SCANDALS: THE BIG PAYOFF

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He is right. President Ford last week expressed "deep concern about the payoff revelations" and ordered a review, possibly by a Cabinet-level committee, of bribery and other improper activities by U.S. companies overseas. Secretary of Commerce Elliot Richardson let it be known he would be happy to head the probe.

Just what can be done to the offending companies is uncertain because the legal situation is murky. U.S. law draws a sharp distinction between domestic and foreign political use of corporate money. Within the U.S., donations to politicians from a corporate treasury are clear-cut crimes—even though more than a dozen companies have confessed to engaging in such activities. But even outright bribery of foreign officials does not violate any U.S. law. It may break the laws of the countries where the bribes are passed, but some of those countries are lax in enforcing their own legal codes. Concealment of foreign payoffs on the books of a U.S. corporation violates the reporting requirements of the Securities and Exchange Commission; the penalties usually are no more than public disclosure of what payments have been made.

The White House has let it be known, however, that the President, after the review he has ordered, may consider disqualifying companies that give foreign bribes from bidding on federal contracts—an act that could spell bankruptcy for some defense contractors. Treasury Secretary William Simon last week pledged to make sure that companies do not treat bribes as honest business expenses, deductible from their taxable profits. He ordered the Internal Revenue Service to intensify and broaden its antibribery campaign.

For example, to ensure that all payments are listed and bona fide, IRS examiners are taking much more trouble in sifting the records of companies thought to be concealing or mislabeling questionable foreign payments. Federal Reserve Board Chairman Arthur Burns would go even further. He called last week for a new statute under which an overseas bribe would be "treated as a criminal violation."

The turmoil overseas and in Washington is endangering Lockheed's survival—with important consequences for the economies of California and Georgia, where Lockheed is a major employer, and the national defense, since Lockheed is the nation's No. 1 defense contractor. The giant company (estimated 1975 sales: $3.25 billion) was saved from bankruptcy in 1971 by the Government's guarantee to repay $250 million in private bank loans. But the General Accounting Office, which conducts audits for Congress, has expressed doubt that Lockheed can repay the loans on schedule by 1978—and the Government is unlikely to extend the guarantee. Burns, who serves on a Government board that oversees the loans (Simon is another member), declared last week that the original guarantee was a mistake.