Transcript of Record — In Re McConnell

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y iii

Plaintiff's

Exhibit

Number Description Page

44 Two-page memorandum dated November 17,

1955, re Erickson-Cross .......ccccsscccscsssscreres 102- 103

45 Lasham Cartage Co. request to Hugh E.

Cross for quotation on equipment, dated

BERG B0, TED nceictecieierncndinnins 104-105

46 Lasham Cartage Co. request for quotation

on equipment from Hugh E. Cross, dated

es 106-107

47 Purchase order from Lasham Cartage Co.

to Carrollton Farm Supply, dated achial 12,

TE. sausicisinisncasietasidicdiinneaninneeainiainialaannataanein 108

48 Lasham Cartage Co. purchase order shied

with Carrollton Farm Supply, dated April

He HIS ‘soistacssathasasaspashentipeasnciasanideabesioasdndiianidennaad 109-110

49 Letter from Hugh E. Cross to Newman of

Lasham Cartage Co., dated April 14, 1955 .... 111

50 Letter from Hugh E. Cross to United States

Freight Co., attention Ray Newman, dated

NE Th I bragieedocinecpatcisenecenmemterssbiatoaniccemeies 112

51 Union League registration for Hugh W.

Cree, GE BE BE, TOD ccsciiscsicsccssiecs 113

52 Union League Clzb registration for Hugh

W. Cross, dated June 28, 1955 wn ccseceees 114

53 Hand-written letter from Diver to Cross,

Se UI BO Miiethiccreinicsiatnininineietinenniinn 115

54 Hand-written letter from Cross to Diver,

RE Sy I shkence 116

55 Articles of Agreement, dated July 11, 1955,

between Hugh W. Cross and Helen M. Cross

and Marguerite K. Erickson ..........sssceseeee 117-120

56 Exclusive real estate listing executed by

Cross with W.C. & A.N. Miller Dev. Co.

Els ND cecciicetintsnnenenniion 121

57 Hand-written letter of Cross to Diver, dated

PEE iG BED: cia scichicsadiennsicainnsdeemsinntieiniicianiabiien 122

58 Union League Club registration for Hugh

W. Cross and Mrs. Cross, dated August 7,

ED ildicisahnsiaiiiunedinaiasitbcincladecsinasiabsasanhinedatiatiansianepniien 123

59 Hand-written letter of Cross to Diver, dated

EE Sita TE peciniaeceesncaeccansnciiiearesni oechainiateonionbcmnien 124

60 Letter of Hugh W. Cross and wife to Wilbur,

dated November 18, 1955 we eeeeeeeees 125

61 Letter of Hugh W. Cross and Mrs. Cross to

Erickson, dated November 18, 1956 ............... 126

62 Report of hearing before Committee on Gov-

ernment Operations re Hugh W. Cross, dated

IO Tk, TO Wicitiieetcscstnienons 127-212

~, iv

Plaintiff's

Exhibit

Number Description Page

63 Annual Report of Committee on Government

Operations, 84th Congress, dated January

as NEE senrdineiinsinsinovatailineeancapeasannncecleidaanieogisabial 213-256

64, 64a-64z, 64aa-64nn

OUND COTE BUND ocniccscsreessrenctensncinsgiervins 257-270

65, 65a-65n

Long distance toll slips wo... eeseeeeeeees 211-275

66, 66a-66i

Long distance toll slips ....scseseseseeseeeeees 276-277

67, 67a-67i

Long distance toll slips ...........ccccescseseeeeeees 278-280

GS _- Hotel registreticm Gin onccsesccescssscsecescscssssiessecscsess 281

69 Summary of telephone toll slips ................ 282-288

70 Telegram dated May 26, 1955, from Johnston

De MMI ins scan ecsptncehacbdacasccsconosccacenesipceeiantic obadienceiidetdlidin 289

71 Memorandum dated May 20, 1955, from Kim-

IIE caititdie wists ueitannatiniasieseidacmaccebiais 290

72 Memorandum dated April 29, 1955, from

OF ge ERE er ae eee OO 291

73 Smart pencilled notes (I.C. 28) oc... 292

74 Smart pencilled notes (Johnston exhibit 5) .. 293

75 Letter dated March 24, 1955, from Baird to

STIR. ‘ttsertinnhctasecnsice aa duamnbicsincemittnscaseiabahainataoieiai 294

76 $Two-page Jetter dated April 27, 1955, from

BE “SP INE centacusaiiaseicnsiainientonsiiccnenl 295-296

77 Tw?-vage memorandum dated May 20, 1955,,~

GEE SIPING shidcswhiitinias Aoncetnieiccmtheineeasinceiacenents 297-298

78 | Memorandum dated May 26, 1955, from Baird

Ra Re Cas E Rn Fem Sore eMart ene we eaee ROA oy 299

79 Memorandum dated May 31, 1955, from Baird

DD HPO isendacscncssntsbaneintdiansiealnienmatmimaaaaaiaend 300

81 Letter dated August 10, 1955, from New

York Central and Chicago Rock Island and

Pacific Railroad Co. to Parmelee, Yellow Cab

Co., amd Checker Taxi Co. .......ccccccccccccsscsssscese 301

82 Bone 1955 notes (New York 121-134) ....302-316

83 Memorandum dated 5/17/55 of A.R.H. to

SII etinisachseahariesiahictenldgianceidiaiien saticlaihanlcesiiedataelahadeintdians 317

Three-page memorandum dated May 19, 1955,

| SRE meee 318-320

85 Letter dated May 20, 1955, from Bone to

IEE beasesisadidiclsin sickens heclaibalaccnsiniasiiipiaadhnatilansineiganme 321

Letter of Bone to Whited, dated May 23,

1955, together with copy of letter dated May

20, 1955, from Bone to Baird ..................00 322-323

v

Plaintiff's

Exhibit

Number Description Page

87 Letter dated May 23, 1955, from Bone to

IIE: sala dssuchnisashieseatcigsseiiesianbiekesncednaxonmastsiannintanate 324

87a Memorandum dated May 25, 1955, from Ner-

BE OEE. TUITE: GIUIED Vnsiscsindtanstsnssaccnénetseniseshssnn 325

88 Letter dated May 24, 1955, from Bone to

I iit sich dish cite sabbhatidiaciaiaientienibileassteas 326

89 Memorandum dated October 6, 1955, initialled

DIR i IIIS 1i5scsutshah iheisdenicarabotenesiniensatinennesss 327

90 Pencilled note of Coleman to Carpi, dated

RII UII ssa ccedassaisidsaadeomnceanstpeesacaicgaci seams 328

91 Memorandum dated June 16, 1955, from

TET IID TEU nda bidescinchcaieasctenesceensniiansansearconeneigins 329

92 Memorandum dated June 7, 1955, from E.R.C.

93

97

98

99

100

101

102

103

104

to E.M.H., together with call for meeting,

Chicago Terminal Lines, dated June 3, 1955,

prepared by Padrick and Winkler ............ 330-332

Memorandum dated June 14, 1955, from

E.M.H. to E.R.C. re Chicago Terminal Lines

meeting of June 13, 1955 wc eseeeeneees 333-334

i a a Ree 335

Four-page letter dated March 15, 1955, from

Be: WD IIE exisistanecsissnnneieeticneree 336-339

Letter dated May 20, 1955, from Markin to

MINI +" cicsiniesiceabteiciinte eshinciiesdelipabiousidainataadiendaecianaianieaah 340

Transmittal letter dated December 15, 1954,

from Keeshin to Bone, together with proposal

for transfer and handling of passengers and

ING « sccecsserssnssninserscennnnmainnsentmenciinnnnenanansenman’ 341-355

ON EES CC eae i eRe eee RN A oP Sty en Ae 356

Three-page letter dated April 6, 1955, from

SRR: WO TN oa necnsnasticteersinrcnetrnnnne 357-359

Transmittal letter dated September 27, 1955,

from E. B. Padrick, together with final con-

tract with Railroad Transfer Service, Inc.

effective October 1, 1955 un... sseeeesseees 360-381

Parmelee Transportation Company summary

of revenues and expenses for a period from

January 1, 1946, to September 30, 1955 ........ 382

Railroad Transfer Service, Inc. summary of

income for a period from October 1, 1955, to

PO Bh, TOGO cccciernnicnnicmiinmenite 383

Daily News; Article re case, May 3, 1960 .... 384

Chicago American, Article re case, May 3,

ee ssc icabetiaeceeni ebbcadadlateounslidsipnmancghieiaain 385

a

vi

Plaintiff's

Exhibit

Number Description Page

105 Chicago Tribune, Article re case, May 4, 1960 386

106 Chicago Sun-Times, Article re case, May 4,

MEE | Wisisicnicssasiteictneiesienscesreci inhi enesehanedeahiiasebccaivsceantllaeie 387

107 Parmelee modified proposal submitted to

BI < chaiitinseesisicannphanmmnssanin uiband taibienibdaionde a aanatiians 388

108 Trunk Line Central Passenger regulation re

through checking of baggage... 389-390

109 Comparison of baggage transfer rates, Octo-

RU Be SIP iekieheieemvaecessonisnnanessenete aiisaad 391

110 Rules, regulations and rates governing

through checking of baggage under Keeshin

service (prepared by Padrick) ................. 392-393

117 Letter from Erie Railroad, dated May 22,

1956, to Padrick (R. E. Towne) ..........ccee 394

120 Office memo dated 6/16/56 re air conditioning

on railroad transfer cars from Reintgen to

TN in rs 395

121 Office memo dated 8/4/56 re air conditioning

on railroad transfer cars from Reintgen to

Ti re 396-397

122 Office memo dated 6/18/57 re air conditioning

on railroad transfer cars from Krock to

ME ivccccsacccarsn stun aelamieiiacemaetumamaeinan 398

123 Office memo dated 6/21/57 re air conditioning

on railroad transfer cars from Krock to

WIC .......cssessesnnssnssonscnccnesneconccncssnesecsnsssnossscaseseees 399

124 Office memo dated 7/2/57 re air conditioning

on railroad transfer cars from Krock to

MEY cidinicctsensciee cased eed iene a ekamahannediiemines 400

125 Office memo dated 7/11/57 re air conditioning

on railroad trasfer cars from Krock to

MT sis daehai acacia hatacenldceatetaiandeachlahabiaiiieasindeaiaaliaeniintal 401

126 Office memo dated 7/19/57 re air conditioning

on railroad transfer cars from Krock to

MINI: “ceases cicasintanehidipitiin \enaldassainlndibasanbeehintsineieinniios 402

127a Letter Bone to Scheeder, dated June 3, 1953,

re Parmelee Centennial radio announcement.. 403

127b Radio announcement referred to in and at-

tached to Plaintiff’s Exhibit 127a above-pre-

sented over air June 15, 1953 0.0.0... eee 404

129 Letter to Markin and Passolt from D. J.

Hearne, dated May 12, 1953 .0.........cessssssseees 405

152 Letter dated April 12, 1954, from Brennan

RRS ah eee eted a ee 406

161 Defendants’ Answer to Amended Complaint

sniblcebhciaediedebciac ita bbcales aeantahoilaicies aad ciditcadladla 407-412

—213—

PLAINTIFF'S EXHIBIT 63

Sen SENATE | { Ravens,

ANNUAL REPORT

COMMITTEE ON GOVERNMENT

OPERATIONS

MADE BY ITS

PERMANENT SUBCOMMITTEE ON

INVESTIGATIONS

71008 WASHINGTON : 1966

7.

—214—

PLAINTIFF’S EXHIBIT 63 (Continued)

COMMITTEE ON GOVERNMENT OPERATIONS

JOHN. L. McCLELLAN, Arkansas, Chairman

HENEY M. JACKSON, Washington JOBEPH R. McCARTHY, Wisconsin

JOHN F. KENNEDY, Massachusetts KARL E. MUNDT, South Dakota

STUART SYMINGTON, Missouri MARGARET CHASE SMITH, Maine

SAMUEL J. ERVIN, Ja., North Carolina NORRIS COTTON, New Hampebire

HUBERT H. HUMPHREY, Minnesota GEORGE H. BENDER, Ohio

STROM THURMOND, South Carolina THOMAS & MARTIN, Iowa

Wattar L. Rernoups, OAief Clerk

PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

JOHN L. McCLELLAN, Arkansas, Chcirmen

HENRY M. JACKSON, Washington JOSEPH R. McCARTHY, Wieconsin

STUART BYMINGTON, Missouri KARL 5B. MUNDT, South Dakota

SAMUEL J. ERVIN, Ja., North Carolina GEORGE H. BENDER, Ohio

Rossat F. Kaxxepr, Chief Counsel

DONALD F. O'DONNELL, Asotetant Ohef Counsel

Japs N. JuviaNa, Chief Couns to the Minority

—215—

PLAINTIFF’S EXHIBIT 63 (Continued)

CONTENTS

Army personnel actions relating to Irving Peress__........._....___.

n

FOA grain elevators in Pakistan._.................................

weer ene ee ee ee eee eee ee esse eee eee sees eee et ee @Oeecececan

A tries

Matters referred to the Department of Justice.___...............___

I IIIS. 6 iittala: pinta dee teed a dina a i a a

\

ba

SSESSRERKSSonn §

—216—

of

PLAINTIFF’S EXHIBIT 63 (Continued)

847TH ConoREss } SENATE

1 Nona

2d Session No. 1444

=

ANNUAL REPORT

Jawouny 2 (legislative day, January 16), 1956.—Ordered to be printed

° &

Mr. McCueiian, from the Committee on Government Operations,

submitted the following

REPORT

MADE BY ITS PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

INTRODUCTION

The Senate Permanent Subcommittee on Investigations of the Com-

mittee on Government Operations, pursuant to the Legislative Reor-

ganization Act of 1946, is charged with the duty of studying the opera-

tion of Government activities at all levels with a view to determining

their economy and efficiency. This task is a huge one, particularly

when we consider that the professional staff of the subcommittee*con-

sists of only 11 members. e executive branch, at a-cost of over 53

billions of dollars, operates several hundred separate artments,

agencies, and independent offices employing 2,366,075 civilians alone.

At the beginning of the year the subcommittee adopted certain rules

of procedure which were as follows:

1. No major investigation shall be initiated without approval

of either a majority of the subcommittee or a majority of the full

Committee on Government Operations. | However, preliminary

inquiries may be initiated by the subcommittee staff with the ap-

proval of the chairman of the subcommittee.

2. Subpenas for attendance of witn and the production of

memorandums, documents, and records shall be issued by the sub-

committee chairman or by any other member of the subcommittee

designated by him.

3. The chairman shall have the authority to call meetings of the

subcommittee. This authority may be delegated by the pg ana

to any other member of the subcommittee when necessary. The

chairman shall not schedule any hearings or series of hearings

outside the District of Columbia without giving at least 48 hours’

notice thereof to the members of the subcommittee.

No public hearing shall be held if the minority members unan-

imously object, unless the full Committee on Government Opere-

tions by * majority vote approve of such public hearings.

1

—217—

{

PLAINTIFF’S EXHIBIT 63 (Continued)

+

ANNUAL REPORT

4. Should a majority of the membership of the subcommittee re-

quest the chairman in Heo | to call a meeting of the subcom-

mittee, then in the event the chairman should fail, neglect, or re-

fuse to call such a meeting within 10 days thereafter, such ma-

jority of the subcommittee may call such meeting by filing a writ-

ten notice thereof with the clerk of the subcommittee, who shall

promptly notify im writing each member of the subcommittee.

5. Any two members of the subcommittee shall constitute a

quorum for the purpose of taking testimony under oath in any

given case or subject matter before this subcommittee, as author-

ized by Senate Resolution 180, 81st Congress, 2d session.

6. All witnesses at public or executive hearings who testify to

matters of fact shall be sworn.

7. Counsel retained by any witness and accompanying such wit-

nesses shall be permitted to be present during the testimony of

such witness at any public or executive hearing, and to advise such

witness while he 1s testifying, of his legal rights; but this shall

not be construed to excuse a witness from testifying in the event

his counsel is ejected from contumacy or disorderly conduct; nor

shall this rule be construed as authorizing counsel to coach the

witness, answer for the witness, or put words in the witness’ mouth.

The failure of any witness to secure counsel shall not excuse such

witness from attendance in response to subpena.

8. Any witness desiring to read a om or written statement

in executive or public hearings shall file a copy of such statement

with the counsel or chairman of the subcommittee 24 hours in

advance of the hearings at which the statement is to be presented.

The subcommittee shall determine whether such statement may

be read or placed in the record of the hearing.

9. A witness may request, on grounds of distraction, harass-

ment, or physical discomfort, that during his testimony, tele-

vision, motion picture, and other cameras and lights shall not

be directed at him, such request to be ruled on by the subcommittee

members present atthehearing.

10. An accurate stenographic record shall be kept of the testi-

mony of all witnesses in executive and public hearings. The

record of his own testimony whether in public or executive session

shall be made available for inspection by witness or his counsel

under committee supervision; a copy of any testimony given in

public session or that part of the testimony given by the witness

In executive session and mgr om ewe quoted or made part of

the record ina public session shall be made available to any witness

at his expense if he so requests.

11. Interrogation of witnesses at subcommittee hearings shall

be conducted on behalf of the subcommittee by members and

authorized subcommittee staff personnel only.

12. Any person who is the subject of an investigation in public

hearings may submit to the chairman of the subcommittee ques-

tions in writing for the cross-examination of other witnesses

called by the subcommittee. With the consent of a majority of

the members of the subcommittee present and voting, these ques-

tions shall be put to the witness by the chairman, by a member of

the subcommittee, or by counsel of the subcommittee.

—218—

PLAINTIFF’S EXHIBIT 63 (Continued)

ANNUAL REPORT 3

13. Any person whose name is mentioned or who is specifically

identified, and who believes that testimony or other evidence

presented at a public hearing, or comment made by a subcommittee

member or counsel, tends to defame him or otherwise adversely

affect his reputation, may (a) request to appear personally before

the subcommittee to testify in his own behalf, or, in the alterna-

tive, (b) file a sworn statement of facts relevant to the testimony

or other evidence or comment complained of. Such request and

such statement shall be submitted to the subcommittee for its

consideration and action.

14. All testimony taken in executive session shall be kept secret

and will not be released for public information without the ap-

proval of a majority of the subcommittee. //

15. Nosubcommittee report shall be released to the public with-

out the approval of 2 majority of the subcommittee.

