E-SYSTEMS TO SUE IRAN FOR WORK ON 707 JETS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88-01315R000200420001-9
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 52
• Document Creation Date: December 16, 2016
• Document Release Date: September 27, 2004
• Sequence Number: 1
• Publication Date: December 5, 1979
• Content Type: NSPR

STAT
Approved For Release 2004/10/13 : CIA-RDP88-01315R0
DALLAS TIMES HERALD
5 DECEMBER 19T9
f cover the money it is, owed.
'
Staff Writer T
- ~.%e company is being careful
E-SystemsInr. Baia it will, file suit" about the answers to questions due to
today in federal court seeking - ap- the eff ect? on legal proceedings,' the
proximately $15.2 million in damages spokesman said.
and cancellation of $4.4 million in let- But according to a.Pentagon source
tors of credit from the Government of familar with the contract, the two
Iran and the Bank of Melli Iran. '-'I tanker-type jets were to be equipped.
The Dallas electronics company said . with sophisticated electronic hard-
it would file the suit in U.S. District , ware for use in a "James Bond" like
Court in Dallas charging that Irah de-' program called IBEX in which the la-
faulted on a 1977 contract in which test American technology was being
the company's Greenville Division applied in Iran for deposed Shah Moo--
was to install communication and hammad Reza Pahlavi with the assis-
navigation equipment on two Boeing tance of the Central Intelligence
707 jets owned by the Pe an Gulf Agency.
nation. Under the $500 million program, .
"We filed the lawsuit to protect the the Shah wanted to establish a border
company and its shareholders proper- surveillance system for Iran. The pro-
round monitoring
11
d f
ll
"
John M.
ty interests in these aircraft,
Dixon, chairman and president, said
in a prepared statement. "We'are ask-
ing the court to declare the contract in
default and to permit foreclosure of
liens existing on the aircraft. Once au-
thorized, the aircraft will be. sold at
auction."
In its one-page statement issued
Tuesday, E-Systems said the value of
the contract, orginally set at $28 mil-
had escalated in value to about
lion
,
$35 million by the time Iran defaulted- ~ he wanted the best electronic ears
in November 1978. The amounts to be ? and eyes on his borders.
claimed by B-Systems, the company i _,I ;
said, represent sums due under the informed sources said the 707 jets
contract and other, unspecified- darn-. were flown to B-Systems' Greenville
ages. facility from the Boeing Co. in Seattle
An E-Systems' spokesman, who in late 1977. While E-Systems has de-
asked to'remain unnamed, declined to dined to say how the planes were to
explain why Iran defaulted on the be 'used by' Iran, a company spokes=
project, how the planes 'would have man said Tuesday that the aircraft
been used or what efforts the corn- were being outfitted with sophisticat-
ed navigation and communication sys-
terns.
No work is currently being done on
.the planes other than that needed to'
prevserve the aircraft; `the company-
said.
The IBEX p%rani has been beset
with troubles since it began. A Jan. 2,
1977, story, by The Washington Post
detailed instances of corruption, pay-'.
ments to U.S. firms from Swiss bank
accounts 'and the Aug.- 28, 1976.. mur-
der of three Rockwell International
employes connected with the project'
in Tehran.
The CIA has 'also declined to an-
swer questions - regarding t` pro-
~ystems was one of many United
States firms to have business with the
country before the 'fall of the Shah.
In most cases, firms selling military
hardware to Iran were protected
,against losses under the Foreign Mili-
tary Sales program which required
Iran to establish a trust fund and -
make pre-payments on projects. But
sources close to the Defense Depart
ment said the F Systems work was
not a part of the military sales pro-
gram and did not qualify for any of,
the trust fund money.. .
The company declined to say how it
was paid or if the Bank of Melli -
the government owned bank of Iran
- had failed to honor letters of credit
that would have provided E-Systems
payment for its work. However, the
-company did say loss of the payments
would not have any "material adverse
effect on its financial statements" be-
cause of a $1.5 million reserve fund
eONTIDIUr ?
g
or.
e
ject ca
posts,, six airborne units and several
mobile ground units. Bids were sub-
mitted by four U.S. corporations in-
cluding E-Systems, Rockwell, GTE
Sylvania and. Mechanics Research Inc.
IBEX, which according to some
press accounts, involved the launder-
ing of millions of dollars through
Swiss bank accounts to pay for work
:done by American corporations, was
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 Approved For Release 2004/10/13: CIA-RDP88-01315R
INQUIRY MAGAZINE
16 October 1978
been broken. Pulling together infoi
1 -2. mation previously gathered by othe
government investigators, they hay
COAV~P OAV. 43 We found that:
u the U.S. Army has consistently ff
vored E-systems over smaller con
panics, such as Bristol, that ofiere..
lower bids on contracts; permitted to boost its prices for the
a the army has changed contract unit considerably.
specifications at the last minute to Bristol's Revzin complained to the
JEFFREY STEIN steer to E-Systems contracts that army that his bid-including the op-
should have gone elsewhere; tion-was much lower than E-
a the army awarded E-Systems a con- Systems's. But even with Revzin, his
tract to build an item at a low unit local congressman, Gerry Studds
price, and then later allowed it to exer- (D.-Mass.), one of his senators,
A sweetheart cise an option to build many more of Brooke, and the General Accounting
the same items at much higher prices; Office looking on, the army went
deal for -0 the company has possibly had the ahead and made contract "modiBca-
> s ? s benefit of inside information from dons" (not "options") that allowed
army officials who later became its E-Systems to build, at higher prices,
employees. twice as many radios as in the original
THIS IS A STORY ABOUT contract, nearly quadrupling the total
big guys and little guys. The THE PROCESS THAT EVEN- value of the deal to a whopping SIl
big guy in the story is the tually led to Stanley Revzin's million.
Dallas-based multinational electronics sad fortunes began 12 years Representative Studds asked the
company, E-Systems. In the five years ago, when the U.S. Army began prop- justice Department to investigate this
since it was taken over by a group of ping up a failing Indiana electronics award. Within weeks, the Justice De-
former high-level defense and. intelli- company, known as MEMCOR,. pith mil- partment replied that it had found "no
gence officials, E-Systems has become lions of dollars of cash grants, unse- grounds" to institute a criminal inves-
a favored contractor for a series. of cured loans, and contracts to build tigation.
highly sophisticated electronic warfare electronic gear. Government welfare to
projects, and it has skyrocketed into the corporation thus indirectly en- N THE SUMMER OF 1976,
the Fortune 500,with annual sales of couraged an outside takeover. The Representative Jack Brooks (D.-
over S320 million. LTV-Eleetrosystems Company stepped Tex.), chairman of the House
The little guy is the Bristol Elec- , in and grabbed MEMCOR. But LTV itself Government Operations Committee,
tronics Company of New Bedford, had troubles, and even with the con- held hearings on the matter and, un-
Massachusetts, owned by Stanley B. tinued flow of government largesse, covered a number of clues to explain
Revzin, the son of Polish-Russian im- couldn't make a go of it. In 1973, the why the army gave E-Systems such
migrants. Put together on a shoestring company, now named E-Systems, was kindly treatment. "The circumstances,
in 1960, Bristol gradually built up a bought by a group of investors headed seem to point to a predetermination on
trade in marine radios and other elec- by a former assistant comptroller of the part of the army that E-Systems I
tronic gadgetry until, by 1973, the the Defense Department, John W. would receive the contract," Brooks
company employed 180 workers and Dixon. Lloyd K. Lauderdale, once remarked to Assistant Secretary of the
grossed S4 million a year in sales. head of the Central Intelligence Aden- Army Harold Brownman.
