ADMINISTRATION'S FEEBLE RESPONSE TO BRIBERY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00957A000100100026-1
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 6
• Document Creation Date: December 16, 2016
• Document Release Date: July 21, 2005
• Sequence Number: 26
• Publication Date: August 5, 1976
• Content Type: OPEN

S 14880
Approved Fzra6engsiMpTiaittDPRO9pZA
thorized by Congress and proclaimed by
the President.
The Council, with members represent-
ing cornorations and labor unions with
derrionstrated hitere_st in the employment
of handicapPedpersons, will-conduct in-
formational and educational activities on
behalf of the ,Conference.
The Ceuncil will participate in deliber-
ationS of the Conference and 'in the
drafting of findings and recommenda-
tions to be submitted to the President
and COngress. _
Special attention will be given to con-
tinued industry and labor efforts to sat-
isfy requirements of the Rehabilitation
Act of 1973 which mandate affirmative
action in the hiring of handicapped
people.
We will recall that _Public j,aw 93-516,
Rehabilitation Act Amendments of 1974,
authorized the White House Conference
on Handicapped inclivichials "to develop
-recommendations and stimulate a Na-
tional assessment of problems and solu-
tions to such problems facing individuals
with hanclicaps."
On behalf of the members' of the Sub-
committee on the Handicapped which I
am privileged to chair, I express our ap-
preciation to the Council and its leaders.
The White House Conference will derive
the benefits from the involvement and
expertise of industry and labor.
Most Americans and especially those
who are handicapped, the equal opportu-
nity begins with employment. The for-
mation of this Council is an expression
of the continuing effort by IVIr. Opel, Mr.
Meany, and industry and labor to assist
in providing that opportunity to handi-
capped Americans.
THE NEED FOR A SURFACE -
EFFECT SHIP,
Mr. TAFT. Mr. President, I would like
to bring to the attention of the member-
ship an article from Business Week-mag-
azine, "A Warship That Flies Over
Water." The article describes the suc-
cessful progress of the surface effect ship
program. The SES promises to be an ef-
fective type of surface ship for combat
against modern, nuclear-powered sub-
inarines?unlike current surface ships.
The SES program is moving forward
well, and, as this article notes, we should
take delivery of our first oceangoing
SES in 1083.
Despite the success thus far of the
SES program, I do have some concern
that planning may not be going forward
to equip the 3,000ton SES with a full
and appropriate suite of sensors and
weapons. A ship Is only as effective as its
senscirs and weapons, and even the first
ship of the claSs should have a full weap-
ons and sensor suite.
Furthermore, the weapons, and most
Importantly, the sensor systems, partic-
ularly those for antisubmarine warfare,
should be appropriate to the specific
qualities of the ship. I hope adequate
planning will be done along these lines,
and intend to keep careful watch to
see that this is done.
Mr. President, ask unanimous con-
sent that the article, "A Warship That
Flies Over Water, be printed in the
RECORD at this point,
There being no ibiection, the article
was ordered to be Printed in the RECORD,
as follows:
A WARSHIP THAT FLIES OVER W ATER
"It was an exciting inoment when we broke
100 mph," says Navy Secretary J. William
Middendorf II. "The ship's speedometer
wasn't built to recorc: that much speed, and
it broke. At that rnoinent I felt I was riding
the wave of the future.
Middendorf was de' eribing the high point
of his ride in the Gilf of Mexico lest week
aboard the Navy's newest speed menhant,
100-ton prototype, we se-skimming Snip that
moved on a self-genesated air cushion up to
103 mph?faster the n any ship has ever
traveled before. Testi of two such vessels,
which the Navy callia surface-effect ships
(SES), have persuaded the Defense Dept., to
let the Navy scale the design up to a 3,000-
ton, destroyer-size salp that could be the
forerunner of a fleet, A fleet of such ships,
says Middendorf could be an almost, perfect
antisubmarine weapon and thus revolution-
ize naval warfare.
Until this year the chances of suct a fleet
seemed remote. The two 100-ton test ships
had been built for the Navy back in 1972 by
Aerojet-General Corp and Bell Aerospace Co.,
a division of Textron Inc. But both were
plagued by stability at id propulsion problems.
In 1974 Aerojet-Gencisal dropped out of the
program, and the Nat V was forced to find an-
other contractor, Rehr Industries Inc., to
take over medificatian and testing of the
Aerojet ship. Bel) e'isitinueel work on the,
other test vessel.
CURING 'ELIE BUGS
A major goal in thd modification program
was to improve the rtrangth and resiliency
of the seals, or "skirts," that contain an
SES's air cushion, Unlike conventicnal air-
cushion vehicles, whirl) lift their skirts above
the water or ground, an SES has rigid, wall-
like extensions_that protrude into the water
on both sides of the hull and stay submerged
even when the ship li; "flying." These solid
walls add to the era rt'a stability, but they
put great stress on the flexible seals fore and
aft, which tended -I a crack or tear. The
designers solved the problem by turning to a
stronger seal mat( cial?a tightly-woven
fabric of nylon or Ke,.lar coated with a tough
rubber compound. _
In recent months g iigineers have overcome
other problems, too, They redesigned the
water-intake system for the ships' gas-
turbine waterjet prop iilsion system. And they
engineered a system s-f sidewall vents to ad-
just air-cushion presenres so the vessels can
move smoothly and safely at high speeds in
rough seas. "Until we learned how to relieve
the air-cushion press tires," says William D.
O'Neil III, a Defense Dept. ship research spe-
cialist, "it was like cly icing fast over railroad
ties."
- BIDDING COMES NEXT
Invitations are now out for bids to build
the 3,000-ton SES, arid Congress is expected
to appropriate some its million for the ship
in the next fiscal year. The Navy will choose
a contractor shortly thereafter. "We will take
delivery of the first Stibi about 1983," Midden-
dorf predicts. After that, he says, 'we will
deploy as many as poseible,"
_ In the long run, there could be several
contractors building EU rface-effect ships, but
the early choice seen 1,1 to narrow clown to
Bell arid Rohr becauss. of their close :involve-
ment with the testily- and evaluation phase.
Bell President Willem G. Gisel expresses
confidence on getting the inside track for the
first big MS. "Over he past 17 years," he
notes, "Bell has clesizned and built 16 air-
cushion surface-effect ships. We have a
+67)?z
:ylust 5, 1976 .
unique capability." But Rohr is also making
a hard pitch.
"The Navy program is at the top of our list
of new business opportunities," says Rohr
Chairman Fred W. Garry. "We see it as the
first step in the development of a major new
industry, one that would design and build
such ships not only for the military but for
commercial applications as *ell."
To save time on the 3,000-ton ship, existing
hardware Will be used wherever possible. Four
gas turbines built by the Pratt & Whitney
Aircraft Div. of United Technologies Corp.
have already been chosen for the waterjet
propulsion system, and two General Electric
Co. gas turbines will run the huge fans to
generate the ship's stir cushion.
COMBAT ROLE
Naval officers familiar with the SES pro-
gram do not feel Secretary Middendorf is
exaggerating when he talks of revolutionizing
naval warfare. A 3,000-ton SES, which would
be much faster than today's version, could
cross the Atlantic in a single day, they say,
It could outrun and corner enemy sub-
marines. And, armed with antiaircraft and
antiship missiles and carrying vertical-take-
off aircraft, it could be an ideal vessel for
-convoy protection.
Rear Admiral Edward W. Carter III, a dep-
uty -commander of the Naval Sea Systems
Command, is most enthusiastic about the
antisubmarine potential. "Surface-effect
ships will be able to respond quickly to sub-
marine contacts over long distances, and
they will have the endurance, the sensors,
and the weapons to both localize and destroy
stibmarines," he says. In addition, an SES has
capability for what the Navy calls "sprint
and drift tactics." It could bob quietly in the
water for long periods, with towed arrays
of hydrophones listening for enemy sub-
marines. Its engines can be started instantly,
and it will' have the speed not only to outrun
any sub but also to dodge torpedoes.
