House of Bush, House of Saud, by Craig Unger

"Science," the Greek word for knowledge, when appended to the word "political," creates what seems like an oxymoron. For who could claim to know politics? More complicated than any game, most people who play it become addicts and die without understanding what they were addicted to. The rest of us suffer under their malpractice as our "leaders." A truer case of the blind leading the blind could not be found. Plumb the depths of confusion here.

House of Bush, House of Saud, by Craig Unger

Postby admin » Wed Nov 27, 2013 3:55 am

House of Bush, House of Saud: The Secret Relationship Between the World's Two Most Powerful Dynasties
by Craig Unger
© 2004 by Craig Unger




To my mother

Table of Contents

Chapter 1: The Great Escape
Chapter 2: The Houston-Jeddah Connection
Chapter 3: The Ascendancy of George H.W. Bush
Chapter 4: Three-Dimensional Chess
Chapter 5: The Double Marriage
Chapter 6: Another Frankenstein
Chapter 7: Friends in High Places
Chapter 8: War Drums
Chapter 9: The Breaking Point
Chapter 10: Masters of the Universe
Chapter 11: A House Divided
Chapter 12: The Arabian Candidate
Chapter 13: Lost in Transition
Chapter 14: 9/11
Chapter 15: Print the Legend
Selected Bibliography

"There is [sic] other forms of racial profiling that goes on in America," he said. "Arab Americans are racially profiled in what's called secret evidence. People are stopped, and we got to do something about that." -- George W. Bush, Oct. 2000


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.


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]


"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."


"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.


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]


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]


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]


"On Thursday, March 28, 2002, acting on electronic intercepts of telephone calls, heavily armed Pakistani commando units, accompanied by American Special Forces and FBI SWAT teams, raided a two-story house in the suburbs of Faisalabad, in western Pakistan. [55] They had received tips that one of the people in the house was Abu Zubaydah, the thirty-year-old chief of operations for Al Qaeda who had been head of field operations for the USS Cole bombing and who was a close confidant of Osama bin Laden's.

Two days later, on March 30, news of Zubaydah's capture was spreading all over the world. At first, the administration refused to corroborate the reports; then it celebrated the capture of the highest-ranking Al Qaeda operative ever to be taken into custody. "This represents a very significant blow to Al Qaeda," said White House spokesman Ari Fleischer. He called Zubaydah "a key terrorist recruiter, an operational planner and a member of Osama bin Laden's inner circle."

Donald Rumsfeld told a news conference that Zubaydah was "being given exactly the excellent medical care one would want if they wanted to make sure he was around a good long time to visit with us." [56]

The international media speculated as to what Zubaydah might know, what he might say. On Sunday, March 31, three days after the raid, the interrogation began. For the particulars of this episode there is one definitive source, Gerald Posner's Why America Slept, and according to it, the CIA used two rather unusual methods for the interrogation. [vii] First, they administered thiopental sodium, better known under its trademarked name, Sodium Pentothal, through an IV drip, to make Zubaydah more talkative. Since the prisoner had been shot three times during the capture, he was already hooked up to a drip to treat his wounds and it was possible to administer the drug without his knowledge. Second, as a variation on the good cop- bad cop routine, the CIA used two teams of debriefers. One consisted of undisguised Americans who were at least willing to treat Zubaydah's injuries while they interrogated him. The other team consisted of Arab Americans posing as Saudi security agents, who were known for their brutal interrogation techniques. The thinking was that Zubaydah would be so scared of being turned over to the Saudis, ever infamous for their public executions in Riyadh's Chop-Chop Square, that he would try to win over the American interrogators by talking to them. [57]

In fact, exactly the opposite happened. "When Zubaydah was confronted with men passing themselves off as Saudi security officers, his reaction was not fear, but instead relief," Posner writes. "The prisoner, who had been reluctant even to confirm his identity to his American captors, suddenly started talking animatedly. He was happy to see them, he said, because he feared the Americans would torture and then kill him. Zubaydah asked his interrogators to call a senior member of the ruling Saudi family. He then provided a private home number and cell phone number from memory. 'He will tell you what to do,' Zubaydah promised them." [58]

The name Zubaydah gave came as a complete surprise to the CIA. It was Prince Ahmed bin Salman bin Abdul Aziz, the owner of many legendary racehorses and one of the most westernized members of the royal family. On September 16, 2001, Prince Ahmed, of course, had boarded the flight in Lexington as part of the evacuation plan approved by the Bush White House.

Prince Ahmed was well known not just in Saudi Arabia, but also in publishing circles in London and horse-racing circles in Kentucky. He was such an unlikely name that the interrogators immediately assumed that Zubaydah was lying to buy time. According to Posner, the interrogators then kept their prisoner on a "bare minimum" of pain medication and interrupted his sleep with bright lights for hour after hour before restarting the Sodium Pentothal drip. [59]

When they returned, Zubaydah spoke to his faux Saudi interrogators as if they, not he, were the ones in trouble. He said that several years earlier the royal family had made a deal with Al Qaeda in which the House of Saud would aid the Taliban so long as Al Qaeda kept terrorism out of Saudi Arabia. Zubaydah added that as part of this arrangement, he dealt with Prince Ahmed and two other members of the House of Saud as intermediaries, Prince Sultan bin Faisal bin Turki al-Saud, a nephew of King Fahd's, and Prince Fahd bin Turki bin Saud al-Kabir, a twenty-five-year-old distant relative of the king's. Again, he furnished phone numbers from memory. [60]

According to Posner, the interrogators responded by telling Zubaydah that 9/11 had changed everything. The House of Saud certainly would not stand behind him after that. It was then that Zubaydah dropped his real bombshell. "Zubaydah said that 9/11 changed nothing because Ahmed ... knew beforehand that an attack was scheduled for American soil that day," Posner writes. "They just didn't know what it would be, nor did they want to know more than that. The information had been passed to them, said Zubaydah, because bin Laden knew they could not stop it without knowing the specifics, but later they would be hard-pressed to turn on him if he could disclose their foreknowledge." [61]

Two weeks later, Zubaydah was moved to an undisclosed location. When he figured out that the interrogators were really Americans, not Saudis, Posner writes, he tried to strangle himself, and later recanted his entire tale. [62] As this book went to press, no one had convincingly refuted Posner's account.

-- House of Bush, House of Saud, by Craig Unger
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Re: House of Bush, House of Saud, by Craig Unger

Postby admin » Wed Nov 27, 2013 4:02 am

CHAPTER ONE: The Great Escape

It was the second Wednesday in September 2001, and for Brian Cortez, a desperately ill twenty-one-year-old man in Seattle, Washington, the day he had long waited for. Two years earlier, Cortez had been diagnosed with congestive heart failure, [1] and since then his prognosis had become even worse: he suffered from dilated cardiomyopathy, a severe swelling of the heart for which the only permanent solution is a transplant.

Cortez had been on the official heart transplant waiting list for months. Now, thanks to an accident in Anchorage, Alaska, an organ was finally available. The transplant team from the University of Washington Medical Center chartered a plane to Alaska to retrieve it as quickly as possible. The human heart can last about eight hours outside the body before it loses its value as a transplanted organ. That was the length of time the medical team had to remove it from the victim's body, take it to the Anchorage airport, fly approximately fifteen hundred miles from Anchorage to Seattle, get it to the University of Washington Medical Center, and complete the surgery.

Sometime around midnight, the medical team boarded a chartered jet and flew back with its precious cargo. They passed over the Gulf of Alaska and the Queen Charlotte Islands, and finally, Vancouver, Canada. Before they crossed the forty-ninth parallel and reentered U.S. airspace, however, something unexpected happened.

Suddenly, two Royal Canadian Air Force fighters were at the chartered plane's side. The Canadian military planes then handed it off to two U.S. Air Force F/A-18 fighter jets, which forced it to land. [2] Less than twenty-four hours earlier, terrorists had hijacked four airliners in the worst atrocity in American history, crashing two of them into New York's World Trade Center and one into the Pentagon. Nearly three thousand people were dead. America was grounded. Brian Cortez's new heart was eighty miles short of its destination, and time was running out. [3]


Cortez's medical team was not alone in confronting a crisis caused by the shutdown of America's airspace. The terrorist attacks had grounded all commercial and private aviation throughout the entire United States for the first time in history. Former vice president Al Gore was stranded in Austria because his flight to the United States was canceled. Former president Bill Clinton was stuck in Australia. Major league baseball games were postponed. American skies were nearly as empty as they had been when the Wright brothers first flew at Kitty Hawk. America was paralyzed by terror, and for forty-eight hours, virtually no one could fly.

No one, that is, except for the Saudis.

At the same time that Brian Cortez's medical team was grounded, Prince Bandar bin Sultan bin Abdul Aziz, the Saudi Arabian ambassador to the United States, was orchestrating the exodus of more than 140 Saudis scattered throughout the country. They included members of two families: One was the royal House of Saud, the family that ruled the kingdom of Saudi Arabia, and which, thanks to the country's vast oil reserves, was without question the richest family in the world. The other family was the Sauds' close friends and allies, the bin Ladens, who in addition to owning a multibillion-dollar construction conglomerate had spawned the notorious terrorist Osama bin Laden.

At fifty-two, Prince Bandar had long been the most recognizable figure from his country in America. Widely known as the Arab Gatsby, with his trimmed goatee and tailored double-breasted suits, Bandar was the very embodiment of the contradictions inherent in being a modern, jet-setting, Western-leaning member of the royal House of Saud.

Profane, flamboyant, and cocksure, Bandar entertained lavishly at his spectacular estates all over the world. Whenever he was safely out of Saudi Arabia and beyond the reach of the puritanical form of Islam it espoused, he puckishly flouted Islamic tenets by sipping brandy and smoking Cohiba cigars. And when it came to embracing the culture of the infidel West, Bandar outdid even the most ardent admirers of Western civilization -- that was him patrolling the sidelines of Dallas Cowboys football games with his friend Jerry Jones, the team's owner. To militant Islamic fundamentalists who loathed pro-West multibillionaire Saudi royals, no one fit the bill better than Bandar.

And yet, his guise as Playboy of the Western World notwithstanding, deep in his bones, Prince Bandar was a key figure in the world of Islam. His father, Defense Minister Prince Sultan, was second in line to the Saudi crown. Bandar was the nephew of King Fahd, the aging Saudi monarch, and the grandson of the late king Abdul Aziz, the founder of modern Saudi Arabia, who initiated his country's historic oil-for-security relationship with the United States when he met Franklin D. Roosevelt on the USS Quincy in the Suez Canal on February 14, 1945. [4] The enormous royal family in which Bandar played such an important role oversaw two of the most sacred places of Islamic worship, the holy mosques in Medina and Mecca.

As a wily international diplomat, Bandar also knew full well just how precarious his family's position was. For decades, the House of Saud had somehow maintained control of Saudi Arabia and the world's richest oil reserves by performing a seemingly untenable balancing act with two parties who had vowed to destroy each other.

On the one hand, the House of Saud was an Islamic theocracy whose power grew out of the royal family's alliance with Wahhabi fundamentalism, a strident and puritanical Islamic sect that provided a fertile breeding ground for a global network of terrorists urging a violent jihad against the United States.

On the other hand, the House of Saud's most important ally was the Great Satan itself, the United States. Even a cursory examination of the relationship revealed astonishing contradictions: America, the beacon of democracy, was to arm and protect a brutal theocratic monarchy. The United States, sworn defender of Israel, was also the guarantor of security to the guardians of Wahhabi Islam, the fundamentalist religious sect that was one of Israel's and America's mortal enemies.

Astoundingly, this fragile relationship had not only endured but in many ways had been spectacularly successful. In the nearly three decades since the oil embargo of 1973, the United States had bought hundreds of billions of dollars of oil at reasonable prices. During that same period, the Saudis had purchased hundreds of billions of dollars of weapons from the United States. The Saudis had supported the United States on regional security matters in Iran and Iraq and refrained from playing an aggressive role against Israel. Members of the Saudi royal family, including Bandar, became billionaires many times over, in the process quietly turning into some of the most powerful players in the American market, investing hundreds of billions of dollars in equities in the United States. [5] And the price of oil, the eternal bellwether of economic, political, and cultural anxiety in America, had remained low enough that enormous gas-guzzling SUVs had become ubiquitous on U.S. highways. During the Reagan and Clinton eras the economy boomed.

The relationship was a coarse weave of money, power, and trust. It had lasted because two foes, militant Islamic fundamentalists and the United States, turned a blind eye to each other. The U.S. military might have called the policy "Don't ask, don't tell." The Koran had its own version: "Ask not about things which, if made plain to you, may cause you trouble." [6]

But now, in the immediate aftermath of 9/11, the ugly seams of the relationship had been laid bare. Because thousands of innocent people had been killed and most of the killers were said to be Saudi, it was up to Bandar, ever the master illusionist, to assure Americans that everything was just fine between the United States and Saudi Arabia. Bandar had always been a smooth operator, but now he and his unflappable demeanor would be tested as never before.

Bandar desperately hoped that early reports of the Saudi role had been exaggerated -- after all, Al Qaeda terrorist operatives were known to use false passports. But at 10 p.m. on the evening of September 12, about thirty-six hours after the attack, a high-ranking CIA official -- according to Newsweek magazine, it was probably CIA director George Tenet -- phoned Bandar at his home and gave him the bad news: [7] Fifteen of the nineteen hijackers were Saudis. Afterward, Bandar said, "I felt as if the Twin Towers had just fallen on my head."

Public relations had never been more crucial for the Saudis. Bandar swiftly retained PR giant Burson-Marsteller to place newspaper ads all over the country condemning the attacks and dissociating Saudi Arabia from them. [8] He went on CNN, the BBC, and the major TV networks and hammered home the same points again and again: The alliance with the United States was still strong. Saudi Arabia would support America in its fight against terrorism.

Prince Bandar also protested media reports that referred to those involved in terrorism as "Saudis." Asserting that no terrorists could ever be described as Saudi citizens, he urged the media and politicians to refrain from casting arbitrary accusations against Arabs and Muslims. "We in the kingdom, the government and the people of Saudi Arabia, refuse to have any person affiliated with terrorism to be connected to our country," Bandar said. [9] That included Osama bin Laden, the perpetrator of the attacks, who had even been disowned by his family. He was not really a Saudi, Bandar asserted, for the government had taken away his passport because of his terrorist activities.


But Osama bin Laden was Saudi, of course, and he was not just any Saudi. The bin Ladens were one of a handful of extremely wealthy families that were so close to the House of Saud that they effectively acted as extensions of the royal family. Over five decades, they had built their multibillion-dollar construction empire thanks to their intimate relationship with the royal family. Bandar himself knew them well. "They're really lovely human beings," he told CNN. "[Osama] is the only one ... I met him only once. The rest of them are well-educated, successful businessmen, involved in a lot of charities. It is -- it is tragic. I feel pain for them, because he's caused them a lot of pain." [10]

Like Bandar, the bin Laden family epitomized the marriage between the United States and Saudi Arabia. Their huge construction company, the Saudi Binladin Group (SBG), [i] banked with Citigroup and invested with Goldman Sachs and Merrill Lynch. [11] Over time, the bin Ladens did business with such icons of Western [12] culture as Disney, the Hard Rock Cafe, Snapple, and Porsche. In the mid-nineties, they joined various members of the House of Saud in becoming business associates with former secretary of state James Baker and former president George H. W. Bush by investing in the Carlyle Group, a gigantic Washington, D.C.-based private equity firm. As Charles Freeman, the former U.S. ambassador to Saudi Arabia, told the Wall Street Journal, "If there were ever any company closely connected to the U.S. and its presence in Saudi Arabia, it's the Saudi Binladin Group." [13]

The bin Ladens and members of the House of Saud who spent time in the United States were mostly young professionals and students attending high school or college. [14] Many lived in the Boston area, thanks to its high concentration of colleges. Abdullah bin Laden, a younger brother of Osama's, [ii] was a 1994 graduate of Harvard Law School and had offices in Cambridge, Massachusetts. [15] Several bin Ladens had attended Tufts University, near Boston. [16] Sana bin Laden had graduated from Wheelock College in Boston and organized a Saudi festival at the Children's Museum in Boston. [17] Two bin Ladens -- Mohammed and Nawaf -- owned units in the Flagship Wharf condominium complex in Charlestown Navy Yard on Boston Harbor. [18]

Some of the young, chic, sophisticated members of the family appeared even more westernized than Bandar. Wafah [iii] Binladin, a twenty-six-year-old graduate of Columbia Law School, lived in a $6,000-a-month rented loft in New York's fashionable SoHo [19] and was considering pursuing a singing career. Partial to Manhattan nightspots such as Lotus, the Mercer Kitchen, and Pravda, [20] she was in Geneva, Switzerland, at the time of the attack and simply did not return. Kameron bin Laden, a cousin of Osama's in his thirties, also frequented Manhattan nightspots and spent as much as $30,000 in one day on designer clothes at Prada's Fifth Avenue boutique. [21] He elected to stay in the United States.

