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within the company so I can't comment on it. I don't know what general he's referring to or what problem he's referring to.

Senator PROXMIRE. I'm going to yield to Congressman Patman. Mr. PATMAN. I want to ask if you're willing to furnish a list of expenses, including the dues, of the Business Round Table and other expenses indicated and itemized for other purposes in connection with your representatives' representation of the Business Round Table in New York. Now since your president is a member of that group, I assume you would have no trouble getting it.

Mr. ANDERSON. Yes, and I would hope that that request could be directed to Mr. Rockwell who is on the Round Table and attends the meetings and I think he would be much more prepared to answer that

question than I am. I am not a member. Mr. Patman. I'm asking you to do it. If you fail to do it, well, we will try to provide a way that we can do it.

Mr. ANDERSON. I will do the best I can.
Mr. PATMAN. But you will do your best on it?
Mr. ANDERSON. Yes, sir.
Mr. PATMAN. Thank you.
[Additional information submitted by Mr. Anderson follows:]

Dues paid by the Company during the past three years to the Business Roundtable were: for 1973, $625; for 1974, $8,750, and for 1975 (including a special assessment), $33,250.

Senator PROXMIRE. Can you give us a company statement on the Operation Common Sense activities at the present time for the record ?

Mr. ANDERSON. I will go back and get whatever I can, Senator Proxmire. I don't believe it's active right now. I haven't heard of it for a couple of years, but I will get whatever I can on what is going on today, if that's agreeable.

Senator PROXMIRE. Isn't the Defense Contract Audit Agency investigating the lobbying activities of Rockwell employees not registered as lobbyists to determine whether salaries are chargeable to the Government!

Mr. ANDERSON. I understood that you had written a letter to the DCAA asking such a study be made and I believe such a study is underway. However, I have not talked to anyone and I have had no information on it.

Senator PROXMIRE. Can you confirm whether the defense auditing agencies are allowing entertainment costs on Government contracts?

Mr. ANDERSON. As part of a DOD investigation they were asked to audit. I believe they have audited certain locations around the country. We have had an understanding within the company and I think with DCAA that those costs are not charged to Government programs and those records are not subject to audit. When they asked' for them in this case, we reminded them of the agreement that we had attained for the past few years and we have heard no more.

Senator PROXMIRE. Now I'd like to ask about the Voices in Politics or VIP program. It's not Very Important Person, but Voices in Politics, but I believe it was supervised by Mr. Jameson, one of your former vice presidents. It is my understanding that every corporate employee making over a certain level of income was expected to contribute 1 percent of his salary to this fund. I have heard suggestions that as much as $1 million were raised for 1972 political campaigns through this fund. It is also my understanding that, at least occasionally, the wishes of individuals as to the recipient of this donation were not observed. The committee intends to continue to examine this question and intends to ask the Defense Contract Audit Agency and the General Accounting Office to consider whether that portion of an individual's salary contributed to a political campaign under pressure from his superiors can be considered an allowable cost on Government contracts. You are in a position where you can make the committee's job somewhat easier, Mr. Anderson. Can you state for the record whether it is your understanding that contributions to the VIP fund or any other company. ; sponsored political funds were voluntary in every sense of the word or whether employees were coerced or pressured in any way to make such contributions ?

Mr. ANDERSON. As far as I know, there was no coercion and no pressure. We did encourage our executives to contribute to the party of their choice. We suggested that this would be a good thing as a citizen, but it was not a pressure tactic and there were some of our executives that did not contribute.

Senator PROXMIRE. I want to make sure I understand. This was the VIP program which was one to which some executives would contribute and then the company would decide the party or the candidate who would get the donation. Is that correct?

Mr. ANDERSON. That's true; some executives contributed, but it was the executive who decided where the contribution went.

