The Buying of America
Sander, Gordon
THE BUYING OF AMERICA A TALE OF THREE CITIES GORDON SANDER I. Houston: "The Arab World's Favorite City" Years ago, when oil was discovered in the Middle East, it was America's Houston-based oil...
...Most business is either contracted by Houston executives visiting the Mideast, or via telephone...
...I bought the columnists...
...They like the climate...
...only two percent of its business was contracted abroad...
...At the news conference announcing this amazing deal, the young, mustachioed Pharaon, standing besides a sheepishly grinning Bert Lance, proclaimed that his sole motive in buying into NBG was profit...
...Georgia, Rothberg told The Atlanta Constitution, is "of particular interest" to the Beirut-based trustee for the Arab fund...
...Architectural and construction firms have been the most recent to benefit from the city's Arab connection...
...Hudson Engineering, which is supplying engineering and design equipment for a $394 million natural gas liquefaction plant in Dubai...
...I have asked a dozen colleagues who follow the area closely as I do, and the answer keeps coming back to the Georgia factor...
...Gamal-Eldin explains why his Arab friends seem to have such a soft spot for Texans: "When an Arab thinks of an American, he sees a tall, open-faced, loud-laughing, hard-drinking man who is open and generous, and warm and as tough as he looks," he recently told Newsweek's bureau chief, Nicholas Profitt...
...And so it went...
...Connally fills the bill in a number of ways...
...The warmth and strength of the Saudi-Californian connection was evident at a series of recent, well-attended Arab-American functions in Los Angeles...
...Although Texas currently seems to be the Arab world's favorite state—and other Sunbelt states like Georgia and Louisiana are gaining in allure—Middle Eastern ties with California, particularly Southern California, are the oldest and probably the most deeply entrenched...
...Adds Profitt: "Houston itself impresses the Middle Easterners, who see the city and its array of gleaming new buildings as the wave of the future rather than the decaying face of such Eastern cities as New York...
...The city's principal academic institution, the 4-campus University of Houston, is also getting a few crumbs, such as a $100,000 contract to train Saudi refinery guards for ARAMCO and another to provide home instruction for a closeted Saudi princess...
...Kilian was one of the many journalists who had flocked to Atlanta to witness the miraculous transfer of 60 percent of Bert Lance's stock in the National Bank of Georgia— 120,000 shares, to be exact, for $20 What New York is financially and spiritually to Israel, so is Houston to the Arab world...
...As a partner in Vinson and Elkins, one of the city's top law firms, and a co-owner of the Main Bank of Texas, one of the city's two central banks, both of which handle a lion's share of the Arab community's legal and banking business, respectively, Connally has emerged as a key figure in the burgeoning petro-industrial complex, along with such other celebrated Arab-Americans as Bert Lance and former U.S...
...The young Saudis came here and studied with Arabists such as Berkeley's professor George Lenczowski, who knew the people at Standard Oil, and USC's professor Willard Beling, a former employee-relations specialist with ARAMCO...
...I don't need anybody...
...After evaluating the situation," Fluor wrote, "we believe that the arms package is a reasonable compromise...
...I bought it all...
...Significantly, CRS Design Associates may soon no longer be in entirely American hands...
...cities and three locations abroad, disclosed that it had signed a one year contract to invest $500 million on behalf of two members of the royal family of Saudi Arabia...
...For whatever reasons—perhaps the area's ethos of conspicuous consumption, or its highly developed sense of moral laxness—Arab interests seem to be considerably less inhibited about dabbling in real estate in and around Los Angeles than anywhere else in the Sunbelt...
...In a recent editorial he wrote upon his return from a trip to the Mideast, Borgen, for example, personally urged President Carter to force Israel to "abandon policies of colonialism" and "come to terms with reality" by accepting a Palestinian state on the West Bank...
...Texas Commerce Bank, the city's other leading financial institution and one of the five American banks belonging to United Bank-Arab American Bank, the massive trade-facilitating consortium, recently opened a branch in Bahrain, there to better serve its dozens of Arab clients...
...To help smooth things over, the sheikh's father, Dr...
...Inevitably, too, this lifeline has political and journalistic ramifications...