But half brother Khalil Binladin wanted to go back to Jeddah. Khalil, who had a Brazilian wife, had been appointed as Brazil's honorary consul in Jeddah [22] and owned a sprawling twenty-acre estate in Winter Garden, Florida, near Orlando. [23]

As for the Saudi royal family, many of them were scattered all over the United States. Some had gone to Lexington, Kentucky, for the annual September yearling auctions. The sale of the finest racehorses in the world had been suspended after the terrorist attacks on September 11, but resumed the very next day. Saudi prince Ahmed bin Salman bought two horses for $1.2 million on September 12.

Others felt more personally threatened. Shortly after the attack, one of the bin Ladens, an unnamed brother of Osama's, frantically called the Saudi embassy in Washington seeking protection. He was given a room at the Watergate Hotel and told not to open the door. [24] King Fahd, the aging and infirm Saudi monarch, sent a message to his emissaries in Washington. ("Take measures to protect the innocents," he said. [25]

Meanwhile, a Saudi prince sent a directive to the Tampa Police Department in Florida that young Saudis who were close to the royal family and went to school in the area were in potential danger. [26]

Bandar went to work immediately. If any foreign official had the clout to pull strings at the White House in the midst of a grave national security crisis, it was he. A senior member of the Washington diplomatic corps, Bandar had played racquetball with Secretary of State Colin Powell in the late seventies. He had run covert operations for the late CIA director Bill Casey that were so hush-hush they were kept secret even from President Ronald Reagan. He was the man who had stashed away thirty locked attache cases that held some of the deepest secrets in the intelligence world. [27] And for two decades, Bandar had built an intimate personal relationship with the Bush family that went far beyond a mere political friendship.

First, Bandar set up a hotline at the Saudi embassy in Washington for all Saudi nationals in the United States. For the forty- eight hours after the attacks, he stayed in constant contact with Secretary of State Colin Powell and National Security Adviser Condoleezza Rice. [28]

Before the attacks, Bandar had been invited to come to the White House to meet with President George W. Bush on September 13 to discuss the Middle East peace process. [29] Even though the fifty-five-year-old president and he were, roughly speaking, contemporaries, Bandar had not yet developed the same rapport with the younger Bush that he'd enjoyed for decades with his father. Bandar and the elder Bush had participated in the shared rituals of manhood -- hunting trips, vacations together, and the like. Bandar and the younger Bush were well-known to each other, but not nearly as close.

On the thirteenth, the meeting went ahead as scheduled. But in the wake of the attacks two days earlier, the political landscape of the Middle East had drastically changed. A spokesman for the Saudi embassy later said he did not know whether repatriation was a topic of discussion.

But the job had been started nonetheless. Earlier that same day, a forty-nine-year-old former policeman turned private investigator named Dan Grossi got a call from the Tampa (Florida) Police Department. Grossi had worked with the Tampa force for twenty years before retiring, and it was not particularly unusual for the police to recommend former officers for special security jobs. But Grossi's new assignment was very much out of the ordinary.

"The police had been giving Saudi students protection since September eleventh," Grossi recalls. "They asked if I was interested in escorting these students from Tampa to Lexington, Kentucky, because the police department couldn't do it."

Grossi was told to go to the airport, where a small charter jet would be available to take him and the Saudis on their flight. He was not given a specific time of departure, and he was dubious about the prospects of accomplishing his task. "Quite frankly, I knew that everything was grounded," he says. "I never thought this was going to happen." Even so, Grossi, who'd been asked to bring a colleague, phoned Manuel Perez, a former FBI agent, to put him on alert. Perez was equally unconvinced. "I said, 'Forget about it,'" Perez recalls. "Nobody is flying today."

The two men had good reason to be skeptical. Within minutes of the terrorist attacks on 9/11, the Federal Aviation Administration had sent out a special notification called a NOTAM -- a notice to airmen -- to airports all across the country, ordering every airborne plane in the United States to land at the nearest airport as soon as possible, and prohibiting planes on the ground from taking off. Initially, there were no exceptions whatsoever. Later, when the situation stabilized, several airports accepted flights for emergency medical and military operations -- but those were few and far between.

Nevertheless, at 1:30 or 2 p.m. on the thirteenth, Dan Grossi received his phone call. He was told the Saudis would be delivered to Raytheon Airport Services, a private hangar at Tampa International Airport. When he arrived, Manny Perez was there to meet him.

At the terminal a woman laughed at Grossi for even thinking he would be flying that day. Commercial flights had slowly begun to resume, but at 10:57 a.m., the FAA had issued another NOTAM, a reminder that private aviation was still prohibited. Three private planes violated the ban that day, in Maryland, West Virginia, and Texas, and in each case a pair of jet fighters quickly forced the aircraft down. As far as private planes were concerned, America was still grounded.

Then one of the pilots arrived. "Here's your plane," he told Grossi. "Whenever you're ready to go."


What happened next was first reported by Kathy Steele, Brenna Kelly, and Elizabeth Lee Brown in the Tampa Tribune in October 2001. Not a single other American paper seemed to think the subject was newsworthy. [30]

Grossi and Perez say they waited until three young Saudi men, all apparently in their early twenties, arrived. Then the pilot took Grossi, Perez, and the Saudis to a well-appointed ten-passenger Learjet. They departed for Lexington at about four- thirty. [31]

"They got the approval somewhere," said Perez. "It must have come from the highest levels of government." [32]

"Flight restrictions had not been lifted yet," Grossi said. "I was told it would take White House approval. I thought [the flight] was not going to happen." [33]

Grossi said he did not get the names of the Saudi students he was escorting. "It happened so fast," Grossi says. "I just knew they were Saudis. They were well connected. One of them told me his father or his uncle was good friends with George Bush senior." [34]

How did the Saudis go about getting approval? According to the Federal Aviation Administration, they didn't and the Tampa flight never took place. "It's not in our logs," Chris White, a spokesman for the FAA, told the Tampa Tribune. "... It didn't occur." [35] The White House also said that the flights to evacuate the Saudis did not take place.

According to Grossi, about one hour and forty-five minutes after takeoff they landed at Blue Grass Airport in Lexington, a frequent destination for Saudi horse-racing enthusiasts such as Prince Ahmed bin Salman. When they arrived, the Saudis were greeted by an American who took custody of them and helped them with their baggage. On the tarmac was a 747 with Arabic writing on the fuselage, apparently ready to take them back to Saudi Arabia. "My understanding is that there were other Saudis in Kentucky buying racehorses at that time, and they were going to fly back together," said Grossi.

With just three Saudis on it, the Tampa flight was hardly the only mysterious trip under way. All over the country, members of the extended bin Laden family, the House of Saud, and their associates were assembling in various locations. At least seven other planes were available for their transportation. Officially, the FBI says it had nothing to do with the repatriation of the Saudis. "I can say unequivocally that the FBI had no role in facilitating these flights one way or another," says Special Agent John Iannarelli. [36]

Bandar, however, characterized the role of the FBI very differently. "With coordination with the FBI," he said on CNN, "we got them all out."

Meanwhile, the Saudis had at least two of the planes on call to repatriate the bin Ladens. One of them began picking up family members all across the country. Starting in Los Angeles on an undetermined date, it flew first to Orlando, Florida, where Khalil Binladin, a sibling of Osama bin Laden's, boarded. [37] From Orlando, the plane continued to Dulles International Airport outside Washington, before going on to Logan Airport in Boston on September 19, picking up members of the bin Laden family along the way.

As the planes prepared for takeoff at each location across the country, the FBI repeatedly got into disputes with Rihab Massoud, Bandar's charge d'affaires at the Saudi embassy in Washington. "I recall getting into a big flap with Bandar's office about whether they would leave without us knowing who was on the plane," said one former agent who participated in the repatriation of the Saudis. [38] "Bandar wanted the plane to take off and we were stressing that that plane was not leaving
until we knew exactly who was on it."

In the end, the FBI was only able to check papers and identify everyone on the flights. In the past, the FBI had been constrained from arbitrarily launching investigations without a "predicate" -- i.e., a strong reason to believe that an individual had been engaged in criminal activities. Spokesmen for the FBI assert that the Saudis had every right to leave the country.

Meanwhile, President Bush was in Washington working full-time at the White House to mobilize a global antiterror coalition. On Friday, September 14, a dozen ambassadors from Arab nations -- Syria, the Palestinian Authority, Algeria, Lebanon, Saudi Arabia, Egypt, Jordan, and the Persian Gulf states -- met at Prince Bandar's home in McLean, Virginia, to discuss how they would respond to Bush's new policies. [39] Bandar himself had pledged his support for the war on terror and, perhaps most important, vowed that Saudi Arabia would help stabilize the world oil markets. In a breathtaking display of their command over the oil markets, the Saudis dispatched 9 million barrels of oil to the United States. As a consequence, the price instantly dropped from $28 to $22 per barrel. [40]

On Tuesday, September 18, at Logan Airport, a specially reconfigured Boeing 727 with about thirty first-class seats had been chartered by the bin Ladens and flew five passengers, all of them members of the bin Laden family, out of the country from Boston.

The next day, September 19, President Bush met with the president of Indonesia, the world's most populous Muslim country, and with the foreign ministers of Russia and Germany. His speechwriting team was also working on a stirring speech to be delivered the next day, officially declaring a global war on terror. "Our war on terror ... will not end until every terrorist group of global reach has been found, stopped, and defeated," he vowed. [41]

Meanwhile, the plane that had originated in Los Angeles and gone to Orlando and Washington, another Boeing 727, was due to touch down at Boston's Logan International Airport. [42]

At the time, Logan was in chaos. The two hijacked planes that had crashed into the World Trade Center's Twin Towers had departed from Logan. The airport was reeling from criticism that its security failures had allowed the hijackings to take place, and exceptional measures were now being taken. Several thousand cars were towed from the airport's parking garages. "We didn't know if they were booby-trapped or what," said Tom Kinton, director of aviation at Logan. [43]

Even though the Federal Aviation Administration had allowed commercial flights to resume on September 13, because of various security issues, Logan did not reopen until September 15, two days later. [44] Even then, air traffic resumed slowly.

Then, in the early afternoon of September 19, a call came into Logan's Emergency Operations Center saying that the private charter aircraft was going to pick up members of the bin Laden family. [45] Both Kinton and Virginia Buckingham, the head of the Massachusetts Port Authority, which oversees Logan, were incredulous. "We were in the midst of the worst terrorist act in history," Kinton said. "And here we were seeing an evacuation of the bin Ladens!"

Like Kinton, Virginia Buckingham was stunned that the bin Laden family was being spirited out of the country. "My staff was told that a private jet was arriving at Logan from Saudi Arabia to pick up fourteen members of Osama bin Laden's family living in the Boston area," she later wrote in the Boston Globe. [46] "'Does the FBI know?' staffers wondered. 'Does the State Department know? Why are they letting these people go? Have they questioned them?' This was ridiculous." [iv]

Yet there was little that Logan officials could do. Federal law did not give them much leeway in terms of restricting an individual flight. "So bravado would have to do in the place of true authority," wrote Buckingham. [47]

"Again and again, Tom Kinton asked for official word from the FBI. 'Tell the tower that plane is not coming in here until somebody in Washington tells us it's okay,' he said.

As the bin Ladens were about to land, the top brass at Logan Airport did not know what was going on. The FBI's counterterrorism unit should have been a leading force in the domestic battle against terror, but here it was not even going to interview the Saudis.

"Each time," Buckingham wrote, "the answer was the same: 'Let them leave.' On September 19, under the cover of darkness, they did."


Of course, the vast majority of the Saudis on those planes had nothing whatsoever to do with Osama bin Laden. The bin Laden family itself had expressed "the strongest denunciation and condemnation of this sad event, which resulted in the loss of many innocent men, women, and children, and which contradicts our Islamic faith." [48] And a persuasive case could be made that it was against the interests of the royal family and the bin Ladens to have aided the terrorists.

On the other hand, this was the biggest crime in American history. A global manhunt of unprecedented proportions was under way. Thousands of people had just been killed by Osama bin Laden. Didn't it make sense to at least interview his relatives and other Saudis who, inadvertently or not, may have aided him?

Moreover, Attorney General John Ashcroft had asserted that the government "had a responsibility to use every legal means at our disposal to prevent further terrorist activity by taking people into custody who have violated the law and who may pose a threat to America." [49] All over the country Arabs were being rounded up and interrogated. By the weekend after the attacks, Ashcroft, to the dismay of civil libertarians, had already put together a package of proposals broadening the FBI's power to detain foreigners, wiretap them, and trace money-laundering to terrorists. Some suspects would be held for as long as ten months at the American naval base in Guantanamo, Cuba.

In an ordinary murder investigation, it is commonplace to interview relatives of the prime suspect. When the FBI talks to subjects during all investigation, the questioning falls into one of two categories. Friendly subjects are "interviewed" and suspects or unfriendly subjects are "interrogated." How did the Saudis get a pass?

And did a simple disclaimer from the bin Laden family mean no one in the entire family had any contacts or useful information whatsoever? Did that mean the FBI should simply drop all further inquiries? At the very least, wouldn't family members be able to provide U.S. investigators with some information about Osama's finances, people who might know who him or might be aiding Al Qaeda?

Moreover, national security experts found it hard to believe that no one in the entire extended bin Laden family had any contact whatsoever with Osama. "There is no reason to think that every single member of his family has shut him down," said Paul Michael Wihbey, a fellow at the Institute for Advanced Strategic and Political Studies. [50]

Vincent Cannistraro, a former CIA counterterrorism chief, told the New Yorker, "I've been following the bin Ladens for years, and it's easy to say, 'We disown him.' Many in the family have. But blood is usually thicker than water." [51]

In fact, Osama was not the only bin Laden who had ties to militant Islamic, fundamentalists. As early as 1979, Mahrous bin Laden, an older half brother of Osama's, had befriended members of the militant Muslim Brotherhood and had, perhaps unwittingly, played a key role in a violent armed uprising against the House of Saud in Mecca in 1979, which resulted in more than one hundred deaths.

Another bin Laden relative, Osama's brother-in-law Mohammed Jamal Khalifa, was widely reported to be an important figure in Al Qaeda and was tied to the men behind the 1993 World Trade Center bombing, to the October 2000 bombing of the USS Cole, and was alleged to have funded a Philippine terrorist group.

Khalil Binladin, who boarded the plane in Orlando to leave the United States, won the attention of Brazilian investigators for possible terrorist connections. According to the German wire service Deutsche Presse-Agentur, he had business connections in the Brazilian state of Minas Gerais and visited its capital, Belo Horizonte, which was allegedly a center for training terrorists, including members of the Hezbollah movement.

How is it possible that Saudis were allowed to fly even when all of America, FBI agents included, was grounded? Had the White House approved the operation -- and, if so, why?


When Bandar arrived at the White House on Thursday, September 13, 2001, he and President Bush retreated to the Truman Balcony, a casual outdoor spot behind the pillars of the South Portico that also provided a bit of privacy. Over the years, any history made on the Truman Balcony had transpired in informal conversation. In 1992, nine years earlier, President Bush's father, George H. W. Bush, had walked out on the balcony with Boris Yeltsin, the first democratically elected president of Russia, to celebrate the end of the Cold War. In 1993, after First Lady Hillary Rodham Clinton put an end to smoking in the White House, Bill Clinton would sometimes retreat there to smoke a cigar in a celebratory moment, as he did after the United States rescued a soldier in Bosnia.

This occasion may have marked the beginning of a new era, but Bandar and President Bush had nothing to celebrate. Thousands of Americans were dead. They had been killed in a terrorist operation largely run by Saudis. Nonetheless, the two men each lit up a Cohiba and began to discuss how they would work together in the war on terror. Bush said that the United States would hand over any captured Al Qaeda operatives to the Saudis if they would not cooperate. The implication was clear: the Saudis could use any means necessary -- including torture -- to get the suspects to talk. [52]

But the larger points went unspoken. The two men were scions of the most powerful dynasties in the world. The Bush family and its close associates -- the House of Bush, if you will. included two presidents of the United States; former secretary of state James Baker, who had been a powerful figure in four presidential administrations; key figures in the oil and defense industries, the Carlyle Group, and the Republican Party; and much, much more. As for Bandar, his family effectively was the government of Saudi Arabia, the most powerful country in the Arab world. They had hundreds of billions of dollars and the biggest oil reserves in the world. The relationship was unprecedented. Never before had a president of the United States -- much less, two presidents from the same family had such close personal and financial ties to the ruling family of another foreign power.

