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Lunch With The Chairman: Why was Richard Perle meeting with Adnan Khashoggi?
Seymour M. Hersh
At the peak of his deal-making activities, in the nineteen-seventies,
the Saudi-born businessman Adnan Khashoggi brokered billions of dollars
in arms and aircraft sales for the Saudi royal family, earning hundreds
of millions in commissions and fees. Though never convicted of wrongdoing,
he was repeatedly involved in disputes with federal prosecutors and with
the Securities and Exchange Commission, and in recent years he has been
in litigation in Thailand and Los Angeles, among other places, concerning
allegations of stock manipulation and fraud. During the Reagan Administration,
Khashoggi was one of the middlemen between Oliver North, in the White
House, and the mullahs in Iran in what became known as the Iran-Contra
scandal. Khashoggi subsequently claimed that he lost ten million dollars
that he had put up to obtain embargoed weapons for Iran which were to
be bartered (with Presidential approval) for American hostages. The scandals
of those times seemed to feed off each other: a congressional investigation
revealed that Khashoggi had borrowed much of the money for the weapons
from the Bank of Credit and Commerce International (B.C.C.I.), whose collapse,
in 1991, defrauded thousands of depositors and led to years of inquiry
and litigation.
Khashoggi is still brokering. In January of this year, he arranged a private
lunch, in France, to bring together Harb Saleh al-Zuhair, a Saudi industrialist
whose family fortune includes extensive holdings in construction, electronics,
and engineering companies throughout the Middle East, and Richard N. Perle,
the chairman of the Defense Policy Board, who is one of the most outspoken
and influential American advocates of war with Iraq.
The Defense Policy Board is a Defense Department advisory group composed
primarily of highly respected former government officials, retired military
officers, and academics. Its members, who serve without pay, include former
national-security advisers, Secretaries of Defense, and heads of the C.I.A.
The board meets several times a year at the Pentagon to review and assess
the country's strategic defense policies.
Perle is also a managing partner in a venture-capital company called Trireme
Partners L.P., which was registered in November, 2001, in Delaware. Trireme's
main business, according to a two-page letter that one of its representatives
sent to Khashoggi last November, is to invest in companies dealing in
technology, goods, and services that are of value to homeland security
and defense. The letter argued that the fear of terrorism would increase
the demand for such products in Europe and in countries like Saudi Arabia
and Singapore.
The letter mentioned the firm's government connections prominently:
"Three of Trireme's Management Group members currently advise
the U.S. Secretary of Defense by serving on the U.S. Defense Policy Board,
and one of Trireme's principals, Richard Perle, is chairman of that
Board." The two other policy-board members associated with Trireme
are Henry Kissinger, the former Secretary of State (who is, in fact, only
a member of Trireme's advisory group and is not involved in its management),
and Gerald Hillman, an investor and a close business associate of Perle's
who handles matters in Trireme's New York office. The letter said
that forty-five million dollars had already been raised, including twenty
million dollars from Boeing; the purpose, clearly, was to attract more
investors, such as Khashoggi and Zuhair.
Perle served as a foreign-policy adviser in George W. Bush's Presidential
campaign - he had been an Assistant Secretary of Defense under Ronald
Reagan - but he chose not to take a senior position in the Administration.
In mid-2001, however, he accepted an offer from Secretary of Defense Donald
Rumsfeld to chair the Defense Policy Board, a then obscure group that
had been created by the Defense Department in 1985. Its members (there
are around thirty of them) may be outside the government, but they have
access to classified information and to senior policymakers, and give
advice not only on strategic policy but also on such matters as weapons
procurement. Most of the board's proceedings are confidential.
As chairman of the board, Perle is considered to be a special government
employee and therefore subject to a federal Code of Conduct. Those rules
bar a special employee from participating in an official capacity in any
matter in which he has a financial interest. "One of the general
rules is that you don't take advantage of your federal position to
help yourself financially in any way," a former government attorney
who helped formulate the Code of Conduct told me. The point, the attorney
added, is to "protect government processes from actual or apparent
conflicts."
Advisory groups like the Defense Policy Board enable knowledgeable people
outside government to bring their skills and expertise to bear, in confidence,
on key policy issues. Because such experts are often tied to the defense
industry, however, there are inevitable conflicts. One board member told
me that most members are active in finance and business, and on at least
one occasion a member has left a meeting when a military or an intelligence
product in which he has an active interest has come under discussion.
