Falconbridge - Made in U.S.A.
Goff, Fred
On June 21, 1972, after a rendition of the Dominican National Anthem, a blessing by the Archbishop of Santo Domingo and some remarks by the Canadian Ambassador and company executives, President...
...In 1967 Superior solidified its control of both companies and Howard Keck personally stepped in to manage his new acquisitions...
...investment in the company...
...A major factor behind this decision was Superior's proven ability to marshall the economic and political resources necessary for developing the McIntyre and Falconbridge assets...
...Within a matter of years, both Gulf & Western and Falconbridge were well on their way toward vastly expanding their Dominican operations and profits...
...In return, he helped the Dominican Republic get a higher U.S...
...El Caribe, Oct...
...Therefore, if it is Texaco that is selling Falcondo oil, the Houston group and others controlling Texaco stand to benefit from the recent price hikes...
...Iron Age, July 27, 1972...
...Armco is a major user of nickel in its specialty steel production...
...The FNCB also lent $21 million to Falcondo...
...An- derson, a Texas lawyer, had previously managed the $300 million Waggoner estate and had been a Texas oil and gas lobbyist...
...Armco Steel, * one of the top five U.S...
...3 2 To help marshal the required political and economic resources to develop the Dominican deposits, and also to help spread the risks, Howard Keck turned to two New York financial groups...
...3 President Balaguer, in a Dominican government ad in the New York Times, held up Falcondo as a weathervane for the foreign investment climate: Among the sure signs of the climate of security and confidence which the Dominican Republic offers foreign investors are the installation of the enormous metallurgical plant by the Falcon- bridge Co...
...Much of the $180 million loan, for instance, was used to buy goods and services in the United States -mainly electric generators, construction and engineering services, mining and12 ONE POUND OF NICKEL: COSTS AND PROFITS The noted Toronto nickel analyst, Ilamr Martens (of Martens, Ball 5 Abrecht Ltd...
...By 1964, as the nickel industry was hit by a worldwide shortage, Falconbridge planned a $78 million Dominican mining project...
...3 8 Johnson first met Nixon as a lawyer in Whittier, California...
...is given credit for8 playing a vital role in the revival at Falconbridge . . ."19 A crucial aspect of this revival was getting the Dominican nickel mine into operation...
...Cooper, identified by the New York Times as a "Toronto entrepreneur," is on so many boards that he (as well as Keck's associate, George Brown--see below) is under investigation by U.S...
...imperial crown...
...Falcondo issued 1.5 million of its authorized 2 million shares at $10 per share to raise capital...
...The bank also receives fees from Falconbridge for acting as Paying Agent in connection with the offer of the debentures...
...consumption...
...The firm, part of the island's legal establishment, has built its practice around serving the interests of such multinational giants as IBM, Colgate-Palmolive, General Motors, Mitsubishi Mining, Alcoa, Texaco, Bank of America and Xerox...
...A closer look at the Falcondo contract and operations raises many questions about these "benefits...
...Other major nickel deposits are being developed in such tropical countries as Indonesia, Guatemala, the Philippines and Colombia...
...Any inflated payments covering these expenditures represents a transfer of profits to the corporate members of the financial groups at the Dominican government...
...It succeeded in passing the Gas act which set aside the Supreme Court's decision regulating natural gas...
...255 ff...
...He went to work for Superior Oil around 1943 as its Washington representative, dealing with federal agencies and working on public land leases...
...Drew Person, op...
...A recent Wall Street journal report put Falcondo's employment "benefits" in perspective: . . The Dominican Republic needs more than 3,000 new jobs a month just to keep pace with youths entering the job market...
...XVI I, events of July 1964, p. 621...
...Kwame Nkrumah, Neocolonialism: The last Stage of Imperialism (New York, International Publishers, 1965...
...nickel have traditionally been the rich Sudbury Basin sulphide deposits in Ontario, Canada (controlled by the International Nickel Co...
...1 7 In a classic case of financial leveraging, Superior Oil invested just under $100 million and gained control of assets valued at over $700 million (see diagram).1 8 Whereas McIntyre's owners had blocked previous takeover bids by Canadian and U.S...
...Jack Anderson column of Oct...
...The sophisticated technological and market structure of the Falconbridge venture prompted Juan Bosch to14 conclude that it would be "foolish" to propose nationalization...
...Dwarfed by the giant INCO during these first years, it averaged only about 5 percent of Canadian production...
...Amidst this growing uncertainty, the potential of the accessible Falconbridge concession must have stood out like a jewel in the U.S...
...See also footnote No...
...invasion of the Dominican Republic...
...New markets and technological assistance have been provided by the Soviet Union and other Eastern European nations...
...The FEA was in charge of international purchases of strategic materials such as manganese, chromium, iron and nickel...
...3 6 In addition to the Connally connection there are numerous other indications of this financial group's links to the levers of power in Washington...
...The industrial connections emanating from the core define the parameters of a financial group.* A closer look at Falcondo provides an insight into the workings of U.S...
...Ventures controlled over 150 prospecting, On the left, Marsh Cooper, president of Falconbridge, toasts Dominican President Joaquin Balaguer (center) after the inauguration of the Falcondo plant in 1972...
...2 4 By June 1972, construction was completed and aroundthe-clock production began...
...financial groups with stakes in the Dominican Republic...
...30, 1972...
...During the ten years of the contract, Falconbridge actually increased its production from 35 to 65 million pounds annually and tripled its total income...
...5, 1964...
...Trujillo biographer, "one of the most intimate of Trujillo's courtiers...
...According to Drew Pearson: Connally was the brains and mainspring of the lobbying drive by gas and oil companies to pass the Natural Gas Act in 1956...
...If the mere potential of Dominican nickel served in any way as an impetus to the U.S...
...Together they organized the following package: $114 million in long term loans from three major U.S...
...al., Latin American Radicalism (New York: Random House, 1969), pp...
...During the 1960's, however, the nickel industry realized that Canada's underground sulphide mines, supplying at that time well over 60 percent of the capitalist world's needs, would not suffice for the future...
...The employment and technical benefits to the country are equally open to question...
...geologist, Thayer Lindsley, to acquire nickel deposits in the town of Falconbridge in Ontario's famed Sudbury Basin...
...Business Week, Sept...
