1997 Congressional HearingsIntelligence and Security
1997 Congressional Hearings
U.S. HOUSE OF REPRESENTATIVES
HOUSE COMMITTEE ON THE JUDICIARY
SUBCOMMITTEE ON CRIME
ON
H.R. 748, "PROHIBITION ON FINANCIAL TRANSACTIONS WITH COUNTRIES
SUPPORTING TERRORISM ACT OF 1997"
JUNE 10, 1997
SUMMARY OF THE STATEMENT OF JAMES D. LATHAM SENIOR VICE PRESIDENT & GENERAL COUNSEL ITT SHERATON CORPORATION
HOUSE COMMITTEE ON THE JUDICIARY SUBCOMMITTEE ON CRIME
H.R. 748, "PROHIBITION ON FINANCIAL TRANSACTIONS WITH COUNTRIES SUPPORTING TERRORISM ACT OF 1997"
JUNE 10, 1997
ITT Sheraton is a leading worldwide hospitality company based in Boston which owns, leases, manages and franchises over 420 luxury, upscale and midscale hotels and resorts in over 60 countries, including 229 hotel properties with 54,000 employees in the United States.
ITT Sheraton strongly supports the objective of H.R. 748 in terms of addressing international terrorism. Sheraton is painfully aware of the human toll inflicted by terrorists as a senior Sheraton executive was killed in the terrorist bombing of Pan Am flight 103 in 1988.
ITT Sheraton's concerns about H.R. 748 as introduced stem from the fact that it could be construed to require us to terminate our long-standing contractual arrangement with the Syrian Ministry of Tourism to manage the Sheraton Damascus Hotel & Towers, a 325-room property in Syria's capital. Enactment of H.R. 748 without modification could subject Sheraton to claims by the Syrian Ministry of Tourism for alleged breach of contract and damages.
Forcing Sheraton to pull out of Syria would not harm that country because one of our foreign competitors would quickly fill the void and assume management of the hotel. Management of a hotel is not a sensitive commercial transaction involving new investment in the local economy or the transfer of technology.
For these reasons, ITT Sheraton strongly recommends that the Subcommittee amend H.R. 748 so that it will not have the effect of disrupting non-sensitive on-going business arrangements in Syria that have no relationship to any possible terrorist activities.
WRITTEN STATEMENT OF JAMES D. LATHAM SENIOR VICE PRESIDENT & GENERAL COUNSEL ITT SHERATON CORPORATION
H.R. 748, "PROHIBITION ON FINANCIAL TRANSACTIONS WITH COUNTRIES SUPPORTING TERRORISM ACT OF 1997"
JUNE 10, 1997
Mr. Chairman and members of the Subcommittee, I am James D. Latham, Senior Vice President and General Counsel of ITT Sheraton Corporation, which is based in Boston. As you may know, Sheraton is a leading worldwide hospitality company which owns, leases, manages, and franchises over 420 luxury, upscale and midscale hotels and resorts in over 60 countries, including 229 properties with 54,000 employees in the United States.
I appreciate this opportunity to express Sheraton's views on H.R. 748, the "Prohibition On Financial Transactions With Countries Supporting Terrorism Act of 1997". Sheraton's concerns about the legislation in its original form stem from the fact that it could be construed to require us to terminate our long-standing contractual arrangement with the Syrian Ministry of Tourism to manage the Sheraton Damascus Hotel & Towers, a 325-room property and one of only two international hotels in Syria's capital. This would occur without harming Syria, but by exposing Sheraton to claims for an alleged breach of contract and money damages. Management of the hotel would be turned over to a foreign competitor.
The Sheraton Damascus is one of twenty ITT Sheraton properties in ten Middle Eastern countries: Bahrain, Egypt, Israel, Kuwait, Qatar, Oman, Saudi Arabia, Syria, United Arab Emirates and Yemen. Furthermore, we recently announced plans for a major expansion of our already considerable presence in Israel and Egypt, where we are a major part of each country's tourism industry.
ITT Sheraton strongly supports your objective of attacking international terrorism. We are painfully aware of the human toll inflicted by terrorist acts as a senior Sheraton executive was killed in the Pan Am 103 bombing. As a worldwide company, Sheraton has been harmed commercially by terrorism. For example, the Sheraton Kuwait fell victim to Saddam Hussein's invasion and, as a result of the ensuing Persian Gulf War, we were also forced to abandon hotels in Baghdad and Basrah, Iraq.
As to the hotel in Damascus, a Sheraton subsidiary is a party to a management contract with Syria's Ministry of Tourism, dating all the way back to 1973, under which the hotel was first constructed and is now operating. The present contract extends through 1998 and is subject to renewal by Sheraton for up to twenty years. The contract has no force majeure provision, right of cancellation or other "escape" clause should H.R. 748 be enacted into law as introduced.
Under this long-standing arrangement, Sheraton provides substantially all of the management services for the hotel, including hiring of personnel, supervision of hotel operations, sales and marketing (including access to Sheraton's worldwide reservation network and sales offices), and the collection and distribution of funds. Sheraton receives a significant management fee for these services based upon a percentage of the hotel's total revenue and its gross operating profit.
