The Biggest Payoff

Exxon Corp. last year passed General Motors to become the nation's largest corporation in terms of sales. Now, so far as the public record shows, it also leads in making secret payments to foreign officials. Last week Exxon executives conceded to the Senate Subcommittee on Multinational Corporations that between 1963 and 1971, an Italian affiliate had spent from $46 million to $49 million to gain such political favors as favorable treatment of refinery licenses, levies on gasoline and heating oil, and other tax legislation. That sum far exceeds the political payments revealed by other U.S. corporations such as Gulf, Northrop* and Mobil (which last week admitted making political contributions of $2 million in Italy between 1970 and 1973).

Exxon Controller Archie L. Monroe told the Senators that during the eight-year period, his company approved contributions totaling $27 million by Esso Italiana, mainly to Italian political parties. Monroe said that Exxon called a halt to the payments in 1971 when it discovered that the subsidiary's president, Vincenzo Cazzaniga, since dismissed, had spent an additional $19 million that had not been authorized. Included was a voucher for $86,000 supposedly paid to the Italian Communist Party, which made sweeping gains in regional elections last month partly by boasting that its hands were "clean" of foreign oil money. The Italian Communists, who wield considerable clout in their country's municipal and union affairs, have denied they ever received the payments.

Italian Custom. According to a 1972 audit by Exxon, a number of bookkeeping stratagems were used to hide the payments. One was to fill out vouchers for goods that were never received. Monroe said Exxon executives were persuaded to keep the payments secret by Cazzaniga, who reported that that was the custom in Italy. Pointing out that camouflaging the payments also enabled the company to deduct them from its Italian income taxes, Subcommittee Chairman Frank Church of Idaho charged that Exxon was practicing "a fraud on the Italian government." Moreover, subcommittee experts reckon that the favorable legislation resulting from the payments was worth 20 times more to Exxon in Italy than the amount of its contributions.

Exxon also disclosed that its Canadian subsidiary, Imperial Oil Ltd., paid $1.2 million to Canadian political parties over the past five years. Monroe stressed that payments in both countries were perfectly legal, but labeled the Italian payments "a mistake." In response, Church quoted from the auditors' report, which concluded that "the principal factor" in the irregularities "was that higher levels of management . . . condoned falsification of records." That, Church remarked, "says it all." Though bribing foreign officials or making donations to foreign parties do not now violate American law, concealing payments on corporate books could easily breach Internal Revenue Service as well as Securities and Exchange Commission regulations. Last week, the IRS revealed that it is now investigating more than 100 corporations for possible illegal political campaign contributions or bribes in the U.S. and abroad.

* Whose chief, 55-year-old Thomas V. Jones, resigned last week as chairman after the company's executive committee declared that he "must bear a heavy share of the responsibility for the irregularities and improprieties" recently disclosed. Jones vows he will fight to stay on as president and chief executive, but the board is looking for a replacement.

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