16. All staff members shal) be confirmed by a majority of the

subcommittee. After confirmation, the chairman shall -ertify

staff —— to the financial clerk of the Senate, in writing.

17. The minority shall select for appointment to the subcom-

mittee staff a chief counsel for the minority who shall, upon bein

confirmed, work under their supervision and direction; who sha

be kept fully informed as to investigations and hearings, have

access to all material in the files of the subcommittee, and, when

not otherwise engaged, shall do other sulbcommittee work.

One clerk on the subcommittee staff, acceptable to it, shall be

assigned to the minority. When not otherwise engaged such clerk

shall be assigned other duties for the subcommittee.”

The subcommittee, during this past year, conducted 79 actual in-

vestigations and 67 preliminary inquiries. Thirty-six days of open

hearings were held and 91 witnesses heard. In addition there were

12 days of executive sessions at which 28 witnesses were heard.

The subcommittee’s hearings extended through the operations of

many of the Government agencies, including the Department of the

Army and Agriculture, the Foreign Operations Administration, the

Air Force, the State Department, Treasury Department, Navy De-

partment, the Interstate Commerce Commission, and the Department

of Commerce.

It covered such widespread activities as the Army loyalty security

procedures, exemplified by the Peress case ; conflict-of-interest matters

at Cabinet and other levels, as in the hearings on former Secretary

of Air Harold E. Talbott and Hugh Cross, the former Chairman

of the Interstate Commerce Commission. Hearings were held on

what steps were \being taken or could be taken to obtain the release

of American nationals held by the Red Chinese Government. It in-

cluded studies of waste and inefficiency in the procurement and con-

struction of grain bins by the Commodity Credit Corporation of

the Department of ’Agriculture and the deficiencies of the Naval In-

tion Serviceéy possible collusion and fraud in the negotiation for

the award for thé cohstruction of grain elevators in Pakistan by a con-

sulting engineer hired by the Foreign Operations Administration;

fraud and corruption in the procurement of military apparel by the

armed services, as illustrated by the hearings on Harry Lev, Marvin

Rubin, and others; a study of the infiltration of Communists in the

—219—

PLAINTIFF’S EXHIBIT 63 (Continued)

4 ANNUAL REPORT

vital areas of defense plants and the inquiry on redefection of refugees

in Europe back to Communist nations, as well as the failure by the

Treasury Department to enforce tariff restrictions on watches which

is alleged to have cost the United States Government many millions

of dollars over the period of the past 25 years. In addition, a con-

tinuing study is being made of East-West trade and export controls

on\materials going to Communist-dominated nations.

Legislative investigations to be worthy should accomplish a con-

structive result. In addition to serving as a basis for legislation,

they also serve the important function of bringing to light the exist-

ence of conditions which need corrective action. All too often in-

stances have been uncovered by legislative committees of failure to

abide by the letter and spirit of our laws, rules, and regulations,

and it is only after the legislative investigation that effective action

is taken to remedy such conditions.

The subcommittee is proud of its constructive record. In the Peress

matter, the hearings revealed that some 48 errors were committed

by the Army in conneciion with the commissioning, transfer, promo-

tion, and honorable discharge of Peress. As a result of these hear-

ings the Army took 19 corrective measures in order to uncover and

deal with security cases.

Because of what was uncovered by the investigations and hearings

in the domestic grain-bin program, the Department of Agriculture

and the Naval Inspection Service have instituted 21 corrective

measures,

In the investigation conducted in connection with the procurement

of military hats, bribery, perjury, collusion and fraud, and improper

inspection were revealed, as well as the method of making large secret

profits through deviations at the expense of the Government. As a

result of these hearings, claims are now being pressed by the Govern-

ment for over a half million dollars on these improper profits. Two

Army, one naval, and one Treasury Department employees were dis-

missed from Government service. An Air Force officer resigned

in the face of a court-martial. Twelve persons and corporations were

suspended and two others were debarred and placed on the Consoli-

dated List of Debarred Ineligible and Suspended Bidders. New pro-

cedures were instituted in procurement of patented components which

will save the Government in the future hundreds of thousands of

dollars.

In the FOA Pakistan grain elevator case, the subcommittee’s un-

covering of strong evidence of collusion in the negotiations for the

award of the contract prevented FO.A from granting a contract to the

— high bidder and saved the Government possibly a million

dollars. an

Its investigation of conflict-of-interest \situation resulted in the

resignation of Air Secretary Tlarold FE. 'Ralbott and Hugh Cross

as Chairman of the Interstate Commerce Commission.

The investigation was continued with regard to Communists in

defense plants, and several witnesses were called from Allis-Chal-

mers, Fitchburg, Mass.; Bethlehem Steel Corp., Bethlehem, Pa.; and

General Electric Co., Schenectady. N. Y.

It is difficult, if not impossible, to calculate the actual monetary

savings accomplished by the legislative investigations of this subcom-

mittee. It is evident, however, that although such savings are impor-

— 220—

PLAINTIFF’S EXHIBIT 63 (Continued)

ANNUAL REPORT 5

tant, of greater importance is the subcommittee’s function as a deter-

rent to improprieties on the part of those in Government and those

dealing with the Government. The watchdog functions of the sub-

committee in the field of general Government operations serves an

extremely useful and essential purpose as a check and balance on the

executive departments.

It should be noted also that these investigations were conducted with

an appropriation of $190,000 and that approximately $15,000 of this

amount will be unexpended and therefore returned to the Treasury

of the United States.

The subcommittee wishes to express its sincere appreciation to the

General Accounting Office for assigning two investigators to the sub-

committee and for the very major assistance rendered in many ways

during the past year.

It is also most grateful to the Senate Committee on Appropriations

for the assignment of Paul E. Kamerick to assist this subcommittee.

Army Personnet Actions Retatine to Irvina Peress

The purpose of this inquiry was to develop all the true facts and

circumstances attending the Department of the Army’s handling of

the induction, change of orders, promotion, and honorable discharge

of Dr. Irving Peress. In preparing for public hearings, the subeom-

mittee staff conducted a 6-week preliminary investigation. The hear-

ings of the Army personnel actions relating to Irving Peress com-

menced March 15 and ended March 31, 1955. A total of 22 witnesses

testified before the subcommittee and interrogatories were taken of

2 additional witnesses. The record is supported by a total of 91

exhibits.

On January 39, 1954, Maj. Irving Peress, a dental officer assigned

to Camp Kilmer and on active duty since January 1, 1953, appeared

before the Senate Permanent Subcommittee on Investigations and

invoked the fifth amendment in résponse to certain questions, among

_which were—

Was he then or had he ever been a member of the Communist

Party?

Had he attended leadership courses at the Inwood Victory Club

of the Communist Party?

Had he attempted to recruit military personnel at Camp Kil-

mer into the Communist Party?

Had he acted under orders from Communist Party function-

aries while at Camp Kilmer?

IIlad Communists intervened to have his overseas orders can-

celed ?

— Communists assisted him in securing a promotion to

major

The fact that an Army officer invoked the constitutional privilege to

uestions of this nature caused the subcommittee grave concern.

Taaiens were thereby raised, not only as to the effectiveness of the

Army’s program of dealing with subversives, but also whether the

circumstances surrounding the original appointment of Peress, his

subsequent change of orders, and his promotion had been, in fact,

inspired by subversive interests.

S. Rept. 1444, 84-2——-2

—221—

PLAINTIFF’S EXHIBIT 63 (Continued)

6 ANNUAL REPORT

The subcommittee’s concern was not lessened by the Army honor-

ably discharging Irving Peress on February 2, 1954. This was par-

ticularly true since this action was taken in apparent disregard of a

February 1 letter from Senator McCarthy, the chairman of the sub-

committee at that time, to the then Secretary of the Army, Robert T.

Stevens, indicating that the subcommittee was in possession of suffi-

cient information to warrant court-martial proceedings against

Peress.'

Subsequent developments revealed that the Army had been in pos-

session of-unfavorable security information concerning Peress for

a considerable period of time but irrespective thereof he was promoted

to the grade of major and later discharged under honorable con-

ditions.

This subcommittee reached the following conclusions with respect

to the Army's handling of Maj. Irving Peress:

I. The Secretary of the Army, or his superiors in the Department

of Defense under whose directions he may have been acting, are to

be criticized for the delay of almost 1 year before the facts concerni

the Peress case were publicly released. Such unnecessary delay cree

to unduly arouse and increase suspicions of the public as to possible

Communist influences and thereby was a disservice not. only to Army

personnel involved in the Peress case, but also to the Army as a whole,

to this subcommittee, to the Congress, and to the general public.

II. Mr. John Adams, Counselor, Department of the Army, showed

disrespect for this subcommittee when he chose to disregard Senator

McCarthy’s letter of February 1, 1954, and allowed Peress to be hon-

orably discharged on February 2, 1954.

III. The list of the 28 officers which was submitted by the Depart-

ment of the Army as having taken an active part in the personnel

actions concerning Irving Peress was deceptive and a gross imposi-

tion on the special) Mundt subcommittee, and also on this sub-

committee.

IV. The Inspector General’s investigation of the Peress matter

was inadequate, demonstrating inefficiency.

V. Had the Inspector General’s report on Irving Peress been fur-

nished to this subcommittee, as was the Inspector General’s report on

Pvt. G. David Schine to the special Mundt subcommittee, the pre-

liminary investigation by this staff and the public hearings held by

this subcommittee would have been expedited. This apparent in-

consistent policy of responsible officials in the Department of De-

fense and the Department of the Army would seem to indicate that

the criterion for furnishing such reports to Congress was whether

they are or are not favorable to the department invoived.

. Irving Peress’ promotion, change of orders, and honorable dis:

charge were the result of a combination of factors: Individual errors

in judgment, lack of proper coordination, ineffective administrative

procedures, inconsistent application of existing regulations, and ex-

cessive delays.

VII. During the period of time Peress was in the service, there was

no well-defined policy or prescribed procedures in the Army which

would insure the effective handling of security risks.

1 Secretary Stevers was out of the country and did not wat

until sometime later. . - Sere Sen ae

_

—222—

PLAINTIFF’S EXHIBIT 63 (Continued)

ANNUAL REPORT 7

VIII. Although the Army had urgent requirements for doctors,

dentists, and veterinarians during the Korean conflict, expeditious

processing of these specialists pace. have been accomplished without

sacrificing fundamental security safeguards. Had such initial safe-

guards been retained, Irving Peress would not have been tendered a

commission, and thus would not have served for 13 months as an

officer on active duty.

IX. At no time when Peress was on active duty, between January

1, 1953, and February 2, 1954, was any investigation or surveillance

conducted by G--2 to determine his activities while in the Army with

the exception of a nrost superficia! spot check at Camp Kilmer.

X. Much of the difficulty attendant the Peress case was due not

only to the failure of the Army to assign adequate personnel to G-2

both in the field and at headquarters in Washington, but also to the

pract. 2 of filling responsible G-2 positions with officer personnel

untrained and inexperienced in the field of intelligence. These prac-

tices strongly suggest a lack of appreciation of the importance of

intelligence, particularly in these times. The field of intelligence is

@ specialized one, and effective results are not attainable therefrom

unless it is treated as such.

XI. G-2 policy of oe copies of investigative reports from

one field command to another where the subject is assigned, through

G-2 headquarters, Washington, rather than directly to the command

in the field, as well as to G-2 Washington, produces unnecessary delay

in apprising the command of facts concerning nnel under its

jurisdiction that might require immediate protective measures.

XII. With respect to the cases presented to it, the Army personnel

board must make recommendations seriously affecting the future

of each individual concerned. Under these circumstances, no recom-

mendation should be made except after a most careful and thorough

consideration of each case by the board members. Such consideration

cannot be expected of any three-man board handling hundreds of

cases each month.

XIII. Some 48 errors of more than minor importance were com-

mitted by the Army in connection with the commissioning, transfer,

promotion, and honorable discharge of Irving Peress. It is, of course,

realized that certain of these errors, such as the failure of an indi-

vidual to exercise good =. are not susceptible to being co

by procedural changes. However, the Army has taken corrective

action applicable to 19 of the 48 errors committed. The subcommittee

found the failure of responsible Army officials to effect most of these

changes until after the Peress case e an incident of national

interest to be inexcusable.

The subcommitte made the following recommendations:

I. That the Department of the Army establish procedures within

the Army personnel board which will not only insure that each mem-

ber thereof approve the board’s recommendation as prepared by the

recorder but also that the G-1 interpretation of the board’s recom-

mendation is in consonance with the intent of the individual board

members. In this respect, the subcommittee specifically recommends:

1. That an adequate record system be maintained whereby the

intent * each board member will be clearly revealed in every

case; an

—223—

PLAINTIFF'S EXHIBIT 63 (Continued)

8 ANNUAL REPORT P

2. That each board member review and approve the board’s

final recommendation as prepared by the recorder prior to for-

warding to G-1 for implementation.

II. That sufficient personnel be assigned to the Army personnel

board to insure a thorough and careful consideration of all cases

presented to it.

Ul. That the Army take appropriate steps to insure that officers

assigned to the Army Reartin.: fbs.2- are qualified in personnel and

security matters and are familiar with applicable regulations and

procedures.

IV. That the Secretary of the Army cause a study to be made of the

rocedures and policies governing the operation of the Office of the

nspector General and that corrective action indicated thereby be

taken to improve the efficiency of that Office.

V. That the Army undertake not only to adequately staff G-2

offices in the field and at headquarters in Washington but also to assign

thereto personnel properly qualified for intelligence work from the

standpoint of both training and experience.

V1. That the practice of forwarding G-2 investigative reports from

one field command to another through G-2, Washington, discon-

tinued. It is recommended that copies of sucl repdrts be sent directly

to the command in the field, thus precluding unnecessary delay in its

being apprised as to matters of interest pertaining to its command.

At the same time copies of these reports should be sent to G-2, Wash-

ington.

VII. That G-2 investigative personnel be required to familiarize

themselves with all forms reiating to security; that as a matter of

course all such forms be examined during a security investigation ;

and that all pertinent information revealed therein be included in

investigative reports.

VIL. That the Department of the Army require (j-2 officers in the

field to advise commanding officers immediately of derogatory security

information relating to personnel under their command. In this re-

spect it is recommended that existing regulations which provide that

intelligence reports remain in intelligence channels until a specific

command is_required to take action be amended accordingly.

IX. That G-2 conduct appropriate active investigation and surveil-

lance of personne/ still on active duty who have been determined to be

security risks or concerning whom there is sufficient evidence of sub-

version or disloyalty.

SUMMARY OF INDIVIDUAL VIEW

Senator George Il. Bender did not sign the report but submitted

his individual views which are summarized as follows :

The purpose of the investigation into the Peress matter, as I understood, was

to determine principally whether there existed any subversive collusion or Com-

munist conspiracy in the Army that. caused the induction, promotion, and re-

assignment from duty overseas of this dentist. A great hue and cry continued

for nearly a year for the identity of the Communist conspirators and the “silent

Communist master of the l’entagon” who “protected” and “covered up” the

affairs of this “fifth-amendment Communist.”

I think it is of paramount importance that this subcommittee should assure

the people of this country that no Communist influence was found in the Army.

Yet, there is not one word in this subcommittee report to inform the American

public that not one iota of evidence was revealed to indicate any subversion,

collusion, or Communist conspiracy concerned with the handling by the military

of the Peress matter. It seems to me that this was the important question the

American people and the Congress desired answered.

—224—

PLAINTIFF'S EXHIBIT 63 (Continued)

ANNUAL REPORT 9g

I cannot agree with the conclusion of the subcommittee that the Secretary of

the Army, or his “superiors in the Department.of Defense under whose direction

be was acting,” performed a disservice to the American people, the Congress,

and the subcommittee by not reventing for nearly 1 year the facts of Dereas

military career.

The report of the subcommittee detailed the efforts of the Secretary of the

Army and high Gevernment officers to acquaint the public and the Congress

with the fact that this case was due to errors. The subcommittee report con-

firmed these statements in its findings and presented many minor personnel fail-

ures in support of the finding.

do not amount in my estimation to @ “disservice” in any degree.

I think that the testimony gives ample ground to recommend that individuals

yy a gan trained in personnel and security matters should be assigned to

FOA Graww Exeyators i PaKIsTan

Senator Stuart Symington, of Missouri, by letter dated Janua

11, 1955, to Senator John L. McClellan, chairman, requested invest!-

gation into the negotiation then being carried on by Foreign Op-

erations Administration (FOA) for the construction of grain stor

elevators in Pakistan. Senator ee inted out that | the

Columbian Steel Tank Co., of Kansas ity, Mo., had submitted the

low bid of $1,448,917.40 for the construction of these elevators and

that it was the expressed intention of Harold E. Stassen, Director of

FOA, to negotiate a contract with the Agricultural Construction Co.,

of Los Angeles, Calif., which was the highest bidder in the compe-

tition with a figure of $2.430,979.56, this amount being in excess of

the low bid by 2.16.

The first step was a request by Senator McClellan to Director Stas-

sen on January 21, 1955, to make available to the subcommittee all

of the FOA files on this matter. It was only after repeated requests

that on February 11, 1955, Mr. ——. turned over to the sub-

committee a limited number of documents. Subsequently, additional

material from the FOA’s records was made available, a

review by a staff investigator.”

copies of certain documents were requested, Mr. Stassen re-

fused to furnish them. He also refused to furnish the names of the

officials who had served as project managers.

When the subcommittee learned that Mr. Howard P. Morrison,

an FOA official, had served as one of the project managers, it re-

quested the FOA to make Mr. Morrison available for interview and

in, on mstructions of Mr. Stassen, this was refused. As a result

of these tactics the subcommittee had to issue subpenas for Mr. Stas-

sen as well as other FOA officials with whom it was necessary to confer

in order that the investigation might proceed.

Inquiry disclosed that the FOA mission in Pakistan issued invi-

tations to bid in June 1954 for the construction of three grain sto

elevators in Pakistan. The opening of the bids took place in Karach.,

t only for

Pakistan, on ony eh 1954. Robert H. Pinner was the grain- /

1 y

storage engineer the Ralph M. Parsons Co., of Los

and sent to Pakistan as grain-storage con:ultant to the FOA missi

there. In this capacity Pinner was most influential in all yn

on grain-storage matters. After the opening of the bids in Pekis-

tan, Pinner made a detailed analysis of the bids and rendered © feel.

sion that only the Agricultural ruction Co., the apparent high

* Heart were held on FOA Grain Storage Elevators in Pakistan, Ma-ch 31; April 6,

14, 15; and May 3, 1955, pts. 1 and 2. 4

~

—225—

PLAINTIFF'S EXHIBIT 63 (Continued)

10 ANNUAL REPORT

bidder 1n this compefffion, met all the specifications. He recom-

mended that the contract be awarded to the Agricultural Construc-

tion Co. Pinner then personally carried the bids back to Washing-

ton, D. C., stopping en route in Los Angeles, Calif. (Senator Karl FE.

