JANUARY 1982 - VOLUME 3 - NUMBER 1
Know What's Behind the Logo
According to the New York Times, many Americans think of ITT as "a three-letter symbol for corporate subterfuge and raw political power." What they probably don't think of is Hostess Twinkies, Wonder Bread, or Hartford Insurance. . . just three of the 275 U.S. companies ITT has bought since 1959.
ITT has not always been so active in its home country. Founded in 1920 by a Virgin Islands sugar broker, Sosthenes Behn, ITT ran phone operations in Cuba, Puerto Rico, and the Virgin Islands. The name was deliberately chosen to create confusion with AT&T (American Telephone and Telegraph). When AT&T's subsidiary, Western Electric, was ordered to sell its overseas manufacturing operations in an antitrust suit in the 1920s, ITT bought the European plants and made a secret cartel agreement with AT&T. The two phone companies, agreed to split the market, worldwide, so as not to compete with each other.
Not surprisingly, then, ITT has become the second largest manufacturer of telecommunications equipment in the world, and virtually owns the market in Europe and Latin America. Some 203,000 of its 348,000 workers are employed outside of the U.S. and Canada.
When Cuba nationalized ITT in 1959, Harold Geneen, then the company's newly-appointed chief executive, decided that the company should re-invest in the United States to protect itself. Over the next 20 years, ITT bought companies engaged in dozens of different industries, and now it owns $23 billion worth of factories, real estate, forests, coal, oil, and securities - about half of it in the USA.
But as Geneen steered the company on its path to becoming what British author Anthony Sampson dubbed the "sovereign state of ITT", he left a trail of international scandals that has given the conglomerate its current notoriety.
Geneen had been paying for his acquisitions spree with ITT stock, a tactic that depends on showing convincing book profits, and by the late 1960s he decided that ITT needed a subsidiary with a large cash flow. He picked the Hartford Insurance Group, but the deal was challenged by an antitrust suit. In June of 1971, the Justice Department allowed ITT to keep Hartford if it sold Avis Rent-a-Car and three other companies. Eight months later, in a prelude to the Watergate scandal, columnist Jack Anderson revealed a memo by an ITT lobbyist indicating that the Hartford deal had been arranged after Geneen had pledged a $400,000 contribution to the Republican Party.
There followed a string of bribery allegations, principally the payment of millions of dollars to an ITT agent in Nigeria who was well-connected in the country's ruling National Party, and payments to government officials and businesspeople in Iran, Indonesia, Algeria, Mexico, Italy, Turkey, Chile and the Philippines. The U.S. Securities and Exchange Commission (SEC) instituted a "special review" process to monitor the company's investigation of more than $9 million in bribes paid by ITT subsidiaries during this period, charging that the company had attempted to cover up its trail of corruption.
Among these scandals none outraged world opinion more than ITT's involvement in the rise and fall of President Salvador Allende of Chile. ITT channeled support to the right-wing candidate opposing Allende's candidacy in 1970, but the attempt failed and Allende became the first elected Marxist president in history. In 1973, however, Allende, who had nationalized ITT's Chilean operations, was killed in a coup, and ITT was rewarded for its partisanship by the return of its holdings.
In 1978 and '79, the Justice Department dropped claims that ITT executives had perjured themselves in congressional hearings on the Chilean takeover, claiming that their evidence would endanger "national security." Edward Kory, who was U.S. ambassador to Chile at the time of the I coup, claimed that ITT Chairman Geneen was not indicted because "he knows too much" about the CIA's relationships with U.S. corporations around the world.
But the rights of citizens or of their elected governments have never loomed large in ITT's worldview. Recently the U.S. Internal Revenue Service obtained a $17.8 million settlement of a $100 million tax bill it was demanding from ITT's purchase of Hartford Fire Insurance Co. back in 1970. And last month an Austrian court convicted 12 defendants, including four top executives of ITT's Austrian subsidiary, on counts of paying and receiving bribes in relation to construction of a public hospital in Vienna.