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Harbinger Group Inc. (NYSE:HRG), Formerly Zapata Corporation, is a holding company based in Rochester, New York, and originating from an oil company started by a group including the former United States president George H. W. Bush. Various writers have alleged links between the company and the United States Central Intelligence Agency. In 2009, it was renamed the Harbinger Group Inc.
The company traces its origins to Zapata Oil, founded in 1953 by future-U.S. President George H. W. Bush, along with his business partners John Overbey, Hugh Liedtke, Bill Liedtke, and Thomas J. Devine. Overbey was a ‘landman’, skilled in scouting oil fields and obtaining drilling rights cheaply. Bush and Thomas J. Devine were oil-wildcatting associates. Their joint activities culminated in the establishment of Zapata Oil. The initial $1 million investment for Zapata was provided by the Liedtke brothers and their circle of investors, by Bush's father Prescott Bush and his maternal grandfather George Herbert Walker, and their family's circle of friends. Hugh Liedtke was named president, Bush was vice president; Overbey soon left.
According to a CIA internal memo dated November 29, 1975, Zapata Petroleum began in 1953 through Bush's joint efforts with Thomas J. Devine, a CIA staffer who had resigned his agency position that same year to go into private business, but who continued to work for the CIA under commercial cover. Devine would later accompany Bush to Vietnam in late 1967 as a "cleared and witting commercial asset" of the agency, acted as his informal foreign affairs advisor, and had a close relationship with him through 1975.
In 1954, Zapata Off-Shore Company was formed as a subsidiary of Zapata Oil, with Bush as president of the new company. He raised some startup money from Eugene Meyer, publisher of the Washington Post, and his son-in-law, Phillip Graham.
Zapata Off-Shore accepted an offer from an inventor, R. G. LeTourneau, for the development of a mobile but secure drilling rig. Zapata advanced him $400,000, which was to be refundable if the completed rig did not function, followed by an additional $550,000 together with 38,000 shares of Zapata Off-Shore common stock when it did.
The U.S. government began to auction off mineral rights to the Caribbean, the Gulf of Mexico, and the Central American coast in 1954, and in the late 1950s and early 1960, Zapata Off-Shore concentrated its business in these areas. In 1958, drilling contracts with the seven largest U.S. oil producers included wells 40 miles (64 km) north of Isabela, Cuba, near the island Cay Sal.
In January 1959, the Cuban Revolution overthrew the Cuban government of Fulgencio Batista, and Bush bought control of Zapata Off-Shore, funded with $800,000, splitting Zapata Corporation into two independent companies with the Liedtkes still in control of Zapata Petroleum. Bush moved his offices and family that year from Midland, Texas to Houston for access to the Caribbean through the Houston Ship Channel. But although Zapata Offshore had only a few drilling rigs, Bush set up operations also in the Gulf of Mexico, the Persian Gulf, Trinidad, Borneo, and Medellin, Colombia, and the Kuwait Shell Petroleum Development Company was among the company's clients.
In 1960, Jorge Diaz Serrano of Mexico was put in touch with Bush by Dresser Industries. Dresser was owned by Prescott Bush's Yale friends Roland and W. Averell Harriman, and had been George H.W. Bush's first employer upon his graduation from Yale, giving him his start in both the oil business and the defense contractor business. Serrano and Bush created a new company, Perforaciones Marinas del Golfo, aka Permargo, in conjunction with Edwin Pauley of Pan American Petroleum, with whom Zapata had a previous offshore contract. The deal with Permargo is not mentioned in Zapata's annual reports, and SEC records are missing. In 1988, a Bush spokesman claimed that the deal lasted only from March to September 1960. However, Zapata sold the oil-drilling rig Nola I to Pemargo in 1964. John Sherwood, who led the CIA's anti-Castro operations in the early 1960s, said that Zapata Offshore was used as a conduit to fund these operations, in the guise of oil contracts.
Zapata's filing records with the U.S.Securities and Exchange Commission are intact for the years 1955–1959, and again from 1967 onwards. However, records for the years 1960–1966 are missing. The commission's records officer stated that the records were inadvertently placed in a session file to be destroyed by a federal warehouse, and that a total of 1,000 boxes were pulped in this procedure. The destruction of records occurred either in October 1983 (according to the records officer), or in 1981 shortly after Bush became Vice President of the United States (according to, Wison Carpenter, a record analyst with the commission).
