The Secret War Against America," by Michael Sayers & Albert E. Kahn by Maebrussel.com

CHAPTER III: LINDBERGH: SPREADER OF HITLER'S LIES

-- Facts and Fascism, by George Seldes

8)(tie) Sears Bankruptcy Recovery Management Services
Type of Crime: Fraud
Criminal Fine: $60 million
13 Corporate Crime Reporter 7(1), February 15, 1999
A unit of Sears, Roebuck and Company pled guilty to bankruptcy fraud and agreed to pay a $60 million fine.

-- Top 100 Corporate Criminals of the Decade, by Russell Mokhiber

Like a molecule at full boil, the Captain moved about at high speeds in all directions. He traveled around the world in his own plane (he was a registered pilot and master of sea vessels), buying up LSD and stashing it, swapping different drugs, and building an underground supply. "I scattered it as I went along," he recalled. With his leather pouch full of "wampum" he rode the circuit, and those on the receiving end were always grateful. "We waited for him like the little old lady on the prairie waiting for a copy of the Sears Roebuck catalogue," said Dr. Oscar Janiger, a Los Angeles psychiatrist.

-- Acid Dreams, by Martin A. Lee

But to the pioneer Father Coughlin, Bishop Paul Peter Prang was as the Ford V-8 to the Model A. Prang was more sentimental than Coughlin; he shouted more; he agonized more; he reviled more enemies by name, and rather scandalously; he told more funny stories, and ever so many more tragic stories about the repentant deathbeds of bankers, atheists, and Communists. His voice was more nasally native, and he was pure Middle West, with a New England Protestant Scotch–English ancestry, where Coughlin was always a little suspect, in the Sears–Roebuck regions, as a Roman Catholic with an agreeable Irish accent.

-- It Can't Happen Here, by Sinclair Lewis

Wackenhut is the largest single company supplying security to U.S. embassies overseas; several of the 13 embassies it guards have been in important hotbeds of espionage, such as Chile, Greece and El Salvador. It also guards nearly all the most strategic government facilities in the U.S., including the Alaskan oil pipeline, the Hanford nuclear-waste facility, the Savannah River plutonium plant and the Strategic Petroleum Reserve. Wackenhut maintains an especially close relationship with the federal government in other ways as well. While early boards of directors included such prominent personalities of the political right as Captain Eddie Rickenbacker; General Mark Clark and Ralph E. Davis, a John Birch Society leader, current and recent members of the board have included much of the country's recent national-security directorate: former FBI director Clarence Kelley; former Defense secretary and former CIA deputy director Frank Carlucci: former Defense Intelligence Agent director General Joseph Carroll; former U.S. Secret Service director James J. Rowley; former Marine commandant P. X. Kelley; and acting chairman of President Bush's foreign-intelligence advisory board and former CIA deputy director Admiral Bobby Ray Inman. Before his appointment as Reagan's CIA director, the late William Casey was Wackenhut's outside legal counsel. The company has 30,000 armed employees on its payroll.

-- Inside the Shadow CIA, by John Connolly

The other person with whom Rogers claims to have discussed Kamal Adham was Sandra Charles, a former staffer on the National Security Council who left the White House at approximately the same time Rogers did in order to work for the International Planning and Analysis Center, a consulting firm headed by Frank Carlucci, the former Deputy Director of the CIA and Secretary of Defense. Like Bamieh, Charles had a background in the Middle East. (16)

-- The BCCI Affair, A Report to the Committee on Foreign Relations

The Carlyle Group, a private massive equity firm, the 12th largest defense business with an obscenely high profit margin, is a business "arrangement" between the Bush and Bin Laden families, wealthy Saudis, former British Prime Minister John Major, James Baker III, Afsaneh Masheyekhi, Frank Carlucci, Colin Powell, other former US Government administrators, and Madeleine Albright’s daughter. The Carlyle Group is the ‘gatekeeper’ to the Saudi investment community. It owns 70 percent of Lockheed Martin Marietta, the largest military contractor in the US, and because Carlyle is privately owned, has no scrutiny or accountability whatsoever. A journalist who calls himself ‘a skunk at the garden party’ described investigating the Carlyle Group, he said ‘it’s like shadow boxing with a ghost’. The Group hires as lobbyists the best known politicians from around the world, in order to influence the politics of war, and privately profit from their previous public policies. The conflict of interest is obvious: President George W. Bush is creating wars as his father, former President George Bush, is globally peddling weapons and "protection". Lockheed Martin Marietta now owns Sandia Laboratories, a private contractor that makes the trigger for nuclear weapons, with a Sandia laboratory facility across the street from Los Alamos and Livermore National Laboratories, where the nuclear bombs are made.

-- Depleted Uranium: The Trojan Horse of Nuclear War, by Leuren Moret

Frank C. Carlucci: Then: former secretary of defense, national security advisor; Now: chairman, Carlyle Group; ex-chairman, BDM

-- Slick Deals: Bush Advisers Cashed In on Saudi Gravy Train, by Maggie Mulvihill, Jack Meyers and Jonathan Wells

A collegiate wrestler at Princeton, class of 1952, with his slight frame and competitive spirit, Carlucci was, in the words of his father, "a tough little monkey." On the Princeton wrestling team, he met Donald Rumsfeld, with whom he forged a longtime friendship. Another classmate was none other than James Baker. [18] Both Carlucci and Rumsfeld went on to become secretaries of defense, Carlucci after having been brought in by Ronald Reagan as assistant to the president for national security affairs to clean up the Iran-contra scandal.

By the time Carlucci joined Carlyle in 1989, the Cold War was drawing to a close and the entire defense industry was contracting rapidly, thereby earning the disfavor of Wall Street. Dozens of large firms were for sale, their stock prices weak. Even Carlyle's critics acknowledge that Carlucci's decision to move into the defense sector at this time was a brilliant piece of contrarian strategy. Still, Carlyle was not the only firm bidding for defense companies, and if a buyout firm really wanted to make money, it had to avoid getting caught up in Wall Street feeding frenzies with lots of bidders jacking up the price. "Get into auctions -- that's the way to lose a lot of money," Rubenstein explained. [19]

Fortunately for Carlyle, Carlucci sat on the boards of no fewer than thirty-two companies and organizations [20] and thus enjoyed the inside track over an ordinary executive to reach a CEO interested in selling parts of his company. "Frank gave us the credibility to avoid full-scale auctions," Rubenstein says. [21] Thanks to the influential friends of Carlucci, Baker, and Darman, more than 60 percent of Carlyle's transactions through 1998 were handled on a proprietary basis rather than through auctions. [22] Whether it was as a board member, a friend, or a former customer, Carlucci had had a close relationship with many of the companies in question. As Frank Gaffney, a former Defense Department official, put it, "The one thing that people like Frank Carlucci know how to do is to work the system." [23]

And so, over the next decade, with Carlucci leading the way, one by one Carlyle began wolfing down bargains in the defense industry. In 1990, Carlyle bought BDM, a McLean, Virginia, military consulting firm that was run by a close friend of Carlucci's named Earle Williams, for $115 million in cash and $15 million in notes and other securities. [24] In 1992, while still under Carlyle's ownership, BDM bought the Vinnell Corporation, a professional and technical services company that, among other things, trained the seventy-five-thousand-man Saudi Arabian National Guard to protect the royal family and its oil installations. [iv]

In August 1992, Carlyle bought Vought Aircraft, which makes parts for the B-2 bomber and the C-17 transport plane, for $215 million. Two months later, Carlyle bought the electronics division of General Dynamics, GDE. Less than a year after that, Carlyle purchased the military electronics division of Phillips, Magnavox, for $400 million. In 1997, it bought United Defense, the enormous manufacturer of combat vehicles, artillery, naval guns, missile launchers, and munitions, for $850 million, and in 2000, Northrop Grumman's jet parts unit. [25]

Carlyle had come from nowhere to become one of the largest defense contractors in the world. By 1993, each of its partners was making $2 million to $3 million a year. [26] [v] And along the way, David Rubenstein and two other founding partners, Dan D' Aneillo and William Conway, were becoming enormously wealthy.

***

But that was just the beginning. Now that the Reagan-Bush era had come to an end, David Rubenstein had his eyes on another highly prized acquisition: James A. Baker III. Carlucci had brought great stature to Carlyle, but Baker was in another league altogether. Whether it was heads of state or CEOs, there wasn't a person in the world who would refuse a call from Baker. "I admired Jim Baker," says Rubenstein. "I thought since World War II, he was one of the two most successful people in a nonelective position -- the other being Henry Kissinger. He had held three jobs and he had done all of them spectacularly well. I knew he could give us credibility overseas, so we approached him." [27]

As a former White House chief of staff, secretary of the treasury and secretary of state, statesman, and confidant of George H. W. Bush, Baker was assessing what he was going to do for his next act. If he signed on, Carlyle could go global. It could take what it had done in defense and replicate it in other sectors, on other continents.

And so, in early 1993, not long after Baker left office, Rubenstein met him at his home in the exclusive Foxhall section of Washington. Even though Carlyle had come a long way with Carlucci, it was still a small firm with only about twenty-five people. "I'd say Baker was skeptical," Rubenstein recalls. "His attitude was, 'Who are you guys? You're not exactly Goldman Sachs.'"

