ITALY'S OPENING TOWARD COMMUNISM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00957A000100100046-9
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 8
• Document Creation Date: December 16, 2016
• Document Release Date: July 21, 2005
• Sequence Number: 46
• Publication Date: June 16, 1976
• Content Type: OPEN

7ue 16, 197#pploved For 600100100046-9 S 9625
fuszliatecl,n nom domestic. markets by a .re went, we can see ;hat ,isolated I:.ves of abun- - sts~nt flow of-funds has been provided for
1 t1~e price set well move die price at Mitch dance"would a mocked fsy indffPerenoe to file the organizational work of the Italian
clop reverses,, and it would staoiiity of tine iCIoa Until nattons.
equate supply to meet our Our nation is not an island. We do defend
regerygjs,ls,,at pest, misieaa
rtosay, as fie did,-.that
wv,aa.aL,cu ta.a SCULl. uz?~a.,Y,aae wuuta.
~e do not stock- may face a food deficit of 85 m:alion tons.
ut dowp his--,production like
line?
c 1zd t Ylraical,e si, ante ITALY'S OPENING TOWARD
ois
es geed d to avert famine COMMUNISM
R The food !ie_,flcit ttign cauh significa ifVy
Apday's existing technology. For example;
1$ce yields in 'Bangladesh are only
53, per-
of the vyoi~,id average .and 24 percent of
.jq, a* ramie
n W_ provfcle food aid it also is im- xta
'Iiariint that the recipient nations not des- silo
- t;ommumsi Mi_ ty is a very u:naemocrat-
iy planning, research and education-- -ically controled organization based on
alms which ultimately tie back at poy-
el't and inadequate food roduction, pro the Soy "t Thprir
e l cessonenl.ralized de-
With. grain consumtion exce ding m0cr
of leadership
Suction in an .Of the last. six years and and internal p e ,t -operation are exactly
oorld population increasing by 70 to 80 mil- the same as the; ar in the Soviet Union,
h, year the worldfood, situation. iswith the line o, au ratic party bosses
critical. -from Palmiro 1-ogliat ' to Luigi Longo
;.promising new .initiative to increase and the present. aggres ve leader, Hen-
ti o7rl? food, production-first proposed in
1014 at the World s Berliliguer decided i closed "polit-
Food JQonference in
Rome-is :yhe International Fund,For..Agri- buro" manner.
s Ytl}ralPevel+ipment. The party itself is_run in, ~P} elf.
ustr
and
e
y
_------ - ---
..v.ah?
rce haunt sup-
me ~~ ecla?es u~ Xlnrt L11e local chapters of the communist
pf E nyr r1d Which As larger Party and the Communist trade unions.
t5 an oursel,y ,a rid our cou erns of tJe, nlo- 9,pthe basis of .This arrangement a cap
Communist Party in particular in Bo-
logna and other areas where the Com-
munist administration is already strong.
To facilitate this channeling of funds
for the Communist operations the party
-organized trade organizations for rela-
tionships with Eastern Europe. The in-
come of these agencies is plainly part of
the operational fund of the party. No
other political party in Italy, or for that
matter any place in the Western World,
has a steady income from the enterprises
and agencies dealing in export-import
or industrial investment abroad. This
"duty" imposed on the Italian industry
when dealing with Eastern Europe is now
the primary source of financial strength
of the Communist Party of Italy which
cannot be compared in any way with the
occasional and very irregular assistance
given to the democratic parties of Italy
by Western Europe or the United States.
Indirect pressure from the trade
unions is another source of power of
the Communist Party. The Communist-
controlled unions are now the strongest
unions in Italy. They exercise enormous
pressure on the private enterprise sec-
tor by the constant threat of strikes and
disorders. But the real day-to-day in-
fluence is accomplished by the direct im-
pact of local trade union committees
which force the business leaders to take
actions which comply with the interests
of the Communist Party.
This is the way the press in Italy be-
came leftist to about 80 percent: It is
not because publishers or editors-in-
chief have gone left, but because the
local union committees force the edi-
torial policies of the newspapers to sup-
port and popularize the Communist
Party in the country. The Communist
Party Is being pictured as a democratic
force compatible with the pluralistic so-
ciety that Italy Is today.
The highly organized and centrally
controlled trade union movement of Italy
very effectively paralyzed the economic
life of the country by strikes. Those are
political, not economic strikes, but they
cost the Italian economy billions of man-
hours in recent years. The Communists
erJt Italy has the highest rate 'of indus-
tria absenteeism in the world and the
most requently occurring strikes for
reason other than wages and worker-
beneflts. Communist Party delib-
erately wThekened the economy and the
ability of t e Government to run an
efficient gove ent. Their purpose is to
force themselv into the Government.
These strictly alitarian methods of
the unions are us by the Communist
Party to defeat the ntrol of the Gov-
ernment by the demo atic parties.
The general misconceision is that the
Communist Party Is use democratic
methods to achieve influent and politi-
cal power in Italy. But, in re ity, in all
levels of life-education, indus , com-
merce, politics-the Communists a us-
ing totalitarian, dictatorial, cen ally
controlled methods of operation to'ge-
createcpnditipns.,-under which they will
ApProrick-I Release.,2005/,08/03: CIA-RDP70-00957A000100100046 9
Mr. THURMiOND. Mr. President, many
Senators share ,with me my deep concern
 Approved Fqr ftEg)Mq$lg1DP$ ;Q"MA00010010004 $ie 16, 1976
be invited to participate In the govern-
ment.
Such participation of the Communist
Party in the Italian Government will ob-
viously jeopardize the effectiveness of
NATO operations In the Mediterrnnoan
Sea and will make the entire northern
flank of NATO defenses an open book to
Soviet intelligence. The consequences of
this development for the freedom of
Western Europe cannot be overestimated.
WHY PIOUS EVASION OF TILE
BRIBERY ISSUE?
Mr. PROXMIRE. Mr. President, the
dead editorial in this morning's New
York Times properly describes the first
report of the President's Cabinet level
task force on bribery as "Pious Eva-
sions."
The report, which is contained in a
letter to me from Secretary Richard-
son, is inadequate in several respects.
While rhetorically condemning bribery
in the strongest language, the Richard-
son report falls to recommend that we
outlaw bribery. According to Secretary
Richardson, we should not outlaw
bribery by American companies over-
seas because It might present enforce-
ment problems.
Mr. President, criminal law en_'orce-
menti never easy, but we outlaw mur-
der, we outlaw armed robbery. And we
outlaw certain activities by American
citizens even though they may take
place abroad, like antitrust violations,
securities fraud, tax evasion, and the
like.
Second, the Richardson report reec:om-
mends that American conlpanle:?, dis-
close any bribes to foreign officials, but
wants the disclosure made to the De-
partment of State or the Department of
Commerce, and not to the SEC. These
are precisely the two department:: that,
have shown the least interest in cxom-
bating corporate bribery--that have
been the most protective of corrupt al-
lies abroad and corrupt corporations at
home. And further, Mr. Richardson
recommends that the filings be kept
secret up to a year. The Richardson
panel seems to want to keep the SEC
out of the enforcement process because
the SEC is the one agency that has
shown some spine.
If the Richardson task force is serious
about a disclosure requirement, the ,Iis-
closures should be made to the SEC
The State Department and the Com-
merce Department do not have the en-
forcement machinery to check on the
accuracy of the filings and to punish
companies that make incomplete or
misleading filings. The SE-C does Fur-
ther, enforcement of a touh disclcsttre
law will not be any easier than enfo:'ce-
ment of a direct prohibition. The Rich-
ardson panel's idea that the disclosure
approach will be easier to enforce than
criminalization is true only If they take
the company's word in every instance
and "never check on the accuracy of the
disclosures. I hope that is not shat
Secretary Richardson has in mind.
