abroad in what we regard as improper activities here at home, such as corporate political contributions.

Although investors operating in foreign lands would be wise to avoid even the appearance of impropriety in those countries, we believe it would not be advisable for the United States to try to legislate the limits of permissible conduct by our firms abroad.

It would be not only presumptuous but counterproductive to seek to impose our specific standards in countries with differing histories and cultures. Moreover, enforcement of such legislation--and I think this is the most important point-would involve surveillance of the activities of foreign officials as well as U.S. businessmen and would be widely resented abroad.

Extraterritorial application of U.S. law-which is what such legislation would entail-has often been viewed by other governments as a sign of U.S. arrogance or even as interference in their internal affairs. U.S. penal laws are normally based on territorial jurisdiction and, with rare exceptions, we believe that is sound policy.

There are other actions that can be taken, however. The Securities and Exchange Commission and other regulatory agencies have the authority to protect specific American interests in foreign transactions, such as the disclosure of material information necessary to protect the investment of shareholders in public companies. The SEC has demonstrated that it is prepared to act forcefully in these cases, and that demonstration should have a positive effect on U.S. businessmen and on those they deal with abroad.

In addition, the executive agencies responsible for administering programs abroad which may provide temptations for such activities need to review their procedures to see whether additional measures might be effective. The Department of State and the Defense Department have begun such a review of the foreign military sales program and we expect improved procedures to result that should be helpful. Another possible approach could be to reflect our position in a code of conduct concerning multinational corporations-MNC's. The U.S. Government has indicated in a number of international fora that it is willing to examine the possibility of development of guidelines relative to MNC's, provided that such guidelines take into account the responsibilities of host states as well as those of enterprises.

If other governments are agreeable, such a code might include a specific provision to the effect that foreign investors should neither make nor be solicited to make payments to government officials or contributions to political parties or candidates. This would be a modest step but international acceptance of this principle might help to relieve pressures for questionable payments.

I am sure, Mr. Chairman, that all of the members of this committee appreciate the complexities of this problem. Corruption of friendly foreign governments can undermine the most important objectives of our foreign policy. But experience shows the United States cannot police the internal affairs of foreign states. In the final analysis the only solution to corruption lies in the societies concerned.

I would be happy to take any questions.

Mr. Nix. It would be unrealistic to assume that these practices are unusual. Obviously this has been going on for a number of years.

Now, fortunately, events occurred in our own country recently which served to prick the conscience of the American public, and the people

of America are more acutely aware of what is moral and what is not now more than ever before in the history of this country in my view.

I am happy to know that your Department shares the concern expressed by the members of this committee. I am happy and pleased that you are taking steps to do something about them.

Now, it is a fact that we need the trade relationships and we need the income accruing to this country from the enterprises such as we have been talking about. There is no question about that.

It is true that American businessmen are as moral as people of other countries but that is only saying that that morality is not of a very high standard.

So far as I am concerned, I am equally appreciative of the attitude of your Department and other departments of government toward the events which recently occurred. Mr. Whalen.

Mr. WHALEN. I am going to have to run in a few minutes. I have an appointment at 3:45 with Ambassador McCloskey, and I just wanted to raise one or two questions.

The allegations of bribery of foreign officials by Americans were uncovered by U.S. executive agencies. In your three points that you made, Mr. Feldman, on page 4, the second related to the intent of the State Department to cooperate with responsible foreign authorities in connection with the allegations of bribery. This prompts me to ask this question:

As far as you know, how many cases in the last 5 years have been leveled by foreign authorities against U.S. business firms for bribery or other illegal conduct? And I am not referring now to practices that might lead to nationalization.

Mr. FELDMAN. I don't have the statistics as to the number of charges of criminal activity. There must have been some cases, but I don't recall any specific case having come to my attention in the course of my responsibilities in the Department.

You sometimes get speculation in the press and among the militant opposition to American companies. When specific companies become a political issue in a country you have rumors of the kind of thing and occasionally, where a serious investment dispute which has led, for political reasons, to a major expropriation, you will get charges that are unspecific that there has been a long history of corruption, which may or may not be true.

