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user during the evaluation and selection process leading to eventual procurement must be maintained."
Now do you think that entertaining Navy aircraft plans and requirements and procurement officials in the time immediately preceding a major Navy aircraft competition in which you will be taking part constitutes an “arm’s-length relationship”
Mr. JONES. I have been informed and I have looked into that that the individuals involved were not involved in any phase of the actual source selection and evaluation process at the time they were guests there. I was concerned myself.
Senator PROXMIRE. Well, give us the details on that then, for the record. I'd like to know who the people were who made the procurement decision and in detail and then the people who were entertained.
[For the Record, Mr. Jones submitted the answer “None."'] Mr. JONES. I don't have that information.
Senator PROXMIRE. I know you don't have it now. I say for the record: Did any DOD or NASA personnel ever express to Northrop officials an expectation that they would receive invitations to hunting trips, skiing trips, football games, or any other form of entertainment?
Mr. JONES. Not to my knowledge.
Mr. Jones. I don't necessarily believe I would have known. I don't know.
Senator PROXMIRE. Would you have a policy of discouraging that kind of invitation; a corporate policy?
Mr. JONES. I don't think it would be necessary to have a policy.
Senator PROXMIRE. Would you condone that kind of invitation? You say it's not necessary. Is it not necessary because it wouldn't be done, or not necessary because if it were done you think it would be ethical and proper?
Mr. Jones. I think it improper to use that for the purpose of securing a clear-cut advantage from someone's side. I think it would be wrong .
Senator PROXMIRE. Well, if you didn't have a policy against it, then it may be your personal conviction but that doesn't make it thé Northrop policy until you have it in writing and communicate it to your subordinates.
Mr. JONES. I don't believe that it has occurred. I don't know. I cannot vouch for various people who have accepted invitations.
Senator PROXMIRE. Wouldn't it be desirable for you, as chief executive, to make that kind of policy clear, communicate it?
Mr. JONES. We don't have any now. There is no entertaining of DOD officials so there's no interpretation needed. It's clear.
Senator PROXMIRE. Now have you made that position clear?
Senator PROXMIRE. Will you give us a copy of the directive, the date it was issued, and who received the directive?
Mr. JONES. Yes.
[See Appendix III (A), p. 177.] Senator PROXMIRE. And what does that directive say in summary?
Mr. Jones. Well, that it's the policy of the company that there will be no gratuities, meals or otherwise granted, or invitations issued to DOD employees.
Senator PROXMIRE. For DOD employees. How about NASA ? How about other Federal officials?
Mr. JONES. I would prefer to provide you what our policies are and we'll be happy to do so because we have been revising them very recently in the last months. I will be happy to provide them.
Senator PROXMIRE. Mr. Jones, isn't it true that the Air Force or the Defense Contract Audit Agency are reviewing books to determine whether entertainment costs were allocated to Government overhead on Government contracts ?
Mr. Jones. I think they are verifying and reverifying previous
Senator PROXMIRE. Isn't such an allocation illegal?
Senator PROXMIRE. My question was, is it true that the Air Force and the Defense Contract Audit Agency are reviewing books to determine whether entertainment costs were allocated to overhead on Government contracts and the question was whether such allocation would be illegal.
Mr. CROWELL. Under the provisions of Section 15 of the Armed Services Procurement Regulations, I believe that entertainment is an unallowable cost under a Government contract.
Mr. JONES. And our policy is not to charge them to the Government. I can tell you that. It's our policy.
Senator PROXMIRE. Did you order your employees associated with the hunting lodge not to discuss business with guests at the lodge?
Mr. JONES. No.
Senator PROXMIRE. Well then, how do you know that business wasn't discussed?
Mr. JONES. I don't know that it wasn't discussed. I don't believe I stated that.
Senator PROXMIRE. As far as you know, that was an occasion on which these officials were entertained, wined and dined and provided a pleasant weekend of hunting and business was discussed ?
Mr. JONES. No, I don't know that business was discussed.
Senator PROXMIRE. You don't know whether it was or not. You had no policy on it?
Mr. JONES. That's right.
