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JUNE 5, JULY 17, 24, 29, SEPTEMBER 11, 18, AND 30, 1975
Printed for the use of the Committee on International Relations
U.S. GOVERNMENT PRINTING OFFICE
For sale by the Superintendent of Documents U.S. Government Printing Office,
COMMITTEE ON INTERNATIONAL RELATIONS
THOMAS E. MORGAN, Pennsylvania, Chairman
CLEMENT J. ZABLOCKI, Wisconsin
L. H. FOUNTAIN, North Carolina
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 G. BIESTER, JR., Pennsylvania
BENJAMIN A. GILMAN, New York
ROBERT J. LAGOMARSINO, California
THOMAS R. KENNEDY, Subcommittee Staff Consultant
THOMAS E. POPOVICH, Minority Subcommittee Staff Consultant
Butler, Michael F., Vice President and General Counsel, Overseas Pri-
Feldman, Mark B., Deputy Legal Adviser, Department of State----.
Alexander, Hon. Donald C., Commissioner of Internal Revenue_.
Barreaux, Theodore, Director of Congressional Relations, Securities
Loomis, Hon. Philip A., Jr., Commissioner, Securities and Exchange
Timmeny, Wallace L., Associate Director, Division of Enforcement, Se-
curities and Exchange Commission----
Wolfe, Singleton, Assistant Commissioner of Compliance, Internal
Baker, Donald I., Deputy Assistant Attorney General, Antitrust Divi-
sion, Department of Justice_-_.
Weldon, James J., Jr., Acting Director, Bureau of Enforcement, the
Stansberry, Brig. Gen., James W., Deputy Assistant Secretary of De-
fense (Procurement, Installations and Logistics) ‒‒‒
Starrett, Charles O., Jr., Assistant Director, Policy and Plans, Defense
Lewis, William, Special Assistant to the Under Secretary for Security
Stern, Thomas P., Deputy Director of the Bureau of Politico-Military
Schmults, Edward C., Under Secretary of the Treasury, Executive Di-
Timmeny, Wallace L., Associate Director, Division of Enforcement,
MATERIAL SUBMITTED FOR THE RECORD
Statement by Hon. Philip A. Loomis, Commissioner, Securities and Ex-
Relevant portions of speech by Chairman Raymond Garrett of the Se-
curities and Exchange Commission before the American Society of Cor-
Memorandum entitled, "Agents Fees in the Middle East," circulated to
American aerospace, electronic, and other industries by Defense Security
Lockheed policy on the selection and use of international consultant, Sep-
Excerpts from report of the Cities Service Co. to the Securities and Ex-
change Commission, file No. 1-1093, form 8-K, current report_----
Memorandum of the Securities and Exchange Commission with respect to a
3. Defense Procurement Circular, No. 75-1, 30 July 1974.
-4. Defense Procurement Circular, No. 74-1, 26 August 1974‒‒‒‒
5. Standard Form 119-Contractor's Statement of Contingent or Other
6. DD Form 633-Department of Defense Contract Pricing Proposal__.
7. Exchange of correspondence between Subcommittee Chairman Nix and
Commissioner Donald C. Alexander, Internal Revenue Service, and
Assistant Commissioner Burke W. Willsey, on the question of cor-
8. Corporate reactions to proposed Department of State changes in Inter-
9. Press release issued by Department of State on bribery of foreign offi-
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
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,
18. Letter and material from Hon. Carlye E. Maw, Under Secretary of
State for Security Assistance, Department of State to Hon. Thomas
Proposed Rules published in the Federal Register on International
International Traffic In Arms Regulations (ITAR) Title 22, Code
of Federal Regulations, Parts 121-128, November 1973--
19. Statement of J. M. Dunn, Acting Executive Director of the Council on
20. Statement of Timothy W. Stanley, president, International Economic
Policy Association, July 30, 1975, on International Business Ethics...
THE ACTIVITIES OF AMERICAN MULTINATIONAL
THURSDAY, JUNE 5, 1975
HOUSE OF REPRESENTATIVES,
COMMITTEE ON INTERNATIONAL RELATIONS,
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. Perù 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