But since 1973, when he began to cience and technology direc- ' But Brownman had another expla-
compete with E-Systems for defense torate cis swas installed as vice resident, nation. "I believe that this is just a
contracts, Revzin's business has taken while a former CIA director, William F. good case of sloppy workmanship and
a nose dive: the company is down to 50 y m, was recruited for the board. nothing else," he replied. "I certainly
employees and will be lucky to gross $1 MEMCOR and Bristol had competed hope so:'
million in sales this year. for contracts before, with Bristol gen- What went unstated was that
Stanley Revzin now has a chance to erally winning out, but the new group Brownman, who had come to the Pen-
tell the public and Congress how that of E-Systems owners would soon prove tagon after the disputed contract had
happened. At a hearing sponsored by' to be overpowering. In 1973, the army been awarded, had been a vice presi-
Senators William Proxmire (D.-Wis.) had solicited bids from several com- dent at E-Systems. But the man he
and Edward Brooke (IL-Mass.), the panies for a contract to build field had replaced in the Pentagon job, the
Senate Banking Committee will look radios for the South Korean armed man who had been in charge ofaward-
into whether the Pentagon follows the forces under the foreign military sales ing the E-Systems contract, had gone
rules in handing out defense contracts. program. For the first two rounds of on later to become a corporate vice
Revzin believes, and the committee sealed bidding, Bristol came in with president at E-Systems, replacing
strongly suspeA A%8F:6rl %e l9nril~i rt _yt a beautiful example
est. During the t i and burr youuno ow no o business," sputtered
,EFFR rSTrJ.y, Washington mraspomAxt of bidding% however, the army made an obviously frustrated Brooks.
for the Boston Phoenix, has evrittrx oi,Joreiix
three chances in the contract. durin? What Brooks didn't know at the time
 -II TICLE Aij1
C
Pressed [J0S,Finn,..
'Costs
' Help '
i 0
court papers that they nave reason to
believe" that some of the cash was
1:y Charles B. Babcock'. , date Tongsun's requirements as well --i - illegally to American off i-
The South Korean government put ter serve his role,- sang wrote. ( he ----
pressure on a U.S. defense contractor misspellings are in the original) Thus one -investigative theory seems
? to be that the KRI might have been
set up by the Korean government; as
an alternate way of funding the Wash-
ington lobbying effort after E-Systems
refused to, deal with Tongsun Park.
Yang, who wrote the letter recit-
ing Park's prowess as a lobbyist, was
the Korean ambassador to Washington
in the 1960s and was a close friend
of Park's. Yang is now dead. Davis,
who is now a Washington lawyer, re-
fusedto discuss his role in the incid-
ent.
Federal investigators tend: to believe
Yang wrote the letter to promote
Park. There is no indication they have
uncovered evidence that the alleged
Korean lobbyist unduly influenced
congressional backers of E-Systems
competitors, as the Yang letter claim-
ed.
But investigators do find the letter
remarkable' for its candor about Park's
activities in Washington. And they
wonder if it shouldn't have made E-
Systems suspicious about. the later
fees in . connection with.-.th .the same
Korean radio contract:
Park, ;who apparently knew Davis
and E-Systems' Washington represen-
tative Robert C. Smith from his days
as a local party giver, was Indicted
i last August on charges he conspired to
bribe, members of Congress-
' ';. Heis-alleged to- have generated the
Officers of E-Systems say the com-
pany refused to make the suggested
payments to Park, who has since been
indicted as an agent of the S. Ko-
dire other. KKorean businessmen a few,
more than $1 million paid to these
verted to cash and funneled back. to
Some of the money, investigators
believe, was used to make the same
kind of, illegal payments to American
officials that Park has. been, accused
of making . ; ~;:, ...
what happened to the money that
E-Systems was initially approached
has obtained, from non-government
The . bluntly 'worded letter, '.dated
-to, former Defense Department coffin--
--set. John (Jeff) Davis..;:avis later
forwarded it to E-Systems:: The letter,
selection by the. Korean .government
~ .'F:"Since it was ? Tongsun's-" interven-
tionv that"caused the project?to`be re-
operation -(Congressiona - Military Ap-
that it would; bix most, advisable for
men to -._.._. fri ends at
System 'that, they, should ,,accamq-
sun Park's lobbying activities in Con-
Dallas-was told by-a Korean. ambas-
sauva that -
contract to make-field radios for the
WASHINGTON POST
Approved For Release S)MMI CMADP88-01315
U. T m e pence agent es an
Ft L.
op of icia s o en move ark and
..r a waan nse agencies and the
E-Systems officials have said they
? declined the overtures from Park.
`.? Pour months later, however, the firm
a group Which- Included a close as-
to assist"' -.E-Systems in Korea.
Over. the next three years, E-Sys-
`tems paid $1.4 million In commissions
to the KRI, -through two Korean-born
-have been converted to cash and fun-
tary attache at- the Korean embassy
Sources familiar with the investi-
gation, for example,. said that Howard?
Lee; one of the?KRI's men In.Los An-
geles, told the Securities and Ex-
and delivered it to his uncle, Col
Lee.
;LosAngeles, Yoo Jong Ho,. is Col.
$700,000 is previous E-Systems - pay
, __dled the same way
phone Interview that he "didn't=make 1
United States."
When asked what he did with the
money then, Lee said only, "That's. a
family .matter,. a private matter."
The, colonel, who was "a military
procurement officer in Korea at the
time of the 'E-Systems contract, also
`emphatically, denied' suggestions that
he was part of the Korean. Central
Intelligence Agency. "Not" even one
day, or one minute ' have I served
with the KCIA," he said. '_
Lee, :43, complained in the phone
,conversation that previous news ac
I
Approved For Re[ 6
ton an s e
31p.:to general..,.-
Washington post reporter, but then
declined,. saying his superiors would
not give him permission.
Lee has been at the embassy since.
j1lay, 1975. - -
SEC lawyers who have beeninvesti-
gating the propriety of the E-Systems
hereceived, as the Korean -govern-i!
-meat's exclusive agent on purchases
f of U.S. rice
The Korean government- has consis-
?tently denied that Park ever had any
official connection with the Seoul re-
gime: The. Yang letter shows that the.
'former ambassador at least was quite
blitnt;In. pointing out such ties.
am of Justice Department pro-
fee in Seoul- has been question-
ing Park about his role in the Korean
lobbying scheme. In preparation for
his :later testimony at trials in the
.United States-
-There have' been reports that he
'described payments.ofsome $750,000
to several former, members of Con-
315R0002004-2.0001.-g4UN ! 1,,lw U,~.'.
 Approved For Release 2004/10/13: CIA-RDP8-0131
?7;'I ' %f nc? # THE w; sHINGTON MOOT L
September 1977
A 6
(,r
by James Henderson
Most people think that government
corruption is confined to politicians,
and to state' and local politicians in
particular. Few consider dishonesty a
major problem among federal career
ti. employees. But the truth is that cor-
ruption has become the rule among
military career people. It is now
assumed that an officer, 'if he does not
continue to work for the government,
will join the staff of a military con-
tractor upon retirement. The result is
a military procurement process in-
creasingly influenced by the future
employment possibilities of the mili-
tary officers involved. The men in the
following example may be innocent of
anything other than a conflict of
interest, but they are part of a larger
pattern that should disturb us all.
June 22, 1976. Room 2154,
Rayburn House Office_ Building..
Meeting: National- Security.
Subcommittee of the Committee on
Governmental Operations. Subject:
Questionable contract for mobile field
radios by the Department of the
Army.
Assistant Secretary of the Army
Harold Brownman, in charge of instal-
lations and logistics, is accompanied
by two generals and a civilian pro-
curement officer. It is not a good day
for Brownman. The contract in ques-
tion is between the Army, where he
now works, and E-Systems, Inc. of
Dallas, where he had been a vice
president a few years earlier.
"Information received by the sub-
committee indicates that normal pro-
cedures may not have been followed
yJaamles Henderson was a Nieman Fellow last ands that favoritism toward the suc-
T~hip a 8'~ F(efMTSe2((04/V/1 RslA bt Al N R0 2 1 been
, says ep, ac rooks of
STAT
 Approved For Release 2004/10/13 : CIA-RDP88-01315
i
CHARLESTON, W.M.