...steel producers and the largest steel producer in Texas (with major operations in Houston) purchased 17.5 percent of the Falcondo stock and agreed to help Falconbridge guarantee payment of Falcondo debts should profits fail to cover costs...
...Kinnear, p. 7. 22...
...G & W, which bought the company in July 1967, is closely linked to the Chase Manhattan Bank and Manufacturers Hanover Trust...
...government contract to build up nickel supplies during World War II...
...4, 1973...
...and in April 1974 it stood at nearly $10/bbl.--an increase of over 550 percent...
...Lyndon Johnson and then Vice-president Richard Nixon, both of whom received heavy campaign financing from southwestern oil and gas interests...
...In 1955, they in turn picked Deputy U.S...
...Connally's past reveals the kind of political power he and other members of the Houston group could marshal should the Falconbridge's investment in the Dominican Republic ever be threatened by expropriation or other nationalist moves...
...249-291...
...The construction and engineering contract for the Falcondo complex-including a power plant, 77 kilometer fuel pipeline, metallurgical process and storage buildings, workshops, office buildings and housing-was handed to the Houston financial group's construction company, Brown & Root...
...Business Week, April 25, 1957...
...and $41 million in a short term revolving credit from the Canadian Imperial Bank of Commerce ($20 million) and the First National City Bank of New York ($21 million...
...Control over Falcondo is maintained through financial transactions backed by several private and multilateral banks, not through the traditional form of direct ownership...
...W. Carter & Fred Goff, "Nickel Imperialism," NACLA Newsletter, January 1971...
...The original 1971 fuel contract stipulated a price of about $1.81/bbl...
...government stockpile contract, which worked out to selling 200 million pounds of nickel at a premium rate of 40 cents a pound (upwards of 50 percent) above the world market rate...
...Prospectus for $50 million Falconbridge debentures issued by Dillon, Read, June 9, 1971, p. 42...
...sugar quota (See Wall Street Journal, Dec...
...The interest charges alone on the enormous initial equipment loans are greater than all the labor costs...
...While he was president of Ventures, Eisenhower reportedly asked him to replace Nixon on his 1956 re-election ticket (see Washington Post, "July 16,1970...
...4 2 Falcondo's top financial administrator in Santo Domingo is Swiss-born Dominican banker Gaetan Boucher...
...oil import quotas were based on domestic refining capacity, it was unable to import its valuable Venezuelan crude oil...
...Recent oil price hikes have boosted fuel costs to the point where Falcondo is actually losing money...
...In addition, it is likely (though unconfirmed) that Falcondo buys its oil from a Venezuelan subsidiary of a company within the same financial sphere...
...According to Falconbridge president Marsh Cooper, "Howard Keck and I, in that order, run Falconbridge...
...My responsibility" explains Johnson, "is to keep in personal contact and communication with the good friends of the President he would like to see but doesn't have time to...
...According to the latter ar- ticle, "Anglo's bid for a major interest in the McIntyre Porcupine group of companies was blocked by Superior Oil...
...He headed up the "Democrats for Nixon" in 1972 and switched to the Republican Party at the height of the Watergate scandal-thus placing himself in the running for the GOP 1976 presidential nomination...
...Falcondo plant in the Dominican Republic...
...27, 1970...
...approximately 80 percent of the world's nickel reserves lie outside Canada, most of which are laterite type deposits in tropical climates...
...New York Times, Feb...
...of Canada-(some 350,000 shares or about 14 per cent in mid-1967...
...The financial groups must certainly realize that the delicate balance of social and political forces in the Dominican Republic could be upset overnight...
...Among the principal sources of Superior's shares of McIntyre stock were the Power Corp...
...15, 1972 and June 15, 1973...
...The biggest accounting loophole is the large interest payments made by Falcondo on its foreign loans...
...Cooper sits on Texas Eastern Transmission Corp...
...invasion and occupation of the Dominican Republic in 1965 marked an upheaval for the country not only in military and political terms, but also, more importantly, in economic terms...
...Neil McKinnon, the CIBC chairman, is a Falconbridge director...
...This is its first venture into raw materials production outside North America...
...For Anderson's more recent oil and other business ventures, see the Wall Street Journal, April 3, 1973...
...In contrast, the new INCO-Hanna $120 million Exmibal nickel project in Guatemala will produce unfinished nickel matte which will be further refined by INCO outside the country...
...government stockpiling program) and how it acts as an industrial price support and corporate subsidy program in the guise of protecting national security, see Bernard Nossiter's article in the Washington Post, Dec...
...Falconbridge established a low profile through its "Canadian" identity...
...Washingtonian, June 1972...
...Its legal counsel on the island is Oficina Troncoso, whose partners are members of the powerful old-line Troncoso and Caceres families...
...23, 1971...
...Falcondo is not only required by contract to sell its total production to Falconbridge at a price set by the parent firm, but it must pay Falconbridge a fee for these "services...
...House of Representatives, "in- vestigation of Conglomerate Corporations...
...The financing and the decision to move ahead was no doubt aided by the 128-day Canadian nickel miners' strike against INCO during the summer of 1969...
...2 9 Howard Keck represents the family and Superior Oil interests on the board of the First City National Bank...
...4 6 -Dillon, Read, the underwriters of the debentures, had received $1,150,000 in fees between January 1968 and December 1970 for its services as financial advisors advisor to Falconbridge and financial agent for Falcondo in arranging the $180 million loan...
...Another factor that has had a pronounced impact on the potential feasibility of lateritic projects has been the strong rise in the price of nickel since the late 1940's...
...had special assignments in the Defense and State departments in the early 1950's...
...A full congressional investigation of the gas lobby was blocked by Sen...
...Superior is the largest U.S...
...Thus the government, under powers granted by the Defense Production Act of 1950, has been one of the major factors in the development of the nickel industry...
...3 5 Connally, like other members of the Houston group, was an intimate political associate of Lyndon Johnson...
...Dept...
...In this way, Falconbridge acquired its array of subsidiaries and affiliates which employ 16,000 people around the world...
...By the end of 1967 Superior Oil had solidified its control of Mclntyre (and Falconbridge) with 35.5 per cent ownership...