Yet few Americans realized that these two dynasties, the Bush family and the House of Saud, had a history dating back more than twenty years. Not just business partners and personal friends, the Bushes and the Saudis had pulled off elaborate covert operations and gone to war together. They had shared secrets that involved unimaginable personal wealth, spectacular military might, the richest energy resources in the world, and the most odious crimes imaginable.

They had been involved in the Iran-contra scandal, and in secret U.S. aid in the Afghanistan War that gave birth to Osama bin Laden. Along with then Vice President Bush, the Saudis had joined the United States in supporting the brutal Iraqi dictator Saddam Hussein for seven full years after knowing that he had used weapons of mass destruction. In the private sector, the Saudis had supported George W. Bush's struggling oil company, Harken Energy, and in the nineties they made common cause with his father by investing in the Carlyle Group. In the 1991 Gulf War, the Saudis and the elder Bush had fought side by side. And now there was the repatriation of the bin Ladens, which could not have taken place without approval at the highest levels of the executive branch of President George W. Bush's administration.

Only Bush and Bandar know what transpired that day on the Truman Balcony. But the ties between the two families were so strong that allowing the Saudis to leave America would not have been difficult for Bush. It would also have been in character with a relationship in which decisions were often made through elaborate and contrived deniability mechanisms that allowed the principals to turn a blind eye to unseemly realities and to be intentionally "out of the loop."

The ties between the two families were an open secret that in some ways was as obvious as the proverbial elephant in the living room. Yet at the same time it was somehow hard to discern even for the most seasoned journalists. Perhaps that was because the relationship had been forged all over the globe and arced across different eras -- from the Reagan-Bush years to the Clinton administration to the presidency of George W. Bush. To understand its scope and its meaning, one would have to search through tens of thousands of forgotten newspaper stories, read scores of books by journalists and historians, and study myriad "Secret" classified documents and the records of barely remembered congressional probes of corporate intrigue and Byzantine government scandals. One would have to journey back in time to the birth of Al Qaeda at the terrorist training camps during the Afghanistan War. One would have to study the Iran-Iraq War of the eighties, the 1991 Gulf War, and the Iraq War of 2003. One would have to try to deduce what had happened within the corporate suites of oil barons in Dallas and Houston, in the executive offices of the Carlyle Group, in the Situation Room of the White House, and in the grand royal palaces of Saudi billionaires. One would have to interview scores of politicians, oil executives, counterterrorism analysts, CIA operatives, and businessmen from Washington and Saudi Arabia and Texas. One would have to decipher brilliantly hidden agendas and purposefully murky corporate relationships.

Finally, one would have to put all this information together to shape a continuum, a narrative in which the House of Bush and the House of Saud dominated the world stage together in one era after another. Having done so, one would come to a singular inescapable conclusion: namely, that, horrifying as it sounds, the secret relationship between these two great families helped to trigger the Age of Terror and give rise to the tragedy of 9/11.


[i] Due to inconsistencies in transliteration, the family company and various family members use the spelling Binladin rather than bin Laden, the spelling most frequently used for Osama.
[ii] At least four members of the extended bin Laden family are named Abdullah bin Laden -- Osama's uncle, a cousin, his younger brother, and his son.
[iii] Sometimes spelled Waffa.
[iv] There are conflicting accounts about the exact number of bin Ladens who boarded in Boston on September 19. In another article, the Boston Globe reported eleven.


1. Warren King, Seattle Times, May 2, 2000.
2. Hank Kurz Jr., "Organ Network Gets Clearance for Charter Flights," Associated Press, September 13, 2001.
3. The heart Cortez was waiting for was brought in by helicopter and arrived just in time for surgery. However, throughout the United States, the entire organ transplant system was disrupted by the grounding of planes. In Salt Lake City, Utah, twenty- three-year-old Kenny Robison's heart transplant was canceled when the heart he had been waiting for could not be transported in time. A girl awaiting a liver transplant at a Stanford University hospital had her operation put on hold because the liver could not be flown in. Normally, transplanted organs go to those who need them most, but while America was grounded, geo graphical proximity became a far more important criterion.
4. John Bradley, "Are the Saudis Sunk?" American Prospect, September 2003.
5. Robert Kaiser, "Enormous Wealth Spilled into American Coffers," Washington Post, February 11, 2002.
6. Robert G. Kaiser and David B. Ottaway, "Saudi Leader's Anger Revealed Shaky Ties," Washington Post, February 10, 2002, p. 1.
7. Evan Thomas and Christopher Dickey, with Eleanor Clift, Roy Gutman, Debra Rosenberg, and Tamara Lipper, "The Saudi Game," Newsweek, November 19, 2001, p. 32.
8. Jack O'Dwyer, Jack O'Dwyer's Newsletter, October 17, 2001.
9. ABC News Special Report: America Under Attack, ABC News, September 12, 2001.
10. Interview with Prince Bandar, Larry King Live, October 1,2001,
11. Jane Mayer, "The House of Bin Laden," New Yorker, November 12, 2001,
12. "Dreamland: A Hint of Florida Comes to Cairo," Middle East Economic Digest, Apri1 2, 1999, p. 7.
13. Daniel Golden, James Bandler, and Marcus Walker, "Bin Laden Family Could Profit," Wall Street Journal, September 27, 2001.
14. Patrick Tyler, "Fearing Harm, Bin Laden Kin Fled From U.S.," New York Times, September 30, 2001, p. A1.
15. "Authorities Search US Apartments of bin Laden's Relatives," Agence France Presse, September 19, 2001.
16. Jacob Silberberg, "Tufts U. Wooed Binladin Family Members," Tufts Daily via University Wire, October 22, 2001.
17. Alison Leigh Cowan, Kurt Eichenwald, and Michael Moss, "Bin Laden Family, with Deep Western Ties, Strives to Re- establish a Name," New York Times, October 28, 2001, sec. I B, p. 9.
18. "Authorities Search US Apartments of bin Laden's Relatives," Agence France Presse.
19. Mayer, "House of Bin Laden."
20. Todd Venezia and Chris Wilson, "Osama Niece Fled NY," New York Post, October 6, 2001.
21. "Osama Kin on Shopping Spree," New York Post, October 28, 2001, p. 10.
22. Associated Press, September 23, 2001.
23. Holly Stepp, "Bin Laden's Half Brothers Are University of Miami Alumni," Miami Herald, September 20, 2001, p. 23A.
24. Tyler, "Fearing Harm, Bin Laden Kin Fled from U.S.," p. A 1.
25. "America Prepares; Allies Respond," Boston Globe, October 1, 2001, p. A8.
26. Kathy Steele with Brenna Kelly and Elizabeth Lee Brown, "Phantom Flight from Florida," Tampa Tribune, October 5, 2001.
27. Elsa Walsh, "The Prince: How the Saudi Ambassador Became Washington's Indispensable Operator," New Yorker, March 24, 2003.
28. "Prince Bandar, Saudi Arabia Ambassador, Holds News Conference," FDCH Political Transcripts, Federal Document Clearing House, September 12, 2001.
29. Walsh, "The Prince," p. 48.
30. A search of all American newspapers two years later using Nexis-Lexis showed that no other paper had reported on the Tampa flight.
31. Interview with Dan Grossi.
32. Interview with Manuel Perez.
33. Interview with Dan Grossi.
34. Ibid.
35. Steele with Kelly and Brown, "Phantom Flight from Florida."
36. Interview with John Iannarelli.
37. Kevin Cullen and Andrea Estes, "Bin Laden Kin, Family Weighed Staying in the US," Boston Globe, September 21, 2001.
38. Interview with Dale Watson, former FBI agent.
39. John Harris, "Bush Gets More International Support," Washington Post, September 17, 2001.
40. Kingdom of Saudi Arabia, Information on Current Issues, 2003, p. 2; also Saudi embassy website, .
41. "Our Resolve Must Not Pass," Text of President Bush's Speech to Congress," Columbus Dispatch, September 20, 2001, p. A4.
42. Marcella Bombardieri and Neil Swidey," America Prepares the Personal and Political; in Cambridge, a Binladin Breaks Family Silence," Boston Globe, October 7, 2001.
43. Interview with Tom Kinton.
44. Ibid.
45. Ibid.
46. Virginia Buckingham, "My Side of the Story," Boston Globe Magazine, September 8, 2002, p. 10.
47. Ibid.
48. "Osama: The Black Sheep," Hotline, September 19, 2001.
49. Charles M. Madigan, "Bush Boosts Police Powers," Chicago Tribune, September 19, 2001, p. 1.
50. Jonathan Wells, Jack Meyers, and Maggie Mulvihill, "Saudi Elite Tied to Money Groups Linked to bin Laden," Boston Herald, October 14, 2001.
51. Mayer, "The House of Bin Laden."
52. Walsh, "The Prince," p. 48.
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Re: House of Bush, House of Saud, by Craig Unger

Postby admin » Wed Nov 27, 2013 4:05 am

CHAPTER TWO: The Houston-Jeddah Connection

On a warm August night in 2002, James R. Bath, a little-known Texas businessman, opens the door to the front of his ranch in Liberty, a town of eight thousand people on the Trinity River outside Houston. His house is framed by trees silhouetted against a moonlit Texas sky.

About six feet tall, trim and balding, Bath mingles a wry, folksy Texas charm with some of the machismo of a veteran jet fighter pilot. The combination has served him well in cultivating relationships with some of the great Texas power brokers of the last generation -- from former governor John Connally to the Bush family.

There are many ways to tell the story of the events leading up to September 11 and the Iraq War of 2003, and Bath is hardly the most important person through whom to view them. However, his very obscurity carries its own significance. Bath happens to have served as the intentionally low-profile middleman in a passion play of sorts, the saga of how the House of Saud and its surrogates first courted the Bush family.

Bath is disarmingly hospitable as he whips up a late-night dinner and recounts the story of the birth of the Houston-Jeddah connection in the 1970s. A native of Natchitoches, Louisiana, he moved to Houston in 1965 at the age of twenty-nine to join the Texas Air National Guard. In the late sixties, after working for Atlantic Aviation, a Delaware-based company that sold business aircraft, he moved to Houston and went on to become an airplane broker on his own. Sometime around 1974 -- he doesn't recall the exact date -- Bath was trying to sell a F-27 turboprop, a sluggish medium-range plane that was not exactly a hot ticket in those days, when he received a phone call that changed his life.

The voice on the other end belonged to Salem bin Laden, heir to the great Saudi Binladin Group fortune. Then only about twenty-five, Salem was the eldest of fifty-four children of Mohammed Awad bin Laden, a brilliant engineer who had built the multibillion-dollar construction empire in Saudi Arabia. [i]

Bath not only had a buyer for a plane no one else seemed to want, he had also stumbled upon a source of wealth and power that was certain to pique the interest of even the brashest Texas oil baron. Bath flew the plane to Saudi Arabia himself -- no easy task since the aircraft could only do about 240 knots an hour -- and ended up spending three weeks in Jeddah, where he befriended two key figures in the new generation of young Saudi billionaires. [1] One of them was Salem bin Laden. In addition, Salem introduced Bath to his family and friends, including Khalid bin Mahfouz, also about twenty-five, who was the heir to the National Commercial Bank of Saudi Arabia, the biggest bank in the kingdom.

Salem was of medium height, outgoing, and thoroughly Western in his manner, says Bath. Bin Mahfouz was taller -- about six feet -- rail thin, relatively quiet and reserved. One associate says that if he had not known bin Mahfouz was a Saudi billionaire, he would have mistaken him for a biker straight out of a Harley-Davidson ad.

Bath immediately took to the two young men. "I like the Saudi mentality. They like guns, horses, aviation, the outdoors," he said. "We had a lot in common."

In many ways, bin Mahfouz [ii] and bin Laden were Saudi versions of the well-heeled good old boys whom Bath knew so well. "In Texas, you'll find the rich carrying on about being just poor country boys," he says. [2] "Well, these guys were masters of playing the poor, simple bedouin kid."

Poor, they were not. Salem and Khalid were both poised to take over the companies started by their billionaire fathers. In fact, they had almost identical family histories. Their fathers, Mohammed Awad bin Laden and Salem bin Mahfouz respectively, had both originally come from the Hadramawt, an oasislike valley in rugged, mountainous eastern Yemen. Both men were uneducated and poor bin Laden was a brilliant but illiterate bricklayer who never even learned to sign his name, and had traveled the same 750-mile trek by foot. In Jeddah, the commercial capital of Saudi Arabia, they made their fortunes off the hajj, the sacred pilgrimages to the great mosques in Mecca and Medina, bin Laden through construction and bin Mahfouz through currency exchange.

In 1931, Salem's father, Mohammed Awad bin Laden, had formed what eventually became the Saudi Binladin Group as a modest general-contracting firm that first became known for building roads, including a stunning highway with precipitous hairpin turns between Jeddah and the resort city of Taif. Ambitious and highly disciplined, the elder bin Laden advanced his cause by submitting below-cost bids on palace construction projects, including palaces for members of the royal family. [3] His shrewdest innovation was to build a ramp to the palace bedroom of the aging and partially paralyzed King Abdul Aziz. [4] Subsequently, the king made him the royal family's favorite contractor for palaces and major governmental infrastructure projects.

As a result of this growing friendship, in 1951, bin Laden won the contract to build one of the kingdom's first major roads, running from Jeddah to Medina. Eventually, he became known as the king's private contractor. "He was a nice man, very well liked by the royals," says an American oil executive who knew Mohammed Awad bin Laden. "He had the reputation of a doer, of getting things done."

The most prestigious and lucrative prize given by the royal family to the bin Ladens was for the kingdom's biggest roads [5] and exclusive rights to all religious construction, including $17 billion in contracts to rebuild the holy sites at Medina and Mecca, [6] which carried enormous iconic significance. In the center of the Grand Mosque of Mecca was the Kaaba, the holiest place to worship in all of Islam. Legend has it that the Kaaba was built after God instructed the prophet Abraham to build a house of worship, and the Archangel Gabriel gave Abraham a black stone, thought to be a meteorite, which was placed in the northeast corner of the Kaaba. "If there is one single image that signifies the Muslim world, it is that of the hajj being performed in the Kaaba," says Adil Najam, a professor at Boston University. [7] "[Rebuilding these sites] would be the Western equivalent of restoring the Statue of Liberty, Mount Rushmore, and the Lincoln Memorial -- multiplied by a factor of ten."

During the same period that Mohammed Awad bin Laden was cementing his ties with the royal family, Salem bin Mahfouz was using similar methods to woo King Abdul Aziz. After leaving the Hadramawt in 1915, bin Mahfouz had worked in various capacities for the wealthy Kaaki family of Mecca for thirty-five years, finally winning a partnership in the Kaakis' lucrative currency exchange business. [8] Because charging interest was condemned by the Koran as usury, at the time Saudi Arabia merely had money changers instead of a domestic banking industry. But bin Mahfouz went to the royal family and argued that Saudi Arabia would never be self-sufficient until the kingdom had a bank. Subsequently, bin Mahfouz won a license that allowed him to establish the National Commercial Bank of Saudi Arabia, the first bank in the kingdom.

By the early sixties, the bin Mahfouzes and the bin Ladens had made extraordinarily successful transitions from the tribal, Wild West -- like Hadramawt in Yemen to the far more commercially sophisticated world of Jeddah. Since they were outsiders -- both families were Yemenites -- the bin Ladens and the bin Mahfouzes did not have the tribal allegiances that other Saudis had, [9] and it was easy for the royal family to build them into billionaire allies who did not bring with them the political baggage other Saudis may have had. Consequently, the two great merchant families had virtual state monopolies in construction and banking.

In effect, the Saudi Binladin Group was on its way to becoming a Saudi equivalent of Bechtel, the huge California-based construction and engineering firm. [10] Likewise, bin Mahfouz had begun to build the National Commercial Bank into the Saudi version of Citibank, paving the way for it to enter the era of globalization.

Knowing full well the value of being close to the royal family in Saudi Arabia, Salem bin Laden and Khalid bin Mahfouz sought to have similar relationships in the United States. With Bath tutoring them in the ways of the West, they started coming to Houston regularly in the mid-seventies. Salem came first, buying planes and construction equipment for his family's company. [11] He bought houses in Marble Falls on Lake Travis in central Texas's Hill Country and near Orlando, Florida. [12] He started an aircraft-services company in San Antonio, Binladen Aviation, largely as a vehicle for managing his small fleet of planes. [13] He converted a BAC-111, a British medium-size commercial liner, for his own personal use, and for fun he flew Learjets, ultralights, and other planes around central Texas.