No one expects surface-effect ships to sup-
plant ships with conventional hulls, espe-
cially aircraft carriers. But Middendorf de-
clares: "We entered this century with ships
built in 1897 that could do 35 knots. If we
do not look to the future wtih surface-effect
ships, we will end the century with ships
still doing 35 knots."
ADMINISTRATION'S FEEBL
RESPONSE TO BRIBERY
. Mr. resident, the
administration has now delivered itself
of a tardy and tepid proposal intended
to deter improper payments overseas by
U.S. business. The administration bill
would require U.S. companies to report
to the Secretary of Commerce payments
made to foreign officials intended to
commercially benefit the payor. The re-
port would be kept secret for a year, or
indefinitely if the Secretary of State
unilaterally decided secrecy would be in
the national interest.
This is the same Secretary of State,
incidentally, who intervened in the
SEC's case against Lockheed to urge the
judge to seal the documents. This is the
saIne Secretary of State who has been
more concerned to protect corrupt for-
eign regimes from embarrassment than
to deter bribery. And, of course, it is the
same Department of Commerce which
has a similar reporting program aimed
at deterring cooperation with the Arab
-boycott, that has largely failed to do so,
and has refused to supply the reported
Information to Congress.
Approved For Release 2005/08/03 : CIA-RDP79-00957A000100100026-1
August 5
1976
6pproved For Release 2005/08/03 ? CIA-RDP79-00957A000100100026-1
CONGRESS ION AL RECORD ? SENATE
event employers froai
tU. rim-
against any employee who is a
student and refuses to Join a
dues or fee; to a labor or-
a condition of hIE con-
exit. In other words, the
Ill would pr a genuine frx.dorii
of choice In lab. relations matters for
high school, tee school, and col-
lege students who to earn tuition
spevaling money rough part -t me or
summer jobs to see u-ri thrrugi the
al:Ode/14c year.
Ur. President, at the e of educ-
tion I failed to state th. this legisla-
tion wOnld not be legally r uired in the
20 States having right -to work laws
Which are exempted under se on 14(b)
of the National Labor Reit) ie. Act,
However, soon after my bill w offered,
I received a letter from i yo a. ndian
boy, a high school student rest in
Parker. Ark., complaining of ent
he had received at the hands o t
representatives when he tried to ob In
part-time employment.
Mr. President. I ask unanitnota con
sent that the letter from Randolph
Fisher be printed in the Excoita at this
Point, together with my reply,
There being no objection, the mate-
rial was ordered to be printed ir: the
RacORD, as follows:
Pmereent, ASV..,
June lt, 1976.
Vasa flans: I am a sixteen year ced Ladum
boy living =Parker. Arizona, on the (Adore-
d* River. I am now working a pastime job
with Telles Piteldng shed, end I wet weirder-
nee weather you had to join a Ution in a
right to work State, because the other day we
bad a strike here and after tele strike a Union
nn castle around and said I bed to join a
because the Union bad a coot ear t with
WM company, X asked him how much it
would mat to join the Union he said tea 00.
And he said If X didn't jcin the Union I
would lose ray job.
AVIDULPI3 FL5ft12.
(Age 16.)
X want 13 a job so I cm go to
school, and make money ;tont cere about
the 'Union.
Jeer 21.
Reerstotrn r/ISIren,
ker. Arta.
DEM Rimer: Thank you for wribng to ins
*Went your recent problems with the union
at Tents Packing.
As you know, Arizona Is a 'right-to work"
Meas. It bass law that protects worker-a like
reinter from having to join a union or pay
Imam (Weser fees as a corkeition of employ-
tient.
Therefore, it Is illegal for any onion official
AG force you to my membership dues in order
to bold a part-time job as Telles Packing
idled or anywhere else. If someone tells you
that you have to pay $63.00 or any ether sum
to work, be is wrong. You should take the
matter to ping employer and Me a formai
complaint against the tuticrt with the Na-
e Ma Labor 'Relations Board, through the
local ?dice of the Department of Labor what
tite union Is doing is unfair labor practice
and is strictly prohibited by law.
X ant forwarding * copy of this iter to
your eingdoyar 'Who May net be await of the
atitrTa41,4 Eg.zrlattlion. / have h traaucte
anon' to protect students all over the
canntris front d1ecrtni1netIot by miens simi-
lar to the situation you encountered In
Plater. andieseli Is a copy of may I, the
Students' Freedom of Melee Act with my
7
tateniet.t tipen n,tr.ttaieirg It In the
ciena,e. Nor:eft:11y, the Conese will take
orksitire artiori to esserect a)use. by lerbtrr
onions end protect the eraMoymeat rights of
young people and all other Americans also:-
a* %ora LA our free enterprise system.
C LI: xiaci regard:,
3 Iv_ er.:ly.
' Senator
Mr. FANNIN. Mr. Itresident, the situ
,ouon tucountered by this 40-year-old
uldmii student is depuealale bat not un-
,isual. It le anoaniklacmable that the
anion would demand of a lad ivitli mea-
.:er linancia .1 x 6s0u.ra..f. who is trying to
.,atike ends meet an exorbitant payment
lust so that he can hold a part-time Sob.
It is unfortunate that even in a right-
e-worit State like Arizona students are
acing diaeriminated against bY Unions
.41c14.mp1oyurs because thci Sail to goal-
44 Ior Union membership or pay union
_.cese or dues. II is bad enough that work-
..ng :Ancients do not know their rights
,J1C:el" urreat law; it it tragic that they
_ati not afforded the protection of em-
Aoyment rlgts under the law. The pur-
_dose of ray legislation is to insure that
tielwitz---It Mather or not. they live in
lit-to-work States--enjoy the full
OPlY of these riallts so that they can
u job without having to sur-ctunli to
ho laid of union demands or threats en-
ed by this Indian student.
dent, clearly there Is a grow -
Lion of the need for reform
I labor laws including pf-o-
working rttudents -from the
of rcenpulsory 'unionism
rimination by emPioyers
labor. Lana olcaled by the
favorable respones the
of Chou* Act has re-
people. front ordinary
rem employers, and
example of press
ttlfn Of MY
by the
tlie
t on
ta CODseili
)ng
.4 nu
eel ion f
:setnilrorn
.nd from
and or
overwli
citudente'
retired from yo
working citizens,
from the 111:1.
eminent, I call
colleagues the edi
nimotax, Aria.. Sim
"Williamsport. Pa
July 11, 1976. I as
that the complete
torials be printed in the R
There being no obJection, ae
-dere ordered to be printed in Rze
10110Wa.
prom the Plagatair (arm)
July as, tiX7131
Tnrar Is MrIttT 15 Fastemeel
Arizona Sen. Paid J. rennin is the
;al sporsor of a bill which would Amen
National i.a.bor Relations Act and the
-ray Labor Act,
If Penni:1'e bill gots through Congress,
studints etuolloct in a lilgh
eolIege, tea ludnel or tea& achoo would be
csenipted from she requirements Of dacap111-
:,Dry unIOLISta.
toaome ;intuit:4u, aatudent hol,atog down.
a part-tines vacetion Job is req4red to Pal,
sation dues in order to keep that pb.
Yet. in
:oast aastentea, they cannot peralcipato in
%.he so-cal:ad benefits, $SChi Si
'um. sick Pay end wage :n.cremes. Which here
negotiated by the union and for which
?ory dU. are aupposed to be used.
great nasal' StudeoW am working a? they
et enougit money to fluith school. They
ist have to be fataed with an additional
:ssardislaip of paying duel in order to hang on
so that Job.