...On June 21, 1972, after a rendition of the Dominican National Anthem, a blessing by the Archbishop of Santo Domingo and some remarks by the Canadian Ambassador and company executives, President Joaquin Balaguer pushed a button to officially begin production at the site of the largest foreign investment in the country-a $195 million nickel mining project called Falconbridge Dominicana (Falcondo...
...An un- confirmed report to this author maintains that Texas lawyer Henry Holland, a former Assistant Secretaryof State for Inter-American Affairs who accompanied Vice President Nixon on his 1955 visit ot the island, played an important role in acquiring the concession for Falconbridge...
...It was Connally who, as Secretary of the Treasury and U.S...
...financial groups and their relationship to the U.S...
...Another potential Falconbridge lobbyist with access to power in Washington as well as Wall Street, is Robert Anderson, who served as president of Ventures, the Falconbridge parent company, at the time Falconbridge signed the original (continued on p. 32) (continued from p. 14) contract with Trujillo...
...10 Though sources of nickel are diversifying, the control of the nickel industry remains in the hands of three giant companies: INCO, Falconbridge and the Rothschild's Le Nickel...
...2 6 The market for ferronickel is expanding rapidly...
...Crassweller, p. 278...
...And once the foreign investment ground rules had been clarified by the giants, dozens of other investors flocked to the island...
...See text of Juan Bosch radio talk on "Tribuna Democratica," El Caribe, July 18, 1972...
...ambassador to Peru (1945-1946) and Brazil (1946-19481...
...As a result, the Falcondo cost structure is mainly a cover-up for extracting profits from the Dominican Republic...
...industrial system must acquire to grow...
...See Joseph Wechsberg, The Merchant Bankers (Boston, Little Brown & Co., 1966), pp...
...Its clients include Superior Oil, Armco and Brown & Root, three industrial concerns which played a key role in the Falcondo project, as well as the regional operations of such giants as Shell, U.S...
...Subsequently, he managed numerous LBJ campaigns, including his unsuccessful bid for the 1960 Democratic presidential nomination...
...His mother was a member of the Anheuser-Busch brewing family...
...For a brief analysis of the Office of Emergency Preparedness (which supervises the U.S...
...Keck is president of Superior Oil, a director and member of the executive com- mittee of Mc Intyre, chairman of Falconbridge and director of Falcondo...
...and Falconbridge, a limited edition, 67 page mimeographed report by the Latin America Working Group (LAWG) and the Development Education Center (QEC) in Toronto, March 1974...
...81-94...
...Over $100 million of this total was invested in expanding production at the Nicaro deposits in Cuba...
...and E. E. Lincoln, former economic advisor to the DuPonts and at the time of his appointment a director of Cleveland Cliffs Iron Co., Investors Diversified Services and Chesapeake Industries...
...P M cd w -H -4 fl -H 4)Uce oCH) 4) -4 0) 4-) 44...
...In 1929 Lindsley acquired a refinery in Norway to process the Sudbury ores because INCO controlled all the North American refining patents...
...Between 1942 and 1947 the Nicaro plant produced about 25 million pounds of nickel per year, an amount equivalent to nearly 15 percent of U.S...
...3, 1971...
...Superior owns no refining capacity and since U.S...
...Anderson's and Connally's careers have followed remarkably similar patterns...
...In seven years, 1950-57, the government invested over $789 million in nickel stockpiling and production contracts...
...For background on Ventures Ltd...
...Initial production was scheduled for late 1959...
...During the ensuing investigations a Superior Oil attorney testified that for eight years Keck had been handling him thousands of dollars at a time to distribute among politicians...
...The firm of James, Biffam & Cooper received some $70,000 in fees from Falconbridge during the same period for services as consulting geologists...
...I wish to thank Mike Locker, various Dominicans (who must remain unnamed) and members of LAWG for their valuable assistance in preparing this article...
...3 0 This Houston-based firm also does work for Superior Oil and Armco...
...As for the technological spinoffs, if Falconbridge has its way, there won't be any...
...During World War II, Fraser served as assistant divisional chief of the ferro alloys division of the U.S...
...According to the U.S...
...His appointment was rather a reflection of his lobbying skills and his representation of the rising Texas interests in the national political arena...
...Pawley, a close friend of both Truiillo and Cuban dictator Fulgencio Batista, had been U.S...
...has revealed some basic data on Falcondo's operating costs...
...See the New York Times, March 20, 1972 and March 15, 1972...
...23, 1971...
...2 0 Nickel deposits were originally explored by INCO after World War II near the town of Bonao, some 60 miles north of the capital, Santo Domingo...
...Commercial banks, investment banks, insurance companies and law firms provide the core of such a network...
...It brought with it a massive influx of U.S...
...In effect, the union held up the free world for its nickel," observed Fortune, "and the ransom had been paid...
...The Nicaro complex had originally been developed by the Freeport Sulphur Co...
...He is the son of Manuel de Jesus Troncoso de la Concha, the second puppet President for Trujillo in 1940...
...1 4 All during this period Falconbridge was the star subsidiary of Ventures, Ltd., a far-flung holding company set up by Lindsley...
...In fact, most industrial corporations must operate within a network of financial and legal interests...
...government contract, Lindsley sought to build up investor interest in Ventures...
...The accelerating military build-up in Viet Nam placed an added strain on the already tightening nickel market...
...of interior, p. 2. 28...
...See Wall Street Journal, Nov...
...INCO), and Falconbridge...
...The core of the Houston group is comprised of the city's leading bank and law firm: the First City National Bank (FCNB) of Houston and Vinson, Elkins, Searls, Connally & Smith...
...12 Due to the refinery's location and INCO's dominance of the U.S...
...25 million from the World Bank (the first loan from this bank for a project in the Dominican Republic...
...The latest technology and round-the-clock production is utilized to get the ferronickel out as soon as possible...
...2. For moreon South Puerto Rico Sugar Co...
...The largest SPRS shareholder at the time of the G & W acquisition was Edouard Rothschild, who was represented on the SPRS board by Chase Vice President A. Barth (p...
...government's internal and foreign policy...
...But the Mellon, Chase Manhattan Bank and Houston groups all participate in its operations on a secondary level...
...The 1959 "loss" of the crucial Cuban nickel mines was a hard blow to U.S...
...of Houston, Texas), acquired a controlling interest in Falconbridge Nickel Mines of Canada, which in turn holds the rich nickel mining concession on the island...
