CONTENTS 7/27/00

Click. Gulf War Eased Cheney's Way to the Boardroom

Click. FORMER CONTRA, RENATO PENA, WINS REVIEW OF U.S. DRUG TIES. Fights deportation to Nicaragua, says CIA knew of cocaine deals.

Click.  A Quality Finish.  The Kornell Champagne Cellars saga continues.

Former contra, Renato Pena, wins review of U.S. drug ties. Fights deportation to Nicaragua, says CIA knew of cocaine deals.

By Bob Egelko
© July 27, 2000

The former Northern California spokesman for the Nicaraguan contras, facing deportation for cocaine trafficking in the 1980s, will apparently get the chance to convince a federal judge that he was assured the drug deals had U.S. government approval.

The 9th U.S. Circuit Court of Appeals ruled Wednesday that a judge should hear and evaluate Renato Pena's claim that a federal prosecutor in San Francisco had told him after his arrest in 1984 that he was at no risk of deportation for having carried cocaine and cash to Los Angeles about a dozen times.

In court papers opposing Pena's challenge to his current deportation order, the U.S. attorney's office said no such assurance was given.

Pena's case recalls the controversy over allegations of CIA- backed drug dealing by the contras, the U.S.-supported guerrillas fighting Nicaragua's leftist government in the 1980s. Accused in a San Jose Mercury News series of connections to the early crack cocaine trade in Southern California, the CIA hotly denied having anything to do with Los Angeles drug traffickers who claimed contra connections.

Pena said he had been told by Norwin Meneses, a major drug trafficker with ties to the contras, that CIA-connected contra commanders were aware of the drug operation in which Pena took part. The CIA has denied any relationship with Meneses.

The appeals court stopped well short of finding that the government condoned Pena's activity as a drug courier. But the court said Pena's claims about the government's attitude were relevant to his attempt to overturn his 1985 drug conviction, the basis of the current attempt to deport him.

"Pena and his allies supporting the contras became involved in selling cocaine in order to circumvent the congressional ban on non-humanitarian aid to the contras," the three-judge panel said. "Pena states that he was told that leading contra military commanders, with ties to the CIA, knew about the drug dealing. Pena believed that the sole purpose of these drug transactions was to help the contras, and he believed the United States government would not seek to prosecute.

"The circumstances surrounding Pena's case, including his belief that his activity was supported by the U.S. government and his alleged reliance on the assurances of the assistant U.S. attorney regarding his immigration status, raise important questions about public confidence in the administration of justice."

The court said a federal judge should hear testimony from Pena and others about what assurances he had been given before pleading guilty in 1985, and about whether his court-appointed attorney had acted incompetently by failing to tell him he risked deportation. The judge would then decide whether to set aside the guilty plea.

Pena's suit, seeking to overturn the guilty plea, had been dismissed by U.S. District Judge Fern Smith in 1997. The hearing ordered Wednesday would be held before another judge, because Smith now heads the Federal Judicial Center in Washington, D.C.

"He's a credible person," said Pena's current attorney, Stephen Shaiken. "He was good enough for the U.S. government when he was spokesperson for the opposition and when he was an informant (against others in the drug ring). He was telling the truth then, and he's telling it now."

He said Pena, now a San Francisco city employee, was not speaking to reporters about the case.

The U.S. attorney's office, which represented immigration officials who want Pena deported, declined comment on the ruling.

Pena was a member of the security force of Nicaraguan dictator Anastasio Somoza, who was overthrown by the leftist Sandinistas in 1979. Pena came to the United States in 1980 and became the chief of public relations in Northern California for the FDN, the contras' political arm.

He applied for political asylum in August 1984 but was arrested three months later on charges of possessing cocaine with intent to distribute it.

Pena said he had been asked by Norwin Meneses' nephew, Jairo Meneses, to travel to Los Angeles with money that would be used to buy cocaine and finance contras, whose U.S. military aid had been cut off by Congress. He was paid about $6,000 for carrying money and drugs to Los Angeles between March and November 1984, the court said.

Pena said he had agreed to cooperate with prosecutors in exchange for a reduced sentence and been told by a federal prosecutor that he would be taken care of and had nothing to fear about his immigration status. He said he never would have pleaded guilty if he had known he could be deported to Nicaragua, then governed by the Sandinistas. He also said his court-appointed attorney had never spoken to him about the possibility of deportation.

After serving a year in a halfway house and testifying against another Meneses relative in the drug case, Pena was granted asylum in 1987, the court said. But the Immigration and Naturalization Service revoked his asylum in 1996 and moved to deport him to Nicaragua because of his drug conviction.

In court papers, Special Assistant U.S. Attorney Robert Yeargin said Pena's asylum had been withdrawn because he had failed to disclose his conviction on his asylum application. Yeargin also said the original prosecutor in the case, Rodolfo Orjales, had discussed drug smuggling to Pena but made no promises to him.

