ITALY'S OPENING TOWARD COMMUNISM

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CIA-RDP79-00957A000100100046-9
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July 21, 2005
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46
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June 16, 1976
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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- Approved For Release 2005/08/03 : CIA-RDP79-00957A000100100046-9 `"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- Approved For Release 2005/08/03 : CIA-RDP79-00957A000100100046-9 LIP, ~. 17Acplrrovec# 4SAq? I&fP7r9A7,00100100046-9 S 9629 ~ 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- Approved For Release 2005/08/03 : CIA-RDP79-00957A000100100046-9