Trading with the Enemy

Houston oil companies maintain their profitable ties to Libya, in roundabout ways

A few weeks ago, Walter Murtaugh, the former CEO of Sea Traders Line, agreed to a guilty plea on one of the counts in a federal indictment filed against him last fall. Soon after, federal prosecutors dropped their charges against Sea Traders, which Murtaugh had sold to new owners several months before his indictment. (The new owners initiated a housecleaning, and no further charges are pending against Sea Traders.)

Not all of Customs' actions are focused on executives, though. One crusty old wildcatter, Clarence Quincy Elliott, now living in Kingwood, agreed to do 100 hours of community service -- and turn state's evidence -- to atone for laboring illegally in the Libyan oil fields for 11 years, for a variety of oil companies.

In several cases, the feds are demanding, and getting, help in making cases against other local companies out to do business with the Libyans. And workers in the oil patch say that Houston has been a rich field for investigators patiently putting cases through the system, with more indictments on the way.

The stakes in this game of international intrigue are huge -- with billions of dollars in Libyan contracts up for grabs.

In addition to its usual hunger for equipment to operate its massive oil fields, Libya has been touting its $25 billion Great Man-Made River Project, consisting of hundreds of miles of tunnels, 13 feet wide, being bored a quarter-mile beneath the 100-degree-plus temperatures of the Saharan desert. Libyans bill this 14-year-old project as one of the world's most ambitious irrigation plans, touted in brochure-like prose as a historic effort to "make the desert bloom."

But a recent report in the New York Times cast a far more sinister shadow on the work in the desert. Times correspondent Raymond Bonner quoted several project engineers who fear the irrigation project is simply an elaborate cover for a military scheme to move Libyan troops to its sensitive borders -- an explosive issue in a region that has seen Libyan troops threaten regimes of two bordering nations.

The tunnels also bore right through Libya's Tarhuna Mountain, which U.S. intelligence officials reportedly believe is Colonel Qaddafi's construction site for an elaborate biological and chemical weapons plant. Engineers told the New York Times -- confidentially, as they fear assassination -- that almost none of the related work associated with an irrigation project is under way. Lately, though, the London Observer has cast doubt on the military aspects of the project, saying that far too much of the equipment inside the tunnels would prohibit any kind of military uses.

While the debate over its ultimate purpose goes on in intelligence circles, no one doubts the immense rewards that await any company that can get a piece of the River deal. Ironically, even as local businessmen face jail time, fines and some gut-wrenching legal defense fees, some of the largest companies in Houston concede they have enjoyed a long, lucrative and apparently legal relationship with Libya and the Great Man-Made River Project.

Brown & Root, the Houston-based subsidiary of global oil-field services giant Halliburton, transferred its work as project manager of the sprawling desert construction work from Houston to its London subsidiary, Brown & Root Ltd., after international sanctions took effect.

Baker Hughes's subsidiary in Belfast, Hughes Christensen, acknowledges that it has supplied parts and material for the Great Man-Made River Project. Company officials say their drill bits -- costing $20,000 apiece -- have been purchased by Dong Ah for the Libyan project.

And Dowell Schlumberger, an international wing of Schlumberger, has supplied construction equipment to the same $25 billion project through Germany.

Schlumberger's official statement on the matter is:"Schlumberger has foreign affiliates that operate within Libya. Each of these non-U.S. subsidiaries operates in full and total compliance with all U.S., European and other applicable sanctions and regulations. Operations relative to customers in Libya are managed out of the company's Cairo offices."

Their position is simple. So long as the foreign operations act independently, without any direction or involvement from U.S. executives, they're not in violation of U.S. law.

"You bet your sweet bippy," responded Baker Hughes's spokesman Art Downey from his Washington office, when asked if his company's involvement through Belfast is legal.

A Customs official in Washington, speaking on condition of anonymity, says that may not be true. American-based multinationals aren't exempt from the law, he says. They, like many European companies, have been essentially free to participate in the Great Man-Made River Project because officials in Europe refuse to cooperate with the Americans.

"Dope is bad everywhere," says the official, "but farm machinery isn't. The problem is getting the evidence outside the U.S., and we have no mechanism for getting it." That may change, though. The Customs official tells the Houston Press that there are several investigations of American multinationals currently under way. Some of those investigations include Houston-based companies, which he declined to name.

Asked if Baker Hughes was aware of a government probe, Downey sarcastically responded that it "wasn't worth his time" to find out. If there was a government probe, some people in the company would know of it and others wouldn't. Says Downey: "Why should I bother?"

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