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COMMITTEE ON

INTERNATIONAL RELATIONS
HOUSE OF REPRESENTATIVES

NINETY-FOURTH CONGRESS

FIRST SESSION

JUNE 5, JULY 17, 24, 29, SEPTEMBER 11, 18, AND 30, 1975

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Printed for the use of the Committee on International Relations

60-363

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON: 1975

For sale by the Superintendent of Documents U.S. Government Printing Office,
Washington, D.C. 20402-$2.95

COMMITTEE ON INTERNATIONAL RELATIONS

THOMAS E. MORGAN, Pennsylvania, Chairman

CLEMENT J. ZABLOCKI, Wisconsin
WAYNE L. HAYS, Ohio

L. H. FOUNTAIN, North Carolina
DANTE B. FASCELL, Florida
CHARLES C. DIGGS, JR., Michigan
ROBERT N. C. NIX, Pennsylvania
DONALD M. FRASER, Minnesota
BENJAMIN S. ROSENTHAL, New York
LEE H. HAMILTON, Indiana
LESTER L. WOLFF, New York
JONATHAN B. BINGHAM, New York
GUS YATRON, Pennsylvania
ROY A. TAYLOR, North Carolina
MICHAEL HARRINGTON, Massachusetts
LEO J. RYAN, California

CHARLES WILSON, Texas

DONALD W. RIEGLE, JR., Michigan

CARDISS COLLINS, Illinois

STEPHEN J. SOLARZ, New York

HELEN S. MEYNER, New Jersey

DON BONKER, Washington

WILLIAM S. BROOMFIELD, Michigan
EDWARD J. DERWINSKI, Illinois
PAUL FINDLEY, Illinois
JOHN H. BUCHANAN, JR., Alabama
J. HERBERT BURKE, Florida
PIERRE S. DU PONT, Delaware
CHARLES W. WHALEN, JR., Ohio

EDWARD G. BIESTER, JR., Pennsylvania
LARRY WINN, JR., Kansas

BENJAMIN A. GILMAN, New York
TENNYSON GUYER, Ohio

ROBERT J. LAGOMARSINO, California

MARIAN A. CZARNECKI, Chief of Staff

SUBCOMMITTEE ON INTERNATIONAL ECONOMIC POLICY ROBERT N. C. NIX, Pennsylvania, Chairman

LEE H. HAMILTON, Indiana

STEPHEN J. SOLARZ, New York

CHARLES W. WHALEN, JR., Ohio

EDWARD G. BIESTER, JR., Pennsylvania

THOMAS R. KENNEDY, Subcommittee Staff Consultant THOMAS E. POPOVICH, Minority Subcommittee Staff Consultant DONNA GAIL WYNN, Staff Assistant (II)

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Butler, Michael F., Vice President and General Counsel, Overseas Pri-
vate Investment Corporation---

Feldman, Mark B., Deputy Legal Adviser, Department of State____.
Solarz, Hon. Stephen J., a Representative in Congress from the State
of New York----

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Stern, Thomas P., Deputy Director of the Bureau of Politico-Military
Affairs, U.S. Department of State____

152

MATERIAL SUBMITTED FOR THE RECORD

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58

Donald I. Baker, entitled, "Antitrust and World Trade: Tempest in

11. Exchange of correspondence between Subcommittee Chairman Nix and

Commissioner Philip A. Loomis, Securities and Exchange Commis-

sion on possible limitations of public disclosure of information to

foreign officials_

12. Exchange of correspondence between Subcommittee Chairman Nix and

Hon. James R. Schlesinger, Secretary of Defense, requesting declassi-

fication of certain documents relating to agents fees__.

13. Letter to Adnan Khashoggi, Triad Financial Establishment regarding

controversy in this country over payments to foreign sales agents in

matters relating to military sales contracts----

14. Cover letter submitted by Thomas R. Kennedy, Staff Consultant, giving

explanation of Khashoggi statement--

15. Statement by Adam M. Khashoggi, Trad Financial Establishment__

16. Exchange of correspondence between Subcommittee Chairman Nix

and Robert J. McCloskey, Assistant Secretary for Congressional Re-

lations, Department of State, requesting declassification of certain

documents relating to military sales contracts_-_-

17. Letter from Hon. Edward C. Schmults, Emergency Loan Guarantee

Board, supplying information on subsidiaries and an agreement be-

tween the Department of the Treasury and Lockheed, October 10,

1975

18. Letter and material from Hon. Carlye E. Maw, Under Secretary of

State for Security Assistance, Department of State to Hon. Thomas

E. Morgan_-_

Proposed Rules published in the Federal Register on International

Traffic in Arms Regulations___

276

THE ACTIVITIES OF AMERICAN MULTINATIONAL

CORPORATIONS ABROAD

THURSDAY, JUNE 5, 1975

HOUSE OF REPRESENTATIVES,

COMMITTEE ON INTERNATIONAL RELATIONS,
SUBCOMMITTEE ON INTERNATIONAL ECONOMIC POLICY,

Washington, D.C.

The subcommittee met at 2 p.m. in room H-236 of the Capitol, Hon. Robert N. C. Nix (chairman of the subcommittee) presiding. Mr. Nix. The subcommittee will be in order.

During the last few weeks, charges that American corporations have maintained secret funds for the payment of gratuities to foreign government and political officials have been made and substantiated by the Securities and Exchange Commission and the Civil Aeronautics Board.

Such payments to foreign officials are not a violation of American law at present, although they are very often a violation of foreign law. However, it is a requirement of the United States Code that American corporations make full disclosure of their assets and liabilities to the Securities and Exchange Commission, the Civil Aeronautics Board, and the Internal Revenue Service. It is also true that if the purpose of the payments was anticompetitive in intent, the Antitrust Division of the Department of Justice would have a basis to begin legal proceedings.

The important point to remember as we begin our deliberations is that the American legal system is working. We are here because agencies of the American Government have without fear or favor brought serious charges and backed them up. We may need improvements in our laws. There is always room for improvement. But we can be proud of the actions of our own Government in these cases.

There has been a negative impact on our foreign policy already because of these revelations. Peru has expropriated property of the Gulf Corp. in that country. Costa Rica is considering expropriation legislation and other countries in Latin America may be considering such steps. The interference in democratic elections with corporate gifts undermines everything we are trying to do as a leader of the free world. Bolivia and the Republic of Korea are cases in point.

We will hear today from Congressman Solarz, a member of our subcommittee, who has taken a great interest in this issue and is the author of legislation bearing on this problem.

Mr. Mark Feldman, Deputy Legal Adviser of the Department of State, will discuss with us the broad aspects of international law and our own law which bear on this problem. Mr. Michael Butler, General

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