There Is meat to Tarawa's legislation. Its
chei .ce of Aritining Congressional approve/ in
this election year la probably remote. It rwmft
gain any votes and is certain to alienate :er-
tala facets of organized labor. Without dues,
there are no funds to pay union bosses, and
the only other recourse would be to tap the
eetiaon roads of members.
liasen Grit, July 11, 19761
I) ac PLNALIZZ Yoram WOIULZRS
Seven Republican senators led by Peul
Fannin, of A-Leona, have introdoced a bin to
exeaspt working students from compulsory
union membership Both the National Lsbor
Relations An and the Railway Labor Act re-
quire that area temporary workers who are
fail-time students must join the union which
represents persons in a particular work fcrce.
(leder the law, employers have no chsiee
but to refuse employment to a worker oho
declines to jr-in the union which holds exit:-
sine bargaining rights to all jobs in a work
force. In one case, a IS-year-old student. iii
3crpl1n, aro was forced to pay an Initla.ion
fee to the retail arks union, plus $7 a month
in dues, to nick groceries on Sundays.
St'dents holding temporary jobs receive
little or no benefit front union membersaip.
Normally thee do not qualify for health in-
surance. Iseeelon rights often accrue to a
wonee,r raaly alter its has put in 10 years or
more on elle joo. Sc' exacting dues from a Au-
den': holdine is temporary or part-time job
amCunts to S; tep-olf.
'Fsue rennin bill would apply to students
care:led In or regatered for full-time pro-
grams in secondary, vocational, or higher
education. If enacted, youths would be able
to keep their hard-earned dollars to pay
schrol expenses Instead of contributim
rich and powerful labor organizations.
thlorinnasely, the Fannin bill is not lately
to he passed. Time Senate Committee on Labor
and Public Welfare, which has custody of the
proposal. Is dominated by pro-union Demo-
crat, WttO lass no intention of amending
present Inas in ways not favored by the labor
banns. Job discrimination against students
will continue until the public insists that
this arrong be righted.
JOIIN OPEL, PRESIDENT OF MK
AND GEORGE MEANY, PRESIDENT
OF AFL-CIO, ACCEPT COCHA.:11-
mANiran, or INDUSTRY-LABOR
COUNCIL OF THE WHITE HOESE
CONFERENCE ON HANDICAPPED
INDIVIDUALS
Mr. RANDOLPH. Mr. President /
bring to the attention of our colleagues
the announcement by Dr. Henry Vis-
ceral', Jr., chairman of the National Ad-
visory Council of the White House Con-
ference on Ha.ndimpped Individuals not
John Opel, president of IBM, and George
Meany, president of AFL-CIO have ac-
cegted the cochalrmanslain of Industry-
or Council of the White House Con-
on handicapped Individuals.
a joint statement Council Coclar-r-
m el ar.d Meany said:
tin Americans are a large mina) -
IV in a ntry dedicated to equality of op-
portunity a d the promise of hope for all
itir most-- hiding 35 million handi-
capped liadiald ?the realization of that
begins with loyment. Industry and
lobar, therefore. have crucial interest in
hanateappect in&vidu tical and
hums.niterian grounds.
The Industry-Labor a Li will ,p ro -
vide advice and support for ? Confer-
ence to be held in May of 1977, as au-
Approved For Release 2005/08/03 : CIA-RDP79-00957A000100100026-1
-
August 5, 197#
pproved For 00100026-1 S 13681
.1144his_ statement releasing the admin-
istration ociptitei, President Poid ar-
gued that a disclosure approach would
be eaSier to enforce than the outright
hihition unanimously reconitnended
by'the Senate tanking COnithittee in S.
664._
it is clearr that_ the eYerge ls'Irue, TO
enterCe a cliselasifre'lpfegraftl,-Yon would
' have to show Yhaf,a liaYinent had been
made; that it lhad 'heen.:inade' for a dis-
closable riUrOOPe; that 'it- been
reported; and,' that the fell-lire to report
hact beenrWM1::,,pth-OWilse, companies
co 14:4101X fairflarePOrt-ThillaeS.. -
e apptaaattnied 'hi-S.-2664 is a
lkjujatoreilfitile:offe:TefletlY prohibits
PEOin.ketit- 0.1 defined' as payments
peljroialse'p16----Pay-anYthing Of value' to
a ',foreign ?nubile' inefal- corruptly in-
tend to ififfifeheeTthe placement of
business "TofleMation'Oitiegulationn. of a
-toreignk*ritraiit:
y,On'to the SEC in
the, ? One h corporations; to the
ZOO;Pir,itil6ltir:
Justice Department In the 'case of Other
persons.- Adttial PrOseeffloil- Would, of
:conr-pe, inn:fated ZuStiee De-
partment - in all cases. These are law en--
:f(-,irceinent-agOelep, While the Commerce
Departmentio,prlmarlty-a linairiess pro-
lotion agency. It Is the *rang .a-keriey to
give etiforeement powers.
?
4'vta, alighted fo_reattiii today's ,New
,TOric Ilmas..streng.,editatil 'SUPP-orf for
nv. and_relection Of the adininistra-
the Times notes, the ad-
ministratiOn bill foll:s.13.'9--ri.; of the mean-
irigfui, sanctions essential to stamp out
bribery.
Tlrnes;,alS,atitiOles:ani excellent
"4ttiele",,by Theodore Sorenson in thereni--
' rent is-,* Of :r-Otelgii 4Nr."0: 41:10,,itorTy, "in
-which Ur. Sorenson presents
case for a direct ciithinal prohibi-
tion :of bribery. Those Who -Stilt believe
disclosure ' IS the preferable approach
3;011,14..do well to 'consult `the parenSen'
attlqk
a41g tin.p.z4mo%: corisent that 'both
articles he printed in the tteCoin.
There being. no Objection, the articles
were ordered to be printed In the RE-Coin,
as '
ttfE gi1tit4 or IfFc.93E1517,?
4'rb.e,Iiatnip.14ratiOn'S' Plan to dis-.
.(ceitrage CotphilartO -hribe0'aread short
of 'the:man1tfu1 sanctions " 'essential to
641,14 out these iinproPer-thougli long ea-
_14usitap,se, practices.
The ,bllI submitted to Cep geese this week
rli frimoStAlety on a disclosure require-
: rdenti _Oar,palnients- officials ferelgri ocials-by'
opriapaiiies of business opportu-
tipeneuSthelipOrted to theVederal GOV--
epeCified- Conditions, this
.infersenattciii -mild, then- 161 inacie available
te foreign' inyeetigativel*Iles and, even-
. tTifilli,16
Do act in itself
a a, Stro4',4efertrent -agaisigt Manx types
?ehriPeoper:tiayinents. tut another bill
011w:a - :teat& sixalre,_ chairman
Withfttee."kees-Tisither" to
040- tee .painiefirof Ib1llThgal Mader
?riltefta,tAtesia*,:w-,gh appropria criminal
perialtres. -
-test-
,:t4g. a eileelnalisidhibi IS tinebnYilicing.
fe "WM:0d b d1jTt to-enforce in disclosure increi?.see, and risen In others as secret to foreign candidates or parties are
' ocials "discover the "full Potential of their "rightfillly suspect. Ilut-linifierly-feearded
od sOTn ?pa_yofr- position. Debate ; between businessmen es- 'corporate political contributions, With no
_
fore ii Vithoritiee or serting that 'brag five inthe "real world" quid pro quo, are legel-fn many if not most
buyers ccalld mar age to conceal the pay-
ments, and the (3,vernment would have a
difficult time esteblishing that an unre-
ported payment bad in fact occured. Fur-
ther, to argue that any criminal prohibition
should await Intel nationally accepted rules,
so that all exporti eg nations would have to
operate under the same strictures, Is to put
off effective action to some far, indefinite-
and perhaps unat ednable-future.