There were days that began in Geneva, continued in England, and ended up in New York. [14] Salem flew girlfriends over the Nile to see the Pyramids. "He loved to fly, and spent more time trying to entertain himself than anyone I know," says Dee Howard, [15] a San Antonio engineer who converted several aircraft for bin Laden, including the $92-million modification of a Boeing 747-400 for King Fahd's personal use, [16] the biggest such conversion in the world. The spectacularly outfitted jumbo jet boasted its own private hospital and was said to make Air Force One look modest by comparison.

From Texas to England, most Westerners who knew the bin Ladens found them irresistible. "Salem was a crazy bastard -- and a delightful guy," says Terry Bennett, a doctor who attended the family in Saudi Arabia. [17] "All the bin Ladens filled the room. It was like being in the room with Bill Clinton or someone -- you were aware that they were there. They may have had the normal human foibles, but they were good for their word and generous to a fault."

Salem loved music, the nightlife, and entertaining guests at dinner parties by playing guitar and singing "Deep in the Heart of Texas." [18] But Khalid bin Mahfouz was more reserved. "Khalid was a banker first and always acted as a banker should," remembers Bath. "He was extremely intelligent and quick to assess things."

For the most part, bin Laden and bin Mahfouz eschewed the gaudy public extravagance of sheikhs such as Mohammed al-passi, who in 1979 painted his Beverly Hills mansion in a color that evoked rotting limes and redid the statuary so that the genitals appeared more lifelike. [19] Still, this was Texas. Bigger was better, and bin Mahfouz and bin Laden observed the prevailing mores. As they became entrenched in Texas in the seventies, bin Mahfouz bought an enormous, rambling $3.5- million faux chateau, [20] later known as Houston's Versailles, [21] in the posh River Oaks section of Houston. He also purchased a four-thousand-acre ranch in Liberty County on the Trinity River near James Bath's ranch.

These men, billionaires from a fundamentalist theocratic monarchy, had arrived in a wide-open American city where strip clubs and churches were often side by side, and they fit right in. "They loved the ranch and they loved the country life," says Bath. "There was a real affinity between Texas and life in the kingdom. Khalid would come out to the ranch with the family and the kids, to ride horses, shoot guns, fireworks. They'd been going to England forever. But Texas -- there was the novelty."


Bin Laden and bin Mahfouz were not the only Saudis who started making the Saudi Arabia Texas commute. Saudi arms dealer Adnan Khashoggi operated a small fleet of Boeing 727s for his private use. [22] [iii] In 1970, Prince Bandar, later the ambassador on the Truman Balcony with President Bush, trained at Perrin Air Force Base near Sherman, Texas, as a fighter pilot [23] and became a daring acrobatic pilot who delighted in entertaining VIPs with his audacious aerial stunts. Joining them were the future king, then Crown Prince Fahd bin Abdul Aziz al-Saud; construction magnate Sheikh Abdullah Baroom; and others. "There were more private planes for the Saudis than many airlines have," says one pilot who flew for Salem bin Laden. [24] "It was quite an operation. Everyone had big airplanes and we flew whatever had wings."

Houston offered them a glimpse of a rapidly approaching Saudi future. As late as 1974, the tallest building in the Saudi capital, Riyadh, was a mere water tower, [25] but downtown Houston was already studded with gleaming skyscrapers. At home, the Saudis shopped in ancient markets known as souks, but in Houston, the extravagantly modern Galleria shopping mall had just opened. [26] Saudi Arabia was still a feudal desert kingdom where people lacked the professional skills and bureaucratic infrastructure to build a modern economy. Houston, by contrast, had gigantic energy-industry law firms -- Baker Botts; Vin- son, Elkins and Connally; Fulbright & Jaworski -- that greased the wheels of America's enormous oil industry so it could easily navigate the corridors of power in Washington. In many ways, Riyadh and Houston could scarcely have been more dissimilar; yet these differences were precisely what attracted the Saudis to Texas and catalyzed a chain of events over the next three decades that would change global history.


In part, it was oil that drew the two cultures together. Its history in Texas dated to January 10, 1901, when a handful of wildcatters in Beaumont, Texas, about sixty miles from Houston, drilled away until mud mysteriously bubbled up from the ground and several tons of pipe abruptly shot upward with enormous force. A few minutes later, as workmen began to inspect the damage, another geyser of oil erupted from thirty-six hundred feet under a salt dome. [27] The wildcatters had hoped to bring in fifty barrels a day. [28] Instead, the legendary Spindletop gusher brought in as many as one hundred thousand. [29] The Texas oil boom had begun.

Before long, Houston's Ship Channel had grown into a twenty-mile stretch of refineries constituting one of the great industrial complexes in the world, where hundreds and hundreds of towers and massive spherical tanks spewed smoke and steam, eerily illuminating the ghostly sky like a brightly lit Erector set. More than a quarter of all the oil used in the United States was refined there. Part of the complex, the Exxon Mobil plant in Bay town, is the biggest oil refinery in the world, producing more than half a million barrels a day. [30]

By contrast, oil was not even discovered in Saudi Arabia until 1938, [31] and even then, and for more than a generation afterward, control of the vast Saudi resources remained heavily influenced by the United States thanks to lucrative concessions granted to Aramco (the Arabian American Oil Company), a consortium of giant American oil companies and the Saudis. [32] [iv] In the early seventies, however, just before bin Laden and bin Mahfouz struck out for Texas, the world of oil underwent a dramatic change. Oil production in the United States had already peaked in 1970 and was beginning an inexorable decline at a time when more people drove more miles in bigger cars that burned more gas. Baby boomers had come of age and were driving. An elaborate suburban car culture had grown up all over the United States. There were Corvettes and Mustangs, muscle cars such as the Trans Am, and drive-in restaurants and shopping malls. The volume of America's imported oil nearly doubled -- from 3.2 million barrels a day in 1970 to 6.2 million a day in 1973. [33] Saudi Arabia's share of world exports sky-rocketed from 13 percent in 1970 to 21 percent in 1972.

Saudi Arabia's transformation from an underdeveloped backwater to one of the richest countries in the world was under way. In October 1973, just after the Arab-Israeli war, OPEC -- the Organization of Petroleum Exporting Countries -- a heretofore impotent consortium of oil-rich nations, abruptly became a genuine cartel capable of driving the price of oil up more than 300 percent. Oil, they had discovered, could be used as a weapon. Suddenly, Saudi Arabia took on the position Texas itself had once had and became the swing oil producer for the great industrial nations of the world. The biggest transfer of wealth in human history was under way. Hundreds of billions of dollars in oil revenues poured into the Saudi kingdom. [34] The Saudis were drowning in petrodollars.

Not surprisingly, most Americans don't have fond memories of the Saudi ascendancy in the seventies. With the embargo, the price of gas in the United States jumped from 38 cents a gallon in 1973 to $1.35 in 1981. [35] Soaring inflation, high interest rates, and long gas lines soon followed. A nationwide speed limit of fifty-five miles per hour was imposed in the interests of fuel efficiency. Government bureaucracies were established to reduce energy consumption.

Houston, however, benefited from the newfound Saudi wealth more than any other city in the country. All over the United States, architectural firms cut back because of the recession, but in Houston, CRS Design Associates more than doubled its payroll thanks to huge contracts from the Saudis. [36] Superdeveloper Gerald Hines built gleaming skyscrapers in downtown Houston designed by the likes of Philip Johnson and I. M. Pei -- financed, it was whispered, with Saudi riyals. Petrodollars flowed into Houston's Texas Commerce Bank, thanks to Arab clients. Saudi companies bought drill bits and pipes and lubricant in Houston. [37] The price of oil was over $30 a barrel and looked as if it would never fall and while the rest of the country had to pay the price, Texas oil producers also enjoyed the higher revenues. At last, Houston was on the map of international cafe society. Local socialites hung out at Tony's Restaurant on Westheimer Road, taking a prominent table with Princess Grace, Mick Jagger, fashion designer Bill Blass, or whichever well-known houseguest had flown in for the week. [38] In all, more than eighty companies in Houston developed strong business relationships with the Saudis. [39] It was even said that Houston was becoming to the Saudis what New York is to Israel and the Jews [40] -- another home half a world away.


Like the Israelis, the Saudis had one overwhelming need that they sought in this new alliance -- defense. For all its newfound wealth, the House of Saud was more vulnerable militarily than ever. A feudal desert monarchy that lacked the infrastructure of a modern industrial nation, the kingdom had more than fifteen hundred miles of coastline to defend. Its oil and gas facilities provided numerous high-value targets. Iran regularly sponsored riots during the pilgrimages to Mecca and provided support to Shiite extremists in Saudi Arabia. [41] Iraq, with which it shares a border, was a threat. Across the Red Sea, Sudan was a hospitable host to extremists. Other troublesome neighbors included Yemen, Oman, and Jordan. Saudi Arabia was vast -- it is about a quarter the size of the United States -- but it had to be defended by a population that, at the time, was under 6 million people, three-quarters of whom were women, children, and elderly. [42]

In addition, the Saudis had extraordinary internal weaknesses. As the rulers of an underdeveloped, feudal desert kingdom, they were in control of one of the most corrupt, authoritarian, undemocratic countries in the world. It was threatened by communists and Islamic revolutionaries. Women had virtually no rights. The Saudis arguably led the world in public beheadings -- many of which took place in a plaza in Riyadh referred to as Chop-Chop Square. [43]

Flooded with petrodollars, the Saudis still urgently needed a partner. As a result, the kingdom began to weave a tight alliance with the United States, militarily, economically, and politically. As the petrodollars poured in over the next twenty-five years, roughly eighty-five thousand "high-net-worth" Saudis invested a staggering $860 billion in American companies -- an average of more than $10 million a person and a sum that is roughly equivalent to the gross domestic product of Spain. [44] They took the United States by storm, selling crude, buying banks, building skyscrapers, buying weapons, investing everywhere.

Most important, the Saudis sought strong political ties to the United States through personal friendships with the powers that be. Education, training, and connections with American power brokers became prerequisites for the next generation of the Saudi elite. "They started sending their sons to school in the U.S.," says Nawaf Obaid, a Saudi oil analyst who himself was educated at Harvard and MIT. "They wanted to build up relationships with key people at the same time they had return on investments." [45]

The vast majority of the Saudi investments in the United States went into major banks and energy, defense, technology, and media companies. There were blue chips such as Citigroup and AOL Time Warner, and huge, secretive consortiums such as Investcorp, which put billions of Arab dollars in companies including Tiffany, Gucci, and Saks Fifth Avenue. But the House of Saud also made a handful of investments in troubled companies that were loaded with debt and regulatory problems -- which just happened to be owned by men who had or might have White House ties. "The leadership in the kingdom definitely supported these activities," says Prince Turki bin Faisal al-Saud, the ambassador to Great Britain who long served as Saudi minister of intelligence and was a son of the late King Faisal's. [46]

Superlawyer Edward Bennett Williams, a roguish Washington fixer, understood exactly what the Saudis were after. According to The Man to See, Evan Thomas's 1991 biography of Williams, in the seventies he accompanied Clark Clifford, a perennial adviser to Democratic presidents and one of the so-called Wise Men of Washington, on a private jet after Clifford had ill-advisedly taken on billionaire Arab clients.

"Williams gleefully acted out a pantomime of a delegation of Arabs visiting Clifford in his office," wrote Thomas. "Williams, a perfect mimic, imitated Clifford gravely telling the visiting sheikhs, 'You understand, of course, that I can only get you access.'

"Then Williams imitated the Arabs winking and grinning as they shoved a bag of gold across Clifford's desk." [47]


As it happened, Edward Bennett Williams's droll account of the Arab strategy for achieving entree to the inner sanctums of American power wasn't far from the truth. However, before approaching a man of Clark Clifford's stature, or, for that matter, wary Republican power brokers, the Saudis went to someone in Jimmy Carter's White House -- someone who not only had access to the president but who also happened to be desperately vulnerable.

After taking office in 1977, Carter had appointed his close friend Bert Lance, the CEO of the National Bank of Georgia (NBG), as director of the Office of Management and Budget (OMB). Lance had played a key role in Carter's presidential campaign, but in many ways he was the polar opposite of a Beltway insider like Clifford. He was not an easy fit in Washington. The media enjoyed tweaking the rumpled, six-foot-five-inch Lance, with his syrrupy Southern drawl, as something of a country bumpkin straight out of the Georgia woods. Within weeks of taking his place in the new administration, he was in trouble.

Lance had financed much of Carter's electoral campaign through overdrafts at NBG, and now that he was in the glare of the Washington political spotlight, those transactions had come under scrutiny. In addition, when he became CEO of the bank, Lance had borrowed $2.6 million to finance the purchase of his stock in the bank under terms that required him to remain its chief executive. [48] That, however, was impossible because now that he was in the government, he was required by law to resign from the bank. Worse, bank stocks had sunk so low that Lance couldn't afford to sell his stock to payoff the loan. [49] Last, Lance was charged with having mismanaged corporate and personal financial affairs by pledging the same stock as collateral for two loans, and having improperly pledged some of the bank's assets against his loans.

An investigation and trial later found Lance innocent, but his reputation was devastated. In September 1977, only a few months after he had taken over at OMB, he resigned. Lance was heavily in debt and unemployed. [50] He just had one thing going for him: he was still close friends with the president of the United States.

In October, just weeks after his resignation, Lance met with Agha Hasan Abedi, the Pakistani founder of the Bank of Credit and Commerce International, or BCCI. At the time, BCCI was said to be the fastest-growing bank in the world. Its assets had grown from $200 million in 1972 to more than $2 billion in 1977. [51] As a bank friendly to Muslim concerns, BCCI was perfectly positioned to take advantage of the petrodollars flowing into the Middle East in the wake of the OPEC oil embargo.

BCCI's ascendancy was also due to business practices that were highly unusual in the staid world of banking. Other banks gave toaster ovens to new depositors; BCCI provided prostitutes. [52] [v] Loans of millions of dollars were granted merely on the basis of a simple request. BCCI allegedly handled flight capital from countries such as India or Pakistan where currency constraints strictly prohibited the wealthy from taking their money out of the country. BCCI was luring customers away from its rivals and now had 146 branches in thirty-two countries. But it still had no presence in the biggest financial market in the world -- the United States.

"You cannot be a global bank, an international bank, without some sort of presence in the United States," Lance told BCCI founder Abedi. "This is the richest, most powerful nation in the world, and this is certainly something you ought to look at." [53] Desperate to sell his stock, Lance had just the thing in mind -- a modest Southern bank, namely, the National Bank of Georgia.

Abedi told Lance that Saudi billionaire Ghaith Pharaon might be just the person to take over NBG. Born in 1940, the dapper Pharaon was the son of a private physician to King Abdul Aziz [54] (as was Saudi billionaire arms dealer Adnan Khashoggi [55]). Pharaon's education included undergraduate work at Stanford and an MBA from Harvard Business School. He wore Savile Row suits and a Vandyke beard. Like his childhood friend Khalid bin Mahfouz, he was close to the House of Saud and personified the wave of "westernized" Saudi billionaires who came to the United States in the aftermath of the OPEC oil embargo. [56] With an annual income of $300 million in 1974, [57] Pharaon had lavish homes in Saudi Arabia and Paris, and a magnificent plantation near Savannah, Georgia, that had been owned by Henry Ford. In 1975, Pharaon helped pioneer the Arab takeover of American banks by purchasing Detroit's ailing Bank of the Commonwealth at a time when Arab money was a novelty in the United States.

Negotiations to sell the National Bank of Georgia to Pharaon and BCCI began over Thanksgiving weekend in 1977, through discussions among Lance, Abedi, and other BCCI officials. [58] On December 20, Lance announced he was selling his NBG stock to Pharaon for $2.4 million at $20 a share -- twice what it had been worth only a few weeks earlier.

Why had Saudis paid top dollar for a failing bank that was a target of federal regulators? The Senate investigation concluded that "gaining access to President Carter and the White House was ... one of the reasons the 'Arabs' were interested in having Lance represent them and in buying his interest in the National Bank of Georgia." [59]

The access Lance offered BCCI was not illusory. Through him, BCCI representatives met Jimmy Carter, the Reverend Jesse Jackson, Prime Minister James Callaghan of Great Britain, and many other officials, including Lance's attorney, the aforementioned Clark Clifford. The Senate report concluded that Carter's integrity was used by BCCI officials as the bank "went about mixing bribery and flattery to obtain access to the foreign reserves and other assets of numerous Third World countries." [60]

As for Lance, who had once been referred to as the deputy president of the United States, he returned to Georgia to work as a financial consultant. But his career in national politics was over. As for the Saudis, they had learned that they could win access to the highest levels of power in the United States.