Four members of the Defense Policy Board told me that the board, which
met most recently on February 27th and 28th, had not been informed of
Perle's involvement in Trireme. One board member, upon being told
of Trireme and Perle's meeting with Khashoggi, exclaimed, "Oh,
get out of here. He's the chairman! If you had a story about me setting
up a company for homeland security, and I've put people on the board
with whom I'm doing that business, I'd be had" - a reference
to Gerald Hillman, who had almost no senior policy or military experience
in government before being offered a post on the policy board. "Seems
to me this is at the edge of or off the ethical charts. I think it would
stink to high heaven."
Hillman, a former McKinsey consultant, stunned at least one board member
at the February meeting when he raised questions about the validity of
Iraq's existing oil contracts. "Hillman said the old contracts
are bad news; he said we should kick out the Russians and the French,"
the board member told me. "This was a serious conversation. We'd
become the brokers. Then we'd be selling futures in the Iraqi oil
company. I said to myself, 'Oh, man. Don't go down that road.'"
Hillman denies making such statements at the meeting.
Larry Noble, the executive director of the Washington-based Center for
Responsive Politics, a nonprofit research organization, said of Perle's
Trireme involvement, "It's not illegal, but it presents an appearance
of a conflict. It's enough to raise questions about the advice he's
giving to the Pentagon and why people in business are dealing with him."
Noble added, "The question is whether he's trading off his advisory-committee
relationship. If it's a selling point for the firm he's involved
with, that means he's a closer - the guy you bring in who doesn't
have to talk about money, but he's the reason you're doing the
deal."
Perle's association with Trireme was not his first exposure to the
link between high finance and high- level politics. He was born in New
York City, graduated from the University of Southern California in 1964,
and spent a decade in Senate-staff jobs before leaving government in 1980,
to work for a military-consulting firm. The next year, he was back in
government, as Assistant Secretary of Defense. In 1983, he was the subject
of a New York Times investigation into an allegation that he recommended
that the Army buy weapons from an Israeli company from whose owners he
had, two years earlier, accepted a fifty-thousand-dollar fee. Perle later
acknowledged that he had accepted the fee, but vigorously denied any wrongdoing.
He had not recused himself in the matter, he explained, because the fee
was for work he had done before he took the Defense Department job. He
added, "The ultimate issue, of course, was a question of procurement,
and I am not a procurement officer." He was never officially accused
of any ethical violations in the matter. Perle served in the Pentagon
until 1987 and then became deeply involved in the lobbying and business
worlds. Among other corporate commitments, he now serves as a director
of a company doing business with the federal government: the Autonomy
Corporation, a British firm that recently won a major federal contract
in homeland security. When I asked him about that contract, Perle told
me that there was no possible conflict, because the contract was obtained
through competitive bidding, and "I never talked to anybody about
it."
Under Perle's leadership, the policy board has become increasingly
influential. He has used it as a bully pulpit, from which to advocate
the overthrow of Saddam Hussein and the use of pre-emptive military action
to combat terrorism. Perle had many allies for this approach, such as
Paul Wolfowitz, the Deputy Secretary of Defense, but there was intense
resistance throughout the bureaucracy - most notably at the State Department.
Pre-emption has since emerged as the overriding idea behind the Administration's
foreign policy. One former high-level intelligence official spoke with
awe of Perle's ability to "radically change government policy"
even though he is a private citizen. "It's an impressive achievement
that an outsider can have so much influence, and has even been given an
institutional base for his influence."
Perle's authority in the Bush Administration is buttressed by close
association, politically and personally, with many important Administration
figures, including Wolfowitz and Douglas Feith, the Under-Secretary of
Defense for Policy, who is the Pentagon's third-ranking civilian
official. In 1989, Feith created International Advisors Incorporated,
a lobbying firm whose main client was the government of Turkey. The firm
retained Perle as an adviser between 1989 and 1994. Feith got his current
position, according to a former high-level Defense Department official,
only after Perle personally intervened with Rumsfeld, who was skeptical
about him. Feith was directly involved in the strategic planning and conduct
of the military operations against the Taliban in Afghanistan; he now
runs various aspects of the planning of the Iraqi war and its aftermath.
He and Perle share the same views on many foreign-policy issues. Both
have been calling for Saddam Hussein's removal for years, long before
September 11th. They also worked together, in 1996, to prepare a list
of policy initiatives for Benjamin Netanyahu, shortly after his election
as the Israeli Prime Minister. The suggestions included working toward
regime change in Iraq. Feith and Perle were energetic supporters of Ahmad
Chalabi, the controversial leader of the anti-Saddam Iraqi National Congress,
and have struggled with officials at the State Department and the C.I.A.
about the future of Iraq.