Theodore C. Scsensen, whose New York
law practice ineeves advising corporate
clients on just these questions, makes a
strong case for ceininal prohibition in the
current issue of Foreign Affairs quarterly.
Mr. Sorensen argess that many corporate
Officials would act itally welcome such leg-
islation because ,f would make it easier
for them to resist eressures.
As more and mire leading American com-
panies come forwerd these days to give the
Securities and Exc. ange Commiseion details
of improper and en illegal payments over
years past, it is i r) longer possible to look
upon the well pt blicized cases as isolated
transgressions. A large part of world com-
merce seems to rest on the shabby founda-
tion of bribery end routive payoffs; once
such practices get started, it is difficult for
any company to pull back on its own
volition.
For its own pro'ection, the business com-
munity-to say nettling of the broader pub-
lic-needs -the strongest possible Govern-
ment sanctions ) rsinst the corruption of
everyday commer, e
IMPR OPER PAY .V1EJ S ABB OAD : PERSPECTIVLS
_ 5555PROPOSALS
(By Therefore C. Sorensen)
_Like maherhoe 1 and apple pie (zero popu-
lation growth? Stott additives?) , corporate
bribery abroad is not the simple, Safe issue
it Aeems 'it first- blush. Sharp division and
delay have characterized its consideration by
the U.S. Securities and Exchange Commis-
sion, Departmeni of Justice a:ad Internal
Revenue Service, .ed by several Committees
of the U.S. Congress, the Organization for
geonorme, Coope -ation and Development
(OECD), and the international Chamber Of Those foreign governments which since
Commerce. In the Ceilt,ed States, a presiden- time immemdrial have closed their eyes and
tral. Cabinet-level Task Force-and in the held out their hands, but which now de-
United Nations, he committee on Trans- nounce the United States for introducing
national Corporations-have been asked to',corruption to their shores;
untangle the proelem: bet no solution is yet; Those U.S. politicians who professed 1g.-
agreed upon. norance of the illegality of the corporate
The practice of exporters and :.nvestors of- campaign contributions they received (or
.fering special Inducements to host country knew others received) in cash in sealed en-
officials es at leas , as old EIS,MarDo Polo. But velppes behind a barn or men's room door.
in the United 3tatCs a poet-Waterg_ate but who now II-first-Met various- company
cillnate ot 1511114 expbsare for all suspeet executives be prosecuted because they
-practices bonnect-d with government has in- should have known of their subordinates'
tensified both the investigations of these pay- improper activities- abroad;
ments and the oversimplified publicity given Those agencies of the U.S. government
to them. Indeed the seeds of the present which long knew of and even approved of
furor were sown in Watergate. When the barely concealed payoffs by companies en-
Special Prosecutor traced some or the "cover- gaged in favored overseas sales and invest-
up" financing to unreported corporate cane- ments, but which now wring their hands at
-resign contributions, often transmitted the unbelievable shame of it all; and
through foreign slush funds," the SEC initi- Those U.S. and foreign newspaper corn-
ated a major check on all undisclosed pay-, mentators who long winked at free junkets
ments to governeents and politicians, both and passes for newsmen, even a little extra
domestic and foregn, by the publicly owned income doing public relations for the orga-
tortilla-Wee stalaje-1 to its Jurisdiction. nleations they were covering, but who now
As a eesuit, U=I. corporate officials have condemn the ethical standards of the busi-
engaged In the I lost painful rush to public ness community.
"voluntary" Confer sion since China's Cultural Nor have those issuing sweeping condem-
Revolethin. Score-s of 'U.S.-base I. companies nations always noted certain valid distinc-
have beefi investlgated' by one cr more antes lions. Not every payment to a foreign gov-
Of the l7.S." eeseutive branch, legislative ernment employee is a bribe. Nor is every
branch, 'and nee s. meBia-or by their Men -cerPorate political contribution abroad im-
direCtors: A/nay foreign officials of varying proper. Not every foreign consultant or sales
prominence have been forced to resign, deny, agent is corrupt or retained to perform some
or` botle-The gOleg rate for bribery 'has re- improper function.
pcirteefly Tanen 1-i some countries as fear of Political contributions paid in cash or in
("Of course, I'm against bribery, but . .")
and bureaucrats asserting that only they are
without sin ("No payment of any kind or
size for any reason should escape .. . .") have
thus far produced more heat than light.
It is to be hoped that a calmer, more long-
range perspective can soon prevail. Other-
wise, genuinely legitimate business practices
will be inhibited by an atmosphere of fear
and suspicion, generated by sweeping and
hasty reactions, while those truly intent on
corruption will merely wait for the emotional
storm to pass.
Is
Clearly, our understanding of the prob-
lem is not enhanced by the tendency in
some quarters to place all the blame on
those few U.S. corporations which -have re-
ceived the most publicity. Those engaged
in the, sale of arms, aircraft, oil and pharma-
ceuticals-all highly government-oriented
businesses-may have been in the forefront;
but nearly all other kinds of business have
been engaging in these practices as well:
privately held corporations as well as pub-
licly owned; small as well as large; strong
as well as weak; producers of civilian goods
as well as of military hardware; those who
buy or invest as well as those who sell; and,
most importantly, companies which are
based abroad as well as companies based
here in the United States.
Moreover, our country has no monopoly
on the resulting stain. Contrary to common
assertion, nor does the Third World. Bribe
recipients have served in every kind of gov-
ernment on virtually every continent: anti-
U.S. administrations and political parties as
well as pro-U.S.; democracies as well as dic-
tatorships; communist as well as non-com-
munist governments; and rich industrialized
nations as well as poor and' underdeveloped
nations. Nor is the blame confined to gov-
ernments and business-members of the ac-
counting and legal professions have played
a role as well.
The picture has been further distorted by
an outpouring of self-serving, self-righteous
hypocrisy on bath sides. Among the biggest
hypocrites have been the following:
S 13682
Approved FotiNtainAnaniENINP7nwt000100100024 ,6u-1ust
of the United States; and Use new Campaign
Finance Refrain Law, passed in the vet y wake
of Watergate, permitted c.orporate-speesored
political activity In our federal electione. It
if; thus unfair and illogical to attack any and
all participation by U.S. corporations, sir their
subsidieries in the political ciunpaisee of
other countries which aLso permit is iry
Slmilerly, payments to a foreign osneult-
ant, agent, lawyer or marketer, If made in
cash or not fully reported or if wholly out of
proport on to his services, moat likely eerier ve
condemnation. But properly recorded pey-
ments, if an amount appropriate tent er the
circumstances, to a qualified and refire
profeasianal for his performance of legitimate
and necessary services, resin well be perrectly
justifiable. To be sure, such inclividuale may
be making the most of their personal, politi-
cal, business or family ties witn key govern-
ment onlcials?a phenomenon sot unhen3leir
In our own country. But they alio know the
local language, procedures, persomiei, regu-
lations, press and sources of supple:, and
Information. They can provide the visieng
businessman with a local headquarters, eire-
munIcations and a means of scheduling and
coordinating appointments, as well SA valu-
able advice on strategy and ereseinetien.
Local government officials, for pe.-feetly
legitimate reasons including their sense of
tineeeiness in dealing with fereigners may
prefer or insist upon working wnli is com-
patriot they know. The payment of e large
commiseion to an agent Is no snore clear
evidence- of illegality than IS peyment of a
large commission to an American real es ete
agent on the sale of an expensive hone.
Not even all payments made to fon-len
government official's should be Judged alike.
Althouge U.S. statutes and Judicial inierpre-
tations vary, the legal eseence of tweets; is
a payment voluntarily offered for the pur-
pose of inducing a public official to cc or
omit to do something in vedation of hsre levy-
ful dut5, or to exercise his official discretion
in favor of the payor's request for a contract,
concession or privilege on some basis other
than the merits. Many forms of paymet t stow
under attack do not constitute "briniery"
under ties definition.