Mundt disagrees with the use of the terms “high bidder” and “low

tidcer™ throughout this report and disassociates himself from any

comparisons and criticisms stemming from attempts to compare the

ybid ogures since he feels the hearings brought out clearly that these

/ were “design bids” rather than bids based on prescribed specifications.

Thus bidders were submitting prices on different sets of specifications,

and Senator Mundt holds that price comparisons under these cireum-

stances are not accurate. Conflicting testimony was received as to

exactly what type of bid FOA intended. FOA deserves criticism for

not spelling out more accurately its intent and the specifications on

which it was to aecept bids, but not for ignoring or rejecting the “low

bidder” under circumstances where bidders were not competing

against each other on the same specifications or materials. )

At the Washington, D. C., headquarters of FOA a contracting com-

mittee and an ad hoc review committee were appointed to analyze the

bids. These committees found that, contrary to Pinner’s opinion,

all five of the competing bidders had substantially met the specifica-

tions. They held, however, that since each bidder was bidding on his

own plans, and that it was now decided to change the specifications,

additional detailed information should be obtained from each com-

pany to put all on an equitable basis for price comparisons. This

view was upheld by D. A. FitzGerald, Deputy Director to Mr. Stas-

sen. However, before this could be accomplished, Director Stassen

intervened, holding up further action until he could personally go

into the case. After holding a conference with officials of the Agn-

cultural Construction Co., Mr. Stassen notified his organization that

FOA would proceed to negotiate with the Agricultural Construction

Co. for the contract.

On March 28, 1955, Mr. Stassen wrote the chairman that unless the

subcommittee had an “adverse view.” he intended to proceed with

negotiations with the Agricultural Construction Co. for a contract.’

At that time he was cognizant that Alfred FE. Poulsen, chief engineer

of the Agricultural Construction Co., had recommended Robert H.

Pinner to the consulting engineer's position with FOA, that it was

Pinner’s recommendation that the Agricultural Construction Co. re-

ceive the contract, and that the Agricultural Construction Co. was the

apparent high bidder. He was also aware that his own ad hoc review

committee, contract committee, and Deputy Administrator had agreed

that Pinner’s recommendations should not be followed.

When Robert IT. Pinner first testified, he denied there had ever been

any communications whatever between himself and Poulsen during

the preparation of the bids. Subsequently other witnesses, including

Alfred FE. Poulsen, testified to frequent communications between

Pinner in Pakistan and Poulsen in Los Angeles regarding the prepa-

ration of the bid and said that Pinner, en route from Pakistan to

Washington, D. C., met in Los Angeles with officials of the Agricul-

tural Construction Co. Pinner then reappeared before the subcom-

mittee, admitted his previous untruthful testimony. and told of his as-

sistance to Poulsen in the preparation of the Agricultural Construe-

® Hearings, FOA Grain Storage Flevators in Pakistan, pt. 2. p. 262. .

—226—

PLAINTIFF’S EXHIBIT 63 (Continued)

ANNUAL REPORT / 11

tion Co. bid. As a result of this the Parsons Co. discharged Pinner

immediately.

Director Stassen announced his intention to reject all bids, hire an

independent engineering company to draw up specifications for a

fixed design, and then submit new invitations to bid. He further

stated that, in view of the evidence of favoritism unearthed by this sub-

committee, the Agricultural Construction Co. would not be given a

new opportunity to bid nor would any firm with whom Robert H. .

Pinner or Alfred FE. Poulsen was connected.

Director Stassen volunteered that there might be some unethical

activity on the park of Mr. Gideon Hadary, of the Columbian Steel

Tank (o., the low-bidding firm in this competition, and Mr. Howard

P. Morrison of his on organization, and the FOA was conducting

an investigation into the matter and would furnish the subcommittee

a copy of its report. The investigative report submitted to the sub-

committee by the International Cooperation Administration (successor

organization to FOA) * on November 17, 1955, states there 1s no evi-

dence to substantiate the allegations.

From its investigation the subcommittee concluded that—

1. In the investigation of this case the subcommittee was ham-

vered by the delaying tactics of Mr. Stassen, Director of the

oreign Operations Administration. He was most uncooperative

for a public official, as illustrated by his attempts to hinder and

impede the legitimate functions of this subcommittee.

2. There was strong evidence of collusion between the officials of

the Agricultural Construction Co. of Los Angeles, Calif., and

Robert Pinner, the engineer employed for the FOA to handle

the contract for grain bins in ost tg As a result it was orig-

inally recommended that the Agricultural Construction Co.

awarded the contract.

3. If it had not been for the investigation conducted by this

subcommittee, Harold E. Stassen, Director of FOA, would have

made the award of the contract to the Agricultural Construction

Co. This investigation, therefore, has affected a substantial sav-

ings to the United States Government, possibly amounting to

$982,062.16.

4. Mr. Stassen exercised poor judgment and used bad business

practice when he indicated as late as March 28, 1955, that he in-

tended to negotiate the contract with the Agricultural Construc-

tion Co. At that time he was cognizant that Mr. Poulsen ofthe

Agricultural Construction Co. had recommended Mr. Pinner for

the job with FOA; that the Agricultural Construction Co. was the

apparent high bidder; that many major changes had been made

in the original invitation to bid; and that his own ad hoc review

committee, contract. committee, and np oa Administrator had

agreed that Pinner’s recommendations should not be followed.

5. The FOA is to be criticized for failing to furnish specific

plans and specifications with its original invitation to bid. The

ambiguity of the bids as issued caused confusion and misunder-

standing and opened the door for possible collusion and favor-

itism.

6. Mr. Howard P. Morrison and other officials of FOA who

opposed awarding the contract to the Agricultural Construction

Co. until all qualified bidders had been given an opportunity to

On IJnly 1, 1955, the FOA became the International Cooperation Administration of

the U. 8. Department of State.

—227—

PLAINTIFF’S EXHIBIT 63 (Continued)

12 ANNUAL REPORT

compete on the basis of the major changes made in the bid invita-

tion are to be commended for using sound business judgment.

7. FOA is to be criticized for the excessive and unnecessary

delay in its handling of this Pakistan grain bin contract where

the time element was deemed of such importance. It indicates

that the activities of the agency in this matter were inefficiently

administered.

8. Mr. Stassen’s irresponsible and unsubstantiated implications

in m9 hearing against Mr. Gideon Hadary of the Columbian

Steel Tank Co. and certain personnel within his own organization

were reprehensible for a high Government official.

The subcommittee recommended that the International Co-

operation Administration should make a study of the procedures

followed by FOA in the handling of contracts and take necessary

corrective action to improve economy and efficiency. An effort

should be made to eliminate misunderstandings among bidders

and avoid the expensive waste of time that occurred in this case.

This is important not only for the sake of efficiency, but for the

effect that lack of proper procedure can have on our relationship

with friendly governments. The following are some specific cor-

rective recommendations:

(1) Wherever possible, contracts should be awarded by

competition.

(2) Invitations to bid should be sent out and the contract

awarded to the lowest responsible bidder. If a bidder is low

but deemed not responsible, the reasons for that finding

should be made public. If there is any other reason for not

awarding the contract to the low bidder, then all the bids

should be dismissed and new invitations to bid issued.

(3) If a low dollar competition is not possible, then the

reasons therefor should be made public.

(4) Invitations to bid should be sufficiently detailed and

clear to prevent misunderstandings by competing bidders.

(5) In submitting invitations to bid, if there are elements

such as types of design, which will be a controlling factor in

the award of a contract, that information should be published

and also set forth clearly in the tender.

INDIVIDUAL VIEW

Senator George H. Bender did not sign the report but submitted

his individual view, which is as follows:

“J dissent from the majority report of the subcommittee because

I consider it to be inaccurate and unfair. Mr. Stassen is an honorable,

capable, and patriotic man, and there is absolutely no evidence to the

contrary in the record of the hearing of the subcommittee.

“The record shows that Mr. Stassen stopped the letting of a contract

in December 1954, when the first adverse claims were made, and this

action on his part was long before this subcommittee first entered the

matter on January 11, 1955. ;

“The record further shows that Mr. Stassen did not enter a contract

with any of the bidders, that no commitment of United States funds

was made to any of the bidders at any time, and that when the charges

and counterch and the comments of Members of Congress could

not be resolved, Mr. Stassen rejected all bids.

/

—228—

PLAINTIFF’S EXHIBIT 63 (Continued)

ANNUAL REPORT * 13

|

'

“The record further shows that Mr. Stassen’s earlier action in asking

that negotiations be started with the Agricultural Construction Co.

was in accord with the recommendation of the director of the United

States operations mission in Pakistan, who was working with the Gov-

ernment of Pakistan, and was based on the preference of the design

and the machinery proposed by that bidder.

“The record further shows that the bids were not for comparable

cost items, that a large item of $720,000 for services and training of

Pakistanis was in 1 bid and not in a proportionate manner included

in the so-called low bid and that the machinery and design of each

bid was different.

“Mr. Stassen offered his cooperation in his first letter fp the subcom-

mittee; the only difficulty arose when he insisted that ‘employees of

FOA should have the right of counsel when summoned before the sub-

cominittee investigators and tlrat star-chamber sessions should not

be held with FOA employees. In this he was right, and the subcom-

mittee met his objection in part by permitting private counsel, and

when thisewas done there were no further questions of cooperation

bet ween the subcommittee and Mr. Stassen.

“Mr. Stassen told the subcommittee of the investigation of Mr.

Hadary, a former FOA employee representing one of the bidders,

only in relation to the charges and countercharges that had been made

to him by bidders and Congressmen, and he agreed to report the re-

sults of this investigation to the subcommittee. Mr. Stassen did not

make any charges against Mr. Hadary, as the record of the subcom-

mittee shows. He would have been wrong if he had withheld this

phase of the situation from the subcommittee.”

Com™munNtst INFILTRATION IN DEFENSEAPLANTS

This subcommittee, under its obligation to make examinations into

the operation and efficiency of the executive departments of the Gov-

ernment, continued its investigation into the matter of infiltration by

the Communists into defense plants. This subcommittee held a publi.

hearing on May 10, 1955, at which time six witnesses were heard.°

James W. Glatis, an affirmative witness, said that he joined the

Communist Party in Boston, Mass., area in 1949 at the request of the

Federal Bureau of Investigation. He remained a member until May

25, 1954, when he testified before the Subversive Activities Control

Board in behalf of the Government. He testified that Charles Wo-

jchowski was a leading figure in the Labor Youth League, an organi-

zation listed as subversive by the Attorney General of the United

States.

Charles Wojchowski, 107 Brunswick Street, Dorchester, Mass.,

thereafter testified and took the fifth amendment as to membership

in the Communist Party. As a direct result, he was discharged on

May 19, 1955, by the Allis-Chalmers Co., Fitchburg, Mass., which has

approximately $1 million in Federal Government contract work.

erman Thomas, an undercover informant for the FBI in the Com-

munist Party for approximately 10 years in the Lehigh Valley area

of Pennsylvania, testified that he knew Charles William Erney as

a member of the Bethlehem Steel Club of the Communist Party.

* Hearings, Communist Infiltration in Defense Plants, pt. 1, May 16, 1955.

8. Rept. 1444, 84-2-—-3

—229—

PLAINTIFF’S EXHIBIT 63 (Continued)

14 ANNUAL REPORT

Charles William Erney, an employee of the Bethlehem Steel Corp.

Bethlehem, Pa., was subpenaed to appear but did not do so due to

reason of illness. It is contemplated that Erney will be heard in the

next scheduled hearing dealing with this subject matter. The Beth-

lehem Steel Corp. has a substantial amount of Government contract

work, much of whieh is classified.

William Delas, of Amsterdam, N. Y., an employee of General Elec-

tric Co., Schenectady,.N. Y., who in executive session before the sub-

committee previously had taken the fifth amendment as to Commnu-

nist Party membership, testified that he was a member of the Sche-

nectady branch of the Communist Party from 1948 to 1952. He testi-

fied that he would cooperate with the FBI. Accordingly, the FBI

was so advised on May 11, 1955. General Electric Co. has several

millons of dollars worth of defense work.

Robert LaFortune, of Troy, N. Y., an employee of General Electric

Co., Schenectady, N. Y., who in executive session before the subcom-

mittee previously invoked the fifth amendment as to Communist

Party membership, testified that he had been a member of the Commu-

nist Party from 1934 to 1938 or 1940. LaFortune testified that he was

cooperating with the FBI and would continue to do so.

Michael Sam, of 428 Robin Street, Dunkirk, N. Y., an employee of

the United Steel Workers of America—CIO, requested and was granted

the right to testify before the subcommittee under rule 13 of the rules

of procedure of this subcommittee.” Michael Sam was shown a copy

of a document bearing the heading, “Communist Party Independent

Nominating Petition” to the secretary of state of the State of New

York, which contained the signature of one Michael Sam, 428 Robin

Street, Dunkirk, N. Y., dated August 6, 1946. Mr. Sam testified that

the signature and address appearing on the above-mentioned docu-

ment looked like his handwriting, but insisted that it was a forgery

and that he could not recall signing this petition. He testified that

he was not now nor ever had been a member of the Communist Party.

Evelyn O. Darin, Alfred Oyler, and Arminio Sardoch had been

identified as members of the Communist Party in an open hearing

on January 3, 1955, before the subcommittee chaired by Senator

Joseph McCarthy. ‘These individuals had been subpenaed to testify

on that date but Alfred Oyler and Evelyn Darin did not appear due

to reason of illness, and Arminio Sandee appeared too late to be

heard by the subcommittee, which had adjourned. At the time that

they were subpenned all three were employees of the Westinghouse

Electric Corp. in East Pittsburgh, Pa., 2 company having defense

contracts. eir employment was terminated shortly after their

identification as Communist Party members.

Arminio Sardoch, Evelyn Darin, and Alfred Oyler were afforded

an opportunity to appear fore this subcommittee to testify eegaonn

to rule 13 of the Rules of Procedure of this subcommittee, but none

availed themselves of the opportunity.

“A whose name is mentioned or who is specifically identified, and who be-

eves testimony or other evidence presented at a public hearing, or comment made

Basins sae Set ea Ue chen ate at

behalf, or in the alternative, ( oy file a sworn statement of facts relevant to

in his own

the testimony or o evidence or comment complained of. Such uest and such state-

ment shall be submitted to the subcommittee for its consideration and action.”

a

—230—

PLAINTIFF’S EXHIBIT 63 (Continued)

ANNUAL REPORT 15

TrextiLk ProcuREMENT IN THE MunLirary SERVICES

In conformity with the obligation of the subcommittee to determine

whether there has been any waste, extravagance, or inefficiency or

other improprieties in the operations of the executive departments,

the subcommittee examines into aspects of the procurement field from

time to time.

Complaints made to the subcommittee as early as 1953 indicated

that favoritism was being exercised in the procurement of military

textile and apparel equipment.

Evidence was presented showing that unscrupulous contractors had

bribed and connived with both civilian and armed services officers. at-

tached to the Armed Services Textile and Apparel Procurement

Agency -knowiras ASTAPA, on certain aspects of procurement. This

agency has been set up by the Defense Department to coordinate the

procurement of textile and apparel items for the Army, Navy, and

Air Force. During the 13 months of its existence, from October

1, 1952, to October 31, 1953, ASTAPA committed for procurement

the sum of $537 million.

During the hearings it was developed that although contracts were

awarded on their face to the lowest responsible bidder, contractors

such as the Spencer Manufacturing Co., a Ponte Rico, and Mid City

Uniform Co., of Chicago, Ill., both controlled by Mr. Harry Lev,

were subsequently granted deviations from the original terms of the

cuntentin Wie enabled them to reap large hidden profits at the ex-

pense of the Giovernment. These contract deviations seldom became

public knowledge and usually were known only to the contractor in-

volved, the contract officers, and inspectors for the Government.

Evidence submitted to the subcommittee clearly demonstrated that

the inspection service personnel had likewise been bribed and cor-

rupted to permit thousands of defective hats to be delivered to the

Navy.

‘4 a result of the investigation the Department of Defense took

disciplinary action against both contractors and Defense Departnient

rsonnel who were guilty of improprieties. Fourteen persons and

rms, mostly those associated with Mr. Harry Lev, were placed on

the consolidated list of “Debarred, aN and suspended bidders.”

Mr. Sol Schlesinger, on the plea of self-incrimination, invoked the

fifth constitutional amendment. He refused to testify on material

matters and was likewise placed on the list of debarred bidders.

The misconduct of Marvin Rubin and Harry Lev in their relations

with Government agencies was particularly noted and criticized.

Their testimony was marked by evasion and was obviously false and

untruthful.

A number of persons involved in improper actions, who were in-

vestigated, are no longer employees of the Department of Defense

and were separated from Government service prior to the hearings.

The subcommittee singled out for criticism the following procure-

ment officials for their lack of candor and evasive testimony as well

as for their inefficiency and misconduct in carrying out their official

duties: Maj. Eric Farnell and George Earnshaw, David Oshiver

Joseph Porreco, Louis I. Alperstein, William Ienni, Mella Hort, an

Henry B. Vining, career civilian employees.

Four career civilian officials, vid Pollack, Julius Goldman,

Ferdinand Tartaglia, and Jerome Schlesinger, were dismissed from

_

.

—231—

4

PLAINTIFF’S EXHIBIT 63 (Continued)

16 ANNUAL REPORT

Government service or resigned after charges were preferred against

them. One Air Force officer, Capt. Raymond Wool, tendered his

resignation for the good of the service and he was separated from the

Air Force under conditions other than honorable.

In other instances the Defense Department is withholding disci-

plinary action at the request of the Department of Justice, which has

the cases under active investigation and does not desire any action

be taken which might preclude or jeopardize possible action by the

Justice Department.