While the administration's belated
recognition of the need for legilation
represents some progress, the prop sed
legislation is, In the words of the Times,
a pious evasion. We need both a direct
prohibition and a workable disclosure
requirement, with the disclosures made
to the SEC and to the public. r ask un-
tan :Hours consent to have the Times edi-
torial printed In the Racoan, together
with Secretary Richardson's letter.
There being no objection, the editorial
and letter were ordered to be printed
In the REO0IW, as follows:
IFrt,rn tile New York Times, June 16, 19761
Pic is EvAsIOmrs
Policing bribery In tnternstional commerce
Is no easy task, but the business community
and public have a right to more than has
been heard so far from Pre3tdent Ford's task
force on payoffs and other questionable pay-
ments by United States corporations abroad.
The first report of this Cabinet -level group,
headed by Commerce Secretary Elliot Rich-
ard.scui, correctly singles out the requirement
for public disclosure as the most effective
Inhibition against such dubiwi&-1f well-
established-business practices. Neither the
payer nor the recipient of a bribe Is normally
interested In having the transaction become
public knowledge. It need hardly have taken
two and a ball months of high level study
to aerrivo at this conclusion.
The President and his study group became
distressingly vague when moving into ques-
tions of how and to whom such disclosure
is to be made and, more important, what
means the Government would establish to
pry the required Information out of a reluc-
tant business concern, By teas leg disclosure
ultimately to the discretion of the firm, the
Federal Government would only leave an in-
viting loophole for those few companies that
choose to regard bribery as a necessary fact
of their business life.
The Administration's resistance to stronger
measures could even be taken by some eon-
cen- -, and their overseas connections, as a
gretai li ,Lt to bustnese as usual. In the murky
realm of trans-national wheeling and dealing,
It lakes more than moral exhortations to
cttrb the flow of cash.
Alternative legislation pending in the Sen-
ate would deolare bribery by American busi-
ne etsi a criminal offense, wherever It occurs.
t'tdnlt.,ediy difficult to enforese, such a first
step rnigiit at least give pause, alongside ef-
fective disclosure requirements; for any
buslnesr:nian wishing to do so this could be
cited as reason enough for refusing ques-
tionable payments-whatever may have been
past practice and expectations.
The Administration argues that an out-
rlgut ban on these payments could put
An,.ericarl business at a competitive disad-
vantage with exporters of other nations
which have not yet absorbed this country's
pcxat-Watergate scruples. To this, Senator
Proxmire. sponsor of the Senate hill, retorted:
Most of the foreign bribes revealed thus far
involved American companies competing with
AnleriCt-u companies for the saris business."
fisE SEcin.TA$v or Cornuraca,
it'a:.htngion, D.C., June 11, 1976.
lioll Wl,_Ltarot Psoxumar,
e 'a(Irrmn:clL, C,rrninfttee on Iianieing, Housing
and Union A.Jairar. U.S. senate, Wash-
ingtns, U.C.
l WAR `3enAros Psoxrarax: In testifying be-
your Committee on April 8, 1976 1 prom-
j"(1 w provide ion with ooxnrnents on your
proposed legnnlatiou concerning questionable
cmpotato payments abroad. A-, that time,
11w Turk Farce on Questionable Corporate
Pavrnentn Abroad had just been created (on
March :11) . la order to allow the Task Pbroe
tie?e to perform relevant preliminary anal-
vnds of the issues Involved--and with the
scliedule of the Congress also in view-we
agreed that ;these conunents should be pro-
vitied by Jute 1. On May 19, you graciously
agreed 'n my request that the June 1 date be
changed to June 10. This letter provides
comments in accord with our agreement.
Your bill, S. 3133, amends the Securities
Exchange Act of 1934 and the Securities Ac c
of 1938 to require disclosure of certain for-
sign payments and to provide for criminal
prosecution of payments made to Influenc?_
actions of foreign governments.
S. 3133 would require each issuer of a secu-
rity registered with the Securities and Ex-
change Commission (SEC) to report to the
SEC all payments in excess of `1,000 made
to: (1) representatives or employees of for-
eign governments; (ii) any foreign political
party tr candidate for foreign office; or (Ili'
any person retained to assist with obtaining
or maintaining business with, or influencing
legislation or regulations of, a foreign gov-
ernmetit. S. 3133 requires that such report',
be made publicly available and that the,
contain a statement cf amount, purpose anal
the name of the recipient of each payment
In addition, S. 3133 would amend the
Securities Act of 1933 to allow the SEC to
Initiate, prosecute or appeal criminal aetiona
against Issuers who use the mails or an:
instrumentality of Interstate commerce to
pay or agree to psy or give anything of value:
to a foreign government official, agent or
representative of such official or to any for-
eign political party or candidate, for tht
purpose of Inducing such Individual or party
to use his or its influence with a foreign
government "to obtain or maintain business
for or with the issuer or to influence legis-
lation or regulations of that government.
Further. S. 8183 would make unlawful any
payment made In a manner or for a pur-
pose, which is illegal under the laws of th,?
foreign: government having jurisdiction over
the trs nsaet ion.
In commenting upon your bill, this letter
discus[:es the following:
(1) - The Questionable Payments Probleri
(2) Relevant Current Law
(3) The (torrent Administration Approach
to Treatment of the Problem
(4) Alternative Approaches Which Might
Supplement the Current Administratioi
Approach
(e) Itecornmendations with Respect to the
Need for Additional Legislation at this Time
(6) Conclusion
(1) The Questionable Payments Problem--
As you know, the Task Force Is charge 3
with responsibility for policy development
and not with responsibility for investiga-
tion. Ongoing investigative responsibilities
rest with auditing agencies (e.g., the Defense
Contract Auditing Agency), the Internet
Revenue fStrvice, the SEC, and the Depart-
ment of Justice---upon whose work the Tasz
Force has drawn in Its attempt better t:,
understand the character and scope of the
problem.
It is clear on the basis of information a_-
ready at hand that the "questionable pay-
ments problem' i9, in fact, real--i.e., that:
A significant number of America's major
corporations. in their dealings with foreign
governments, have enraged in practices which
violated ethical arc. in some cases legal
standards of both the United States and for-
eign countries.
To carry out these practices, certain Amer.-
can corporations have falsified records, had
to auditors, and uses off-the-books "slush"
funds.
In some eases. improper foreign paymnen':s
have been unl awfull v deducted as ordinal y
and necessary business expenses for U.S. ii-
come Lax perposos.
In the case of a number of major corpora:-
tions, employment of improper business
practices abroad has coincided with past I: -
legal ;politirl contributions in the United
States. (Some allege that a major area of
abuse involves the possible direct connec-
tion between questionable payments abroad
and illicit domestic payments.)
"The problem" Is, of course, a set of prat-
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 `"1
Approved For Release 2005/08103 : CIA-RDP79-00957A000100100046-9 '
?_? l-v~rv,y7- tL/IA-rlvN.. 4.
