Rules for Lockheed

A large number of big U.S. companies have now admitted making payoffs to foreign officials and political organizations to help win overseas sales. So far, however, none has so stoutly rationalized the practice as the Lockheed Aircraft Corp. Last month the nation's No. 2 defense contractor publicly conceded that it has made at least $22 million in such payments. Last week, in testimony before the Senate Banking Committee, Lockheed Chairman Daniel Haughton adamantly refused to name the recipients of the company's largesse, saying that disclosure would jeopardize present and future foreign-sales prospects. Was under-the-table cash really necessary? Snapped Haughton: "If payments are made and you get the contract, it is good evidence that you needed to make the payments."

Suspended Payments. Haughton's argument failed to impress Treasury Secretary William Simon, however. He is one of the three members, along with Federal Reserve Board Chairman Arthur Burns and Securities and Exchange Commission Chief Ray Garrett, of the Emergency Loan Guarantee Board, which was set up in 1971 to provide Government backing for up to $250 million in commercial bank loans to financially troubled Lockheed. Understandably unhappy at the appearance of the Government guaranteeing loans to a corporation that has been shelling out millions in overseas payoffs, Simon told the Senate Committee that Lockheed had "apparently not been forthright" about its practices, and insisted that the Loan Board "will not condone illegal or unethical activities by American business, here or abroad."

Loan Board staffers are drafting a resolution to add to the agreement with Lockheed that will prohibit bribes made to secure foreign business. For its part, Lockheed has suspended all overseas payments, even ordinary sales commissions, until its directors formulate a policy proscribing bribes that will win the Loan Board's approval.

The exercise may involve considerable semantic horse trading. During the Senate hearings, for example, Haughton preferred to describe Lockheed's payments as "kickbacks" rather than bribes, presumably because bribes to government officials are patently illegal in most countries, while a company's culpability in the case of kickbacks is less clear. Lockheed and the Loan Board will probably agree on some rules before Lockheed's board meets next week. Although they will apply only to Lockheed, which is heavily dependent on its Government loan guarantee, the forthcoming rules could provide some needed guidelines for other companies in the legally and morally murky area of foreign-sales practices.

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