...3 3 Pearson went on to relate that in doing so the lobby overreached itself and it was revealed that lobbyists for Howard Keck of Superior Oil had attempted to bribe Sen...
...A 1971 prospectus for Falconbridge debentures listed the following fees and financial arrangements under the title "Interest of Management and Others in Certain Transactions...
...A labor and community counterinsurgency program was fashioned out of a large-scale "social science" research project...
...of Canada (200,000 shares or 8.3 per cent of Mcintyre's outstanding shares in July 1966) and two Oppenheimer companies-Charter Consolidated and Anglo-American Corp...
...This would not be too difficult since both Dillon, Read and Keck have wide contacts and holdings in the oil and gas industry...
...Fred Goff and Michael Locker, "The Violence of Domination: U.S...
...In the words of Newsweek, * For a full discussion and definition of financial groups, see S. Men- shikov, Millionaires and Managers (Moscow: Progress Publishers, 1969) and Victor Perlo, The Empire of High Finance (New York: International Publishers, 1957).9 Superior "is in effect owned lock, half-the-stock, and barrels by the Keck family: which owns 52 percent of the stock...
...The first National City Bank is the New York trustee which receives an undisclosed fee...
...Foreign Economic Administration...
...Original plans reportedly called for the stateowned electric company, the CDE, to build and operate the plant and sell the electricity to Falcondo . Instead, the CDE trained nine electricians to go to work at the Falcondo plant...
...by 1965 nickel producers and consumers were fully aware of the rising costs and diminishing supply of Canadian nickel...
...Fuel represents the single most important item in Falcondo's operating expenses...
...representative to the World Bank and the Inter-American Development Bank, led the hard line against takeovers of foreign-owned corporations in Bolivia, Guyana and Chile...
...mining and refining operations producing gold, silver, copper, tin, uranium, phosphate, cobalt, oil and gas around the world...
...175-194...
...See New York Times, March 12, 1974...
...In 1969 Don Nixon reportedly helped obtain the valuable Las Canitas copper and manganese mining concession for a company closely linked to Howard Hughes...
...In the mid-fifties, he brought four internationally known U.S...
...In a recent radio program criticizing the Falcondo contract, ex-President Juan Bosch calculated that Falcondo was going to end up paying $123 million in interest over the next 20 years on the original $180 million loan...
...See Falcondo Annual Report, 1973, p. 8. 46...
...Ramon Caceres Troncoso was Secretary of Finance under the Consejo government which ruled the island briefly after Trujillo's assassination and later was a member of the Triumvirate which took power after the military coup against the Bosch government in 1963...
...Over the past two decades, many millions of dollars have been spent by the major nickel producers in developing process technology which can be applied to the laterites...
...The four directors were: H. J. Carmichael, former head of General Motor's Canadian subsidiary...
...This is true even though labor in Canada and Norway costs twice as much (36 cents versus 18 cents...
...6 In fact, the history of nickel is marked by price peaks and production expansion closely coincident with wars...
...9. James Kinnear, "Nickel: Fundamental Changes in the Industry," (Toronto, Astaire, Taylor International Ltd., Dec...
...Horace T. Reno, "Nickel" Preprint from the 1972 Bureau of Mines, Minerals Yearbook, U.S...
...Secretary of Defense, Robert Anderson, as Venture's President.15 Anderson sold off unprofitable companies and reorganized Ventures to sweeten the profit picture and attract new capital for expansion...
...Department of the Interior, twice as much ferronickel was used in the United States in 1972 as in 1971.27 The Texas-Wall Street Nexus The placement of such a large and sophisticated investment ($195 million) in such a politically unstable country-at a time when nationalism was making headlines elsewhere in Latin America-required the mobilization of substantial political and economic power to guarantee its security...
...In the late 1950's Jesus Maria Troncoso was, in the words of a leading U.S...
...Tilley, Carson & Findlay, Falconbridges' legal counsel in Canada, had received $625,718 during the same period for legal fees and services to Falconbridge and its subsidiaries...
...See: U.S...
...Benefits to Dominicans...
...Newsweek, March 19, 1956...
...25, 1964...
...His brother(s) reportedly hold con- cessions in Hatillo, near the Falcondo project...
...Martindale Hubbell Law Directory...
...He first called on Dillon, Read & Co., a prestigious Wall Street investment bank...
...The invasion also forced a re-alignment of U.S...
...Interview with an INCO executive...
...In other Falconbridge operations in Canada and Norway--where much cheaper hydroelectric power is used and, therefore, operating costs greatly reduced (to only 4 cent a pound for fuel)--nickel is produced for only $1.20/lb...
...The proceeds from these sales are deposited with a New York trustee: the ever-present First National City Bank...
...His appointment was not a reflection of an expertise in the nickel mining industry--though he does have a broad knowledge of oil, ranching, insurance and banking gained as an attorney for the estate of Texas oil multimillionaire Sid Richardson...
...It has served as the investment bank of Superior Oil, Falconbridge, Union Oil, Texaco and Texas Eastern Transmission...
...The complexity of the mining operations required sophisticated technology, engineering skills and heavy machinery...
...Falconbridge, p. 17...
...According to the contract, the technology used by Falcondo, supposedly developed to exploit the Dominican lateritic ores, is top secret and totally controlled by Falconbridge...
...The awesome coalition of finance capital assembled behind the Falcondo investment has firm, multiple links to the U.S...
...Crassweller, p. 319...
...Marsh Cooper, president of both Falconbridge and Falcondo (and a director of McIntyre, Superior Oil and the CIBC) was a partner in the firm from 1937-69...
...government production contracts...
...2 Superior Oil Co...
...McIntyre was a major gold mining company and a giant investment trust with a portfolio of over $84 million...
...22 Falconbridge explored the concession and built a pilot plant to process the ore and develop the necessary technology...
...which controls La Gloria Oil), the Home Oil Co., Ltd...
...Fortune, March 1970, p. 102...
...4 3 Rounding out Falcondo's team of Dominican executives is its director of public relations, Mario Rodriguez, who joined the company in 1969 after 15 years in the diplomatic service...
...Dillon, Read has long served as a bridge between Wall Street and Texas and other Southwestern groups, particularly in financing oil and gas ventures...
