Steamrolled:  a special investigation into the diplomacy of doing business abroad

Steamrolled: a special investigation into the diplomacy of doing business abroad

One of Europe’s poorest countries wanted a road, so U.S. mega-contractor Bechtel sold it a $1.3 billion highway, with the backing of a powerful American ambassador. Funny thing is, the highway is barely being used—and the ambassador is now working for Bechtel.

Story by Matthew Brunwasser

Photographs by Matthew Lutton

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It isn’t every day that a U.S. ambassador inspires a character in a comic strip. But that’s exactly what Christopher Dell, a former ambassador to Kosovo, did in 2011 — and his likeness wasn’t flattering. Dell was satirized as the “Chief Pimp” in “The Pimpsons,” a Simpsons-like strip created by local artist Fisnik Ismaili that depicted the local political elite commandeering Kosovo’s democracy and selling the country off to the highest bidder. Published on Facebook, the comic portrayed Dell as a monarch, and in one edition, he was shown taking cash from Bechtel, an American construction and engineering corporation, in exchange for helping the business win a $1 billion road contract seen by many as a very bad deal for Kosovo taxpayers.

That contract was real: The 48-mile, four-lane Kosovo Highway, as it is known, was completed in November 2013 for roughly $1.3 billion — or about $25 million per mile — according to official government figures given to an international organization in Pristina, Kosovo’s capital. It was the most expensive public works project in Kosovo’s modern history, and it is arguably one of the highest-quality roads in the Balkans.

But today, the highway is practically empty, used at less than one-third of its capacity, according to the government’s own traffic count and information provided by international economic experts.

The road stretches through one of the poorest pockets of southeastern Europe. About one in three Kosovars live in poverty (on less than $2.18 per day), and the most basic infrastructure is weak or absent; in 2012, for instance, 58 percent of household subscribers reported daily cutoffs in water supplies. As of 2013, only one in seven Kosovars owned a car, giving the country one of the lowest automobile ownership rates in Europe. The highway’s black vein of asphalt now stands out against the Balkan countryside, as if mocking the surrounding poverty like a cruel Dickensian joke.

Who was supposed to use the Kosovo Highway? The answer still isn’t entirely clear. What is clear, however, is that the highway is only the latest project built by Bechtel in the Balkans that has been plagued by concerns about the iconic corporation’s business practices, including high prices, poor transparency, and accusations of corruption. (Bechtel denies that such concerns are valid; spokeswoman Michelle Michael wrote in an email, “We conduct every aspect of our business ethically and to suggest otherwise is flat-out wrong.”)

Bechtel, the largest contractor by revenue in the United States and the third-largest internationally, according to an annual list compiled by the Engineering News-Record, has in recent years constructed expensive highways in Kosovo, Croatia, Romania, and Albania. A six-month investigation by the Investigative Reporting Program at the University of California at Berkeley Graduate School of Journalism has found that these highways were boondoggles for the countries in which they were constructed, and that members of governments and international institutions often saw problems coming before Bechtel (along with its Turkish joint venture partner, Enka) even began work on the roads.

On the left, a man moves by wheelchair along the old road running parallel to the new Kosovo highway in the village of Vërmicë located on the Kosovo-Albania border. On the right, a bridge for the new Kosovo highway near the town of Zhur, also near the border.

Ambassador Dell is emblematic of another concern cited by Bechtel’s critics: that its Balkan road projects have blurred the line between U.S. foreign policy and the corporation’s interests. Dell spoke out publicly in support of the highway project, the contract for which was signed in April 2010 — even as international institutions questioned the road’s value to Kosovo. A May 2010 World Bank report, for instance, found that only two out of nine sections of the road (those nearest Pristina) would be “economically viable,” meaning that they could be expected to produce an economic benefit greater than the cost of construction and maintenance. (The findings were based on projections of Kosovo’s economic growth until the year 2032.)

Dell left Pristina in 2012 and took another diplomatic position elsewhere, before retiring from the State Department in October 2013. The following month, Bechtel hired him as its representative in Mozambique. According to a disclosure statement Dell filed with the State Department while he was still working there, Bechtel first discussed a job offer with him in July 2012, a month before he left Kosovo and in the middle of the highway’s construction.