If Baker was reticent about joining Carlyle, it was not because he was averse to cashing in on the Gulf War. At roughly the same time, in April 1993, he accompanied former president Bush and two of his sons, Marvin and Neil, on a trip to Kuwait. According to an article by Seymour Hersh in the New Yorker, Baker stayed in Kuwait for meetings in which he represented Enron, the Houston oil company, which was bidding to rebuild a Kuwaiti power plant. [vi] Even though Enron's bid was characterized as "fatally flawed," the article said, it was taken seriously by the powers that be in Kuwait because of "pressure" from the ruling al-Sabah family to compensate Baker for his services during the Gulf War. [28]

The trip demonstrated the kind of cachet Baker had that an ordinary businessman didn't. To woo the former secretary of state, Rubenstein went first to Richard Darman, who had served as Baker's deputy when Baker was Reagan's chief of staff and at the Treasury Department when Baker was its secretary. After one of the most dazzling non-elective careers in the history of American politics, Baker became one of just seven partners at Carlyle. "I have run five presidential campaigns," he told the Financial Times. "I have run the Treasury. I have run the White House twice, and I have run the State Department. I don't want to manage." [29] As usual, Baker took full advantage of his new opportunity: not only did he join Carlyle, but his law firm, Baker Botts, also won Carlyle as a prized client. [30] Darman was so entranced with the possibilities that Carlyle offered that in the end he joined the firm as well.

Carlyle was not the only investment firm to bring in high-powered politicians, of course. In 1988, David Stockman, Ronald Reagan's budget director, had joined the Blackstone Group. Years later, Henry Kissinger joined the firm of Hicks, Muse, Tate & Furst, which itself was closely connected to George W. Bush. But Carlyle was developing the practice of access capitalism into an art form.

Getting James Baker on board had been an extraordinary coup, but in 1995, Rubenstein topped even that by persuading former president George H. W. Bush to join Carlyle as a senior adviser. Later, former prime minister John Major joined as well. For good measure, Carlyle added prominent Democrats such as former Speaker of the House Tom Foley and Arthur Levitt, former head of both the Securities and Exchange Commission and the American Stock Exchange. [31] [vii]

Rubenstein argues that the role played by these high-profile officials in Carlyle has been wildly exaggerated by the press. Carlyle, he points out, has 320 deal makers -- nearly three times as many as the next largest firm. And once they had joined the firm, as Rubenstein tells it, these high-profile statesmen didn't really do that much. "We would have lunches or dinners with prospective investors," he says. "We would talk to investors and Baker would talk about the world and that would be it. He didn't negotiate deals. He would meet with prospective investors and not ask for money."

Likewise, Rubenstein says Bush was not directly involved in fundraising. "Bush's speeches are about what it's like to be a former president, and what it's like to be the father of a president. He doesn't talk about Carlyle or solicit investors."

Of course, just showing up was all that was necessary. [viii] particularly when Bush and Baker went to visit the House of Saud in Saudi Arabia on behalf of Carlyle.

***

Rubenstein takes umbrage when asked about the firm's relationship with the Saudis, which he characterizes as virtually nonexistent. "The implication is that we have so much Saudi business," he says. "Actually, we have no investments in Saudi Arabia and never have." [32]

Maybe. But a look at the many defense companies Carlyle has bought and sold shows that the investment firm has had a long and lucrative history with the Saudis. The Carlyle Group was not just the most prominent outpost for Bush and his allies in the private sector, it was also where the House of Saud and the House of Bush really did business.

Carlyle's first major transaction with the Saudis took place in 1991 when Fred Malek steered Prince Al Waleed bin Talal, a flamboyant thirty-five-year-old Saudi multibillionaire, [33] [ix] to the firm for a deal that would enable him to become the largest individual shareholder in Citicorp, which had seen a sharp fall in its stock price. At the time, Carlyle's partners said they were selected by Al Waleed because they knew the right people in the right places. Suddenly, Carlyle, a nonentity compared to the huge Wall Street firms, had a name. "Little-Known Carlyle Scores Big," read the headline in the New York Times. [34]

Al Waleed's investment would prove enormously profitable. By 1998, his $590 million in stock was worth as much as $7 billion. [35] Soon, the amity between the House of Saud and Carlyle became a two-way street. In bringing together Baker, Darman, Carlucci, and later, former president Bush, Rubenstein had reassembled the team that had helped set up the AWACS deal with Bechtel and Saudi Arabia in the early days of the Reagan-Bush era. A decade earlier they had turned on the spigot for tens of billions of dollars of arms sales to the Saudis.

Carlyle's companies still had to compete with rivals for Saudi defense contracts, but now they had extraordinary advantages. In addition to its familiarity with the corridors of power, Carlyle's trump card was that it could offer members of the royal family or other wealthy Saudis equity in the Carlyle funds that owned defense companies. That way, the Saudis could share in the profits instead of seeing the money leave the kingdom to go to the Bechtels of the world or to rival defense companies. "They knew that the Saudis were tired of relying on foreigners and having all their money leave the country," says an American oil executive with ties to the Saudi royal family. "That's where Carlyle made its claim to fame." [36] [x]

As world leaders who had defended the Saudis during the Gulf War, Bush, Baker, and Major were soon becoming star rainmakers for Carlyle, and the firm's practices allowed them to do so without sullying their hands by asking for money directly. On several occasions, Bush, Baker, and Major flew to Saudi Arabia on behalf of Carlyle to meet with and speak before members of the royal family and wealthy merchants such as the bin Ladens and the bin Mahfouzes. [37] "Carlyle wanted to open up doors," one observer told the Financial Times, "and they bring in Bush and Major, who saved the Saudis' ass in the Gulf War. If you got these guys coming in ... those companies are going to have it pretty good." [38]

As elsewhere, it was standard procedure for former president Bush to give speeches before potential investors. [39] After Bush's speeches, in which he never mentioned investing in Carlyle, CEO David Rubenstein and his fundraising team went in for the money. The Saudis could not have been more receptive.

According to a source close to the Saudi government, the royal family viewed investing in the Carlyle Group as a way to show their deep gratitude to President Bush for defending the Saudis in the Gulf War. "George Bush or James Baker would meet with all the big guys in the royal family," the source says. "Indirectly, the message was, 'I'd appreciate it if you put some money in the Carlyle Group.'" From the Saudi point of view, the source adds, "There is nothing wrong with this. You are basically marketing the relationship you have developed." [40]

And so Carlyle became the vehicle through which the highest officials of the Reagan-Bush era reaped their rewards. Prince Bandar himself, the Washington Post reported, was among those who invested. [41] In 1995, the bin Ladens joined in, investing $2 million in the Carlyle Partners II Fund, a relatively small sum that was widely reported to be part of a larger package. And according to Cherif Sedky, Abdulrahman and Sultan bin Mahfouz, two sons of Khalid bin Mahfouz's, became investors that year as well by making an investment "in the neighborhood of $30 million." [42] [xi] Carlyle put a first cousin of the bin Mahfouzes, a Saudi investment manager named Sami Ba'arma who oversaw their finances, on one of its boards. [43]

Now that key Saudis, who had the blessing of the royal family, shared in the profits, it was not difficult for Carlyle's defense companies to win contracts in Saudi Arabia. In the wake of the 1991 Gulf War, while under Carlyle ownership, defense contractor BDM won contracts for technical support services for the Royal Saudi Air Force [44] and computer systems in Kuwait. [45] In 1993, BDM opened an office in Riyadh and expanded its presence to support its growing interests in the kingdom. [46] In 1994, it won lucrative new contracts to provide technical and logistics support to the Saudi Air Force. [47]

In 1995, after a visit to the kingdom by Carlucci, Vinnell won a $163-million contract to modernize the Saudi Arabian National Guard. [48] According to Associated Press accounts, under a new contract with the Saudis, Vinnell, which was serving as part of the personal bodyguard unit for Crown Prince Abdullah bin Abdul Aziz, the designated heir to King Fahd, agreed to "share the proceeds, taking on a brother-in-law of the crown prince as a joint-venture partner. Saudi Arabia's princes often make government contracts a family affair." [49] In July 1995, BDM announced its earnings per share had increased 46 percent, in large measure due to the company's expansion in Saudi Arabia. [50] In all, BDM alone had more than $5 billion in contracts with the Saudis over two decades. [51]

In 1994, the Saudis spent $6 billion on fifty U.S.-made commercial airliners, the tail sections of which were made by Carlyle's Vought Aircraft. [52] United Defense, which Carlyle had bought in 1997, quietly operated joint ventures in Saudi Arabia. [53] Among many other items, United Defense manufactured the Bradley Fighting Vehicle, which forms the core of American mechanized forces, two thousand of which were used in the 1991 Gulf War. [xii] Through a joint venture with the Saudi government, United Defense provided training and maintenance for the Bradleys that were purchased by the Royal Saudi Land Forces after the Gulf War. [54]

As a private equity firm, Carlyle's goal was not long-term profits for the companies it acquired. Rather, its strategy was to buy companies cheaply, rebuild them to the highest levels of profitability possible, and sell them within three to five years -- at huge margins. Thanks in large part to the Saudi contracts, its defense portfolio performed handsomely. When they were sold off, the defense deals Carlucci had brought in to the firm reaped some $2 billion in profits. [55] This for a company that, according to Rubenstein, had no investments in Saudi Arabia.