Enactment of H.R. 748 as introduced, by precluding all financial transactions with Syria other than those "incident to routine diplomatic relations", would effectively preclude Sheraton from managing the property and thus likely subject Sheraton to a claim for significant damages by the Syrian Ministry of Tourism for, in its view, the unlawful termination of the management contract. Enactment of U.S. economic sanctions on Syria would not necessarily be a defense to such a contract claim. Under the terms of the contract, arbitration of any claims would occur in Lebanon, a country to which U.S. citizens are not permitted to travel without prior State Department approval.
Despite our strong support for the bill's objective, we do not believe that this legislation, which could force Sheraton to cease operation of the hotel in Damascus, would in any way reduce terrorism. In fact, the opposite may be the case because a successful breach of contract action by Syria against Sheraton would result in serious financial exposure to Sheraton which could require Sheraton to pay substantial money damages to Syria. By contrast, allowing Sheraton to continue to operate the hotel will result in significant sums being paid from Syria to a U.S. corporation under a legitimate commercial arrangement with no relationship to any terrorist activity.
Forcing Sheraton to pull out of Syria would not adversely impact that country. The Sheraton Damascus is not a project where a U.S. company is making a significant new financial investment in the local economy, building a physical plant, or transferring sensitive technology. Instead, our relationship is one in which a U.S. company performs on-going basic management services which are readily available from non-U.S. companies, in this instance from other international hotel systems, most likely one of our European competitors.
If Sheraton is forced to leave Syria, another hotel company will quickly take over and immediately begin to receive revenues that otherwise would have gone to a U.S. firm and thus subject to U.S. taxation. In addition, as the only U.S.-run hotel in Damascus, U.S. diplomats and other U.S. citizens traveling to that city would no longer have a U.S.-managed hotel in which to stay if Sheraton is forced to leave. The diplomatic importance of Sheraton's presence in Syria is illustrated by the fact that former Secretary of State Warren Christopher and his delegations stayed in the hotel no less than nine times and the hotel hosts an average of four to five congressional delegations each year, in addition to more routine diplomatic guests.
We strongly urge the Subcommittee, if it determines to go forward with this legislation, to amend H.R. 748 so that it will not have the effect of disrupting non-sensitive on-going business arrangements in Syria, including our operation of the Sheraton Damascus.
This result could be accomplished in several ways. For example, the bill could be targeted to address only those specific economic activities that the Subcommittee determines might facilitate support for terrorism. Alternatively, the legislation could expressly exclude from sanctions non-sensitive business activities, such as the provision of consumer goods and services. At the very least, on-going business arrangements, such as our management of a hotel, should be protected from any new economic sanctions.
Mr. Chairman and members of the Subcommittee: ITT Sheraton appreciates this opportunity to express its views on this important subject. I look forward to responding to your questions and providing such additional information as the Subcommittee might require. We stand ready to work with you and your colleagues as deliberations on this measure proceed. Thank you, Mr. Chairman.
BIOGRAPHY OF JAMES D. LATHAM
James D. Latham is Senior Vice President, General Counsel and Secretary of ITT Sheraton Corporation, the Boston-based global hotel network. He was appointed to this position in March 1992.
Mr. Latham joined ITT Sheraton in 1975 as Assistant Counsel and was later appointed Senior Counsel. In 1980, he was named General Counsel for the company's Europe, Africa, Middle East and India Division and Vice President and Assistant Secretary, Sheraton Management Corporation, located in Denham, England. He returned to the company's Boston headquarters as Assistant General Counsel in 1983 and was elected a Vice President of the Corporation in 1985.
Prior to his association with ITT Sheraton, Mr. Latham was a partner in the law firm of Goldman, Curtis, Cashman, Leahey and Latham in Lowell, Massachusetts.
Mr. Latham was a 1985 recipient of ITT's highest award, the Harold S. Geneen Award. A native of Lowell, Massachusetts, Mr. Latham received his A.B. degree from Dartmouth College in Hanover, New Hampshire, and his L.L.B. degree from Boston University Law School.
Statement Pursuant To House Rule XI, Clause 2(g)(4) Concerning Federal Government Grants, Contracts and Subcontracts
ITT Sheraton hotel properties in the United States are approved by the U.S. General Services Administration as satisfying the requirements of the Hotel and Motel Fire Safety Act of 1990 and thus suitable for the lodging needs of federal government employees. Sheraton's U.S. and non-U.S. hotels have special room rates for government employees. In addition to overnight lodging guests, ITT Sheraton is pleased to host numerous conferences, meetings and other functions sponsored by federal government agencies or attended by federal employees. Arrangements for such lodging and meetings are on a case-by-case basis.
Furthermore, ITT Sheraton is a wholly-owned subsidiary of ITT Corporation, whose other businesses include a majority interest in ITT Educational Services, Inc., which operates 60 ITT Technical Institutes. Students at these colleges receive federal student financial assistance to assist in paying for their expenses in attending these institutions. 2