Friday, 2 May 2003

Rummy's North Korea Connection

What did Donald Rumsfeld know about ABB's deal to build nuclear reactors there? And why won't he talk about it?

Defense Secretary Donald Rumsfeld rarely keeps his opinions to himself. He tends not to compromise with his enemies. And he clearly disdains the communist regime in North Korea. So it's surprising that there is no clear public record of his views on the controversial 1994 deal in which the U.S. agreed to provide North Korea with two light-water nuclear reactors in exchange for Pyongyang ending its nuclear weapons program. What's even more surprising about Rumsfeld's silence is that he sat on the board of the company that won a $200 million contract to provide the design and key components for the reactors.

The company is Zurich-based engineering giant ABB, which signed the contract in early 2000, well before Rumsfeld gave up his board seat and joined the Bush administration. Rumsfeld, the only American director on the ABB board from 1990 to early 2001, has never acknowledged that he knew the company was competing for the nuclear contract. Nor could FORTUNE find any public reference to what he thought about the project. In response to questions about his role in the reactor deal, the Defense Secretary's spokeswoman Victoria Clarke told Newsweek in February that "there was no vote on this" and that her boss "does not recall it being brought before the board at any time."

Rumsfeld declined requests by FORTUNE to elaborate on his role. But ABB spokesman Bjoern Edlund has told FORTUNE that "board members were informed about this project." And other ABB officials say there is no way such a large and high-stakes project, involving complex questions of liability, would not have come to the attention of the board. "A written summary would probably have gone to the board before the deal was signed," says Robert Newman, a former president of ABB's U.S. nuclear division who spearheaded the project. "I'm sure they were aware."

FORTUNE contacted 15 ABB board members who served at the time the company was bidding for the Pyongyang contract, and all but one declined to comment. That director, who asked not to be identified, says he's convinced that ABB's chairman at the time, Percy Barnevik, told the board about the reactor project in the mid-1990s. "This was a major thing for ABB," the former director says, "and extensive political lobbying was done."

The director recalls being told that Rumsfeld was asked "to lobby in Washington" on ABB's behalf in the mid-1990s because a rival American company had complained about a foreign-owned firm getting the work. Although he couldn't provide details, Goran Lundberg, who ran ABB's power-generation business until 1995, says he's "pretty sure that at some point Don was involved," since it was not unusual to seek help from board members "when we needed contacts with the U.S. government." Other former top executives don't recall Rumsfeld's involvement.

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