Perle has also been an outspoken critic of the Saudi government, and Americans
who are in its pay. He has often publicly rebuked former American government
officials who are connected to research centers and foundations that are
funded by the Saudis, and told the National Review last summer, "I
think it's a disgrace. They're the people who appear on television,
they write op-ed pieces. The Saudis are a major source of the problem
we face with terrorism. That would be far more obvious to people if it
weren't for this community of former diplomats effectively working
for this foreign government." In August, the Saudi government was
dismayed when the Washington Post revealed that the Defense Policy Board
had received a briefing on July 10th from a Rand Corporation analyst named
Laurent Murawiec, who depicted Saudi Arabia as an enemy of the United
States, and recommended that the Bush Administration give the Saudi government
an ultimatum to stop backing terrorism or face seizure of its financial
assets in the United States and its oil fields. Murawiec, it was later
found, is a former editor of the Executive Intelligence Review, a magazine
controlled by Lyndon H. LaRouche, Jr., the perennial Presidential candidate,
conspiracy theorist, and felon. According to Time, it was Perle himself
who had invited Murawiec to make his presentation.
Perle's hostility to the politics of the Saudi government did not
stop him from meeting with potential Saudi investors for Trireme. Khashoggi
and Zuhair told me that they understood that one of Trireme's objectives
was to seek the help of influential Saudis to win homeland-security contracts
with the Saudi royal family for the businesses it financed. The profits
for such contracts could be substantial. Saudi Arabia has spent nearly
a billion dollars to survey and demarcate its eight-hundred- and-fifty-mile
border with Yemen, and the second stage of that process will require billions
more. Trireme apparently turned to Adnan Khashoggi for help.
Last month, I spoke with Khashoggi, who is sixty- seven and is recovering
from open-heart surgery, at his penthouse apartment, overlooking the Mediterranean
in Cannes. "I was the intermediary," he said. According to Khashoggi,
he was first approached by a Trireme official named Christopher Harriman.
Khashoggi said that Harriman, an American businessman whom he knew from
his jet-set days, when both men were fixtures on the European social scene,
sent him the Trireme pitch letter. (Harriman has not answered my calls.)
Khashoggi explained that before Christmas he and Harb Zuhair, the Saudi
industrialist, had met with Harriman and Gerald Hillman in Paris and had
discussed the possibility of a large investment in Trireme.
Zuhair was interested in more than the financial side; he also wanted
to share his views on war and peace with someone who had influence with
the Bush Administration. Though a Saudi, he had been born in Iraq, and
he hoped that a negotiated, "step by step" solution could be
found to avoid war. Zuhair recalls telling Harriman and Hillman, "If
we have peace, it would be easy to raise a hundred million. We will bring
development to the region." Zuhair's hope, Khashoggi told me,
was to combine opportunities for peace with opportunities for investment.
According to Khashoggi, Hillman and Harriman said that such a meeting
could be arranged. Perle emerged, by virtue of his position on the policy
board, as a natural catch; he was "the hook," Khashoggi said,
for obtaining the investment from Zuhair. Khashoggi said that he agreed
to try to assemble potential investors for a private lunch with Perle.
The lunch took place on January 3rd at a seaside restaurant in Marseilles.
(Perle has a vacation home in the South of France.) Those who attended
the lunch differ about its purpose. According to both Khashoggi and Zuhair,
there were two items on the agenda. The first was to give Zuhair a chance
to propose a peaceful alternative to war with Iraq; Khashoggi said that
he and Perle knew that such an alternative was far-fetched, but Zuhair
had recently returned from a visit to Baghdad, and was eager to talk about
it. The second, more important item, according to Khashoggi and Zuhair,
was to pave the way for Zuhair to put together a group of ten Saudi businessmen
who would invest ten million dollars each in Trireme.
"It was normal for us to see Perle," Khashoggi told me. "We
in the Middle East are accustomed to politicians who use their offices
for whatever business they want. I organized the lunch for the purpose
of Harb Zuhair to put his language to Perle. Perle politely listened,
and the lunch was over." Zuhair, in a telephone conversation with
me, recalled that Perle had made it clear at the lunch that "he was
above the money. He said he was more involved in politics, and the business
is through the company" - Trireme. Perle, throughout the lunch,
"stuck to his idea that 'we have to get rid of Saddam,'"
Zuhair said. As of early March, to the knowledge of Zuhair, no Saudi money
had yet been invested in Trireme.