...3 1 Through Falconbridge, the Houston group controlled 65.7 percent of the Falcondo stock, yet raised only 5 percent of the total capital needed for the project...
...11, 1973...
...Power Corp., a diversified holding company, had acquired its shares in an unsuccessful takeover bid in 1963-64...
...Whereas a four-engine piston powered plane required about 125 pounds of nickel, a modern jet requires 4,000 pounds...
...Superior paid over $90 million for its eventual 900,000 shares of Mcintyre stock...
...Department of the Interior, nickel is one of the 13 basic raw materials required by an industrialized society.5 Its qualities of strength at high temperatures make it a prime candidate as an alloy with other metals-particularly in the production of stainless steel...
...Falconbridge has retained this firm for ten-year period (197080) at an unusual fee of $50,000...
...While Falconbridge received a big boost from the World War II demand for nickel, it wasn't until the Korean War that, in the words of Business Week, (Falconbridge) catapulted into big time with a lush ten year (1952- 62) U.S...
...Prior to his Falcondo position Boucher had been President Balaguer's administrator of the large stateowned sugar complex and then an assistant vice president at Morgan Guaranty Trust's Zurich office...
...The 35 per cent increase in wages and benefits won by the miners made them the highest paid union members in Canada...
...18, 1974...
...See New Chile, NACLA, 1973, pp...
...The distribution of the shares broke down as follows: Falconbridge Nickel Mines 65.7 percent, Armco Steel 17.5 percent, the Dominican Government 9.5 percent, and other U.S., Canadian and Dominican investors the remaining 7.3 percent...
...3 7 Perhaps one of Superior Oil's best means of getting a sympathetic hearing from President Nixon is through a little-known special assistant to the President named Roger E. Johnson...
...In 1973 alone, out of total revenues of $91 million, Falcondo paid over $17 million to its foreign creditors, whereas it contributed only $3 million in taxes and $285,000 in dividends to the Dominican govern- ment...
...Iron Age, July 27, 1972...
...William Spencer, FNCB president, is a Falconbridge director...
...2 8 The FCNB is the largest bank in Houston and is controlled by Vinson, Elkins, one of the ten largest law firms in the country...
...The 1970 Superior Oil proxy statement indicates that this ownership share is basically unchanged...
...H. B. Lake, partner in Ladenburg, Thalman, New York investment bankers...
...Any national threat to the investment would trigger a violent U.S...
...William F. James, a partner, is a director of Falconbridge (and the Canadian Imperial Bank of Commerce...
...In fact Superior Oil, Keck's domestic oil operation, owns 3.6 million shares of Texaco, a leading foreign producer with operations in Venezuela...
...In July 1966 it bought 8.3 per cent of McIntyre Porcupine Mines' stock-Mcintyre's main asset being a controlling interest in Falconbridge...
...4. New York Times, Oct...
...8, 1955), "Toronto financial men credit the new directors with picking Anderson for president...
...Falcondo is currently selling its ferronickel to Falconbridge for $1.45 under a one year marketing contract...
...Power in the Dominican Republic," in I. L. Horowitz, et...
...Because of the strategic nature of nickel, powerful U.S...
...The interest payments on these huge loans are of course deducted from Falcondo's total income before profits are calculated...
...4 Brief Overview of Nickel According to the U.S...
...By law, 33 percent of Falcondo's profits are taxable by the Dominican government...
...2 1 According to one INCO executive, the company had given up in part on the Dominican deposits because Trujillo was demanding "to big a bribe...
...During the 1965 Constitutionalist uprising, Caceres sought asylum with his friends-in the U.S...
...and Dominican political apparatus...
...federal officials and Congress who are looking into possible anti-trust violations by business executives who simultaneously sit on the boards of several oil companies...
...But through a series of standard accounting acrobatics, much of Falcondo's real income is listed as operating costs...
...Department of Defense, Office of Assistant Secretary of Defense (Supply and Logistics), Annual Materials Conservation Report, 1954, p. 4. 7. L. G. Bonar, The Nickel Industry, (Toronto, Canavest House Ltd., 1971), as quoted in Falconbridge, p. 6. 8. For the story of nickel in Cuba see Percy Bidwell, Raw Materials, Council on Foreign Relations (new York, Harper Bros., 1958...
...under a U.S...
...Nickel is an extremely valuable commodity which the technologically advanced U.S...
...In 1969 it revised its original 1956 contract with the Dominican government and incorporated Falconbridge Dominicana (Falcondo), a Dominican corporation, to develop the deposits...
...Before his retirement in 1970, after 27 years with Keck's Superior Oil, he served as the company's executive vice president and general counsel for the international division.39 On the Dominican side of the power equation Falconbridge has lined up a similarly impressive string of lobbyists, executives and representatives...
...military response...
...Cuba provides an example of what can happen to perfectly good nickel capacity...
...government signed a contract with a Freeport Sulphur subsidiary for delivery of a maximum of 271 million pounds of nickel to be mined at Moa Bay in Cuba...
...Falconbridge was even reimbursed for the $13.8 million it spent during the 17 years it held on to and developed the Dominican deposits, the pilot plant and the secret pyrometallurgical smelting technology...
...25, 1969...
...Huge sums of capital had to be raised through commercial loans, the securities market and international lending organizations...
...The most important industrial component of the Houston group involved in the Falcondo operation is Superior Oil, which gained control of Falconbridge in 1967...
...Another of the firm's partners, Ramon Caceres Troncoso, was one of the principal Falconbridge representatives in the 1969 contract negotiations with the Dominican government...
...If Texaco is not supplying Falcondo directly, it could arrange a trade-off, as is commonly done among the major oil companies, whereby Shell (or some other firm) supplies Venezuelan crude to Falcondo while Texaco supplies a Shell customer with an equivalent amount in another part of the world...
...Superior Oil headquarters are also located in the FCNB building...
...It is ex- pected to be"one of the major gold mines in the Western Hemisphere...
...As one writer put it, "The Browns were the principal financiers of his early rise to power, and Lyndon is the man who more than anyone else made them rich...
...interests which control it, and for the Dominican people...
...The coalition's composition pinpoints the forces arrayed against any possible nationalist moves in the Dominican Republic that might threaten Falcondo's security...