_______________

[i] The term access capitalist was first used in a 1993 New Republic piece by Michael Lewis that was one of the first serious critiques of Carlyle.
[ii] Baker became a full partner in Carlyle, but former president George H. W. Bush did not. He was paid by the appearance -- what was reported to be $80,000 to $100,000 per speech. He was allowed to reinvest his earnings in Carlyle funds, though his investments did not end up in companies that do business with the U.S. government.
[iii] At the time, Caterair was carrying an enormous amount of debt financing and trying to cope with unexpected changes in the airline industry that had already led to more than $263 million in operating losses. As a result of its poor performance, the company became known as Craterair, and when Bush ran for governor of Texas in 1994, he dropped his board membership from his official campaign resume.

[iv] Readers may recall that Vinnell was called in to help put down the uprising known as the Mecca Affair in 1979.
[v] According to Chris Ullman, a spokesman for Carlyle, the firm's most recent evaluation, in 2001, put Carlyle's worth at approximately $3.2 billion. Ullman added that the firm's three founding partners, owned substantially more than 50 percent but less than 75 percent of that. Using the 2001 evaluation, that would mean that the average share for each of the three founding partners would be worth between $533 million and $800 million.
The remaining equity in Carlyle, if divided equally among the twenty other partners, would yield an average of $40 million to $80 million per partner. Ullman points out, however, that the shares are not divided equally among the partners, and he notes that Carlyle is highly illiquid.
[vi] Marvin Bush was representing a company selling electronic fences to Kuwait, and Neil was selling antipollution equipment to Kuwaiti oil contractors. All parties concerned insisted there was no conflict of interest. But another hero of the Gulf War, General Norman Schwarzkopf, shied away from business with Kuwait that could be characterized as war profiteering. "I told them no," he said. "... American men and women were willing to die in Kuwait. Why should I profit from their sacrifice?"
[vii] Carlyle's formula was so successful that several of its key figures left to start similar investment firms on their own. One of Carlyle's cofounders, Stephen Norris, left the firm to start Appian Group, with former secretary of state Lawrence Eagleburger as an adviser. Fred Malek went on to chair Thayer Capital Partners, and Alton Keel, the former NATO ambassador, left Carlyle to start Atlantic Partners.
[viii] Carlyle also had an advantage over its rivals when it came to pitching portfolio managers from state funds -- given that two governors were members of the Bush family. In March 1995, the University of Texas Board of Regents voted to invest $10 million in one of the Carlyle Group's funds, Carlyle Partners II, at a time when George W. Bush was the governor of Texas and had direct power over the board. In addition, the Florida State Board of Administration had placed a $200-million investment in Carlyle that had begun before Jeb Bush became governor of Florida, a relationship that continued during his administration.
[ix] Shortly after 9/11, Al Waleed offered to give $10 million to the World Trade Center victims' fund, but his gift was rejected by New York mayor Rudy Giuliani when Al Waleed suggested the United States reexamine its policy toward the Palestinians. Al Waleed had also been the subject of an earlier debacle. After taking his huge position with Citicorp, of which Diners Club was a subsidiary, he distributed Diners Club credit cards to his relatives, which is to say, the House of Saud. According to The House of Saud, by Said K. Aburish, a few months later Diners Club was faced with $30 million in charges it refused to honor. The reason was typical of the thinking of the House of Saud, asserted Aburish, in that "the recipients proceeded to use [the credit cards] without knowing that they had to pay for their purchases." As a result, the Diners Club ceased to operate in the kingdom of Saudi Arabia.
[x] The Carlyle Group also participated in what was called the Economic Offset Program, through which American defense companies selling arms to the Saudis gave back some of their revenues through contracts to Saudi businesses, many of which were connected to the House of Saud.
[xi] The Carlyle Group categorically denied that Prince Bandar or the bin Mahfouz family ever invested in Carlyle. When apprised of Carlyle's denial, Cherif Sedky stood by his original statement. "I assume that Carlyle has records of investments from somebody on the bin Mahfouz side, whether it is with Sami Ba'arma as a nominee or someone else," he said, in an email to the author.
[xii] United Defense also manufactured another weapons system named, astonishingly enough, the Crusader, as if they were oblivious to the implications of sending Crusaders into battle in the Islamic world. Given that United Defense had made billions of dollars selling tanks to the Saudis, it was not exactly a wise marketing ploy.

NOTES:

1. Interview with David Rubenstein.
2. Robert H. Williams, "Postscript," Washington Post, June 27, 1977, p. A 3.
3. Michael Lewis, "The Access Capitalists -- Influence-Peddling: The Next Generation; The Carlyle Group," New Republic, October 18, 1993, cover story.
4. Williams, "Postscript," p. A 3.
5. Greg Schneider, "Connections and Then Some; David Rubenstein Has Made Millions Pairing the Powerful with the Rich," Washington Post, March 16, 2003, p. F1.
6. Lewis, "The Access Capitalists."
7. Ibid.
8. Interview with David Rubenstein.
9. Carlyle website, http://www.thecarlylegroup.corn/eng/ind ... ry495.html.
10. Melanie Warner, "What Do George Bush, Arthur Levitt, Jim Baker, Dick Darman, and John Major All Have in Common?" Fortune, March 18, 2002, p. 104.
11. Tim Shorrock, "Crony Capitalism Goes Global," Nation, April 1, 2002.
12. Interview with David Rubenstein.
13. Christopher Connell, "Malek Juggles Jobs to Plan Economic Summit," Associated Press, Apri1 21, 1990.
14. Beth Ewen, "Malek Brings Cargo of Controversy to NWA," Minneapolis-St. Paul City Business, October 9, 1989, p. 1.
15. David Rubenstein, speech to the Los Angeles County Employees Retirement Association, http://www.pacifica.org/programs/dn/030703.html .
16. David Ignatius, "Bush's Fancy Financial Footwork," Washington Post, August 6, 2002, p. 15.
17. "Profile on Frank Carlucci: From the Knives of the Congo to Darkest Pentagon," Times (London), November 8, 1987.
18. Lewis, "The Access Capitalists."
19. Ibid.
20. Ibid.
21. Interview with David Rubenstein.
22. Erica Copulsky, "Gadzooks! -- The Super LBO Players Increasingly Are Those That Are Expanding Their Reach into New Product Lines or Geographic Regions," Investment Dealers Digest, August 17, 1998.
23. Lewis, "The Access Capitalists."
24. Ibid.; and Alison Leight Cowan, "Carlyle Getting Part of Ford Aerospace," New York Times, September 19, 1990, p. D5.
25. Katie Fairbank, "Carlyle Builds Defense Portfolio," Dallas Morning News, June 18, 2000; and PR Newswire Association, October 27, 1994.
26. Leslie Wayne, "Elder Bush in Big G.O.P. Cast Toiling for Top Equity Firm," New York Times, March 5, 2001, p. A 1.
27. Interview with David Rubenstein.
28. Hotline, August 20, 1993; and Louis Dubose, "O Brother, Where Art Thou?" Austin Chronicle, March 16, 2001.
29. Alan Friedman, "Big Names at Little Known Investment House," Financial Times, September 30, 1993, p. 27.
30. Baker Botts website, http://www.bakerbotts.com.
31. Michael Carroll, "Doing the Washington-Wall Street Shuffle," Institutional Investor, September 1996, pp. 48-66.
32. Interview with David Rubenstein.
33. Said K. Aburish, The Rise, Corruption and Coming Fall of the House of Saud, p. 82.
34. Kenneth Gilpin, "Little-Known Carlyle Scores Big," New York Times, March 26, 1991, p. D 1.
35. Nigel Dempster, "Desert Storm Costs Saudi Prince £76M," Daily Mail, August 6, 1998, p. 33.
36. Interview with Texas oil executive.
37. Interview with Chris Ullman, vice president, Carlyle Group; and Cherif Sedky, attorney for the bin Mahfouz family, via email.
38. http://www.globalarchive.ft.com/globala ... +and+Saudi.
39. Interviews with Chris Ullman and David Rubenstein.
40. Interview with oil analyst.
41. Robert G. Kaiser, "Enormous Wealth Spilled into American Coffers," Washington Post, February 11, 2002, p. A 17.
42. Interview by email with Cherif Sedky.
43. Ibid.
44. Laura Litvan and Jay Mallin, "Race Is On for Kuwait Projects," Washington Times, March 5, 1991, p. A 1.
45. PR Newswire, June 29, 1993.
46. "BDM Seeks to Buy 25pc of ISE," Moneyclips Ltd., April 10, 1995.
47. PR Newswire, October 27, 1994.
48. PR Newswire, May 3, 1995.
49. Charles J. Hanley, "Saudi Guard Gets Quiet Help," Associated Press, March 22, 1997.
50. PR Newswire, July 20, 1995.
51. Martin Walker and David Pallister, "Saudi Bomb Targets U.S. Military Role," Guardian, November 14, 1995, p. 13.
52. Richard Oppel, "Aerospace Deals Could Aid Area," Dallas Morning News, February 17, 1994, p. 1 D.
53. "Corporate Profile for United Defense," Business Wire, February 27, 1998.
54. Shorrock, "Crony Capitalism Goes Global."
55. Warner, "What Do George Bush, Arthur Levitt, Jim Baker, Dick Darman, and John Major All Have in Common?" p. 104.