J' cue 6' 1976NN COI GRL5S (?'ri AL REC01t~S S 9627
that vr1ICi hAs alregd been voluntarily re- his choice of action in the transaction in discover, disclose, and terminate, on 9101-
I-- tYaled- Crimix aea.nctions attach ;question [~ `atlon omitted.]P` (emphasis unitary basis, the making--67e
.
riot Iikel to a si>nfficantl rester than ack importance "[to it] in determining to encourage publicly-owned oorpor"ationeto
i a ysi indicates that at least 95 corpora- (1975). The materiality of any fact is to be gram," provide a means whereby companies
...
tip s v Jsp oze possible questionable or 'assessed, at co. .ling to the cc arts, by deter- can seek the informal views the COarmis-
t1Iegalpayments And the SEC would sug- mining: sloii coribefning the appropriate disclosure
.. whethe-r a reasonable than would at= of certain matters. The program is intended
st That the actual sco "of`tlie problem is "
l1lTes'idy exposed_ is highly atypical-that most dent Investor ought, reasonably to be in- to the proper disclosure of questionable for-
International corporations have conducted formed before purchasing the security regis- eign payments. These procedures, frequently
tutions generally Materiality sas been defined by the SEC min addition to its regular enforcement
15, 1 Stage, some WO--Ad argue that' the as liinitin? tae information required "to program, the SEC has established special pro-
pattern of illegal and gum stionable behavior `those matters as to which an average pru cedures for registrants seeking guidance as
lexrl Q ten interrelated but ? -distinguish- report, Y.e., thy. Incentive fully to disclose `f`eet which In reasoxialde and objective
" "voluntarily" arguably been high. contemplation might affect the value of the
o {to
ship, as fws _
irob1em of 'petty corruption So- Others argue that the pattern of voluntary corporation's stock or securities . . [Cita=
caailed'grease "or"facilitating"payments are, disclosure to the SEC has shown corpora- tion omitted.]" (Emphasis supplied.) Thus,
4 business requirement in a number of less tions to have 1 hen less than wholly forth- material facts include not only information
''developed countries-where they are `often coming-that in many instances additional disclosing the earnings and distributions
culturally tf"not , legally, accepted as - a Investigation has shown initial disclosures of a company but also those facts which
means of remuneration for an underpaid to have been it adequate. Some note further affect the probable future of the com-
civil service r, I petty corruption Is a that SEC rt po "ting requirements have not pany and those which may affect the
"'fact of lite"-artliougli Vesuinably--to a reached tho,e companies whose counsel have, desire of investors to buy, sell, or hold the
lesser extent-in many developed countries. on one ground or another, advised against company's securities." SEC v. Texas Gulf
The problem of "compett`tive necessity." It disclosure. Sulphur Co., 401 F.2d 833, 849 (2d Cir. 1968).
Js frequently argued that American firms In short, thr extent to which disclosures Alternatively stated, the test is whether ".. .
are required to bribe In order to - "out- to date do or dc: not fully represent the scope a reasonable man might have considered .. .
compete" foreign competition. (While this of the problem remains in dispute. It is the [the information] Important in the making
`hypothesis may be valid, no substantial evi- current view of the Task Force and the Pres- of [his] decision." Affiliated Ute Citizens v.
dente to support this hypothesis has, as yet, ident that the overwhelming majority of U.S. United States, 406 U.S. 128, 153-54 (1972).
been pYesetited to the Task Force. In several corporations dr, conduct themselves as good The courts have not yet addressed the is-
cases; payments have been made to inter- citizens-and. tarot they are to some extent sue of whether arid under what circum-
mediari'es, but have not -been transmitted to now the victims of a public mood which al- stances questionable payments made by a
the intended governmental decision makers. -leges guilt-by-association. U.S. corporation to foreign officials would be
In a number? of questionable payments More definitive delineation of the precise material information which should be dis-
cases-especially those involving sales of dimensions of the questionable payments closed publicly' Thus, the SEC, through Its
military and cbxnmercial aircraft-payments problem must await further investigation by enforcement program and its voluntary dis-
have `been made not to "out-compete" for- corporations isi.vestigating themselves with closure program,2 has been the sole arbiter
eign competitors, but rather to gain an edge the approval o?l" the SEC and the courts (the as to the materiality of such payments.
over 4tl er U.S. manufacturers.) "Gulf model"), by the IRS whose intensified The extent of the Commission's activities
The problem of extortlori: In some in= review of the problem Is in its initial stages, with respect to both foreign and domestic
stances, improper payments have been ex- by the Federal Trade Commiss Lon, and by the payments and practices has created a great
totted from U.S. companies by corrupt 'offi- Department of Justice. deal of uncertainty as to how the materiality
cials"br agents purporting to speak for such It is- clear, -however, that the nature of standard applies to improper foreign pay-
officials. ` ' the problem-t aid the extent of the problem meats. The SEC has not issued a release con-
The problem of adverse effect on foreign as revealed to date-are sufficient to justify taming disclosure guidelines on this subject
relations. The manner of disclosure of alIea- the remedial measures already under way and to date. However, In a report submitted to
t1onS regarding past practices, the substance serious coiisidf a$ion of possible additional your Committee on May 12, 1976, the SEC
of the allegations revealed, and in some cases measures. has given some guidance as to its current
the practices themselves, have had adverse '(Z) Relevant Current law- position (''Report of the Securities and Ex-
impact on the political and social fabric of The discussion which follows in sections change Commission on Questionable and II-
countries friendly to the United States-and (a)-(d) outlines current law and in section legal Corporate Payments and Practices).
have, thereby, adversely affected U.S. for- (e) analyzes lt:; sufficiency far the task of In this Report, the SEC takes the position
eign relations. deterring future improper payments by that questionable or Illegal payments that
The problem of adverse impact on multi- American flrmr- abroad. are significant in amount or that, although
not corporations. Exposure of the ques (a) 'securities Laws-- not significant in amount, relate to a sigg-
tlpuible, payments problem has exacerbated The securiti s laws are designed to pro- nificant amount of business, are material
concerns about. multinaticinals' accountabii- tect investors from misrepresentation, deceit, and required to be disclosed. Other question-
ity to the national legafconstraints'of both .and ' otIiei frai:diilerit practicnis by requiring able payments may also be material, accord-
home and foreign "host" countries. It has public disclosure of certain information per- ing to the Report, regardless of their size or
raised the level of concern that such enter- "taming to the issuers of securities. Such dis- the significance of the business to which they
prises have the capacity to conduct rode- closure ` is" acchinplIibed, first, through the relate, Thus, the Report indicates (at page
pendant foreign policy including the suborn- mechanism o f a registration statement 15) that: ". . . the fact that corporate ofd-
ing of host country political and government- which is req'iired to be filed with the cials have been willing to make repeated
al processes. Increased" anxiety regarding SEC as a precondition to a public offer- illegal payments without board knowledge
xiaultinationa,ls' legal and political accounta- Jug of securities pursuant to the Securities and without proper accounting raises ques-
bility could lead to national and interna- Act of- 1933, 15 U.S.C. ? 77a et seq. (1970), tions regarding improper exercise of corporate
., authority and may also be a circumstance
tionai "backlash" In the form of laws or the "1933 Act- and, second, through the an-
regulations hich could seriously handicap nual and `othe'r periodic reports and proxy relevant to the 'quality of management' that
si}Ch enfierprises with resulting deteriment materials required to be filed by registered should be disclosed to the shareholders."
to the United States economy, to world com- companies with the SEC pursuant to the Se- Moreover, even if expressly approved by
inert a and to the pattern of world develop- "curitl"es Exchithge AOt of 1934, 15 U.S.C. ? 78a the, board of directors, the Report states (at
ment, etseq 6(1970), the "1934 Act." page 15) that ' . .. a questionable or illegal
The problem of eroding confidence in "free" ' ' There is'"nospeciflc requirement that ques- payment could cause repercussions of an un-
fs stttutio ts. ttevelations of questionable pay- tionable payments to foreign officials be die- known nature which might extend far be-
ments-with oft-book accounting may have closed In registration statements filed our- yond the question of the significance either
undermined, to some degree, investor con- suant' to the 193:3 Act or in the annual or of the payment itself or the business directly
$dente in the adequacy 'of-regulatory meth- periodic reports or proxy materials filed pur- dependent upon it"-and for that reason
anisms Intended to assure the provision of suant to the 1934 Act, however, in addition might have to be disclosed.