In 1962, Bush was joined in Zapata Off-Shore by a fellow Yale Skull and Bones member, Robert Gow. By 1963, Zapata Off-Shore had four operational oil-drilling rigs—Scorpion (1956), Vinegaroon (1957), Sidewinder, and (in the Persian Gulf) Nola III.
In 1963, Zapata Petroleum merged with South Penn Oil and other companies, to become Pennzoil.
By 1964, Zapata Off-Shore had a number of subsidiaries, including: Seacat-Zapata Offshore Company (Persian Gulf), Zapata de Mexico, Zapata International Corporation, Zapata Mining Corporation, Zavala Oil Company, Zapata Overseas Corporation, and a 41% share of Amata Gas Corporation.
In 1965, an oil rig that had cost three million dollars was reported lost in Hurricane Betsy and Zapata received a claim settlement of eight million dollars from Lloyds of London; for this insurer to settle a claim for an oil platform disaster without any physical evidence was unprecedented.
In 1964, Bush ran for the United States Senate, and lost; he continued as president of Zapata Off-Shore until 1966, when he sold his interest to his business partner, Robert Gow, and ran for the U.S. House of Representatives.
In 1966, William Stamps Farish III, age 28, joined the board of Zapata.
Two Federal Bureau of Investigation (FBI) memoranda have been offered to show connections between the CIA and George H. W. Bush during his time at Zapata.
The first memo, written by FBI Special Agent Graham Kitchel on November 22, 1963, names Zapata Off-Shore regarding the John F. Kennedy assassination at 12:30 pm CST that day. It begins: "At 1:45 pm Mr. GEORGE H. W. BUSH, President of the Zapata Off-Shore Drilling Company, Houston, Texas, residence 5525 Briar, Houston, telephonically furnished the following information to writer. .. BUSH stated that he wanted to be kept confidential. .. was proceeding to Dallas, Texas, would remain in the Sheraton-Dallas Hotel."
A second FBI memorandum, written by J. Edgar Hoover, identifies "George Bush" with the CIA. It is dated November 29, 1963 and refers to a briefing given to Bush on November 23. The FBI Director describes a briefing about JFK's murder "orally furnished to Mr. George Bush of the Central Intelligence Agency. .. [by] this Bureau" on "December 20, 1963. When this second memorandum surfaced during the 1988 presidential campaign, Bush spokespersons (including Stephen Hart) said Hoover's memo referred to another George Bush who worked for the CIA. CIA spokeswoman Sharron Basso suggested it was referring to a George William Bush. However, others described this G. William Bush as a "lowly researcher" and "coast and beach analyst" who worked only with documents and photos at the CIA in Virginia from September 1963 to February 1964, with a low rank of GS-5. Moreover, this G. William Bush swore an affidavit in federal court denying that Hoover's memo referred to him:
I have carefully reviewed the FBI memorandum to the Director, Bureau of Intelligence and Research, Department of State dated November 29, 1963 which mentions a Mr. George Bush of the Central Intelligence Agency. ... I do not recognize the contents of the memorandum as information furnished to me orally or otherwise during the time I was at the CIA. In fact, during my time at the CIA, I did not receive any oral communications from any government agency of any nature whatsoever. I did not receive any information relating to the Kennedy assassination during my time at the CIA from the FBI. Based on the above, it is my conclusion that I am not the Mr. George Bush of the Central Intelligence Agency referred to in the memorandum.(United States District Court for the District of Columbia, Civil Action 88–2600 GHR, Archives and Research Center v. Central Intelligence Agency, Affidavit of George William Bush, September 21, 1988.)
US Army Brigadier General Russell Bowen wrote that there was a cover-up of Zapata's CIA connections:
Bush, in fact, did work directly with the anti-Castro Cuban groups in Miami before and after the Bay of Pigs invasion, using his company, Zapata Oil, as a corporate cover for his activities on behalf of the agency. Records at the University of Miami, where the operations were based for several years, show George Bush was present during this time.
Another writer quotes four former U.S. intelligence officials saying that Bush was involved with the CIA prior to the Bay of Pigs:
Robert T. Crowley and William Corson of the CIA:
Bush was officially considered a CIA business asset, according to Crowley and Corson. "George's insecurities were clay to someone like Dulles", William Corson said. To recruit young George Bush, Robert Crowley explained, Dulles convinced him that "he could contribute to his country as well as get help from the CIA for his overseas business activities." [Bush] was, according to Corson, "perfect at talent spotting and looking at potential recruits for the CIA. You have to remember, we had real fears of Soviet activity in Mexico in the 1950s. Bush was one of many businessmen that would be reimbursed for hiring someone the CIA was interested in, or simply carrying a message."