At the request of the subcommittee the Defense Department made

a new study of the claims against the contractors in the light of the

evidence develo at the hearings. This study revealed that a total

of $511,475.63 is due to the Government from these contractors on

these claims, and it is the committee’s understanding that these claims

are now being processed for collection. ,

It is honed that the investigation will act as a deterrent in the

future. The exposures of these instances of bribery, collusion, cor-

ruption, and inefficiency can paint the way to corrective measures.

It is certain that the matter of deviations:will receive more active

scrutiny in the future and the interests of the Government will be

more closely guarded.

As a direct result of the hearings the Quartermaster Corps insti-

tuted a new practice of letting contracts on patented items which were

included as specifications in the manufacture of armed services hats

and caps. A contract was let for the manufacture of 750,000 metal

stays and grommets at an estimated savings in cost of 4614 cents per

hat. Such items will be given to the contractors as “Government

furnished property” with a resultant savings to the Government of

4614 cents per hat over previous costs. Thus on future procurement

contract of only 1 million hats the savings to the Government will

amount. to $465,000 by this simple rectification of procurement prac-

tice which resulted from the subcommittee hearings.

It is the committee’s intention to continue to investigate into pro-

curement practices from time to time to seek methods of avoiding

waste and extravagance and to bring to light any fraud or corruption

in the field of procurement.

Hanon FE. Tarnorr

Mr. Harold FE. Talbott, having been designated by the-President to

be Secretary of the Air Force, appeared before the Armed Services

mittee of the United States Senate on January 16, January 29,

and again on February 2, 1953, and there was interrogated regardin

his holdings in companies which might have direct or indirect deal-

ings with defense establishments.’ Regarding such companies as

Electric Auto-Lite, Baldwin-Lima-Hamilton Corp., and Chrysler

Corp., the following colloquy took place between the chairman of the

committee and Mr. Talbott:

Chairman Sattonevatyt. Have you severed your relations with all of those

companies?

Mr. TA.rorr. Yes, sir. I had one other interest. I have an engineering

eompany in which I have dropped back as a special partner.

* Hearing on nominations before the Committee on Armed Services, U. 8S. Senate, Janu-

ary 16, pp. 90-103 ; January 29, pp. 49-53 ; February 2, pp. 7-50.

—232—

PLAINTIFF’S EXHIBIT 63 (Continued)

ANNUAL REPORT x 17

Chairman SaLTonstaALt. Are you still a special partner?

Mr. TALBorr. I am still a special partner in that company.

Chairman SaLTonstatt. What is the name of that company?

Mr. Ta.sort. Mulligan & Co.

Chairman SaLTONSTALL. What business does it do?

Mr. TAporr. Industria! engineering, and they confine their work entirely to

clerical companies, controls, clerical controls, or the study of the numbers of

clerks needed in an industry, and in their clerical work. And it is very suc-

cessful in its analysis of how many clerks are needed in the operation of 4

business.

Now, in setting myself up as a special partner, our lawyers drew up an agree-

ment with the other partner—there are only two partners, Mulligan and my-

self—that no work was to be done while I am in Washington that had to do

with defense work essentially. They may be doing some work for Ford, for

example, but that is not essentially a war contract. But where it is possible,

they will stay away from any of the aircraft companies.

Chairman SALTONSTALL. In other words, you have divested yourself of every

business interest, or will have divested yourself from every business interest,

when you are sworn in as Secretary of the Air?

Mr. TAsotr. Yes, sir.”

Mr. Talbott was sworn in us Secretary of the Air Force on Feb-

ruary 4, 1953. In early March 1955, it was reported to the staff of

this subcommittee that Mr. Harold Talbott’s interest in the Paul B.

Mulligan & Co. had undergone no change since he became Secretary

and this company was doing business with other companies that had

contracts with the defense services, including the Air Force. <A pre-

liminary investigation was ordered by the chairman of the subcom-

mittee. Upon its completion, on July 18, 1955, the chairman arranged

a conference between the Secretary of the Air Force and the subcom-

mittee members.

_ At Mr. Talbott’s request, he appeared on the afternoon of July 21,

in open session and thereafter, public hearings were held on July 25,

26, and 27 to hear Mr. Talbott 2 more times, as well as 4 other wit-

nesses. In addition, a recorded telephone conversation between the

chairman and Senator Mundt with representatives of Douglas Air-

craft was placed in the record. All the hearings, by unanimous con-

sent, were open to the public.

The record established that the contracts entered into by the Paul

B. Mulligan & Co. during the period of 1953-55 were the following: ®

Company Date of contract

DATION COT on cn cece ectcncnsnntcconensnsnnca Nov. 16, 1953.

Anemostat Corp as ar June 1, 1953.

BI vircinttninemcnctminnaannin eS See or July 6, 1953.

Blue Bell eae -.. November 1953.

Baldwin-Lima-Hamilton Corp.*....------- June 1, 1953.

Cleveland Electric Illuminating Co.’_...------- Mar. 1, 1954.

I FE ecient cose setbantnctnnsgtsicinsinanniacnns ite July 14, 1954.

Electric Auto-Lite* asin Aug. 18, 1954.

Greyhound Corp. maid ae Nov. 30, 1953.

Mutual Benefit Life Insurance Co- Mar. 1, 1955.

Olin Mathieson (former Olin Industries)' Sept. 15, 1953.

Oscar Mayer‘ Nov. 29, 1954.

Owens-Illinois Glass Co., Inc_.- mana June 29, 1953.

R. H. Macy - w July 6, 1953.

CS G5 ee eee Fee ae .. June 15, 1954.

Co fee « . Apr. 4, 1955.

Willys Motors, Inc.’ June 28, 1954.

ED GI erie tcenbeinncenitinnccnanpenensandounenngiets Feb. 24, 1954.

1 Indicates companies having business with one or more of the defense services.

® hid” January 16, P23,

® Hearings, Harold B. Talbott, Secretary of the Air Force, p. 109.

—233—

PLAINTIFF'S EXHIBIT 63 (Continued)

18 ANNUAL REPORT

The earnings of the Paul B. Mulligan & Co., as placed in the record

by Paul B. Mulligan, were as follows: *°

Statement of operations—Paul B. Mulligan & Co.. Fch. 1, 1947, to Jan. 81, 1955

=a = Pc !

h — N stealth

we ss | Net Mu n

A ! Harold E.

Year ending Jan. 31 a. een — a SF Talbott

&Co., | partners | (including | “Teome

salary | salary)

_—_—_ — -_o - —_—~ — —_—_—_— ——— | —— -— —_— =a

ee $76, 000 $49, 200 $2,833 | $28, 375 $1,417

Me Oe ee 94, 825 60, 152 9, 674 29, 837 4,837

“Raa neta nee ae 169, 200 92, 678 51, 522 | 50, 761 25, 761

Shae 2ne, OND 159, 908 4,004 | 67, 002 2,002

| ee 321, 500 105, 972 100, 528 | 75, 204 50, 264

1 e 285, 500 176, 173 84. 327 | 47, 163 42,1

1054 405, 300 249, 542 130, 758 | 90, 370 | 45, 370

1955 411, 850 253, 542 133, 907 | 91, 653

Mr. Talbott in his appearance before the subcommittee on July 21

denied any illegal or improper action on his part while serving as

Secretary of the Air Force and as a partner in the Paul B. Mulligan

& Co™ He asked that there be placed in the record a letter written

to Mr. Mulligan on January 8, 1953, which follows :

Dear Mr. Mutiican: As you know, I have been desiznated Secretary of the

Air Force in the new administration, and if confirmed by the Senate, will be in

charge of procurement of aircraft and other materials, equipment, and services

for that branch of the Armed Forces of the United States. I have resigned all

directorships and other positions of responsibility with all corporations with

which I have been connected.

You and I are general partners in Paul RB. Mulligan & Co., which in its business

of management engineering, could logically acquire clients and receive compen-

sation from business entities doing business with the Department. Because of

. possible criticism of such an eventuality and the fact that I will be fully occupied

by my new duties, I wish to record now my view of how such accounts should

be handled. I do not believe our partnership should be discontinued, but believe

some changes should b@ made in my participation in it.

I suggest that during my tenure of office, I be considered in the nature of a

special or limited partner in the firm of Paul B. Mulligan & Co.. with full and

complete authority in you alone to continue the business and to make all decisions

without consultations or advice from me. ;

Should the firm secure clients whose business, in your opinion, is predominately

in the area of the procurement responsibilities of the Secretary of the Air Force,

they shall be handled as special accounts and be secregated completely from the

other business of the firm. Should you be in doubt with respect to the classt-

tication of any account, I authorize you to consult with my attorney Mr. Murray

Smith, who will advise you concerning same. With respect to such special

accounts, I shall receive no income or compensation whatever. Will you please

sign and return the enclosed copy of this letter as evidence of your agreement

to the foregoing? :

With best wishes for your continued success, I aim,

Sincerely,

Haroun FE. Tarnert.

Mr. Talbott stated that this special partnership arrangement was

never used by him and that he had received his full share of all the

profits of the company while he was Secretary of the Air Force. He

agreed that the Paul B. Mulligan & Co. did business with companies

“« that had contracts with the military services, but stated that these

_——————

@ Ibid., p. 198.

"“ Thid. p. §.

2 Ibid., p. 195.

13 Ibid. pp. 5, 198.

-

—234—

PLAINTIFF'S EXHIBIT 63 (Continued)

ANNUAL REPORT 19

companies were not * predominantly” or “egsentially” in the defense»

fields.* However, Mr. Talbott later acknowledged that approxi-

mately 50 percent of the business of Avco Manufacturing Co., a client

of Paul B. Mulligan & Co., was with the defense services.* He said

he found nothing improper in —— to prospective clients, even

though these prospective clients were defense contractors.* Some cor-

responde

from the files of the Paul B. Mulligan & Co. and were placed in the

following :

Fesavary 12, 1953.

Mr. Joun W. Hanes,”

Olin Industries, Inc., New York, N.Y.

Dear Jonn: I am asking Mr. Paul Mulligan, of Mulligan & Co., to drop in to

» you.

I will appreciate it very much if you can arrange to give him 30 minutes. You

can be really helpful to me, I feel sure.

Sincerely,

Harotp E. TALsort.

Fesevary 11, 1955.

—_—_———

Mr. Frank MiscuH,

Detroit, Mich.”

Dear Mr. Miscu:”™ After I chatted with “Tex” Colbert, I telephoned to our

offices in New York. Mr. John B. Van Haelen™ and Mr. Robert W. Moore,”

will be at your office at 10 o'clock Monday morning, February 14.

I appreciate very much your seeing these men, and feel sure that you will be

very much interested in the story as they present It.

Things move along 80 fast these days that I don’t realize how many of you

younger men have come up to take the important positions in the corporation.

I had hoped that I would be out to visit with’’Tex” and some of your officials

before this time, but it seems that it bas just been impossible. I do hope In

be able to pay a visit soon, and will look forward to seeing you at that time.

Harotp B. Tasort.

Examples of memoranda taken from the files of the Paul b.

Mulligan & Co. are the. following:

- Sunsects To Be Discussep Wrrn Harotp E. Tavsort, Apatt. 7, 1953

(1) February financial situation

(2) Olin Industries

(3) Baldwin-Lima+ Hamilton

is; Western Union

5) Gillette Safety

(6) Inthe Fast:

American Can (Mazur)

American Smelting (Mazur)

Hanover Bank (Schwarts)

General Cable (Mazur)

Grand Union (Van Haelen)

Kennecott Copper (Schwartz)

Phillip Morris ( Schwarts)

Schenley Industries (Schwartz)

Sperry Corp. (Schwartz)

Underwood Corp. (Schwartz)

—235—

PLAINTIFF’S EXHIBIT 63 (Continued)

20 ANNUAL REPORT

(7) Stewart-Warner-

(8) Western situation :

Ford Motor

American Greeting Card

Perfection Stove

Cleveland Electric Iiluminating

(9) Request advise on:

Atchison, Topeka & Santa Fe

Greyhound +

(10) Advise concerning rental of space

(11) Quinn-Cincinnati Milling Machine Co.

J. & W. Selegman

Minneapolis Honeywell (Schwartz through Quinn)

Maytag (Schwartz)

(12) Have Harold E. Talbott call Schwartz at 4 p. m.”

JANUARY 27, 1955.

From : Billy Kern.

To: Walter Cook.

Just a note to let you know that Mr. Talbott has talked directly to Reece Taylor

on the telephone. Hope this does the trick.

Best regards.

Bitur Kran.”

Paul B. Mulligan & Co. signed a contract with the Union Oil Co. on

April 4, 1955. It should be noted that Mr. Mulligan testified that

_ Billie Kern is his secretary ; Walter Cook, an employee of Mulligan &

oo = the west coast, and that Reece Taylor is president of the Caio

il Co.*

Secretary Talbott testified in his first appearance on July 21, 1955,

that when he learned that the RCA company had raised a question as

to the propriety of its making a contract with the Paul B. Mulligan

& Co. because of Talbott being a partner and RCA having contracts

with the military services, his immediate reaction was: “My goodness,

if there is any such suspicion forget it. We won't do the contract or

have anything to do with it.”* He stated he immediately told Paul

B. Mulligan to drop the idea of making a contract with RCA for he

would “not think of having any business with them.”* He said he

did not press RCA to make the contract, and initially stated he did not

tell anyone in the Air Force that he was dissatisfied with RCA for not

entering into the contract. However, later he agreed that he might

have mentioned the difficulty the Mulligan Co. had been having with

RCA to the General Counsel for the Air Force, Mr. John A. Johnson,

but he stated he did not ask him to take any action.” He further testi-

fied that he could not remember having a conversation with Mr. Sam

Ewing, an attorney for RCA at Camden, N. J., regarding the con-

tract and in which conversation he expressed disapproval of RCA’s

position.” \

However, on July 22, Mr. Talbott wrote to the chairman:

This morning I talked with Mr. John Johnson, General Counsel for the Depart-

ment of the Air Force.

He refreshed my memory regarding the conversation with a Mr. Ewing of

RCA, Camden. Mr. Kennedy's statement yesterday that I had talked with Mr.

Ewing is correct,and my memory was at fault.”

2 aan, Marelé E. Talbott, Secretary of the Air Force, p. 200, exhibit 10.

% Ibid., e 51.

® Ibid. p. 29.

% ibid., p. 30.

® Available in the files of the subcommittee.

—236—

PLAINTIFF’S EXHIBIT 63 (Continued)

ANNUAL REPORT 21

On July 25, 1955, Mr. Sam Ewing was called to testify. He stated

that a question as to the legality and propriety of RCA a into

a contract with Paul B. Mulligan & Co, was raised when RCA officials

learned that Mr. Harold Talbott was a partner of Paul B. Mulligan

in this efficiency firm.” This came about after Mr. Talbott tele-

honed Mr. David Sarnoff, chairman of the board of RCA, in Novem-

r 1953 and told him that his partner, Paul B. Mulligan, was meet-

ing some obstacles in making a contract with the RCA company and

that Mr. Sarnoff might look.into the matter to see if it could be

—

he legal division of RCA questioned whether it would be legal

and proper for RCA to contract with the Mulligan Co." Mr. Ewing

testified that Mr. Mulligan was informed of this opinion and that

RCA would not make a contract with Mulligan Co. unless it received

a letter or memorandum from the Attorney General stating that it

was legal and proper for RCA todo so.” Mr. Mulligan told him that —

he should have a conference with Mr. Murray Smith, a lawyer desig-

nated by Mr. Talbott tp handle these affairs** Mr. Ewing held suc

a conference, and Mr. Smith told him he would be in touch with him

at a later date.

On a number of different occasions in December, Mr. Mulligan

called Mr. Ewing and another official of RCA to tell them that Mr.

Talbott was disturbed that this question had been raised by RCA.™

On January 4, 1955, Mr. Ewing received a telephone call from Mr.

Mulligan, who asked him how the matter stood. Mr. Ewing explained

that he still had not heard from Mr. Murray Smith.**

Mr. Kennepy. And then what occurred after that?

Mr. Ewina. Well, later in the day, I received a telephone call from Washing-

ton from a man who identified himself as the General Counsel of the Air Force,

Mr. John A. Johffson.

Mr. Kennepy. Go ahead.

Mr. Ewrne. All right.

He sald that he had understood that RCA was troubled about this proposed

contract with Mulligan & Co. and that he was prepared to write a letter of opinion

and give it to RCA stating that he saw no legal reason why the contract could

not be entered into.

Mr. Kenneny. He said that he would provide a legal opinion for RCA regard-

ing the legality of entering into this contract?

Mr. Ewino. Yes; he said he would give a legal opinion to RCA.

Mr. KENNEDY. What was your answer to that?

Mr. EBwine. Well, we discussed or we got into somewhat of a legal discussion,

as I was not clear that he understood all of the facts, and that he had really

looked into the matter.

Mr. Kennevy. How long did that discussion last?

Mr. Ewrna. It is hard to tell.at this late date. I wouid guess a couple of

minutes, certainly.

Mr. Kennepy. Then did some other event take place?

Mr. Ewine. Yes.

Mr. Kennepy. What happened then? ;

Mr. Ew1na. A new voice came on the wire. and the individual speaking

identified himself as Secretary Talbott. He was talking quite rapidly and,

among other things, he told me or listed over the phone the names of a number

of other companies that he said were doing work for the Air Force that had

contracts with the Mulligan Co.

™ Ibid.. p. 83.

% Ibid.. p. 84.

.

—237—

PLAINTIFF’S EXHIBIT 63 (Continued)

22 ANNUAL REPORT

Mr. Kennepy. Do you remember the names of some of those companies?

Mr. Ewina. I recall a few of them. He must have mentioned 12 or 15, AVCO

was one, Baldwin, I think Continental Can, General Analine, General Foods,

and those are the only ones that I happen to remember.

The CHAIRMAN. I understand that he mentioned those as companies that had

contracts with the Defense Department?

Mr. Ewino. Yes, sir.

The CHAIRMAN. Pointing out, as I understand it, that others with contracts

with the Air Force were becoming clients or had been clients of Mulligan & Co.;

‘is that correct?

Mr. Ewina. Yes, sir.

Mr. Kennepy. Did he say that these companies had contracts with the Air

Force or with the Defense Department?

Mr. Ewinoa. To the best of my recollection, he said the Air Force, but it might

have been the Defense Department.

Mr. KENNEDY. Now, the conversation went on and what did he say?