GAZETTE
M - 63,294
GAZETTE-MAIL
$ - 106,775
JUL. A, 51977
CIS Deal
For some businesses. it-pays to do
business with the CIA, Rep. Gerry`
Studds, D-Mass., has discovered.
,"E-Systems Inc. of Dallas, Tea.', does
frequent business. with various Penta-;
gon agencies, as well as the CIA, and in ;
1975 it picked: up for a relative. song Air.'
Asia Ltd., until the purchase a wholly
owned CIA company with hp ;rl "
on Taiw ~: ~s: ..
'? . All' oug Asia's ''assets-exceeded
liabilities by $3.4 million, E-Systems,
paid,$1.9 million for its new acquisi-
tion.. Had E-Systems executives been.
walking- along a deserted. street and,
found $1.5 million,in new money, they
couldn't have been better or more prof-
itably served.. Deals of this kind may be
made in Heaven, but they're not made
on earth in the free enterprise sector.
This little deal stinks to Heaven. Its
smell is so awful, in fact, that this little
deal deserves a full scale congressional
investigation, after which a federal
grand jury may wish to learn if any
laws have been broken.-...`.-.: This little deal provides yet another
good reason why the CIA's total budget
should be public. CIA officials might be
::.less inclined to give away the public's
''treasure - if' the public knew just how
rmuch of its. treasure was doled out
annually totheag'ency'
`Finally;. this little, diaP provides yet
another reason why-much of the CIA's
total budget oughtto, be. subject W
review o?. the whole: Congress and not
just that select committee of specially
selected overseers. By the way where
was that committee when the CIA was
negotiatirig'with `itself and. giving away
the public's money to CIA insiders?
Approved For Release 2004/10/13 .' CIA-RDP88-01315R000200420001-9
P STAT
 'r AART!CLE proved For Relea ~2(~ Ql~ pC~IA~ ~P p% 1Q,F Q3j2004
I4 JULY 1977
C A Front Firm Sale ta Be Probed
T1ie S'enatel.'3elect 'Commit. t'ee ?on Intelligence
will investigate. "as part'of our- regular oversight
function;" the 1975 sale of a CIA front company to.
a.' major.-government, contractor. a committee
spokesman said . yesterday. And Rep. -Gerry
Studds, D-Mass;-who- has-been fighting for?more~
information about the deal said the CIA's sale of
Air Asia. Ltd. to'-E-Systems Inc. of Dallas,-Tex.,:
should.be.on the agenda:-of:-the proposed-House
Intelligence Committee..,:.... , . . . `, .
E-Systems,,-&'- major-supplier of sophisticated
electronic equipment to the-CIA and the Pentagon,-
bought Air: Asia Ltd. from the CIA for $1.9 million
in cash. An audit of Air-Asia, a Taiwan-based air-
craft maintenance operation,-. showed the,compa-
ny's net worth was $3.4 million'. on March-31, 1974,
10 months:before the sale.
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 Approved For Release 2004/10/13: CIA-RDP88-0
CIA OPERATIONS CENTER
NEWS SERVICE
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 Approved For Release 2004/10/13 : CIA-RDP88-01315ROO02 -
ART*CLE .4PI'1:THE PHILADELPHIA INQUIRER
ON PAGE /,,. ---,D 13 July 19 7 7
A-o U dit sh~aW s C
$L5'i~illkth.
for
Aa:otiaied Press Air Asia was sold by Air America, = The audit, Studds ;released Wad
WASHINGTON - The CIA sold one ? the CIA-owned company. that ran air , dated'March 31, 1974, by the account=.
in the ast and
d
d
`?"? ` ,, uig item or Coopers ue L,yoran
, an
of its front companies for $1.5 minion
less than its stated net worth, gov Asia and provided transportation for was an appendix to a classified Gen_:
i
CIA
e
-
proj
ous
cts. .
erat accounting Office report.
ernment documents show. : var
E-Systems Inc. of ]Dallas,. Tex., ' Air Asia did: about $12 million John Kumpf, an E-Systems spokes,
bought Air Asia Ltd., a CIA-owned worth of ; business in 1975, mainly at -roan, said the net worth shown by the,
firm based in Taiwan, in 1975 for $1.9 an aircraft base. on Taiwan, where ' ' audit of .Air Asia, dated Jan. 31,1975
million. An audit of Air Asia showed `about '2,800', employes. do: contract .-. He cited a second.Coopers & Lybrand
that i. the firm's net Worth - .the maintenance on military and com- audit of air Asia, dated Jan. 31, 1975,
amount by which its assets exceeded mercial aircraft In the Far East. "showing its net worth at $3.2 million.
its liabilities -- was $3.4 million. The documents on E-Systems' pur-' - Ke claimed that even that figure,
E-Systems is a large government chase of the firm were released by was too high.
contractor - that provides sophisti- Rep. Gerry Studds (D., Mass.), cvhD, Nevertheless, Kumpf said, ' ti Te'ra"j~
cated equipment for the Pentagon,. asked the CIA for information about not denying" that - Air 'Asia was
a f
~
the CIAO and other agencies., the sale: good buy. a,?
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in its Y-a
 ,roved For Releaser A4/ll9fi1l3JG -I EW38EGR3'F5ROQd?b
1 ,)N PAGE App
13 July 1977
A large government contractor purchased a for-
mer front company from the CIA for slighty more
than half of its net worth, government documents
show.
The" CIA sold Air Asia, Ltd., to E-Systems Inc. of
Dallas; Tex., for $1.9,million in cash in 1975. The
deal was a profitable one for E-Systems, since an.
audit of the Taiwan-based company showed its net .
worth was $3.4 million.
A E-Systems_ spokesman said the purchase was
.a "good one for the.'manufacturer of sophisicated
electronic gear, but he insisted that Air Asia's net
worth was inflated in the audit.
Air Asia was part of Air America, the CIA-
owned company that ran airlines in the Far East,
and Southeast Asia and provided transportation
for various CIA projects. .
AIR ASIA DID about $12 million in contract
maintenance on military and commercial aircraft
in the Far East in 1975, mainly at a huge aircraft
base on Taiwan staffed by about 2,800 employes.
Rep. Gerry Studds, D-Mass., asked the CIA for
information about the sale. He released the CIA's
reply plus the audit dated March 31, 1974, by Coop-
ers and Lybrand, a large accounting firm. The
audit was an appendix to a classified General Ac-
counting Office report.
John Kumpf, an E-Systems' spokesman, said
the net worth shown by the audit was overstated.
He said a second Coopers and Lybrand audit of the
Air Asia, dated Jan. 31, 1975, showed its net worth
at$3.2million, +..c".
He said even that" figure was too high.
"We want to make clear that we assumed some
The biggest one was-an employe
major liabilities
.
retirement or termination obligation," Kumpf said
yesterday. "We feel that was understated.-Sine we
ood
wa
Ai
h
s a g
Asia
--
aL
L
Not only was the purchase a good one for E-Sys
"terns in terms of assets, it was a good one in terms
I
l was
d
h
ea
e
of profits. In the 10 months before t
consummated on- Jan. 31, 1975, Air Asia earned
$1.35 million in profits, a CIA document revealed.:..
E-SYSTEMS PAID only about 1.5 times earn-
ings for Air Asia. By comparison. recent stock
market prices show that one would have to pay 10
times earnings to buy all the stock in American
Telephone and Telegraph and seven times earn-
ings for General Motors.
E-Systems has had a long, close relationship
with the CIA.
The company is a major provider of secret elec-
tronic and radio equipment to the CIA and the De-
fense Department. One of its specialities is the so-
called "electronic warfare" equipment that was
used widely in the war in Southeast Asia. -
In addition, W.A. Raborn, a CIA director under
,President Lyndon Johnson, is on the firm's board
of directors. A former deputy CIA director, Lloyd
K. Lauderdale, is a company. vice president.
STAT
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 STAT
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WASHINGTON POST
13 July 1977
CIA Supplir Buys a CIS Bargain
By Evans Witt
Associated Press
The CIA sold one of its front companies for $1.5
million less than its net worth, government docu-
ments show.
