The Senate Banking Committee interrogated top officials of Textron Corp. for eight hours yesterday, but was unable to turn up any evidence that showed President Carter's nominee to head the Federal Reserve Board knew a company Textron did business with in Iran was secretly controlled by the commander of the Iranian air force.
Textron's Bell Helicopter division made a $2.9 million payment to cancel a sales agreement with an Iranian firm at the same time Bell was awarded a $500 million contract to supply helicopters to the Iranian army.
G. William Miller, nominated by President Carter to run the nation's central bank, was president of Textron when the sales agreement with Air Taxi Inc. was signed in 1968 and is chairman of Textron today.
Last month, Miller testified that he did not know that, General Mohammed Khatemi controlled Air Taxi through a nominee. Miller will testify again today.
At issue is whether the $2.9 million payment to Air Taxi - which was meted out between 1973 and 1975 - was actually a bribe to get the helicopter contract and not the legitimate payment that Miller and other Textron officials argue it was.
Since 1973, Bell Helicopter has sold another $1 billion to $1.5 billion of helicopters to Iran, but no longer has Air Taxi as its representative for military sales.
The staff of the Senate Banking Committee has conducted a month-long investigation into the payment.
The investigation turned up many State Department and U.S. military officials in Iran who claimed that it was common knowledge in that country that Khatemi controlled Air Taxi through a nominee.
But under heavy questioning by Chairman William Proxmire (D-Wis.) and ranking minority member Edward Brooke (R-Mass.), top Textron-Bell officials said yesterday that:
They did not know Khatemi had anything to do with Air Taxi.
Their own investigations did not show any silent owners.
In any event, selection of a sales representative in Iran, where the company had done almost no business until 1972, would have been made within the Bell division itself and never would have filtered up as high as Textron.
The Miller nomination hearings have dragged on for more than four weeks as the Banking Committee has investigated the $2.9 million payment.
For the first time, the Miller nomination had a strong Democratic supporter on the committee, as Sen. Donald W. Riegle Jr. (D-Mich.) took a basically friendly tone in his questioning, continuously pointed out that the investigation should be confined to Miller's fitness for the job and not be broadened into an investigation of Textron Corp., a Providence-based conglomerate.
The Securities and Exchange Commission has announced a wide-ranging investigation into some of Textron's activities, an investigation prompted by the Banking Committee probe of the Iranian payment. The SEC investigation will go beyond the Iranian probe and will take about four to six months.
Proxmire admitted at the close of nearly eight hours of hearings yesterday that Miller will likely be confirmed. Miller was supposed to take office Feb. 1 to replace Arthur F. Burns.
Proxmire, Brooke and other senators noted that the key meetings which Textron officials say they don't remember, while the same officials state emphatically that Miller knew nothing of the problems with their Iranian sales agent although he was kept aware of the negotiations to terminate the Air Tax agreement.
Bell officials emphasized that the company's sales in all of Asia, not just Iran, were miniscule until the early 1970s, when Iran decided to buy many copters for its army.
C. Robert Bell, an attorney for Bell Helicopter's Iranian sales representative from 1964 to 1967, testified yesterday that he personally told two top Bell Helicopter officials in 1966 that Khatemi controlled Air Taxi.
Bell said he met with Dwayne Jose, Bell-Textron vice president for marketing, and Edwin J. Ducayet, then president of Bell-Textron, in November 1966, Bell said he told the officials that his client, William G. French, had been run out of Iran by Khatemi (who died in a hang glider accident in 1975) because the general wanted all the air business in Iran.
Bell had negotiated an arrangement with Khatemi's representative to form a new company - 51 per cent owned by a Khatemi nominee and 49 percent by French's company - that would take over the business. At those meetings with the Jose and Ducayet, attorney Bell said he told them that Khatemi silently owned Air Taxi.
Textron-Bell had used Air Taxi as its representative from 1959 until 1964, when it changed to the French company.
James F. Atkins, now president of Bell Helicopter, testified later that if the company had any desire to buy influence through General Khatemi (often spelled Khatami), Bell Helicopter never would have cancelled the sales agreement in the first place. Atlkins and the others said Textron has a rigied policy of not doing business with firms controlled by government officials.
However, none of the Textron-Bell officials could remember why the company had cancelled the arrangment with Air Taxi in 1964.
But Atkins and Jose said yesterday that French's inability to enter Iran was reason enough to terminate his company as its Iranian sales agent.
Jose said that he remembers the meeting with Bell in November 1966, but could not remember whether Bell brought up Khatemi's name.
Ducayet said that he had no recollection of the meeting with Bell. Bell said he first met with Jose, who then asked him to tell the story to Ducayet and they went together to Ducayet's office where attorney Bell talked for 30 to 45 minutes. Jose said he does not remember whether they want to Ducayet's office.
Jose said, however, that the decision to terminate the French contract was made shortly after that meeting but that it was renewed temporarily because the annual termination deadline had passed. Jose testified that, when Bell Helicopter sent a team to Iran in 1967 to find a new agent, he specifically asked that conflict-of-interest possibilities he investigated and was assured by the company's consultant that there was no conflict.
Atkins testified later that, in 1970, when the almost non-existent Iranian business appeared to have some growth potential, the company had a thorough Dun and Bradstreet report on Air Taxi that made no mention of Khatemi and characterized the company as high quality.