For eisanaple, a certain amount of gots
? ntech of it undoubtedly justifiet has
greeted the claims by some business execu-
tives that their payments to rcteigit officials
were the result of extortion on the pert of
those ?Calais, not bribery. But the courts do
recognize the distinction between those pay-
ments which are voluntarily offered by some-
one who seeks an unlawful advantage and
those- which are extracted under gc nubs
duress and coercion from an innocent eictirn
seeking only the treatment to which lit is
ISWfUlly entitled. A company which ears
demonstrate that it was truly confronted
with an unmistakable choice betvreee pay-
ing a cc rrupt foreign official, or feeler; its
entire levestment In that country expropri-
ated, is not paying a "bribe." (A recent V.S.
Federal Court of Appeals decision reached a
similar conclusion with respect to a hapless
accounts, nt indicted for having muds pay-
ments to a group of threatening IRS
agents.)
Nor does the above delinitien of bribery
cover these payments, usually emaller, mede
by businessmen In a country where they are
not prnitibited, to facilitate, expedite or ex-
press appreciation for the menial. Stant
performance of ministerial or procederal
duties by a low-ranking government em-
ployee. 'Grease" payments which help per-
suade the bureaucrat or functionary to do
his job and continue the lawful flow of paper
or goods should not be commended; but
neither should they be confused with brib-
ing that Individual not to do his Job.
Finally, there is a distinctioa not tihs.iya
easily determined, between a bribe erre a
relativele small sum of cash or oilier lift
sr tervice offered to an official by way of
co:tenon courterry or Horial amenity, a present
per forward and accepted on the basis of
sir triable personal relations unconnected
wi- 13 the performance of his ditty. Some of
triese payments are ethically questionable
?11)-.1 of doubtful Motivation as well; but
ilvere u a legal difference, however subtle,
? ween the $20 bill you hand your local
potesensan on Christmas Eve and the $ae bill
? hand hint when he stops you for speed-
ink a (inference recognized by a recent New
Fiiipreme Court decision involving a
eriostreas gift of cash from a builder its a
tee buildine inepectesm
is net easy, of couree, to determine
'halt foreign corporate preittcsi cOntribu?
1 :0' , ageres' fees, gifte, "grease" paymente,
end elleeed extortion are in reality nothing
i Ici than indirect or camouflaged bribes or
1. ic einsee -, U.S. federal and state statutes
;fed justifiably prohibit or penalize
other forms of payrnent to public of-
f.; lee as well as bribes; and gray areas of
enespretation will always 'The size,
fore ar,e timing ref the payrneet. the ade-
eue.C) 04 its disclosure, and ocher facts must
ees - on tie conclesion in a doubtful case,
ve thsir there will be countless situations
in 'elect a fan-minded investigator or Judge
'.11 ice 'i-rd-put to determine whether a
put 1 1 C111 0' pa} mere or practice is a legitimate
iir.( oer)v.ksible business aistivin or a means
nenreper influence:
rosier.? I The best lawyer .n a foreign
t..0.1 a is the Loncion-eaucated son of the
ttee see of Gozurtheree. Should he be pre-
ss's esti loan accepting clients who need pu-
les , frosts he Ministry? Should 11, U.S. corpo-
JI. be prevented from retaining him?
tvouni it make any difference If he were a
for seltent or agent instead of a lawyer? The
epriortunitles for abuse here are undeniable
I tr not Inc vitable.
/ rani:pie 2. A U.S. corporation is esisktd by
t ie Prot 'note! Governor to contribute to the
lest Health end Welfare Fund, his favorite
tin ely. Is this the obligation of a public-
ere lesel rompany or an opportunity for co-
1 er; 4raJi?
rinv'e 3. A UE.. corporation, already CIO-
eubetantiel business in a foreign coun-
t-:.' west re to Invest as well In one of its local
tierpuer Tbe Prime Minister is the latter's
? 'pal stoskhol5ler, Would it Make any
tinletclice if tt were another U.S. company
iti elect nosy would be Invelters together?
eeeeepie 4, A US. corporation's valuable
inv,i,tory calmed is Mewed in a remote ware-
hoe se. The nearest police are willing to act as
ro-r-hoor, roards if they are paid by the
cor;,orfitior. fer the.r overtime services? Must
a 2[33 effective and more expensive alterna-
tea be feend
.IL:arrip/o .5 A U S corporation wishes to
form a pent ..enture With is loced firm owned
by . nemeer of the riding family (not un-
usua. Cr rioasidered unethical In small coun-
tries with ensill elites). Bea see Exastriple 1.
E .urnple 6. A U.S. corporation. seeking to
laivis it- plant in en inepoverfebed land, in-
nit lie enpoveriabed Minister of Fboviron-
ceetal infisixe to Si' to the tlnirexi States at
Its expense for a tour of its domestic instalia,-
tior.s. reeenteclly to demonstrate that its
propig,eci p:tail will not pollute the local air
sied water At what point does its- hospitality
bee- lee i-nces,ive; bIld should this expensive
trip ee snore permissible than contributing
Use 3esh iqul.. filen' thereof'
eeniple 7, A U.E. corporatton Is informed
ten the govern:nein permit. for which it was
beeline has already beers keeled to a local
cene,ratrun co unknown ownership which Is
'vinare to sell it to the U.S. bidder at the bid
price If no extra payment Is time involved,
dee the actdirioned step render the trustier-
ton. improper
nee-airier:le nem and eves) angels will def-
ier the en- wens to these and similar ques-
5, 1976
tions. At eln, very least such distinctions
Should peace es less sweeping in our Jude-
!mute and :less confident of our solutions.
let
None of this, however, alters *.he bas -
parameters of iae reel problem:
It is illegal for a U.S, corporation to deduce
as an ordinary business expense on its UI.
Income tax return any bribes, payoffs, Mei -
backs or other improper payments to for-
eign goverement officials, whatever the label
or juteification, or .sny political contribt -
tIons, whether lawfvl or not; for any cor-
poration sebJect to the jurisdiction of tie
US. Securities Acts to fail to include and to
closcsibe accurately all such payments (ar-
atindri.t they. are material to the company's
limeades or materially indicative of its mar -
agement's tntegrity in its various state-
menta and periodic reports to the SEC anci
eharebolders required by those Acts; and nit-
any such corporation to finance these pa3 -
menta through secret slush funds or phony
offshore corporate entitles 'outside the not -
met syedem of financial accountability pre -
scribed by those Acts. Neither bribery of ill
foreign official outside the United States ncr
violation of a foreign law, however, appears
to violets any U.S. less
It Is unethical for a corporation to pee
bribes or kickbacks to foreign officials to ie.-
duce them to violate their duty?a practice
aohversive cf sound government, sound bus?
Deter and sound relations between the tee
no matter how deeply entrenched It may
have become le the host country; a costle,
wasteful interference with the free competi-
tive market system; and a cynical, shables
technique of getting business which usually
rewarde the richest, roost reckless and ruth-
less while passing on the cost to those wh:
can afford it least.
Jr is senbustriesslike for a corporation te
pay bribes and kickbacks, regardless of hoe
routine a practice it rosy appear to be in tht
host country and regardless of competitive
pressures. This conclusion, it should to
acknowledged, Is far front unanimous in tete
business community. (The legend persists
that the Harvard Sliminess School student
who questioned the ethics of this practIcz
was directea by his professor to enroll in th:
Harvard Divinity School.) Nevertheless, 3
large number of U.S. corporations success-
fully operating overseas have constantli
faced end consistently resisted the pressure,:
and temptations to make payments. MOSS
not retesting appear in many cases to hate
been those too lazy to compete In hones:
salesmanship Or too Inefficient to compete
on prise, (panty and service.
