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MUNITIONS INDUSTRY
HEARINGS
BEFORE THE
SPECIAL COMMITTEE
INVESTIGATING THE MUNITIONS INDUSTEY
UNITED STATES SENATE
SEVENTY-THIRD CONGRESS
PURSUANT TO
S. Res. 206
A RESOLUTION TO MAKE CERTAIN INVESTIGATIONS
CONCERNING THE MANUFACTURE AND SALE
OF ARMS AND OTHER WAR MUNITIONS
PART 11 ^--_/ </
DECEMBER 6, 7, AND 10, 1934
CHEMICAL PREPARATIONS FOLLOWING THE WAR
AND
INTERCHANGE OF MILITARY INFORMATION
Printed for the use of the
Special Committee Investigating the Munitions Industry
UNITED STATES
GOVERNMENT PRINTING OFFICE
83876 WASHINGTON : 1935
MUNITIONS INDUSTRY
HEARINGS
BEFORE THE
SPECIAL COMMITTEE
INVESTIGATING THE MUNITIONS INDUSTRY
UNITED STATES SENATE
SEVENTY-THIED CONGRESS
PURSUANT TO
S. Res. 206
A RESOLUTION TO MAKE CERTAIN INVESTIGATIONS
CONCERNING THE MANUFACTURE AND SALE
OF ARMS AND OTHER WAR MUNITIONS
PART 11
DECEMBER 6, 7, AND 10, 1934
CHEMICAL PREPARATIONS FOLLOWING THE WAR
AND
INTERCHANGE OF MILITARY INFORMATION
Printed for the use of the
Special Committee Investigating the Munitions Industry
UNITED STATES
GOVERNMENT PRINTING OFFICE
S3S76 WASHINGTON : 1935
HARVARD dOLLtgf LIBRAKt
RFCeiVED\THX0U6H THf
9UR{^U FORykESEAftCH ih
KUNICIPALyfcbvERNMENT
SPECIAL COMMITTEE INVESTIGATING THE MUNITIONS INDUSTRY
GERALD P. NYE, North Dakota, Chairynan
WALTER P. GEORGE, Georgia ARTHUR H. VANDEXBERG, Michigan
BENNETT CHAMP CLARK, Missouri W. WARREN BARBOUR, New Jersey
HOMER T. BONE, Washington
JAMES P. POPE, Idaho
Stephen Raushenbush, Secretary
Alger Hiss, Legal Assistant
II
CONTENTS
Testimony of — Page
Beebe, H. F., manager foreign department, Winchester Repeating
Arms Co 2517, 2521, 2523, 2526, 2532
Bradwav, F. W., assistant general manager, smokeless-powder depart-
ment," E. I. du Pont de Nemours & Co 2492,2502
Casev, K. K. V., director of sales, smokeless-powder department, E. I.
difPont de Nemours & Co 2428, 2433,
2449, 2457, 2466, 2475, 2483, 2485, 2489, 2492, 2505
Davis, C. K., president and general manager. Remington Arms Co-_ 2514-
2516, 2533
Du Pont, A. Felix, vice president, E. I. du Pont de Nemours & Co__ 2425,
2477, 2484, 2486, 2488, 2502
Du Pont, Irenee, vice chairman of board of directors, E. I. du Pont
de Nemours & Co 2448, 2457, 2464, 2469, 2474
Du Pont, Lammot, president E. I. du Pont de Nemours & Co 2397,
2400, 2407, 2412, 2415, 2482, 2485, 2487, 2491, 2493, 2511
Du Pont, Pierre S., chairman of board of directors, E. I. du Pont de
Nemours & Co 2404, 2413, 2418
Handy, E. E., vice president. Remington Arms Co 2514
Jonas, Elmslie E., sales agent, Winchester Repeating Arms Co., and
Western Cartridge Co_: 2521, 2523
Monaghan, F. J., export manager, Remington Arms Co 2512, 2515,
2517, 2525, 2528, 2532
Reisinger, W. U., secretary and treasurer. Remington Arms Co 2514
Sparre, Dr. Fin, director development department, E. I. du Pont de
Nemours & Co 2399, 2402, 2411
Swint, W. R., director foreign-relations department, E. I. du Pont de
Nemours & Co 2395,2462
Weston, Charles K., director publicity department, E. I. du Pont de
Nemours & Co 2400, 2413, 2416, 2420, 2431, 2462, 2465, 2468
Background of chemical warfare 2395
Propaganda for protective dye legislation 2400
Activities of American dye industry in opposing attempt to control chemi-
cal-warfare business in 1922 2419
Sale or interchange of military inventions and secret processes 2425
European countries aim for independence in powder supply 2450
Exchange of technical information by munitions companies 2461
Question of control of chemical industry in relation to disarmament 2466
Methods of doing business:
Balkan States 2477
Poland 2489
China 2496
Argentina 2502,2549
Mexico 25 11
Guatemala 2520
• Nicaragua 2525
Bahama Islands 2526
Dominican Republic 2537
Colombia 2543
Brazil 2550
INVESTIGATION OF MUNITIONS INDUSTRY
THURSDAY, DECEMBER 6, 1934
United States Senate,
Special Committee to
Investigate the Munitions Industry,
Washington, D. C.
The hearing was continued in the Finance Committee room, Senate
Office Building, Senator Bennett Champ Clark, presiding.
Present: Senators Vandenberg, Barbour, George, Clark, Pope.
Present also : Stephen Raushenbush, secretary to the committee.
At this point the committee concluded that part of the testimony
which is incorporated in Part X of these hearings, " Embargoes."
afternoon session
(The committee reconvened at 2 p.m. pursuant to recess.)
Senator Clark. The committee will come to order. The Chair
would like to inquire whether any of the companies are now pre-
pared to furnish any of the exhibits which have previously been
requested, and which have not yet been furnished. Mr. Raushen-
bush, let me suggest that you come up here. I believe everybody
can hear you better if you come up here. I happen to know that the
particular place where you are seated is the hardest place in this
room from which to be heard.
Mr. Raushenbush. Mr. Chairman, with your permission, may we
have as witnesses this afternoon the officers of the du Pont Co. who
are particularly well acquainted with the early post war chemical
history of the company and the various foreign connections that
were involved in them. Do you care to call any others, Mr. du Pont?
Mr. Lammot du Pont. I would like to have Dr. F. Sparre.
Senator Clark. You were previously sworn, were you not. Doctor?
Mr. Sparre. Yes ; I was sworn in September,
Mr. Lammot du Pont. Mr. Chairman, I would also like to have
Mr. W. R. Swint.
Senator Clark. You have not been previously sworn, have you?
Mr. Swint. No.
TESTIMONY OF F. SPARRE (RECALLED) AND W. R. SWINT
background of chemical warfare
(Mr. Swint was duly sworn by the chairman.)
Mr. Raushenbush. In the absence of the Chairman, he asked me
to begin an inquiry into a certain phase of the munitions business
2395
2396 MUNITIONS INDUSTRY
which is, frankly, based on one supposition, that the committee is
not only interested in the munitions business, but is interested in the
cause and need for a munitions traffic at all, and the next question
that follows that immediately is the very simple one of why every
nation feels obliged to arm, and the answer is obvious, because every
other nation is arming too.
Then the further question occurs, well, how did this get started —
how did that situation get started, and because it has seemed to us
in examining some of the files of the companies that there were some
slight clues or indications along that line, we wanted to get a little
more background on the question of the chemical development not
only of your companies but of others, because certainly the chemical
developments have a large place in the next Avar, by your admission,
I am sure, and by everybody else's.
Let me add, perhaps, one personal statement in that, that it is
going to be the attempt to be scientific about this. You gentlemen
do not, perhaps, realize how someone coming to the industry newly
feels it impossible quickly to make final judgments. If you Avill per-
mit an illustration, it is a little as if people who have never been in
the jungle have suddently captured a species of life that they had
never seen before, and they were observing it. Of course they bring
nothing but their own understanding of the life around them to
observe that new species. It lives by its own laws and it functions
well, but an outsider looking at it cannot say when it kicks with its
hind legs instead of with its front legs; he cannot say that there is
anything ethical or unethical about that. It is a matter of scientific
interest to find out just how the thing functions, and if you will be-
lieve in the first instance that there is no ethical implication here, I
will appreciate that. We had here at the earlier hearings an illustra-
tion of some of our gas companies that took some convicts in one of
the South American countries and tried out some of their gas on them.
That met with some ethical comments by the members of the commit-
tee. But for the moment, what we are interested in is just to see the
function of this industry not only in connection with the national
defense but with foreign countries, and with this somewhat lengthy
introduction I would like to have a rather full story from then on by
you who are conversant with the early postwar developments of the
company about that.
I frankly am undecided in my own mind whether or not to con-
tinue the practice we have followed on saying, now, is this true,
and showing you an exhibit on it, or asking for a full story. We
do know, let me put it that way. that during the war you did go
into the dve business in a rather large wav. I take it that is correct,
isn't it?
Mr. SwiNT. Yes.
Mr. RAusHENBrsH. It happened about 1917, and we have here quite
a list of the activities regarding dyes of the du Pont publicity bureau
from 1917 to 1921, which shows or which covers a great number of
pages. I do not think I will enter it as an exhibit, but practically
every day, beginning with A]jril 12, 1917. about the time Ave AA'ent into
the Avar, thei-c is a story of the dye developments of the company. I
do not think the time or place or the interest of the company in that
plan is questioned. So I won't enter that as an exhibit.
MUNITIONS INDUSTRY 2397
Now, the investment in that dye industry, we may, without any
implication, say was made possible the same way the investment in
General Motors, which we discussed at the earlier hearing. I mean
there were profits from dealing with the Allies, and these were the
means of seeking the investment.
Mr. Lammot du Pont. No, sir ; I think you are under a misappre-
hension, Mr. Raushenbush. It is true we started into the dye busi-
ness during the war and, in fact, before the United States went into
the war, I believe. In the early days we did not require any very
larsfe investment, because the important thing at that time was the
study of the processes of the industry which, of course, meant both
the men and laboratory rather than plant. The construction of a
plant was started then, but it was very small as compared with
today. The great growth in the investment in the dye business, in
bricks, mortar, and machinery, so to speak, took place after the close
of the war, and it is going on today.
Mr. Raushenhush. I do not see any great importance of that
point. Now, immediately after the close of the war is it a fair
statement to say that both you and the English and the French dye
companies saw that they had a struggle for life against the German
d3^e industry, and started to put up, or help to put up protective
measures against imported dyes?
Mr. Lammot du Pont. I do not think I ought to speak for the
English or French, but we, in this country, fully realizing that we
being an infant industry, must have protection in order to protect
our home business from those who were far more experienced at
that time.
Mr. Raushenbush. At that time, v\-e find a letter from the head
of your publicity department, who had apparently gone to London
at the time. The letter is dated December 10. 1920, which I wish
to offer for the appropriate number.
(The letter referred to was marked " Exhibit No. 909 ", and is
included in the appendix on page 2559.)^
Mr. Raushenbush. He tells of ''" my mission "
Mr. Lammot du Pont. Who wrote the letter ?
Mr. Raushenbush. It is written by Mr. Weston to Mr. Meade, one
of the vice presidents of your company.
He states :
My mission seems to he going fairly well ; I have met a number of our
Amierican newspaper correspondents, and have, I think, succeeded in selling
them our idea. One cannot tell, of course, until the results begin to appear in
American newspapers.
He goes on to say that he is watching the vote in the House of
Commons.
He goes on to say :
I believe that the great strong point to be brought out by our friends in the
United States Senate is, that with .Japan. France, and England all protecting
their dye industries, the United States is left as the only hope of the Germans.
They will, without doubt, concentrate over there and give us a particularly
hard fight.
Now, I do not think that there is any question that the French
and English were, naturally, interested in protecting their new
industries.
1 " Exhibit No. 909 " was referred to further in Part XII, p. 2758.
2398 MUNITIONS INDUSTRY
Senator Clark. That is the first mention of infant industries in
tariff debates for nearly 100 years.
Mr. Lammot du Pont. What is that ?
Senator Clark. That is the first mention of infant industries in
connection with tariff debates for nearly 100 years. That was the
original theory of tariffs and has, in a sense, been cast into the
limbo of forgotten things.
Mr. Lammot du Pont. I do not know about tariff debates.
Mr. Raushenbush. AVould Dr. Sparre or Mr. Swint care to say
whether this was the policy followed by the allied countries, that
they were all trying to protect their new industries from the pos-
sibility of a large German influx after the war ?
Dr. Sparre. Yes, I think that is correct; but I have no first-hand
knowledge except the newspaper reports.
Mr. Eaushenbush. Mr. Weston goes on on the second page :
I shall remain here next week to see this bill through and to continue my
efforts to stoke up the interest of those whom I came to see.
It seems to indicate, does it not, that he was very interested in
not only watching the English tariff bill, but to continue to " stoke "
up the interest of those whom he came to see. It would give the
impression, and I am willing to be corrected, that the company was
sufficiently interested in having that English bill go through to, at
least, send a man over there. He spoke of his mission, and to get in
touch with the newspaper men and to stoke up interest in the matter.
It goes on :
The correspondents in Paris report to the offices here so it is apparent
that if the men in London get the right angle it will be wonderfully helpful.
In Paris I shall devote my energy very largely to bringing the correspondents
in contact more closely with the American sources of news, at the same time
trying to give them the proper angle so that they will appreciate the importance
of the news.
Is there any comment on that particularly ?
Mr. Lammot du Pont. I have no comment.
Mr. Raushenbush. Now, at this point we are not particularly in-
terested in the way the tariff bill in this country was to operate,
although it does come into your correspondence. What we are
interested in at the moment is the thinking that underlies your
interests, but it seems to me, as we examine your files that that
interest is fairly expressed, and here is a cable from Mr. Poucher,
dated December 3, 1920, which I think is, if you will let me say so, an
intelligent cable, an understanding cable. Would you identify Mr.
Poucher for us?
Mr. Lammot du Pont, He was employed by the du Pont Co. He
was in charge of the sales of dyestuffs.
Mr. Raushenbush. In this country, and traveled abroad for you,
did he?
Mr. Lammot du Pont. Yes.
Mr. Raushenbush. This cable, then, in 1920, follows the beginning
of the interest in protecting the dye industry here. It gives the
reason for the thing. That, I think, is very interesting. He says
that he understands —
Signor Tittoni has raised League of Nations interest in national monopo-
lies and their danger to world peace. Urge attention of League be drawn
to danger of resumption of German organic chemical and dye monopoly.
MUNITIONS INDUSTRY 2399
This is by far the most menacing and deserves immediate attention of League,
who might welcome American support on a chemical disarmament measure.
You cannot destroy organic chemical factories having peace functions, but
must insure world redistribution of organic chemical producing capacity by
support of national protective legislation. This is a critical measure, on
which all disarmament schemes must stand or fall.
Now, at this point, you see, Mr. du Pont, the committee becomes
interested in this chemical thing we want to take up this afternoon.
It goes on to offer the proposition :
Disarmament is a farce while Germany retains organic chemical monopolies.
Now, that statement is the one that struck me :
Disarmament is a farce while Germany retains organic chemical monopolies.
You can get full details in disarmament chapter of Major LeFebures' book
now held by Whetmore —
And so forth.
Now, there is a reference to this Major LeFebure, and we find he
left with your company a memorandum dated February 1, 1921,
although it seems to be a little redundant. Because of the im-
portance of the whole chemical warfare equipment industry, I would
like to read it and, if necessary, get your comments on it. His point
is that everything possible should be done to destroy the German
chemical monopoly. He is a British officer, isn't he?
Dr. Spakre. Yes.
Mr. Raushenbush. I offer this cablegram for the appropriate
number.
(The cablegram referred to was marked " Exhibit No. 910 " and
is included in the appendix on p. 2559.)
Mr. Raushenbush. Now, we had a rather interesting illustration of
the head of your publicity bureau being in London watching, stok-
ing up the interest in the tariff over there in the British House of
Commons, and now we have this British major making this comment
that everything possible should be done in America. I offer this
for the appropriate exhibit number.
(The memorandum referred to was marked " Exhibit No. 911 "
and is included in the appendix on p. 2560.)
Mr. Raushenbush. He refers to the dyestuffs OA^er there, and he
goes on to prove the importance of that arsenal in time of war. He
speaks of clause 168 of the treaty, which —
demands limitation of munitions and war-material production to factories or
works approved by the Allied and Associated Powers.
He says it refers to any war materials whatever, and, roughly,
makes the argument that that really should include the big I. G.
plants. He concludes by mentioning specifically :
In addition to certain specific poison-gas plants a large proportion of the
Haber process capacity should logically be dealt with under this article of the
treaty.
Now, that Haber process for manufacture is one of the most suc-
cessful processes in the world?
Dr. Sparre. For ammonia.
Mr. Raushenbush. For ammonia?
Dr. Sparre. Yes.
Mr. Raushenbush. That has been bought by America and other
countries ?
2400 MUNITIONS INDUSTRY
Dr. Sparre. I do not believe it has been bought by the United
States.
Mr. RAUSHE^BUSH. Never in the United States?
Dr. Sparre. No ; but some other countries have.
Mr. Raushenbush. Some other countries have?
Dr. Sparre. Yes.
Mr. Raushenbush. Then he goes on to mention the number of tons
of poison gas produced in those plants, and makes quite a long case
about the need for denying Germany the right to have any gas-
producing capacity at all.
Then he goes on on page 3 :
It may be that by taking certain measures in peace regarding these potential
arsenals, production of poison gases in war would be prevented, because war
itself would be prevented, and the need to produce would not arise.
I think I have already entered that as " Exhibit No. 911."
Then we find that your company was conducting an active cam-
paign over here for the tariff, and in " Exhibit No. 912 " taken from
the 1921 file on " Our present and proposed activities ", showing the
publicity that Shipp & Co., Bronson Batchelor, Inc., and all of the
articles written, and speakers' publicity. It says the company had
made arrangements, and I suppose he is speaking for the company,
and correct me if I am wrong, and that it has many contacts to get
them to send resolutions and personal letters to their Senators, news-
papers, and so forth.
Mr. Lammot du Pont. I have no criticism to make of your state-
ment, Mr. Raushenbush, but I think I would like to study the letter
a little before I could say I could confirm it all.
Mr. Raushenbush. The question is simplj^^ whether or not Mr.
Hale was speaking as an employee of the company. Could you turn
that letter over to somebody ? Perhaps Mr. Weston is here, or some-
body conversant with that, and that you would like to have any
negative answer registered at the proper place in the record. If
Mr. Weston wants to state that, we can have the answer inserted at
this point or later on.
Mr. Lammot du Pont. You want Mr. Weston to testify directly
to this? He was the gentleman who was abroad.
Mr. Raushenbush. If yoii think it is important enough.
Mr. Lammot du Pont. I do not know whether it is important or
not.
Mr. Raushenbush. May we have Mr. Weston sworn, please, Mr.
Chairman ?
TESTIMONY OF CHARLES K. WESTON
PROPAGANDA FOR PROTECTIVE DYE LEGISLATION
(The witness was duly sworn by the chairman.)
Mr. Weston. This is a report of the activities, not of the du Pont
Co. particularly but of the entire chemical — not the entire, but a
very large part of the chemical industry of the United States at
that time. They were formed into the Dyes Institute, I think was
the name, and I was a member of that institute, the publicity and
legislative committee, and this is a report of the activities of the
committee representing the industry.
MUNITIONS INDUSTRY 2401
Mr. Raushenbush. In 1920 the company contributed $21,773.49 and
in 1921 $10,100 to the Chemical Institute."^
Mr. Weston. I do not know.
Mr. Raushenbush. That is '' Exhibit No. 913."
Mr. Lammot du Pont. Not to the chemical industry-
Mr. Raushenbush. I am sorry, to the American Dyes Institute.
Mr. Weston. Yes ; later merged into the Synthetic Organic Chemi-
cal Manufacturers' Associations of the United States.
Mr. Raushenbush. You contributed to an organization which, I
take it, paid Dr. Hale his expenses and fees in these matters. I do
not think it is an important point whether or not he was paid directly
by the company. The thing I was interested in was whether or not
this was not a fair statement about this campaign for protecting the
dye industry that was carried on. Dr. Hale was making speeches
that fairly represented things that were said, and we make certain
allowances for the post-war hysteria at that time, in 1921, and we
find Dr. Hale making a speech that the publicity department quoted,
dated December 16, 1921, called '• The War After the War." That
had some interesting conmients to make on the peace treaty from
the angle of the chemical industry.
Mr. Weston. May I just interject there? I think Dr. Hale was
the vice president of the Dow Chemical Co., and not merely an
employee who was speaking.
Mr. Raushenbush. Most of the gentlemen, as you list them here
as paying their fees and expenses, seem to be men of a great deal of
standing, Mr. Weston, not only Dr. Hale but Dr. Parsons and others.
Mr. Weston. Dr. Herty and others.
Mr. Raushenbush. Dr. Herty is not on that particular list. That
woidd not be the point. You can comment on it, Mr. du Pont, if
you care to, wdiether that was not the sort of atmosphere in which
the chemical protection was put over, speeches like this being made
imder your own auspices and those of the American Dyes Institute.
I am getting at this simply to get at the point of the matter, because
it seems to me that w-as the point that carried at that time.
I now offer the exhibits just referred to as " Exhibits Nos. 912,
913, and 914."
(The memorandum referred to as " Our Present and Proposed
Activities" was marked '"Exhibit No. 912" and is included in the
appendix on p. 2562.)
(The Report of the Activities of the Chemical Industry referred to
was marked " Exhibit No. 913 " and is included in the appendix on
p. 2563.)
(The address by Dr. William J. Hale entitled " The War After
the War " was marked " Exhibit No. 914 " and is included in the
api^endix on p. 2564.)
Mr. Raushenbush. Dr. Hale comments:
The peace treaty was drawn up entirely tri)ni tlie standpoint ol modern
medievalism, or that period just preceding the advent of cliemistry in the
world of industry, and the result was appalling. Thus the " Bungle of
Versailles" was given to man and passed forthwith into obsolete history. Its
four points, from the standpoint of the future, may be characterized as follows:
1. National hatreds engendered by silly apportionments of trivial territory.
2. Germany tinancially crippled but stirred to industrial activities, such as
will soon reinstate her in the iwsition of world leader.
2402 MUNITIONS INDUSTRY
3. Germany deprived of those useless adjuncts of a nation's pride — lier battle-
ships — and thus saved from wasting her wealth on monstrosities of the future.
4. As a gift from the gods, there was left to Germany all of the implements
for future wars, and she was asked to develop them to her best ability.
Then he tells the story about the Badische-Anilin und Soda-Fabrik
at Ludwigshafen, and there was the manufacture of indigo, and
points out that —
Were Germany to be drawn into war, this entire plant may be converted into
a mustard-gas plant in less than an hour's time.
Mr. Lammot du Pont. I think that is a little exaggerated.
Mr. Raushenbush. That is the vice president of the Dow Chemical
Co.
Mr. Weston. I suggested that I think he is.
Mr. Raushenbush. He may be taking a fee for going around mak-
ing these speeches, but supposedly he is saying what is accurate.
He speaks of the indigo plant of the Badische-Anilin which can be
converted into a mustard gas plant in an hour's time. You know that
outfit, do you not. Dr. Sparre ?
Dr. Spakre. It, Badische Co., is part of the I. G. now.
Mr. Raushenbush. It is part of the I. G. now (
Dr. Sparee. Yes, sir.
Mr. Raushenbush. We do not want to go too far afield in this,
but the whole point I am making is that this was a tariff speech
at the time, and he went on to state that the international bankers
who had trade in Europe would take an awful lacing in this regard,
and that American industry must be prepared to m'eet tliis after the
war. In other words, there should be a tariff to protect the chem-
ical industry.
This cable from Mr. Poucher, in which he says that disarmament
is a farce as long as Germany maintains her chemical monopoly,
and the statement by Lefebure, and the speech by Mr. Hale are only
typical things which were in the files, showing, it seems to us, that
the whole question of control of the chemical industry was really a
very important one to the whole question of disarmament.
Would you not accept that at this moment?
Dr. Sparre. If you ask me, I rather have a different opinion.
Mr. Raushenbush. All right, sir.
Mr. Sparre. I do not tliink so.
Mr. Raushenbush. You think these men were wrong ?
Dr. Sparre. If course, different men have different opinions. So
far as I am concerned, I was engaged in the munitions end up to
1916, and that year I was asked to discontinue my work in con-
nection with munitions and undertake a study of new industries,
which the du Pont Co. would take up after the close of the war,
because of at least some people's opinion being, and being also my
own, that that would probably be the last war in our generation, at
least the last large war. We had a large organization of very
competent men, technical men and financial men, and such an organ-
ization is a very valuable asset. And we did not think it was proper
business or fair to the men to discharge them immediately peace
was declared.
Mr. Raushenbush. Pardon me, but are you not getting into what
may seem to be a changing over to another industry ? I was simply
MUNITIONS INDUSTRY 2403
trying to get at the fact that these people were using this argu-
ment to put through the tariff: that the chemical industry had a
relation to war and disarmament, and I asked for an agreement or
disagreement on that fact.
Dr. Sparre. It is true that there is a relationship, but I think it
was very much exaggerated in those days. Certainly the fact is
that the du Pont Co., being now engaged very widely in the chemical
industry, probably only 1 or 2 percent of our business is connected
with munitions. Over 98 percent of our business is commercial.
Senator Clark. Was not that the theory on which we took over
the Germans' chemical patents, Doctor?
Dr. Sparre. The chemical patents were, of course, taken over by
the United States Government.
Senator Clark. Is not that the correct theory?
Dr. Sparre. To some extent, certainl}^, because during time of war
then everything becomes of military value.
Senator Ci^ark. We did take them and keep them on that theory,
did we not?
Dr. Sparre. Yes, but, when peace is declared these patents have
no longer military value.
Mr. Raushenbush. Either the people who sold this tariff to the
country, if one may use that phrase, in those days — and that is, as I
say, of course, only typical of a great many other instances — were
completely wrong, or they were offering a proposition which had
some sense to it ; that is, this proposition that as long as the Badische-
Anilin has a plant that can be converted into a mustard-gas plant,
if true is certainly interesting, on the whole question of chemical
{irmament, and certainly everybody applied it in those days.
" Disarmament is a farce while Germany retains organic chem-
ical monopolies ", signed by your man Poucher, which is a proposi-
tion which we at this moment are now willing to accept; that the
chemical questions were right in the middle of the disarmament
problem, and I wonder whether most of you now here would not
really accept that even today, after some 10 or 15 years beyond the
particular instances that led to this particular action on the tariff.
We still find that in a chemical code you put clauses referring to
the importance of that industry in the preparedness situation, for
example, which was undertaken last year,
Mr, Lammot du Pont, Mr. Raushenbush, I do not think there is
any question in anybody's mind that the chemical industry is very
important from the military standpoint, but the degree of import-
ance is different in every individual's mind.
Mr. Raushenbush. That is fair enough. There are times, let us
say, when it is more important, to state it one way, perhaps, than
another.
Mr. Sparre. I said, Mr. Raushenbush, that the opinions here im-
mediately after the war, I thinl?:, were exaggerated, in the light of
present knowledge. I said that the chemical industry is immensely
important, during time of war, and I said during peace times that
it is also so, but it is commercial products.
Mr. Raushenbush. I do not think there is any argument on that,
Dr. Sparre. The big chemical companies, not only the German,
but ours and the French and English, are prominent at peace-time
conferences, and have to be, so they claim.
2404 MUNITIONS INDUSTRY
Mr. Sparre. That is right.
Mr. Raushenbush. The only point I Avas raising is that in war
time or the period before war, which Major Casey told us might be
10 years the other day, they had a peculiar importance, and the only
thing I was going to draw out of that — and again subject to cor-
rection on this — I was going to accept the proposition that these
people, Mr. Poucher and the others, expressed in those days that dis-
armament would be a farce without such control, and he said with-
out the German chemical monopoly controlled, and I want to take
it one step further and say that disarmament would be a farce with-
out control of the chemical industry. That is what I was trying
to get at.
If these people are wrong, then perhaps this conclusion is wrong.
Dr. Sparre. I think it is very much exaggerated.
Mr. Raushenbush. You do?
Dr. Sparre. Because the chemical industry is a commercial indus-
try, with a negligible part of its sales for munitions purposes during
times of peace, but during times of war the sales for munitions pur-
poses become a much larger percentage, but nevertheless, the com-
mercial requirement is far larger.
Mr. Raushenbush. The comment which should be made on that, T
think. Dr. Sparre, is this : That war-time preparedness naturally is
always taking place in peace times, and if we look across the border of
Germany, or France looks across the line and says, "All these big
chemical plants can within a few days be producing poison gas ", it
has an effect on what France does.
That is what I was trying to say. What happens after the war
starts is less important than the feeling about it. I was making a
very simple point and not trying to make anything very complicated
out of it; that is, that proposition that your people referred to, that
disarmament after the war seemed to be a farce as long as Germany
kept her chemical monopoly, and I wanted to take it one step further,
and see whether chemical companies were in the middle of the dis-
armament question toda3\ and whether it might follow that unless
there was some international control of chemical companies, disarma-
ment might still be a farce.
I threw that open as a tentative conclusion from what I had gotten
out of this. I think possibly we will come back to it later.
Mr. Pierre du Pont. Might I say a word on this situation ?
Mr. Raushenbush. Yes, sir.
Mr. Pierre du Pont. It is just another man's point of view on tht
whole subject.
As I recollect the situation before the war, Germany was the
largest producer of what we call organic chemicals or dyes. There
is no way of distinguishing between an organic chemical, a dye, and
an ordinary chemical. There is no sharp difference. Formerly
organic chemicals were those which grew naturally, either from vege-
tables or through other natural processes, but later on those chemicals
were produced artificially from all sorts of inorganic substances, and
dyes were a part of that group, a small part, probably.
The whole thing is interwoven. Take the manufacture of indigo.
That may result in production of a large quantity of byproduct.
MUNITIONS INDUSTRY 2405
To get rid of that it is used as a raw material for manufacture that
some other industry might be engaged in, so that the whole chemical
industry is one of making major products, and taking the byproducts
and converting them again into other products and byproducts, still
going further, so that there is a continual change and interrelation
of all these products.
Take the question of munitions : It today happens that the princi-
pal munitions are classified among the chemical industry, and also
among the organic chemicals, as I know them, although they were
never made naturally or never occurred naturallj^
Let us take a small instance : We might take nitrotoluene, which
is used for munitions and commercial explosives. The knowledge
of making nitrotoluene, which was all we had when the war began,
put the Government in the position of being able to make trinitro-
toluene, TNT. It is the knowledge of the one which gives you the
knowledge of the other. Although the processes for making nitro-
toluene are not suitable for trinitrotoluene, they are closely allied.
The same thing occurs all through the industry; that is, the knowl-
edge of one thing is useful in connection with the knowledge of how to
make some other product.
In the war materials, there are continuously new inventions being
made, which are used in small quantities only, but are very important.
Such knowledge cannot be had unless a body of experienced men is
engaged in research, and finding out how to get things, learning what
others are doing, and reproducing those inventions either by obtain-
ing direct knowledge or by additional research.
So that it is very important that every nation shall have the
knowledge connected with these products. If the whole thing was
left in German hands, or in the hands of any country, they would
have not only the know-how, the men to do it, and the apparatus
to do it, but they would have a tremendous volume of production on
which to build an explosive business, if it were required.
The important point, as I see it, at the end of the war, was to
reduce the important volume of German business and transfer it
to British or French or other control, so that they would have the
volume basis, the experience basis, and the man-power basis that
Germany had practically monopolized. I wdsh you would correct
me. Dr. Sparre, because I may go wrong on some facts, and if I do,
you may check me up right away — when Germany started in the
chemical industry, one of the first things they made was turkey-red
■dye and indigo dye.
Is that right. Dr. Sparre?
Dr. Sparre. Yes, sir.
Mr. Pierre du Pont. The German plan was to sell those dyes in
great volume. They put natural turkey-red and natural indigo com-
pletely out of business, and that whole enormous trade which for-
merly belonged to China, was transferred to Germany, That en-
abled Germany to have a great background of industry on which
they could build the more intricate dyes, those more difficult to make,
and those used in smaller volume. They would sell their indigo
and turkey-red at prices with which nobody could compete, and that
enabled them to make these other dyes, also beyond the competition
of other people, because they had no volume of production, of course.
2406 MUNITIONS INDUSTRY
Mr. Eaushenbush. I think all this is accepted, Mr. du Pont.
Mr. Pierre du Pont. I think it is.
Mr. Raushenbush. We accepted that as the proposition that Ger-
many had a great advantage in the chemical industry.
Mr. Pierre du Pont. It became necessary to distribute that among
the nations, if Germany was not to retain this immense monopoly^
this great chemical industry.
Mr. Raushenbush. You might also couple that with the proposi-
tion, the very sam^e thought Mr. Poucher had, that unless that was
done, that the matter of disarming was a farce. It would go along
that line, would it not? That is, if Germany had the whole monopoly
of dyes and patents that it had before the war, on low-grade products
and so forth, that other countries could not go in for disarmament.
Is not that right?
Mr, Pierre du Pont. That is right.
Mr. Raushenbush. In 1921 we have some instances of the way that
this campaign was conducted — and I do not want to dwell on them
too much — being a letter dated March 25, 1921, from your publicity
manager to an employee of yours in Washington by the name of
McNeely, which I will offer for appropriate number.
(The letter referred to was marked " Exhibit No. 915 " and is
included in the appendix on p. 2569.)^
Mr. Raushenbush. I want to point out what is said in the third
paragraph of that letter, which reads as follows (reading) :
It is, of course, a fact and is quite apparent that American dye manufacturers
want to protect and develop their industry as a business proposition, but we
want more than the ordinary tariff for the reason that this is an intricate
industry and cannot be developed except under unusual conditions. It really
requires the absolute embargo of competitive products so that we can secure
an income over the sale of these which will be sufficient to pay for the develop-
ment of the products which we have not yet learned to make.
I think with the present unsettled condition of world affairs, and with
Germany's attitude toward the peace treaty argimrents based on the question
of disarmament are very much stronger than any others.
We cite your publicity manager because supposedly he was in
charge of putting the campaign out before the country, and the
argument was being made on the question of disarmament. I want
to go back to that a little later.
We will enter that as an exhibit.
Then a book was apparently prepared by the American Dyes
Institute, in the same year, and put out again, making the same
case, and being sent to all the people, Senators, Congressmen, and
so forth.
It makes a stronger case for the dyes, and says that with an efficient dye-
making industry, no nation need fear disarmament.
I will repeat that :
With an efficient dye-making industry, no nation need fear disarmament, but
without such an industry the disarmed nation would be at the mercy of any
other dye-making nation in the world.
Again he makes the same point I was trying to make a minute
ago, and ran into a little difficulty on, namely, that no nation need
fear disarmament, if it has an efficient dye-making industry, but
^ " Exliibit No. 915" was refprrecl to furtlipr in Fart XII, p. 2704.
MUNITIONS INDUSTRY 2407
without such an industry the disarmed nation would be at the mercy
of any other dye-making nation in the world.
I confess I cannot quite understand what he means by it, but he
goes on, in the next paragraph, to state (reading) :
It points out how quickly a nation with an adequate dye industry can expand
it to make the gases with which Germany almost won the war and which
must figure so prom'iuently in all future conflicts.
Again I am not sure I understand what he means. I simply
want to make the point that here the whole matter appeared to me
to be somewhat under the guise of war defense — using " guise "
without any reflection — somewhat under the theory of war defense,
and was being developed in that way and was being put before
the public.
(The document referred to was marked " Exhibit No. 916 " and is
included in the appendix on p. 2569.)
Mr. Pierre du Pont. The proposition is exactly the same as it is
in the matter of food. A nation is at a great disadvantage if it has
to depend on others for its food, because food is the greatest am-
munition, without which no one could exist at all. It is the same
proposition,
Mr. Raushenbush. Does not your analogy break down if a nation
can borrow food ?
Mr Pierre du Pont. I do not think so.
Mr. Raushenbush. You are talking about the chemical industry
being like food, and you were talking here about putting in an
embargo, or putting in a very high tariff with high foreign duties.
Using your illustration, it would be food. I was just pointing out
that it was not very analogous, when you look at it.
Mr. Pierre du Pont. I am not so sure I follow^ you on that, but
if there is an embargo on the exportation of food to any nation
in the event of war, it is without food and goes down very quickly.
Mr. Raushenbush. There was an embargo on dyes into this
country.
Now, you kindly furnished us with several tables showing your
publicity expenses and your contribution to the American Dyes
Institute, and various other manufacturing organizations, T. R.
Shipp Services, American Chemical Society, Chemical Alliance,
and so forth, during those years. I have not added them up,
however.
Then, in addition, there are contributions to the Chemical Foun-
dation, of very considerable sums. Those were for patent royalties?
Mr. Lammot du Pont. The Chemical Foundation w^as a founda-
tion organized for the purpose of taking over German patents.
Mr. Raushenbush. And these contributions of yours were in pay-
ment for those patents ?
Mr. Lammot du Pont. I do not think they were contributions,
were they?
Mr. Raushenbush. Those payments.
Mr. Lammot du Pont. I think they were payments for the stock.
Mr. Raushenbush. It was a stock arrangement? Did the Chem-
ical Foundation conduct some of the propaganda, if j^ou will, for
some of these tariffs and embargoes at that time ?
83876 — 35— PT 11 2
2408 MUNITIONS INDUSTRY
Mr. Lammot du Pont. I did not get the question.
Mr. Raushenbush. Read the question, Mr. Reporter.
(The pending question, as above recorded, was read by the re-
porter.)
Mr. Lammot du Pont. I cannot answer that.
Mr. Weston. Yes; very decidedly.
Mr. Raushenbush. They did take part?
Mr. Weston. Yes, sir ; they were very active in it.
Mr. Raushenbush. The stock purchasers of the Chemical Foun-
dation would pay for some of that ?
Mr. Lammot du Pont. Some of our payments to the Chemical
Foundation were for stock in the corporation, and some were by
way of royalties for use of the patents owned by the Chemical
Foundation.
(The table showing du Pont publicity expenses was marked " Ex-
hibit No. 917 '' and is included in the appendix on p. 2570.)
(The list of du Pont contributions to various chemical organiza-
tions was marked " Exhibit No. 918 '"' and is included in the appen-
dix on p. 2571.)
Mr. Raushenbush. All I was driving at was this — and again it
is not the most important point — that these contributions listed
here in " Exhibit No. 918 ", along with all the others, in some way
brought about a favorable reaction on the tariff legislation at that
time.
Mr. Lammot .du Pont. Of course, I cannot say what the actual
dollars which we paid into the Chemical Foundation were used for.
Presumably they put it in their bank account and then used the
money for their expenditures, whatever they were.
Mr. Raushenbush. It was something more than a foundation sim-
ply to hold the patents, was it not? It was actively engaged in
doing what it thought necessary to defend the chemical industry at
the time?
Mr. Lammot du Pont. I understand it was formed to acquire the
German patents.
Mr. Raushenbush. And also to acquire the German patents; yes,
sir.
Then going on to a letter written November 29, 1919, in the middle
of this, addressed to W. S. Carpenter, a vice president of the du
Pont Co., from Mr. Meade, and dated in Paris, which I would like
to have you look at, especially on the second page, where we begin
to get what seems to be one of the explanations which is of very
intense interest in the matter of protecting the dye industry in this
country.
I will offer that as the next exhibit.
(The letter referred to was marked " Exhibit No. 919 " and is
included in the appendix on p. 2571.)
Raushenbush. The point to which I particularly wish to refer
in that last exhibit is the end of the second paragraph on that page.
I wonder if you would read that. The letter deals with a great num-
ber of things, but largely the negotiations with the German chemical
industry, and I think you had men over there, did you not, negotiat-
ing with them off and on pretty steadily, from very shortly after
the war, on?
MUNITIONS INDUSTRY 2409
Mr. Lammot du Pont. No ; I think we had nobody there steadily.
Mr. Raushenbush. Oif and on. They were constantly going and
•coming, were they not?
Mr. Lammot du Pont. I think that is correct; yes, sir, not literally,
constantly.
Mr. Raushenbush. Who were your representatives over there ? At
this moment Mr. Meade was over there, and you also had a Mr. Berg
over there reporting to you.
Mr. Lammot du Pont. Yes, sir ; he was over there.
Mr. Raushenbush. And at various times it seems to me you had
other officers. Did not Mr. Poucher go over?
Mr. Lammot du Pont. I think he did.
Mr. Raushenbush. And Mr. Laffey?
Mr. Lammot du Pont. I tliink so.
Mr. Raushenbush. And Mr. Kunz?
Mr. Lammot du Pont. I think so. I do not know that thev were
all there in 1919.
Mr. Raushenbush. We find them getting together in 1919.
Mr. Lammot du Pont. I think it is quite likely.
Mr. Raushenbush. While this business was going on, of showing
the country the importance of the chemical industry in warfare,
which most of us agree is of great importance — we divide, seem-
ingly, Dr. Sparre, only on the degree to which it is important
Dr. Sparre. No; I disagree with another statement.
Mr. Raushenbush. On that particular point?
Dr. Sparre. No; not on that particular point.
Mr. Raushenbush. We will come back to that in just a moment.
At the moment, when you were showing the country here that it
was very important to take over the control of the chemical
monopoly, to take it away from Germany and get a well-developed
chemical industry in this country, you were dealing with the Ger-
mans over there, and that sentence which I asked you to read would
throw some light on it, would it not?
Mr. Lammot du Pont. Which sentence do you mean?
Mr. Raushenbush. I mean this one, toward the end of the second
paragraph, on the second page, which states [reading]
It may be that the I. G.—
that is the German dye trust —
may decide to deal as a unit in the United States with either National,
Grasselli, or ourselves. At any rate you can see the importance of ever-
lastingly turning the regulatory screw in America both as to control of
imports and future protective legislation.
Now, as I understand it, the idea is that that letter says that the
Germans must know that you have control of the situation in this
counry, and that they cannot expect to use the export market, be-
cause you can prevent them in cloing that and that it is therefore
important to —
everlastingly turn the regulatory screw in America both as to control of imports
and future protective legislation.
At the same time the big tariff campaign was going on. This was
one of the results of that campaign that brought the Germans to
terms?
2410 MUNITIONS INDUSTRY
Mr. Lammot du Pont, It was what was sought over there.
Mr. Eaushenbush. It was intended to bring the Germans to-
terms ?
Mr. Lammot du Pont. Yes ; to keep them out.
Mr. Raushenbush. In that connection, in the same document there
are minutes of a meeting held November 20, 21, and 22 at the Baur
au Lac Hotel. Zurich, Switzerland, in which the representatives of
the Badische Co. had an indigo plant to be converted into a mustard-
gas plant, according to Dr. Hale, inside of an hour.
Mr. Lammot du Pont. Not an indigo plant.
Mr. Raushenbush. He referred to it as having an indigo process,,
didn't he?
Mr. Lammot du Pont. Only a part of the plant.
Mr. Raushenbush. They had a much bigger plant, of course.
Mr. Lammot du Pont. I am not a chemist, but I do not think,
indigo and mustard gas would relate to the same thing at all.
Mr. Raushenbush. I do not want to be f ormalistic about this ; Dr.
Hale describes in detail that matter, but I skipped the description.
But let us take, for example, indigo, and he talks about how it is
processed, the making of chlorine gas, and so on, and he says that
with Germany drawn into war this entire plant could be converted
into a mustard-gas plant in less than an hour's time.
Mr. Lammot du Pont. I said I thought that was an exaggeration.
Mr. Raushenbush. Yes; you did at the time.
Mr. Lammot du Pont. Yes.
Mr. Raushenbush. Now, coming to this negotiation you were hav-
ing with the Germans at the time — that memorandum of the minutes
I would like to enter as an exhibit with the proper number.
(The minutes referred to were marked " Exhibit No. 920 " and are
included in the appendix on p. 2573.)
Mr. Raushenbush. It is proposed here to form a world corpora -
tion — what they call a world company — with this German company.
Isn't that about it? They reserve the German market for them-
selves, and they say the French market is tied up by the French, but
you will have about the rest of the world on that. Isn't that about
an accurate outline of what this process was ?
Mr. Lammot du Pont. I do not see that.
Mr. Raushenbush. That is on the first page there [reading] :
The world company should have the whole world as its market, except as
follows :
(a) France with whom the Badische Co. already have made a contract which
is limited to the manufacture and sale only in France, her colonies, and pro-
tectorates. It is understood that should the French fail to carry out their
plans these territories should be included in those assigned to the world
company.
(6) The Badische Co. shall be granted an exclusive territory in which to
exploit the process, Germany and the territory known as "Austria-Hungary."
And certain further rights in Europe. And then you seem to have
the rest of the world there, according to this tentative plan.
Mr. Lammot du Pont. The paragraph numbered 1 there says it is
possible to do that.
Mr. Raushenbush. Yes. And then you go on to describe what
that company would be if that plan went through.
Mr. Lammot du Pont. It was all possible.
MUNITIONS INDUSTRY 2411
Mr. Ratjshenbush. Yes ; it was all possible. The point is not the
detail here, Mr. du Pont. What I am trying to get at is that tbere
were fairly serious negotiations going on at the time.
Mr. Lammot du Pont. At that stage they were all possibilities.
Mr. Raushenbush. Yes. Here was a new situation the world was
in. Germany had had the chemical monopoly, had shown it up very
■expressly in a military way during the war, and the chemical com-
panies in the rest of the world were interested in either utilizing their
processes or their chemists or their markets, isn't that true ? There is
nothing unusual about it. All I am trying to get is an agreement
on that.
JNIr. Lammot du Pont. No. The only point I wanted to make is
that they were discussing possibilities.
Mr. Raushenbush. Yes. This did not go through.
Mr. Lammot du Pont. No.
Mr. Raushenbush. Mr. Sparre, did you want to interrupt to tell
>me where I made a mistake a little while ago?
Dr. Sparre. I said I disagreed with the statement that the dis-
armament would be a farce unless tlie chemical industry were under
control.
Mr. Raushenbush. Would you raise your voice, please ?
Dr. Sparre. Do you want me to repeat it?
Mr. Raushenbush. No ; but would you just raise your voice from
now on?
Dr. Sparre. All right. That was my only disagreement. That
was a statement I made.
Mr. Raushenbush. You disagreed with' what was said here about
the disarmament being a farce unless the chemical industry were
under control?
Dr. Sparre. Yes. I think that is an exaggeration. I don't think
there is the slightest foundation for it. I don't think that it has
any connection with disarmament.
Mr. Raushenbush. You don't think it has any connection with
disarmament?
Dr. Sparre. The commercial chemical industry.
Mr. Raushenbush. Did you see any material put out by chemical
companies, the American dye industry, when they made their case
at the time ? Or was that put out over your opposition ?
Dr. Sparre. No; I do not disagree with anything else said, only
that one statement.
Mr. Raushenbush. I certainly thought in those days when they
were trying to protect their newly won industry against the rest
of the world, it was right in line with the disarmament question.
It is either concerned with the armament question or the disarma-
ment question, is it not? There isn't much doubt about that, is
■there?
Dr. Sparre. No; I think it is a commercial industry.
Mr. Raushenbush. Then why did you write a year ago that " the
industry is to be considered especially because of its importance to
national defense " ?
Dr. Sparre. It is important to national defense; yes. I don't
have any disagreement with that.
Mr. Raushenbush. National defense being then either disarma-
.ment or armament. It is either way you do it. It is in the middle
2412 MUNITIONS INDUSTRY
of the aniiainent question rather than the disarnient question. It
is very important, is it not ? I believe we agree on that.
Dr. Sparre. Certainly it is very important; yes. There is no dis-
agreement on that.
Mr. Raushenbush. Coming back to this outline, here is another
letter dated January 12, 1920, which will be offered as an exhibit.
(The extract of letter referred to was marked " Exhibit No. 921 "
and is included in the appendix on page 2574.)
Mr. Raushenbush. That is an extract from a letter dat^d January
12, 1920, from Mr. Berg, describing a further conference between the
English and the Germans and the Belgians in Aachen, in Germany,.
January 12, 1920, in which the English and the Belgians and ap-
parently the French — French members of the Solvay Company — are
also trying to negotiate with the Germans, and the head of the
German group has said he has already made an arrangement Avith
the du Pont Co. to tie up with them, if thej^ can agree.
Mr. Lammot du Pont. On what subject was that, Mr. Raushen-
bush ?
Mr, Raushenbush. Do you want me to go through the whole
letter?
Mr. Lammot du Pont. No. I think the subject was mentioned in:
the fifth paragraph.
Mr. Raushenbush. Of the second page?
Mr. Lammot du Pont. The first page, where it says, " World ex-
ploitation of the ammonia process."
Mr. Raushenbush. I don't seem to find that.
Mr. Lammot du Pont. It is the fifth paragraph on the first page.
Mr. Raushenbush. Oh, yes. " World exploitation of the ammonia
process is concerned."
It says [reading] :
The Badisclie has, as you know, been communicating with Brunner Mend
for quite some time and he believed the Badische should see them alone and
inform them in a general way about our arrangement as far as the world
exploitation of the ammonia process is concerned.
Did the Badische have other processes which were particularly
interesting to you in a chemical way at that time ?
Mr. Lammot du Pont. Why, yes; they had a very large number
of processes.
Mr. Raushenbush. It was one of the leading chemical companies
of Germany; was it not?
Mr. Lammot du Pont. Yes.
Mr. Raushenbush. It was only in that connection that I wanted to^
bring that out.
Mr. Lammot du Pont. Incidentally, that previous report, I think^
refers to the ammonia process also.
Mr. Raushenbush. Now we come back to Washington about this
time in 1920, and on January 22, 1920, we have a letter from Mr.
Poucher to Mr. Irenee du Pont.
(The letter referred to was marked "Exhibit No, 922" and is
included in the appendix on p. 257G.)^
Mr. Pierre du Pont. Mr, Chairman, I think it is unfortunate that
Mr, Irenee du Pont was excused today. That is a part that requires
his presence.
I •' Exhibit No. 922" was referred to further in Part XII, p. 2774.
MUNITIONS INDUSTRY 2413
Mr. Raushenbush. Who?
Mr. Pierre du Pont. Mr. Irenee dii Pont.
Mr. Raushenbush. That is right.
Mr. Pierre du Pont. He was at that time the president and he
would have at his fingers' ends things that I do not know anything
about, and I doubt if my brother Lammot is familiar with it.
Mr. Lammot du Pont. I am just pinch hitting.
Mr. Pierre du Pont. Could we pass to another part of it and let
that go until he returns?
Mr. Raushenbush. See if you can help identify events there.
Were you still president of the company there in 1920, Mr. du Pont?
Mr. Pierre du Pont. No.
Mr. Raushenbush. Not in 1920?
Mr. Pierre du Pont. No. I had nothing to do with this part of
it and I am totally unfamiliar with it, except as it comes to me by
reading the documents for the first time.
Mr. Raushenbush. It is a matter describing the fight here inWash-
ington. It says, " Situation clearer and better today." Can you
identify " Martin " and " the major " and " Culbertson "? Mr. Wes-
ton, you were active in all this?
Mr. Weston. Yes. That was 15 years ago, but I cannot think who
Martin is or the major.
Mr. Raushenbush. You have seen all of this correspondence re-
cently, haven't you?
Mr. Weston. Yes; and I have tried to remember a lot of it, but
have been only partially successful.
Mr. Lammot du Pont. The only one I recall there is Culbertson.
He was a Senator at the time.
Mr. Raushenbush. He was a Senator?
Mr. Lammot du Pont. Yes.
Mr. Raushenbush. And Wood, do you recognize as John P. Wood,
the Congressman?
Mr. Weston. Where did he figure? I don't recognize the name.
Mr. Raushenbush. He was in Congress. Perhaps you can get it
from this.
Situation clearer and better tmlay.
Martin and the major are liard at it. The plan is to push and keep Wood
in the background ; that is, beliind Culbertson. Martin and the major are to
fight it out with Culbertson by agreement witli Senator Curtis.
They will take anything from Culbertson that will help embargo and nothing
that will hurt.
It is not that so much as the next paragraph that I am interested
in:
The major will likely propose that, as this is a measure touching national
defense ; the Commission should be headed by General Siebert to give it the
flavor of defense rather than tariff.
Does anybody place the major in that story?
Mr. Weston. I cannot.
Mr. Raushenbush. The only point there was that here was a defi-
nite attempt to give, I suppose, the Embargo Commission a flavor of
defense rather than of tariff. That is the only purpose.
Mr. Weston. Culbertson was a member of the Tariff Commission^
wasn't he?
2414 MUNITIONS INDUSTRY
Mr. Pierre du Pont. I do not recall that.
Mr. Kaushenbush. That is the only purpose for which that is
introduced.
Mr. Weston. No; that does not mean anything to me. The only
major I can think of was a Major Sylvester. That is bringing in
another dead man, but I don't think he had anything to do with that.
Mr. Kaushenbush. Mr. Weston, are you " C. K. W." ?
Mr. Weston. Yes.
Mr .Kaushenbush. I have here a letter signed by you, addressed
to Mr. Kust, of the Koppers Co. in Pittsburgh, November 10, 1919.
(The letter referred to was marked " Exhibit No. 923 " and is
included in the appendix on p. 2577.)
Mr. Kaushenbush. That refers to a Col. John P. Wood. Is that
the man referred to in the earlier letter ?
Mr. Weston. Yes; Twenty-second and Spring Garden. John P.
Wood was, I think, head of a large textile industry in Philadelphia.
Mr. Kaushenbush. Yes.
Mr. Weston. That " Twenty-second and Spring Garden " rather
identifies it.
Mr, Kaushenbush. Yes; it does. Then you were asking the sup-
port of the Koppers group in Pittsburgh, with Mr. Grundy in
Pennsylvania to help you in this matter, w^eren't you ?
Mr. Weston. Yes.
Mr. Kaushenbush. Then there is another letter which shows some-
what the same sort of thing, and again may I point out that I per-
sonally feel that when an industry wants to get something it operates
in certain wa3^s, and one cannot at long distance pass too much judg-
ment on it, and I am not attempting that, but here is a letter dated
March 23, 1920, addressed to Mr. Choate and signed by Mr. Poucher,
which deals with this same business.
(The letter referred to was marked " Exhibit No. 924 " and is
included in the appendix on p. 2577.)
Mr. Kaushenbush, Will you look at that, Mr. du Pont, if you can ?
It deals with this opposition of the textile industry to your bill and
shows the rather interesting way one of your men attempted, it
seems, to influence the textile industry. I refer to the last para-
graph on the first page, beginning " Incidentally, Mr. Hobbs." Can
anybody identify Mr. Hobbs, Mr. Franklin W, Hobbs?
Mr. Lammot du Pont. He was a man interested in textiles in New
England ; I think in Providence.
Mr. Kaushenbush (reading) :
Incidentally, Mr. Hobbs called Mr. Woods' attention to the movement under
way by the Department of Justice, to investigate the textile industry on the
charge of undue profiteering. At any rate, Mr. Wood decided to call this meet-
ing. Mr. Hobbs tells me he made a statement along the lines of Mr. Hobbs'
letter. This was followed by some remarks by Mr. Auerbach, to the effect that
in his opinion these mills should all support the bill.
It would seem to be a little use of well, perhaps, inside information
from the Department of Justice in the matter. Does anybody know
anything about that transaction at all? Don't you remember, Mr.
Weston ?
Mr. Weston. Let me check it again. I have not noticed this.
Mr. Kaushenbush. I realize we are at some handicap by the ab-
sence of Mr. Irenee du Pont, but he was excused.
MUNITIONS INDUSTRY 2415
Mr. Weston. Where is that reference to the Department of
Justice ?
Mr. Eaushenbush. The last paragraph.
Mr. Weston. No ; I cannot throw any light on that.
Mr. Rausitenbush. You do not identif}^ that in any way?
Mr. Weston. No, it does not register with me at all.
Mr. Raushenbush. We come to another letter dated February 3,
1920, from your agent, Mr. Berg, over in France to the du Pont Co.
(The letter referred to was marked " Exhibit No. 925 " and is
included in the appendix on p. 2578.)^
Mr. Raushenbush. In the second paragraph on the second page of
this letter, the Germans seemed to realize that you are doing what
seems to be working against them over in this country. There isn't
much question about that point, is there ? Dr. Herty was in on that,
apparently. Now, did this scrap, Mr. du Pont or Mr. Swint, or as
far as anybody remembers here, did this business of your raising
the tariff against the Germans sort of put an end for awhile to
your negotiations with them about these various things ? Was there
the feeling that they would not particularly deal with you on their
processes and patents as the result of this?
Mr. Lammot du Pont. That paragraph seems to indicate that.
Mr. Raushenbush. I mean, what is your general experience and
memory on that thing? How about it?
Mr. Swint. i was not connected with this sort of work at that
time.
Mr. Raushenbush. Was there a lapse in connection with your
securing this?
Mr. Lammot du Pont. We never did get it.
Mr. Raushenbush. On any arrangements at all?
Mr. Lammot du Pont. Not on this ammonia job.
Mr. Raushenbush. No, but didn't it affect the German companies
generally ?
Mr. Lammot du Pont. I do not think it did. but I do not recall
how it happened.
Mr. Raushenbush. I do not want to particularly go into it, but we
have some other letters about it.
Now, coming back to the Congress of the United States, it would
seem that Mr. Irenee du Pont had taken the fight down to Congress
himself. Was he then the president of the company, Mr. Pierre
du Pont?
Mr. Pierre du Pont. Yes, sir.
Mr. Raushenbush. When did he take it over ?
Mr. Pierre du Pont. In 1919.
Mr. Raushenbush. That exhibit needs some identification, per-
haps, and we had better wait until he comes back on that. Let me
take that up later. I will withdraw that for a moment.
At the same time that you were making this fight in the Con-
gress for your legislation, your protection, is it not true that you
had a man in Paris who was actively engaged in publicity work over
there in trying to get dispatches sent from both Paris and London
to make our people in this country feel that we absolutely had to
1 " Exhibit No. 935 " was referred to further in Part XII, p. 2756.
2416 MUNITIONS INDUSTRY
have this protection for our dye industry or your dye industry as a
war measure ? Do you remember that, Mr. Weston ?
Mr. Weston. Yes.
Mr. Raushenbush. Will you tell us a little about that ? Here is a
letter from Mr. Raleigh written from Paris to you January 25, 1921,
which will be the next exhibit number.
(The letter referred to was marked "Exhibit No. 926" and is
included in the appendix on p. 2579.)
Mr. Weston. What is the name ?
Mr. Raltshenbush. Mr. Raleigh, addressed to Mr. Weston.
Mr. Weston. Yes.
Mr. Raushenbush. I call your attention to paragraph 3, as to the
matter of control of the press. He speaks of having arranged cer-
tain articles to come out in France. He goes and talks with some
prominent people there and gets news stories which seem to be
calculated to have a very definite effect on public opinion here.
Mr. Weston. That was the object of the visit over there. The
visit over there was to try to off-set the very rabid German propa-
ganda which was coming over here, I think, at that time — this is
back in what?
Mr. Raushenbush. In 1921.
Mr. Weston. At that time the question of reparation dyes was
under consideration. I think we were still officially at war with
Germany at that time. I don't remember just when we signed the
treaty. When was it? Anyway, the question of reparation dyes
was a very live topic. There were a number of American chemists
and people interested in the industry over there, and we were very
anxious at this end, our D^^e Institute committee, to offset what we
thought were the unfair and untrue stories that were coming from
abroad. I went over there to try to get in touch with the news
sources and put the American newspaper correspondents in touch
with the sources of information. Mr. Raleigh was an old American
newspaper acquaintance of mine, and when I left I left him in
charge of that work. His work principally was to keep the news
going from the American sources over there rather than from the
German sources which we had been getting.
Mr. Raushenbush. You speak of the —
Public Ledger syndicate and the Chicago Tribune syndicate papers are to be
supplied with a story I have arranged which will point out that the French
Government, upon confidential information from its investigators in Germany
regarding a coming great German dump of goods, will further increase its co-
efficient tariff rates on dyestuffs, chemicals, etc. The stories will point out that
France will increase the coefficients not only to safeguard French industry but
also to prevent further unemployment.
You go on, then, with other letters addressed to your department,
filed by them, Mr. Poucher, and others, particularly January 5, 1920,
to cite the headlines in the British papers, " Britain foresees gas
war."
That will be offered as an exhibit.
(The document referred to was marked " Exhibit No. 927 " and
is included in the appendix on p. 2580.)^
1 " Exhibit No. 027" was referred to further in I'art XII, p. 2759.
MUNITIONS INDUSTRY 2417
Mr. Raushenbush. That headline continues :
New legislation will shut out dyestuffs and enable plants to be built which
can be converted into poison-gas factories.
You cite further stories from the British papers :
Dye plants, by a slight change, can be readily converted into war plants for
the manufacture of poison gas.
Then you take credit on January 15. 1921, for a story in the Bos-
ton Transcript, dated from London. "" Britain fore-^ees <ias warfare ",
a story by Wythe Williams from Paris about German dye plots
against tlie United States; the Evening Bulletin of Philadelphia,
dispatch dated from London; and the Public Ledger, a dispatch
dated from Paris. '" Germany sets dye trade trap."
That will be offered as another exhibit.
(The memorandum referred to was marked " Exhibit No. 928 ",
and is included in the appendix on p. 2851.^
Mr. Weston. I do not remember the details of that, but all of
that was part of a campaign that we were conducting for the up-
building of the American dye industry and to offset, as I said before,
the things that were coming out of Germany that I thought were
inimical to our own industry.
Mr. Raushenbush. And you had the men in Paris who were writ-
ing articles for the Paris editions of the New York Herald and Chi-
cago Tribune writing under assitmed names; is that right?
Mr. Weston. Yes. I think that was Ben Raleigh. Ben Raleigh
was the European representative of the Whaley-Eaton News Serv-
ice, and Ben was doing this entirely outside of his Whaley-Eaton
connection, and he did not want to do it under his own name.
Mr. Raushenbush. He was writing under the name of Guy Martin
for publication purposes?
Mr. Weston. I do not recall the name, but if that is the name
that is given in the letter, that is it.
Mr. Raushenbush. I will offer as an exhibit, dated April 28, 1921,
letter from the publicity manager to Mr. Meade, dealing with that
«tory.
(The letter referred to was marked " Exhibit No. 929 ", and is in-
cluded in the appendix on p. 2581.)
Mr. Raushenbush. Now, isn't this true — this is not your chemical
company we want to got into, but the others — is it not true that
you thought the situation was important enough so that you had
to send a man over to Europe to keep the pot boiling, not only in
Paris but in London, with dispatches that would be calculated to
make the American people see the importance of favoring your par-
ticular industry ?
Mr. AVeston. That is exactly what we were after.
Mr. Raushenbush. That is exactly what you were after and
exactly what you were doing.
Mr. Westox. Yes.
Mr. Raushenbush. Just to show you were not the only ones here,
I want to offer an exhibit dated June 14, 1922, which indicates —
again, you received this from the Whaley-Eaton Service — that some
1 " Exhibit No. 928 " was referred to further in part XII, p. 2760.
2418 MUNITIONS INDUSTRY
of your competitors in the chemical industry were over negotiating
with the Germans,
(The letter referred to was marked "Exhibit No. 930", and is
included in the appendix on p. 2582.)
Mr. Raushenbush. Mr. du Pont, would you recognize that letter
at all? Do you recognize which of your competitors were over
there, referred to in those negotiations?
Mr. Weston. I don't know.
Mr. Lammot du Pont. No, I do not recognize them at all.
Mr. Raushenbush. Isn't there anj^body here, outside of Mr, Irenee
du Pont, more closely connected with the whole tariff and dye busi-
ness at that time? Your competitors were apparently over there,,
and, according to this, they were using three United States Con-
gressmen to help them in their negotiations. Don't you remember
who those people were? It must have been some company of some
importance.
Mr, Lammot du Pont, This refers to competitors.
Mr. Weston. This, I take it, Mr. Raushenbush, is a quotation from
the Whaley-Eaton Service, which is one of these Washington news
services,
Mr. Raushenbush. A cable from Paris.
Mr. Weston. Sent along as a matter of information. That would
be my guess on that, without knowing anything at all about it.
Mr. Raushenbush. Your staff has all this correspondence some-
w^here in the back of the room, I am sure, but, as I remember it
from the rest of the papers which we did not take, one of your com-
petitors had this particular Congressman mentioned in the third
line helping them in connection with the negotiations with the Ger-
mans at the time. Now we find out he had two other Congressmen
associated with him, which makes three, and what I am trying to
get at is what company that was that was so interested in getting
in on this German dye industry.
Mr. Pierre du Pont. Weren't they all interested, all of the manu-
facturers in the chemical industry?
Mr. Weston. All except those who had German connections. They
were not interested in this American Dye Institute. That was Metz
and some others. I forget who.
Mr. Pierre du Pont. Weren't all of the members of the Dye In-
stitute active in this question?
Mr. Weston. All the members?
Mr. Pierre du Pont. Yes,
Mr. Weston. Very active.
Mr. Pierre du Pont. Haven't you a list of those members?
Mr. Weston, No; I have not.
Mr. Pierre du Pont. Haven't you a list of the members of the
Dye Institute? I think that would be quite complete.
Mr. Raushenbush. I don't think we have that here, as I recall it.
Mr. Weston. It included all of the American dye and chemical
manufacturers, except the few who had German connections sur-
viving their pre-war control of the industry in this country. There
are not many of them.
Mr. Raushenbush. Wliat I am getting at is this: Some of you
must have known what your competitors were trying to do over
MUNITIONS INDUSTRY 2419
there in Germany. Either they were trying to sign up with the
Germans on some of these patents and processes at the time when
the Germans were antagonistic to you because of tariff activities,
■or else they were trying something else.
Mr. Weston. I am sure, without knowing names, that there were
no competitors in this thing, that all of the American dye and chem-
ical interests worked together in this movement, and that the only
competitors were the few with German connections wdio were not
members of the institute.
Mr. Raushenbush. Who would those be?
Mr. Pierre du Pont, I think at that time all of the German pat-
•ents were in this Cliemical Foundation. You see, the United States
Government took the whole thing over, and it was placed in the
hands of the Chemical Foundation, so the Germans were powerless
to negotiate their patents with anyone.
Mr. Lammot du Pont. And those patents were available to every
American manufacturer.
Mr. Raushenbush. The processes were still open, weren't they?
I mean, you were negotiating with them about this ammonia process
liere a little while ago.
Mr. Pierre du Pont. That was not a part of the dye industry.
Mr. SwiNT. I do not believe there were any patents valid at that
time. I am not sure.
Mr. Raushenbush. But there were processes of considerable
importance.
Mr. SwiNT. Yes.
Mr. Raushenbush. I do not think the distinction you made there
changes the subject?
Mr. Pierre du Pont. You are quite right in that.
Mr. Raushenbush. Here is something I do not want to stress too
much, but apparently the Germans had enough so that rather lead-
ing American Congressmen carried on negotiations for somebody
who I recall from your file was one of your competitors, and now
we find he has two others, who are rather important Congressmen,
associated with him. All I am trying to show is not what your
company was doing, but what competitive companies were doing,
and I wanted to see if somebody from your correspondence or file
could find what that transaction was or what the name of that
•company was.
Mr. Lammot du Pont. I don't think there is anybody could state
that, unless it is Irenee, and I don't know whether he would be
able to.
Mr. Pierre du Pont. Cannot we mark that for something to
investigate? We may be able to find out.
Mr, SwiNT. Mr, Raushenbush, I would like to correct that state-
ment about the question of patents, I recall now there were several
patents on ammonia that were still in force at that time. There
was a long series of them and some of them had expired and some not.
activities of AMERICAN DYE INDUSTRY IN OPPOSING ATTEMPTS TO
CONTROL THE CHEMICAL WARFARE BUSINESS IN 192 2
Mr. Raushenbush. In view of the absence of so many members,
when we arranged our schedule we did not realize, or I did not
2420 MUNITIONS INDUSTRY
realize personally, that Mr. Irenee du Pont would not be here. I
think we would like to wait until his return before proceeding with
all of this. But I do want to ask Mr. Weston, who is here, just a
few more questions about things at this time, Mr. Weston, I want
to show you an exhibit dated September 22, 1921, which will be
offered.
