A Bitter Payoff at ISC

After lavish bribes for big deals, SEC transit gloria

The skein of corruption reached across four continents and featured the bribery of top government officials or members of ruling families in seven countries, including Saudi Arabia, Iran, Chile and Nicaragua. These are the elements of a complaint by the Securities and Exchange Commission against Houston's International Systems & Controls Corp., which surged during the early 1970s by providing services and equipment to help Third World countries develop .their and agriculture.

In a federal civil Suit in Washington last week, the SEC accused ISC of getting some $750 million in orders over the past decade by making more than $23 million in "questionable and illicit" payments, and having "outstanding commitments" of $10 million for similar payments. Named as defendants were the company, deposed Chairman J. Thomas Kenneally, Senior Vice President Herman Frietsch, former General Counsel Raymond Hofker, former Treasurer Albert Angulo and Chief Engineer Harlan Stein. The SEC asked the court immediately to appoint an agent to take over the company's records and oversee its activities. Reason:

according to the SEC, the firm in recent weeks has begun "a massive shredding of corporate documents."

The unusually detailed charges suggest that the company spent almost as much effort buying off officials as it did pursuing its business. The SEC's allegations read like a Baedeker of bribery.

For example, in Iran, where ISC sales averaged $60 million annually in recent years, the company, in pursuit of a $350 million pulp-and-paper project, paid sev eral groups of agents $11.3 million of a $22.3 million commitment. Among them:

Prince Abdul Reza, a brother of the Shah.

The prince, says the SEC, was paid to use his influence for ISC.

In Saudi Arabia, where ISC won a $106 million contract to design and build a desalination plant, the SEC charges that the company paid Adnam Samman, then vice governor of the state-run Saline Water Conversion Corp., $3.5 million. To pick up a $50 million contract for a sugar processing complex in the Ivory Coast, ISC paid Gilchrist Olympic, son of a for mer President of Togo, more than $1 million and gave him a new Lincoln Continental, the SEC says.

At the time, Olympic was managing director of a British consulting firm hired by the Ivory Coast government to screen competitors for the contract. Another $310,000 went to a company half owned by Timothee Ahoua, then and now the Ivory Coast ambassador to the U.S.

In Chile, the company worked out a deal with Daniel Fuenzalida, chief economic adviser to General Gustavo Leigh, a member of the ruling junta. Fuenzalida and others formed a company called Chilco, which the SEC said was to be paid .5% of the value of any contracts that ISC secured in the country. One member of Chilco was Benjamin Rencoret, who was and is a Chilean honorary consul in Houston. Despite payments of $30,000 to Chilco, the company failed to get the contract it was seeking: construction of a $375 million liquefied natural gas plant.

An ISC subsidiary landed a contract in Algeria to build a natural gas treatment plant. The subsidiary listed a cost of $400,000 paid to Rhasid Zeghar, a former senior military officer, for consulting services, which the SEC says consisted of meeting with ISC representatives for four days. In order to win a $5.2 million contract to build a grain storage facility in Nicaragua, other subsidiaries paid $415,538 to companies owned or controlled by Dictator Anastasio Somoza and his wife.

Company officials deny that the payments were bribes and claim they were sales commissions and consulting fees. In any event, the two-year investigation by the SEC has put ISC in dire trouble. Unable to meet its payroll since April, it has piled up $24 million in losses, and trading in its once highflying stock has been halted by the American Stock Exchange.

The Justice Department is also investigating. It could bring criminal charges against the company and some officers for violating the Foreign Corrupt Practices Act and U.S. securities laws.

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