John Sherwood of the CIA:
Bush was at first a tiny part of OPERATION MONGOOSE, the CIA's code name for their anti-Castro operations. According to the late John Sherwood, "Bush was like hundreds of other businessmen who provided the nuts-and-bolts assistance such operations require... What they mainly helped us with was to give us a place to park people that was discreet."
An anonymous official connected to "Operation Mongoose":
George Bush would be given a list of names of Cuban oil workers we would want placed in jobs... The oil platforms he dealt in were perfect for training the Cubans in raids on their homeland.
John Loftus, in his book Secret War quotes former U.S. intelligence officials reporting the same story:
The Zapata-Permargo deal caught the eye of Allan Dulles, who the "old spies" report was the man who recruited Bush's oil company as a part time purchasing front for the CIA. Zapata provided commercial supplies for one of Dulles' most notorious operations: the Bay of Pigs Invasion. – Chapter 16, p. 368
In 1960, Fabian Escalante was in the Department of State Security (G-2) in Cuba. At the time of the Bay of Pigs Invasion, Escalante was head of a counter-intelligence unit, and was part of a team investigating a CIA operation called Sentinels of Liberty, an attempt to recruit Cubans willing to work against Castro. His information about Bush comes from a counterintelligence operation against Tracy Barnes of the CIA:
Tracy Barnes functioned as head of the Cuban Task Force. He called a meeting on January 18, 1960, in his office in Quarters Eyes, near the Lincoln Memorial in Washington, which the navy had lent while new buildings were being constructed in Langley. Those who gathered there included the eccentric Howard Hunt, future head of the Watergate team and a writer of crime novels; the egocentric Frank Bender, a friend of Trujillo; Jack Esterline, who had come straight from Venezuela where he directed a CIA group; psychological warfare expert David A. Phillips, and others. The team responsible for the plans to overthrow the government of Jacobo Arbenz in Guatemala in 1954 was reconstituted, and in the minds of all its members this would be a rerun of the same plan. Barnes talked at length of the goals to be achieved. He explained that Vice-President Richard Nixon was the Cuban "case officer", and had assembled an important group of businessmen headed by George Bush [Snr.] and Jack Crichton, both Texas oilmen, to gather the necessary funds for [Operation 40]. Nixon was a protege of Bush's father [Prescott], who in 1946 had supported Nixon's bid for congress. In fact, [Prescott] Bush was the campaign strategist who brought Eisenhower and Nixon to the presidency of the United States. With such patrons, Barnes was certain that failure was impossible.
In early November 1960, the CIA agreed to use US contractors for the maritime component of the operation. The CIA codename for the Bay of Pigs Invasion of April 1961 was "Operation Zapata". Through his work with Zapata Off-Shore, Bush is alleged to have come into contact with Felix Rodriguez, Barry Seal, Porter Goss, and E. Howard Hunt, around the time of the Bay of Pigs operation.
CIA liaison officer Col. L. (Leroy) Fletcher Prouty alleges that Zapata Off-Shore provided or was used as cover for two of the smaller ships (LCIs) used in the Bay of Pigs invasion: the Barbara J and Houston. Prouty claims he delivered two ships to an inactive Naval Base near Elizabeth City, North Carolina, for a CIA contact and he suspected very strongly that George Bush must have been involved:
They asked me to see if we could find – purchase – a couple of transport ships. We got some people that were in that business, and they went along the coast and they found two old ships that we purchased and sent down to Elizabeth City and began to load with an awful lot of trucks that the Army was sending down there. We deck-loaded the trucks, and got all of their supplies on board. Everything that they needed was on two ships. It was rather interesting to note, looking back these days, that one of the ships was called the Houston, and the other ship was called the Barbara J. Colonel Hawkins had renamed the program as we selected a name for the Bay of Pigs operation. The code name was "Zapata." I was thinking a few months ago of what a coincidence that is. When Mr. Bush graduated from Yale, back there in the days when I was a professor at Yale, he formed an oil company, called "Zapata", with a man, Lieddke, who later on became president of Pennzoil. But the company that Lieddke and Mr. Bush formed was the Zapata Oil Company. Mr. Bush's wife's name is Barbara J. And Mr. Bush claims as his hometown Houston, Texas. Now the triple coincidence there is strange; but I think it's interesting. I know nothing about its meaning. But these invasion ships were the Barbara J and the Houston, and the program was "Zapata." George Bush must have been somewhere around.