Senator PROXMIRE. Will you find out from the people who were involved whether or not business was discussed and let us know for the record ?
Mr. JONES. To the best of my ability.
Senator PROXMIRE. Please describe the circumstances surrounding the Department of Defense investigation of your hunting lodge guests. Did the DOD come to you to ask for a list or did you voluntarily submit it?
Mr. Jones. I can't be precise but it became public 6 or 8 months ago and we did provide it to the Defense Department. As to whether it was their request or our initiation, I can't recall, but we were responsive. We were concerned that they be informed as quickly as possible.
Senator PROXMIRE. Again, will you determine for the record, if you can, if you have it in writing, whether they took the initiative
, or you did ?
Mr. Jones. I certainly will.
Senator PROXMIRE. Did they interview you or other corporate officials to determine what costs you had paid for your guests, whether there were other guests not named in your invitation list or whether military officials had been your guests in other forms of entertainment? Maybe I should take these one by one.
Mr. JONES. Yes.
Senator PROXMIRE. Did they interview you or other corporate officials to determine what costs you would pay for the guests whether you would pay for the meals, lodging, transportation and so forth?
Mr. Jones. I don't know. There is factfinding going on at the levels where these facts would be known for some time and I cannot
Senator PROXMIRE. Again, can you give us that for the record ? Did you tell us whether there were other guests not named in the invitation list and whether the DOD asked for this?
Mr. JONES. I can't tell you that myself. Senator PROXMIRE. I'm surprised that you wouldn't know that, Mr. Jones, as a top official in Northrop. Since that has been such an important, almost traumatic experience for you and your corporation, I would think you would make it your business to find out.
Mr. JONES. Senator, we have opened our doors and our books to the various people who have asked and I have let those processes proceed where the knowledge resides. I have asked to be kept informed, but I cannot with certainty tell you—answer some of the questions, but we can provide them.
Senator PROXMIRE. Can you tell us whether or not the DOD asked why you had decided to provide such entertainment?
Mr. Jones. I will see if the question has been asked. It wasn't asked of me.
Senator PROXMIRE. And do you know whether or not they asked whether military officials had been your guests in other forms of entertainment, whether the DOD asked you whether or not they had been your guests in other forms of entertainment besides the hunting lodge?
Mr. JONES. I will ascertain that.
Senator PROXMIRE. Will you provide for the record copies of all correspondence between your company and either the DOD or NASA regarding their investigation of entertainment by your company?
Mr. JONES. I will do my best to comply.
[Information submitted for the record follows:] Question. Please provide copies of any correspondence between the company and the Department of Defense relating to its investigation of entertainment of military officers and DOD officials. Did the DOD request the company's guest list, or was this list voluntarily provided ?
Answer. Martin R. Hoffman, then General Counsel for the Department of Defense, requested a list of attendees at Northrop's hunting facility. Northrop transmitted the lists to DOD under cover of letter dated June 13, 1975. This letter represents the only correspondence in Northrop's files with DOD regarding its investigation.
WILMER, CUTLER & PICKERING,
Washington, D.C., June 13, 1975. MARTIN R. HOFFMANN, Esq. General Counsel, Department of Defense, Pentagon, Washington, D.C.
DEAR MR. HOFFMANN: At your request, I am herewith transmitting certain materials which relate to a hunting facility, leased and used by Northrop Corporation and located on the Eastern Shore of the Chesapeake Bay.
These materials consist of lists, contemporaneously prepared and annotated, of individuals who were invited to the hunting facility or who received game taken from a hunt at the facility during the period from October, 1971 through January, 1974. These lists were used by Northrop's Auditors to prepare the information concerning the hunting facility which appears in Section II of the "Report of Special Investigation,” which has been previously supplied your Department.
I wish to emphasize, however, that these lists do not constitute an authoritative roster of individuals who visited the hunting facility. I am informed that certain individuals whose names appear on the list as having been invited or as having received game taken from a hunt did not, in fact, attend.