Some corporate executives have undoubt-
edly achieved substantial gains in the short
run by these methods; some have obtained
only marginal Miefness; and some will never
know if their payments were necessary or
helpful or even leeched the intended official's
pocket But all who rind thereby established
their emapanies as easy marks for more de-
mands; and blackmail An were immediately
courting troubles If they reported these pay.
meats and mere trouble if they did not. Al:
were exposing their corporations and them
selves to the- possibility of stockholder suite
legal action by the US. government, tie
poessible disclosure of proprietary interline
tion of valise to their competitors as a con-
sequerete, sed retaliation by the host coun-
try ranging from the cancellation of order
te the nationalization of assets. Moreover
Just as a handful of dishonest door-to-does
peddlers can turn an entire town against
home volleitati:n. so the conduct of these
The appeopriate limits of "materiality."
if any, under tie Securities Acts in genera.
and in Ca$213 of Improper foreign payments
in particular are being hotly debated as this
goes to preset arid are beyond the scope of tin
article.
Approved For Release 2005/08/03 : CIA-RDP79-00957A000100100026-1
?Approved For Rele,m2R16/1)$/.03..,:XJA;RIDP79,A9A517f000100100026-1
ugust 5, 1916, CuNciltts N.A.! ? S 13683
tions?at a thee VT-en-the business
rCjntty _linsleheritil and multinational
corperations'in.partietilar Ttto been seeking
to ,Ward'OrcrinreaSoitittlile restrictions and
sie*Aellens-'--maY have da6 a?graeit disservicee
to :all' who ',trade abroad. sarely, of all the
Iscierites- ilearr'61-thia IsSue mentioned
ler,--We ?reateal? or all are Ehose business
O'X eietries ho nade such payrnent,S, whose
coortfns are iov r?it, in- deep
d1fflsiUWbUt'Wholiilist they did it "for the
goad of ?OM' '
feLa that, in far
too Many coilhael "for- far too Many years,
lit!ve 'been an aecepted
41:1-0Ptiatomartesay -cif -doing business with
the gi5Verritne through agents
wheal virthally _every MsitffigThUsineisman
As expected ?6 retlin. rn eitin-offiee Countries,
sUP,,ttaipinerres,'y not`eSSeritial, are widely
tolerate ahd-eXpeeted.
hatVOUStOIgryii-riPt: thereby ethi-
cal; or e.wi' lerafita rn rnOie than one
Arneeleaf) cily:Weisreati torrtiption in the
police ciep_aftreent; Emig tliVilight tee deeply'
exti#euehed tOba;irepreifited,liffs been effective-
- lreipOSed-and curbed. 'Thrfaet that many
U.S. Conine:riles- have suce(esfully avoided
these ctivities in the -very cceintries where
it *ra4 most customary, and that others have
t 1700 Up OpPeritinitieS in those
Cln;tileS arid--MbireireiSevhere as a matter of
_ SC" -_11.ieligmeiet, undermines the
;pale:ea' usual justification that he had ne
,tornative,,-that 'every-One does it," and that
"se iititin't-dO'ft? SOrneorre 'elle 'Would (the
,
same excuse offered b h?in pushers).
eeiVere the fact that the tYpioefi local
? lel wive takes a, bribe wants It kept secret,
fearing punishment in his own. country if his
' corruption becomes known, casts doubt upon
- any payor'S deferiselhat he Was merely play-
ing acceidiiig to "the rules of the game."
I ,thie. is by way of baCkgroUnd for a cen-
t eeation 9f U.S. national -interesta in the
Current ,piteratioM Without a el:bail' Under=
, standing of the sec's:4 and nature of the probL
iprti 4i-tu4 its jImplications for American busi-
- tieSs, neither the desirability nor the feasibil-
7' 1:ty of a workable Sala-ion can' be accurately
asqe, sled.
1141,particularly-214
rue liget of the
presently art-AWL-tient attitude 'Of the federal
government: While the SSC; Department of
.JuStice and congress rail against improper
'paYrrlent,s abroad, more inticed signals have
'emanated from _elsewhere in the executive
branch.
Americari, pnbassies Ewen:mid the world
-have long itneWn ' of these -practiOes but
,
voiced no protests to host_ governments and
,offered no protection to honest . American
lApinesetnert? Those U.S. eitporters who
thought they Were SerVini: their country's
foreign
foreign Policy interests by Making undei
the-tabiseepaefrereAts to friendly foreign oft.-
Dead politiCal partied -Were never told
? 917..IPP- ?c?ionally-State Department
officials have been even Offereel guidance On
the names and 'etandard 1%4 of those agents
'with the best -Cti`tineetitina:-
1e complfcity of the t4eartment Of DM-
felleaTU;theeefirritetreed rippeivia even greater.
Irt over the le.St decade the sale
-of:10-.S; .arlps?..-4:r64:the:peliartinerit ap=
preyed eontraotST finarieed'in'whole-Oivin part
by militarY a4stiaio? tuhde _Without too
6 s0,:41- of tenth fees-a
Undertook to
utp'gplitraetirs:,pii:tEe: 'necessity and
iMpliatiOns of_StiCh keS;'I'lleWe sales helped
intain7,064atiori capadifY in this country
1TP .,440,getit- -*regarded as vital, helped
aevqconoesca1aiozl
,,,cp-Aparies, and helped
-CLIP-Pg; ep leara7nd, political ties
LOP- 4-arY...#44:E..00.r.4.-,*LePt0 leaders
eci.pient countries,
"flow, with some present orders canceled as
the result Of currel,,, investigations and still
others in doubt, the Pentagon is fearful of
liselleg those advar tagee. other agencies are
similarly fearful that Unilateral US. govern-
ment restrictions on foreign bribery will
make it More 'Titania fel American corpora-
tions to compete for orders with any less
scrupulous companies from Germany, Japan,
Prance, -Great?pritilin. and elsewhere, with
adverse effects on U.S. exports, 'balance- of
'per/nett and empf,yment.
"The'State Depar merit is, in addition, up-
set by the effect of the present investigations
on several friendl s governments In Italie,
Japan and elsewbe re, governments in an al-
ready precarious position have been shaken
by these revelaticei of corruptior... Commu-
nist and other anti -U.S. forces hav 3 exploited
this evidence of immorality in capitalism
and pro-Western governments. Hostility to
American interests has increased. More than
one foreign official friendly to the United
States is fearful of ouster and is resentful
of America's role in exposing these traditional
practices. More than one friencily foreign
newspaper has chietised the Melted States
for broadcasting It national self-flagellation
to the detriment of the Western alliance.
But those who are angry at the revelation
of bribes instead if at their payment (like
those angry at Woodward and Bernstein in-
stead of at NiXOW confuse the weatherman
with the weather. Even before they were un-
covered, these briSies?merely by being of-
fered and acceptee -had damaged. American
foreign policy and made it more vulnerable
to its adversaries. By engaging Fa such de-
bilitating practice,. US, businessmen, who
in most countries are more visible repre-
sentatives of the A merican way cif life than
our diplomats, ,-ernished our country's
image; subverted I be lawful basis of friendly
governments; aggravated the economic .in-
aAiliitIes and Instability that inevitably ac-
datiMan'Y his subsidization and corruption
of a power elite; alsd rendered both the host
gbeerrifnefft and reer own government more
eliedeptible to an ultimate backlash.
I doubt that the messenger will in the end
be condemned for bringing the bad news.
Many foreigners, -eithout ever fully under-
Standing Watergate, came to admire the
courage and -independence of the American
press, courts, pro -;ecutors and legislative
branch for exposing and cleaning up that
mess. I believe the same will happen here.