Senator PROXMIRE. That's quite different from encouraging executives to contribute to parties of their choice which would be completely voluntary. There would be no question about that. Everybody is for that. When you contribute to a fund that the company controls and then in turn spends

Mr. ANDERSON. My counsel reminded me there was no fund. We do not maintain a fund within the company.

Senator PROXMIRE. There's not a fund within the company?
Mr. ANDERSON. Correct.
Senator PROXMIRE. What is the Voice in Politics fund?

Mr. ANDERSON. As I understand it, VIP was a program to encourage our executives to donate to the political party of their choice or to the groups which were soliciting for major events to be supported, but it was not in the form of a kitty or a fund that somebody would take money out of, as far as I know.

Senator PROXMIRE. Mr. Anderson, you responded earlier to my question on entertainment by saying that this policy is now ceased except where you're sure that you comply fully with the law.

Mr. ANDERSON. Yes, sir.

Senator PROXMIRE. Now that doesn't satisfy me because, of course, this is not a law that we are talking about. We are talking about a regulation.

Mr. ANDERSON. Well, then, I should have said regulation.

Senator PROXMIRE. 'And how painstakingly do you determine what the regulation requires ? What have you done to make sure you're in compliance with the regulations?


Mr. ANDERSON. Well, any exception that we permit now is going to be so clear cut, as I understand it-for example, NASA in their new regulations say that if it comes in the course of a business day of meetings, and it's not convenient for the NASA employee to buy lunch, he can have and enjoy lunch at the plant or at the shop with

Senator PROXMIRE. You're still going to entertain public officials at places like Wye Island and Cat Cay! Mr. ANDERSON. That is stopped.

Senator PROXMIRE. That has stopped?

Mr. ANDERSON. We have never entertained a public official at Cat Cay. We just bought it. But we will not entertain public officials there.

Senator PROXMIRE. At any hunting lodge or other resort?

Mr. ANDERSON. Let me rephrase that. Federal officials, we will not entertain.

Senator PROXMIRE. But you will entertain public officials?

Mr. ANDERSON. We might. I don't know. I came here really to address myself to the two specific questions.

Senator PROXMIRE. That's correct. You will not in the future entertain at any of your resorts any Federal official?

Mr. ANDERSON. That's correct.

Senator PROXMIRE. Legislative or executive, I presume?

Mr. ANDERSON. Any Federal official, executive or agency. Senator PROXMIRE. Gentlemen, I want to thank you very much. Mr. Anderson, you're obviously a highly competent executive and you have done a very responsive and responsible job. We appreciate it very much. Your testimony has been most helpful and you certainly have been completely cooperative. Thank you very much.

Mr. ANDERSON. Thank you.

[Additional questions for the Record, see Appendix II (E), p. 174.] Senator PROXMIRE. Now our next and final witness today is Mr. Thomas V. Jones, President of the Northrop Corp.

Mr. Jones, committee rules prevent me technically from swearing you at this time; however, I want to ask you whether your testimony will be fully consistent to what you would say under oath. Mr. JONES. It will be.

Senator PROXMIRE. All right, sir. Will you introduce the gentleman who is with you and then either give us your full statement or condense your statement and we will file your full statement in the record either way.

Mr. JONES. This is Mr. Eldon H. Crowell, of Jones, Day, Reavis and Pogue, a law firm in Washington.

Senator PROXMIRE. Welcome, Mr. Crowell.


Mr. JONES. My name is Thomas V. Jones. I am president and chief executive officer of the Northrop Corp. I am here in response to your request for a perspective on relationships between Govern

ment contractors and Federal officials. I believe that the hearings by your committee can be constructive, and I hope that I can add to the committee's understanding of the relationships between members of the defense industry and the Department of Defense.

Obviously, I cannot speak for the defense industry as a whole, but I certainly can give you the views and perspectives of Northrop on some of the considerations with which you will wish to be concerned.