(The letter referred to was marked " Exhibit No. 931 " and is
included in the appendix on p. 2582.)^
Mr. Raushenbush. In this letter you wrote to Mr. P. H. Whaley
of the AVhaley-Eaton Service:
My Dear Whaley: You know, of course, that the chemical industry will
figure very largely in the coming Disarmament Conference. The Chemical
Warfare Service will, of course, be consulte<l. It may interest you, as a piece
of news, to learn that the chemical industry as a whole will be represented
through advisers to be appointed to help the American delegation solve its
problems. The names of several distinguished chemists are now under con-
sideration at the White House and announcement of the appointment of rep-
resentatives of the chemical industry probal:)ly will be made very soon.
For your private information, the President has received favorably the
suggestion that Dr. Charles H. Herty and Dr. Edgar Fahs Smyth, former
provost of the University of Pennsylvania and president of the American
Chemical Society, be named as advisere.
Could you identify Dr. Herty for us, Mr. Weston ?
Mr. Weston. Dr. Herty is one of the outstanding chemists of the
country. Dr. Herty is one of three who tonight is receiving high
honors from the Chemical Alliance in New York. That is where
Mr. Irenee du Pont has gone to present those honors to Dr. Herty,
Mr. Poucher, and Francis P. Garvin. Dr. Herty has been one of
the outstanding chemists of the country. Dr. Smith was a very
famous and Avell-known chemist and former provost of the University
of Pennsylvania, as it says here.
Mr. Raushenbush. Was not Dr. Herty involved in your negotia-
tion with the Germans? Had he not been in Europe for you?
Mr. Weston. Dr. Herty went to Europe for the Dyes Institute.
Mr. Raushenbush. For the Dyes Institute ?
Mr. Weston. Yes, sir.
Mr. Raushenbush. But he was actively interested in your dealings
with the Germans at these various meetings, was he not?
Mr. Weston. He was actively interested in our activities here.
I do not know that he had anything to do with the Germans here.
Mr. Raushenbush. It seems to me that we ran into him a few
moments ago.
Mr. Weston. He was a Dyes Institute man.
Mr. Raushenbush. And you contribute, in turn, to the Dyes Insti-
tute?
Mr. Weston. We were a part of the organization.
Mr. Raushenbush. Then we come to something which took place
on November 9, 1921, and I show you this letter from the Whaley-
Eaton Service to Mr. Frank Byrne, which I wnll ask to be appro-
priately nnmbered.
(The letter referred to was marked " Exhibit No. 932 " and is in-
cluded in the appendix on p. 2582.)^
Mr. Raushenbush. Was Mr. Byrne in your department?
1 " Exliibit No. 931 " was referred to further in Part XII, p. 2755.
^"Exhibit No. 932" was referred to further in Part XII, p. 2756.
MUNITIONS INDUSTRY 2421
Mr. Weston. Frank Bj'rne is my assistant.
Mr. Raushenbush. That letter states [reading] :
Referring to your telephone inquiry in regard to the members of the French
delegation experts on chemical disarmament^ —
This was approaching the 1922 Chemical Disarmament Conference
here in Washington, was it not?
Our own information, as carried in our last week's foreign letter, came by
cable, which mentioned the names of these two gentlemen as Mayer and
Moren. On inquiry at the State Department, we find that M. Andre Mayer
is in Washington with the French delegation, but no M. Moren.
Then the letter goes on to state this, to which I call your attention :
We tliink it very unlikely that we will he able to get any of the details of
the plan for chemical disarmament from these gentlemen, but we will do our
best.
Mr. Weston. Yes, sir.
Mr. Raushenbush. Do I take it from that, that yon were trying to
sound out the members of the French disarmament delegation at that
time ?
Mr. Weston. I have tried to refresh my memory on this, and, as I
recall it, the Whalen-Eaton Service was a Washinglon news service,
and they sent out the announcement that these gentlemen were com-
ing over from Paris, as they say here in their foreign letter, and my
department asked the Whaley-Eaton Service if they had any more
information or if they could get any information to supplement their
news announcement. That is the reply.
Mr. Raushenbush. The reply is that, '' We think it very unlikely
that we will be able to get any of the details of the plan for chemical
disarmament from these gentlemen, but we will do our best."
Mr. Weston. Yes, sir.
Mr. Raushenbush. Now, that, together with an exhibit dated No-
vember 25, 1921, which you wrote to Mr. Poucher, is interesting.
I will offer that last letter for appropriate number.
(The letter referred to was marked " Exhibit No. 933 ", and is in-
cluded in the appendix on p. 2583.)^
Mr. Raushenbush. That letter reads :
I am informed through the Washington " grapevine " that the British dele-
gation to the Limitation of Armaments Conference has a plan to submit con-
cerning the chemical industry which embotlies these points —
That again is a disarmament conference or a limitation of arma-
ments and the chemical industry is coming into it, is it not?
Mr. Weston. Yes, sir.
Mr. Raushenbush. And you were informed through the " Wash-
ington grapevine " about what the British delegation has. Could we
stop for a minute and find out just exactly whom you had down here
in Washington at that time ?
Mr. Weston. We had down here a large delegation and^ the
American Dyes Institute continued on the job. We had headquar-
ters established here, with a secretary. I suppose there was probably
at all times a half dozen or more representatives of the industry who
were here seeking all kinds of information bearing on this subject.
That is probably the " grapevine." I do not know.
1 " Exhibit No. 933 " was referred to further in Part XII, p. 2757.
2422 MUNITIONS INDUSTRY
Mr. Raushenbush. Could you mention some of the names of the
people Avho were most active for you at that time down here ? What
is this Washington " grapevine ? "
Mr. Westox. I was just saying that.
Mr. Raushenbush. You mentioned the institute, and so forth.
Can you give me the names of all of these people ?
Mr. Weston. You will have to get the names from the Dyes Insti-
tute; get the membership of the Dyes Institute and check up the
names.
Mr. Raushenbush. The names of the members of the Dyes Insti-
tute would go all over the country and be located there.
Mr. Westox. Yes, sir.
Mr. Raushenbush. Who was in Washington operating here at that
time ?
Mr. Weston. Tiiere was a representative from nearly every com-
pany which was doAvn here. I think all the Dyes Institute member-
ship had representatives here. We were here, and National Analine
had men here, and Calco Chemical Co. had men here, and the Dow
Chemical Co. were here, and the Monsanto Chemical Co. That is
about as far as I remember offhand.
Mr. Raushenbush. I wanted a list of the representatives of the
companies and the names of the people who were active down here
just before this 1922 Disarmament Conference, when the Gas Con-
vention came up. There was an attempt to control the chemical-
warfare business in 1922?
Mr. Weston. Yes, sir.
Mr. Raushenbush. And I am asking the specific and detailed list
of all the people representing the chemical industry who were down
here and actively interested in opposing that.
Mr. Weston. I guess, to get a real answer to that, we will have
to get the membership of the dyes industry, because I remember
only a few individuals, and it would not be fair to name a few people
when there were probably 20 here.
Mr. Raushenbush. Perhaps when Mr. Irenee du Pont comes back,
he will be prepared to answer that.
I want to finish this one exhibit which I have already introduced,
the letter of November 25, 1921, that you wrote to Mr. Poucher.
You state [reading] :
I am informed through the Washington " grapevine " that the British dele-
gation to the Limitation of Armaments Conference has a plan to submit con-
cerning the chemical industry which embodies these points:
First, to outlaw the use of poison gas in warfare and to outlaw as far as
possible, anything of a dangerous chemical nature.
Second, failing to secure drastic action (as they expect to fail) to limit the
use of chemicals as much as possible.
I will repeat that :
Second, failing to secure drastic action (as they expect to fail) to limit the
use of chemicals as much as possible.
That is important, in a way, and I do not know which of you can
answer this best, but here you know what the British delegation
is going to try and do, and what it knows it cannot go ahead and do,
and we want to know what sources you had on that. Were you told
by Nobel about that, about what the British delegation would try
and what it would fail to go ahead and get done?
MUNITIONS INDUSTRY 2423
Mr. Weston. No ; I cannot throw any light on that.
Mr. Raushenbush. Can any of the other gentlemen sitting here?
Mr, Lamont du Pont. I certainly cannot.
Mr. Weston. These reports, Mr. Raushenbush, reports of that sort
to Mr. Poucher, were the summary of information which was coming
to me, as one of the representatives of the du Pont Co. on that Dyes
Institute Committee, and probably represents — I say probably
because I do not know definitely at this date — probably represents
the summary of the news and gossip tliat we had all along the line,
where everybody was trying to keep their ears open for information.
Mr. Raushenbush. The British were still over there and had not
come over here yet, and had not said anything, and you were passing
around information, and I am asking for definite information, which
is of very great interest, in the chemical industry.
There is a sort of logic to this questioning, Mr. Weston. You
started off with a proposition by some of your people, that as long
as there was chemical control by Germany, or, no chemical control
of that situation, disarmament would be a farce. Now we are get-
ting back again to 1922, to discuss control of chemical warfare, and
find that the British delegation is planning to propose to outlaw the
use of poison gas, and expecting to fail in it.
Mr. Weston. Yes, sir.
Mr. Raushenbush. And somewhere in those 2 or 3 years the whole
argument for the control of the chemical industry as a means of dis-
armament has shifted and changed ; and the third proposition is also
one which is very interesting to the chemical industry :
Third, to put the chemical industries of the various nations under the control
of the governments.
Those were the three propositions which you heard about, and I
was asking for definite information on how you knew about these
things and I was going to ask about how all that affected you.
Mr. Weston. I cannot give you an answer to that, and have no
real information.
Mr. Raushenbush. Mr. Chairman, in view of the fact that this
outline draft was prepared for use in the examination of Mr. Irenee
du Pont, I suggest that we adjourn now.
Senator Vandenberg. The committee will stand recessed until 10
o'clock tomorrow morning.
(Thereupon, the committee recessed at 3 : 45 p. m., until tomorrow
morning at 10 o'clock, Friday, Dec. 7, 1934.)
83876-
INVESTmATION OF MUNITIONS INDUSTRY
FRIDAY, DECEMBER 7, 1934
United States Senate,
Special Committee to
Investigate the Munitions Industry,
Washington^ D. C.
The hearing was resumed at 10 a. m. in the Finance Committee
Room, Senate Office Building, pursuant to the taking of recess,
Senator Gerald P. Nye presiding.
Present: Senators Nye (chairman), Vandenberg, Barbour, George,
Clark, Pope.
Present also : Stephen Raushenbush, secretary to the committee.
FURTHER TESTIMONY OF IRENEE BIT PONT, LAMMOT DU PONT,
A. FELIX DU PONT, K. K. V. CASEY, AND F. SPARRE
sale or interchange of military in\'entions and secret processes
(The witnesses were previously duly sworn by the chairman.)
The Chairman. Let the committee be in order.
Senator Vandenberg, you may proceed.
Senator Vandenberg. Mr. Chairman, before taking up the evi-
dence this morning, I want to say that I neglected last evening to in-
sert in the record a newspaper statement made by Mr. Julius Klein,
former Assistant Secretary of Commerce, respecting the Department
of Commerce conference. I think as a matter of information that it
should be printed in the record at this point.
(The document referred to was marked "Exhibit No. 934" and
is included in the appendix on p. 2583.)
Senator Vandenberg. Now, Mr. Chairman, we want to inquire
this morning rather briefly into the problem of the sale or inter-
change of new military inventions and secret processes as between
American and foreign companies in connection with these inter-
national munitions contracts.
May I ask you, Mr. Felix du Pont, and I believe you were at the
head of this section of the du Pont busine^s, is it an inevitable part
of foreign selling that upon occasion there must be an interchange of
inventions and information respecting new processes ?
Mr. A. Felix du Pont. I do not think so ; no.
Senator Vandenberg, It is a substantial part of your relationship
over the years with your European colleagues ; is it not ?
Mr. A. Felix du Pont. In military business ; no. It has been in
the past.
2425
2426 MUNITIONS INDUSTRY
Senator Vandenberg. I am speaking of the past.
Mr. A. Felix du Pont. That is quite a while ago, quite a good
many years ago. I cannot give the exact number.
Senator Vandenberg. Of course, in whatever degree it is a neces-
sity, we confront a rather serious problem, because in effect we would
be paying for the upkeep of a commercial industry at the expense
of the military preparedness of our own country. At any rate, it
is that phase of the matter that it seems to the committee important
that some information should be available on.
Mr. A. Felix du Pont. Senator, it is quite evident from what we
have done that we find it was not necessary, because we stopped ex-
changing new military secrets years ago.
Senator Vandenberg. Let us see to what extent the situation has
existed, and to what extent it still does or could exist. Certainly it
has been a fundamental principle in the export policy of your com-
pany to work in close cooperation with I. C. I., has it not?
Mr. A. Felix du Pont. That is true ; yes.
Senator Vandenberg. You still believe in the desirability of that
arrangement, do you not?
Mr. A. Felix du Pont. As regards the chemical industry gener-
ally, exclusive of military business.
Senator Vandenberg. You now definitely exclude the military
phase from your response?
Mr. A. Felix du Pont. Yes, sir.
Senator Vandenberg. If there has been a change in your policy in
this aspect, is it the result of difficulties which you have confronted
in the past, difficulties with the Government itself?
Mr. A. Felix du Pont. No, sir.
Senator Vandenberg. Do you recall your trip to England in the
spring of 1923, during which you arranged for the licensing of the
Nobel Co., which is now the I. C. I., on your patents for improved
military rifle powder?
Mr. A. Feux du Pont. Yes; I remember it fairly well.
Senator Vandenberg. Was this improved military rifle powder,
which will be referred to hereafter as I. M. R. powder — was that de-
velopment a pretty important one?
Mr. A. Felix du Pont. Yes; it was.
Senator Vandenberg. I want to read the first exhibit this morn-
ing, which will be given its appropriate number, 935. It is a cable-
gram addressed to Mr. Felix du Pont while he was in London at-
tending this conference with the Nobel Co., and sent to him from
the Wilmington office.
(The cablegram referred to was marked " Exhibit No. 935 " and
appears in full in the text.)
Senator Vandenberg (reading) :
Referring to your telegram of June 5 executive committee May 2, by resolu-
tion, decided that if Nobel Industries was granted exclusive license (to) manu-
facture I. M. R. powder for European country (ies) our sale would be so re-
stricted that we would be driven out (of) tliat business. Executive committee
recommended to finance committee that Nobel Indu>:trifs be granted nonexclu-
sive license to manufacture I. M. R. powder for nominal consideration of £1.
On May 8 finance committee concurred and by resolution authorized you to
offer Nobel Industries in London nonexclusive license for nominal considera
tion of £1. There have been no further action.
MUNITIONS INDUSTRY 2427
This offer of these important militar}^ powders to the Nobel Co.
came about in the ordinary course of affairs under the 1920 agree-
ment between the two companies, did it not?
Mr. A. Felix du Pont. I think so.
Senator Vandenberg. I suppose the man who would be most fa-
miliar with your foreign powder arrangements would be Colonel
Taylor, would it not?
Mr. A. Felix du Pont. With our foreign powder arrangements?
It was his business to sell in Europe and to get his orders from the
home office.
Senator Vandenberg. And to keep you advised respecting the
general situation ?
Mr. A. Felix du Pont. Yes.
Dr. Sparre. Senator, I believe I know as much as anybody, if not
more than anybody, about the foreign patent business.
Senator Vandenberg. I will be very glad to remember that, Dr.
Sparre, as we proceed.
Mr. Casey. Senator. I believe I am perhaps more familiar with
the details of this whole thing.
Senator Vandenberg. I am delighted that we have so much expert
testimony available this morning. We certainly ought to be able to
get all the facts.
Now, referring back to the fact that Colonel Taylor is representing
you upon the Continent at this time, and having in mind the confer-
ence which you, Mr. Felix du Pont, are having in London with Nobel
respecting the license for I. M. R. powder, I call your attention to one
paragraph in Colonel Taylor's letter of June 9, 1923, which I do not
as yet offer as an exhibit, but which I would be glad to have you
refer to, being Colonel Ta^dor's letter of June 9, 1923, to Major
Casey.
I read the second paragraph :
There seems to be no doubt that military patents are included in our agree-
ment with the English and that the only exceptions are in case of objections
on the part of our Government or delay of 12 months on the part of the
English to say whether or not they desire to acquire these patents.
For at least the first 3 years of the agreement your legal depart-
ment offered all patents, including military patents, automatically
to Nobel, did you not?
Mr. A. Felix du Pont. I am not quite sure, Mr. Senator, about
the dates there, and I would like to be sure of that.
Senator Vandenberg. Let us proceed in the preliminary stages
without attempting to define the dates, because it is nonessential.
In the preliminary stages of your contract with Nobel, it was the
opinion of your legal department that you were bound to give them
the advantage of all this information, including military informa-
tion, was it not?
Mr. A. Felix du Pont. There was a period during our agreement
with I. C. I., or its predecessor, in which we did exchange military
patents and agreements.
Senator Vandenberg. Precisely.
Mr. A. Felix du Pont. Always subject to the Government.
Mr. Casey. Senator Vandenberg
Senator Vandenberg. Yes, sir, Mr. Casey.
2428 MUNITIONS INDUSTRY
Mr. Casey. I think it is in our own files that no proposition, even
though the legal aspect might make it clear, that no proposition
involving a military powder Avas to be even offered to I. C. I. or Nobel
without first being submitted to military sales, and Government ob-
jection was always a bar to anything being offered.
Senator Vandenberg. And you never offered anything to which
the Government objected?
Mr. Casey. No; in this particular case we were in a very awkward
spot. When this proposition came up, I canvassed and found that
the Ordnance Department of the Army objected.
Senator Vandenberg. Will you permit me to come into this thing
with some consecutive attention to the exhibits, Major, and I will be
more than happy to let you discuss them serially as we proceed. I
am establishing for the moment simply the initial proposition.
Mr. Casey. Yes, sir.
Senator Vandenberg. That in these original stages of your con-
nection with Nobel, the predecessor of I. C. I., your arrangement did
include the exchange of military processes.
Mr. Casey. Yes, sir.
Mr. Lammot du Pont. Subject to governmental objection, how-
ever, Senator.
Senator Vandenberg. You mean, in no instance did you ever over-
ride governmental objection?
Mr. Casey. No.
Mr. Lammot du Pont. I think not.
Senator Vandenberg. All right, we will come to that in a moment.
Now I want to read just one sentence from the next letter, dated
June 26, 1923. I am reading from the fourth paragraph of Major
Casey's letter to Colonel Taylor under date of June 26, 1923, the
following :
"We learned some time back that the legal department automatically would
refer patents to the Nobel Co. as a matter of routine.
This simply confirms the preliminary status.
Mr. Casey. Will you go on with the rest of the sentence. Senator?
Senator Vandenberg. I would be very happy to :
We effectively stopped this practice by letters of Mr. A Felix du Pont, dated
April 26, 1923, copies of which are attached, so we believe we will have no
fnrther trouble in this connection.
Is there anything else you want me to read ?
Mr. Casey. No, I think that is enough.
Senator Vandenberg. Did any memljer of the smokeless powder
department object to the licensing of the Briti<h on I. M. K. powders?
Perhaps Major Casey could answer it bettor than anybody else.
Mr. Casey. I did.
Senator Vandenberg. You objected?
Mr. Casey. Yes, sir.
Senator Vandenberg. Did not Colonel Taylor object?
Mr. Casey. Yes.
Senator Vandenberg. Why was Colonel Taylor so concerned about
the granting of this particular Nobel license?
Mr. Casey. Perhaps the reason was a little different from mine.
He was afraid that if they got the license to make this powder, that
MUNITIONS INDUSTRY 2429
he would then run into competition on exactly the same powder that
we were trying to sell.
Senator Vandenberg. Precisely.
Mr. Casey. My objection was entirely different.
Senator Vandenberg. Before we go to yourself, let us confirm
Colonel Taylor's objection. I am referring to Colonel Taylor's
letter dated July 12, 1923, addressed to Major Casey, from which
I read the first paragraph, as follows [reading] :
I wish to acknowledge receipt —
And so forth.
I see that with regard to our company, you have succeeded in gaining our
point and I feel sure that if the War Department understood what was going
on, they would object to any concessions on our part.
What does he refer to when he says, " if the War Department
understood what was going on " ?
Mr. Casey. The answer to that is this : The War Department was
interested in seeing that the du Pont Co. kept facilities alive and
the " know-how " for the manufacture of military propellants and
explosives. The only way to do that at that time, with practically
no Government orders, was by foreign sales. If the type of powder
we were making was to be offered all over the world in direct com-
petition with ours, one of the objectives of the War Department
might be inter f erred with, that is, we might not be making the prod-
ucts, and that is ail they were interested in. That is what is meant
by that statement.
Senator Vandenberg. Colonel Taylor's further reasoning, which
probably should be submitted for the record, because it is very lucid,
being contained in the original letter of June 9, 1929, which was the
second letter which we had this morning. I think I will read from
the second page, beginning 8 or 10 sentences from the top. Colonel
Taylor is now discussing this proposed release of I. M. R. informa-
tion to Nobel's :
The British foreign-sales organization for military explosives consists entirely
of a Mr. Smith, who lives at Vienna, and who is also charged with conducting
the negotiations between the British and the Tchecoslovak Explosives, Ltd., and
one of the members of their London oflSce who handles correspondence on con-
tinental military sales. Before the war the British had an agreement with
Rothweiler, handled all their sales, all their military business on the continent.
The British kept out and I believe divided the profits with Rothweiler. The
man in charge of Rothweiler sales on the continent was Herr Philip, at pres-
ent managing director of the Nobel Dynamite of Vienna and holder of 16 per-
cent of the sales in Czechoslovak Explosives, Ltd. He is the most experienced
continental military salesman in the old German organization.
What is the " old German organization ? "
Mr. Casey. That I do not know.
Senator Vandenberg (continuing with the letter) :
The Czechoslovak Explosives, Ltd., is a company In which the shares are
held : 52 percent check ; 16 percent Nobel British ; 16 percent Herr Philip —
what nationality would that be ?
Mr. Casey. Which one?
Senator Vandenberg. The third one here, Herr Philip.
Mr. Casey. He is the man I just mentioned, is he not?
Senator Vandenberg. Yes, sir.
2430 MUNITIONS INDUSTRY
Mr. Casey. I do not know his nationality.
Senator Vandenberg (reading) :
Sixteen percent Societe Centrale de Dynamite.
Is that French ?
Mr. Casey. The name sounds like it. I am not familiar with all
these foreign firms.
Senator Vandenberg (reading) :
This last factory lias tlie monopoly of exportation, importation of explosives
in Czechoslovakia and they are building a factory with the idea that it will be
large enough to supply all the continent and take on to itself the old military
explosive business formerly held by the Germans. This factory is largely under
British control and the Mr. Smith above mentioned is the person to whom this
control is handled. I believe it is the British intention that all continental
military business shall go to this Czechoslovak Explosive, Ltd., who have in
their territory continental Europe. I believe the British themselves will make
no attempt to sell directly on the continent as they have not a personnel com-
petent for this work and expect to have this thing handled entirely from Czecho-
slovakia. I also believe that due to the fact that the Balkan states are gradu-
ally changing nitroglycerine powders to nitrocellulose powders they are induced
by the Czechoslovak Explosive, Ltd., to undertake the manufacture of nitro-
cellulose powder.
Now why do the British want us to cede them the patents for I. M. R.?
Either to show the Czechoslovaks how to make our powder or to manufacture
powder under our patents to be sold by the Czechoslovak organization or to keep
us out of Europe so as not to interfere with the development of the Czechoslovak
Co. I believe this to be the key of the whole matter.
So that Colonel Taylor was seriously concerned over the possi-
bility that the prospects of the I. M. R. powder formula might get
into the hands of a Czechoslovakian company, run by " the most
experienced continental military salesman in the old German
organization " with a disadvantage to your company ?
Mr. Casey. Yes, sir.
Senator Vandenberg. Do you know of any other reasons that
Colonel Taylor might have had, or any other reasons which you
might have had, for thinking that this would be an unfortunate
arrangement ?
Mr. Casey. Beyond the viewpoint of Taylor's as affecting sales in
Europe, where he was giving quite considerable thought to this being
an attempt to force us out of Europe, there was really a great deal
of objection on the part of European manufacturers, in view of the
reputation which du Pont had made during the war. He also nat-
urally concurred in my objections.
Now my objections, it later on developed, did not hold very much
weight in one respect, and that was as far as England was concerned,
but I objected to giving anything out to which there was Government
objection.
Here is the situation which developed
Senator Vandenberg. The situation will develop as we proceed,
and suppose you address your discussion to it as we proceed with the
exhibits.
Mr. Casey. All right. Senator.
Senator Vandenberg. You were about to say, no doubt, that you
had consulted the War and Navy Departments with regard to
licensing the production of these powders.
Mr. Casey. Not the Navy Department. The War Department is
the only one interested in small arms.
MUNITIONS INDUSTRY 2431
Senator Vandenbekg. You did consult the War Department.
Who was Mr. Henning?
Mr. Casey. He was technical director of military sales.
Senator Vandenbekg. I want to read from Mr. Henning's letter of
June 21, 1923, without offering the letter as an exhibit, because there
are some sections of it which it is not necessary to enter in the
record.
I will read the first sentence, with some deletions. This is Mr.
Henning, your assistant director of military sales, reporting upon
his conference with the War Department in Washington (reading) :
1. Discussed the following subjects with officers and representatives of the
Ordnance Department
1. Ordnance Department policy with respect to supplying information to
British on du Pont I. M. R. powder.
Talked this over briefly with Major Hardigg and Dr. C. G. Storm, simply
setting forth the early history and more recent facts. In the absence of General
Williams the subject was referred to General Peirce for decision, who called
General Ruggles and Major Wilhelm in for conference. Major Hardigg and
Wilhelm stated the case to General Peirce, it being their concensus of opinion
that it was a subject of considerable importance, and in which the Bureau of
Ordnance, Navy, was also interested. Following recent precedent, it was their
suggestion that no information be given. This comes about partly by reason of
the action of the British in refusing to give the Ordnance Department any
information on subjects in which the British Navy is interested. * * *
General Peirce first inquired carefully as to the use and status of du Pont
I, M. R. powder as a service propellant.
General Peirce stated that it was their policy to carefully consider giving us
every assistance and encouragement for staying in the production of military
explosives. Hence he did not want to handicap us in any development work
that would aid us. It was the decision, however, that the Ordnance Depart-
ment could not sanction our giving information to tic British at this time, on
our service propellent for ammunition intended for aircraft armament. Gen-
eral Peirce was of the opinion that Admiral McVey would take a more positive
stand on this subject.
As a matter of courtesy to the Bureau of Ordnance, I discussed the conference
briefly with Commander Courts. As expected, the Bureau of Ordnance takes
a more positive stand on this subject.
Now, simply to confirm the attitude of the Government
Senator Clark. Do I understand from this that you informed the
Government that unless you were permitted to sell your secret proc-
esses to another government, that you were going out of the business ?
Mr. Casey. I do not see any indication of that whatsoever, Senator.
Senator Vandenbekg. I think this trends in a different direction,
Senator, which will appear shortly.
Now, I want to confirm the attitude of the Government respecting
the release of this new and secret militarj'^ powder process to the
British, or to aiiy other foreign country.
Dr. Spakre. Senator, pardon nie, but it was not secret. I am
sorry to interrupt you, but you have used the word " secret " so often
that I have to call your attention to the fact that it was not secret.
Pardon me if I may explain the situation at this point, because it is
very important.
Senator Vandenbekg. Yes, sir.
Dr. Spakre, During the war, that is, after the United States
entered the war in 1917, and during the war period, we were under
instructions from the administration to give to the allied countries
all our information of any military value ; as a matter of fact, every-
thing which we possessed.
2432 MUNITIONS INDUSTRY
Senator Vandenberg. That is during the war ?
Dr. Spakre. And we gave to the allied munitions departnients,
and so forth, everything that we had. For instance, I myself was
sent abroad on a military commission appointed by the Chief of
Ordnance. As a member of that commission I went, together with
Army officers and others, and inspected British military factories,
and we exchanged information with the British munitions depart-
ment. At the conclusion of that visit I went to France and in-
spected all the French powder works, shell works, and so forth, and
all the information which I collected was then transmitted to the
Chief of Ordnance. The I. M. R. information was given to the
allied governments. There is no secret about it. They got all our
information under instructions from our own administration.
Senator Vandenberg. If they knew all about it, what is all this
about ?
Dr. Sparre. That is what I wanted to tell you. This appears like
it was a secret thing, but there is no secret about it.
Mr. Irenee du Pont. They had a patent on it.
Dr. Sparre. There were some patents.
Senator Vandenberg. Do you mean to say the British could manu-
facture the I. M. R. powder without your consent?
Dr. Sparre. They had gotten blueprints of suitable plans, com-
plete specifications, all information about the thing. The only thing
which we had left would be such foreign patents as there might be,
but they did not amount to much, did not amount to very much, be-
cause the patent situation was not as satisfactory^ in foreign coun-
tries as it was in our own country. I do not think that those patents
were of any substantial value. But, in any event, there was no secret
about it, the complete information was given.
Senator Vandenberg. Apparently the release of this privilege
which involved a very serious question with respect to your rela-
tionships with Nobel also in your judgment involved your relation-
ship with the United States Government in 1923.
Dr. Sparre. Surely.
Senator Vandenberg. So let us follow through and see to what
extent our relationship is involved.
Dr. Sparre. Yes, but. Senator, please don't hold it secret informa-
tion.
Senator Vandenberg. All right. I will use the exact language of
our own War Department in describing the situation, and I will use
it in the next exhibit, which is a letter of June 27, 1923, from W. S.
Pierce, Acting Chief of Ordnance, to the military sales division of
the du Pont Co. at "Wilmington :
It is the understanding of tliis office tliat you are in receipt of requests from
foreign sources for detailed information concei-ning the technical process in-
volved in the manufacture of your improved military rifle powders.
In view of the fact that powders of this type are employed in certain stand-
ard service ammunition used not only by the United States Army but also by
the Navy and Marine Corps, the Ordnance Department believes that the
methods involved in manufacture should be regarded as confidential military
information.
So at least the Chief of Ordnance of the United States Army
thought there was something in connection with I. M. R. powder that
you could protect if you wanted to.
MUNITIONS INDUSTRY 2433
Dr. Sparre. We have given all of the information to the Board.
Senator Vandenberg. All right. We are proceeding with the rec-
ord, and there is an amazing lot of important attention being given
to an inconsequential thing, if it is inconsequential, it seems to me.
At any rate, let us continue to establish the facts.
I refer to the next exhibit. In this instance, it is of sufficient im-
portance so that you even hear from the Navy in connection with it,
which is unusual in your contacts, so that evidently from the view-
point of our own Government, there was something of relative mag-
nitude involved, rather than anything else. I read the next exhibit,
which will be properly marked.
(The memorandum referred to was marked " Exhibit No. 936 "
and appears in full in the text.)
Senator Vandenberg (reading) :
MEMORANUUit
To : Chief of Ordnance, War Department. Washington. D. C.
Subject : Agreement with tlie Du Pont Co. regarding improved military rifle
powder.
The Bureau of Ordnance concurs in the belief of the Ordnance Department,
expressed in its letter of June 27, 1923, to the Du Pont Co., that the technical
processes and the methods of manufacture of improved military rifle powders
should be regarded as confidential military Information.
Chas. B. B. McVay, Jr.,
Chief of Btireau.
So as the matter stands up to date on the face of these exhibits,
you gave the Nobel Co., did you not, the right to manufacture a
powder which was the standard propellant in both branches of the
United States service for almost all types of rifle and aircraft am-
munition, and did so over the objections of both the War and Navy
Departments?
Mr. Casey. Senator, you assured me a few moments ago that you
Avould develop this thing gradually. At that time I tried to tell you
the story. Now you are not developing it gradually if you make the
statement at that point
Senator Vandenbp:rg. I do not want to prejudice it, Major. I am
onlji' seeking the facts.
Mr. Casey. I do not believe you do. Senator.
Senator Vandeni5erg. You mean which? That you do not think
I am trying to prejudge it or trying to get the facts?
Mr. Casey. No ; I want to give you the facts.
Senator Vandenberg. Now, let us see whether or not the exhibits
will not permit you to develop the thing chronologically. It is only
facts that I want, Major.
Mr. Casey. I appreciate that, Senator. By the way. Senator, in
order to bring you up to date
Senator Vandenberg. What do you mean by up to date ?
Mr. Casey. By what is going to follow, may I give you the early
history of the I. M. R. powder?
Senator Vandenberg. If you consider it pertinent.
Mr. Casey. I think it is.
Senator Vandenberg. All right.
Mr. Casey. I. M. R. powder was developed after about 10 or 15
years research, I would say, either in the latter part of 1913 or early
2434 MUNITIONS INDUSTRY
in 1914. The first powder of that type that we made was to fit
certain modifications that Admiral Bedbeder, who at that time was
head of the Argentine Naval Mission in New York, wanted. He
w^as considering certain charges in the Argentine Mauser rifle, and
in order to give him what he required in direct competition with
the German progressive rifle powder, this powder, as the result of
15 years experimental work, was found to oe the only powder suit-
able for the purpose.
At about that time we had already started an erosion test — when
I say we, I mean the Government and ourselves — to determine in
connection with the high velocity 30-06 rifle, the different types
of powder, and their relative erosive effect, and in that test they
used cordite, exite, and I think the French powder, some Koln-
Kottweiler, vrhich was imported in this country by the Government,
and called Chilworth, because it was bought through the Chilworth
Co. in England. We had also some Argentine powder, and I think
some Brazilian powder.
Those powders were being put through the test at Springfield
Arsenal. In the meantime, after the tests had actually started, this
I. M. E,. powder came along, so even though the poAvder was not
suitable to the Springfield rifle, being too slow burning, we re-
quested the Government to allow that powder to also enter the
test. As I say, it was not suited in the particular granulation to
the Springfield rifle.
That is the early development. If it had not been for developing
that powder, w^e would not have been able to fill the requirements for
the British and Russian and certain other rifles. It was not needed
for the French rifle. This was after the European war broke.
In the meantime, the Government, because of ballistic character-
istics of the 30-06 cartridge, did not need that powder. It was not
until after the United States had entered the war that they discovered
for special ammunition, such as tracer and incendiary the regular
pyro D.G. 30-caliber powder, which was the regular standard U.S.
powder, could not be used, and I believe the Government throughout
the entire period of the war only bought possibly in the neighborhood
of 2 or 3 or 4 million pounds of this I.M.R. powder. That was the
only place they used it.
In the meantime, the allied Governments, England and Russia,
were both using it in tremendous quantities. That is the only type
of rifle powder they bought from us. That was the situation at that
time. As Dr. Sparre has just explained to you, we were required to
give all of the information regarding the manufacture of this powder
to the British.
Senator Vandenburg. This is, during the war?
Mr. Casey. This is, during the war. In the meantime, a plant was
actually being built. You may remember that Mr. Irenee du Pont
referred at a previous hearing to the fact that they discovered instead
of importing raw material and making their own powder it was
better to import the powder because of the tonnage factor. There
was the situation when we came along after the war.
In the meantime, experimental work had been started in 1917 at
the Bordenbrook Reservoir outside of Springfield to try and get a
bullet and a combination of bullet and case that would ffive them a
MUNITIONS INDUSTRY 2435
more effective ammunition. It was discovered that the tables in the
bhie book of the Springfield rifle giving an extreme range of 5,100
yards were simply paper figures; that the extreme range of the
Springfield rifle was around 3,500 to 3,600 yards.
At the command of the commanding officer there I went up to
assistant Major Wilhelm at the Reservoir, to help solve this problem.
That was in connection with the boat-tail bullet which the Swiss had
at Camp Perry in 1913 and which excited a great deal of comment
among the competing teams during those matches.
So an attempt was made in the early time of Bordenbrook Reser-
voir to see if we could not develop a boat-tail bullet along the lines
of the Swiss, because it was found that the Swiss bullet at that time,
even fired in our own case, would outrange ours almost 2 to 1.
This work was intensely interesting, to such an extent that they
then moved down to Florida to continue the work, and that work was
then being continued along the beaches at Daytona and Miami and
later on when the Infantry School at Benning was established the
work continued there.
Even then at that time and for a couple of years after the war it
was not still the service propellant. It was not until they found it
possible to make a satisfactory boat-tail bullet in this country, that
they found they were up against another obstacle. They were only
buying this I. M. R. powder from us in small quantities, five or ten
thousand pounds at a time, which means very expensive production.
We also found that the Infantry Board which was continually in
session at Camp Benning considered they would not be able to get
the desired velocity the}' wanted, the reason being price, that they had
the old pyro D. G. 30 caliber, which had cost them probably during
the war, 50 or 60 cents a pound, and, of course, this powder was cost-
ing them 90 cents a pound. So I went to General Williams and I
said:
It seems to me a serious problem of design is being interfered with, because of
an unnatural position on price.
Senator Vandenberg. What year was this ?
Mr. Casey. This is in that period of 1921 and 1922.
Senator Vandenberg. Yes.
Mr. Casey. The Infantry school was formally opened in the fall
of 1920, so that will give you an idea of when this occurred.
Senator Vandenberg. All right.
Mr. Casey. So I said to General Williams :
We haven't the slit^litest idea on a peace-time production basis what this
powder is apt to cost, but we believe if you will give us an order for 100,000
pounds, to let us make a run, we will take a chance and sell it to you for 70 cents
a pound.
That changed the picture. The result was that it was then
adopted, around 1921 or 1922, in connection with the boat-tail bullet.
But in the meantime Russia and England knew all about it. They
had bought millions and millions of pounds of it for their service
cartridges during the war.
Now, that will bring you approximately up to date.
Senator Vandenberg. All right. Now, why did Mr. Henning go
to the War Department in June 1923 to inquire whether the Ameri-
can Government had any objections to your arrangement with Nobel?
2436 MUNITIONS INDUSTRY
Mr. Casey. To tell you perfectly frankly, Senator, because I ob-
jected.
Senator Vandenberg. And I assume that when he made this in-
quiry from the War Department it was on the theory that if the War
Department said it did object
Mr. Casey. That Ave would not have to turn it over.
Senator Vandenberg. That you would observe the War Depart-
ment's viewpoint?
Mr. Casey. Yes.
Senator Vandenberg. Did 3^our company observe the War Depart-
ment's viewpoint?
Mr, Casey. Now, if you will i:;o ahead you will find out what
happened.
Senator Vandenberg. I am going ahead, but, as a matter of fact,
it did not observe the War Department's viewpoint ; isn't that so ?
Mr. Casey. You are asking me to go ahead. Now, let us move
ahead. Senator.
Senator Vandenberg. I think that is a fair observation. We will
move ahead together.
Mr. Casey. All right.
Senator Vandenberg. Now, we are in this position, before we move
ahead, so let us start at the same point. Your representative has.
been to the War Department to find out whether the American Gov-
ernment has any objection to your licensing Nobel in respect to
I, M. E.. powder. The War Department has not only notified your
Mr. Henning, and he has reported to you their objections, but in
addition, you have the written word of the Acting Chief of Ordnance
of the United States and you have the written word of Admiral
McVay, Chief of Bureau of the Navj^^ Department, that there is em-
phatic objection on the part of the United States Government to this
arrangement.
Mr. Casey. Right.
Senator Vandenberg. That is the point at which we noAv take up
the trail.
Mr. Casey. At that point; yes.
Senator Vandenberg. This decision by the War Department evi-
dently confirms Colonel Taylor's prophecy of Jul}' 12, 1923, when he
wrote you from Paris, as I have previously read :
I see that with regard to our company you have succeeded in saining our
point, and I feel sure that if the War Department understood \\])a{ was going
on, they would ohject to any concessions on our part.
Mr. Casey. I think I have already answered that, Senator.
Senator Vandenberg. Yes, And evidently the War Department
did understand what was going on,
Mr, Casey, Yes ; I think we told them pretty thoroughly.
Senator Vandenberg, You told them, and then they told you
something.
Mr. Casey. Naturally,
Senator Vandenberg, Did this feeling of apprehension with re-
gard to exchanges of technical information with Nobel continue ?
Mr. Casey. If you let me anticipate the same as you are doing, all
right, we will just move along then. This is the only case that ever
came up.
MUNITIONS INDUSTRY 2437
Senator Vandenberg. Well, we will take the exhibit. We will
take Major Casey's letter addressed to Mr. Felix du Pont, general
manager, on April 14, 1924. I read at the moment only the fifth
paragraph, in which Major Casey is recommending:
That no agreement be made with Nobel whereby we will refrain from en-
deavoring to sell military products in any foreign country.
Mr. Casey. Which paragraph is that?
Senator Vandenberg. It is marked " number 4."
Mr. Casey. I thought you said 5, Senator.
Senator Vandenberg. It is the fifth paragraph, but it is num-
bered 4.
Mr. Casey. Yes.
Senator Vandenberg. Now, on the second page we find your rea-
sons, Major Casey, and I will read those.
Mr. Casey. Senator, wouldn't it be probably advisable to really
read the whole thing?
Senator Vandenberg. I will be very glad to, if you desire. You
mean the entire letter?
Mr. Casey. Yes.
Senator Vandenberg. All right. This is Major Casey writing to
General Manager Felix du Pont under date of April 14, 1924, on the
subject of military sales in foreign countries [reading] :
After liaving made a very careful analysis of all the data in our files on the
Nobel agreement, and a thorough study of compelition which we have experi-
enced in foreign countries, particularly in Europe during the past 3 years, I feel
that it is in order for me to present to you my recommendations, to which I
hope you will give due consideration in discussing military business with Nobel
ofiiciais. My recommendations are as follows :
1. That military propellants and explosives be specifically exempted from the
patents and secret-process agreement in the same way as in the case of the
South American pool agreement.
2. That the temporai-y arrangement regarding Argentine and other South
American military business be terminated as of July 1, 1924.
3. That the arrangement for joint construction of plants in foreign countries
for military material be discontinued.
4. Tliat no agreement be made with Nobel whereby we will refrain from en-
deavoring to sell militai-y products in any foreign country.
5. That no agreements be entered into with any manufacturer for the ex-
change of information on military propellants or explosives.
6. That no information be exchanged concerning prices of military propellants
or explosives and that no division of profits be made on military business.
I might interrupt to say that I think these are fairly sensible recom-
mendations, Major.
Mr, Casey. Well, they were made, anyway.
Senator Vandenberg (reading) :
My reasons for making the above recommendations are as follows :
Our competitors in Europe on military business are German, Italian, and
French interests, tlie most successful competitors being the Germans. If we
were to refrain from soliciting military business abroad, we would leave the
field fi'ee for a German, French, and Italian monopoly, because Great Britain's
position in European politics is such that an English concern would find it very
difficult to secure business. It is very doubtful as to whether Nobel could hold
the customers wliich we have gotten to date among the European nations. Our
success in securing business is mainly due to the fact that we are an American
concern whose products enjoy an excellent i-epntation. In Europe, the prestige
of the name dn Pont was estalili'slied through onr military-powder manufacture
during the late war. nnd it is only natural that we are looked upon as a
source of suiiply. inwticularly by European states which do not manuf actum
their own requirements.
2438 MUNITIONS INDUSTRY
Now, I want to emphasize the next two paragraphs, which are the
ones I started to read and which are pertinent to my line of inquiry
[reading] :
We cannot act in good faith with om* Government if we contract to exchange
information on military propellaut.s with a foreign concern. Both the Army and
Navy have indicated that they are desirous of keeping secret development work
which we may do for them. If we were to agree to exchange information with
any foreign firm and at the same time accept help in selling powder abroad
from our own Army and Navy, we would create a condition which would at
some time or other bring discredit upon us.
It is probable that in the next few years Congress will fully investigate all
war contracts and particularly the construction of Old Hickory. Sucli an
investigation will bring about the scrutiny of our military sales in general.
If Congress were to ascertain that the Army and Navy both helped du Pont in
securing military business from abroad and if it could be shown that the
du Pont Co. had a working agi'eement with a foreign powder manufacturer,
the conclusion could be drawn that the du Pont Co. was acting in bad faith
with our own Government. Congress would have an opporunity to brand us
as traitors.
We have been successful in securing military business in foreign countries
without a price-fixing agreement with any of our competitors. We have fre-
quently been able to secure business although our quotations were higher than
competitors. This was probable due to the fact th;it the customer decided to
develop a source of military supply in America and our prestige and reputation
enabled us to get the business. Even with unfavorable foreign -exchange rates
we are competing with foreign concerns on newly made powder. When the
exchange rates improve we will undoubtedly be placed in a more favorable
position. Therefore, in competing for foreign business, success will come to
the firm which can make the best product and which enjoys the best reputa-
tion. The neutrality of America in European politics, and America as an
abundant supply of raw materials are factors which enable an American concern
to secure foreign military business.
Now, referring back to the two middle paragraphs on this second
page, it is the expression of your opinion that it would not be an
act of good faith for you to accept cooperation from the Government
of the United States in the promotion of your sales; and you have
had that cooperation, have you not, very generously ?
Mr. Casey. Yes.
Senator Vandenberg. It was your opinion that you could not be
in that contact with the Government and at the same time be per-
mitting the foreign use of your military processes ?
Mr. Casey. No; that is a fine point there. Senator. Don't think
that I am quibbling. It is not a question of permitting manufacture,
but a question of exchanging information.
Senator Barbour. What would be the nature of the information?
Wouldn't it be the matter of processes?
Mr. Casey. Yes.
Senator Vandenberg. That is the point.
Mr. Casey. Because we will come to that question of manufacture
later.
Senator Vandenberg. Yes, we are coming to that. It is summed
up in your sentence:
If Congress were to ascertain that the Army and Navy both helped du Pont in
.securing military business from abroad, and if it could be shown that du Pont
Co. had a working agreement with a foreign powder manufacturer, the con-
clusion could bo drawn that the du Pont Co. was acting in bad faith with our
own Government.
That sums up your feeling on the matter?
Mr. Casey. Yqs.
MUNITIONS INDUSTRY 2439
Senator Vandenberg. Was this recommendation put into effect?
Mr. Casey. This recommendation was submitted to my chief. I
believe this recommendation had a great deal to do with the modifi-
cation of the agreement which took place and was eventually signed
on January 1, 1926.
Senator Vandenberg. Now, this memorandum
Mr. Casey. Not completely, however.
Senator Vandenberg. This memorandum is dated April 14, 1924.
Mr. Casey. Yes.
Senator Vandenberg. You did make an agreement, did you not, in
London, in November 1925, 18 months later, an agreement to co-
operate on military sales — I mean your company made it — in spite of
your recommendations and in spite of the opposition of the military
sales division?
Mr. Casey. We made some sort of an agreement. I think that
discussion finally resulted in the agreement of 1926, did it not?
Senator Vandenberg. The agreement of November 1925 ?
Mr. Casey. Well, that was not a signed agreement, was it? Is it
not a memorandum of discussion?
Mr. Raushenbush. You operated under it, didn't you ?
Mr. Casey. Yes ; without waiting for the signature.s.
Senator Vandenberg. It was an operating memorandum.
Mr. Casey. Yes.
Senator Vandenberg. Let me read from this memorandum. This
is a memorandum 18 months later. It may be offered as an exhibit
and marked.
(The memorandum referred to was marked " Exhibit No. 937 " and
is included in the appendix on p. 2584.)
Senator Vandenberg (reading) :
Attached hereto is memorandum on " du Pont-Nobel Corporation, Sales of
Military Propellant Powders and Explosives", which is the present agreement
between the du Pont Co. and the Nobel Interests concerning military sales to
goveniments other than the United States and Great Britain.
A brief summary on how it came into being is timely. For some years past
an accord has existed regarding foreign sales of commercial explosives, but
all documents covering this accord specifically excepted military sales, as for
example, that of January 1, 1920.
This was largely due to the fact that du Pont felt that any accord on
military sales would tend to disturb their relations with the United States Gov-
ernment, which relations had been carefully cultivated for over a century.
Which is a reexpression of that same general policy of the du Pont
Co.?
Mr. Casey. Yes.
Senator Vandenberg (reading) :
How Nobel felt in this regard is not known to us, but probably the Cordite
factories at Waltham Abbey, Holton Heath, and Auruvankadu (India) occupy
a relatively larger place in the British propellant supply than do the American
equivalents, so that the relations of Nobel with the British Government are
possibly not as intimate as du Font's with the United States Government.
It is your observation that that is a fair assessment of the rela-
tive relations between du Pout's and the United States Government
and Nobel's and the Government of Great Britain?
Mr. Casey. At least it was at that time.
83876—35 — prll 4
2440 MUNITIONS INDUSTRY
Senator Vandenberg. Continuing the reading:
The military sales divisiou of the du Pont Co. is charged with sales to aud
contact with the United States War and Navy Departments, and our constant
acquaintance with the officials of these Departments gives the members of the
military sales division a knowledge of opinion in Washington that is never
written and seldom spoken. It is the unanimous belief of the military sales
division that any agreement on military sales with an alien firm will materially
hurt our relations with the United States Government, if indeed such agree-
ment will not eventually conflict with Article XIV (d) Ordnance Contract
What is the ordnance contract?
Mr. Casey. I think that is a paragraph in ordnance contracts.
Senator Vakdenberg, I quote from the paragraph in the ordnance
contract. [Reading :]
No contractor having in hand work of a military character which the Ord-
nance Department may designate as confidential shall permit any foreign officer
or other foreigner not in the contractor's employ to visit portions of the plant
where stich work is in process, nor shall the contractor give to such person
any specific information concerning such work without the authority of the
Chief of Ordnance, nor shall any alien in the contractor's employ be engaged
on or permitted to examine such parts of the work as the Ordnance Depart-
ment may specifically designate as confidential.
That is the end of the quotation from the contract. [Reading:]
Notwithstanding this belief, an agreement to cooperate with Nobel on mili-
tary sales was signed in London in November 1925, whereby du Pont was
given priority of sales on nitrocellulose powders and Nobel given priority on
TNT and nitroglycerin powders.
Now, the statement is that notwithstanding this belief an agree-
ment was made. I assume it is a fair interpretation to say that the
document itself thus confesses that tlie agreement is in hostility to
the belief.
Mr. Casey. To my belief.
Senator Vandenberg. Yes; and was it your belief that it was also
in hostilit}^ to the du Pont formula for dealing with the Government
of the United States?
^ Mr. Casey. No ; I don't think so. Perhaps at this time I was try-
ing to stress my point and I was bringing every bit of pressure I
possibly could, even perhaps to the extent of slight exaggeration.
I would say exaggeration, perhaps, in the language.
Senator Vandenberg. Let us proceed with this exhibit. I drop
doAvn to the final paragraph on page 2, the same page from which I
was reading:
The following has developed : On the 1,000-ton Polish order, Nobel's quota
would liave been 300 tons, but the Polish Government declined to split the order
and. in general, it may be assumed that this attitude will be followed by other
govern inei lis.
Befcre I sjjeak of that in detail, this general agreement did finally
obligate you to guarantee to Xobel WO tons of nitrocellulose powder
business on tl\e continent every year, didn't it?
Mr. Casey. It did not obligate us.
Senator Vandenberg. What was the point?
Mr. Casey. The point was tliis : That I. C. I., Nobel, or E. T. L.,
whatever the name Avas at that time, stated that they Avanted to keep
alive that know-how to n)anrifacture the nitrocellulose powder which
tliev had been workinji on durinir tb.e war to a certain extent.
MUNITIONS INDUSTRY 2441
Therefore, they said that they would like to have a certain amount
of business each year, but not in excess of 300 tons, as that was the
limit of their capacity, and all they wanted to do was to keep alive
the " know-how ", without expanding their plant. Therefore, it pro-
vided for not in excess of 300 tons.
Senator Vandenberg. You operated under this agreement for a
number of years after this, did 3'ou not?
Mr. Casey. Yes.
Senator Vandenberg. In 1927 Colonel Taylor wrote you
Mr. Casey. Senator, will you pardon me?
Senator Vandenberg. Yes.
Mr. Casey. Would you mind reading all of the first paragraph on
page 3, the first paragraph at the top of the page beginning "At
a meeting held in London."
Senator Vandenberg. I will read anything you want read
[reading] :
At a meeting held in London on October 11, 1927, it was stated by a Nobel
representative that Ardeer must have orders for nitrocellulose powders in
order to gain experience and keep the plant force employed, which indicates
that the difficulties still exist in perfecting a nitrocellulose powder and pro-
ducing it at a cost sufficiently low to compete with other firms.
Do you want me to read some more?
Mr. Casey. No, I think if I can look at the date of this document,
it was certainly after 1927, I think that will have some relation
later on.
Senator Vandenberg. Perhaps we are coming to it. Major.
Mr. Casey. You notice, Senator, though, that even in 1927 they
were still having diflSculties in making powder of that type.
Senator Vandenberg. Yes; I realize that.
Mr. Casey. It was some time after 1927.
Senator Vandenberg. In 1927. on November 16, Colonel Taylor
wrote you from Paris concerning certain difficulties which the nor-
mal functioning of the agreement had brought about.
Now, I want to read from this letter, from page 3. It is a very
lengthy letter, and the entire letter will be marked as an exhibit.
(The letter referred to was marked " Exhibit No. 938 ", and is
included in the appendix on p. 2585.)
Senator Vandenberg. On page 3, starting with paragraph 17,
Colonel Taylor, your European representative, writing to Mr. Casey
says :
However, it is now very easy to project one's self into the future and foresee
that certain military difficulties are about to arise. These difficulties are
about to develop in specific cases :
The first case is the question of Poland. We are looking forward to con-
siderable business fi-om Poland, and hoping that it will come in the form
of additional quantities to the present contract, which if it takes place, would
obligate us under the agi'eement. to endeavor to pass a certnin quantity of
this contract to Nobel, specifically 300 tons of powder. It is evident to me,
however, that without our assistance. Nobel cannot manufacture in accordance
with the specifications and we will either have to show Nobel how to manu-
facture this powder by sending men to Ardeer, or he will have to take Nobel's
men to America to work them in on this matter.
Are we now discussing the powder on which the War Department
objected to your releasing information?
2442 MUNITIONS INDUSTRY
Mr. Casey. Not entirely, because a good deal of the powder was
cannon powder of the regular straight nitrocellulose type.
Senator Vandenberg. Is there some of the powder in the type we
are now discussing, of the type on which the War Department ob-
jected to your releasing information?
Mr. Casey. Yes, I think it was ; some I.M.R.
Senator Vandenberg. Some was I.M.R. ?
Mr. Casey. Yes.
Senator Vandenberg (reading) :
The second case is the question in Belgium where, for every commercial
reason, it would appear reasonable to place the business expected from the
Fabrique Natiunale on Nobel's, and where Nobel is about to undertake studies
to meet the requirements. In this case, unless I give Nobel's the results of
the studies made by us for the Fabrique Nationale, and give them certain
assistance, which knowledge I have acquired through efforts of the du Pont
Co., they will have trouble in meeting these requirements.
Thirdly, in the question of powder for the 13.2 mm Hotchkiss machine gun,
the question comes up why should they not furnish powder to Kynoch, if they
can make it, as Kynocli is their own factory, and here again, in order to enable
Ardeer to make this powder, we will eventually have to give them some
assistance.
So, it would appear that, in order to fullfil your quota obligations
to Nobel, you would be forced to give them information to enable
them to manufacture a number of different types of powder, would
it not?
Mr. Casj:y. That is what Taylor thought, looking into the future
was, perhaps, apt to happen.
Senator Vandenberg. Yes : and that included, in whatever degree
it involved them, it included these powders which the War Depart-
ment had put their prohibition?
Mr. Casey. Yes.
Senator Vandenberg. This is in 1927?
Mr. Casey. Yes; in 1927.
Senator Vandenberg. Now, did the 1927 contract Avith Poland for
1,000 tons go through?
Mr. Casey, Yes ; and du Pont filled it all.
Senator Vandenberg. Did you promise to show Nobel how to make
the powder which Poland required under this contract so that they
could fill their quota under the agreement?
Mr. Casey. We did not.
Now, Senator Vandenberg, would you mind letting me now go
back to fill in the gap ?
Senator Vandenberg. Just a minute, on this particular point. I
want to refer to the next letter which will be marked as an exhibit.
(The letter referred to was marked " Exhibit No. 939 ", and is
included in the appendix on page 2589.)
Senator Vakdenberg. This is a letter to Colonel Taylor from
W. H. O'Gorman, assistant director. Was he your assistant, Major?
Mr. Casey. Right.
Senator Vandenberg. He was assistant director to Major Casey,
which letter is dated January 10, 1928, and I want to refer to the
second page, the paragraph marked with the numeral 4. [Reading :]
We do not intend to furnish technical information to Nobel on any rifle or
cannon powder which we have in the past made up or may make up for
MUNITIONS INDUSTRY 2443
European governments. The sole exception to this is in the case of Poland
where we have promised, and are willing to show the Nobel representative the
manufacture of rifle and cannon powder on the Polish contract.
Does that change your answer to my question as to whether you
made a promise to release this information?
Mr. Casey. We did not.
Senator Vandenberg. Now, this information that you promised
to release to the Nobel representative in the case of Poland, did that
involve this I. M. R. powder in any degree?
Mr. Casey. But, we made no promise to release it to Nobel.
Senator Vandexrfjjo. What does this mean when you say [read-
ing] :
The sole exception to this is in the case of Poland where we have promised
and are willing to show the Nobel representative the manufacture of rifle and
cannon powder on the Polish contract?
Mr. Casey. That may be in the letter, but we still want to fill in
that gap. Senator. Otherwise, this paragraph does not stand out as
it should. If you will permit me, I would like to tell you the story.
Senator Vandenberg. All right; then we will come back to this
paragraph.
Mr. Casey. After this Government's objection, previously referred
to, of 1923, our position became ridiculous to such an extent that our
people accused Henning and myself of deliberately trjdng to block
the proposition, which was simply this : Nobel had the information
on the manufacture of this powder which was given to all British
manufacturers at that time during the war, but if Nobel made any
of that powder they would be promptly running up against our
patents, which would possibly lead to a lawsuit. The final result
of all this was that Mr. Felix du Pont and myself went down to
General Williams, and explained to him that, really, what Nobel
wanted, and all we expected to give them was a non-exclusive license,
so that they could make powder in England, which would absolve
them from the danger of a lawsuit on our part because of a violation
of our patent. While they had all the knowledge as to making it,
they had never been licensed to make that powder.
Now, the fact also remains that no further information was given
to Nobel's on any improvements we made on I. M. R. powder, other
than they had in the original developments as they existed during
the war. Therefore, when you read this paragraph, if Nobel's had
been able to supply to Poland a certain portion of the contract, if
Poland were willing, and Poland wanted to supply the type of
powder which was manufactured during the war, which England
and Russia could, and when you say Russia you must include the
Poles as part of Russia, they knew what the Russian powder was-r-
then we might assist them in making the type of powder that they
were making, or trying to make during the war, but on no further
development. I think that clears the picture a little differently.
It makes the set-up appear a little different.
Senator Vandenberg. It makes it appear a little different, yet the
thing I am trying to discover, and which, I confess, leaves me in
some perplexity is this : Back in 1923 you were asking the War De-
partment of the ITnited Statues whether it had any objection to this
relationship with Nobel's in respect to I. M. R. powder.
2444 MUNITIONS INDUSTRY
Mr. Casey. Right.
Senator Vandenberg. Obviously because there must be some in-
formation involved which is wanted abroad as a result of your
release. You are consistently proceed! n<2; on the theory that you
want to do everything the War Department asks you to do.
Mr. Casey. Right.
Senator Vandenbekg. The War Department asks you. and the
Navy Department asks you not to proceed with your arrangement.
Mr. Casey. That is right.
Senator Vandenberg. And you do proceed with the arrangement
in spite of tliose objections. In a conference which you yourselves
sought with the governmental authorities as late as 1928, you are
asserting your willingness to continue to violate this request from
the War Department in some degree in respect to this Polish order,
it seems to me. Am I mistaken about that?
Mr. Casey. Do you think that is really a fair statement. Senator?
I know from my contact with you that you want to be absolutely
fair.
Senator Vandenberg. I think you are correct about that.
Mr. Casey. Now, I have just tried to indicate to you that here was
something they had complete information on. They have that to
the extent, not only of the information we gave them, but that our
own Ordnance Department people gave them.
Senator Vandenberg. Didn't they have that before you sent Hen-
ning up to the War Department to find out if the War Department
had objection to this?
Mr. Casey. Who?
Senator Vandenberg. Henning.
Mr. Casey. Yes; they did.
Senator Vandenberg. Why did vou send Henning over to the War
Department?
Mr. Casey. I wanted to block it.
Senator Vandenberg. You agreed with the W^ar Department's
viewpoint ?
Mr. Casey. I wanted to prevent any further improvements reach-
ing Nobel's. They had the type of powder existing during the war,
and I wanted to prevent any further improvements, improvements
had to be made in that powder, reaching them. What they would
have gotten would not have been the I. M. R. powder we supplied
to the United States.
Senator Vandenberg. Now, let us both be perfectly fair and frank
about this.^ Is it not a fact that the relations of the du Pont Co.
with Nobel's did violate in spirit, if not in letter, the regulations of
the War and Navy Departments as asserted to you in 1923 in connec-
tion with your relations with Nobel's ?
Mr. Casey. I do not think so, Senatoi-, and I am trying to be frank
about it, too, because when Mr. Felix du Pont and myself explained
to General Williams that it was simply a question of authorizing
legally their right to make the powder "which they already had in-
formation on. That is us far as the matter went, and General Wil-
liams said they did have the information, I know it — General
Williams talking said, " I know they have the information."
We said this is simply a question of legallj^ giving them the right
without danger of a lawsuit, to make something the information on
MUNITIONS INDUSTRY 2445
which they already have. To this day, I do not believe Nobel's
has ever been able to make that powder. So that shows we have
not helped them.
Mr. Lammot du Pont. Senator, I think that Major Casey has
missed your point, and for that reason has not cleared up your
mind on it.
Senator Vandenberg. No ; he has not cleared up my mind.
Mr. Lammot du Pont. The United States Government did not
object to the relations between du Pont and Nobel, or between du
Pont and I. C. I. They objected to the giving of information on
that powder.
Senator Vandenbekg. That is my understanding, and it is also
my understanding that you did give information in spite of the
objection.
Mr. Casey. No; no information, Senator.
Senator Vandenberg. What did you give?
Mr. Casey. The right to manufacture.
Senator Vandenberg. Wasn't it the right to manufacture which,
necessarily, involved the information that the War Department and
the Navy Department were telling you to keep confidential?
Mr. Casey. This was information that Nobel already had.
Senator George. Do you mean, Major Casey, that you were agree-
ing to license a developed process, developed during the war, that
they already had, isn't that your meaning?
Mr. Casey. Exactly.
Mr. A. Felix du Pont. The conversations with the War Depart-
ment that Major Casey mentioned occurred quite a while ago, and
I want to say that I remember very distinctly the conversation that
we had with General Williams, in which General Williams said :
It is all right for you to give them the right to manufacture that powder,
which they knew liow to make during the war.
Senator Vandenberg. Is there anything in writing which you have
ever received from the Bureau of Ordnance, or the Chief of the
Bureau of the Navy Department, which mentions in any way the
memorandum of June 27, 1923?
Mr. Casey. Which one is that?
Senator Vandenberg. That is the memorandum in which the
chief of the War Department says:
In view of the fact that powders of this type are employed in certain
standard service ammunition used not only by the United States Army but
by the Navy and Marine Corps, the Ordnance Department believes that the
methods involved in the manufacture should be regarded as confidential mili-
tary information.
Mr. Casey. And so they were.
Senator Vandenberg. Has that ever been mentioned in any way
in writing?
Mr. Casey. It did not have to be, because we gave them no infor-
mation over what they originally had. Therefore we absolutely
lived up to the request of the Chief of the Bureau of Ordnance and
Chief of Ordnance of the Army. We gave them no information.
Senator Vandenberg. What kind of I. M. R. powder was it that
you were going to permit Nobel to manufacture and sell to Poland
in 1928, many years later? Is that the old stuff?
2446 MUNITIONS INDUSTRY
Mr. Casey. The old stuff.
Senator Vandenberg. Without any of the new developments
later?
Mr. Casey. No.
Senator Vandenberg. Now, let us consider the flashless nonhygro-
scopic powder. A large portion of the powder furnished on this
Polish contract was this F.N.H. type, which you developed for the
War Department?
Mr. Casey. A large part?
Senator Vandenberg. Yes.
Mr. Casey. I do not think we supplied any.
Senator Vandenberg. You do not think there is any F.N.H. pow-
der that has been involved in these foreign sales ?
Mr. Casey. No. When you talk about F. N. H., and when our
powder began to be known around the world. We were approached
by I.C.I, for the know-how. Our answer was obvious. There is a
little situation that always comes up, and that is this, it might be that
the United States ordnance, either Army or Navy might want to use
that. So, therefore, we simply said to I.C.I., if you want this infor-
mation, you put in your request through the military attache and
the British Embassy. They will in turn deliver it through channels
down to the Ordnance Department, and if the Ordnance Department
is agreeable and we are agreeable to this, we will transmit the infor-
mation back through the Ordnance Department.
Now, the reason that I make that statement is this : It is a com-
mon practice among governments if one country has certain infor-
mation, they will use that to trade with another nation for some-
thing of military importance that they may have, and so we wanted
to find out in such cases whether or not this was of any use to the
United States Government to assist them in getting any further
information.
Senator Vandenberg. In connection with the Polish order, the
reason it failed was because the Polish Government refused to com-
plete the order in the fashion suggested, was it not ?
Mr. Casey. That was one reason, yet we anticipated that in the
beginning, because if I wanted du Pont powder I would say, " I
want du Pont to make it and not somebody else."
I have here, and I do not know whether it is complete or not, a
list of patents on I.M.R. powder. One is dated, without going into
the serial number, July 29, 1916. That is the year it was filed.
Another was British application June 9, 1917, and another August
17, 1916. British application, June 9, 191T. Another, August 17,
1916, and British application June 9, 1917. Another July 14, 1916,
and British application June 9, 1917.
All of these patents except no. 1313459 — all of those except the
last had been given to the British during the war. All information
in connection with it is covered by those patents, and the right to use
them on account of the war.
Now, it was simply legalizing the right to operate under those
patents. That is involved in this whole proposition.
Now, as to the number of patents since that time, I do not know
how many there are, but I.C.I, has no information, and there is no
intent on our part to give that information. Further than that.
MUNITIONS INDUSTRY 2447
when we got these instructions from the Chief of the Bureau of Ord-
nance, and the Chief of Ordnance of the Army, we lived up to them
and gave tliem no further information than on the basis of the first
patent, what they ah^eady had.
Senator Vandenberg. Anything subsequently sold is the old stuff?
Mr. Casey. What?
Senator Vandenberg. Anything subsequently sold is the old stuff,
sold under this arrangement?
Mr. Casey. Yes; but to my knowledge they have never sold a
pound. They have not been able to make it.
Senator Vandenberg. We will proceed.
Mr. Lammot dtj Pont. Senator, before you proceed, you asked a
while ago whether there was any modification of the War Depart-
ment's position.
Senator Vandenberg. Yes.
Mr. Lammot du Pont. On the memorandum of 1923, I have here
a memorandum which indicates that there was a modification, and I
would like to read it.
Senator Vandenberg. I think you should read it.
Mr. Lammot du Pont. I think it is part of the chronology. This
is a letter from Mr. Henning of April 29, 1924, which is, of course,
Mr. Henning's version of what we agreed to. I will just read one
extract, and then, if you would like to, you can have the whole
communication on it. [Reading:]
Even before seeing our letter. General Ruggles had dictated an endorsement
relating to the military attache's cable, stating that it was vastly more impor-
tant to encourage du Pont in the manufacture of propellants for military use,
than to endeavor to protect secrets relating to the manufacture.
