A Record of Corporate Corruption

The record of U.S. corporations indulging in bribes, kickbacks and political payoffs is already voluminous; yet it is sure to swell. The Securities and Exchange Commission is now investigating at least 54 major U.S. companies. The Internal Revenue Service is probing others. Here are the results so far:

During the Watergate investigations, a total of 17 companies confessed to making corporate contributions to help re-elect President Nixon. Why would they knowingly break the law? Some had much to gain or lose from federal action regardless of who won the election; many made corporate donations to the Democrats as well. Northrop Corp., which admitted a $150,000 donation to the Nixon campaign, is a major defense contractor. Three oil companies--Gulf, Phillips and Ashland--gave $100,000 each to Nixon; their industry is under political attack. American Airlines ($55,000) and Braniff Airways ($40,000) are dependent on federal regulators. But there were also companies among the 17 that had no obvious self-interest. Minnesota Mining & Manufacturing, makers of Scotch tape and other products, gave Nixon $30,000. Said former Chairman William L. McKnight: "I don't know that 3M did anything different than a great many other corporations."

The penalties were light. The Watergate Special Prosecutor's Office meted out tiny fines--usually $5,000 for the guilty corporation and $1,000 for the top officer--and closed its books. But the SEC, fearing that the political contributions had violated reporting rules, promptly reopened all the cases. It discovered several slush funds.

Gulf Oil, for example, used a Bahamas subsidiary to "launder" $12.3 million used for political purposes. The 3M Co. set up a Swiss bank account for the same purpose. Nor were the big multinationals the only influence seekers. Sanitas Service Corp., a Connecticut-based firm with 1975 sales of $83 million, passed $1.2 million to local politicians through a dummy concern founded by a former officer.

The SEC has demanded that the offenders promise to stop violating U.S. securities laws by concealing illegal contributions in their reports to the SEC and the public. Most companies let the matter drop at that point. Some exceptions: Ashland Oil chose to make Chairman Orin Atkins and two other executives pay the company $325,000 from their own pockets, and 3M got several officers, including former Chairmen Bert Cross and Harry Heltzer, to give back $480,000. Thomas V. Jones resigned as chairman of Northrop and is supposed to be replaced as president no later than June 16; after that, he may--or may not--stay on as chief executive. Gulf fired Chairman Bob R. Dorsey, even though his degree of knowledge of the slush fund was not proved.

When it discovers questionable payments overseas, the SEC orders an auditors' investigation of how much was paid where and to whom. Investigators have found that Northrop distributed a staggering $30 million to foreign agents. Some U.S. corporations were embarrassed by publicity about their contributions even in nations where the laws condone such gifts. IBM, Mobil and Standard Oil of Indiana, among others, made legal donations in Canada and Italy. Exxon contributed at least $46 million to Italian politicians, some of it in return for specific favors.

Until the Lockheed revelations, the payoff with the most explosive consequences was United Brands' 1974 payment of a $1.25 million bribe to a high official in Honduras to reduce an export tax on bananas. The bribe was uncovered by an SEC investigation into the suicide of United Chairman Eli Black, who swung his briefcase to smash a hole in a window of his office on the 44th floor of New York City's Pan Am Building and then jumped to his death. The disclosure helped bring on a Honduran coup that overthrew the government of President Oswaldo Lopez Arellano.

Other scandals are still emerging or growing. It is not known yet exactly how many U.S. military officers and high-ranking Pentagon civilians accepted the hospitality of Northrop and other defense contractors at hunting lodges; the current count is 101. Some highly principled companies are investigating their overseas activities on their own. G.D. Searle, the pharmaceutical firm, last month announced that it had discovered payments of $ 1.3 million to "foreign government employees or their agents." While the making of such voluntary disclosures is admirable, it intensifies a troubling question: When will the scandals ever end?

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