Moammar Gadhafi's aides in 2009 demanded U.S. firms make huge payments to Tripoli to help foot its $1.5-billion settlement for Lockerbie bombing victims or risk losing lucrative contracts in Libya , The New York Times reported Thursday.

Libyan officials warned executives that if the companies -- many of them global energy giants -- did not comply, there would be "serious consequences" for their oil leases, according to a State Department report on the meeting cited by the newspaper.

The extraordinary request by the Gadhafi regime and the Times report highlight Libya's culture of corruption and political patronage that has swelled since 2004, when the United States re-opened trade relations with Tripoli and multinationals scrambled to exploit Libya's vast oil reserves.

Gadhafi and sons manipulated U.S. firms eager to operate in the North African nation, reportedly amassing a multi-billion-dollar stash that has helped the embattled regime stay in power, even as Western airstrikes pound Libyan forces and rebels mount a challenge to Kadhafi's four-decade rule.

"
Libya is a kleptocracy in which the regime -- either the Gadhafi family itself or its close political allies -- has a direct stake in anything worth buying, selling or owning," one State Department cable read.

Business interest in
Libya surged in 2008 when Tripoli reached a settlement over the country's role in the 1988 Pan Am bombing over Lockerbie , Scotland .

The Times said at least a dozen major
U.S. firms sought to gain a foothold in Libya , including Boeing, Raytheon, ConocoPhilips, Occidental, Caterpillar and Halliburton.

Many of the firms balked at paying
Libya 's terrorism settlement, but a February 2009 State Department cable said that when the regime made its demand, executives suggested "smaller operators and service companies might relent and pay."

Several industry executives and a person close to the settlement, all of whom declined to be identified, said the payments went through, but they declined to name the firms, the Times said.

Some major companies struck expensive deals with the government. In 2008, U.S.-based Occidental Petroleum shelled out a $1.0 billion "signing bonus" to Libya as part of a 30-year deal, while Canadian oil giant Petro-Canada made a similar payment in 2007, the paper said, citing cables and company officials.

Caterpiller also became ensnared in
Libya 's strong-arm tactics.

It was on the verge of signing an equipment deal in 2009 when
Libya demanded Caterpillar partner with a firm controlled by the Gadhafis. The machine maker resisted, and was blocked from the work, the paper said, citing the State Department.

Juan Zarate, a former top White House official in president George W. Bush's administration, said Washington made "a deal with the devil" when it resumed business with Libya in 2004.

"The hope was that with normalization, Gadhafi would serve less as the mad dog of the
Middle East and more as a partner," he told the Times.

"But I don't think this is the way anyone would have wanted it to work out."