Certainly the Communists in Italy will now
have difficulty maintaining that the multi-
national corporations and Wall Street domi-
nate Washington, end equal difficulty deny-
ing that it wee 'Washington's efforts Instead
of their own that r,elped expose this corrup-
tion initalearepollice.
-To be sure, notwithstanding the virtues of
disclosing and thus discouraging these prac-
tices, special care ehould be taken by both
our executive and legislative branches not to
publish the nani,L; of foreign officials ac-
cused only by unsubstantiated testimony,
hearsay or rumes and not to prejudice
criminal proceedleses in either our country
or _others_ by the premature publication or
tranemittal, 0,1 seief mune% That is a _legiti-
mate cp,ncerri,of he president and the De:7
pertinent, of State- that, must be respected.
But even greater elunage to America's reputa-
tion for imortfOO'N.0 honor than has already
been caused by _the current revelations could
result from any appearance of a cover-up?
any suspicion *the part of the legislative
branches _or citiaries of other comitries
that the TI,S. government is conspiring_ with
their gevIrnmenf, delay indefinitely any
disclosure N.ffectln,;' their incumbent .offieiale
or political partie
Imagine the real Lion Of the Ara eric.an peo-
ple had the jaw .ese government pessessed
Vital infer-math:1n Watergate and refilSOC-
to ,transmit it, to the gonse Judiciary Corn-
initUe's inipeachir,nt proceeding, announc-
trig injtead 'that alai- information should
go exclusively to our executive branch! Yet
a similar paternalistic decision has been
made by our Department of State; and it is
small wonder that this approach has caused
the darkest suspicions in Japan about the
possibilities of CIA and other U.S. govern-
ment involvement in these overseas slush
funds and bribes.
So let the information flow, with due re-
spect for the rights of the ,accused. Little at-
tention need be paid to complaints about
damaged reputations from those foreign of-
ficials who have for years accepted bribes; or
from those foreign governments that have
long tolerated their receipt by their own of-
ficials or their payment by their own 'ex-
porters; or from those foreign governments
which are not now seriously investigating the
clear evidence of such practices in their
midst; or from those which are making a
great show of cracking down on them with
the full intention of permitting their resump-
tion once the heat is off. Any pro-U.S. politi-
cal party whose success has depended upon
this kind of secret subsidy and corruption
could not have been a very strong reed upon
which our country could have leaned in any
event.
The other principal concern of the Penta-
gon and other executive branch agencies is
well-founded. Any unilateral U.S. restriction
on foreign bribery by U.S. exporters undoubt-
edly will cause our arms merchants and
others to lose substantial sales opportunities
to their less-principled competitors, at least
in the short run, particularly in some of
our weaker industries. That unfortunate fact
should be acknowledged. A crackdown by the
United States will not be cost free.
But surely these highly vulnerable and
immoral arrangements between atypical U.S.
businessmen and corrupt foreign officials
provide a wholly untenable and shaky basis
for building our military alliances. U.S. se-
curity and stature are not increased when
foreign officials are improperly induced to
ignore their countries' internal needs or to
distort their defense priorities by spending
their limited funds (or our limited military
assistance grants) on what are frequently
marginal weapons systems or a kind they do
not need, cannot afford to maintain or will
not be able to operate.
Moreover, there was no gain to our coun-
try's balance of payments or economy when
U.S. companies paid bribes to win a con-
tract that would otherwise have gone to
another U.S. company. On the contrary, the
added cost of these improper contracts to
the host country further weakened the mar-
ket _for other U.S. exporters. The fact that
.eotne American companies have succeeded in
these countries, without the payment of
bribes is an indication that U.S. exports will
not suffer all that severely from an end to
such payments. Those governments desirous
of obtaining U.S. technology and quality
will unquestionably learn to buy our goods
without any special inducement.
In short, it is on balance in the long-run
interest of the United States to halt these
Waatefule _ corrosive and _indefensible pay-
ments te foreign officials by U.S.-based cor-
porations and their subsidiaries. Such action
would enable this country once again to offer
moral leadership to the world, demonstrating
our, concern apt ,enly for the defense of
society but also for the kind of eociety we
are defending, and practicing what we preach
,_alsout the free market system. It veould also
provide a sounder basis for our Alliances,
increase respect for ,our values, enhance our
standing with more progressive elements de-
sirous pireform, and make those govern-
ments,purehasing from us less vulnerable to
future political political attack.
uch,,Ktion would not Was onoil_charged,
an attempt by the United States to impose
Its pueitanical standards on the rest iof the
S 13684
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tigust 5, R171i
world, disregarding the sovereanty o o hers.
and policing everyone else's Steles in a Lope-
less &tempt to reform mankeid. No a' all.
It Would instead Simply require corpora-Ions
based In oily own country to 0,41h ere, wherever
they Operated, to a standard tree seemed
national Interests. Our antitrust, 'feeding
with the Enemy, and other statutes have
long been held to have similar extruterr it orial
epplication. Setting a good exempt? does not
require any other government to follow it.
Of course, it would be pretrial:'e f leery
c-ommercially important rove-emelt in the
world not only enacted but unforeer, t??iigh
and comprehensive lava against the peyment
and re eipt of bribes. That would avoid iv-1y
adverse competitive consequence, ef uni-
lateral U.S. action, But awaltIt deeeiopi nent
of an international code by th? OECD. ele'IT.
IMP or the United Nations is Ian ely an
exc-use for delay and inaction. Most el the
membere of these organizatichs ere -0- t In
agreement on what should be tete. ani remy
are noi enthusiastic about deng anything.
Such codes, If they were to he -rely menring-
ful and enforced, would have to sink cc the
level of t/ae lowest common clenomei vor.
Mild acinionitions from the OECD at ci gen-
eralLsee resolutions from the Milted N1111,1n4
are the best they are likely to produ? e,
The United States will be in a stronger
position to call for action front othe coun-
tries, and to embarrass or otherwise pressure
any US. companies' competitors weer ere still
Paying bribes, after we have taken effeetive
action against our own unetlecal erre-ora-
tions in this regard. Inasmuch as Cresgress
Is already past the halfway mere in Se elec-
tion-year session, enactment ??f new lege-te-
non may as well await a feller deternmeat ion
this year of the entire range of the preble
lest American business be ccieronted situ
an Incomplete statute corustan?anly under-
going amendment, Nevertheless It sheeld he
already clear to our Congress that our present
laws an- not adequate, and the-, action se pad
be taken next year before public Inure t In
the problem flags.
Apart from the illegality of deduct It ? tet
payments on U.S. tax returns the principal
statutory tool by watch CB. eompanies can
currently be called to account Is the variety
of disclosure requirements In the Securities
Acts. In addition, Congress bee recentle called
for further discloeures with respect to Mili-
tary sales under the latest foreign Kid legis-
lation: and a similar emphasis on declosere
is contained In most of the Other legs-el:eve
proposals on overseas bribery.
This emphasis is well placed. Sim/Jeer, In
the menorah]. phrase of Justice Brands, is
still the hest disinfectant. A company le ally
required to expose its bribes? and th Is face
wbatever stockhokier sults, imbilc ,t2Dber-
rassmeet and government penel ties may fol.
low?is less likely to make these permeate
In the erst place and their oceleborat see ere
less likely to demand them.
But our present disclosure liets n Is be
strengthened: to impose more severe and
certain criminal es well as eve penal-les for
those a ho fail to disclose totte apprem late
IJJI government authorities any pmenents
abroad, including legitimate ;minima ?ion-
tributices and agents' fees, of a sigrefleent
amount; to cover privately ow ted companies
as well as those subject to SEC pirieliction
(Indeed the SEC may nor be t in apprepriete
enforcement agency); to cover exporters ale
civilian as well as military g axis; to cover
requeete received t as is true c: cume
('omme -Ce Department regula ,ons 'Deuce-n-
em the Arab boycott) as well as pa-nnerits
made; and to prohibit more precisely the
many t-schnlques used to conceal them prac-
tices from corporate and gov,,T omen mi as-
countaellity systems.
