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FCPA Blog Daily News

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Monday
Jun122017

Arms dealer who helped inspire FCPA dies in London

Adnan Khashoggi, the Saudi arms dealer in the middle of the giant 1970s bribery scandal that led to enactment of the Foreign Corrupt Practices Act, has died in London at 81.

From 1970 through mid 1975, Lockheed paid Khashoggi and his company, Triad, $106 million in commissions.

A U.S. Senate investigation in September 1975 also revealed that Northrop paid Khashoggi $54 million and Raytheon paid him $23 million.

When the wider Lockheed bribery scandal broke into public view, several overseas governments collapsed. The U.S. Congress launched an investigation and looked for ways to end the graft.

Khashoggi worked as Lockheed's sales agent in Saudi Arabia. At first he denied paying bribes to win sales there.

But on September 13, 1975, Lockheed chairman Daniel Haughton testified to the Senate that Khashoggi had told him bribes were necessary.

"Haughton did not estimate how much of the $106 million [that Lockheed paid to Khashoggi] may have been paid to Saudi officials as bribes," the New York Times reported then.

Khashoggi said Lockheed's records and testimony were based on "misunderstanding, confusion and hearsay."

Haughton testified that Lockheed also paid bribes directly to Saudi officials through numbered bank accounts in Switzerland and Lichtenstein, the Times report said.

The Times said in 1975 that "Khashoggi's empire includes banks in California and herds of cattle in Arizona as well as a furniture factory in Lebanon and an insurance company in London. All together, he owns more than a score of businesses."

Senator Frank Church said “through these extortionate practices, American companies are really financing the purchases in the United States of Mr. Khashoggi and his associates. That's one of the ways these bribes are being recycled.”

The NYT reported in 1975 that an internal investigation at Northrop showed payments of $450,000 to Triad, Khashoggi's company, that went to two Saudi generals.

Khashoggi was the model for Harold Robbins’ bestseller The Pirate, published in 1974.

He owned a dozen homes, the Guardian said in its June 7 obituary, and a thousand suits. He spent $70 million on his third yacht and $40 million "on a customized Douglas DC-8 described as a flying Las Vegas discotheque."

After the House and Senate finished the "Lockheed" hearings, they ironed out a bill to stop overseas bribery. President Jimmy Carter signed the Foreign Corrupt Practices Act into law on December 19, 1977.

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Richard L. Cassin is the publisher and editor of the FCPA Blog.