...L. J. Burk, New Jersey metallurgist...
...The end product of the operation is ferronickel ingots which are sold to customers-mainly large European, U.S...
...It is a producer not only of nickel but also of copper, oil, natural gas, lead, zinc, iron, platinum, gold and other industrial minerals...
...It increases the risk factor in nickel investments, since these regions are located in countries which, in the words of Falconbridge executive W. G. Dahl, "are not renowned for the stability of their governments . .. or their fervor to deal fairly with freeenterprise business...
...S4)J )'H CH k 0 b '- -H -H rCU 0 -) C) -CU 4-1 c cO 4-) CUC4) so r >-e4 OC, cto -H 4CU 0 4-) 04-) C *H C MON~ P) 4) b . , U) Qd 9 a) 0L) CUC o 0a, OtS 0 CD CU - 4 ~ kk UOC *H -4 C CU 4- cd 0 -H U) u rl V a. ) P. - F4 P. I 4) bO 4j* Q 1) 4) 4) $4 0 -4 cd Cd -41 44ZV) 0 1.4 PCOU a cl k .H U) -4 0)4 rx -4 4H ~0 u) E-* 44 O 0"o 1-4 4-4U)CUr o -Hc)m CUC 4) -H - kF...
...See also Panorama Economico Latinoamericano, Prensa Latina, (La Habana, 1964) pp...
...26, 1973, p. 1. 6. U.S...
...have seemingly turned Falcondo into a money losing venture...
...Listin Diario, June 7, 1972...
...and had diverse holding in Florida, Cuba and the Far East (where he organized the Flying Tigers airline...
...Business Week reports that "management of the three companies-Superior, McIntyre and Falconbridge-has become increasingly interlocked, and Howard B. Keck...
...metallurgical equipment for the complex...
...In the deal, he also was given an option to build a luxury apartment complex on government-owned ocean frontage in Santo Domingo...
...No one corporation, whatever its size, could independently satisfy all these essential requirements...
...HeV) 0 o H -4 Ob...
...But, for the financial groups behind Falcondo, the situation is hardly so gloomy...
...It was these assets (including Falconbridge's Dominican holdings) and McIntyre's own gold, coal and copper mines that Superior Oil President Howard Keck was seeking when, in 1966, he moved to acquire McIntyre...
...The last important aspect of these financial transactions has to do with Falconbridge's complete control over marketing operations...
...Falconbridge maintains its principal bank deposits in Canada with the Canadian Imperial Bank of Commerce, which extended a $50 million line of credit to Falconbridge in addition to its $20 million loan to Falcondo...
...The New Republic, March 5, 1956, p. 8. 35...
...Oc- cupation troops had even left the Dominican Republic...
...Both are Texas lawyers who got their start managing Texas oil estates, became top lobbyists for oil and gas interests, became secretaries of the Navy (in the Eisenhower and Kennedy administrations, respectively)-the Navy being the world's largest buyer of oil-and later secretaries of the Treasury (under Eisenhower and Nixon...
...This is because open pit mining and the metallurgical processing of the ore are two of the most capital intensive industries (see article on Labor / Community Struggles in Bonao...
...The firm represents large oil and gas companies as well as other big business interests...
...Faced with a total U.S.-enforced economic blockade and lacking technicians, Cuba has managed over the last 15 years to significantly boost nickel production and exports...
...2 3 But the schedule for implementing these plans was drastically altered by the island's political upheaval in 1965...
...Armco chairman, C. William Verity, is a director of Falcondo, and Howard Keck is a director of Armco...
...Two of the largest known nickel reserves today are laterite deposits in Cuba and New Caledonia, a French possession in the Pacific...
...He is the son of former Dominican President Ramon Caceres (1906-1911...
...In the fall of 1969, a financing package was negotiated with banks and insurance companies, and construction began...
...Other indications of this role are his appointment as Secretary of the Treasury in 1971 and as a special advisor to President Nixon in 1973...
...The main beneficiaries of Superior's profits are the members of the Keck family, primarily the two sons (William Jr...
...Washington Post, Feb...
...At least $1.15, or 74 percent of operating expenditures, goes directly to foreigners while only 12 percent is paid out to Dominican workers...
...Thus the new fuel prices that raise production costs to $1.54/lb...
...and Canadian investors...
...Under such an arrangement, this immense pool of funds can be easily seized and impounded should the Falcondo complex ever be threatened with nationalization...
...Throughout its history on the island, Falconbridge and its apologists have boasted of the many "benefits" the investment will bring to the country...
...George Brown, founder of Brown & Root, previously sat on Armco's board of directors...
...4 5 A second category of income deductions covers operating costs and services...
...Although the costs of high volume strip mining of lateritic ores are now low, a minimum nickel price is required for their development due to the high cost of processing, and it is apparent that this price level has now been...
...It acquired these holdings (representing over 1 percent of Texaco's outstanding shares) by selling its Venezuelan oil operations to Texaco in 1964, following an unsuccessful merger attempt with that company...
...The major lenders are represented on the Falconbridge board by Dillon, Read * Armco Steel is primarily within the sphere of tpe First National City Bank of New York group...
...Francis Case of South Dakota...
...4 0 The firm's senior partner, Jesus Maria Troncoso, sits on Falcondo's board...
...According to Business Week, "he also, by implication, might have been opening the way for U.S...
...Thus, within two years after the invasion, two of the three principal foreign investments on the island had changed hands: Gulf & Western Industries, a fast-rising conglomerate closely linked to two major New York banks, bought South Puerto Rico Sugar Co., the island's largest privately-owned sugar mill...
...Mcintyre was previously controlled by an alliance of Canadian, British and South African capital, which included the Oppenheimer South African interests, Hambros Bank (London's larges merchant bank) and the Locana Corp., an in- vestment company connected with the Canadian mining industry (see Business Week, Jan...
...strategic plans...
...insurance companies, Metropolitan Life, Equitable and Northwestern Mutual...
...financial experts to the Ventures board...
...independent producer of both crude oil and natural gas, with vast domestic and foreign operations...
...investors, they acquiesced to this Superior Oil offer...
...For example, Peter Flanigan, Nixon's chief personnel talent scout and his assistant for international economic affairs, worked for two decades on Wall Street as a Dillon, Read partner...