Orjales, now a Justice Department employee in Washington, D.C., was out of his office Wednesday and unavailable for comment.

Gulf War Eased Cheney's Way to the Boardroom



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This article was reported by Leslie Wayne, Richard A. Oppel Jr. and James Risen and written by Mr. Risen.

WASHINGTON, July 26 -- Four years after helping to win the Persian Gulf war and liberating the oil fields of Kuwait, former Secretary of Defense Dick Cheney went from fighting for oil to running a Dallas-based business that he has helped transform into the world's largest oil field services company.

As chief executive of the Halliburton Company since 1995, Mr. Cheney has been able to rely heavily on the high-level contacts in the Middle East he made as defense secretary to win business in the roughneck world of international oil.

And now, as he re-emerges from the business world to become the running mate of the presumed Republican presidential nominee, George W. Bush, Mr. Cheney's corporate experience has made clear the Republican ticket's roots in the oil industry.

Since Mr. Cheney joined the company in 1995, his background as a leader in the gulf war has seemed tailor-made for Halliburton, because much of its business is done with Arab governments. Almost 70 percent of Halliburton's nearly $15 billion in annual sales come from overseas.

Mr. Cheney quickly established himself as Halliburton's outside man, a globe-trotting rainmaker, while his deputy and now successor, David Lesar, handled internal operations.

"Cheney could go to the Middle East, he had a reputation there, and most C.E.O.'s don't have that," said David Gribbin, a longtime friend of Mr. Cheney who now serves as Halliburton's vice president of government affairs in Washington.

Kenneth Adelman, a former Reagan administration official and longtime Cheney friend, agreed that "Halliburton played to his strengths, which were contacts in the Arab world and dealing with governments."

Under his leadership, the value of the company's stock has fluctuated dramatically. In August 1995, when he arrived, it was trading at around $21 a share. Within two years, the value had nearly tripled. But more recently it has fallen back, closing today at $43.5625 a share.

Mr. Cheney was a surprise choice when he was named chief executive of Halliburton, since he had virtually no experience in the business world and had not held a full-time job since leaving the Pentagon. In 1993 and 1994, Mr. Cheney had spent his time giving speeches, joining corporate boards, and campaigning for Republican candidates while he decided whether to run for president himself.

But by early 1995, Mr. Cheney had decided against a presidential bid, and began considering his next move. The business world, largely unknown to Mr. Cheney, became "a more attractive option after he gave up on running for president," recalled Sean O'Keefe, who was secretary of the Navy in the Bush Administration and remains close to Mr. Cheney.

The opportunity came in the kind of power-networking event that is so typical in corporate America today: a fly-fishing trip with Halliburton's chairman, Thomas Cruikshank, who came away impressed.

Later, after Mr. Cruikshank decided to retire and was disenchanted with the list of his possible successors drawn up by a Halliburton search committee, he began pushing Mr. Cheney for the job.

"There was instant backing for Dick when his name was brought to our attention," said Anne Armstrong, ambassador to Britain in the Ford administration and then a Halliburton board member.

Several friends and business associates said they did not know of any role former President George Bush played in helping Mr. Cheney obtain the post at Halliburton.

Roger Staubach, the former Dallas Cowboys quarterback who was a member of Halliburton's board at the time of the selection, said Mr. Cheney's health and his history of heart problems were "not an issue anyone worried about," although it was "brought up in passing" by the board.

Appointed chief executive of Halliburton in August 1995, Mr. Cheney took over a company that analysts said was trying to adapt to big changes in the oil industry, including a collapse in oil prices in the late 1990's that dampened exploration.

With more than 100,000 employees, Halliburton's main business is to provide oil producers with the technology and equipment to find, drill for, and pump oil out of the ground, including everything from sophisticated computer software that helps locate underground oil fields to drill bits and pressure pumping systems.

Its customers include the world's largest oil producers as well as oil-producing nations. It also has large engineering and construction businesses, and has pursued other lines of business, like construction work for the United States military abroad, including logistical support to American forces in the Balkans.

Since arriving at Halliburton, Mr. Cheney has sprinkled the company with a few longtime, loyal aides. Mr. Gribbin, a high school friend from Wyoming who worked for Mr. Cheney in Congress and at the Pentagon, is now vice president of government affairs in Halliburton's Washington office.

Joe Lopez, a retired admiral who was Mr. Cheney's military aide while he was secretary of defense, is now chief operating officer of Brown & Root Services, a Halliburton subsidiary that has government contracts.

Mr. Cheney's most important move at Halliburton was to orchestrate the 1998 acquisition of one of its largest competitors, Dresser Industries. Overnight, the merger made Halliburton the world's largest oil services company.