infor,nlatipn necessary for the` honest and to the specific instructions and requirements (b) Tax Laws-
Q C nt functioning of -capital markets. The incident to carp of these filings, the SEC re- Section 162(c) of the Internal Revenue
payments themselves may baste distorted the quires the dlsclosure of all material infor-
allocat on "of resources ' within a" would-be mation concer ring registered companies and
eSixrlpetItive system--or, in some cases, may of all infonrialion necessary to prevent other 'The conviction of a director and chief
have dtq.torted, representation 'within a po- disclosures made from being misleading, e.g., executive officer of a company for bribing
cayl. system.'Sut most funda mentally, the 17 C.F.R. _ .1 230.40$, 240.12b-20, 240.14(a)- U.S. public officials has been held to be a ma-
uilco`veTing OS these improper past practices 9(a) (1975)-11hus, facts concerning question- terial fact which should have been disclosed.
has eroded confidence inn corporate responsi- able payme nff. are required to be disclosed Cooke v. Teleprompter Corp., 334 F. Supp.
bility and in, democratic and capitalist insti- insofar as ttheq are material. 467 (S.D.N.Y. 1971).
 S 9628 Approved F:p0rN IRjt&010~8/Rp J? i RD SENT QI,E957A0001001000~46~ e 16, 10 6
Code provides that bribes and kickbacks. It,-
eluding payments to government officials,
cannot be deducted in computing taxable
income if the payment (whet=aver wide)
would be unlawful under U.S. law if trade
in the United States.
The principal mechanism for the detection
of improper deductions is the corporate in-
come tax return and. in the case of foreign
subsidiaries and affiliates. certain informa-
tion returns. Criminal and civ l sanctions
may be applicable if an improper payment
is deducted from earnings.
The Internal Revenue Service (IRS) does
not routinely require taxpayers to furnish
information as to the payment of bribes or
kickbacks However, In August 1475, the IRS
issued guidelines to its field examiners pro-
viding techniques and compliance check to
aid in the identification of schemes used by
corporations to establish "slush funds" and
other methods to circumvent federal tax
laws. In April and May of 1076, additional
Instructions were issued focusing on illegal
deduction, of questionable payments to for-
efgn officials abroad. The IRS is row engaged
In investigating hundreds of the naton'F
largest companies regarding possible In--
proper deductions of such palanents and
related tart improprieties.
(c) Ant'-trust Laws---
The antitrust laws may have an Impact
on improper payments in a variety of ways
Depending on the factual clrcunistancer, an
Improper payment could violate Sections 1
or 2 of the Sherman Act. 15 US.C. li 1. 2
(1970); Section 8 of the Federal Trade Com-
mission Act, 15 U.S.C. 1 45 (1970) the "?FI'C
Act"; or Section 2(c) of the Clayton Act. the
so-called brokerage provision of the Robin-
son-Patms,n Act, 15 U.S.C. i 13(c) (1970).
As a general rule, an American corpora-
tion which pays it bribe to gain favorable
legislation abroad, or to facilitate a sale at
the expense of- a foreign competitor, will not
be in violation of the U.S. antitrust laws
On the other hand, payment of a bribe by
one U.S. company to assist its rates at the
expense of another 17S. company may well
be an unfair method of competition within
the meaning of Section 6 of the FTC Act
A conspiracy among two or three U.S. com-
panies to bribe a foreign official to keep au-
other U.S_ company out of an overseas mar-
ket would probably violate Section 1 of the
Sherman Act; however, it is no clear that
an improper payment involving cne firm and
one government official can constitute a con-
spiracy for the purposes of this section
Bribes paid by one company for the purpose
of monopolizing a foreign market might vio-
late Section 2 of the Sherman Act.
Section 2(c) of the Clayton Act prohibits
the payment of commissions or other allc.+w-
ances, except for services actually rendered.
in connection with the sale cf goods in
which either the buyer or seller Is engaged
in commerce (including commerce with for-
eign nations). Section 2(c) encompesw*
commercial bribery and bribes of state gov-
ernment officials to secure business at the
expense of U.S. competitors. Although there
do not appear to be any Section 2(c) rase.,
involving dealings with foreign govern-
manta, the statute might be applicable to
the payment of a bribe by a U.S. corporation
to a foreign official to assist its business at:
the expense of its U.S. competitor.
(d) Criminal Statutes and Other Lass--
Present federal law does not prohibit, per
so, bribery or similar questionable practicer
by American companies or persons wifY re-
spect to foreign officials, companies, or per-
sons in furtherance of commercial gain.
However, criminal or civil liability may at-
tach from collateral false reporting practices.
3fcst particularly, false statements filed with
federal agencies may constitute a violation
of 18 U.S.C. i 1001 (1970) or other specialhied
false statement statutes. Relevant lorts
are summarized below:
( S t The Export-import Sank of the United
Ststee (Eximbank). Certificates prepared by
American firms whose goods are purchased
with ifxport-Import Bank loans must declare
any a )nunissions, fees, or other costs above
and 1;eyond the actual value of the goods
sold ithtch constitute any part of the con-
tract price. Several cases of possible fraud
have ttinut;y beers referred to the Criminal
Fraud Sect ton. of the Department.
(it) The krency fir International Develop-
ment AU)). Under the Foreign Assistance
Act. 2'1 V.9C. 12399 (1970), AID makes
loans of hard currency available to foreign
countries for purchase of American com-
mcdi'..lee for importation. An American ex-
porter who makes a sale under this program
must file is supplier's certificate with AID
eertifsving that no kickbacks or commissions
were paid. AID officials compare contract
pricer, with current market prices and occa-
stona!i" dt-cover discrepancies requiring legal
action, including referrals to the Department
of ,lit-tire for possible fraud prosecutions. It
has been held that a concealment of im-
proper payments in AID forms constitutes a
violaf son of the federal statute making It un-
lawful to conceal any matter within the
jurisdiction of any United States depart-
ment or agency, 18 U.S.C. 111001 (1970). D.S.
v. olfn Mathieson C7remieal Corporation, 368
F.2d 525 (2d Cir. IM).
(tit) State Department Export Licences.
Registered dealers may sell for export Items
on the U.S. Munitions List provided an ex-
port license is obtained from the State De-
partment. (29 C.F.R. i 12127). The applica-
tion corms for such licenses require that the
cost he listed, but without a breakdown. The
Interoetional Security Assistance and Arms
Err)xcrt Control Act of 1976 (which was vetoed
on May 7, 1978. but then reintroduced in
alters I form as S. 3459 and R.R. 1380 would
add a new provision to the Foreign Military
Sales Act. 22 U.S.C. i 2751 et seq. (1970). to
require reports to the Secretary of State.
pursuant to regulations issued by him, con-
cerntrT political contributions, gifts, oom-
mfsst .its and fees paid by any person in order
to secure sales under Section 22 of the For-
eign Military Sales Act. No such payment
could be reimbursed under any U.S. procure-
ment contract unless It was reasonable, allo-
cable to the contract. and not made to some-
one *,he secured the sale in question through
improper influence. Similar reporting re-
quirements would be required with respect
to conunerclal sales of defense articles or
defense services licensed or approved under
Section 38 of the Foreign Military Sales Act.