Air Asia Ltd., a CIA front based on Taiwan. was
sold in 1975 for $1.9 million when an audit showed
it was worth $3.4 million.
It was a good deal for the buyer, E-Systems, Inc.,
of Dallas, a large government contractor that provides
highly sophisticated electronic equipment for such
agencies as the Pentagon-and the CIA.
Air Asia was sold by Air America, the CIA-owned
company that ran airlines in the Far East and South-
east Asia and provided transportation for various CIA
projects.
Air Asia did about S12 million in business in 1975,
mainly at a huge aircraft base on Taiwan. '-here
about 2,800 employees perform contract maintenance
on military and commerical aircraft in the Far East.
The documents on the purchase by E-Systems were
released by Rep. Gerry Studds (D-Mass.). who had;
asked the CIA for information about the sale.
The audit Studds released was dated March 31,;
1974, by Coopers and Lybrand, a large accounting-
firm, and was an appendix to a classified General Ac-
counting Office report.
John Kumpf,' an E-Systems spokesman, said the
net worth-how much assets exceeded liabilities -
shown by the audit was overstated s o m e w it a t. He
cited a second Coopers and Lybrand audit of Air
Asia, dated Jan. 31, 1975, showing its net worth at
$3.2 million. And he said even that figure was too
high.
Nevertheless, Kumpf said. "We're not denying"
that Air Asia was a good buy.
Not only was the purchase a good one for E-Systems
in terms of assets, it was a good one in terms of pro-
fits. In the 10 months before the deal was consum-
mated on Jan. 31, 1975, Air Asia earned $1.35 mil-
lion in profits, 'a CIA document revealed.
E-Systems has had a long, close re-
lationship with the CIA.
`1 he company is a major provider of
secret electronic and radio equipment
to the CIA and the Defense Depart-
ment. One of its specialities is the so-
called "electronic warfare" equipment
that was used widely in the war in
Southeast Asia.
And E-Systems runs the listening
post in the Sinai Desert between the
Egyptians and the Israelis, under con-
tract to the U.S. government.
E-Systems has other connections
with the CIA. A former director of
the CIA, W.A. Raborn, who developed
the Polaris submarine, is on E-Sys-
tems' board of directors. A former
deputy CIA director, Lloyd K. Lauder-
dale, is a top vice president of E-Sys-
tems.
[E-Systems has been under investiga-
tion by the Securities and Exchange
Commission for allegedly paying S1.3
million to the Korean Research Insti-
tute, a Seoul-based marketing consult-
ant firm, to obtain military contracts
with South Korea. The money paid to
KRI, according to sources familiar
with the investigation, was transfer-
red back to the United States, where
It may have been used to make illegal
payments to American officials.]
E-Systems' 1975 purchase of Air
Asia was a logical extension of its air-
craft maintenance business in the
United States, which totaled $33 mil-
lion in 1976.
E-Systems is also heavily involved
In sales in the Far East, particularly
to South Korea and Taiwan. One of
the contracts held by Air Asia. is with
the Taiwan government for mainte-
nance of F-4 fighters supplied by the
United States.
E-Systems does not provide figures
on any subsidiary's profits, and nanei
on Air Asia since its acquistion. ,... ._,
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 Approved For Release 2R,t/'1,61PM8-01315R
12 JULY 1977
conne-c
i :11,
unu
The {Justice:. Dept. d e aides - n
t0 probe spici /us deal ...
~m: xc-c
w f_... B IC.-A ;der rlsa Final rnntracr arrangements:>
STAT
ass:;. electronics: firm ,lids castigatecr as _5ysrems anu ute niu,y, ,c~c
shabby the decision of the Justice De- '.lion-whereby additional radio .unitswore But AssistantAttorney Genera l Foth
partment,not to investigafe cjuestionable -solfln to South Korea '. at-=much higher Criminal Division-Benjamin Civiletti re-='
er
rocedure the award of a $2.9 million prices; bringing the total value of the$2.9 plied in a letter- to Studds that--`we hav
p
dillih y
contract - for military -radios for South million awar to $11 mon. .: found nothing in te material whichou
Korea': i `The=Army official in charge o# the furnished us or4which-we have received':
The "winner of the award, granted by award, Eugene E. Berg, later joine .: E from the House Qmniittee on Govern
f
the US Army as part of its foreign" m i l l y ystems as vice-president or new biisi- merit Operations to indicate any paten
tary-sales program, was the'Dallas-based " mess development. 'A -former vice presi- tial for criminal conduct ? `
electronics ,'conglomerate .,E-Systems;? ..' ; dent -of `E-Systems, - Harold L. Brown SEC recordsr on file in:= WashingEon y
which. has;:been under investigation by man, succeeded Bergg as Asses ant acre- show that five South Koreans. involved in
the Securities; and Exchange-- Commis--. nary of the Army for Logisiics and ln- the E-Systems=investigation were sub-'J
sion in connection with the Korean bnb _stallations.' poenaed to furnish records of any com
ery scandal " Bristol Electronics Presidents 'd: Rev-
The;-low_,bidder for the 'contract on zin said in a telephone interview with the inunications they-might have, had with=
three occasions in 1974 was Bristol Elec- Phoenix last week that he feared foe. the MEMCOR Adivision of E Systems that-
tronics ofNew -Bedford. On the Army's financial future of his company.if he''ire-I rnanufactured'. they radios for South Kor
:
fouri'rs-request for. bids, the contract was vealed .information that die feels would ea. An_attorneyfor, the Koreans has told-`
awarded to E-Systems - afterthe Army cast.further'doubt on the validity of-the the SEC that--such records as may. have
changed the contract specifications. Un award ;-E Systems. I ve got Zoo em- existed have been taken to South Korea
E-Systems.; sales increasedfr
inillion:in..1975 6'$119.3-iri'1978Its of-~
fivers -`ineIude William L. `Ra 5orii" and
Lloyd !C : Lauderdalesci" ear o wham: once-
liar t e lAs ence and;technology'
division, and Harold Br wnnta&Lwha `va
-onee deputy icl rect of
or - the- CIA for'
'special protects A recent acquisition of
.the company was Air Asia, =forineily any
rm of the CIA`progiietary_toinpany.Air
America: n~
In all,. the coritpa ny has six major sub
dtvisions an #-foi teen.' ubsidtarie that=
.hold- majof?US,'governmentKeontracts
most of which are classified he corn
pany keeps-up''custorixer relations"with
Brazil, German r;Indonesia,'- I`ran' Italy,
Japan, South. Korea aiidEgypt Sonie -85
:
percent of E-Sys tems'sales-in*1975"~.=
_total of nearly, $218. million -=were?to the;
IS government
., .:, ,
Congressman; Studds has asked?_the.
Justice Departriit nt to explain Jiowat'ar,-:
rived at its conclusion that ?t.here was-'not.
sufficient eividence',.toa warranr`an =ryes
tigation of the; E'-Systems contrach `Lam=
puzzled by your apparent derision _: to ;rely
Approved For Release 2004/10/13: CIA-RDP88-01315R00 -42'J O)l iIity to prouide-yow with:
evidence in order to arrive:ata:decision
for a formal investigation." Studds wratex:
"It seems tame: that the Tua-i~r r9,..+,.i-
 Approved For Release 2004/10/13 : CIA-RDP88-01315R000200420001-9
pin
51
liiii,itimmiOlM
1 1 l
0
III
- , =14111,
or ele 2004110113 CIA-RDP88-01315R000200420001-9
 The world
comes to
with its
?
problems
Electronic Warfare,
Intelligence,
Reconnaissance,
and Surveillance
Aircraft Maintenance
and Modification
Guidance, Controls
and Navigation
Communications and
Data Systems
 I 'e/)tit technology dcsi ;tlcd nrinufatturc I
to work in s'sternrttic t rove p~^ ~~ ~ 2004/10/13: C
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 16 E-Systems
Operations
(ORPORATP, ELECTRONICS AIR(:RAP'I
Approved Farr leaese'20104/10/13: CIA'RDP818-013)15ROO0200420001'-g"-,,nis(' "MIT"
l: S~stcros, Inc_ G:uland Division Grccnvilk Division
0' O 1.13 I rccw:n P. O. Box 01 18 P. O. Box 1006
P. O. I3ov 0000 Dall.ts,'I'cxas-5222 Grccrnvilk. l'rxas 5101
Dallas,'I(xas -5 "2 'I I) 2 2 0515 2II) -155 3.150
(21 1)6011000
ESY EXPORT CO\IPANY
~Icll,ar Division
-00 Arlin~-,ton Blvd.