On the Republican side, James Bath didn't have nearly the stature of Edward Bennett Williams or Clark Clifford, or for that matter, the visibility of Bert Lance. But in the seventies in Houston, for Khalid bin Mahfouz and Salem bin Laden, Jim Bath was the man to see. He counted among his friends and business associates no fewer than five Texans, four of them Republicans, who at one time or another would be considered presidential candidates.

Bath was friendly with the family of Senator Lloyd Bentsen, the lanky, distinguished Democrat who would run as vice presidential candidate in 1988 [vi] and later become secretary of the treasury. Bath had become partners with one of his sons, Lan Bentsen, in a small real estate firm that developed an apartment complex and airplane hangars and sought investments for the senator's blind trust. [61]

While he served in the Texas Air National Guard, Bath had also befriended the young George W. Bush, [62] who had begun training in 1970 as a pilot of F-102 fighters at Ellington Air Force Base near Houston. Bush had been a member of the "Champagne Unit" of the National Guard, so-called because it was famous for serving as the vehicle through which the sons of Houston society escaped serving in the Vietnam War.

In the mid-seventies, young Bush also introduced Bath to his father. A former Houston congressman who had lost senatorial races in 1964 to liberal Democrat Ralph Yarborough and in 1970 to the more conservative Lloyd Bentsen, the elder George Bush had been a devoted Nixon loyalist even through the mire of Watergate. His steadfastness had been rewarded with appointments as U.S. ambassador to the United Nations, as chairman of the Republican National Committee, and under President Gerald Ford, as chief liaison to the U.S. mission to China. In 1976, Bush was appointed head of the CIA.

There was also Bath's duck-hunting buddy, [63] James A. Baker III, then in his mid-forties. One of Houston's most powerful corporate attorneys and a true Texas patrician, Baker was a close friend and associate of George H. W. Bush's.

Finally, there was John Connally, the silver-haired, silver-tongued former Democratic Texas governor who became secretary of the treasury under Nixon in 1971 and who later switched to the Republican Party.

By 1976, Salem bin Laden had appointed Bath his American business representative. [64] Khalid bin Mahfouz drew up a similar arrangement with him as well. Bath was more than simply someone who could provide the Saudis with entree to political power brokers. But exactly what he did beyond that, in the intelligence world and elsewhere, was shrouded in mystery. From Time to the Wall Street Journal, the press speculated about Bath's connections to the Bushes, to John Connally, to the CIA, to BCCI, and to various figures in the Iran-contra scandal of the eighties.

When asked about his career, Bath usually downplayed his importance. By his account, he was merely "a small, obscure businessman." It was often said that he was in the CIA, but Bath denied that to Time. [65] Later, he equivocated. "There's all sorts of degrees of civilian participation [in the CIA]," he says. "It runs the whole spectrum, maybe passing on relevant data to more substantive things. The people who are called on by their government and serve -- I don't think you're going to find them talking about it. Were that the case with me, I'm almost certain you wouldn't find me talking about it." [66]

Bath's role in investing for the Saudis took various forms. "The investments were sometimes in my name as trustee, sometimes off shore corporations, and sometimes in the name of a law firm," he says. "It would vary." [67] Bath generally received a 5 percent interest as his fee and was sometimes listed on related corporate documents. [68]

On behalf of Salem bin Laden, Bath purchased the Houston Gulf Airport, a small private facility in League City, Texas, twenty-five miles east of Houston. [69] He also became the sole director of Skyway Aircraft Leasing in the Cayman Islands, which was actually owned by Khalid bin Mahfouz.

Through Skyway, Bath brokered about $150 million worth of private aircraft deals to major stockholders in BCCI such as Ghaith Pharaon and Sheikh Zayed bin Sultan al-Nahayan, president of the United Arab Emirates. To incorporate his companies in the Cayman Islands, Bath used the same firm that later set up a money-collecting front for Oliver North in the Iran-contra affair. [70] He also served as an intermediary between the Saudis and John Connally, who, having served as Nixon's treasury secretary, began to position himself for a shot at the White House in 1980.

In August 1977, John Connally and Bath teamed up with Ghaith Pharaon and bin Mahfouz to buy the Main Bank of Houston, a small community bank with about $70 million in assets. [71] Soon, the tiny bank began obtaining more than $10 million a month in hundred-dollar bills. [72] It was highly irregular for such a tiny bank to require such large amounts of cash. Such unusual transactions can be a sign of money laundering, but bank regulators in Texas said they did not know why the bank needed the money. The transactions were not illegal and the reason for them was never uncovered.

Then, in July 1978, Khalid bin Mahfouz and forty bodyguards took over an entire floor of the Mayflower Hotel in Washington, D.C., with John Connally there to introduce him to Texas billionaires William Herbert Hunt and Nelson Bunker Hunt. [73] [vii] The purpose of the meeting was allegedly to get bin Mahfouz and Pharaon to participate in the Hunt brothers' quest to corner the world's silver market. The Saudis' role in the silver deal fell through -- and the Hunt brothers' participation in it led to one of the great financial follies of the decade.

Nevertheless, through Main Bank, the young Saudis had established ties to Connally. [74] They were now in business with a legitimate presidential contender who seemed well positioned for the 1980 campaign. For two young men, still in their twenties, to have business partnerships with an American presidential candidate elevated them enormously in the eyes of the Saudis back home, especially the royal family.

With his lantern jaw and silver mane, his Stetson hat, cowboy boots, and bolo tie, Connally was straight out of central casting. He had movie-star good looks, and a powerful appeal to Wall Street and corporate America. He had survived close ties to the disgraced Nixon presidency and bribery charges in the so-called Milk Fund scandal of 1974. He had even survived the Kennedy assassination in November 1963. Sitting next to Kennedy in the motorcade, he too was shot that day, but emerged a wounded hero.

At the time, Connally had only one serious political rival in Texas -- George H. W. Bush, a man who possessed little of Connally's charisma. Whereas Connally was festooned with the iconography of the Lone Star State, Bush was a Connecticut Yankee who constantly had to prove his Texas bona fides. Connally was a po' boy from Floresville in the Texas Hill Country -- his father had been a tenant farmer -- who had made his fortune through lucrative relationships with oil barons Sid Richardson and Clint Murchison and then taken on the trappings of a brash wheeler-dealer himself. By contrast, Bush was a genuine oilman, but he was an East Coast transplant whose understated style sought to mask but only accentuated his patrician background. A partner in the huge Houston oil industry law firm of Vinson, Elkins and Connally, Connally was unabashed about being the biggest Arab-money lawyer in Texas. Bush kept his distance. Next to Connally, he seemed bland indeed.

For all that, Bush had mastered one extraordinarily important aspect of politics in a way that left Connally and scores of other wannabes in the dust. George H. W. Bush was wired. Whether it be the old-moneyed East Coast establishment or Richard Nixon's team, the rising young Turks of the new conservative movement or the power brokers of Republican Party infrastructure, Bush either knew the right people or knew how to meet them and make them his friends. He knew people who would enable him to raise campaign funds, to get the right decisions made at government agencies such as the Securities and Exchange Commission and the Export Import Bank, people who would back his son's oil companies, who would perform favors when called on. He did not like to make decisions without knowing the outcome in advance. From the Petroleum Club in Midland, Texas to the Bayou Club in Houston to the Bohemian Grove [viii] in California; from clubby men's institutions like the CIA and the oil industry -- he had cultivated an extraordinary power base. In the long run, it was capable of taking him all the way to the White House.

And in the short run -- within a few years -- Saudis seeking access to the highest levels of American power soon forgot Bert Lance, Clark Clifford, and John Connally and realized that George H. W Bush was the man to see.


[i] Because the Hegira calendar used in Saudi Arabia does not consistently conform to the Gregorian calendar used in the West, the ages of many Saudis in this book are approximate.
[ii] Bin Mahfouz has widely been identified in the media as the brother-in-law of Osama bin Laden, thanks to congressional testimony by former CIA director James Woolsey. But a spokesman for bin Mahfouz denies the assertion, and the author has found no evidence to back up Woolsey's charge.
[iii] Khashoggi made a fortune as a middleman on an estimated 80 percent of Saudi-American arms deals, including commissions of more than $100 million from Lockheed alone between 1970 and 1975.
[iv] The Saudis first granted concessions to explore for oil in Saudi Arabia to the British, thanks to Jack Philby, who is best known today as the father of the notorious British spy Kim Philby. At a time when King Abdul Aziz was hoping to find water, Philby persuaded him to let him look for oil. According to Daniel Yergin's The Prize, Philby was dismissed by British government officials as merely a bit player. But Standard Oil of California recognized that he had access to the king and signed him on to help acquire concessions. The initial concession agreement called for Socal to put $175,000 in gold up front, an additional loan of $100,000 eighteen months later, and still another loan of $500,000 on the discovery of oil. The concession was good for sixty years and covered 360,000 square miles. It was one of the greatest bargains in history.
[v] According to the U.S. Senate's BCCI probe, the bank's involvement in prostitution grew out of its "special protocol department" in Pakistan, which allegedly serviced "the personal requirements of the Al-Nahyan family of Abu Dhabi, and other BCCI VIPs, including other Middle Eastern rulers." The Senate report asserts that Abedi employed a woman who helped him cement his relationship with the Al-Nahyan family by providing them with Pakistani prostitutes. The report says that the woman was reputed to have first won the attention of the royal family "by arranging to get virgin women from the villages from the ages of 16 to 20. [She] would make payments to their families, take the teenaged girls into the cities, and teach them how to dress and how to act. The women were then brought to the Abu Dhabi princes. "For years, [she] would take 50 to 60 girls at a time to large department stores in Lahore and Karachi to get them outfitted for clothes. Given the size of [her] retinue and her spending habits -- $100,000 at a time was not unusual when she was outfitting her charges -- she became notorious and there was substantial competition among clothiers and jewelers for her business. ... According to one U.S. investigator with substantial knowledge of BCCI's activities, some BCCI officials have acknowledged that some of the females provided some members of the Al-Nahyan family were young girls who had not yet reached puberty, and in certain cases, were physically injured by the experience. The official said that former BCCI officials had told him that BCCI also provided males to homosexual VIPs."
[vi] Bentsen's most memorable moment in politics came in the 1988 campaign when his youthful rival, GOP vice presidential candidate Dan Quayle, invoked President John F. Kennedy's name, to which Bentsen replied, "I knew Jack Kennedy. Jack Kennedy was a friend of mine. And, Senator, you're no Jack Kennedy."
[vii] In 1973, Bunker, Herbert, and Lamar Hunt, three sons of oil billionaire H. L. Hunt, began to hedge against the depreciating dollar by investing in silver at a time when gold could not be purchased in the United States. By hoarding huge quantities of the precious metal, they pushed the price of silver to more than $50 an ounce. But in 1980, the price plummeted to $9 an ounce. The Hunts never recovered from the financial debacle and eventually had to sell their art collections.
[viii] The Bohemian Grove has held secret meetings for a global elite since 1873 in a redwood forest of northern California. In addition to Republican presidents Eisenhower, Nixon, Reagan, and George H. W. Bush, members have included James Baker, Richard Cheney, Donald Rumsfeld, David Rockefeller, William Casey, and Henry Kissinger. Each year, the members don red, black, and silver robes and conduct a ritual in which they worship a giant stone owl.


1. Interview with James Bath.
2. Ibid.
3. Unattributed, biography of Osama bin Laden, PBS Frontline Online.
4. Michael field, The Merchants, p. 105.
5. Ibid.
6. Lowell Bergman and Martin Smith, "Saudi Time Bomb," PBS Frontline, November 15, 2001.
7. Interview with Adil Najam.
8. Field, The Merchants, p. 106.
9. Interview with Jamie Etheridge, analyst for Strategic Forecasting.
10. Jane Mayer, "The Contractors," New Yorker, May 5, 2003, p. 35.
11. Interview with James Bath.
12. Interview with Gerry Auerbach.
13. Suzanne Hoholik and Travis E. Poling, San Antonio Express-News, August 22, 1998, pt. A, p. 1.
14. Pavlo Solodko, "The Bin Ladin Business" [in Ukrainian], Lviv Halytski Kontrakty, no. 45, pp. 8, 24.
15. Dee Howard, telephone interview.
16. Mike Ward, "Bin Laden Relatives Have Ties to Texas," Austin American Statesman, November 9, 2001, p. Al.
17. Interview with Terry Bennett.
18. Torch Lewis, Business & Commercial Aviation, December 2001, p. 112.
19. Dennis McLellan, "Obituary: Mohammed al-Fassi," Los Angeles Times, December 31, 2002, pt. 2, p. 10.
20. Dan Balz, "The Saudi Connection," Washington Post, April 19, 1981, p. C 1.
21. Interview with a Houston associate of bin Mahfouz.
22. Robert Baer, Sleeping with the Devil, p. 41; and interview with bin Laden pilots.
23. Scott Farwell, "Saudi Arabia Asks Iran for Son of bin Laden," Dallas Morning News, September 8, 2003.
24. Interview with Heinrich Rupp.
25. Sandra Mackey, The Saudis, p. 45.
26. International Council of Shopping Centers, "The Impact of Shopping Malls,"
27. Daniel Yergin, The Prize, p. 84; and Herbert S. Parmet, George Bush, p. 69.
28. Yergin, The Prize, p. 84.
29. Parmet, George Bush, p. 69.
30. Edward Vulliamy, "The Dark Heart of the American Dream," Observer (London), June 16, 2002, p. 22.
31. Yergin, The Prize, p. 300.
32. Ibid., pp. 287-91.
33. Ibid., p. 591.
34. "The Arming of Saudi Arabia," transcript of PBS Frontline #1112, February 16, 1993.
35. California Energy Commission, "Historical Yearly Average California Gasoline Prices per Gallon," ... usted.html
36. Steve Emerson, The American House of Saud, p. 53.
37. Balz, "The Saudi Connection," p. C1.
38. Mimi Swartz, "Oscar Wyatt," Texas Monthly, September 2001.
39. City of Houston, Office of the Mayor, Mayoral Speeches, ... 020701.htm.
40. Balz, "The Saudi Connection," p. C1.
41. Anthony Cordesman, Saudi Arabia, p. 7.
42. Mackey, The Saudis, p. 293.
43. Robert Baer, "The fall of the House of Saud," Atlantic Monthly, May 2002, p. 55.
44. Washington Post, February 11, 2002, p. A17; and Prince Bandar bin Sultan bin Abdul Aziz al-Saud, U.S.-Saudi Arabian Business Council, Third Plenary Meeting, Washington, D.C., October 2, 1996.
45. Interview with Nawaf Obaid.
46. Interview with Prince Turki.
47. Gay Jervey and Stuart Taylor Jr., "From Statesman to Front Man: How Clark Clifford's Career Crashed," American Lawyer, November 1992, p. 49.
48. Jonathan Beaty and S. C. Gwynne, The Outlaw Bank, p. 149; and James Ring Adams and Douglas Frantz, A Full Service Bank, p. 36.
49. Adams and Frantz, A Full Service Bank, p. 32.
50. Beaty and Gwynne, The Outlaw Bank, p. 149.
51. Adams and Frantz, A Full Service Bank, p. 27.
52. Ibid., p. 34; and 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 Collg., 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 published by the Government Printing Office, differs slightly from the committee's soft-copy version at .
53. Beaty and Gwynne, The Outlaw Bank, p. 150.
54. Ghaith Pharaon's profile on his website at
55. "Hunting bin Laden," PBS Frontline; ... amily.html.
56. Alexander Stuart, "Citizen Connally: The Businessman You Never Knew," Fortune, July 31, 1978, p. 86.
57. James Ring Adams and Kenneth Timmerman, American Spectator, May 1997.
58. The BCCI Affair, Senate Print 102-140.
59. Ibid.
60. Ibid.
61. Jonathan Beaty with reporting by S.C. Gwynne, "A Mysterious Mover of Money and Planes," Time, October 28, 1991, p. 80.
62. Interview with James Bath.
63. Ibid.
64. Jerry Urban, "Feds Investigate Entrepreneur Allegedly Tied to Saudis," Hous ton Chronicle, June 4,1992, p. A21.
65. Beaty with Gwynne, "A Mysterious Mover of Money and Planes," p. 80.
66. Interview with James Bath.
67. Ibid.
68. Daniel Golden, James Bandler, and Marcus Walker, "Special Report: Aftermath of Terror -- Bin Laden Family Could Profit from a Jump in Defense Spending Due to Ties to U.S. Bank," Wall Street Journal, September 27, 2001.
69. Urban, "Feds Investigate Entrepreneur."
70. Beaty with Gwynne, "A Mysterious Mover of Money and Planes," p. 80.
71. Associated Press, August 18,1977.
72. Brad Kuh, "BCCI Tentacles Reached Far, Even into Central Florida," Orlando Sentinel Tribune, August 11, 1991, p. A 1.
73. Paul Galloway, "Bankrupt Hunt Brothers Bid Adieu to Art collections Worth Millions," Chicago Tribune, May 10, 1990, p. C 1.
74. Roy Rowan, "A Hunt Crony Tells All," Fortune, June 30, 1980, p. 54.
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Re: House of Bush, House of Saud, by Craig Unger

Postby admin » Wed Nov 27, 2013 4:08 am

CHAPTER THREE: The Ascendancy of George H. W. Bush

The social structure of the United States, of course, bore little resemblance to a monarchy like that of Saudi Arabia. But within the American context, George H. W. Bush was the nearest equivalent to royalty, a member of a patrician class that was able to pass on power in both the private and public sectors from generation to generation.