If you will forgive me for not getting into names, I can recall a situation where there were such unspecific charges and where the company's view was that one of the reasons it was expropriated was that it refused consistently to pay anybody. Now, we are not in a position to judge the accuracy of charges of this kind.

But in view of your specific question, I should clarify my statement-it is not our thought that U.S. Government agencies would properly become a vehicle for investigating violations of foreign law, That is not what we had in mind.

But cases have arisen, as you pointed out, in which these countries' reputations have been put at issue as a result of allegations appearing in the U.S. press, sometimes on the basis of leaks and sometimes otherwise, which have resulted from the law enforcement activities of U.S. regulatory agencies protecting U.S. interests; and we believe, where that occurs, it is our responsibility to be as forthcoming as possible. We have had very specific requests from foreign governments in

this regard. We have not been able to provide the kind of information they want because, in most cases, this information is being developed by investigations being pursued by various committees pursuant to court order and that process has to take its normal course.

This is sometimes very difficult for those outside of our system to appreciate and it has been one of the foreign relations problems we have had as a result of this series of disclosures, one of our responsibilities is to cooperate with foreign governments and to help them understand the U.S. legal procedures.

Mr. WHALEN. I was referring to specific cases which have been uncovered, with the countries involved pursuing this investigation, and preferring charges against alleged American violators.

Mr. FELDMAN. I must say, first of all, I am not familiar with some of the cases that you suggested; but, for example, in the Gulf case. which is one you mentioned and which has received a great deal of attention, I am not aware of any investigation that was going on in any of those countries nor am I aware of any awareness on the part any of their officials, any more than there was awareness on the part of any of our agencies, as to the possibility of these payments prior to the domestic investigations of our internal problems which led ultimately to the discovery of these funds.

of

Mr. WHALEN. Just to get back to my first question-and then I will have to depart-in your opinion, there has not been a rash of charges leveled by foreign governments against U.S. firms in terms of bribery or other illegal activities?

Mr. FELDMAN. I think that is a fair statement.

Mr. WHALEN. Thank you.

Mr. SOLARZ. Mr. Feldman, would you know offhand how many foreign countries American firms do business in?

Mr. FELDMAN. Well, no; I am sorry I can't say but I would imagine American firms would do business in nearly all of the countries of theworld. We are getting close to 150 of them. There are some where they are not too interested but these are very few.

Mr. SOLARZ. Do you have any idea whether there are any foreign governments in which American firms do business in which bribery is not a crime?

Mr. FELDMAN. I am not familiar with the statutes of various countries in the international community. We would assume that offenses: such as bribery are obviously criminal in most countries of the world but that does not imply that their legal systems are the same, that their definitions of the offense would be the same or that they would have the same legal defenses. I cannot give you a definite statement. Mr. SOLARZ. Assuming, just for the purposes of discussion, that in most countries of the world bribery is illegal, why would those countries in any way resent it if we enacted legislation making the bribery of foreign officials by our own citizens illegal as well?

Mr. FELDMAN. Mr. Solarz, I think it is not hard to understand that countries feel they have the right not only to enact the laws in their country but to enforce the laws in their country. We have reason to believe that there would be resentment and that we could not really quarrel with that if the U.S. Government, as a function of its sovereign power, undertook to insure, in effect, that foreign officials lived up to the statutes which have been enacted in their countries.

Mr. SOLARZ. What I am talking about is legislation which would make American citizens live up to the statutes of the United States. For example, would our government in any way resent it if a foreign government passed legislation in its own country prohibiting their nationals from bribing American officials?

It would seem to me that that would be no basis for any feeling of resentment on our part that they wouldn't infringe on our sovereignty. They would be regulating the conduct of their citizens. If they choose to make something illegal which is already illegal here in the sense it would apply to their citizens, why should we in any way be concerned about that? It seems to me that we might welcome that as an additional form of insurance against such activities taking place.

Mr. FELDMAN. I am not confident that we would have the view you express. We have had an experience where we have been in the position of an exporter of capital and suddenly we see ourselves, as we actually were for many years, an importer of capital, and suddenly we get a different perspective on the problems of capital flows, or some people

do.