Mr. Ewine. Well, when I had the opportunity to say anything, I said that I

was very much surprised by this telephone call, that I had reviewed the matter

with the attorney I thought was representing him in his Mulligan & Co. interest,

Mr. Murray Smith, and that I was waiting to hear back from him; and that I had

never heard from him.

Mr. Kennepy. What did he say to that?

Mr. Ewina. Well, he said something to this effect, that “Oh, Murray Smith is

just a lawyer out in Dayton; he doesn’t know what is going on around here” and

“Mr. Johnson is represent me in this matter.”

The CHAIRMAN. You mgan he told you that Mr. Johnson, General Counsel for

the Air Force, was repregenting him in this matter?

Mr. EwIna. Yes, sir,

Mr. Kennepy. I t what you want to convey to this committee?

Mr. Ewinc. Well, it is what unfortunately I am compelled to convey to this

comnnittee, sir. ,

Mr. KENNEDY. What else did he say in this conversation regarding the position

of RCA?

Mr. Ewina. Well, I don’t recall that.

Mr. KENNEDY. Do you recall some of the words that he used, Mr. Ewing?

Mr. Ewina. I honestly don't.

Mr. Kennepy. Do you remember if I refresh your recollection of our first

conversation, you stated that he said, “Why is RCA acting so high and mighty?’

Do you remember him using those words?

Mr. Ewina. You are absolutely correct. He said that if all of these other

companies could take contracts with Mulligan & Co., why was RCA acting so

high and mighty?

Mr. Ewing testified that Mr. Talbott seemed “annoyed” during the

conversation; “his tone of voice was forceful and it seemed that.

he wanted sone action.” *

Mr. Ewing reported this conversation to his superiors in New York

and that same day he received instructions from them to have no

further dealings with Mr. Johnson or any other person in Washing-

ton on this contract.” Mr. Ewing telephoned Mr. Johnson to this

effect and told him that all his future dealings should be with the

New York office of RCA.” ‘

Mr; John A. Johnson, General Counsel of the Air Force, was called

to testify. Ie stated that on January 4, 1955, Mr. Talbott had called

him into his office and told him of the objection that RCA had raised

to making a contract with the Paul B. Mulligan & Co. After re-

viewing the testimony of Mr. Talbott before the Senate Armed Serv-

ices Committee, he called Mr. Sam Ewing at the RCA Camden,

% Tbhid., pp. 84-85.

* Ibid., p. 86.

* Ihid.. p. 89.

* Ibid., pp. 86-87.

# Tbid.. p. 87.

“1 Ibid., p. 93.

‘ —238—

PLAINTIFF’S EXHIBIT 63 (Continued)

ANNUAL REPORT 23

N. J., office? There was discussion regarding the legal question

involved, and he told Mr. Ewing he was prepared to give the Secre-

tary of the Air Force a letter to the effect that no statute would be

violated if RCA made this contract with the Paul B. Mulligan & Co.#

Mr. Johnson said that Mr. Talbott then carried on a conversation

with Mr. Ewing in which Mr. Talbott—

indicated he was very upset by the implication that the legality and propriety

of hia retention of a partnership interest in Paul B. Mulligan & Co. was being

questioned.”

Mr. Ewing telephoned him later in the day to tell him the matter had

been referred to the RCA New York office and was out of his hands.”

On January 5 a lawyer from the RCA Washington office visited

Mr. Johnson and indicated that RCA would be satisfied only with an

opinion from the Attorney General or the General Counsel of the Air

Force concurred in by the Attorney General.“ Mr. Johnson testified

that he informed Secretary Talbott and the Secretary asked him to

discuss the matter with the Attorney General. Mr. Johnson called

on the Attorney General on January 6 and showed him a memorandum

which he had prepared for the Secretary, stating that no statute would

be violated in an RCA and Paul B. Mulligan & Co. contract.2 The

Attorney General, he said, expressed no disagreement with this legal

conclusion but stated he would like to take this matter under con-

sideration.@

On January 8, 1955, Mr. Johnson told Secretary Talbott of the

conference with the Attorney General, and within a few days Secre-

tary Talbott told him there would be né contract between the Paul

B. Mulligan & Co. and RCA and to take no further action in the

matter.”

Mr. Johnson stated that he was meeting the duties of his office in

giving the Secretary a legal opinion as to whether there would be

a violation of the conftict-of-interest statutes. He said it was not his

duty nor did he deem it proper for him to comment on the propriety

of Mr. Talbott’s actions in this matter.“4 He pointed out, however,

that Mr. Talbott had put the Armed Services Committee on notice

that he was going to retain an interest in the Paul B. Mulligan &

Co. as a special partner.

Mr. Talbott. reappeared before the subcommittee on July 26, 1955,

and testified he had been in error in his previous testimony. He said

Mr. Ewing and Mr. Johnson were correct regarding his actions in the

Mulligan-RCA dispute. Specifically, he stated that he was mistaken

when he testified that he did not ask Mr. Johnson to take any action

in this contract, because, in addition to calling Mr. Ewing, at his re-

quest, Mr. Johnson had gone to see the Attorney General to get a rul-

ing from him that no statute would be violated if RCA made this con-

tract with the Mulligan Co. He believed the Attorney General sub-

sequently informed him that he could not, within the duties of his

office, give him such an opinion.“

—239—

PLAINTIFF’S EXHIBIT 63 (Continued).

24 ANNUAL REPORT

Mr. Talbott reappeared before the subcommittee on the last day of

the hearings and said: |

In retrospect, however, I now see that I was mistaken in permitting myself to

make phone calls or write letters about the Mulligan Co. The few minutes I

hare given to the Mulligan Co. since I took office have been a trivial part of my

time. I really doubt that I have given Mulligan Co., arf@ my other private affairs,

2% days out of the 2% years I have been in Washington. My interest in the

company has never influenced me in the slightest degree in the execution of my

duties as Secretary of the Air Force, and I hope and believe that that is the

opinion of you all.

Mr. Talbott then testified that on July 22 he had written his partner,

Mr. Paul B. Mulligan, that he was divesting himself of all interest in

their partnership and that Mr. Mulligan had informed him that the

partnership would be dissolved as of July 31, 1955."

Mr. Tal resigned as Secretary of the Air Force on — 1

1955, and his resignation was accepted by the President of the nitéd~

States on the same day.

The subcommittee finds that Mr. Talbott made o mistake and acted

indiscreetly in his position as Secretary of the Air Force. It agrees

his resignation was quite proper under the circumstances.

INEFFICIENCIES IN DEPARTMENT OF AGRICULTURE GraIn Bin ProcraM

As part of the farm pene support —— Department of

Agriculture, through the Commodity Credit Corporation, has pur-

chased millions of dollars of surplus grain from American farmers.

The handling of this grain presented a considerable problem, since its

storage requirements have far exceeded commercial storage facilities.

In order to store surplus grain, the Department has actively engaged

in the purchase of grain storage bins since 1949. As of August 20,

1954, it had on hand 192,878 grain bins with a capacity of 843,890,529

erat Bo cost to the American taxpayer for these facilities totals

5000.

The Department of Agriculture, since 1949, has arranged with the

Naval Inspection Service of the Navy Department, on a reimbursible

basis, to establish proper and adequate inspection procedure at the

manufacturer’s plant to assure that these materials meet specifications.

The Department of Agriculture has been —— for the furnishing

of adequate specifications and plans to the Naval Inspection Service.

The Department is responsible for establishing a proper inspection

at the erection site to see that the bins are erected according to Gov-

ernment specifications.

This subcommittee held public — for 4 days during July and

August of 1955 and Seqacre closely allegations of res and

mismanagement in the purchase and construction ‘o in sto

facilities. , = —

CONFUSION AND LACK™OF COORDINATION

The metal grain bin program of 1954 was handled in an atmosphere

of confusion, gross carelessness, and a lack of coordination which was

—— by _ —— of ys man a the Sep

o —— ure, Naval Inspection Service, and State agricultural o

to whom the bins were delivered. om - wad

* Ibid., p. 179.

« Ibid. P 180.

ad rings, Grain Bins, Department of Agriculture, July 22, August 2, 8, and 4, 1955.

— 240—

PLAINTiFF’S EXHIBIT 63 (Continued)

ANNUAL REPORT 25

FAILURE TO PROFIT BY ERRORS

During 1949 and 1950 the Department of Agriculture purchased a

a number of bins which were found to be defective. The inability

to fix responsibility between the fabricator and the erector or, in other

instances to establish the liability of the manufacturer, was due to

lack of proper inspection procedures. As a result only $31,000 out

of $893,864.89 of claims for defective bins erected in 1949-50 has thus

far been collected.

In 1954 a large number of metal grain bins were purchased under

the grain storage bin program and many have been found to he defec-

tive. Errors in manufacturing by Black, Sivalls & Bryson of Kansas

City, Mo., coupled often with poor workmanship on the part of the

erectors, has caused many of the side walls of the bins to buckle and

uash.

The fact that some of these bins are neither weather nor grain tight,

the fact that moisture and vermin might enter the structures, and the

necessity of moving the grain to new bins to prevent its deterioration

and contamination have made the 1954 grain-bin program unneces-

sarily costly to the Government.

The Department of Agriculture did not adopt sufficient corrective

measures following the mistakes made in 1949 and 1950. It was aware

that the losses in the erection of defective bins were caused by the lack

of proper specifications, failure to provide for proper inspection of

materials at the manufacturing plant, and failure to provide for

roper inspection at the site of erection. Despite this knowledge it

ailed to remedy the situation by providing adequate specifications

and inspection in 1953-54. From the number of defective grain bins

in 1949 and 1950, the Naval Inspection Service knew or should have

known of the deficiencies in its Inspection Service.

The Department of Agriculture and the Naval re, yas Service

were both guilty of gross inefficiency and demonstrated poor business

management and lack of initiative and judgment.

WOODEN BINS ~

Wooden bins purchased by the Department of Agriculture in

1954 from the Reeves Cc., of Los Angeles, Calif., ard other companies,

were found to be defective. The Department of se is

severely criticized for its negligence and inefficiency in failing to act

and process claims when defective wooden bins were reported. The

Navy Department likewise is severely criticized for its ligence

and inefficiency in wrongfully apne that defective lumber met

Government specifications. The negligence and inefficiency of these

Departments has resulted in a considerable loss to the Government.

There were 14 major errors committed by the Department of Agri-

culture and the Naval Inspection Service in the 1954 grain-bin pro-

gram. They are listed below:

—241—

PLAINTIFF’S EXHIBIT 63 (Continued)

26 ANNUAL REPORT

1. The Department of Agriculture

(a) «Metal bins

(1) The Department of Agriculture failed to furnish the Navy

inspectors with adequate drawings and specifications in order for

them to carry out a proper inspection of grain bins.

(2) No provision was adopted by the Department of Agriculture

for adequate inspection at the erection site to check whether the ma-

terials received were in accordance with Government specifications or

if the erection was rly performed.

(3) A pilot model bin or sample structure was not requested by

the Department in 1954 to check whether the component parts of the

bin = Government specifications and the bin could be readily

assembled.

(4) The Department of Agriculture instructions relating to the

method and procedure for the packaging for shipment of the various

parts of the grain bin lacked clarity and detail.

(b) Wooden bins

(5) The Department of Agriculture was dilatory in acting upon

— that the lumber used in bins was defective and Ae so

(6) The Department of Agriculture failed to properly press for

price acca from the contractors for faitare ts “= proper

17. The Naval Inspection Service

\\(a) Metal bins

(1) The Naval Inspection Service failed to properly check and

ascertain whether the Department of Agriculture’s drawings and

specifications submitted for the inspection of steel bins were adequate

for a proper inspection.

(2) The inspectors were not instructed by their superior as to the

type of inspection they were to carry out. ;

(3) The Naval Inspection Service used drawings after their defi-

ciencies had been drawn to the attention of the Inspector-Director of

the Office of Navy Material by the staff of the subcommittee.

(4) Naval inspectors on several occasions improperly used the

manufacturer’s shop drawings to conduct their inspection of the bins.

These drawings had not been approved by the Department of Agri-

mb) The _—— ~s improper! ved 900 perfection-type bi

5 i tors improperly appro rfection- ins

od were not in accordance with the Depertanent of Agraekure

specifications for bolt one ; oh

(6) The inspectors certified various component parts of the bin to

be in accordance with Government specifications, even though they

failed to i them. These included—

b eaten the rrugation of the foundation ri

ormation 0 co ion of the foundation ring.

e) Distance between beltholes on the side-wall sheets of the

bins. |

(7) In the inspection of the pilot model bin the following errors

made:

(a) The inspector was not present when the bin was erected to

determine if it could be readily assembled.

—242—

PLAINTIFF’S EXHIBIT 63 (Continued)

ANNUAL REPORT 27

(b) The inspection was carried out without drawings and speci-

fications.

(c) The material used to construct the pilot model was not

checked by the Navy inspector. It was erected from 1953 stock,

not from the material sold to the Government in 1954.

_(d@) The naval inspector was not aware that it was his responsi-

bility to determine whether the bin met Government specifications

until sometime after he completed his inspection.

(b) Wooden bins ;

(8) Navy inspectors in 1954 improperly and inaccurately certified

lumber as meeting Government specifications.

CORRECTIVE MEASURES

The subcommittee has been informed that on December 22, 1955,

B.S. & B. entered into an agreement with the Department of Agricul-

ture to extend its warranty for 4 years to August 31, 1959. This war-

ranty calls for repair of defective bins to assure that they will be

graintight, weathertight and structurally sound. As evidence of its

faith, the company has posted a $1 million surety bond. It

should be noted from the inception of its investigation the subcommit-

tee found the officials of B. S. & B. most cooperative.

The subcommittee also has been informed that there have been 21

corrective measures taken by the Department of Agriculture and the

Department of the Navy as a result of the investigation and hearings

of the subcommittee on this matter.

(a) The Department of Agriculture

(1) An inspection at the erection site has been instituted for the

1955 grain-bin program. ae

(2) The manufacturer-is required to submit to the Department of

Agriculture shop drawings for the side-wall sheet of the bin, founda-

tion-ring sheet, and the footing pad. f

(3) The Department of Agriculture will provide the Navy inspec-

tors with adequate and approved fabrication drawings for the side-

wall sheet, the footing ped, and the foundation-ring sheet.

(4) The Department of Agriculture will provide drawings and speci-

fications for completely corrugated foundation rings in lieu of those

previously used.

(5) The manufacturer is required to erect a complete sample struc-

ture from current production, :

(6) The erection of a sample structure will be required at the rate of

1 structure out of every 500 bins, or more frequently if required bythe

i 2

7) Manufacturers will be required to assemble any part or parts

of the structure from elements under current production, selected at

random by the in ras negscmes | as he may determine.

(8) The manufacturer is required to package structures for ship-

ment in such manner as to obtain lowest carload lot rates. New re-

quirements for loading, blocking, and bracing of structures and parts

have been adopted to fully protect and \naintain original shape and

design.

In the packaging of the bin components for shipment, no pack-

wal exceed a total weight of all the six sheets comprising ring No.

2 of the bin. nes

— 243—

PLAINTIFF'S EXHIBIT 63 (Continued)

28 ANNUAL REPORT

(10) The inspector designated by the Department of Agriculture

will either reject structures or parts thereof or certify that they are in

accordance with Government specifications.

(11) The manufacturer is required to certify that each structure

erected meets all erection specifications and was constructed fully in

accordance with Government specifications.

(12) The inspection or acceptance of structures by the Department

of Agriculture shall in no way affect warranties or other contract

requirements. :

(13) The manufacturer's warranty that the bin is in accordance

with Government specifications is to be for 2 years instead of 1 year.

(14) The manufacturer is required to supervise and inspect all

hases of the work in connection with the construction in erection of

is structure.

(15) If the structure does not meet Government specifications, the

manufacturer shall specify in detail where it fails to conform.

(16) The punching of holes in all sheets will vary with each tier

sheet. This will preclude placing the wrong wall sheet in any of the

six tiers which comprise the bin.

(47) Both wooden bins and the manufacturers’ own designed bin

are excluded from the Department of Agriculture grain bin procure-

ment program. Unless an emergency arises only the Department’s

standard cylindrical bin is to be purchased.

(6) The Naval Inspection Service

(1) Individuals responsible for inspecting grain storage bins are

being trained much more intensively. '

(2) Upon receipt of request to perform inspection services, the Nav

i tion office will carefully review the request to assure that all

essential detailed information, specifications, and drawings are pro-

vided. It will undertake to establish proper inspection procedures

and assign a trained and capable staff of inspectors to perform re-

quested services.

(3) A closer liaison has been instituted at the Washington level be-

tween the Department of Agriculture and the Naval Inspection

Service.

(4) A closer liaison between the Naval Inspection Service in Wash-

ington and its field office will. be maintained in the future. Upon a‘

receipt of a request from the Department of Agriculture, t aval

inspection office in the field will immediately notify the Navahinspec-

tion office in Washington, so that the latter office will be able to main-

tain administrative control over the inspection services being

furnished.

Huon W. Cross

In early September 1955 it was reported to the subcommittée that

Mr. Hugh W. Cross, chairman of the Interstate Commerce Commis-

sion, interceded for personal reasons with officials of certain railroads

in order to influence the awarding of a contract in favor of a company

owned by Mr. J. L. Keeshin, of Chicago, Ill. This contract was

awarded by these railroads to Railroad Transfer Service, Inc., the

Keeshin firm, for the intracity transportation of passengers and bag-

gage between stations in Chicago, I1].”

oo bi w. ¥ o

oan inn 1988" fugh Cross, Chairman of the Interstate Commerce Commission, Novem

—244—

PLAINTIFF’S EXHIBIT 63 (Continued)

ANNUAL REPORT 29

Mr. Hugh Cross is an attorney and has been a member of the Inter-

state Commerce Commission since April 11, 1949. From J uly 1, 1955,

until the date of his resignation, November 23, 1955, he was Chairman

of this Commission.

In the past the Interstate Commerce Commission has ruled that the

transportation of passengers and baggage between stations in Chicago,

If., is not properly the subject of ) ent Cemmerce Commission

regulation. This matter of jurisdiction is still in controversy." How-

ever, there is no question that the railroads upon whom the decision in

this contract negotiation rested are subject to the Interstate Commerce

Commission regulations and are, therefore, susceptible to influence by

its members.

Chicago is one of the largest railroad centers in the United States.