[admin]

CHAPTER ELEVEN: A House Divided

Lucrative as the House of Bush's relationship was with the Saudis through Carlyle, it did not come without a price. After all, the ruling Saudis were still the custodians of Wahhabi Islam, and now its most militant adherents, led by Osama bin Laden, were on the warpath. At precisely 11:30 a.m. on November 13, 1995, just before the midday call to prayers in Riyadh, a car bomb exploded outside the offices housing the Military Cooperation Program, a nondescript structure just off Thirty Street, which has been described as Riyadh's answer to Rodeo Drive. [1] The explosion killed seven people -- five of them Americans -- and wounded sixty others, among them several American advisers with Vinnell, the mysterious military consulting firm that trained the Saudi Arabian National Guard (SANG). The rather anonymous-looking building was staffed in part by nonuniformed Americans and its offices were shared by SANG and Vinnell.

As the Bush secretary of defense during Desert Shield/Desert Storm (1990-91), Cheney also directed special operations involving Kurdish rebels in northern Iraq. The Kurds' primary source of income for more than 50 years has been heroin smuggling from Afghanistan and Pakistan through Iran, Iraq, and Turkey. Having had some personal experience with Brown and Root, I took note when the Los Angeles Times observed that on March 22, 1991, a group of gunmen burst into the Ankara, Turkey, offices of the joint venture, Vinnell, Brown and Root and assassinated retired Air Force Chief Master Sergeant John Gandy.

-- Crossing the Rubicon, by Michael C. Ruppert

The bombing could not definitively be pinned on bin Laden, but his fingerprints were everywhere. The techniques behind it -- a powerful car bomb with smaller antipersonnel devices, the types of fuses and explosives -- were identical to those used in his terrorist training camps in Sudan and in Pakistan. [2] Bin Laden himself described the attack as "praiseworthy terrorism." [3] Several militant Islamic fundamentalist groups -- apparently using bogus names -- claimed credit for it and cited him as their major influence.

In striking their most serious blow against the House of Saud since the Mecca Affair in 1979, militant Islamists had hit a target of extraordinary symbolic value -- an American-staffed, private military facility at the heart of the supposedly impregnable al- Saud family, a building that represented the ties between the House of Saud and its mighty American defenders. And in addition, knowingly or not, the bombers had attacked a company linked to George H. W. Bush and James Baker, who had sent the infidel Americans to Saudi Arabia in the first place.

In response to a terrorist attack so pregnant with meaning, both the House of Saud and the House of Bush took the same course of action: they acted as if it had no significance whatsoever. Prince Bandar categorically declared that Saudi "dissidents did not cause the car bombing." [4] Later, he explained, "Islamic radicals are very, very small and looked upon in this country as outcasts. ... Islamic extremists are not a threat to the stability of the country." [5] Likewise al-Hayah, a Saudi publication owned by another son of Prince Sultan, Khalid bin Sultan, and something of a mouthpiece for the defense minister, asserted, "No one believes that the blast has internal connotations." [6]

The House of Bush took the same tack. In an appearance on CBS's This Morning, James Baker blandly told newscaster Paula Zahn, "You see a lot of terrorism in that part of the world, but very little of it in Saudi Arabia. ... We'll just have to wait and see who's responsible." [7] Baker was interviewed because of his weighty experience in the Middle East. But strikingly, in his CBS appearance, he was not identified as a partner in Carlyle, which owned Vinnell's parent company, BDM. Nor did he acknowledge that he had any relationship whatsoever to the company that had been bombed. Likewise, Carlyle itself refrained from issuing a statement or an expression of condolences to the families of the victims, even though several of Vinnell's employees had been wounded in the attack. [8] Carlyle's companies had billions of dollars in business with the Saudis. Its interests were best served by keeping a low profile. Discretion was the order of the day.

***

The Clinton administration, however, did not have the luxury of ignoring the Riyadh bombing. For nearly two decades, America had quietly served as the military guardian of Wahhabi Islam. But how could that protection continue now that the more militant neo Wahhabis had declared war on America?

In fact, the Clinton administration's fight against terrorism had actually begun even before the Riyadh bombing. In June 1995, Clinton signed a presidential directive reorganizing the management of federal agencies in the event of a terrorist attack. [9] In October, he ordered the Departments of Justice, Treasury, and State, the CIA, and the National Security Council to integrate their efforts against money laundering for terrorists. [10] And immediately after the attack in Riyadh, President Clinton sent a dozen FBI agents to Saudi Arabia and insisted on being informed of the investigation into "this hideous act." [11]

Initially, Clinton counterterrorism officials naively saw bin Laden as merely a financier of terror. [12] "At first we thought that by watching him we would find out who the real bad guys were, because they would be coming to him for money," says Steven Simon, the senior director for transnational threats on the National Security Council in the Clinton administration. [13]

But the attacks escalated. Just six days after the Riyadh bombing, on November 19, 1995, the Egyptian embassy in Pakistan was bombed, killing sixteen people and wounding sixty. [14] The bombing was said to have been the handiwork of bin Laden's Egyptian colleague Ayman al-Zawahiri. A year earlier, Pakistani prime minister Benazir Bhutto had extradited Ramzi Yousef, a conspirator in the 1993 World Trade Center bombing, and more than a dozen Egyptian militants, to the United States and Egypt respectively. [15] Authorities believe that Bhutto's campaign against terrorism was the motive behind the bombing.

On June 25, 1996, a truck bomb with five thousand pounds of explosives rocked the Khobar Towers military housing complex in Dharhan, Saudi Arabia, killing dozens of people, including nineteen American soldiers, and wounding more than five hundred others. The blast left a crater thirty-five feet deep and eighty-five feet across. Again, bin Laden was suspected. [16] [i]

Soon the Clinton administration realized that bin Laden had radically redefined the way terrorism worked. He was not just underwriting bombings, he was also running huge training camps for terrorists and had set up a network to finance them. With his Al Qaeda operatives, he could ship massive quantities of arms across international borders and use suicide bombers to engage in sophisticated feats of asymmetrical warfare. He was even trying to obtain materials for nuclear weapons and to develop chemical arms. [17] Moreover, he and his network embodied a new, transnational entity, an Islamic fundamentalist army that was state-free. With bin Laden in the saddle, no longer were terrorists dependent on state sponsors. In Sudan, and later in Afghanistan, it was he who helped out the government financially not the other way around.

As a result, the administration's approach to fighting terrorism changed dramatically. "Clinton immediately understood the transnational nature of terrorism," says Will Wechsler, who served as director for transnational threats on Clinton's National Security Council. [18] The CIA, which heretofore had focused solely on a country-by-country approach to terrorism, created its first "virtual" station, the UBL [ii] station, targeting Osama bin Laden and Al Qaeda. [19] Richard Clarke, a career civil servant with a rare facility for navigating difficult bureaucracies, was appointed chairman of the Coordinating Sub-group (CSG) to centralize control of various interagency groups -- in effect becoming the nation's first counterterrorism czar. National Security Council "threat" meetings were held three times a week. Clinton put billions into stockpiling antidotes and vaccines against a possible bioterrorism attack.

In early 1996, the Clinton administration pulled the U.S. embassy staff out of Sudan and urged all other Americans to leave the country. It demanded that the Sudanese turn over information on bin Laden's finances, give it access to terrorist training camps, and that the Sudanese expel bin Laden. Conservative critics often attack the Clinton administration for missing an opportunity to capture bin Laden when the Sudanese allegedly offered to turn the terrorist over to the United States in March 1996. But in fact, the Sudanese had offered to send him back to Saudi Arabia, not to the United States. However, as Daniel Benjamin and Steven Simon, both of whom served on Clinton's National Security Council, report in The Age of Sacred Terror, there was absolutely no likelihood that the Saudis would take him. "Riyadh had stripped bin Laden of his citizenship in 1994 for a reason. It would do everything it could to keep him out of the kingdom, where he would have become a magnet for opponents of the monarch. As the scion of one of Saudi Arabia's wealthiest clans, bin Laden was untouchable. U.S. officials approached the Saudis, but were turned down cold. ... The issue came up again several times over the next few years, but the kingdom's aversion to taking custody of bin Laden remained a stumbling block." [20] Bin Laden ended up leaving Sudan in 1996 for Afghanistan, where the Taliban served as his host.

***

But Clinton was up against more than just Osama bin Laden. At times, partisan resistance from Republicans and Saudi Arabia's lack of cooperation thwarted crucial counterterrorism measures. An early example was the administration's bill to bar foreign countries and banks from U.S. financial markets unless they cooperated with investigations into money laundering. The legislation was bitterly opposed by the banking industry, which objected to the new constraints it would impose on financial institutions, and as a result it was killed by the chairman of the Senate Banking Committee, Phil Gramm, a Republican from Texas, who called the counterterrorism efforts "totalitarian." [21] The right-wing Gramm added that he killed the bill because he was a "civil libertarian," a label that was wildly incongruous with his political history.

Worse, Clinton never had the warm relationship with the Saudis that Bush enjoyed, especially once he began pressuring them to clamp down on terrorism. [22] [iii] Wary of having a visible American presence on the streets of Riyadh after the November 1995 bombing, the Saudis conducted their investigation behind closed doors. Five months later, they announced that four suspects had been arrested. But before American authorities could interrogate them, the Saudis beheaded the four men. [23]

After the Khobar Towers bombing in 1996, Clinton's national security adviser, Sandy Berger, repeatedly met with Prince Bandar to press for better Saudi cooperation with the FBI. [24] But the Saudis still refused to allow the FBI access to the suspects or relevant materials and tried to blame Iran for the bombing. Berger got nowhere. According to Benjamin and Simon, Bandar's unending evasions were so frustrating that Berger described them as "Groundhog Day" rituals, a reference to the Bill Murray movie in which one day repeats itself endlessly.

