Lying to the Pakistani government about secret sales agreements "could well be the beginning of our own 'Watergate' . . . in that part of the world," warned an official of McDonnell Douglas Corp. in a 1974 company memo filed late yesterday in U.S. District Court by the Justice Department.
The corporation and four top executives were indicted on Nov. 9, 1979, on fraud and consipiracy charges for allegedly paying $1.6 million in secret "commissions" on the sale of DC10 jetliners to Pakistan.
The interoffice memo and other documents were filed with the court to answer motions by the McDonnell Douglas defendants seeking dismissal of the indictments.
In one of the court filings, the government claimed that negotiations had been upset last fall when the company's chairman and founder, the then 81-year-old James S. McDonnell, came to Washington and told the government attorneys: "This [the company] is my baby, my little jewel, I cannot live with this settlement."
The memo citing "Watergate" was dated Aug. 23, 1974 -- one year after the first contracts with Pakistan were completed -- and was signed by J. D. Burns, director of commercial contracts, who is not a defendant. The memo notes that Pakistan International Airlines and the government "somehow discovered the existence" of an "agreement for representation" between the company and "the Sequeira brothers." The brothers apparently were McDonnell Douglas' agents there.
Pakistan insisted that the company deduct the disclosed $100,000-per plane commission from the contract price to the government-owned airline.
The memo, which was circulated a few weeks after President Nixon resigned, warned that company could face "Watergate" in that part of the world if McDonnell Douglas signed a secret agreement and later denied its existence.
The 1979 indictment named James S. McDonnell III, vice president of the St. Louis-based corporation; John C. Brizendine, president of Douglas Aircraft Co. of Long Beach, Calif., the corporation's main division; Charles M. Forsyth, executive vice president of Douglas Aircraft; and Sherman Pruitt Jr., sales manager of the division.
A routing slip attached to the memo filed in the court was initialed by defendants Forsyth and Pruitt, indicating they read the memo. And in another memo -- dated Aug. 23, 1974, and stamped "sensitive" -- defendant Pruitt says a secret agreement with the Sequeira brothers "would not be 'uncovered' as Mr. Burns suggests."
The indictment also charged the defendants with making false statements to the Export-Import Bank to conceal $6 million in payments to airline executives in South Korea, the Phillipines and Venezuela and to the government officials in Zaire.
The defense claimed that the law was vague and, as a result, the defendants were denied due process. But the government, in its court filings last night, introduced a memo dating back to 1971 in which Chief counsel of McDonnell Douglas states that the identity of recipients of payments "must be set forth on a certificate submitted . . . to Ex-Im Bank."