Most famously, while an undergraduate at Yale, Bush had become a member of Skull and Bones, the secret society to which his father, investment banker Prescott Bush, belonged. [i] With its baroque and mystifying preppie voodoo rituals, Skull and Bones was where bonds were forged by men who would run the old-line banks and white-shoe law firms, men who would become the Wise Men of Washington. This was the Eastern Establishment -- the Bundys, the Buckleys, the Harrimans, and the Tafts. Bonesmen counted among their ranks three presidents, several Supreme Court justices, U.S. senators, secretaries of state, national security advisers, the founders of Time, Inc., and the CIA, and more. [1]

And so, in 1948, when Bush took off for Texas with his wife, Barbara, and infant son, George W., he was not some poor immigrant striking out for the uncharted wilderness with nothing to fall back on. It was a long journey from the cosseted, leafy suburbs of Greenwich, Connecticut, where Bush grew up, to the land of barbecue and catfish, Dr Pepper and Lone Star beer, armadillos and the Texas two-step. But thanks to Neil Mallon, his father's best friend, Bush had already lined up a job in Odessa, Texas, with the International Derrick and Equipment Company (IDECO). Prescott Bush served on the board of directors of its parent company, Dresser Industries, had been instrumental in transforming Dresser into a public company, and was close to Mallon, its president, a fellow Bonesman and a man who was so intimate with the Bush family that he was known as Uncle Neil. [2] [ii] Young George H. W. Bush even named his third son Neil Mallon Bush.

Bush soon found other Ivy League immigrants and elite Texans who had gone east to school. In many ways, they were reenacting a domestic version of what the British did during the Raj in India, sending out the young sons of aristocrats to mine the resources of an underdeveloped colony. Texas, with its rich oil reserves, was like a third world country ripe for development by ambitious scions of East Coast wealth. The Spindletop gusher had given birth to the mythic Texas of oil barons and Giant, the sprawling James Dean epic. By the forties, the state had truly begun to shift from an agrarian economy to one based on oil. It was a land where rough-hewn wildcatters won and lost fortunes overnight. Here, Bush would develop an appreciation of oil as an important strategic resource, a characteristic he would later share with his Saudi friends.

By the time Bush got there, the Midland-Odessa area of West Texas was already an oil boomtown. Bush himself described it in his memoirs, Looking Forward, as "Yuppieland West." [3] An incongruous quasi-prep subculture began to emerge. Newly minted millionaires lived on streets named Harvard and Princeton. [4] Oilmen sent their sons north and east to prep at the Hill School, Lawrenceville, Choate, and Andover. Preppie clotheshorses shopped at Albert S. Kelley's, Midland's answer to Brooks Brothers. [5] Bush and his circle at the Petroleum Club constituted local society.

In 1953, Bush partnered with Hugh Liedtke to form a new independent oil company, Zapata Petroleum, backed by Bush's family connections. Bush's uncle, Herbert Walker, [iii] whose family helped found Brown Brothers Harriman, at one time the largest private investment firm on Wall Street, raised at least $350,000. Bush's father, Prescott Bush, put in $50,000. Washington Post publisher Eugene Meyer put in $50,000 and again that amount in the name of his son-in-law, Phil Graham, who later succeeded Meyer as publisher. [6]

Zapata drilled 128 wells in Texas in its first year without hitting a dry hole. [7] With the company's instant success, Bush moved to Houston in 1954 and the following year founded the Zapata Off-Shore Company, which he later ran himself after spinning it off from Zapata.

At Zapata Off-Shore, Bush learned firsthand about the interaction between business and government. Crucial to the company's future was a happy resolution to a political controversy that would determine whether Zapata, or any other company, could drill offshore in the Gulf of Mexico within the twelve-mile limit. Fortunately, Bush did not have to look far to find a friendly politician happy to enter the fray on his behalf. His father, Prescott Bush, had become a Republican senator from Connecticut. Having given up investment banking for a seat in the U.S. Senate, Prescott Bush led Senate Republicans in battling efforts to take federal control of mineral deposits within the twelve-mile limit. [8] As a result, the success of Zapata Off-Shore was preordained. Congress tabled its attempt to federalize those waters, and George Bush's Zapata Off-Shore was able to drill off the Mississippi coast in the Gulf of Mexico.


His early success notwithstanding, Bush had never been an insatiable, dyed-in-the-wool oilman. Accumulating money for its own sake was not and had never been the driving force in his life. His father was.

At six feet four inches, Prescott Bush Sr. was a commanding figure with Hollywood good looks and athletic grace. Imposing as his physical presence was, Prescott Bush loomed even larger in the imagination of his sons. According to Herbert S. Parmet's George Bush: The Life of a Lone Star Yankee, he was "a leviathan of a father," a man whom his children, George included, never dared challenge. His presence inspired words such as dignity, respect, duty, service, and discipline. At home, his sons wore coats and ties to the family dinner table each night. [9] "We had a father who taught us to ... put something back in, do something, help others," Bush told the Los Angeles Times. [10] [iv]

As managing partner of Brown Brothers Harriman, Prescott was a familiar figure in New York's moneyed class. He belonged to the best clubs and went on cruises with Averell Harriman, the former governor of New York, presidential adviser, and heir to the Union Pacific railroad fortune. He sang harmony on the porch after dinner with the Yalies. And yet, as much as Prescott was a part of the fabric of that world, he looked with disdain at the lives of the "economic royalists" around him whose only goal was the accumulation of money.

So to those who truly knew him, it was not surprising that Prescott Bush had gone to the Senate to serve the public; indeed, it was almost as if a Senate seat were preordained. [11] In 1962, however, for reasons of health, Prescott decided not to run for reelection. George resolved to follow in his father's footsteps -- and vowed that he would go even further. He confided to his friends that he entertained presidential ambitions.

And so, in 1966, Bush sold out his position in Zapata, then worth about $1 million, [12] and was elected to his first of two stints in Congress. In saying good-bye to Zapata, Bush was leaving behind a chance at truly great wealth. In 1963, partner Hugh Liedtke had merged Zapata with Penn Oil, in the process creating Pennzoil. Having mastered the art of the hostile takeover, he then used Pennzoil to eventually gain control of the United Gas Pipeline Company, a company five times larger than his. By 1986, Liedtke's stock had gone up in value by 10,000 percent. [13]

George Bush had forsaken great riches, but he clearly had a promising political future. By the time Bush was reelected to Congress in 1968, Richard Nixon had put the young congressman on his short list of vice-presidential candidates. [14] A Senate seat appeared to be within his grasp, and Bush thought that would be a stepping-stone to the White House. When he lost the 1970 Texas senatorial race to Lloyd Bentsen, however, he was devastated. "I feel like [General George] Custer," he told a friend, equating his campaign with Custer's disastrous loss to the Sioux Indians in the battle of Little Bighorn. [15]

Luckily, a Republican who appreciated Bush's fealty sat in the White House. In 1972, after his landslide reelection, President Nixon ordered a housecleaning based on one criterion -- loyalty. "Eliminate everyone except George Bush," Nixon told his domestic affairs adviser John Ehrlichman. "Bush will do anything for our cause." [16]

Then, after Bush's stints at the United Nations, the Republican National Committee, [17] [v] and heading the U.S. delegation to China, in 1976 President Gerald Ford asked him to be director of the Central Intelligence Agency.

With the CIA under fire for its excesses during the Vietnam era, [vi] however, being the nation's head spook was a political liability, not an asset. Bush reluctantly acceded to Ford's request to take the job, but he viewed it as a ruse by rival Republicans to keep him out of the White House. "Could that be what was happening?" Bush wrote in his memoirs. "Bury Bush at the CIA?" [18]

Bush had other liabilities as a national candidate. His loyalty to Nixon had paid off with high-level patronage positions, but in the aftermath of Watergate, being a protege of the disgraced president had serious drawbacks.

And Bush had been a very real beneficiary of the Republican campaign abuses. Specifically, during his failed 1970 Senate campaign, in what became known as Operation Townhouse, Bush, assisted by campaign finance chairman Bob Mosbacher, a wealthy New Yorker who had moved to Houston in 1948, [19] and Hugh Liedtke's brother William, [20] had received $106,000 in unreported campaign funds. The money had been funneled through no fewer than fourteen different Bush campaign committees to avoid detection. Two Nixon associates, Jack A. Gleason and Herbert W. Kalmbach, later pleaded guilty to running the illegal fund-raising operation. Bush himself never faced formal charges, but the Wall Street Journal termed the operation "a dress rehearsal for the campaign finance abuses of Watergate." [21] [vii]

So when Bush returned to Houston in 1978 to assess his chances for higher office, he found little enthusiasm among even his closest friends. Hugh Liedtke had warned him that the CIA job was political suicide. [22] John E. Caulkins, a banker friend from Detroit, was taken aback when he received a call from Bush saying he planned to run for the presidency.

"Of what?" Caulkins asked.

"The United States," said Bush.

"Oh, George," Caulkins replied. [23]

Nevertheless, in late 1978, Bush met with James Baker and Bob Mosbacher and put together groups to raise funds and assess his candidacy. In addition to his father's East Coast connections, the Yalies and Bonesmen, to his CIA colleagues and his patrons in Washington and on the Republican National Committee, Bush had assembled a significant new political network in Houston -- Big Oil.

For the House of Saud, of course, there was no difference between the public sector and the private sector. They owned the oil industry and ruled the country. But in the United States that was not the case, and Bush set about transforming capital from the oil industry into political power. With Baker and Mosbacher, he hit up executives from Pennzoil, Exxon, Houston Oil and Minerals, McCormick Oil and Gas. [24] He had oil industry contacts at the highest levels all over the world. During his days at the CIA, he had cultivated friendships with the "friendly royals" of the Middle East. In Houston, he entertained King Hussein of Jordan and Nelson Rockefeller and hung out at the exclusive Bayou Club. Bush's former partner Hugh Liedtke, as Pennzoil's president and CEO, had become an oil heavyweight in his own right. William Farish Jr., heir to the Humble Oil and Standard Oil (now ExxonMobil) fortunes, was, as Barbara Bush put it, taken in "almost like family" by the Bushes. [25] [viii]

Bush was also tied in with the power-broker attorneys at the great law firms of the oil industry in Houston, including but not limited to Baker Botts and Fulbright & Jaworski, who lobbied the powers that be in Washington, handled international mergers and acquisitions, and mapped out strategy for multibillion-dollar pipelines for virtually every major energy firm in the world.

This was a tightly knit world. The legal department of Pennzoil, for example, was closely linked to Baker Botts, the firm founded by James Baker's great-grandfather, and which today represents ExxonMobil, ARCO, Schlumberger, BP Amoco, Halliburton, and many more top energy companies. Baker Botts had long had a special relationship with the Bush family, representing Zapata in the fifties and later providing George W. Bush with a summer job as a messenger when he was a sixteen-year-old student at Andover. The firm also played a key role in what would become the most important friendship of Bush's life, a partnership with James A. Baker III that would last a lifetime. [ix]


Tall, trim, and athletic, Baker, who was forty-eight years old when Bush began to explore a run for the White House, brought a compelling blend of unlikely characteristics to the Bush team. He chewed Red Man tobacco and wore cowboy boots, but had polish and a certain sartorial elegance. [26] He mixed a steely-eyed toughness with an unflappable serenity. He was unyielding, but a realist -- the consummate negotiator. He was also the perfect partner for George H. W. Bush.

If they had never met, Baker would likely have been merely another successful corporate lawyer, and Bush a politician with a fabulous resume. But, like Fred Astaire and Ginger Rogers, they were more than the sum of their parts. Bush provided a genial, clubby exterior and contacts to power and capital at the highest levels in Washington and New York. Tough, decisive, and disciplined, Baker gave Bush the spine of steel he sorely needed.

Together, the two men masked their enormous ambitions under a genteel, Ivy-covered veneer that was a distinct break from the profane, cajoling, flesh-pressing, arm-twisting, bourbon-drinking Texas political style of the era dominated by Lyndon Johnson and Speaker of the House Sam Rayburn. It started, appropriately enough, as a partnership on the tennis court, with Bush's volley and net play complementing Baker's strong baseline game [27] so well that they twice took the doubles title at the Houston Country Club. [28]

Peggy Noonan, who later wrote speeches for Bush, eroticized their refined-but-ruthless ambition. "They're these big, tall, lanky, hot-as-a-pistol guys with ambition so strong it's like a steel rod sticking out of their heads," she told the New York Times. "But they always make a point not to show it. Steel with an overlay of tennis." [29]

Baker had captained the tennis team at the Hill School, then still a traditional private boys' school near Philadelphia, before moving on to Princeton, just as Bush had been a baseball captain at Andover before playing baseball at Yale. Likewise, Baker had been tapped by Princeton's most celebrated eating club, the Ivy, as Bush had been for Skull and Bones. [30]

The Bakers were the stuff of Texas legends. In 1872, Judge James A. Baker, Baker's great-grandfather, joined Gray & Botts [31] a major firm that went on to represent railroad magnates and bankers such as Jay Gould and E. H. Harriman. [32] The judge later became a name partner, and in 1900, his son, Captain James A. Baker, by then also a member of the firm, played a key role in an important part of Texas lore. He discovered that the will of a murdered client, millionaire William Marsh Rice, was fraudulent and succeeded in allowing the merchant's vast fortune to be used as intended -- to establish Rice University in Houston. [33] The Bakers were not of the East Coast Establishment, but in their very Texas way, their pedigree was every bit as refined as Bush's.

Yet for all their similarities, there were important differences in the two men. Bush seemed guileless, his face an open book, more concerned with politeness, civility, and accommodation than substantive issues and confrontation. [34] His cousin Ray Walker, a psychoanalyst, attributed that characteristic to Bush's relationship with his father. "He always placated his father," said Walker. "Then, later on, he placated his bosses. That is how he relates -- by never defining himself against authority." [35]

Bush's courtliness made for a certain protean charm. People saw in him what they wanted to see. But his agreeable exterior was so palatable to almost everyone that he risked being seen as uncertain as to his principles -- "a wimp."

In contrast, Baker was all smoothness and charm, the Velvet Hammer, always proper, but a man no one wanted to cross. "Baker holds you locked in his gaze and Southern Comfort voice, occasionally flashing a rather wintry smile," the New York Times said. " ... He is such a fox you feel the impulse to check your wallet when you leave his office." [36]


When it came to electoral politics, however, Bush and Baker had not had much success. After winning his congressional seat, Bush had lost races for the U.S. Senate in 1964 and 1970, and his name had not appeared on a ballot since. His son, George W., lost a 1978 bid for a congressional seat representing Midland, Texas. Bored by corporate law, Baker had been lured into politics by Bush, but was then relegated to relatively menial political jobs such as undersecretary of commerce in the Ford administration. [37] In 1978, he ran for attorney general of Texas, but lost to conservative Democrat Mark White.

In defeat, Baker learned a valuable lesson. Mark White, as secretary of state, had declined to extradite a murderer named Kleason, and during the campaign, an aide dug up the salacious details. "Baker was scared of [using the case] because it was so bad," the aide told the New Republic. "It seemed like we were making it up. It became a joke later. Baker would say, 'It's time to go with Kleason.'" [38] Baker refrained from smearing White and lived to regret it. But he was not the kind who made the same mistake twice.

