JULY 1983 - VOLUME 4 - NUMBER 7
Citibank before Congress: Take three
It is not often that the chief executive of a powerful corporation takes time out from money-making ventures to sit before a Congressional committee and answer unpleasant questions about the operations of his firm.
But that is precisely what transpired in late June when Walter Wriston, chairman of Citicorp, appeared before a House Energy and Commerce subcommittee to respond to charges that the bank, with his approval, systematically evaded the currency and tax laws of at least 16 foreign countries (see MM, October 1982). The hearings were the third of four to be conducted by the subcommittee on the heels of a December, 1981 decision by the U.S. Securities and Exchange Commission (SEC) to drop its three-and-one-half year probe of Citicorp's foreign dealings.
The lineup for the June 28 hearings represented about as high-powered a corporate group as any that has appeared on Capitol Hill for some time. In addition to Wriston, witnesses included Hans Angermueller, the 58-year-old vice-chairman of Citicorp, widely rumored as a possible successor to his present boss; Darwin Smith, chairman of the $3 billion Kimberly-Clark Corporation and a member of the Citicorp board; and Lloyd Cutler, former counsel to President Jimmy Carter and now a counsel to Citicorp.
From the opening gavel, the Citicorp team took the offensive. Wriston addressed himself only in passing to the foreign exchange flap, focusing instead on Citicorp's internal system for policing irregularities by bank officers and employees. This is understandable, since SEC investigators charge Wriston himself with knowing of - and approving - many of the allegedly illegal transactions. In response to such talk, Wriston said simply that Citibank has a "model system of corporate governance," and pointed to law-and-order rhetoric from several policy manuals distributed to top managers of the firm.
The real business of responding to SEC and Congressional charges was left to Angermueller, no slouch when it comes to tough talk with legislators. As Citicorp's chief lobbyist, the vice chairman has made a name for himself as one of the most aggressive - some say ruthless - business political operators in America.
Angermueller presented detailed critiques (running nearly 70 pages) of two Citicorp investigation reports: a study prepared by the staff of the SEC Division of Enforcement and presented to the commission in 1981; and an "Analysis of Citicorp's Transactions," a 1982 staff report of the House Subcommittee on Oversight and Investigation.
Angermueller called the SEC report "a careless, sloppy piece of work ... replete with miscitations, misquotations, omissions . . . arithmetic mistakes and similar flaws." He questioned the accuracy of no less then 130 quotations in the 138-page report.
Angermueller was no easier on the Energy and Commerce study, which he claimed "consistently misconstrues the documentary and testimonial evidence in an effort to force it into a preconceived hypothesis: that Citicorp has violated the law."
Corporate claims of biases and inaccuracies against legislative and regulatory officials are hardly unheard of on the political scene, but the intensity of Citicorp's rebuttals suggests that management is taking these charges, and their potential fallout, quite seriously. It looks as if the Congressional probe of Citicorp and the SEC has an awfully long way to go before any definitive conclusions are reached.
- Bill Taylor
Caterpillar packs up Ohio plant and heads to Korea...
Daewoo Heavy Industries, one of South Korea's ten largest conglomerates, has signed a long-term contract with a subsidiary of Caterpillar Corporation, confirming rumors in the press since last year (see MM, January 1983).
The agreement between Daewoo and Towmoter Corporation, Caterpillar's wholly-owned subsidiary based in Peoria, Illinois, initiates production of 10,000 lift trucks a year in Korea, while production at Caterpillar's Mentor, Ohio plant will be completely phased out. However, Caterpillar will continue producing large lift trucks at its Dallas, Oregon plant.
Announced in Seoul on June 11, the contract is part of Caterpillar's effort to consolidate its operations in order to overcome competition from Japanese companies. It also marks a deepening of ties between Daewoo and U.S. multinationals: General Motors and Daewoo Heavy Industries own equal shares of Daewoo Motor Company in a joint -venture arrangement.
The announcement came weeks after the settlement of a 205 day strike between Caterpillar and members of the United Auto Workers, the union representing Caterpillar workers in Mentor, Ohio. It was during the strike, while the plant was closed, that reports began to circulate that truck production would be shifted to Korea. Caterpillar denied the reports at that time, however.
The reason for the Daewoo contract, says Caterpillar spokesperson Steve Newhouse, is "obviously the overcapacity in the world market. We needed to reduce our surplus and the Daewoo deal will help us meet world competition."
A UAW spokesperson in Detroit said that "there's no question they're moving to Korea because of the wages there."
... while Hyster's move angers Portland
Another - and even larger - forklift truck manufacturer, Hyster Corporation, is also abandoning its hometown, but it won't be able to leave quietly.
Hyster's announcement last February that it was moving its truck manufacturing operations from Portland, Oregon to Danville, Illinois where it had been offered an attractive financial package (see MM, March 1983), angered members of the community into forming the Portland Committee on Unemployment Action (PCUA). The group has organized activities to focus public opposition to Hyster's move, including one protest demonstration at the truck plant and two at nearby corporate headquarters. In February, the PCUA also delivered a strong letter of protest to Hyster chairman William Kilkenny, calling on him to "exercise some loyalty and fiduciary responsibility by rescinding" the company's decision to close the plant. According to a Hyster spokesperson, however, shutdown of the plant will be completed by fall, although corporate headquarters will remain in Portland.
The committee staged another, more dramatic event to express community feeling toward Hyster. On May 25, it held a trial before the "People's Court of Oregon." Hyster, the defendant, was summoned to answer to charges of "corporate extortion and desertion" brought by "the Unemployed" as plaintiffs, according to Sandy Willow, PCUA chair.
Willow served as the chief prosecutor at the trial and the PCUA appointed a defense counsel in Hyster's behalf after Hyster failed to respond to the summons. One witness testifying at the trial described himself as a "red-blooded capitalist" but said that he thought "Hyster's act brings shame on us all." To no one's surprise, the jury found Hyster guilty of the charges, and the judge ordered the company to make reparations to the people of Portland. The PCUA hopes to retry the case before other communities, as an educational forum.