At the same time Prince Bandar was stalling Berger, however, he had secretly established a back channel to FBI director Louis Freeh. A 1993 Clinton appointee, Freeh had never enjoyed a good relationship with the White House, partly because of the bureau's disastrous failure in counterterrorism. [25] According to Benjamin and Simon, Bandar eagerly exploited Freeh's well-known antipathy toward Clinton to "undercut U.S. efforts to pursue the investigation. " [26]

Notwithstanding Berger's repeated efforts to get Saudi help, Bandar told Freeh again and again that the White House had absolutely no interest in the investigation whatsoever. But President Clinton kept after the Saudis. When he met with Saudi crown prince Abdullah in 1998, [iv] Clinton warned Abdullah that Saudi American relations would suffer if the Saudis did not cooperate on the Khobar Towers investigation. [27] Nevertheless, Bandar continued to tell Freeh that he was the only one in Washington who cared about the Americans who had died in Khobar Towers.

In response, Freeh did something highly irregular. He reached out to former president Bush, knowing full well how Bush was revered by the Saudis, and asked Bush to be his secret emissary to get the Saudis to cooperate with the investigation. [28] Later, Bandar invited Freeh to his estate in northern Virginia and told him the FBI would be allowed to watch through a one- way mirror while Saudis interrogated the suspects. According to Elsa Walsh of the New Yorker, Freeh credited this sudden breakthrough not to the Clinton administration's efforts, but to former president George H. W. Bush. [29]

Whether it was Bush's phone call or pressure from Clinton that actually triggered the Saudi cooperation is not entirely clear. But one thing was certain: the House of Saud preferred Bush, not Clinton, in part because the Democratic administration was violating the unwritten rule about Saudi-American relations; Don't ask any questions about what really goes on in Saudi Arabia. [30]

***

As subsequent events and revelations have made clear, the Saudis had reason to fear the inquiries of the Clinton administration. There was a lot to hide. In the eighties, the House of Saud had encouraged donations to charities that funneled tens of millions of dollars to bin Laden's Afghan Arabs during the Afghanistan War. But over the years, as Al Qaeda evolved from Afghan Arab freedom fighters into sophisticated anti-American terrorists, Osama bin Laden had effectively hijacked countless millions to fund terrorism. As a report sponsored by the Council on Foreign Relations later put it, "These widely unregulated, seldom audited, and generally undocumented practices have allowed unscrupulous actors such as al-Qaeda to access huge sums of money over the years." [31]

The funds regularly flowed through Saudi Arabia's biggest bank, Khalid bin Mahfouz's National Commercial Bank. According to court documents filed in a $1-trillion lawsuit by more than four thousand relatives of the victims of 9/11 against hundreds of wealthy Saudis and others who had allegedly aided bin Laden, "A bank audit of NCB in 1998 showed that over a ten year period, $74 million was funneled by its Zakat Committee to the International Islamic Relief Organization, a Muslim charity headed by Osama bin Laden's brother in law." [32] Congressional testimony by Vincent Cannistraro, former chief of operations for the CIA's Counterterrorism Center, which was also cited in the court case, adds that much of "the money is paid as 'protection' to avoid having the enterprises run by these men attacked" by Al Qaeda terrorists. [33] Money transfers through NCB were allegedly used to finance a number of bin Laden's terrorist acts, including the attempted assassination of Egyptian president Hosni Mubarak in 1995. [34] Mubarak was constantly at war with Islamic militants in his own country and in Sudan.

The National Commercial Bank was not the only institution tied to the bin Mahfouz family alleged to have aided terrorist funding. In 1991, Khalid bin Mahfouz had created the Muwafaq (Blessed Relief) Foundation, hoping, according to a spokesman, "to establish an endowment like the Rockefeller Foundation to give grants for disaster relief, education, and health." [35] His son, Abdulrahman bin Mahfouz, had become a director of it. However, the U.S. Treasury Department later concluded that Muwafaq transferred "millions of dollars from wealthy Saudi businessmen to bin Laden." [36] [v]

Even though the bin Laden family claimed to have cut off ties with their errant terrorist sibling, that was not clearly the case for the entire extended family. According to Carmen bin Laden, an estranged sister-in-law of Osama's, several members of the family may have continued to give money to Osama. [37] At least one member of the family, Osama's brother-in-law Mohammed Jamal Khalifa, was a central figure in Al Qaeda and was widely reported to be linked to the 1993 World Trade Center bombing and was alleged to have funded a Philippine terrorist group.

Two other relatives were key figures in a charitable foundation linked to Osama. The American branch of the World Assembly of Muslim Youth (WAMY) was directed by Abdullah bin Laden, who lived in Falls Church, Virginia, near Washington, D.C. His brother Omar bin Laden was also on WAMY's board. WAMY members have denied that the organization has been involved in terrorist activities. But the charity, which published writings by Islamic scholar Sayyid Qutb, one of bin Laden's intellectual influences, was cited by Indian officials and the Philippine military for funding terrorism in Kashmir and the Philippines. "WAMY was involved in terrorist support activity," says a security official who served under George W. Bush. "There's no doubt about it." [38] FBI documents marked "Secret" and coded "199," indicating a national security case, show that Abdullah bin Laden and Omar bin Laden were under investigation by the FBI for nine months in 1996 and that the file was reopened on September 19, 2001, eight days after the 9/11 attacks. [39]

Then there was the Saudi royal family itself. According to court documents in the 9/11 families' lawsuit, after the Gulf War in 1991, Saudi defense minister Prince Sultan, the father of Prince Bandar, supported and funded several Islamic charities, including the International Islamic Relief Organization, that allegedly provided funds to Osama bin Laden and Al Qaeda totaling at least $6 million. [40] Sultan's attorneys acknowledge that for sixteen consecutive years he approved annual payments of about $266,000 to the International Islamic Relief Organization, a Saudi charity whose U.S. offices were raided by federal agents. [41] [vi]

Finally, there was Prince Bandar. Saudi royalty, including Bandar and his wife, frequently came to the aid of Saudis who had financial trouble when they were abroad. As first reported by Michael Isikoff of Newsweek, in 1998 when Osama Basnan, a Saudi living in California, pleaded for financial assistance from the Saudi embassy in Washington because his wife was suffering from a thyroid condition, Prince Bandar wrote a check for $15,000. In addition, his wife, Princess Haifa bint Faisal, began sending the couple a stipend of roughly $2,000 a month. [42] According to the Baltimore Sun, over a four-year period the sum given by Bandar and his wife came to roughly $130,000. [43] As it turned out, Basnan was said to be an Al Qaeda sympathizer and signed the money over to another Saudi who had moved to the United States, Omar al-Bayoumi. Al- Bayoumi also had Al Qaeda connections -- and he had other things in mind for Bandar's funds. In turn, al-Bayoumi subsidized two other newly arrived Saudis, Nawaf Alhazmi and Khalid Almidhar, two of the men who helped hijack American Airlines Flight 77, which crashed into the Pentagon in the September 11 plot. What had happened was undeniable: Funds from Prince Bandar's wife had indirectly ended up in the hands of the hijackers.

In all these instances, the Saudi royals and the Saudi merchant elite argue, sometimes persuasively, that they did not knowingly aid terrorists or their sympathizers. Given Osama bin Laden's hatred of the royal family and their wealthy merchant allies, it would be counterintuitive to think they would do so. "Who do you think Osama bin Laden really wants to destroy most?" argues Saudi oil analyst Nawaf Obaid. "It's the royal family and billionaires like bin Mahfouz. It's laughable to think that they would intentionally aid bin Laden." [44]

"People say we pay [Al Qaeda] off, but that's simply not the case," adds Nail al-Jubeir, a spokesman for the Saudi embassy in Washington, D.C. "Why would we support people who want to overthrow our own government?" [45] The problem, al- Jubeir explains, was in not having tough regulatory measures to govern the flow of money through these charities, a task that was especially difficult as money circulated through international channels. It was, he adds, essentially a case of innocent contributions gone wrong.

It should certainly be said that the allegations against the Saudi merchant elite and various members of the House of Saud are precisely that -- allegations. Charges that many of them knowingly facilitated the transfer of funds to terrorists have been brought in court and have not been proven.

In fact, in November 2003, the suits against Prince Turki and Prince Sultan were thrown out when U.S. District Court judge James Robertson ruled that there was not sufficient evidence to suggest that the Saudi princes had intentionally funded 9/11. "Plaintiff's allegations that Prince Turki or Prince Sultan funded those who carried out the September 11th attacks would stretch the causation requirement ... not only to the farthest reaches of the common law but perhaps beyond, to terra incognita," Robertson wrote. [46]

"My own view is that extraordinary claims require extraordinary evidence," says Will Wechsler. But, he adds, "The search for the sin of commission makes people overlook the vast sin of omission, which is definitely true. These guys did not pay any serious attention to this issue. They did not give us all the cooperation we needed. There was no real political will to stop this. That's clear." [47]

In fact, whenever the United States tried to investigate these charitable donations or looked at financial institutions such as the National Commercial Bank, the House of Saud performed a well-rehearsed rendition of Captain Renault in Casablanca proclaiming himself "Shocked! Shocked!" that funds were flowing to terrorists. According to counterterrorism czar Richard Clarke, when U.S. counterterrorism officials tried to trace terrorist funding through Islamic charities, the Saudis inevitably came back with one of two answers. "They said we need more information from you, or that they had looked and hadn't found anything. " [48]

Clarke suggests that the lack of cooperation from the Saudis occurs because they have responded to Al Qaeda in different ways. Some actively support the terrorists while some cooperate with Al Qaeda in the hope that the group will leave them alone. Others merely resent American interference in what they see as their own domestic issues. "Some of them were clearly sympathetic to Al Qaeda," Clarke says. [49]

But the larger point is that the complex, impenetrable, and unregulated system of Islamic charities actually enabled the House of Saud to have it both ways. Through their generous charitable donations, they could both establish their bona fides as good Muslims and even buy "protection" from militants. And thanks to the unregulated nature of the charities, they could do so in a way that gave them plausible deniability to the West.