Reached on his cell phone in Mozambique, Dell declined to comment for this story. In a phone interview, Charlene Wheeless, Bechtel’s vice president of global corporate affairs, described as “slanderous” any suggestion of a conflict of interest between Dell’s work as ambassador in Kosovo and any business he helped generate for his future employer. She said Dell was hired for his experience and expertise working in Africa. Michael also wrote that the company and Dell followed all State Department policies and procedures in the hiring of the former ambassador.

But in Kosovo, both Bechtel and Dell continue to face scrutiny. “No one was against the road, but rather the way in which it was contracted and built,” said Lumir Abdixhiku, executive director of the Riinvest Institute for Development Research in Pristina. “We could have built a very nice road and still had a lot of money left over for health care and education.”

Much the same is being said of other Bechtel projects in nearby countries.

Cows graze in a pasture near a dried lake bed in Vërmicë alongside the Kosovo Highway.

Founded in 1898, Bechtel is a private company, now in the hands of the fifth generation of the family for whom it is named. It has demonstrated a talent for winning big contracts and expanding its projects into a variety of fields, including transportation, oil and gas, and mining. It is perhaps best known for building the Hoover Dam and the Chunnel. Other projects include the Trans-Alaska Pipeline System and the Silver Line of the Washington, D.C.-area Metrorail system. Bechtel raked in $38 billion in revenues in 2012, and it has some 53,000 employees working on projects in almost 40 countries.

The company has long used highly placed officials in the State Department and other government agencies to shepherd international contracts; diplomatic knowledge, experience, and contacts have played vital roles in establishing the corporation as a major player in international construction. There is also a revolving door between Bechtel and the U.S. government, with some former diplomats joining the company and some former Bechtel executives and senior employees taking up public positions in the foreign service and elsewhere. Sources say that, in turn, welcoming Bechtel has become a signal of a foreign country’s willingness to cooperate with the United States, and even to support Washington’s interests abroad. “There is a sense that, if you work with Bechtel, people in Washington will smile and think more positively about your country as a partner,” said Matthew Bryza, a former U.S. ambassador to Azerbaijan who is now retired from the State Department. “Working with Bechtel validates you as a country connected to the world where the big players operate.”

To be sure, promoting the business interests of American companies abroad is in the portfolio of every U.S. diplomat. Government officials argue that such efforts benefit the United States economically by creating exports and jobs. But the drive for private profit, critics assert, can conflict with foreign-policy interests, especially when projects cause damage in host countries.

“There is a sense that, if you work with Bechtel, people in Washington will smile and think more positively about your country as a partner.”

The case of David Welch, which was widely covered by the media several years ago, has been held up as an example of these concerns. The assistant secretary of state for Near Eastern affairs under President George W. Bush, Welch led negotiations in 2008 to normalize relations between Libya and the United States. He later took up a senior executive post with Bechtel. In August 2011, as NATO airstrikes sought to dislodge Muammar al-Qaddafi from power, Welch reportedly advised regime officials on how to stay in power by funneling damaging information about Libyan rebels to friendly intelligence officials, according to documents later found in Tripoli. At the time, Bechtel had a contract to build power plants in Libya. The corporation issued a statement saying that any activities or comments attributed to Welch were “of a personal nature and unrelated to Bechtel business activities.”

The controversial history of Bechtel in the Balkans goes back a bit further. As the wars in the former Yugoslavia cooled down in the late 1990s, and post-communist economic development progressed, Bechtel seized an opportunity: The region badly needed modern infrastructure. In 1998, the corporation signed a road contract in Croatia, directly negotiated with the government and without public bidding. When the Croatian foreign minister lobbied for a second road contract negotiated the same way, however, it was revealed that he had previously worked for the Washington-based law firm Patton Boggs, which had a lobbying contract with Bechtel. Under pressure from the European Union, Croatia abandoned the contract and held a public tender. Later, in Romania, Bechtel directly negotiated and signed another no-bid contract in 2003, to modernize the country’s almost nonexistent highway network for $2.7 billion. The project became a 10-year nightmare for both sides, however, rife with delays, disputes, and mutual accusations of corruption and mismanagement. According to the Economist Intelligence Unit, Bechtel ultimately delivered 12.5 percent of the road at about 64 percent of the contract price. The contract was canceled in May 2013, and Romanian Prime Minister Victor Ponta said state funds would be used to pay some $113 million in additional debts and damages.

