88m3
Fast Money & Foreign Objects
Dear Sirs, I Am the Son of US President George H.W. Bush and I Have a Business Proposition for You
The fraudulent Nigerian water pump deal that continues to haunt Jeb Bush’s political career.
—By Stephanie Mencimer
| Thu Jun. 11, 2015 12:27 PM EDT
Sipa/AP; sheff/Shutterstock
IN MARCH 1989, Jeb Bush arrived in Nigeria to a royal welcome. More than 100,000 American-flag waving Nigerians lined the streets of Gombe to watch as the US president's son was honored with a 1,300-horse "durbar," a festival typically reserved for heads of state and religious holidays. Bush later met withNigerian dictator Ibrahim Babangida, who had come to power in a 1985 military coup. They chatted about Cuban human rights and the failed nomination of John Tower, Bush's father's pick for defense secretary.
But the president's then-36-year-old son was not visiting Nigeria on a diplomatic mission. He had come to promote an industrial water pump company. The visit—and the $82 million deal tied to it—would form one of the more controversial episodes of Bush's business career and dog him for years after he jumped into politics. The deal became notorious because of allegations, outlined in thousands of pages of court documents, that the transaction had been greased through massive bribes to Nigerian officials paid for by American taxpayer money loaned through the US Export-Import Bank. The deal triggered a federal criminal investigation, as well as nearly two decades of civil litigation by the US Department of Justice that in 2013 resulted in a federal jury finding that the water pump company, MWI Corp., had defrauded the federal government of millions of dollars.
Bush has long tried to distance himself from the deal. He was not a defendant in the Justice Department lawsuit, and no criminal charges were ever brought against him or MWI. He has repeatedly said that he didn't directly profit from the venture or know about any alleged bribery or political influence peddling. But even the less salacious details of the deal, revealed in years of legal filings, don't reflect well on Bush.
Bush lent his name—and that of his prominent family—to an enterprise with hazards that should have been obvious. Nigeria, then as now, was infamous for its corruption that was virtually inescapable for anyone attempting to do business there. And according to the Justice Department and testimony in the trial, the company Bush was promoting sold overpriced agricultural equipment to an impoverished nation whose people often couldn't use it. In the process, the deal put the already indebted nation further into hock to foreign creditors.
Bush did not respond to a request for comment for this story, but as he prepares to announce his bid for the presidency, questions still linger about the exact part he played in a deal that the Justice Department said took advantage of both the Nigerian people and American taxpayers.
BUSH'S INVOLVEMENT WITH THE NIGERIA PROJECT began in 1989, the year after his father was elected president, when he formed a partnership with J. David Eller, the CEO of a family-owned Deerfield Beach, Florida, company now called MWI, short for Moving Water Industries. Eller's father founded the outfit in 1926. It manufactures large-scale water pumps used for flood control, agriculture, mining, and other industrial projects. (Some of its pumps ended up in New Orleans after Hurricane Katrina.)
Asked what percentage of the MWI equipment sold to Nigeria had gone unused, a former vice president at the company replied, "Ninety percent.”
Bush and Eller had become friends through Florida GOP circles in the early 1980s. Eller was a big Broward County Republican activist and donor and had landed a slot on the state lottery commission during the administration of Republican Gov. Bob Martinez, who had tapped Bush as his commerce secretary in 1986.
An engineer known for his rumpled hair, wide ties, snakeskin boots, and Bible-thumping Southern Baptist faith, Eller had taken his father's company global in the 1970s. In the early 1980s, the firm discovered that it could help Nigeria obtain financing from the US Export-Import Bank to buy MWI's pumps and other equipment, and it ramped up its work in the country. (The Ex-Im Bank, a US government agency, is supposed to promote US exports by providing loans and credit guarantees to foreign countries that agree to buy products from US companies.)