By virtue of their friendship, it was a given that Baker would sign on as Bush's campaign manager -- a task he did not particularly relish. Baker had played the same role in Gerald Ford's failed 1976 presidential campaign and won enormous credit in the GOP for engineering a come-from-behind campaign that barely lost to Jimmy Carter. But Baker loathed playing second fiddle, being a mere handler. He would certainly be relegated to such a role in a Bush campaign, as he had been in Bush's earlier efforts. [39]

When the 1980 season got under way in January, Bush pulled off a stunning victory over Ronald Reagan in the Iowa caucuses. But before long the Reagan juggernaut was on. In February, the affable, fatherly Reagan defeated Bush by nearly two to one in New Hampshire. In early March, Reagan won in Vermont and South Carolina, then swept Florida, Alabama, and Georgia. Then Reagan won in Illinois. Throughout the spring, Bush frantically campaigned all over the country, even resorting to an uncharacteristically biting attack during the Pennsylvania primary in which he derided Reagan's tax-cut proposal as "voodoo economics." But by June, Reagan had won twenty primaries, and Bush had defeated Reagan only four times. Baker, seeing Reagan's inevitable victory, thought about how to bring his friend's campaign to a productive end. [40]

Bush won Michigan in May, but by then, Reagan had already locked up enough delegates for the Republican nomination. Baker sent Rich Bond, a young aide who later became chairman of the Republican National Committee, to California, where Bush was campaigning, with instructions to mislead both Bush and the press into thinking Bush still had an active campaign there. [41]

Meanwhile, Baker met privately with the press. He spoke to the reporters only on background. But he made it clear that there was no way the Bush forces could continue to campaign in California when they were broke. [42] Soon, it was all over the news: Bush was dropping out.

There was just one problem. Baker had told the media, but not Bush. In effect, Baker's close friend and partner learned that his campaign was over from the press. [ix] Later, Bush exploded at Baker. He told an associate that he had been "misserved." [43]

Baker found the clash with his longtime friend distressing. "I'll never go through that again," he later said. "That was the worst experience in my life." [44]

But soon Bush realized, as Baker had all along, that the longer he campaigned, the more likely he was to alienate the eventual winner, Ronald Reagan. Baker and Bush finally made up. Eschewing tactics and rhetoric that might have offended the gentlemanly Reagan, mending fences after Bush's "voodoo economics" gibe, Baker had adroitly managed the entire primary campaign almost as if aiming for Bush to get the vice-presidential nod.

At the last minute, during the Republican National Convention in Detroit in July, former president Gerald Ford suddenly emerged as a potential running mate for Ronald Reagan. But that "dream ticket" also raised the specter of an unworkable co-presidency and soon fell through. Late at night on July 16, 1980, Reagan called George Bush in the Poritchartrain Hotel to offer him the number-two spot. [45] Finally, the Reagan-Bush campaign against Jimmy Carter and Walter Mondale could begin in earnest.


Now that he was on board as Reagan's vice-presidential candidate, a rarely seen side of George H. W. Bush emerged, at least to political insiders. In many ways, he was and would remain one of America's most misunderstood and underestimated politicians. With his genial disposition and verb-challenged, syntactical idiosyncrasies, Bush often played the amiable doofus who had an unerring instinct for the tone deaf remark. On the campaign trail, he listened distractedly to an underprivileged, black ghetto youth who didn't like homework, then responded with feigned concern, "Ah, comme ci, comme ca." [46]

Conventional wisdom had it that Bush lacked backbone. His positions on hot-button issues such as women's rights or giving formal diplomatic recognition to mainland China flip-flopped. James Baker was the real Texan who went duck hunting and chewed tobacco. Next to that, Bush's conspicuous acts to show that he was just one of the guys -- devouring pork rinds, for example -- were embarrassing contrivances designed for the media. As columnist Molly Ivins put it, real Texans do not use "summer as a verb. Real Texans do not wear blue slacks with little green whales all over them. And real Texans do not refer to trouble as 'deep doo-doo.'" [47]

But in fact, Bush's perceived weakness -- his accommodation to his superiors -- was not so much spinelessness as a powerful political weapon. He was a consummate pragmatist capable of changing positions when political demands called for it. As Reagan's running mate, he had shown how far he would go to be a team player, reversing his stands on Reagan's "voodoo economics" and on the Equal Rights Amendment. [48] Accommodation was a means of achieving goals. Bush got what he wanted.

However, Bush was not just flexible and open to compromise as all politicians must be. His genial disposition disguised it well, but when he engaged in combat, he could be cunning and devious. As early as 1960, the elder Bush won success for Zapata Off-Shore that was partially attributable to a dubious deal in Mexico in which Bush used third-party fronts to disguise his presence in the transactions. [49] [x]

During his tenure as U.S. representative to the United Nations, as chief of the U.S. liaison office in China, and as director of the Central Intelligence Agency, he had also mastered the arts of compartmentalization and secrecy, and some of the more unsavory practices of political combat.

As head of the Republican National Committee, Bush had served on the front lines during the Watergate scandal. He had benefited from the Republicans' scandalous campaign practices through Operation Townhouse, but did not suffer politically. At the CIA, Bush had not initiated the Agency's use of Panamanian president Manuel Noriega, but he was kept apprised of Noriega's role in narcotics traffic, met with the dictator, [50] [xi] and still continued to use him as an intelligence asset. [51] Bush's great talent was that he regularly employed such practices to their fullest, but managed to do so without leaving fingerprints. He always emerged unscathed.

Just a few years earlier, in the wake of Watergate and investigations into the overzealous practices of the CIA, Bush's credentials would have been a serious campaign liability. But in November 1979, Iran had seized fifty-two American hostages. With the crisis still ongoing and the theme of America held hostage an endless drumbeat dominating the news, it was a particularly propitious time for the Republicans to have someone with Bush's experience in intelligence on the ticket.

Certainly the CIA itself saw Bush as a favorite son. Jimmy Carter's appointment of Stansfield Turner as CIA director had angered hundreds of agents. In October 1977, Turner eliminated 820 surplus CIA personnel, many of whom had been counterintelligence officers. "You can't imagine the tremendous anger against the Carter administration in the military and intelligence apparatus," says Susan Clough, Carter's personal secretary. "Emotions had been boiling for years." [52]

Widely hailed as the most popular director of Central Intelligence since Allen Dulles, Bush had enormous support within the Agency. As the campaign got under way, Reagan-Bush posters appeared all over CIA headquarters in Langley, Virginia, many cut in the middle with only the right side, the Bush side, on display. [53]

During the campaign, Bush would allow the tradecraft of intelligence to work for the Republican ticket, again without leaving fingerprints. On July 15, 1980, while the Republican Convention was still taking place in Detroit, Reagan-Bush campaign manager William J. Casey announced that an "intelligence operation" was "already in germinal form" to monitor the Carter administration. [54]

Republican officials insisted that these efforts did not suggest "clandestine information gathering." [55] And many of the activities were simply aggressive but legitimate campaign practices, such as getting Jimmy Carter's schedule so that Reagan-Bush teams could spin the press at Carter's appearances. [56]

But a 1984 congressional investigation determined that the Reagan-Bush campaign's "information gathering efforts were not [emphasis in the original text] limited to seeking materials that could be acquired through public channels." [57] The report, sometimes referred to as the Albosta Report, after its chairman, Congressman Donald Albosta, a Democrat from Michigan, added that there was "credible evidence" that crimes had occurred. [58] Specifically, as the election approached, the Republican campaign operation attempted to get internal Justice Department documents on an investigation into the president's brother, Billy Carter, [xii] confidential reports on the Iranian hostage crisis from the Justice Department and Carter's National Security Council, and more. [59] The most famous of these Reagan-Bush operations later became known as Debategate and involved the apparent theft of Carter's briefing papers by Republicans before the October 1980 presidential debates. [60] [xiii]


On November 4, 1980, Reagan and Bush swept to a landslide victory over Jimmy Carter and Walter Mondale, winning the electoral vote by 489 to 49. In the two and a half months before the new administration took office, Bush spent his time putting together his staff and bolstering his relationships with Reagan's team. Reagan appointed Bush's Yale friend and Connecticut campaign chairman Malcolm Baldrige as secretary of commerce.

More important, James Baker's adroit political footwork during the campaign and his success at getting Bush to bow out of the race before dealing any unseemly blows to Reagan had so impressed Ronald Reagan's circle that he was the surprise choice for the powerful position of chief of staff. Thanks in part to lobbying on his behalf from the new CIA director, Bill Casey, Baker was now gatekeeper to the president of the United States.

A new era was beginning. The juxtaposition was stark. The Carter administration had been characterized by economic stagflation, hostages being seized, and a period of national embarrassment and humiliation. Now, a glamorous Hollywood royalty was replacing the dowdy Georgia rubes. Nancy Reagan breezed into the White House wearing Reagan Red -- her own color -- in gowns by Galanos, Bill Blass, and Adolfo. [61] There was a sense of style not seen since the Kennedys. The inauguration was going to be a coronation.

On January 18, 1981, just two days before the Reagan inauguration, the Carter administration finally reached an accord with Iran about returning the fifty-two hostages, who had then been in captivity for 442 days. All that remained before signing the agreement was a final translation of the terms into three languages, English, French, and Farsi. [62] Senator Charles Percy, chairman of the Senate Foreign Relations Committee, said, "I'm certain a deal will be made public before we go to bed tonight."

President Carter desperately hoped he would be able to welcome home the released hostages before his administration ended. But the next day, as negotiators fiddled with the final wording of the translations, Tehran Radio asserted that Carter would not get his wish. [63] "He certainly will not have the opportunity to engage in such clowning acts, because he has to be present outside the White House tomorrow to hand over his shameful office to his successor."

There seemed no reason for the Iranians to delay -- except to further humiliate Carter. As January 20 approached, one of the Iranian negotiators bragged that "we have managed to rub the nose of the biggest superpower in the world in the dust." [64]

Two hours before sunrise on Inauguration Day, Carter at last announced the final agreement for the hostages to be released. As Carter left the White House, and Reagan took the oath of office, the television networks cut furiously back and forth from their inauguration coverage to images of the hostages returning. [xiv]


Meanwhile, the Saudis had been closely watching their connections climb the political ladder and had taken on the services of former secretary of defense Clark Clifford. That spring, Clifford began lobbying on behalf of a group of Arabs, led by Sheikh Kamal Adham, the former chief intelligence officer of Saudi Arabia, to acquire Financial General Bankshares, a Washington, D.C.-based bank holding company. [65]

In the banking world at least, the Saudis were moving up the ladder. In addition, the Saudis were now particularly visible in Houston. Just three months after Bush and Baker began to settle down in the nation's capital, the Washington Post published a long article by Dan Balz on "Houston as the Mecca for the Saudis." [66] The piece went on about how the Saudis had become Houston's number-one trading partner. It discussed the mysterious Khalid bin Mahfouz, living in his stone mansion in the exclusive River Oaks section, sealed off from the neighborhood by a daunting iron fence, a sea of azaleas, and a burly guard poised to ward off intruders. It mentioned John Connally's involvement with bin Mahfouz and Ghaith Pharaon in buying the Houston Main Bank.

Two prominent Houstonians, Vice President George Bush and White House chief of staff James Baker, however, were nowhere mentioned in the article. The Bush family had pretty much steered clear of the Saudis -- or so it seemed.

But indirectly, bin Mahfouz had managed to get closer to James Baker. According to his attorney, Cherif Sedky, bin Mahfouz and his brothers joined forces with Houston developer Gerald Hines in developing the Texas Commerce Tower, the seventy- five-story I. M. Pei-designed home of Texas Commerce Bancshares, which was completed in 1982. [67] [xv] The building (now known as J. .P Morgan Chase Tower) was under construction by the time Baker and Bush got to Washington.

Sedky says neither he nor bin Mahfouz recalls who the other partners were in developing Houston's tallest building. But, according to the American Banker, the other major partner was the Texas Commerce Bank itself, [68] which had been founded by James Baker's grandfather. [69] According to the New York Times, as of December 31, 1980, just before he became chief of staff, Baker owned or controlled 111,428 shares of the bank company, worth $7,242,820 at the time. When he entered the Reagan administration, Baker put his stock into a blind trust to avoid potential conflicts of interest. There is no reason to believe he engaged in wrongdoing. [70]

But from the Saudi side, bin Mahfouz had accomplished something of a coup. Just thirty-two years old, the young Saudi billionaire now had shared business interests with the chief of staff to the president of the United States, the gatekeeper to the White House -- something that was bound to win approval at the highest levels of Saudi royalty. "Bin Mahfouz is a shrewd banker. He is not a risk taker," says a Saudi analyst who knows the royal family. "When he did that transaction, he had to have the complete authorization of the Saudi royal family." (James Baker declined requests to be interviewed for this book.)

To many Americans, the Saudi investments with politicians seemed unsavory, though it was not always precisely clear why. The most obvious assumption was that the Sauds were trying to buy access to the White House or to influence policy toward Israel -- or rather against it.

But in fact, even the Texans who had met the bin Ladens and the bin Mahfouzes knew little about them. Few had been to Saudi Arabia. Few knew anything about the House of Saud. Few understood the nature of the Saudi monarchy and its hierarchy. Few knew anything about its culture, about what was taught in Saudi schools. They did not know that the kingdom was a theocratic monarchy, that there was no separation of church and state, nor did they understand the first thing about Wahhabi Islam and its fundamentalist and puritanical nature.

For the most part, Texans interpreted the Saudis in American terms, in terms they understood, ones that had to do with money and oil and huge homes and multimillion-dollar business deals. The Saudis were so rich they could fly their own private commercial-size jets halfway around the world to see famous heart surgeons like Denton Cooley and Michael DeBakey at the Houston Medical Center.

Even those who were somewhat more knowledgeable thought the new generation of Saudis appeared thoroughly westernized and that perhaps the rules had changed. "As Americans trying to do business in Saudi Arabia, we'd always had lots of problems," says one oil executive who had been going to Riyadh for decades and knew the royal family firsthand. "Back then, you had to wear Arab clothes. And the Wahhabis were always reluctant to do business with the infidel. But now they came over dressed in Western clothes and looked real good. They were good businessmen. They did due diligence and hired good people."

Yet enormous differences between the Saudis and the Americans lay hidden beneath the surface. The American pilots who flew for the bin Ladens and the bin Mahfouzes and saw how they lived in Jeddah were among the few who actually got to glimpse the Saudis on their home turf. On one occasion in the mid-seventies, Gerry Auerbach, a pilot from Texas who worked for Salem bin Laden, noticed a tall, lanky, rather dour teenage Saudi boy, who was one of Salem's many half brothers, and inquired who the young lad might be.

"Oh," he was told. "That's Osama. He's praying. " [71]


[i] Bush's son George W. also became a Bonesman.
[ii] Dresser was later taken over by Halliburton, which was run by another Bush colleague, Dick Cheney
[iii] The Walker family also oversaw the creation of Madison Square Garden, the Belmont Race Track, and the New York Mets, and lent their name to the Walker Cup, one of golf's most prestigious events. Walker Point in Kennebunkport, Maine, is the site of the estate to which President George H. W. Bush and his family often went for summer vacations.
[iv] Not everyone agreed that Prescott Bush ruled the Bush children. According to Bill Minutaglio's First Son, Barbara Bush once said that Dorothy Walker Bush had "ten times" as much influence on her sons as had Prescott.
[v] When Bush was chairman of the RNC, a Washington Post reporter asked him about a young man who had been accused of teaching political espionage and "dirty tricks" to college Republicans. According to First Son, a few months later, after the news stories had been forgotten, Bush hired the man, Karl Rove, as his special assistant. Part of his job was to make sure that George W. had a car whenever he came to town. Years later, Rove, of course, became known as the political strategist and image shaper behind George W. Bush.
[vi] One of the most egregious excesses of the CIA was the Phoenix program in Vietnam. According to Vietnam Information Notes, published by the U.S. State Department in July 1969, "The target for 1969 calls for the elimination of 1,800 VCI per month. ... The Phoenix program ... [has] served notice to Province Chiefs that their performance will in large part be measured by Phoenix results." In other words, under the program, the CIA required province chiefs to assassinate a quota of eighteen hundred Vietnamese per month.
[vii] When confronted with the allegations, Bush often told reporters that special prosecutor Leon Jaworski had found no evidence of illegal activities by Bush after investigating the Townhouse fund. As Newsweek noted, Bush was close friends with Jaworski, a partner at the huge Houston law firm Fulbright & Jaworski.