This is referring to I.M.R. powder.
Senator Vandenberg. I am glad you read it. I think I am com-
ing to something of that same character, Mr. du Pont.
Mr. Casey. Before we quit these patents, may I say that these
patents have lapsed.
Senator Vandenberg. I refer now to Mr. O'Gorman's letter of
March 10, 1928, to Colonel Taylor, in which the close cooperation on
military products is reaffirmed.
(The letter referred to was marked " Exhibit No. 940 ", and is
included in the appendix on page 2590.)
Senator Vandenberg. I want to read this letter addressed to
Colonel Taylor, signed by Mr. O'Gorman, who is Major Casey's
assistant.
Senator George. What is the date of that letter ?
Senator Vandenberg. March 10, 1928. The title of it is " Con-
ference with Nobel Officials." [Reading:]
1. On March 9 a conference took place between Nobel and du Pont officials
on matters appertaining to sales of military products of both companies. We
have not as yet been furnished with a copy of the minutes of the conference,
but the following as reported by Major Casey is a summary of recommenda-
tions :
(a) A 10-year agreement between Nobel and du Pont covering military sales
in Europe be entered into as more or less of a continuation of the 1925 agree-
ment.
(6) It was explained to Nobel that our Paris office is not in a position to
furnish technical information, and therefore all technical problems should be
referred to Wilmington. We offered Nobel our facilities at Brandywine Labora-
2448 MUNITIONS INDUSTRY
tory for the development of nitrocellulose rifle powders for British Army car-
tridges. We suggested that Brandywine would welcome visits of Nobel technical
men, and we would undertake to develop nitrocellulose rifle powders to fulfill
the British requirements, provided Nobel would furnish us with guns and
components to be used in ballistic tests. The development would then be turned
over to Nobel and. If necessary, we would send a man to Ardeer to assist in
the manufacture of nitrocellulose rifle powder for the British Government.
All technical information passed on to Nobel would be on the basis of Nobel
agreeing to consider same as confidential, and under no condition divulge it to
subsidiary or other companies in which Nobel may have part ov/nership or
some other interest.
To what extent would that involve the release of what we might
term " military secrets " ?
Mr. Casey. None whatsoever. One of the powders which had the
greatest sale was I.M.R, 18, which was developed during the war
for the British cartridge. As I have stated before, Nobel had never
been able to make a satisfactory copy of that powder, although they
had all the information. They were trjdng to induce the British
Government to drop the use of cordite with its highly corrosive
qualities, and use a progressive burning powder, which they felt they
could make. This whole proposition here is that we felt we could
assist them in making the old powder that was made during the war,
I.M.R.-18, because it was ideally suited to the British cartridge, and
there had been no change in the British cartridge, it was the old 303
mark 7.
Senator Barbour. Major, I am wondering if that assistance which
you speak of is not the fulfillment of a promise that I remember
being mentioned in one of the other letters.
Mr. Casey. You mean about help?
Senator Barbour. About help.
Mr. Casey. In regard to information which they already had?
Senator Barbour. Yes. I think there has been a little confusion
in our minds in regard to a promise which was made, which appeared
in connection with your arrangements with the Department and a
nonfulfillment of it.
Mr. Casey. Yes, sir.
Mr. Irenee du Pont. Mr. Chairman
Senator Vandenberg. Yes, Mr. du Pont.
Mr. Irenee du Pont. I would like to ask if you have taken from
the files the original copy of the patents, which it seems to me is the
most important part of this controversy. I do not know what it
contains.
Senator Vandenberg. If it is available, it might be entered, but
it is so technical that it seems to me that the interpretation of the
situation made by your own officials is thoroughly competent.
Mr. Irenee du Pont. It seems to me that the first-hand testimony
of the actual contract ought to be the thing which governs, rather
than somebody's interpretation.
Senator Vandenberg. Let it be entered at any time you want to
furnish it as an exhibit. Nevertheless, I disagree with you that these
particular exhibits are not thoroughly pertinent and competent and
material.
This conference in 1928 was a conference relating to the sale of
military products, was it not?
Mr. Casey. Right.
MUNITIONS INDUSTRY 2449
Senator Vandenberg. And it is renewing a thoroughly intimate
and close relationship, a sort of a reciprocal cooperation, between
you and Nobel, is it not?
Mr. Casey. No. This is a suggestion to renew a selling arrange-
ment. The 1925 agreement did not include patents or secret proc-
esses. They had been specifically excluded.
Senator Vandenberg. You are suggesting the visit of Nobel's tech-
nical man and complete hospitality in the matter and everything.
Mr. Casey. As I just explained this, they had still not been able
to manufacture the same powder on which they had information
during the war, which was developed for the British cartridge at that
time, and they were trying to get the British Government to adopt a
nitrocellulose powder instead of cordite. To date, they have not
succeeded.
Senator George. Then Major Casey, we are to infer, or to under-
stand, that they did not take advantage of this suggestion or offer?
They did not send their technical experts ?
Mr. Casey. They did, but you have got to take into consideration
the typical British viewpoint. They sent over two men. One was
an old long-range rifle shot, with whom I had been acquainted a
number of years, F. W. Jones, and the other man was a doctor from
Scotland by the name of Stickland. Those men came over and here
is as far as they got : The very minute we began discussing the pow-
der which we made for the British Government, their first attitude
was, " You do not know how to make it." That is as far as we got.
Every bit of the talk we had with them after that they tried to show
us we were " all wet ", the answer being that if we were, they would
now be able to produce the powder, and when they were given the
opportunity during the war period to see how the powder was made,
they would not have anything to do with it, and they did not know
anything about making the powder. I was at the Ardeer plant in
1925, and I saw them with German machinery which they had gotten
from the German plants right after the war — I think there was a
general distribution of it — I saw them trying to make German
powder, and likewise on some of the German equipment they were
trying to make our powder, and when they tried to make powder on
a guillotine press, like a paper press, I could understand how they
would not be able to make our type of powder, unless they changed.
You cannot change the British nature.
Senator Vandenberg. You have a great deal more technical knowl-
edge about the manufacture of powder than most of the countries to
which you sell, have you not?
Mr. Casey. I would not say that, no ; but I think we have had more
practical experience. You know that technical knowledge is one
thing and application is another thing. Two experts may have equal
technical knowledge but the actual " know-how " or operation as to
the question of distinction between them is bad.
Senator Vandenberg. This technical capacity, let us say, which
you possess, becomes
Mr. Casey. Technical and operating capacity.
Senator Vandenberg. Technical and operating capacity which
you possess becomes of considerable sales use, does it not, in the
course of your foreign contacts?
Mr. Casey. If we did not have it, we could not sell.
2450 MUNITIONS INDUSTRY
Senator Vandenberg. Precisely.
Mr. Casey. Senator, I would say that in selling to a foreign
country we have repeatedly run up against this situation : In spite
of the fact they say " the powder is good, but not as good as we
can make ", this being the foreign country, and " we like it ", then
they start in to tell you that you are making it the wrong way.
You always run up against that situation. The fact of the matter
is : In the case of one country, to whom we never sold, they had
a term in their own specifications which really meant unless you
were able to get the water from the Danube Kiver you could not
fulfill the specification — and we did not have a pipe line. That
country was Rumania. After the war the same representatives
who were here during the war came over, and the net result of that
was — after being told that we still did not Iniow how to make
powder and they did not want our powder — they wanted their
own — yet on actual test their own did not show up as well as ours —
and the net result of the proposition was an expense account for
furnishing lemonade on all occasions to the representatives — and
it was lemonade.
Senator Vandenberg. As a statement of your company's policy
with respect to the use of technical and operating capacity in sales
promotion, let me read into the record the final two paragraphs
of the letter of W. H. O'Gorman, who was Major Casey's assistant
director, addressed to Colonel Taylor in Paris on December 12, 1927,
which I will offer for appropriate number.
(The letter referred to was marked " Exhibit No. 941 " and is
included in the appendix on p. 2591.)
Senator Clark, That reads :
The matter of furnishing technical assistance to foreign governments or
foreign plants is one which comes up quite often. In general, our policy is
not to answer the question until we have some indication as to whether
the giving of technical assistance will result in a large order or orders. If it
is necessary to answer the question as to the giving of technical assistance
before any information can be had as to whether the foreign government will
agree to give us a percentage of its powder requirements over a period of
years, we think our position should be as follows :
The du Pont Co. will furnish technical assistance on powder manufacture,
providing we can be guaranteed orders for a definite quantity of powder
per annum over a period of 10 years. Of course, our decision will be based
upon the quantity of powder which we will be permitted to manufacture
for the customer over the specified period.
Is that a fair statement of the attitude of the company?
Mr, Casey. Yes, sir; but, Senator, before you leave that, realize
this: O'Gorman is writing to our own man. Colonel Taylor, and
while it is not expressed here, as I have stated repeatedly, we do not
have to explain policies to our own people every minute. It stands
without any further comment that that is also predicated upon
Government permission and approval.
EUROPEAN countries AIM FOR INDEPENDENCE IN POWDER SUPPLY
Senator Vandenberg. This whole phase is further discussed in con-
siderable more detail in Colonel Taylor's letter to Major Casey under
date of March 3, 1930, which will be marked appropriately.
(The letter referred to was marked " Exhibit No. 942 " and ap-
pears in full in the text.)
MUNITIONS INDUSTRY 2451
Senator Vandenberg. I am now approaching another phase of the
matter, which is of exceeding interest to me. I read :
In the European countries where the joint sales of du Pont and Imperial
Chemical Industries material are conducted by the Paris office, our prospects are
limited to getting a few orders based on mobilization plans which we have
stimulated.
May I interrupt to inquire in how many different countries du
Pont and I. C. I. conduct joint sales?
Mr. Casey. At this time we were handling sales practically for
both companies. We did not think they knew how to sell.
The Chairman. That was in 1930?
Mr. Casey. That was in 1930.
Senator Vandenberg. To what extent? You mean all over the
world ?
Mr. Casey. No, no; this was Europe we were talking about.
Senator Vandenberg. All over Europe?
Mr. Casey. Yes, sir; including Turkey, I believe, and Persia.
Senator Vandenberg (reading) :
In the European countries where the joint sales of du Pont and Imperial
Chemical Industries material are conducted by the Paris office, our prospects
are limited to getting a few orders based on mobilization plans which we have
stimulated.
What does that mean ? How do they stimulate mobilization plans ?
Mr. Casey. You do not stimulate the plans. I believe this was
brought out in the previous hearing: Every nation has a mobiliza-
tion plan. The trouble with nearly all these nations was that they
were trying to fulfill the program called for by the mobilization plan
but did not have the money with which to do it. Further than that,
in the different branches requiring material, each one would try to
get priority for his particular kind of equipment. In other words,
there might be a certain amount of money available in that country
for mobilization. The quartermaster would come along and say,
"Yes; I must have this for canteens." They might want escort
wagons, they might want trucks, tractors, or something of that sort.
The Ordnance Department might want guns, they might want
powder, they might want small arms, so that there was continually
a fight in every country" as to who was going to get the right to spend
the amount of money available on their mobilization scheme. That
is what they were referring to here.
Senator Vandenberg. Let me read the next sentence [reading] :
We have such prospects in Poland, Holland, Finland, Esthonia, Latvia.
In other words, in Poland, Holland, Finland, Esthonia, and Latvia
you had prospects for getting a few orders based on
Mr. Casey. Mobilization plans.
Senator Vandenberg. Which you had stimulated.
Mr. Casey. We have not stimulated the plan. We were trying
to stimulate them to buy the powder on their mobilization program.
Senator Vandenberg. They have the progTam and you are try-
ing to stimulate them to get powder to carry out the program.
Mr. Casey. To get our powder, which would be natural. You must
realize also. Senator, if they buy guns and no ammunition, the guns
are no use.
Senator Vandenberg. Certainly not as deadly.
2452 MUNITIONS INDUSTRY
Mr. Casey. If they buy powder and do not buy the ammunition
at the same time, or the components making up the ammunition,
the powder is of no use. In every case, they have got to keep a
balanced program. If they decide to buy guns, it generally means,
if they use all the money for guns, they probably have to wait until
the next year to buy ammunition. There is a time element in there.
It may be that the guns take longer to produce than their am-
munition, 2 or 3 years, and they say, " We will order the guns this
year and the next year or the second year following we will have
the ammunition for the guns."
Senator Vandenberg. Wlierever they have a mobilization plan as
a matter of business procedure you see if you can sell the stuff ?
Mr. Casey. We try to secure some of it for our material.
Senator Vandenberg. You try to turn that from a paper plan
into an actual plan, wherever you find this situation existing?
Mr. Casey. I vrould not say that. We try to get our part of the
money which they have available. Senator, to say that we can in-
fluence a foreign government as to its policy, I think it is self-evi-
dent that such a thing is impossible. They have a policy and we
have nothing to do with their polic}-, nor could we in any way pos-
sibly have. They would not take us into their confidence.
The fact of the matter is, I might add, that at the previous hear-
ing I stated when we firet started or attempted foreign sales, which,
with two exceptions before the war, was not begun until after the
war, we found we were like children in the wilderness, and the
first contract which we had was from an extremely friendly country
to this country, and where they had actually started their pur-
chasing in this countr}'^ through a purchasing commission on Fortieth
Street in New York City, and it was several years afterward before
we finally got a contract.
Now, Colonel Taylor, who, when this thing started, was not in
military service, when he began going around to the different gov-
ermnents, the door was shut in his face. It was not until they
began to realize that he would not leave that he was able to get
by the outer door. The foreigners will come to this country and
be surprised as to how easily they can get in to see people. Over
there you cannot. They may keep you waiting in an anteroom
for days, and when they finally let you get into the inside, you are
ready to say, at least, " They are now ready to consider us as a
possible source of supply."
If the members of this committee think that this is a matter of
just going some place and selling munitions, and that we have some-
thing to say and they jump at it, they are very much mistaken.
Senator Vandenberg. The committee has no such idea.
Mr. Casey. If you would like to have first-hand information, I
would like to put you on the job.
Senator Vandenberg. From my observation of the methods em-
ployed, I wouhl prefer to stay in the Senate.
Mr. Casey. I will say this : I do not know what you get as a Sena-
tor, but you ai'e certainly better off.
Senator Vandenberg. (reading) :
We have such prospects in Poland, Holland, Finland, Esthonia, Latvia,
and based on your stimulation of their own mobilization plan?
MUNITIONS INDUSTRY 2453
Mr. Casey. That is true.
Senator Vandenberg. They set up the plan and then your sales-
men proceed to tell them that their plan is no good so long as it is
just a plan on paper?
Mr, Casey. No, On their mobilization plan — we have never seen
an actual plan in any country — they have plans for powder, guns,
ammunition, high explosives, and we say, " Why not buy some from
us?"
Senator Vandenberg. What good is it on paper ?
Mr. Casey. What good is it on paper ?
Senator Vandenberg. If they have a gun and no powder, what
good is it?
Mr. Casey, To make an ornament for some city.
Senator Vandenberg. I will continue reading that letter [reading
" Exhibit No. 942 "] :
We may get one order from each of these countries, and there may be no
more. The current business is gradually being well taken care of by local
factories.
However, the current production of the local factories is not entirely satis-
factory. They are calling for help, and it might appear that the best chance
we have of getting orders in the future would be to help them in their powder-
factory plans.
It is the ambition of every European country to build a local factory, or to im-
prove the quality of their production, where factories already exist. The pro-
duction, in existing factories, of a poor quality at high costs has not dis-
couraged in the least the ambition of the country operating the factory, nor
caused any hesitation on the part of other countries not owning factories in
considering the erection of a factory of their own.
The intention of each country is to produce in their local factory the type
of powder that the government adopts as standard, or to adopt as standard the
type of powder they can produce.
In the territory directed by Imperial Chemical Industries, they have decided
that their chances of business are so small that their only profit can be found
in conjunction with assistance given to local factories.
They are now negotiating various factory schemes in Bulgaria, Rumania,
Turkey, and Yugoslavia.
In the case of the powder factory in Turkey, Imi^erlal Chemical Industries
have definitely arranged with Koln-Rottweil, Gute-Hoffnungs-Hutte, and
Golzern-Grimma to supply the technical assistance.
The Germans have been discussing for a long time with the Turks regarding
the erection of a factory, and Imperial Chemical Industries decided that In
order to get the job they would have to take the Germans in, which they did
without consulting us, although they keep us informed at all times of what is
going on.
What does he mean by taking the Germans in? Have you any
idea?
Mr. Casey. I am not sure that my memory is very good on it, but
I think that they had talked of taking in the" Germans in the erection
of a powder mill in another country.
Senator Vandenberg. Does that mean a German investment or
does that mean the purchase of material in Germany?
Mr. Casey. No; it meant a German investment.
Senator Vandenberg. I read:
It is believed that in our territory we should give consideration to this matter
for the following reasons :
(a) We have been approached several times by each of our customers to
assist them in building a factory or in improving their present production.
(&) When it becomes known that Bulgaria, Rumania, Turkey, and Yugo-
slavia are being assisted by Imperial Chemical Industries and the Germans in
2454 MUNITIONS INDUSTRY
the production of a military powder, other countries will become more enthusias-
tic about production in their own country.
(c) If we continue to turn a deaf ear to our customers' requests for assistance
in their predominant ambition, they will seek assistance either from Germany
or from Bofors.
(d) Two existing government factories in Europe, 1 in Turkey and 1 in
Finland, produce the German type of powder.
(e) The Gei-man type of powder is entirely satisfactory in Europe, and
fulfills present-day requirements.
(f) The du Pont type of powder is not produced by any local government
factory in Europe.
(g) It would be a great asset if the du Pont type of powder would be
adopted as standard in some of the European countries, and produced there.
(h) In order to adopt du Pont powder as a standard type, the interested
country must be able to produce it.
We recommend that:
(a) The Paris office be authorized to negotiate the sale of "know how" for
the production of such du Pont rifle and cannon powder granulations as cus-
tomers may adopt as standard.
(6) Definite proposals be submitted to Poland for F.N.H. powder and pyro-
cannon powder, and to Holland for cannon and rifle powders.
Very truly yours,
William N. Taylob.
Now, if this analysis of the European situation is correct, it would
appear that no European country intends to remain dependent upon
a foreign country for its powder supply, if it can possibly help it.
That is a fair interpretation, is it?
Mr. Casey. Eight.
Senator Vandenberg. So that this means that you face the predic-
ament of the ultimate disappearance of your European market, when-
ever they achieve powder independence of their own, does it not?
Mr. Casey. Eight.
Senator Vandenberg. You apparently recognized this fact in 1925,
as long ago as 1925, and I am very much interested in the memoran-
dum of a meeting held at Nobel House on November 9, 1925, which
is offered for appropriate number.
(The memorandum referred to was marked " Exhibit No. 943 " and
is included in the appendix on p. 2592.)
Senator Clark. I read from this memorandum :
President: Mr. Ir^nee du Pont, Maj. K. K. V. Casey, Col. W. N. Taylor, Mr.
A. G. Major.
The discussion evidenced that the du Pont representatives accept our theory
that eventually : (1) European countries will be self-supplying and/or (2) draw
their supplies from countries more logically situated (geographically) than the
U.S.A. and that jointly du Pont and ourselves should adopt the policy of afford-
ing technical assistance to European countries wishing to erect factories in re-
turn for a fee and the guarantee of jiowder orders to us during the erection
period.
So that as early as 1925 you quite generally recognized the fact
that your European market would dry up witli respect to American
sales ?
Mr. Casey. Yes, sir.
Senator Vandenberg. And that therefore apparently the only pro-
gressive outlet for the time being was through cooperation in the
creation of these independent producing units in their various foreign
countries, and you would get as much out of it incidentally by way
of temporary orders and fees as you could?
Mr. Casey. As a matter of interest, Senator, nothing ever came of
any of it.
MUNITIONS INDUSTRY 2455
Senator Vandenberg. None of these plans have ever succeeded ?
Mr. Casey. Not a bit. In connection with this letter of Colonel
Taylor's of March 3, 1930, you may not have drawn the reply from
my files. On account of my voice, I would like to have somebody
else read this. This is the reply from O'Gorman, which is in reply
to letter T-1862. Will somebody else read it?
Senator Vandenberg. Will you read it, Mr. Raushenbush ?
This is a complete confirmation, is it not?
Mr. Casey. Of his general idea.
Senator Vandenberg. Of his general idea. Perhaps it will suflfice
if we enter it in the record at this time, without taking the time to
read it, unless you want to have it read.
Mr. Casey. I do not think there is any need.
Senator Vandenberg. All right, let it be entered.
(The letter referred to was marked " Exhibit No. 944 ", and is
included in the appendix on p. 2593.)
Mr. Casey. In connection with all these European factories we
are beginning to talk about around this period, I would like to read
an extract from a letter of Colonel Taylor's dated September 5,
1932.
Senator Vandenberg. Yes, sir.
Mr. Casey. He says:
The result was that in 1925 all the projects for building local factories
were pushed and a great many new ones developed. The net result of the
threat of this convention was, I am told, that over 300 building projects
were considered before January, 1926.
A great number of projects which might otherwise have died have succeeded
in becoming realities.
Such as in Tinland, Latvia, Zagadore * * * also some 40 factories in
Poland for other materials, 6 in Yugoslavia including powder plant, rebuild-
ing of i)owder factory in Roumania, 4 factories built in Turkey, and an at-
tempt to start a series of factories in Greece, reconstruction of arsenals in
Spain, government assistance to powder factory of Minden in Holland, and
the decision by Italy that the Italian army would only buy from Italian
factories.
That is the result of the Geneva Conference in 1925.
In referring to the date of January, 192G, I think that date is
important when you realize when the convention was held.
Senator Vandenberg. Mr. Chairman, I think I can conclude on
this matter in about 15 minutes.
Referring now to this method of procedure of sales, I call at-
tention to the Polish proposal made some time subsequent to 1924,
and I call attention to the next exhibit, which will be given an ap-
propriate number, which is cable No. 184.
(The cablegram referred to was marked " Exhibit No. 945 ", and
appears in full in the text.)
Senator Vandenberg. This is a cable from Mr. A. Felix du Pont,
on April 25, 1924, and reads :
Cable No. 184.
Negotiations with Poland powder plant proposition requires instructions
in manufacture flake I.M.R. powder. Ask Chief of Ordnance, Army, for per-
mission in writing to give these instructions and telegraph result.
Is that the I.M.R. powder that was described in the previous
testimony ?
83876 — 35 — pt 11 5
2456 MUNITIONS INDUSTRY
Mr. Casey. No ; flake powder was a type of powder we made on a
few occasions similar to, the powder made by the German company
Koln-Rottweiler, but made in a different way because we have not
their equipment.
Senator Vandenberg. It has no relation to the I.M.R. powder that
the War Department declined to let you release?
Mr. Casey. No more relation than our I.M.R. powder had to
earlier forms of progressive-burning powders in Europe.
Senator Vandenberg. I do not know what that is. Your answer
is there is no relation here?
Mr. Casey. I do not want to make a flat statement that there is
no relation, because all progressive-burning rifle powders work on
one principle; that is, a deterrent on the outside of the powder to
move the pressure curve down the barrel rather than have it at the
breech. That is the principle of a progressive-burning rifle powder.
Senator Vandenberg. The answer is in the next exhibit, which will
be marked.
(The document referred to was marked "Exhibit No. 946", and
appears in full in the text.)
Senator Vandenberg. It is a cable to Mr. A. Felix du Pont on
April 29, 1924:
[Felix Cable No. 97]
Refer to your telegram no. 184, have letter in hand from Chief of Ordnance
authorizing us to assist and instruct Poland in manufacture of flake rifle
powder and other military powders are mailing to you today copy of letter.
In other words, the Chief of Ordnance authorizes you to assist
in the construction of this powder factory in Poland ?
Mr. Casey. Yes.
Senator Vandenberg. And to use your flake I.M.R. powder
processes in that connection?
Mr. Casey. Yes. -
Senator Vandenberg. And the alloy of our own War Depart-
ment in this same connection is emphasized in this same trans-
action, not only by the authority given you by the Chief of Ord-
nance but also by a sentence which I will read from the next
exhibit, which is C. I. B. Henning's report under date of April 29,
1924. from Washington.
(The report referred to was marked " Exhibit No. 947 ", and is
included in the appendix on p. 2593.)
Senator Vandenberg. In which he says :
The flake rifle powder situation was emphasized, and apparent contra-
dictions were cleared up.
Perhaps these contradictions were the same things that confused
me regarding I. M. R. powder [reading] :
Even before seeing our letter, General Ruggles had dictated an endorsement,
relating to the military attache's cable, stating that it was vastly more im-
portant to encourage the du Pont Co. to continue in the manufacui'e of
propellants for military use, than to endeavor to protect secrets relating to
the manufacture.
Who was General Ruggles at this time ?
Mr. Casey. Assistant Chief of Ordnance.
Senator Vandenberg. This is the same General Ruggles who later
was a United States delegate to the Geneva Conference in 1925?
MUNITIONS INDUSTRY 2457
Mr. Casey. Yes.
Senator Vandenberg. General Euggles is quoted as asserting the
policy of the United States Government that it is vastly more im-
portant to encourage the du Pont Co. to continue in the manufac-
ture of propellants for military use than to endeavor to protect
secrets relating to the manufacture. And the personification of this
opinion is the fact that they at the moment permitted you to make
this arrangement with Poland.
Mr. Casey. To try to make.
Senator Vandenberg. To try to make this arrangement with
Poland.
Mr. Casey. There is an awful difference there, Senator.
Senator Vandenberg. I suppose there is. I found that out by the
cross-examination.
Mr. Irenee du Pont. You asked some time ago whether the pro-
hibition on the giving of the secrets of the I. M. R. powder had ever
been reversed in writing. At that time it was a rather unsatisfactory
answer. I think this does answer that the letter was written.
Senator Vandenberg. But this refers to I. M. R. flake powder.
Mr. Irenee du Pont. Yes ; and other military powders.
Senator Vandenberg. Do you think that includes I. M. R.. flake ?
Mr. Irenee du Pont. I do not know. This includes the manufac-
ture of flake rifle powder and other military powders.
Senator Vandenberg. Do you read that as a reversal of the atti-
tude?
Mr. Irenee du Pont. It sounds like it. I know nothing about it,
but I just wanted to call your attention to it.
Mr. Casey. Senator, I think I can explain why General Ruggles
took that position. We made an arrangement with General Williams,
as Chief of Ordnance, in 1919, and it was based on this : I had just
heard the rumor in Wilmington that the directors of the company
were considering going out of the powder business. They had a great
many reasons why. There was the Government with the two finest
powder plants in the world. Old Hickory and Nitro. There were
tremendous stocks of powder left over from the war. It did not
seem feasible, nor possible, that there would be any further occasion,
for some years to come at least, for us to be in the powder business.
When I heard that I simply said to General Williams, " This is what
is being talked of ", and that started a letter from General Williams,
which resulted in an agreement of September 25. Now, I think you
will find — Mr. Raushenbush, you pulled all that.
Mr. Raushenbush. Yes; we have all that.
Mr. Casey. You have all that?
Mr. Raushenbush. Yes.
Mr. Casey. I believe those letters should be read into the record
at this time.
Mr. Raushenbush. At the proper time they will be.
Mr. Casey. Then, if they will be put in the record, let me just give
you an idea of what it means. General Williams said he thought it
would be a serious blow to the national defense if the du Pont Co.,
with its vast reservoir of technical information and know-how, were
to lose interest in the production of military propellants particularly,
and likewise the possible effect it might have on the national defense
in time of emergency.
2458 MUisriTioNS industry
At that time, as the result of experiences during the war, the result
of the report of the Westervelt Board, there were something like
two hundred and seventy-five odd problems to be solved in con-
nection with military propellants and explosives.
As a result of that we said, " Well, we will try it. We will con-
tinue going." At the same time General Williams said he, however,
could not promise to give us any business, but he hoped we would
stick by the crowd. The fact of the matter remains that we did not
get any business from the Government, and then only in very small
quantities, for several years to come.
I think a little prior to this date of 1924, or it may have been at
the same time or slightly after, I know there was a newspaper article
that said something about du Pont going out of the powder business,
and Irenee du Pont received a letter from General Williams hoping
that that rumor was incorrect and asking him if we would still not
continue in the game.
Now, from our own viewpoint in the entire smokeless powder
department, we never knew at any time, in spite of this arrangement
whereby they would see the proposition probably so far in the
future, but what we might all be out of jobs.
So you can readily see, in view of the fact that improvements in
material of this type are taking place daily, that they considered it
was more important to keep us in the game, because if you gave
information under such an arrangement as suggested here this year,
the whole thing might be radically changed by something that took
place in the course of the next year.
Senator Vandenberg. So we find ourselves in this position: The
instrumentalities of defense are constantly improving from day to
day.
Mr. Casey. Yes.
Senator Vandenberg. And as rapidly as we make improvements
over here, these improvements presumably giving us an advantage
in our defense, we are in the anomolous position of being forced to
let the other fellows have the advantages which we had obtained for
ourselves, in order to keep our munitions manufacturers going, so
that we can take advantage of the same progressive steps?
Mr. Casey. Well, I don't know. I think that is stating it a little
crudely.
Senator Vandenberg. I think it is worse than crude. If you can
state it any plainer, I wish you would. But you get my idea.
Mr. Irenee du Pont. Isn't that true. Senator, in practically every
technical manufacturing process? Take the automobile manufac-
turners, when they bring out new ideas, they are passed on to the
other fellows.
Senator Vandenberg. Yes; but there is a vast difference there.
T suppose the automobile is a dangerous weapon under some cir-
3umstances, but there is no analogy, as I view the situation — and I
do not mean to enter any personal opinions in this testimony, but
you have raised the point — I don't think there is any analogy be-
tween private cars, in the normal sense, and the munitions trade,
because the making of private cars involves only a commercial
aspect, whereas the munitions trade involves the life, and the trade
of the country indirectly, and the physical life and death of its
MUNITIONS INDUSTRY 2459
people. So you cannot consider them in parallels. It seems to me
we now have the amazing proposition that as an abstract proposi-
tion wlien the United States perfects a new advantage in the art of
self-defense, we must sooner or later impart that knowledge to all
the rest of the nations of the earth, which must include our potential
enemies against whom we are attempting to set up our defense in
prospect. We must impart this advantageous information to our
potential enemies, or our private munitions manufacturers in the
United States will be unable to continue to arm us with this ad-
vantageous thing. It seems to me that that is the proposition which
we confront.
The Chairman. Doesn't it come to this in just a word : That we
must arm the world under this practice, so that we can have the
capacity to take care of ourselves in an emergency, when and if the
world decides to use our devices against us ? I don't think there is
a more thorough argument against the private manufacturer of
munitions than that one to which you have just directed yourself,
Senator.
Mr. Caset. Senator Nye, a military secret is a secret for only
about 2 years.
The Chairman. Less than that very often, is it not?
Mr. Casey. No; I am saying a government secret like you talk
about is a secret for only about 2 years, because just as soon as tests
are made it does not take long for the thing to drift around.
The Chairman. How do you account for the drifting around?
Mr. Casey. Does not our Government maintain and every other
foreign government maintain military and naval attaches?
The Chairman. Yes.
Mr. Casey. What is their job?
The Chairman. You think that that is their job?
Mr. Casey. I ask you the question, what is their job ?
The Chairman. I do not know. What is their job ?
Mr. Casey. To get information.
The Chairman. You think they are the ones who get the infor-
mation and convey it back home ?
Mr. Casey. That has nothing whatsover to do with private manu-
facture.
Senator Vandenberg. I had a number of other exhibits which I
was going to introduce bearing upon your negotiations with the
Dutch Government and with the Belgian Government, in each in-
stance simply typifying this same general situation which we ap-
parently now confront, namely, that in return for technical assistance
in establishing their own munitions institutions, if you are given
interim orders that are adequate, you are perfectly willing to set
them up in business.
Mr. Casey. Don't say we are.
Senator Vandenberg, Who shall I say is willing to set them up
in business?
Mr. Casey. Say the Government is walling to have us do it, pro-
vided we get production. The Government has absolutely no in-
terest
Senator Vandenberg. Exactly.
Mr. Casey. In our building a plant in a foreign country.
2460 MUNITIONS INDUSTRY
Senator Vandenberg. I understand. I am simply coming to this
conclusion : If this thing then is carried to its ultimate conclusion
and your prophecies are correct, it is only a matter of a short time
when you will have, assuming that the system works as you expect
it to work, when you will have or somebody else will have assisted
all of these foreign countries to become self-dependent in respect to
these supplies and you will be out of the export business.
Mr. Casey. There is no doubt of that last part.
Senator Vandenberg. That is the ultimate result of the forces
that are at work, if they work as you contemplated they would work.
Mr. Casey. Let me remind you. Senator, there, that it is self-
evident from these reports of Taylor's, that what they wanted assist-
ance on was in reality on improving their own type of powder.
France took enormous quantities of our powder during the war, but
they have never made, as far as I know, a bit of that powder since.
They still believe in their own type of powder. That will apply
throughout Europe. The fact remains, as stated, that there is not
one nation in Europe making the du Pont type of powder, even
though they were given the information to make certain types of
powder during the war.
Senator Vandenberg. But the thing I am trying abstractly to
establish is that the American export business in powder, if not al-
ready at an end, will be at an end just as soon as this self-sustaining
manufacturing activity has been concluded in the other countries.
Mr. Casey. I think so.
Senator Vandenberg. And it is the policy of your company now
to contribute to the making of these countries self-sustaining?
Mr. Casey. No.
Senator Vandenberg. Oh, yes. You are perfectly willing to give
them technical assistance in establishing their own factories, so long
as you have the interim orders for powder.
Mr. Casey. I don't think that is quite a fair statement.
Senator Vandenberg. I want it to be fair. What is the statement?
Mr. Casey. Here is the summary of the situation, put up by Tay-
lor, the way tlie future looks to him. He has shovrn that the Geneva
Conference of 1925 resulted in this tremendous expansion in all
Europe, where they all began to realize if that did not take effect
then ultimately it would be at the place where every nation would
have to be self-supporting, as far as plants were concerned.
There is this distinction, however, that certain nations, in spite of
the fact they have their own plants, would still be dependent on
imports to operate those plants. For instance, how many nations of
the world produce cotton? And cotton is the very backbone of
powder. How many nations would have to import fuel, whether it
is in the form of coal or oil? How many nations would have to
import toluol for the manufacture of TNT ?
That is why in a great many cases this race for putting up their
own plants went into effect as the result of the Geneva Conference.
In a great many cases in these nations a powder plant was the last
thing in the world they would want, because when they actually
needed material in time of war they would be up aganist the same
problem that England faced in the World War, the question of
tonnage. It is better to use every bit of tonnage you have to import
MUNITIONS INDUSTRY 2461
something you can use rather than to use from 9 to 15 times that
tonnage in order to then have a net result of 1 ton.
Senator Vandenberg. I think we are through for this morning.
The Chairman. The committee will be in recess until 1 : 30.
(At 12 : 15 p.m. the committee recessed to 1 : 30 p.m. of the same
day.)
AFTERNOON SESSION
(The committee reconvened at 1 : 30 p.m.)
TESTIMONY OF K. K. V. CASEY, lEENEE DTJ PONT, LAMMOT DU
PONT, W. R. SWINT, A. FELIX DU PONT, AND DR. FIN SPAERE—
Resumed
EXCHANGE OF TECHNICAL INFORMATION BY MUNITIONS COMPANIES
The Chairman. The committee will be in order.
Mr. Casey. Senator Nye
The Chairman. Just a moment, please. The committee is having
to announce that by reason of the illness of Senator Clark it is not
going to be possible for the committee to go on with the intended
program of this afternoon. Except for a little finishing up on the
case that Senator Vandenberg had in hand this morning and such
statements as the Chair understands witnesses wish to make, the com-
mittee will recess until Monday very early this afternoon.
Senator Vandenberg. Major Casey, just one further exhibit. In
respect to this question of the interchange of information, and
whether or not it involves military processes, I show you a letter
from C. A. Woodbury, director. Who is Mr. Woodbury?
Mr. Casey. He is chemical director of the explosives department,
of which I loiow very little.
(The letter referred to was marked " Exhibit No. 948 ", and is
included in the appendix on p. 2594.)
Senator Vandenberg. This is Director Woodbury writing under
date of November 10, 1933, to Mr. W. R. Swint, director, foreign
relations department, and dealing, as it states, with du Pont LCI.
patents and processes agreement. I read :
In answer tO' the questions contained in your letter of November 2:
1. We have received no valuable assistance from I.C.I, on new products or
new processes, but have had valuable assistance along the line of improvements
in existing processes in two instances: (a) In the process for refining TNT
and (6) the complete process for manufacturing tetryl.
Are not TNT and tetryl military instrumentalities ?
^ Mr. Casey. Partly so, but tetryl has a tremendous use in peace
time in blasting caps.
Senator Vandenberg. How about TNT ?
Mr. Casey. That is also used in the manufacture of Cordeau Bick-
ford and likewise used in certain commercial explosives.
Senator Vandenberg. It is primarily a war explosive, is it?
Mr. Casey. Not in the sense used here, because the question of war
explosives is a question of melting point. In other words, you may
have a TNT with a very low melting point which will have no use
whatever for military purposes. I am talking now, understand, on
2462 MUNITIONS INDUSTRY
something that is really out of my bailiwick. I think somebody
else ought to handle this proposition.
Senator Vandenberg. I am not sure but what I am. doing the
same thing, Major.
Mr. Casey. I might make statements which are absolutely incor-
rect. All I was giving you was just my own understanding.
Senator Vandenberg. I was struck as I read this with the im-
pression that this would indicate an exchange either of information
directly relating to military propellants
Mr. Casey. Not propellants. High explosives.
Senator Vandeberg. Explosives, or, at least, to explosives that
have had a major military purpose and use. Am I wrong about
that?
Mr. Casey. Wouldn't it be better to have somebody else answer
that?
Mr. SwiNT. I am the man to whom this communication was
addressed.
Senator Vandenberg. You were sworn yesterday?
Mr. SwiNT. Yes.
Senator Vandenberg. Wliat is the answer to that question, then?
Mr. SwiNT. The answer is no, Wliile these explosives are used
in military explosives, in peace time they are not used for military
purposes and they have a very large use in ordinary industrial
explosives.
Senator Vandenberg. What explosives are exclusively military?
Any?
Mr. SwiNT. I suppose some of the military propellants would not
have any use in industrial explosives or as industrial explosives.
Senator Vandenberg. Would it be fair to say that an exchange
of information regarding nonmilitarj^ explosives in peace time would
exchange information which would become of value in war time?
Is that a fair statement?
Mr. SwiNT. That is a fair statement to the same extent that ex-
changing information on all other commodities applies.
Mr, Vandenberg. I understand, but whether the analogy is justi-
fied is a matter of argument, and we will not argue it. I am simply
asking the general question: The exchange of information regard-
ing explosives that are peace-time explosives in peace time, could be
of value, could it not, in war time?
Mr. SwiNT. Yes; with that same qualification.
Senator Vandenberg. Now, Dr. Sparre, you said this morning in
the recess that there w^as some comment you wanted to offer sup-
plementary to your testimony this morning.
Dr. Sparre, Yes.
Senator Vandenberg. We would be very glad to have you say
what you wanted to say.
Dr. Sparre. Just a few comments to supplement Major Casey's
statements in regard to I. M. R. especially.
I think the first idea in regard to that type of powder came up in
1905, but no use was made of it. It was an incomplete invention, if
you call it that.
We obtained information from Germany in 1908 and 1909 in re-
gard to their types of improved military powder, namely, the flake
MUNITIONS INDUSTKY 2463
powder which Major Casey referred to. That information we re-
ceived and we paid for it, and we gave no information to the
Germans. We inspected their factory, but we gave them no informa-
tion, because they were not interested in the standard types of
military powder which we manufactured.
During the war when I went over with the military mission, there
had already preceded me to England the Mr. Henning referred to
in the testimony heretofore, who was our ballistics engineer, as well
as a man very well versed in all branches of military powder manu-
facture. The officials of the British Munitions Commission compli-
mented Mr. Henning very highly for the complete cooperation he
gave them, at the orders of the American Chief of Ordnance. When
1 came over there they mentioned it to me. He was nominally my
subordinate at that time.
There had already preceded me over there Mr. Jackson, a construc-
tion engineer, and the orders from the Chief of Ordnance were to
construct plants in accordance with our practice. I gave some in-
formation as well. Therefore, they had complete information, both
from a construction standpoint, a ballistics standpoint, and every-
thing else, in regard to the manufacture of our I.M.R. powder and
the state of the art at that time. The only thing which they had
not at that time were the licenses under patents, but during the war
time we did not pay any attention to patent rights. But there was
absolutely no military information given to the British or French or
anybody else that I know of except under orders from the American
administration.
Now, I visited foreign powder factories several times during the
years I have been with the company. I have never given any mili-
tary information to anybody that I know of. I never heard of any-
body giving any military information. I just do not see how such
a statement can be made. I have been with du Pont for 31 years
and never heard of it. I was in charge of the Central Laboratory
for the du Pont Co. for many years. I have been for many years
in their development department. It is a mystery to me how the
statement can be made.
Of course, this is an art which very few people understand. This
art is not taught in colleges or universities. You have got to be in
the industry to understand it. There is a considerable overlapping
of military explosives and commercial explosives, as far as the
fundamentals are concerned. By that I mean, that is largely as far
as economics are concerned.
Now, when you mention TNT, the valuable information there of
which we now talk about is whether we can cut the cost of manufac-
ture a quarter of a cent a pound, or something of that sort. When
we come to the military use of TNT, you require a very high degree
of purity in order to be acceptable to the military authorities. I do
not know that we ever exchanged information on that type of TNT,
but only on the type which is used in commercial explosives, which
is of lower degree purity.
Of course, during the war I saw the manufacture in both France
and England of the military type of TNT, and w^e got complete
knowledge of their manufacture of TNT during the war, and I
dare say they got our information, too; but, as a matter of fact,
2464 MUNITIONS INDUSTRY
we got the TNT information from the British and the French. We
did not manufacture TNT until we got the information from the
British and the Germans before the war. It was an unknown manu-
facture to us. We acquired that knowledge and we paid for it. We
have acquired a great deal of military information from the other
companies and paid for it. I do not know of any information which
we have given them. I would like to have pointed out to me what
information it is. The statement has been made that we have sold
military secrets. You know more about military secrets than I do if
you can make that statement. I will ask you to please tell me what
it is. I never heard of it.
The Chairman. I see what you are worrying about. What I am
wondering about is whether there is any such thing as a military
secret. I do not know that we have run into one yet.
Dr. Sparre. I certainly think there are military secrets. There
is no doubt about it.
Senator Vandenberg. Are there any military secrets, Doctor, when
we find General Ruggles stating to your representative that he is
perfectly willing to part with any so-called " improved and tempo-
rary secret processes " that the Government possesses, so long as it is
necessary to keep the du Pont Co. in business.
Mr. Irenee dtt Pont. That only referred to military powder.
Dr. Sparre. That is not a military secret.
Senator Vandenberg. Is not a military powder, if it is a progres-
sive, improved thing, a distinct military secret?
Dr. Sparre. Yes; but we did not give out any information in
regard to the type of military powder which the United States
Government uses. We have to remember that the Brazilians make
military powder of the same general type; the Germans do: it is
made in the Scandinavian countries. They make the particular
type of powder which we call surface coated powder. We call it
I.M.R. It is a type of powder which is manufactured in many,
many countries. We manufacture that powder of a certain gran-
ulation. We have our way of doing it. The Germans have
a flake type. We have it in the form of small tubes. We have a
different coating agent. The Germans have a coating agent. We
do not use their coating agent. These may be classified as military
secrets, but we did not give the information away.
As Major Casey explained, we offered to sell or did sell — ^I have
forgotten which — flake improved powder. That was the German
type of powder which we made. It was not the American type, as
standardized by the United States Government.
Senator Vandenberg. What were the military explosives or mili-
tary propellents upon which information was exchanged with Nobel
in the early twenties, when your legal department was insisting
that you had to give them everything you had? What military
information did they get at that time, if any?
Mr. Irenee du Pont. I want to correct your statement that the
legal department insisted that we had to give them everything we
had. That was subject to Government approval. That contract
which was drawn up in 1914 and carried over, I think, to some-
thing like 1925 or 1923, specifically stated that it was subject entirely
to Government approval.
MUNITIONS INDUSTRY 2465
Dr. Sparre. Let me give an example, Senator Vandenberg. You
asked the question, "What is an exclusively military explosive?" I
will just cite an example that comes to my mind. That is gun cotton
as used in naval torpedoes. I do not know that it has any commercial
application. We do not manufacture it. We could not give informa-
tion on it if we did not know anything about it.
Now, to show the misunderstanding about these things, I want to
refer, for instance, to some testimony which Mr. Raushenbush intro-
duced. He referred to certain sales of technical information in re-
gard to nitric-acid plants which we had sold to different countries.
We have given that same information to several American companies
and to several European companies. But, furthermore, we published
complete information about the principles, about the construction,
even photographs of the plant in Industrial and Engineering Chem-
istry in November 1927, in Canadian Chemistry and Metallurgy in
November 1930, and in the Journal of Industrial and Engineering
Chemistry in August 1931.
Those are publications which are found in all technical labora-
tories the world over.
How that can be called a military secret I do not know. In the
first place it is a commercial product. There is not 2 percent, I
don't believe, of nitric acid which is used in the manufacture of
military explosives, except in time of war that percentage goes up.
But today 98 percent, about, of nitric acid is used for purely commer-
cial things.
Furthermore, the information was all published. Wliatever patents
we could take out were in accordance with American patent practice
also published. In the first place, it is not military, and in the second
place it is not secret.
Now, Senator Vandenberg, you also will realize this: That the
American statutes encourage the taking out of patents, because if an
inventor does not cover this invention by a patent he runs the risk
of losing the entire value of his invention. In accordance with the
statutes, the inventor is compelled to submit a full, complete, precise
statement of his invention, involving such a complete disclosure that
anyone skilled in the art can duplicate the invention and duplicate the
product and practice the invention.
When the American Patent Office accepts that invention as patent-
able, the Patent Office publishes that information in the United' States
Patent Gazette, which is available in practically all of the libraries
over the world, and I know from personal experience that all of the
chemical companies over the world take regularly that Patent Gazette.
For 10 cents you can get a complete copy of the patent. Further-
more, anyone, whether he be an American citizen or a foreigner, at
negligible expense, writing into the Patent Office and asking for a
complete copy of the correspondence between the inventor and the
Patent Office, can obtain it, and all of the letters going out for a
period of years disclosing the thing completely are available for
practically nothing to competitors and anybody "else.
It is certainly an act of common sense for an inventor to apply for
a patent in foreign countries, because the Patent Office published in-
formation makes a gift of it to anybody. If there are enemy coun-
tries, as you suggest, Senator Nye,* they can get the information for
2466 MUNITIONS INDUSTRY
nothing. Why should not an American inventor apply for a patent
in foreign countries? If it is an enemy country, at least you make
the enemy pay for it. But, as you suggested, it Avas not even paid for.
How can an American inventor or an American Corporation be criti-
cized for doing that thing which is merely complying with the
American statutes.
I have been in this business for 31 years, and I have been dealing
with literally thousands of patents. I suppose over my desk I
handle annually between one and two thousand suggestions of new
developments, and I never yet found any other way of handling it
than we are doing.
Senator Nye, if you know of a better way, I will be thankful to
learn it, because it would give me great help in handling this busi-
ness; and yet it is a very serious accusation which you have made
against this company, I take it to heart personally, because it is my
business to handle these things and I do not know of any better way
to handle them.
The Chairman. Perhaps we quibble over the word " secret " too
much. It seems to me that it does not matter what we call it.
The facts are that there is taking place daj"^ after day the sale of
what is, if not a military secret, a military advantage, that is ours
here in America, by reason of the ownership or production of a thing
which enters into national defense. It seems to me that is the thing
we are primarily concerned with. You ask what to do about it.
Very frankly, I am uncertain in my own mind what we can do
about it.
Dr. Sparre. Let me make one suggestion.
The Chairman. But the further we move along in this study I
am very frank to say, the more thoroughly convinced I become that
the business of providing the national defense as relates to the pri-
mary things entering into national defense ought to be a government
owned and government controlled thing altogether. I do not like
the idea in toto — it is an exceedingly difficult thing to work out — but
you have asked me the question, and I am answering you, not for
the committee, but only for myself. It seems to me the sooner we
cease this practice of arming all the world so we can have capacity
to fight the world with when the world turns on us with those things
we have sold them, the better off we will be.
QUESTION OF CONTROL OF CHEMICAL, INDUSTRY IN RELATION TO
DISARMAMENT
Mr. Casey. Senator Nj^e, you said a little while ago you would
give me permission to introchice into the record a report which was
in our files but which was not taken. It has to do with the question
of this morning's and likewise the present subject. I would like to
read it.
The Chairman. Yes.
Mr. Casey. It is dated January 13, 1933, and is a memorandum
from Colonel Simons :
Colonel Taylor in his T-2554 of December 28, 1932, forwards his annual
report, and comments on European conditions in general, not only as regards
the business outlook, but also as regards the political and military aspects.
MUNITIONS INDUSTRY 2467
His comment on disarmament is of sucli interest and importance that I extract
it for your attention as follows :
" In view of the very great effect in Europe of the convention covering the
limitation of the traffic of arms, signed at Geneva in 1925 but not ratified, in
accelerating the construction of government factories in Europe, the ofti(,'e has
been very much concerned as to what might be the result of the present dis-
cussion at Geneva.
" There is no need to describe the visible result of this conference as this has
been well covered by the press ; but we have been trying to find out what the
real effect would be.
" It is the opinion of the military manufacturers that no limitation will be
put on government manufacture ; for example, in France, there are 300,000
people employed in the government arsenals, and nearly all these men vote
for the socialist deputies ; therefore, while the socialist deputies with their
liberal doctrines cry for disarmament, any attempts on the part of the
French War Department to close down the government factories are bitterly
opposed by these same deputies on the basis that it would throw voters out
of work. In many other countries the same situation exists, and whenever
there has been a tendency on the part of the military administration to reduce
governmental manufacture, it has been always opposed by the Labor deputies
on the basis that it would put men out of work.
" It is, therefore, generally believed that there will be no limitation to govern-
mental manufacture. The only thing which will be acceptable to the politicians
is limitation on private manufacture ; and it is further supposed that in case of
further limitation on private manufactui'e, that the present private factories,
such as Hotchkiss in France and Bofors in Sweden, will be immediately trans-
formed into governmental arsenals and continued as before. It is also sup-
posed that no limitation will be put on the delivery of arms from one govern-
ment to a friendly government; hence there will be some export business from
the government factories.
" The net result of this conference so far has been the tendency on the part
of the governments to develop governmental manufacturers and to spend their
money at home.
" There is also a tendency, which does not affect the armament business, for
the military advisers to devise suggestions destined to obtain military advan-
tages for their respective countries. One of the motives back of the French
proposal, that all countries should establish a conscription is to upset the pres-
ent German system of handling their Reichswehr. The Reichswehr is limited to
100,000 men of 12 years' enlistment and it would appear reasonable to suppose
that there should be at present a number of soldiers around the ages of 33 or
34 ; the fact is that when one meets a soldier of the Reichswehr he is a young
man in the early twenties, and it is pretty well accepted that there are several
men available under the same name and hence training much larger number of
men than permitted. The French feel that this is a more dangerous system
than general conscription. Both the French and German proposals for disarma-
ment are simply jockeying to get a favorable situation."
In view of the newspaper reports that the Swedish Government has taken
steps to nationalize Bofors and in view of the reports in today's paper of the
larger exports from France by Hotchkiss and by Schneider, it would appear that
the proposed American embargo on munitions is simply a method of destroying
American competition and turning over a free field to continental competitors.
Aiken Simons.
Now, incidentally, at the previous hearing there was considerable
to-do about a report of Colonel Simons dated January 17, 1933. where
he went around and saw a Major Brown and he saw General Moseley
and he tried to see Secretary Payne and others, and he also went to
the Bureau of Ordnance, but this is the memorandum that Colonel
Simons took around, and you can readily see that, not as inferred at
the previous hearing, that it had something to do with trying to
block or interfere with the disarmament conference, but it was simply
giving what our people thought was the tendency in Europe.
I would like to have that made thoroughly clear. I would like to
have that put in the record.
2468 MUNITIONS INDUSTRY
The Chairman. Did you read the entire thing?
Mr. Casey. The entire thing.
Mr. Raushenbush. Of course, Major, you have been reading this,
offering it, and it has been accepted, and it is in a way your exhibit,
which you ascribe to the situation. Both you and Dr. Sparre refer
to evidence brought in in September. It is quite simple for each one
of you to remember all of your testimony, but we, on the other hand,
are supposed to remember the testimony of 50 people. So it is diffi-
cult, without the books in front of us to go back and recall exactly
what was said. I think later on we will come into some of the points
Dr. Sparre made. For instance, about the amount of peace-time ma-
terial that can be war-time material, I think we will accept at first
blush without question your statement that in peace there is very little
war-time material, but that in war it gets to be war material. There
is nothing startling about that one way or the other.
The point made, as I remember it, roughly, in September, was
that these were also war possibilities, and it was brought out again
yesterday that immediately after the war your own people were
saying that the disarmament would be a farce unless that huge
arsenal of I.G. was either destroyed or scattered around the world.
If you wish, we can let that argument go for a few days.
Dr. Sparre. I wish you would not let it go. I made yesterday an
incomplete statement, for reasons which I will tell you, and I wish
now to take this opportunity, since you brought it up, to complete
my statement of yesterday, which I think is of importance, certainly
to us.
Mr. Raushenbush. Will you just let me finish with Major Casey's
memorandum for a moment. It is only a brief comment, and then I
am through with that.
Senator Vandenberg. It seems to me the whole thing is coming
back now into the specific field of exhibits, and we have none of our
exhibits here, and we are not prepared to go ahead this afternoon.
I think perhaps we better postpone the discussion of these cases.
The Chairman. We are going to move directly into that field
Monday, Doctor.
Dr. Sparre. The reason why I mention it now is this: That my
testimony is incomplete and I think your committee should have my
complete statement before you start the next hearing on this subject.
It won't take me long to put it in, because I wrote it out to be sure it
would go very quickly.
Mr. Raushenbush. Why don't you file it. Dr. Sparre, with what-
ever exhibits you have from your own files to back it up, and then we
can study it and have it before us until Monday ?
Dr. Sparre. Mr. Raushenbush, you know how it is. We have been
asked to tell the truth and the whole truth, and I do not like the idea
of being asked to tell a part truth, because I know in these questions
a part trutli is worse than nothing at all, and I would like to tell the
whole truth. If you don't want that, I will keep quiet.
The Chairman. The only thought is that we are leading into some-
thing which is bound to stretch out this afternoon, how long no one
knows, on a ground we will have to go over again Monday, when
Senator Clark, who is in charge of that particular matter, will be
here. Why don't you malce that statement then?
MUNITIONS INDUSTRY 2469
Mr. Lammot du Pont, May I call your attention to the fact that
Dr. Sparre was testifying earlier today and he was interrupted by a
member of your Committee and was not allowed to continue. You
surely will not deny him the privilege of reading that statement.
The Chairman. I suppose if it is in connection with testimony
that was being offered this morning — I am not aware of the incident
myself.
Dr. Sparre. No ; this is in connection with testimony of yesterday
afternoon.
Mr. Raushenbush. It was not this morning. It was yesterday.
Dr. Sparre. But we adjourned very early and I gave an incom-
plete statement.
Mr. Raushenbush. I did not realize at the time that is was incom-
plete.
Dr. Sparre. It was.
Senator Vandenberg. Do you feel, Dr. Sparre, that it would be
an injustice to postpone your statement until Monday?
Dr. Sparre. I would say there, if you give me the opportunity to
start out with the statement at the next hearing, before anything
else is said or done about that situation, I will be satisfied.
Senator Vandenberg. I think that is preferable, because I would
like to have Senator Clark here, who is in charge of that phase of it.
Mr. Irenee du Pont. But, Mr. Chairman, the continuity of the
thing is lost. I would like to hear the rest of it. I cannot see why
so early in the afternoon we should not hear the rest of the statement.
Senator Vandenberg. You are familiar with the statement, aren't
you?
Mr. Irenee du Pont. No ; I am not. I do not know a thing about
it. I just got back from New York this morning.
Senator Vandenberg. I am perfectly willing to sit here, if you feel
it is unfair to you not to proceed. I decline to plead guilty to an
accusation of that character.
Mr. Irenee du Pont. Thank you.
Senator Vandenberg. Go ahead, Dr. Sparre.
Dr. Sparre. Mr. Raushenbush, at yesterrlay afternoon's session,
submitted among other papers a copy of a communication relative to
disarmament conferences to the effect that " Disarmament is a farce
while Germany retains organic chemical monopolies." A little later
Mr. Raushenbush suggested that " the whole question of control of
the chemical industry was really a very important one to the whole
question of disarmament."
Those are two totally different statements. One deals with the
German monopoly which handicaps other countries and the mon-
opoly confined to the organic chemical industry. That has nothing
to do with the general chemical industry. It is a totally different
thing to talk about the German monopoly before the war and another
thing to talk about the domestic American chemical industry.
Mr. Raushenbush asked whether the du Pont representatives before
the Senate committee were in accord with such a proposition. I re-
plied that I was not in accord with it. I did not elaborate on the
subject at the time, as I did not want to interrupt Mr. Raushenbush
in his presentation of a number of documents for the record, expect-
ing that an opportunity would be given to me to explain my position
2470 MUNITIONS INDUSTRY
after Mr. Raiishenbush had presented his case. The matter is of
such vital importance to the American chemical industry, however,
that I would like to present the reasons for my opinion now.
Ever since the outbreak of the world war I have been convinced
that there is a very close connection between preparedness and the
chemical industry. There is, however, an important distinction be-
tween chemicals and munitions. The chemical industry is important
in war; it is also enormously important in time of peace. Munitions,
on the other hand, serve no purpose in peace time except as a matter
of military preparedness.
To prove the correctness of the assertion that Government control
of the chemical industry would have to be a part of any disarma-
ment agreement Mr. Eaushenbush referred to a statement by Dr.
Hale, an eminent chemist mentioned in one of the documents, to the
effect that an indigo factory could be converted within an hour's
time into a plant capable of manufacturing poisonous gas for war
purposes.
Granting that Dr. Hale's statement is correct, it must be under-
stood that in times of peace such a factory would produce only indigo
and would not produce any war gas whatever. Even in the event
of war the demand for indigo for commercial purposes would con-
tinue, and it would, therefore, be desirable to leave the indigo plant
unchanged and build a new plant designed entirely for military pur-
poses. This would only be possible if the country were prepared
with reserve supplies of war gas, so that time would be available for
the construction of the new plant. The existing indigo factory and
its personnel would then offer the advantage of serving as a model
for the war-gas plant which could be constructed more quickly and
more efficiently and would have a trained personnel immediately
available for its operation.
Under these conditions there would seem to be no reason to put the
indigo plants during peace times under the type of Government con-
trol that has been suggested for munitions.
The same statement would apply to the chemical industry as a
whole. The manufacture of chemicals is essentially a commercial
operation with only a negligible portion of its output used for mili-
tary products in time of peace. I do not believe that anyone will
dispute the fact that the progress of American industrv today is very
largely based upon chemical research. To say that because the
chemical industry is important in war it should therefore be placed
under the control suggested for armaments is like saying that the pro-
duction of wheat or steel or any other basic product of great im-
portance in war should be similarly subject to armament regulation.
As a further illustration, permit me to point out that gimcotton as
used m naval torpedoes is manufactured to the extent of between 60
and 70 percent of its weight from cotton, and smokeless powder is
manufactured to the extent of between 50 and 60 percent of its weight
from cotton, which is one of the important reasons why cotton was
contraband in the late war. Yet the percentage of the American
cotton production which is consumed during peace times in the manu-
facture of military munitions is negligible, though during times of
war it becomes an important factor If the chemical industry were
to be placed under Government control in connection with disarma-
MUNITIONS INDUSTRY 2471
ment regulations there is just as much, if not more, reason for placing
farms producing cotton and the entire cotton textile industry under
Government control during peace times.
I can, therefore, only reiterate my refusal yesterday to accept Mr.
Raushenbush's suggestion that we are in agreement with the state-
ment that disarmament would be a farce unless the chemical industry
is placed under Government control. I am convinced that these two
questions have nothing to do with each other. On the other hand, if
disarmament regulations are put into effect they will, of course,
include military munitions and that would include any existing plants
and equipment suitable for the manufacture of war gases and not in
use for other purposes.
Mr. Raushenbush. Mr. Chairman, may I question him on that ?
The Chairman. I think since the statement has been read, the
member of the committee or Mr. Raushenbush, if you would like to,
may question the witness upon the statement, and now is the time
to do it.
Mr. Raushenbush. Mr. Chairman, we hope to get into this thing a
little more in detail later on Monday. On the face of it, there is
nothing in Dr. Sparre's statement that was not made clear by him
yesterday, as far as I understood his position. Dr. Sparre says on
the first page of this statement that since the beginning of the war,
the outbreak, he had been convinced that there was a very close con-
nection between preparedness and the chemical industry. That was
one of the points that we were making yesterday.
We also made the point that a good many of the people either
directly in the employ of the company or operating through one of
the institutes to which the company was contributing the American
Dye Institute, I believe, were making a case for protection, which is
natural, to young industries, on the ground that the chemical indus-
try was very important in the whole question. First, it was put on
the question of disarmament and then, later, it was put under the
heading of armament, as I remember it.
The point that the chemical industry is enormously important in
time of peace is very obvious, and would be accepted without any
question at all.
The assertion on the second page that the government control of
the chemical industry would have to be part of any disarmament
agreement, was simply taken, and I am sure Dr. Sparre will admit
that the question on that was without any conclusion — was simply
taken from the records of the company's people at the time. They
were the ones who made the argument as to the conversion of an
indigo plant into a plant capable of manufacturing poison gas was
within an hour's time.
Dr. Sparre, at this point, draws a distinction between the organic
chemical industry and the nonorganic. I think not only you, but
anyone else, will agree with me about the war-time importance of the
organic chemical industry. I know not enough about the rest of the
chemical industry to speak of its war-time experience. What would
you consider theBadische Aniline & Soda Fabrik? Would you con-
sider them in the organic group ?
Dr. Sparre. That is organic.
Mr. Raushenbush. That comes under that discussion.
83876— 35— PT 11 6
2472 MUNITIONS INDUSTRY
Dr. Sparre. That comes under that, Doctor, because it involves
really a specialized knowledge of all of the organic chemical indus-
try, whereas, take sulphuric acid, and nitric acid, or something like
that, they are inorganic and the United States has always had a
large industry in the general chemical field, and when the war broke
out there was no difficulty about it. There was only one inorganic
chemical that we did not have in sufficient quantity, and that was
nitrogen. At first, the United States relied upon Chile for nitrate
of soda, and that was its source of supply at that time. The ques-
tion of nitrogen is no longer an important one.
Mr. Raushenbush. I understand that.
Dr. Sparre. For instance, at the outbreak of the war, the coke
business only recovered about 15 percent of the byproduct ammonia.
Mr. Raushenbush. You did admit just a moment ago, and I
thought we were in general agreement on that, that the organic
chemical industry was of importance to the war.
Dr. Sparre. Yes.
Mr. Raushenbush. You are now saying that it is a little less im-
portant than when we were dependent upon Chilean nitrate for our
supply ?
Dr. Sparre. The only inorganic chemical that was important when
the war broke out was Chilean nitrate.
Mr. Raushenbush. Will you enlighten my ignorance on that one
subject. When speaking a moment ago you seemed to set sulphuric
acid and things like that in the inorganic group.
Dr. Sparre. - That is right.
Mr. Raushenbush. Then your distinction was, admitting the or-
ganic chemical industry meant the heavy nitrates, and so forth
Dr. Sparre. No; that is inorganic. Let me give you an example
of that.
Mr. Raushenbush. Yes ; I wish you would, Doctor.
Dr. Sparre. When the war broke out, we continued our manufac-
ture of smokeless powder, but we had to manufacture largely in-
creased amounts of smokeless powder. Take, for instance, diphenyl-
amine, that is an organic chemical pure and simple, made only in that
industry. When the war broke out it was not made in the United
States. It is made from anilin. We did not have plants of that
part of the organic chemical industry. One job we had to tackle
in 1914 was how to get diphenylamine for our smokeless powder.
Mr. Raushenbush. If you will allow me to continue with the
analysis of the statement made, I ask you on these two questions,
indigo and diphenylamine are on the organic side?
Dr. Sparre, Yes. sir.
Mr. Raushenbush, And sulphuric acid is inorganic?
Dr. Sparre. That is right.
Mr. Raushenbush, You made the distinction, then, in your state-
ment that while you admitted rather freely that the organic chem-
ical industry was of enormous importance in armament in time of
war, you were a little more doubtful, Avere you not, about the in-
organic side, the rest of the chemical industry?
Dr, Sparre. You did not get me right there.
Mr. Raushenbush. All right.
Dr. Sparre. I said at the outbreak of the war we could handle our
inorganic situation, because we had increased our production enor-
MUNITIONS UsTDUSTRY 2473
mously, the resources of the country, and the knowledge within the
country permitted that.
Mr. Raushenbush. Yes.
Dr. Sparre. On the other hand, the organic industry was so limited
in its use, and so limited in its manufacture that the country was
handicapped in the organic field. On the other hand, Germany had
pretty nearly a monopoly in that field. That is the way we drew a
distinction between the organic industry at the outbreak of the war,
in which Germany had almost a monopoly.
Mr. Raushenbush. Yes.
Dr. Sparre. The moment we establish an organic industry here,
we are in a far better position than in 1914.
Mr. Raushenbush. You go with me far more completely than I
thought you did. You say, then, in war time that both organic and
inorganic chemistry are important to the successful handling of a
war?
Dr. Sparre. Yes; but isn't the same thing true of steel, cotton, or
everything else ?
Mr. Raushenbush. Add to that the statement about this is going
to be a chemical age, and I believe those statements are of enormous
importance to the progress of the chemical industry, perhaps a little
bit above steel. But that is a matter we can go into later.
Then, on the second page you take up the proposition that it must
be understood that in times of peace such a factory would produce
only indigo and would not produce any war gas whatever. You
do not know what the Badische factory is doing.
Dr. Sparre. When the war broke out between the European coun-
tries we found it desirable to build new plants rather than rebuild
old factories ; it was more economical.
Mr. Raushenbush. It was Dr. Hale who offered that proposition
that an indigo plant could be converted inside of an hour into a
mustard-gas plant. You do not say that cannot be done ?
Dr. Sparre. No.
Mr. Raushenbush. If a country were wise enough to build up a
supply of mustard gas it would not use that same plant for the
making of gas in time of war ?
Dr. Sparre. It would be more economical to build a plant, rather
than to convert the old one.
Mr. Raushenbush. On the supposition that the country had piled
up a supply ahead of time, when we come to time of war they are
supposed to have jDiled up a supply ahead of time. In that event
we have the proposition of Dr. Hale's still stand as a possibility ?
Dr. Sparre. I think Dr. Hale's suggestion is intended to illustrate
the organic chemical industry. I do not believe anybody would want
to convert an indigo factory into a gas factory. It is more economi-
cal to build a new one than to convert an old one. That has been
the experience, you see, Dr. Raushenbush.
Mr. Raushenbush. It is mister.
Dr. Sparre. Our experience is that we save both time and money
by going ahead and doing the right thing right away, rather than
patching up an old one. That is our war experience.
Mr. Raushenbush. Our country is a little longer distant away
from the others, and these continental countries might operate
differently.