In addition, many things suggest that the House of Saud was not nearly so naive as it professed to be. Despite its pronouncement that the 1995 Riyadh attack was not the work of dissidents, the Saudis clearly knew better. Privately, Minister of Intelligence Prince Turki had even told Egyptian authorities that bin Laden's Afghan Arabs were behind the attack, probably with the help of accomplices who had infiltrated the Saudi National Guard. [50]

In fact, a few days after the bombing, threatening letters had been faxed to the private fax numbers of several high-level Saudi officials, including Prince Turki and Interior Minister Prince Nayef. [51] The implications were staggering. The fax numbers were for the exclusive use of the highest-ranking members of the royal family. The National Guard's sole mission was to protect the House of Saud. Terrorists had penetrated the House of Saud's last line of defense -- and the royal family clearly knew it. Moreover, there were thousands of princes in the family, and many of them were said to be privately delighted by the bombings: "A lot of the royal princes remained sympathetic to bin Laden, even after his citizenship was stripped," says Robert Baer, a former CIA case officer in the Middle East and the author of Sleeping with The Devil. "Quite a few of the junior princes hate the U.S." [52]

Some of the senior royalty may have felt the same way. According to Yossef Bodansky's Bin Laden; The Man Who Declared War on America, it was widely speculated that no less a figure than Prince Salman bin Abdul Aziz, the powerful governor of Riyadh, had advance knowledge of the 1995 bombing and allowed it to take place to solidify his political position. A brother of King Fahd and Prince Sultan's, and a member of the Sudairi Seven, Prince Salman may have hoped to use the growing Islamist violence and his putative ability to control it to advance his fortunes -- perhaps even all the way to the throne. [53]

When it came to dealing with the West, of course, the House of Saud revealed none of this internecine complexity, preferring to project the image of a stable monarchy that ruled a patriotic populace that honored its legitimacy and authority. Despite pressure from Clinton, in the end the Saudis simply declined to press any charges whatsoever against bin Laden for the 1995 Riyadh bombing and the Khobar Towers bombing on 1996. On November 5, 1998, Saudi interior minister Prince Nayef bin Abdul Aziz said, "It has been reported that the two explosions in Riyadh and Khobar were planned by Osama bin Laden. This is not true."

Nayef went further, asserting, with astonishing logic, that because the kingdom had revoked his citizenship, bin Laden was no longer a Saudi and therefore the Saudis no longer had any interest in the activities masterminded by the world's most wanted terrorist. "He does not constitute any security problem to us and has no activity in the kingdom," said Nayef. "Regarding his external activity, we are not concerned because he is not a Saudi citizen." The House of Saud failed to have bin Laden extradited from Afghanistan, where he was a guest of the Taliban, and declined to prosecute him legally. [54]

And so, the double game continued -- though by now, through his repeated bombings, bin Laden had upped the ante. Through the late nineties, cash flowed virtually unrestricted into bin Laden's and Al Qaeda's coffers as they escalated their jihad against the West. In counterterrorism circles, it was widely said that the Saudis had made deals with militant groups such as the Muslim Brotherhood and Hamas, agreeing to fund them in return for a promise not to wreak havoc on Saudi soil. [55] [vii] It was not unreasonable to ask if they were doing the same with Al Qaeda. This was the Saudi veil that the Clinton administration had to penetrate if it was to get a handle on terrorist funding.

Over time, the Clinton administration slowly began to decipher the web of international Islamic religious foundations funneling money to Al Qaeda. In 1998, according to government officials, at the behest of the Clinton administration, the Saudi government audited bin Mahfouz's National Commercial Bank and found that $3 million in bank funds that had been given to Muwafaq (Blessed Relief) allegedly ended up in bin Laden's hands. [56] [viii]

Richard Clarke pounded the table in National Security Council meetings demanding to know about Islamic charities and foundations that may have been funding Al Qaeda. [57] But the administration was not able to move fast enough.

At 5:30 a.m. on August 7, 1998, Bill Clinton was awakened unexpectedly by National Security Adviser Sandy Berger. [58] It was the eighth anniversary of the arrival of U.S. troops in Saudi Arabia leading up to the Gulf War -- or, as bin Laden would have it, the occupation of Islam's holiest sites by the Jewish and Christian Crusaders. To mark the occasion, Osama bin Laden had struck his most violent blows yet against the United States, setting off massive car bombs in front of the U.S. embassy in Dar es Salaam, Tanzania, at 10:30 a.m. local time, and then at the U.S. embassy in Nairobi, Kenya, 450 miles away, just five minutes later.

The carnage was unparalleled in the history of terrorism. In Nairobi, the explosion gutted half the U.S. embassy, leveled a nearby secretarial school, incinerated dozens of people in buses passing by, and left more than a dozen pedestrians dismembered. In Dar es Salaam, the entrance to the U.S. embassy was in ruins. Altogether, about 260 people were killed. Roughly five thousand people were wounded in the twin attacks. Many of the victims were African Muslims.

The magnitude of the explosions and the fact that they had taken place simultaneously suggested an operation of enormous complexity and sophistication. Nearly a ton of military-type explosives was used in each bombing. This huge quantity had been shipped from Pakistan to Tanzania and Kenya, where it was stored in safe houses. Scores of people were involved in a highly compartmentalized operation. [59] Counterterrorism analysts knew immediately who was behind it. For the first time, the eyes of the world turned on Osama bin Laden as master terrorist and public enemy number one.

The operation was extraordinary not just because of the increased ferocity and sophistication of the bombings. There was now a grandiose scope and extraordinary clarity to bin Laden's hallucinatory vision, a paranoid fantasy straight out of the Crusades that called forth the image of heroic Muslims battling a Judeo-Christian alliance to control the holy places of Mecca, Medina, and Jerusalem. In 1996, bin Laden had issued a declaration of jihad specifying that in response to "one of the greatest disasters in the history of Islam," [60] his goals were to drive American forces from the Arabian Peninsula, overthrow the House of Saud, liberate Muslim holy sites, and support Islamic revolution all over the world. [61] In 1998, bin Laden had elaborated on his ruling by issuing another fatwa in the spirit of the Crusades. "We -- with God's help -- call on every Muslim who believes in God and wishes to be rewarded to comply with God's order to kill the Americans and plunder their money wherever and whenever they find it," he declared. [62]

His philosophy mandated that all Muslims take part in brutal terrorist acts. It rationalized the killing not just of American soldiers, but of civilians as well; the killing of not just Americans, but of devout Muslims as well; and the killing not just of Muslim soldiers, but of civilians, women and children included. As bin Laden explained it, the duty of Muslims was "to kill the Americans and their allies -- civilian and military ... in any country in which it is possible." [63]

If necessary, he added, he would even sacrifice the lives of his own children. "Imagine it was my own children [who] were taken hostage," bin Laden said. "And that shielded by this human shield, Islam's enemies started to massacre Muslims. I would not hesitate, I would kill the assassin even if to do that I had to kill my children with my own hands. ... Sometimes, alas, the death of innocents is unavoidable. Islam allows that." [64]

Clinton vowed to strike back. "These acts of terrorist violence are abhorrent, they are inhuman," he said. "We will use all the means at our disposal to bring those responsible to justice."

Less than two weeks after the attacks on the U.S. embassies in East Africa, on August 20, 1998, Clinton launched a two- pronged strike against Al Qaeda targets in Afghanistan and Sudan. The rationale for attacking Afghanistan was incontrovertible. Bin Laden had been encamped there, escaping not long before the U.S. attack. The justification for attacking Sudan was slightly more complicated. Bin Laden still had operations there, including the El-Shifa pharmaceutical factory in Khartoum, which, U.S. intelligence showed, was manufacturing chemical weapons for Al Qaeda. As a result, Clinton ordered a devastating Cruise missile attack against El-Shifa that destroyed the factory.

It may be impossible to corroborate beyond a shadow of a doubt the assertion that the El-Shifa factory was actually producing chemical weapons, but there is strong evidence that the Clinton administration had in fact chosen a legitimate target. The most persuasive case for it was made by Dan Benjamin and Steven Simon in their book, The Age of Sacred Terror. According to the authors, a soil sample obtained by the CIA from El-Shifa showed that the factory was producing EMPTA, which has no commercial use whatsoever, but is an extraordinarily rare chemical used as a precursor for the fabrication of VX. [65] VX is a lethal chemical weapon, a single drop of which can cause death within fifteen minutes of being placed on the skin. [66]

Moreover, additional evidence justifying the El-Shifa bombing was in the testimony of Jamal Ahmed al-Fadl, the first witness for the prosecution in the trial for the bombings of the two embassies in East Africa in 1998. Al Fadl, a Sudanese Islamist who joined Al Qaeda in 1989 and was one of its first members, testified that Al Qaeda did manufacture chemical weapons in Khartoum, which was noted in the New York Review of Books in an article by Benjamin and Simon. [67] [ix]

Unfortunately, Clinton's strike against bin Laden came while the president was enmeshed in the Monica Lewinsky sex scandal. Just three days before he struck El-Shifa, on August 17, the president had appeared before a grand jury investigating his sexual relationship with the young intern. Caught in a political whirlpool, Clinton was weakened further by a cultural event: several months earlier Wag the Dog, a movie starring Robert De Niro and Dustin Hoffman, had been released, about a foreign war fabricated by the White House to cover up a presidential sex scandal.

