135. Telegram From the Embassy in Saudi Arabia to the Department of State1
3378. Subject: Corruption in Saudi Arabia; U.S. Firms.
1. During the past weeks we have seen a number of reports in the press concerning efforts now underway in the U.S. to probe activities of U.S. firms abroad. Embassy has heard from a reliable businessman that the SEC investigation of Northrop activities could produce evidence of Northrop payments to officials as high as [less than 1 line not declassified]. We have also noted that Lockheed and Raytheon are reportedly under investigation.
2. We believe American performance has been significantly “better” in this area than our British and French competitors. Nevertheless, despite our advice that the old payoff system is no longer mandatory, many Western businessmen believe it is a way of life in the Middle East (some of the news articles, of course, indicate the Middle East is not unique in this). No doubt there is some fire under this current smoke screen.
3. If widespread publicity is given to allegations of corruption and bribery of Saudi officials the results could be extremely damaging. Bi-lateral relations would almost certainly suffer, and American business with Saudi Arabia would receive a serious setback, especially in the defense field if [less than 1 line not declassified] name were to be directly associated with major otherwise unexplainable payoffs. There might also be an important impact on Saudi society and political stability if [2 lines not declassified] should come into the [less than 1 line not declassified] light.
Despite news censorship, this kind of development could not be kept secret. It might have the effect of exaggerating it. The impact could be even greater at this particular time when lines of authority are still being drawn in the new regime.
4. Action requested: We are in no way implying that the Department should interfere in this investigation. We do, however, urgently need whatever advance notice the Department can give us concerning the course of investigations (both SEC and Congressional).
Summary: The Embassy requested up-to-date information on investigations by the Securities and Exchange Commission of military contractors operating in Saudi Arabia, including Northrop, Lockheed, and Raytheon.
Source: National Archives, RG 84, Jidda Embassy Files, Lot 79F80, DEF 12–5.13, Northrop. Confidential; Exdis. Drafted by Butcher; cleared by Bird, Murphy, and Akins; approved by Horan.
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