In April 2008, the Kosovo government published a tender for “expressions of interest” from companies to build a new highway from Pristina to the country’s border with Albania, where it would connect to another highway designed by Bechtel. (The other highway was already under construction and would be completed in 2010.) According to Kosovo’s Ministry of Infrastructure, Bechtel was one of two companies whose bids were fully considered for the highway project. The U.S. Embassy helped the corporation lobby the government to select its proposal — a common practice for American companies seeking contracts in foreign countries.

On the left, a gasoline truck drives past the first exit of the Kosovo highway leading to the town of Malishevë. On the right, near the same exit, a construction camp sits full of idle equipment.

But things work a little differently in Kosovo than in other places: There, the U.S. ambassador enjoys extraordinary power. This is due to the undisputed leadership role played by the United States in the 78-day NATO bombing campaign against Slobodan Milosevic in 1999, which set Kosovo on a path toward separation from Serbia. (The country unilaterally declared independence in 2008.) For more than 15 years, American officials have been integral in building Kosovo’s institutions. “Embassy Pristina exerts a wide and unusual influence over the Kosovo Government’s policies and actions,” reads an internal audit done by the State Department’s inspector general in 2010. This “goes well beyond traditional advocacy,” and Kosovo officials “consult [U.S. representatives] on a daily basis on actions, large and small.”

The relationship extends to business as well. “The rule is that the country which bombs is the country which gets the contracts,” said a Western consultant with years of experience in the Balkans. “Bombs are expensive.”

Dell, who became ambassador in July 2009, apparently relished his powerful role. He earned a reputation for toughness and for being unafraid to wade into Kosovo’s domestic politics. Several diplomats in Pristina say that he was known for his aggressive personality. Some human rights groups also expressed concerns. Reporters Without Borders, for example, publicly criticized Dell in 2011 after he accused local media organizations of violating Kosovo’s criminal code by publishing text messages exchanged between himself and an aide to politician Behgjet Pacolli, in which Dell offered advice prior to a parliamentary vote that won Pacolli the country’s presidency. “The ambassador’s comments constitute unacceptable harassment of the Kosovar media,” the organization said in a statement. “The contacts between Kosovo’s future president and the ambassador of a very influential country during a crucial election and at a time of a great deal of political tension were clearly a matter of public interest.” Agron Bajrami, editor of Koha Ditore, one of the publications Dell took to task, said in an interview, “He was continually targeting us after that. Dell was at war with us.”

“The rule is that the country which bombs is the country which gets the contracts,” said a Western consultant with years of experience in the Balkans. “Bombs are expensive.”

Few doubted that Dell had the power to influence, if not dictate, the government’s decisions. Many Kosovars, in fact, felt he went too far during his term as ambassador by appointing himself kingmaker. In one high-profile instance, when Pacolli’s election was ruled unconstitutional — following an official complaint relating to matters of parliamentary quorum and a pause between votes — political parties got stuck trying to appoint a new president. Dell brokered a deal and appeared with party leaders on television to announce the name of a new, nonpartisan leader, a relatively unknown deputy director of the Kosovo police.

After Bechtel submitted its bid for the highway, according to interviews with officials from international institutions, Dell put pressure on the Kosovo government not only to choose Bechtel but also to sign a contract with terms that were favorable to the corporation. Meanwhile, according to these sources, a broad coalition including the World Bank, the IMF, European embassies, NGOs, and think tanks opposed Bechtel’s bid—sometimes publicly, sometimes privately. They were concerned that the bidding process and negotiations lacked transparency, and that the proposed project was so lavish that it might damage Kosovo’s economic stability. Of particular concern was the bid’s unit-price contract, which meant the highway project’s final bill would be tallied only when all work had been completed. This left open the possibility that estimated costs could skyrocket.