2474 MUNITIONS INDUSTRY
I think on that proposition of the indigo factory it has been ana-
lyzed into what it boils down into. Your statement that the manu-
facture of chemicals in peace time is a commercial operation is with-
out doubt true. It is like saying anything in peace time is a
peace-time matter to a large extent, and we had considerable argu-
ment here the other day about the question of whether or not certain
powders could be used for sporting powders and other purposes. In
the rest of the statement it simply goes on to make the point that all
of these things like cotton and steel can be and are decidedly war
materials under certain circumstances. I do not think we would
question that at all. What you were doing was stating in the words
of your own people that disarmament involved the chemical indus-
try and armament involved it, also.
Now, if you are going to get the chemical industry out of the whole
question of arms, you are doing something more than these so-called
" disarmament conferences " have done. They perhaps have not
been able to function as freely as they should.
Dr. Spaere. I think the chemical industry should be in the same
class as the steel industry or any other industry. Why single out
the chemical industry, because, after all, the steel industry in times
of war is far more important than the chemical industry.
Mr. Raushenbush. If it is believed that the chemical industry and
the poison-gas industry is going to be a big industry in the next
war, then that is testimony we ought to hear from the War Depart-
ment officials, whether or not they consider the chemical and poi-
son-gas industries and others along this line more important than
steel or cotton.
The Chairman. All of which the committee is planning for during
the course of its studies.
Mr. Irenee du Pont. President Wilson repeated his statements
three times to Congress on that. [Reading:]
President Wilson said in a message to Congress May 20, 1919, and repeated
in two other messages December 2, 1919, and December 7, 1920 :
" Nevertheless, there are parts of our tariff system which need prompt at-
tention. The experiences of the war have made it plain that in some cases
too great reliance on foreign supply is dangerous, and that in determining
certain parts of our tariff policy domestic considerations must be borne in
mind which are political as well as economic. Among the industries to which
special consideration should be given is that of the manufacture of dyestuffs
and related chemicals. Our complete dependence upon German supplies before
the war made the interruption of trade a cause of exceptional economic
disturbance. The close relation between the manufacture of dyestuffs, on
the one hand, and of explosives and poisonous gases, on the other, moreover,
has given the industry an exceptional signiticance and value. Although the
United States will gladly and unhesitatingly join in the program of interna-
tional disarmament, it will, nevertheless, be a policy of obvious prudence to
make certain of the successful maintenance of many strong and well-equipped
chemical plants. The German chemical industry, with which we will be
brought into competition was and may well be again, a thoroughly knit mono-
poly capable of exercising a competition of a peculiarly insidious and dangerous
kind."
Now, Mr. Wilson had the king's English at his command, if any-
body had it, and I think that that is expressed very clearly. It in
some way suggests your idea that this is a peculiarly important in-
dustry. That w^as the basis of this quotation that has been referred
to so much about disarmament " is a farce."
I
MUNITIONS INDUSTEY 2475
Mr. Raushenbusii. Without going into it further, you were not
present yesterday afternoon when the interest of the company in the
proposals of the British delegation to the 1922 Washington Con-
ference were brought out, the interest not only of the British but
also of the French and Italians, and what their proposals would be
about the use of gas in warfare. They seemed to corroborate some
tilings that Mr. Irenee du Pont is expressing here.
Mr. Irenee du Pont. Mr. Wilson, not Irenee du Pont.
Mr. Raushenbush. I really was drawing a distinction. Mr. Irenee
du Pont was expressing and agreeing in the phrase after he read this
quotation, that this industry is vitally interested in any regulations
imposed upon the chemical industry, because the chemical industry
is, as this very conference showed, by taking it up as part of the dis-
armament program of the world. Those exhibits are of course avail-
able for your study later.
Senator Vandenberg. I think we might as well recess now.
Mr. Garvan. Mr, Chairman, may I ask a question ?
The Chairman. In view of the fact that you are going to appear
as a witness could that not be deferred until later ?
Mr. Garvan. I am not going to make a statement. I just wanted
to ask permission to appear as a witness.
The Chairman. You are going to have that permission ; you may
be sure of that.
Mr. Casey. Mr. Chairman, may I make one further statement?
The Chairman. Mr. Casey.
Mr. Casey. In connection with the report which was just read, I
think there is one thing that does stand out as a result of that infor-
mation, and that is this : That if this committee is trying to find out
a means of achieving disarmament, it certainly clearly indicates that
if there are government plants all over the world where they have
the same situation, it probably may result that then any efforts in-
stead of reducing government manufacture, and achieving your
objective, will have just the opposite effect.
The Chairman. That is a matter of argument.
The committee will stand in recess until 10 o'clock Monday
morning.
(Thereupon the hearing recessed until 10 a. m. Monday, Decem-
ber 10, 1934.)
INVESTIGATION OF MUNITIONS INDUSTRY
MONDAY, DECEMBER 10, 1934
United States Senate,
Special Committee to
Investigate the Munitions Industry,
Washington^ D. G.
The hearing was resumed at 10 a. m. in the Finance Committee
room, Senate Office Building, pursuant to the taking of recess, Sena-
tor Gerald P. Nye presiding.
Present: Senators Nye (chairman), Clark, Pope, and Barbour.
Present also: Stephen Kaushenbush, secretary to the committee,
and Robert Wohlforth, assistant to the secretary.
The Chairman. The committee will be in order.
The committee would like to hear this morning Mr. Beebe, Mr.
Monaghan, and Mr. Felix du Pont.
FURTHER TESTIMONY OF F. J. MONAGHAN, H. F. BEEBE, A. FELIX
DU PONT, LAMMOT DU PONT, AND K. K. V. CASEY
methods of doing business — BALKAN STATES
(The witnesses were previously sworn by the chairman.)
The Chairman. Mr. du Pont, the record at the moment rather
clearly establishes your belief that there is necessity for foreign sales
of powder and munitions generally in order to keep our own powder
plants and munitions factories ready for an emergency should it
arise. I take it that that is your opinion, is it not?
Mr. A. Felix du Pont. Yes.
The Chairman. For the purpose of making clear the record again,
just what is your connection with the du Pont factory ?
Mr. A. Felix du Pont. I am general manager of the smokeless-
powder department and one of the vice presidents of the company.
The Chairman. We want this morning to raise a few questions
relative to the social cost of these foreign sales and foreign negotia-
tions. We would like to know, of course, what price the nations of
the world pay to keep our American plants in the state of readiness
or unreadiness to prepare for the next war; and when we concern
ourselves with bribery of foreign officials we are not concerning our-
selves so much with the bribery itself as we are with the thought of
what it leads to.
Surely, where a company bribes — at home or abroad, it matters
not — there must be builded in the mind of that business that is en-
gaged in that bribery a feeling, a spirit of contempt, for any country
that must be approached in that manner in order to get the busi-
2477
2478 MUNITIONS INDUSTRY
ness and, where, as is true or seems to be true, all munition companies
the world over are getting their business in a country through meth-
ods involving bribery, there must be contempt toward that country
or of that country on the part of all of the companies doing business
there.
Don't you think that these methods that are found, so-called, " nec-
essary " rob administrations of governments of any feeling of moral
independence ? Don't you feel that that is the case ?
Mr. A. Felix du Pont, I think you raise a very complicated ques-
tion there. Senator Nye, The customs of different countries are
so entirely different that it is quite difficult to dispose of the question
in any very few words.
For instance, while I have not traveled in the Orient, except in
a very limited way, all that I have heard about it is that the methods
used in the way of bribery are quite different from what they are in
this country, and certain things that are frowned upon in this coun-
try and perhaps done in a different way are the natural course of
trade and trade competition in those other countries.
I believe that bribery of a certain kind is used in most of the
countries of the Orient in all walks of commercial life. It is no
different in the munitions business than it is in any other commercial
business. It is accepted; not talked about very much; but people
in competition in those countries simply could not possibly carry
on their trade if the customs of the country were not adhered to.
The Chairman. But it has a tendency at one and the same time to
break down moral fiber, doesn't it? Representatives of a country
that are in any way involved in programs of bribery, the receiving
of bribes, are not apt to make the best kind of representatives at a
disarmament conference, for example, are they?
Mr. A. Felix du Pont. They are the kind of people who are of
their own set. The either doing or not doing what they accept as
the way of doing in their country would have no weight with them
whatsoever.
The Chairman. If I had been in times past the recipient of any
bribe for any favor I had performed, for example, for your industry,
or even though I had received campaign contributions, do you think
it would be fair for me to try to give representation that was square
serving on a committee such as this, investigating the industry?
Mr. A, Felix du Pont. Now j^ou are speaking of the United
States.
The Chairman. I am speaking of that only.
Mr. A. Felix du Pont. Yes.
The Chairman. That we may better put ourselves in the shoes of
those we are dealing with in other lands.
Senator Clark. In any country, Mr. du Pont, if a public official
would accept a bribe for the letting of a public contract, it is very
plain he would let the public contract to the highest bidder, irre-
spective of the public interest or the interest of his country at all;
isn't that so?
The Chairman. We will not press for an answer there. It was not
propounded for an answer, to be franli with you. But I am coming
back to the question we originally opened with : What is the price of
keeping American plants, munitions plants, ready for functioning
MUWITIOISrS INDUSTRY 2479
in time of emergency, by proceeding abroad, as we are proceeding,
to sell our wares in other lands?
I will admit, in starting, that there is another question in the back
of my mind. The question is this : Why have disarmament confer-
ences been the repeated failures that they have been? Have they
failed because the friends or beneficiaries of the private munitions
people were in the delegations ? Until every country in the world, it
seems to me, has brought out the facts, as we are trying to bring them
out here, we probably never will know the exact and proper answer to
that question.
You have already said that you believed in the desirability of for-
eign trade in order to keep our plants ready for that emergency
which none of us hope is going to arise, but which may arise. You
have been engaged in an intensive campaign, have j^ou not, Mr.
du Pont, selling powder all over the world ?
Mr. A. Felix du Pont. Yes, but the records show, I think, that it
has been rather an unsuccessful campaign. All of our efforts or the
greater part of our efforts, as the testimony has brought out here,
the most of the efforts that we were making came to naught.
The Chairman. Are you still striving for that trade ?
Mr. A. Felix du Pont. Yes.
The Chairman. As diligently as ever you did?
Mr. A. Felix du Pont. We have found in so many places that we
were not successful that we have practically given up attempting to
sell through certain channels which have been pretty well exhausted,
so that I suppose we might say that the campaign is not as intensive
as it was.
The Chairman. To what do you attribute your failure to win that
larger field that you might at one time hope for ?
Mr. A. Felix du Pont. European competition.
The Chairman. Competition in the ordinary sense or the particu-
lar kind of competition that you have to meet there ?
Mr. A. Felix du Pont. In the ordinary sense.
The Chairman. Do you find practices engaged in in order to ac-
complish sales abroad rather distasteful?
Mr. A. Felix du Pont. I might say yes to that. The record shows
that we have attempted to make sales in certain countries and under
certain conditions where we finally discovered that the methods re-
quired were distasteful and we abandoned our efforts.
The Chairman. Their practices in many instances are really
reprehensible, judged by ordinary business standards, are they not?
Mr. A. Felix du Pont, Judged by our standards, yes, but in the
ordinary course of competition of trade in certain countries, I believe
they are not different from effort in the introduction or attempt to
sell any other kind of commercial product.
The Chairman. You are doing some business in the Balkans?
Mr. A. Felix du Pont. At present, I think not.
The Chairman. None?
Mr. A. Felix du Pont. I think not.
The Chairman. Are you armed with agents in the Balkans who
are striving to sell?
Mr. A, Felix du Pont. Yes, we have some.
The Chairman. As many or less than you have had at other
times ?
2480 MUNITIONS INDUSTRY
Mr. A. Felix du Pont. There are about as many. You see, these
agents do not receive any salary. They simply report to us when
they think they can make a sale.
The Chairman. When did you first institute sales efforts in the
Balkans ?
Mr. A. Felix du Pont. I cannot remember exactly the year, but
it was around 1923, I believe, or 1922.
The Chairman. After the World War?
Mr. A. Felix du Pont. Yes.
The Chairman. We have before us a letter written to Mr. Casey
by your European representative, William N. Taylor, which is
offered as " Exhibit No. 948."
(The letter referred to was marked " Exhibit No. 948% " and is
Included in the appendix on p. 2595.)
The Chairman. This letter, Mr. du Pont, is dated October 10, 1922,
and its general nature seems to indicate that this was about the first
approach that was made to the Balkan market for your powder. I
want to read in part that letter.
Have you been previously aware of this letter?
Mr. A. Felix du Pont. Yes.
The Chairman. You are conversant with it?
Mr. A, Felix du Pont. Yes.
The Chairman. Was it called to your attention
Mr. A. Felix du Pont. I have not read it for a good while,
Senator.
The Chairman. Was it called to your attention at the time that it
was sent?
Mr. A. Felix du Pont. At the time it was sent, I think so. I think
I read it at the time it was received by my office.
The Chairman. Mr. Taylor points out in this letter that there are,
after his study, certain essentials in the traffic carried on in the
Balkan countries which are going to have to be met if the du Ponts
are going to attract any of that business.
In the Balkans I ran across a situation so entirely different from anything
we liave in America that I am writing this in addition to my letter no. 36
to try to give you a picture of tlie situation there.
We want to sell powder in the Balkans and powder can he sold to the
Balkans, but the method of straight selling for what they need and getting
paid for it will not work. If you draw a line from Trieste to Warsaw and
go east of that line, you find the business and financial conditions run on a
set of rules entirely their own, and if we can't conform to the situation, we
won't be able to get any business. There, the ordinary business ethics are
entirely different from ours and people have no knowledge of ours, they don't
know what our business ethics mean. Their financial methods and the methods
of raising money from their Governments are also entirely different from ours.
In the first place, the country is constituted of a great mass of peasants
who work in the field and cannot read nor write. Until comparatively recently
the Governments were absolute monarchies run by a group of people around
the monarch who, by every means which they could imagine, extracted money
from the peasants without any idea of what we might call a national instinct
or any idea of being fair or doing good to the peasant — on the contrary !
Generally in these countries are several groups of such people and all political
agitation is simply a fight between these different groups to get their hands
on the spoils. The great western European powers have attempted to force
upon these people the western ideas of government and eithics and the result
has been merely a complication of their primitive methods. They begin by
collecting all the taxes they can, then they purchase things for the Govern-
ment and all of them collect all the graft they can in every way out of these
MUNITIONS INDUSTRY 2481
purchases. They don't much care what they pay so long as they get the
graft, which is their main object. Internal politics consist of disputing over
the graft — external politics consist in developing complications which permit
them to spend or collect more Government money. The idea of doing anything
for the good of the country has never been translated into their language.
Mr. du Pont, would not that rather indicate that there was
a byproduct to what Mr. Taylor referred to as the internal graft,
and that that byproduct was war, which afforded a larger oppor-
tunitj'^for graft? Was that his meaning, do you think?
Mr. A. Felix du Pont. I don't know. And I will say this : That
this letter was written 12 years ago. Colonel Taylor was setting out
to do something entirely new.
The Chairman. This was his first approach to that market?
Mr. A. Felix du Pont. This was his first approach in that general
line of work. He had only been on it a short time, he had been on
ordinary commercial business before this.
Senator Clark. You mean that that is the first time Taylor ever
recognized the necessity of bribing public officials to get contracts?
Mr. A. Felix du Pont. I don't know. I could not say that ; but
I do think that with the experience that Colonel Taylor has had, if
he read that letter over now he would not subscribe to his own
remarks entirely.
Senator Clark. You mean, he would not be quite so thin-skinned
as he was then?
Mr. A. Felix du Pont. No ; I do not mean that at all. I think
he would be a little more charitable in his views of other people, and
that would temper his judgment in regard to it.
The Chairman. You mean that his experience 'has equipped him
to know that this is quite the ordinary thing in the Balkans?
Mr. A. Felix du Pont. I think that
The Chairman. That he is rather resigned to it?
Mr. A. Felix du Pont. No. I think he would feel now that his
very strong accusations that he makes in this paper or in this letter
are not warranted.
Mr. Raushenbush. Has he ever told you so ?
Mr. A. Felix du Pont. No ; but the tone of his letters at various
times and his conversations indicate a change in thought on that.
Mr. Raushenbush. If there are any letters we missed, Mr. du
Pont, in which he reverses himself and said that that situation is
changed, we would be glad to have them submitted.
Mr. A. Felix du Pont. I do not think you could find it in any
direct statement, Mr. Raushenbush. You would simply find that
he does not believe all he hears when he goes into a country. He
apparently got with people who told him how perfectly frightful
their practices are and he found out that after all they were a good
deal like most people ; they were not quite so dishonest as he indicates
in this letter.
The Chairman. Let us read from the letter [reading] :
For instance, the idea of issuing an internal Government loan, selling it to
the people, has never occurred to them and could not be done. When they
want an internal loan they get together the rich merchants and Jews and
say "You will lend the Government some money or we put you in jail; if
you do lend the Government money, we will let you in on the profits for 15
or 20 percent." A merchant is successful when he knows how to distribute
the graft and get away with part of the profits.
2482 MUNITIONS INDUSTRY
If you go clown to that country with something to sell and expect to find
fair competition on prices and quality, you will be very much deceived —
there is no such thing. People who traded the most with those countries
and are most successful are the English and Germans. How do they do It?
Let us take Vickers for example. It is impossible for Vickers, with their
British stockholders and their English business ethics, to play this game
directly. So they use the intermediary of a man like Sir Basil ZaharofC
who is the most important of his class, who acts about as follows : He gets
a price from Vickers with a discount of 40 or 50 percent. He goes to the
countrj^ and he says : " You need so much material, I'll provide you with this
whole lot and give you so much graft and I'll lend you the money t8 buy it
with." Then he will go to a local banker or merchant and he'll say this:
" "We will make a loan through Mr. So-and-so to the Government, and this
loan will bring you a very large interest and we will give so much commission
to the Minister of Finance " and he'll promise to collect enough taxes to
pay this loan and he does not get the commission until the loan is paid back.
He gets his money from these various people. The Government pays Vickers
the full amount less the discount which goes to some intermediary. In time
the Government collects taxes, pays back the people who made the loan, and
all the people in the game pluck up the profits. He has now made an arrange-
ment of this type for refilling the Greek Army. If we want to sell down
there, we will have to do somewhat the same thing. We will have to go to
the Government and say " We can furnish you with a variety of materials,
large orders, which will make a big enough smn to be interesting. We will
cover fixed ammunition, powder, rifles, and cannons, shoes, uniforms, etc., and
we will help to arrange a loan to permit you to pay for this." We can then
go to a local bank and say " Now you must arrange a loan to the Govern-
ment to pay for this material on which you will get a large i)ercentage."
This bank will get up a private loan promising large interests to the sub-
scribers, subject to a purchase of material to our combination.
Now, Mr. du Pont, this story here, to the effect that the people
who traded the most with those countries and are most successful
are the English and Germans, is this generally known to the trade,
the munitions trade?
Mr. A. Felix du Pont. Is what generally known ?
The Chairman. That the Germans and the British were the most
successful in that field.
Mr. A. Felix du Pont. I suppose it was.
The Chairman. Do you know whether the British Government
had knowledge of Vickers' activities in that field?
Mr. A. Felix du Pont. No ; I do not know.
The Chairman. I read on from Mr. Taylor's letter [reading] :
In order to work this we must work through an American bank who will
act as an intermediary between us and a local bank and must be able to do
its share in raising the loan among the rich Nationals of the country to
which we sell, who are residents in America. If we could find a bank who
knew how to do this, we should get up an expedition to go to those countries,
consisting of representatives of the bank, technical men from the Bethlehem
Steel, a small-arms company, an ammunition company, and sit on the job
until we could negotiate.
How much sitting on the job has there been, Mr. du Pont, to make
such an arrangement?
Mr. A. Felix du Pont. There has not been any following out of
that method which he thought at that time was the necessary way
to go about the business.
Mr. Lammot du Pont. And, Mr. Chairman, Mr. Felix du Pont is
of course speaking for the smokeless-powder department. I would
like to speak for the company as a whole, the smokeless-powder de-
partment, the explosives department, and all the others.
The Chairman. Splendid.
MUNITIONS INDUSTRY 2483
Mr. Lammot du Pont. We have not done business with the State
in question on any such basis as described as necessary by Colonel
Taylor.
Mr. Casey. I can add to that, Senator Nye, if you will pardon me,
but I promptly wrote back to Colonel Taylor that we could not do
business that way, but would do business the way we always had
done, on a cash basis. Further than that, I might add when the
letter was presented by Mr. Felix du Pont to the executive commit-
tee, a resolution was promptly put into effect prohibiting such
practice.
The Chairman. Since that time, 1922, I expect there has been
some change in that field by reason of the building of powder plants.
Mr. Lammot du Pont, I do not know as to that. Senator.
The Chairman. Does not I. C. I. have its powder plants there?
Mr. Lammot du Pont. I do not know that.
The Chairman. And Nobel?
Mr. Lammot du Pont. I do not know that.
The Chairman. Mr. Felix du Pont, do you have any knowledge
of what companies are operating plants in the Balkans at the
present time ?
Mr. A. Felix du Pont. No ; I do not know.
The Chairman. Mr. Casey?
Mr. Casey. The only thing I know is that it was brought out the
other day that there was a connection with a Czechoslovakian pow-
der factory, but that is not strictly in the Balkans. That is a little to
the west of the Balkans. That is the only place I know of.
The Chairman. That they had bought an interest in those plants ?
Mr. Casey. That was a commercial explosives factory, which also
had military.
The Chairman. You have no knowledge, beyond what was devel-
oped here the other day, on that score ?
Mr. Casey. None at all.
The Chairman. It was that knowledge which prompted me to ask
the question.
Mr. Casey. We have made practically no effort in the Balkans,
because, whether this situation is true or not as described by Colonel
Taylor, it is very evident that we did not seem to get to first base
trying to do any business there. Whether that was the reason or
not, I do not know, but the fact remains we have not sold them
anything.
The Chairman. I read on in Mr. Taylor's letter, leaving out two
paragraphs from where I left off [reading] :
Selling a combined lot of ordnance and taking in hand the creation of a loan
would have the best chance of success ; sales to Vickers or Schneider have
the second best chance of succeeding, and an attempt to sell powder directly
to these Governments the least chance of succeeding.
Was any one of these proposals considered by the officers at the
time that this suggestion was received ?
Mr. Casey. No. I might add to that, in the case of Schneider
it would have been almost impossible to have sold them because they
got their powder from the French powder monopoly, a Government
proposition.
2484 MUNITIONS INDUSTRY
The Chairman. I read on. [Reading:]
I know this sounds like a story from the Arabian Nights and will probably
be digested with diflaculty at Wilmington, but it is as clear an exposure of the
situation in the Balkans as I am able to make. Please think this over and
tell me which line you wish me to pursue. If you don't feel like going into
a loan of this kind, and don't know any bankers who would undertake it, it
is possible that our best mode of operation would be this : That our agents in
these countries do the best they can toward little sales and have me put in my
time on the big munition companies in the western European countries. So
far I have put all my efforts on straight selling to these countries, and I expect
to get some results, but I don't believe that that method is going to bring us
anything very big. I think, from what I saw in the Orient, that there are
very great chances in favor of a war in the Near East and one must include
the Balkans as being part of the Near East.
This is in 1922 that this is being written.
Senator Pope. Does Mr. Taylor work on a salary basis ?
Mr. A. Felix du Pont. He works on a salary basis.
The Chairman (continuing reading) :
Those savage people don't know how to live without war and robberies.
They have in the past been helped on a certain line of good conduct by fear
of the military action of the great powers. Before the Anglo-Turkish incident
there was still in the Orient a great fear of the western powers but the fact
that both the French and the English refused to fight Kemal and are going
to permit him to enter Europe, has given a tremendous blow to the European
prestige in that part of the country. All the people are absolutely astonished.
I saw Turks, Bulgarians, Greeks, and Serbians, and with one accord they say
that the great powers are done for, that they are afraid to fight and add
" We don't have to obey them any more."
To maintain European prestige in those countries there was nothing to do
but fight the Turks but as neither the French nor the British Governments
felt it possible to ask their people to go to war, they simply have had to/
accept a tremendous moral defeat. The result will be that all those near
eastern people will feel that the time has come to throw off the government
of the great powers and if it does not lead to one enormous war, it will lead
to a great number of small ones.
It would appear that Mr. Taylor had the picture pretty well in
hand, because it was only shortly after he had written that the Turk-
ish trouble developed, and indicates that he had been talking to pretty
good authority.
Mr. A. Felix du Pont. He was over there studying the situation,
and I suppose he learned what was pretty commonly known over
there.
The Chairman (continuing reading) :
If we want to sell military powder to these people, we have got to hit on the
proper plan and get busy in a concentrated way. All these people will prob-
ably buy fixed ammunition, and it looks to me as if a powder factory had a
fairly small chance of selling directly to these countries. But the sales to these
countries should be made by the big munitions people and perhaps our best
plan is to concentrate all our efforts on these munition firms.
How are you selling in the Balkans at the present time ? Direct or
not?
Mr. A. Felix du Pont. We are not selling.
The Chairman. You are not selling anything at the present time?
Mr. A. Felix du Pont. No.
The Chairman. What is the situation since 1922?
Mr. A. Felix du Pont. Since 1922 we had agents, but they were
unable to procure any sales which amounted to anything.
Mr. Casey. I think my previous statement covered that. I think
I said we found our methods were apparently unsuccessful.
MUNITIONS INDUSTRY 2485
Mr. Raushenbush. Who got the sales, Mr. du Pont ?
Mr. A. Felix du Pont. I do not know.
Mr. Raushenbush. Who made the sales, Mr. Casey ?
Mr. Casey. I do not know. We have a list of them but they were
made by different people, if they were made.
Senator Pope. But you did sell some small orders?
Mr. Casey. No, sir; none at all.
Mr. A. Felix du Pont. I suppose Greece is in the Balkans. We
made one sale to Greece.
Mr. Casey. We made that in our regular fashion.
Mr. Lammot du Pont. Mr. Chairman, you have read this letter in
its entirety, and I would like to point out it is evident from the lan-
guage that Colonel Taylor used that he expected this story to be re-
pulsive to the company management. He refers to it as being diffi-
cult to digest in Wilmington. The whole tone of his letter implies
that he was repelled by the conditions which he found in the Balkans
and he expected the company's management to be equally repelled.
Major Casey has pointed out, and I have tried to, that that repulsion
was a fact. The particular letter in question was brought to the at-
tention of the executive committee and was discussed with Mr. Felix
du Pont and Major Casey, and a resolution was formally passed by
the executive committee. If I may, I would like to read that reso-
lution.
The Chairman. If you would like to insert it in the record, and
have it with you, the committee would be glad to receive it. If it is
not very extended, you might read it.
Mr. Lammot du Pont. This is an extract from the minutes of a
meeting on November 15, 1922, of the executive committee. The sub-
ject is " Sales in the Balkans." [Reading :] ^
Letter was received from Mr. A. Felix du Pont, general manager, smokeless-
powder department, dated November 7, 1922 (No. 8418), enclosing copy of
letter from Col. Wm. N. Taylor in connection with the above subject. Mr.
du Pont and also Maj. K. K. V. Casey, of the smokeless-powder department,
joined the meeting, and after full discussion, it was moved and unanimously
carried that the aboA^e-mentioned letters be accepted and ordered filed, and
that the smokeless-powder department be advised it is the desire of the
executive committee that this company should not pay commissions directly
or indirectly to Government officials, employees, or agents.
The wish of the executive committee in a matter of that kind is
equivalent to a ruling.
The Chairman. What was the date of that action ?
Mr. Lammot du Pont. This extract is November 15, 1922, and
refers to this particular letter.
The Chairman. Does Mr. Taylor represent your associates in the
I. C. I. in any particular?
Mr. Lammot du Pont. Under the joint selling arrangement
Colonel Taylor did represent and sell for the I. C. I.
Mr. Casey. Not at that time.
Mr. Lammot du Pont. Not at that time.
The Chairman. Not at that time ?
Mr. Casey. The fact of the matter is that the selling arrangement
which was entered into later did not mean Taylor's actions in the
Balkans. That was handled by I. C. I. We never took over the
1 Entered as "Exhibit No. 959" (see p. 2312).
2486 MUNITIONS INDUSTEY
whole proposition until the arrangement, I believe, of 1932, was it
not? Yes.
Mr. Raushenbush. Do Vickers use I. C. I. powder ?
Mr. Casey. Vickers?
Mr. Rausiienbush. Yes, sir.
Mr. Casey. I could not tell you. I know we have heard of them
getting powder from Coopal and others.
Mr. Raushenbush. The letter seems to be largely a commentary
on Vickers actions there, and I was curious as to whether I. C. I.
furnished them the powder in question.
The Chairman. You do not know whether they did ?
Mr. Casey. No; we really know practically nothing of Vickers
activities, one way or the other.
Mr. Lammot du Pont. I think I would like to point out again,
Mr. Chairman, that in a letter of this kind from Colonel Taylor to
his department, that the statements made in there are not endorsed,
let me say, by the company.
The Chairman. I think that is quite evident from your minutes.
Nevertheless, we have here rather a clear situation, it seems to me,
the report of a situation, which finds itself engaged in the sale of
munitions of war, quite ready to participate in the game of stirring
up the hatreds and suspicions and fears of the people in those
countries, all to the end that there might be profit flowing to the
munitions industry.
Mr. Lammot du Pont. That may be inferred from Colonel
Taylor's letter, Mr. Chairman, but that does not make it a fact.
Senator Clark. It seems to me that the letter at least is very
illuminating, as being the report of an acute and trained observer,
irrespective of the attitude of the du Pont Co.
Mr. A Felix du Pont. I disagree with you there. Senator Clark,
that he was a trained observer. He was going out into what was,
to him, virgin territory; and when a person goes to those countries
they meet with all kinds of peojDle and talk with them, and the in-
formation received from that kind of people is, I think, rather more
likely to be incorrect than correct.
Senator Clark. How long had Colonel Taylor been in your em-
ploy, Mr. du Pont?
Mr. A, Felix du Pont. He had been in our employ in a com-
mercial way for, oh, I think, 5 or 6 years before that.
Senator Clark. He had been stationed in Europe, had he not?
Mr. A. Felix du Pont. Almost entirely in France.
Senator Clark. And he had written you voluminous reports as to
conditions in different countries?
Mr. A Felix du Pont. I think not.
Senator Clark. We have had a great many in evidence here.
Mr. A Felix du Pont. Prior to 1922?
Senator Clark. Some were prior to 1922 and some were subsequent
to 1922.
Mr. A. Felix du Pont. I think very few of them were before 1922.
Senator Clark. Colonel Taylor is still in your employ?
Mr. A. Felix du Pont. Yes.
Senator Clark. You did not discharge him as a result of this
communication ?
MUNITIONS INDUSTRY 2487
Mr. A. Felix du Pont. Certainly not ; because he was simply writ-
ing his findings.
The Chaikman. Now, according to the findings, Sir Basil Zahar-
off was outbidding the Greeks at that time. Do you know whether
or not that was true?
Mr. A. Felix du Pont. I do not know. We never had any con-
tact with Sir Basil Zaharoff whatever.
The Chairman. It was at this time that the French were outbid-
ding Kemal's Turkish Army. I was wondering if you might have
any knowledge of the activities of the sales at that particular time.
Mr. A. Felix du Pont. No.
The Chairman. The du Ponts had no knowledge at that time?
Mr. Casey. None whatever.
Mr. Lammot du Pont. Not to my knowledge.
Mr. Casey. The only thing we got was from the newspapers.
The Chairman. All this was just prior to the Turkish-Greek War,
and it would appear that the British were arming the Greeks for
50 percent commission and the French were arming Turkey. In the
light of that experience and in the light of the profit which flowed,
I wonder if there could be really much occasion to be wondering why
there was a conference in 1925 which resulted in anything but failure.
Surely the British and French munitions makers, in the light of
what they had done in Turkey and in Greece at that time, would not
want any agreement entered into which might restrict what they
were doing in those fields, I am sure.
Mr. Lammot du Pont. Senator, we have no right to state what the
manufacturers of munitions in Europe have done or said. We know
that we had no part in the disarmament conferences. Is it not fair
to assume that they had no part either ? It is true some of our news-
paper reports and some of the information which Colonel Taylor
picked up would indicate otherwise. We have no assurance whatever
that the information Colonel Taylor picked up was authentic or
true.
The Chairman. You mean in connection with that 1925 confer-
ence ?
Mr. Lammot du Pont. Yes, sir; or any other conference.
The Chairman. Is it not true that your company did participate
in the conferences that were held prior to the departure of the
American delegation to the Geneva Conference?
Mr. Lammot du Pont. We participated in a conference called
by the Department of Commerce at the request of the Department of
State, but we did not
The Chairman. I am going to deny very emphaticallv here this
morning that that was at the request of the Department of State.
Mr. Lammot du Pont. I was referring to the telegram which was
read into the record.
Senator Pope. ^Vhat telegram?
Mr. Lammot du Pont. I think there was a telegram read into
the record to that effect.
The Chairman. That was a press dispatch.
Senator Clark. You w^ere referring to the press dispatch wdiich
Senator Vandenberg read?
Mr. Lammot du Pont. It was a telegram.
83876— 35— PT 11 7
2488 MUNITIONS INDUSTRY
Senator Clark. It was a newspaper flimsy. He was reading a
statement made by Mr. Hoover to the press.
Mr. Lammot du Pont. It was a telegram.
Senator Clark. Not the one which Senator Vandenberg read into
the record. It was a United Press flimsy.
Mr. Lammot du Pont. I might have been in error. It looked like
a telegram to me.
The Chairman. Mr. Felix du Pont, as relates to your contacts,
is the acceptance of graft confined to the Balkan countries, or does
it prevail in other territories in which your company is selling
powder ?
Mr. Lammot du Pont. Senator, might I interrupt a moment, to
finish the answer which was interrupted by this question, as to the
telegram ?
The Chairman. Yes.
Mr. Lammot du Pont. We did not participate in the Geneva
Conference. That was a statement which I wished to make. I think
that your question inferred that we had. We had not participated in
it.
The Chairman. No; but you did participate in the conferences
which were held here?
Mr. Lammot du Pont. At the request of the Government.
The Chairman. All right, let us put it that way.
Mr. Lammot du Pont. At the invitation of the Government.
The Chairman. The conferences called by agencies of the Gov-
ernment. You did participate in those?
Mr. Lammot du Pont. Yes, sir.
The Chairman. At which v/ere present the representatives of the
munitions industry, secretaries, and delegates who had been named
to the Geneva Conference?
Mr. Lammont du Pont. I am not sure that the delegates were
present.
The Chairman. I think the record is very clear on that.
Mr. Lammot du Pont. The conference called by the Department
of Commerce, to which we were invited, the first such conference,
the delegates were not present.
The Chairman. At the first one?
Mr. Lammot du Pont. You will recall that a committee was aj3-
pointed to meet later when the delegates could be present?
The Chairman. But a second conference was held?
Mr. Lammot du Pont. Yes, sir.
The Chairman. At which they were present, these men who had
been delegated to the Geneva Conference.
Mr. Lammot du Pont. Yes, sir.
The Chairman. Now, Mr. du Pont, these practices which Colonel
Taylor has led us to believe were necessary to resort to in the
Balkans, are those practices confined alone to the Balkans?
Mr. A. Felix du Pont. No; I think in speaking of it a short while
ago I said then I believed that those practices in general trade in the
Orient, meaning the whole Near East and Far East, that they are
looked upon differently from the way tliey are in this counti\y, and
I have been told are necessary in order to carry on trade in those
countries.
MUNITIONS INDUSTRY 2489
METHODS OF DOING BUSINESS POLAND
The Chairman. Who is William H. OXiorman?
Mr. A. Felix du Pont. He was the assistant director of sales of
my department. He is now dead. He was assistant to Casey.
The Chairman. I would like to ask as to the meaning of this
letter addressed by Colonel Taylor to Mr. William H. O'Gorman,
dated January 18, 1928, in connection with your negotiations in
Poland [reading] :
I am now working on a proposal to help Zaiorzdon, in return for which
we are to get 300 tons a year for 12 years. Thei-e is one aspect of this
negotiation on which I must know exactly where I stand, and that is, in
order to get this we will have to pay 7 percent commission, of which 2 percent
must be paid in its entirety the day of the signing of the contract. If I can
promise this, I have a good chance of getting away with this order. Cable
me firm answer.
Sincerely yours,
William X. Taylor.
That will be offered as " Exhibit No. 949."
(The letter referred to Avas marked " Exhibit No. 949 " and ap-
pears in full in the text.)
The Chairman. What is the meaning of that, Mr. du Pont?
Mr. A. Felix du Pont. I do not know.
The Chairman. Did Mr. O'Gorman consult you at the time?
Mr. A. Felix du Pont. I do not remember if he did. I do want
to mention, however, that this is one of those sales propositions that
never came through. Is not that correct ?
The Chairman. Whether or not it came through, vou gave your
consent to it, did you not '{
Mr. Ratjshenbush. What was Major Casey's answer to your
question ?
The Chairman. Had he directed a question to Major Casey?
Mr. Casey. It is a question of the date.
Mr. A. Felix du Pont. Three hundred tons a vear for 12 years.
Mr. Casey, No; that never came through. Zarorzdon was the
Polish powder plant.
The Chairman. What was the thought there involving the neces-
sity of paying 2 percent of this commission, of this 7-percent com-
mission, on the day of the signing of the contract?
Mr. Casey. That is because the agent, a man by the name of
Klawe, said he could not possibly get along with a 5-percent commis-
sion, and other expenses of his office, the financial adviser he had to
use, and that he was put to considerable expense because he had to
pay this fellow who was his financial backer.
Senator Clark. He had to pay that 2 percent on the whole 12-vear
contract ? ''
Mr. Casey. Yes, sir; because the banker was through when the
deal was terminated.
Senator Clark. The banker was not taking any chances.
Mr. Casey You bet your life he was not. Not if he was a banker.
He wanted that 2 percent. In other words, he had to pay this 2 per-
cent CO the banker, and I felt it was only fair to him that we should
anticipate his commission to the extent of 2 percent, so that he could
get rid of that oblijration.
2490 MUNITIONS INDUSTRY
The ChzVirman. I offer as an exhibit a letter dated February 3,
1928, addressed to Colonel Taylor by Mr. O'Gorman, which will be
" Exhibit No. 950."
(The letter referied to was marked " Exhibit No. 950 " and is
included in the appendix on p. 2597.)
The Chairman. I read from it [reading] :
You may be sure in the event that you conclude a deal along the lines indi-
cated in your letter of January IS, that I will promptly remit by cable the
amount involved to pay the 2 percent commission, so that there will be no delay.
Mr. Casey. I think that matter has pretty well been covered, the
reason for that immediate payment.
The Chairman. That contract did not ever materialize. However,
an exactly similar arrangement had previously been negotiated, had
it not?
Mr. Casey. About the same time we got a contract from Poland
for a thousand tons, somewhere around 1927 or 1928.
The Chairman. I offer " Exhibit No. 951 ", which is a letter to
Colonel Taylor by Mr. O'Gorman, under date of July 3, 1928.
(The letter referred to was marked " Exhibit No. 951 ", and is in-
cluded in the appendix on p. 2597.)
I read from it [reading] :
In regard to advance of 2 percent on agent's commission on new order, this
matter can be handled exactly the same as we did on the 1,000-ton conti'act so
that the money will be available upon receipt of telegraphic advices from you.
You may rely upon me to personally take care of this matter so that the funds
will be placed to Mr. Klawe's credit within 48 hours after receipt of telegraphic
advices from you.
Now, the question, who was Mr. Klawe?
Mr. Casey. He was our agent in Warsaw.
The Chairman. Two percent involves in this particular contract
a sum of about $30,000. Is it customary, Mr. Felix du Pont, to
advance such sums to j^our agents on the day contracts are signed,
when the prospects for payment are so far in the future? Is that
a customary practice?
Mr. A. Felix du Pont. No; I do not think it is. I think those
things are judged according to the conditions when they are brought
up.
The Chairman. Wliat induced you to make an exception, then, or
to make that advance in this particular case?
Mr. A. Felix du Pont. Just on the information we had, we
thought we would do as Colonel Taylor recommended.
The Chairman. Is it not likely that Mr. Klawe had to pay some
key man before this contract could be finally entered into ?
Mr. Casey. Senator Nye, I do not think so. I would like to give
you an illustration of our contact with the Polish inspectors that
came over here in connection with the thousand-ton contract.
In order to avoid the slightest semblance of any irregularity on
their part, they would not accept from us an invitation, " Let's go
down and have lunch." They would say. " Yes, if you will have
lunch with me tomorrow."
That was their attitude all the way through. And they not only
took that attitude, but we felt they were sometimes leaning over
backwards to avoid any accusation, whatsoever, that they accepted
any favors of any sort from us that they did not promptly return.
MUNITIONS INDUSTRY 2491
With that atmosphere. I do not see where there is the slightest
idea that we could possibly have had that there was going to be any-
thing in the slightest degree irregular.
Senator Claek. Who paid the expenses of that Polish commission,
Major?
Mr. Casey. They did; the Polish Government.
The Chairman. You do not think that the payment of this com-
mission involved the necessity of Mr. Klawe's paying others before
the deal could be finally put through ?
Mr. Casey. I do not believe so.
Mr. Lammot du Pont. Mr. Chairman, you will recall that the
resolution of the executive committee addressed to the smokeless-
powder department was earlier than this proposed contract. The
smokeless-powder department was well aware of the attitude of the
executive committee. They knew that a contract of this size would
have to come to the attention of the executive committee. It was
entirely unreasonable that they should have had in mind any pro-
vision of the kind that you suggest.
The Chairman. I offer now " Exhibit No. 952 ", a letter dated
May 20, 1930, by Mr. O'Gorman to the Parlin plant, industrial fin-
ishes division, export department. Evidently Mr. J. H. Frechen of
that department had made inquiry concerning this particular deal.
He says [reading] :
In reply to your letter of May 14 and contirming our telephone conversation
on the above subject, we are slart to advise tliat Mr. Klawe has been agent for
the military sales division in Poland for the past 6 years, during which time he
was successful in obtaining for us orders from the Polish Government for large
Quantities of smokeless powder. Some of the sales were made on a cash basis,
others on credit extending ovei- a year and a half, and on the last contract,
which was for 1.000 tons of powder, payments extended over a 3-year period.
I jump over the next paragraph [reading] :
Mr. Klawe's commission on the above-mentioned contract was 7 percent or
approximately $126,000. Upon signing of the contract, even before we received
the Polish notes, we made iin advance pavment of commission to Mr. Kin we of
.$30,000.
He got his 2 percent even before the deal was finally closed?
Mr. Lammot du Pont. No, sir ; that is not correct.
(The letter referied to was marked '* Exhibit No. 952 ", and is
included in the appendix on p. 2598.)
Mr. Casey. No; before we got the first notes.
The Chairman. Even l^efore the notes were signed?
Mr. Casey. Yes; but not before the deal was closed.
Mr. Lammot du Pont. He does not say before the notes wej?e
signed, either, Mr. Chairman. It says before we received the Polish
notes.
The Chairman. I see.
Then Ave go to the last paragraph on that page [reading] :
In dealing with the Polish Government you are rattier fortunate to have Mr,
Klawe as agent as he is a man who is very well connected and thoroughly un-
derstands what must be done in order to secure business. He is very trust-
worthy, and I suggest that you follow his advices so far as the obtaining of
Polish Government business is concerned.
What are Mr. Klawe's connections, referred to here?
Mr. Casey. He is looked on in Poland as a man of unusually high
standing, and, by the very nature of things, he is accepted as a man
2492 MUNITIONS INDUSTRY
of intej^rity, and therefore a man that the Government feels they
can deal with. I consider that we were fortunate in getting him as
our agent.
Senator Pope. Outside of his agency for you, what was his busi-
ness, his general profession ?
Mr. Casey. I think Mr. Brad way can answer that, because he has
met Klavfe and has had dinner with him.
The Chairman. Please come forward, Mr. Bradway.
Mr. Bradway, have you been sworn ?
Mr. Bradway. No.
TESTIMONY OF F. W. BRADWAY
m
(The witness was duly sworn by the chairman.)
The Chairman. The question has been asked and the point has
been made that you perhaps could tell us more about Mr. Klawe, your
representative in Poland, than anyone else could. What do you
know of him?
Mr. Bradway. He is a mechanical engineer, as I recall it, and he
had had to do with the construction of several manufacturing build-
ings in both Warsaw and in St. Petersburg — that was prior to the
war, in St. Petersburg — and he had a sort of a small factory there
where he refinished automobiles. In general he was quite highly
respected by the people in Warsaw.
Senator Pope. What is your present position?
Mr. Bradway. I am assistant general manager of the smokeless-
powder department.
Senator Pope. Of the du Pont Co.?
Mr. Bradway. Yes; smokeless-powder department.
The Chairman. Is it the custom to pay as much as 7 percent com-
mission on that business in Poland ?
Mr. A. Felix du Pont. I think that the amount of the commission
is in a general way dependent upon the question of whether you have
to find an agent who can do the job for you and get the orders for
you. If you cannot do it yourself, you get an agent who can, and the
question of whether you can do it or not yourself very much decides
the amount of the commission the agent gets.
The Chairman. Have you had to pay higher rates, higher commis-
sions than that in connection with any of your sales ?
Mr. A. Felix du Pont. I could not answer that. I am not sure.
The Chairman. Mr. Casey?
Mr. Casey. I think 7 percent would represent a little higher than
average. There may have been exceptions to that, but you must re-
alize this : The payment of a commission to an agent is very much
more economical from our viewpoint than for us to establish a branch
office for the sale of military material in any country. I think it does
not take very much thought to realize that.
Senator Clark. In other words, you do not have to pay any perma-
nent overhead or salaries?
Mr. Casey. Yes.
It is necessary that somebody be there all the time. It is not like a
commercial proposition, where there might be a broadcast that they
are going to build a bridge, and everybody can rush there to see that
they have a chance to bid. You never know at what moment any
MUNITIONS INDCrSTRY 2493
government may decide, " Well, now, this is the time we ought to buy
something." So the man who is right there on the job, practically,
you might say, almost in the capacity of being a branch office, except
we have no control over him, is much cheaper to have. In other
words, if we had to do business throughout the world or try to do
business by having branch offices, we would probably be in the busi-
ness about one year and quit. It would be costing us too much.
Mr. Raushenbush. Have you ever paid commissions higher thafi
7 percent?
Mr. Lammot du Pont. Mr. Chairman, I think I can answer that
question from the standpoint of general business.
The Chairman. Will you, whoever can answer it?
Mr. Lammot du Pont. I would like to answer it from that stand-
point.
The Chairman. All right.
Mr. Lammot du Pont. Certainly there is no fixed amount for a
business commission. They run anywhere from one-eighth of 1
percent, the usual brokerage in stock transactions, up to as high as
30 or more percent in commercial goods selling. The ordinary com-
mission for an automobile dealer agency is 25 percent.
The Chairman. On the sale of powder, do you mean to say that
you have paid commissions as high as 30 percent?
Mr. Lammot du Pont. I do not think so ; no, sir.
Mr. Casey. No.
The Chairman. In what instances have you paid more than 7
percent ?
Mr. Casey. I think we may have paid or offered to pay at least
10 percent, possibly 15. But you must realize this, that the ques-
tion of how much commission depends to a great extent on the a^ent.
Some agents will say, " We cannot afford to take this proposition
on for any 5-percent basis, because the amount of business is going
to be so small it will not even pay us to carry on negotiations."
On the other hand, as to some other nation, it might be a case
where the man would say, "Why, yes; 5 percent is all right with
me. I will get by with that."
So as to the question of saying there is any fixed agency price,
that is entirely dependent on the type of man you get for agent and
the nation he is selling to.
There is another side. Senator. We naturally try to restrict the
amount paid in commission, because whatever is paid in commission
is added and above our base price, and therefore, any increase in
commission means it puts our price that much higher, which makes
it bad from the standpoint of competition. So we are on our part
doing our best to keep the commission as low as possible, and at
the same time the agent is doing his best to get the commission as
high as possible.
Senator Clark. How much would be the commission involved in
this Polish contract that Senator Nye was talking about, 7 percent
on 3,000 tons for 12 years?
Mr. Casey. No ; on a thousand tons.
Senator Clark. No; but the other proposition that I understand
was never consummated.
Mr. Casey. Oh, the other proposition ? You see, there would have
been a 12-year contract, 300 tons a year.
2494 MUNITIONS INDUSTRY
Senator Clark. Three hundred or three thousand?
Mr. Casey. Three hundred tons a year. We could not produce
3,000 tons a year.
Senator Clark. How much was involved ? I was just trying to get
an idea of the size of the commission involved on that Major.
Mr. Casey. You are asking me to do some mental gymnastics here.
Senator Clark. I thought you would be familiar with the subject.
Mr. Casey. No. We never went any further, to figure out what it
would be.
The Chairman. Mr. O'Gorman's figure on that was $1,846,000.
Senator Clark. That was on the thousand tons.
The Chairman. For your information, the total sales price of the
thousand tons of smokeless powder amounted to $1,846,000.
Mr. Casey. Yes.
Senator Clark. You can figure the commission on that.
The Chairman. That commission would figure $168,000.
Mr. Raushenbush. Mr. Casey and Mr. Bradway, were there any
other instances where an arrangement like this of a 2-percent com-
mission or a definite part of a commission had to be paid on the very
day the contract was signed ?
Mr. Casey. I do not know that there was in this, particular case,
you see. It involved credit, the credit to be, you might say, in the
form of Polish notes. That required the services of a local banker
who knew the situation as to the Polish method of finances. There-
fore, this banker was put to a tremendous amount of work to investi-
gate the whole thing before we were willing to accept those notes.
We had to get some local banker's opinion.
Mr. Raushenbush. Do you have any reports from Mr. Taylor re-
ferring to that banker ? We do not seem to have run into them at all.
Mr. Bradway, while Mr. Case}'^ is looking for that, can j^-ou answer
from your memory on that matter: Were there ever any other in-
stances where a part of the commission had to be paid on the very
day of the signing of the contract?
Mr. Bradway. I cannot recall that.
Mr. Raushenbush. It was a somewhat unusual case.
Mr. Casey. Mr. Raushenbush, it would not be at all out of the ordi-
nary for a proposition of this sort, where the contract provided that
the agent's commission is not paid until the notes had been paid, and
not when the notes are received by us, but the notes have been paid.
In the meantime, this thousand-ton proposition had been worked on
for several years before it was finally brought to a conclusion.
The Chairman. Did Klawe do the work?
Mr. Casey. He did the work.
Senator Clark. The 2 percent that had to be paid cash on the
barrel head on the day of signing the contract did not have to do,
if I recall it, with the thousand-ton transaction?
Mr. Casey. It had to do with the thousand-ton likewise.
Senator Clark. You had to pay the commission^
Mr. Casey. We had already paid it at the time this 12 years
developed.
Senator Clark. And this other one was to be based on the same?
Mr. Casey. It was simply a duplication of it.
You just take the position of an agent. Here he is getting a
commission and nothing else. After he has done a certain amount
MUNITIONS INDUSTRY 2495
of work, some of these agents say, " I would like to have half my
commission ", because after all, when the contract is signed you
might say the agent's job is done, isn't that true? He has negotiated
the contract to the extent of where our own man then can go in
and sign. Now, really, his work is done. Except in this case,
Klawe also had to help us in seeing that the notes that were called
for under the terms of the contract were sent out at the proper
tune. So he in reality had a continuing job. Whereas ordinarily
an agent's or a salesman's job on a particular piece of business is
completed when the contract is signed. In a great many cases you
will find that agents are paid their commissions in full when a
transaction is closed.
Mr. Raushenbush. What cases do you mean, your company ?
Mr. Casey. I mean the commercial business, in commercial busi-
ness.
Mr. Lammot du Pont. The usual architect's com.mission is paid
one-third on completion of the plans.
Senator Clark. That is because he has done a third of the work.
Mr. Lammot du Pont. The agent had done his work in this
powder case.
Mr. Raushenbush. The reason for this line of questioning, Mr.
Chairman, is that we had a good deal of these advance commissions
in the case of another company, the Electric Boat Co., so I was
interested in tracing them down.
Mr. Casey. Mr. Raushenbush, you are questioning du Pont now,
are you not, not another company?
Mr. Raushenbush. We do not know whif this means, Mr. Casey.
The Chairman. You do not have direct knowledge of having
paid more than 7 percent for powder sales, do you ?
Mr. Casey. No. I do not have any direct knowledge at the mo-
ment. It may be that we did, but if so, it was on a very small piece
of business.
The Chairman. Is there any significance in the language which
Mr. O'Gorman uses in this memorandum from Mr. Frechen, when
he says of Mr. Klawe that —
He is a man who is very well connected and thoroughly understands what
must be done in order to secure business?
Mr. Casey. I do not think there is the slightest bit of significance
in that at all. You must realize that this was a letter being sent
from one department to another department.
Tlie Chairman. That is right.
Mr. Casey. We felt that Klawe was a good man for us, and we
were trying to make as good a case as possible for Klawe for this
other department, because it had this advantage to us : If Klawe
likewise had an agency for another branch of the company, then we
would keep him more contented.
We had from our agents requests such as, " Well, won't you give us
a retainer, because we go along year after year, and no business."
In some cases we have to pay a nominal sum, of $25, $50, or $100 a
year, so that they will pay the expenses of keeping their files. They
say, " Why, we do not got enough even to pay the expense of keep-
ing our files up and our correspondence."
2496 MUNITIONS INDUSTKY
Senator Clakk. Klawe has been pretty well paid, Major. The
commission on this one transaction of a thousand tons ran about
one-hundred-and-eightj^-some thousand dollars.
Mr. Casey. How many years has he worked ?
Senator Clark. I do not know.
Mr. Casey. That is the way you have to look at it.
Senator Clark. That seems to be fair compensation.
Mr. Casey. You take the amount of work he has done for a period
of we will say 10 years, if you like, and he has gotten this order,
which gave $180,000.
Senator Clark. At that figure you are not going to the poorhouse.
Mr. Casey. Let us admit that. But is not the man who does the
work entitled to his reward?
Senator Clark. Yes; but you were talking about his being dis-
satisfied. I say he is doing pretty well.
Mr. Casey. The fact remains that since that time we have not
done any business with Poland.
The Chairman. Prior to this 1928 sale, how long prior to that
had Mr. Klawe been recognized as a representative in Poland?
Mr. Casey. I could not say the exact date, but I would say at
least 3 or 4 years and iDOssibly more.
Mr. A. Felix du Pont. Senator Nye, there was no sale in 1928.
The Chairman. 1927 was the sale.
Mr. Bradway. He had been our agent for at least 3 or 4 years
prior to that.
Mr. Casey. Three or four years ; I am not quite sure.
The Chairman. Can you say that Mr. Klawe negotiated this deal
without the resort to any payment of graft ?
Mr. Casey. I can never say that any man negotiates a deal and
say that I know positively that he has not. That is beyond me.
The Chairman. But it has not been made ?
Mr. Casey. But there has not been the slightest knowledge on our
part that any such thing was necessary, because in the first place,
Klawe was looked on as a man of such integrity that we would not
suspect it.
The Chairman. That is not true as respects some other places or
sales, is it? You do have knowledge that graft is necessary in con-
nection with some sales?
Mr. Casey. I would not even say that. We sometimes suspect,
but that is a thing that we may be absolutely unjust about, suspi-
cion.
methods of doing business CHINA
The Chairman. Did you not do more than suspect as relates to
your negotiations in China?
Mr. Casey. Then we found out.
The Chairman. Then you found out?
Mr. Casey. Yes.
The Chairman. So it is not a matter of suspicion there ?
Mr. Casey. No. I am trying to tell you to the best of my know-
ledge how we look at these things.
The Chairman. You have done considerable business, Mr. Casey,
in China.
MUNITIONS INDUSTRY 2497
Mr. Casey. From the time of lifting the embargo I think over a
period of 3 or 4 years, we did probably an average, I will sslj — what
was it, about?
Mr. Bradway. $800,000, total.
Mr. Casey. $200,000 or $300,000 a year.
The Chairman. In these negotiations in China and other dealings
with a Colonel de Fremerj^ — who was De Fremery?
Mr. Casey. De Fremery, as he came to our attention through Mr.
Van Veen, who was our agent in Holland — he advised us that Mr.
de Fremery was going over there to advise the Chinese Government
on ordnance matters.
The Chairman. He was originally from where?
Mr. Casey. I understand from Holland. Whether he is a Hol-
lander I do not know, but the name might indicate otherwise.
The Chairman. I have before me excerpts from a letter written
by Mr. O'Gorman to the circulation manager of the du Pont maga-
zine, saying of Colonel de Fremery rhis :
Colonel De Fremery is a Dutch ofBcor working uniler contract with the
Chinese Government as an adviser.
Mr. Casey. That is right.
The Chairman. You understand him to be that.
I offer " Exhibit No. 953 ", cable dated September 23, 1929, to Col.
W. N. Taylor.
(The letter referred to was marked " Exhibit No. 9o3 ", and appears
in full in the text.)
The Chairman. I read:
Cable No. 660 : Following telegiam has been received from N. E. Bates :
Would suggest v.e do not pay any other commissions except 7.5 percent Preston,
Wills, DyestufCs, Wilmington, du Pont Dyestufit's Office, Shanghai, China, will
advance all prices at plant 5 rerreiit for distribution as follows: 4 percent
Chinese Army, Nanking; 1 percent Coi. de Fremery. N. E. Bates does not know
of any good i-eason for payment commission by Col. W. N. Taylor. Unless there
is good reason to contrary we will advise N. E. Bates to settle definitely on the
basis quoted.
Who can tell us the meaning of that?
Mr. Casey. This \^as an arrangement made by Bates after he got
over there in China. It was brought out the other day that we had
severed our conneciion with I, V. Giliis. Because of the embargo in
China we felt there was no chance for him, since we really had hung
onto him year after year with the idea perhaps that the embargo
might be lifted. I think that a few months after vre severed our
connection with Giliis, the embargo was lifted. When we tried to
get Giliis bacJv we found that he had made some other connection.
The result was we were looking for a new method of getting into
China, when this opportunity arose in Europe through Van Veen.
The very first arrangement was that Van Veen insisted that he should
have 8 percent, and out of that 8 percent he was going to take care
of De Fremery. Then we later learned from the Chinese Govern-
ment that they did not want to do business through intermediaries,
that they Avanted to do busines direct. I think that came out the
other day.
We had in Shanghai an office of the dyestuffs department of the
du Pont Co., so we asked Dr. NoeJting if he would take care of the
matter for us.
2498 MUNITIONS INDUSTRY
Then we were up against this proposition : The dyestuffs depart-
ment said, '• Yes, but this is going to cost us money." We were
going to face the proposition of paying Van Veen 8 percent, which
Look care of De Fremery, and also from the smokeless powder depart-
ment paying into the dyestuffs department a certain amount, which
all meant boosting our price.
So when Bates got over there he found that De Fremery would
be satisfied with 1 percent. The dyestuffs people thought that in
order to pay them and have them break even on the handling of this
Dusiness they required 7^2 percent. That is our own office. And
when Bates said he could not see any occasion for payment of com-
mission hj Taylor, he meant he could not see any reason why we
should pay any commission whatsoever to Van Veen. So this ar-
rangement then went into effect. The reason for putting aside 4
percent was because we were — as brought out by Mr. Felix du Pont
a few moments ago — practically told that that was an old Chinese
custom.
The Chairman. The 4 percent that was paid to the Chinese Army
of Nanking, who was that paid to?
^Ir. Casey. I do not know. I never did know until that other
letter indicating by name a couple of officers, which was brought out
at tJie hearing in September.
The Chairman. But De Fremery, who was a Dutch officer working
under contract with the Chinese Government as an adviser, also got
a percentage?
Mr. Casey. He got 1 percent.
The Chairman. Have you paid commissions to other Chinese
officers, army officers?
Mr. Casey. Whatever was paid under this 4 percent; that is all
I know of. I do not even really know whether the payments were
made, to whom, or how, but the money at least was set aside by the
budget.
The Chairman. I offer " Exhibit No. 954 ", which is an excerpt
from a letter dated December 27, 1929, to the circulation manager of
the du Pont magazine by Mr. O'Gorman. That letter makes refer-
ence to Dr. C. Y. Wang.
(The letter referred to was marked " Exhibit No. 9.54 ", and is
included in the appendix on page 2599.)
I read :
Dr. C. Y. "Wang is a chemical engineer in charge of dyestuiTs demonstration
in our Shanghai office, hut since Dr. Wang is also engaged in military sales
work, the du Pont Magazine would be of value to him, as he is In constant
touch with government officials.
Wliat is this we are hearing of more recent days concerning Dr.
Wang's present predicament?
Mr. Casey. Somebody else can probably tell the story better than
I can on that. I just heard the rumor.
The Chairman. Is it any more than rumor, this story that he has
been arrested and is about to be executed?
Mr. Casey. I could not tell you. Senator.
Mr. Lammot dut Pont. I had not heard of that. Senator. C. Y.
Wang is not in the company's employ and has not been for some
time.
MUNITIONS INDUSTRY 2499
The Chairman. Since when?
Mr. Lammot du Pont. I think since 1932.
The Chairman. Is there anyone present who has heard anything
more than mere rumor along that line ?
Mr. Casey. I was just handed this memorandum and I am trying
to make it out. This is evidently a message from the back of the
room. It says here that he is going to be hung.
The Chairman. Is there anyone here in connection with the du
Pont industry, their attornys or others, who has any direct informa-
tion concerning Dr. Wang's difficulties i There has been a very per-
sisting story, emanating, I understand, from one of the counsel for
the du Ponts, that that was tlie case. In any event, in light of the
record that has been made, it would seem that if there be foundation
for the story that is being told it seems rather unfair that Dr. Wang
should be one or the only one punished for what we understand to be
the occasion for his punishment.
Is it a common occurrence, as you understand, Mr. Casey, in
China, to pay these commissions to Chinese officers of the Army?
]Mr. Casey. I have never been in China, so therefore, I have no
iirst-hand information. But I recently read a book, "" Oil for the
Lamps in China " — I imagine a great many of j^ou men have read
that book — and all through it is this question of the squeeze.
The Chairman. This question of the what?
Mr. Casey. Of the squeeze. But in addition to that, I have
heard from people who have been there that there has always been
a custom of exchanging presents. In other words, when New Year's
comes, or some otTier ceremonial occasion, people doing business
with one another will exchange presents.
Now, this, of course, is all hearsay. I understand that sometimes
foreigners going over there trying to do business have been very
much embarrassed by having a very handsome gift come to them,
in the form of a piece of Chinese jade, or something of that sort,
and they don't know what in the world to do with it. If they try
to return it, they have made a deadly enemy of the man who has been
a customer of theirs, and it is the customer buying from them who is
giving the present to the man selling to him. But he will make a
deadly enemy if he refuses that gift, so the man feels he cannot
refuse the gift.
The Chairman. Is the man buying sometimes made the recipient
of a gift, a New Year's gift?
Mr. Casey. He is very apt to be. Of course, that is hearsay, as
I say. I have never been in China.
The Chairman. I offer " Exhibit No. 955," a letter to Mr. O'Gor-
man, unsigned, dated December 29, 1930.
(The letter referred to was marked " Exhibit No. 955 ", and
appears in full in the text.)
The Chairman. I should like, first of all, to have identified the
author of that letter. It is initialed J.W.S.
Mr. Casey. J. W. Squirrel.
The Chairman. Who is he?
Mr. Casey. He is an assistant in LC.I.'s office in New York.
The Chairman. Can you tell where the letter was written from?
Mr. Casey. I imagine from New York. There is nothing here to
indicate, however.
2500 MUNITIONS INDUSTRY
The Chairman. Oh, yes; it is indicated up at the top here. It
is written from 19 West Forty-fourth Street, New York, December
29 1930.
This letter would make it appear, Mr. Casey, that your British
friends, the I.C.I. , at least hint that you have obtamed business m
China, 'and this in spite of price cutting by the Bofors, with the
element of graft. Let us read the letter, " Exhibit No. 9o5 :
In your letter of November 20 you advised that you had secured an order for
rifle powder from the Chinese Government at the price of $2.10 per kilo, pre-
sumablv c.i.f. Chinese port, against Bofors' quotation of $1.25 per kilo f.o.b.
European port. You indicated that you secured the business on the basis of
service and the quality of your product. We, of course, admit the possibihty
of this argument being successful in some instances over lower competitive
prices but the margin between the two figures given is so wide that we are
wondering whether there were not some other considerations. For instance, we
think that it is not at all unusual to have to give away large commissions in
China in order to secure business. ^ ^ ^ , ^ i ■,
Id the fdisenre of ordprs from the British Government, I.C.I, have to depend
on getting business from other sources, in order to keep their factory employees
up to the mark. They are not willingly following the prices established by
Bofors, but they do not see how they can get business by any other means. In
your case, of course, circumstances are different in that you receive large orders
from the United States Government.
Senator Pope. Who is this man ?
Mr. Casey. Squirrel?
Senator Pope. Yes.
The Chairman. He is of the I.C.I.
Senator Pope. An agent of the I.C.I. ?
Mr. Casey. No ; he is one of their representatives in this country.
Senator Pope. In this country?
Mr. Casey. Yes.
The Chairman. Mr. Casey, what is the deduction to be drawn
from this letter?
Mr. Casey. I think in the first place that SqunTel's deduction was
incorrect, to the extent that it was trying to explain how we were able
to sell when they were not. I am referring now to I.C.I.
The Chairman. Yes. , , • <:
Mr. Casey. That statement that we made the sale on the basis ot
service and quality was absolutely correct. There was no such fig-
ure as this Bofors' quotation. Now, you have got to take the dis-
tinction there between c.i.f. and f .o.b., as referred to by Senator Clark
the other day. I believe that Bofors' price c.i.f. would have been
25 or 30 cents a kilo higher, on account of ocean freight and trans-
portation. But ours represented a c.i.f. price.
The Chairman. Even so, that would have left a difference ot
about 80 cents.
Mr. Casey. But that price that Squirrel refers to of Botors did
not exist at the time we got the order. Now, what we understood
was— and we afterwards heard it to be the fact— that every time
Bofors heard we had gotten some business that they had not gotten,
they would go to some official and say, " You were foolish to give
them that business at that price. We would have given you that
powder at a good deal less." Bofors was not selling powder at that
time. Later on. when the world became a little chaotic on account
of England going off the gold standard, our prices in dollars re-
mained the same, but in comparison with European prices they were
MUNITIONS INDUSTRY 2501
way out of line. At one time we understood that Bof ors were offer-
ing powder in China at $1,121/^ a kilo, but they could do that without
lowering their price, on account of the exchange.
The Chairman. Now, what part of your price that you obtained
in connection with that order was for graft ?
Mr. Casey. That 4 percent referred to, and that was all.
The Chairman. In addition to the 4 percent, there were other re-
wards, were there not, such as your New Year's presents plan that
you just suggested?
Mr. Casey. Anything tliat came there was in that 4 percent.
The Chairman. Your director of sales for China recognized the
necessity for gifts at New Year's, Chinese New Year's ?
Mr. Casey. As I say, that was set aside for gifts or of whatever
nature that might be,
Mr. A. Felix du Pont. Senator Nye, might I state that you put in
the record or called it our New Year's plan. We made it very clear
that that is a Chinese New Year's plan.
The Chairman. All right.
I have before me a letter addressed to E. I. du Pont de Nemours &
Co. by F. A. M. Noelting, director of sales for China, written Aug-
ust 22, 1929, which I offer as " Exhibit No. 956."
(The letter referred to was marked " Exhibit No, 956 " and is
included in the appendix on p. 2599.)
The Chairman, I will read only a sentence from it on page 2,
Anyway, presents will have to be given to various parties at Cbina New Year's
and the overprice we get can be nsed for this purpose.
Mr. Casey, Doesn't that indicate just what I said?
The Chairman, You think that is covered by the 4 percent ?