However, while Washington, New York, Boston, and other major

cities have 1 or 2 railroad stations, Chicago has 8 separate terminals at

different points in thecity. Each of these stations provides a terminal

for from 1 to6 railroads. A large number of the passengers traveling

through the city of Chicago are, therefore, required to transfer from

one terminal to another by means other than railroad. The contract

calling for transportation of these passengers and baggage from one

station to another amounts to a gross of $114 million each year.

For 102 years the transfer of er with their baggage between

stations in Chicago has been provided by the Parmelee organization of

Chicago. Except for isolated instances, this service was provided by

the Parmelee organization without a formal contract.”

The 21 railroads involved have entrusted the making of these ar-

rangements to the Western Passenger Association, an organization

made up of railroads. Because of rising costs and allegations of de-

clining service, the question of whether to continue the arrangement

with Parmelee came under consideration by this group.

A subcommittee of this Western Passenger Association was ap-

inted and met in March of 1954 to consider available alternatives.

is subcommittee was made up of vepresentatives of the following

railroads : ** 7

Baltimore & Ohio

Chicago & North Western

Illinois Central

Pennsylvania Railroad

New York Central

Atchison, Topeka & Santa Fe

Negotiations with a number of firms in the trarfsportatron business

were carried on over the next year or so, culminating with the vote by

the subcommittee on June 3, 1955, which unanimously favored trans-

ferring this business to Mr. John I. Keeshin. This action was ratified

by the full group on June 13, 1955, and the Parmelee organization was

notified that its services would terminate October 1,,1955, while the

Keeshin firm was notified that its services would be contracted for

“————— the same date.

he allegation is that prior to the vote by the subcommittee Mr.

Hugh Cross contacted certain railroad officials and attempted, to

influence their vote in favor of Mr. Keeshin because of an arrangement

whereby, if Mr. Keeshin received the contract, Mr. Cross would be

employed by him. ~

p. 6.

ama: e $

Ibid. pe 82.

— 245—

PLAINTIFF’S EXHIBIT 63 (Continued)

30 ANNUAL REPORT

A pretiminary staff inquiry developed certain information regard-

_ 1s transaction and included a staff interview with both Mr. Dents

and Mr. Keeshin. In view of the fact that the information secured

from independent sources tended to oy cde initial allegation, but

was at variance with that secured both Mr. and Mr. Kee-

shin and also because the information provided by Mr. Cross was in

certain respects different from that provided by Mr. Keeshin, executive

hearings were held by the subcommittee on November 15, 1955, at

which these men, among others, were witnesses.

Paul E.. Feucht testimony

Mr. Paul E. Feucht, president of the Chicago & North Western

Railroad, testified before the subcommittee that on May 13, 1955, Mr.

Hugh Cross telephoned him regarding this contract.

r. Feucht’s testimony follows in part:

feet, and if Keeshin’s bid was the best bid we could get and they could perform

the service and they were financially responsible, I would be very glad to take a

a at it. But from an economic standpoint, each bid had to stand on its own

a

The CuarrMan. Mr. Feucht, did he amplify or go into any explanation of the

nature of his interest in seeing that Keeshin got the contract?

Mr. Fevcrt No, and I was quite puzzled as to why I got the cull.

The Cuarrman. You were puzzled?

Mr. Fevcur. Yes.

The CHatrnmMan. You mean that you had not anticipated such a call?

Mr. Fevcnt. No, I had not.

The CuHarrMan. You also were concerned about the propriety of such a call?

Mr. Fevont. I didn’t give it a second thought, at that time? I thought about

it afterward a little bit.

The Cnarrman. What did you think about it afterward?

Mr. Fevcr. I just thought it was kind of funny that someone like that would

call me about this contract.

At another point in this testimony the following was recorded:

The CHARMAN. And the information he gave you was somewhnt in the nature

of an argument in favor of Keeshin, was it not?

Mr. Fevcut. That is correct.”

There was ge to the subcommittee in evidence a memorandum

repared by Mr. Feucht immediately following his conversation with

Mr. Cross. It is headed “Memorandum of My Conversation With

Hugh Cross, Commissioner, Interstate Commerce Commission, at

4:15 p. m.** Friday, May 13, 1985”:

Hugh Cross stated that he was very much interested in seeing that J. L.

Keeshin got the new. contract with’ the railroads here in Chicago to handle

baggage and people between the various stations. He understands the contract

expires July 1 and there are three bids for the new contract—Willett, Parmalée,

and Keeshin.

The bid Keeshin has proposed is $1.20 which is 2 cents lower than what we

are now paying. In other words, we are paying $1.22. For every 5 cents an*

hour wage increase they will only increase 1 cent an hour but they will not go

higher in 3 years than 3 cents eren though the wage increase might be higher

than 3 cents an hour. Parmalee came down and inet the $1.20 but there are

Ibid., pp. 8-9. 5

* Tbid., ” 58 The telephone records subpenaed by the subcommittee indicate that

there was a telephone call from Mr. Cross in ashington, D. C., to Mr. Feucht in Ch >

at 5:10 p. m., Friday, mee 18, 1955. In view of the difference of time, the 5:10 in

—246—

PLAINTIFF’S EXHIBIT 63 (Continued)

ANNUAL REPORT 31

some jokers in their proposal in that their contract states that for every 1 percent

decrease in receipts there will be a 1 cent raise in tickets;which clause is not in

Keeshin's bid.

In addition, Keeshin offers eight passenger station wagons, heated in the

wintertime and air conditioned in the summer, they would put any suggested

name on them the railroads decide upon, they would handle baggage every hour

ow the hour between the various stations, and they would have representation

here in Chicago as against the absentee representation by Parmalee.

He also stated that Keeshin’s proposal was backed up by the First National

Bank and they would get new equipment every 3 or 5 years (I am not positive but

I believe he said every 3 years).”

Mr. Feucht said that prior to receiving the call from Mr. Cross, he

did not know the details of the competing proposals. Upon checking

later he learned that these features as quoted by Mr. Cross were sub-

stantially accurate.

Wayne A. Johnston testimony

Mr. Wayne A. Johnston, president of the Illinois Central Railroad,

testified before the subcommittee that, sometime pridr to the final

decision on the contract in question, he was talking with Mr. Hugh

Cross in Mr. Cross’ office in Washington. Mr. Johnston said that he

had heard that Mr. Cross was planning to go to work for the new com-

pany to be formed by Mr. Keeshin to handle the transfer business and

therefore on this occasion he asked Mr. Cross whether the rumor he

had heard was accurate; whereupon Mr, Cross said that if Mr. Keeshin

was successful in getting the contract he, Mr. Cross, was going to go

to work for him.”

Mr. Johnston was uncertain what position Mr. Cross would occupy,

Lut he was under the impression that Mr. Cross would be president

of the new company set up to handle the transfer business. Mr.

Johnston also testified that at no time did Mr. Cross ask him to give

favorable consideration to the Keeshin Co.”

Howard EF. Simpson testimony :

Mr. Howard E. Simpson, president of the Baltimore & Ohio Rail-

road, submitted affidavits in lieu of his personal appearance. In

these affidavits he said that during the spring of 1955 Mr. Cross called

him from Washington asking for an appointment and thereafter

came to Baltimore and conversed with him in his office. Among the

subjects discussed was the contract for the transfer of passengers

ve baggage between railroad stations in Chicago. Mr. Cross asked

Mr. Simpson the status of the negotiations, to which Mr. Simpson

replied that he did not know all the details but would find out and

inform Mr. Cross, which he did several days later. Mr. Simpson

- further said that Mr. Cross inquired about this matter a couple of

times later. Mr. Simpson said that Mr. Cross made no attempt to

influence his decision regarding which company should get the

contract.”

The records of the Chesapeake & Potomac Telephone Co., subpenaed

by the subcommittee, indicate four long-distance telephone calis, per-

son to person, from Mr. Cross to Mr. Simpson on April 18, May 3,

May 20, and June 8, 1955.° Two of these were made during the

working hours from the Interstate Commerce Commission telephone

but charged to Mr. Cross’ home telephone number.

* Ibid., p. 10.

® Ibid., p. 20.

® Ibid., p. 19.

© Ibid., p. 22.

@ Ibid. p. 25.

—247—

PLAINTIFF’S EXHIBIT 63 (Continued)

32 ANNUAL REPORT

Fred G. Gurley testimony

Mr. Fred G. Gurley, president’ of the Atchison, Topeka & Santa

Fe Railroad also submitted affidavits in lieu of of his personal appear-

ance and in these affidavits he said that he had heard “rumors and

statements” to the effect Cross would become associated with the

Keeshin 4 if it should succeed in securing the transfer

contract. However, he swore that he had no communication of any

kind either with Mr. Cross or Mr. Keeshin regarding the truth of

these —* or with Mr. Cross regarding the merits of the Keeshin

proposal.*?

In connection with this investigation the telephone toll tickets of

Mr. Cross’ home telephone number, along with that of Mr. Keeshin’s

home and business telephone, were subpenaed from the telephone

“company having gry he them. An examination of these calls from

the period March 15 through September 1955 shows a total of 32

rson-to-person telephone calls between Mr. Cross and Mr. John L.

Xeeshin. Of these, 18 were from Mr. Cross to Mr. Keeshin and 14

were from Mr. Keeshin to Mr. Cross. Af] but four of the Keeshin-

to-Cross calls were made to Mr. Cross’ home.“

It will be noted that these conversations took place at various times

during the day but more often in the afterwork hours. In addition,

it was noted that a number of these calls lasted for substantial lengths

of time. A breakdown follows:

Number of calls up to 6 p. m.....----------.---~-----------4--------------- S

Number of calls from 6 p. m. to 9 p. m_-.---.--------------------- cae keaeuedokis 8

Number of calls from 9 p. m. to midnight__------------------------------- 14

Number of calls on which the time is not indicated__....----.----------- 2

TUOER.. .... c.nocctcnccnctnccusencsscdcccoensncapesaccsnanensacsnsanne 32

It will be further noted that the length of these conversations is

broken down as follows:

Up to 15 minutes. ...........-.....------~----------------------------- 13

SS Ob ee SN .o ececnceacnennnceuccas Mh ch diene ne ke rane ame ees 17

i ne. 8. LARS GRNS SAREE RREEATROMER REGS ERGER ERR 2

IIe Sete Dh Neng nS NE | aid aah cident Ek oe IS 32

J. L. Keeshin testimony

When Mr. Keeshin testified before the subcommittee, he stated that

in connection with another firm he had tentatively planned to buy

more than a year ago, he had told Mr. Cross, who is a personal friend

of many tpn duration, that if the transaction could be consummated

he would like to have Cross come to head up the company.“ He

said this purchase was not concluded and therefore the condition for

the offer was not fulfilled. However, he said:

I told him then that if at any time he wanted to go back into business and

wanted to become associated with me I would be very happy to have him asso-

ciated with me.“

Mr. Keeshin told the subcommittee that there was no specific offer

in connection with the contract for the intracity transfer service in

Chicago.”

+ 4

om

- 4

—_

-"

SPPPP

wm & Wats

SESRS

—248—

PLAINTIFF'S EXHIBIT 63 (Continued)

ANNUAL REPORT 33

Mr. Keeshin, in his sworn testimony, informed the subcommittee

that he had discussed the contract for the Chicago transfer business

with Cross and added:

I wanted his views as to the fact that I was going into a different phase of

this business of mine, and, like anything else, being he is my friend, if the

octasion arises, that he could pass a good word for me, naturally I would hope

he would do it.”

In another instance, Mr. Keeshin said with reference to Mr. Cross:

* * * and he said if ever the occasion arose, he would pass a kind word

for me.™

In another instance Mr. Keeshin said:

When I got the contract, I called him and thanked him fer what help he did

five me, if he did give me any * * *™

Mr. Keeshin stated that he is a close friend of Mr. Cross, that they

talked frequently by telephone, and that‘this Chicago contract was

often a subject of discussion.”

Hugh W. Cross testimony

Mr. Hugh Cross informed the subcommittee in his sworn testimony

that in his opinion and in retrospect he had been “indiscreet” in dis-

cussing this contract with officials of the interested railroads.” Te

informed the subcommittee that he has been personally friendly with

Mr. Keeshin for a number of years. He said that probably in compli-

ance with Mr. Keeshin’s request that he determine the status of the

matter he made an appointment with Mr. Simpson, president of the

Baltimore & Ohio Railroad, and discussed the matter with Mr. Simp-

sor inquiring about the current status. On one or more occasions

later he also inquired from Mr. Simpson, and on each occasion Mr.

Simpson informed him concerning the situation at that time regard-

ing the Chicago contract.”

Mr. Cross said that he is a close personal friend of Mr. Johnston,

president of the Illinois Central Railroad and has been such for a

number of years. He said that at some informal gathering which both

attended, Mr. Johnston facetiously asked him if he was going to go

to work for Keeshin. He said that since he considered Mr. Johnston's

remark to be in jest, he did not make a flat denial. Ile said, however,

that he did not tell Mr. Johnston that he would go to work for Mr.

Keeshin if Mr. Keeshin got the Chicago contract.”

With reference to the telephone call to Mr. Feucht, Mr. Cross said

that, as a member of the Interstate Commerce Commmission, he was

interested in the welfare of ll railroads. He said the situation of the

Chicago & North Western Railroad was of particular interest to him

for various reasons including the financial plight of the railroad and

the isolated geographic location of the railroad station in Chicago

requiring more transfers within the city. He said he called Mr.

Feucht and gave him some details of Keeshin’s bid in order to insure

that Mr. Fencht and his subordinates would give adequate attention

and study to this matter and arrive at the solution which was to the

* Ibid., p. 40.

® Ibid. p. 41.

@ Ibid. p. 46.

* Ibid., pp. 37, 40, and 41.

. 59, 65.

™ Ibid., pp. 60, 75.

" Ibid., p. 79.

—249—

PLAINTIFF'S EXHIBIT 63 (Continued)

34 ANNUAL REPORT

best interests of the Chicago & North Western Railroad.”* In this con-

nection the following testimony was recorded :

Senator Ervin. You were afraid that without the suggestion from you that

the president of the Chicago & North Western Ra!!road might not take the trouble

to find out which 1 of the 2 or more bids was the best for the railroad. And

therefore you called him to suggest that he decide the matter on the merits and

take the one for the best economic advantage of his railroad. Is that correct?

Mr. Cross. I assume that that is substantially correct, Senator.”

Mr. Cross was questioned by subcommittee members concerning his

apparent knowledge of the contract negotiations as demonstrated in

his conversation with Mr. Feucht. In response to such inquiries Mr.

Cross, although he later qualified these answers, stated :

Mr. Cross. I did not have any knowledge as to the specific terms of the bids.”

Mr. Cross. I did not know what the other bid or bids were * * *."

The CHarRMAN. Did you know at that time anything about the Parmelee inter-

est's bid, as to what rate it had proposed in its proposal?

Mr. Cross. No; I did not.

The CHARMAN. Did you know that it had revised its proposal downward?

Mr. Cross. No; I did not.

The CHAIRMAN. You did not discuss that with Mr. Feucht?

Mr. Cross. No.”

Mr. Cross told the subcommittee that at no time did he have any

thought of asserting his influence in favor of Mr. Keeshin and that

his possible employment by Mr. Keeshin had not been discussed in

connection with this contract.”°

With reference to Mr. Keeshin’s contact with Mr. Cross, Mr. Cross

said the following:

The CHarRMAN. In those conversations did tie at any time ask your assistance,

or help in any way, in connection with securing this contract ?

Mr. Cross. I think that he inferentially at least, did.

The CHAIRMAN. In what manner, Mr. Cross? ,

Mr. Cross. I think that he didn't ask me to go out and talk to people, if you

mean that.

The CHAIRMAN. What did he ask you to do?

Mr. Cross. I think he said to me if I could put in a good word for him, he

would appreciate it.

The CHAIRMAN. Did you agree to put a good word in for him?

Mr. Cross. I don't think that I agreed to that.”

Following the testimony hereinbefore described, which took place

on November 15, 1955, Mr. Cross resigned his Government office to

take effect ifimediately upon acceptance on November 23, 1955. For

this reason it was the decision of the subcommittee that no useful pur-

pose would be served by a further inquiry into this matter.

The subcommittee feels that Mr. Cross made a mistake and acted

indiscreetly in his position as Chairman of the Interstate Commerce

Commission. It agrees his resignation was quite proper under the

circumstances.

_ Since Senators Karl E. Mundt and George H. Bender did not par-

ticipate in the Hugh W. Cross matter, they neither concur nor endorse

this section of the report.

—250—

PLAINTIFF'S EXHIBIT 63 (Continued)

ANNUAL REPORT 35

Tarirr oN Importep WatTcirs

The subcommittee received an allegation that the Treasury Depart-

ment Bureau of Customs has failed to collect a duty imposed in the

Tariff Act of 1940 on jeweled watches containing 17 or fewer jewels.

The specific duty is applicable to adjustments performed on these

watches prior to their shipment into the United States. It is alleged

that prior to the passage of the Tariff Act of 1930, which imposed the

duty on adjustments, most foreign watches were shipped into the

United States marked “adjusted.” a to the passage of this

act most of them have been shipped into this country marked “unad-

justed.” The allegation is that these watches actually are adjusted

ut are marked “unadjusted” in order to void the tariff.

It is further alleged that this enforcement failure has three major

results :

1. The loss of revenue to the United States Government of at

least $238 million since the act was passed.

2. The placing of the United States watch-producing industry

at a severe competitive disadvantage as compared to its counter-

part abroad, particularly in Switzerland.

3. The loss of skills developed in the production of watches

which are applicable and necessary to defense industries.

The subcommittee held hearings in executive session on this subject

on June 29 and 30, 1955, and January 10, 1956. Among other wit-

nesses, Under Secretary of the Treasury H. Chapman Rose testified

on the last two of these dates. Following his first appearance, Secre-

tary Rose caused an investigating team to conduct inquiries in Switzer-

land and in the United States concerning this problem. He stated

that upon receipt of its report and the completion of a study he is*hav-

ing made here in this country, he will report the Treasury's findings

and recommendations on the matter to the subcommittee.

The subcommittee will thereafter issue its report on this subject,

based on its investigation.

Starr Srupy on Reperecrion

During the year the staff made a study of the redefection campaign

in Europe, which is a concentrated effort of Communist countries to

induce people who have fled communism to return to their homelands.

It became apparent during 1955 that the problem had become a matter

of major-significance.