...To be sure, Pharaon was not the first Arab businessman to arrive in Atlanta: in the early 1970's a group of Kuwaitis bought into Atlanta's $100 million Hilton Hotel complex...
...Indeed, aside from visiting Arab dignitaries, who are appropriately wined and dined, and a handful of transplanted Arab investment counselors, the visible Arab presence in Houston is virtually nil...
...anti-boycott legislation...
...Whenever a Saudi or Kuwaiti or Bahraini planning minister decides he needs a new sewer—or perhaps a new city—his first inclination, it seems, is to call Houston...
...a run for 12 German shepherds (local law permits only 3 canines per residence), 12 brass American eagles, and $10,000 worth of gruesome plastic flowers...
...In 1975, for example, Kuwaiti merchant Kutayba Alghanim bought Houston's Kirby Building Systems, Inc...
...One of the more obliging listeners at the luncheon was J. R. Fluor, chairman and chief executive officer of the Fluor Corporation, who promptly wrote a peppy memorandum in which he urged all 40,000 Fluor employees, shareholders, and vendors to do their part for their munificent, albeit indirect, employers, and help put the controversial deal over...
...One of those who is helping to open the doors to those buildings is Houston's most prominent citizen, former U.S...
...Pressure from the AJC forced the organizers to let the media in, however, and everything seemed to be aboveboard...
...Los Angeles: "I Bought It All...
...One of the highlights of the recent Arab-American spring rites was a sumptuous luncheon, hosted by a Northrop Corporation executive, and attended by Mayor Tom Bradley and other distinguished guests, in honor of Prince Bindar Bin Sultan (you know him), commander of the Saudi air force, who was in town to garner support for the pending U.S.-Saudi F-15 jet sale—which, as readers will doubtless recall, the Carter Administration, in its infinite wisdom, had tied, in an all-nothing deal, to a major jet sale to Israel...
...Is the tie between the two parties emotional, psychological, or financial—or all three...
...Houston's Congressional contingent was in the forefront of last year's fight against the Carter Administration's proposed anti-boycott legislation and for last spring's Saudi F-15 deal—certainly no accident, that...
...Hines isn't saying—and the Arabs certainly aren't...
...Georgia—and particularly Atlanta—is attractive to Arabs for many of the same reasons why they find much of the rest of the Sunbelt appealing," says Bill Grelnick, the American Jewish Committee's representative in the city...
...balance of payments, as well as keep the Saudis' oily sword of Damocles from severing American necks for a while...
...But what really freaked everyone out (so to speak) were the custom-made nude male and female sculptures scattered around the grounds—and easily visible to passing motorists—which Al-Fassi had painted in such a way as to emphasize the private parts, e.g., blue torso, orange genitalia...
...For $50,000 [the original estimate of the party] I have bought the Beverly Hills Jews...
...And if Connally doesn't know, he knows who to call to find out...
...Thatcher and Hart in turn knew the powerful Saudis who had gone to school in California: the men who were back home and in charge of trade, industrialization, planning, and military construction...
...realtor Gerald Hines, who is erecting a $200 million "Cairo Galleria" in the Egyptian capital...
...The U.S...
...Rumors of other sub rosa purchases abound...
...Moment/31 at the Conrad Hilton organized by various U.S.-Arab Chambers of Commerce, brought together 100 leading Arab businessmen and their happy, back-slapping, Bear State counterparts for what was innocuously billed as an opportunity "for an exchange of views on mutual business interest...
...with My Money...
...Pullman & Kellogg, which recently was engaged to build liquefied natural gas plants in Kuwait and Algeria and which currently has about $1 billion in Mideast contracts...
...Probably the closest the Arabs have to a media mouthpiece is Erik Borgen, editor of the widely read Business & Energy International magazine...
...And, of course, you can't discount the Carter Administration's ties with the city...
...Among those benefiting from the sheikhdom's $142 billion internal development program are: San Francisco's Bechtel Corporation, which is supervising construction of a $9 billion seaboard industry complex at Jubail and the new Riyadh international airport...
...Among the Houston concerns either overseeing or actively participating in the current Mideast building boom are: the San Francisco-based Bechtel Corporation, the nation's largest construction and engineering company, whose Houston office is designing Saudi Arabia's $370 million Ghazlan power plant...
...Treasury Secretary John B. Connally...