Mr, Casey, Yes. In other words, there was nothing given in the
nature of a New Year's present in addition to that 4 percent. If
presents were given, that was deducted from the 4 percent.
Now, I might add that at the time this proposition came in, this
was an explanation as to why they wanted us to advance the price,
to take care of that 4 percent. It was a question indicated in this
letter that this was for New Year's presents. It was not until later
that we got an indication that there was an actual cash transaction.
I might at that point just bring out this : That the question as to
the responsibility of approving of that action put me in a very awk-
ward spot. This Shanghai office was the office of the dyestuff depart-
ment, an entirely different department. When I later learned that
this was a proposition which I felt violated the resolution of the exec-
utive committee as of 1922, I said to myself, "Well, now, it may be
that an exception is being made in the case of China." Yet that did
not relieve me of the responsibility for reporting it. But I felt that
I would be presumptuous to be reporting an incident relating to the
action of some other department. But there was this phase, perhaixs,
that likewise helped govern : That I knew if I ever did bring it to the
attention of the executive committee they would say, " No more ; that
is contrary to our policy." Therefore, I was anxious to make the
sale, and figuring, as I said before, that it was an old Chinese custom
and the fact it was another department, I did not mention it. But I
am really responsible for at least particij^ating in the violation of a
company policy, because I knew the executive committee would have
said flat-footeclly, " No more business on that line."
2502 MUNITIONS INDUSTRY
Senator Pope. Did you take it up with any other department?
Mr. Casey. No.
Mr. Eaushenbush. When the executive committee found out about
this, was there another resolution on the Chinese business ?
Mr. Casey. When the executive committee found out about this,
we were doing no business with China, on account of the exchange.
Mr. Raushenbush. But you sold $800,000 worth, according to Mr.
Bradway, in the last 2 years.
Mr. Bradway. I didn't say that.
Mr. Raushenbush. I will correct that. Since the embargo.
Mr. Bradway. In 1931, 1 think, was our last sale to China.
Mr. Raushenbush. How much has it been since 1929 ?
Mr. Bradway. About $800,000.
Mr. Raushenbush. That is what I was saying.
Mr. Bradway. Yes ; but we haven't sold anything to them for 21/2
years.
Mr. Raushenbush. But since 1929 it has been $800,000 worth of
business.
Mr. Bradway. Yes.
Mr. Raushenbush. You did not answer my question. Major.
After the company found about this China business was there another
executive committee resolution on the question of not paying such
commissions ?
Mr. Casey. I do not believe the executive committee ever learned
of it until this year.
Mr. Raushenbush. When they learned of it this year was there
another resolution passed?
Mr. Casey. I don't think it was necessary, but it was an error on
my part. Whether it was a justified error or not is beside the point.
I am the fellow who made the bull.
The Chairman. Mr. Felix du Pont, in 1930 did you win a contract
for the sale of 30 tons of TNT in China?
Mr. A. Felix du Pont, I do not know. Do you know, Major?
Mr. Casey. I have not got the materials here.
The Chairman. Mr. Casey?
Mr. Casey. I don't know.
Mr. A. Felix du Pont. I have not got the detail.
The Chairman. Do you have any knowledge of that, Mr. Brad-
way?
Mr. Bradway. No; I do not have the details. The $800,000 re-
ferred to included TNT, I might add.
Mr. Raushenbush, Yes.
Mr, Bradway. It was not all smokeless powder.
The Chairman. On various occasions, several occasions, at least,
in cases of contracts with China for military material, these contracts
had to be put through with the assistance of graft or bribes, or what-
ever you are going to call it here.
Mr. Casey. So we were assured.
methods of doing business ARGENTINA
The Chairman. Mr, Felix du Pont, was the Argentine Govern-
ment a pretty good customer of the du Ponts for powder?
Mr. A. Felix du Poxt. 1 would not call it a pretty good customer.
MUNITIONS INDUSTRY 2503
The Chairman. As foreign sales go, were they considered a good
customer ?
Mr. A. Felix du Pont. No. Covered over the years, taking the
average per year, it was small. We would not consider the Argen-
tine a good customer.
The Chairman. Have you considered it a good prospect?
Mr. A. Felix du Pont. No. We did at the time some years ago,
but we were disappointed, I think.
The Chairman. Do you recall who, in 1920 and 1921, was your
representative selling powder in the Argentine?
Mr. A. Felix du Pont. When?
The Chairman. 1920 and 1921.
Mr. A. Felix du Pont. No.
The Chairman. Would mention of the name Adolph Lissner mean
anything ?
Mr. A. Felix du Pont. Yes.
The Chairman. He was your representative there?
Mr. A. Felix du Pont. Yes.
Mr. Casey. He was our salesman.
The Chairman. He was your salesman ?
Mr. A. Felix du Pont. Yes; he was our salesman. He was work-
ing under a salesman.
The Chairman. No commission?
Mr. A. Felix du Pont. No commission.
The Chairman^ Outright salary?
Mr. A. P^ELix du Pont. Yes.
The Chairman. He was a regular employee, then, of your mili-
tary-service division ?
Mr. A. Felix du Pont. Yes.
The Chairman. Who picked Mr. Lissner?
Mr. A. Felix du Pont. Colonel Buckner, during the war.
The Chairman. Who was Colonel Buckner.
Mr. A. Felix du Pont. Colonel Buckner was the director of mili-
tary sales during the war. I think he had Mr. Lissner before the
war began — before the European war began.
Mr. Casey. As an interpreter.
Mr. A. Felix du Pont. Yes ; he had him as an interpreter.
The Chairman. Are you familiar with his methods?
Mr. A. Felix du Pont. No ; I don't think anybody is.
The Chairman. He is no longer in your employ?
Mr. A. Felix du Pont. No; he died. But he was discharged
from the du Pont Co. before that.
The Chairman. When did that discharge come?
Mr. A. Felix du Pont. I do not remember the exact year. It was
about 1921, 1920, or 1921, 1 believe.
The Chairman. Did it arise out of complaints that were made
concerning his methods in the Argentine ?
Mr. A. Felix du Pont. Yes.
The Chairman. I have before me a letter written by Mr. O'Gor-
man concerning a trip he had made to Washington, which is offered
as " Exhibit No. 957."
(The letter referred to was marked " Exhibit No. 957 "" and is
included in the appendix on p. 2601.)
83876— SS— FT 11 8
2504 MUNITIONS INDUSTRY
The Chairman. On this memorandum we find Mr. O'Gorman
notes [reading] :
Called at the Department of Commerce regarding their letter of December 9
concerning our negotiations in Argentine. Saw I\Ir. P. S. Smith and Mr. J. P.
Bushnell. Mr. Bushuell is a former employee of the du Pont Export Co., who
was a traveling salesman in IMexico and South America for the Export Co.,
Mr. Bushuell stated that he knew Mr. Lissner and therefore was interested
in doing all he could for us.
Wlien did Mr. Bushnell cease his connection with the du Pont Co. ?
Mr. A. Felix du Pont. I do not know.
Mr. Casey. I have not the slightest idea.
Mr. A. Felix du Pont. It is a very long time ago.
The Chairman. Do you know whether he is still in the Commerce
Department?
Mr. A. Felix du Pont. I do not know.
The Chairman. This memorandum, of course, is dated December
17, 1921.
Mr. A. Felix du Pont. Yes.
The Chairman. You have no knowledge of Mr. Bushnell's pres-
ent connections, have you.
Mr. A. Felix du Pont. No.
The Chairman. Pie declares in his memorandum concerning being
told of the methods which Lissner was employing down there in the
Argentine, and then he reports as best he can from his memory, after
reading a confidential and personal letter which was in the files of
the Commerce Department. The letter in particular seems to have
been dated October 27, 1921. Then reporting from his memory he
says of this correspondence [reading] :
The du Pont Co. has in Buenos Aires a German Jew named A. Lissner, who
is negotiating with the Argentine Government for the sale of a quantity of
powder which the du Pout Co. has on hand, due to the cancelation of a con-
tract with the Italian Government. In a conversation with the Chief of Ord-
nance he told me confidentially that Lissner was endeavoring to bribe Argentine
officials by indiscriminately distributing funds through a middleman. The Chief
of Ordnance, together with other Argentine officials, strongly resents Lissner's
business methods, contending that Lissner came to Argentina with the idea that
the Government officials were corrupt and that he could only obtain a contract
by paying bribes.
Was it this general complaint that led to Mr. Lissner's discharge?
Mr. A. Felix du Pont. We had the general complaint, and we were
forced to the conclusion that Lissner was not acting — or his methods
were not — according to du Pont Co.'s methods, and it seemed to
show up most particularly in his traveling-expense accounts.
Senator Clark. How long did Lissner work for you, Mr. du Pont?
Mr. A. Felix du Pont. He started in, I think, somewhere around
1907. or 1908, and he was an interpreter, used to go around with mis-
sions, government missions from the various countries, when they
could not speak English. He R])oke a number of languages. He had
a way of ingratiating himself with those people, who made us have
an idea that he was quite valuable as an interpreter.
The Chairman. I read further from Mr. O'Gorman's memoran-
dum, the bottom paragraph on ]iage 2 :
Both Mr. Smith and Mr. Bushnell felt that a great deal of the above report
could be discounted, stating that Mr. White was a very high type of man.
conscientious and painstiiking. The nioial conclusion which Mi-. White
MUNITIONS INDUSTEY 2505
attempted to draw attention to in his report, of course, is a high thought,
but Mr. Smith stated that he spent 8 months last year in Buenos Aires and
knew for a fact that the officials were corrupt and endeavored to obtain graft
whenever possible. He ventured to sa.v that it was quite possible that the
Chief of Ordnance was incensed becaiise Lissner had not conducted the business
directly through him and, further, that it miglit be likely that he objected to
Lissner's methods because he was not getting part of the graft.
That is a general charge as relates to the situation in the Argentine,
is it not?
Mr. A. Felix du Pont. It is very general; yes, sir.
Mr. Raushenbush. Mr. Chairman, may I point out that the ad-
ministration referred to in this letter back in 1921 is not the admin-
istration in power in the Argentine in these days, and the reflection
on the officials at that time would certainly not apply to the officials
iodny.
Mr. Lammot du Pont. Mr. Chairman, I should also point out that
this was not a matter that was covered by our own observations.
This report is not a du Pont Co, report.
The Chairman. No ; that is correct.
Mr. A. Felix du Pont. I should like to point ont, too, Mr. Sena-
tor, that in this case, the case of Lissner, he Avas not successful in
negotiating the sale of a pound of powder in the Argentine.
The Chairman. This being called to your attention is through the
avenues of the Commerce Department of the United States Govern-
ment. Mr. Smith, one of the spokesmen of the Commerce Depart-
ment, Mr. O'Gorman reports, stated that —
as far as the Department of Commerce was concerned, they merely felt it was
their duty to report to us the fact that our representative had not been discreet
in conducting negotiations. He stated that they knov,- perfectly well that the
du Pont Co. would not permit a representative to negotiate along the lines
described by the Charge d'Affaires, and whether his report be true or not, it
was Mr. Smith's belief that Mr. Lissner must have been very indiscreet.
You had knowledge of this from other sources as well, did you
not?
Mr. Casey. I think there was one other source of information that
Mr. O'Gorman developed along the same general line.
The Chairman. Mr. O'Gorman, it aj^pears, had a friend who had
connections in the Argentine.
Mr. Casey. There was something of that sort.
The Chairman. He was visiting back here and went and called on
Mr. O'Gorman and reported to him in a way that caused Mr. O'Gor-
man to prepare a memorandum for Mr. A. Felix du Pont, which is
introduced as " Exhibit No. 9o8."
(The memorandum referred to Mas marked " Exhibit No. 958 "
and is included in the appendix on p. 2602.)
The Chairman. I read only two paragraphs from that letter, the
tiiird paragraph first :
During Mr. Lissnors fit'st trip to Avgontino in lit20, Mv. Valentine —
He was the one who was bringing this report on his Ansit, from the
Argentine —
became acquainted with ]\Ir. Lissner by meeting him at tlie American Club.
Mr. Lissner openly announced that he was down there to sell Argentine a quan-
tity of Italian powder Avliieh he pevs»nally repurciint^ed from t'lo Italian Gov-
ernment at 1 cent a pound and which we intended to resell to the Argentine
Government at a price of 70 cents per pound. This fact was made public by
2506 MUNITIONS INDUSTRY
people who heard it and naturally, before very long the officials of the Gov-
ernment knew the exact cost of this repui'chased powder and fought shy of
buying it. In Mr. Valentine's opinion this is the real reason why the Argen-
tine Goverenment did not contract with us for a quantity of Italian purchased
powder.
What was your outlay on this Italian powder, Mr. du Pont?
Mr. A. Felix du Pont. I do not remember what the outlay was.
Mr. Casey. At the close of the war there still remained at Carneys
Point a quantity of powder which belonged to the Italian Govern-
ment.
Senator Clakk. That powder had been manufactured for the
Italian Govermnent during the war?
Mr. Casey. Yes. And they came to this conclusion : If you gen-
tlemen will remember, immediately after the war, food was the all-
important thing to send abroad. They stopped all shipments of
munitions and used all of the tonnage for food. Now, here was this
quantity of powder. The Italians figured that it might be several
years before they would be allowed to ship that poAvder. They said
if we would take it off of their hands, at any price, where it was, they
would be very glad to let go of it.
Now, the interesting point about that powder was that it was a
powder of an unusual character in this respect : All powder made
for the Italian Government had to be made to a constant weight
of charge, the reason for that being apparently that their loading
machines were of such a type that they could not adjust them to fit
the change in weight of charge which might occur in normal prac-
tice. You can understand that, I believe, Senator.
Senator Clark. Yes.
Mr. Casey. So we had a blend — a cross blend. It happened to be
that this particular powder was ideally suited to the Argentine — the
rifle powder I am speaking of now — was ideally suited to the Argen-
tine 7.65 Mauser rifle. In 1918, Avhile we were still in the war, a
Colonel Reyborn, attached to the Italian Embassy, came in to see
Colonel Buckner one hot afternoon, I think, in August or September,
about purchasing from us, when the war was over, a plant at a very
cheap price, and he then explained to us what Argentine needed.
Colonel Buckner's answer was :
Well, when the war is over is time to talk. At the present time we only
think of one thing, and that is helping the United States to win the war.
Wlien the armistice occurred and things were clearing up there was
a certain amount of contact between ourselves and the Argentine
naval mission in this countr3\
I might say, to disgress for a moment, that the Argentine plant
proposition started in 1918 and has never been closed since. I mean
there has never anything happened since.
At any rate, in this connection, here we had this powder and we
thought that if the situation was as described by Colonel Reyborn,
with the further realization that Argentine had bought practically
all of its powder for the Army, at Teast, from Germany, and Ger-
many as a source of supply was cut off, there was a possibility that
this proposition might justify to our going to a considerable expense
in traveling funds to try to sell Argentine some of this powder.
The possibility was before we got through witli the sale of that
MUNITIONS INDUSTRY 2507
powder, where it cost us a cent a pound at the time we made the
purchase, you add all of the traveling expenses of a trip to South
America and stayino; there for a month and coming back again and,
as it was, trip after trip, I think if today we had any of that powder
left and sold it, it would be sold at a loss.
But this letter, I think, or this report, indicates pretty well that if
a man down there, not realizing that the powder he sold to the
Argentine Government would probably in the end at that time have
made us a very small profit, when he starts in blurting out things
of this sort, it was self-evident at the time that he was not the type
of man to represent any company.
Senator Clark. Naturally, if he shot off his moutli to that effect
it would not help the sale very much.
Mr. Casey. I might give you a reason as to why Lissner was
picked. As we stated before, Colonel Buckner took him in as an
interpreter, because he knew suiiicient Spanish, and perhaps a smat-
tering of Portuguese — I do not know — but at least he was able to
converse with the different foreign representatives who came over
with these missions during the war. After the war he was promptly
transferred to the export company, which was started for com-
mercial sales and in which military did not form a part, because
they felt he might be of value to them in the export company. But
when this purchase of powder was made from the Italians, the sug-
gestion was made, Avho would be any better fitted, in view of his
dealings with different foreign missions, than Lissner to effect the
sale, so that we started Lissner down there. After about a year or
probably less, he came back with what was termed an ad referendum
contract. The contract meant that here was a contract signed but
of no value until it had been approved by the Argentine Congress.
There was a further clause in there that we had to sign the contract,
and in signing the contract we were then agreeing to the specifica-
tions code. In other words, we were to agree to the words in those
specifications. We could not get a copy of the specifications, so
that they wanted us to agree on this proposition. Now, the fact
rernaineci that the contract was not really Avorth the paper it was
written on, unless ratified by the Argentine Congress, so that as a
result of that it was felt that he came back too soon, and that if he
really had a contract, before he brought the contract to us he then
had to have the book of conditions, which we could then go through
and see if we were prepared to meet them, and, lastly, the thing
should have been ratified by the Argentine Congress. So that he
was home for a short time and was sent back, I think, probably the
middle of 1921, when he was sent back, and then it was after" that
time that we began to get these different reports which indicated
there was something wrong.
We sensed it, but were not sure. I mean, we felt that there must
be something. When he came back, ]\Ir. Felix du Pont — in the
meantime the company having gone through a reorganization from
the functional system to the subjective system, where the different
departments were then set up — and one of the first things Mr. Felix
du Pont said to me, as soon as he took charge of both sales and
operations, was, " Casey, I think the best thing we can do is to get
rid of Lissner." That was even before we had these reports.
2508 MUNITIONS INDUSTRY
He said, " There is something I do not like." When we got the
reports, the reason was obvious, and when he came back he was
dismissed.
Mr. A. Felix du Pont. I might say that this was the only sales
mission Lissner was ever put on, and the reasons speak for them-
selves.
The Chairman. To use ordinary language, he Avas " just too
raw ", was he not 'i
Mr. A. Felix du Pont. Yes.
Mr. Casey. I might add that we sent a man down there who was
no salesman for the sole purpose of trying to correct the bad im-
pression which we felt must have been left behind.
The Chairman. Mr. O'Gorman made a note in his memorandum
to the effect that Lissner resorted to open bribery methods to such
an extent that the officials of the Government were afraid to deal
with him and considered him irresponsible. In the sale of this
powder in the post-war days there was a great deal of pressure, was
there not, to accomplish sales of left-over supplies?
Mr. Casey. No. This was our first attempt, and that was fol-
lowed by another one with Poland.
The Chairman, We have already dealt with that one, have "\ve
not?
Mr. Casey. That was newly made powder, but I am talking about
an earlier sale which started in this countr3\ The negotiations
stretched over 3 or 4 years, but that was a case where they knew
they were buying a different type of powder. As I say, this Italian
stuff was used for an entirely different purpose than that for Poland.
The stuff which Ave had from the Italians would not have fitted
the Polish guns.
The Chairman. What constitutes your fields for foreign opera-
tions ?
Mr. Casey. At the present time ?
The Chairman. Since the war, let us say.
Mr. Casey. At one time we thought we had a pretty good field.
I think, as stated in the memorandum which I Avrote to Mr. Felix
du Pont, Avhich we offered the other day, that we felt, with the
reputation du Pont powder had made during the war, we had a
wonderful opportunity, especially due to the fact that Germany,
who supplied all continental Europe with the possible exception
of France, was not then a potential seller, and at this time we found
that our original idea of a Avonderful market Avas all Avrong.
The Chairman. Now your foreign market, strictly speaking, is
confined to the Balkans, the Far East, and South America, is it not?
Mr. Casey. We never had a market in the Balkans.
The Chairman. You have sold some little orders there, have you
not?
Mr. Casey. A little in Greece. We had sold Greece before that.
We sold Greece a small quantity in 1915, I think.
The Chairman. Outside of these three classifications, do you have
any foreign market at all?
Mr. Casey. The European market at the present time, I would
say, is practically limited, so far as we are concerned, anyway.
Mr. Raushenbusii. Colonel Taylor keeps reporting on everj^ sin-
gle country in Europe.
MUNITIONS INDUSTRY 2509
Mr. Casey. He is supposed to.
Mr. Raushenbush. And he sells for I.C.I, as well as 3- ou ?
Mr. Casey. Yes. He tries to sell, you mean.
I might say the section around the North Sea really has been the
only chance of doing much business; that is, Poland, Latvia, Fin-
land, and those countries.
The Chairman. Now, as respects the Balkans, the Far East, and
South America, in all of them there seems to be an anticipation
that bribery, graft, of some kind and size is necessary.
Mr. Casey. Senator, we have heard that such things are necessary
in all business in South America, but that is a rumor, but we have
never had the slightest indication, so far as Poland, Latvia, Finland,
and those countries are concerned, that any bribery is even con-
sidered.
Of course, there is this thing about those countries, that is prob-
ably why they offered us the best market : They were new countries,
set up, and with nothing to start from.
The Chairman. In any event, confining it to those three classifi-
cations, you do have a situation there that at least is very different
from the one which you deal with, or which any business firm deals
with, in dealing here at home?
Mr. Casey. The question is reallj^ one of national viewpoint.
The Chairman. That is it.
Mr. Casey. You could take this situation in France: Owing to
certain laws that were put into effect in the seventies, I believe, an
employee of a company cannot be discharged except on 6 years'
notice, and during the 6 years he had to be paid his salary, the result
being that wherever they can they give their people nominal salaries
and then in addition to that other compensation. Now, in the case
of their purchasing agents — I am talking now of commercial busi-
ness — now, in the case of their purchasing agents, we know of one
case of a man representing a very large concern, who gets about 1,000
francs a month, or did at the period I am talking about, or approxi-
mately $40 a month. If you can imagine a high-class purchasing
agent working for $40 a month, he must get some money some other
place. Here is the way he gets it : A sale was made to this concern
and, after the sale was finished, he said, "Where is my 4 percent? "
So that our representative promptly went to the head of the firm
and reported the incident.
He said, "That is all right; that is what he gets, 4 percent."
Then it was explained to him why he got it, and the simplification
of the principle was this : that in case his services were discontinued,
why, they had to pay him this 1,000 francs a month, or $40, for that
6 years, and that when times were good and purchases increased,
his compensation automatically increased with it. When their pur-
chases were cut off, because times were getting bad, the thing took
care of itself.
There was another case — this time, I might say, not knowing this,
we lost the 4 percent, because it was not provided for in the price —
in another case, shortly after that, our representative thought, " Here,
when I make the price, I better allow for 5 percent ", so that he made
an allowance of 5 percent to take care of the purchasing represen-
tative of the company being sold to. When the transaction was
2510 MUNITIONS INDUSTRY
completed, he went to this man and said, " Here is your 5 percent."
He said, " No, I only get 3i/^ percent. That is the arrangement I
have with my employers."
He said, " We have set aside 5 percent on the price."
" Return the balance to the company. I get 3i^ percent. That
is my arrangement."
You cannot call that graft. That is a business arrangement and
their method of doing it.
The Chairman. What would you call it here?
Mr. Casey. We pay our purchasing agents.
The Chairman. But what would we call it here, if they did the
same thing?
Mr. Casey. If we had a law to meet of the same sort, the chances
are we would do the same thing.
The Chairman. You mean to say that is permissible under the
law over there?
Mr. Casey. Yes.
Mr. Lammot du Pont. Senator, your statement that our repre-
sentatives find this graft situation to exist in Europe, the Far East,
and South America is not correct.
The Chairman. I said the Balkans, the Far East, and South
America.
Mr. Lammot du Pont. We did not find it to exist there. It was
reported to us that it existed, but there was some question as to the
validity of the reports. As Major Casey has testified, in the Far
East he made a blunder in certain cases, and he referred to that as
a blunder. I am not sure that is the word he used, but that is what
he intimated. Such a thing was not found elsewhere.
Mr. Casey. Senator, we promptly, without waiting for the action
of the executive committee, instructed Taylor with regard to the
Balkan situation, that we will have to try to do business in our
regular way, on a cash basis. We would not attempt to set up any
machinery for credit or payment of graft of any sort, the result
being, with the exception of Greece, which has been done on a regu-
lar basis through our agent there, whose name is Sapyras, we have
not done any business. We have had one or two nibbles in Turkey,
but have generally lost out in the adjudication.
The Chairman. Where you found these practices to exist, it is
nevertheless true that even a concern who tries to be as high-class
and high-type as yours does was in a position where you would have
to follow along certain lines to get business, would you not?
Mr. A. Felix du Pont. No.
Mr. Lammot du Pont. That is incorrect.
Mr. Casey. The case of China is the one exception, and that, as
I said before, is my error for not reporting.
The Chairman. Is that business worth having?
Mr. Casey. The small amount of business which we have been
getting made me feel personally at the time that I should sacrifice
it, especially in view of the fact that I would be put in position of
reporting on or telling tales on another department. I was in an
awkward spot, which does not let me out, however.
The Chairman. In spite of the fact that these foreign sales are
undertaken on the ground that we have got to have them in order to
MUNITIONS INDUSTRY 2513
maintain a capacity here at home to take care of our own needs,
when and if we are drawn into war, then we have pretty nearly got
to conclude that these practices, and our subscribing to them, are in
the interest of our own national defense.
Mr. Lammot du Pont. That is not a fair inference at all.
The Chairman. Is it not a fair inference?
Mr, Lammot du Pont. No ; I think not.
The Chairman. Why is it not a fair inference ?
Mr. Lammot du Pont. The fact that foreign business is felt to be
necessary in order to support our proper national defense does not
mean that any improper methods shall be used in getting that busi-
ness, and we have never felt that it was necessary to use improper
methods to get business.
The Chairman. You would not say that that Chinese process was
a proper method, would you?
Mr. Lammot du Pont. That was a blunder, as Mr. Casey said.
Senator, your men have been spending weeks going through our
files, and they have not turned up a single case except this Chinese
one you mentioned.
Mr. Raushenbush. The Argentine powder factory.
Mr. Lammot du Pont. There was no commission paid there to any
representative of the Government.
The Chairman. In the Argentine powder factory matter ?
Mr. Lammot du Pont. The evidence did not show that.
The Chairman. The evidence showed that it came awfully close
to officials of the Argentine Government.
Mr. Lammot du Pont. I do not think there was anj'^ closeness indi-
cated.
The Chairman. Did it not reach the family, at least?
Mr. Lammot du Pont. That might have been. I do not know.
The Chairman. Reach the family of an official of the Govern-
ment?
Now, Senator Barbour, I am finished. Do you want to start now
or take a recess at this time and get a fresh start?
Senator Barbour. That is entirely up to you, Mr. Chairman. We
have been recessing, as a rule, around noon. I could not start very
well.
The Chairman. I would not want you to start and then have to
stop at an inappropriate place.
Senator Barbour. I suggest that we recess until 2 o'clock.
The Chairman. The committee, then, will stand in recess until
2 o'clock.
(Thereupon, at 12: 15 p.m., a recess was taken until 2 p.m. of the
same day.) \
Afternoon Session
methods of doing business MEXICO
(The hearing was resumed at 2 p.m.)
The Chairman. The committee will be in order.
Mr. Lammot du Pont. Mr. Chairman, before you start on a new
line of inquiry, may I say something about this morning's testimony?
I read into the record a resolution of our executive committee of
November 15, 1922. I thought at the time it was being entered as
2512 MUNITIONS INDUSTRY
an exhibit. I believe that was not so, and I would like to ask that
it be entered as an exhibit. This is a copy of it [handing document
to the chairman].
The Chairman. You read it in its entirety, did you not?
Mr. Lammot du Pont. Yes, sir. May I have it entered as an
exhibit also?
The Chairman. What is the purpose ? The reason I ask, Mr. du
Pont, is that it would only be repetition. You read it in its entirety.
Did you want it given a designation ?
Mr. Lammot du Pont. Yes.
The Chairman. As an exhibit?
Mr. Lammot du Pont. Yes.
The Chairman. Then the reporter can give it a number and let
it be noted in connection with the testimony this morning that it is
offered as " Exhibit No. 959."
(The resolution referred to was marked " Exhibit No. 959 ", and
appears in full in the text on p. 2485.)
The Chairman. Senator Barbour.
Senator Barbour. Mr. Monaghan, I will not attempt to make any
preliminary observations in relation to these exhibits which I have
been asked to study, because of what you have said at the beginning
of your remarks this morning. It covers the same story.
What I have in mind for the committee this afternoon refers back
to other companies here in the United States and other countries.
To make beginning at once, I have here a letter dated September 1,
1930, from Heedles & Breidsprecher, Remington agents in Mexico.
They speak of a large amount of contrabrand ammunition. I will
just read this one paragraph:
With reference to tlie metallic business we found a vex'y peculiar situation
in Guadalajara. The writer saw more contrabands in this section of the coun-
try than anywhere else, there is a fellow mth name of Godinez installed right
in the market place, he has no permit to seU nor has he permit to import and
yet he must have at least 100,000 metallics in stock. Most of it is Western
ammunition which he gets from Nogales as contrabands and the balance is from
Arms & Metal who sell this man metallics ■
" Metallics " are cartridges, by the way, are they not?
Mr. Monaghan. Yes.
Senator Barbour (continuing reading) : ,
at less than the cost laid down Guadalajara woiild be by regular importation.
Arms & Metal is doing this to compete mth prices quoted to this man by
Quintana and it will not take long until Quintana will make use of this con-
fidential discount and will try to underbid Arms & Metal, etc, Roberto A.
Gonzales of this city offered cal 25 auto, at Mex. .$70. a hundred to this man,
and laid down costs of this cartridge is $92.30 Mex. a hundred and you realize
that this also must be contrabands metallica.
I want to explain, Mr. Chairman, that this gentleman who writes
this letter is a Latin American, and his English or the translation
of it does not lend itself to very ready reading.
Mr. Monaghan, is this the general situation in the country? I
refer now to the existance of contrabands. Is that a unique case, or
is that a quite usual thing?
Mr. Monaghan. I do not know what the general situation is; I
imagine the way this man has described it.
MUNITIONS INDUSTRY 2513
Senator Barbour. You iinclerstand that I am very anxious to be
frank with you and have you and the other witnesses frank with
me. My position is this whole thing is to try to get as much informa-
tion as I can.
Mr. MoNAGHAN. Yes, sir.
Senator Barbour. I am not subjecting you or others to implica-
tions that you are not entitled to. The more help you can give us,
I think the better and quicker we will go. I mean, if it is a fact
that you know there is a great deal of contraband in existence ordina-
rily, I think that is very helpful, and it does not bring any criticism
on you at all, as I can see it.
Mr. MoNAGHAN. All I can answer for. Senator, is what these
people write. I have never been in Mexico myself to know what the
real true situation is there, and I do not recall finding this letter in
our file as having been pulled. It may have been, but I do not
remember reading it over before.
Senator Barbour. I guess there is no doubt of its being a proper
document in that respect?
Mr. MoNAGHAN. I believe so; yes.
Senator Barbour. Because that is the only way we could get it.
Now, Mr. Beebe, this letter mentions Western ammunition as being
handled in this bootleg fashion. The Western Cartridge Co. now
owns Winchester, as I understand it.
Mr. Beebe. That is right, sir.
Senator Barbour. I wonder if you have any knowledge of this
question? In other words, I asked the same question of you that I
just asked Mr. Monaghan.
Mr. Beebe. Let us see, this was in 1930, was it not ?
Senator Barbour. That is right, September 1, 1930.
Mr. Beebe. The Western Cartridge Co. bought the assets of the
Winchester Repeating Arms Co., I think, about December 1931.
So that this is a situation about Western which I would be unable to
answer. I should presume that any contraband that reached there
might be materials bought from anybody in the United vStates and
smuggled over, if there was such a case.
Senator Barbour. To go on, in order to secure import permits for
ammunition in Mexico, we understand that application must be made
to the war department there, to the general in charge. Is that so?
Mr. Monaghan. Yes, sir.
Senator Barbour. It says in this same letter, on page 4, last para-
graph, as follows :
The general in charge of the war department, artillery depai'tment, has,
however, not signed for the past 3 weelcs, and this in spite of the fact tiiat we
have contributed with $200 oro nacional to make the general's life more pleasant
and reform the new law on ammunition and arms, so with all contrabands, price
underbidding of Arms & Metal and Quintana, permit affairs, etc., you will
appreciate wliat joy it is to work for Remington Arms Co., Inc.
(The letter refered to was marked " Exhibit No. 960 ", and is in-
cluded in the appendix on page 2603.)
Mr. Monaghan. Senator, on those things, I really believe that you
know the situation of an agent working on commission, the letters
they will write you telling you the hardships they undergo in getting
business for you, the competition they meet, and how much money
they have to spend.
2514 MUNITIONS INDUSTRY
The Chairman. Would they be alibiing to that extent as much
if they Avere on commission as they would be if they were on a regu-
lar salary?
Mr. MoxAGHAN. It is hard to say just wliicli way it would be.
In either case they would be telling their home office of the amount
of work that they were doing and the difficulty of getting the business
for you.
Senator Barbour. Those methods are necessary?
Mr. Monaghan. They are human nature, that is all.
Senator Barbour. I mean, you do not sell unless those methods
are followed?
Mr. Monaghan. I did not mean that ; I mean in writing this type
of letter.
Senator Barbour. Oh, yes.
Now, Mr. Monaghan, right there in the last paragraph of this
letter, your agent asks for credit or cash for reimbursement of this
payment to these Mexican generals, as I understand it, because he
says:
I forgot to mentiou that $200 which we kept at the office ready for War De-
partment expenses were stolen tlie other day, so you better make the check
or U.S.G. $240.
Apparently he had this $240 handy here for the Mexican War De-
partment, and it disappeared, so he asks you for twice that amount.
What about that? Can you throw any light on it?
Mr. Monaghan. I would like to say two things: First, now that
I have gotten down to this part of the letter, I do remember seeing
a copy of this, and know that we had a copy that was taken from our
files. This point brings it to mind, because we got a laugh out of
reading it again.
I have looked into it, and there was not a cent paid to Heedles &
Breidsprecher on the strength of this letter. I think the letter itself
indicates the spirit in which it was written.
Senator Barbour. He certainly was in an optimistic spirit.
Mr. Monaghan, Well, he did not get it.
Senator Barbour. No such payment was made?
Mr. Monaghan. No, sir; not a cent.
Senator Barbour. By yourselves, in answer to this call?
Mr. Monaghan. Not a cent.
Senator Barbour. You are quite sure of it?
Mr. Monaghan. Absolutely.
The Chairman. Mr. Davis, I believe you were sworn the other
day.
Mr. Davis. Yes.
The Chairman. There are two other gentlemen whom I think
have not been sworn, who may be participating in the examination,
that will be sworn at this time.
TESTIMONY OF C. K. DAVIS, H. F. BEEBE (RECALLED), W. U.
REISINGER, AND E. E. HANDY
(Mr. Reisinger and Mr. Handy were duly sworn by the chairman.)
The Chairman. For the information of the committee, will you
please give your name?
MUNITIONS INDUSTRY 2515
Mr. Reisinger. W. U. Reisinoer.
The Chairman. And your connection?
Mr. Reisingeb. Secretary and treasurer, Remington Arms Co.
The Chairman. And yours?
Mr. Handy. E. E. Handy, vice president, Remington Arms Co.
Senator Barbour. On March 11, 1931, these same agents, the Mex-
ican agents in Mexico, informed the company that the person in the
War Department was apparently demanding more money.
(The letter referred to was marked "Exhibit No. 961" and is in-
cluded in the appendix on p. 2605.)
Senator Barbour. I will read, if I may, the latter part of the third
paragraph :
We had a friend over there at the department that represented quite an
investment for us —
I do not know whether that is a significant statement or not.
and he was supposed to stay on and the trouble maker go out at the end of last
month, and the result was that the trouble maker held on and he went out.
He was asking for 10 Mexican Cy.. per cartritlge and you can appreciate what
that means, for revolvers he asked for ,$2 each. I have been taking him out
and endeavoring to demonstrate w^here he was wrong and why and although
it has taken a while I may be able to get somewhere -aitli him' this week.
Is this a very general practice ? That is a very definite indication
to me of a fixed price that had to be contributed with relation not
only to shells, but also to revolvers, and that the man had to be
bribed, to put it bluntly, or you not sell your ffoods. Is that a fair
statement? I do not want to say anything that is not fair.
Mr. Monaghan. No, sir; I do not think so.
Senator Barbour. Can you throw some other light on it that will
make a distinction there that Avill be a difference ?
Mr. Monaghan. This letter goes back to March 11, 1931. We have
a rather loose, perhaps, contract or agreement with Heedles & Breid-
sprechor, entered into about 1927 or 1928, where they are to get 71/2
percent commission or 10 percent commission, rather leaving it to
our judgment or decision as to which they are to get. Many times
when I receive letters like this, or read them, I say, " Oh, oh, one of
those things again; that goes up to 10 percent, and here goes the
argument for the 10 percent."
Senator Barbour. I see.
Mr. Beebe, there is no further light that you could throw on the
situation in a general way?
Mr. Beebe. None whatever.
Senator Barbour. By the way, where I read only part of an ex-
hibit and the witness has the whole exhibit before him, if he feels
that something in addition should be read, it is only fair for him to
make the request. We have so many letters here and they are so
long that I have marked only certain passages myself. But that
does not mean that other things can not be read if it is felt fair to
read other things.
Mr. Monaghan. Senator, there is one other thought perhaps you
would like to have expressed here. That is. that all this business
that is spoken of in this letter and the former one. is commercial
ammunition, not military ammunition. We have not sold any mili-
tary ammunition in our company to Mexico or anywhere near Mexico
2516 MUNITIONS INDUSTRY
where we knew it was destined to Mexico by the facts that developed,
since 1929. In 1929, you recall, there was some trouble in Mexico
at the beginning of the year. At that time we had a few sales, one
in particular I have in mind, to the Governor of the State of Lower
California. That and every other instance at that time was called
to the attention of the United States Department of Stae. They
were advised of the details of it, of items, and the quantities, because
they were military items. We knew they were intended for military
use. The item and the quantity of the item very clearlv indicated
that.
As I say, since that time we have not had any military sales to
Mexico or near Mexico that I know of.
Mr. Davis. Senator, in this connection it might be of interest to you
know that more than 96 percent of our sales this year have been in
sporting arms and ammunition, and for the past 10 years we have
averaged only li^ percent sales to foreign and United States Govern-
ments. Of the lyo percent two-thirds, or 1 percent, was to the United
States Government. Sales amounted to one-half of 1 percent to
foreign governments.
Senator Barbour. When you speak of sporting arms and ammu-
nition, do you refer to shot guns?
Mr. Davis. Shot guns and rifles for hunting, .22 rifles and ammu-
nition therefor. I might say that we have a full line of our guns
down here, that we would like to show you any time you wish.
Senator Barbour. We will speak about that afterwards.
Senator Pope. What calibres do you regard as war guns? You
sa}'^ a .22 rifle would be regarded as a sporting arm. Would a .32
be regarded as sjDorting arms? What is your distinction there be-
tween war material and sporting arms?
Mr. Davis. The shot guns, of course, are 20 gauge, 16, and 12.
Senator Pope. Yes.
Mr. Davis. Then we have a .22 rifle. The range of a .22 rifle,
Senator, is about 250 to 300 yards. That is the effective range. The
effective range of a shot gun is about 100 yards, whereas military
rifles are about 1,200 yards. I think that Mr. Hadley would give
you a definition of the difference between sporting arms and military
arms if you would like to have it.
Senator Barbour. I have that fairly clearly in mind, Mr. Davis,
so far as I am concerned, although I do think that in Central Amer-
ica and South America, and at times in Mexico, there have been all
kinds of arms used other than for just sporting purposes. I do not
say that to refute what you say, but I do think that.
Mr. Davis. I have no direct knowledge of that.
The Chairman. You mean that in some cases shot guns would
be used?
Senator Barbour. Or any type of repeating rifle might be used.
By the way, that is a very good statement you have made. I am
glad you have made it. Would that also apply to the metallics?
Do your shells fall in the same category as your small arms?
Mr. Davis. Yes, sir.
Senator Barbour. So far as sporting and military uses are con-
cerned ?
Mr. Davis. Yes, sir.
MUNITIONS INDUSTRY 2517
Senator Barboltr. The next exhibit is a letter dated March 21,
1931, wherein the Remington agents in Mexico stated that the War
Department official made a slip in that he issued a permit for Win-
chester. I will read just a small part of that.
Gonzalez also secured a permit for 1(J0,<.X)0 but tins was a slip up on our
friend in the department, we both had an application in, that is Winchester
as well as ourselves, and he permitted both to be issued at the same time but
I think Gonzalez also will delay liis order. '
At that time, Gonzalez. I understand, Mr. Beebe. was vour ao-ent
was he not ? ' - ^ ^ j
Mr. Beebe. No. He was a dealer.
Senator Barbour. A dealer, a customer of yours ?
Mr. Beebe. A customer ; yes.
Senator Barbour. The last paragraph in the same letter is
interesting :
We are cont^ulted for most of the " acuordos ", that is, to whom permits can
be granted, delayed, canceled, refused, etc., and we hope it lasts for a while
longer, because in about 6 months' time nothing but Kleenbore would be
allowed.
Mr. Monaghan. Senator, is not that the best example of what I
said l3efore about these letters? Mr. Beebe could tell you that we
certainly never did get all the business down there.
Senator BARBOuit. Of course, the implication is, or could be— yet
I do not believe in just implications— that by these commissions' if
you want to stick to the word, you carj get the business, and without
them 3'ou cannot.
(The letter referred to was marked " Exhibit Xo. 962 " and is
included in the appendix on page 2606.) '
Senator Barbour. The next exhibit is a letter of March 16 also
from the Remington agency in Mexico. I will read some of' this
It IS the last part of the first paragraph :
The reason for this is that this company is getting a large quantity of
metallics over the border without paying duty, Mr. Silva has a combination
with a number of customhouse officials? Jn Ciudad Juarez
However in order to import large quantities of metallics which is the
intention ot Mr. Silva, he is going to send to our office several applications for
permits which will cover a greater quantity of metallics than specified later on
the permits, the permits simply cover up the whole affair and if he gets ir
trouble he can make reference to these permits. As soon as I get to Mexico
City I shall see that the War Department will grant those permit! and as s^ on
as we have secured same you can expect quite larger orders from this client
lou are undoubtedly aware of the fact that all of the arms and amniunition
which you ship to this client is for sale into Mexico, he does not do any
ciuTcfjutrb^iiilSi.^'^'^ '''''• '' '''' ^^- ""^^''^^ '^'^ ^-^-- thiLlr./iS
?i^® Chairman. Hoav long have you employed this firm '?
Mr. Monaghan. I think since 1927 or 1928.
The Chairman. Are you still employing them?
Mr. Monaghan. Yes, sir.
Senator Barbour. In other words, the shipment to the border
really ceases as far as the responsibility of the shipper is concerned,
and after that it is no concern of the shipper or manufacturer what
becomes of the cartridges?
Mr. Monaghan In some respects if we followed the shipments
through to completion we might be getting in trouble with the
J^ederal Trade Commission.
2518 MUNITIONS INDUSTRY
Senator Barbour. I am just trying to show— I am not trying to
name anybody— by this very method that you follow or have to fol-
low, a great deal of your product could become contraband through
no fault of your own. That is true, is it not?
Mr. Handy. Yes, sir.
Mr. MoNAGHAN. May I ask if you will read the last paragraph
on the first page?
Senator Barbour. Yes. [Reading:]
I believe we never received any conmiission on the sales which yon make to
this company althoug:h all of these sales cover goods for sale into IVIexico
and for that reason yon sell this acconnt at export prices and ship from yonr
export department and not domestic department and I would appreciate if
you would kindly look up this matter and see that the commission which will
be due to us will be taken care of.
Mr. MoNAGHAN. Following receipt of that letter we gave Heedles
& Breidsprecher a commission on the sales to the Mexican Hard-
ware Co. AYe never have yet heard any more about how the Mex-
ican Hardware is conducting their business. It indicated clearly
why he stopped to see Mr. Silva and why we had this report.
(The letter referred to was marked '' Exhibit No. 963 ", and is
included in the appendix on page 2607.)
Senator Barbour. It appears from a letter written to Remington
dated November 13, 1929. by Fernandez, that bribery of a little
higher order is customary in Guatemala.
(The letter referred to was marked "Exhibit No. 964", and is
included in the appendix on page 2607.)
The Chairman. I should like to ask before you leave t^he case of
this Mexican firm, you have said that this same firm is still in your
employ ?
Mr.'MoNAGiiAN. Heedles & Breidsprecher?
The Chairman. Yes.
Mr. MoNAGHAN. Yes, sir.
The Chairman. Are you encountering continued experiences in
what you call " padding " their expense accounts ?
Mr. MoNAGHAN. They have no expense account of any kind with
us. We ]3ay them a commission on the business. We have never
paid Heedles & Breidsprecher a cent in any way to tie in with the
statements that shoAv in some of these letters of the amount that
they paid out to a general or the amount that was stolen from their
safe, or anything like that.
The Chairman. Why do they Avrite these letters to you if they
laiow th("re isn't any chance of recovery?
Mr. MoNAGHAN. Perhaps they just keep on trying. They don't
get anything; that is sure.
Mr. 'D.\^^s. Senator. I would like to say that it is not the policy
of the Remington Arms Co. to obtain business by bribery or graft.
If we cannot obtain it any other way, we don't want it.
The CHAiR:srAN. And yet here are the letters coming to you report-
ing to you wliat your agents, your folks, down there are doing, and
yet you keep them as your agents.
Mr. Davis. I know* nothing about this. This happened before I
was connected with them.
Mr. MoNAGHAN. You see, that was prior to du Point acquiring
control of the Remington Arms Co., Senator.
MUNITIONS INDUSTRY 2519
Senator CiiARK. The same fellow is still representing you down
there, isn't he?
Mr. MoNAGHAN. Yes, he is, and I might tell you, too, that the
activities of the agent down there are in shotgun cartridges or .22
caliber cartridges, such as Mr. Davis described to you. They are
entirely sporting items. They could not be used for any other pur-
pose by the greatest stretch of the imagination. But they come un-
der the War Department regulations and you have to get permits.
I do not know it in detail, but I have had it reported to me that
the rules and regulations that surround the importation and sale
of those sporting items are similar to military supplies, and nat-
urally Heedles & Breidsprecher are working with them in an at-
tempt to differentiate between sporting items and any military items.
Senator Clark. The only reason they included sporting ammuni-
tion in the classification of the War Department is to simply throw
the burden on the shipper to show it is not military ammunition?
Mr. Monaghan. Yes; that is true, and yet in Mexico and in
other countries they place those restrictions on us. They do not
differentiate at any time. They keep those regulations on the .22's
and on shotgun cartridges. You would be astonished to see some
of the red tape we have to go through in making a shipment of
sporting ammunition to any of the Latin American countries.
The Chairman. Do you think this representation that was made
of someone having stolen the money that was on hand to do some-
thing with, that there was any occasion for such a report? Do you
think it was stolen ?
Mr. Monaghan. I don't know.
The Chairman. I very clearly gathered, and I think the other
members of the committee have, that you do not have a large trust
in this firm.
Mr. Monaghan. They are good agents.
The Chairman. They are good agents, but you get a letter from
them and you say, " Aha, another one of that kind of letters."
Mr. Monaghan. Perhaps they are business men. They are not
working on a salary. They are working on commission.
The Chairman. You distrust their representations?
Mr. Monaghan. No, sir.
The Chairman. You distrust them?
Mr. Monaghan. No.
Senator Barbour. You didn't send them their $480 in that case?
Mr. Monaghan. No, sir.
Senator Barbour. So either you cheated them or you did not feel
they were entitled to it.
Mr. Monaghan. I don't say we cheated them.
Senator Barbour. I say, you did either one or the other. If you
trusted them you would send them the $480.
Mr. Monaghan. I didn't feel they were entitled to it.
Senator Barbour. They should not have asked for it.
Mr. Monaghan. No.
The Chairman. You have large faith in this firm ?
Mr. Monaghan. Yes.
The Chairman. Large trust in them?
Mr. Monaghan. Yes.
83876—35 — pt 11 9
2520 MUNITIONS INDUSTBY
The, Chairman. Irrespective of the representations made in their
letters ?
Mr. MoNAGHAN. Surely ; as I say, they are business men, working
on commissions, and the more business they do the bigger their
return.
The Chairman. And however they may do the business, you get
it?
Mr. MoNAGHAN. I do not reach that same conclusion; I don't
believe, the way you do, Senator.
METHODS or DOING BUSINESS GUATEMALA
Senator Barbour. I may revert again, if I may, to the letter I
mentioned " Exhibit No. 964 ", dated November 13, by Fernandez,
which I think will speak for itself.
Senator Barbour. It refers to an order, and then he goes on to say :
This subsecretary held the signing of same and finally did not sign. He is
a very close friend of Salvador Koenigsberger, agent for Western and showed
Salvador Koenigsberger the contract for the paltry sum of $100 and at the
same time made a lot of noise, recommending that the order vs^as not legal
because it was not submitted to public bidding, and at the same time attached
to Van de Putte's contract, an offer from Western's agent, for the same quan-
tities but for the amount of $15,066, Van de Putte's contract being for $18,000,
The difference between your quotation and the amount appearing on the
contract was to be divided among the Minister of War, etc., and Juan Van de
Putte & Co. had already advanced to Gen. Juan Padilla the sum of $1,000
on account of this order and another $4,000 for another contract effected for
some leather kids and belts, for the national army. When this happened the
Minister of War sent for all the papers and documents, and was going to put
it through because they expected a clean-up in all departments, and naturally
the order remained in status quo, although we retained the right-of-way, the
Minister of War being morally obligated.
Is that the way in which a little grease, as referred to in this
letter, is handled, and business conducted in that way in that
country ?
I can read something else, on the second page of the same letter
[reading] :
He has been fighting like hell. He is a very close friend of General Padilla,
the Minister of War, and this Minister of War is indebted to Winchester,
because they give him a commission for ordering in all the permits Winchester
ammunition.
I suppose that means he has a commission for arranging the per-
mits for Winchester, as another way of putting it. As I say, the
wording is very difficult to read, with the continuity.
You will recall that when Freddy —
Who is Freddy ?
Mr. MoNAGHAN. Koenigsberger.
Senator Barbour (continuing reading) :
You will recall that when Freddy arrived in New York he Imd quite a nice
order for loaded shells and some cartridges. Both these orders were for
Winchester, but Freddy gave you the order for the cartridges and he bought
the loaded shells from Winchester, and when he arrived here the genei*al gave
him hell for doing so, and he finally admitted to Freddy tliat he was " morally "
interested in Winchester. The percentage of commission whicli they gave the
INIinister of War I have been unable to find out, but I believe that I will secure
this information before I leave.
MUNITIONS INDUSTRY 2521
Did you get that information from him in due course ? Did he find
that out, do you know ?
Mr. MoNAGHAN. I was reading ahead, taking the letter as a whole.
Senator. I did not
Senator Barbour. Well, after all, what we are really interested in
is to what extent General Padilla is morally interested, and why.
Mr. Beebe, can you give us any light on that, because it refers spe-
cifically to Winchester in that case.
Mr. Beebe. General Padilla was a friend of Elmslie Jonas, our
salesman, as I understand it.
The Chairman. Is that the Jonas who appeared before the com-
mittee in September?
Mr, Beebe, No.
Senator Barbour. Is it his brother?
Mr. Beebe. It is E. E. Jonas.
Senator Barbour. Is it his brother?
Mr. Beebe. It is his brother; yes.
Mr. Raushenbush. Is the Jonas who appeared before us a Rem-
ington salesman?
Mr. Beebe. That is correct.
Mr. Raushenbush. This Jonas is a Winchester salesman?
Mr. Beebe. Yes.
Senator Barbour. Well, you cannot throw any light on that, Mr„
Beebe?
Mr. Beebe. No.
Senator Barbour. It speaks very specifically of actual money that
went to Government officials and speaks of you in connection with it ;
that is, your company.
Mr. Beebe. Yes. I think on that the best thing would be for yoii
to ask Mr. Elmslie Jonas, who is here, to explain this. He was a
friend of General Padilla before he ever came here, and it had to do
with a purely commercial transaction, as I understand it.
The Chairman. Mr. Jonas, come forward and be sworn.
TESTIMONY OF EIMSLIE E. JONAS
(The witness was duly sworn by the chairman.)
The Chairman. Come forward a little further, Mr. Jonas.
Senator Barbour. Mr. Jonas, will you run your eyes through that
letter?
The Chairman. Just a minute. Mr. Jonas, give the committee
your full name.
Mr. Jonas. Elmslie E. Jonas.
The Chairman. Where is j'^our home, Mr. Jonas?
Mr. Jonas. New York.
The Chairman. You are a representative of what firm?
Mr. Jonas. The Winchester Repeating Arms Co. and the Western
Cartridge Co. at present.
The Chairman. How long have you been such ?
Mr. Jonas. Since 1920.
What was the question. Senator ?
The Chairman. He wants an explanation of that second and
third paragraph, as to just what the meaning of it is and what the
relationship involved there was.
2522 MUNITIONS INDUSTRY
Senator Barbour. To the end that we may find out, if we can, Mr.
Jonas, the moral obligation that General Padilla feels toward Win-
chester and how he got that state of mind.
Mr. Jonas. I was a friend of General Padilla before he was the
Minister of War, and when he became Minister of War he might
have favored me by making it easy to get permits for the importa-
tion of commercial ammunition. This particular case was a case
where he wrote to me that the firm of Koenigsberger wanted to buy
shotgun shells, and due to his so-called " friendship " he issued the
permit in favor of Winchester.
Senator Barbour Then in your case you get these permits simply
on the basis of friendship.
Mr. Jonas. Well he wrote to me at the time and suggested that I
make him a present. I didn't do it then.
Senator Clark. You didn't do it then ?
Mr. Jonas. No; but on one trip to Guatemala I did make him a
present.
Senator Clark. How long was that after he suggested it ?
Mr. Jonas. Oh, probably 6 months.
Senator Clark. What did you give him ?
Mr. Jonas. I gave him on one order $250.
Senator Barbour. On one order ?
Mr. Jonas. Yes.
Senator Clark. He was a petty-larceny grafter, wasn't he?
Mr. Jonas. Yes.
The Chairman. You say one order?
Mr. Jonas. Yes.
The Chairman. Then you gave him on other orders?
Mr. Jonas. I do not recall the amounts
The Chairman. Or presents on other orders ?
Mr. Jonas. But on practically all import permits on commercial
ammunition, for importations to private firms, not military.
The Chairman. How did you strike up a personal acquaintance
with him?
Mr. Jonas. For one thing, he was quite a hunter. I have been out
on hunts with him. Formerly he was in charge of railroads. He
was the Government supervisor of railroads and I knew him at that
time.
Senator Clark. Was it before or after you gave him the $250 that
he wrote this letter as to being under moral obligations to the Win-
chester Co. '2
Mr. Jonas. I think it was before. I would not be positive of that.
Senator Clark. You mean he wrote the letter before you gave him
the $250?
Mr. Jonas. Yes ; I believe it was.
Senator Clark. What was the moral obligation he was under to
Winchester ?
Mr. Jonas. I think the word was not intended. I don't under-
stand what he means by it.
Senator Clark. I don't either.
Senator Barbour. There is a great deal of the same sort of thing
here, Mr. Chairman. I think we can go on. These instances of
themselves, I am frank to admit, are not great, as I view it in one
MUNITIONS INDUSTEY 2523
sense, but taking it altogether they show a situation which I think
warrants the time of our completing the picture.
The Chairman. Yes.
Mr. Jonas. I think, Senator, that is about the only instance in my
experience where that actually has happened. It is one of the very,
very few times. It is the only case that happened at that particular
time with that particular party. I do not think it is general at all
in our dealings with our agents or our customers.
Mr. Beebe. May I make a further statement in regard to this?
I would like to call attention to two things : First, that was made
during the time of the existence of the old company, not the present
company.
Senator Barbour. Yes.
Mr. Beebe. Furthermore, to clear up positively that that was to
secure or in return for favoring Winchester in the way of a permit,
but not on any Government business ; it was purely commercial busi-
ness; shot, shells, and so forth.
Senator Clark. It was a payment to a public official for perform-
ing a public duty, was it not?
Mr. Beebe. No. It was for switching the business from another
concern to Winchester.
Senator Clark. It was part of his business to issue the permits,
was it not ?
Mr. Beebe. Yes; to issue permits.
Senator Clark. And he did receive a present or a bribe, as you
please to call it, for performing a public duty.
Senator Barbour. This was the Minister of War that was involved
in this. It was not commercial.
Mr. Beebe. No. I would like to amplify that, if you please, once
more, to clear up this point that Senator Clark brings up. This is an
order for commercial goods. It is a fact that the Minister of War
had to issue a permit for the importation of commercial ammunition.
What the Minister of War told Mr. Jonas was that what he did was to
induce this man to change his order to Winchester and then he would
issue the permit, and after he had done that wrote and told him what
a good job he had done for him, and suggested it was worthj^ of some
recognition. It was not done beforehand for switching the order,
but for his good idea in changing the order to Winchester.
Senator Clark. In other words, Mr. Jonas became an accessory
after the fact instead of an accessory before the fact.
Mr. Beebe. If you look at it that way, although he had no prom-
ise, Senator, that he would get anything.
The Chairman. What did you consider this present that you made,
Mr. Jonas?
Mr. Jonas. As a percentage.
The Chairman. As a bribe at the time ?
Mr. Jonas. No; I thought we would sell the ammunition at the
regular export prices. He asked for it, and if I did not give him a
present I did not expect that we would get permits in the future.
The Chairman. Did they expect presents pretty generally?
Mr. Jonas. This particular party did; not as a general thing
around the countries; no.
The Chairman. What record was made of the present you made
to him ?
2524 MUNITIONS INDUSTRY
Mr. Jonas. I suppose I charged it up, just as it was, in my ex-
penses as payment. I do not know just what happened. I did not
pay it out of my own pocket.
Senator Clark. Did you pay it in cash?
Mr. Jonas. Paid it in cash ; yes.
Senator Clark. Did you notify the company that you had made
this payment?
Mr. Jonas. I assume I did. I do not recall.
Mr. Beebe. I think it was in his expenses.
The Chairman. Mr, Beebe, you recall that it was reported?
Mr. Beebe. It was reported; yes.
Senator Clark. Do you recall what the company said, Mr. Jonas ?
Mr. Jonas. What is that?
Senator Clark. Do you remember what the company said when
you reported to them that you had given this man a bribe of $250 ?
Mr. Jonas. I would not call it a bribe. It was not a bribe at all.
It was a present I gave him.
Senator Clark. Given to a public official for performing a public
act.
Mr. Jonas. It happened to be he was a Government official. It had
nothing to do with the Government's business, however.
Senator Clark. It just happened to be he had the power to issue
these permits and he would not issue them unless you got the busi-
ness, and shortly after he made this transaction you gave him $250.
What happened when you reported to the company that you gave
him $250?
Mr. Jonas. I do not recall what happened.
Senator Clark. They didn't write to you and fire you for doing
what they did not approve of?
Mr. Jonas. I do not recall that at all.
Senator Pope. Did you say that you gave other parties money ?
Mr. Jonas. Probably small amounts.
Senator Pope. At this time?
Mr. Jonas. For other orders.
Senator Pope. For other orders?
Mr. Jonas. Yes.
Senator Pope. Did you report that to the company at the time ?
Mr. Jonas. I presume I did.
Senator Clark. Are you still working for the company ?
Mr. Jonas. Yes, sir.
The Chairman. Mr. Jonas, I think you said this was the only case
of the kind during your experience.
Mr. Jonas. Paying for permits ; yes, I think so.
The Chairman. Are you ready to swear that it was the only case ?
Mr. Jonas. If I remember rightly; yes. If anything else is called
to my attention, I will tell you.
Mr. Raushenbush. Your question was very specific on permits,
Mr. Chairman. The answer was on permits.
The Chairman. Yes, on permits. Now, as respects the present
Government, is that the only official you ever made a present to ?
Mr. Jonas. I think, yes.
The Chairman. You think yes? Don't you know? Can't you
remember the presents given to public officials?
MUNITIONS INDUSTRY 2525
Mr. Jonas. I might have given them a rifle or some very trivial
thing possibly, but "that doesn't amount to anything; nothing of any
value to speak of, a very picayune item, if it were.
The Chairman. This was the only monetary consideration?
Mr. Jonas. Yes, I am sure it was.
Senator Barbour. Keferring to Mr. Jonas, we have a letter of
his — no, that is the brother.
Senator Clark. Mr. Jonas, coming back to this $250, as a matter
of fact, you gave him the $250 for issuing the permits, didn't you ?
Mr. Jonas. So he would issue permits, yes.
Senator Clark. You said you were afraid he would not issue any
more permits if you did not give him a present for issuing the first
batch.
Mr. Jonas. That is right.
METHODS OF DOING BUSINESS NICARAGUA
Senator Barbour. I have a letter here from Frank Jonas, written
from Nicaragua, and dated June 27.
(The letter referred to was marked " Exhibit No. 965 " and is
included in the appendix on p. 2609.)
Senator Barbour. Is that Frank S. Jonas your brother ?
Mr. Jonas. He is; yes.
Senator Barbour. He is an employee of Remington?
Mr. Jonas. I believe so.
Mr. MoNAGHAN. Senator, before you pass up that other letter, it
is in the record — there is an opinion there quoted about a $3,000
advance necessary.
Senator Barbour. What letter is that?
Mr. MoNAGHAN. The one you just read, at the bottom of the
second page, about Van Putte.
Senator Barbour. Yes.
Mr. MoNAGHAN. It says [reading] :
To proceed with shipment order need $3,000 advance adding same to value
of order, etc.
We never advanced that money.
Senator Barbour. You never did?
Mr. MoNAGHAN. We never paid that money.
Senator Barbour. Let me make another start at this " Exhibit No.
965." This is June 27 [reading] :
General Somoza had dinner with me last night, and he told me that he in-
tended to equip the army with .45-caliber Colt automatic pistols as standard
equipment. Gurueeta, of course, when he is here is pushing the Star pistol,
so I suggest that you communicate with Mr. Nicols to write direct to General
Somoza oifering to sell him direct. I would .suggest that in his quotation he
should include a 10-percent commission for General Somoza.
Now, is this customary?
Mr. MoNAGHAN. No, sir; this is very unusual.
Senator Barbour. Just a coincidence?
Mr. MoNAGHAN. Absolutely not. There are two distinctions that
J make of business in Nicaragua. One is the sales for the use of the
army. The other is for sales to what they call the Guardia Nacional.
The Guardia Nacional imports all of the commercial aimnunition
and then sells it to the dealers there. It has nothing to do with
2526 MUNITIONS INDUSTRY
military items. This letter very plainly shows that the understand-
ing with General Somoza is that the commission shall apply on
orders for the Guardia Nacional, not on purchases of the Govern-
ment for their own use.
Senator Bakbour. But it does show that the general should get
the 10-percent commission.
Mr. MoNAGHAN. The second paragraph of that letter says [read-
ing] :
General Somoza has acceptetl this commission with the full knowledge of the
President and it is not considered as graft but is considered as an extra pay-
ment for the work he is doing here.
The Chairman. I suppose that as long as the President knows
about it, it is not graft.
Mr. MoNAGHAN. Have I made it clear, Senator?
Senator Barbour. Yes.
Mr. MoNAGHAN. That these cartridges for the Guardia Nacional
are commercial items, shotgun cartridges, .22's, revolver and pistol
ammunition.
The Chairman. Yes, I think you have.
Senator Barbour. This national force you refer to, are those the
ones the United States Marines trained ?
Mr. MoNAGHAN. Yes, sir.
Senator Barbour. While it has nothing to do with it directly, is
this General Somoza the one who is believed or supposed to have
executed Sandino?
Mr. MoNAGHAN. I don't know.
Senator Clark. What was the official function of the General, the
one that got the 10 percent? Does that appear?
Mr. MoNAGHAN. He was in charge of the Guardia Nacional.
Senator Barbour. That would be like our militia, I suppose.
Mr. MoNAGHAN. Partially, I suppose.
METHODS OF DOING BUSINESS — BAHAMA ISLANDS
Senator Barbour. In San Salvador the situation seems to be get-
ting a little more acute, and I would like to read from page 2 of this
letter of March 5 from Fernandez to the Remington Arms Co., a
little way down from the beginning.
(The letter referred to was marked " Exhibit No. 966 " and is in-
cluded in the appendix on p. 2610.)
Senator Barbour (reading) :
The Treasurer, air. Joaquin Rodezno, is a " son of a so-and-so ", to put it
mildly. I have been trying not to have another clash with him. He is a
very good friend of Saul Garcia, Winchester representative, and he has been
" greased " by Garcia, with the result that he is as mad as a " puppy " because
I secured the business and he is trying to place everything in my path just
to bother.
Garcia is the Winchester representative and Garcia has greased
this gentleman, the Treasurer; is that so? Do the Winchester people
know anything about that?
Mr. Beebe. No knowledge at all. He is our agent on a commission
basis.
Senator Barbour. The commi.ssion, of course, is the source from
which the grease flows, is it not?
MUNITIONS INDUSTRY 2527
Mr. Beebe. If any flowed, it probably did come from there. I
don't know where else it would come from.
Senator Pope. Did he put it in his expense account?
Mr. Beebe. He has no expense account. They are our local agents,
working on a commission.
Senator Clark. How much commission did you pay him?
Mr. Beebe. It depends on the price we got for the order or the
price at which he has been able to get the order. It has varied from
5 to 15 percent. If we got a line of goods on which the profits were
reasonable and he got the right price, we have at times given him 15
percent. At other times it has been as low as 5 percent.
The Chairman. Doesn't it amount to this, Mr. Beebe; that you
engage your representatives on a commission basis down there and
you tell them what you have got to have for your product, and any-
thing they sell it for above that is theirs ?
Mr. Beebe. To an extent, except we always have to have in mind
the competition of other people, and that more or less in most cases
prevents any abnormal price being received for the goods.
Senator Barbour. Here is just a short bit in the third paragraph
[reading] :
This is one party I do not have to " grease ", but there are plenty in some
other directions. For instance, Colonel Bara, Chief of the War Supply Depart-
ment, wants 2 percent ; there is the buyer of the Republic Provendor General, he
wants something, too ; and there is Mr. Armando Frenkel, who is working with
me on this business, and there is me, too.
That is interesting, because the term " grease " and the reference
to a commission figure are analogous.
Mr. MoNAGHAN. The next sentence there. Senator, I don't know
whether you are going to read it, but
Senator Barbour (reading) :
That is why the 7^2 percent is not an enormous percentage, as you seem to
think it is.
The 71/2 percent is to be used as grease ?
Mr. MoNAGHAN. You keep pinning them down, pinning them
down, trying to reduce the rate of commission they are to get, and
they are fighting trying to build up the rate of commission, and the
higher the rate of commission is, the worse you are going to be in
■competition with European concerns. Now, this is — well, this does
refer to the 7-millimeter cartridge.
Senator Barbour. Then a little further down — I want you to pick
out what I don't read. We will never get through if we read all of
this. [Reading] :
He is a Mason and General Martinez is a Mason too, and it seems that Gen-
eral Martinez when he was appointed last year Minister of War induced Mr.
Frenkel to get some connection in the arms and ammunition line.
There he says the Minister of War induced Mr. Frenkel to get some
connection in the arms and ammunition line.
Mr. MoNAGHAN. And I would like to say right there that Mr.
Fernandez I do not believe is a Mason, so his references there do not
have any bearing at all.
Senator Barbour. Now, I offer next a letter from San Salvador
to the Winchester Co., dated November 5, 1932. It is signed, I be-
lieve, by " Garcia ", but I don't know.
2528 MUNITIONS INDUSTRY
(The letter referred to was marked " Exhibit No. 967 " and is in-
cluded in the appendix on p. — .)
Senator Barbour. The part I have in mind to read is this :
As you will note, that order was reduced to 200,000 and placed at the price
of $14.70 c. i. f. This is the same price that was quoted by the three competi-
tors, from that country, and I was able to secure the order for you through
the very efficient cooperation of Col. Ernesto Bara, Chief of the Department
of War.
