Senator WILLIAMS. Are you familiar with this memorandum of understanding, and to what countries this memorandum ran?

Mr. MENELL. No; I am not, except for Vinnell's connection.

I do know, however, that the memorandum was signed under the Foreign Military Sales Act. Because of the sale of arms and the military buildup in the Middle East, there are various committees in the Senate and the House looking into the authority of the Defense Department to sell the arms and make contracts such as Vinnell's under the Military Sales Act.

One committee is the Committee on Armed Services; another is the Permanent Subcommittee on Investigations.

Senator WILLIAMS. Where did you get this information about this announcement of yesterday, the nuclear powerplants, that that was under the Military Sales Act?

Mr. MENELL. Excuse me, Senator. I didn't mean to say that it was under the Military Sales Act; only that it was the result of a similar memorandum of understanding.

Senator WILLIAMS. You said the memorandum of understandingMr. MENELL. In part involved the Military Sales Act.

Senator WILLIAMS. That is another country that is involved under that nuclear one-Middle East, but not one of the Arab countries? Mr. MENELL. Yes, sir.

Senator WILLIAMS. When you inquired, did you get any answers to the questions as to why Mr. Shakir withdrew from his informal understanding of buying into Vinnell, and why he didn't take the formal step of sending back, signed, the subscription agreement?

Mr. MENELL. I certainly did. I was very curious to find out how he first became interested in Vinnell, and then to discover why he withdrew.

Vinnell had been bidding, along with, I believe, eight other qualified American companies, for this contract. The bidding process began well over a year ago, so that Vinnell was bidding for the contract to train Saudi Arabian troops at the time Mr. Shakir first expressed interest.

I questioned Mr. Hammill, president of Vinnell, as to how Mr. Shakir first got involved, since it is such a small company-although its gross revenues fluctuate between $40 million and sometimes $150 million a year. But, it is a relatively small company and I was interested to find out how Mr. Shakir became involved. Mr. Hammill's only response was that he has known Mr. Shakir for many, many years. I could establish no other connection between Mr. Shakir and Mr. Hammill and the Vinnell Corp.

As to why he withdrew, the most obvious answer, and the one I was given, is that since the contract was awarded in January and first announced by the Defense Department in February-February 9, I believe there has been a tremendous amount of publicity concerning not only the Vinnell Corp. but the U.S. activities in general in training Middle Eastern troops and supplying that region of the world with arms. I am told that because of all the adverse publicity, Mr. Shakir withdrew his proposed investment.

Senator WILLIAMS. Thank you very much.
Mr. MENELL. Thank you, Senator Williams.
Senator WILLIAMS. Well done.

The next witness is Seymour Graubard, national chairman of the Anti-Defamation League.

STATEMENT OF SEYMOUR GRAUBARD, NATIONAL CHAIRMAN, ANTI-DEFAMATION LEAGUE; ACCOMPANIED BY MEYER EISENBERG, MEMBER, NATIONAL COMMISSION OF THE ANTI-DEFAMATION LEAGUE; DAVID A. BRODY, DIRECTOR, WASHINGTON OFFICE, ANTI-DEFAMATION LEAGUE; JUSTIN FINGER, CIVIL RIGHTS DIVISION, ANTI-DEFAMATION LEAGUE; HYMAN BOOKBINDER, WASHINGTON REPRESENTATIVE, AMERICAN JEWISH COMMITTEE; AND LAWRENCE RUBIN, AMERICAN JEWISH CONGRESS Senator WILLIAMS. Mr. Graubard, will you introduce your colleagues.

Mr. GRAUBARD. Mr. Chairman, we appreciate deeply your invitation to appear before your committee to present our views on S. 425, the Foreign Investment Act of 1975.

I am accompanied this morning by Meyer Eisenberg, a member of the National Commission of the Anti-Defamation League; Mr. David Brody, Director of the League's Washington office; and Mr. Justin Finger of our civil rights division. We also have in this room representatives of the American Jewish Committee and the American Jewish Congress, both of whom join in making the statement I present to the committee, and by whom I am honored to have been delegated the responsibility of representing them as well.

Mr. Chairman, in order to conserve time, I would ask that my prepared statement be printed in full while I summarize the contents of the paper and thus make myself available, within the time limits of the committee, to any questions that may be asked.