During this period, Nigeria's military leaders were borrowing extensively from the West to finance dubious projects, many of which never materialized. The money often disappeared thanks to Nigeria's institutionalized corruption. The most egregious example was the Ajaokuta steel plant. The project was launched in 1979 and, by the mid-1990s, Nigeria had spent nearly $5 billion on the facility, which never produced a single sheet of steel.
When Ibrahim Babangida seized power in 1985, the country was virtually bankrupt. Unable to service its debt as prices plunged for its oil exports, Nigeria's credit dried up, and its creditors started demanding repayment of billions in loans. In 1986, most of the developed world stopped opening new lines of credit to the troubled country. That same year, Nigeria started begging for international debt relief. It won temporary reprieves, but its debt continued to grow. Under pressure from the World Bank and International Monetary Fund, Babangida implemented some economic reforms, including limits on debt-funded imports.
Yet even in this climate, the Export-Import Bank continued loaning Nigeria money, which it used mostly to purchase MWI products. By the time Bush teamed up with Eller in 1988, the Ex-Im Bank had already financed about $87 million of MWI's sales to Nigeria.
Former MWI employees say that much of the equipment they sold the country was never used, in part because Nigeria didn't have the infrastructure to utilize it. Brian Stair, a former MWI assistant vice president, explained in a recent interview withMother Jones that he visited Nigeria in the late 1980s to inspect an MWI shipment of water pumps, which were intended for use by local farmers to irrigate their fields. He found the pumps were gathering dust. The Nigerians "had built sheds to put them under because they weren't going to put them in the fields right away," he said. "The fields weren't prepared. They didn't have the money to do that."
"The fact that MWI was able to obtain Ex-Im Bank financing at all is surprising given the Nigerian Federal Government's traditionally poor credit history," the Justice Department noted in its lawsuit.
Nonetheless, in 1988, the company was cooking up its biggest deal yet: an $82 million package that would ultimately involve about eight different Ex-Im Bank loans to a variety of Nigerian states. These loans would finance the purchase of MWI products—industrial water pumps, pipes, and other products the company told the Nigerians they needed. The project would be worth four times MWI's annual revenue.
But the deal hinged on two big uncertainties: whether the Ex-Im Bank could be relied upon to provide the funding, and whether various Nigerian officials could be persuaded to sign on to the loans.
Nigeria's credit was essentially shot, and it was already in default on millions of dollars in loans to US creditors. The Ex-Im Bank had concerns about continued lending to the country. And not every local official MWI approached was enthusiastic about the deals the company was pitching.
That's where Bush seems to have come in. In early 1989, he and Eller created a corporation called Bush-El to market MWI's products. The outfit would receive a 3 percent commission on any deals Bush-El helped secure.
Bush has said he never contacted the Ex-Im Bank on behalf of MWI. But in Nigeria, Eller exploited his connection to Bush, suggesting that the then-president's son was well wired in Washington. Eller made a low-budget promo video for the company's prospective Nigerian clients that touted his connections to the "highest levels" of the US government and even prominently featured photos of him posing with Ronald Reagan and George H.W. Bush.
In his video, Eller noted that Jeb Bush would be joining company representatives in Nigeria for the inauguration of a small manufacturing plant MWI had constructed to develop goodwill with the local officials who were contemplating deals with MWI. "We're very proud of that and it shows that our government is very interested in what we're doing in Nigeria and very supportive," he said in the video.
A MWI advertisement in a Nigerian magazine, March 1989. Library of Congress
When Bush hit Nigeria in March 1989,he praised MWI's work to Babangida, the Nigerian dictator, as an "outstanding example of American private sector cooperation with Nigeria and a contributor to Nigeria's development," according to a cable sent to the State Department by US ambassador to Nigeria, Princeton Lyman.
In a separate cable to the State Department, Lyman called the trip "a sensation, no doubt about it…We'll live off this one for a long while." President George H.W. Bush later sent Babangida a personal note of thanks for hosting his son.