...13 These premium rates were intended to induce Falconbridge to expand annual production from 35 to 55 million pounds...
...of Canada, for the mining and refining of nickel at a cost of $200 million...
...According to Business Week (Oct...
...Fred Goff FOOTNOTES 1. For important background on this article see...
...embassy...
...Barron's March 4, 1968...
...Brown & Root's emergence as the third largest construction company in the world is closely linked with the rise of the Houston financial group and particularly with the rise of one of the group's political proteges, Lyndon B. Johnson-the Texan who as President ordered the 1965 invasion of the Dominican Republic...
...see Goff & Locker...
...see Barron's, April 25, 1955...
...Hispanic American Report, Vol...
...This vision is exactly what haunts Falconbridge and its financial backers as they plunder the Dominican Republic...
...37 below...
...1972), p. 2. 10...
...To the benefit of Falcondo's principal owners and financial backers, final stated profits are therefore held to a minimum...
...7 The United States, the world's largest consumer, imports over 90 percent of its nickel...
...At Dillon, Read, Flanigan handled the Texas Eastern Transmission stock and debenture issues...
...Falconbridge, p. 12...
...Dillon, Read also works closely with the First National City Bank of New York which it approached to help arrange the Falcondo financing...
...S. Wall Street Journal, Dec...
...This of course reflects the corporate point of view since the "free world" referred to by Fortune in this case consists of only three cor- porations--INCO, Falconbridge and Le Nickel-that have a total monopoly over the market...
...Instead, the new source would be open pit laterite mines in the tropics...
...financial groups closely connected with the nickel industry have been able to obtain lucrative subsidies from the government to develop nickel deposits...
...invasion, the present lucrative mining operation must surely be a key factor in U.S.-Dominican relations...
...One additional factor helps give nickel its "strategic" quality: seven industrialized nations-the United States, Great Britain, Japan, the Federal Republic of Germany, France, Italy and Sweden-account for over 90 percent of the capitalist world's consumption, yet none of these countries have substantial nickel reserves within their borders...
...In 1962 Ventures was dissolved and its assets were bought out by Falconbridge which remained under McIntyre's control...
...and Japanese steel producers-without need for further processing...
...Business Week, Nov...
...market, Falconbridge sold most of its nickel to Western Europe...
...U)cnc 4V) CU0 4) C U) oU) F-4 OC)d 10 w C, x -J ch, w w I Ir 1 J L11 managed Johnson's bitterly contested campaign for the Senate in 1948 and accompanied him to Washington as his administrative assistant in 1949...
...The concession was arranged by Miami-based millionaire diplomat William Pawley, who, after drafting Trujillo's foreign investment legislation, obtained oil and nickel concessions covering four million acres...
...l 6 But Anderson's plans were countered by an offer from a Canadian firm, McIntyre Porcupine Mines, Ltd., to gain control of Ventures and take over its management in a step-by-step acquisition...
...Drew Pearson, "The Washington Merry-Go-Round," York Gazette & Daily, January 16, 1961...
...John Bartlow Martin, Overtaken By Events (Garden City, Doubleday, 1966), p. 658...
...In producing one pound of ferronickel, Falcondo's spends the following: Interest on debt 27 cents Labor 18 " Fuel 57 " Shipping and marketing 6 Other direct operating costs 21 " Selling and administration 10 Depreciation 15 " Total costs before taxes $1.54 These figures demonstrate in precise terms just how profitable the Falcondo venture is for U.S...
...This strike paralyzed the Sudbury mines and convinced INCO, as well as Falconbridge, to accelerate the development of alternative sources of supply...
...by the beginning of 1973 this had increased to $2.50/bbl...
...4 1 He also served the Trujillo dictatorship as Ambassador to Washington and as Secretary of the Treasury...
...Cyril Carson, a partner in the firm, N_13 is a director of Falconbridge and is general counsel to the Bank of Nova Scotia, which has a branch in Bonao, the site of the Falcondo complex...
...Welsh, p. 53...
...Legal services...
...But the sale of these operations to Texaco probably gave Keck access to Venezuelan crude...
...8 The main sources for U.S...
...Superior Oil began buying control of Falconbridge in 1966 (before the U.S...
...It represents, according to Iron Age, the biggest capacity increase by a major nickel producer in the 1970's.25 The Falcondo project is unusual for the Third World in that it not only mines the ores but also processes them in a highly sophisticated metallurgical plant...
...28, 1970...
...The coalition also includes financial allies in New York and has strategic influence in both Democratic and Republican administrations...
...3. These included Nestle and Carnation (milk), Shell Oil (refining), American Can (canning), Rosario Resources (mining) and Don Nixon (President Nixon's brother...
...Each man also has directorships and ties with many of the other corporations mentioned in this ar- ticle...
...The Mcintyre relations with this group are still close...
...See Wall Street Journal, July 6, 1966 and July 12, 1967 and the Financial Post Corporation Service, "McIntyre Por- cupine Mines Ltd.," Toronto, 1972...
...These three companies account for some 80 percent of capitalist world production: INCO 50 percent, Falconbridge 15 percent and Le Nickel just under 15 percent.ll A History of Falconbridge Falconbridge was founded in 1928 by an entrepreneurial U.S...
...aid" and economic "advisors," a new welcome mat for foreign investors and proof that Washington was not about to permit a nationalist or leftist government to come to power...
...Falconbridge management from 1948 to 1969 was entrusted to Horace Fraser, a Canadian geologist...
...Two years of instability following the invasion paralyzed Falconbridge's development of the deposits...
...These figures highlight the mechanisms by which only financial groups, and not individual companies, can control world market prices and siphon off revenues from countries where nationalism threatens the profits of the direct investment...
...They include: foreign exchange earnings, tax revenues, employment, training of skilled personnel, importation of technology, and development of local housing, schools, roads, water and medical facilities...
...Its move into Ventures was followed by Anderson's departure in 1957...
...Hearings Before the Antitrust Sub- committeeofthe Committee of the Judiciary, Part 1, Gulf & Western Industries," July 30 & 31, August 6 & 7, 1969...
...As modern machines are built to run faster and faster and are submitted to greater stress, the need for higher quality steels and super-aloys increases...
...For a recent summary of Oppenheimer's Anglo-American group, the world's largest producer of gold, diamonds and platinum, see Forbes, Dec...