So that here is one case where th^ price was right; and the fact
that the gentleman in Salvador writes to the Winchester Repeating
Arms Co. that at the same price he was able to get the business, and
knew he was able to get the business because of the cooperation of
the Chief of the Department of War, and it follows, I believe, that
there is no comment necessary, unless you say it does not mean what
it says.
Mr. Beebe. No ; except this : That if he receives 20 cents a thou-
sand, it means he could not have paid very much graft on the 200,000
cartridges. That is about $40.00 commission for the transaction.
Senator Barbour. That is one of the cases where you whittled
it down as much as you could.
Mr. Beebe. We had to quote a low price on this business in com-
petition, and offered him only 20 cents a thousand ; and as a matter
of fact, it is certain that that is a very small commission.
Senator Barbour. I think it is.
Mr. Beebe. If he paid anything to anybody else, he would not
have made anything on the transaction.
Senator Barbour. He speaks of the cooperation he received from
the Chief of the Department of War.
Mr. Beebe. There might be coopertion, but I do not think there
is any indication there that he paid anytliing for it.
Senator Barbour. There is plenty of indication in the other let-
ters which build up to that, Mr. Beebe.
Mr. Beebe. There may be.
Senator Barbour. I do not want to go all over that again.
(The letter referred to was marked " Exhibit No. 967 ", and is
included in the appendix on p. 2611.)
Senator Barbour. The next letter is dated March 5, 1932, where
there is mention of more " grease ", as I recall it. I will offer that
for appropriate number.
(The letter referred to was marked " Exhibit No. 968 ", and is
included in the appendix on p. 2612.)
Senator Barbour. At the top of page 2 that letter states [read-
ing] :
On this order for 7-mm Mauser which I got the whole commission of 7^
percent is not for L. G. F.
Who is L. G. F. ?
Mr. MoNAGHAN. Luis G. Fernandez,
Senator Barbour [reading] :
As you probably know you have to " oil " or " grease " certain parties in
order to get it through. Otherwise you are out of luck.
Then, a little further down, the letter continues :
You will be surprised to note how things are here now as far as the compe-
tition is concerned. There are representatives from Czechoslovakia, Spain (two
of them), Belgium, France, and Germany, plus Winchester, and little me.
MUNITIONS INDUSTEY 2529'
In Other words, it links up very directly, in my mind, with the
necessity of having plenty of " grease " ready. [Reading :]
Representatives have sprung up from the ground. As soon as I tliink it
advisable to leave San Salvador I will fly to Honduras and go south passing
through Costa Rica and to my final destination, Panama. I have not great
hopes in Costa Rica as I believe that there is not much doing over there in the
way of securing any military-cartiidge business. I might be wrong at that.
Mr. MoNAGHAN, He was right.
Senator Barbour. He did not get any ?
Mr. MoNAGHAN. No, sir.
The Chairman. Were his activities confined to the military-cart-
ridge business?
Mr. MoNAGHAN. The other day you were not here when I ex-
plained that our principal activities in the export field are on com-
mercial ammunition and not on military, and that is very clearly
proved by the very small percentage of our business that is classi-
fied properly as " military." I believe 94 percent of our export busi-
ness over the last 10 years is commercial annnunition.
The Chairman. This letter would lead one to believe that this
agent was looking not for commercial business but was looking alone
for military cartridge business.
Mr. MoNAGHAN. These agents looking for commissions will ehase
these rainbows, and we do have our difficulties keeping them in the
profitable end of the business, which is the commercial end. They
believe one big sale on the military
The Chairman. Is the commercial end of the business as profit-
able to the salesman as the military end ?
Mr. Monaghan. It is more — if they would look at the profitable
sale — more profitable.
The Chairman. But they do not?
Mr. Monaghan, The trouble is they are chasing rainbows, and
that is the trouble, keeping them down to the regular routine of the
commercial sale.
The Chairman. Is it not proper to assume that they are finding
the military business more profitable than they do the commercial
business ?
Mr. Monaghan. No, sir ; I do not think so. You can check up the
military sales, all we made, such as with Fernandez, and find the
commercial end far more remunerative than the other. They do not
sit down and analyze it, but are intrigued by the military end of it
and think they are effecting a big sale, a big deal.
Senator Barbour. Mr. Monaghan, this business you referred to of
representatives from Czechoslovakia, Spain, et cetera, is not that an
unusual situation in such a small place?
What do you speak of in connection with such things? We are
wondering about the stimulation of sales, in other words.
Mr. Monaghan. No, sir; I do not think so. They would be
attracted bj^ the fact that there was a prospect of the countries buy-
ing. In our own experience we would send s<inu'one to the market or
direct our agents' attention to the business, through it having reached
us first that that nation was in the market and Avanted to buy, rather
than going around and trying to foist any ammunition on them.
Senator Barbour. I was wondering Avhether the whole adminis-
tration in a country under those circumstances could, not be cor-
rupted, to put it baldly. Is not that likely to occur?
2530 MUNITIONS INDIJSTEY
Mr. MoNAGHAN. I do not believe it is; not under our method of
doing business, at least.
Senator Barbour. No; I do not attribute it to you people here.
What I am trying to get at is, what is the situation there, and Avhat
is the business all about?
Mr. MoNAGHAN. Where you get as many people as this competing
for business in a small country, such as we have before us, you have
got to get the price down so low that there is not much in it for
anybody, and particularly I mean the man that gets the order
eventually.
Senator Barbour. Here is a letter which may throw some light on
this, and it may not. It is under date of April 25, 1932. to the
Remington Arms Co., also being from Fernandez. I will offer that
for appropriate number.
(The letter referred to was marked "Exhibit No. 969" and is
included in the appendix on p. 2613.)
Senator Barbour. The first paragraph of that letter reads as
follows :
I wish to confiim my letter to you dated the 16th instant. You will probably
have received the order for Rentas from Mr. Armando Frankel and probably
you will have received advices from the bank that the outstnnding draft has
been paid. As you perfectly know I sold that merchandise sometime last year,
at the old list prices. There was an average of 10 percent for Mr. Lemus at
that time, the Proveedor General del Gobierno. Since Mr. Lemus has been
kicked out we do not liave to pay him up.
In other words, as I gather this, when the order was placed, there
was 10 percent in it for Mr. Lemus, and at that time he was the
Proveedor General del Gobierno, but since that time he has got " the
air ", as far as the position of Proveedor General del Gobierno is
concerned, and he does not have to get the 10 percent. Is that right?
Mr. MoNAGHAN. The original letter, I very clearly recall looking
at the other day, and there was a notation in the right margin of it
alongside the paragraph, " Nothing doing "; and he did not get any-
thing because there was not any such understanding with anybody.
Senator Barbour. It w^as not because he was kicked out?
Mr. MoNAGHAN. No, sir; there was no understanding in any way
with anyone down there getting 10 percent overage, commission, or
anything else, on this order.
Senator Barbour. On page no. 2 there is reference to a man by
the name of Brooke [reading] :
very wealthy and influential. He always gets permits because he advances
money to public officials ; including the President himself.
That is rather a startling statement. I know that you are not
responsible for it, but did it surprise you when you got it, or did you
make any inquiry about it, or did you take it as a matter of course?
Mr. Monaghan. Ver}^ interesting reading. We never had any
relation witli this Mr. Brooke other than the report Avhich you have
read here, and never had anything more to do Avith him.
The Chairman. Do you believe that this agent know^s what he is
talking about?
Senator Barbour. He seems to have many names in mind.
The Chairman. I ask the question quite seriously : Do you think
that this agent loiows what he is talking about when he reports
what somebody else is doing?
MUNITIONS INDUSTRY 2531
Mr. MoNAGHAN. That is a pretty hard thing to do, to report on
what somebody else is doing and report on all the facts, Senator?
Do you not think so ?
Senator Barbour. He is your source of information for these
things ?
Mr. Monaghan. The source of information for the point indicated
in the letter. That is all.
Mr. WoHLTORTH. Mr. Monaghan, you know Mr. Fernandez pretty
well, do you not?
Mr. Monaghan. Yes, sir.
Mr. WoHLFORTH. You have pretty good trust in him, in the way
he handled these business matters ?
Mr. Monaghan. Mr. Fernandez is no longer with us, and has not
been with us for a year and and some months.
Senator Clark. How did he happen to quit ?
Mr. Monaghan. We decided to make a change in the method of
selling in the markets which he covered for us.
Senator Barbour. Would that change, in your opinion, interest the
committee ?
Mr. Monaghan. No, sir ; I think not.
Senator Barbour. To read on a bit in the letter [reading] :
I asked Mr. Ochoa the Minister of War in a very diplomatic way wlio was
the persona grata with him and the President for Government business and
he sent me over to Mr. Cornelio Zamora of the firm of Zamora, Henriquez &
Co. It seems that this firm is now doing all the Government business, and
they split with the officials the commission and overages; etc.
That is a very clear-cut and direct businesslike statement of just
what is going on.
Mr. Monaghan. We never had any business dealings through this
firm of Zamora, Henriquez & Co.
Senator Barbour. Do you really think that is a true statement ?
Mr. Monaghan. We never had any business, and I do not know
beyond this statement in the letter.
Senator Barbour. Now we pass to another letter, Mr. Chairman,
which I think illustrates to what lengths salesmen have to go in
order to make sales. I will offer it as " Exhibit No. 970."
(The letter referred to was marked "Exhibit No. 970" and is
included in the appendix on p. 2614.)
Senator Barbour. I am referring to a letter of April 7, 1932, also
by Fernandez to the Remington Arms Co., and I will pass to the
second page [reading] :
The order was put through the consul of the National Guard, and has been
decided, etc., etc. We only need the signature of General Llanos, the head of
the Guardia Nacional. Yesterday we talked to him, and he informed us not
to worry, as the order is ours. No matter what the competition say or holler.
They are discounting 10 colones every month from each soldier of the Guardia
(750), making a total of 7.500 colones every month to pay for the pistols and
the ammunition. They are depositing these amounts in a bank in a joint
account Armando Frankel-Guardia Nacional. You see. these pistols have to be
shipped from Germany and the cartridges from New York. It does not matter
how soon you will receive the order, as it will have to be held up at your
office until Mr. Frankel advises you to ship, so that the cartridges would arrive
more or less about the same time as the pistols. By the time that the pistols
are ready there will be enough money in the bank to pay for the cartridge^, and
Mr. Frankel will see to it that you get your monev "first, as he has agreed
with me.
2532 MUNITIONS INDUSTRY
Now, it seems to me that I have never heard of a case wherein
these poor soldiers themselves are fined in order to pay for an order
of shells. Apparently there was money enough to buy the pistols but
not money enough to buy the cartridges.
Is this a new departure or has that been a common thing? Have
any of you gentlemen heard of that before ?
Mr. Beebe. I can say this: that I do not know whether it was
when I was in Mexico, somebody talked with me about it, or whether
there was some correspondence, but I understand that some of these
officers have to buy their own pistols and their own cartridges, and
they have not enough money to buy one outright and put up the
money, but arrange to have so much taken out of their pay each
month, which is done for other things in this country.
Senator Barbour. That is, each soldier of the guard ?
Mr. Beebe. I do not know whether the soldier has the pistols or
not.
Senator Barbour. What does 10 colones amount to in depreciated
American money?
Mr. Jonas. About $2.
Senator Barbour. A moment ago wei mentioned the probable effect
of this type of competition. Here is a letter of July 6, 1934, from
F. S. Jonas to the Remington Arms Co., a very long letter, which I
will offer for appropriate number.
(The letter referred to was marked " Exhibit No. 971 " and is
included in the appendix on p. 2616.)
Senator Barbour. I will read the last paragraph first, if I may
[reading] :
The Salvador Government would not give me permission to take the sample
rifle to Guatemala ; however, they consented to my taking it to the other
Central American Republics, but I had to agree to return it, as it was shipped
to them gratis and has been entered on the Government records. Evidently
they are not on very friendly terms with Guatemala, and as soon as there is
a rumor that Guatemala has made a purchase they do likewise.
That refers, Mr. Chairman, to something that I mentioned, and
undoubtedly others have mentioned at the very beginning of the
hearing, about a sale in one instance immediately stimulating a sale
in another instance.
Is there any comment you would like to make on that? There are
a number of other passages which I have marked in this letter.
The Chairman. I suggest. Senator, if they have relation to this
very important subject, that those passages be read in their entirety.
Senator Barbour. It does not directly, Mr. Chairman.
Mr. MoNAGiiAN. There were no sales made of that rifle.
Senator Barbour. That is a 7-millimeter Remington, is it not?
Mr. Monaghan. Yes, sir. It was some time ago, because our
agent down there said they were interested in them, but there was
no sale made to either Salvador or Guatemala.
Mr. WoHLFORTH. You made sales to other countries of that same
rifle down there, did you not?
Mr. Monaghais'. We made a sale to Honduras. That was the first
sale of a military rifle that we had made since the World War.
Senator Barbour. That is the point I was really going to come to.
The Chairman. What is the date of this?
MUNITIONS INDUSTRY 2533
Senator Barbour. The date of this is July 6, 1934, and the rifle
was a single-shot rifle, was it not?
Mr. MoNAGHAN. No, sir; it is a repeating five-shot bolt-action and
not automatic.
Senator Barbour. I guess that is what they mean by referring to
it as single-shot once or twice in the letter.
Now, on page 3, the third paragraph [reading] :
This Government has a stock of over 3,000 new model 1901, 7-mm Remington
single-shot rifles and 4,000 11-mm rifles.
That is not the one?
Mr. Mo^AGHAN. No, sir. That is an old rifle, the best I could find
out from delving into memory and our records, probably purchased
around 1900.
Senator Barbour. In the next letter further light is shed, as I see
it, on this competitive situation, and I am referring to a letter under
date of July 3, 1934, attention of Mr. Monaghan, from F. S. Jonas
again. I will offer that for appropriate number.
(The letter referred to was marked " Exhibit No. 972 " and is in-
cluded in the appendix on p. 2619.)
Senator Barbour. I will read the last two paragraphs on page 1
[reading] :
They are very mucli interested in purchasing a 50-caliber Colt machine gun.
I was not sure of the price, so quoted approximately $1,500. Please ask them
to send me particulars and also prices on their 7-mm auto rifles.
Automatic rifles, is that right?
Mr. Monaghan. Yes, sir.
Senator Barbour (continuing reading) :
They want to standardize their ammunition to this caliber only.
I am told that they have no money and then again it is said for army equip-
ment, somehow or other, they are always able to raise the money. I have
not learned of any large purchases they have made, except 150 reconditioned
7-mm Maxims, which were purchased in Europe.
It is rumored that the only way that this President can hold his job is
through being well prepared, so I have hopes of the various rainbows coming
through.
We realize you are not responsible for that observation, or your
company, but what interests the committee, as I see it, is the fact
that he makes a report to you, and, whatever you want to say about
the reports, they are humorous as well as interesting, and interesting
as well as humorous, but he does say that the President can hold
his position only " through being well-prepared, so I have hopes of
the various rainbows coming through."
The rainbows, I suppose, refer to a lot of " greased " orders?
Mr. Monaghan. Orders, without the adjective. I would like
to say also. Senator, on this matter of the Colt machine gun, we
do not make it. Nothing was done about that. We spoke to Colt
about it, and they stated at that time they had an agent down there,
and any business that was done would be done through their agent.
Senator Barbour. Mr. Davis, does your company deal in manu-
factured machine guns at all ?
Mr. Davis. No, sir.
Senator Barbour. The next exhibit is a contract, and I do not
believe there is any need to read the preamble, because it is the usual
2534 MUNITIONS INDUSTRY
preamble between a company and a government. The interesting
thing about it, as I can see it, is what the contract calls for.
I will offer that for apropriate number.
(The contract referred to was marked " Exhibit No. 973 " and
is included in the appendix on p. 2620.)
Senator Barbour. I notice that there are —
3,000 " Remington Enfield " rifles, model 1934, caliber 7 mm, without
bayonets, but with sling straps, $26 per rifle, c.i.f. Amapala, total
price $78,000'
(Pencil note) caliber 7 mm.
1,000,000 cartridges " Kleanbore Smokeless ", $23 per thousand, c.i.f.
Amapala, total price 23, 000
50,000 cartridge clips 7 mm, $10 per thousand c.i.f. Amapala, tdtal
price 500
200,000 cartridges, .45 caliber Colt automatic " Kleanbore Smokeless "
for Thompson machine guns, $16 per thousand, c.i.f. Amapala,
total price 3, 200-
500 Thompson machine guns, 21-A, $140 each, f.o.b. New York, total
price 7,000'
Now, this is a contract with Remington, and it does cover machine
guns. It is for machine guns which they sold but did not make.
Is that the idea ?
Mr. MoNAGHAN. Those guns were sold to the Government merely as
a courtesy. The Government paid us the identical sum for those
guns that we paid the Thompson people for them. It is one of the
very unusual cases we have ever had of such a transaction. But here
was Jonas down there negotiating this order. They asked him to
put in the machine guns with the order at the same time, and we did
so as a courtesy merely. We did not make a cent on them anyway.
Senator Clark. Jonas also represents a gas company down there,
does he not?
Mr. MoNAGHAN. Yes, sir.
Senator Clark. And they were the agents for the Thompson sub-
machine guns?
Mr. MoNAGHAN. Yes, sir.
Mr. Davis. It is not my understanding that he represents anyone-
but Remington.
Senator Clark. He testified at the last hearing that he did.
Mr. MoNAGHAN. After reading the testimony when he was here,,
we did realize he did some work for the other company. We were
not aware of that when he went on the mission.
The Chairman. You were not aware that he was a representative
of Federal Laboratories?
Mr. MoNAGHAN. That he was to do anything for them in any way.
He was on a salary trip for us and was not doing anything except
work for us.
Mr. Handy. That was our definite understanding with him.
The Chairman. On this specific trip?
Mr. MoNAGHAN. Also the trip before that, when he went down to-
Brazil and Argentine for us on commercial business for those
countries.
The Chairman. Is he down there now?
Mr. Monaghan. He is in Puerto Rico now.
The Chairman. In whose employ is he now?
MUNITIONS INDUSTRY 2535
Mr. MoNAGHAN. In our employ.
Senator Barbour. I do not want to split hairs, Mr. Chairman, but
in the contract it states:
Whereas Remington is a manufacturer of and dealer in arms and ammuni-
tion of the type and kind referred to
And so forth, and so forth, and Thompson machine guns is one of
the items referred to in that categorly. Personally, I am willing to
take your explanation of it, but in your preamble there it would, of
course, be misleading for you to state that you are a manufacturer
of guns.
Mr. Monaghan. The wording of that contract followed the plac-
ing of the order. That was the reason for the " dealer in." I
IDointed out to the man drawing up the agreement up here that we
were not manufacturers of these Thompson machine guns, and we
only handled it as a courtesy for the Government. That was the
reason for that wording going in there. We do not make a prac-
tice, as I said before, of dealing in anj^thing except what we
manufacture ourselves.
Senator Barbour. Did you get the export license for the whole
thing, Thompson guns and so forth?
Mr. Moxaghax. Yes, sir.
Senator Barbour. Was that explained at the time you got the
license for the export ?
Mr. Monaghan. I do not believe there was any question in the
application form, where it was necessary to go into that detail.
Senator Barbour. Mr. Chairman, here is another letter from Mr.
Fernandez, dated June 10, 1931, which I offer for appropriate
number.
(The letter referred to was marked "Exhibit No. 974" and is in-
cluded in the appendix on p. 2622.)
Senator Barbour. That reads :
Pursuant to the conversation I had with you upon my arrival to New York 2
weeks ago, I wish to inform you that the extra 5 percent charged to take care
of certain party in Tegucigalpa as agreed by the writer, part of the total
amount of .$740.25 has already been paid up to Mr. Francisco Argueta of San
Salvador. This Mr. Argueta received instructions to receive this amount from
Coronel Villanueva or the party who was interested in Tegucigalpa. I effected
a payment of $300 to Mr. Argueta in San Salvador, when you cabled me the
$500. Before I left San Salvador I handed Mr. Argueta the amount of $150
making it a total of $450. Two days ago I received the attached cable from
Mr. Francisco Argueta (Chico) as everybody nicknames him, requesting of me
to turn over some funds to a friend of his here in New York. Today I will
hand this party here in New York the sum of $75 and as you have arranged
that this amount be turned over to us, I wish to report that as soon as the
balance of the amount is turned over to me, I will remit to Mr. Francisco
Argueta a bank's check for the balance of $215.25, thus completing this
transaction.
I further state that this is my understanding that Mr. Argueta is a relative
of residing in San Salvador of the party in Tegucigalpa, Honduras.
What I want to show is that $500 was cabled to Fernandez, and
with the additional amount of $240.25, $740.25 was paid to him for
what, except to give to these different people who are cited here;
and who were they? If that is not what it is, what does the trans-
action cover? You have got the letter there. Do you know what
it all means ?
83876— 35— PT 11 10
2536 MUNITIONS INDUSTRY
Mr. MoNAGHAN. I would like to explain it. I have a very complete
file on that, and if you will let me go into it, it will show you an
entirely different picture than this letter, standing out by itself.
Senator Barbour. That is just what we want to know about. By
the way, I should have mentioned that this gentleman, whose name
begins with V, is a colonel. However, you are going to tell us about
it, and we would be glad to have you do so in your own way.
Mr. WoHLFORTH. Mr. Monaghan, will you look for a letter dated
April 20, 1931?
Senator Barbour. Let me say again, Mr. Monaghan, that it was a
letter dated April 20, written by yourself to Mr. Fernandez that we
are interested in. Do you recall any such letter?
Mr. Monaghan. I have heard from numerous sources about there
being such a letter, but I cannot find it. I would like to say here
that here is a letter from Fernandez with a rubber stamp on it that
looks like April 20. It is April 29, if you will look closely; I
believe that is the letter they mean.
Mr. WoHLFORTH. That letter we refer to was the one dated April
20 from you to Mr. Fernandez, and it was supposed to explain the
contents of this letter under discussion. I do not know whether
such a letter exists, but we heard about it.
Mr. Monaghan. Would you give me some more information on it,
and let me help you find that letter?
Senator Barbour. Is Mr. Fernandez in New York now?
Mr. Monaghan. I believe so; yes, sir.
Senator Barbour. Have you been in communication with him
recently ?
Mr. Monaghan. Yes, sir. He called me up on the phone when the
investigators of your committee called on him the first time.
Senator Barbour. Did you refer to this particular letter that the
investigators were trying to locate?
Mr. Monaghan. He asked me to tell him what that letter was,
that the investigators had asked about it, and he could not find it
in his file. He said, " Will you look in yours ? "
I said, « Yes, I will."
I looked it up, and that is how I came across this letter here that
looks as though it might be April 20 and had misled somebody,
when on close inspection you will find it reads "April 29." He in-
sisted there was such a letter of April 20, and I told him I could
not find any, and he could not find it either.
Mr. WoHLFORTH. Did Mr. Fernandez call you or did you call Mr.
Fernandez ?
Mr. Monaghan. Mr. Fernandez called me. He asked me what to
do. I said, " There is only one thing you can do, it is the same thing
we are doing, give the investigators everything you have and tell
them everything you know."
Mr. WoHLFORTH. Is that the substance of your conversation ?
Mr. Monaghan. Yes, sir.
Senator Barbour. To get back to this letter of the 10th, can you
give us any more information with relation to these expenditures ?
Mr. Monaghan. Yes, sir ; I think I can. There is quite a volumi-
nous file on that order. We have a letter here to Fernandez dated
April 29 :
Since writing yon our other letters enclosed, we received yours, dated
Toojnx'igalpa, dated April 25, with the order for the Honduras Government.
I
MUNITIONS INDUSTRY 2537
You have a copy of that letter. This letter relates to the fact
that " we are going to make a shipment within a few clays of a cer-
tain part of that order ", and the money was received about that
time, April 29. What I am pointing to is that this letter here of
June 10 that you speak of, of the payment of $740, was subsequent
to our having received the order from Fernandez, and the money
being received or the credit being opened in the bank in New York —
I forget which — covering that order. The letter of June 10, being
subsequent to the whole transaction so far as the order and the pay-
ments are concerned, was something that occurred after the sale had
been completed, and was our first knowledge that there was any such
sum involved as this $740.
Senator Barbour. He says at the bottom of the letter there, at the
■very end, " I received the sum of $740.25 in payments as noted." In
'Other words, he got the money all right.
Mr. MoNAGHAN. Yes, sir. It was paid to Mr. Fernandez. He said
he paid it out in accordance with this letter here that he wrote out.
So when we gave him the $740.25, we got his receipt for that money
as noted on the bottom of the letter.
Senator Babbour. Yes.
Mr. WoHLFORTH. Did you give Mr. Fernandez instructions as to
liow or to whom to pay that money?
Mr. Monaghan. No, sir. The first indication or intimation we had
'of any money such as this being paid out on this order was at the
itime Mr. Fernandez came into our office and asked for this $740 and
substantiated his request by this letter. We do not know, and did
not then know who Col. Villa de Nueva is, whether he is a Kentucky
colonel or a South American colonel.
Mr. WoHLFORTH. You have seen the name before you saw it in
this letter, have you not?
Mr. Monaghan. No, sir; I did not.
Senator Barbour. Is there anything further you want to ask about
that? It simply is not at all clear to me. It is an amount which I
think has gone to those different people.
In the meantime we will get along, because we have a great many
more exhibits.
Mr. Monaghan. Senator, might I say there that we have never
iiad any real information about what this letter is of April 20, on
which so much stress seems to be placed. I do believe that it arose
from that rubber stamp on there that looks like April 20, and is
really April 29. Here is the letter of April 29.
Senator Barbour. I know, of course, nothing about it at all, simply
that that report comes to me from the investigators, that there was
some discussion there and I wanted to run it down, because your
explanation may be the true one, although the report, as I get it, was
that there was a letter from you to Fernandez and not a letter from
I^'ernandez to you.
Mr. Monaghan. There was no such letter, Senator.
METHODS or DOING BUSINESS — DOMINICAN REPUBmC
Senator Barbour. We have the next letter, which is dated Decem-
ber 22, from Mr, Monaghan to Mr. Norvell, who was then president
•of the Remington Arms Co., I believe.
2538 MUNITIONS INDUSTRY
(The letter referred to was marked " Exhibit No. 975 ", and is in-
cluded in the appendix on p. 2622.)
Senator Barbour. It refers to a certain action taken by Mr. Mon-
aghan relating to the stopping of a foreign order to the Dominican
Republic.
We have recently had an example of how the United States Department of
State at Washington, D. C, can help us.
Skipping the second paragraph, I will read the third :
When we approached the State Department they admitted knowing some-
thing of the deal but were glad to get the additional information we had ob-
tained. They sent a copy of our letter giving the full facts to our minister
at Santo Domingo. They are willing to shut their eyes to small graft on such
transactions in Latin American countries but they felt this was going too far
especially as the Dominican Republic still has a lot of unsettled American
claims. Our agent, who knows nothing of our dealings with the State Depart-
ment, which have to be strictly confidential, now reports the President of the
Dominican Republic called for an investigation with the result the contract for
the .303 rifles and cartridges has been canceled and the first installment is to
be shipped back. Our chances of regaining the business are, therefore, very
bright for the President has issued an order that in future all purchases are
to be made direct from manufacturers.
Is this the only cooperation of the kind that you received from
our State Department, Mr. Monaghan, or have you gotten it before ?
How much graft is the State Department willing to shut its eyes to ?
Mr. Monaghan. This was a communication from me to the presi-
dent of our company.
Senator Barbour. To the president of the company ?
Mr. Monaghan. To the president of our company.
Senator Barbour. From you?
Mr. Monaghan. And I did believe that we were doing something'
worthwhile in attempting to get the business of the Dominican Re-
public for newly manufactured arms or ammunition, which would
help American workmen here, instead of selling the war stuff that
was offered at this time by some concern in England or Germany,
I forget which — England or Hamburg.
Senator Barbour. England, I think. I think we have that.
Mr. Monaghan. I am not sure.
Senator Barbour. I am referring to the cooperation that you got
from the State Department and their knowledge of graft, and their
not minding it up to a certain point.
Mr. Monaghan. Certainly it was not a State Department state-
ment. It was an individual that I knew in the State Department.
Perhaps we talked of it in passing, not as an official statement
from him — certainly I did not consider it that way ; I went there, I
believe, at the time to talk to him about Cuba, having been down
there. I discussed things in Cuba, and discussed this matter of
Santo Domingo. Naturally, in the course of such a conversation
some little personal remark would slip out, which was responsible
for this statement of mine.
Senator Barbour. You make a very clear statement to your presi-
dent in your letter. While I do not want to overemphasize this, it
certainly gave me the impression that the State Department was cog-
nizant that there had to be a certain amount of graft, and up to a
certain point they had no objection to it.
MUNITIONS INDUSTRY 2539
Mr. MoNAGHAN. No ; I do not think that is the proper conclusion
to draw from this letter of mine, because I have never had any such
official statement from the State Department.
Senator Barbour. There may be honest differences of opinion, but
they, as the State Department —
are willing to shut their eyes to small graft on such transactions in Latin
American countries, but they felt that this was going too far.
The Chairman. Whom do you contact in the State Department
in matters of that kind?
Mr. MoNAGHAN. On that occasion I think it was Mr. S. W.
Morgan.
The Chairman. That was back in 1928?
Mr. Monaghan. 1928.
Mr. WoHLFORTH. Mr. Monaghan, is this just a chance conversa-
tion that you had about this Dominican order with the State Depart-
ment?
Mr, Monaghan. No. What I said was a chance remark, perhaps,
of his, but it was not a chance talk with him of the thing. I related
the facts to him in quite some detail, of this attempt to sell the war-
time stocks from Europe.
Senator Barbour. It is one thing in the statement you write, and
in sense is another?
Senator Clark. Wliat did you mean to say by that statement in
the letter, Mr. Monaghan, if you did not mean to say what it sounds
like, when you say :
They are willing to shut their eyes to small graft on such transactions in
Latin American countries but they felt this was going too far, especially as the
Dominican Republic still has a lot of unsettled American claims.
That seems to be a perfectly clear statement. If it does not mean
what Senator Barbour said it meant, what does it mean?
Mr. Monaghan. I certainly do not believe the State Department
in any dealings I have had with them would indicate they would
make such a bald official statement, that they would countenance any
small graft.
Senator Clark. You wrote this letter, did you not ?
Mr. Monaghan. Yes, sir.
Senator Clark. Just explain to the committee what you did mean
when you said —
They are willing to shut their eyes to small graft cm such transactions in
Latin American countries, but they felt this was going too far.
That does not seem to be susceptible of more than one interpre-
tation. Just what did you mean by it?
Mr. Monaghan, Perhaps the comparison of the thing. I believe
at that time those rifles to the best of my memory were, oh, around
$50 to $G0, say, and they were obtainable in Europe for about $10,
which would make anyone laugh that knows anything of the business
of selling manufactured items, to pay a price of $10 in one market
and resell the same item in another for $50 or $60.
Senator Clark. Did anybody in the State Department tell you
that they were willing to shut their eyes to small graft on such
transactions?
Mr. Monaghan. I said I did not look at it as an official attitude
of the State Department, no.
2540 MUNITIONS INDUSTRY
Senator Clark. Here is the whole paragraph again, Mr,
Monaghan :
When we approached the State Department they admitted knowins something
of the deal but were glad to get tlie additional information we had obtained.
They sent a copy of our letter giA'in;; the full facts to our ^Minister at Santo-
Domingo.
That was an official action of the State Department.
They are willing to shut their eyes to small graft on such transacfons in
Latin American countries but they felt this wasf going too far, especially as
the Dominican Republic still has a lot of unsettled American claims.
What was it that was going too far?
Mr. Monaghan. Buying an item at one price, of $10, and selling it
for $50 oi- $60.
Senat(jr Clark. Did they give you any idea of the size of graft
the3^ were willinj.'- to shut their eyes to, and where they drew the line
when you ste|)])e<l over from the small graft category into the situ-
ation where they were going too far?
Mr. MoNAGH.' X. Perhaps when you go back and take that one
little word " graft " there
Senator Clark. That is a word of rather large significance, I think,
in this transaction, Mr. Monaghan. It has not very many letters in
it, but it is of considerable significance in what we are getting at.
Mr. Monaghan. Perhaps the impression was more to the effect
that if there were a commission, a small commission above that price
of $10 for those rifles, they could not say anything, but when it be-
came such an <>utrageous difference as from 10 to 50 or 60 dollars,
certainly then it would not come into the class of commissions.
Senator Clark. In other words, they are willing to condone petty
larceny but not grand larceny?
Mr. Monaghan. Oh, no; I "do not think that.
Senator Clark. This apparently is another one of those instances
such as we had tlie other day, Mr. Monaghan, wdiere you want to
delete some of the words froin your oAvn letters.
Mr. Monaghan. Every man when he writes a letter and reads
it over again the next day would change it, he would not leave it in
its entirety.
Senator Barbour. Unless somebody else wants to pursue the same
subject, that covers all of it.
The Chairman. We are getting nowhere so fast on that I think
that we might well leave it.
Senator Barbour. That brings us to a letter of April 17 to Mr.
Monaghan from Smith & Wesson. I offer it in evidence because it
refers to the contribution made by the Remington Arms Co. to a
political campaign in Santo Domingo.
(The letter referred to was marked " Exhibit No. 976 "'. and
appears in full in the text.)
Senator Barbour (reading) :
We are just in receipt of a wire from P>ro. Nicolas, reading:
"Party asking campaign contribution $1,00(>, ready contribute $500. expect-
ing secure balance from Eilis, Remington, Philadelphia, Fisch, and yourselves
$100 each, cable acceptance to send sight draft. Thanks."
The Chairman. To what country does it relate ?
Mr. Monaghan. Dominican Republic.
MUNITIONS INDUSTRY 2541
Senator Barbour (reading) :
Presumablj' you have had a similar message.
Before replying we shouhl like to know what your reaction is to the some-
what strange appeal.
Hitherto we have spent nothing in advertising in Santo Domingo, and if
Bro. Nicolas is lucky enough to put his money on the right horse, I should
think that the proposed $100 investment should be a good one. In my varied
associations with Latin Americans I have had some curious propositions, but
never one to contribute to any political campaign fund.
According to the last cables that I saw, they propose to run Morales, for-
merly the Minister at Washington, for vice president, though at one time he
was scheduled for the premier post.
What are your latest advices?
Whilst we haven't any $100 bills growing in the back yard, I am inclined to
recommend that we make the contribution without delay.
Please be good enough to reply by return mail, using the enclosed stamped-
addressed envelope.
You got this letter, Mr. Monaghan, from Mr. Bungey?
Mr. Monaghan. Yes, sir.
Senator Barbour. You recall the incident?
Mr. Monaghan. Yes, sir; I do.
Senator Barbour. What did you do about it?
Mr. Monaghan. We were in the same position as he expresses it
there — ^that this is the first time he has had any proposal to con-
tribute to a political campaign fund. Dr. Morales, that he speaks
of, the former Minister at Washington, some of us in the company
knew personally. I did. We credited Mr. Nicolas' account
with that $100 more as a personal matter than as a business one.
Certainly we never expected a $100 contribution to get us very far.
Senator Barbour. What do you mean b}' that, that you would
have to come higher than that to be effective ?
Mr. Monaghan. As I say, it was the first time we have had any
occasion to contribute to a political campaign fund such as Nicolas
proposes here, and he kept pressing us to make this contribution.
We did do it.
Senator Barbour. It is not a practice of munitions concerns to
make political campaign contributions?
Mr. Monaghan. No, sir; it is not. It is the only one that I
know of.
Senator Barbour. Mr. Davis, do you know of any other?
Mr. Davis. I do not. I think this was before the acquisition of
the Eemington Arms Co. by the du Pont Co. It is certainly not
our policy to make any campaign contributions, either here or
abroad.
Senator Barbour. It is a fact the contribution was made. Mr.
Chairman. And by the next exhibit, which is a letter from Nicolas
under date of June 17, it seems that the candidate Morales was not
elected.
(The letter referred to was marked " Exhibit No. 977 ", and is
included in the appendix on page 2623.)
Senator Barbour (reading) :
As per my letter of last mail, which you will surely receive together with this
mail, as it could not be placed in the mails until after the steamer had left,
you will be advised that the permit situation is the same, maybe worse at
present because the Army is now after a few generals that took the mountains
against the actual government. No permits will be issued to anybody while
peace and tranquility are unstable.
2542 MUNITIONS INDUSTRY
Tiie reason for my mail not getting the last boat was that a few minutes after
it was written, I was induced to hide l)y some friends who knew in advance
that the order to imprison me had been given by Government ofBcials. On
Wednesday noon, after communicating with the general, I gave myself up and
was locked in Columbus place at the Torre del Homenajo, for 48 "hours, after
which I was released. The reason for my prosecution has been given as " For
being a friend of Dr. Morales and selling arms and ammunition to the revolu-
tion." This chai-ge was made by some competitors interested in wiping me out
of the map and taking any agencies away, both of wiiich things they will be
unable to do.
At the latter part of the next paragraph :
I also informed him that I am no politician and that my business was to
work and sell everybody that came in power, and that he will find me ready to
cooperate with him to that end.
Senator Pope. He bet on the wrong horse that time, did he not ?
Mr. MoNAGHAN. I would like to sny this, Senator, that he did not
sell any cartridges or arms of ours to any revolution down there that
I know of.
Mr. WoHLFORTH. Did Mr. Morales ever visit your factory in
Bridgeport?
Mr, MoNAGHAN. No, sir; I do not think he did.
Mr. WoHLFORTH. You did not ever sell him direct?
Mr. MoNAGHAN. No; we did not.
Senator Barbour. In the next letter offered in evidence we have
a breach of etiquette, according to the munitions companies' stand-
ards, apparently.
(The letter referred to was marked " Exhibit No. 978 ", and is
included in the appendix on page 2623.)
Senator Barbour. This letter is dated June 10, 1932, from Mr.
Monaghan to Mr. Nicolas, and the committee after hearing the previ-
ous testimony appreciates Mr. Monaghan's concern as expressed in
the last paragraph. I think that is all we need read, unless Mr.
Monaghan wants anything else.
It is rather interesting to learn from your letter that Mr. Naramore is wear-
ing the uniform of a captain of the United States Army. This, to say the least,
is a serious breach of etiquette and perhaps a more serious charge could be
brought. It is our understanding an officer of the Army is not supposed to wear
the uniform except on active duty or state occasions. Certainly Mr. Naramoi-e
is not entitled to wear the uniform when i-epresenting the Lyman Gunsight
Corporation, which was the case when he was in Santa Domingo.
The Chairman, "What was the occasion for that letter ?
Mr. Monaghan. I understood Mr. Naramore was down there — I
do not know the full details of it, he never told me — on some mis-
sion for the Dominican Republic in the way of reloading cartridges.
I did not believe, partly selfishly from a business standpoint, and
also in the interests of the Government, that it was wise for a gov-
ernment like that to try to reload ammunition, and eventually have
cartridges that w^ould have excessive breech pressures, and in fact the
qualities be so poor in every manner that they would not be suitable
for use.
The Chairman. Who was Naramore?
Mr. Monaghan. He was employed l)y the Lyman Gunsight Cor-
poration.
The Chairman. Had he been in the service of the Army or the
Navy?
MUNITIONS INDUSTRY 2543
Mr. MoNAGHAN. I do not know.
The Chairman. How did he come into possession of a uniform of
a captain of the United States Army ?
Senator Barbour. That was the question that I had in mind.
Mr, Monaghan. He is known as Captain Naramore. I believe it
is Captain Naramore.
Mr. Beebe. I understand so.
Senator Clark. Do you happen to know% Mr. Monaghan, whether
the Department has any regulation or order on the subject of muni-
tions salesmen wearing Reserve officers' uniforms?
Mr. Monaghan. What I stated that I have found out about it is
all incorporated in that paragraph, that I did not believe it was
proper for him to do so.
Senator Clark. I do not think it was proper for him to do so,
either, but so far as I have been able to find, there is no Army regu-
lation or order of the AVar Department against it. At the last hear-
ings here in September, we had one instance of a poison-gas concern
which put out a very elaborate catalog with pictures of all of its
principal officers in uniform as Reserve officers in the United States
Army. The president of the company was in the habit of writing
letters to South American countries offering to establish poison-gas
plants for them and train a chemical w^arfare service, and of signing
himself " Lieutenant colonel, U. S. A. Reserves." I was just wonder-
ing if you have been able to find any regulation against such prac-
tices as that.
Senator Barbour. Are you through, Senator?
Senator Clark. Yes.
The Chairman. Did you investigate this matter any further?
Mr. Monaghan. No, sir.
METHODS of DOING BUSINESS COLOMBIA
Senator Barbour. Leaving Central American republics for a
moment, let us turn to South America, Remington sold Colombia
a large order of ammunition in 1932, and this order was secured
by your agent Restrepo. We understand that you had what your
firm termed " unfortunate publicity " in connection with this order.
Anyway, I will read from your letter to Mr. Roger L. Bracken of
October 27, 1932.
I am very glad to confirm the good news Restrepo sent yon. He is certainly
doing a wonderful job for us and the way he is taking hold of things the last
few months has simply been a revelation to me. I don't think I ever had a man
in the foi'eign field who kept us so informed of the complete picture of things
as they were happening. Yes. indeed, you were due for thanks in having
trained him and recommended him to us.
We had some unfortunate publicity in connection with the Colombian order
and for that reason we are now doing mighty little talking about it, so we ask
you to hold it confidential.
(The letter referred to was marked "Exhibit No. 979", and is
included in the appendix on p. 2624.)
Senator Barbour. Now, what was the nature of that publicity arid
what was there that you did not want to become public or otherwise,,
to do anything or say anything, to help the committee understand
the paragraph there, which might have a great deal of significance?
2544 MUNITIONS INDUSTRY
Mr. MoNAGHAN. We attempted at all times to keep confidential
any orders that we received from a foreign government, and in some
manner the New York Times published around that time the in-
formation that we had received this order from Colombia for car-
tridges, and there was quite a stir by Colombia about it getting out
that way. They felt we should have held it more confidential.
The Chairman. From whom do you keep those things confi-
dential ? Everyone ?
Mr. MoNAGHAN. The publicity that they objected to was that it
was pul\lished in the press.
The Chairman. How could you keep a thing like that secret?
Surely the shipping records would show what you were shipping
down there, wouldn't they?
Mr. Monaghan. But it was not necessary perhaps for us to make
the statement. I believe the president of our company made the
statement that we had received this order. It was not kept confi-
dential in every respect. The State Department knew of this order.
Senator Barbour. As a matter of fact, the publicity to which you
refer was simply ordinary newspaper publicity?
Mr. Monaghan. Correct.
Senator Barbour. And for trade reasons or otherwise you do not
want any newspaper publicity?
Mr. Monaghan. That is another reason ; we would not want our
competitors to know about it.
Senator Barbour. I say, you would not want them to know.
Mr. Monaghan. No.
Senator Barbour. I do not want to say the wrong thing, but you
feel the munitions business should be kept as secret as possible, as far
as the press is concerned, and the public ? Do you agree with that ?
Mr. Monaghan. I believe our relations should be that way and the
business we get should not necessarily be spread in the public press.
Senator Barbour. I am not sajdng that I agree with you or dis-
agree with you.
Mr, Monaghan. That is our feeling.
Senator Barbour. I just want to get clear the fact that that is the
sort of thing you refer to.
Mr. Monaghan. When it gets in the press it hurts not only the
munitions business of this country, but it hurts all export business
of this country.
The Chairman. Is that why there comes from your industry so
much objection to international plans for providing greater publicity
for the traffic in arms ?
Mr. Monaghan. I do not know of anyone in our companj^ who has
ever objected to publicity in the international sense of ever}^ govern-
ment participating in it, but that has not become an established fact
as yet. If and when it does, certainly there would be no objections
on our part to it, so far as I know.
Senator Barbour. Here is a letter, Mr. Chairman, from Koger L.
Bracken, export manager of Miller Falls Company, to George
Rugge, dated October 25, 1932.
(The letter referred to was marked " Exhibit No. 980 " and ap-
pears in full in the text.)
Senator Barbour. I read the first paragraph :
MUNITIONS INDUSTRY 2545
In a letter just received from our good friend, Resti*epo, I understand he has
sent through to you a contract for $70,000, wliich is the result of a great deal
of effort on his part and, I understand, at the outlay of some personal funds
in lobbying work with certain Government departments.
I will finish the letter :
As I was responsible, in a sense, for getting your agency for Restrepo, I feel
a personal satisfaction in getting this report from him. In these difficult days,
such a conti-act I am confident must be exceedingly welcome and I um excep-
tionally glad to note this evidence that Rep is apparently cashing in, and I
hope he will continue to merit your confidence.
With kindest personal regards,
Cordially yours.
Who is Millers Falls Co.?
Mr. MoNAGHAN. Perhaps I can give you in a minute the whole
story there. You see, this letter preceded the one you just read that
I wrote.
Senator Barbour. I see.
Mr. MoNAGHAN. Mr. Restrepo had been employed by Millers Falls,
New York, and then went to Colombia as their representative, and
ours, and other companies, working on a commission basis.
Senator Barbour. I see. That is October 25 and this is October 27.
Mr. MoNAGHAN. Yes.
The Chairman. Mr. Monaghan, did jou say that this letter of
October 27, previously read, was an answer to this ?
Mr. Monaghan. I believe so. Was it not, Senator ?
Senator Barbour. Yes ; I think it is.
Mr. Monaghan. This is October 25. The one read just previ-
ously is the 27th.
Senator Barbour. The 27th; yes.
Mr. Monaghan. And it acknowledges the one on the 25th.
The Chairman. You say nothing in your acknowledgment there
of the suggestion that was made about Mr. Restrepo having made
an outlay for lobbying work. Why did you avoid in your acknowl-
edgment saying anything about that?
Mr. Monaghan. I knew nothing of what he meant there. I never
saw the letter to the Millers Falls Co. that he refere to. I never asked
any questions.
Senator Barbour. Did he get any money for any such purpose or
was he reimbursed for anything in that connection?
Mr. MoNAGi-iAN. On this contract here of the 3,000,000 cartridges
he received his commission. He did not receive any money for out-
lay of personal funds in lobby work. I know of none that he did.
Senator Barbour. He speaks of it here.
Mr. Monaghan. Well, I don't know what he wrote Bracken.
Senator Barbour. But you are or were conversant with what he
said in his letter. This is one of those cases where the letter reads
perfectly clear, it seems to me, and yet we do not have the same
understanding of it when we discuss it.
Mr. Monaghan. No; I did not feel there was anything we owed
him for any money that he should write to Millers Falls. If there
was, he should write directly to us.
Mr. WoHLFORTH. You mean, you did not know anything about
what he was doing down there ?
Mr. Monaghan. Mr. Wohlforth, I did know^ some things about
what he was doing, because I went down there to Colombia in the
2546 MUNITIONS INDUSTEY
first part of 1933, and I did not find any evidence there of any lobby-
ing work on his part.
The Chairman. There was the highest order of approval of the
man, of what he was doing down there, wasn't there ?
Mr. MoNAGHAN. Yes.
Senator Barbour. Now, go back a little. Here is a letter dated
September 10, 1932, about the time the order was being negotiated
and Colombia was in arms against Peru, which I offer for appropri-
ate marking.
(The letter referred to was marked " Exhibit No. 981 ",. and is in-
cluded in the appendix on p. 2625.)
Senator Barbour. I will read beginning with the third paragraph r
Coroiiel Curios Padilla, about whom I wrote you some time ago, is a very close-
friend of the writer as well as his family ; they live next door to my home..
This gentleman occupies now a high position in the Colombian Army and be-
longs to the Estado Mayor del Ejercito. In the strictest confidence Coronel
Padilla infoiined me the Government wants to buy at the present time 2 million
cartridges and informed me about the quotation they have from Switzerland of
$22. These cartridges are intended for part of the army that is being sent to>
Puerto Leticia on the Amazon River, our frontier with Peru.
Going to the bottom, to save time :
However, ths Government is taking the necessary measures in order to pro-
tect our national integrity.
Coronel P;idi!la put me in contact with Coronel Adelrao A. Ruiz — ;
And then, down further —
Coronel Padilla is giving me his iull support in order to get the business
and is keeping me confidentially informed of this matter. Indirectly I under-
stand he wants a comniLssiun. however, I may be wrong and am keeping a
very diidomatic attitude until further developments. This gentleman also
informs me he is doing his best in order to induce this Government to buy
40 million cartridges.
Then at the wind-up he says :
Kindly destroy same as this request was made to the writer by the War
Department.
Senator Clark. Who is that signed by, Senator?
Mr. MoxAGHAN. Restrepo.
Senator Barbour. That is from Restrepo to the Remington Arms
Co., marked, " Confidential."
Did this Government official receive any commission?
Mr. MoNAGHAN. No, sir.
Senator Barbour. I am w^ondering why he worked for so large
an order all of a sudden without any hope of compensation.
Mr. MoNAGHAN. There never transpired any such order Avith us
for 40 million cartridges. The only order we received of a big
item at one time was the 3 million, and I saw Colonel Padilla down
there. I established the fact that he was a next door neighbor and
friend of Restrepo. I also met Colonel Ruiz. I also was very pleas-
antly surprised to learn when I got there that Colonel Padilla had
visited our })lant some years before as a member of a Colombian
commission that came up here, and he was ajipreciative, as he told
me, of the courtesies that we showed him at our ])lant. He thought
well of our ammunition, and being a friend of Restrepo naturally
he would try to get him the business.
MUNITIONS INDUSTRY 2547
Senator Barbour. Well, I must say in this letter there seems to
be some doubt about the necessity of a special commission, whereas
in some of the others it has been a very direct statement.
Going back further again, we have a letter of November 12, 1930,
from Mr. Monaghan to Mr. Restrepo, which I will ask to have
marked with the appropriate number.
(The letter referred to was marked " Exhibit No. 982 " and is
included in the appendix on p. 2626.)
Senator Barbour. I read the third from the last paragraph on
the second page :
You will probably desire to bring every influence you can to bear to obtain
this business for us, and as a suggestion we should like to mention that in
some instances we have found it advisable to diplomatic;! lly ask the Minister
of War or tlie person who will have the final say in placing the order who he
would like to have us work witli as our agent. In other words, who is the
intermediary to see and pay commission f(n- the business. Such commission,
as we mentioned before, would have to be added to the prices we have given
you.
After giving these instructions, would it not seem to follow that
your agent woidd pay to the Government official placing the order
part of his commission?
Mr. Monaghan. That is not the intention of that at all. Restrepo
had never had any dealings on Government business and we were
trying to tell him how to operate. The point was we did not want
to have an agent for military business Avho was i)ersona non grata
with the Minister of War or the people with whom he was dealing.
Senator Barbour. You do not think then that the authority mak-
ing the purchase got any graft?
Mr. Monaghan. Pardon me?
Senator Barbour. You do not think then that the authority who
had the final say as far as the purchasing is concerned got any
graft ?
Mr. Monaghan. No, sir ; I do not.
The Chairman, You had found in other proceedings that is was
to your advantage to have someone who could stand between you
and the minister of war, or whoever was buying the supplies, didn't
you?
Mr. Monaghan. The thought is there that we do not have enough
business to econmically have our own salaried representatives in
every market watching developments as they occur and the possi-
bility of obtaining business, and we wanted someone who was es-
tablished in that market operating on a commission basis and who
could watch the situation and get the business for us, if possible.
The Chairman. But you were finding it " advisable to diplo-
matically ask the Minister of War or the person who would have
the final say in placing the order whom he would like to have us
work with as our agent."
Mr. Monaghan. Correct.
The Chairman. So you were leaving it to the Minister of War
or to the agent of the Government who was buying the supplies
to say whom your agent should be.
Mr. Monaghan. Oh, no ; not that.
The Chairman. Then what does that mean ?
2548 MUNITIONS INDUSTET
Mr. MoNAGHAN. It means that we wanted a man who could deal
with the Minister of War and who the Minister of War had con-
fidence in.
The Chairman, Yes; but you are not even going to suggest who
that agent might be. You are going to leave it to the Minister of
War.
Mr. Monaghan. At that time we did not know the available
agents on military business in Bogota, Colombia.
The Chaikman. And the Minister of War did, is that the idea?
Mr. Monaghan. He would know the people through whom he
had been purchasing material representing other companies. We
did not want him to choose some man who was one of the outs
instead of one of the ins.
The Chairman. In your letter to Restrepo you go on and say :
In other words, who is the intermediary to see and pay commission for
the business V Such commission as we mentioned before would have to be
added to the prices we have given you.
Mr. Monaghan. It has gotten to be the general practice on any
military business to establish the price that the manufacturer has
to get and then allow the commission agent to add to that his com-
mission, so as to stop the squabbling that would go on of stating a
definite price that would include, say, some particular rate of
commission.
The Chairman. That is hardly the issue that was involved here,
though. Here you are trying to ascertain or have ascertained who
is the intermediary to have and pay a commission for the business,
an intermediary who is going to be suggested or approved by the
Minister of War. Now, does it mean just this: That in some in-
stances 3^ou found a minister of war ready to do business, if and
when he could have a cut in the commission that accrued to that
sale, and you are suggesting here to Restrepo that he should find,
diplomatically, who it was who would stand properly with the
Minister of War and just what commission should be paid for the
business, isn't that true ?
Mr. Monaghan. No, sir; it does not read that way.
The Chairman. Well, now, tell us what in the world this language
means, then? I am going to read the entire paragraph:
You will probably desire to bring every influence you can to bear to obtain
this business for us. and as a suggestion we should like to mention that in some
instances we have found it advisable to diplomatically ask the Minister of War
or the person who will have the final say in placing the order, who he would
like to have us work with as our agent. In otlier words, who is the inter-
mediary to see and pay commission for the business. Such commission as we
mentioned before would have to be added to tlie prices we have given you.
What does that mean if it does not mean just exactly what it says?
Mr. Monaghan. Let me explain to you what happened when I
went down to Colombia myself. Restrepo got this military order
for us, but we were not quite satisfied with him continuing as a mili-
tary agent for us. In fact, his contract originally provided for him
to act on commercial business and not on military. In this transac-
tion, the way it developed, we did recognize him as the agent in the
transaction.
When I got to Bogota and talked with the Minister of War on
various things, I found him one of the highest type men you could
MUNITIONS INDUSTRY 2549
meet anywhere, I found that Restrepo, for example, was not with
that minister in power the right man to, in my opinion, transact any
further business for us. I then obtained another agent, Samper,
who socially was better connected to be able to talk properly with
the Minister of War there than Restrepo was ; and in saying that I
want to make very plain there was no thought, in getting Samper,
that there was any payment beyond Samper to the Minister of War.
When I made those arrangements with Samper I stated to him the
base price that we would expect for our cartridges and left it to him
to add any commission, if he could, to that, and had in mind, of
course, a reasonable commission, and it has always been such on
some small business we have obtained.
The Chairman. Would Restrepo consent to any plan that might
deprive him of his commission?
Mr. MoNAGHAN. His contract with us was on commercial ammuni-
tion and not on military.
The Chairman. Did he never sell any military ammunition?
Mr. MoNAGHAN. After that he did not.
METHODS OF DOING BUSINESS — ARGENTINA
Senator Barbour. The next exhibit is a letter from the Remington
agents in Buenos Aires, Palmer & Co., dated August 22, 1933, which
I will ask to have marked with the appropriate number.
(The letter referred to was marked " Exhibit No. 983 " and is in-
cluded in the appendix on p. 2627.)
Senator Barbour. I would like to begin reading at the bottom of
page 1.
Rifle model 33 was formerly priced at $3.30 each. Mr. Werns would like to
get this price on order 1193. If, however, this is impossible it is understood
that you will bill at $3.80, which is the price according to list no. 14, that is to
say, these rifles should be billed, at all events, at the prices prevailing before
you sent your cable of the 19th, and this applies to the model 34 also.
Now, this is the interesting part [continues reading] :
With reference to the packing of the three model 34's in each shipment, please
put them in boxes such as are used for the model 33, so that the customhouse
inspector will not notice any difference at all in the boxes when the cases are
opened. Furthermore, please put the boxes which contain the model 34's right
in the center of the case, that is the center from side to side and also the center
from top to bottom. If these instructions are all carefully followed it will be
very bad luck indeed if the customhouse inspector discovers that there are
some repeating rifles in this shipment. Mr. "Werns is not only anxious to save
the additional duties on repeating rifles, but even more he wishes to avoid the
delays incident to the entry of repeating caliber 22 rifles. Strictly speaking,
repeating rifles of any caliber should not come into the country at all.
Then, the last paragraph [reading] :
In one of the paragraphs above we have been rather explicit about the pack-
ing of the rifles for Mr. Werns and we have done so because of what happened
in connection with a recent shipment for Gonzales & Russell. In our letter of
June 6 we asked you to pack the caliber 44's in the center of the cases, and
your letter of June 23 indicated that you understood just what was wanted.
But apparently the man who actually did the packing did not understand it at
all, because in each case or cases (we do not know at the moment how many
there were) the small calibers have been put around the outside of the case
from top to bottom and the 44's have been put in the center of the case also
from top to bottom. The result is that as soon as the top of the case is lifted.
2550 MUNITIONS INDUSTRY
one sees immediately tlie caliber 44's, which is, of course, just what we wanted
to avoid. The customhouse inspector immediately discovered that the case did
not contain only small calibers and the large calibers have been seized.
That is a letter, as I have said, from your agent in Buenos Aires
to the Remington Arms Co. in Bridgeport, Conn. Now, can you
explain why any such action as that is necessary?
Mr. MoNAGHAN. They are not necessary and they are contrary to
our policy. That was not handled by me. It was one of those rou-
tine things that came in in the course of business. Those 33 and 34
rifles are both .22-caliber boys' rifles. The 33 rifle is a single-shot
.22-caliber rifle. The 34 is a repeating rifle of the same caliber.
Senator Barbour. Is that bolt action or a pump gun ?
Mr. MoNAGHAN. Both bolt action. They are the same in everj^
respect, except the 33 is a single shot and the 34 is a repeating type.
The invoices on that transaction were made properly, as 34 repeat-
ing rifles and not 33 single shot rifles. It is unfortunate that we did
follow the instructions of the agent in packing the 34 rifles in the 33
boxes. It is contrary to our policy, as I told you before, and I can
let you have photostatic copies of the invoices, showing that they
were billed correctly as 34 repeating rifles. In my experience with
anything going through a customs, the invoice is the governing
document rather than the method of packing.
I am not trying in any way to excuse this. It is wrong. We do
not do it and we have not been doing it. It is one of those things
that Avent through in the ordinary course of business without being
discovered.
Senator Barbour. That is the only instance you know of or Mr.
Davis knows of.
Mr. Davis. Senator, this occurred about a month after I went with
Remington. It is a slip and I do not condone any such action.
Mr. WoHLFORTH. I wondcr who did? If you did not know about
it, Mr. Monaghan, who did know about it?
Mr. Monaghan. The letter was passed along to the members of
the department. I don't know whether I saw it in passing or whether
it was just passed along. Without any instructions of what to do
with it or anything else, this clerk took it and as it was received by
him without any advice at all, he thought it was all right to do this.
Senator Barbour. You do not know whether he got any benefit in
doing this ?
Mr. Monaghan. I don't know.
Mr. WoHLFORTH. You make the model 33 and 34 in larger caliber?
Mr. Monaghan. No, sir; we do not. The .22 caliber rifle is the
only caliber rifle that is made up in the 33 and 34 models.
Mr. WoHLFORTH. What about the 44?
Mr. Monaghan. The .44 caliber is not made by ujs in any rifle at
the present time.
METHODS OF DOING BUSINESS BRAZIL
Senator Barbour. Now the next letter, dated October 21, 1929, is
from Mr. Barata, Remington agent in Brazil, which I offer for
appropriate marking.
(The document referred to was marked "Exhibit No. 984 " and is
included in the appendix on p. 2629.)
MUNITIONS INDUSTRY 2551
Senator Barbour. It a]ipears that a similar situation existed in
that country to the one in Mexico. The letter speaks of a Christmas
list and a monthly payment to a War Department employee.
Mr. Chairman, the names are so difficult for me to recite, I will
just simply say that the letter states:
Last year Mr. Kuhlen distributed Christmas presents amounting to $300
amongst liis friends.
Then the names are listed there.
The amounts spent on each person were as follows —
Mr. MoNAGHAN. That is 150 milreis. In our figures it roughly
means 5 or 7 cents to the milrei.
Senator Barbour. There is a general, a captain, a colonel, a cap-
tain, a major, a mister, a consul, a colonel, a captain, and a mister,
and they range all the way from 150, 140, 140, 240, 240, 700, 300,
150, 240, to 200 milreis apiece.
Then the letter goes on to say, Mr. Chairman and gentlemen :
The onlj' person who has been rendering us valuable services just now
has been Mr. Araujo, of Rio. He has been giving me prompt information
about the applications from our clients that arrive at the War Department.
When I give an application to a client for signature, I immediately advise
Araujo. He is on the lookout for it in Rio and puts it before the minister
for dispatch as soon as it arrives at the War Department.
If you are going to decide to discontinue the practice of giving Christmas
presents to any Government officials from Rio as well as from S. Paulo, I
think that you should make an exception in the case of Mr. Araujo. A
Christmas gratification to him in addition to what he gets every month will
act as an encouragement to his continuing to give us his good services In
Rio.
In other words, this party was on your pay roll with a number
of other army men — at least they are officers of different rank —
who received — what would 700 milreis amount to? About $400?
Mr. Davis. $35 or $40.
Senator Barbour. $35 or $40?
Mr. MoNAGHAN. $35 or $40; yes.
Mr. WoHLFORTH. May I state here. Senator, that we examined
Mr. Barata's expense account and learned Mr. Araujo was receiv-
ing 330 milreis per month for 14 months, beginning in 1929, and
that Mr. Florambel received 2 months' payments. Is that correct?
Mr. MoNAGHAN. That is correct.
Senator Barbour. And his function was to give you prompt in-
formation about the applications from clients that arrived at the
War Department?
Mr. MoNAGHAN. The function of it?
Senator Barbour (reading) :
When I give an application to a client for signature, I immediately advise
Araujo. He is on the lookout for it in Rio and puts it before the Minister
for dispatch as soon as it arrives at the War Department.
Do you think he passed on any of the money?
Mr, Monaghan. To the best of my knowledge, this Mr. Araujo
he speaks of is one of the clerks in the War Department. As I
said, this was all for commercial business. We have a large com-
mercial business in Brazil. It is subject to the same restrictions
as we spoke of in some other countries. Import licenses have to be
obtained for rifle cartridges and shotgun cartridges, and all kinds
83876— 35— PT 11 11
2552 MUNITIONS INDUSTRY
of red tape. After those permits are issued by the War Office, they
are transmitted by cable or letter to the consul at point of shipment..
We have to go through the routine of applying to the consul in
New York continually to learn if the permits have come in for the
orders that we have received so as to tie them together.
After we learn of the permits being in, we have to w^rite a letter
to the consul outlining the shipments we are going to make against
the license, present it to the steamship company, before they will
issue a shipping permit.
This man in the War Office was essential to us in getting the
permits properly transmitted to the consul in New York and prop-
erly itemized. Those items of cartridges are somewhat compli-
cated in their description, many different items of them, and we felt
it was worth our while really to pay this tip to the man in the War
Department to see that it was properly followed.
Senator Barbour. Unless there are some further questions, that,
is all on that matter.
The Chairman. Have you discontinued the practice of making
Christmas gifts to these people?
Mr. MoNAGHAN. I believe we have discontinued the Christmas
gifts. The only man we have been making any payments to, I
believe Mr. Wohl^orth will verify — having checked into it and ascer-
tained — was Mr. Aran jo.
Mr. WoHLFORTH. There is one other man, monthly payments for 2'
months, Florambel.
Mr. MoNAGiiAX. I do not know just who he is. but I imagine in the-
same division of the War Office.
The Chairman. The general practice of playing Santa Claus has
been discontinued?
Mr. Monaghan. There have been very few cases that I know of.
This is one of them.
Senator Barbour. Mr. Chairman, I am very glad to go on. I
have got quite a few left, and I will do it as rapidly as I can.
(At this point there ensued an informal discussion off the record
after which the proceedings were resumed as follows:)
Senator Barbour. I will go along as rapidly as I can, because L
do not want to hold anybody, witnesses or otherwise.
Next is a letter dated January 31, 1930. from Rugge to Barata,
which I offer for appropriate number.
(The letter referred to was marked "Exhibit No. 985" and is
included in the appendix on p. 2630.)
Senator Barbour. I will read the second paragraph of that letter ;
Your letter dated January 7 confirms the cableg:ram you sent covering your
visit to the Rio Embassy in conjunction witli tlie embargo and detained ship-
ments. It is certainly good to note that there continues to be prospects of the
Minister of War allowing the shipments held up to pass into the hands of the
consignees and we hope that ere this letter reaches you something has been
done in this regard.
Those prospects with the Minister of War must have been fairly
good, it seems to me, if you have a man in the Brazilian department,
as you say, giving tips to watch things for you.
Mr. Monaghan. No, sir; I do not believe from what I know, that
(hat man would be able to do an3^thing for us in watching a situa-
tion as mentioned here. This is after the permits have been issued
and shipments have been made, some trouble may arise J own there,
MUNITIONS INDUSTRY 2553
local or temporary, and they immediately embargo everything, even
the items which are in transit, and hold them in the customs house
at the port of entry. Then it is a question of the Minister of War
lifting that embargo, and I am quite sure that this clerk would not
be of any assistance to us that way.
Senator Bakbour. Do you have anybody who would be of assist-
ance to you?
Mr. MoNAGiiAN. No, sir.
Senator Barbour. You have no connections in that respect?
Mr. MoNAGiiAN. No, sir.
Senator Barbour. Sometime in June 1930, Mr. Barata tried to do
some business with the Brazilian Government and considered select-
ing an intermediary. He wrote you on June 23, 1930, a letter, which
I ask be appropriately numbered.
(The letter referred to was marked " Exhibit No. 986 " and is
included in the appendix on p. 2630.)
Senator Barbour. I will read from the bottom of the first page of
that exhibit:
I prel'erred, therefore, 8ome firm that has not ouly been selling to the Gov-
ernment but that also has enough pull and power to obtain the Government's
preference to a proposition it offers irrespective of how attractive other propo-
sitions made by different concerns may look t^ the Government. I found this
firm, one of the partners of whieli is Dr. tMrmiuo de Mello who is a son-in-law
of President Washington Luiz. There are two other partners who are very
well known in Government circles. The name of one of them is Dr. Max
Leitao with whom I instituted friendship and dined together a couple of
times.
Now it was about this time, or shortly thereafter, that the Bra-
zilian revolution of 1930 broke out, and one of the issues that brought
about that uprising was the wholesale graft in the regime in power
at the time.
On page 2 of this same letter I would like to read a passage which
reads in part as follows :
He told me furthermore and confidentially that the business for the Euro-
pean factories was obtained through intervention by their respective ambas-
sadors. That the Italian Ambassador upon knowing what the price quoted
by Nobel was went personally to the President of the Republic and obtained
his consent to cutting down the share given to the British factory and giving
a part of the order to the Italian factory. He also confirmed that the Ameri-
can factory's bid was turned down.
Can you tell us, any of you gentlemen — Mr. Monaghan particu-
larly, or Mr. Beebe — if ambassadors act in this way as salesmen for
munitions.
Mr. Beebe. We have no positive information on the subject, but
our agents at times have intimated that their governments assisted
them in making sales. Just in what way. I do not know.
Senator Barbour. Do you know anything about it, Mr. Mon-
aghan ?
Mr. Monaghax. To the same effect as Mr. Beebe has just said.
That is all.
