We have a number of civilian banks which have been invited out to do what we would call ordinary banking business, type of business you and I do. They may deposit monies. They may have checking accounts. They may have a savings account. We have a number of these banks Mr. GALIFIANAKIS. Those are established banks, are they? Mr. BARTIMO. We give them certain logistic support, for example, a place to have an office. As a matter of fact, some of this is Govrenment-supported on the logistics side. It is all done through the cooperation of the Department of the Treasury. They work with us, and it is done in accordance with regulations which set up these banks. Mr. GALIFIANAKIS. Are most of the personnel who allegedly perpetrate the fraud with the defrauding serviceman Americans primarily? Mr. BARTIMO. Well, if we are talking about the so-called money black market, Mr. Parker-I believe you weren't here when he testified-what he was saying is true, from our own observations and investigations. I myself have visited South Vietnam on six separate occasions and each time I focused some of my time on this particular problem. Generally, it is what is often referred to as the Indian money changers. By Indian, I mean they are from India, not American Indians as some might suspect. These people make a living out of the socalled money black market. One of the reasons is, and we are trying to cope with this problem, the piastre is officially exchanged at 118 piastres to an American dollar. Unfortunately, the black market brings as much as 300, and, I am told, on some occasions 380 piastres to the dollar. Therefore, it is very difficult for an ordinary GI who must buy his piastres at the official rate, and get 118 piastres when he is tempted on all sides by being offered 300, 350, 360 to the dollar. Now, this is not to say that we have a lot of this on the part of the GI's. I think that conductwise our troops have done an outstanding job. But nevertheless, the propensities of some to get 400 piastres or 350 instead of 118 leads them to this so-called money black market. Mr. GALIFIANAKIS. One more question. Then I will yield. Are the banks that are local, or parochial in Saigon, are they governed by secrecy laws, do you know? Mr. BARTIMO. I don't know the answer to that, whether the banks in Saigon are governed by secrecy laws. But I can state that our problem is not with the banks in Saigon. They are either in Hong Kong or elsewhere in the world. I am sorry, but I could supply the answer for that. Mr. GALIFIANAKIS. Well, if there were branches for those banks with which you have difficulty, it facilitates the fraud if they are located there in Saigon, doen't it? Could you ascertain that for us for the record? Mr. BARTIMO. Yes, Perhaps one of my colleagues knows the answer. I don't know whether you heard that answer. He doen't know whether there are any secrecy or secret bank accounts in Saigon. I doubt it from what I observed. But he did also say that we have Bank of America and other U.S. Banks which I have already Mr. GALIFIANAKIS. Would you be kind enough to see if there is a source of information on that? Mr. BARTIMO. I would be glad to supply that for the record. Chairman PATMAN. Mr. Blackburn. Mr. BLACKBURN. Thank you, Mr. Chairman. Mr. Bartimo, a question has come to my mind which I will submit to Mr. Morganthau, who testified earlier today, and the other witnesses, but I would like to have your thoughts on it. The whole purpose, as I understand, of the secrecy of the bank accounts is to permit the transfer of funds to a person whom the transferror does not wish to be identified. Mr. BARTIMO. That is correct, sir. Mr. BLACKBURN. And in the case of the manipulations of the PX accounts, the funds would be deposited by a firm in America through their American bank to a numbered account in Switzerland. The secrecy occurred at the time the money was deposited in the numbered account in the Swiss bank? Mr. BARTIMO. Yes, sir. I believe that is correct, sir. Mr. BLACKBURN. So, the transfer of funds is completed at the time the beneficiary of this deposit goes to Switzerland and draws the funds out and then brings cash into this country? Mr. BARTIMO. That is correct. Mr. BLACKBURN. Now, do you think it would be helpful if we had a requirement that persons bringing huge sums of money, or sums in excess of some figure, say a thousand dollars in cash, be required to declare that on their declaration? I know when we come in we have to tell how much perfume we bought or watches or whatever else we might have on hand, but we don't have to tell how much cash we have. Usually, there is very little in my pocket. But do you think that would be a device that would be helpful? Mr. BARTIMO. Yes, sir. And I note that in your bill you make such a provision. I think it would be helpful indeed. Mr. BLACKBURN. Good. That is my only question. Thank you, Mr. Chairman. Chairman PATMAN. Yes, sir. Mr. Griffin. Mr. GRIFFIN. Yes, sir. I wanted to ask you a question in line with Mr. Reuss's questions. You apparently have taken no action against the suppliers that were involved in kickbacks and what not? Mr. BARTIMO. Well, I am sorry if I didn't answer that fully, but I would like to explain what I meant by my answer. Let's go back a way and focus on the suppliers selling to the post exchange. First of all, it might be useful for you to have a feel for the magnitude of this problem. I happen to have the figures with me, and I would like to refer to them. For example, in 1969, the post exchange, which means the Army and Air Force Exchange, did $1.17 billion worth of overseas business. In the continental United States it was $1.67 billion, I believe, or a total of $2,238,000,000. Now, focusing again on overseas, the number of businesses involved, that is, the number of buyers that sell goods to the post exchange, were 2,918, which we term small business, 1,347, which we call large business, or a total of 4,292 suppliers. The post exchange is like any other big business; they go to salesmen who are