The Worse Things Get, the Better

In the heady days of gunboat diplomacy and banana republics, U.S. companies like United Fruit and Jersey Standard often intervened in the internal politics of South American countries. Sometimes, to help promote their foreign interests, the companies could count on the diplomatic and military leverage of the U.S. Government. Those days are long past. But executives of the International Telephone and Telegraph Corp., the largest U.S. conglomerate, apparently yearn to carry on in the not-so-grand old tradition. The testimony in two weeks of hearings by the Senate Subcommittee on Multinational Corporations, which showed how ITT and the Central Intelligence Agency conferred on ways to block the election of Marxist Salvador Allende in Chile 2 1/2 years ago, provided enough juicy material to keep any Yankee-go-home propagandist busy for years.

Realizing that the company was about to have its $150 million investment in Chile's telephone system nationalized, ITT executives worked overtime to devise ways of stopping Allende and tried to donate, through CIA operatives, large amounts of money for an anti-Allende coalition. The company management even considered the old insurgent Communist Party strategy against troubled capitalist states: foment economic chaos on the principle that the worse things get, the better. Though ITT and CIA officials deny that any of these plans were ever carried out, such schemes ran against the stated U.S. policy of non-intervention in Chile and, in light of the CIA'S involvement, raise doubts as to how firm the policy was.

In an unprecedented move, the subcommittee heard and released the closed-session testimony of the CIA's chief of clandestine operations in the Western Hemisphere, William Broe. (It was the first time that a CIA agent has testified before a congressional committee.) Broe's testimony, added to what ITT executives told the subcommittee a week ago, unraveled the following chronology of collaboration:

JULY 16, 1970. Broe met with ITT Chairman Harold Geneen in Washington. The meeting had been proposed to Richard Helms, then the CIA chief, by John McCone, an ITT director and former head of the CIA. Broe said that Geneen told him that ITT was willing to put up a "substantial fund" to support a conservative candidate for President in the elections in Chile to be held Sept. 4. According to Broe, at that time the CIA declined the proposal because the U.S. was not supporting a candidate in the Chilean election.

SEPT. 4. Allende won a 36% plurality but still had to face a run-off vote in the Chilean Congress Oct. 24.

SEPT. 9-10. Geneen told McCone at an ITT board meeting that he was willing to put up $1,000,000 for the U.S. Government to use in Chile. A few days later, McCone made offers to both Henry Kissinger and Helms of "up to $1,000,000 to support any Government plan for the purpose of bringing about a coalition of the opposition to Allende." McCone did not receive an answer.

SEPT. 29. Broe then made what amounted to a counterproposal to ITT Senior Vice President Edward Gerrity Jr. Broe said that he discussed with Gerrity "the feasibility of possible actions by U.S. companies designed to create or accelerate economic instability in Chile." Broe mentioned such measures as the cancellation of credit lines to Chile by American banks, a slowdown in delivery of machinery spare parts, action to force savings and loan institutions to close down, and the withdrawal of technical assistance. Broe gave Gerrity a list of American companies that might help in such a plan, "providing the economic course was feasible." Gerrity said that he was opposed to creating economic disturbances, but later organized, according to the testimony, at least two meetings with representatives of such companies as Anaconda, Kennecott Copper, Bank of America, Pfizer Inc. and Ralston Purina. The other companies were not willing to go along with such adventurism.

OCT. 24. Allende was elected by the Chilean Congress. Later he nationalized many U.S. companies, including ITT's Chilean telephone subsidiary.

During the hearings, several witnesses gave conflicting versions of the purpose of the million-dollar offer. Contrary to McCone's testimony that the money was to be used for an anti-Allende coalition, Gerrity maintained that it was for constructive programs, such as housing and social development, "to make Allende happy about the American presence." Later, Charles A. Meyer, then Assistant Secretary of State for Inter-American Affairs, repeatedly emphasized that the U.S. policy toward Chile during this period was one of strict non-intervention--a statement that seemed to conflict with Broe's testimony about CIA suggestions to create economic disturbances in Chile.

"It is obvious," said Subcommittee Chairman Frank Church, "that somebody is lying." Members of the subcommittee will review the transcripts of the testimony to decide whether to send them to the Justice Department for possible charges of perjury.

For either private companies or the U.S. Government to intervene in a free election is, as Church said, "very improper." Beyond the question of propriety, the troubling aspect of the ITT affair is that it will fan suspicions in foreign countries that multinational corporations commonly use their financial powers to influence foreign political affairs directly. To date, there is little public evidence that other companies have in recent years tried to meddle as ITT sought to do.

Senator Charles Percy noted during the hearings that corporations have an obligation to protect their assets and the interests of their shareholders. But, he said, such protection must not improperly involve the corporation in the internal affairs of the host country or contradict U.S. foreign policy. In Chile, most of the U.S. corporations--except ITT--have followed that standard, even at a loss. Ford, for instance, simply pulled out of Chile, wrote off a $16 million loss and settled for a $900,000 payment from the federally financed Overseas Private Investment Corp. (OPIC), which insures multinational corporations against expropriation. ITT now stands to lose whatever compensation Allende had promised to pay; and unless the company can disprove the mounting evidence that its loss resulted from its attempt to interfere in Chilean politics, it may also lose its $92.5 million claim with the OPIC. To knock down that evidence will be Harold Geneen's task in testimony this week.

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