169. Telegram From the Department of State to the United States Military Mission to Saudi Arabia1
Quote 7728. Subject: Agents’ Fees for Peace Hawk V Program. For Chargé.
1. At earliest opportunity, you should seek an appointment with Prince Sultan and state that you have been instructed to deliver to him following confidential letter from LTG. Fish which seeks SAG guidance regarding Triad’s claim that it is entitled to an agent’s fee for the Peace Hawk V program. You should tell Prince Sultan that once he has had an opportunity to study letter, Embassy will be happy to transmit his response.
2. Following is text of letter: Your Royal Highness: The letter of offer and acceptance for the Peace Hawk V program recently was presented to the Saudi Air Force. It includes a clause stating (in effect) that no agent’s fees will be allowed for the Peace Hawk V program unless such agent’s fee/commission has been identified and payment thereof approved in writing by the Government of Saudi Arabia before contract award. There are no funds now included, in the estimated costs shown in the letter of offer, for payment of any agent’s fees for the program.
On March 6, 1975, Assistant Secretary of Defense Ellsworth advised you of the existence of an agency agreement between the Northrop Corporation and the Triad Financial Establishment. This letter was associated with an earlier proposal for the Peace Hawk V program. Your response dated May 17, 1975, stated your “non-acceptance of any middleman . . . in any arms contract between the Government of the Kingdom of Saudi Arabia and the Government of the United States of America.” This was followed by publication of Decree no. 1275 of the Council of Ministers of Saudi Arabia dated September 17, 1975. Accordingly, the United States Government took appropriate action to comply with its understanding of those desires.
Notwithstanding, the Triad Financial Establishment now has provided its firm view that the Peace Hawk V proposal is not subject to the limitations provided in the Council of Ministers decree, and has requested the Northrop Corporation to make provision for payment [Page 569] of an agent’s fee to Triad under terms of the agency agreement. The primary basis for this request by Triad is its interpretation of an interview, purportedly given by His Royal Highness Prince Fahd bin Abdul Aziz, which was published in the Lebanese newspaper Al Anwar on November 28, 1975.
Consequently, the Northrop Corporation has identified a potential agent’s fee of approximately dols 77 million for the Peace Hawk V program, and we are identifying this fee to you in accordance with paragraph 20 of the terms and conditions appended to the Peace Hawk V letter of offer. The Department of Defense, as the administrator of the program, is not in a position to assess the appropriateness of this fee and requires your guidance.
We have re-examined the Council of Ministers decree and note that it mentions only “arms and equipment” contracts. We therefore believe that it is in our mutual best interests to clarify the matter of “services” contracts. We would appreciate it if you will provide the Saudi Government position regarding inclusion of an agent’s fee in contracts awarded for the Peace Hawk V program.
Sincerely,
LTG. H.M. Fish,
Director, Defense Security Assistance Agency.
Kissinger
Unquote.
Summary: The Department directed USMTM to deliver a letter from Fish to Prince Sultan, which requested clarification about agents’ fees for services to be delivered under Peace Hawk Phase V.
Source: National Archives, RG 59, Central Foreign Policy File, D760012–1045. Confidential. Drafted and approved by Dickman.
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