Critics worried too that the Kosovo government was letting the U.S. embassy guide a bad decision. In an exchange of private letters from early 2010, made available for this article by a confidential source, Kosovo Prime Minister Hashim Thaci protested to Jane Armitage, the World Bank’s regional coordinator for southeastern Europe, that the bank’s resident representative in Kosovo had been “mischaracterizing the way my government manages important tenders” by asserting that it was choosing Bechtel under pressure from the U.S. embassy. On the contrary, Thaci wrote, “[T]his decision was based on the best interests of Kosovo.” Armitage responded to Thaci a week later to say that the highway plan did “not appear to be economically viable,” and that good use of scarce public resources required “open and transparent bidding, efficient allocation of risks, and capped financial obligations.” She warned also that open-ended financial obligations “can adversely affect the macro-economic performance, even to the point of destabilizing a small economy.”

The Kosovo government’s legal advisor on the highway tender, the British international law firm Eversheds, also advised its client against signing the contract with Bechtel. Eversheds found Bechtel’s bid to be noncompliant with the invitation to tender because it did not include a fixed price and a specific design. The tender process was also not considered “competitive,” because only one other bid was considered (from an Austrian firm). The terms and conditions of the contract “do not reflect a good deal for the government of Kosovo,” the firm wrote bluntly in an internal memo dated Feb. 5, 2010, and shared by a confidential source for this story. The $551,225,824 bid price offered by Bechtel was, contractually, “nothing more than a non-binding estimate.”

Despite these warnings, the Kosovo government signed the contract with Bechtel in April 2010. Dell was present at the event. There had been virtually no public debate and little information made available about the U.S. company’s plan for the highway. The Ministry of Infrastructure didn’t respond to repeated interview requests for this article, and it declined to disclose the highway contract, citing Kosovo’s Law on Public Information as precluding it from doing so because the document “could be used by the competition.”

A man who was dropped off by a minibus under a bridge walks near the first exit of the Kosovo highway.

The only other international official able to challenge the awarding of the contract to Bechtel and compete with Dell’s influence said the U.S. ambassador forced him out of the process. Pieter Feith, a career Dutch diplomat, was the international civilian representative chosen to supervise Kosovo’s transition to independence. From 2008 to 2012, Feith had a broad portfolio, covering economic, political, and social affairs.

But when Feith asked for the Bechtel bid and information about its budgetary implications, he said that Kosovo government officials refused — and that Dell sided with them. “Formally speaking, I was left out in the cold,” Feith recalled in January of last year.

“I thought it was bizarre that the ambassador of a Western country would take such a directly opposing position to IMF advice,” he added. “We normally support the analysis of the IMF and World Bank.”

Feith described the mission of Western countries working in Kosovo as building democratic and stable government, fighting corruption, protecting ethnic minorities, and enhancing the rule of law. “It was unimaginable,” he said, “that because of business interests, these things could have been circumvented.”

Eventually, the project’s price would double, costing over 20 percent of Kosovo’s 2010 GDP. A 2012 IMF report found that the highway put “considerable” pressure on Kosovo’s budget and could only be paid for “in part through running higher deficits” and by “curtailing other capital expenditures”; these expenditures were cut across the board by 48 percent for each of the last three years of construction, to pay for the highway. The project absorbed resources, in other words, that may have been destined for languishing schools and hospitals; also neglected were local roads, 95 percent of which are in “poor or very poor” condition, according to the World Bank — the worst in the Balkans.

“It was a colossal waste of scarce public money,” said Andrea Capussela, economic director of the International Civilian Office, the institution formerly headed by Feith. “This road was designed for the Kosovo of a generation from now.”

Citing a confidentiality agreement with Bechtel, the Kosovo government refused requests for financial details of the highway deal from legislators and journalists. Yet more information did emerge, in dribs and drabs and leaks, and public anger grew. “The Pimpsons,” certainly, was one example of criticism. More formally, questions from members of Kosovo’s parliament became increasingly pointed.