Senator Barbour. On page 3 of this letter your agent Barata seems
to think that Souza Sampaio & Cia., the firm which was selected
to act as intermediary in his proposed business, is even more influ-
ential than ambassadors, because in the third paragraph on the third
page he says :
2554 MUNITIONS INDUSTRY
Witli the connections I have made I can assure you that no Government
business shall be given in the future to any of our European competitors
without our being given a break. I dare say that a firm as influential with the
Government as Souze Sampaio & Cia., Ltda., can shut out any competitors
having even Ambassadors as intermediaries.
It was a pretty good connection, in other words, he was sug-
gesting ?
Mr. MoNAGHAN. I would say he was bragging, in any event,
because he has never been successful in getting any military busi-
ness for us in Brazil.
Senator Barbour. He never got any business for you, Mr.
Monaghan, and he never appointed any agent?
Mr. Monaghan. Not at that time. It was only recently we got
an agent to act on military business. By the way, I want to modify
that a bit by saying in 1933, I believe it was, we did have a sale to
the Federal Govermnent at Rio, through an agent we appointed on
.50 caliber cartridges at that time, and it was not any of these firms
he mentioned.
Senator Barbour. With this company's position of force or power
with the Government, why do you suppose that was the case? Do
you suppose there was any graft there between them and the Gov-
ernment in turn ?
Mr. Monaghan. I do not know.
Senator Barbour. I am not trying to say that you are a party to
that, but I am trying honestly to find out whether there are link-
ujis Avhich are detrimental and harmful, entirely aside from the
problem which confronts anybody who has to sell munitions and
I am convinced that there is a lot of graft down there, from the
study which I have made since I have been on the committee. It
is pretty evident. I think everybody feels that is really so. It is
not that I am blaming the American manufacturer alone for that
situation. I think he has got a situation he has got to face or keep
out of the market, but we want to try and have the whole picture
in the end here, gentlemen. That is my point of view on it, and
anything you can do to help us on it, is just what we are after.
Xow I Avould like to read from a letter of Mr. Monoghan to Mr.
Barata, under date of August 8, 1930, which I offer for appropriate
number.
(The letter referred to was marked "Exhibit No. 987" and is
included in the appendix on p. 2632.)
Senator Barbour. That reads in part :
We absolutely agree with you that in government business, the prime
essential is to liave the right connection ; otherwise price, quality, or other
considerations are of no avail.
Fiuthermore, it is necessary to nurse these contracts from time to time ;
but the extent of the time and money to be employed has to be gaged by
the potentiiil business that might ensue. Before long you will no doubt know
more on this score and in particular the prices we would have to quote in
Older to obtain the business. Then we can tell if we can meet competition.
Now you say yourself to your man in Brazil that price, quality,
and other considerations are of no avail, and that it is essential to
have the right connection. Now is that the proposition? Do you
mean to say, if you can get the right indi"\ddual, that he, without
any gratuities, or anything of the kind, is the fellow who can get
the business?
MUNITIONS INDUSTRY 2555
Mr. MoNAGHAN. Oh, no. First off, in business dealings I think
the most important factor is that of confidence in the man with wliom
you are dealing.
Senator Barbour. That is true.
Mr. MoNAGHAN. And it follows from that that he won't liave any
chance at all, they won't listen to him as to price, quality or any
of those things, unless he is a man in whom you know 30U can have
confidence for fulfillment of anything he enters into.
The second part of that is again reminding him to keep away
from these rainbows. I have had a number of occasions with Barata-
chasing rainbows down there, and I wanted to keep him in the com-
mercial business, which is the big part of our business, and wanted
him to put his time on that instead of playing all around with these
things.
Senator Barbour. Mr. Chairman, we will go to the next exhibit,
in which you, Mr. Monaghan — I think it is; the name is cut off at
the bottom, but I am quite sure it is — give a little sales talk. Of
course, at that time you did not know that the E. I. du Pont de
Nemours Co. would interest themselves in you. I offer that letter
for appropriate number.
(The letter referred to was marked "Exhibit No. 988" and is
included in the appendix on page 2633.)
Senator Barbour. However, I will read some of that letter
[reading] :
We have to hui'i'.v in order to catch today's mail. The latest news we liave
this moming is that the Brazilian Government resigned and the new people
are in power. Wliat the developments are within the next few days remains
to 'oe seen and no doubt we will have your cable advices as to prospects for
business.
Of course, the change in government is no absolute reason to our way of
rhinking that there will be no further inquiries for Government supplies, but
rather we are inclined to think the new Government will consider it necessary
to replenish their stocks of cartridges and perhaps even build up the stocks
beyond the point at which they were before the trouble. Of course, we are
wondering what your status will be with the new Government, that is to say,
if you will be accepted as a friend in view of your negotiations for attempting
ro sell those formerly in power and we await with interest your advices on
this point.
Then, to skip to page 3, the letter continues [reading] :
In all these negotiations for Government business, you as well as ourselves
have been working up toward the top instead of the way some big companies
do — from the top down. In other words, you find what you believe is a good
intermediary and then try to reach the Minister of War or whoever else has
authority in placing orders. The du Pont Co. makes it a practice of finding
out who is the right man to work with, the Minister of War, the head of the
Ordnance Department, or whoever else it may be, and then asks that authori-
tative person who it is believed would be a good agent to apiK)int for negotia-
tions. But again we want to say no details are to be arranged by you with
an intermediary without our authority after we have received complete dfta
from you.
Now, that you and the du Pont Co. are one, you can sort of work
both ends against the middle, because you begin at the bottom to
start working up, and you report that they begin at the top and work
down.
Mr. Monaghan. If you will read the whole letter and tie it in
with the letter before of Barata and the numerous people he is talk-
ing about, who never reach any conclusion, " that man is good to
work with ", " this man is good to work with ", " the other knows
2556 MUNITIONS INDUSTRY
how to go about the business; he is acceptable to the Government."
I am trying to tell him how to stop this playing around so much and
get a person who was acceptable to the Government.
Senator Barbour. The interesting thing, as I read it — there is a
lot in the letter here which I certainly am not avoiding because I feel
it would help you if it were read — that certainly is not so.
Mr. MoNAGHAN. This letter is giving him a calling down for the
way he conducted his business, or attempted to conduct it, and got
nowhere.
Senator Barbour. Do you want all of it read?
The Chairman, It will all be in the record.
Mr. Monaghan. That is enough for me.
Senator Barbour. I am not trying to avoid it, but it is a long let-
ter and a lot of people want to get home. It brings out the point,
however, that you made, very clearly : This man that you wrote to
is finding a man at the bottom and working up from him, and then
you go on and tell him what you feel is the du Pont procedure,
which is the reverse,
Mr. Monaghan. If you get the right man that way, he can be of
much assistance to the War Department or Ordnance Department
in the way of ballistics, which many of these nations do not have.
Senator Barbour. The next letter is dated November 30, 1932,
W'hich I feel is of considerable interest to the committee, and I
would like to read the first two paragraphs. This is a private and
confidential letter from you, Mr. Monaghan, to your man, Barata,
that we have been talking about.
I will offer it for appropriate number.
(The letter referred to was marked " Exhibit No. 989 " and is in-
cluded in the appendix on p. 2635.)
Senator Barbour. I read :
Since we received your letter saying the Government was going to close up
the local ammunition factory in Sao Paulo, we have given a lot of thought to
that situation, for we recognize it is a mighty important one to our interests.
Wliat we are going to say to you in this letter we want treated strictly confi-
dential.
In the first place we want to tell you that nearly all the companies in this
country and Europe wh.o would be benefited by having the local factory out of
the way, agreed some time ago not to enter bids with Mr. Matarazzo for his
company, for we all felt by standing off the factory would eventually fail. This
is the reason we never turned a sympathetic ear to any of the overtures made
through you for us to become interested in the purchase of the company.
Now, when did the American munitions companies agree that this
Brazilian munitions factory ^vould fail? Do you know when the
agreement was arrived at?
Mr. Monaghan, I never knew of any agreement directly with us
on that proposition. I heard in Europe in 1929 that "Winchester had
been apj^roached on the purchase of that factory. I never questioned
Winchester at any time after that whether they were or not. But I
understood the}^ were not going to do anything about it. In my
opinion, at that time, at the time of that letter, all the ammunition
companies were in such financial condition I did not believe they
would be interested in paying any big money to purchase that
factory there.
Senator Barbour. Then you were not really quite right in telling
him. Of wliat he would infer, as I would, in reading the letter, that
MUNITIONS INDUSTRY 2557
you knew that all the manufacturers were probably standin<»: off so
that there would not be any bid and the thin^T would flop ?
Mr. MoNAGHAN. That is not the true picture; no, sir.
Senator Barbour. I will read paragraph 4, if I may [reading] :
It might be that some incentive could be given tlie Government official who
was responsible for the scrapping of the plant to see that he went througli with
these plans. With all the ammunition factories practically broke nowadaj's,
not much could be done in the way of paying worthwhile money, but we are
thinking the result possibly could be accomplished if handled diplomatically,
at a vei-y small cost.
Now, is this a suggestion that your agent, or anyone, trj" to pro-
hibit anybody or try to corrupt anybody ?
Mr. Monaghan. No, sir; that letter was written by me without
anyone in the company knowing that I wrote it.
Later on — and I can give you the copies if you desire — I asked
Barata if he had received it, and he said he never received the letter.
He said, " Send me a copy of it."
I said, " No, too much time has elapsed now. Just forget it."
So that this letter, so far as I know, never reached Barata.
Mr. WoiiLFORTH. Have you that letter with you?
Mr. Monaghan. Yes, sir. Do you care to have it?
Mr. WoHLFORTH. I would like to see it, if you have it.
Senator Barbour. I will read it on to the finish, Mr. Chairman
[reading] :
What we want you to do is to watch this situation from every angle and add
any propaganda you can with the proper Government officials to the end that
the plant be scrapped.
This is a rather sketchy plan we are presenting to you and you want to be
careful you do not make any false moves. As a matter of fact you should do
nothing where you would appear as a principal. First and foremost we want
every bit of information from you as to what transpires and is intended in
connection with this local plant. Your suggestions as to what could be done in
furthering our interests in connection with this factory will be anxiously
awaited by return air mail.
Mr. Monaghan. I had a letter from Barata prior to writing this
letter, saying that it was the thought — in fact, a good deal more
than the thought — of the central government at Rio de Janeiro to
close this Matarazzo ammunition plant near Sao Paulo because in
the revolution, prior to this letter, the Matarazzo plant had sup-
plied ammunition to the rebels at Sao Paulo. They made both
types, both the military and the commercial. We felt that if they
moved the military equipment to the Federal ammunition plant at
Rio de Janeiro they would not have any interest in the equipment
for the commercial ammunition.
Senator Barbour. I see.
Now, Mr. Chairman, I do not want to add anything in conclusion
of my own, because I do not know that it is necessary or appropriate,
but it seems to me that this whole story here which has to do with
many instances which seem alike to me. although they may be de-
j^cribed differently, are simply cases of where the American manu-
facturer is helpless in the situation. He has got to indulge in these
practices or he does not get any business.
And, by the same token, the purchaser is interested first in it
because of what he selfishly makes out of it. By the same token,
again, it seems to me that the greater his purchases can be, the more
2558 MUNITIONS INDUSTEY
graft he makes, when we come back to the stimulation of munitions
that has been mentioned time after time, and the part that the
receiving of graft plays in that.
I look upon it as being a problem in the situation more than what
he is selling.
Mr. MoNAGHAN. May I say, Senator, that I have traveled in some
Latin American countries, some little time in China, and many other
countries, and never in any of my business experience have I paid
one cent of graft.
The Chairman. Why do you countenance it on the part of any-
one representing you?
Mr. Monaghan. We do not.
The Chairman. You have.
Mr. Monaghan. Well — I do not know of any case.
The Chairman. How?
Mr. Monaghan. I do not know of any case.
The Chairman. You have had reports made to you of what it was
necessary to do. You have reason to know that those things were
being done by your agents, have you not?
Mr. Monaghan. No, sir.
The Chairman. What prompted you to make the contribution to
the campaign fund?
Mr. Monaghan. I explained to you, and the record shows, it was
more of a personal matter of friendship with Dr. Morales.
The Chairman. In a letter of October 4, 1930, to Mr. Barata in
Brazil, upon what authority did you undertake to declare as to what
the policy of the du Pouts was in their sales of military supplies,
Mr. Monaghan?
Mr. Monaghan. Of working from the top, so as to find out the
man who was persona grata to the authority, you mean?
The Chairman. Yes. Your exact remark was this :
The du Pont Co. makes it a practice of finding out wlio is the right man to
work with, the Minister of War, the head of tlie Ordnance Department, or who-
ever else it may be, and tlien asks that authoritative person who it believes
would be a good agent to appoint for negotiations.
Mr. Monaghan. I had known for a number of years various
men in the du Pont organization, and naturally talked things over
with them of mutual interest. I do not recall who in particular
would be the author of such an idea.
Senator Barbour. I might just mention, Mr. Chairman, if I may,
that these exhibits that I presented have not all been numbered, but
should be before another set comes into existence.
The Chairman. The reporter will take care of that.
The committee will recess until 10 o'clock tomorrow morning.
(Thereupon, at 5 p.m., the hearing adjourned until tomorrow,
Tuesday, Dec. 11, 1934, at 10 a.m.)
This concludes that part of the testimony known as " Part XL
Chemical Preparations Following the War and Interchange of
Military Information." At this point the committee took up the
question of " Relationship of the Munitions Makers to the Govern-
ment and International Connections in the Chemical Industry."
(See Part XII.)
APPENDIX
Exhibit No. 909
[File : Publicity bureau. C. K. Weston. European correspondence!
London, December JO, 1920.
Mr. Charles A. Meiade.
Vice President, E. I. du Pont dc 'Nemours d Co.,
Wilmington, Del., V. S. A.
Dear Mr. Meade : My mission seems to be going fairly well ; I have met a
number of our American newspaper correspondents, and have, I think, suc-
ceeded in selling them our idea. One cannctt tell of course, until the results
begin to appear in American newspapers.
I am sending you clippings giving details of the debate in the House of
Commons, along with other matter which I think is interesting.
It appears that the vote does not end the matter for the bill goes auto-
matically to a committee which, as far as I can understand, will discuss such
changes as it thinks should be submitted on final passage. My understanding
is that there will be no changes, and that the action on second reading is,
in the natural course of parliamentary procedure, likely to stand throughout.
This committee meets again on Monday, and I suppose will then finish up its
work.
I believe that the great strong point to be brought out by our friends in the
United States Senate is, that with Japan, France, and England all protecting
their dye industries, the United States is left as the only hojpe for the Ger-
mans. They will, without doubt, concentrate over there and give us a par-
ticularly hard fight.
You will notice in the report of the debate and in the other clippings that
the British bill had exactly the same kind of opposition as that with which
we had to contend at Washington. The minority of the consumers raised the
same cry about poor quality and insuflScient quantity. Their statements of
so-called facts were as inaccurate as those made by the opposition to us.
I shall remain here next week to see this bill through and to continue my
efforts to stoke up the interest of those whom I came to see.
The correspondents in Paris report to the offices here so it is apparent that
if the men in London get the right angle it will be wonderfully helpful.
In Paris I shall devote my energy very largely to bringing the correspondents
in contact more closely with the American sources of news, at the same time
trying to give them the proper angle so that they will appreciate the importance
of the news.
It is difficult to make a definite report on what I think I have accomplished
here, but my feeling is that the work is well worth wiiile.
If things continue to move along well I shall be able to leave here early in
January. I hope to return on the Imperator which I think sails January 8.
Will you advise Byrne of the contents of this letter, and pass along to him
some of the clippings, so that lie too may keep informed and be ready to take
such action as suggests itself from your end.
Very truly yours. (S) C. K. Weston.
W/DGO.
Exhibit No. 910
[File : Publicity bureau. C. K. Weston, European correspondence]
[Draft]
Wilmington, Del., Dec. 3, 1920.
* Weston.
Understand Signor Tittoni has raised League of Nations interest in national
monopolies and their danger to world peace (Stop) Urge attention of
* Pencil markings. 2559
2560 MUNITIONS INDUSTEY
League be drawn to clanger of I'esumption of German organic chemical ;infl
dye monopoly (Stop) This is l»y far the most menacing and deserves im-
mediate attention of League who might welcome American support on a
chemical disarmament measure (Stop) You cannot destroy organic chemi-
cal factories having peace functions but must ensure world redistribution
*of organic chemical producing capacity by support of national protective
legislation (Stop) This is a critical measure on which all disarmament
schemes must stand or fall (Stop) Disaimament is a farce while Germany
retains organic chemical monopolies (Stop) You can get full details in
disarmament chapter or Major Lefebure's book now held by Whetmore, British
Dyestuffs Corporation, Imperial House, Kingsway. He *has been cabled to
confer (Stop) Suggest consult Lord Moulton on best means to obtain early
consideration of this question by League (Slop)
Exhibit No. 911
[Moulton file]
MEMORANDUM BY MAJOR LEFEBURE, DATED LONDON, FEBRUARY 1, 1921
The chief points which I thinli we should both bear in mind in connection
with dye legislation and disarmament questions are the following:
I. Dye legislation promotes the redistribution of organic chemical capacity
throughout the world. This move from Germany monopoly toward world
equilibrium will not, as some of your press stated, perpetuate chemical warfare.
It will remove the biggest incentive for its use ; that is, the monopoly of pro-
duction.
You will find the whole case stated in my memorandum which has been pub-
lished in the Chemical and Metallurgical Engineering Journal for January 5th,
1921. I left this statement as a straight uncorrected dictation with General
Fries and Mr. Poucher, and apparently they have thought fit to give it publicity.
II. Everything possible should be done in America to include in the treaty
or in official disarmament discussions the conditions that the relevant clauses
of the Treasy of Versailles shall be applied to that huge arsenal, the I. G.
These clauses are as follows;
((■) Article 168.
This demands limitation of munitions and war material production to
factories or works approved by the Allied and Associated powers.
Numbers of plants in the German dye combine were either converted, adapted,
or actually built for the production of poison gases or nitric acid for explosives.
Article 168 gives us the right to restrict the number of these plants. As the
use of poison gases in Germany is forl)idden by the treaty, Germany should
not be allowed to retain any of those plants which were used for poison-gas
production. There can be no other possible way of reading article 168 as far
as the plants actually built for poison gases and war nitric acid are concerned.
Article 168 refers to any war material whatever, an unqualified statement.
(ii) Article 169.
This requires that any special plant intended for the manufacture of war
material, except such as may be recognized as necessary for equipping the
authorized strength of the German Army, must be surrendered to be destroyed
or rendered useless.
In addition to certain specific poison gas plants a large proportion of the
Haber process capacity should logically, be dealt with under this article of the
treaty.
What are the numerical facts of the ease?
About four thousand tons per luonth of poison gas material were produced
during 1918 by the German dye combine in converted or expanded dye plants.
This enormous output represented about one-third of the pre-war German dye
capacity, and covers a number of new plants built specifically for poison gas.
To leave them untouched while article 169 exists is to admit that these plants
represent authorized equipment for the German Army ! This is the anomalous
but logical conclusion of the present situation.
With regard to the Haber process, Germany has capacity of at least two
hundred thousand tons of nitrogen in excess of all her pre-war needs. She
either requires this for: —
(ft) World monopoly.
* Pencil markings.
MUNITIONS INDUSTRY 2561
If she acliieves this we are leaving her witli a criminal advantage in eventual
explosives production, seeing that the dye and nitrating plants of the I. G. are
all literally within a stone's throw of Oppan and Mersebourg. Germany has
a complete and mighty arsenal left untouched by the Allies.
(&) Actually contemplated militarif ^^e.
Tlie Governnient support afforded to the Haber developments is consistent
with the military use of the plants. Whatever its alternative peace time uses,
this enormous excess Haber capacity is an exceedingly weighty military factor
far in excess in quantity to the standard laid down in Article 169.
(iii) Article 171.
This forbids the manufactui'e of asphyxiating gases and analogous materials
in Germany.
The point arises as to the value of this denial to Germany of the right to-
manufacture such substances. Obviously, in case of war, the country pos-
sessing these factories and willing to use them for such purposes, could do so.
But let us take the case of Germany. It may well be there, however, that
the possibility of rapidly converting, unhampered forty thousand tons per annum
of producing capacity (a low estimate of the German poison gas production by
the I.G.) for the use of vital war chemicals would be an important factor in
her decision to make war.
It may he that by taking certain measures in peace regarding these potential
arsenals, production of poison gases in war would be prevented because war
itself would be prevented, and the need to produce would not arise. This is not
in the least an unreasonable conclusion. Chemical warfare was rapidly develop-
ing to meet the large number of technical and military situations which had
formerly been met by the use of explosives. The League and treaty propose to
limit the possibility to use explosives by actually destroying and limiting ex-
plosives plants in Germany. It is therefore a fair conclusion that the unfettered
use of this enormous capacity for filling shell and other devices with chemicals,
alternative to explosives, the latter not being available, would be a serious factor
in a decision of war. This advantage would be comparable with the possession
of a large, rapidly mobilizable force or a large number of guns, or a fleet.
(The I. G. itself produced 15.000 tons of explosives per month and can produce
much more, however.)
It is therefore important to consider what steps could be taken in peace to
supervise these German plants in such a way that any undiscovered attempt to
produce chemical munitions would be impossible ; in other words, to neutralize
this inducement for war. In our opinion article 171 is almost valueless unless
some control and inspection of these plants is arranged to ensure its execution.
However unpalatable to Germany, such action is merely a logical conclusion of
rheir abuse of the possession of this organic chemical world monopolv.
(iv) Article 172.
This obliges Germany to disclose the nature and mode of manufacture of all
explosives, toxic substances, or other like chemical preparations used by them in
war or prepared by them for the purpose of being so used.
It may not be obvious, but it is nevertheless true that the full disclosure de-
manded above would function as a measure of prohibition against the use of
poison gas by Germany in any future war. A ]ioint which cannot be too strongly
emphasized is the following : War chemicals lose a large chance of decisive use
liy an enemy if one is aware of their nature and mode of preparation. Knowl-
edge of these facts at once enables us to develop protective measures. This is
the supreme lesson of the chemical move and counter move of the last war.
Has Germany disclosed these secrets? It does not appear so. An analysis of
her production of poison gas and use against us on the front reveals the signifi-
cant fact that all the important discoveries and research decisions were made
in time for production to commence in 1915, 1916, and in a few cases l9l7. This
implies that a vast amount of research whose results never appeared on the
front must have occurred subsequent to this, and these discoveries and informa-
tion are infinitely more significant if left unexposed.
We are not yet even in possession of full information on the manufacture of
tliose substances whose plants the " Hartley Mission '" identified in 1919. vriiat
detailed knowledge have we, for example, on tiie German production of carbon
monoxide for phosgene, yet allied manufacturers stumbled at this and similar
problems. Phosgene production was removed to Mersebourg, and the plant there
must have embodied many improvements which we should know.
We must demand the full execution of this article of the treaty.
2562 MUNITIONS INDUSTRY
Exhibit No. 912
l[File, publicity bureau, Thomas R. Sbipp — Correspondence dyes. No date from 1921 filo i
Memorandum
Our present and proposed activities.
For Mr. Atherton.
From Mr. Braddock.
I. Written publicity :
In conducting this we have recourse to two media :
A. Tliomas R. Sliipp & Company Iiandles news material and illustrated
mats from Washington ; specializes on the country press and
newspapers in smaller cities.
B. Bronson Batchelor, Inc., works along the following lines :
1. Special articles in New York daily and Sunday newspapers.
2. Editorials to 1,025 newspapers, one in each city.
3. Illustrated mats to selected newspapers, varying from 400 to
1,025, according to circumstances.
4. Special articles supplied through syndicates — illustriation :
Herty full-page articles to 40 leading Sunday newspapers.
5. Member of his staft" supplying special articles and telegraphic
items re Finance Committee hearings, disarmament confer-
ence, administration backing, etc.
6. Supplies newspaper editors with statistical facts bearing on
the relationship of the organic chemical industry to the
public.
7. Publishes Current Opinion, a 4-page newspaper comprised
entirely of editorials upon the necessity of establishing a
selective embargo for the protection of the American dyes
industry.
8. Conducts the Institute of American Business, which mails
Current Opinion and other material to Senators, Con-
gressmen, and selected editors.
9. By daily conference learns latest situation and gives benefit of
his judgment based on intimate knowledge of what we are
doing.
II. Speakers' publicity : Letters were sent to chambers of commerce, Rotary
clubs, Kiwanis clubs, National and State conventions offering a speaker
on this subject. Somewhat over 200 requests for a speaker were received.
Using virtually all the time of —
Dr. Charles T. Baylis, described on attached folder.
Hon. Gilbert A. Currie, former Congressman.
Dr. Elwood Hendrick, three times president of the Chemists Club.
Together with frequent engagements for —
Dr. William H. Hale Dr. William H. Hunter
Dr. J. Merritt Matthews Dr. Charles S. Parsons
Prof. H. G. Byers Dr. Charles E. Coates
Prof. H. E. Simmons C. F. Williamson
Dr. W. Lee Lewis F. G. Moses
A. B. Carter Prof. H. K. Benson
Dr. J. Howard Matthews
We pay fee and expenses, varying from $40 to $100 each. Concentrating on
Indiana, Ohio, Illinois, Pennsylvania, Iowa, New York, Wisconsin, with
scattered engagements throughout the other States. Mr. Gleuzing and
Mr. Schmitz, together with a stenographer and typist, are devoting entire
time and a great deal of overtime to handling this speakers' bureau.
III. Personal interviews :
A. Virtually all of Mr. Abbott's time is required calling on big men like
Mr. Firestone, Mr. Edison, Mr. Schwab, Mr. O'Reilly, Mr. Brisbane,
and other leading business men.
B. Mr. Weddell similai'ly is making and maintaining numerous con-
tacts, such as the Associated Advertising Clubs, selected firms which
sell materials and do business with some of the larger companies
in the industry, etc.
C. Mrs. Emmons is engaged in building up contacts with the women's
organizations, particularly in the 7 States enumerated in a pre-
ceeding paragraph.
MUNITIONS INDUSTRY
2563
The object of all these contacts is :
1. To educate individuals and organizations concerned with respect to
the necessity of the dye embargo.
2. To get them to send resolutions and personal letters to their Sena-
tors and Congressmen.
3. To get them to furnish interviews for newspapers, etc., etc.
Note. — There are other activities arising daily which cannot be fore-
seen and therefore cannot be enumerated in this outline. For illustration :
This morning Stuart Godwin called on me to say that if we can supply
Frederick J. Haskin, of Washington, who is the accredited representative
of loO daily newspapers, some of them the largest in the United States,
with 100,000 leaflets on our subject, Mr. Haskin will be glad to advertise
the leaflet in his 130 newspapers and to mail these leaflets for us, mak-
ing no charge either for the advertising, for the mailing, nor for any
other expense connected with this. All we have to do is supply the leaflets
and he will do the rest.
Again, the Dye & Chemical Section of the "War Trade Board has sent
an innocent-looking letter to certain dye manufacturers, telling about an
application for an importation license by a certain mill. This kind of
innocent-looking, dangerous activity must be handled.
In view of the above, you will understand that this memorandum
attempts to be only a skeleton outline of some of our more important
activities.
(S) Harold Braddock.
Sept. 12, 1921. Harold Braddock.
Exhibit No. 913
American Dyes Institute:
Chemical Alliance Inc.:
1918.
. $2,400.00
1918
550. 00
1919
. 13, 000. 00
1919
25.00
1920
1921 -.
21 773 49
10,100.00
Total.
575.00
1922
8, 167.70
1923
1,147.21
T. R. Shipp Service:
1922
2, 500. 00
Total
56,588.40
Total
2, 500. 00
Synthetic Organic Chemical Manufac-
turers Association:
Whaley-Eaton Service:
1921
250.00
1919
73.00
1922
14,050.00
1920
238. 15
1923
21, 966. 67
1921
238.50
1924
14, 687. 00
1922
485. 46
1925 --
9,934.50
1923 .
305.00
1924
391.60
Total...
60, 888. 17
1925
Total
343.00
Manufacturing Chemists Association:
2, 074. 61
1918
1919
75.00
384. 57
John McNeeley:
1920
375. 00
1921
3, 033. 00
1921
375. 00
1922...
78.00
Total. -_
3, 033. 00
1923
75 00
1924
375.00
Benjamin Raleigh:
1925
75.00
1921
Total
Sporting Arms & Ammunition Manu-
100. 00.
Total
1,812.57
100.00!
Chemical Foundation:
1920
9, 570. 41
facturers Association:
1921
16, 698. 72
1926
933. 33
1922
46, 986. 48
1927
5, 236. 02
1923
64,249.17
1928
5,000.04
1924
33, 454. 88
1929
3, 672. 45.
1925
81,503.23
1930
5, 158. 24.
1931 .
3, 263. 69
Total
252, 462. 89
1932
2, 713. 24
1,316.72
2, 298. 96
American Chemical Society:
1934 to date 11/20
1918
66.00
1919.
436.00
Total
29,592.69
1920
500.36
1921
226. 78
1922
1,068.80
1923...
492. 49
1924
1,409.64
1925
330.00
Total
4, 530. 07
2564 MUNITIONS INDUSTRY
Exhibit No. 914
[E^le, Publicity Bureau, Lobby Inquiry — Legislation Dyes]
* Ir^nee du Pont
From P. S. du Pont.
(Address given by Dr. Wm. J. Hale, of the Dow Chemical Company, Midland,
-Michigan, before the Flint Rotary Club, Friday, December 16, 1921.)
THE WAR AFTEK THE WAR
Not until the middle of tlie nineteenth century do we find any real scientific
advances in the field of industry. The Bessemer process for the production of
steel inaugurated this period in the inorganic world ; simultaneously Perkin's
synthesis of a natural dye, mauve, marked the advent of synthetic dyes in the
organic \\orld. Discovery after discovery, invention after invention, aided and
stimulated the progress of man thereafter. The Anglo-Saxon directed his atten-
tion more particularly to the inorganic, whereas the Teuton devoted himself
primarily to the organic, though in no sense relinquishing the other. Scientific
progress was everywhere apparent, but the Germans were the only scientists to
sense the importance of great detail. In this no more favored field can be
conceived than organic chemistry, and thus by 1914 upwards of ten thousand
synthetic dyes and one thousand synthetic medicinals had fallen to the credit of
German endeavor. The Germans alone grasped the message of the future. It
was verily the voice of the ages, reverberating through aeons of civilization :
•• Chemistry is the industry of tlie terrestrial sphere — the only industry given to
man. Inorganic chemistry is but a small part thereof, comprising less than the
one one-hundredth part of the organic domain, and the latter is doubling itself
every ten years. Organic chemistry dominates every man, woman, and child,
every nation." Is it any wonder that the Germans devoted themselves with all
vigor to the study of chemistry and especially to organic chemistry? Suffice it
to say that in actual scientific attainments Germany far surpassed all the other
civilized nations of the day. So far ahead was she that we seemed as mere
pygmies in comparison. Though we called the Germans barbarians, it was we
who were actually the barbarians in science, though in matters of business and
morals " barbaric " is far too mild a term to describe German perversions.
In the fall of 1913 Professor Haber sent word to the German war office that
the Oppau plant for synthetic ammonia was in readiness. Germany had nothing
more to fear from an English blockade against Chile saltpeter with an inde-
pendent source of ammonia and consequent nitric acid at home. War soon
followed, as you recall, and unforeseen hazards forced the Germans to fall back
upon their lines of defense.
On April 22, 1915, chemical warfare was first inti'oduced ; the Germans essayed
to discharge chlorine into the Canadian trenches. Had the German Army been
provided with masks and a plenteous supply of this chlorine, nothing could have
stayed their speedy approach to Calais. After numerous gases had been em-
ployed by the German Army, they finally threw over " mustard gas " against the
English at Ypres on July 12, 1917. A kind fate seemed ever to smile on the
Allies throughout the war. The Germans could not prepare more than 5 tons of
mustard gas per day. Had they hoarded their supply for later use in limitless
quantities what a different story would now be told.
At the peace conference the fates at last smiled upon Germany. The Allies
were here beset with many, many learned savants — men learned in all but the
science of clii^mistry, by which and for which the war was really waged. The
peace treaty was drawn up entirely from the standpoint of modern mediaevalism,
or that period just preceding the advent of chemistry in the world of industry,
and the result was appalling. Thus the " Bungle of Versailles " was given to
man and passed forthwith into obsolete history. Its four points, from the stand-
point of tlie future, may be characterized as follows :
1. National hatre<ls engendered by silly apportionments of trivial territory.
2. Germany financially crippled but stirred to industrial activities, such as
will soon reinstate her in tiie position of world leader.
3. Germany deprived of those useless adjuncts of a nation's pride— her bat-
tleships — and thus saved from wasting her wealth on monstrosities of the
future.
Written in ink.
MUNITIONS INDUSTRY 2565
4. As a gift from the gods there was left to Germany all of the implements
for future wars, and she was asked to develop tliem to her best ability.
What a tirade on justice ! The " Bungle of Versailles " aims to create in
Germany the greatest power for industry and for war on the face of the earth.
Oh, that there might have been just a few level-headed business men of science
in command at Versailles; men who knew not one damned thing about history
or economics, not one blessed thing about the wishes of Hottentot or Hindu !
As matters now stand, what have we accomplished for the betterment of the
world? We have wrecked thousands upon thousands of homes and there are
some who wonder at the lack of confidence and diligence among us. Chemicals
comprised twenty-seven percent of the munition shells used by Germany at the
close of the war. The greatest German chemists today have already announced
that chemicals will henceforth constitute Germany's mightiest weapon for future
combat. We are at the very beginning of the great chemical and electrical age.
Can you imagine the leaders of science willing for one single moment to relin-
quish their prowess to legal advisors or diplomats when the honor and integrity
of their respective countries are at stake !
In spite of this, our dreamers will tell you that chemical warfare is to be
banned by civilized nations. You never heard a real American chemist inti-
mate any such damned nonsense. He knows it is the future weapon for all
wars from now henceforth. The type of man striving to relegate chemical
warfare to antiquity is just that type who decried the use of gunpowder in
place of spears. When we have the most effective weapon of all time, when
we are made to realize that this weapon is the most humane ever introduced
into war by man, and when we come to know that the nation most advanced
scientifically is the nation who will have the greatest advantage, pray what
kind of being is he who will have us revert to savagery, making of war a sort
of huge slaughterhouse?
The next war, which will come in its time, will be waged entirely with chemi-
cals and high explosives, usually together. Combatants, as well as noncom-
batants, will be supplied with suits of armor — a la Jules Verne's " Men from
Mars "^the mask in itself will not suffice. The old-time military manoeuvers
must give way to chemical discipline. Airships iind dirigibles will constitute
our flying squadrons for offense and defense and our land armies for future
struggles will be officered entirely by trained chemists. Together with the
"Aery " and Army, we shall have need of the, fast cruisers of our Navy ;
cruisers with airplane landings, and also submarines, no doubt similarly
equipped. The aerial torpedo will have come into its own and be made the
carrier of our poison gases. Our battleships are things of the past. Tlie
Washington Conference now in session might just as well make the whole leap
as only a part. Destroy all battleships. They are of absolutely no use what-
soever either in offense or defense and it will be a godsend to man to be rid
of such monstrosities. Their only possible use today is as scarecrows for
smaller nations. Give me a spot well protected, such, for example, as the
Dardanelles. Give me a couple dozen airships well equipped with high explo-
sives and chemicals. Allow me a hundred or more aerists and I will defy the
combined fleets of the world. Not one vessel could ever get close enough to us
to do any material damage; we should not attempt to sink a single battleship.
Why waste heavy ammunition when it is so simple a task to annihilate the
crews !
Let us now turn our attention to Germany. Let us visit the Badische-
Anilin und Soda-Fabrik at Ludwigshafen, and there note the manufacture of a
single dye. Let us take, for example, indigo, where some 800,000 pounds per
month constitute the output of one plant. Alcohol is passed over heated alu-
mina, thus becoming completely dehydrated into ethylene. Tliis gas is then
led into chlorine- water (or its equivalent) and the ethylene chlorohydrin thus
resulting is concentrated to the desired strength, whereupon it is heated with
aniline and the oily residue fused with caustic potash. From this fusion indigo
is at once obtained by solution in water and oxidation by air. Were Germany
to be drawn into war, this entire plant may l)e converted into a mustard gas
plant in less than an hour's time. In place of the aniline in the indigo process
above, a cheap chemical — sodium sulfide (obtained by the reduction of Glau-
ber's salt with coke) — is substituted, and the homogeneous solution thus ob-
tained is concentrated and treated in large tanks with hydrochloric acid. The
oil product settling out at the bottom is the well-known mustard gas and may
be drawn off at will. Truly this particular plant is a slumbering arsenal and
2566 MUNITIONS INDUSTRY
the greatest of its kind today. Had Germany won tlie war, do you think that
she would have pennitted the du Pont powder plants or the Springfield arsenal
to resume business? Would not any normal child be able to answer this ques-
tion correctly? And yet our savants of Versailles could not understand!
As with the indigo process, so with many other processes used in dye
plants in Germany, each with a hidden terror for' her enemies. Those of U3
who have studied the situation and have felt it our bounden duty to acquaint
every true American with the conditions as they stand are constantly meeting
with" men blind by nature and men so stubborn that reason itself seem to
have left them, it is not for the chemical industry alone we plead. Far,
far beyond lies our vision! And we pray in all sincerity for the awakening
of this country to the importance of chemistry in every industry. From an
agricultural country we have graduated into an industrial country. Indus-
tries make for advancement of the Nation as Germany has so of en pro-
claimed. An agricultural country can never wield an influence in international
affairs.
Upon the growth of our industries rests now or never the future great-
ness of America. Ninety-seven percent of our manufacturing output is con-
sumed in this country. Our agricultural products are, to a large extent, ex-
ported, but now with our increased industrial capacity, as a result of war
activities, why not turn tlie excess of cotton, of wheat, and of corn into finished
products for our own consumption? It is this great opportunity for chemical
endeavor that commands our immediate attention. We must develop chemi-
cally if we are to attain that highest enlightenment destined for men. There
is no other option. Men must think in terms of chemistry, whether they be
engaged in agriculture, mining, or manufacture. This is the greatest lesson
of the World War.
Take, for example, the question of fertilizers. Enormous quantities are
used in every State of the Union, and yet when we face the actual figures of
ammonium sulfate unrecovered from the byproducts in the burning of coking
coal in this country, we are amazed. For instance, in Michigan, $4,887,253 was
paid in 1919 for commercial fertilizers and during that same year $1,080,300
worth of ammonium sulfate was wasted in the burning of 1,385,000 tons of
coking coal. Can we call this efiiciency? And yet more appalling still are
those figures which represent the amount of benzene, toluene, xylene, and other
products obtained from the coal tar itself, likewise wasted in this and all
States.
Atmospheric nitrogen is now employed by foreign countries in the manu-
facture of fertilizers, though in this country we have scarcely passed the ex-
perimental stage. The Muscle Shoals plant, erected at an enormous cost by
the Government for the preparation of ammonia, is now idle — in fact, it never
did function — and if ever our Government is to show its eflScient organization,
not a moment, should pass till that plant is set into operation for the benefit
of our lands. Henry Ford deserves highest conmiendation for his munificient
offer to the Government to take over and operate the plant upon a practical
basis, holding it in readiness for Government purposes in case of war. No
other individual or pi-ivate organization has made, nor is likely to make, so
flattering an offer to the Government as that announced by Henry Ford. We
sincerely hope that our authorities will sense the importance of this plant to-
the betterment of our lands and to the industries of the country in time of
peace as well as in time of war.
The dye industry, in particular, claims the interest of every true American.
He realizes that here are untold possibilities for a marvelous future. Why
should not America lead? Shall we again permit Germany to conquer the
markets of the world in this field as in many others? Germany has once
more established herself in many countries as the leader in this industry.
Witness, for example, Mexico, where the German dyes are now again supplied
in linutless quantity. For the establishment of the dye industry, it is absolutely
necessary that we be given the strongest possible protection, such, for example,
as may obtain from a dye embargo. Such an embargo was asked for as an
additional clause to the Fordney tariff bill, but the "class legislation" bogy
scared our Congressmen, as they feared a continual line of other class pro-
tections. Our Congressmen, however, are for the most part lawyers and
cannot see through chemical eyes. It is the bounden duty of all Americans who
understand this subject to demcmstrate to our Congressmen the great need
of building up our chemical industries. The protection of chemistry in this
MUNITIONS INDUSTRY 2567
country is clearly demonstrable as something far more important than the
building of forts and fleets. " Class legislation " in this instance becomes
translatable into " fundamental legislation." Many of you will wonder why
we need any legislation beyond tliat protecting our general industries. Let
us pause here to consider the cost of experimentation alone in the chemical,
physical, and engineering fields. Witness, for example, the first commercial
production of indigo in America. The first pound of synthetic indigo laid on
the desk of the President of the Dow Chemical Company in December 1916
cost our company upwards of $4.50,000. From that year, selling at .$1.25 per
pound, the process has undergone constant and market improvement until
today it is selling under forty cents per pound, favorable indeed with iirewar
German prices. The manufacture of dyes calls for the highest mechanical
skill and plant supervision in the field of organic chemistry and the various
stops in these processes make up a complex surpassing that of any other in-
dustry.
If you believe in America, and if you believe that we can succeed without
protection, then you are the men we need, and we shall ask you at once for
several hundred thousand dollars to assist us in oiir endeavors. Do you think
you are likely to contribute when you know that labor in Germany is paid at
the rate of seventeen cents per day, whereas we must pay at least thirty cents
per hour? Do you think you will contribute when you know that a chance of
foreign dumping in this country is always at our door, and that the German
importer is using every means he can to undersell American products? I know
you will not take the risk. You have a right to a reasonable rate on your
investments, and I don't blame you for this lar-k of confidence in your own
Government. Has a German any lack of confidence in his Fatherland? No,
indeed, his Fatherland protects him and guarantees to him, through the big
cartels that the losses of one company shall be averaged with the gains of
another and the profits equally distributed. Germany has the greatest system
of protection the world haf^ ever known. When they see that an imported
article interferes with their industries, they outlaw it. Thus the importation
of rubber into Germany in the last six months has been decried and its further
importation seriously handicapped.
We need a protecting tariff, a tariff that is not based on fictitious foreign
values, for such a tariff is no tariff at all. We must make up in some way for
the difference in cost of production at home and abroad, especially now that for-
eign cost of production is practically nil. To this end. Congressman Fordney
has proposed the greatest scientific principle ever introduced into American
tariff^ — that of the American valuation plan. It stands supreme as the guiding
star to a bright American future, and Mr. Fordney desei*ves the praise of all
true Americans for the steadfast stand he has taken in its defense.
The German importer sees in the American valuation plan his death knell,
and veritably it is so written. By every means, no matter how foul, has this
dastardly type of fake American tried to infiuence our Congressmen. But we
are proud to say that many of them are far too stalwart to succumb to the
vicious sting of these German Gila monsters. The German importer is any-
thing but ]iatriotic. He cares nothing for America and looks only to the profits
which he can squeeze out of the American people. If he were a true American,
would he not renounce his nefarious business and seek other more honorable
pursuits? No. He prefers to remain the depraved and immoral reprobate that
be is, and to work with might and main through retail merchants' associations,
farm bureaus, and the like, to influence as many Congressmen as possible to
delay the pas.sage of the tariff bill. What a contrast to this debased wretch
is that prominent American. Charles Schwab. When the Washington confer-
ence proclaimed that the battleship fleets would be reduced in number and
that a ten-year holiday in ca])ital shipbuilding would be inaugurated, did you
find this man, manager of one of the greatest shipbuilding yards in the world,
bewailing his fate? No. He is a true American. Scarcely a day elapse<^l
before he announced that he stood for disarmament and that his great ship-
building yards would be turned to other pursuits. What more striking con-
trast could we have between this man, Charles Schwab, the American, and such
types as H. A. Metz, Kutroff. Pickard, and other German importers?
The American industrialist must needs smile to himself and wonder what
new foi-m of insanity has l)een evolved when he reads of those asinine state-
ments of the so-called "international bankers." They see only through foreign
8.S876 — 3.5— PT 11 12
2568 MUNITIONS INDUSTRY
glasses. They maintain tliat America must buy foreign products in order that
our money shall revert to European c(juntries and thus make it p^wsible for
them to pay off their indebteihiess to us. Why should American industries be
completely annihilated in order for the foreign countries to pay this indebted-
ness V Would it not be a wiser and more sane act for our Government to con-
sider the indebtedness on Ihe other side and let us pay the indebtedness to them
as a compromise? Let us devote this sum, so fast as paid in, to the upbuilding
of devastated areas of Europe and the world. This is practically the sugges-
tion m:ule by Mr. Frank A. Vanderlip, to which such praise is given. But has
it never occurred to these international bankers that there are other things that
one can purchase besides the products of American industry? Why not sell to
us those millions of dollars' worth of South American bonds? Why not sell us
tracts of land in the West Indies and thereabouts? Sell us anything under the
heavens, but don't sell us what we are trying to make. I would that each
international banker, in his sane moments, if such occur, might purchase a
farm and raise products for the market and for his livelihood. What would he
say when told that he must buy his potatoes and wheat, and such like, from
foreigners? And yet that is exactly what he is asking the American indus-
tries to do. I fear, even were he half-witted, he would refuse to consider any
such dealings.
All of the objections to the Fordney tariff bill, the embargo on dyes, and espe-
cially to the American valuation plan come directly from the German importers.
They are united against America and against all that America can become.
There is not one single practical argument which they have ever raised that can
stand up against the array of facts marshalled in favor of these measures.
The influence which these debased German importers have been able to wield
among our Congressmen is indeed disheartening to all true Americans, when we
know that prosperity cannot return until the tariff is made a law and that there
will be no chance of even a minor prosperity until that time. Is it not possible
to awake Congress to the situation; to show them huw these German Gila
monsters are endeavoring in every possible way to thwart the action of Con-
gress? Are there not enough Congressmen of real red American blood able to
force through that tariff, which nlone spells prosperity? Many have tried to
fexplain this period of depression and show how it will slowly pass. Much of
what is said may be true, but unless we have the tariff there can be no return
for the betterment of American industries ; and unless we better the American
industries today, their chances for growth are frightfully impaired. Indeed,
many, many years of endeavor would be required ere they could hope to gain
world sway against the industries of Germany and other countries, strong now
and ever waxing stronger.
We may talk of disarmament and peace, but there will be no peace until
Germany is made to realize that America stands preeminent ; that our industries
surpass their industries and those of all other countries. In this war after the
war our battle cry must be " To hell with all German importers ! Down with
every thing opposed to American industries ! " Let us have a tariff that protects
Americans. Let us be sufficient unto ourselves so far as our heaven-given
resources will permit. Why should we fear to cast out the German importer?
Have we not destroyed the saloon keeper and his curse, many of whom were true
Americans at heart? If we do not work to this end and our Congressmen do not
realize the importance of industrial growth for our future greatness, there is
only a limited future stretching out before us.
As I now reflect upon my student days in Germany, I well recall that toast
that my old professor so often proposed as we sat together on a summer after-
noon in our favorite beer garden, " Hoch der Kaiser, Deutschland iiber AUes,
Mohr Kraft den Demokraten der Vereinigten Staaten." I thought he referred
more particularly to his son, a Democrat in Tennessee, but now I know that he
meant, " Give the Democrats and German-Americans more power and a hold on
free trade and America becomes the vassal of Germany." Our raw products will
be exported to the Fathei-land and there converted into finished goods ; then re-
turned to us that we agriculturalists, miners, and shepherds may eat and be
clothed withal, and be happy in serving our beloved master, Deutschland !
MUNITIONS INDUSTRY 2569
Exhibit No. 915
[File, John H. McNeely]
March 25, iy21.
Mr. John H. MoNebly,
101 District National Bank Bldff., Washington, D. C.
Deiab Ma McNeely : I am returning the story received from you this morning
with some changes in the introductory paragraph, which I hope you will approve.
We are making every effort tn take this fight out of the held of mere tariff
production to a new industry. You will noti<-e that the recent literature, includ-
ing the articles in the book to which you refer, deals with the question of dis-
armament. The clauses in the iieace treaty virtually require the destruction of
plants in Germany. If this cannot be accomplished, then the next best thing is
to have similar plants built here so that we may produce the new chemical war
munitions to offset the production in an enemy country.
It is, of course, a fact, and is quite apparent, that American dye manufacturers
want to protect and develop their industry as a business proposition, Imt we
want more than the ordinary tariff for the reason that this is an intricate indus-
try and cannot be developed excei»t under unusual conditions. It really requires
the absolute embargo of competitive products so that we can secure an income
over the sale of these which will be suflBcient to pay for the development of the
products which we have not yet learned to make.
I think with the present unsettled condition of world affairs, and with Ger-
many's attitude toward the peace treaty argiiments based on the question of
disarmament are very much stronger than any others.
I am asking the Dyes Institute for the list of plants which you want. Mean-
while, I am sending you a letterhead of the Dyes Institute, which gives the
location of some of these plants.
Very truly yours,
CKW/P Publicity Manager.
Exhibit No. 916
[File John H. McNeely]
(From room 101, District National Bank Building — Release morning papers
Tuesday, March 29)
Washington, March 28. — Supporting the contention that if the American
Nation is to be prepared and is to be safeguarded for future wars, development
of an American coal-tar chemical industry is imperative, the American Dyes
Institute has put out a book containing an elaborate exposition of the case for
the American people and a plea for legislative assistance to develop the industry
and permit it to take a position where it cannot be destroyed by competition
from (iermany. The book has been issued '• to the American people." It has
been sent in Washington to members of Congress and administration oflBcials,
and is a notable addition to the arguments already made by the Chemical War-
fare Service for protection from the renewal of munitions manufactured in the
chemical plants of Germany.
In addition to extracts from speeches in Congress last year urging passage
of protective legislation, the book carries excerpts from writings of well-known
authorities familiar with the industry here and abroad and with the importance
of dyes in peace and war. It makes a strong case for the dyes and says that
with an efficient dye-making industry no nation need fear disarmament, but
without such an industry the disarmed nation would be at the mercy of any
other dye-making nation in the world. It points out how quickly a nation with
an adequate dye industry can expand it to make the gases with which Gennany
almost won the war and which must figure so prominently in all future
conflicts.
" Chemical warfare ", says the book, " developing by leaps and bounds
throughout the Great War, has assumed commanding importance. In the last
of the fighting half the shells used were designed to distribute poison gases,
while floods of noxious vapors were launched by means altogether independent
of artillery. Chemical defense against these substances had become a first
2570
MUNITIONS INDUSTEY
essential. By the same token, scientific advances in the way of discovery of
new poisons, or new methods of applying old poisons, held out constant possi-
bilities of instant and overwhelming victory. Already projectiles — not guns —
had been developed which could be made in quantity in any tube works and
which could put down oceans of gas at a range of a mile. The science was and
is in its infancy, but already the chemists, to some extent without the aid of
any existing weapon, and to an overpowering extent in conjunction with the
older equipment, can provide an attack of hitherto unparalleled efficiency, while
they alone can offer any adequate means of resistance."
After discussing the need for dye chemists and dye chemical employees the
book goes on to say : "Accordingly no nation can disarm to any serious extent
unless it has such an industry. The equipment and the knowledge necessary
cannot be improvised, nor even provided beforehand specially for war purposes,
and kept, during peace, unused. Inactive plants deteriorate and indispensable
trained employees cannot be kept available and the advance of science is so
rapid that no anticipation of the Nation's needs can succeed. A scientist at
work with only the simplest apparatus hidden away anywhere, at any time,
may make discoveries which render all previous preparation worthless. Only
the incessant intensive research constantly necessary in the dye industry can
hope to keep up with the progress of the science.
" Equipped as a complete dye industry equips a nation with facilities for
immediate huge production of the needed substances, and with the men who
have the necessary knowledge, no nation need fear to limit its guns, ships,
planes, and tanks proportionately with other nations. To a nation not so
equipped such a limitation would be suicide. In a disarmed world the dye-
making countries will reign supreme.
" Before the war there was but one such country. Germany supplied the
world with dyes. In the war her dye works, without material changes, sup-
plied many of her explosives, all her gases, and all the technique of her gas
defense. While the Allies were expending years and tens of millions in build-
ing plants and making experiments, she was producing as rapidly as she thought
necessary. Had she realized her advantage and used gas at the outset as on the
later scale, the Allies could never have resisted. A colossal power, fortunately
but half understood, was in her hands, and in hers alone.
" Today the United States and to some extent Great Britain are in a similar
fortunate position. To be sure of maintaining it, the British have embargoed
German dyes for 10 years. As long as we maintain our industry, and for not
one moment longer, we can safely plan and attempt disarmament. If we lost
our new dye industry we must either remain armed to the teeth or accept the
certainty that we cannot resist an attack by any dye-making country."
Exhibit No. 917
PvMiGUy tweau expense, years 1916 to 1934. inclusive
Year
Total (exclud-
ing products
publicity)
Products
publicity
Year
Total (exclud-
ing products
publicity)
Products
publicity
1916
$9, 284. 34
13, 238. 69
21, 892. 79
29, 724. 58
31,698.34
24, 378. 40
18, 382. 83
23, 423. 95
26, 121. 66
26, 536. 02
1926
$30, 355. 70
34, 905. 93
37. 203. 93
32. 405. 94
44, 042. 63
33, 218. 85
28, 648. 37
29, 167. 45
2 26, 004. 53
1 $4, 512. 50
1917
1927
22, 562. 50
1918
1928
35, 591. 46
1919 - -.
1929
53, 785. 39
1920
1930
66, 134. 74
1921
1931 ---
52, 630. 42
1922
1932-._
43,917.19
1923
1933
1934..
49, 081. 69
1924
2 55, 608. 15
1925
1 2 months, November and December.
2 10 months, January to October, inclusive.
MUNITIOJiS INDUSTRY 2571
Exhibit No. 918
1918 and 1925
American Dyes Institute $56, 588. 40
Syutlietic Organic Cliemical Manufacturers Assn 60, 888. 17
Manufacturing Ctieniists Association 1, 812. .57
American Cliemical Society 4,530.07
Chemical Alliance, Inc 57-5. 00
T. R. Shipp Service 2,500.00
John McNeeley 3, 0:J3. 00
Benjamin Raleigh 100. 00
Total 130, 027. 21
Exhibit No. 919
[File — 115]
[ Copy ]
Copy to: Mr. Iren^e du Pont, Mr. Lammot du Pont, Mr. R. R. M. Carpenter,
Mr. W. C. Spruance, Mr. W. F. Harrington, Mr. J. P. Laffey, Mr. W. S.
Carpenter, Jr.
Paris, Nov. 29, 1919.
JVIr. W. S. Carpentkk. Jr., V. P.,
E. I. du Pont de Nemours & Co.,
Wilmington, Del.
Dear Walter: In view of Judge Laffey's sailing on November 30th, ahead
01 the date on wliich Poucher and I leave, I am enclosing some papers vphieh
-will supplement our cable advices and give you some material for discussion
until we arrive in Wilmington about Christmas time. The reasons for our
waiting until the Mauretania will be seen later on in this letter.
Our cables numbered one to twenty-four give an accurate view of our ac-
tivities since October. It may have seemed to you at times, in view of the
expression in your cable #2, that undue time was spent upon matters relating
to import regulation but all this lias been of the greatest help in bringing about
at least a partial realization on the part of the Germans that the U.S. market
is not free for them to use as they will.
As soon after we return as possible we must determine just what we should
say to the Alien Property Cust<xlian concerning our action in the ammonia
matter which never would have been possible at all but for the Chemical
Foundation. The sale of the German patents to the foundation has been a
very startling thing to the Germans and this evidence of America's power has
Obeen a great factor in making it possible to deal with them.
I enclose the following papers which can be discussed at once though I
shall of course try to have ready when I reach home, a detailed account of the
moves leading up to the conference; 1st, a letter in German (written by Berg
in Ludwigshafen) with a translation thereof. This letter while written by
Berg to the Badische Co. in the form of a personal reason statement as to why
the Badische Co. should cooperate with du Pont Co. is based on discussions of
the matter with Berg before his departure for Germany; 2nd, the minutes of
the conference as simimarized from his notes by Dr. Schwartz and a transla-
tion into English by Dr. Kunz; 3rd, the minutes of the conference In English
as summarized by Dr. Kunz who acted as our secretary and with Mr. Berg as
interpreter.
The plan is for each side, provided the general plan is ratified, to prepare
a contract based on the general plan laid down, the final contract that is
accepted by both sides probably being a composite of the two contracts sub-
mitted respectively by Badische and du Pont.
You will note that the minutes as written make no reference to dyes. This
is for the reason that the agreement in the I.G. prohibits discussion without
authority from the I.G. The full notes of the meeting, however, which are
being worked up, give considerable infoiination as to the attitude on this
side of the Badische business, but it was outside of the formal conferences
that we learned Dr. Bohn was determined, if it was at all possible, to find a
2572 MUNITIONS INDUSTRY
way of direct cooperation with du Pont Co. in dyes. This is the internal
problem referred to in cable #22. The size of the ammonia proposition so far
exceeds the dye matter that it has seemed best not to attempt to push this
affair too rapidly, as a successful ammonia arrangement certainly would lead
at once to a dye exchange.
The plan has been for Bosch and Duisberg to visit the U.S. early in the year,
but I believe that Dr. Bosch is going to be inclined to go slowly in such a
move and not to allow the I.G. to get him in a position where he might have
unpleasant contact with official America. Dr. Bohn, of course, being a Swiss
citizen could come to U.S. any time. Although hard pressed during the war
he never surrendered his Swiss citizenship. It is perfectly clear that there
are two contending forces in the Badische board. Apparently the sensible,
modern division is led by Bohn-Bosch and realizing the economic situation is
determined to make as good a deal as possible with America in order to get
ahead. The other side probably responds to the attitude of Duisberg who
apparently still believes he can bully the U.S. The Badische has recently
reorganized and we shall have in due time a chart which Berg will get for
us next month. Bosch is now president and while he and Bohn will not
have an easy time with some of the other directors, I feel that they will have
their way, particularly since Badische's position on account of the ammonia
process is considerably better than that of the other members of the I.G. It
may be that the I.G. may decide to deal as a unit in the U.S. with either
National, Grasselli, or ourselves. At any rate you can see the importance of
everlastingly turning the regulatory screw in America both as to control of
imports and future protective legislation.
I regret very much that Harry Stephenson has been agreed upon as the
Textile Alliance representative. In view of our relations with Badische you
can see how desirable it was that the men representing the Textile Alliance
be drawn from the ranks of the consumers. However, we shall be able to
give sufficient information to enable Stephenson to help the Alliance and not
compromise us. We shall be glad to learn just the details as to what went
wrong in the State Dept. and War Ti-ade Board that allowed the under-
strappers at Ludwigshafen to boast to Herty and Fleisch that they were able
to deal directly with their old agents. Heading this off was a fine piece of
work on your side which unfortunately was not known by the Germans at our
Zurich conference, and we thought it better to let them find it our rather
than get it from us. I am afraid consumers are going to be disappointed in
the quantity of dyes they can get cheaply under the reparation plan, but the
next month will show what can be done. Poucher will have a conference with
Stephenson before we go. We have Kunz in Paris today, but we want to
keep him out of this end of the game from now on as he may be asked to go
over to Ludwigshafen at any time.
Our return to London is for two reasons. First, Lord Moulton and Turner
showed us the new miniature Leverkusen at Dalton (Huddersfield) with the
evident idea of impressing us with the value of the things Levinstein gouged
out of the Bayer factory in the British section of the occupied territory. They
have considerable no doubt, but I do not believe Great Britain is going to
make a very great success in the industry and as our cable plainly stated
we were against paying any more money for second-hand information. We ac-
cordingly left the Levinstein matter hanging and will now see whether we can
so arrange as to have the British Dyes assume the L. contract with some
modifications. Otherwise we shall let it stand as it is.
We also wanted to see Sir Harry McGowan, but will have to see Mitchell in
his place, as we understand Sir Harry has gone to U.S.
When we were in Paris we learned that Semet Solvay had been endeavoring
to make connections with Badische. We were called upon by Mr. Brunner, Col.
Pollit (technical man) and Mr. Gold of Brunner Mond & Co., who in a very
inept fashion tried to find out just what we were doing. This was before we
sent Berg into Germany to begin negotiations. They expressed belief in the
necessity of making some kind of a deal with the Badische Co. if the process
was to be instituted successfull.v — .stated that they understood we were negotiat-
ing with Badische — were we, etc. They also used the name of the Explosives
Trades, Ltd. in a fashion from which we might conclude that they had come to
us by that route. The situation was, as you can see, decidedly embarrassing,,
but I think we cleared the air by asking Mr. Brunner if he wanted us to cooper-
ate with him in securing rights to the technical information. He shied at this
and after a little talk agreed to return to Paris the next Wednesday (this was
MUNITIONS INDUSTRY 2573
Friday, Oct. 31) to discuss the situation. I had told them that we had reports
on the situation but had no negotiations. I believed they were on a fishing
excursion — felt sure I was trying to mislead them and would endeavor to
connect with Badische direct without further word with us. Please note that
they referred bravely to alliances when talking with us — I did not expect them
to meet their engagement. They turned up neither on Wednesday nor Thurs-
day, Nov. 5 and 6, and on Thursday evening Nov. 6 Berg left for Germany to
arrange if possible for a conference. Poucher very properly was insistent on a
sifting process to determine whether we would have to meet some of the old
crowd who undoubtedly would be very antagonistic to him and us.
We knew that negotiations were under way between Badische and the
French Government but in what form we could not tell. When Berg left for
Mannheim there was some uncertainty as to the whereabouts of Dr. Bosch as
we knew that he was likely to be called to Paris by the French. Berg left a
letter for him at the German legation. The result of this was that we were
called up Sunday morning Nov. 9 by Mrs. Berg saying Dr. Bosch was at her
house and would like very much to see us. Poucher, the judge, and I, of course,
went out at once. We found Dr. B. a thick-set German savant, who naturally
was a bit shy under the circumstances. He explained the French situation to
us but did not want to sign up with them until he felt that he was not damag-
ing his chance of a deal with us. We could see that it was really necessary
for him to make this agreement and told him to go ahead. This is a feature
of the situation to which some attention must be given though I am of the
opinion that if we do this at all France will be buying synthetic sulfate before
she makes it. The contract also has to be approved by the Senate and may
fail there.
It was agreed with Dr. Bosch to have the Zurich meeting if it could be
arranged when he returned to Mannheim on the following Wednesday — Berg's
good work on this helped with the result you have seen. Dr. Bosch confirmed
my belief as to the action of the English whom he accused of very bad manners
to say the least. When he was arranging to go to Zurich he had a telegram
from Brunner asking that a conference be arranged for in Aachen. I suppose
Bosch is now arranging for a conference with these people, whom he feels
bound under the conditions to listen to, for sometime in December — I hope
after we have sailed. As Brunner called upon us at Berg's oflSce I am sending
Berg back to Germany (when Bosch sends him word) to be present with Bosch
when meeting Brunner, Mond & Co. whom he will advise that their arrange-
ment must be with the new company. I am, of course, anxious that there be
no feeling on the part of the Explosives Trades Ltd. that they will liave no
chance to share in a thing of this kind and if we can arrange things in England,
as I believe we can, so that Brunner Mond if they are working with Explosives
Trades Ltd. cannot lay the charge of poor faith at our door. We are certain
of one thing however — we never had any intimation from either Explosives
Trades or Brunner Mond that they were ready to share with us.
This I think gives you the main situation which with the enclosures will put
you in pretty good shape for discussion as soon as we retuni. Judge L. will
proceed with contract preparation along the line of the conference as you may
suggest — if the idea is approved as the result of your study of the nitrogen
question. Personally I hope it will be approved as I think we have a chance
now to do something really big in chemical work and particularly in the fer-
tilizer industry.
Faithfully yours, Chas. A. Meade.
Exhibit No. 920
Copy to: Mr. Irenee du Pont. Mr. Lammot du Pont. Mr. R. R. M. Carpenter,
Mr. W. C. Spruance, Mr. W. F. Harrington, Mr. .T. P. Laffey, Mr. W. S. Car-
penter, Ji\
(No date.)
Our Wordings
MINUTES OF A MEETING HELD NOVKMRER. 20. 21. 22, AH THE EAU1R AU LAO HOTEI ,
ZURICH, SWITZERLAND
There were present : Dr. R. Bosch, Dr. R. Bohn, Dr. I. Schwarz, representing
the Badische Anilin & Sodatabiic, Ludwi^schafen, Germany, referred to here-
after as Badische Co., and Ch. A. Meade, M. R. Poucher, J. P. LafEey, Eysteni
2574 MUNITIONS INDUSTRY
Berg, E. C. Kunz, representing E. I. tlu Pout de Nem,ours Co., Wilmington, Del-
aware, U. S. A., referred to hereafter as the du Pont Company.
On the l)asis of a letter dated November 12th. 1919, addressed to the Badische
Co., by Mr. Eysten Berg, in behalf of the du Pont Co., in which was ourlin^^d
a plan for cooperation between the du Pont Co. and the Badische Co., for the
world exploitation of the Bosch-Haber ammonia process, the following points
were discussed and agreed upon as a basis of a final contract.
(1) It was agreed that it is possible to form a comptiny for the world ex-
ploitation of the Bosch-Haber process.
(2) The world company should have the whole world as its market except
as follows :
(a) France with whom the Badische < 'o. already have made a contract
which is limited to the manufacture and sale only in France, her colonies,
and protectorates. It is understood that should the French fail to carry out
their plans, these territories should be included in those assigned to the
world company.
(5) The Badische Co. shall be granted an exclusive territory in which to
exploit the process, Germany and the territory known as Austria-Hungary in
1913.
It is understood that the Badische Co. shall have the right to sell in all
^Europe the products of its plants at Oppau and Merseburg, Gennany, up to
the equivalent of 300,0(X) tons of nitrogen until such a time as the consump-
tion in the exclusive territory of the Badische Co. will absorb this production,
when the Badische Co. sales are to be confined to its exclusive territory.
The world company is to give if necessary a special license to England to be
confined to the production of nitric acid for the needs of the British Isles, the
returns from such license to be given entirely to the Badische Co.
The Badische Co., stating that they have tentative negotiations with Japan
for the process agree that these negotiations be held in susi)ense until proper
action can be taken by the new world company.
(3) Capital for the world company shall be furnished by the du Pont Co.
and the du Pont Oo. shall manage the business.
(4) Provided conditions warrant the initial capacity of the new company
should be a plant for 100,000 tons nitrogen per year. The nitrogen produced
by the new company is for conversion into nitrates, nitric acid, and similar
compounds as well as fertilizers, by the processes developed in connection with
the Bosch-Haber process by the Badische Co.
Nitrogen products taken by the du Pont Co.< from the world company shall
have the price fixed on the basis of the market pxice of sulfate of ammonia
less the cost of conversion of ammonia into sulfate of ammonia.
(5) The increase in production capacity shall be according to demands. A
<?ertain minimum production shall be maintained.
(6) The world company and the Badische Co. shall exchange free infor-
mations and improvements made in the l)usiness covered by the contract.
(7) A corporation is to be formed of which the Badische Co. is to receive
'^% of the total stock issue in exchange for its information and its ex;-
perience and the Badische Co. is to have representation on the board of the
new company in proportion to its stock holding.
In case the capital is increased the Badische Co. is always to receive a like
proportion of free shares. Tlie capital to be increased as the production ca-
pacity increases. The Badische Co., in case it wishes to dispose of its stock
holding shall first make offer of such holding to the du Pont Co.
(8) The du Pont Co. will undertake the plan construction of the world
company at cost plus 10%.
Exhibit No. 921
EXTRACT OF LETTER FlJOil MR. HERO JANUARY 12, 11120
Have just returned from Aachen, where I met Director Bosch, Director Smith,
and Dr. Schwarz, of the Badische Company.
The meeting with the English group (Brunner Mond and Solvay) took place
yesterday afternoon at the Palast Hotel, in Aachen.
Before the meeting I talked the situation over with Dr. Bosch, and we came
to the conclusion that it was best that I should only appear at the meeting if
the circumstances required it.