According to Mr. Staubach, the company had kicked around the idea of buying Dresser before Mr. Cheney's arrival, but "he definitely reignited it," bringing it back as "a real opportunity when he was C.E.O."

Still, the Dresser deal has received mixed reviews from industry analysts. The merger took place when oil producers, Halliburton's main customers, were facing declining oil prices and were trimming spending.

"They had what then seemed to be a brilliant deal with the merger of Dresser, which made a lot of sense in a lot of ways," said Arvind S. Sanger, an industry analyst at Donaldson, Lufkin & Jenrette. But "the cycle turned down viciously for the oil services group."

Like other big oil companies, Halliburton does business in some of the third world's roughest areas, providing oil services in the Caspian region in Central Asia, the North Sea, offshore fields in West Africa, the Middle East, Venezuela and now Bangladesh.

Since taking over the company, Mr. Cheney has sharply increased the company's reliance on international operations. Since 1994, the year before he became chief executive, the percentage of Halliburton's revenues from domestic operations fell to just 32 percent from about 59 percent.

The company's most recent annual report said that it did business in more than 120 countries; the report did not list all of the nations, although it noted that Halliburton operated in such politically unstable nations as Algeria, Angola, Nigeria and Russia.

Mr. Cheney's role as chief executive of a multinational oil company has given him the chance over the past few years to weigh in on controversial foreign policy issues. At the top of his list has been ending the use of unilateral trade sanctions as a tool of American foreign policy. Speaking at an oil industry conference in Canada last month, Mr. Cheney urged that United States sanctions on Iran be lifted.

He called relations between Iran and the United States a "tragedy," adding that one of the best ways to improve ties with Iran would be "to allow American companies to do the same thing that most other companies around the world are able to do now, and that is to be active in Iran. "We're kept out of there primarily by our own government, which has made a decision that U.S. firms should not be allowed to invest significantly in Iran, and I think that's a mistake," he said.

Halliburton and other oil service companies have faced consistent criticism from environmental groups. It also faces a wide range of domestic regulatory issues.

Mr. Cheney has said that he will take a financial "bath" by giving up his lucrative post at Halliburton to run for vice president.

Last year, he earned nearly $1.3 million in salary, and documents filed with the Securities and Exchange Commission show that he owns 1,089,000 shares of Halliburton, including 860,000 options to purchase Halliburton shares at a reduced price.

The market value of this package is around $43 million, based on today's stock price for Halliburton shares.

As vice president, Mr. Cheney would earn $181,400 a year.

A Quality Finish. The Kornell Champagne Cellars Saga continues.

Hanns Kornell's work was a labor of love. He produced champagnes in the traditional methode champenoise -- each bottled hand turned on the racks in his cellars.

When methode champenoise is made, still wine already fermented is "charged" with yeast and a bit more sugar to begin a secondary fermentation in the bottle. This is what "adds the bubbles" to create a world class product.

The bottles are riddled, given 1/4 turn periodically, as they age over years. The sediments from the secondary process flow to the neck as the bottle rests canted in racks, secured with a beer cap. After several years, the bottles are gently handled and the neck of the bottle only is frozen. The beer cap is removed, setting in motion a rapid evacuation of the ice that carries sediments and cleanses the neck. The process is known as disgourging. Add a light top-off, champagne cork, wire, foil, labels and the bottles are ready to market. The champagne can be safely cased and transported.

But what happens if you fail to disgourge the sediments? If instead of resting the beer-cap-secured bottles on their sides, you deside to stand them upright? And fail to remove the sediments? The wine once destined to be champagne over time becomes vinegar.

And here rests a monumental problem for Koerner and Rich.

When Napa Valley Bank rather illegally seized the Kornell's prized cellars in July, 1992 they walked in and fired the workers. By December of 1992 Koerner privately purchased the inventory of aging champagnes. Instead of hiring experienced personnel, he sent his own crew over .... and out the door went bottle after bottle with naught but a beer cap, foil, the distinguished Hanns Kornell Champagne labels ... bottles standing upright in their cases. And down went the sediments.

It didn't take restaurants and wholesalers long to see something was wrong, and hundreds upon hundreds if not thousands of cases were shipped back to Koerner.

And where did they languish all these years? Why, as cased goods in the warehouse that caught fire in June, of course.

Firefighters were commenting on all the exploded bottles with beer caps and couldnt' figure out what was going on. "What's this, beer in a champagne bottle?" "Naw ... it's just Koerner's vinegar."

Remember Koerner's comments to Bay Area papers such as "The San Francisco Chronicle," "The Press Democrat," and "The Napa Valley Register?" He lamented "my prized reserves of Hanns Kornell Champagne are lost." Hey, let me tell you, standing upright in a case like that since 1993, they were lost years ago. Maybe this explains the vinegar works over the years? Gotta bond for this buddies? Looks like the fire took care of any problems they may have otherwise had with the ATF and FDA.