Two years later, in 1991, Bush returned to Nigeria on MWI business. A May 1991 MWI memo, entered as evidence in the Justice Department's case against the company, noted that a trip to the country by Bush "may help unlock AAA," shorthand for Nigerian finance official Alhaji Alhaji Alhaji. According to a MWI spokesman, Bush did not meet with Alhaji or other Nigerian finance officials on this trip.
The following year, the Ex-Im Bank authorized $74.3 million in loans to Nigerian states so they could buy $82 million worth of water pumps and other equipment from MWI. (The states were required to put up about $8 million as a condition of getting the loans.) The loans were authorized even as Nigeria was begging international creditors for debt relief. The Justice Department later observed in its lawsuit, "The fact that MWI was able to obtain Ex-Im Bank financing at all is surprising given the Nigerian Federal Government's traditionally poor credit history."
MWI obtains Ex-Im financing (pg 12)
The loans launched MWI into the top tier of American exporters receiving funding from the Ex-Im Bank. According to the Miami Herald, in 1992, MWI ranked ahead US Steel, Motorola, and Union Carbide to become the 13 largest beneficiary of Ex-Im Bank loans.
The 1992 pump deal could have netted Bush-El in the ballpark of $2.5 million, based on the company's 3 percent commission. But Bush has said that he didn't make any money off deals underwritten by the US government. "He had established strict rules for his involvement with Bush-El Trading," the MWI spokesman told Mother Jones. "Those rule precluded him from having any involvement or receiving any compensation whatsoever in any transaction that required US government financing or interfacing with Nigerian or US government officials about such a transaction." In 1994, when he decided to run for governor of Florida, he sold his shares in Bush-El, eventually receiving nearly $650,000 for his stake.
THAT MIGHT HAVE BEEN THE END of Bush's Nigerian adventure, except for one problem: Robert Purcell.
A former MWI vice president, Purcell in 1996 sued Bush-El and MWI for violating his contract, alleging that some of the money that had been diverted from MWI to Bush-El for its marketing work was owed to him. MWI countersued, alleging that Purcell had breached a noncompete contract. This case was settled confidentially in 1998. (Purcell declined to comment for this story.)
The fraudulent Nigerian water pump deal that continues to haunt Jeb Bush’s political career.
—By Stephanie Mencimer
| Thu Jun. 11, 2015 12:27 PM EDT
IN MARCH 1989, Jeb Bush arrived in Nigeria to a royal welcome. More than 100,000 American-flag waving Nigerians lined the streets of Gombe to watch as the US president's son was honored with a 1,300-horse "durbar," a festival typically reserved for heads of state and religious holidays. Bush later met withNigerian dictator Ibrahim Babangida, who had come to power in a 1985 military coup. They chatted about Cuban human rights and the failed nomination of John Tower, Bush's father's pick for defense secretary.
But the president's then-36-year-old son was not visiting Nigeria on a diplomatic mission. He had come to promote an industrial water pump company. The visit—and the $82 million deal tied to it—would form one of the more controversial episodes of Bush's business career and dog him for years after he jumped into politics. The deal became notorious because of allegations, outlined in thousands of pages of court documents, that the transaction had been greased through massive bribes to Nigerian officials paid for by American taxpayer money loaned through the US Export-Import Bank. The deal triggered a federal criminal investigation, as well as nearly two decades of civil litigation by the US Department of Justice that in 2013 resulted in a federal jury finding that the water pump company, MWI Corp., had defrauded the federal government of millions of dollars.
Bush has long tried to distance himself from the deal. He was not a defendant in the Justice Department lawsuit, and no criminal charges were ever brought against him or MWI. He has repeatedly said that he didn't directly profit from the venture or know about any alleged bribery or political influence peddling. But even the less salacious details of the deal, revealed in years of legal filings, don't reflect well on Bush.
Bush lent his name—and that of his prominent family—to an enterprise with hazards that should have been obvious. Nigeria, then as now, was infamous for its corruption that was virtually inescapable for anyone attempting to do business there. And according to the Justice Department and testimony in the trial, the company Bush was promoting sold overpriced agricultural equipment to an impoverished nation whose people often couldn't use it. In the process, the deal put the already indebted nation further into hock to foreign creditors.