I am not sure what the reaction would be in a U.S. community were we to have foreign operations active here and suddenly to have issues affecting the local political structure in our community become litigated on a foreign stage. It is hard to say how everyone would react. In any event, I cannot testify as to the sensibilities in the United States; I can testify only as to the sensibilities abroad where we have enough to go on.

Mr. BIESTER. On this line, it seems to me that the problem of sensibilities is less serious than the problem of how we prove the case. If the bribe took place in a foreign country and the trial were held in a district court in the United States, the foreign public official would have to be subpenaed to testify in the United States.

Mr. FELDMAN. That is entirely right. I think that you are correct to put the emphasis on enforcement. It is not just a trial; it is also the investigative process, the surveillance. And, if I may comment on that, I appreciate I have not had a chance to consider the proposals in Mr. Solarz's statement, but the idea of the U.S. Embassy taking the responsibility of surveillance, whether over American citizens abroad or foreign citizens abroad, I do not think is in keeping with the function of the service and I do not think it is in keeping with what congressional opinion or public opinion would be as to the role of the Foreign Service.

I would think, particularly in recent years, there is a high degree of sensitivity to the possibility of surveillance of U.S. citizens and their activities abroad by their Government. I would think that we would have to look at that very carefully before we could give support to such a program.

Mr. SOLARZ. I am neither a criminal nor corporate lawyer and, in fact I am not a lawyer at all, but I would observe that it would appear as if instances of bribery have already been uncovered by a number of U.S. agencies without having conducted these kinds of investigations abroad. Because when a large corporation is engaged in making substantial cash payments to a foreign official, usually there are a number of people involved in this.

It can be reflected in the records and books of the corporation involved, and I am not sure that in point of fact it would be absolutely essential-although obviously it would be helpful-but I don't know it would be absolutely essential, in order to prove a bribe had been. transacted, to have testimony of foreign officials.

Mr. FELDMAN. If I may make two comments on that. A responsibility of reporting on criminal activity abroad necessarily involves surveillance abroad-however vigorous it may be is another matterbut that is a responsibility which would put the Foreign Service in a very different relationship with American citizens than historically has been the case.

As far as enforcement of U.S. law, as in the case of the SEC, even where documentation can be found in the United States of activity which takes place abroad bringing it out through procedures in the United States can be an intrusion into the internal life of a foreign country.

More important, the experience that the agencies, and particularly the independent committees that are investigating these cases will have may indicate that, without the facilities for actually tracking down the payments abroad and establishing for what purposes they were made and what services were rendered, they will not be able to get to the bottom and may leave a situation in which you have a lot of charges or questions which cloud people's reputations and which cannot be adequately resolved one way or the other. I have a feeling there may be some lingering damage from the present phase we are going through. Mr. SOLARZ. You raise some very serious questions and they have to be explored further.

Let me ask: To what extent does the State Department have any information concerning the possibility that the CIA may have allegedly used some American corporations to funnel its own contributions that is to say, the CIA's contributions and payoffs to foreign governments or politicians?

Mr. FELDMAN. Mr. Congressman, I wouldn't want to give any credence to these suggestions when I say I have no information or have no way of knowing if it were true. Questions on the intelligence activities of the U.S. Government are the responsibility of their Director of the Central Intelligence Agency. Other committees are investigating, and I think we have to leave those questions to those forums.

Mr. SOLARZ. Has there been any response from foreign governments to the suggestions which you have indicated in your testimony we had made in various international forums concerning the possible development of a code of conduct with respect to these multinational corporations making political contributions or illegal payments?

Mr. FELDMAN. I think I owe it to the committee to clarify that. We have not made any suggestion. We discuss this in the statement, saying it could be used. We will be talking. at least informally, with other governments in the very near future about this possibility.

In respect to the more general proposition as to whether the United States of America could support a set of principles of conduct relating to the activities of transnational corporations, we have indicated, in the U.N. and other agencies, that we wish to work with the other govern