Senator WILLIAMS. We will include the full statement in the record. I see copies have been distributed and we have them on hand, and we will be pleased to have you sum it up.

[The complete statement is printed at p. 302.]

Mr. GRAUBARD. Thank you, sir.

I note for the record that I am national chairman of the Anti-Defamation League of B'nai B'rith.

We now find it most important for the preservation of our American constitutional principles and traditions to support this legislation which would defend our civil liberties and civil rights against abuse by foreign investors. In these extraordinary times, the adoption of S. 425 will provide our Nation with a reasoned and careful reaction to the realities of foreign petrodollar accumulation facing the United States today.

As you stated in introducing this bill, Mr. Chairman, it is an attempt "to rationalize and coordinate this country's approach to foreign investors," and to take reasonable steps to assure that the government knows what acquisitions are taking place and has an opportunity to act if the national interest so requires.

The bill is certainly within the spirit of disclosure of our securities laws and a natural extension of the existing section 13 (d) reporting requirements for the acquisition of over 5 percent of the outstanding shares of public companies.

It is appropriate to note that the oil cartel, as a result of the tremendous increase in oil prices, is accumulating cash reserves at a previously inconceivable rate. It is estimated that Arab oil countries received some $112 billion last year and have a $60 billion surplus of petrodollars available for investment in foreign economies.

Until today, the accumulation of these dollars was not a reality. Today, however, we face the fact that in the money markets there is a surfeit of ready cash investments for the Arab dollars. The Arab countries must now turn to capital investments in order to realize profits on their accumulation of these petrodollars. Thus, what was anticipated in the past as a possibility is today a reality.

We have read in the newspapers, of late, of investments of substantial sums in major corporations by the Arabs in Japan, Germany, and elsewhere. Today the United States faces this problem, and your legislation, Mr. Chairman, is designed to cope with what will become an ever-increasing serious problem to the United States. Those who view realistically the potential dangers of accumulating oil country money are not being alarmist when they see that some of the major oil powers are not prone to be mere investors. The Arabs are reported as saying that they do not have the desire to control companies but view themselves as any institutional investor seeking a diverse portfolio of investments which will yield the best long-term

return.

This assertion is simply not justified or supported by the evidence to date. The Arabs have mixed economic and political objectives. They have distorted the economic realities of the marketplace, not only by imposing a boycott on over 1,500 U.S. companies because of their ownership by Jews or business relationship with Israel, but they have also insisted in their contracts on enforcing discrimination against American citizens because of their faith.

We point out, sir, that the Arabs profess to be simply anti-Zionist. They do not want to deal, they say, with companies or persons who are supportive of Israel. But that is not the way their conduct is spelled out.

The Anti-Defamation League has made public recently a number of instances where, as a condition to the receipt of Arab contracts in the United States, discrimination against Americans of Jewish persuasion is insisted upon. I am not now referring to the well-known instances of discrimination against certain banking firms. Actually, the type of discrimination which we refer to includes agencies of the U.S. Government which have been working cooperatively with the Arab nations enforcing their boycott. And we have cited a number of private corporations which have adopted employment policies and practices which are nothing less than clear, blatant anti-Semitism.

We have available for the committee or its staff, sir, the data in regard to these instances. We have the supporting evidence as well. We will make it available to the committee for such use as the committee sees fit, if the committee so desires.

I have referred to a few instances of such discrimination in this testimony. To take them up case by case would call for far more time than the committee has at its disposal. I therefore leave it to the discretion of the chairman and the members of the committee whether or not you want such instances to be discussed in the course of this oral testimony.

Plainly, however, Arab economic power is now being used to accomplish political and discriminatory ends in clear violation of U.S. policy and law.

As you, Mr. Chairman, and Senator Javits have correctly pointed out to the concerned Cabinet Departments in your letter of February

14:

"It is clearly intolerable to permit Arab-or any-investors to attempt to extend such religious discrimination to the U.S."

Moreover, as you noted, such discrimination violates express national policy as contained in the Export Administration Act, for which I may note, sir, you and Senator Javits were largely responsible.

It is most unfortunate that the Congress did not see fit to adopt your bill in the form it was introduced, thus putting teeth into the statement of national policy prohibiting boycotts against nations friendly to the United States. We trust that that past omission of the Congress will be rectified during this session.

