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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PLAINTIFF'S EXHIBIT 64
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PLAINTIFF’S EXHIBIT 64 (Continued)
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—261—
PLAINTIFF’S EXHIBIT 64 Contiaanes
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PLAINTIFF'S EXHIBIT 64 (Continued)
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— 263—
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PLAINTIFF'S EXHIBIT 64 (Continued)
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PLAINTIFF’S EXHIBIT 64 (Continued)
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—271—
PLAINTIFF’S EXHIBIT 65
@ bad -sy WR.
4.
SPEC INT ome
(aC
Ty
al»
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: ve
EE os
[ * 7
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t
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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
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ae
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. 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
|
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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 $0
76 CY TO LOS ANG 1§ 10
WASH TO SCARSDALE 1 20
WASH TO CY 89
WASH TO LOS ANG 300.
27 WASH T> SC/RSNALI 110
WASH TO JERSEYVL 6 30
WASH TO CY 1 20
CY TO JERSEYVL 1 30
CY TO CHICAGO 3 30
WASH TO CY 80
28 DAYTON TO MT VERNON 3 75
ARLINGTN TO CY BO -
29 cY TO JERSTYVL 2°70
TORR INGTepO SCARSDALE 40
40% U.S. TAZ se
carte ~~ rN TO BILL '
— 280—
PLAINTIFF’S EXHIBIT 67 (Continued)
. ’
Statemen New Yoru TEL_ernone Company ’ a Me
A «6TOLL CALLS COMPLETED | Leura 7s peas
BY OPERATOR, AND TELEGRAMS 4 Eee ae, 4
Apgeshin BL <<
‘ <7 z
BU 8 1931 AvIr7 54
=) - vp 2270ove¢
- WASH 1 10 2 nun aa
oct ro sararee
17 FROM’ BRADLEY 1 20 SS 8nn 439
26 WASH - 90 ‘< =
eS | 12 bg tank :
29 B SHR ee a 3
WOODSIDE TLGRM 1 77 ~ wi _ °
NOV zEurr >? 279 m
1 PHOEN 1X _* 4 bd =&
t “vig
6 oo °
WASH 1 10 rere +
‘ 1 70 pegs 8 4 5 5
" 1 65 at i ea an
CITY TLGRM 3 03 ro
n 2 85
FROM CONCORD 3 15 i «2
FROM WASH 3 90 A 8352
9 FROM BRADLEY 5 40 ; Pais
i 1 10 © 2 Os
2 6B SHR 40 ne
10% U.S. TAX =?
ee Oe
TOTAL CARRIED TO BILL
&-14681-& 6-86 -
—281—
PLAINTIFF'S EXHIBIT 68
—282—
PLAINTIFF'S EXHIBIT 69
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PLAINTIFF’S EXHIBIT 69 (Continued)
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PLAINTIFF’S EXHIBIT 69 (Continued)
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— 285—
PLAINTIFF'S EXHIBIT 69 (Continued)
Te °“X3 2I
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PLAINTIFF'S EXHIBIT 68 (Continued)
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PLAINTIFF'S EXHIBIT 69 (Continv ‘
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cz°z$ (211 FAses2ze¢) ss0x5 ysvez0g 497/01
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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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