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This publication is available in microform from UMI. UMI 800-521-0600 toll-tree 313-761-4700 collect from Alaska and Michigan 800-343-5299 toll-free from Canada r w kt 1 ,[…1%, ” PIM III sir ti.111 WI./ `l iN ‘.1.1t1n/ d ,111 ‘ la CONGRESSIONAL RECORD HOUSE H 2555 April 25, 1991 top officials from the Lockheed Corp., the United Technologies Corp., the Martin Marietta Corp., the LTV Corp.. the Raytheon Co., the Grumman Corp.. and ITT Defense Inc. A SHOT IN THE ARM State Department officials and defense executives stress that defense exports are different from commercial trade since they must be deemed in the national interest before sales are allowed. Nevertheless, the thrust of the recent lobbying campaign and the government’s campaign to promote export has been to spur defense business abroad, which has been in the doldrums for years. Worldwide export deliveries of U.S. arms totaled $16.5 billion in 1987, but by 1989 had slipped to $11.7 billion. Defense executives have used the shrinking defense budget as a key element in their campaign to increase foreign sales. With the Pentagon budget going down, they argue, exports are critical to individual companies and to the well-being of the defense industrial base. The war against Iraq notwithstanding, annual defense spending is projected to decrease by some $56 billion, in constant dollars, over the next five years. “International opportunities are a mustdo for the defense industry,” says Gordon Adams, the director of the Defense Budget Project, an independent research group on defense issues. “You can’t just drive over there,” Adams adds. “If you want to get into the foreign government, you’ve got to get into the American government.” That’s just what the industry has been busy doing. And it has had a strong and well-placed ally in Eagleburger, who, along with National Security Adviser Brent Scowcroft, has been instrumental in forging closer ties between U.S. agencies and industry export programs. REVERSING THE LEPROSY LETTER For years, exporters smarted over one legacy of President Jimmy Carter. Dubbed the leprosy letter, the directive instructed U.S. embassies to steer clear of defense firms because of concerns about regional arms races and high-tech weapons proliferation. Companies complained that many foreign governments took the opposite approach, providing their defense industries with strong encouragement for exports. Now that’s all changing. And Lawrence Eagleburger has been getting a lot of the credit. “Larry has made a substantial difference. He’s probably the most sympathetic guy who’s been up there in years,” says Joel Johnson, vice president for international operations at the Aerospace Industries Assoof the nation’s leading aerospace firms. Defense officials have been direct in their approaches to Eagleburger. At the January 1990 dinner meeting with defense executives, he was urged to send a clear signal to U.S. embassies in favor of defense exporters. “We encouraged Eagleburger to do that, and he said he would be glad to do that,” says Don Fuqua, a former Democratic congressman from Florida who is president’ of AIA. Adds Perlman of Martin Marietta, who wasn’t at the meeting, but has worked on export issues: “We were happy when Eagleburger, under pressure from the industry, put out his directive.” According to s. State Department release in August, Eagleburger’s July 10 cable advised embassies to be “well informed about, and responsive to, U.S. defense industry sales in host countries. Posts may provide pertinent country information to industry representatives,” including help in setting up appointments for U.S. executives. Fuqua says the January meeting was at tended by a few members of the AIA’s executive committee, including D. Travis Engen, the chief executive officer of ITT Defense, which makes radar-jamming systems for fighter planes and night-vision equipment. The meeting, Fuqua adds, also focused on the need to expedite licensing procedures. Engen confirms that he attended the meeting, but says he cannot remember whether the need for a letter to U.S. embassies was discussed. He did recall Joking briefly with Eagleburger about how they should be on good behavior at this gathering, considering their past corporate ties. Eagleburger was on the board of the ITT Corp. from June 1984 to March 1989. The annual director’s fee varied; in his last full year, he received $84,759, according to his financial disclosure form. As a former director, he has a vested pension plan from ITT that will kick in when the 60-year-old Eagleburger turns 65. Through Kissinger Associates, Eagleburger also had ties to ITT, which was one of his clients. Eagleburger was president of Kissinger Associates from 1984 to 1989. Eagleburger