...Washington Post, March 5,1972 and March 26, 1972...
...both in the United States and the Dominican Republic, were required to negotiate the contracts and secure government backing...
...It wasn't until 1968, when Keck was in control, that the company once again began to move, this time calling for a $190 million investment...
...Connally's association with Keck and Superior Oil is nothing new...
...This article will explore the background and significance of this investment-its significance for the international nickel market, for the U.S...
...This stems from the use of four million barrels of crude oil a year for fueling Falcondo's electric plant and ore drying process...
...Ninety two percent of the company's capital-a proportion equilavent to $180 million-consists of loans from foreign financial institutions (U.S., Canadian and international...
...Other expenitures include fuel oil (the largest item in the Falcondo budget), executive salaries, office overhead, communications, transportation, warehousing, legal, financial, and consulting services, advertising, etc...
...Balaguer recently put unemployment at 400,000 or about 33 percent of the estimated job force of 1.2 million...
...Cooper is a director of Superior Oil, a director and member of the executive committee of Mclntyre and president of both Falconbridge and Falcondo...
...director Frederic Brandi, First National City Bank president W. I. Spencer, and Neil J. McKinnon, chairman of the Canadian Imperial Bank of Commerce (all of whom, along with Keck, were present at the inauguration of the Falcondo complex in 1972...
...Johnson and his wife were among the small group that went with Nixon to Florida and the Caribbean after his 1960 presidential defeat...
...Wall Street Journal, Sept...
...Since they also control Falconbridge, which markets the ferronickel and passes on operating costs, they are assured a profit...
...Canada's largest domestically owned oil company) and Superior Oil...
...The S20 million Rosario open pit mining complex (gold, silver, zinc and copper) is located in Cotui, just a few miles from the Falcondo project...
...Flanigan's father, millionaire president of Manufacturers Hanover Trust, sat on the Republican Party's Finance Committee...
...For a summary of recent developments in nickel production see Barron's, Feb...
...Conclusion No one knows exactly what role the rich Falconbridge concession played in prompting the 1965 U.S...
...This obvious instability, a product of historical exploitation and oppression forced the investors to devise an elaborate investment strategy to preserve their holdings...
...Had the $180 million been invested capital and not loans, profits would have been $123 million higher and the government's 33 percent share would have amounted to an additional $40 million.44 Bosch's figures, however, understate the real dimensions of Falcondo's financial manipulations...
...See also Goff & Locker, pp...
...467...
...Seldom has a more effective lobbying operation been seen in Washington...
...Unemployment is thought to approach 50 percent in some neighborhoods of Santo Domingo.4 The company even refuses to share the electricity produced at its plant-a plant which generates as much electric power as all existing Dominican generating plants combined...
...Its best known partner, John Connally, joined the firm in 1969 after serving three terms as Governor of Texas...
...Frederic Brandi, chairman of Dillon., Read during the period, is a Falconbridge director...
...Steel, Dow Chemical, Gulf Oil and General Motors...
...7, 1971...
...Ian Keith, Falcondo vice president and general manager, joins the festivities...
...The U.S...
...and Howard) and two daughters of the late William K. Keck, an independent oil contractor who made his first big strike at Huntington Beach in southern California in 1923...
...The Group's Political Power In 1973, John Connally, a partner of the Houston group's law firm, was elected a director of Falconbridge...
...During the period of the U.S...
...One guess is that Roger Kyes of GM, Anderson's friend and predecessor at the Pen- tagon, passed the word to Carmichael and Lincoln that he was available...
...Cuba proves a small country like the Dominican Republic, relying on the people, can challenge and defeat even ferocious attempts to strangle its independence and social development...
...3 4 In the end, Howard Keck was not made a defendant in the case, though the corporation, which could not be put in jail, pleaded guilty and was fined $10,000...
...According to the New York Times, Flanigan is "the most influential official in the administration on critical issues that affect businessmen...
...47-48...
...See David Welsh, "Building Lyndon Johnson," Ramparts, December 1967 for a highly informative article on Brown & Root...
...These qualities, along with the metal's application in the manufacture of a wide variety of armaments and weapons delivery systems, led the Defense Department to qualify nickel as being the closest to a true "war metal...
...The coalition of financial groups that own, control and benefit from Falcondo combines a powerful alliance of interests which are led by the Houston group...
...He was Counsel in the Washington and Ottawa embassies...
...Falcondo's production of 66 million pounds of nickel in 1973 confirmed its standing as the largest nickel mining and smelting operation in Latin America...
...In short, Falconbridge's control over management and technology gives it ample working room to allocate expenditures to benefit the financial coalition...
...4 5 While it is true that it would be extremely difficult to nationalize and operate Falcondo under state direction, Bosch ignored the revolutionary Cuban example...
...The latter is resposible for holding and dividing up this income, a procedure shrouded in secrecy...
...Despite a total capital investment of $195 million, the company only provides jobs for 1,828 Dominicans (plus 127 foreigners...
...Falconbridge in the Dominican Republic Falconbridge started prospecting for Dominican nickel in 1955, when it was expanding to meet its lucrative U.S...
...For two informative articles on Connally, the bank and the law firm see the Miami Herald, May 20, 1973 and the New York Times, March 5, 1973...
...As the high cost of processing was one of the main stumbling blocks preventing the development of laterite deposits, * Nickel occurs in two basic forms: in sulphide ores found underground mainly in the temperate zones, and in laterite ores found near the surface in the tropics.the apparent economic feasibility of such procedures as INCO's lateritic process and Falconbridge's pyrometallurgical technique have represented significant breakthroughs, and have rendered lateritic deposits commercially viable...
...Norway, which in the earliest days of the nickel industry held a monopoly of the world's supply, closed her mines in 1921 for economic reasons...
...In 1957, under a new expansion program, the U.S...
...9 This move to laterite ores adds a further dimension to the politics of nickel...
...Thus, the the Dominican government is ignorant of and effectively eliminated from the management of this money,and has little control over how it is manipulated...
...achieved . .. The price increases have been necessary to preserve profit margins, as the cost of production by underground mining has been escalating rapidly, particularly in the Sudbury district where the ore is being extracted from deeper levels and at lower grades...
Vol. 8 • April 1974 • No. 4
