The Task Force has not yet received a report on the fruits of these efforts. With respect to the Task Force's relationship to the SEC, we would note that, with the exception of the unfortunate misunderstanding concerning Secretary Richardson's June 11 letter to Senator Proxmire, relations have been cordial and cooperative. Chairman Hills has personally briefed the Task Force and has consulted frequently with the Chairman of the Task Force and with the Steering Committee. We think it fair to say that without the vigorous enforcement efforts of the SEC, the Task Force would have been at a serious informational disadvantage in its attempt to address the questionable payments problem. It is perhaps important to make clear at this point that in all consultations with investigative agencies, our principal interest has been in gaining such understanding of the general scope and character of the questionable payments problem as would allow the Task Force to provide the President with informed advice as to additional policy actions deemed necessary or desirable. Although the Task Force did not have a complete view of the scope of the - of the Task Force, concluded that the scope and character of the problem as already generally revealed require the additional actions he outlined. This is a view which is entirely consistent with the work of the Task Force and one with which, accordingly, we strongly agree, for reasons we would be happy to elaborate in response to such further questions as the Committee may wish to ask. Mr. ROSENTHAL. Before we go on with the questioning, I would appreciate it if you would furnish for the record biographical data on each of you. Mr. DARMAN. We would be glad to do that. [Information requested follows:] Principal policy adviser to the Secretary of Commerce responsible SUMMARY OF VITA PRIOR TO CURRENT POSITION: B.A., Harvard, cum laude in Government, 1964; M.B.A., Harvard RESUME OF JOHN THOMAS SMITH II Recent Experience Mr. Smith has been associated with the Washington, D. C. law firm of Covington & Burling since February 1974, where his practice has included general commercial matters, litigation, and corporate representation before a range of federal agencies including the Labor Department's Occupational Safety and Health Administration, the Environmental Protection Agency, and the Department of Housing and Urban Development. Previously, he was associated with Commerce Secretary-designate Elliot Richardson in his three prior Cabinet positions as his executive assistant. Employment Background Executive Assistant to the Attorney General, May 1973-October 1973; Assistant to the Secretary of Defense, January 1973-May 1973; Executive Assistant to the Secretary of Health, Education and Welfare, September 1972-January 1973; Special Assistant to James B. Cardwell, Assistant Secretary, Comptroller, HEW, 1971-1972; Program Analyst, Office of Planning, Programming and Budgeting, Central Intelligence Agency, 1970-1971; Officer, U.S. Air Force, 1968-1970 (assigned to CIA, 1969-1970); CIA, August 1967-February 1968. Yale National Honorary Scholarship, 1960; graduated in top third of class, Yale Law School, 1967; Director, Yale Moot Court; law school senior writing project on national regulation of international trade: "The Interrelation of the Most Favored Nation Clause and the Principle of Reciprocity in U.S. Foreign Trade Policy." Date and Place of Birth: October 22, 1943, New York City, New York Marital Status and Residence: Smith, his wife, the former Linda Carol Kridel, and two sons reside in Washington, D. C. January 27, 1976 77-169 - 76 - 14 # # # Mr. ROSENTHAL. Mr. Gradison. Mr. GRADISON. I would like to reserve my time. I have no questions right now. Mr. ROSENTHAL. Mr. Levitas. Mr. LEVITAS. I have a couple of questions. Thank you, Mr. Chair man. I direct this question, I suppose, to either of you. It seems to me that at the heart of the questionable payments situation, whether it be payments in the form of bribes to foreign government officials or whether it be a return of laundered money back into this country for political or other purposes, there are some essential features that keep cropping up. An examination of the Gulf case is an example, but there are others. And it usually seems to involve the assistance of a foreign subsidiary and/or the existence of secret bank accounts which are not made known to U.S. governmental officials. And only through that device of secrecy do you really create this veil of secrecy that permits the laundering of funds. Would you agree that in order to deal with this problem of questionable payments, both abroad and for improper purposes in this country, that any future legislation would have to strike right at the heart of the mechanism; namely, the secret bank account situation as it relates to the use of the foreign subsidiary? Mr. DARMAN. I agree with your general observation, Congressman, as to the need to get at the veil of secrecy. I would think that it can be addressed in part through U.S. legislation; but, it has been our view that that alone will not be adequate. Even if the U.S. Government had authority to develop the audit trail all the way up to the farthest point that U.S. law will reach, it would still be quite easy for a corporation to set up an intermediary abroad which would not be subject to that reach, and which could perform the function one wishes to deter. Ultimately, it will be necessary, if possible, to develop an international agreement or treaty which will allow one to get to the intermediaries which are foreign controlled. Mr. LEVITAS. Reference was made earlier to the Bahamas, which has been a situs through which funds apparently have been laundered and handled through secret bank accounts. There is no incentive, it seems to me, for the Bahamian Government to enter into such a treaty. They have an economy based upon a banking industry which provides this secrecy. They have no income tax laws of their own. So what incentive is there for them to enter into a treaty with this country to make available this type of information? Mr. DARMAN. I think that is a very serious problem. The progress in developing an international agreement has been slower than one would wish. It was in part for that reason that the President decided to seek unilateral legislation. And I am only noting that I do not think that will be adequate. Now as to how one could get other countries to agree to something which may not be, at least in this narrow area, in their short-term self-interest, some have suggested that moral suasion alone in the international community will be of value. I leave that for others to judge as to its likely efficacy. Some have suggested that we explore the possibility of using other areas of economic leverage available to the United States-trade pref |