All L-Sormation reported and records kept
would be available to Congress upon request
and to any authorized U.S. agency. It should
be noted that even at the present time, the
Defense Department requires disclosure of
all fete and commissions paid in the We of
military equipment pursuant to the Foreign
Military Sales (Fads) program. False state-
ment: made pursuant to these disclosure re-
quireincnts would constitute possible viola-
tlons of Is U.8.C. i 1001 (19701.
tiv) Securities and Exchange Commission.
The -allure to report in corporate financial
statements filed with the SEC bribes and
kickbacks to foreign officials or governments
may constitute criminal fraud. However, to
fall l's that category under present law, the
error.; or omisslona must have a material
effeot on the financial picture of the com-
pany as a whole as presented by the report.
In conjunction with violations in all of
the foregoing areas, depending on the facts
of a zsarticnalar case. additional charges may
be appropriate for conspiracy, 18 U.S.C. 9371
(197C), mail fraud, 18 U.S.C.". 1 1341 (1970).
or fraud by wire, 18 U.S.C. 1 1343 (1970).
Purtlsernlore. attempts to circumvent or de-
feat,t regulatory system designed to ensure
the integrity of a governrrtexrt program may
cwrustii.ute a conspiracy to defraud the United
S3tate -.
(e) Analysis--
The following analysis addresses the issue
of whether new legislation is required to
deal with improper corporate payments or
whether the lawsand regulations described
above are, taken together, sufficient to de-
ter such practices. Another way to state the
question is whether the company that would
consider the making of an improper pay-
ment-or the foreign official that would de-
mand one-will be deterred from doing so by
the existing laws and regulations.
The dimensions of the improper payments
problem suggest, to some, the singular in-
effectiveness of existing laws and regula-
tions. On the ocher hand, some argue that
the past failure of deterrence may be a func-
tion of insufficiently vigorous enforcement
of existing authorities. My personal assess-
ment is that even the most vigorous en-
forcemen: of existing law would not be an
adequate solution to the problem, and that
the shortcomings of existing law are the
result of statutory and jurisdictional limits-
tions rather than of enforcement policy.
It is clear that the provisions outlined
above are insufficient to deal adequately
with the questionable payment problem. In-
deed, the requirements of the SEC are the
only ones which, as a practical matter, de-
serve detailed consideration. For ease of
presentation, it may be useful to discuss first
the laws and regulations of lesser signifi-
cance.
With respect to taxation and antitrust,
both system are theoretically applicable
to all U.S. corporations doing business
abroad but only to the extent that the mak-
ing of a questionable payment also results
In a violation of certain statutory prohibi-
tions.
The tax laws only reach those transactions
in which a questionable payment is deducted
as a business expense. If a company making
an improper payment does not take a de-
duction, the only source of potential liabil-
ity arises from the maintenance of "slush
funds" to circumvent federal tax laws gen-
erally. Although the IRS could require re-
porting of questionable payments, the in-
formation obtained could not be disclosed to
the public because of the confidentiality of
tax administration. M.xeover. the mission
of the IRS in the area of questionable pay-
ments abroad is to administer and enforce
the tax law. All of the procedures and pro-
grams which the IRS has adopted, or might
adopt In the future, are designed to accomp-
lish that central objective-the enforcement
of the tax statutes.
The antitrust laws are generally inapplic-
able to an improper payment unless it can
be shown that there is an anticompetitive
effect on U.S. foreign commerce, for example.
where a bride Is paid to exclude the product
of a U.S. competitor or to monopolize a for-
eign market. There a?so exist substantial
constraints to the justifiability and enforce-
ability of applications of antitrust laws to
foreign transactions. These Include tradi-
tional legal doctrines regarding sovereign im-
munity of foreign governments and compul-
sion by foreign governments and considera-
tion of comity between nations.
The Eximbank, AID, and P748 programs
only apply to companies taking advantage of
these particular programs. Moreover, none of
them at the present time requires public dis-
closure. They are designed merely to ensure
that the Government does not aid in the
financing of questionable payments. In the
case of the FMS program, pending legislation
(as noted above) would provide for disclosure
to the Congress but, in any case, it would
still be limited to companies making sales of
military equipment. Thus, as a practical
matter, these programs taken together affect
the actions of a limited number of companies
doing business abroad and the FMS program,
through its disclosure requirement (sesum-
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~
tri age ofythe new"1 i.latioi ), is the conduct 'the' illieality itself Is of &conse- ' osures to date have increased the a n-
one which contains a deterrent element. quence-regardles,; of the nature: of the of- tiveness of responsible enforcement agencies
I;ere `a"re several reasons why the SEC fense and of its erect upon the value of the in general-and that they have increased
tl closure fetiuirements may be inadequate stockholder's investment. Indeed, with re- the deterrent effect of current law thereby. A
td deter iLi f-fopel?' payments. First, they only spect to quest.on,,ble payments, It does not particularly noteworthy example is provided
apply __ - i lie `companies, i.e., to companies even appear to matter to the SEC whether by the IRS's guidelines of May 10, 1976-re-
-0th securities registered under the 1934 they are actually Illegal, that is, whether sub- quiring affidavits concerning "slush funds" and concerning bribes, kickbacks or other
f
Act or toicorii ante mskl1y g to the ext nt in the United Sta ssyor abroad. The Commis- payments, regardless of form, made directly offer- ject to indictment
prosecutinE: #r gs Second t ey
or favorable treatment
a?p
. n?+ ,a "m a.terial." sion's enforcernen t policy in this area, how- or Indirectly to obtain
_ _-_ .-- _- nnnea] a ncessions:
le
p
- -
1 s " rounds. At the cry 1r;ast, giver., ,.,... ,,......--- "- ---'?-- ---
d so osure cif the nam?s of recipients of ques-
t ~~ t' ble-'- fiib'its. Fourth, they are not de- of the commission's enforcement activity, purpose of opposing, any government, p ttee.
f ate
the interests there is a good possibility that the matter tealparty,
nal agreements -
tel
natiom
e
`
y
er
qua
o
roect ad
signed to p
t wdizl$ be served by new legislation. will be presented o the courts. (b)
EC Chairman Gar- We anticipate endorsement of a code of
t1
&
t
}ietheless ffi utilffy of the SEC disclosure The remarks of former S
o r?quir ie1its must be examined in some de- rett underscore tl,e fact that the Commis- conduct for multinational corporations aCo-
tail since the Commission itself believes that sion's policy is a function of its composition the coming organization for EconomicMin-
oixifellt securitie's laws are" adequate to re- at9a h- disnnsled t o take different interprets- .serial Conference slaters this Omo~nOth_ The
SIC pm, there are at present app the
t or Ynately 9rogra000 dorporations, not all of which depend for its via.bilitdy i on i trators ccntinued zeal any en b prop ervant o$rtholdercof public eoffice;
n s
r , ~,,_, Commission, is is uucci oaua ,,?.- -.-- ____ -- ------ - - -
ritte financial reporting sysem.
