Inside Bechtel’s Spin Machine

The Bechtel Group, the massive San Francisco-based construction and engineering firm, has played a leading role in some of the most controversial construction projects in modern history: California’s San Onofre nuclear reactor, Boston’s budget-busting “Big Dig,” the failed attempt to rebuild and privatize Bolivia’s water system, the ongoing corporate takeover of London’s subway system – and now a large chunk of the reconstruction job in Iraq.

The bad public relations from just one these projects could sink a lesser firm, but somehow the well-connected, privately held corporation always seems to emerge unscathed and ready to score more big-ticket public works jobs.

So how does Bechtel do it?

Though any corporation of Bechtel’s size – it boasted $16.3 billion in revenue for 2003 – works hard to control spin, Bechtel seems to have taken the concept of media manipulation to new heights. Judging from a raft of high-level internal memos and e-mails obtained by public interest group CorpWatch, it seems Bechtel has a three-point P.R. strategy: trashing journalists who report critically on the company, spinning financial institutions who lend the company money, and bending the truth.

The documents, which include several e-mails to and from chief executive officer Riley P. Bechtel, are fascinating because they offer rare insight into the mind-set of one of the most secretive corporations in the United States, one that has been handed more than $1 billion by the federal government to rebuild Iraq’s pulverized infrastructure.

“We get critical stuff written about us all the time,” Bechtel spokesperson Jonathan Marshall told us. “We try to be responsive so people can hear our side and judge for themselves.”

One story Bechtel wishes never saw the light of day is a 4,700-word exposé on its disastrous dot-com and energy ventures that ran last month in Business 2.0, a glossy, San Francisco-based magazine. The reporters behind the story, Ralph King and Charlie McCoy, came into some amazing information, gleaned from Bechtel insiders worried about the financial state of the company, which had lost some $300 million on bad investments and taken on a staggering debt load of $500 million. Things were so grim, King and McCoy learned, that in early 2003 top execs were asked to pony up $50 million in personal funds to keep the firm afloat.

When King first contacted Bechtel about the money crunch late last year, company spinmeisters promptly ran a background check on him, pulling together a bunch of his stories. “King is a former banking reporter for the Wall Street Journal,” wrote Jock Covey, director of corporate and external affairs, in a November 2003 memo to Riley Bechtel and other execs, adding, “King does not have a record as a muckraker.”

In interviews the company sought to give “a more balanced perspective” but offered little substantive information about its finances because doing so “would require an unprecedented surrender of privacy,” according to the memo.

Bechtel also tried to “craft a response” that would convince the reporters to drop their investigation.

When that didn’t work, Covey decided to put out a canned statement claiming Bechtel was doing fine financially. “It will help persuade many if not all journalists that Bechtel is doing no worse, and possibly better, than other major industry players – thereby reducing the incentive to invest time and resources in following up the Business 2.0 story,” he theorized in a memo.

While downplaying the charges to outsiders, Bechtel was actually reeling from the journalistic probe. The company, internal e-mails indicate, ran an exhaustive search of its phone and e-mail logs hoping to root out the employees who were feeding information to the reporters.

At a November 2003 meeting of company execs, Riley Bechtel directly addressed the looming exposé, while president and chief operating officer Adrian Zaccaria described it as “disturbing” and said, “We are going to suffer real, tangible harm from this story,” according to a written copy of his prepared remarks.

A chief concern was the company’s bankers. “I am not worried about being able to explain or calm our key banks and customers but I am concerned that our newer and smaller stakeholders will demand more from us,” he said, according to the document. Zaccaria added that lenders might start asking for more-detailed financial statements or attach more conditions to loans made to the company.

But Bechtel knew how deal with the banks. One tactic was to smear King, McCoy, and Business 2.0. “We can take the initiative with key lenders, and perhaps others, to say that Business 2.0 is about to print a story we (and they) know to be highly misleading,” Covey wrote in an e-mail sent in November.

Another tactic, according to a December 2003 memo from Covey to Riley Bechtel and others, was to draft a “dummy” financial document to assuage the doubts of lending institutions.

Bechtel’s finance division was ordered to prepare a “dummy for contingency use with financial institutions,” the memo says. There’s no indication the document was fraudulent in any way, though the whole discussion raises intriguing questions about Bechtel’s approach to balance-sheet calculations.

Deputy chief operating officer Jude Laspa was tasked with “rehearsing” answers to “tough questions” from the press, correspondence shows.

Today Bechtel maintains the story is “absolutely” inaccurate. “It portrayed the company as being in financial crisis when, in fact, we’re in a very healthy position,” Bechtel spokesperson Marshall said. “The basic premise was wrong.”

As for the lenders, Marshall says, “They get extremely detailed financial information.”

But Bechtel’s own documents make it clear the firm was going through rough times before landing the Iraq gig and other work overseas. A “strictly confidential” December 2003 report authored by Riley Bechtel explains the company’s overall net worth plummeted by $175 million in 2002, mostly due to power plant investments that soured.

“That’s why I don’t have a job anymore,” one former Bechtel employee told us.

Apparently, the company has since rebounded – last week it reported a major surge in revenue, thanks in part to its work in Iraq.

We contacted King, McCoy, and Business 2.0 for comment on Bechtel’s P.R. tactics; they chose to let the story speak for itself.

This isn’t the first time Bechtel has aggressively challenged its critics.

Last year, after the Boston Globe published a three-part series on gargantuan cost overruns on the Big Dig, the firm responded by circulating an 18-page memo labeling the stories “a disservice to the truth” and accusing the Globe of failing to understand the basics of the construction trade. And when the Bay Guardian ran a pair of scathing stories in 2000, the company spammed its employees with an e-mail faulting the paper for “relying on well-worn innuendoes, falsehoods, and quotes from biased or incredible sources to round out their negative portrait.”

Marshall says his company has gotten a bum rap. In fact, he says, “Bechtel is one of the most transparent firms doing reconstruction work in Iraq.”

[Bay Guardian reporter A.C. Thompson is on a sabbatical doing research for CorpWatch. A version of this story appears on its Web site,]

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