terminated his director’s role with ITT and othr companies When he joined the Bush administration in 1989. To avoid any appearance of conflict, Eagleburger said that, among other steps, he would recuse himself for his whole term from any matter in which the ITT Corp. was a “formal party or in respect of which it is known to me to have a direct and predictable effect on my interest in the ITT pension plan for outside directors.” Eagleburger also agreed to recuse himself for one year from matters specifically involving his , former clients at Kissinger Associates. That year expired on March 20, 1990, Weeks after the Jan. 8, 1990, meeting with defense officials that was attended by ITT Defense’s Engen. While Eagleburger would not comment, a State Department lawyer, speaking on the condition of anonymity, says that Eagleburgerthrough his meeting with the ITT Defense executive and through his subsequent embassy cabledid not violate his pledge to recuse himself from matters relating to ITT. “We don’t think the general promotion of exports, even industry specific exports, is a matter in which the ITT Corp. is a formal party,” this of fical says. The ITT Corp. was not a formal party because the memo promoting exports was a general policy initiative that affected all American defense companies, not just ITT, according to this official. Another federal ethics officer concurs that Eagleburger’s actions did not violate any ethics standards. Formal party, this official says, is generally understood to mean a company or individual with a petition or other official proceeding pending at the department. In the one-year recusal from matters relating to his former Kissinger clients, Eagleburger did not specify that only situations where the clients were formal parties were covered. Nevertheless, the State Department official says that the “formal party” standard applies. ‘ At least one liberal public-interest activist, David Cohen, co-founder of the Advocacy Institute, is not convinced by the State Department’s explanation. “It doesn’t matter that the whole industry benefits,” says Cohen, whose organization trains public-interest advocates. “In this instance, there’s a clear and direct benefit to the ITT subsidiary.” As for the notion that ITT individually would have had to petition Eagleburger for help in order for the recusal pledge to come into play, Cohen calls it “a distinction without a difference.” Cohen adds that Eagleburger’s presence at the meeting and his writing of the cable are issues that the State Department and the Office of Government Ethics ought to address. Eagleburger is not the only high-ranking official who has passed through the revolving door and is now pushing defense exports from the inside. Defense lobbyists also tout the help they’ve received from National Security Adviser Scowcroft, who for a time headed Kissinger Associates’ Washington office. Scowcroft, who could not be reached for comment, also served as a consultant to the Lockheed Corp. William Paul, a senior vice president for the United Technologies Corp. in Washington, says he and three other industry officials met with Scowcroft last year on the issue of developing a cohesive administration policy on defense exports. Noboby from Lockheed attended that meeting, participants say. “We talked about how the U.S. should have an affirmative policy for defense exports,” Paul says. “We’ve gotten very good responses from Brent Scowcroft.” “Our role has been to stay with it and keep the pressure up,” Paul adds. “This administration has been absolutely superb.” The AIA’s Johnson says that both Scowcroft’s and Eagleburger’s offices had significant roles in developing the administration’s proposal to provide loan guarantees for weapons exports from the Export-Import Bank. Without question, the defense industry’s spadework is paying off. In relationships with other countries, the sale of defense weapons is now on the table with other issues. “We’re now putting on the bilateral agenda issues like \(defense exports]. When there’s a sale pending, we’re putting these sales on the agenda,” says Charles Duelfer, the director of the Center for Defense Trade, the year-old State Department agency that replaced the Office of Munitions Control. Duelfer also notes that since the Eagleburger memowhich his office helped draftwent out last July, several ambassadors have been especially helpful. In fact, Dueller says, when the State Department evaluates U.S. embassies, support for defense companies “in one of the things they’ll be graded on.” Duelfer adds that the revamping of the Office of Munitions Control grew out of extensive conversations with Eagleburger and Secretary of State James Baker on the need for streamlining the licensing process and promoting exports. THE TEXAS OBSERVER 15