First, with respect, to the coverage of-t a tuetinua legislate a schemehwhich does not solicit d or expected to render-any bribe or
do business abroad, which regularly file roc- or militancy of ito m
dents withr the Commis,
0s the other e of thernames of t pie recipe nts oflquestionable contributions to candidates fortpublic office
00
-r- , , ---
dnd an additional number of
_4oing business abroad which do not export do so, at least in most cases, even under the (11i) asbstain from any improper invo ve-
me of the most expansive nterpretation of the mate- ment in local political activities."
d
so
rom the United States. Indee
, adore important 'U.S. firms doing business riality doctrine. The SEC Repar t states that Ambassador Dent has asked the General
tbroa4?are private companies which are not while, in some cases, disclosure of the iden- Agreement on Tariffs and Trade to take up
subject to the SEC disclosure requirements. tity of the recipient might be Important to the questionable payments issue, as called
r Second, the Commission's authority to an investor's understanding of the transac- for in Senate Resolution 265. The resolution'
squire disclosure `is limier in that a ques- tion, more frequently his identity may have proposes negotiation in the Multilateral Trade
onab1e payment must be reported only if little or no sign?.ficance to the investor (at Negotiations of an international agreement
- a , +v,e ma sm to curb "bribery, indirect payments, kick-
unknown nature us aerie ,
or' integrity of inanagelnerit. This very broad sensitive and broad-raging public policy priority.
concept of materiality is at substantial var.- and foreign rela?ions implicaticns. Moreover, Most significantly, the U.S. proposal for
dnce with other recent discussions of ma- it may be asked whether the SAC, in its ex- negotiation in the United Nations of a
'Eeriality by the SEC. For -Instance, in facing pansive definition of materiality, has not treaty on corrupt practices was made on
the issue whether a company is required to raised serious questions as to the purpose March 5 at the second session of the UN Com-
eport unlawful discrimination in employ- and scope of the securities laws and the mission on Transnational Enterprise in
tinent, the SEC stated-in a release issued statutory role - ,F the Commission. in re- Lima. The proposal is for an agreement to be
less than one year affd_that: marks delivered in Decembe:: 1975, then based on the following principles:
"The Co experience over the Commissioner E~ommer urged the (I) It would apply to international trade
mmission`s ex Comm s-
'ears in-_proposing'and framing disclosure lion to go siow:y in expanding the area in and investment transactions with govern-
fequirements has not led it to question the which SEC disclosure becomes a substitute ments, i.e., government procurement and
bast, decision of the Congress that insofar for the enforcement of other substantive other governmental actions affecting inter-
as investing -it concerned the primary in- laws. In particular, he pointed out that: national trade and Investment as may be
ferest,of investors is economic. After all, the "... Materiality is a concept that will agreed;
rineipal 'if not the only reason, why people bear virtually any burden; it can justify (ii) It would apply equally to those who
nvesttheir money in securities is to obtain almost any disclosure; it can be expanded all offer to make improper payments and to those
return.-A variety of other motives are prob- but limitlessly. But we must constantly bear who request or accept them;
ably present in the investment decisions of in mind that overloading it, unduly burden- (III) Importing governments would agree
bumerous investors; but the only common ing it, excessively expanding it may result in to esabliscleaguidelines concerning the
thread is `the hope for a satisfactory return, significant char. ges in the role of the Com- use establish clear guideli n with cerni nmte
acid it is' to this that a -disclosure scheme mission, the role of other enforcement egen- agents
4ntended to be useful to all must be pri- ties, and our ability to carry out our statu- procurement and other covered transactions,
tnarily addressed." Freeman, "The Legality tory duties." SFC News Digest, December 12, and establish appropriate criminal penalties
for defined corrupt practices by enterprises
bf the SEC s Management Fraud Program," i97b.
1 Sus:, Law '1295 f301 March"1978}. Whatever definition is given "materiality" and officials in their territory;
In t o same`release theCommIssiori stated by the SEC or the courts, SEC disclosure Is (iv) All governments would cooperate and
-that "there is no distinguishing feature designed to protect the Interests of the pru- exchange information to help eradicate cor-
w lcli would'justify thesingling out of equal dent investor, it is, arguably, not an appro- rupt practices;
pniployment from amonglte myriad of other priate mechanic-m to deal with the full array (v) Uniform provisions would be agreed
social raters in which investors may be in- of national concerns caused by the problem upon for disclosure by enterprises, agents and
'terested.' The' release tlien listed 100 so- of questionable payments. officials of political contributions, gifts and
The Current Administration Approach payments made In connection with covered
;be social matters inh tch investors may (3) transactions.
be intereste$z (include "activities which to Treatment o1' the Problem-
;would be illejal` fn the.. S but Which are The current Administration approach is The proposal was forwarded to the UN
=ognducted abroad but -'h" , presumably, comprised of th4, following: Economic and Social Council (ECOSOC) with
are not, materiarper se:Aia stated not long (a) Vigorous enforcement of current law a recommendation that ECOSOC give the is-
ago by then haiirman 11ay Garrett: - (as summarized in (2) above). sue priority consideration.
If asou can see if you require disclosure Investigative enforcement activities are The U.S. objective Is to have ECOSOC, at
of alt Violations of law=aainst bribery or being conducted by audit agencies, the IRS, its July 12-August 6 meeting In Geneva,
'political contributions on the ground that the Federal Tn,de Commission, the Depart- pass a resolution on corrupt practices which
i e e1p ments are mater el per se, we may ment of Justice, and the SEC. The SEC has will create a group of experts charged with
be ra pressed to ex lain that other illegal provided you tF ith a Report based on the writing the text of a proposed international
c0 orb le ache are not equally material for findings of its "voluntary program." As treaty on corrupt practices and reporting
s~me reason -Securities Act Release No- noted, the investigative activities of all these that text back to ECOSOC in the summer of
" goal would then be to for
The U
S
roduct of 1977
-and th
oi
r
s
on
.
.
e p
ng
a
e
g
Wt agencie
='6627, October 14,1 5 p
. ' Ile mmi'' ions current 'position with their investigations will continue to emerge ward an agreed text to the UN General As-
res eet to uestionable payments, however, In accord with fair and orderly legal sembly for action in the fall of 1977.
he c Further policy development and coor-
e
rprfe of a new process.
t ggest t _
emi ~
-0495714000
App `cued For. Release 2005/08103': CIA-RDP79"1 00100046-9
 J ii 16, 197) pproved For RI It.0$51 i L IPEJ Ol79-OOH ,p OflO100100046-9 S 9631
to the eilccte .,foreign government, The 're- For reasons stated, the Administration be- Olgert Osenieks, a Latvian high school
l
pores would ecome avai
able for public Neves the disclosure approach to be a more . student who was arrested in October of
inspection after- an appropriate interval, effective and manageable means to deter- 1940 I
J
1
1
n
une
94
he was deported to
., such as one year, to protect proprietary con rence. Siberia and his family does not know
Corns and to allow opportunity for` construe- (d) Although the preferred long-term ap
'live diplomatic intervention prior to public proach to solution must be an enforceable what happened to him. In 1967, his
controversy regarding a given payment. international treaty (as proposed by the U.S. mother received unofficial word that her
i -
Civil and/or criminal penalties would be in Lima), the prospects for prompt adoption son might still be alive. To this day she
set for ne ligent or willful failure to;report. of such a tre=,i:y would, in the. ordinary Wasunable to confirm the rumor.
(Deliberate misrepresentation on such: "re- course, have to ire viewed realistically as un- Gunars Meierovies, chairman and Ed-
orts would be covered by Current criminal likely. There is a need for the U.S. to accel-
' ward Sumanas, public relations director
law, 18 C7.S 1061 (l '70) orate efforts tq achieve its proposed inter of the Joint Baltic American Committee
The requirement for Such reports would national agreement.
apply to all American business entities and (e) Accordingly, the President has reached have compiled additional data on the
through them to controlled foreign sub- the following decisions which are fully con- 1941 deportations and I ask Unanimous
idiarfes. Ppri(ifties for J4 lure to report tent v ith my own views: Consent, Mr. President, that this sum-
would apply only to ti parent corporations (!) The President has decided to initiate mary entitled "35th Anniversary of the
endtheir oi$c special efforts to accelerate progress toward Deportation of Baltic Peoples to Siberia"
It is reasii y ailparent_ Eat t ie approach achievement of"sin, international agreement- be printed in the RECORD.