[viii] In 1964, Farish was the first person to whom Bush confided his presidential ambitions. A tennis partner of Bush's, he managed Bush's trust, and when Bush was elected president, Farish and his wife, Sarah, gave George and Barbara Bush a dog, Millie, that became known as the White House dog. In the election cycle of 1999-2000 alone, Farish contributed $142,875 to the Republicans. He was later appointed ambassador to Great Britain by President George W. Bush in 2001. James Baker was initially prohibited from working at Baker Botts because of an antinepotism rule at the firm. Eventually, the rule was changed, however, and Baker joined the firm.
[ix] In The Politics of Diplomacy, Baker recounts the episode: "I really had to wrestle with him to do the right thing for himself politically. 'George, it's over,' I told him. 'We're out of money, it's mathematically impossible to win the nomination, and to continue on through the last primaries would destroy any chance whatsoever you may be picked as Vice-President."'
[x] At the time, Mexican law required that all oil drilling contracts be controlled by Mexican citizens. But according to Barron's, in 1960 Bush and Zapata Off-Shore teamed up with a prominent Mexican businessman, Jorge Diaz Serrano, a longtime friend of Mexican president Lopez Portillo, to circumvent that law. Diaz Serrano later served five years in jail for defrauding the Mexican government of no less than $58 million.
The financial magazine reported that Bush and his Zapata Off-Shore colleagues owned about half the stock in Perforaciones Marinas del Golfo, better known as Permargo, but made it appear as if Permargo was 100 percent Mexican-owned. Zapata's shareholders were never told of the company's part ownership of Permargo. When asked why the American participation in the company was kept secret, Bush press aide Steve Hart said, "An American firm could not do business directly in Mexico without having Mexican partners."
After Bush became vice president in 1981, the Securities and Exchange Commission destroyed SEC filings for Zapata for 1960 to 1966, the years during which Bush was involved with Zapata and Permargo. According to SEC officer Suzanne McHugh, "The records were inadvertently placed in a session file to be destroyed. It does occasionally happen."
[xi] Noriega once boasted, "I've got Bush by the balls." He told the Washington Post's Lally Weymouth that Bush "is my friend. I hope he becomes president." Bush had been warned about using Noriega as an asset by the legendary head of French intelligence, Count Alexandre de Marenches, who warned him with regard to Noriega, "My own philosophy has always been that when you have something particularly dirty to do, you hire a gentleman to do it. If the gentleman is persuaded that what we are contemplating is an act of war, and by extension an act of patriotism, then we will find some very good people to work for us. By contrast, if we hire a thug, then eventually we will be compelled to kill the thug in one way or another because eventually we would be blackmailed by him."
[xii] In the scandal that became known as Billygate, President Carter's brother, Billy, registered as a Libyan agent and accepted $220,000 from Libya, thereby precipitating a congressional investigation.
[xiii] For a detailed look at Debategate and the intelligence operation behind the Reagan-Bush campaign in 1980, see note 60.
[xiv] According to Heinrich Rupp, a pilot who worked for Salem bin Laden, at the behest of Vice President-elect George Bush, one of the bin Laden planes, a BAC-111, was made available to pick up the hostages in Tehran and take them back to the United States. "When they were liberated, he [Salem bin Laden] offered it, and he had the airplane. I was sitting in Tehran airport [as the plane's pilot] when we got called off." Rupp is a highly controversial source whose credibility has been questioned by a congressional investigation. The author has been unable to corroborate or refute Rupp's account.
[xv] When it was founded by Captain James A. Baker, it was known as South Texas Commercial Bank.


1. Ron Rosenbaum, New York Observer, Apri1 23, 2001, p. 1.
2. Ed Vulliamy, "Dark Heart of the American Dream," Observer (London), June 16, 2002, p. 22; Herbert S. Parmet, George Bush, p. 25; and Elizabeth Mitchell, W: Revenge of the Bush Dynasty.
3. George Bush, Looking Forward, p. 56.
4. Parmet, George Bush, p. 78.
5. Daniel Yergin, The Prize, p. 753.
6. Parmet, George Bush, p. 81.
7. "Bush's Energy Policy Is No Policy at All," Atlanta Journal and Constitution, February 26, 1991, p. 12.
8. Parmet, George Bush, p. 83.
9. Ibid., pp. 30-31.
10. Barry Bearak, "His Great Gift, to Blend In; Team Player Bush: A Yearning to Serve," Los Angeles Times, November 22, 1987, p. 1; and Bill Minutaglio, First Son, p. 218.
11. Richard Ben Cramer, What It Takes, pp. 86-88.
12. George Lardner Jr. and Lois Romano, "George Bush: A Texas Childhood," Washington Post, July 26, 1999, p. Al.
13. Parmet, George Bush, p. 85.
14. Ibid., p. 135.
15. Walter Pincus and Bob Woodward, "George Bush: Man and Politician, Part 2," Washington Post, August 8, 1988, p. Al.
16. John Loftus and Mark Aarons, The Secret War Against the Jews, p. 369.
17. Minutaglio, First Son, pp. 166-67.
18. Bush, Looking Forward, p. 153.
19. Historic Houston website, ... y11hof.htm .
20. Parmet, George Bush, p. 140.
21. Jill Abramson and Thomas Petzinger, Wall Street Journal, June 11, 1992; and "Periscope," Newsweek, September 29, 1980, p. 19.
22. Parmet, George Bush, p. 189.
23. Bob Woodward, "To Bones Men, Bush Is a Solid 'Moderate,'" Washington Post, August 7, 1988, p. A 18.
24. Parmet, George Bush, p. 209.
25. Vulliamy, "The Dark Heart of the American Dream."
26. Maureen Dowd and Thomas Friedman, "The Fabulous Bush & Baker Boys," New York Times, May 6, 1990, sec. 6, p. 34.
27. James A. Baker III, The Politics of Diplomacy, p. 18.
28. Dowd and Friedman, "The Fabulous Bush & Baker Boys."
29. Ibid.
30. Ibid.
31. Jacob v. Lamar, "The Cool Texan: Master of the Game," Time, October 3, 1988, p.21.
32. Kenneth J. Lipartito and Joseph A. Pratt, Baker & Botts in the Development of Modern Houston, p. 17.
33. Burt Solomon, "The President's Peer," National Journal, January 7, 1989, p. 6.
34. Dowd and Friedman, "The Fabulous Bush & Baker Boys."
35. Bearak, "His Great Gift," p. 1.
36. Dowd and Friedman, "The Fabulous Bush & Baker Boys."
37. Harry F. Rosenthal, Associated Press, March 4, 1980.
38. Sidney Blumenthal, "I, Baker: George Bush's Final Gambit," New Republic, November 2, 1992, p. 17.
39. Ibid.; and Dowd and Friedman, "The Fabulous Bush & Baker Boys."
40. Blumenthal, "I, Baker," p. 17.
41. Ibid.
42. Parmet, George Bush, p. 235
43. Blumenthal, "I, Baker," p. 17.
44. Ibid.
45. "Hour by Hour: The Deal That Got Away," U.S. News & World Report, July 28, 1980, p. 22.
46. Clarence Page, "Here's Who'll Help Bush," Chicago Tribune, July 20, 1988, p. 20.
47. Solomon, "The President's Peer"; and "Molly Ivins Discusses New Collection of Columns," CBS News Transcripts, This Morning, October 3, 1991.
48. Bill Peterson, "For Bush, a Potential for the Spotlight," Washington Post, January 20, 1981, p. 16.
49. Jonathan Kwitny, "The Mexican Connection: A Look at an Old George Bush Business Venture," Barron's, September 19, 1988.
50. Alexandre de Marenches and David Andelman, The Fourth World War, pp. 253-54.
51. Parmet, George Bush, pp. 204, 289.
52. Interview with Susan Clough.
53. Gary Sick, October Surprise, p. 24.
54. "Unauthorized Transfers of Nonpublic Information During the 1980 Presidential Election," report prepared by the Subcommittee on Human Resources of the Committee on the Post Office and Civil Service, May 17, 1984, pt. 1, p. 10.
55. Ibid., p. 34.
56. Craig Unger, "October Surprise," Esquire, October 1991.
57. "Unauthorized Transfers," Committee on the Post Office and Civil Service, May 17, 1984, pt. 1, p. 35.
58. Ibid., p. 3.
59. Howard Kurtz, "Reagan '80 Campaign Sought Data on US Probe of Billy Carter," Washington Post, May 24, 1984, p. 16.
60. One of the key figures in Casey's operation had been Bush's national policy director, Stefan Halper. Halper, the son-in-law of CIA deputy director Ray Cline, set up a complex in Arlington, Virginia, that used former CIA operatives to monitor the Carter administration. All of the men working under Halper later denied participating in covert operations for the Reagan-Bush campaign. And Halper said that the existence of an intelligence network spying on the Carter administration was "absolutely false." Nevertheless, sensitive documents from the Carter- Mondale campaign repeatedly came into their possession. Halper told congressional investigators that he did not know how that could have happened.
In September 1980, however, Halper sent three memos to Ed Meese, the campaign's chief of staff, who later became attorney general. The memos indicated that Halper had sources inside the Carter administration or the Carter-Mondale campaign. Each memo was accompanied by materials from the Democrats. Halper was not the only one close to Bush who had moles inside the Carter organization. In the latter days of the campaign, Bush's brother, Prescott Bush Jr., wrote three letters to James Baker about Herb Cohen, a consultant to the Justice Department and the FBI. The letters asserted that Cohen had reliable sources on Carter's National Security Council and was ready to expose the administration's handling of the hostage situation. Cohen later objected to the way he was characterized in these letters.
The pilfered papers consisted of a black loose-leaf notebook that had been in the office of Zbigniew Brzezinski, Carter's national security adviser. The Albosta Report concluded, "The presumption, therefore, is that these materials were improperly taken for use by the opposition campaign." This apparent theft must have created a special problem for James Baker. As a lawyer in Houston, Baker had a reputation as a model of probity. It was said that he gave up litigation early in his career because of the unsavory practices it entailed. At the same time, part of Baker's job was to supervise people who prepared the debate briefing books for Reagan. The Albosta Report found that at least thirteen members of the Reagan-Bush team either received the Carter debate material or saw it at one time or another. One was Baker himself, who, in an affidavit, admitted that he had in his possession "materials apparently intended or designed to be used in the preparations of briefings for President Carter." Baker said he passed the material on to other staffers.
And how did Baker get them? "My best recollection is that I received the material ... from William Casey," he explained.
And where did Casey get them? Baker said he did not know. For his part, the perpetually disheveled Casey, who mumbled so much during his congressional testimony that many could barely understand him, said he did not recall giving any such materials to Baker. The Albosta Report concluded that both Baker and Casey could not be telling the full truth. But that left the essential questions unanswered.
As the investigation neared its unsatisfactory conclusion, Congressman Albosta considered upping the ante by calling for a special prosecutor a la Watergate. But a young Republican congressman from Wyoming dropped by Albosta's office -- the same man whom Albosta suspected of giving the papers to Casey. It was Dick Cheney.
"Cheney came over to my office and pleaded with me not to investigate any- more," said Albosta. "I was at the end where I was going to drop it anyway. The reason he gave was the nice-guy reason -- him being a nice guy and he didn't want to get involved.
"There were suspicions in my mind about him. The papers were supposedly in Cheney's hands, in Bill Casey's hands, and Casey handed them to Baker. But he was one of the people I had to work with and I didn't want to make waves anymore. If I had done any more, I think he would have been teed off with me." And so, the Albosta investigation sputtered to a halt with his committee unable to get the Justice Department to appoint a special prosecutor to investigate. Many of Bush's men appeared to have played key roles in a sophisticated intelligence operation directed against the Carter campaign, but Bush himself emerged entirely unscathed.
As it turned out, the Republicans were already so teed off at Albosta's investigation that they had resolved to make sure he was defeated that fall. "I was the number-one house member they [the Republicans] targeted in the elections," recalls Albosta. "They labeled me the number one to get rid of." As the November election approached, President Reagan himself went to Albosta's district in rural Michigan to campaign against him, as did Vice President George Bush, Secretary of Commerce Malcolm Baldrige, Agriculture Secretary John Block, and other high-level cabinet members.
"They put in more than a million dollars in soft money against me. They bought up every minute of television time for advertising," Albosta added. He lost to Republican Bill Schuette in the November election and later retired to a farm in rural Michigan.
Sick, October Surprise, p. 24; "Unauthorized Transfers," Committee on the Post Office and Civil Service, pt. 1, pp. 36, 39, 55, 100, 102, 124, 1086, 1105; United Press International, July 24, 1983; Laurence I. Barrett, Gambling with History, p. 383; and Donald Albosta, telephone interview.
61. Nina Hyde, "Having Designs on the First Lady," Washington Post, January 18, 1981, p. A 9.
62. Barry Schweid, "US, Iran Close to Hostage Accord," Associated Press, January 18, 1981.
63. United Press International, January 19, 1981.
64. Richard Harwood and T. R. Reid, "U.S. Announces Resolution of Dispute Blocking Return of Hostages from Iran," Washington Post, January 20, 1981, p. A 1.
65. E, J. Dionne, "Albany Plea on Arab Bank Bid," New York Times, May 13, 1981, p.D3.
66. Dan Balz, "The Saudi Connection: The Next Best Thing to Mecca Is Houston; Houston as the Mecca for the Saudis" Washington Post, April 19, 1981, p. C 1.
67. Cherif Sedky, interview by e-mail, September 7, 2002.
68. American Banker, December 24, 1985.
69. James Conaway, "The Texas Connection: James Baker and George Bush Rep resent a New Kind of Lone Star Politician in the White House -- the Texas Preppie," Washington Post Magazine, December 13, 1981, p. 18; and Alexander Stuart, "Texan Gerald Hines Is Tall in the Skyline," Fortune, January 28, 1980, p.101.
70. Thomas Friedman, "Baker Selling His Stocks to Avoid Any Conflict in State Dept. Role," New York Times, February 15, 1989, p. A 1.
71. Interview with Gerry Auerbach.
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Re: House of Bush, House of Saud, by Craig Unger

Postby admin » Wed Nov 27, 2013 4:12 am


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.
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Re: House of Bush, House of Saud, by Craig Unger

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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.


1. "Looking for Answers: Egypt," PBS Frontline, .
2. U.S. Department of State, Patterns of Global Terrorism, 2001, May 2002, .
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, .
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, ; 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, .
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,
39. "Iraqi Use of Chemical Weapons," from Jonathan T. Howe and Richard Mur- phy to Lawrence Eagleburger, November 21,1983, National Security Archives,
40. "U.S. Documents Show Embrace of Saddam Hussein in Early 1980s Despite Chemical Weapons," National Security Archives,
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),
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,
44. Dean Foust and John Carey, "A U.S. Gift to Iraq: Deadly Viruses," Business Week, September 20, 2002, ... 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," ... 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,
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
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.
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Re: House of Bush, House of Saud, by Craig Unger

Postby admin » Wed Nov 27, 2013 4:14 am

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."


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,
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,
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,"
23. Jihad, About Islam and Muslims; Ibid.
24. F. Gregory Gause, "Be Careful What You Wish For," .
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, ... 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, .
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,
45. Robert Siegel, "Sayyid Qutb's America," All Things Considered, National Public Radio, May 6, 2003,
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, ... amily.html.
53. Neil MacKay, "Family Ties: The Bin Ladens," Sunday Herald (Scotland), October 7, 2001,
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.
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Re: House of Bush, House of Saud, by Craig Unger

Postby admin » Wed Nov 27, 2013 4:17 am

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."


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,
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, .
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, .
13. Yossef Bodansky, Bin Laden, p. 10.
14. Jacquard, In the Name of Osama bin Laden, p. 11.
15. "Hunting bin Laden," PBS 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,
21. Daniel Benjamin and Steven Simon, The Age of Sacred Terror, p.103.
22. Interview with Prince Bandar, "Looking for Answers," PBS Frontline, terrorism/interviews/bandar.html .
23. Ibid.
24. Rashid, Taliban, p. 132.
25. Jane Mayer, "The House of Bin Laden," New Yorker, November 12, 2001,
26. Mary Anne Weaver, "Blowback," Atlantic Monthly, May 1996, .
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, .
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," .
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, .
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, .
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, ... 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.,,,SB ... 00.html#CX .
67. Interview with Robert Baer.
68. Interview with Cherif Sedky, attorney for Khalid bin Mahfouz.
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Re: House of Bush, House of Saud, by Craig Unger

Postby admin » Wed Nov 27, 2013 4:33 am


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]
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Re: House of Bush, House of Saud, by Craig Unger

Postby admin » Wed Nov 27, 2013 4:34 am

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 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.


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,
7. "Not rated for the period 1 May 1972 through 30 Apri1 1973. Report for this period not available for administrative reasons,"
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, ... roove.html .
13. "World Oil Market and Oil Price Chronologies: 1970-2002," Energy Information Administration, Department of Energy, .
14. "The Bush-Saudi Axis," Time, September 15, 2003, .
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



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, ... ale+.shtml .
45. Glenn Simpson, "Harvard Was Unlikely Savior of Bush Energy firm Harken," Wall Street Journal, October 9, 2002, ... 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, ... .
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.
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