At least 13 U.S. senators and representatives, including both Maryland senators, are the unwitting recipients of nearly $10,000 of illegal corporate political contributions in the early 1970s, according to testimony last week in the tax trial of Fairchild Industries.
The government is charging in the criminal trial in U.S. District Court here that Fairchild knowingly falsified its corporate income tax returns for 1971 and 1972 in order to hide an illegal cash fund used to make the political contributions.
Fairchild claimed on the tax returns that it paid the full cost for company cars. In addition to listing 32 cars as legal business expenses, the corporation claimed depreciation on their value.
The government alleges that Fairchild and its chairman, Edward G. Uhl, created a scheme whereby company cars would be offered only to certain executives, who were required to make three or four annual payments in cash to the corporation. Those cash payments, which totalled 63 percent of each car's value, provided the cash for the political fund, according to U.S. Attorney Russell T. Baker Jr.
Defense attorneys said in opening statements over a week ago that the car payments were voluntary, and the deductions claimed on the tax returns were legal. But the attorneys, who include three Watergate lawyers, must wait about five weeks until the government finishes its side of the case before presenting their defense witnesses.
The trial is expected to last about two months.
Baker and two assistant U.S. attorneys began their case last week with a parade of current and former officers of International Aircraft Co., a Fairchild industry.
Some of the officers said they knew about the cash political fund and were reimbursed out of it for what would have appeared to be legal personal political contributions. But others said they thought they were making payments for a company car.
Some of the officers said Uhl decided which politicians would get money and they were told to make contributions to specific political campaigns in lieu of the annual car payments. Others said they asked for and received envelopes containing cash to buy tickets for political fundraisers.
A former controller of Fairchild, William R. Beckert, described how the formula of car payments was derived in the mid-1960s "to make the payments sufficiently large enough that we would accumulate as much cash as possible in that fund."
Prosecutors allege that more than $80,000 was generated from the car payments for political contributions..
Beckert said the cash was kept in a metal box by a secretary in the finance department. When he first explained the car payment plan to executives of Fairchild, Beckert said he revealed the purpose of the payments to anyone who asked. "We did not try to keep it a secret," he said.
Among the 13 senators and congressmen who received money, according to testimony last week, were both Maryland senators, J. Glenn Beall and Charles McC. Mathias Jr. In addition, $500 went to the Maryland Democratic State Central Comfittee in 1970.
Beall, who received $2,000, according to witnesses, said he "wasn't aware of the source of the contributions" until he heard about the testimony this week.
According to testimony, others who benefitted from the contributions were: Rep. Samuel S. Stratton (D-N.Y.), $500; Rep. Joseph Karth (D-Minn.), $250; Rep. Larry Winn Jr. (R-Kan.), $100; Sen. Howard Baker (R-Tenn.), $800; Sen. Ted Stevens (R-Ala.), $950; and former Rep. Gerald R. Ford $500.
Also, Rep. Robert H. Mollohan (D-W. Va.), $200; Rep. Bob Wilson (R-Calif.), $250); former Rep. William Marshall (R Ohio), $200, and Sen. Jesse A. Helm (R-N.C.), $400. Mathias received $1,000.
At least $100 went to Richard Nixon's 1972 re-election campaign, $700 went to two unnamed New York congressional campaigns and $200 each went to Republican and Democratic committees in Suffolk County, New York, according to testimony.
Uhl's defense attorney, Herbert J. Miller Jr., who represented Nixon during Watergate hearings in 1974, said Fairchild reported an income of $255 million in 1971. The corporation paid more than $4 million in taxes that year, and the figures are comparable for 1972, Miller said.
The court dispute over the fleet of company cars offered to the Fairchild executives could mean that the corporation owes $12,000 more in taxes, if the jury of 10 men and two women find the deductions for cars were improper.
In addition to defending itself in the tax case, Fairchild will be defending itself in another trial in federal court here this week. Another jury here will have to decide, based on the laws of Paraguay, South America, whether Fairchild is liable for any damages stemming from a 1969 airplane crash that killed several people in that country.