Outlined above, in Conce tual terms is, in a be the lines proposed by the United States
In Liena* There being no objection, the summary
fer legislation to a. ident has decided to endorse ordered to be printed in the RECORD,
At Poon of i howver, iIn aat least one 133. Our appportdoe sdiffer,
sure the integrity of corpo- as follows:
As already noted, reporting would not be rate reporting systems and the accountabil- 35TH ANNIVERSARY Of THE DEPORTATION OF
made to the ,SEC hg $ jurisdiction ity of corporate officials---legislation first pro- BALTIC PEOPLES TO SIBERIA
limited to issuers" of registered securities, posed to your Committee by C:aairman Hills This year, about one million Americans of
is inadequate to the 'problem. Further, the in his l gport of May 12. Baltic descent are commemorating the 35th
Task Force believes ,ghat Ville 81 P would be (' i) The President has decided to propose anniversary of the mass deportations of Lith-
iil inappropriate agency for this re ortin
i i 1 i t
i
i
ti
P
t
d
r
ng repor
ng an
a44
on- eg s,;- -n requ
g
which is directed at important national and disciostire of certain payments by U.S.-oon-
i`oreign policy concerns and not simply to trolled oorporations made with the intent of
investor confidence. influencing, directly or indirectly, the con-
The further extent, to w ich thee Adminis-
ductof-foreigngovernment officials.
tration's disclosure approach may differ from We know-you share with us a conviction.
that embodied in S,b3133,xcpiains to be,.de- that what is fundamentallyat stake is not
terminedhrough detailed drafting and the merely the impropriety of certain financial
Process of resolving points which remain at transactions... What is. at stake. ultimately is
issue Within'the Task For-e.' I confidence in, and respect for, American
In addition to deciding to recommend the business, American Institutions, American
proposed new, disclosure legislation, the principles-indeed, the very democratic
President alas teclded to ,cndorse the legis- political values and free competitive eco-
ative approach to improve private sector nomic systems which we view as the essence
fpternal reporting and accountability first of our most proud heritage and our most
Iirbposed ` to your" Committee by Chairman
promising future. With this in view, we look
Dille in ..his,,l$eport of May 12 and recom- forward to working with you and your col-
mended by the Task Force. That approach leagues toward enactment of legislation
$ould:, which will best serve the fundamental public
Prohibitialsifioation of corporate account- interests which. require a responsible salu-
lpg records; tion to the queisionabie payments problem.
Prohibit the making of galse and mislead- Sincerely,
ing statements by corporate officials or ELLIOT L. RICHARDSON.
fish and maintain its ,own, system of internal
uanians, Latvians, and Estonians to Siberia
which took place on June 14-15, 1941. During
these first arrests, 100,000 persons were de-
ported to various places in Asian Siberia.
This was done to subdue the Baltic States,
which had been illegally occupied by the
Soviet Union against the will of the people.
The Soviet government began planning for
mass extermination of the Baltic people soon
after the conclusion of the Hitler-Stalin pact
of 1939. The clear evidence of this is found in
N.K.V.D. Order number 001223 regarding the
"deportation of anti-Soviet elements from
Lithuania, Latvia, and Estonia." According
to data collected by the Lithuanian Red
Cross, 84,260 persons were deported from
Lithuania, 35,102 from Latvia, and 33,500
from Estonia.
Statistics on age groups and professions
have also been provided from a list of 20,974
persons. There are 1,626 infants; 2,165 chil-
dren from the ages of 4 to 10; 2,587 persons
from the ages of 10 to 18: 3.986 from the ages
THE DEPORTATION OF 100,000
BALTIC PEOPLES TO SIBERIA
apcounting controls designed to provide rea-
.pnable assurances that corporate transac-
tion# are execlited-i . accordance with man-
a ement's ygeneral or specific authorization,
d that Aucix trapsaptiong are, properly re-
on, the ps>rporation's books.
FAY ?re,aspns "suggested above, I firmly be-
ifeve thatex3actment of the. disclosure and
a' countability legislative proposals, as rec-
o nnxended by the President, will provide the
by st approach to remedying the inadequacies
oo current law ,and to, restoring confidence
ereby. Should you or your colleagues wish,
I,.would be, happy to provide further elabora-
tion of reasons fox this lelrl-by whatever
in,eans may be'inost conveuient.to the Com-
r ittee.
(6) GioncluutQn-
, Let pre, conclude with several summary
pbint drawn from, the above discussion:
r (eA T47 questionable payments problem
14 .?e 'io .-a?, ,ia_, ba deed for additional
initi9.tiyes to s4 J1 Tl c,improper actions
o a iel)r l~ vp;j at_ rtiy disturbed foreign re-
olxs " bud hazc.alsed ,p, further erosion of
e)zliidexice erica Meese and Ameri-
04ri instil ltions.,11pI d1a1r actions taken to
$te_,havp._"beeAL, insuf cient to restore.-con-
Mr. BEALL. Mr. President, June 14 and
15, 1976, marked the 35th anniversary
of the deportation of approximately 100,-
000 people frorii Latvia, Lithuania, and
Estonia to Siberia and other remote 're-
gions of the So,,?iet Union. This mass de-
portation reflected the brutality of the
Soviet occupation of the Baltic States.
I have sought to draw attention to
these atrocities in speeches on the floor
of the Senate marking Captive Nations
Week and the independence days of the
Baltic States. On May 4, 1976, I offered
an, ameladlllent, to the "detente resolu-
tion"-Senate Resolution 406--which re-
affirmed the U.S. nonrecognition policy
toward the illegal seizure and annexa-
over 7o years of age; and the remainder of
undetermined age.
The largest groups were elementary and
secondary school students: 6,378. There were
3,389 farmers, 1,865 housewives, 1,591 govern-
ment employees, 1,098 teachers, 879 workers,
622 servicemen, and 416 university students.
All of these people were loaded into freight
cars with fifty to sixty persons In each car.
The windows of the cars were boarded over,
husbands separated from wives, and children
separated from parents. They all were locked
in the cars lacking air, food, and water.
The long journey from the Baltic states to
Siberia killed many weak and sick. Some
dead children were thrown out of the cars
by guards and left by the railroad, disregard-
ing the enormous grief of their mothers.
In the following years, many other depor-
tations took place. Baltic deportees were
transported to northern Russia, western and
eastern Siberia, and Kazakhstan. They were
tion of the Baltic nations by the Soviet used for slave labor and many of them per-
Union. In addition, I have worked on a ished in the mines and forests, or they were
number of individual cases involving ef- diseases annihilated d u the cold, the starvation, and
diseases because they lacked proper clothing,
forts to reunite Maryland families with food, and medical attention.
their relatives who are seeking to leave Some managed to survive. A few even
Soviet occupied Estonia, Latvia, and reached the United States, and readily test!-
-Lithuania. fled to the inhuman conditions of life and to
t
he cruelty of their imprisonment. Even Alex-
Mr. President, the deportation of Baltic
{b) Although current Investigative and peoples to Siberia began sortly after ander Solzhenitsyn in his book "Gulag Archi-
e So- ~
ip~ axe able cur- viet forces occupied the thr 9e nations. pelago" witnessed how Baltic deportees were
41
I t deter im- Ms. Ruta V. Sv pis,"the secretary of the tortured and forced to live under inhuman.