Bush did not respond to a request for comment for this story, but as he prepares to announce his bid for the presidency, questions still linger about the exact part he played in a deal that the Justice Department said took advantage of both the Nigerian people and American taxpayers.
BUSH'S INVOLVEMENT WITH THE NIGERIA PROJECT began in 1989, the year after his father was elected president, when he formed a partnership with J. David Eller, the CEO of a family-owned Deerfield Beach, Florida, company now called MWI, short for Moving Water Industries. Eller's father founded the outfit in 1926. It manufactures large-scale water pumps used for flood control, agriculture, mining, and other industrial projects. (Some of its pumps ended up in New Orleans after Hurricane Katrina.)
Asked what percentage of the MWI equipment sold to Nigeria had gone unused, a former vice president at the company replied, "Ninety percent.”
Bush and Eller had become friends through Florida GOP circles in the early 1980s. Eller was a big Broward County Republican activist and donor and had landed a slot on the state lottery commission during the administration of Republican Gov. Bob Martinez, who had tapped Bush as his commerce secretary in 1986.
An engineer known for his rumpled hair, wide ties, snakeskin boots, and Bible-thumping Southern Baptist faith, Eller had taken his father's company global in the 1970s. In the early 1980s, the firm discovered that it could help Nigeria obtain financing from the US Export-Import Bank to buy MWI's pumps and other equipment, and it ramped up its work in the country. (The Ex-Im Bank, a US government agency, is supposed to promote US exports by providing loans and credit guarantees to foreign countries that agree to buy products from US companies.)
During this period, Nigeria's military leaders were borrowing extensively from the West to finance dubious projects, many of which never materialized. The money often disappeared thanks to Nigeria's institutionalized corruption. The most egregious example was the Ajaokuta steel plant. The project was launched in 1979 and, by the mid-1990s, Nigeria had spent nearly $5 billion on the facility, which never produced a single sheet of steel.
When Ibrahim Babangida seized power in 1985, the country was virtually bankrupt. Unable to service its debt as prices plunged for its oil exports, Nigeria's credit dried up, and its creditors started demanding repayment of billions in loans. In 1986, most of the developed world stopped opening new lines of credit to the troubled country. That same year, Nigeria started begging for international debt relief. It won temporary reprieves, but its debt continued to grow. Under pressure from the World Bank and International Monetary Fund, Babangida implemented some economic reforms, including limits on debt-funded imports.
Yet even in this climate, the Export-Import Bank continued loaning Nigeria money, which it used mostly to purchase MWI products. By the time Bush teamed up with Eller in 1988, the Ex-Im Bank had already financed about $87 million of MWI's sales to Nigeria.
Former MWI employees say that much of the equipment they sold the country was never used, in part because Nigeria didn't have the infrastructure to utilize it. Brian Stair, a former MWI assistant vice president, explained in a recent interview withMother Jones that he visited Nigeria in the late 1980s to inspect an MWI shipment of water pumps, which were intended for use by local farmers to irrigate their fields. He found the pumps were gathering dust. The Nigerians "had built sheds to put them under because they weren't going to put them in the fields right away," he said. "The fields weren't prepared. They didn't have the money to do that."
"The fact that MWI was able to obtain Ex-Im Bank financing at all is surprising given the Nigerian Federal Government's traditionally poor credit history," the Justice Department noted in its lawsuit.
Nonetheless, in 1988, the company was cooking up its biggest deal yet: an $82 million package that would ultimately involve about eight different Ex-Im Bank loans to a variety of Nigerian states. These loans would finance the purchase of MWI products—industrial water pumps, pipes, and other products the company told the Nigerians they needed. The project would be worth four times MWI's annual revenue.
