Lockheed Tells How it Won Friends and Influenced People
"I'm not saying it's right, but it's a way of doing business," Daniel J. Haughton, chairman of the board of the Lockheed Corporation, leaned back in the plush chambers of the Senate Foreign Affairs Committee, glaring at the television lights and the whispering reporters. This was Haughton's second appearance before a Congressional firing line: in late August, Sen. William Proxmire (D-Wisc.) chaired the Senate Banking Committee's inquiry into Lockheed's business practices and financial status. Barely three weeks later, the Multinationals Sub-committee of the Foreign Affairs Committee, chaired by Sen. Frank Church (D-Idaho), questioned Haughton as part of its investigation into the illegal overseas dealings of American companies.
As part of the recent disclosures about corporate bribes and political contribution abroad by several major U.S. corporations--Northrop, Gulf, Ashland Oil--the Securities and Exchange Commission revealed this summer that Lockheed has paid $202 million in agent's commissions since 1970, of which at least $22 million was destined for contributions to foreign political parties and bribes to officials of other governments.
Haughton defends these practices as essential and characteristic elements of doing business abroad: "Unless everybody plays by the same rules, it's necessary if you're going to win." (Sept. 12 hearings). But when pressed at the multinational hearings by Sen. Joseph R. Biden, (D-Del.), Haughton would only cite "gossip" and a recent French newspaper article as evidence that Lockheed's foreign sales competition employs similar practices.
Like its mammoth defense competitors Northrop and Raytheon--and unnamed others--Lockheed apparently has directed enormous sums to Saudi Arabia's flashy contract agent, Adnan Khashoggi, and his mysterious Triad Corporation. Lockheed officials reportedly payed Khashoggi $106 million in the last five years: the ante is high, but in the unreal world of big-money defense contracts, the stakes are higher still. In Europe, Africa and the Middle East, uneasy rulers are channeling huge sums into sophisticated weapons systems, and American companies are fighting with each other and with foreign competition to obtain slices of the increasingly lucrative pie.
Lockheed is not your ordinary cost-plagued, beleagured defense producer, however. In 1971, the federal government bailed out this dying giant with a $250 million loan guarantee authorization, of which $195 million is still outstanding. Receiving 62 per cent of its total sales from the government, the Pentagon's second largest contractor for fiscal year 1974 and number one during the five years prior to that, the military-industrial establishment found Lockheed too prominent--and too entrenched--to permit it to collapse.
Congress approved the loan guarantee and the aircraft production lines kept humming. But the Emergency Loan Guarantee Board (ELGB), created to oversee the Lockheed loan, received no information about bribery payments uncovered no traces of the corporation's questionable overseas sales habits. William E. Simon, Secretary of the Treasury Department and chairman of the ELGB, told the Banking Committee at the August 25 hearings that he and co-members Ray Garrett, Jr., chairman of the SEC, and Arthur F. Burns, chairman of the Federal Reserve Board, were "distressed" at the new disclosures. But Simons hedged on Proxmire's recommendation that the ELGB announce its intention to stop the loan if bribes continued. He insisted instead that "we'll stop the bribery," although he couldn't suggest a foolproof monitoring system. Just that morning, the ELGB had approved a rollover, or extension, of a matured $30 million Lockheed loan which forms part of the government's guarantee package. Lockheed didn't even get a slap on th wrist, despite the evidence that government-approved loans may have been used to subsidize bribes to foreign officials, and were supporting a business which engaged in practices contrary to U.S. law.
Lockheed's initial disclosure of overseas payments came in a statement released on August 1, 1975 with its earnings report. The company had consistently denied the existence of such practices but was forced to acknowledge the payments when the corporation's auditors, Arthur Young & Co., refused to certify Lockheed's financial statements and thus allow issuance of the earnings report until the bribery payments were acknowledged.
The Lockheed statement claimed that payments were necessary to its success in some sales overseas but did not list the specific payments. This secrecy was defended by the assertion that "disclosure could have a serious impact on several hundred million dollars of the company's present backlog" of $1.6 billion in foreign orders. Haughton denied both Senate committees access to the details: "Attempting to establish names of recipients or attempting to prove that payments had been received in specific foreign countries would be unfair, would serve no useful purpose and would cause a maximum amount of harm." (August 25 hearings).
Haughton claimed that he and the rest of Lockheed's corporate management did not usually know where its payments ended up. But he defended the practice's usefulness: "If you get the contract, it's pretty good evidence that the payments had to be made."
He asked for a clean slate: forget the past, make new rules, and a penitent Lockheed would obey along with the rest. But his rationales seemed perilously close to royal assertions of immunity. Senator Proxmire, in his August 25 closing statement to the Banking Committee expressed the same fear:
"The question that remains to be answered is whether a giant corporation whose business is largely dependent on sales to the U.S. Government will be permitted to continue to act in utter contempt of the U.S. government.
"Here is a company which came to Congress hat in hand four years ago asking for $250 million in loan guarantees.
"Today the same company so stands as a self-confessed briber, but refuses to give the government and the public the details of the bribes."
Bankrolled by assurances from government agencies and contract infusions from the Pentagon brass, dependent Lockheed is a twisted model of traditional American "competitive free enterprise." The "perfect competition" of an Ec 10 problem set disappears into the power and reach of the corporate Goliath, and nowhere is this more apparent than in the defense industry.
Lockheed's cog in the corporate-military wheel has been oiled by federally-guaranteed money, producing a scenario that reads like a twisted version of some new socialism. And despite its financial involvement, the public doesn't even buy the right to know what it's funding, let alone ensure that the money is used properly. Lockheed, its competitors in the weapons industry, and their Pentagon and congressional allies exemplify the close and pervasive government-corporate relationship of today: a corporate socialism that serves the interests of men like Haughton and their businesses, leaving the people slightly poorer but no better off.
Marilyn Booth 77 is presently on leave.