In my first telephone conversation with Gerald Hillman, in mid-February,
before I knew of the involvement of Khashoggi and Zuhair, he assured me
that Trireme had "nothing to do" with the Saudis. "I don't
know what you can do with them," he said. "What we saw on September
11th was a grotesque manifestation of their ideology. Americans believe
that the Saudis are supporting terrorism. We have no investment from them,
or with them." (Last week, he acknowledged that he had met with Khashoggi
and Zuhair, but said that the meeting had been arranged by Harriman and
that he hadn't known that Zuhair would be there.) Perle, he insisted
in February, "is not a financial creature. He doesn't have any
desire for financial gain."
Perle, in a series of telephone interviews, acknowledged that he had met
with two Saudis at the lunch in Marseilles, but he did not divulge their
identities. (At that time, I still didn't know who they were.) "There
were two Saudis there," he said. "But there was no discussion
of Trireme. It was never mentioned and never discussed." He firmly
stated, "The lunch was not about money. It just would never have
occurred to me to discuss investments, given the circumstances."
Perle added that one of the Saudis had information that Saddam was ready
to surrender. "His message was a plea to negotiate with Saddam."
When I asked Perle whether the Saudi businessmen at the lunch were being
considered as possible investors in Trireme, he replied, "I don't
want Saudis as such, but the fund is open to any investor, and our European
partners said that, through investment banks, they had had Saudis as investors."
Both Perle and Hillman stated categorically that there were currently
no Saudi investments.
Khashoggi professes to be amused by the activities of Perle and Hillman
as members of the policy board. As Khashoggi saw it, Trireme's business
potential depended on a war in Iraq taking place. "If there is no
war," he told me, "why is there a need for security? If there
is a war, of course, billions of dollars will have to be spent."
He commented, "You Americans blind yourself with your high integrity
and your democratic morality against peddling influence, but they were
peddling influence."
When Perle's lunch with Khashoggi and Zuhair, and his connection
to Trireme, became known to a few ranking members of the Saudi royal family,
they reacted with anger and astonishment. The meeting in Marseilles left
Perle, one of the kingdom's most vehement critics, exposed to a ferocious
counterattack.
Prince Bandar bin Sultan, who has served as the Saudi Ambassador to the
United States for twenty years, told me that he had got wind of Perle's
involvement with Trireme and the lunch in Marseilles. Bandar, who is in
his early fifties, is a prominent member of the royal family (his father
is the defense minister). He said that he was told that the contacts between
Perle and Trireme and the Saudis were purely business, on all sides. After
the 1991 Gulf War, Bandar told me, Perle had been involved in an unsuccessful
attempt to sell security systems to the Saudi government, "and this
company does security systems." (Perle confirmed that he had been
on the board of a company that attempted to make such a sale but said
he was not directly involved in the project.)
"There is a split personality to Perle," Bandar said. "Here
he is, on the one hand, trying to make a hundred-million-dollar deal,
and, on the other hand, there were elements of the appearance of blackmail - 'If
we get in business, he'll back off on Saudi Arabia' - as
I have been informed by participants in the meeting."
As for Perle's meeting with Khashoggi and Zuhair, and the assertion
that its purpose was to discuss politics, Bandar said, "There has
to be deniability, and a cover story - a possible peace initiative
in Iraq - is needed. I believe the Iraqi events are irrelevant. A business
meeting took place."
Zuhair, however, was apparently convinced that, thanks to his discussions
with Trireme, he would have a chance to enter into a serious discussion
with Perle about peace. A few days after the meeting in Paris, Hillman
had sent Khashoggi a twelve-point memorandum, dated December 26, 2002,
setting the conditions that Iraq would have to meet. "It is my belief,"
the memorandum stated, "that if the United States obtained the following
results it would not go to war against Iraq." Saddam would have to
admit that "Iraq has developed, and possesses, weapons of mass destruction."
He then would be allowed to resign and leave Iraq immediately, with his
sons and some of his ministers.
Hillman sent Khashoggi a second memorandum a week later, the day before
the lunch with Perle in Marseilles. "Following our recent discussions,"
it said, "we have been thinking about an immediate test to ascertain
that Iraq is sincere in its desire to surrender." Five more steps
were outlined, and an ambitious final request was made: that Khashoggi
and Zuhair arrange a meeting with Prince Nawaf Abdul Aziz, the Saudi intelligence
chief, "so that we can assist in Washington."