Discaresure, however, cermet cany the
whole burden of law enforcement. It would
be illogical to punish more severely than at
present the nondisclosure of in activity not
ces. Mega! leder U.S. lass elereover. ween
tee geherel or etockholdimg public provers to
Ix Indifferent to a company's dieciceuree
ys ere:doing, as is often the case, no penalty
ILI 0 no reform may follow.
the more dlrec- and traditional approach
to law enforcement io simply to outlaw tee
pa onent of bribes and kickbacks to foreign
ofecials by ell U.S. oorporatieim arid thee
seneadieries. Many corporate reficials s'ould
,ect teeny be relieved by such legileation; for it
wit Id Deter enahle them to theist all temp-
mimes and pressures and ?e hold both their
same-senates and at least their US. corn-
pe Rom to a higher staneerd, It would also
pr wide a stronger legal basis for independent
,tuditere, director, and lewyere?as well as
"ears" authoritics?to incest In suspiciele
sees upon a closer look at the books. It
an old communicate to eatery company and
,m,eriunent the ebearea possible statement
of our national integrity.
such a law would bare to he drawn told
e It with great care arid precision, mire-
iy setting forth the dinstinctions between
hr eery and the other fm-mts of paymente
demribel above, and not undertaking to en-
Mese what it cannot reach without placing
lice are UE police agents lii et.cry VS. Irri-
04.sy. Unenforced arid eneriferceable lave
en v engender disrespect,
nor sitcmid compliance with a host ccciii-
irs ii
laws be available us- a defense under
? new reviews Too many 01 those laws are
eIt blem-um Incomprehensible or imenforced,
mei the United States cannot endertake to
iii 'erce then] Nor In some centarles, is corn-
tin' will the lea, much proof of pro-
fs i???y
le? matter hew carefully the new statute
e ;Meted and Implemented, however, some
neeeper prestices will escape and some rear
rot S WE1 1m invented to ciretenvent P. Aeor-
t ige agent who acts as an independent con-
re-or for several companies will be able, on
he o'er initiative and with his own funds,
it :mut the knowledge or reimbursement of
I. principal. to make Improper payments in
Mee prInclpale behalf that no outside law
SI reami It corporations wishing to avoid
tra arm by selling to truly independent local
distributors who in turn resell to the local
(-renege, complete with kickbacks, will
to doute be able to do so, at least diminish-
tie 1 lie inns-I, of titer conduct on the United
rim tilt Fv.remely difficult problems a def-
?nli fa( L.-ending and interpretation, such
eie seven esampless cattier cited, will be
re, mem
hut tie courla and eoneress are not unac-
? -?? ????eie (Irrisrlog flee lines of dietinction,
Ma iv a ;collet' law now MI the books Is fre-
eu?-: violated bet nevertheless desirable
es I niece-eel standard, even If some viola-
p? tintieteeted. With a strengthened
ore stlitute. wbatever federal agency
4 lire law will MI be without tools
g, the legality of a suspect payment,
ife, could also iceulele tee use it
Lt tits To prehibit their tete would be out-
:sad:0e cerieng many legitimate practicm
boo me nosing those intent on paying
iitn iii- con 'cal them elsewhere. TO impose
.1.7:.01010 coirilubsion MIS would only pc-
? KII7e ,nkan-ticket" sates Bet U.S.-baited
I oripleal long could be rewired (1) to dis-
? ie c to tii, U S enforceineat agency not only
? *.c) fee or commie:eon paid over-
hot also the servlees for which it Is paid
liii the recipient a qualifications there:fee
s ? et 11,-.tru,t, ;he agent by contract to make
Lo temente to or for government officials
oh mci p0111 ti-St centributlons on Its behalf
t with its f, nee. and (3) to obtain the ox-
ili-a [teetotal of the Teel government for
I lit 1. tontra4 r and for tbe agent's rate of
c sr .teneatioe Honest and qualified agents
eel, on the whole, accept such conditions;
these inteet en dislionesty will net.
fedi other new legislative or executive Mr. HOLLINGS. Mr. President. Ur.
rementres could empower the executive current issue of Time magazine contain,
brance to tan: supplementary action, Vio-
lators should he warned that the U.S. govern-
aunt would terminate their eligibility fer
goverement contracts and impose no oe-
steel. to their extradition to any country
posse...else actual proof of their wrongdoing.
Any VS. tnisinet-s executive receiving from a
foreign oft.eiai a request or a demand for im-
proper pm-metals sheuld be required to re-
port 11 promptly to the U.S. Zmbaesy, white
rthould be required to protest vigorously :o
the h^-?r.st povernment. Foreign countries er-d
comminies persisting in such practices to the
detriment ef Tea economic interests shoe'
be warned of the possibility of economic re-
tallaton, ranging from termination of eco-
nomic and military assistance to denial ?.:1
access to our domestic markets or stock e:;?
change litzLnge.
Eveta thougt -a strong international code
Is not In the offing, lbs Department of Stara
shouloi undertake to obtain in advance the
approsal of all affected governments for each
of the legislatere measures proposed Mame
Whatever their real feelings, they tvould Si d
it delimit to object; and such a step wou ,1
both riampen the cries that truch legislatem
was impocling our standards upon the reo,
of the world and improve the prospects for
ile. general effectiveness.
It Se to he hoped that such laws will also
be accompanied by an increased demonstrie
tion 01 corporate self-regulatioia. In light of
recent revelations, this will never be an ac-
ceptable substitute for government measure'. ,
But ft will still be the most effective form of
reguletion if ettiorced, because management
can establish is system of clearances for "tre-
tisual'' or ''potentiady embarrassing" pa;'-
ments out in the field that no law can ade-
quately reach Any new legislation and Ls
acinemstration should thus recognize and
meow:age millinery initiatives of this kina
That will notaire, however, something more
than Me exert public relations announce-
ments; of comparies rushing to "reemphaste -
longeitanding policy" by the issuance of new?
corporate peacrice g-aidelines which are ee
titer tio GO be meaningful ("do notl -
tog milawlui sr inearoper"I; carefully de-
signed not te, interfere with their particulet
practices -0i? riot violate local law, local
ouster. U.S :atm make no payments to
the ntreign go:eminent officials respomih.it
for our ibeteery ?n: otherwise Ineffectivr
by design or inactvertence.
Corr panels ?o more than governmen
shoulp atternp-, to enforce -what they cal -
not malistsealle reach. But a strict, compie -
hensive comps.ny code should be imple -
mentee In prompt disciplinary action, le-
eluding demefel at any level for violate:nee
by femme sworn certifications of compliance
by all responeele members of Managemew.;
and be a matere of fell disclosure to counsel
and ailditeue as well u.s superiors. Such meat -
urea, 11 accompanied by a reduction in pre
sure Ilu the fleet to obtain contracts by weal -
ever ',learn. metessmy, welted be far tune
elfecti.e than the recent proposal authorizing
ere et...arrow:el to remove the chief exert -
tire of an offending company.
Jul teethe:eine governments as well as pe-
wee seguititlee in this area, Arnericar
should bear in mind a wise cone:use:in ce
John I McCler and his associates in theo
landederk inveitigation of the Gulf Oil Cor-
poration's payments at home and abroad
ellit is ner, in the institution of rules arm
procedures said that report, that the ac-
suer to this ernblem lies "as much as e
Ls in the tone and purpose given to tie
Comphny OF top management."
The san,E Ic tree of our country.
sIRLIGGLE TO STAY
HEALTHY
Approved For Release 2005/08/03 : CIA-RDP79-00957A000100100026-1