Scr\ Air. Inr.
16v15 El Camino Real
P. O. 1',ox 6000
balls Clturrh, Vir,ini:t 22!16
Suite 101
Dallas,'Tcxas -5.''2
(~O0) 560-50(10
I loustorn_'Tcxas -050
(21 1) 661 1000
( I') 1"-6;111
A1ontck Dioision
"61 South 02-'0 Wcsr
Salt Lake Gifu. 1, I t c h 5 i 119
( 501) 9' i- 1000
Air Asia Companv l.imitrd
Taman Aitiicld
I ainan, Taiwan ?00
Rcpuhli( of China
TAI, Inc.
P. O. liox 21
balls (.Lurch, Virginia 22016
(-00 ) 5-j 8680
PRODII(1I()N
ELE(TIMNICS GROUP
\Icmror Division
P. O. Ihox 5 19
I luntinilton, Indiana 16-50
() 19) 056-0000
Approved For Release 2004/10/13: CIA-RDP88-
I VI DIVISION
P (). Box 121 IS
IoI '.'.rd Street North
St. Pctcrshur Florida 30
(`,'I;) i,812()00
 E-Systems (Domestic) LAN(GT%Y-ITAMIYI`ON (International)
Customer relati&Wroved For Release 2004/10/13: CIA-,RAR88kOt3l.RQWA2Q1Q420001-9
offices BOS'T'ON Hampton, Virginia 23666
Suite 22 [phone]
9 Meriam Street
,
Lexington, Mass. 02173
BELGIUM, (BRUSSELS)
Av. AM, Coningham 1
Brussels, 1050 Belgium
[phone]
LOS ANGELES
64 8-71-70 TcLLx : 846-24452
DAYTON
P. O. Box i03 1
5030 B. Broughton Place
Dayton, Ohio 454 31
[phone]
5430 Van Nuvs Blvd., Suite 309
Van Nuys, California 91401
(21 3) 986-9961
OGI)EN
P. O. Drawer 202
BRAZIL, (BRASILIA)
Shi-Sul QI-4-1 Casa 21
Brasilia, DF, Brazil
48-1799 Telex: 391-611/120
5523 Painters Professional Plaza
R
GERMANY, (BONN)
Ii( LIN-I'1'. WALTON BEACH
oy, Utah 84067
53 Bonn-BAT) Godcsber'g
FOCOIN, [n(.
[phone]
AM Fronhof 8
233 Yacht Club I)r., N.E.
Federal Republic of Germany
It. Walton 13cach, Fla. 325.18
OKLAHOMA CITY
2221 352021/22 Telex: 841 885711
(904) 243-012
P. O. Box 15420
FT. MONMOUTH
Oklahoma Cite, Okla. 73115
[phone]
INDONESIA, (JAKARTA)
P. O. Box 359 KBY
Holiday Oflic e Ccntcr
Jakarta, Selatan
P. O. Box 38
ROME, N. Y.
Indonesia
121 Monmouth Parkwac
P. O. Box 767
773293 (Jakarta)
West Long Brandt, N. J. O776.1
Rome, New York 1 3440
Telex: 79044"33
(2(11) 2.22-0565
[phone]
SAN ANTONIO
7039 San Pedro, Suite 803
San Antonio, Texas 78216
[phone]
S'I'. LOUIS
11960 Westlinc Industrial Dr.
Suite 322
St. Louis, Missouri 63141
( 314) 576-1770
\X'ARNIER ROBINS
P. O. Drawer It
1764 Watson Bldg., Suite 203
Warner Robins, Ga. 31091
[phone]
WAS] IINGI'ON
1901 N. Moore Street, Suite 609
Arlington, Virginia 22209
( 703) 521-2310
IRAN, (TEHRAN)
P. O. Box 12/1265
'I'chran, Iran
840-851 Telex: 95 1-2 1 25 37
ITALY, (ROME)
Continental Electronics
Systems. Inc.
Via dci Sansov.na, 6
00196 Rome, Italy
396-6398 "1 'elex: 84 1-81241
JAPAN, ("TOKYO)
Room 401, "Tanaka Bldg.
1-15-1 Nishi Aaabu
Minato-ku, Tokyo 106 japan
03-102-1367 'T'elex: 781-26319
KOREA, (SEOUL)
Yongsan P. O. Box 72
Yongsan, Seoul, Korea
5-8887 `1'celex: 787-28395
EGYPT, (CAIRO)
P. 0. Box 2657
Cairo, Egypt
982100 "Telex: 9272096
Approved For Release 2004/10/13 : CIA-RDP88-01315R000200420001-9
 Dear-Fellow Shar llo_lde ; _ is 21QYiu-; e y ji' l irly electronic war-
1976 was a milestone
year for our Company
because it marked the
seventh consecutive year of
significant profit gains. It
was the most profitable
year in our history. Net
income after taxes was
more than double that for
1975, amounting to
$14,528,000 or $5.80 per
common and common
equivalent share. Sales rose
26 percent over the pre-
vious year to nearly $320
million, our highest ever.
Following its acquisi-
tion onjuly 26, 1976, the
operating results of E-Sys-
tems new ECI Division in
St. Petersburg, Florida were
consolidated with those of
the parent company for the
last five months of the
year. The addition of ECI
was in line with a continu-
ing acquisition policy of
adding businesses which
are compatible with our
existing operations and
capabilities. The ECI
acquisition resulted in cor-
porate operations at year-
end that include seven
divisions and three subsid-
i i,uOu persons. 00200 re an communications.
I attribute much of our The Company booked
1976 performance to the
generally improved effi-
cicncy of our people.
Because h-Systems, unlike
many other companies, is
not capital intensive,
human resources are our
most valuable asset. Instead
of investing vast amounts
of capital in physical equip-
ment and facilities, we
depend more upon the
knowledge, motivation
and efforts of our
employees.
Solidifying this concept
of "oneness" among
members of the "E-Team"
is our Employee Stock
Ownership Plan (ESOP).
Adopted in 1973, the
ESOP has made each
employee a shareholder.
Both the Company and
the individual employee
shareholder benefit. As
each employee exerts his or
her best efforts, the Com-
pany benefits through
improved operations and
the employee may be able
to gain through a possible
growth in the value of his
ESOP shareholdings. Thus
the goals of the employee,
the Company and our pub-
lic shareholders are even
more closely related.
Products andl Customers
I;-Systems record-high
results for 1976 stemmed
principally from improved
performance in most of
our product areas, but
some significant new
orders in both the elec-
tronic warfare (LW) and
communications markets.
Together, these areas
accounted for approxi-
mately three-fourths of our
total sales. (The majority
of E(I's sales and orders
are included in the com-
munications product cate-
gory.) The remaining one-
fourth of the revenues
came from our other three
product categories - 1)
command and control, 2)
guidance, control and navi-
gation, and 3) aircraft
maintenance and modifi-
cation.
Last year about 45 per-
cent of our sales were to
international, commercial
and non-defense U.S.
Government customers.