...In effect that would be like an auto manufacturer refusing to sell cars in an effort to stop air pollution...
...Part three of this series will appear in the November issue...
...III...
...An example of Fluor's impeccable logic: "The easy and emotional answer would be to say 'no' to the sale, pretending that would spur the Arabs and Israelis toward peace...
...Again, this is only a partial list...
...However, a few transactions have been made public...
...CRS, which was recently awarded a $55 million contract to design the desert campus of the University of Riyadh, is a good example of the new wave of Houston-Arab success stories...
...Nevertheless both Grelnick and other Jewish watchdogs based in Atlanta find it difficult to come to any hard and fast conclusions about the true consequences of the city's developing Arab connection—at least just yet...
...Renamed "Dirty Disneyland" by scandalized neighbors, the Al-Fassi residence features such eye-popping renovations as a new coat of hospital green paint, a $1 million copper roof (copper...
...Also, some observers claim to see Arab money behind the increasingly anti-Israeli editorials of The Houston Chronicle and some of the oil capital's other media...
...3D/International, which is at work on 17 Mideast design projects worth $3 billion, including a new city for "visiting dignitaries" in Saudi Arabia and 5 hotels in the United Arab Emirates...
...We are writing to Senators and Congressmen in Washington to express our thoughts and urge you to do so as well, if you agree with our conclusion...
...Nor was he seeking to buy influence with the Carter Administration, Pharaon gesticulated...
...However, it's hard to put your finger on it...
...To be sure, direct Arab investment in Houston, like direct Arab investment elsewhere in the Sunbelt, is extremely difficult to pin down, both because of the vagueness of federal reporting laws, and the vagueness of the Arabs' Texas money managers...
...He has connections in banking circles since he was Treasury Secretary, and he knows what types of government regulations an investor would have to deal with...
...Senator J. William Fulbright...
...I bought the press...
...There aren't too many Jews—certainly not as many as in New York...
...Nevertheless, one Wall Street bank executive told The Washington Post's Jim Hoagland, "You have to ask yourself why a Saudi millionaire with lots of options in today's market settles on a bank that stopped paying dividends last year and is under such strong federal scrutiny...
...We are restricted now from doing business with Israel by the Palestinian and boycott problems," Pharaon says...
...But once these are lifted, I don't see any reason why I shouldn't be dealing with Israel...
...In March, Corporate Finance Associates, a 22-year-old Atlanta business consulting firm with offices in 35 U.S...
...In making that choice, one might want to bear in mind the credibility of Pharaon's assertion that his association with Lance's bank was motivated strictly by profit...
...32/Momenl...
...He sees a Texan...
...The biggest problem we see in the South, and particularly Atlanta, is that some American businessmen, in order to attract potential petrodollars, have been leaning over backward to be 'nice' to the Arabs, including making statements which are anti-Israel," says Stuart Lewengrub, of the Anti-Defamation League's Atlanta office...
...The professor knew the other Arabists in the state, who included two former ambassadors to Saudi Arabia: Nicholas Thatcher of Wells Fargo Bank and Park Hart of Bechtel Corporation...
...According to a July dispatch in the New York Times, two of the company's largest shareholders are on the verge of selling a 20 percent interest in CRS to Ghaith Pharaon, the same high-flying Saudi millionaire who recently caused a stir when he bailed out President Carter's friend Bert Lance by buying the former federal budget director's stock in the anemic National Bank of Georgia...
...Those contacts in the oil business," Anthony Cook wrote in a recent article about the California-Saudi connection in New West magazine, "mushroomed into what is today a kind of Saudi-Califor-nian 'old boy' network...
...But lately a change has come over the residents—particularly the business community—of Georgia's fair city...
...THE BUYING OF AMERICA A TALE OF THREE CITIES GORDON SANDER I. Houston: "The Arab World's Favorite City" Years ago, when oil was discovered in the Middle East, it was America's Houston-based oil and petrochemical industry which succeeded in tapping it and making its hidebound, medieval owners rich, so it seems only fair that the Arab OPEC nations have chosen to return that favor by making the sprawling Texas metropolis the nerve center of their multi-billion dollar internal development programs...