Some 360,000 refugees are the target for various redefection media

utilized by Communist countries. This number is the residue of some

10 million non-German refugees and displaced persons in Western

Europe since the close of World War IT, coupled with well over 600,-

000 people who have since fled from Russia or one of her satellite coun-

tries tothe West. Health, age, lack of certain skills required by immi-

gration and sometimes criminal] and even pro-Communist records have

made resettlement for the majority of the 300,000 somewhat hopeless.

This problem is a continuing one, as refugees every day flee to the

West for asylum.

Throughout the years the United States has participated either

solely or with other countries in various programs aimed at findin

a solution to the problems of refugees. Its active interest is indicat

—251—

PLAINTIFF’S EXHIBIT 63 (Continued)

36 ANNUAL REPORT

by the fact it has resettled in the United States some 500,000 persons,

which is almost as many as have been resettled in all the other coun-

tries of the free world put together. At the present time the United

States participates in four groups: Intergovernmental Committee for

European Migration which deals primarily with migrants (including

refugees) out of overpopulated Europe, the organization under the

Refugee Relief Act which deals only with the issuance of visas, the

Office of United Nations High Commission for Refugees, which seeks

to aid those not qualified for resettlement, and the escapee program

which lends assistance to the refugee, both from a welfare standpoint

and resettlement. This latter program, which was established aac

22, 1952, renders aid to persons who escaped from Russia after Jan-

uary 1, 1945, and to refugees from a satellite nation after January 1,

1948. Because of these restrictions and the fact that for policy rea-

sons —— from Yugoslavia do not qualify, only 30,000 persons

are eligible for escape aid. Through this assistance this group main-

tains a standard of living somewhat higher than the other refugees.

The administrative aspects of this program are handled by the em-

ployees of the International Cooperation Administration, but the

actual implementation from an operational standpoint is by non-

governmental workers, namely, voluntary agencies.

These agencies, who for — years have endeavored to assist the

refugees, have continued to work under this escapee program. They

operate on the basis of contracts which, within the limits of the ap-

propriation, permits them to actively assist the refugee in skills, educa-

tion, orientation, and resettlement problems.

The refugee is housed either in a camp or regular housing, but this

does not mean that he enjoys the comforts of life. In Germany, for

example, the sum of 35 cents a day is allotted for his livelihood. Since

he is not allowed to work, even if able, pending a check by the Govern-

ment of asylum which takes some several months, he often lives where

the slumlike conditions have bred unhappiness and discontent border-

ing on desperation.

he files of this subcommittee have documentation showing that

newspapers, radios, circulars, chain letters, and personal letters to

refugees from Iron Curtain countries urging their return have in-

creased within the past year to the point of it becoming a concentrated

plan on the part of Communist nations. Some of these satellite coun-

tries have declared an amnesty to refugees, but this is only one of the

facets for the success of the redefection program. Length of resi-

dence in camps, the low subsistence of living, inability to work, hope-

lessness for the future, and fear are ail factors that must be considered

in the redefection campaign.

The number of persons who have actually redefected is unknown.

The only known figure is that of the escapee program, which shows

some 2,700 persons have disappeared. The redefection campaign has

had an unsettling effect, and the free world is in danger losing a

propaganda advantage which it has thus far maintained.

East-West TRape

The subcommittee has continued during 1955 its close watch on

the trade between our allies and the Communist world. The most

recent statistics on the dollar value of free-world trade with Com-

—252—

PLAINTIFF’S EXHIBIT 63 (Continued)

ANNUAL REPORT 37

munist China made available by the Commerce Department disclose

for the first 6 months of 1955 the value of this trade to Red China

to be 394.1 (millions of dollars). For the same period of 1954 the

figure was 310.6 (millions of dollars). This is an increase of $83.5

million in this 6-month period. 7

In addition, the latest trade figures furnished the subcommittee

by the Defense Department disclose that the number of Western-flag

vessels moving in and out of Chinese Communist ports continues to

increase at an alarming rate.

These figures show that for the first 8 months of 1955 vessels flying

the flags of non-Communist countries and totaling 7,136,202 gross

tons, made 1,187 trips in and out of Red Chinese ports. For the same

period in 1954 these vessels had a total gross tonnage of 5,650,091

and made 935 trips in and out of Red Chinese ports. This is an

increase in 1955 of approximately 1,400,000 gross tons and 252 trips.

On the basis of these statistics our allies shipping to China in 1955

will surpass the former peak year of 1954.

A closer look at these statistics graphically portrays the tremendous

contribution British-flag vessels are making in the carriage of goods

to the Red China mainland. hactodneaely 53 percent of the vessels

involved in this trade during this 8-month period were under British

registry and flying the British flag.

An analysis of the voyages of these vessels shows a substantial

number carried cargoes from European Communist countries to Com-

munist Chinese ports. This is a practice that was prevalent during

the Korean war, and it is obvious that our allies are continuing to

render this major economic assistance to the Communist world.

The subcommittee once again wishes to draw attention to the val-

uable contribution made by Communist-controlled shipping companies

— out of the British Crown colony of Hong Kong to Red

‘hina’s economy. A majority of the vessels operated by these Com-

munist companies fly the British flag and, therefore, are accorded the

protection of the British Fleet.

One of these companies, the Far East Enterprising Co., Ltd., of

Hong Kong, was singled out in 1953 for its activities during the

Korean war in chartering Western-flag vessels to carry goods to the

China mainland. Nothing was done by the British at that time.

The subeommittee on March 13, 1955, made public the fact that the

Finnish tanker Aruba, which was carrying jet fuel to the Red China

mainland, had been chartered for this trip by the Far East Enter-

— Co. and that this company, although operated out of Hong

ong, was actually own and controlled by the Chinese

Communists."

The subcommittee also made public the fact that the Swedish-flag

vessel Sunnanbris carried strategic materials to the Chinese mainland,

even though the ship’s manifest listed its cargo as “lawful

merchandise.”

The subcommittee feels that our allies, particularly the British, are

making major contributions to the Chinese war economy. As pointed

out in another part of this report, at least 11 Americans remain im-

prisoned in China while our allies’ trade with China increases. The

@ The Arube never did arrive in Red China, as it turned back about March 22, 1955.

—253—

PLAINTIFF’S EXHIBIT 63 (Continued)

38 ANNUAL REPORT

role of our allies on this matter during the Korean war and during

this unhappy postwar period is a matter of deep distress to the

members of the subcommittee. —

Purcuase or Locomorives ny THE Sranisi GOVERNMENT

By a telegram dated March 8, 1955, the Baldwin-Lima-Hamilton

Corp., Eddystone, Pa., complained to this subeommittee that an award

for the purchase of diesel locomotives by the Spanish Government

had been made to the American Locomotive Co., despite the fact that

Baldwin-Lima-Hamilton was a lower bidder by about one-quarter of

a million dollars, and that these locomotives were being purchased

by the Spanish Government with funds allotted by the Foreign Oper-

ations Administration.

The Spanish Government in 1954 sent out invitations to bid for

14 diesel locomotives for the use of the Spanish National Railroad

System, the locomotives to be purchased with funds made available

by Foreign Operations Administration. After an examination of

the bids the Spanish Government made the award to Alco (Amer-

ican Locomotive Co.) for $3,035,970 or $216,855 per locomotive. Alco

had provided a working model of its locomotive which the Spanish

had tested for several months and found to be very satisfactory. The

Baldwin-Lima-Hamilton Corp.’s bid was $199,800 per locomotive, the

total bid being $238,770 less than Alco’s.

The a. reflects that the Spanish Government was legally

within its rights in selecting the Alco bid. Despite the difference

in price the Spanish Government found that the Alco locomotive

was best suited to Spain’s needs, was cheaper to operate and maintain,

and the earlier delivery date promised by Alco made for economies

whi ore than offset the difference in price. Furthermore, no addi-

tional to the United States Government is involved. Since Spain

is allotted a fixed amount of money for the year, the amount spent

for locomotives only decreases the amount available for other

expenditures.

AMERICAN Prisoners in Iron Curtain CounTRIES

The subcommittee has continued its study of American personnel,

both civilian and military, who are —- held prisoners in Commu-

nist-controlled countries. Extensive staff interviews have been con-

ducted with prisoners who had been released by Communist China.

In its appraisal of the situation the subcommittee held two executive

sessions with representatives of the Departments of State, Defense,

Navy, and the Air Force. At the first, on April 18, 1955, there was

discussion regarding the efforts being made by the executive agencies

and by the Secretary General of the U.N. Any further action by the

subcommittee was deferred pending the outcome of iations being

conducted by the Secreta neral with Communist China.

On June 29, 1955, another subcommittee conference was held with

representatives of the State nt and military services at

which the release from China of the four airmen and several civilians

since the April 18 session was discussed. In view of the conferences

being held in Geneva by the American and Chinese consuls and the

meeting of the Big Four powers at the summit in Geneva, it was felt

—254—

PLAINTIFF'S EXHIBIT 63 (Continued) :

.

ANNUAL REPORT 39

that open hearings by the subcommittee would not be propritious and

apparently would not assist or contribute in the release of the Amer-

ican prisoners. Since that date 11 military and 29 civilians have been

released from Communist China.

The subcommittee continues its active interest in this matter and

with the rest of the world awaits China’s release of at least 13 addi-

tional Americans as well as the other foreign nationals from

imprisonment. ® %

Marrers Rererrep To THE DEPARTMENT OF JUSTICE

During the course of various public hearings several matters devel-

oped which were referred to the Justice Department for possible

prosecution.

In the case of Irving Peress the testimony of Brig. Gen. Ralph W.

Zwicker, former commanding officer at Camp‘ Kilmer, N. J., was in

conflict with that of C. George Anastos and Mary Morrill, former sub-

committee staff members. On April 12, 1954, all testimony and docu-

ments;in connection therewith were forwarded to the Department of

Justice for study as to whether there appeared to be a violation of the

perjury statute. On November 23, 1955, the Department advised that

a thorough investigation had been conducted and the results were

being studied in the Criminal Division. The letter stated the sub-

committee would be informed of the determination ‘made.

On May 26, 1955, a transcript of the public hearings on the inves-

tigation involving the FOA grain-storage project in Pakistan was

referred to the Department of Justice. An opinion was requested for

possible prosecution of Robert H. Pinner, an FOA consulting engineer,

and various individuals of the Agricultural Construction Co. On

October 10, 1955, Justice advised that since there was a possible viola-

tion of perjury statutes by Robert H. Pinner, the matter was being

forwarded to the United States attorney for the District of Columbia

for his consideration as to criminal prosecution.

All of the hearings, executive — in the textile procurement

in the military services, which \includes testimony of Harry Lev,

Marvin Rubin, Mrs. Mella Hort, David Pollack, Julius Goldman

Joseph G. Porreca, Capt. Raymond Wool, Jerome Schlesinger, and

Ferdinand Tartaglia, were furnished to the Department of Justice for

various violations of law. The Department is studying such testi-

mony with a view to violations of the bribery and perjury statutes.

The testimony of one witness who appeared in executive session in

connection with Communist infiltration in defense plants was referred

to the Department of Justice on May 2, 1955, for an opinion as to

violation of the perjury statute.

Diantha Hoag, a former employee of the Westinghouse Electric

Corp., was cited for contempt by the Senate on February 4, 1955. She

was thereafter indicted by a grand jury in the District of Columbia

on June 21, 1955, and her trial is pending. In her testimony before

this subcommittee she had initially denied she was, had been, or would

engage in espionage and sabotage. Later, in response to questions re-

lating to possible espionage, she invoked the first and fifth amendments.

«*

—255—

PLAINTIFF’S EXHIBIT 63 (Continued)

40 ' ANNUAL REPORT

~

Current Work

A number of investigations are being made by the staff at the present

time. These, of course, do not include the numerous prelimindry

inquiries.

COMMUNIST INFILTRATION OF SCHOOLS OBTAINING BENEFITS UNDER

VETERANS’ EDUCATIONAL AND REHABILITATION PROGRAM

The subcommittee has been in receipt of allegations that certain

schools owned or operated by members of the Communist Party have

been approved to train veterans of World War ITI and the Korean war

under various laws providing educational and rehabilitation benefits.

It has been reported further that veterans have been and are presently

attending such schools, their tuition being paid by the Veterans’

Administration.

The staff is presently engaged in a detailed inquiry to determine

whether schools actually owned or controlled by Communists have

in fact been so approved, whether the Veterans’ Administration is ex-

nding funds for the tuition of veterans attending these schools, and

if so, the reasons therefor.

EAST-WEST TRADE

In 1954 extensive changes were made in the export controls on the

sale and delivery of strategic materials from the free nations of the

world to the Soviet-dominated areas.

The changes in United States security export controls were cvordi-

nated and ran concurrently with a similar review of international

East-West export controls. This downgrading of strategic items has

been highly classified and cloaked with secrecy, particularly as to the

aspects relating to internationalscontrols. However, it has been re-

rted that controls over certain highly strategic items have been un-

uly relaxed and that the officials authorizing decontrol have disre-

garded technical and intelligence reports strongly opposing such

decontrol. ;

The subcommittee also received reports of illicit traffic in strategic

materials, particularly copper, and of constant efforts being made by

Soviet purchasing agencies to obtain such products. The subcom-

mittee is continuing its study of these problems in preparation for

possible hearings this coming year.

GSA PURCHASES OF MEXICAN MANGANESE

Information was furnished the subcommittee that an American-

owned mine in Chihuahua, Mexico, was under contract to furnish

manganese to the Emergency Procurement Service of General Serv-

ices Administration and was operating on money loaned by the Ex-

port-Import Bank. Through an error there was an overpayment to

the mining company, and when the mine was unable to refund the

overpayment, EPS then canceled the contract.

An investigation is being made to determine if both the Export-

Import Bank and the EPS acted in the best interests of the United

States Government and whether there was any wrongdoing on the

part of the mining company involved.

—256—

PLAINTIFF’S EXHIBIT 63 (Continued)

ANNUAL REPORT 41

ARMED FORCES PROCUREMENT

The investigation of procurement of textile and apparel equipment

for the armed services has led to information regarding improper

practices in other types of procurement. The subcommittee is pres-

ently conducting inquiry into irregularities in this field.

The members of the Committee on Government Operations, except

those who are members of the Senate Permanent Subcommittee on

rem did not sit in on the hearings and executive sessions on

which the above report was prepared. Under these circumstances,

they have taken no part in the preparation and submission of the re-

port, except to authorize its filing as a report made by the subcom-

mittee.

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tte) CLEVELAND, 0.

—271—

PLAINTIFF’S EXHIBIT 65

@ bad -sy WR.

4.

SPEC INT ome

(aC

Ty

al»

/? “4/5

: ve

EE os

[ * 7

} ; =

t

f I4) fry 4

=

i: )

y ‘ae <—e

Be heed SEIS V4

5

ORY A

C

AF /OG NZL

ri yy »

m. “S

~ => ix

-%°e aS

.

‘ ee

Ss how

Paes

7

wn APR 1455 FY LE

‘CHICAGO,

—272—

PLAINTIFF’S EXHIBIT 65 (Continued)

cr) 20237 2ea7

=

: on So

MAY17-55,:~+

~ ae: ! -- oa te g j = .

ror~4__. GLa

“4 1% lore

Ans «(bees

a wiii7s5 f=

CHICA 1ICAGO,

SPCC. InsT.

“7 ve .

C ai tel brga = pest

eveeeit v, -) )

a -_- _—- -_—_—~ -

A A Lawad

te —

>.

—273—

PLAINTIFF'S EXHIBIT 65 (Continuec)

a,

oe ae

CHICAGO, ~ hb

ANS |eces oeeee

<7 fame “ST

Tac

ve —

"“Wuw Po

"let mal 8-Iibe0 ce

CamAnnestssn Cray ae

aa on a

MAY 23-8$ Hp .*

—214—

PLAINTIFF’S EXHIBIT 65 (Continued)

4 .. . .- (8

- MAY2855 “LL ,

| Wife, 00 | N35 7

MLL.

—275—

PLAINTIFF’S EXHIBIT 65 (Continued)

wsss LT Os ea

4

24a 3 Cw es

a!

JUL 21 fang & T&T.

2 aR Hee Stine

;

}

:

—276—

PLAINTIFF’S EXHIBIT 66

y Le mt CUCM valols care

o aw we 1 11 Ia ! ee ; a ~ cmncace ni horas (macnn

- vit fon Gta tue vit FoR - GLA tuc vil ron / Gta

a P pe et he

ee ee Ic mS Las ah vy ee

146

_- te

ae

/ T ! 2 ; **

. a se / by | 14 © {

Men a Me he

eee __SiP. 9-55. L

tue mt rome ct Pan TT ts a I. * ron? cua

iS Ba 5 ) L7G DY¥SI

SsPErc. imgT A 100. ? “PIC IMT

Tac. enc Tac

<a 7a tae WY Ecce 7 rT

ae eS ie oer pate CL A-wlf

~. Gate

155 44 1 193° ie hl ad * |

NV

3 i |

(av 2vae3e4 Fi -L#

eranae a 24 2 uf

Cll C7 4

—277—

PLAINTIFF'S EXHIBIT 66 (Continued)

shales Iie Anibel

oor au Jos

CGE Ser, |

ae RE, L L ne tM ee. By ac a5

ruc 8k CSO 9°" Hn vit FOR GLA tuc vit FOR GLA

7450 : 14 5/

SPEC. INST. ‘ ims SPEC. INST.

Tac TA‘ Tac

70 to To

: hy

H De ; Ly

OL 2-Gold . ‘ é Bu Fl4 3/ |

Ps

. 36 253. hie st 10 of 26 j 9) 10 1Y YT De oe

| : s¥ zw | //O EP s7v-. (1, $2 100k 321-4 Aq?

Tae Sri Oe Aik fs

wet

{7 / bs LEY

£

4

|

;

Mit |

chy At Sa AGM SO en PL .