The United States Depart-
ment of Defense (DoD)
contributed 55 percent of
total revenues. This was
about the same as in 1975
(although the actual dollar
sales to DoD increased in
1976) and was down from
65 percent in 1974. Inter-
national sales posted the
sharpest increase to $119
million from $82 million.
Approved For Release 2004/10/13 : CIA-RDP88-01315R000200420001-9
 Approved ForjIrejjlet 24~1~3
bookings p us t c inc u-
sion of ECI, E-Systems
entered 1977 with a
record-high backlog of
orders of $303 million.
This was up 25 percent
from $243 million at the
CIAIIIt~b042006~ronic peace monitor
toners. Systems has ong ing system in the Sinai
been an acknowledged Desert. The system became
leader in this tech- operational ahead of sched-
nologically-demanding ule and we completed the
business. permanent facilities at the
E-Systems booked a sub- remote outpost by mid-
stantial amount of contin- year. The maintenance and
uing EW business, such as operational portion of the
a large U.S. program in contract was renewed last
which E-Systems has been September.. This is a
involved for over a decade. prestigious program for E-
Orders were also received Systems and has enabled us
for several new programs to play a role in helping
with potential for future maintain peace in the Mid-
follow on sales. For Me East.
end of 1975. As in the past,
the Company plans to con-
tinue expansion of business
to both DoD and to our
other markets. Our objec-
tive is to achieve a 50-50
split between DoD and
non-U.S. defense sales.
Business by Product Line
Electronic Warfare
capabilities at E-Systems
include the design,
integration and installation
of electronic intelligence, recon-
naissance, surveillance, and
electronic countermeasure
(ECM) products and systems
in airborne, ground and sea-
based environments. During
1976 electronic warfare
(EW) continued to be the
F-Systems product line
sales leader, with revenues
in this area of $124 million
and a year-end backlog of
$98 million.
Most market forecasts
indicate EW will be
among the fastest-growing
areas of defense spending
for years to come by both
our Government and
example, we received a
$3.4 million letter contract
from the IBM Corporation
for initial development and
testing of the electronic
intelligence (FLINT) sub-
system for the U.S. Navy's
Tactical Airborne Signal
Exploitation System
(TASES). This EW sys-
tem, for which E-Systems
will design and build the
ELINT receivers, will be
installed on the Navy's
new S-3A twinjet, carrier-
based aircraft. It will be
Communications
includes military VHF and
UHF radios, digital com-
munications systems and
products, microwave telecom-
munication services, and
ground based satellite
antennas. The Company's
most dramatic sales
increase for the year was
recorded in our communi-
designed to receive, process
won the contract to install,
operate and maintain this
and analyze electronic sig-
nals during reconnaissance
flights for near-real time
support of task force com-
manders.
Our expertise in special
ground-based sensors con-
tinues to be utilized at the
Sinai Field Mission's early-
warning station between
Egypt and Israel. In Jan-
uary 1976 the Company
193.4
166.4
156.1
$ millions 72 73 74 75 76
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 cations product catego yppro eo 'r Aease h6113 : CkW64 ?.01~31~5 0200420001-9
Sales totaled $116 million, to instal a centralize communications su si
with a year-end order back- police and fire department iary, TAI, Inc., was
log of $122 million. Com- communications system awarded a contract to pro-
munications systems of all for a group of seven cities vide upgraded tclccom-
types, both for defense and in the Los Angeles area. munications for the
commercial applications The system incorporates National Railroad of Boliv-
worldwide, along with the use of DIGICOMT"' is and also completed a
electronic warfare, repro- mobile data terminals to study contract to prepare a
sent what we feel will be be installed in over 80 20-year master plan for a
our two largest growth police cars. We also con- telecommunications sys-
markets for the long-term tinucd installation of our tem for the national tele-
future. largest and most advanced phone organization of the
In 1976 we consum- DIGICOM system to date, Republic of El Salvador.
mated an agreement with this one fora large South We hope to use the El Sal-
the Government of Fin- American country. vador plan as a marketing
land for "in-country" pro- Moreover, we developed springboard for winning
duction of military radios, a new, highly cost-effective similar programs in other
bringing the number of line of small-diameter earth Latin American countries.
countries in which we have station antennas and sold In addition, the acquisi-
obtained such co-produc- several of them for use tion of ECI added impor-
tion agreements to five. overseas. These can provide tans programs to the com-
Since the mid-1960s, E-Sys- many foreign countries, munications product cate-
tems has been the largest especially the developing gory. These include surface
volume producer of mill- "Third World" nations, ship and submarine UHF
tary radios in the Free with the means of cstab- terminals for fleet satellite
World. lishing modern satellite communications, the UHF
During the year our communications systems. receiver subsystem on the
Significant progress also spacecraft for the Navy's
was made during 1976 Fleet Satellite Communica-
toward completion of a tion (FltSatCom) system,
Very Large Array (VLA) teleprinters, and air traffic
radio-telescope project in control systems.
New Mexico for the
National Science Founda-
tion. E-Systems is provid-
ing 28 special antenna
structures and related facili-
ties for this history-making
installation. When com-
1 2.4 _ ? pleted in 1980, the VLA
facility will be the world's
largest radio telescope, and
will be used for further
I .1
6.6 mom scientific research into the
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 Command and T
involves the t }},,c Com s kcd the first time our
Approved orro ugh o ure 4 ~ .'CIAV ~8 `U2004200(
Control Fhe o t tnCalled Aviation once all-military navi 1a-
capability of installing air-
borne and ground-based sys-
tems and equipment requiring
communications, electronics
and mechanical expertise.
This segment of our sales
continued to be an impor-
tant source of business for
E-Systems in 1976, with
sales totaling $26 million
and the year-end backlog
amounting to $28 million.
The Advanced Airborne
Command Post
(AABNCP) program
entered its second phase
with the completion of the
third airplane and delivery
to E-Systems of the fourth
aircraft late last year. Work
continues on the modifi-
cation of this Air Force
version of a 747-type air-
plane. E-Systems is under
contract to install and inte-
grate into the fourth flying
advanced command post a
more sophisticated elec-
tronic communications
and command and control
system than those pre-
viously incorporated by the
Company in the first three
aircraft.
g
Division, a number of sys- Weather and Notice to tion equipment has been
tems for the U.S. Air Airmen System installed to permit landing
'
Force
s new E-3A Airborne
Warning and Control Sys-
tem (AWACS) aircraft.
The E-3A also is being con-
sidered by the NATO
nations for their various
requirements in the com-
mand and control area.
Also in this product
category, our Company
received a contract to
design and install an auto-
mated mail-coding and
processing system for a
large New York bank.
When completed in mid-
1977, this installation will
make this bank the first
financial institution in the
United States to adopt
such a computerized,
high-speed letter mail-
handling system.
These types of systems
from the Company offer
the large volume mail-
handling commercial
installation a rapid method
of automatically processing
vast amounts of incoming
mail.
Earlier in the year,
E-Systems was awarded a
contract by the Federal
Aviation Administration
to install an automated
flight information system
in the FAA's flight service
(AWANS), it is similar to approaches during inclem-
the first AWANS installa- ent weather by helicopters
tion completed by the providing supply and per-
Company at Atlanta, sonnel service to offshore
Georgia in 1975. drilling rigs. The potential
Guidance, Control
and Navigation
includes electromechanical
controls and ground-based
navigational and guidance
equipment. Sales totaled $20
million and the year-end
backlog was up 78 percent
from a year earlier to $32
million.
The Company com-
pleted development of Very
high-frequency Omni-
Range (VOR) and Dis-
tance Measuring Equip-
ment (DME) navigation
systems and we are bidding
on a contract overseas. We
also sold several Tactical
Air Navigation (TACAN)
systems, in both land-based
and shipboard versions, to
international customers.
We received contracts to
lease two TACAN systems
for use on Alaskan offshore
drilling platforms. This
future sales possibilities are
obvious.
