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the legitimate employment of agents for the hidden purpose of making payments to foreign government officials. We believe a better approach to the problem of potential abuse is one which we have already adopted, namely, notification in advance of contract award to foreign governments under the Foreign Military Sales Act of any contractor claimed agents fees and of our assessment of the reasonableness of such fees. Insofar as your amendment would exempt such information on agents fees from the strictures of 18 U.S.C. 1905, it appears to us that such an amendment may well raise constitutional issues as to the extent which Congress may lawfully require disclosure of proprietary information. The question is raised whether such disclosure constitutes a taking of private property for public use without just compensation. You may wish to consult with the Department of Justice on that score. Further, you may also wish to consult the Judiciary Committee, inasmuch as the provisions of Title 18 of the United States Code come within the jurisdiction of that Committee.

As to that portion of the proposed amendment which relates to licenses granted for sales in excess of $100,000 on the Munitions List, it should be noted that such licenses are issued by the Department of State rather than this Department, and that the report required by section 414(e) of the Mutual Security Act of 1954, as amended, concerning licenses for the export of articles on the Munitions List in excess of $100,000 is made by the Department of State. Sincerely,

H. M. FISH, Lieutenant General, USAF.

60-363 O 75 18

APPENDIX 13

LETTER TO ADNAN KHASHOGGI, TRIAD FINANCIAL ESTABLISHMENT REGARDING CONTROVERSY IN THE COUNTRY OVER PAYMENTS TO FOREIGN SALES AGENTS IN MATTERS RELATING TO MILITARY SALES CONTRACTS

MR. ADNAN KHASHOGGI,

Triad Financial Establishment, (Through Morton T. McCleod), Los Altos, Calif.

SEPTEMBER 16, 1975.

DEAR MR. KHASHOGGI: Recent newsstories have discussed your views regarding the controversy in this country over payments to Foreign Sales Agents in matters relating to military sales contracts.

The Washington Post on page A-10 of its September 13th, 1975 issue quoted you as saying that you would not comment further on the stream of allegations made by Lockheed and others until there is an appropriate time and place to set the record straight formally.

On behalf of the Subcommittee I would like to offer you the opportunity of appearing on the 2nd of October at 2:00 p.m. in Room H-236 of the Capitol and testify on your views on the question of agents fees. If you cannot appear yourself, perhaps you would send an authorized representative to give testimony before the Subcommittee.

If your views have not been described accurately in our press up to now, then our hearings would afford you with the opportunity to state with precision the true facts. This could be of importance not only to the Subcommittee, but to all those with an interest in changes in legislation relating to Military Assistance and Military Sales programs. We are looking forward to your reply.

Sincerely,

ROBERT N. C. NIX,

Chairman, Subcommittee on International Economic Policy.

(270)

it is small indeed-often less than recommended by the Pentagon to American companies for their representatives all over the world.

American real estate brokers and agents assembling huge parcels of land in rural areas or cities with values in the multi-millions receive as much as 10 percent for their work.

"Banks and investment houses may spend 30 to 90 days arranging a $800,000,000 loan for a company and receive $8,000,000-1 percent-as a fee. In working with American companies to obtain contracts of a similar size we may receive no more than that for work over a period of five to six years— 20 to 30 times as long as the bank works for their pay. On the other hand. if we don't obtain these large contracts we receive nothing at all for our investment of money, time, overhead, technical and managerial personnel, travel and so on.

American companies couldn't afford to pay for the maintenance of local companies and offices in every country when they try to get business. We shoulder the risk and the financial burden for them and we are paid only where we are successful. There are many large contracts we have worked very hard to get for American companies that have gone to other countries.

Often the situation is somewhat like that of the inventor who may work years and years on a machine only to find no buyers. On the other hand, if the result fills a great need, the reward makes the work and risk worthwhile. Our entry into this defense materiel business many years ago occurred because we were one of the first companies established in Saudi Arabia. Our company registration, somewhat like the American corporation, was the third ever made. Our broad range of activities in representing non-defense industries, such as automotive and heavy transport and our experience in manufacturing. fitted us to provide the services American companies needed.

The defense materiel business was very small at first and has grown with the rapid increase in the size of defense systems provided by technological advances. It is still just one phase of Triad activities which include other types of enterprise in many countries. We are very active in the United States. England, France, Italy. Germany, Brazil, Indonesia, The Sudan and other countries with financial services, a variety of manufacturing, agri-business, insurance, land development, housing, and shipping.

In all of this work we seek experience to transfer to our country to help the development of a strong economy by establishing facilities and businesses of all types which our people need just as we need a strong military defense.