Whether or not politics was imitating art, the juxtaposition of the movie and Clinton's dilemma was irresistible. Partisan politicians and the press had a field day. From right-wing talk radio hosts to the toniest magazines in the land, virtually every media outlet in the English-speaking world picked up the Wag the Dog theme. Radio talk-show host Rush Limbaugh demanded to know how many innocent people were killed in bombing "an aspirin factory." [68] Christopher Hitchens of Vanity Fair and the Nation alone raised the subject in more than half a dozen columns he wrote. [69] Republican senator Dan Coats of Indiana accused Clinton of "lies and deceit and manipulations and deceptions." [70] Former CIA officials criticized the legitimacy of El- Shifa as a target. [71] Thousands of articles asserted that the administration had destroyed an innocent target, a factory that made medication for poor people, not deadly nerve gas, that the factory was struck not for reasons of national security, but to distract the public from the Lewinsky affair.

These were not just partisan attacks; they spanned the political spectrum and included supposedly liberal icons in the media such as the New Yorker, the New York Times, and CBS's Dan Rather. [72] A profile in the Washington Post characterized the owner of the El-Shifa factory, Saleh Idriss, as a rags-to-riches son of a tailor who "wasn't making nerve gas for terrorists, just ibuprofen for headaches" [73] and did not allow that there might be more to consider. Idriss had worked at both BCCI and the National Commercial Bank of Saudi Arabia, and the article described him as a protege of Khalid bin Mahfouz's. [x] But it failed to point out that, as ABC News had in fact already reported, sources said bin Mahfouz had been "accused of using his bank to funnel money to charities and companies that are fronts for bin Laden's organization." [74] Nor did it mention that the plant's general manager lived in bin Laden's Khartoum home or that the area was swarming with Al Qaeda operatives. [75] [xi]

Regardless of the legitimacy of the target, a large measure of the failure of Clinton's battle against terrorism was the fault of the president himself. By getting involved with Monica Lewinsky, he had given his enemies exactly what they were looking for. The ensuing impeachment hearings provided a ready-made, ongoing forum for an epic circus that far, far surpassed any concerns Americans had for national security. Next to the lascivious spectacle of a search for a semen-stained dress, the terrorist threat of Al Qaeda was nothing more than a weak sideshow starring an unfamiliar and bizarrely dressed Arab with a weird and exotic name. At a time when Wall Street was euphoric over dot-com mania, and the economy was booming as never before, the American zeitgeist had no room for faraway fears.

Worse, now that Clinton's attempt to protect Americans from chemical weapons had been ridiculed, his counterterrorist efforts, however noble their intentions, were crippled. The Lewinsky affair had so depleted Clinton's political capital that there was no support for strong military measures in Afghanistan. At a time when national security was a genuine issue, the administration was also widely criticized for trying to get bin Laden, because in doing so, they had "mythologized" him and helped build him into a hero among Muslims. Yet Clinton continued to fight bin Laden. He cut off relations with the Taliban government in Afghanistan that harbored bin Laden. He pressured the Saudis to negotiate with the Taliban to extradite bin Laden, and he pressured the Saudis to audit the National Commercial Bank's funding of terrorism. But as a result of Monicagate, few Americans understood the nature of the terrorist threat.

***

The House of Saud was clearly none too happy with the Clinton administration's efforts to probe Saudi ties to terrorism, and the Sauds much preferred their longtime American friends the House of Bush. Their relationship now spanned roughly two decades, in both the private and public sectors, and neither side had any reason to think that their close ties would not continue for years to come.

In the summer of 1998, for example, just before the East African embassy attacks, Bandar visited George H. W. Bush and his family at Walker's Point in Kennebunkport, on the peninsula jutting out from the rugged Maine coast. [76] For former first lady Barbara Bush, the visit was an unexpected but delightful surprise, with Bandar cooking up a storm in the kitchen.

By this time, the Bushes could provide Prince Bandar with a ray of hope that his frustrations with the Clinton administration would soon be over. The president's son, Texas governor George W. Bush, was positioning himself as the leading Republican presidential candidate for 2000. Karl Rove, once his father's aide, was putting together one of the most efficient fundraising machines ever. Within a month of getting started, Bush had raised hundreds of thousands of dollars, two of the primary big contributors being the massive oil giant Enron and Baker Botts, James Baker's law firm.

Bandar's visit was soon followed by the carnage in Kenya and Tanzania. But for former president Bush and Baker, it was business as usual. In November, Bush flew to Saudi Arabia and met with members of the bin Laden family representing the Saudi Binladin Group. Likewise, in January 2000, Bush again met with Crown Prince Abdullah and the bin Laden family, not long after the United Nations had passed sanctions against their terrorist sibling Osama. At the time, Carlyle was working with SBC Communications, the Texas-based communications giant, in an unsuccessful attempt to nail down the acquisition of 25 percent of the Saudi phone system. In addition, during his trips to Saudi Arabia, James Baker met with Khalid bin Mahfouz on several occasions. [77]

Officially, Bush was not really doing business with the Saudis -- or so a spokeswoman said. "President Bush has never conducted business with Saudi citizens or government officials on behalf of anyone, including the Carlyle Group," says Jean Becker, chief of staff to former president Bush. "He has delivered some speeches at Carlyle functions in Saudi Arabia and other countries, but has not engaged in private business conversations with anyone in Saudi Arabia or elsewhere." [78] As for whether Bush had concerns about doing business with the Saudis in light of all the terrorist bombings, a spokesman for the Carlyle Group said that Bush had "no responsibilities for investor relations." But in fact, what that meant was that Carlyle had created an elaborate deniability mechanism for Bush. The relationship was such that in the end, with Bush and Baker making appearances before potential Saudi investors, the Saudis placed $80 million in the firm. [79] It is unclear how much of that sum was raised following meetings attended by Bush or James Baker.

Meanwhile, as Bill Clinton's second term was coming to an end, the House of Saud was eagerly looking forward to a Bush restoration. If that happened, it could be fairly said that their friends in the House of Bush would be unlikely to probe too deeply into the Saudi role in the terrorist threat.

_______________

[i] By this time, the extended bin Laden family clearly had interests on both sides of the terrorist wars. The family profited from the attacks when the House of Saud gave the Saudi Binladin Group a $150-million contract to rebuild the Khobar Towers facility.
[ii] Osama is sometimes spelled Usama, hence the designation UBL.
[iii] The Saudi-Clinton relationship began with, and was typified by, a halfhearted, last-minute attempt by Prince Bandar to win over Clinton even before he entered the White House. In 1989, Clinton, then the governor of Arkansas, tried to help the University of Arkansas raise $23 million to launch a Middle East studies program and approached Prince Turki, who had been a classmate of his at Georgetown University. Turki came up with $3 million. But that still left $20 million, so in 1991 Clinton approached Prince Bandar.
However, at the time Bandar was preoccupied with the Gulf War and twice canceled appointments with the little-known Arkansas governor. At a third appointment, Bandar saw Clinton, but gave him short shrift, and for two years there was no response to Clinton's request. Bandar had other things on his mind. Then, suddenly, in the summer of 1992, Clinton emerged as the Democratic presidential nominee. As the economy soured, incumbent George H. W. Bush began plummeting in the polls. In October, just a few weeks before Clinton won the presidency, Bandar miraculously got word that the $20-million request had been approved.
[iv] King Fahd collapsed in August 1998, and as his health deteriorated, Crown Prince Abdullah, already Fahd's designated heir, gradually became the de facto ruler of Saudi Arabia.
[v] In response to allegations tying the bin Mahfouz family to terrorism, Cherif Sedky, an attorney for the family, emailed the author the following statement: "The entire Bin Mahfouz family categorically and unreservedly condemns terrorism in all of its manifestations. At no time has any member of the family contributed to any terrorist organization, nor has the family ever had reason to believe that funds it has given over the years to a wide variety of charities, including Muwaffaq (Blessed Relief), have been used other than for the charitable purposes intended."
[vi] In response to charges that Prince Sultan had knowingly funded terrorists, Casey Cooper, an attorney for Prince Sultan at James Baker's law firm, Baker Botts, says, "The allegations have no merit." He adds that Prince Sultan authorized the grants as part of his official governmental duties and did not knowingly fund terrorism.
[vii] The House of Saud was not merely paying lip service to the Palestinian jihad. In fact, the Popular Committee for Assisting the Palestinian Mujahideen, headed by Prince Salman bin Abdul Aziz, the governor of Riyadh, gave over $4 billion to Palestinian groups fighting Israel.
[viii] Bin Mahfouz's attorney denied that any such audit took place.
[ix] For al-Fadl's testimony, see an excerpt from the transcript of his trial in note 67.
[x] According to bin Mahfouz's attorney, Cherif Sedky, Idriss served as deputy general manager of the National Commercial Bank from 1996 to 1998. Sedky adds, "Mr. Idriss was involved in coordinating the activities of the various lawyers representing KBM (Khalid bin Mahfouz) and the bank during the BCCI litigation." Idriss had other ties to the bin Mahfouz family. He was a shareholder in a company called WorldSpace and introduced it to the bin Mahfouz family. Subsequently, bin Mahfouz's sons, through a company called Stonehouse Capital, held a large amount of debt in WorldSpace. "Saleh Idriss and KBM are business acquaintances and have done business together from time to time, although the El-Shifa plant in Sudan was not a matter in which KBM had any interest," says Sedky.
[xi] Idriss later sued the U.S. government over the bombing of his factory and hired as his attorney George Salem, a prominent Arab American and Republican fundraiser. According to the Washington Post, Salem also represented the Holy Land Foundation for Relief and Development.

