Musical Flags

By R.Z. Sheppard

THE SOVEREIGN STATE OF ITT

by ANTHONY SAMPSON

323 pages. Stein & Day. $10.

The beginning of World War II found the company in a peculiar position. Its communications systems were supplying information to German submarines, and its American factories were assembling "Huff-Duff," the High Frequency Direction Finder used by the Allies to save their ships from German torpedoes. This is not one of Milo Minderbinder's fast-buck schemes from Catch-22. It is, in fact, a part of the corporate record of ITT, the American-based telecommunications conglomerate with worldwide interests as diversified as smoked meats and rental cars.

To be sure, ITT's German equipment was under Nazi control, though, as Anthony Sampson argues, the company tried to conduct business as usual for as long as possible. In Sampson's view, ITT is not merely a multinational giant but a state within states, a moral chameleon that will do business with any complaisant regime and try to prevent the election of politicians who threaten the corporate interests.

Last year ITT's power and presumptuousness came to light with disclosures that it stood ready to underwrite with cash any efforts the CIA might be considering to prevent the election of Salvador Allende, Chile's Marxist President. At home--if such a cozy term can be used for a multinational--ITT provided an early trickle to the Watergate. ITT Lobbyist Dita Beard's secret memo found its way into Jack Anderson's column, where it told of a $400,000 pledge for the 1972 Republican Convention. All this occurred shortly before the Justice Department settled an antitrust action against ITT.

International Telephone and Telegraph Corp. was founded in 1920 by Sosthenes Behn, who was born of Franco-Danish parents in the Virgin Islands and was educated in Corsica and Paris. With such a background, it is not difficult to see how Behn's buccaneering character developed. Starting out as a sugar broker, he got into telecommunications almost by accident. He and his brother Hernand bought a small, foundering telephone company in Puerto Rico. The brothers soon acquired another phone system in Cuba, moved on into Spain, and bought the international holdings of Western Electric. By the mid-'20s the young empire was known as I T & T--a name chosen to confuse its rickety little venture with the mighty AT&T. When Hernand died in 1933, Sosthenes became the undisputed master, "the Prince of Telephones" as he came to be known. At his New York headquarters, he worked in a Louis XIV salon with a portrait of Pius XI on the wall. Haute cuisine for 200 in the private dining room was not uncommon.

Behn believed he could contribute to international understanding by constructing global telephone links. Central to ITT's European operations was a German holding company established in 1930. It was inevitable that Behn would have to do business with Hitler. "In trying to hold his system together," writes Sampson, "Behn gradually wove a web of corruption and compromise which left the idealism in ruins." From documents he found in U.S. archives, Sampson concludes that Behn cooperated willingly with the Nazis, choosing not to repatriate his German profits and agreeing to his German subsidiary's purchase of an interest in Focke-Wulf, the aircraft company. It is only fair to say that ITT denies Sampson's interpretation, arguing that foreign-owned companies in Nazi Germany were not allowed to send their profits home. Compensation was another story, however. When Nazi-controlled Rumania threatened to expropriate ITT's phone system, Behn cannily negotiated a sale of the besieged assets for $13.8 million.

No Surprises. In 1959, two years after Behn's death, the leadership of ITT passed to Harold S. Geneen, a small, owlish man who was trained in accountancy, and seems to prefer hamburgers to French cuisine. Even so, Geneen cannot resist comparing himself to Behn: "He was a man of his time; I am a man of my time." Born in Britain 63 years ago, Geneen came to the U.S. at the age of one. A wizard with figures, Geneen began his career as a New York Stock Exchange page and rose from accountant to executive positions in such companies as Bell & Howell, Jones & Laughlin and Raytheon.

Under Geneen, ITT has come to own some 260 companies in 86 countries. Crucial to his management is a system that can keep executives at meetings for up to ten days a month. The system is designed to avoid surprises. Ironically but predictably, the vaunted "no surprise" system produced shocks on the political front. Predictably, because most men who are trained to think in quantitative terms are insensitive to nuance and subtlety. Sampson fails to stress this inherent characteristic of business bureaucracies. He also fails to meet the challenge of Geneen's complex personality and conflicting drives.

In some ways, Geneen is close to genius: the management method he has imposed on ITT disciplines and tames territorial chieftains who might otherwise rebel and enables him to check the performance of a widely--almost wildly--diversified company. In other ways Geneen is a gambler on a monumental scale. Sampson neglects this facet of Geneen, although he does show that when Geneen acquired Hartford Insurance he knew full well that the antitrust division of the Justice Department would oppose him. In short, Sampson concludes, Geneen was under the utmost compulsion to try to change the trustbusters' collective mind.

Sampson's book may be blemished in places by inaccuracy and skewed judgment. ITT has released a 24-page rebuttal which argues that Sampson colored many of his conclusions by quoting sources out of context. Nevertheless, his book is a brisk narrative that raises fundamental questions about the relationships between international business and governments. If Sampson has no final answer, it is because the multinational and conglomerate phenomena are still so new that, beyond profits and losses, corporations do not yet fully comprehend the effects of what they are doing. . R.Z. Sheppard

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