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14.022": F769
FOREIGN CORRUPT PRACTICES AND DOMESTIC AND

FOREIGN INVESTMENT DISCLOSURE

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COMMITTEE ON
BANKING, HOUSING, AND URBAN AFFAIRS

UNITED STATES SENATE

NINETY-FIFTH CONGRESS

FIRST SESSION

ON

S. 305,

TO AMEND THE SECURITIES EXCHANGE ACT OF 1934 TO
REQUIRE ISSUERS OF SECURITIES REGISTERED PUR-
SUANT TO SECTION 12 OF SUCH ACT TO MAINTAIN AC-
CURATE RECORDS, TO PROHIBIT CERTAIN BRIBES, AND

FOR OTHER PURPOSES

MARCH 16, 1977

Printed for the use of the Committee on Banking,

Housing, and Urban Affairs

UNIVERSITY

STANFORD

AUG 1977

GOV'T.

DOCUMENT

UEPARTMENLE

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 1977

87-232 O

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

WILLIAM PROXMIRE, Wisconsin, Chairman
JOHN SPARKMAN, Alabama

EDWARD W. BROOKE, Massachusetts
HARRISON A. WILLIAMS, JR., New Jersey JOHN TOWER, Texas
THOMAS J. MCINTYRE, New Hampshire JAKE GARN, Utah
ALAN CRANSTON, California

H. JOHN HEINZ III, Pennsylvania
ADLAI E. STEVENSON, Illinois

RICHARD G. LUGAR, Indiana
ROBERT MORGAN, North Carolina

HARRISON SCHMITT, New Mexico
DONALD W. RIEGLE, JR., Michigan
PAUL S. SARBANES, Maryland

KENNETH A. MCLEAN, Staff Director
JEREMIAH S. BUCKLEY, Minority Staff Director
CHARLES L. MARINACCIO, (Special Counsel
HOWARD A. MENELL, A88i8tant Counsel

(II)

CONTENTS

Page

75

American Airlines, review of ownership information---

American Council of Life Insurance, views on title II of S. 305_--

American Life Insurance Association, letter and statement received from

Larry M. Rosenstein, assistant general counsel -

American Institute of Certified Public Accountants :

Letter to Senator Proxmire from Wallace E. Olson, president------

Letter to Securities and Exchange Commission from Philip B. Chenok,

Auditing Standards Committee.--

Statement before House Committee on Interstate and Foreign

Commerce

Chamber of Commerce of the United States, statement of J. Jefferson

Staats, staff associate --

Civil Aeronautics Board, letter from John E. Robson, Chairman, regarding

Cede & Co. in stockholder reports---

Comptroller of the Currency, letter to Depository Trust Co., from Robert

Bloom, Acting Comptroller---

Corporate Data Exchange, Inc., letter to Senator Metcalf regarding Amer-

ican Airlines' largest stockvoter---

Depositary Trust Co.:

Exchange of letters with Civil Aeronautics Board regarding annual

reports required of companies under regulation----

Letter to Senator Metcalf regarding the security position listing for

American Airlines.--.

Federal Deposit Insurance Corporation, letter from Robert E. Barnett,

Chairman

Federal Election Commission, relationship to the Congressional Research

Service of the Library of Congress..

Federal Power Commission, letter to Depositary Trust Co. from L. H.

Drennan, Jr., chief accountant-

Federal Reserve Board, letter to Depositary Trust Co., from Arthur F.

Burns, Chairman..

Federal statutes directing that agencies shall tabulate information so as

to maximize its usefulness to other agencies and the public--

Machinery and Allied Products Institute, letter received from Charles W.

Stewart, president--

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Page

6

20
17

30

43

41

47

201

Metcalf, Lee, U.S. Senator from the State of Montana :

Exhibits accompanying prepared statement--
Reprint of remarks in the Congressional Record on the Federal Power

Commission regulatory information system--

Response to subsequent questions of Senator Williams--
Model corporate disclosure regulations developed by the interagency steer-

ing committee on uniform corporate reporting, established by GAO---
Morgan Guaranty Trust Co.:

Holdings of American Airlines' common stock---
Letter to Senator Metcalf enclosing list of the names of all nominees

used for the registration of securities--
Report to the Civil Aeronautics Board regarding capital stocks held

as trustee-----
National Association of Manufacturers, letter and statement received from

R. Heath Larry, chairman.-
Price Waterhouse & Co., views on title I, sec. 102 concerning certain

aspects of corporate accountability-
Securities and Exchange Commission :

Beneficial ownership disclosure requirements, reprinted from Federal

Register
Joint letter received from Senators Williams and Metcalf and Con-

gressman Moss on regulatory delay of subsection 13(f) of the Secu-

rities Exchange Act of 1934..
Letter to Depositary Trust Co. from Roderick M. Hills, chairman.

Proposed section 21(c)---
Treasury Department, letter from W. Michael Blumenthal, detailing mem-

bers of United Nations Working Group on Corrupt Practices represent-

ing the U.S. Government---
Wolfson, Nicholas, professor of law, Connecticut University, statement on

title I, foreign corrupt practices.

231

133

4
34
142

106

215

FOREIGN CORRUPT PRACTICES AND DOMESTIC AND

FOREIGN INVESTMENT DISCLOSURE

WEDNESDAY, MARCH 16, 1977

• U.S. SENATE, COMMITTEE ON BANKING, HOUSING AND URBAN AFFAIRS,

Washington, D.C. The committee met at 10 a.m., in room 5302, Dirksen Senate Office Building, Senator William Proxmire, chairman of the committee, presiding

Present: Senators Proxmire, Sparkman, Williams, Sarbanes, Brooke, Tower, Garn, Heinz, Lugar, and Schmitt.

OPENING STATEMENT OF CHAIRMAN PROXMIRE

The CHAIRMAN. The committee will come to order.

Today the committee will hear testimony on S. 305 which is sponsored jointly by Senator Williams and myself. This is Secretary Blumenthal's first appearance before this committee and we look forward to Secretary Blumenthal's statement and appearance. He is obviously a very brilliant man and a great addition to the administration and we are proud and happy to have him as our witness this morning.

We are also pleased to have Rod Hills, Chairman of the Securities and Exchange Commission, testifying. Mr. Hills, in my judgment, has been an excellent chairman of the SEC, one of the very best. Under his leadership the SEC has maintained the position in my view as the most effective regulatory agency in the Government.

Title I of S. 305 outlaws the bribery of foreign officials by American companies. The SEC has recently uncovered 300 instances in which U.S. companies engaged in the bribery of foreign officials involving over $300 million. Public confidence in the business community, the heart of our free enterprise system, has been seriously affected by these revelations. Bribery is not only morally bad, it's bad business. Companies which engage in such practices run the risk that when uncovered substantial business may be lost or, even worse, property may be confiscated by hostile governments. The image of our Government abroad is tarnished and the effectiveness of our foreign policy diminished. Bribery undermines fair competition between American firms. Price and quality no longer contro] the market. The growth, profitability and employment levels of firms operating in such circumstances are distorted. There's just no disagreement on these principles or on the venal effect of bribery, that it is wrong.

Former Secretary Simon spoke with eloquence before this committee against bribery. The business community has spoken out as with one voice against bribery. The only dispute is how to stop it and how to make any prohibition we write into law effective.

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