HUGHES AIRCRAFT FACES ALLEGATION THAT IT USED BRIBERY IN INDONESIA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88-01315R000300120025-2
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 1
• Document Creation Date: December 19, 2016
• Sequence Number: 25
• Content Type: NEWSPAPER CLIPPING

Approved For Release 2006/11./07: CIA-RDP88-01315RO 0300120025-2
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NEW YORK 1IMESS2501m lion esttimaterforrstefephone cir-
{~ !~ c [` p~ cults and equipment. H Zi gh' e A rC Nett .X. ' a& ,'s Al egatiV;;. L The Indonesian official implicated by
the American executives was Major
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General Sohardjono, Director General of
naL?~ t Used _.4 ribe 'y, in Indonesia Pasts and Telecommunications. Darn;
the meeting, held in his office, a pa
and SEXbI0U1i 'Al. HERSH '' kickback" and said it could be added to
'No way!'" the Ameri-
"I said
rice
the
,
p
.
An unalicized dispute between two
Pu' Aircraft, which is based in Culver City, can recalled. "He laughed and I laughed,
pf America's largest electronics corpora-'' Calif. Nor could it be learned how any and that was it."
tions over allegations of large-scale brib- payments were made and to whom. "I wasn't about to go back to rnanage-
ery of Indonesian officials has again Such payoffs by American concerns ment and say, "Hey, we need $40 milLon
raised questions about the lack of Federal operating overseas are not illegal. Late to get the contract,"' he added' "There
payoffs last ear the Senate, actin., after highly was no way anyone in the company was
controls over such and the need y o going to go along with this."
for international cooperation to end them. publicized payoff scandals in Japan and- ? The executive asserted, however, that
The controversy, as reconstructed by elsewhere, approved legislation calling' if General Sohardjono had scaled his re-
The New York Times, began late in 1973 for criminal sanctions against such activi- Guest down to the usual agent's fee of
when a high-ranking Indonesian official ty, but the measure, which did not include 3 million or S4 million, "we might have
agreed to rneet in Jakarta with repre- enforcement provisions, was not acted gone along"-as General Telephone has
sentatives of the General Telephone and upon by the House of Representatives. apparently "gone along" in the past. The
(Electronics Corporation, an American- The Securities and Exchange Cornmis-! Securities and Exchange Commission has
sion has been conducting a lengthy in-, disclosed that it gave four Philippine in-
donned multinational concern seeking a vestigation into overseas payments and, vestment officials more than S4 million
5330 million contract for electronic and pending its conclusion, has set up a vol-!; in questionable payments in a transaction
telephone equiipment. untary compliance program for corpora- involving a long-distance telephone con
The official was blunt, according to the tions wishing to disclose such payments.:. pany. No criminal act was alleged.
!Americans: A contract was possible, but The program does not provide for full Denial by a Vice President
i he would need a S40 million cash payoff. public disclosure of the volunteered cor-
porate Asked about General Telephone's e,c-
t information.
T'he Americans refused and the business The Multinational Subcommittee of the perience in Indonesia, William L. 'Mayo,
went to their chief competitor in Indo- . Senate Foreign Relations Committee has a vice president for Asian and Pacific af-
+ nesia, the Hughes Aircraft Company. held extensive hearings in recent years, fairs, said in an interview that to his
The situation arose after the Indonesian into overseas payoffs by Lockheed and knowledge the company had no indica-
Government decided to construct a na- . other defens contractors. Its proposed leg tion of payoff requests here. "I was never
+ tioncvide satellite communications sys- islation calling for full disclosure of cor- approached," he said, though he did ac-
1
payments has yet to be considered knowledge meeting at least once with
tP _m a system. whose of cost climbed from '3by Congress. General Sohardjono to discuss the Gen--
an initial estimate of less than $80 mil* Experiences such as that described by eral Telephone proposal. - i
lion to more than $160 million. - - - agents of General Telephone, which A source with direct ties to the concern I
A bitter conflict arose between Gen- has its main offices in Stamford, Conn., said that Mr. Mayo's comment was a re-
oral Telephone and Hughes, with at least have become routine facts of life in inter- Election of General Telephone's apprehen-
national business. Salesman say they con- sion that unfavorable publicity about the
thso former sales agents of General Tele?, stan, ~ly find themselves under Indonesian matter would damage its in-
- competitive
phone accusing Hughes Aircraft of payer pressure to make substantial kic'.;h?.cks ternational credit rating. In addition, the
ing bribes of 20 percent or more to Indo? J or payoffs in return for fore'.gn co tracts. source said, top officers "did not want to
nesian officials. Senior executives of what makes the experience of General imply that G.T.E., as the most. ultrapure.
Hughes Aircraft, a major part of the l Telephone in Indonesia different is hat was complaining about the big bad
some of those involved decided to cotrn- world" since "they don't pretend to be
business empire of the late Howard R
Hughes, have emphatically denied the aI? plain - to the American Embassy in all that clean."
Jakarta, to officials of the Central Intelli- Allegations of large-scale payoffs in
legations. connection with the installation of the
More than $50 million in Bence Agency, to the Export-Import Bank Indonesian satellite system, in l rime and, finally, to the press. which hewn
i States-guaranteed loans were granted by ? Subsequent inquiry has raised a number' limited operations in August, have been
the sport-ImpoBan ;rt it Bank in Washington to of questions about the procedures used widespread in the electronics and aero-
help finance the satellite system. The' by the Export-Import Bank on foreign space char-es during intervie Sep-
bank made the loans despite knowledge American goods. tember with Dr. Thomas P. Cheatham Jr.,
of the allegations of a payoff and con The inquiry found further that Amer!- a former high-level Pentagon official who
ducted no inquiry into the allegations, can concerns, which had justified payoffs was employed as a consultant by General
though it did require statements by the as necessary because of competition from ------ -
contracting parties that no payoffs were foreign companies, began to compete
demanded or made. among themselves to see which could
offer the biggest payoffs.
Three-Month Investigation Significantly, growing numbers ? of
The Times, in an extensive series of ! American business executives believe that'
interviews during a three-month investi- some form of international cooperation is
gation in Southeast Asia and the United necessary to curb such activities. .
States, was informed by Indonesian offi- Telephone Modernization Planned
cia!s, foreign intelligence agents and busi- I The role of General Telephone in Indo-
ness and sales agents with d'rect involve- nesia began shortly after it learned that,
ment in the negotiations that at least 20 the Government had decided to modern-,
percent of the purchase rice of the satel- ize the telephone system in Jakarta, the,
p capital, and in outlying regions. As part,,
lite system was funneled to Indonesians of that project, the Government decided
in payoffs. on the satellite communications system.:
It could not be established independ- 'which could link the 3,500-mile-long
ently that money was paid by Hughes chain of islands. General Telephone's-
Approved Approved For Release 2006/11/07: CIA-RDP88-013.15R00030012002g 2(1
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