Visar Ymeri, an outspoken opposition member of the legislative body, said his research shows that Bechtel overcharged for a range of materials, such as gravel, for which the company charged three times the market price. The contract, which Ymeri claimed was dropped anonymously on his doorstep in 2011 (the government has said the document he obtained was not the final version), also included a $53 million “mobilization” charge, even though workers and machinery only had to be moved across the nearby border with Albania, where Bechtel had just completed the highway that would link to Kosovo’s. Ymeri characterized the negotiating position of the Kosovo government as “total capitulation.”

As criticism mounted, Prime Minister Thaci and Dell defended the project publicly. Dell said the road was a sound investment in infrastructure that would serve as an engine for Kosovo’s economic development. And when the openness of Bechtel’s procurement process was questioned, Dell was categorical in his support. “I have no problem with the way the transaction was conducted,” he said in a television interview in September 2010. “I think it was transparent and fair. It’s the most transparent process we’ve seen in Kosovo so far.”

What sort of profit Bechtel received from the project is not publicly known. Wheeless said the company would not answer queries about profits, noting, “We don’t engage and make judgments for our potential customers on how they should spend their dollars. We stick to our expertise, which is how to build a road and how to build them the best road in the best way possible.” But a World Bank economist, speaking on the condition of anonymity, estimates that Bechtel’s target profits on projects like the Kosovo highway are typically around a hefty 30 percent — and evidence from the project in Albania shows this can indeed be the case.

According to a Bechtel veteran, Balkan governments have chosen the company for projects because of its proven record of delivering quality products on tight deadlines. “The history of infrastructure in the Balkans is fraught with non-performance,” said Charles Redman, a senior vice-president at Bechtel from 1996 to 2008 and a retired career U.S. diplomat. (Among his senior posts, Redman was assistant secretary and State Department spokesman during the term of Secretary George Shultz, who himself was plucked from his position as president of Bechtel by Ronald Reagan. Bechtel’s onetime general counsel, Caspar Weinberger, also served alongside Shultz in Reagan’s cabinet, as secretary of defense.)

Redman worked directly with the government of Albania—but there, the Bechtel contract led to problems serious enough that criminal proceedings resulted.

In 2006, Redman found a decisive head of government eager for a grandiose project: Albanian Prime Minister Sali Berisha had decided to make the “Patriotic Highway,” which would run from the Adriatic port of Durres to the Kosovo border, a priority of his administration and a centerpiece of his 2009 re-election campaign. The World Bank had offered to help Albania finance and prepare a tender procedure for local contractors to build a two-lane road. World Bank economists say the smaller road would have cost about one-third the price — saving some $700 million in public funds, or about 5 percent of Albania’s GDP — and taken significantly longer to tender and construct than what was eventually built. But Berisha insisted on a four-lane motorway, and he wanted it fast. Bechtel was happy to help.

A 2006 State Department cable released by WikiLeaks quoted the Albanian transport minister, Lulzim Basha, telling the U.S. ambassador to the country that Tom Ridge, the former U.S. secretary of homeland security and then an advisor to Berisha, would look at the proposal Bechtel prepared for Berisha’s government and offer recommendations on how to overcome the World Bank’s objections. According to the cable, “Basha thinks that Ridge might ask him to come to Washington to promote the project.”

The project ultimately went forward using a special fast-track procedure, and before long, unsavory business details came to light. Arben Mece, a civil engineer at the Albanian Ministry of Public Works at the time, said he was shocked by the prices for materials charged by Bechtel, describing them as several times the going market rate. Concerned, Mece contacted prosecutors and provided details about what he described as “corruption.”

Basha and his main legal aide, Andi Toma, were charged in 2008 with two criminal counts of abuse of office and violating procedures in the way they chose the consultant for the tender procedure that awarded the road contract to Bechtel and in the way they negotiated the contract. Prosecutors argued that the pair damaged the state by accepting unit prices significantly higher than those charged by other firms and by allowing work to begin without a plan or fixed cost in place (as in Kosovo, the Albanian project was based on a unit-price contract). “We never found any evidence that the government ever said that a price proposed by Bechtel was too high,” said former Albanian Prosecutor General Ina Rama, who filed the indictment in the case. At the time of the filing, she calculated the damage to the Albanian state at some $337 million.

