Bechtel Corp., a giant international construction company based in California, agreed to settlement of a major federal antitrust suit yesterday by vowing not to participate in the Arab League's boycott of companies doing business with Israel.
In a consent decree filed at U.S. District Court in San Francisco, where Bechtel has its headquarters, the heavy construction firm agreed not to enforce any boycott of a person or company blacklisted by certain Mideast countries.
By signing a proposed consent agreement with the Justice Department's antitrust division, Bechtel neither admitted nor denied that it had violated U.S law in the past, as alleged in a controversial lawsuit filed one year ago. The State Department had warmed Justice about foreign policy consequences of such a lawsuit.
Yesterday's settlement represented a change from Bechtel's previous position that it intended a full court defense against the allegations, however, Bechtel had said last year that it violated no laws and planned a "vigorous" defense.
A spokesman for the Anti-Defamation League of B'nai B'rith, a Jewish organization that submitted documents to the government which alleged Bechtel's complicity in the Arab boycott, said last night that "cursory examination" of the proposed settlement "indicates a significant victory has been achieved against Arab boycott operations in the United States."
Arnold Forster, general counsel of the Anti-Defamation League, said the consent order "does indeed seem to prohibit Bechtel from engaging in activities which precipitated" his organization's initial communication to the Justice Department in mid-1975.
A statement by Bechtel said its proposed consent accord would end the civil antitrust suit and "clarify procedures" for work in the Middle East.
While its initial reaction had been one of rejecting any such agreement, Bechtel said, the agreement "is the foundation of a settlement which is acceptable to and in the interests of all parties." At the same time, Bechtel stated, "we violated no laws and have not discriminated."
The Justice Department had accused Bechtel, one of the largest private companies in the United States, with violating the Sherman Act by taking part in a "conspiracy" to boycott persons and companies by refusing to deal, and requiring others to refuse to deal, with American-based suppliers of goods and services that were blacklisted by Arab League nations.
Yesterday, as part of the consent agreement, the Justice Department spelled out its allegations in greater detail. Specificially, the antitrust division alleged that Bechtel had implemented the boycott of Israel in this country "in restraint of U.S. commerce."
Such alleged actions cannot be excused on the ground that it was directed by a foreign state, the Justice Department said.
Beginning as early as 1971 and continuing at least through last January, the government alleged, Bechtel signed contracts requiring that company to blacklist "certain U.S. persons with whom they might otherwise deal in the procurement of subcontractor services as to major construction projects."
The Justice Department said at trial it would have alleged that Bechtel actually "effectuated these contracts to the detriment of certain blacklisted potential U.S. subcontractors," and that Bechtel signed agreements with nonblacklisted subcontractors requiring them "to refuse to deal with U.S. blacklisted persons . . ."
"The government was prepared to show further, that (Bechtel's) actions implementing the boycott had a substantial and direct effect on U.S. commerce" because certain persons or firms were denied the opportunity to sell goods and services and because firms desiring to become Bechtel subcontractors "were restrained from freely doing business in or with Israel for fear of being blacklisted themselves."
In its consent agreement, Bechtel said it would not perform or enforce any provision providing for the boycott of a U.S. person or firm; would not require any other person or firm to boycott any U.S. blacklisted person; would not sign any agreement within the U.S. which provides for a boycott; and would not exclude from lists of possible suppliers any U.S. blacklisted firm.
At the same time, the government and Bechtel agreed to a list of five specific forms of conduct that are not prohibited despite the general thrust of the accord.
For example, Bechtel could continue to sign contracts with Middle East nations stating that they will be interpreted under laws of the country involved. Provided that implementation of such an agreement does not violate terms of the Bechtel consent order with the Justice Department, the government said it would continue to permit such contracts so long as they are negotiated and signed outside of this country.
This would appear to solve a dilemma faced by such multinational firms as Bechtel, that they might lost billions of dollars in business by not signing contracts normally required by Arab countries. Bechtel would be permitted to seek subcontracts with overseas companies only from nonblacklisted firms, but if it seeks a bid from even on U.S. firm it must not exclude companies on a blacklist, for example.
Forster, of the Anti-Defamation League, said he would be studying the list of exemptions and may file comments before the proposed consent order is final. Comments from the public must be filed within 60 days after which the federal court will make a final decision on the proposal.
Bechtel, whose worldwide speciality is supervision of giant construction contracts, never publishes financial information but its current volume of ongoing business has been estimated as high as $40 billion. It may be the largest privately-owned company in the country.
According to Engineering News-Record, which estimates contract volume at the 400 largest U.S. construction companies, Bechtel's 1975 new business exceeded $3 billion. While that figure was smaller than two other firms for 1975, Bechtel has topped the annual list more often than any other company and its backlog of business is thought to exceed the others.
Much of Bechtel's business in recent years has come from overseas. For example, Bechtel last year signed a contract with Saudi Arabia for construction of an entirely new seaport city at Jubail on the Persian Gulf - a $20 billion first phase of a projected $144 billion Saudi economic development program for 1977-1982.
Bechtel will build petrochemical plants, refineries, steel mill, water and sewer systems,transportation system, harbor complex, telecommunications, manpower training center and a complete residential and business community in one of the largest projects ever started.
Bechtel started in 1898 as a small western U.S. railroad construction firm and has since headed engineering and construction projects in more than 100 nations. The firm has played a major role in building Hoover Dam, the San Francisco-Oakland Bay Bridge, the trans-Abrabian pipeline, the trans-Alaska pipeline, the largest nuclear power plant in the country, and Washington's Metro subway system.