...Then in June, Ghaith Pharaon succeeded in his bid to buy a controlling interest in NBG by purchasing 615,000 more shares—or about 60 percent of those outstanding—in the Atlanta bank...
...for $100 million...
...Now, thanks to the University of Riyadh contract and others like it, the company's staff has mushroomed to 700, and CRS had overtaken Skidmore, Owings, and Merrill of Chicago as the country's top-grossing architectural firm...
...Clearly, no other American city is as dependent on the sheikhs for its economic well-being...
...In 1977 CRS's gross fees totaled $34 million...
...In 1972, just before the last major OPEC price hike and the building and construction boom it financed, CRS had only 250 employees...
...It was a smash: attendance topped one thousand, and all the invited guests and assorted gate crashers seem to have had a marvelous time...
...In London, which has lately become OPEC's favorite playground, the average Arab visitor disports himself in robes and white limousines...
...Although the Saudis no longer think of California as being the center of Western civilization—not with the coruscating Houston and Atlanta skylines to divert their attention—West Coast firms still do a lion's share of business with the oil-rich Saudis...
...We have good reasons to believe that in the future our investment will grow...
...Atef Gamal-Eldin, director of the city's Arab-American Chamber of Commerce, the 350-member organization which certifies shipments of cargo bound for the Mideast...
...Northrop Corporation of Los Angeles, which is building all manner of planes and defense installations...
...Indeed, it seems highly probable that in Lance, Pharaon was seeking another wasta, or go-between...
...and Caudill, Rowell, Scott, Inc., which has contracts to design no less than $6 billion in Middle East projects...
...Later, after the party, Al-Fassi's mood darkened...
...Now, Kilian sarcastically notes, "Any stranger with a jingle in his jeans is welcome—even strangers with glittering eyes and pointed beards and good old American names like Ghaith Pharaon...
...Atlanta: "The Arabs Are Coining...
...the few Arabs who do maintain residences in town, Newsweek reports, "cut so low a profile as to verge on secrecy...
...The chairman added, "Fears that the Saudi Arabian planes may become part of an offensive against Israel should be somewhat assuaged by the need for American technicians to keep them operating," and anyway, he noted, the sale would help the U.S...
...Fluor Corporation of Irvine, which is building a mammoth $5 billion natural gas gathering system...
...II...
...a share—to the canny, Harvard-trained Saudi...
...James M. Sink Associates, which is charged with designing a $200 million teachers' college in Riyadh...
...Envirogenics System Company of El Monte, which has designed a $700 million desalinization plant, Whitaker of Los Angeles, which is managing hospitals and training athletes for Olympic competition...
...He knows Texas, which is a favorite investment market...
...According to Michael Rothberg, executive vice president of the consulting firm, as much as $70 million of the investment fund could end up in the Atlanta area "if we can find the right situations...
...Thus the Los Angeles Times reported in May that Arab investors had bought two movie theaters on the West Side of L. A., as well as six office buildings on Wilshire Boulevard...
...Nevertheless the meeting was scheduled to be closed to the press, leading some observers, particularly the American Jewish Committee, to suspect that the conferees wanted privacy to discuss, among other things, ways of circumventing recently enacted U.S...
...Mideast projects accounted for half that...
...The scope of Houston's Arab connection is simply enormous: experts estimate that of the roughly $7 billion in goods and services transacted this year between the oil-exporting countries and the U.S., at least half of that is being handled by Houston-based companies or ones with Houston branches...
...More recently, Saudi wheeler-dealer Adnan Kashoggi—who is currently under investigation by the Securities and Exchange Commission for allegedly taking and giving bribes—dished out $5.7 million for 22 acres of the city's best commercial real estate...
...Indeed, the first real contact which the Saudis had with Americans was via the California subsidiary of Standard Oil, California Standard, which won the first oil concession from King Abd al-Aziz and drilled the first successful well in 1938...
...This is a good bank, a sound bank...
...Several weeks before, the New York Times noted that Arabs and Iranians had spent $150 million on homes in the Beverly Hills area over the previous 18 months...
...Once upon a time, Michael Kilian wrote in The Chicago Tribune, Atlantans were so xenophobic that visitors from South Carolina were "shunned as wicked foreigners...
