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In 1975 a Senate subcommittee investigating foreign payments by American corporations looked into Khashoggi's dealings. Northrop said it had given him $450,000 in bribes for Saudi generals. Khashoggi denied the allegations that he had asked for bribe money, but the accusations did not endear him to the Saudi ruling family. In 1976 and '77 the Securities and Exchange Commission attempted several times to subpoena Khashoggi as part of its investigation into arms companies. Khashoggi stayed away from the U.S. for nearly two years, but later came back to give a voluntary deposition.
By the mid-1980s, the era of cash-and-carry megadeals had wound down as oil prices declined and the oil sheiks became more sophisticated about arms transactions. By then they had reviewed thousands of arms proposals themselves and had sent their sons off to the U.S. to earn M.B.A.s. Khashoggi was no longer essential.
As a businessman and broker, Khashoggi has as a trademark the exquisite and exotic women who seem to hover around him. He has often been accused of hiring expensive call girls to seduce the men he is attempting to do business with. He amiably confesses to paying for escorts to liven up business functions. The women, he suggests, sweeten the deal. "They lend beauty and fragrance to the surroundings," he says, while sitting on the terrace of his Marbella house overlooking Gibraltar. "They are also intelligent hostesses. I challenge anyone to come forward and prove that I ever told him the girls are available for sex," he says with a smile and a wink.
Such women served Khashoggi's purposes in other ways. In the 1970s Khashoggi spent much time and money recruiting the "escorts" hired by the Shah, in order to get information about the Iranian's military plans. "The Shah was timid with women," Khashoggi says, "and liked to impress them by telling them exciting secrets." Khashoggi himself coached the women on how to guide the conversation to areas of particular interest. "They always came back with valuable intelligence," he says with a smile.
As Khashoggi began to spread his wealth into other investments -- banks, fledgling high-tech companies, farms and ranches -- his attorney Morton MacLeod tried to create a corporate organization for his enterprises. It did not work. "We were thinking of corporate organizational structures, operating capital and bottom-line earnings," says MacLeod. "He's thinking more in % terms of people, relationships, alliances." Khashoggi is not an administrator. Instincts guide him; details do not concern him, and he leaves them to his aides.
Some of the deals went bad. One of his first failures was a planned $600 million tourist resort that was shot down by the Egyptian legislature because of concern about damage to the nearby pyramids. Sudan's President Numeiry invited Khashoggi to become a virtual economic czar in his country. He set up a joint venture with the government to exploit oil resources. When Numeiry was deposed in a coup in April 1985, the new government accused Khashoggi of having interfered in the country's political and economic affairs. He is now unwelcome there.