We are concerned with the fact that the foreign investments in the United States, as well as contracts with U.S. corporations, are now bound to increase at a very high rate. It is most timely, therefore, that action be taken now, so that there may be no misunderstanding among American businessmen-and, I regret to add, American Government agencies that such discriminatory tactics against American citizens of whatever faith will not be condoned.

If Arab investors or purchasers have in the past been able to organize a boycott by putting 1,500 U.S. firms on a blacklist, by forcing or attempting to force Jewish-connected firms out of investment syndicates, and succeeded in excluding some American Jews from corporate activities, then it is time for the Congress to take note of what is going on and to adopt the kind of legislation that you have introduced and which is before this committee today.

As you correctly stated recently in New York, Mr. Chairman, "Petrodollars can be used-and the boycott demonstrates that they will be used-to advance objectives which may well be counter to our fundamental national commitments."

We strongly agree with your assessment that we can no longer ignore "the dangers inherent in our traditional 'open door' policy toward foreign investment."

Some claim that it is unlikely that a substantial portion of the Arab funds will go into equity investments in the corporate sector. If that be true, then foreign investors need have no concern about this legislation. Rather, it is the well-substantiated likelihood that their moneys will go heavily into equity investments in the United States that makes this bill have pertinence and urgency today.

It is clear that Arab investments in the United States will meet a demand that the Arabs have in making good use of the moneys that they are receiving from the United States through payment for their oil.

And let us make it clear, sir, we have no objection to Arab investments in the United States. We welcome them. We likewise welcome contracts of a nonmilitary nature to supply the Arab nations with material, with technical services, and other of their needs. Our objection to the conduct of the Arabs is limited to what I may say are the nonbusiness aspects of their utilization of their funds, the

importation into the United States of discriminatory tactics and practices.

The present bill would accomplish this objective, first, by making public the list of Arab investors and investments in this country; and second, by putting the public spotlight on discriminatory tactics that may be utilized against American citizens.

We understand that the Treasury wants to deal with this problem by using voluntary restraints, by quiet diplomacy, and discussions with Arab nations. If the administration means what the President so clearly stated last week-that such discrimination will not be tolerated and has no place in commerce-then such discussions must be backed by the force of law.

If our policy is really so clear and is not going to be compromised away in negotiating sessions, then there can be no harm in the adoption of S. 425. It is only if we are preparing to tolerate quietly what we profess to reject publicly that terms like "flexibility" become important.

Existing legislative safeguards are not enough. There is no coordination of policy nor, as you have pointed out, Mr. Chairman, "are there effective techniques to assure that the Government receives notice of a completed foreign acquisition, much less notice of a proposed acquisition."

Voluntary restraint is not enough, I may add, nor was it enough in combating inflation. We know that it is a credo of American corporations to make profits. We think it's a good credo. We know that salesmen often make representations in order to gain contracts which skirt the edge of the law. We cannot rely upon our able businessmen in competition with each other to refrain from making concessions in regard to discrimination in order to obtain Arab investment business.

We recognize that we are dealing with nations with a different and often opposing foreign policy, nations whose economic interests are not necessarily our own, and whose objectives are often at variance with ours. Their concept of legitimate government action often includes support for terrorists who use indiscriminate murder as a weapon of everyday policy.

We think that President Ford has put the executive arm of the Government on notice that he expects compliance with our laws. We think there are deficiencies in our laws which must be made up at this time because of what is so obviously upon us, the deluge of the petrodollars and the abuse of such petrodollars in the United States.

Therefore, sir, we congratulate the sponsors of this legislation. We trust that it will receive the support of this committee, and that it will thus be made clear that no foreign government will be permitted to undermine the constitutional right of United States citizens to remain free of discrimination, and that our Government will not permit considerations of financial expediency or economic leverage to undermine its fundamental principles.

We thank you, sir.

Senator WILLIAMS. Thank you very much, Mr. Graubard. We are certainly on common ground here on what our national policy should be, and we feel the law is inadequate to make our policies effective. That is why we have this legislation.

Now, I wonder if you and your colleagues feel that this legislation is fully effective in meeting its stated objectives.