...Department of Commerce estimates that every $1 billion in exports translates into 90,000 American jobs—which means that roughly 270,000 Houston residents, about a third of the city's work force, owe their paychecks, either directly or indirectly, Gordon Sander is a freelance writer whose work has been published in The New York Times Magazine, The New York Times Week in Review, and other national periodicals...
...to Arab largesse...
...It troubled no one that Pha-raon's deal to pick up most of Bert Lance's bank stock would give the Arab a major interest in one of Georgia's largest financial institutions and the lifelong obligation of the President's best friend...
...The biggest powwow, a two-day conference in April Obviously, no one had schooled the young man in what has become the first rule for wealthy Arabs moving to America...
...Sheikh Sham- .• suddin Aldin Al-Fassi did what any self-respecting Angelino would do in a similar situation: he threw a party, to the tune of $65,000...
...Many wonder, for example, how much of the $93 million which realtor Gerald Hines received from a West German bank for the spanking new Penn-zoil Place office complex was actually put up by Arabs...
...Over $2 billion in exports to the Mideast passed through the port of Houston alone in 1977, in addition to $500 million in imports from the Arab world...
...But in Houston, he inclines toward business suits and black Cadillacs—and sometimes an ill-fitting Stetson...
...One may choose to believe Pha-raon's statement or choose to be skeptical of it...
...Apparently inebriated, and obviously further intoxicated by a new sense of power, the sheikh fired his American business advisor, shouting, prophetically, "I don't need you...
...Of course, no discussion of the Arab presence—and particularly the Saudi presence—in the United States would be complete without mentioning California...
...It is because of such obliging souls that, as one Saudi businessman declared, "What New York is financially and spiritually to Israel, so is Houston to the Arab world...
...Obviously, no one had schooled the young man in what has become the first rule for wealthy Arabs moving to America, particularly to communities with large Jewish populations like Beverly Hills: lie low...
...Well, as everyone knows, the arms deal did pass, and, coinciden-tally or not, several days after the dramatic vote, the Saudis awarded a Fluor subsidiary an $18 million contract to provide engineering design and procurement services for a computerized accounting system that is to be installed in Dharan...
...Perhaps Houston's most voluble Arab is Dr...
...As for the smooth-talking Pharaon, he assures the troubled Jewish community that he "welcomes" its business "because it is only by closer understanding and communication that we can solve much of our differences and problems...
...Nevertheless it was not until Pharaon's highly publicized arrival —coupled with the purchase, several days later, by Saudi Arabia's Prince Faisal, of one of Atlanta's most prestigious houses—that rumors began to fly about a purported Arab "invasion" of the state...
...Eventually, California Standard became the titanic Arabian American Oil Company, better known as ARAMCO...
...He knows his way around the country...
...Even the Jewish-dominated Beverly Hills City Council appeared to be mollified by Al-Fassi's "old-worldly charm" (which included a promise to take down the offending statues...
...I think we were selected primarily because we are located in Atlanta...
...Brown and Root, which is developing pipeline and port facilities along the Arabian gulf...
...How's that for positive reinforcement...
...Litton Industries of Beverly Hills which is negotiating to build the country's data communications system...
...The Los A ngeles Times called it the party of the year...
...with my money...
...The Arabs are coming," columnist Hal Gulliver cried in The A tlanta Constitution several days before...
...Potential Arab investors, explains Mark Winchester, executive vice president of Houston's Center for International Business, "want to work with a person who has demonstrated an ability to get things done...
...One of those homes, a $2.4 million affair on the corner of Sunset Boulevard and Alpine Street that was recently purchased and flamboyantly refurnished by a 21-year-old Saudi—Sheikh Mohammad Al.-Fassi—has turned out to be a real traffic stopper...
...Unions aren't too strong...
...More about the Lance affair later...
...Meanwhile, a number of newly arrived Saudi private citizens and other OPEC nouveau riche are buying into California itself...
...Vinnell Corporation of Alhambra, which is training the Saudi National Guard...
...Not all the visitors were businessmen, however...
...Since then a number of related developments have further fueled speculation...
...In the meantime, Houston's lifeline to the Middle East grows stronger and more elaborate...
...World Airways of Oakland, which runs charter flights for the thousands of Californians on their way to jobs in Mecca and other Saudi boom towns...
Vol. 3 • October 1978 • No. 10