;

3

3

3

é

/

y

—278—

PLAINTIFF'S EXHIBIT 67

TOTAL CARRIED TO BILL

(see 866-66

New Yoru Te.eewone Company

“TOLL CALLS AND TELEGRAMS

foeossa f¢ 2 10

New Yorn Te.senone Company

TOLL CALLS AND TELEGRAMS

Ox $,

ial AIA? ORES $600

API

5 FISOM BUR ItIGHAM . ee ay

F ‘OR! 60

HAVANA 19 70 Vy OLD G@W!CH 35

FROM SYRACUSE ' oe BLUCMFLD 15

CY TO VETROIT ', 60 LOS ANGLES 2 50

FROM WASH 1 10 LOS ANGLES 2 50

FORM 1 10 PHOGN IX 7 50

FLOM 130 ROCHESTER 1 00

FROM WILKES BARRE 16 SYRACUSE 8S

FROM tn 60 PRINCETN 80

FROM CLEVELD 3 10 PRINCETN 69

FiXOM MWK te) PHILA 70

7 CHICAGO 3 70 PHILA 70

CHICAGO 3 50 WASH 1 10

CHICAGO 9) 70 WASH 2 60

CHICAGO u 10 WASH 1 10

HERTED 1 3. WORCESTER 1 20

EPRRIOGEPT 1 2 CHICAGO 18 90

“TEMES SBARKRE “90 C41 CAGO 1 90

INDIANAPOLIS 3 80 BALTO 2 45

CAKROLLTH 3 15 HARTFD 60

WOKCESTER 1 10°: CARR ILTON 2 25

BRIDGE PT 1 10 BOSTON 2 0S

a SPR INGE LD 2 a NWh 2

FROM BUFFALO 1 05

me } "

10% U.S. TAX

New Yorx Te.epwone Company New Yoru Tetepnows Company

TOLL CALLS AND TELEGRAMS 4 < TOLL CALLS AND by ya 1D

ORE § Peeyteny ORE 5 5600 “Fo w y

2 a]

TOLL CREDIT PLAN a7 JUN

MAR 8 FROM BRIOGEPT 1 00

29 ™ TO NY 1 05 FROM WASH 1 90

APR FROM w 1 60

ay MENCERSON TO NY 1 10 Aad . +4

"

ty rad 2B

RUTHERFD

26 NY TO NORFOLK us & 15

J CY TO NORFOLK 3 00 J CY 15

NY TO CHICAGO 8 19 6 £9

27 NY TO HOUSTON 28 B SHR 1

NY TO # 5 60 RUTHERFO 15

NY TO w 6 70 Rp 15

28 NY TO WASH 1 5O WOODBDG 50

29 NY TO CHICAGO 13 50 -WASH 1 10

30 MY TO EAGLE RIV 7 20 ” 110

Sas NY TO WASH 1 16 " 1 19

n 1

1 CHICAGO TO NY 1 80 CARROLLTON 3 15

2 NY TO WASH 5 19 HARTFO 60

NY TO OENVER 3 CINCINNATI 135

WASHTO NY 1 70 CLEVELD 1 15

ARLINGTN TO DENVER y 50 SPR INGFLD 1 35

NY TO CHICAGO 22 50 PHOENIX 3 90

NY TO JERSE YVL 1 20 CLEVELD 3 85

DETROIT 2 10

10% U.S. Tax 10% U.S. TAK

A

—279—

PLAINTIFF’S EXHIBIT 67 (Continued)

New Yorn Terernone Company

TOLL CALLS AND TELEGRAMS ¢

Statement New Yorn Trverwone Comrany

A TOLL*CALLS COMPLETED

OCT

19 FROM DAYTONA

> Seu!

21 WASH

22 WASH _

— :

2y CHICAGO 6 50

LOS ANG 3 50

JERSEYVL 25

WASH 1 yO

WASH 1 0

2 WASH 80

25 WASH 80

%

4t C Y ] q ”

(¢

% f+ BY OPERATOR, AND TELEGRAMS L

jo has ys wef

ee 7 OR 5 5600 rot ”

JUN | A

13. ST LouIS 5 40 OCT

TOLEDO 1 80 23 CY TO JERSEYVL 72

ATLANTA u 50 es CY TO WASH "

CINCINNATI 25 eu CY TO PHILA 2 6

ror 1 88

BALTO 1 ig MESSAGE UNIT PERSON TO

BUFFALO 1 PEISON AND COLLECTCALLS

are" Bae

Tatton 2 70 a FROM FLORAL PK 5

CARROLLTON 3 60

CHICAGO 2 30 6 FROM EDGEWD | 35

. 1 90 G FROMGLEN COVE 35

e 2 70 11 FROM WESTMORE 35°

a 2 90 1y FROMFLORAL PK 5

K pas 19 FROM PIONEER 35

EATONTN 55 20") FROM PIONEER 30

K 15

RUTIERFD a4 ocr MOBILE CONNECT 10N

ALO 2 5 COLUMBUS

14 «FROM EEVERLY 2 175

FROM CLEVELD ss |_

— FROM 1 90 2 fe nno

10% V.8. TAR 10% v.s. Tax oP a4 yy)

TOTAL CA

———— eee a asi a ) a ch O

Statement New Yora Tricewone Company

New Yoru Tecesnone Company

Statement

A TOLL CALLS GoM PLETED

BY OPERATOR, AND TELEGRAMS

ORS 5€90

‘7?

$699 i Nt?

oCcT

17 WASH TO CRGL 85

16 CLEVELD TO TOLEDO 1 25

25 WASH TO CY 90

WASH TO SCARSO*LE 1 35

25 CINCINNATI! TO “MT VERNON 2 39

W4SH TO CY $0

76 CY TO LOS ANG 1§ 10

WASH TO SCARSDALE 1 20

WASH TO CY 89

WASH TO LOS ANG 300.

27 WASH T> SC/RSNALI 110

WASH TO JERSEYVL 6 30

WASH TO CY 1 20

CY TO JERSEYVL 1 30

CY TO CHICAGO 3 30

WASH TO CY 80

28 DAYTON TO MT VERNON 3 75

ARLINGTN TO CY BO -

29 cY TO JERSTYVL 2°70

TORR INGTepO SCARSDALE 40

40% U.S. TAZ se

carte ~~ rN TO BILL '

— 280—

PLAINTIFF’S EXHIBIT 67 (Continued)

. ’

Statemen New Yoru TEL_ernone Company ’ a Me

A «6TOLL CALLS COMPLETED | Leura 7s peas

BY OPERATOR, AND TELEGRAMS 4 Eee ae, 4

Apgeshin BL <<

‘ <7 z

BU 8 1931 AvIr7 54

=) - vp 2270ove¢

- WASH 1 10 2 nun aa

oct ro sararee

17 FROM’ BRADLEY 1 20 SS 8nn 439

26 WASH - 90 ‘< =

eS | 12 bg tank :

29 B SHR ee a 3

WOODSIDE TLGRM 1 77 ~ wi _ °

NOV zEurr >? 279 m

1 PHOEN 1X _* 4 bd =&

t “vig

6 oo °

WASH 1 10 rere +

‘ 1 70 pegs 8 4 5 5

" 1 65 at i ea an

CITY TLGRM 3 03 ro

n 2 85

FROM CONCORD 3 15 i «2

FROM WASH 3 90 A 8352

9 FROM BRADLEY 5 40 ; Pais

i 1 10 © 2 Os

2 6B SHR 40 ne

10% U.S. TAX =?

ee Oe

TOTAL CARRIED TO BILL

&-14681-& 6-86 -

—281—

PLAINTIFF'S EXHIBIT 68

—282—

PLAINTIFF'S EXHIBIT 69

$ °"4 d99

y °S2 279

S-€ °XI Syucg

Ct-€°Sa Troa° iT

Z °xg yse8104

Ce °S4 F793

OI-€ °=3 TISa°trr

TE °SE TTA TTI

Vid SSE

— (ST9¢-S°20 18) UsPBI05—

(°2P5)

(280204 22Azi) THYSSCY (emoy *pii) ssozrD ot/y

(280203 z2AzU) TPYSeCy (emoq *m:) sco1D = ST /®

Wa °Bd dA Fay (oat *ysen) yeclze, = ST /4

(Ste¢-¢°20 XH) qseZ202 | (OSeoqyD) aFusesy = 91 /4

(#8029°g q3ry:) BOIOZITD yer Sac 3 L£/%

(a#0204 22AzY) BFYSE0% (amoy °p 7) sserc of

(Seo) ETSY = O/+

6109"Z “IO O8rrTYD C2 TTT

(smoy “P) S035 (puvyenets) arysezy cc/c

| oy " Gar car

are

HEVSuels GIY Siti

Seize SMOLKEHIUCH *sessmcry::

20 UAEMISTS WL POAWEL Civalso0

-SaIiS hee BIOuUdSISL §0 AU EGS

mosey UNG) INYO HN 3 Moy

ee) re ai.

300978 eee ee

or Me cae ev iy —"

PLAINTIFF’S EXHIBIT 69 (Continued)

fT °x3 299

dt °S3 90

OT °2 e359

91T °S2 d39

€T °S35 Pd

CZ-E PSN Tiec° tts

Vo °S4 TLS Til

Ce °S: gs

Te ky dbo

TT

4

(3809 =o)

Soqncey: ct

Wd 29°9

Rd O1°S

tid S729

tid E19

""? [O56

Ta €0°TT

Wd ZI-Ut

WY L92oT

(289203 2aatzy) cTYyssoy

VOTsFIO OFratT

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BOTFIIE ITC

O8ad *Saag Sucsalys

@STITO “eye

oss *td e ci. Fore)

(corotus) arysce~,

ome om * © SEC=5

Bum “Pl = S607

7220 eer Ts

~~ at

“or eed

(169202 Asafa) aTTeesy

COpN\G°HeT "SIO 8sTET

yeas

Osa *seag *GCra ys

COOT$S°LS CFO SUTTIG

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cL

4

se

(emery *pry) e#co75

(emoy *pry) seoxD

(ecoy *pi') scorn

(scoy *! 03 [Th3

*°330 QDI-ZO7L°A°I) Scon2

(oxoy *Er: 62 TIT

“*Z3O SOI-€97L°a 1) ocean

(asexzoz xeaye) uTuecco.:

(0030s Zeayy) apest7:

one “Dr ©2 TIT@

(D572 -€0T2°G°T) ScoxD

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(201-z07L°a"'l) sF0a5

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(291"Z0z2° al) secrzp

’ Box

™

PLAINTIFF’S EXHIBIT 69 (Continued)

~

SZ °S3 d¥O

¥ °XS EF

Tet °S3 Tres Tr |

Of-t°S5 TISI°TI1

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ct

d-9°S2 ITea° til ¥

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tZ °f2 5D

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pexequnacy yses104

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BOTTING ,

RV 20-8

Wd ST*s

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Hid 49°71

RV I¢S*TT

Fe oye¢

Wa 16°76

Fd 72°€

«Kd 998z

Wd 99°F

t-

(380202 22ATE) CTYSeCy

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(amoy *pH) sSOxD

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(ofcoTyD) sTrsse%

(smoq ZX) qSeZ202

(acon, *Mm) ss0i5

BIFIIO °ITPT

WY OVA °Seada ‘uosdcts

(@3FFZ° DOI) eFF029

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(ZiT

FV ZO°CT ‘“@oatorrey) eserD *s cen:

ouFL

(8023p °S ulm) aoIyToOrr=>

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(smog “p) ss025

(awoq *pmz) ss0zD

(oSeaqys) cPysesy

(oS tuo) sFyscoy

“(2004 °F: C2 TITG

*D0I-ZOTL°a1) 85025

(38020] 2eATY) UYEssx

(388203 xaaty) apUSI8y

(amen °Hy C2 ITT

**3IO QOI-CCZLZ°a°l) e025

(o2esFqg) apiceey

(OSestyD) cyysecy

(oSrstyo) upeeoy

uUsesxzc J

Doxy

— 285—

PLAINTIFF'S EXHIBIT 69 (Continued)

Te °“X3 2I

6Z °S3 279

Of °SS J 39

LE °SS TISI° iI

¢ °x3 TsTt20zZ

Of-<€ °Zx ITOa°TIZ

€ °*SE teTlz0s

$2 8 22 °FS cz

C35Z °Z2 Py

W2E-C°FE TIPe° II

" xz GOFS q

rs Wd Sfty Osg *se2g ‘tos tS

(s°oTT-¢

ot IZ 90° “PTFid) °f8d dA *Fest5D

ry OS: TT re

LI ITS ZOSCT «peortz (elSco gro) afyse:y

¢ try Sos¢ (23FIIO O5T) eeo29

0z°TS (ssozn°z Geri) eTTTAseszer

T 11 $437 (eoTsyJO yn) werzacs

apd Be (X9ATS CTler) uTYSsox

etonrce{3e2 sac “I! S8025 C3 TIT4

*MOAICWC CF oc ‘pyrnce

ST 3tq2 az0eces put

28275 PIFz3 9226 °STt..

°OLCGeF Ss IE et! Se

c Wry¥ 6£°TT °yy OTg “soag ‘Tesccys

6 7 TEST (P°TIFJO DOI) ss07D

(a80) 40) aayL oL

S2ITcT: cy

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STsz esnene

Vs 729 se Rot

(suey °*rr;) ecorD

(smoy *pr') Es625

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fexss0 DOTetcz “c°} eros

(ofeotys TULoIy

Sotrayng Of Serazle{sq So207

rm Ge

(asey *p 7) esc=D

(ofesTic) atucse:

broad

PLAINTIFF'S EXHIBIT 68 (Continued)

6y °x3 @99 6 Wi 6:8 (z2aya O[3eq) aPysooy (emoy °p;i) “8075

Te6T-98 °3nG

ey “Xa 299 9 Wd 72:01 (smoy XN) qsEdz04 (smoy “PpH) 63015

Sy °x3 292 1 Wd 60:TT (280204 22@ATY) ATYSICY (amoy °pi) seo7z9

ZI98-zZ °CO

ty °x4a a0 € Hd Z0:G¢ (aeBeqnen) x2ATC 20uU22"TD (owoy °P!) G8025

9L9T-€ SFIs0 FEN

ty °%a 35 € Kd OY:¢ (aeBexmen) s22ATq sousrV15 (swoy *pH) s#0z5

x2ure4 ) przteg

Gt °xa a0 9 Wd 77°¢ SSeI-S°OH = 2nqTy (smoy °pil) sBec7zD

9€ °X3 dD cz Wa $S°8 (z2aAtq eTZeq) aTyssoR (awoy Pi) 88025

Wey °S4 TOG TIX Lz Wd 9626 (emoy *pH) s80z5 (2602031 22AFc) TFUS30%4

¥ °X4 ddd ¥Z wd OS*2 (283204 22AzE) TTySEsyY (amoq *pri) 86025

St-€°Sa Ila Til y wV 40°01 (S196-S°20 im) YSeBz04 (o8eotqy) apyseox

y °Xa qee8z04 o9°¢s (s802xD°g G2rq) G0210228D yersz04

€ °=8 ysuBr04 st°e$ (s902D°q YS) BoITO21FD qevaz03

°O aka GOFI~sodeq (asoj 20) SaTL oL hold

soInNayW Ut

aoF3e1Ng

PLAINTIFF'S EXHIBIT 69 (Continv ‘

fete “9 299 go

§

A

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(o8es~D) uprsesy

(oZes7qD) apNssey

(zeysurzy peozttr:

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UNS °C:

(emoy°o2qD) uysaspro5

verpa “ed ‘an “FES

(smoq “pri) sox

(oZe57qD) apYSsey

(O8e27qD) uPySesy

(amoq *py) 88025

or

(se0q °*Pii) sB025

(emoyq pi!) #8025

(emoq “p) ss025

(380204 22AyY) UTQSeoy

(smoyq *PH! ITT

“*330 DOI-ZOZL°a°1) #8025

(saoq *pt) s#025

(saoy “pr1) s802D

(280204 22Ayzy) apySeCy

(emoy °pyi) S025

(sm0q “pH) ss07D

(29474 ST3eq) upyseoy

Bolg 3

78 °"a avo

9€ °XqZ Ysesx03

61 °Xa yseS2043

61 °Sa User3z03

61 °*3 yee8203

i °x3 yses204

9 °Xa Yyse8204

S€ “Xa ysesi07

Y-y *S2 Ila III

S-y “S39 Tl?a° ITI

O-y °Z2 TTSS*TII

“On xa GOTT ;sOdaq

€ Wd 96:21 (ax) qeerzog (omoy *P) S802 = ¢2/TI

Ot°ts Satpezq s8xey - (am0q ss0x woxz) yeerk8107 TI/tt

02°Z$ (#1TFAseszer) s8025 ysesx0g 62/01

of°1s (®1TpAkaszar) ss0x5 (AN) GseZ2x0z 8 7/O0T

0E°Ss (21T}Asesxer) sox (ao3upysen) ysesz02 17/01

cz°z$ (211 FAses2ze¢) ss0x5 ysvez0g 497/01

0z°2$ (2T1tAkesx2¢) s20xp yseZ20g = £Z/01

Oz°1$ eZivyo Satpexzg - (am0y ss0xp @oxz) yse8r04 L1/0T

3 RV 80:01 (emoy XIN) YsESx04 (380204 29aTy) cTYyseCy 07/6

IFFJO = YSrZrcyz

£ RV 65:6 C19S-¢°20 An (380204 zeayty) utyseoy 07/6

(*°ans)

€ Wd ¥£:9 (emoq “py) es0xD (289204 22ATy) aTYse0y 81/6

“T2809 20) 0 SFL ol woig 486 330g

Senay at

@oF2e2Ing

PLAINTIFF’S EXHIBIT 70

2121273

CHICAGO, MAY 26, 1955.

HON. HUGH w. CROSS, COMMISSIONER

INTERSTATE COMMERCE COMMISSION

WASHINGTON, D. C.

DEAR HUGH: I SHALL BE IN WASHINGTON TOMORROW (FRIDAY) FOR AAR BOARD MEETING

AND IF THS LENGTH OF THS MEETING PERMITS LL CONTACT YOU. EXPECT TO BE BACK

IN CHICAGO SATURDAY AND WILL BY DELIGHTED TO SEX YOU «HEN YOU ARS HERE MAY 321

THROUGH JUNE 2, WARM RSGARDS,

@aYME A. JOHNSTON

PRESI DENT

ILLINOIS CENTRAL RAILROAD

—290—

PLAINTIFF'S EXHIBIT 71

ee we: |

mm g2). &

é Chic - 20, 1955, Mee | te ft é 4

@age,

ae et OD hep py ri )

Mr. Trevillien:s hy E hte A -.

. ah Ae PT

Referring to my letters March £2 and January 13 reperting te yeu eetion

of Subcommittee, Chicago Terminal Lines, involving transfer of passengers end

baggage between stations in Chicago.

This Bubcommittes met yester

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Transcript of Record — In Re McConnell · 370 U.S. 230 | Frix