Another key develop-
ment in this product area
was a several million dollar
order from General Elec-
tric Company to develop
and produce hydraulic
shock suppressors for 17
nuclear power plants. Such
shock suppressors,
designed to protect the
piping of nuclear power
plants during earthquakes
and other major distur-
bances, are required equip-
ment in these power-
generating facilities.
The newly-acquired ECI
44
3.7
3.2
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 Division produces g~ uide h ff {{;; ECI has long 'been a
ppr v4e8'0bPP,4II` 99 2bdW*o/1f t'FA-RbP Wy -g315R00020
~~5QPPr1i-P satellite corn-
0
missile telemetry and track-
ing sets and kits which are
utilized in missiles. One
such system includes a new
concept of an electron i-
cally-steered phased array
antenna for the receiving
portion of the shipboard
tracking capability under
development for the U.S.
Navy's new Standard Mis-
sile 2.
Maintenance and
Modification in the United
States includes depot level
maintenance on the nation's
Special Air Mission (SAM)
fleet of airplanes, including
the Presidential aircraft, and
aircraft service contracts per-
formed on-site at various cus-
tomers' bases. Work on the
SAM fleet is in the fourth
year of a five-year contract.
This overall product line of
business resulted in sales of
p
backlog of $23 million. program to esign, con-
Internationally, Air Asia
Company Limited, our
subsidiary in Taiwan,
Republic of China,
increased its commercial
aircraft maintenance and
modification contracts. Air
Asia continues the work it
performs on F-4s and other
military aircraft.
As we entered 1977, E-
Systems received other
international business
through a contract from
another country for the
refurbishment and modifi-
cation of large commer-
cial-type aircraft.
Energy Technology Center
We formed an Energy
Technology Center in
August. Our Company
was awarded a contract to
participate with Texas
Tech University in the first
operation of a solar ther-
mal-electric power plant at
Crosbyton, Texas. Funding
for this program, spon-
sored by the Energy
Research and Develop-
ment Administration
(ERDA), ultimately could
exceed $20 million. We
subsequently formed a new
joint-venture company,
with an oil and gas firm to
pursue a similar solar-
power contract in Lea
County, New Mexico. Dr.
Lloyd K. Lauderdale, Cor-
porate Vice President-
Research and Engineering,
is General Manager of the
new Energy Technology
Center.
ECI Acquisition
The addition of Elec-
tronic Communications,
Inc. (now our ECI Divi-
sion) in August was a very
compatible acquisition for
your Company, principally
because of ECI's excellent
reputation in the high-
technology field of military
communications equip-
ment. In addition, ECI
brings with it a long-stand-
ing relationship with the
United States Navy, pro-
viding E-Systems with a
broadened base for doing
business with this impor-
tant customer.
They currently are in quan-
tity production of AN/
WSC-3 satellite communi-
cations terminals for the
Navy. This highly-
advanced solid state UHF
radio terminal provides
Navy surface ships and
submarines with a world-
wide satellite communica-
tions capability. The AN/
WSC-3 is designed to
work with the new Fleet
Satellite Communication
(F1tSatCom) system. ECI
also is supplying the UHF
receiver sub-system for use
in the FltSatCotn satellites,
the first of which is sched-
uled to be launched late
this year from the Ken-
nedy Space Center.
Another promising area
for ECI is its full line of
Net Income Per Common Share Total Stockholders' Equity
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 6 military teleprinter. Incor-
porating advanced~c~lccoved
tronic technology, these
units have application in
virtually any military
environment - land, sea or
air. The teleprinter line is
being marketed domesti-
cally and internationally.
ECI also has been suc-
cessful in the marketing of
UHF/VHF air traffic con-
trol communications sys-
tems for European airports.
Many of these serve mili-
tary and commercial air-
craft, requiring dual-
frequency communications
capability for air traffic
controllers.
ECI also supplies UHF
radio equipment for the
Air Force's new E-3A Air-
borne Warning and Con-
trol System (AWACS).
It is our intention to
supplement ECI's strong
capabilities in high-tech-
nology product develop-
ment and manufacturing
with a more aggressive
international marketing
effort through E-Systems
existing worldwide cus-
tomer relations organi-
zation. ECI's capabilities in
communications systems
also will be strengthened.
4tn cal Bet f ~~~,,~~,~ reholders c uity plus
r,` pease00+41101 3 :CIA
`s-6 ? ~tT 2000$ ' q
financial conservatism, through the earning of a bled to 24 from 12 percent
with emphasis on strong
centralized controls and
efficient asset management,
contributed not only to a
substantial improvement
in our overall profit mar-
gin in 1976 but also to the
strongest financial position
in our history as the Com-
pany entered 1977.
Substantial progress has
been made toward attain-
ing our initial objective of
after-tax profit margins of
5 percent. Pre-tax profit
margins have increased
steadily since the first
quarter of 1974; during
1976 pre-tax margins
advanced from 6.13 per-
cent in the first quarter to
8.93 percent in the fourth
quarter, resulting in an
average pre-tax margin for
the entire year of 7.83 per-
cent.
This improvement has
been due chiefly to busi-
ness mix, fixed-cost effi-
ciency obtained from our
general sales increase and
progressively strict
emphasis on corporate
goals in our pricing, bid-
ding policies and risk anal-
ysis and controls.
Also of great impor-
tance is our primary objec-
tive of maximizing the
higher return on invested during 1975.
capital and by more effi-
cient use of assets.
On September 30, 1976,
the Company signed a new
seven-year loan agreement
with several banks which
provides for borrowings of
up to $40 million until the
end of 1978 and decreasing
$6 million per year thereaf-
ter. There have been no
borrowings against this or
the predecessor loan agree-
ment for over a year.
The liquidity of your
Company last year was suf-
ficient to provide enough
cash to acquire the ECI
Division in Florida, pay for
E-Systems new corporate
office building, purchase
approximately 550,000 of
the Company's
outstanding warrants, and
increase the common stock
dividend to the share-
holders without use of the
S40 million credit available
to us.
At year-end, the ratio of
cent from 16 percent while
the net return on average
interest-bearing debt to
total invested capital
(debt-to-capital ratio)
stood at 17 percent. Net
return on average assets
thus improved to 14 from
7 percent. Net return on
average shareholders'
equity increased to 28 per-
Recognizing E-Systems
present earning power and
financial position, your
Board of Directors in 1976
raised the annual dividend
rate on the Company's
common stock from S 1.00
to $1.60 per share. The
Board also voted to pay a
10 percent stock dividend
on October 15, 1976. Our
dividend policy will con-
tinue to be reviewed peri-
odically, with the Com-
pany's cash needs and
general business conditions
duly considered, in the
realization that investors
are putting greater
emphasis on dividend
yield.
It has been most gratify-
ing to note the growing
recognition of E-Systems
Net Return on Average
Shareholder Equity
10.7
9.6
0.0
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 securities in
marketplace.
the invests ro '&fi *3'WSF '2O4/10/13 : fA='1 6P' '-b4h OM004,2,000icTnt product and
For example, As I stated in the 1975 our principal long-term customer base and with
in a recent statistical survey
published by Forbes Maga-
zine E-Systems was ranked
sixth among more than
900 leading American cor-
porations for market-price
growth of its stock, with
nearly a 277 percent gain in
per-share price in the five
years from 1972 through
1976. In 1976 alone, ESY
more than doubled in mar-
ket price.
During 1977, we plan
to continue our policy of
making regular appear-
ances before security ana-
lysts, stockbrokers and
similar groups in various
cities in an effort to keep
them abreast of Company
activities and operations
and to further enhance E-
Systems identification in
the investment commu-
nity.