Furthermore, I would like to point out that this "facility” consists of two tracts of land with a farm house nearly 150 years old which has been furnished in a rough fashion. I am informed that guests at the facility frequently bring their own weapons, furnish their own ammunition and obtain their own hunting licenses. In addition, although it is difficult to estimate the cost of the meals iurnished at the facility, I am informed that some guests prefer to make some forin of payment for their share of the meals.
The persons who most frequently use the facility are Northrop employees or Consultants residing in the Washington, D.C., area. Some of these individuals are former government employees. Most of them maintain close personal friendships with other current or retired government employees, members of Congress, and congressional staff personnel. I am informed that invitations to use the facility are extended primarily to personal friends, including friends who may be government employees, with whom the Northrop personnel share an interest in hunting. In particular, I am advised that responsible Company personnel strictly avoid extending invitations to DOD employees or other government personnel who work in the area of procurement or contract administration.
Notwithstanding the foregoing, I believe that public disclosure of these documents would result in unwarranted inferences of impropriety which could needlessly embarrass Northrop and the individuals identified in these lists. Because, as I have emphasized, those lists do not accurately or reliably indicate whether any person named actually attended the hunting facility, I believe it would be especially inappropriate to make public disclosure of these lists.
I am providing these materials to you on the understanding that you require this information in connection with a possible Departmental investigation of allegations that DOD Standards of Conduct may have been breached by persons attending Northrop's hunting facility. I hope you will take into account the deficiencies and limitations inherent in the enclosed materials during any such investigation.
Finally, insofar as these materials are to be used in conjunction with such an investigation, I hereby request that they be treated as investigatory records compiled for law enforcement purposes within the meaning of the Freedom of Information Act, as amended, 5 U.S.C. $ 552(b) (7), and that the Department resist disclosure of these materials to the fullest extent possible. Sincerely,
HIOWARD P. WILLENS.
Senator PROXMIRE. Whatever files you have, I imagine you would have the communication if it had been in writing, and I presume it was. I note from the invitation list that at least three military officers who were later hired by the company attended the hunting lodge while they were still on active duty. These were Captain Wynn Whidden, General Homer Hansen, and General David Burchinal. This seems to indicate more than the normal amount of pre-retirement contact with the company. Was there any discussion of business or any direct or implied job offer to any of these individuals before they retired from the military?
Mr. JONES. I'm certain not.
Mr. JONES. Well, in terms of the two of them, I have firsthand knowledge, and one of them I don't have firsthand knowledge.
Senator PROXMIRE. All right. Let's have each of them in turn. First, General Hansen. Do you have knowledge whether or not,
Mr. JONES. He's the one I wouldn't know.
Senator PROXMIRE. You see, it is suspicious in that a man who is a procurement official is entertained and then he goes to work for you, but you have no knowledge of whether or not that was discussed before he left active service?
Mr. JONES. Even the General Hansen hiring was done at the division level; he is a consultant, not an employee.
Senator PROXMIRE. Again, will you try to determine that for the record ?
Mr. JONES. Yes.
Senator PROXMIRE. Now you have certain knowledge then as to General David Burchinal?
Mr. JONES. Yes.
Senator PROXMIRE. And you know, I presume, from what you have said—that whether or not he would work for your company was not discussed with him.
Mr. JONES. I made the job offer to General Burchinal and I specifically waited for 6 months after his retirement and, incidentally, he was not a procurement official.
Senator PROXMIRE. I understand that.
Mr. JONES. That's why I know that one. The Whidden one, I have to say I have secondhand knowledge, not firsthand knowledge.
Senator PROXMIRE. What does your secondhand knowledge indicate?
Mr. JONES. I was told by our people—I was advised that these individuals were hired fully complying with the conflict of interest rules. I was told that. I asked for it to be looked into.
Senator PROXMIRE. By that, you mean that they were not approached until 6 months after they had left the service?
Mr. JONES. I was concerned when I saw the list and I asked were there any of these improperly done, and I have been advised by people in my company, legal and others, that it complied and that's why I mean secondhand knowledge.
Senator PROXMIRE. Will you ascertain by asking these gentlemen directly--they would be the best witnesses, I guess, on this—as to