But the deal hinged on two big uncertainties: whether the Ex-Im Bank could be relied upon to provide the funding, and whether various Nigerian officials could be persuaded to sign on to the loans.
Nigeria's credit was essentially shot, and it was already in default on millions of dollars in loans to US creditors. The Ex-Im Bank had concerns about continued lending to the country. And not every local official MWI approached was enthusiastic about the deals the company was pitching.
That's where Bush seems to have come in. In early 1989, he and Eller created a corporation called Bush-El to market MWI's products. The outfit would receive a 3 percent commission on any deals Bush-El helped secure.
Bush has said he never contacted the Ex-Im Bank on behalf of MWI. But in Nigeria, Eller exploited his connection to Bush, suggesting that the then-president's son was well wired in Washington. Eller made a low-budget promo video for the company's prospective Nigerian clients that touted his connections to the "highest levels" of the US government and even prominently featured photos of him posing with Ronald Reagan and George H.W. Bush.
In his video, Eller noted that Jeb Bush would be joining company representatives in Nigeria for the inauguration of a small manufacturing plant MWI had constructed to develop goodwill with the local officials who were contemplating deals with MWI. "We're very proud of that and it shows that our government is very interested in what we're doing in Nigeria and very supportive," he said in the video.
A MWI advertisement in a Nigerian magazine, March 1989. Library of Congress
When Bush hit Nigeria in March 1989,he praised MWI's work to Babangida, the Nigerian dictator, as an "outstanding example of American private sector cooperation with Nigeria and a contributor to Nigeria's development," according to a cable sent to the State Department by US ambassador to Nigeria, Princeton Lyman.
In a separate cable to the State Department, Lyman called the trip "a sensation, no doubt about it…We'll live off this one for a long while." President George H.W. Bush later sent Babangida a personal note of thanks for hosting his son.
Two years later, in 1991, Bush returned to Nigeria on MWI business. A May 1991 MWI memo, entered as evidence in the Justice Department's case against the company, noted that a trip to the country by Bush "may help unlock AAA," shorthand for Nigerian finance official Alhaji Alhaji Alhaji. According to a MWI spokesman, Bush did not meet with Alhaji or other Nigerian finance officials on this trip.
The following year, the Ex-Im Bank authorized $74.3 million in loans to Nigerian states so they could buy $82 million worth of water pumps and other equipment from MWI. (The states were required to put up about $8 million as a condition of getting the loans.) The loans were authorized even as Nigeria was begging international creditors for debt relief. The Justice Department later observed in its lawsuit, "The fact that MWI was able to obtain Ex-Im Bank financing at all is surprising given the Nigerian Federal Government's traditionally poor credit history."
MWI obtains Ex-Im financing (pg 12)
The loans launched MWI into the top tier of American exporters receiving funding from the Ex-Im Bank. According to the Miami Herald, in 1992, MWI ranked ahead US Steel, Motorola, and Union Carbide to become the 13 largest beneficiary of Ex-Im Bank loans.
The 1992 pump deal could have netted Bush-El in the ballpark of $2.5 million, based on the company's 3 percent commission. But Bush has said that he didn't make any money off deals underwritten by the US government. "He had established strict rules for his involvement with Bush-El Trading," the MWI spokesman told Mother Jones. "Those rule precluded him from having any involvement or receiving any compensation whatsoever in any transaction that required US government financing or interfacing with Nigerian or US government officials about such a transaction." In 1994, when he decided to run for governor of Florida, he sold his shares in Bush-El, eventually receiving nearly $650,000 for his stake.
THAT MIGHT HAVE BEEN THE END of Bush's Nigerian adventure, except for one problem: Robert Purcell.
A former MWI vice president, Purcell in 1996 sued Bush-El and MWI for violating his contract, alleging that some of the money that had been diverted from MWI to Bush-El for its marketing work was owed to him. MWI countersued, alleging that Purcell had breached a noncompete contract. This case was settled confidentially in 1998. (Purcell declined to comment for this story.)