It is in the clear interest of the Nation to preclude and avoid conflicts of interest. We favor clearly defined rules for competition among contractors seeking to meet the requirements established by the Department of Defense. "Arm's length" dealings between manufacturer and user during the evaluation and selection process leading to eventual procurement must be maintained.

I can state with certainty that Northrop, as a contractor confident of its ability and performance record, strongly supports this approach to the selection and procurement process. I am sure that I would be joined by my competitors in the defense industry in my belief that these procedures and standards, governing the selection and procurement process, are vital.

There is, however, a clear and necessary distinction between Government-industry relationships during the procurement phase and those that are required during the conceptual phase, and again, during the service life of the product in the field. The evaluation and source selection process must be conducted in an environment that is sterile and aloof; by contrast, the conceptual phase that begins many years before demands close communication, knowledge, and understanding.

There is, therefore, an important distinction between the close relationships necessary for the concept and utilization of a weapon system and the distant relationships that must be maintained with those responsible for the evaluation and selection of a particular weapon system.

In order for the defense industry to support the national security interests of the United States effectively, it is necessary to understand what those interests are and what they will be 10 to 15 years in the future. We need to know the Defense Department's concerns about the operational use of the aircraft and other systems that are in service today so that we can improve upon them, or correct them, and assure that new systems will be more effective and more economical in the future. Years before the competitive procurement cycle begins, we have to understand the Defense Department's problems of operational reliability, of maintenance, of operating costs, of projected manpower availability.

The Defense Department officials responsible for assuring that efficient and effective weapons systems will be available, if and when they are needed, do benefit from an understanding of the capabilities and limitations of the defense industry and the technology we have at hand, or that we can anticipate with confidence for the future. This does not usually involve discussions of specific hardware, but rather consideration of ideas and concepts. These require a free flow of communications, formal and informal, at all

levels and across the whole range of disciplines that must be taken into account before we can even begin to design a weapon system.

With this in mind, we can focus on the specific questions of corporate policies pertaining to the potential for conflicts of interest.

Our corporate policies are intended to conform to the restrictions set forth in the regulations which apply to the standards of conduct and conflict of interest of Government employees. It is our policy to observe these rules and to implement whatever procedures are necessary to assure that these policies are carried out. Over the years there have been continuing changes in attitudes and interpretations, and from time to time new regulations. We are continually examining our corporate policies to assure that they reflect and conform to these new circumstances.

Northrop's policy with respect to hiring men and women is to obtain the services of the most competent and most qualified individuals possible. Military officers alone possess actual operating experience with weapon systems that is unique and is unavailable elsewhere. We employ those people because they have experience in understanding the extremely complex organizational, administrative and operational problems of the Defense Department, and can relate the capabilities and limitations of our company to developing solutions to those problems. It is obvious that this experience is of great value.

To design and produce effective systems that meet a wide variety of operational roles and needs for our armed services requires men of broad operational experience. We must also have men who have knowledge of the problems of field maintenance anywhere in the world, the complexities of supply and logistics support, the needs of preparation and training, the requirements of reliability, and effective methods to assure force readiness. This knowledge best comes from those who have actual experience at all levels in the field, and who can translate this experience in a manner that will permit us to provide a product that will be effective, reliable and at the lowest possible cost. This represents a competence and an understanding derived from individual experience that I believe is valuable to our national defense when properly utilized.

It is our corporate policy to conform to the laws and regulations governing potential conflicts of interest, and our procedures are designed to preclude violations by any Northrop employee. It is essential to examine on a case-by-case basis whether the job to be performed by an individual would involve a conflict of interest. With this stipulation satisfied, I know that former military officers and Government officials contribute significantly to the effectiveness and quality of our products. This is in the national interest.

I know it is the committee's objective in these hearings to seek ways to provide the greatest national security for the defense budget expended upon it. To achieve this, I believe it is important that we place in proper perspective the very important relationship between individuals in the defense industry and those in the Department of Defense.

Now in preparing for my appearance before this committee in the last several days my attention has been drawn to the com

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