Net Return on Average Assets
Annual Report, your Com- objective to continue our existing expertise. We
pany has established certain growth at a controlled and have developed our own
initial general and specific profitable rate. "ABCs" for acquisitions:
goals, with the primary To achieve this, your "A" for "Availability"; "B"
objective of increasing the management recognizes for "Buyability"; and "C"
value of the investor's that we must keep and for "Compatibility" -
ownership in E-Systems. further improve the repu- which is the most impor-
We are pleased with the tation and recognition we rant.
progress we made in 1976 have attained in all of the Early in 1977, in a con-
toward meeting those areas in which we do busi- tinuing effort to strength-
goals. These initial objec- ness or are involved - pri- en our divisional manage-
tives included an average manly with our customers, ment and posture for
annual sales growth of 10 the U.S. Department of future growth, the Corn-
percent (when measured Defense and the military pany named James M.
over the next several years), services, other government Osborne President and
after-tax profit margins of agencies, and the investing General Manager of the
5 percent and a 13 percent public, both in this ECI Division. As a Cor-
minimum normalized country and abroad. We porate Vice President, Mr.
average net profit on will continue to pursue Osborne will continue to
invested capital. our traditional areas of be responsible for new
Looking toward 1977 business in U.S. defense business development and
and beyond, I realize that while seeking further pene- planning. In addition,
we cannot afford to rest on tration of our international Edward G. Casteel an
our laurels. In order to and commercial markets. experienced cornmunica-
further enhance the value We will further refine our tion-systems executive,
of your investment in E- policy of centralized became Vice President and
After-tax Profit Margin
management control General Manager of our
whereby we seek to mini- Memcor Division. He suc-
mize risk and carefully ceeded Robert H. Mitchell
balance both risk and in this capacity, enabling
investment against poten- Mr. Mitchell to devote full
tial rewards. This concept attention to overseeing the
is designed to produce the expanding activities of our
most profitable business Production Electronics
mix and maximize our Group.
return on assets and invest-
ment over the long term.
Moreover, we intend to
continue our acquisition
policy of seeking to add
businesses to E-Systems
that are compatible with
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 In summary, I a*pprved(S(ovcH aheas0 b064/10/13: CIA RO} O X151 200420001-9
optimistic about the future through congressional
of E-Systems. We have the legislation and regulations
products, the people, the by various agencies, in the
reputation and, I think, the affairs of private business.
motivation to maintain the This threatens to severely
growth momentum that curtail the ability of bust-
we've built up over the last nesses to earn the profits
several years. We are less necessary to finance the
susceptible to the vagaries capital investment and
of general economic condi- future growth required to
tions that often affect
many other companies.
The outlook for the
businesses we are in
appears good. The U.S.
defense portion of it is
expected to continue
provide employment for
the millions entering the
job market each year.
Another concern that
more directly affects every
American is this country's
future defense posture.
growing at the present, if Every reliable intelligence
not at an increasing, level estimate reported in the
because we are in the areas media indicates the Soviet
that are on the upswing, Union is indeed devoting a
especially electronic warfare greater proportion of its
and communications. Our Gross National Product to
international markets like- defense efforts than we had
wise should continue originally been led to
expanding. However, the believe. One recent brief-
challenge will be for us to ing of the Congress by our
obtain a reasonable share of military intelligence agency
this business. translated this fact into a
We face other chal- current Soviet military pro-
lenges and concerns. One duction program at least
of these is the ever-present 140 percent of the total
threat of inflation. While U.S. defense effort.
the inflationary spiral has All indications point to
been checked somewhat in increased emphasis by
the United States, it could Soviet leaders on major
resurge since inflation has weapons systems, includ-
been increasing at a much ing ballistic missiles, elec-
higher rate in other parts of tronic equipment and
the world. high-performance tactical
A continuing personal and strategic aircraft. The
concern of mine is the unsettling growth of the
growing anti-business sen- Russian Navy and the
timent and increasing Soviet's anti-satellite devel-
interference by the Federal opment program have
been widely chronicled of
late.
This presents ominous
overtones to the United
States and the rest of the
It is dangerously unrealistic
for us to rest on past laurels
and to ignore the clear
message from the Soviets
as to what they can and
will do in the years ahead.
We must maintain tech-
nological superiority!
If growing government
regulation of business and
the status of our national
security concern you, I
urge you to voice your
concerns by communicat-
ing them to your congress-
men and senators in
Washington.
John W. Dixon
Chairman of the Board
and President
Approved For Release 2004/10/13 : CIA-RDP88-01315R000200420001-9
 Contents
Corporate ? 1
Statements ? Consolidated Income 11
Accountants' Report Consolidated Balance Sheets 12
Statements of Consolidated Changes
in Financial Position 14
Statements of Consolidated
Stockholders' Equity 15
Notes to Financial Statements 16
Charts 19
Backlog
Five-year Financial Summary of
Operations and Condition 20
 VII KVCl' Cos oran I~
Approved For Release 2004/10/13: CIA-RD 88-0131
John W. Dixon F-SYS'II;ms, INC.
Chairman of the Board and President P.O. Box 6030
Eugene E. Berg Dallas, Texas 75222
Vice President-International Customer Relations (214) 7/12-9471
James W. Crowley
Vice President, Secretary and General Counsel
E. G. Kciffer
Vice President and General Manager,
Garland Division
Dr. Lloyd K. Lauderdale
Vice President-Research and 9nfrineerint
Robert L. Lewis
Vice President and Controller
Robert H. Mitchell
President, Production Electronics Group
James M. Osborne
Vice President-New Business Development and Planniii
Virgil B. Pettigrew
1/ice President-Finance and Chief Financial O, icer
Joe W. Russell
Vice President-Corporate Relations
Kenneth M. Smith
President. Aircraft Systems Group
Robert C. Smith
Vice President-Domestic Customer Relations
David R. Tacks
President, Electronics S'ystenrs Group
Harry L. Thurmon
Vice President and 7 recdsurer
Directors
John W. Dixon
President. E-Systems. Inc.. Chairman
E. F. Buehring
Retired E-Systems, Inc., Executive
Dr. LcVan Griffis
Vice Provost, Southern Methodist Unireruty
Thomas A. Lewis
Vice President, Moseley, Ilallkarten & Ertal>rook. Inn..
Investment Bankers
Robert H. Mitchell
President, Production h'lcctronicc Group. E-Systems. Inc.
William F. Raborn
Vice Admiral, USN (Rel.), Consultant to E-Systems. Inc.
Kenneth M. Smith
President. Aircraft Systems Group, Ii-Sy teen,. Inc.
David R. Tacks
President. Electronics Systems Group. E-.Systems, Inca
Transfer Agents & Registrars
Texas Bank & Trust Company
Dallas, Te.xas
Manufacturers Hanover
Trust Company
New York. New York,
Auditors
Export Comp
P.O. Box 6030
Dallas, Texas 75222
[phone]
rcraft System
9t 1
Group
GRLPNVILLIi DIVISION
P.O. Box 1056
Greenville, Texas 75401
[phone]
DONALI)SON DIVISION
P.O. Box 8515, Station A
Greenville, South Carolina 29604
[phone]
Sia v-AIR, INC.
16915 1:1 Camino Rcal
Houston, 'Texas 77058
(713) /188-6811
AIR ASIA COMPANY
'1'ainan Airfield
'Taman, Taiwan 700
Republic of China
214141
GARLAND DIVISION
P.O. Box 61 18
Dallas, Texas 75222
[phone]
MELPAR DIVISION
7700 Arlington Blvd.
halls Church, Virginia
[phone]
MON'I']EK DIVISION
2268 South 3270 Wcst
Salt Lakc City, Utah 81119
[phone]
TA 1, INC.
P-0. Box 211
FalIs Church, Virginia 22046
[phone]
1\11iMCOR DIVISION
P.O. Box 549
Iluntington, Indiana 46750
[phone]
ECI DIVISION
P.O. Box 12248
St. Petersburg, Florida 33733
[phone]
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 Approved For Release 2004/10/13 : CIA-RDP88-01315R000200420001-9
E-SYSTEMS
E-Systems, Inc. ? Corporate Offices ? P. 0. Box 6030 ? Dallas, Texas 75222
,,r;n