(Prouty is incorrect, Barbara Bush's full name is Barbara Pierce Welch Bush. Although Barbara Bush does not have a "J" in her name, the ship which George Bush served on during WWII while he was flying airplanes which he named "Barbara," was the U.S.S. San Jacinto. So the Barbara J might very well be the Barbara J(acinto))
John Loftus writes: "Prouty's credibility, however has been widely attacked because of his consultancy to Oliver Stone's film JFK," but notes on page 598 that: "While his credibility has suffered greatly because of his consultancy to Oliver Stone's film JFK, his recollections about the CIA supply mission have been confirmed by other sources."
A CIA memorandum states that the freighter ships were leased, not purchased, by the Garcia Line Corporation that had offices in Havana and New York City. The owners were Alfredo Garcia and his five sons. The CIA was using the Rio Escondido for "exfiltrating anti-Castro leaders......prior to 1961 BOP planning." It had brought out Nino Diaz, and Manolo Ray. Its captain Gus Tirado was well known to the CIA. Eduardo Garcia met with two CIA agents in NYC and D.C. to arrange the use of the Garcia ships for the invasion. The alleged price was $600.00 per day per ship plus fuel, food and personnel. Eduardo selected and hired 30 men who were "executioners for Batista" Miro Cardona of the Frente, and the CIA did not like the choice of men hired to protect the Garcia ships. "Nobody questioned that Eduardo was coming along with the expedition. "I'm going to be in charge of my ships", he said.
Memorandum From the Chief of WH/4/PM, Central Intelligence Agency (Hawkins) to the Chief of WH/4 of the Directorate for Plans (Esterline):
The Barbara J (LCI), now enroute to the United States from Puerto Rico, requires repairs which may take up to two weeks for completion. The sister ship, the Blagar, is outfitting in Miami, and its crew is being assembled. It is expected that both vessels will be fully operational by mid-January at the latest. In view of the difficulty and delay encountered in purchasing, outfitting and readying for sea the two LCI's, the decision has been reached to purchase no more major vessels, but to charter them instead. The motor ship, Rio Escondido (converted LCT) will be chartered this week and one additional steam ship, somewhat larger, will be chartered early in February. Both ships belong to a Panamanian Corporation controlled by the Garcia family of Cuba, who are actively cooperating with this Project. These two ships will provide sufficient lift for troops and supplies in the invasion operation.
The Bay of Pigs operation was directed out of the "Miami Station" (code-name JM/WAVE), that was the CIA's largest station worldwide. It housed 200 agents who handled approximately 2,000 Cubans. Robert Reynolds was the CIA's Miami station chief from September 1960 to October 1961. He was replaced by career-CIA officer Theodore Shackley, who oversaw Operation Mongoose, Operation 40 (including Porter Goss, Felix Rodriguez, Barry Seal), and others. In 1976, when Bush became CIA Director, he appointed Ted Shackley as Deputy Director of Covert Operations. In 1981, when Bush became Vice President, he appointed Donald Gregg as his National Security Advisor.
Kevin Phillips discusses George Bush's "highly likely" peripheral role in the Bay of Pigs events. He points to the leadership role of Bush's fellow Skull and Bones alumni in organizing the operation. He notes an additional personal factor for Bush: the Walker side of the family (who initially funded Zapata Corporation) had apparently lost a small fortune when Fidel Castro nationalized their West Indies Sugar Co. Edwin Pauley was "known for CIA connections", according to Phillips; it was Pauley who put Pemargo's Diaz and Bush together.
Phillips and others have detailed subsequent involvement by Zapata associates in the Watergate affair. George Bush, as Richard Nixon's ambassador to the United Nations, allegedly urged his former Zapata partner Bill Liedtke to launder $100,000 to the White House plumbers. After Nixon's 1972 re-election, he appointed Bush as Chairman of the Republican Party National Committee. When the laundering was exposed, those involved included several CIA officials: E. Howard Hunt, Frank Sturgis, Eugenio Martínez, Virgilio González, and Bernard Barker. A discussion of the laundering appears on the Nixon tapes for June 23, 1973.