APPENDIX 15

STATEMENT OF ADNAN M. KHASHOGGI, ON TRIAD MARKETING For U.S. DEFENSE MATERIEL MANUFACTURERS

Adnan M. Khashoggi, Saudi Arabian businessman identified in news reports recently as a representative for American companies which have been successful in seeking large defense materiel contracts in Saudi Arabia, today issued a statement explaining his work:

Our function for manufacturers of defense materiel is threefold:

1. Advice and assistance in preparing responses to government invitations for proposals which require work in Saudi Arabia such as construction, installation, maintenance and other logistic support with which our executives and Saudi Arabian companies are familiar and can provide.

2. Liaison with dozens of government purchasing officials and experts during the extended periods of sometimes as much as five or six years in which production, technical capacities and costs of the manufacturer are matched and adjusted to harmonize with the requirements of the government.

3. Bringing together in support of the more complex defense systems, a number of companies, sometimes from different countries, whose capacities must be linked to meet the enormous requirements of a multi-billion dollar system using modern equipment; organizing these companies into a consortium; and sometimes arranging financing, from many sources, for the work to be done when the companies do not themselves have the financial resources required.

We act as interpreters in a sense. We know our country and how to organize the facilities to do the work there. We advise the company on this. We explain to our government and its experts the technicalities involved in designing and manufacturing highly sophisticated equipment which only a few nations can make. We are middlemen in the same sense that any sales engineer is the link between the customer and maker in bringing about a match between a custommade product and the customer's very complex needs.

The Triad companies are able to do this because we have had experience for nearly 20 years in manufacturing, financing, and selling in our country and yours and others. We know both sides of the picture well enough to be helpful to all parties concerned. We don't buy favors from either the companies we represent or the government officials who purchase. We earn confidence by hard work and knowledge.

If we have earned the respect and regard of Saudi Government officials it has been through hard work and service to the Saudi Arabian government, which is their overriding concern. I do not believe they permit personalities to interfere with the objective execution of their responsibilities.

We feel we are contributing significantly to the defenses of the West in helping our country build a military capacity on which Saudi Arabia is being advised by the U.S. Government. For more than 50 years my country and the United States have worked hand in glove in military matters. We are part of the easternmost bastion of Western defenses. Our pilots and many of our military are trained in your country. Your military maintains a good number of advisors on duty in Saudi Arabia to assist our country.

We are also helping the United States in equipment export sales that are today one of the largest factors in effecting a favorable balance of trade for the United States. Your sales of defense materiel is a main pipeline through which the money you spend for oil is recycled back to you. In fact my country. Saudi Arabia, is the best trading partner the United States has of all nations in the world on a per capita basis. We spend more money per person to buy U.S. products than any other nation.

Our compensation for our work for American companies may be large in amounts, but in terms of the volume of business to be done under the contracts,

it is small indeed-often less than recommended by the Pentagon to American companies for their representatives all over the world.

American real estate brokers and agents assembling huge parcels of land in rural areas or cities with values in the multi-millions receive as much as 10 percent for their work.

"Banks and investment houses may spend 30 to 90 days arranging a $800,000,000 loan for a company and receive $8,000,000-1 percent-as a fee. In working with American companies to obtain contracts of a similar size we may receive no more than that for work over a period of five to six years20 to 30 times as long as the bank works for their pay. On the other hand, if we don't obtain these large contracts we receive nothing at all for our investment of money, time, overhead, technical and managerial personnel, travel and so on.

American companies couldn't afford to pay for the maintenance of local companies and offices in every country when they try to get business. We shoulder the risk and the financial burden for them and we are paid only where we are successful. There are many large contracts we have worked very hard to get for American companies that have gone to other countries.

Often the situation is somewhat like that of the inventor who may work years and years on a machine only to find no buyers. On the other hand, if the result fills a great need, the reward makes the work and risk worthwhile. Our entry into this defense materiel business many years ago occurred because we were one of the first companies established in Saudi Arabia. Our company registration, somewhat like the American corporation, was the third ever made. Our broad range of activities in representing non-defense industries, such as automotive and heavy transport and our experience in manufacturing, fitted us to provide the services American companies needed.

The defense materiel business was very small at first and has grown with the rapid increase in the size of defense systems provided by technological advances. It is still just one phase of Triad activities which include other types of enterprise in many countries. We are very active in the United States, England, France, Italy, Germany, Brazil, Indonesia, The Sudan and other countries with financial services, a variety of manufacturing, agri-business, insurance, land development, housing. and shipping.

In all of this work we seek experience to transfer to our country to help the development of a strong economy by establishing facilities and businesses of all types which our people need just as we need a strong military defense.

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