O e discloadequateito
sex q conditions.
{ j e approach and the Oint Baltic American Comm sur lttee has Four young Lithuanian girls, who were de-
iatici ppoach to additional leg- been active in the Baltic P
i
o
f
r
s
ners O
td t Sib
poreoeria, have secretly written a
anon alb 1lo corlxixatible(with each other. Conscience Projr Ct. They have "adopted" praverbook, which through underground
ApprovedEFor Release 2005/08/;03: CIA-RDP79-00957x4( 0610 046-9
 S 9632
Channels, aas been smuggled to I he wee cr:z
world. It was published in English, and
their dear cne;.
of th-"tr friends
Approved Fpj- fa {2 Q 49 JfR,D 57A0001001OO Y46r,19 16, J6
of tl+tusancLs buried there in unmarked
graves
The Cnrnrnnr.tst$ murdered or deported
about 350.000 people from Lithuania, the
total +'sceedirg ten percent of the population.
and 't` t me. flgnre:t are also the same for Latvia
and f,tcunla.
soldiers. about thirty altogether. all nth
heavy weapons. In the yard, a machine, gun
had been :et up. The o!ticer pushed me add-,
went into the house, and demanded my TAT;-
hour to prepare myself for the deportvtkn
journey. Awakened by the n alse, my son
families had been collected. . . Each tamely
sat on the-ir sacks in a group. Nc one talked.
vezys for two full days. We were given t
food. . . Our transport consisted of sixty
cars, so It can be estimated that it cont.aned
about 2,440 persons... The feelings of hu-
mans beings herded Into cattle cars ar{' Un-
possible to describe. No one kne-w where we
were going or what could be expected. . .
In one car, a woman with two Milli children
largest city in Siberia. . . We were ordeted
to get out,. . . We stood there for about _feur
hours In a cold rain mixed with snow The
here to die."
On starvation rations. they were lcrrred U14'. the United States had exported the
to cut trees in the ,ores- flv+ miles quay heavy ttata3r needed to run the reactor,
from th,- barracks. The work norms were and that it the safeguards on the reactor
very high, and they had only primitdve tails. were "not appropriate," neither were the
The regimen for prisoners war, severe M-M safe";titu(is on the heavy swater-
Armonas writes: "I was always hungrv. We
}3,ila exiroi t--title teat' ~T by Canada
were not allowed to wear shoes n o.ir r~azn:s. anc the tacavy water by the United
We could. not ,It on the beds." Sttates -last.d been made subject to writ-posed nuclear agreer_ients and on all sig-
Fortutsately for Mrs. Armonas, ts-
chev s a meaty rclea:.ed her from the he 4,1%10 ten, nudes landings that the nuclear as- nificarit proposed exports and other sig-
labor camps, but there are atria tens of thou- slat.;-lice would be used only for peace- nificant arrangements made pursuant to
sands of Baltic deportees in Siberia, and tens ful purgotes. The United StaUp and those agreements. ACDA's technical as-
its li i
of art a m
at t"tat
strong m
n
the Milted tates to Join with Canada In
e
h
i?ebu::ing In.-- t for the inisuse ofpeaceful
e
nncksr assi cc.
t 'ly cut India off from
Canada b rim a
further ruclear a- i
had used an uru"M sY
Supplied r.earch re or to Produce the to to prodt r
matt riai io t.?le IJuci
exploi"on- India
heavy water
also had used U.B.-supl l
Lit run thae Canadian r tar
sei~r,;el ingredient that mak t
wol I. and that converts natti I uranium,
a nonexplosive material, into
the tuff that atymr bombs are ade of.
'eons parth,'ular reactor, known the
CIRUS. produces 19 pourals of plat Tuna
a year. enough for at least one born of
the =;ize that the United States dropl
an Negasat:i.
B2.:t the United States had not made
ptibl:c~ it= export of 21 tons of heavy
water to India for use in the CIRUS
reactor, either at the time of the export
in 1936. or after the explosion of 1974.
T ire days lifter the explosion of May 18,
1974 a spokesman for the Atomic Energy
Con mtsato'l said there was "no reason to
belie ac" that U.S.-supplied material was
involved. A month later, during a press
ecru ererc a or June 17, Seeretsia'y of State
Itiam miter cirri
Ilse India tnclear explosion c~rt'urred with
inat'rlat tin t v: as dl- g not from an Amer-
lean reactor under American safeguards but
frrvi;r: a Canadian reactor that did not have
tq)lnt* Sst~'egtards.
Zt hat the Secretary dd not say was
INDIA'S NUCLEAR EXPLOSION AND
THF EXPORT REORGANIZATION
AC'r
Mr RtB[COFF. Mr. President, on
FridttY, June 11, I disclosed tdiattheGov-
ernrae:lt of India now pes.s ss a sig-
niflcfxrt quantity of U.5.-supplied heavy
water- thszt is not covered by the safe-
of the International Atomic En-
ergy Agenc' --IAEA. That means that
Indic... which has not ratifled the Nuclear
Non-Proliferation Treaty--NPi'is free
to use this heavy water to produce ma-
terial for its nuclear-explosion programs.
In ft=ct. there now are strong and dts-
Canada each had asserted to India prior
to India's explosion that an explosicn slid
not constitute a peaceful use. India did
not acknowledge these assertions and
went ahead with its peaceful nuclear ex-
plosion .inyttay. Canada, in agreement
with the United States that there is no
technical difference between a peaceful
nucleari explosion and an atomic bomb,
imposed a nuclear embargo on India. The
United States did not join in the em-
bargo. Why?
The answer to that iuestian, Mr. Pres-
ident, is not yet clear, but it must be
clarified if we the to know whether U.S.
nuclear nonproliferation policy is suf-
ficient to prevent the spread of nuclear
weapons. Tile answer is being sought by
the Senate Committee on Government
Operations, of which I am chairman, as
part of its continuing inquiry into Fed-
eral interagency management of the U.B.
nuclear export program. The principal
cgencici involved in ruclear exports and
the Nuclear Re ulatory Commission-
NRC-t< to Liner, Research and Devel-
opment Admiristration-ERDA-the
State Department and the Commerce De-
partment.
On May l$, the committee reported S.
1439, the Export Reorganization Act of
1976, to upgrade Federal interagency
controls over nuclear exports and non-
prolifernlion poltcymaking. The bill was
referred for 60 days to the Joint Com-
mittee on Atomic Energy and the Sen-
ate Foreign Relations Committee.
I with to stress, Mr. President, that
r.everal principa provisions of the bill ap-
ply directly to file problems raised by the
Indian nuclear program. For example:
First, section 6(c) (2), offered by Sen-
.ttDi? GaI:NN, a principal cosponsor of the
bill, wo.tld re'iuire that government-to-
government nu::rear transfers, such as
the heavy water export to India, be li-
censed by the NRC. At present, these
transfers--incieding peaceful exports of
Second. Section 5(b) would require
at when heavy water is to be exported
port of t uciear itomponents is being exer-
cised b the Commerce Department
rather tt a by the NRC.
Third. & coon 4(n) would make the
State iepa ment the lead agency for
negotiating all nuclear agreements and
subsequent athtngements with other na-
tions, with th close cooperation and
technical atsi.ttaSlce of ERDA. At pres-
ent, these a, reten is and arrangements
are negotiated by RDA, as they were
by its predece.a or a eney. the AEC, in-
elud1n the t greeme t to export heavy
Fourth. Section 7 wO}t1d require the
Arms Control and Disarmament Agency
r AC?DA t to prepare Nuclear Prolifera-
tion Assessment Statements on all pro-
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