The American economy is in the throes of another giant corporate merger wave. Bigger corporations are gobbling up big corporations. But some companies are fighting back with information about their potential gobblers.
One of these companies is the Mead Corporation–a profitable Dayton, Ohio-based, diversified firm with projected 1978 sales of $2 billion. Two months ago, Occidental Petroleum corporation formally proposed to purchase Mead in return for Occidental’s preferred stock. The Mead board of directors rejected the proposal a few days later and conveyed the reasons in a letter to their shareholders.
After recounting Occidental’s declining coal sales, the instability of its oil business, and the alleged shakiness of Occidental preferred stock if exchanged for Mead stock, the Dayton forest products company told its shareholders something about Occidental’s management. The Mead letter stated:
“In 1976 the United States District Court for the Central District of California accepted a guilty plea to federal criminal violations by Occidental’s chairman of the board and chief executive, Mr. A. Hammer. Mr. Hammer was fined and received a one-year suspended sentence.
“In 1971 the Securities and Exchange Commission charged Mr. Hammer and Occidental with participating in a’scheme, artifice and fraudulent course of business’ in violation of the anti-fraud provisions of the federal securities laws with respect to the way income and earnings were reported. Without admitting the SEC charges, Occidental and Mr. Hammer consented to a permanent injunction.”
Other completed law enforcement cases involving Occidental also were cited in the Mead letter, before devoting space to touting the performance of their company. What Mead was saying basically was that Occidental gets into too much legal trouble to be a worthy suitor.
Other companies have fought takeover attempts but few have done what Mead has done. It is not considered proper in corporate circles for companies to highlight other companies’ legal problems. After all, such a practice could open a Pandora’s box of dirty linen covering both companies or even entire industries. Instead struggles are limited to technicalities of the securities laws.
Anyone who has observed closely the business world knows that only a fraction of the fraud and crookedness ever surfaces to the public and even less ends up before a prosecutor. Consider the prevalence of inter-corporate bribery compared with its public disclosure. As the Wall Street Journal and other business publications have reported, paying off to get orders is common practice for all too many firms and sales executives.
The current General Service Administration scandal, involving bribes and gifts to federal government building managers and buyers by commercial firms, has been going on for years. Tens of millions of taxpayer dollars were looted before one businessman could not take it anymore and blew the whistle.
What may become the most extensive congressional hearings on economic crimes in decades have begun in the Crime Subcommittee of the House Judiciary Committee. Chaired by Rep. John Conyers, the investigation will extend through 1979, with dozens of witnesses being heard.
The most valuable witnesses may not come forward from the business world voluntarily. It will either take subpoenas or a changed climate of opinion that equates speaking out with a patriotic duty to save the business community from the forces of corruption which destroy honesty and competition on the merits.
Readers interested in the hearings may write Representative Conyers for more information in care of the House Judiciary Committee, Washington, D.C., 20510.