Michael Maholy alleges that Zapata Off-Shore was used as part of a CIA drug-smuggling ring to pay for arming Nicaraguan Contras in 1986–1988, including Rodriguez, Eugene Hasenfus and others. Mahony claims Zapata's oil rigs were used as staging bases for drug shipments, allegedly named "Operation Whale Watch." Mahony allegedly worked for Naval Intelligence, US State Department and CIA for two decades.
Zapata, under Robert Gow's direction, sought to acquire a controlling interest in the United Fruit Company in 1969, but was outbid by AMK Corp. Robert's father, Ralph Gow, was on United Fruit's board of directors.
Gow apparently left Zapata in 1970. He took with him from Zapata Peter C. Knudtzon. Ties to the Bush family continued. In 1971, both Jeb Bush and George W. Bush worked for Gow's new company, Stratford of Texas (also known as Stratford of Houston). Stratford imported tropical plants. According to Knudtzon, George W. Bush reportedly flew for Stratford to Florida and Guatemala. Stratford evidently had ties to a large commercial plantation in La Democracia, Huehuetenango, Guatemala.
In the 1970s, under chairman and CEO William Flynn, Zapata expanded its business to include subsidiaries in dredging, construction, coal mining, copper mining and fishing.
By the late 1970s, saddled with weak operations, high debt and low return on investment, the company again began undergoing changes in management and direction. Led by John Mackin, who succeeded William Flynn, the company began selling off some of those businesses and refocused on offshore oil and gas exploration and production.
In 1982, chief operating officer Ronald Lassiter assumed the role of CEO, and presided over a decade of loss-making brought on by the collapse of oil prices. In 1982, Zapata Off-shore became Zapata Corporation. Its stock performed poorly. By 1986, Zapata was one of the bad loans that shook the foundations of San Francisco-based Bank of America, with a debt of more than $500 million and a fiscal year loss of $250 million. The company announced several restructurings during those years and managed to stave off bankruptcy, but continued to incur major losses. In 1990 the oil drilling company proposed selling its entire fleet of offshore drilling rigs to focus solely on fishing. The company had not had a profitable quarter in more than five years.
In 1990, Zapata Offshore sold 12 of its drilling rigs to Arethusa Offshore, which a few years later merged with Diamond Offshore. Still struggling with debt by 1993, Zapata signed a deal with Norex America to raise more than $100 million through a loan and stock sale. But financier Malcolm Glazer, owner of the Tampa Bay Buccaneers NFL franchise and at the time owner of 40 percent of Zapata, did not want his holdings diluted and filed a lawsuit to block the deal.
By 1994, the company had come under Glazer's control, after a proxy fight. Glazer became chairman of Zapata, replacing Ronald Lassiter, and in 1995 Avram Glazer was named CEO and president of Zapata. De facto headquarters moved from Houston to Rochester, New York. It no longer engaged in exploration, but owned several natural gas service companies. It also produced protein products from the menhaden fish. In subsequent years Zapata sold its energy-related businesses and focused on marine protein.
Between 1998 and 2000, Zapata tried to position itself as an internet media company under the "zap.com" name. In July 1998, Zapata announced its plans to acquire several web sites, including ChatPlanet, TravelPage and DailyStocks.com. The company's stock boomed and crashed along with other dot-coms, and in 2001 the company conducted a 1 for 10 reverse stock split. The venture was cited by many investment journalists as an example of a company jumping on the internet bandwagon without any relevant experience. This period is probably best remembered for Zapata's unsolicited (and unsuccessful) takeover bid of the Excite internet portal.
During this period, Zapata also built up a controlling stake in Safety Components International, a manufacturer of air bag fabrics and cushions.
On December 2, 2005, Zapata Corporation Chairman, Avram ("Avi") Glazer, announced the sale of 4,162,394 shares, 77.3%, of Safety Components International to Wilbur L. Ross, Jr. for $51.2 million. The company sold its remaining stock in Omega Proteine on December 1, 2006, leaving it with no active subsidiary. The Glazer family sold its controlling stock of the Zapata Corporation to Philip Falcone’s Harbinger Capital in 2009, and the company’s name was charged to Harbinger Group Inc. with the ticker symbol HRG on the NYSE. In 2010–2011, Harbinger Capital Partners LLC transferred its 54.4% interest in Spectrum Brands to Harbinger Group Inc. giving the company controlling interest in that company. Also in 2011 Harbinger Group Inc. acquired the insurance company Old Mutual U.S. Life Holdings, Inc.