Both Khashoggi and Zuhair were skeptical of the memorandums. Zuhair found
them "absurd," and Khashoggi told me that he thought they were
amusing, and almost silly. "This was their thinking?" he recalled
asking himself. "There was nothing to react to. While Harb was lobbying
for Iraq, they were lobbying for Perle."
In my initial conversation with Hillman, he said, "Richard had nothing
to do with the writing of those letters. I informed him of it afterward,
and he never said one word, even after I sent them to him. I thought my
ideas were pretty clear, but I didn't think Saddam would resign and
I didn't think he'd go into exile. I'm positive Richard
does not believe that any of those things would happen." Hillman
said that he had drafted the memorandums with the help of his daughter,
a college student. Perle, for his part, told me, "I didn't write
them and didn't supply any content to them. I didn't know about
them until after they were drafted."
The views set forth in the memorandums were, indeed, very different from
those held by Perle, who has said publicly that Saddam will leave office
only if he is forced out, and from those of his fellow hard-liners in
the Bush Administration. Given Perle's importance in American decision-making,
and the risks of relying on a deal-maker with Adnan Khashoggi's history,
questions remain about Hillman's drafting of such an amateurish peace
proposal for Zuhair. Prince Bandar's assertion - that the talk
of peace was merely a pretext for some hard selling - is difficult
to dismiss.
Hillman's proposals, meanwhile, took on an unlikely life of their
own. A month after the lunch, the proposals made their way to Al Hayat,
a Saudi-owned newspaper published in London. If Perle had ever intended
to dissociate himself from them, he did not succeed. The newspaper, in
a dispatch headlined "washington offers to avert war in return for
an international agreement to exile saddam," characterized Hillman's
memorandums as "American" documents and said that the new proposals
bore Perle's imprimatur. The paper said that Perle and others had
attended a series of "secret meetings" in an effort to avoid
the pending war with Iraq, and "a scenario was discussed whereby
Saddam Hussein would personally admit that his country was attempting
to acquire weapons of mass destruction and he would agree to stop trying
to acquire these weapons while he awaits exile."
A few days later, the Beirut daily Al Safir published Arabic translations
of the memorandums themselves, attributing them to Richard Perle. The
proposals were said to have been submitted by Perle, and to "outline
Washington's future visions of Iraq." Perle's lunch with
two Saudi businessmen was now elevated by Al Safir to a series of "recent
American-Saudi negotiations" in which "the American side was
represented by Richard Perle." The newspaper added, "Publishing
these documents is important because they shed light on the story of how
war could have been avoided." The documents, of course, did nothing
of the kind.
When Perle was asked whether his dealings with Trireme might present the
appearance of a conflict of interest, he said that anyone who saw such
a conflict would be thinking "maliciously." But Perle, in crisscrossing
between the public and the private sectors, has put himself in a difficult
position - one not uncommon to public men. He is credited with being
the intellectual force behind a war that not everyone wants and that many
suspect, however unfairly, of being driven by American business interests.
There is no question that Perle believes that removing Saddam from power
is the right thing to do. At the same time, he has set up a company that
may gain from a war. In doing so, he has given ammunition not only to
the Saudis but to his other ideological opponents as well.
http://www.newyorker.com/fact/content/?030317fa_fact
Issue of 2003-03-17, Posted 2003-03-10
Coda
Writer Terrorises US War Businessman
Following the publication of this article in New Yorker magazine, Richard
Perle, then still chairman of the Pentagon's private Defense Policy Board,
called journalist Seymour Hersh a 'terrorist' on CNN and threatened to
sue him in the UK.
CNN transcript: http://www.cnn.com/TRANSCRIPTS/0303/09/le.00.html
'Put Up or Shut Up': http://64.176.94.191/article2241.htm
Conflicts of Interest
On Monday, 24th March Rep. John Conyers, a Michigan Democrat, asked
the Pentagon's inspector general to probe Perle's work as a paid adviser
to bankrupt telecommunications company Global Crossing Ltd. and his guidance
on investment opportunities resulting from the Iraq conflict.
On the Wednesday, Perle submitted his resignation as Chairman of the Pentagon's
Defense Policy Board to Secretary of Defense Donald Rumsfeld, stating:
"As I cannot quickly or easily quell criticism of me based on errors
of fact concerning my activities, the least I can do under these circumstances
is to ask you to accept my resignation as chairman of the Defense Policy
Board."
Rumsfeld accepted Perle's resignation as chairman but, incredibly, asked
that he remain a member of the board and continue as a leading advisor
to the Defense Secretary.
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