Of Envelopes and Packing Grates

After a corporation has agreed to make a payoff, the problem arises of how to transfer the money. Speed and secrecy are the obvious requirements for such exchanges, but sometimes the methods are astonishingly unsubtle. Part of the $7 million paid by Lockheed to Yoshio Kodama, the company's secret agent in Japan, arrived in yen-filled packing crates. Some of the rest was passed a bit more discreetly, in the form of checks made out to "bearer." Still, Kodama signed receipts for the equivalent of $2 million, and translations of the receipts were among documents given to a Senate subcommittee by Lockheed's auditors, Arthur Young & Co.

The most popular vehicle for relatively small payoffs is the envelope. In Italy, bustarelle, or "little envelopes" containing lire for favors rendered, are quietly left on government officials' desks. In the U.S., Gulf Oil passed out many of its political contributions in sealed envelopes. Gulf Lobbyist Frederick Myers testified to the Securities and Exchange Commission that in 1964 he handed one envelope to New Mexico Republican Senator Edwin L. Mechem, now a federal judge, at a ranch outside Albuquerque. In 1970, Myers said, he flew to Indianapolis to present another envelope to Republican Representative Richard L. Roudebush, now head of the Veterans Administration, in a men's room at a Holiday Inn.

The "black account" is another favorite device. The term refers to money kept in a foreign safe-deposit box and doled out as the need arises. According to one U.S. executive in Latin America, the amount of cash in the box is usually kept small--$50,000 at the most--to avoid detection by auditors, and there are no receipts, no official records. Sometimes, though, the amounts are much larger. Lockheed's auditors discovered that payments ranging up to $130,000 had been made from a safe-deposit box in Paris at the discretion of company officials. The fund was not carried on Lockheed's books until mid-1975, when what remained of the cash turned up in a Lockheed checking account.

For the big money, the delivery systems are less direct and personal. The preferred method is still the numbered Swiss bank account. It can be used by the company making payoffs as an anonymous distribution point, or company agents can set up Swiss accounts for the receivers.

An SEC investigation disclosed that Phillips Petroleum Co. went so far as to establish two Swiss corporations into which it channeled a total of $2.8 million. A bit less than half of that was then withdrawn and transferred to a cash fund at the company's Oklahoma headquarters. By the time the Government caught on, $585,000 had been paid out in political contributions in the U.S., most of it in violation of the laws. The other half of the "laundered" Swiss money was spent overseas on payoffs and attorneys' fees for the Swiss corporations.

Other methods of concealing payoffs can go undetected for a long time. A foreign subsidiary of Burroughs Corp., the Detroit-based computer company, tacked payoffs onto sales prices and distributed some $2 million through the use of fictitious invoices. Burroughs headquarters found out about the payoffs after a Price Waterhouse audit that company chiefs ordered last year. The company will not say what officials or countries were involved. In their annual report, Burroughs officials allude to the payoffs and say that the company is taking "vigorous steps to reinforce its longstanding policy against such actions."

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