representing these 4,000 some odd firms rather than going to the firms themselves. And the reason I understand is if they were to buy directly, it would cost them more money than by going through these so-called manufacturers' representatives. In the case that I alluded to, having this as background, where they had set up a dummy corporation in Europe, and yet they were representing a number of American suppliers Mr. GRIFFIN. How many suppliers were involved there? Mr. BARTIMO. I don't have the exact number, but I can supply that for the record. But I think I can still make the point. Mr. GRIFFIN. If you made an example of two or three of them and blacklisted them, I would think that would be the best enforcement. Mr. BARTIMO. I was going to bring that out to show you how this works, and make that statement. As soon as we find in the Department of Defense that any supplier, or a manufacturer's representative is bribing our people, our buyers, he is immediately blacklisted. Mr. GRIFFIN. The agent is blacklisted? Mr. BARTIMO. The individual who was guilty of the deceit and the fraud, the man who gave kick-back to our buyers. Mr. GRIFFIN. Right. But what about the industry involved, the particular person, the company that was manufacturing some of these items. Have you taken any action against a manufacturing concern? Mr. BARTIMO. We have this one case I mentioned in my testimony. I think we could speculate and say that the manufacturers should have known or should now know that this was going on-what have they done about it? I don't have an answer. And I have asked our authorities in the Army-Air Force exchange located in Texas. However, I would like to add this for the record, if I may, that we have been meticulous in working with other Government agencies. For example, we try to at least correct what we can. These individuals, these representatives who set up a dummy corporation in Europe so that they wouldn't have their profits taxed were doing it under a device by saying that the sale was consummated in Europe and not the United States. We are now working with the Internal Revenue Service so that all PX sales, no matter where bought, it will actually reflect on the consignment that the sale was consummated in the United States of America; therefore, giving the Internal Revenue people a better focus on Mr. GRIFFIN. That would help. But if you would find two or three flagrant violations by the manufacturers to make an example out of that would make everybody honest, I think, because it is a tremendous business, over a billion dollars involved. Mr. BARTIMO. I agree. Yes, sir. Mr. GRIFFIN. Thank you, Mr. Chairman. Chairman PATMAN. I would like to ask you-now, you are in Vietnam most of the time, are you not? Mr. BARTIMO. No, sir. I have my office in the Pentagon, but I have made trips there. Chairman PATMAN. You are in Washington, but you have made six trips recently over there? Mr. BARTIMO. Well, over the last 4 or 5 years; yes, sir. Chairman PATMAN. Do you know anything about the servicemen borrowing funds and where they borrow these funds and the rates of interest that they pay, and so forth? Mr. BARTIMO. Generally, I know something of it, sir. Chairman PATMAN. Who do they get their money from, like they have some urgent call from home and they have to borrow funds. Mr. BARTIMO. Well, I know you are a great expert in this area, Mr. Chairman, and I know the answer you would like me to give, and I will give it, that they make use of so-called co-ops. The Pentagon co-op Chairman PATMAN. You mean credit unions? Mr. BARTIMO. Credit unions; yes, sir. Chairman PATMAN. Well, now, we ran into some very unfortunate cases over in Vietnam. They were paying 50, 70, and 100 percent interest. And those who wanted an automobile, they would have to pay $200 or $300 more than they should have to pay to finance it, and they were just really being robbed in many ways, and we working with the Defense Department Mr. BARTIMO. Yes, sir. I know that. Chairman PATMAN. And we had good cooperation. Mr. BARTIMO. Thank you. Chairman PATMAN. We got the credit unions over here to have an office over there, and that way they do their business by mail, and they got their checks back rather quickly. Mr. BARTIMO. Right, sir. Chairman PATMAN. Is that the way they still do it? Mr. BARTIMO. Yes. I believe that your stimulus in this area has, I think, been very beneficial to many of our GI's located in South Vietnam and elsewhere in the world. Chairman PATMAN. It saves them a lot of money on interest. Chairman PATMAN. And they are not robbed by these sharks. Chairman PATMAN. We have a number of credit unions in the United States that have offices overseas. In fact, we have sent people from this committee, investigators, all over the world, and everyplace where men are assembled, we have made it possible for them to get loans through credit unions. Mr. BARTIMO. Yes, sir. Chairman PATMAN. Directly through some credit union here Mr. BARTIMO (continuing). And at a low rate of interest and saved them enormous sums of money, millions of dollars. Yes, sir. That is true. Chairman PATMAN. And we are proud of it. Mr. BARTIMO. Well, you can be proud and we are delighted that you have helped us. Chairman PATMAN. Yes, sir. Now, I have here the Wall Street Journal of February 9, yesterday, heading "Swiss Bank. Swiss Credit Bank is pleased to announce its new location at 100 Wall Street." And next to a picture of the building, it says, "We look forward to serving our customers in our spacious modern offices and making new friends in our new home. Visit us soon and let us welcome you to our world of banking. Swiss Credit Bank, New York Branch, 100 Wall Street, New York, N. Y. Telephone number; Pacific Coast Representative office, 900 Wilshire Boulevard, Los Angeles, Calif., telephone; Head office, Zurich." (The advertisement referred to follows:) THE WALL STREET JOURNAL, Monday, February 9, 1970 Swiss Credit Bank We look modern offices many new friends in our new home. Visit us soon and let us to our world |