It was the first criminal corruption indictment of a sitting minister in Albania’s post-communist history. The case was eventually dismissed in April 2009 on procedural grounds. The road was completed in 2010, just as the roadwork in Kosovo began. Berisha, who is no longer in office, dismissed the prosecution in an interview as “totally politically motivated.”

This March, the IMF approved a $457 million loan request by Albania, in part to pay off debts incurred through the Bechtel project. The ratio of public debt to GDP had risen from 56 percent in 2006, when the road was contracted, to 71 percent in 2013. According to a financial statement filed by Bechtel with the Albanian tax authorities, published in the local business magazine Monitor, the company’s profit margin was about 32 percent, or $400 million — roughly the same size as the IMF loan. A U.S. diplomatic cable released by WikiLeaks described the project as “very profitable for Bechtel.”

Back in Kosovo, the outgoing Thaci government last year praised Bechtel’s highway as its signature project that will boost trade, tourism, and closer regional ties. For instance, officials pointed to it as being convenient for Kosovars vacationing in the summer on Albania’s Adriatic coast: the drive time from Pristina to the sea has been cut from nine hours to four.

Yet in reality, the promised economic benefits of the Kosovo Highway have largely failed to materialize. Only a small portion of Kosovo’s trade was with Albania before the road was built, and that remains the case; the proportion of Kosovo’s exports that go to Albania has increased from 10.4 percent in 2010 to 14.9 percent in 2013, according to the Kosovo Statistics Agency. The proportion of Kosovo’s imports that come from Albania — much larger in volume — has increased from 3.2 percent to 4.5 percent.

Despite the ongoing contention over the highway project, Bechtel was awarded a second deal in Kosovo last year, for a 40-mile highway from Pristina to the Macedonian border. The contract became a campaign issue in Kosovo’s June 8 general elections, with both major opposition parties promising to cancel it. In a signal of the political embarrassment now associated with the earlier Bechtel road, Thaci’s lame-duck government signed the contract on July 1, while it was still unclear whether it would even return to power. (The new contract was made publicly available in the infrastructure ministry’s press office under the watchful eye of ministry personnel — for a total of three hours.)

Today, Amb. Christopher Dell is at work in Mozambique, but criticism of his time in Pristina continues to dog him. An incident that occurred two weeks after the contract for the Kosovo highway was signed highlights the outsize influence critics say Dell had, and the questionable actions they say he sometimes took as ambassador.

In April 2010, armed police from EULEX, the European Union law and order mission in Kosovo, launched raids on the offices and family residences of then-Transport Minister Fatmir Limaj. According to the EULEX press release, the raids on six locations were “part of an investigation into several tenders related to the construction of roads in Kosovo in the period 2007-09,” which may have included the tender won by Bechtel. (EULEX would not specify which deals it suspected involved corruption.)

“I’m trying to put the cuffs on them, and [he is] handing them champagne.”

Dell had drawn criticism for working closely with reportedly corrupt Kosovo government officials, including Limaj; frustrated by the cozy relations, a police advisor in Kosovo who participated in the Limaj raids said of the former U.S. ambassador’s relationships, “I’m trying to put the cuffs on them, and [he is] handing them champagne.” After the raids, according to Pieter Feith, Dell proposed arranging a diplomatic posting for Limaj in the United States, possibly as consul general of Kosovo in New York, in order to “whisk him away” from any legal proceedings. Feith said that Dell discussed the possibility at one of their weekly meetings. “I thought it was a bad idea because it would lead to further impunity,” Feith said. “[It] would set us back in our efforts to root out corruption and organized crime.” He added that, in the end, Washington didn’t consider the idea “actionable.”

Almost four years later, Limaj (who has also stood trial for alleged war crimes, for which he was found not guilty) and several associates were indicted in February 2014 on criminal corruption charges for taking kickbacks on road projects — though not the Bechtel-constructed road. To date, no legal charges have been brought in connection with the highway.

Matthew Brunwasser is a freelance investigative journalist currently working in the Balkans. Reporting for this article was supported by the Investigative Reporting Program at the University of California at Berkeley Graduate School of Journalism.

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