NOTES:

1. Christopher Dickey and Gregory Vistica, "Attack on the House of Saud," Newsweek, November 27, 1995, p. 44.
2. Yossef Bodansky, Bin Laden, p. 138.
3. Anonymous, Through Our Enemies' Eyes, p. 199.
4. Anthony H. Cordesman, Saudi Arabia: Guarding the Desert Kingdom, p. 42.
5. Bruce W. Nelan et al., "Gulf Shock Waves," Time, July 8, 1996, p. 20.
6. Bodansky, Bin Laden, p. 138.
7. CBS This Morning, November 13,1995.
8. Interview with Chris Ullman, vice president, Carlyle Group.
9. Sidney Blumenthal, The Clinton Wars, p. 656.
10. Tim Weiner and David Johnston, "Roadblocks Cited in Efforts to Trace Bin Laden's Money," New York Times, p. A 1.
11. George Gordon, "Clinton Sends In FBI," Daily Mail, November 14, 1995, p.15.
12. Daniel Benjamin and Steven Simon, The Age of Sacred Terror, p. 242.
13. Interview with Steven Simon.
14. Bodansky, Bin Laden, p. 245.
15. Kathy Gannon, Associated Press Worldstream, May 31, 1996.
16. Sig Christenson, "Bin Ladens Building U.S. Troops' Housing," San Antonio Express-News, September 14, 1998, p. 7 A.
17. "Osama bin Laden, a Chronology of His Life," PBS Frontline, http://www.pbs.org/wgbh/pages/frontline ... /cron.html .
18. Interview with Will Wechsler.
19. Benjamin and Simon, The Age of Sacred Terror, pp. 242-45.
20. Ibid., p. 246.
21. Weiner and Johnston, "Roadblocks Cited in Efforts to Trace Bin Laden's Money," p. A 1.
22. David B. Ottaway, "Been There, Done That: Prince Bandar, One of the Great Cold Warriors, Faces the Yawn of a New Era," Washington Post, July 21, 1996, p. F 1.
23. Benjamin and Simon, The Age of Sacred Terror, p. 242.
24. Ibid., p. 301.
25. A decentralized, risk-averse bureaucracy, the FBI has a culture that does not appreciate taking orders from policy makers. In addition, FBI agents are trained to react after a crime has been committed, not to investigate situations that might foster terrorism. The FBI's horrendous failure to see the assassination of Meir Kahane as part of a larger terrorism problem typified the problems with its approach. Astonishingly, it had not even bothered to translate Arabic documents that pointed out future targets such as the World Trade Center. In addition, under Freeh the FBI had endured fiascos in handling crises at Ruby Ridge, at Waco, and in the investigation of Timothy McVeigh in the Oklahoma City bombing.
26. Benjamin and Simon, The Age of Sacred Terror, p. 301.
27. Ibid., p. 302.
28. Robert Siegel interview with Elsa Walsh, All Things Considered, National Public Radio, May 7, 2001.
29. Benjamin and Simon, The Age of Sacred Terror, p. 302.
30. Ottaway, "Been There, Done That," p. F 1.
31. William F. Wechsler and Lee S. Wolosky, Terrorist Financing, report of an Independent Task Force sponsored by the Council on Foreign Relations, p. 13; and Bodansky, Bin Laden, p. 304.
32. Litigation for the Victims of 9/11, U.S. District Court for the District of Columbia, 1:02CV01616(JR) Second Amended Complaint, p. 564, http://www.motleyrice.com/911_victims_9 ... ments.html .
33. Ibid., p. 563.
34. Jack Kelley, "Saudi Money Aiding bin Laden," USA Today, October 29, 1999.
35. Interview with Cherif Sedky.
36. U.S. Department of Treasury press release, October 12, 2001, part of court papers in the Litigation for the Victims of 9/11, p. 583.
37. "Bin Laden's Sister-in Law Speaks," UPI, October 24, 2001.
38. Craig Unger, "Saving the Saudis," Vanity Fair, October 2003.
39. Documents were given to the author by David Armstrong, an investigator for the Public Education Center, the Washington, D.C., foundation that obtained the documents.
40. Litigation for the Victims of 9/11, p. 612.
41. Unger, "Saving the Saudis"; and interview with Casey Cooper.
42. Michael Isikoff et al., "The Saudi Money Trail," Newsweek, December 2, 2002, p.28.
43. Mark Matthew, "Saudis Admit Money Trail Leads to Envoy," Baltimore Sun, November 25, 2002.
44. Interview with Nawaf Obaid.
45. Interview with Nail al-Jubeir.
46. Washington Post, November 15, 2003, final ed.
47. Interview with Will Wechsler.
48. Interview with Richard Clarke.
49. Ibid.
50. "Turki Appeals for Egypt's Help," Intelligence Newsletter, November 23, 1995.
51. Bodansky, Bin Laden, p. 173.
52. Interview with Robert Baer.
53. Bodansky, Bin Laden, p. 139.
54. Ibid., p. 304.
55. Middle East Media Research Institute, http://www.memri.org/bin/articles.cgi?P ... 3#_ednref2 .
56. David Jackson et al., "Saudi's Cash Funds Terrorism, U.S. Says: Ex-Chicagoan's Assets Are Frozen," Chicago Tribune, October 28, 2001, p. 1.
57. Interview with Will Wechsler.
58. George Gedda, "Clinton Vows Justice for Terrorists," Associated Press, August 7, 1998.
59. Bodansky, Bin Laden, p. 258.
60. "Riyadh Accused of Detaining Shiite Clerics as Sunnite Dissident Calls for Jihad Against U.S. Troops," Mideast Mirror, vol. 10, no. 172, September 4, 1996.
61. "Hunting bin Laden," PBS Frontline, http://www.pbs.org/wgbh/pages/frontline ... /cron.html .
62. Litigation for the Victims of 9/11, Third Amended Complaint, p. 213, http://www.motleyrice.com/911victims/Fi ... plaint.pdf .
63. Shaykh Usamah Bin-Muhammad Bin-Ladin; Ayman al-Zawahiri, amir of the Jihad Group in Egypt; Abu Yasir Rifa'i Ahmad Taha, Egyptian Islamic Group; Shaykh Mir Hamzah, secretary of the Jamiat-ul-Ulema-e-Pakistan; Fazlur Rahman, amir of the Jihad Movement in Bangladesh, "Jihad Against Jews and Crusaders," World Islamic Front Statement, February 23, 1998, http://www.fas.org/irp/world/para/docs/980223-fatwa.htm .
64. Anonymous, Through Our Enemies' Eyes, p. 197
65. Benjamin and Simon, The Age of Sacred Terror, p. 355.
66. Ibid., p. 353.
67. Daniel Benjamin and Steven Simon, "A Failure of Intelligence," New York Review of Books, December 20, 2001. Jamal Ahmed al-Fadl's testimony:

Q. Did you ever travel to the section of Khartoum called Hilat Koko [a facility near El-Shifa] with any member of al Qaeda?

A. Yes, I did.

Q. Tell us about the time you went to Hilat Koko with Abu Hajer al Iraqi, what you discussed.

A. I learn that in this building they try to make chemical weapons with regular weapons. ...

Q. Returning to your conversation with Abu Hajer al Iraqi, did he discuss with you who it was that was trying to make the chemical weapons in the area there of Hilat Koko?

A. He tell me the al Qaeda group try to help Islamic National Front to do these weapons, to make these weapons [italics added in New York Review].

Q. Okay. So I'm asking you, do you know that chemical weapons are used to kill people?

A. Yes, that's what I hear from them.

Q. You know that, for example, they use gas to kill people, right?

A. Yes.

Q. And whoever is in the area where that gas goes runs the risk of being killed?

A. Yes.

68. Peter Worthington, "An Honourable Man Would Resign," Toronto Sun, December 22, 1998, p. 16.
69. Benjamin and Simon, The Age of Sacred Terror, p. 361.
70. Ibid., p. 359.
71. Interview with Frank Anderson; and Vernon Loeb, "A Dirty Business; Because of a Cupful of Soil, the U.S. Flattened This Sudanese Factory," Washington Post, July 25, 1999, p. Fl.
72. Benjamin and Simon, The Age of Sacred Terror, p. 363.
73. Loeb, "A Dirty Business," p. F 1.
74. Benjamin and Simon, The Age of Sacred Terror, p. 363.
75. James Zogby, "The Attack on Sudan," Mideast Mirror, August 16, 1999; and James V. Grimaldi, "An Arab American Charitable Connection That Might Be Too Close for Comfort," Washington Post, December 17, 2001, p. E6.
76. Barbara Bush, Reflections, p. 234.
77. E-mail from Cherif Sedky.
78. E-mail from Jean Becker.
79. Interviews and emails with David Rubenstein and Chris Ullman.