MUNITIONS INDUSTRY 2575
As the Badische CJompany and we have not signed a contract, Dr. Bosch
thought it would be unwise if I took deal in the meeting, particularly while he
was determined not to make any definite arrangement with the English at this
time, but only wished to hear what they had to say.
The Badische has, as you know, been communicating with Brunner Mond for
quite some time, and he believed the Badische should see them alone and inform
them in a general way about our arrangement as far as the world exploitation of
the ammonia process is concerned.
If I appeared in the meeting as the representative for the du Pont Company,
the whole matter could end in a fight and be very disagreeable for the Badische,
that had not advised the English about this matter before they came to Aachen.
After considering the matter, I came to the conclusion that it was just as well
that I did not participate in the meeting, particularly as I was on the spot, and
Dr. Bosch furnished me all information about what was going on.
A. The following is the result of the meeting at the Palast Hotel, Aachen, the
11th of January 1920. The information received from Dr. Bosch and by
looking through Dr. Schwarz's report of the meeting :
Present :
(1) From the Badische: Director Dr. Bosch, Director Smith (Commercial
Director instead of Brunck), Dr. Sehwarz.
(2) Of Brunner Mond Company: Roscol Brunner, Mr. Pollit, Mr. Gold, Mr.
Aron.
(3) Of the Solvay Company: Mr. Gielen, German Director of Semi Solvay in
Bernburg, Mr. Jansson, Mr. Hannon, Mr. Tourniere, French Directors of Semi
Solvay.
Mr. Roscol Brunner, being the chief spokesman for Brunner Mond, gave the
following explanation :
The British Government has handed over to Brunner Mond and Solvay all
their work and experimental plants on the synthesis of ammonia made in
England during the war on the condition that this group shall arrange with
the Badische to secure the Bosch-Haber process for Great Britain. For this
reason they have approached the Badische for the purpose of buying the am-
monia process.
They wanted the process for the consumption of nitric acid and other chemical
technical purposes for England, but the combination made with the Solvay
Company made it desirable to secure the process for all purposes and for the
whole world. Semi Solvay being established over the whole world and working
in connection with the General Chemical Company in America would secure the
best possible guarantees for a successful introduction of the process for the
world market.
Dr. BoscH. We have already made an arrangement with the du Pont Company
for the exploitation of our process for the world. We have always gone out
from the point of view, that we should be directly interested in such a proposi-
tion. We are bound to the du Pont Company as far as the world is concerned
and you will have to discuss this matter with them.
As far as Britain is concerned we understand that you wish to secure the
process for nitric acid and other technical purposes and we are ready to discuss
this matter with you.
We wish to limit this license to these purposes only.
R. Bktjnnek. We must have the right not only for Great Britain but for at
least the British Empire. We must also have the right to manufacture sulphate
of ammonia for fertilizing purposes.
We have already been in communication with the du Pont Company for the
purpose of exploiting your process and we are through, " Explosives Trades "
in close relations with the du Pont.
IMr. PoLXJT. Have you met the du Pont Company's official representatives
lately?
Dr. Bosch. Yes; we have discussed matters with them.
Mr. Jansson. As the matter stands we will then have to discus a world
combination with the du Pont ; as Mr. Gold and myself intend to go to the U. S.
on January 28, we shall see the du Ponts and discuss the matter with them.
Mr. Gold. The best thing to do is to leave the whole proposition until we have
talked the matter over with Du Pont, in order that we may come to an under-
standing and avoid unnecessary competition.
Dr. Bosch. I am ready to discuss the matter as far as Great Britain is con-
cerned, but I leave it entirely to the Du Ponts to arrange as far as the world
company is concerned.
2576 MUNITIONS INDUSTRY
I wish you to bear in mind that our process may not be as advantageous as
you believe under the present difficult conditions.
The plant cost will naturally be high now and we have also the competition
with the Chile saltpeter and coke-oven fimnionia to reckon with.
Under pre-war conditions our process is far ahead of any other competitor,
but the conditions may have changed the prosperous outlook. This, I am,
however, )iot able to judge, as I do not know the conditions in other countries.
Mr. roi LIT. Leave that entirely to us. We know, perhaps, better the nitrogen
situation at the present than you do.
We have looked carefully into it and we are sure that there is no fear of
competition from Chile saltpeter. We ai'e convinced that your process is the
process, and by going hand in hand with the coke-oven ammonia people, we
would be able to dominate the world market.
We must in any case have the process for the British Empire and also for
fertilizer purposes.
Dr. Bosch. This can only be discussed after you have seen the Du Fonts in
Wilmington.
Mr. Brunnek. Then, we leave the matter open in such a way that we will
see you after we have discussed the matter in Wilmington.
The above covers in the big lines the discussion. The meeting was a short
one. Dr. Bosch left the English and came to me and we discussed again the
situation. We agreed that there was no reason for me to appear, as the English
group is sending representatives to Wilmington, and you had not given me any
authority to act on your behalf.
The English i>eople do not know that I have been in Aa<:hen or the next room
in the Palast Hotel, and I believe this way to handle the matter from my side
was the best thing to do.
Dr. Bosch requests me to tell you that if the English should say that he
(Dr. Bosch) has agreed upon to give them full rights for the whole British
Empire, also for fertilizer, this is not the case. Nothing definite has been
arranged no memorandum has been exchanged. The whole was an informal
discussion pending upon what kind of arrangement the English group may make
with you in Wilmington.
The outstanding points of the meeting are:
(a) The English group claims they are working under direction of the Eng-
lish Government.
This is absolutely contradictory to the statement made by Lord Moulton to
Mr. Mead.
(b) The English group is convinced that the Badische's process is the best
and wish to secure it for the whole world.
(c) They insist upon at least to obtain license for the British Entpire not
only for nitric acid and technical purposes but also for fertilizers.
(d) They did not, and know still nothing about our meeting in Zurich.
They do not know anything about our tentative agreement with exception
of what Dr. Bosch told them, that the Badische is going to be Interested in
the new company.
(e) Brunner Mond claims near connection with Explosive Trade and through
them with us.
(f) Nothing has been decided upon; all is pending upon our standpoint and
all further discussions have been postponed until Messrs. Gold and Jansson
return from America and have talked with you.
Exhibit No. 922
[File 99]
Waedman Pabk Hotel,
Washington, D. C, January 22, 1920.
iRtiatE DU Pont, Esq.,
Wilmmgton.
Deab Mr. du Pont: Situation clearer and better today.
Martin and tlie major are hard at it. The plan is to push and keep Wood in
the background ; that is behind Culbertson. Martin and the major are to fight
it out with Culbertson by agreement with Sen. Curtis.
They will take anything from Culbertson that will help embargo and nothing
that will hurt.
MUNITIOlSrS IN^DUSTRY 2577
The major will likely propose that as this is a measure touching " national
defence", the Commission should be headed by Gen. Siebert to give it the
flavor of defence rather than tariff, the other members to be one each from
Treas., TarifE Board, dye makers and consumers.
No call as yet from the Sub. Com. for the dye manufacturers. My guess
is it will not come before next week but if it does I will phone you.
Sincerely,
POUCHEIR.
Exhibit No. 923
IPublicity Bureau momorandum fur information on il.ve tariff bill — legislation — rtyps)
NOVEMBEK 10, 1919.
* X7.1-1.
Personal.
Mr. H. B. Rust.
The Coppers Ccmipany, Pittshurgh, Pa.
Dear Sir: Our chemical department has started to get up the information
which you asked, about the amount of coke oven byproducts which enter into
the making of dyes. Their data will deal not only with the du Pont Com-
pany but with the American dye industiy as a whole, and I hope to have it
ready for you in a short time.
Col. John P. Wood can be addressed at 22nd and Spring Garden Streets,
Philadelphia, Pa.
Mr. du Pont thinks that a word from you to Joseph R. Grundy of Bristol,
Pa., would be very valuable to our organization. Mr. Grundy and Col. Wood
are very closely allied, and Mr. Grundy is an important factor in the eastern
part of the State. We are informed that he would be glad of recognition by
interests in the western part of the State, and that if he could he shown that
Pittsburgh and vicinity have a vital interest in the pending legislation he
might withdraw nmch of his opposition, which is based on what he believes to
be the sentiment of his own section.
I would be glad to talk tliis over with you on the phone at your convenience.
I understand that you will not l^e in Pittsburgh for some time, but if you are
within phone call, either there or elsewhere, I would be glad to talk the matter
>over with you.
Very truly yours. .
■CKW/MAP
Exhibit No. 924
[I'liblicity Bui'eau fllo : I'oucher. M. R. Corrospondpnce, dye]
M.\KCH 23, 1920.
File: 2763-MRP.
Mr. Joseph H. Choate, Jr.,
60 Wall Street, New York Citi).
My Deab, Me. Choate: I have lieen trying to get you on long distance this
afternoon to tell you that I have just received a telegram from our mutual
friend, Mr. Franklin W. Hobbs, of Boston, reading as follows :
" I attended a conference on dyestuffs with several manufacturers, at Mr.
Wood's office this morning. His counsel, Mr. Aurebach. was als'O present. I am
confident that Mr. Wood is now ready to change his amendments so that they
will meet Mr. Choate's approval. I am convinced Mr. Wood favors your bill.
I am to meet Mr. Aurebach again tomorrow, Wednesday morning, for further
conference."
(Signed) Franklin W. Hobbs.
Immediately upon receipt of this message. I got Mr. Hobbs on long distance,
and he gave me the story of wliat took place at their meeting this morning. It
appears that Mr. Hobbs took upon himself to write Mr. Wood a letter a few
* Personal marking.
2578 MUNITIONS INDUSTRY
days ago, pointing out the danger of not only his own position but that of the
entire textile industry in opposing this bill.
Incidentally, Mr. Hobbs called Mr. Wood's attention to the movement under
way by the Department of Justice to investigate the textile industry on the
charge of undue profiteering. At any rate, Mr. Wood decided to call this meet-
ing. Mr. Hobbs tells me he made a statement along the lines of Mr. Hobbs'
letter. This was followed by some remarks by Mr. Auerbaeh, to the effect
that in his opinion these mills should all support the bill.
I told Mr. Hobbs that I thought the proper procedure would be for Mr. Auer-
baeh to see you immediately upon his return from New York (either Thursday
evening or Friday morning), and if the amendment proposed by him met with
your approval, it could, with the consent of Mr. Wood, yourself, and Senator
Watson, be brought up in conference ; provided, of course, that Mr. Wood with-
draws the four amendments and so notifies Senator Watson.
If we can get these four amendments out of the way by some arrangement
with Mr. Auerbaeh, then the next step will be to get rid of the Moses amend-
ments in the same manner, through the influence of Mr, Wood and Mr. Auer-
baeh, if within the range of possibility.
I am going back to Washington tonight and will be at the Wardman Park
Hotel for the next few days.
I repeated Mr. Hobbs' telegram to Judge (Jovington over the telephone; and
the suggestion to take the Auerbaeh amendment, if acceptable, into conference
instead of introducing it on the floor of the Senate comes from him.
Yours very truly,
(S) H. R. POUCHER.
LPL
Exhibit No. 925
File— 115
[Copy]
41 Avenue de l'Opeba.
Paris, Februari/ 3, 1920.
Copy to: Mr. Irenee du Pont, Mr. Lammot du Pont, Mr. C. A. Meade, Mr.
M. R. Poucher.
Subject : Our negotiations with the Badische.
Attention also : Messrs. Laffey, Mead, and Poucher.
E. I. DU Pont db Nbmouks & Co.,
Development depa/rtment, Wilmington, Delaware.
Dear Sirs : Referring to my letter of January 27tli on this subject, I beg to
inform you that further interviews with as well Dr. Bosch as Dr. Duisberg
in the big lines have conflnned the facts outlined in said lettei'.
First, ammonia : The Germans did not come to any definite arrangements with
the Solvay Company, as was expected.
The fight is now between Solvay and the French Government. The former
does not want to start any construction at the present but would prefer to wait
sometime until conditions are more favorable for such large development.
The French Government, however, demands the immediate construction of
a relative large factory.
The Solvay Company would prefer importation from Germany at the present
and the beginning of the construction, say, next year.
The contract with the Badische is therefore still in the hands of the Govern-
ment, but all chances are for an arrangement between Solvay and Badische
with the French Government as mediator.
They will now probably wait until they have seen you, but you might bear
in mind that they have made no definite arrangement with the Badische for
France.
As far as Bnniner Mond is concerned, the situation is as informed you in
my letter of January 27.
Second, dyes: The arrangement regarding dyes have l>eeu made with the
French interest " Compagnie National de Matieres Colorantes." The arrange-
ment is made in such a way that the French company, togetlier with the I.G.,
shall operate all former German dyestuff factories in France, the French being
directly shareholders in these former exclusively German factories. The ar-
rangement, so Dr. Bosch says, concerns only France and her colonies and has
not in view any exportation to other parts of the world.
MUNITIONS INDUSTRY 2579
The Germans seem to be much pleased with the arrangement they have here
and they may have in view some similar move in America.
As well Duisberg as Bosch, both of whom I had out to dinner the other day,
were furious on Dr. Herty, and Dr. Bosch declared that he would at once
break off all negotiations with us if we have anything to do with the difficulties
raised against the German dyes in America. We must understand, he said,
that if we were negotiating with them both sides must be frank to each other
and that we could not expect the Badische to go further in the started negoti-
ations with us if they knew that behind their back make everything possible
to hurt their interest in America and elsewhere as far as dyes are concerned.
Dr. Duisberg said it was the only thing for them to do to try to go to
America as soon as possible and that he could arrange to get permission to
land. They would also visit Japan, the Japanese having invited tliem to come.
The whole miscontent is due to the fact that the Germans have been of the
opinion that Dr. Herty belongs to our company and that all measurements
taken in America against the German dye interests originate from us.
We parted as good friends, I being invited to Bosch and Duisberg the last
evening they were here, and they are now convinced that as far as we are
concerned we have paid fair play vis-S-vis them.
I told Duisberg that he better not come to America just now but let Bosch
go alone for the ammonia question. I do believe he will not sail at the same
time as Dr. Bosch but come later with Mr. Weinberg.
Bosch requested me to come to Ludwig-shafen before I sail ; and as I cabled
you today, I intend to do so in the near future.
It seems to me that I should postpone my trip to America nntil you have
discussed the matter with Messrs. Gold and Jansson. No doubt you will have
to communicate with Badische during or immediately after these discussions,
and you may probably have suggestions to make Bosch that should come in his
hands before the representatives for Mond and Solvay return. Consequently,
I have taken passage on the Rotterdam, leaving Holland on February 27.
I am sure you agree with this arrangement.
Yours very truly,
Etsten Bmui.
Exhibit No. 926
[File, Publicity Bureau, Whaley-Eaton Service]
Pabis, (VI),
3 Rub Benaparte,
January 25, 1921.
Mr. Charles K. Weston,
Publicity Department, E. I. du Pont de Nemours & Co.,
Wilmington, Del., U. 8. A.
Dear Mr. Weston : I have had three meetings with Dr. Chapin, as a result of
which I have arrived at the most satisfactory arrangement I think possible,
under present conditions, to make with him. He will not, cannot he says, talk
officially. He therefore will not meet the newspapers at an arranged con-
ference. He appears all tied up to silence ofiicially, but he will tip me off to
I^eople he comes into contact with who know conditions and who are in a position
to talk. He mentioned that he had information in his possession of vital im-
portance to friends in New York, information, he said, which would prevent
them severe money losses, but that he could not pass the information on under
the present policy.
I asked him who is responsible for such a policy when almost all Government
agencies in Washington have by now established oflBcial publicity bureaus. He
said Mr. Boyden, head of the Commission, was the man. I am arranging to have
Dr. Chapin, with whom I am getting along famously in a personal way. intro-
duce me to Mr. Boyden, to whom I am going to suggest the advisability and
wisdom of loosening up on information, if not to the extent of putting out
statements, at least to the extent of saying to correspondents who come for
verification of information. " That is so " or " That is not so." If I can get such
a system working here, tliere will be no trouble in having information which can
be obtained from uuofiicial sources approved as correct officially, which will be
sufficient for the puri>oses of the Paris correspondents.
2580 MUNITIONS INDUSTRY
The A. P. carried a cable on the substance of an interview I had with Professor
Blondell, professor of economics and political science of the College of France,
and I suppose you noted it in the cable despatches. The Public Ledger syndicate
and the Chicago Tribune syndicate papers are to be supplied with a story I
have arranged which will point out that the French Government, upon con-
fidential information from its investigators in Germany regarding a coming
great German dump of goods, will further increase its coefiicient tariff rates on
dyestuffs, chemicals, etc. The stories will point out that France will increase
the coefficients not only to safeguard French industry but also to prevent further
unemployment due to Fi'ench production being stopped by a great stream of
German goods. This will checkmate the German plans as far as France is con-
cerned but will have the effect of concentrating Germany's attention on the
United states, which alone of all the great countries has not acted to safeguard
its dye industry. This story should bring out some editorials in the American
press, and it might be possible to have it suggested to some of the newspapers
that editorial treatment of the cable would be of public service.
Dr. Jacoby, who is Dr. Chapin's associate, showed me yesterday a clipping
from one of the Ledger syndicate newspapers. It was a cable dated January 7,
and was the article you supplied. The clip had been sent him from America, and
the last paragraph had been heavily blue-penciled as a mark of approval.
I sent you a cable yesterday notifying you of the coming appearance of the
stories for the P. L. syndicate and C. Tribune papers. I hope to get some more
material over the A. P. wires shortly.
I have made arrangements with Dr. Chapin and Captain Norris, who is a good
fellow, to be tipped off promptly if Kail von Weinberg arrives in Paris. He
would get in touch with either of these two men upon his arrival. I shall then
attempt in an interview to get him to boast a little and to have three or four of,
the other correspondents with me at the interview.
Dr. Chapin says confidentially that he sent some information to a friend of
yours, who, I believe, is Mr. Poucher, and that his action was objected to in the
office here when it l)ecame known. He gives this as an illustration of how care-
ful he has to be, although in full accord and entire sympathy with our purposes.
Dr. Chapin went over all his difficulties tlioruughly when we had luncheon
together yesterday.
By the way, I suppose that an occasional luncheon, etc., in furtherance of the-
project would not be objected to. but- I should like authorization. In this case
Dr. Chapin paid for the lunch, but I want to be in a position to come back at
him and the other people who we want to cultivate, including such men as
Williams, of the P. L., Roberts, of the A. P., De.scheil, who is a good plugger, etc.
Floyd Gibbons, of the Tribune, should be cultivated more closely, and you know
how much can be done over a bite to eat and a drink.
Carl Aekerman, who dropped into the Ledger Bureau while I was there, over
on a short visit from London, requested me to remember" him to you.
I shall have a new office next week, right at the Place de la Concorde. The
address will be 8 rue Saint-Florentin, Paris (lor), off the Rue de Rivoli at the
Place de la Concorde, just over the bridge from the Chamhre des Deputies and
the French Foreign Office, and right up against all the hotels, ere. I am very-
much pleased with it.
Dr. Chapin and Col. Taylor and Mr. Chase ask me to remember them to you.
Sincerely,
(s) Ben K. Rat.eigh.
Exhibit No. 927
[File, Publicity Bureau, Poucher, M. R. ; correspondence, dyes]
Boston, Mass., January J, 1920.
F. D. Byrne,
Pwbliciiy Department:
I received a letter today from Mr. Weston from London, dated December 17th,
together with some clippings from the London papers of various dates between
December 3rd and 17th. I think we are beginning to see some results ; for
example, the article in the Boston Transcript issued Dec. 31st, page 6, under
this heading:
MUNITIONS INDUSTRY 2581
" Britain Foresees ' Gas ' War — New Legislation Will Shut Out Dyestuffs
AND Enable Plants to be Built Which Can be Converted into Poison-Gas
Factories
'•London, December 31. — That poison gas will be the supreme -weapon in the
next war is aeceptefl by the Go\ernnient. This is the inference drawn from
the passage of the dyestuffs import regulations act, which prohiits the importa-
tion of dyestuffs for the next ten years. During this period England will be
enabled to build up her dye industry to a iwint of absolute dependence from
the outside world.
" Dye plants, by a slight change, can be readily converted into war plants
for the manufacture of poison gas. When the World War began in 1914,
England had very few dye works, but Germany was full of them. Hence the
British had to build the factories for the making of poison gas, Avhile the
Teutons had everything ready. The conversion of the numerous dye plants
into ' gas ' plants was, pi-actically speaking, the work of only a few hours."'
I notice that this heading follows very closely the one in the London Evening
Standard of December 7th, reading :
" Poison Gas and the Next War — Nations Experimenting Already — British
Position — Gases in Warfare — Value of a Highly Devei^opbh) Chemical
Industry "
This is the right line and it must be pushed hard on this side. I suggest
that you look out for any statements or reports from General Fries. They
will, of course, be quite in line with the foregoing.
MRP-F.
Exhibit No. 928
[Memorandum]
M. R. POUCHER.
January 15. 1921.
To: C. K. Weston.
From : F. J. Byrne.
Recently there have appeared a number of dispatches in the American papers
along the lines that are very desirable to us. These look to me as if they have
been cabled to this country as a result of your visit to the other side.
(1) The Boston Transcript of Dec. 31, 1920, carried a fine story on "Bricain
Forsees Gas Warfare," dated from London.
(2) The Wasliington Herald had a cable dispatch written by Wythe WilMams
from Paris about German dye plots against the United States. This w;is taken
up by the Manufacturers Record and made the subject of a splendid full-page
editorial.
(3) The Evening Bulletin of Philadelphia had a dispatch from London talk-
ing .-ibout the importance of the British action passing the dye bill and irs
relation to American affairs.
(4) The Public Ledger of Jan. 8, 1921, had a dispatch from Paris about " Ger-
many Sets Dye Trade Trap."
These dispatches, of course, are syndicated in many cases to appear in
different places throughout the country, so that the publicity on these four
items I mentioned must have been very considerable.
C. K. W.
FJB/P.
Exhibit No. 929
* See me about this.
FJB.
April 28, 1921.
To: Mr. C. A. Meade, room 9104.
From: C. K. Weston.
The inquiry which Dr. Koontz makes through Mr. Chase concerning the
whereabouts of Mr. Guy Martin, and the articles which he wrote for the
Paris editions of the New York Herald and the Chicago Tribune, throws an
interesting sidelight on my visit to London and Paris.
2582 MUNITIONS INDUSTRY
You will recall that I sent you copies of these articles very recently. They
were written by Mr. Ben A. Raleigh, an old newspaper acquaintance whom I
left on guard in Paris. He assumed the name of Guy Martin for publication
purposes.
His Paris address is 8 Rue Saint-Florentin, Paris, and he is in constant
touch with our Paris office. He as my agent will carry out any suggestion
which Dr. Koontz or Mr. Chase may make. I am returning Mr. Chase's letter.
Publicity Manager.
CKW/P
Exhibit No. 930
[Copy to: C. K. Weston]
Mr. M. R. PoucHEK, June) 14, 1922.
Room 9120, Building:
The following cable was received today by the Whaley-Eaton Service from its
Paris correspondent :
" Congressman Everett Sanders and Frederick Purnell associated with Britten
Berlin negotiations."
J. F. Btbne.
FJB/AER.
Note. — Both Sanders and Purnell are Congressmen from Indiana.
Exhibit No. 931 September 22, 1921.
Mr. P. H. WHAI.EIY,
Whaley-Eaton Service, Munsey Building, Washington, D. C.
My Dear Whalby: You know, of course, that the chemical industry will
figure very largely in the coming disarmament conference. The Chemical War-
fare Service will, of course, be consulted. It may interest you, as a piece of
news, to learn that the chemical industry as a whole will be represented thi'ough
advisers to be appointed to help the American delegation solve its problems.
The names of several distinguished chemists are now under consideration at the
White House, and announcement of the appointment of representatives of the
chemical industry probably will be made very soon.
For your private information, the President has received favorably the sug-
gestion that Dr. Charles H. Herty and Dr. Edgar Fahs Smith, former provost
of the University of Pennsylvania, and president of the American Chemical
Society, be named as advisers.
The Evening Journal, of Wilmington, is reprinting on its editorial page today
the chemical story which the Manufacturers Record printed last week.
Very truly yours,
Managee Publicity Bureau.
CKW/AER.
Exhibit No. 932
Whaley-Eaton Service,
Washington, D. C, November 9, 1921.
Mr. Frank Byrne,
E. I. du Pont de Nemours <& Co., Wilmington. Delaware.
Dbab Sib: Referring to your telephone inquiry in regard to the members of
the French delegation experts on chemical disarmament :
Our own information, as carried in our last week's foreign letter, came by
cable, which mentioned the names of these two gentlemen as Mayer and Moren.
On inquiry at the State Department we find that M. Andre Mayer is in Wash-
ington with the French delegation, but no M. Moren. There is, however, a
M. Moureu. It is our opinion that this last is unquestionably M. IMayer's asso-
ciate and that the Moren in our cable was gai'bled.
We think it very unlikely that we will be able to get any of the details of
the plan for chemical disarmament from these gentlemen, but we will do our
best.
Very truly yours, Whaley-Eaton Service.
By: (s) Harry Eaton.
ho.w
MUNITIONS INDUSTRY 2583
ExHiHiT No. 933
NOVBMBEK 25, 1921.
Mr. M. R. PoucHER,
Room 9120, Building:
From : C. K. Weston.
I am informed throush the Washington "grapevine" that the British dele-
gation to the Limitation of Armament.s Conference has a plan to submit con-
cerning tlie chemical industry which embodies these points :
First, to outlaw the use of poison gas in warfare and to outlaw as far a?
possible anything of a dangerous chemical nature ;
Second, failing to secure drastic action (as they expect to fail) to limit the
use of chemicals as much as possible;
Third, to put the chemical industries of the various nations under the control
of the governments.
From the same source comes information that an economic confei'ence is a
certainty and that Britain will suggest, among other things, that Germany be
helped to reestablish her industries, particularly those which depend least on
outside sources for their raw materials — meaning their chemical industries —
and that England will be willing to assume the responsibility for control of
this German industry by undertaking to supervise the distribution of German
chemical products to the markets of the world.
I understand that Sir Reginald McKenna, chairman of the board of the
Midland and City Bank (?), is now or has been recently in this country in
conference with leading American business and banking interests.
CKW/AER.
Exhibit No. 934
statement by julius klein, former assistant secretary of co'm^[e»cb and
diebctor of thel bureuvu of foreign and domestic commerce
The Senate inquiry appears to me to present an incomplete version of the
Commerce Department's discussions with American manufacturers of sporting
arms in 1925.
AVhen the State Department began preiiarations for the arms conference a
draft of the projected treaty was released in Geneva. American manufacturers
discerned at once that the text appeared to apply also to international peace
commerce in sporting arms and ammunition and to industrial explosives.
They protested to the State Department that such prohibitions threatened
a damaging encroachment upon American commerce without in any way ad-
vancing the real purpose of the Arms Limitation Conference.
At the request of the Secretary of State, Mr. Hoover, then Secretary of
Commerce, called a meeting of the principal American manufacturers of
sjiorting arms and industrial explosives. This conference, held at the Depart-
ment of Commerce on April 1, 1925, was devoted exclusively to a discussion
of such changes in the text of the treaty as would free sporting arms and
industrial explosives from the restrictions contemplated for military supplies.
My own covering letter of April 2, transmitting the conclusions of the con-
ference, ended with this paragraph :
" Your attention is invited to the fact that the enclosed memorandum does
not necessarily represent the views of the Department of Commerce, but
merely those of one branch of the industry, and that the participation of
the Department of Commerce is limited to the task of ascertaining and crys-
tallizhig the views of the industry for tlie benefit of the Department of State
and of the American delegates to the Geneva Conference."
The whole purpose of the conference, and the only interest of the Commerce
Dejiartment in the Discussions, was to distinguish between normal ]ieace-time
connncrcial business in sporting equipment and industrial explosives on the
one hand and military arms on the other; and to make certain that the legiti-
mate peace commerce should be properly safeguarded in the treaty.
A full report covering these discussions was transmitted to the State Depart-
ment at the time.
During his administration President Hoover, in messages to Congress and
public addresses, urged ratification of the Geneva Arms Treaty no less than
83876—35— PT 11 13
2584 MUNITIONS INDUSTRY
six times. As late as January 10, 1933, he sent a special message to Congress,
again urging ratification of this treaty. In this message President Hoover
said in part :
" This convention has been adhered to by a large number of other important
nations and is practically stopped through failure of the United States to adhere
to it. Its ratification would contribute to the ends being sought by the entire
world for the prevention and limitation of war. I earnestly urge that this
convention should be ratified."
Over a period of twenty years Mr. Hoover has been a conspicuous figure
in the movement for the effective organization of the peace of the world. His
vigorous advocacy of the Kellogg-Briand Pact, hisi unceasing effm-t for the suc-
cess of the Naval Limitations Conferences his exposure of the jingo propa-
ganda which once threatened the Geneva effort, his work for the universal
acceptance of the doctrine of nonaggression, and his efforts to advance the
entire limitation program- — all these are testimony to his sincere devotion to
the cause of peace.
("ExHrBiT No. 935" appears in text on p. 2426.)
("Exhibit No. 936" appears in text on p. 2438.)
Exhibit No. 937
[File MS-80-A]
* 135 Ms-8
DU PONT-NOBEIL RELATIONS KEGARDING MILITARY SALES
Attached hereto is memorandum on " du Pont-Nobel cooperation, sales of
military propellant powders and explosives ", which is the present agreement
between the du Pont Company «nd the Nobel interests concerning military sales
to governments other than the United States and Great Britain.
A brief summary on how it came into being is timely. For some years past
an accord has existed regarding foreign sale.s of commercial explosives, but all
documents covering this accord specifically excepted military sales, as, for
example, (hat of January 1, 1920.
This was largely due to the fact that du Pont felt that any accord on mili-
tary sales would tend to disturb their relations with the United States Govern-
ment, which relations had been carefully cultivated for over a century.
How Nobel felt in this regard is not known to us, but probably the Cordite
factories at Waltham Abbey, Holton Heath, and Auruvankadu (India) occupy
a relatively larger place in the British propellant supply than do the American
equivalents, so that the relations of Nobel with the British Government are
possibly not so intimate as du Pont's with the United States Government.
The military sales division of the du Pont Company is charged with sales to
and contact with the U. S. War and Navy Departments, and our constant
acquaintance with the ofiicials of these Departments gives the members of the
military sales division a knowledge of opinion in Washington that is never
written and seldom spoken. It is the unanimous belief of the military sales
division that any agreement on military sales with an alien firm will materially
hurt our relations with the United States Government, if, indeed, such agree-
ment will not eventually conflict with article XIV (d), ordnance contract.
" No contractor having in hand work of a military character which the Ord-
nance Department may designate as confidential shall permit any foreign officer
or other foreigner not in the contractor's employ to visit portions of the plant
where such work is in process, nor shall the contractor give to such person
any specific information concerning such work without the authority of the
Chief of Ordnance, nor shall any alien in the contractor's employ be engaged
on or permitted to examine such parts of the work as the Ordnance Department
may specifically designate as confidential."
Notwithstanding this belief, an agreement to cooperate with Nobel on mili-
tary sales was signed in London in November 1925, whereby du Pont was given
priority of sales on nitrocellulose powders and Nobel given priority on TNT
and nitroglycerin powders. In general, this agreement was satisfactory, but
MUNITIONS INDUSTRY 2585
since Nobel was to have some of the nitrocellulose business and had not per-
fected this type of powder or brought their manufacturing costs to a figure that
could secure orders, it was not entirely satisfactory.
Closer cooperation was agreed on under date of October 14, 1926, whereby
du Pont from their Paris oflSce took charge of joint sales in northern and west-
ern Europe and Nobel from their Vienna office took charge of the Balkans.
Italy was left to Nobel ; no mention made of Spain or Portugal, which in effect
left them to Nobel ; Hungary not mentioned ; and Germany left for future
discussion.
The following has developed : On the 1,000-ton Polish order Nobel's quota
would have been 300 tons, but the Polish Government declined to split the
order, and, in general, it may be assumed that this attitude will be followed by
other governments.
At a meeting held in London on October 11, 1927, it was stated by a Nobel
representative that Ardeer must have orders for nitrocellulose powders in order
to gain experience and keep the plant force employed, which indicates that tJie
difliculties still exist in perfecting a nitrocellulose powder and producing it at
a cost suflSciently low to compete with other firms.
Frankly stated, the military sales division did not and does not desire this
alliance, as our technical developments and production costs permit us to secure
sufl5cient European business in competition with any or all manufacturers,
and we feel that any such alliance causes apprehension in Washington, which
is detrimental to the interests of the du Pont Co.
This alliance further impedes our sales, since no government will allow an
order to be filled from factories in two different countries, where with the
greatest care and skill, differences in finished product must result.
Although it is a delicate matter to discuss, the political situation of Great
Britain in regard to continental powers must be given consideration, and it
is believed that an American firm will have sales advantages, due to the de-
tached position of the United States in reference to European politics and'
political alliances.
We believe also that our European representative and his local agents will
be more successful in negotiations with the various governments than will their
Nobel associates.
To sum up, our objections to the existing Nobel agreement are :
The detrimental effect on du Pont relations with the United States Govern-
ment.
The relative lack of nitrocellulose-powder development by Nobel and the
relatively higher prices hamper sales.
The impossibility of du Pont aiding Nobel to develop nitrocellulose powders
without conflicting with the United States Army contracts.
The impossibility of inducing foreign governments to permit orders to be
filled partly from du Pont and partly from Nobel factories.
The relatively greater skill of du Pont representatives, agents, and technical
men in securing European orders.
We consider- this information confidential.
E. I. DU PoNT DB Nemours & Co.^
By K. K. V. Casey,
Exhibit No. 938
[Pile MS-80-A]
16 Place Vendomb, Paris,
Novemher 16, 1927.
T-1012
Major K. K. V. Casey,
E. I. dxi, Pont de Nemours & Co., Wilmington, Delaware.
(Cooperation with Nobel:)
Dear Sir: 1. In accordance with tlie decision of the meeting held between the
principals of the du Pont Company and Nobel Industries, Limited, on the 29th
day of July 1926, an agreement was drawn up on the date of October 20th, 1926,
which resulted in a joint sales agreement by which the du Pont office in Paris
was to supervise the sales of certain territories on behalf of both companies and
2586 MUNITIONS INDUSTRY
the Nobel office in Vienna to supervise otlier territories on behalf of both
companies.
2. In accordance with the minutes of the meeting of July 29th, 1926, Mr. A. G.
Major and myself were delegated to draw up the detailed arrangement. As an
actual matter of fact, when we drew up tliis arrangement, the following ideas
were in our minds :
a. First, that there was no essential difference in the effort put upon sales
between the du Pont Company and the Nobel Company.
4. Secondly, that the quality of the products of the two companies was equally
sellable.
5. Thirdly, that the sale's prices were approximately the same.
6. We took this attitude because neither of us had had any comparative
experience of a real nature to permit us to presume anything different.
7. However, we did understand that the matters might not worlx out exactly
as we foresaw and that there might be some possible developments along this
line, and therefore we put in a paragraph which said :
8. " It is recognized tliat in actual practice the ([uotas may not be adhered
to, and it is therefore suggested to the du Pout and Nobel management that,
at the end of each year adjustment shall be made for services rendered in the
event of one party obtaining an over-quota by the payment of some agreed
amount per unit of oversales."
9. Furthermore, it was provided : " When occasion demands Colonel Taylor
is to be provided with technical assistance from Nobel necessitated by enquiries
from his territory, whilst reciprocally Mr. Smith may call for technical assist-
ance from Colonel Taylor where necessary."
10. Furthtrmore: "Government objection or prohibition shall be a valid
excuse on the part of either of the parties hereto to decline to make disclosure
of information pertaining to products within the scope of this arrangement."
11. And furthermore: " It is agreed that this arrangement shall not entail the
exchange of costs."
12. We have now been working under this agreement for a year and the
situation has developed as follows : In endeavoring to sell Nobel goods in my
territory there has not been any great difHculty in deciding in a reasonable
manner as to which company shall bid on enquiry from any certain country
and therefore on the basis of meeting the allocation mentioned in the contract,
there seemed to be no great problem to be expected, as circumstances appear
to dictate that in certain countries it is easier to sell Nobel material, due to
political and psychological reasons, and in other countries it is more easy to sell
du Pont material. Therefore, it first appeared as if the agreement would
work out exactly as intended, but unfortunately political and psychological
reasons are not the only things that sell powder, and therefore other considera-
tions have come in, unforseen at the time the agreement was made and which
may lead to certain complications.
These are : First, that Nobel cannot sell as cheaply as du Pont.
13. Secondly, that du Pont disposes of a greater history of experimental work,
\vhich permits them to offer a greater variety of solutions of the problems
presented than Nobel, and above all, permits them to answer these requirements
more rapidly and with greater assurance of success.
14. Therefore, one of my first studies in undertaking this sales' supervision
for Nobel's was to try to improve their situation by giving them more complete
information aliout the requirements than they had before, by getting their
technical men In closer touch with the customer, by putting pressure on them
to increase their experimental and research activities, which has been received
with a mixed i-eaction :
15. On one hand they resent rather strongly any criticism of their products,
and on the other hand they are pleased to be put in closer contact with the
proidems.
16. It has also occasionally happened that where we have offered Nobel mate-
ri;d we have lost the order, whereas we might have had a better chance of getting
it if we had offered du Pont material. In each of the.se cases, liowever, it was
a (luestion of iirice. not of quality. It is not. however, beyond the iiossibilities
that Nobel would be willing to sell at the same prices as du Pont and hence
correct this difficulty, so at the moment of writing this there appears to be no
obstacles that cannot be corrected in time.
17. How<'ver, it is now very easy to project oneself into the future nnd foresee
lliijt certain more serious difficulties are about to arise. These difficulties are
about to develop in specific cases :
MUNITTONS INDUSTRY 2587
18. The first case is the question of Poland: We are looking forward to cun-
siderahle business from Pohind and hoping that it will come in the form (,f addi-
tional quantities to the i)resent contract, which, if it takes place, would oltligate
us, under the agreement, to endeavour to pass a certain quantity of this
contract to Nobel, specifically 300 tons of powder. It is evident to me. however,
that without our assistance Nobel can not manufacture in accordance with the
specifications, and we will either have to show Nobel how to manufacture this
powder by sending men to Ardeer or we will have to take Nobel's men to America
to work them in on this matter.
1J>. The second case is the question in Belgium, where, for every commercial
reason, it would appear reasonable to place the business expected from the
Fabrique Nationnle on Nobel's, and where Nobel is about to undertake studies
to meet the requirements. In this case, unless I give Nobel's the results of the
studies made by us for the Fabrique Nationale and give them certain assistance,
which knowledge I have acquired through efforts of the du Pont Company, they
will have trouble in meeting these reciulrements.
20. Thirdly, in the question of powder for the 13.2 mm Hotchkiss machine gun,
the question comes u]) why should they not furnish powder to Kynoch, if they
can make it. as Kynoch is their own factory, and here again, in order to enable
Ardeer to make this powder, we will eventually have to give them some
assistance.
21. Fourthly, if it would be possible to continue without giving Nol)el any
direct assistance in manufacture from Wilmington's iiersonnol, in any case I
.^hall have to give them, in order to sell their goods properly, a great deal of
information regarding customers' desires, methods, and results, which has been
acquired by me through working for the Du Pont Company and which is, there-
fore, the property of du Pont.
22. I can also foresee another complication : The experiences of the war have
caused a very considerable change in the requirements demanded of powders,
and Europe holds a quantity of unsolved problems. Ot all the p(!W(ler manu-
facturers, the Du Pont Company is at present the most capable of solving those
problems. This is being realizeil in Europe, and in the near future we are
going to get our principal Inisiness presented to us along the following line-;:
23. A country will say to us: "We have now adopted new guns and small
arms, but we are not satisfied with the powder solution for this problem as
presented by local factories. We will place a. large order for powder with you,
provided you solve the problem and then show our local people how to make
the powder. We must necessarily have you to show our local people liow to
make it. as it is not possible for us to be dependent on our powder supply
entirely from a foreign country; and therefore we cannot buy the ]M3wder from
you, nor use your solution of the problem, unless it is a solutio.n which we can
eventually produce ourselves."
24. The problem will be presented in the above manner, and Du Pont is in
a position to make considerable money by solving it iri the above manner. It
appears to me that we have the technical exiierience to allow us to solve such
problems and that we can in most cases show how to make the particular
powder for the particular problem which they put up to us, without disclosing
matters of great secrecy, not losing our lead in experimental work : in fact, the
stimulus of solving these problems will increase our technical advance.
25. This appears to me to be the immediate future of our work, and the
present agreement which we have with Nobel is not adapted to this problem.
I take it that under the present relations with Nobel we are obligated to show
them anything we show to a continental country, and tliat we are obligated to
place a part of these orders with them if possible; and, if this is not possible,
we are obligated to shai-e profits with them.
26. Suppose that the Paris office should be called upon to negotiate a contract
along the above lines. Should I present the problem to both the Du Pont Com-
pany and the Nobel Company at the same time, secure a duplicate set of in-
formation and components, have both factories study the problem imlepend-
ently, and have them comi.ete with eacli other for a technical solution?
27. If this is to be done, the Paris office of the Du Pont Company, being the
organ of transmission of information and questions, is bound to acquire thnmgh
this activity an intimate kn(iwledge of the working of the two parties; it will
be almost impossible for the Paris ofl^ice to decide which information belongs to
which company and whether it is to be transmitted to one and not to the other.
Furthermore, as experiments would go ahmg, it is inevitable that one company
would succeed and the other fail, and that the .second time a situation like that
2588 MUNITIONS INDUSTRY
arose the weaker company would insist upon the other giving them the advan-
tages of their experience, and immediately a very acute development of the
problem on tlie exchange of information would arise.
28. If I gave all the problems to the du Pont Company and none to the
Nobel Company, there would be a legitimate objection. If I should give one
problem to one company and one problem to the other, there would be a legiti-
mate question as to my judgment as to which company I allocated the problem
to.
29. Therefore, in the development of our relationship with Nobel, the follow-
ing questions will come up:
* No. First, is the Paris office justified, in its efforts to sell Nobel goods,
in giving Nobel the results of all the experience which it has acquired as
representative of du Pont?
30. Is the Paris office justified in deciding that a certain order should be
placed with du Pont or Nobel, if the decision is to be made based on the
ability of the given company to manufacture in accordance with the require-
ments of the problems?
31. Is the Paris office justified in negotiating a contract which requires the
study of a new technical problem?
32. If so, is the Paris office justified in saying that du Pont will take this
problem because tliey can do it, and Nobel will not take up this problem because
they cannot do it?
33. Can the Paris office negotiate a contract for du Pont with a provision
for giving the purchaser certain knowledge regarding the manufacture of
powder, first offering this knowledge to Nobel, or without consulting Nobel?
34. Is it correct, in order to avoid the development of the above type of
problem, that the Paris office should abandon business where the question of
a technical study is involved and confine itself to simply selling what might
be described as the curi-ent manufacture of the two companies?
35. I foresee that, within six months, every one of the above questions will
come up and it appears to me that there is no provision for the solution of
these questions in the contract under which the Paris office is working, and
it appears evident that the Paris office is not competent to decide the above
questions, and if the Paris office has no direction along which to work in view
of the above, our business is going to be a great deal interfered with.
36. As these questions will surely come up, it npi>ears to me that they should
be foreseen and an agreement made with Nobel before the occasion arises,
otherwise tlie Paris office will find itself in the position of taking responsibility
of action on wliat are general company problems. I thing the Paris office
should be given specific instructions as to its action in these cases.
37. To possibly enlighten the discussion, I would like to give the following
personal opinion : Our future business will probably be, in every case, in the
form of a solution to a new ballistic problem and the business of selling what
might be called the current production of the two companies is practically
over, and as the agreement of the 20th of October 1926 was based upon the
idea that the sales would be of current products, it seems to me that this
agreement will no longer cover the situation. I further believe that the volume
of business will be inevitably tied up with the obligation to teach the Euroi>ean
customers how to produce, in their own country, the powder resulting from
the solution of the problem.
38. I further believe that it will be impossible from a sales point of view
to successfully conduct the negotiations with du Pont and Nobel competing
between themselves. I also believe that the number of cases in which du Pont
will find a solution will be greater than the number of -ases in which Nobel
will find a solution, but the technical knowledge of the Paris office is not suffi-
cient for the Paris office to decide which company should study which problem.
39. I further believe that the organization of the du Punt Company permits
us to work along these lines and that our state of technical development would
permit us to give a certain knowledge to the European factories without harm
to ourselves, but that the state of development of the Nobel organization
renders the solution of such problems much more difficult, longer, and less
likely of success. The Paris office has not an intimate knowledge of the Nobel
organization nor the possibilities of cooperation that it has with du Pont.
40. Of the possible solutions, one would be a division of territories, certain
territories to be only for du Pont to be free to do as they wish and other
Pencil marking.
MUNITIONS INDUSTRY 2589
territories to be for Nobel to be free to do as they wish. This solution has
disadvantages, as it means restricting du Font's activities on tlie Continent
and also restricting Nobel's activities. The dissolution of our sales agree-
ment of October 20tli, 1926, would certainly cause very active competition and
probably bad feeling in the relations between the two companies.
41. Giving the whole problem to du Pont on a profit-sharing basis with
Nobel would probably not be accepted by them as satisfactory, although from
the sales point of view, it would be the most workable.
42. I see no happy solution of this question, but I am clear that these prob-
lems will, in a very short time, become acute, and I hereby request instruc-
tions.
Vei"y truly yours,
(S) William N. Taylok.
WNTRB/
Exhibit No. 039
[File :MS~S0-A. 135. MS-S. MS-208. D-1307]
January 10, 1928.
Col. W. N. Taylor,
16 Place Vendome, Paris, France.
Dear Sib : 1. Your letter T-1012, cooperation with Nobel. This letter con-
tains reasons set forth in 42 paragraphs why cooperation with Nobel is not
feasible. In replying to tlie various questions asked by you, we think that
you are reading in tlie Nobel-du Pont agreement things which are not men-
tioned. The agreement was one of cooperation on matters of sales in Euro-
pean territory. If you limit your efforts for Nobel entirely to sales, we think
your troubles would be few, but when you attempt to tell Nobel they are
right or wrong on the quality of their products, or the necessity for Nobel to
do development work in order to place themselves in position to successfully
compete on military pov.der business, you naturally place Nobel on the defen-
sive and they in turn seek to acquire from us the results of our development
work.
2. We feel that the Paris ofRce should pass on to Nobel Company all in-
quiries for military powder and obtain from Nobel their minimum sales prices.
It is our idea that the Paris office should function with Nobel in the same
manner that you function with Wilmington on sales. Paris does not wire or
write to Wilmington and tell us to do development work or research work
before quoting prices on military powder. We do the development work long
before quoting prices, and if Nobel does not see fit to follow such a procedure,
perhaps they can achieve success along other lines. You should not consider
that you personally are responsible for the quality of powder manufactured
by Nobel. This is only true when we take a European order and allocate
Nobel a portion of the powder for manufacture. In such a case the contract
would be with the du Pont Company, regardless of where the powder might
be manufactured, and the du Pont Company would be the loser in the event
the product was not in accordnnce with the specifications. If the Paris oflSce
should sul)mit prices on powder for Nobel and prices for du Pont on the
same prospect, assuming that prices were exactly the same, the choice of
placing the order would be entirely with the customer, and if you are unbiased
in the matter, you would make no effort to take the business for du Pont or
Nobel. The question of allocation can never be settled by you nor by us, as it
is a matter which the purchaser must decide, and Nobel and du Pont have to
be satisfied with that decision. Our experience in Poland has taught us that
it is impracticable to assume that a large order can be divided on some agreed
to basis between Nobel and du Pont.
3. As long as you continue to function with Nobel on the basis of keeping
tliem advised as to whether their product is good, poor, or indifferent, you will
find trouble for yourself and us. You will recall when the writer was in' London
that you cautioned Nobel how necessary it was to manufacture experimental
samples and to pay strict attention to various items in the manufacture of nitro-
cellulose powder in order that they would be in a position to manufacture a
product of quality. The writer took the position that the specifications would
• Pencil markings.
2590 MUNITIONS INDUSTRY
give the Nobel company what the customer desired in the way of quality, and
that it was not the business of the salesman to take the responsibility of stress-
ing certain features of the specifleatious. Fairther, that the peciflcations were
drawn up so that the manufaciurer would know full well what the purchaser
desired in the way of quality and the acceptance of the specifications by the
contractor meant that he was fully aware of his obligations, and in quoting on
a prospect, did so with the idea that he could fulfill the specifications 100%.
This is the basis on which the Paris office functions with Wilmington and should
be the procedure between Paris and London.
4. We do not intend to furnish technical information to Nobel on any rifle or
cannon powder which we have in the past made up or may make up for European
governments. The sole exception to this is in the case of Poland, where we have
promised and are willing to show the Nobel representative the manufacture of
ritle and cannon powder on the Polish contract.
5. Would it not be a good plan for you to announce to Nobel that from this
date on you are concerned only with their prices on powder on prospects where
you intend quoting for Nobel ; that on all prospects you contemplate submitting
prices for Nobel-du Pont and would like our prices to be exactly the same? At
the end of the year it is up to the officials of Nobel and du Pont to get together
and make an allocation which will be satisfactory to all concerned. We feel
that you are quite satisfied that you are in no position to make the allocation in
question before bidding on a prospect, and if this is true, why not try to get the
business for either Nobel or du Pont by an impartial method of quoting exactly
the same price for the product of both concerns? This plan will undoubtedly
lessen your troubles with Nobel.
6. Of course, we shall discuss the Nobel agreement with Sir Henry MacGowan
or other Nobel officials when they visit Wilmington in the near future. We be-
lieve that our discussion will result in a working plan very similar to that out-
linetl in this letter, as we feel it is the only satisfactory solution to the
numerous questions set forth in your letter T-1012.
7. Before replying to this, may we suggest that you await the arrival of Mr.
Singer, who has on numerous occasions discussed the Nobel agreement with
us, and he undoubtedly can furnish you with details and reasons for the
conclusion drawn above.
8. Your letter T-1012 certainly tells the story of the Nobel-du Pont military
sales cooperation. We are glad that you wrote us in detail and gave us your
very complete thoughts on all the items which have been and will continue to
cause you discomfort and trouble. You may be sure that we will make an
earnest effort to revise the agreement so that your work with Nobel in the
future will be a pleasant task. This cannot be done as easily as it can be
written, but if you will do your part, as suggested in this letter, we will do our
utmost to bring about a satisfactory change.
Very truly yours,
W. H. O'GoKMAN, Asst. Director.
WHO'G/h.
Exhibit No. 940
[ICI — Militar.v Powers. D-1.378]
March 10, 1928.
Conference with Nobel officials.
Col. W. N. Taylor,
16 Place Yen dome, Paris, France.
Dear Sir: On March 9th, a conference took place between Nobel and du Pont
officials on matters appertaining to sales of military products of both com-
jianies. We have not as yet been furnished with a copy of the minutes of
the conference, but the following as reported by Major Casey is a summary
of recommendations :
(f/) A 10-year agreement between Nobel and du Pont covering military sales
in Europe be entered into as more or less of a continuation of the 1925 agree-
ment..
{h) It was explained to Nobel that our Paris office is not in a position to
furnish technical information, and thei'efore all technical problems should
be referred to Wilmington. We offered Nobel our facilities at Brandywine
Laboratory for the development of nitrocellulose rifle powders for British Army
cartridges. We suggested that Brandywine would welcome visits of Nobel
MUNITIONS INDUSTRY 2591
techuicul meu, and we would undertake to develop nitrocellulose rifle powdersj
to fulfill the British reiiuirenients, provided Nobel would furnish us with guns
and components to be used in ballistic tests. The development would then be
turned over to Nobel and, if necessary, we would send a man to Ardeer to
assist in the manufacture of nitrocellulose rifle powder for the British Gov-
ernment. AH technical infoi-mation passed on to Nobel would be on the
basis of Nobel agreeing to consider same as confidential, and under no condi-
tion divulge it to subsidiary or other companies in which Nobel may have part
iiwnership of some other interest.
(c) We advocated that the sale in South America of nulitary products of
both du Pont and Nobel be under the jurisdiction of du P<jnt, Wilmingtcm.
{(I) We recommended that our Paris office have complete charge of all
European powder sales for Nobel and du Pont, and that the Vienna oflice of
Nobel function under our Paris ofiit-e.
Mr. Mitchell was not prepared to make a decision in this connection as he
was without details and felt that the present arrangement functioned satis-
factorily. He stated that upon his return to London he would communicate
with Colonel Taylor for the purpose of having a conference in order to
determine whether the recommended arrangement would be best for all
concerned.
2. Attached is memorandum which the writer prepared for the above-men-
tioned conference, and which may be of service to you when you talk with
Mr. Mitchell.
3. We believe it is generally admitted among the Nobel executives that
our military-sales organization is better equipped to handle foreign sales than
is Nobel. It is with this thought that we recommended that all European
sales for both com]ianies be handled through the Paris office. Mr. Mitchell
no doubt desires to iliscuss this subject with Nobel London before he con-
fers with youj It woidd therefore seem wise for you to prepare a memo-
randum showing the advantages which may be gained through the adoption of
our recommendation, and also to point out specific cases where business has
bei'n taken by comiietitors because of the lack of unity of action on the part
of du Pont and Nobel.
4. From your cable #6";8 it aiipears that you can cite your pre.sent negotia-
tions in Poland as an example of what both companies may lose through lack
of unity of action.
Very truly yours,
WHO(G:N
W. H. O'GoBMAN, Asst. DhTcffrr.
Exhibit No. 941
[Filo: MS-80-.\. D-l:!84]
December 12, 1927.
Col. W. N. Tayloe,
16 Place Vendome, Pwris, France.
Deab Sir: Your letter T-1009'— Prance— 13.2 m/m Hotchkiss.
We appreciate that the adoption of the Hotchkiss 13.2 gun by France will
undoubtedly bring about an embax'rassing situation for the French Powder Serv-
ice. It must be fairly well known among the French that we have during the
past two years manufactured a satisfactorj powder for this gun. We, of course,
are perfectly willing to furnish France with her requirements of this powder but
see absolutely no reason why we should even think about making arrangements
for the manufacture of the powder in France or by the French Powder Service.
Having in mind our conversation in Paris concerning the possibility of France
adopting a multiperforated type of grain for larger guns, it seems reasonable
that inmiediately after the cannon-powder samples will have been tested, you
will have an opportunity of discussing in general the smokeless-powder situation
with French War Department officials. At that time you undoubtedly can
bring into the discussion the subject of powder for the 13.2 gun and offer to
supply a trial lot of ten tons. It is logical to expect that the French War
Department might purchase a trial lot even though it has been stated that the
French Powder Service can produce a satisfactory propellent for the 13.2 gun.
The proposition of giving or selling to France technical information which
might permit the French Powder Service to manufacture 13.2 powder and per-
haps powder of the multiperforated type is one which depends largely on
2592 MUNITIONS INDUSTRY
whether France might be willing to contract with us for a specific percentage of
her annual requirements of smokeless powder. We know of no way by which
a valuation could be placed upon technical assistance or information which we
might furnish to the French Power Service. Therefore, it seems to us that it
is a question of how many pounds of powder we can sell to France over a period
of years in return for our technical assistance on the manufacture of nitro-
cellulose-smokeless powder. Of course, if we enter into any agreement with the
French Powder Service, it would be on the basis of that service furnishing the
powder to France and France only. We would not permit them to manufacture
our type of powder for any other foreign government.
The matter of furnishing technical assistance to foreign governments or for-
eign plants is one which comes up quite often. In general, our policy is not to
answer the question until we have some indication as to whether the giving of
technical assistance will result in a large order or orders. If it is necessary to
answer the question as to the giving of technical assistance before any informa-
tion can be had as to whether the foreign government will agree to give us a
percentage of its powder requirements over a period of years, we think our
position should be as follows :
The du Pont Company will furnish technical assistance on powder manu-
facture, providing we can be guaranteed orders for a definite quantity of powder
per annum over a period of ten years. Of course, our decision will be based
upon the quantity of powder which we will be permitted to manufacture for
the customer over the specified period.
Very truly yours, W. H. O'Gorman, Asst. Director.
WHO'G/h.
("Exhibit No. 942" appears in text on p. 24.i0.)
Exhibit No. 943
[File: MS-80-A]
MEETING HELD AT NOBEL HOUSE ON 9TH NOVEMBER 102o
Present : Mr. Irenee du Pont, Major K. K. V. Casey, Colonel W. N. Taylor,
Mr. A. G. Major.
The discussion evidenced that the du Pont representatives accept our. theory
that eventually : (1) European countries will be selfsupplying and/or (2) draw
their supplies from countries more logically situated (sieographically) than the
U.S.A., and that jointly du Pont and ourselves should adopt the policy of
affording technical assistance to European countries wishing to erect factories
in return for a fee and the guarantee of powder orders to us during the erection
period.
Colonel Taylor suggested that Nobel's are more interested in having a financial
interest in such propellant factories and taking their profits that way rather
than through the supply of powder. He also expressed the view that we were
not so free to collaborate with du Pont to the extent that might be necessary on
account of our commitments in other directions.
It was pointed out that so far we had only gone in for industrial explosives
in this connection and our policy had been to avoid the propellant powder side,
except where we were forced to adopt it, e.g., the Czechoslovakian Explosives
Company. If, however, we were forced to enter the propellants field, we adopted
the plan as outlined above by Colonel Tayloi*.
Roth IMajor Casey and Colonel Taylor put forward for consideration the
principle of N.G. powders for Nobel and N.C. powders for du Pont. In answer
to this it was explained that this was not a proposition we could put up to our
management as it seemed to us inequitable — any cooperation should be based on
a proper division of the required supplies.
A discussion followed concerning the extension of the Greek Powder C<mipany's
plant to enable them to execute their contracts with their own government, and
it was agreed to find a basis for joint working (this of course has since been
effected ) .
A general talk ensued on the formation of a pool in Europe embracing Nobel,
du Pont, Bofors, and the Czechoslovak Company, but no decision was reached.
3rd Januaby 1928.
MUNITIONS INDUSTRY 2593
Exhibit No. 944
[File MS-80-A; MS-124]
[D-2076]
Prospects of future sales. May 21, 1930.
Colonel W. N. Taylor,
16 Place Vendome, Paris, France.
Deab Sir: In your letters T-1862 and 1893 you summarized, in a general
way, prospects of sale to various European countries. In paragraph three of
your letter you enumerated various conditions under items " a " to " h ",
inclusive, and in paragraph four you made two remmendations under captions
" a " and " b."
Your recommendations need no approval from this office as similar projects
have come up for discussion many times during the last five years, and on
each occasion we have approved the plan which you suggested.
We are willing to sell our " Know How " providing by so doing we will make
additional sales of smokeless powder. One basis on which to trade is for
the firm to which we give the " Know How " to divide its smokeless powder
business over the next ten-year period on a basis which would justify our
giving to that concern or government the " Know How " and technical assist-
ance on powder making. Tliis, in general, has been our policy and it can
only be formulated into a si3ecific proiwsition in cases where we are fully
aware of conditions in connection with the government factory or privately
ownetl concern in Europe which may be producing powder for its government.
If we are to succeed in making sales of military powders abroad, we un-
doubtedly have to make connection with European government factories or
powder companies in such countries that do not have government powder
factories.
Orders in Europe are few and far between and, at the present time, it
cannot be said that our prospects are good other than on the sale of FNH
powder to the Polish Government. It seems as though we should start at
once to see what connections we can make and nnder what conditions we
might be able to make a tie-up with factories in Europe. AVIiat we do in this
connection depends mostly upon you and we expect to hear from you more
specifically on the Coopal factory and also on the Muiden factory in Holland.
Very truly yours,
W. H. O'GoRMAN, xisst. Director.
WHO'G : MH
(" Exhibit No. 945 " appears in text on p. 245.5.)
("Exhibit No. 946" appears in text on p. 2456.)
Exhibit No. 947
[File MS-IOO-R]
Memo, for file.
Report No-. 38-H, April 29, 1924
Washington. Ai)ril 28, 192.'/.
I. ordnance DEPT'.
Left Aberdeen Proving Ground at 11 a. m. in order to be certain of getting in
touch with Gen. Ruggles before he left for the afternoon. Met Major .J. K.
Grain in the hallway just outside of Gen. Ruggles' oflice, who greeted me with a
statement that I had come to find out if the Ordnance Dept. would sanction the
du Pont Co. assisting the Polish Govt, in the manufacture of " IMR " powder,
and this was based on cablegram from the European military attache's office in
Paris. I advised that his question was apparently Itased on incomplete informa-
tion, giving a misconception of the situation. I showed Major Grain our letter
of April 26th addressed to the Chief of Ordnance, and proposed that we discuss
the subject with Gen. Ruggles in detail. There was nut time to do this very
thoroughly with Gen. Ruggles because of pending engagement of his in Col.
2594 MUNITIONS INDUSTRY
Ferguson's office to discuss " Muscle Shoals." However, discussion was guided
along lines that indicated to Gen. Ruggles that it was very desirable tliat the
work be undertaken as they stood to profit by it. The flake rifle powder situa-
tion was emphasized, and apparent contradictions were cleared up. Even be-
fore seeing our letter, Gen. Ruggles had dictated an endorsement relating to the
military attache's cable, stating that it was vastly more important to encourage
the du Pont Co. to continue in the manufacture of propellants for military use,
than to endeavor to protect secrets relating to the manufacture. Major Grain
dictated the letter of reply to us, based on instructions from Gen. Ruggles.
There was no argument or hesitation in making the decision as to their attitude.
Question did arise, however, as to tlie need of submitting this question to the
Bureau of Ordnance of the Navy. I stated that I expected to see Capt. Hough,
of the Division of Naval Intelligence, and would, as a matter of courtesy to the
Navy Dept., mention the matter. Capt. Hough was absent from the oflSce on
account of illness, hut the subject was discussed briefly with his assistant,
Comdr. Galbraith, who had little comment to make, except that he would like
copies of the correspondence, simply for record.
II. NAVY DEPT.
(o) Division of Naval Intelligence. — Discussed subject as noted above with
Comdr. Galbraith. also the recent correspondence regarding Capt. Sugimato's
letter, and Japanese visitors. No difference of opinion developed during this
discussion.
(&) Bureau of Ordnance. — Made further detailed arrangements with Comdr.
Courts regarding tests of " Pyralin Containers", for 5" 51 cal. powder charges,
to be made at Dahlgren Proving Ground on May 2d.
Subject of safety and fire inspection of the Naval Depot at Lake Denmark,
following similar inspection of Picatinny Arsenal, was mentioned, and Comdr.
Courts took this subject up with Admiral Bloch. The latter concluded that it
was not advisable to have such inspection made because there were no funds
available to correct known defective conditions.
C. I. B. Henning,
CIBH:N (s) C. I. B. H.
ExHiHiT No. 948
[File 99-12-2]
November 10. 19.33.
du Pont-I. C. I. patents and processes agreement.
Mr. W. R. SwiNT,
Director Foreign Relations Department:
In answer to the questions contained in your letter of November 2d :
1. We have received no valuable assistance from I. C. I. on new products or
new processes but have had valuable assistance along the line of improvements
in exi.sting processes in two instances: (a) In the process for refining TNT,
and (b) the complete process for manufacturing tetryl. Up until recently we
have received very few suggestions or ideas for new lines of research or new
approaches to existing research prol^lems. Over tiie past few years there has
been a definite iraiJrovement in the practical nature of the work carried out by
I. C. I. as affei'ting explosives. The commercial attitude seems to have been
inserted more and more, and, at the present time, there is one problem on which
they are working which has stinnilated thoughts along the same lines in cur
minds, namely, the development of a practical method for providing safety
sheaths for explosives to be iised in coal mines. Up until the present time our
connections with I. C. I. have lieen chiefly of value in reference to improvement
in existing pi'ocesses, and have been of very minor inipi rtance in connection
with new products or new processes. There is no question but that the in-
formation received from I. C. I. has been of a valuable nature, and the situation
in this respect seems to be improving as time goes on.
C. A. WoooBiTRY, Director.
CAW : MKB
Tlie above is an excerpt of letter to Mr. W. K. Swint, as shown in first
paragraph.
MUNITIONS INDUSTRY 2595
Exhibit No. 948 1/2
56 RUE DE Vatjgiraed,
Paris, 6e.,
October 10, 1922.
T-37.
Siiles in the Balkans.
Mr. K. K. V. Casey,
E. 1. du Pont de Nemours, Wilmington, Del.
In the Balkans I ran across a situation so entirely different from anything
we have in America that I am writing this in addition to my letter no. 36' to
try to give you a picture of the situation there.
We want to sell powder in the Balkans and powder can be sold to the Balkans
but the method of straight selling for what they need and getting paid for it
will not work. If you draw a line from Ti'ieste t<> Warsaw and go east of that
line, you find the business and tinancial conditions run on a set of rules entirely
their own, and if we can't conform to the situation we won't be able to get any
business. There the ordinary business ethics are entirely different from ours
and people have no knowledge of ours, they don't know what our business
ethics mean. Their financial methods and the methods of raising money from
their goveriuuents are also entirely different from ours.
In the first place, the country is constituted of a great mass of peasants who
work in the fields and cannot read nor write. Until comparatively recently the
governments were abs<dute monarchies run by a group of people around the
monarch who, by every means whicli they could imagine, extracted money from
the peasants without any idea of what we might call a national instinct or any
idea of being fair or doing good to the peasant — on the contrary ! Generally in
these countries are several groups of such people and all political agitation is
simply a tight between these different groups to get their hands on the spoils.
The great western European powers have attempted to force upon these people
the western ideas of government and ethics and the result has been merely
a complication of tlieir primitive methods. They begin by collecting all the
taxes they can, then they purchase things for the government and all of them
collect all the graft they can in every way out of these purchases. They don't
much care what they pay so long as they get the graft, which is their main
object. Internal politics consist of disputing over the graft — external politics
consist in developing complications which permit them to spend or collect more
government money. The idea of doing anything for the good of the country
has never been translated into their language.
For instance, the idea of issuing an internal government loan, selling it to
the people, has never occurred to them and could not be done. When they
want an internal loan they get together the rich merchants and Jews and say,
" You will lend the government some money or we put you in jail ; if you do
lend the government money, we will let you in on the profits for 15 or 20
percent." A merchant is successful when he knows how to distribute the
graft and get away with part of the profits.
If you do down to that country with something to sell and expect to find
fair competition on prices and quality, you will be very much deceived — ■
there is no such thing. People wh(> traded the most with those countries and
are most successful are the English and Germans. How do they do it? Let
us take Vickers for an example. It is impossible for Vickers, with their
British stockholders and their English business ethics, to play this game di-
rectly. So they use the intermediary of a man like Sir Basil Zaharoff, who
is the most important of his class, who acts about as follows : He gets a
price from Vickers with a discount of 40 or 50 percent. He goes to the country
and he says, " You need so much material. I'll provide you with this whole
lot and give you so much graft and I'll lend you the money to buy it with."
Then he will go to a local banker or merchant and he'll say this, " We will
make a loan through Mr. So-and-So to the government and this loan will bring
you a very large interest and we will give so much commission to the Minister
of Finance ", and he'll promise to collect enough taxes to pay this loan and he
does not got the commission until the loan is paid back. He gets his money
from these various people. The government pays Vickers the full amount
less the discount which goes to some intermediary. In time the government
collects taxes, pays back the people who made the' loan, and all the people in
the game pocket the profits. He has now made an arrangement of this type
2596 MUNITIONS INDUSTRY
for refilling the Greek Army. If we want to sell down there we will have to
do somewhat the same thing. We will have to go to the government and say
" We can furnish you with a variety of materials, large orders, which will
make a big enough sum to be interesting. We will cover fixed anununition,
powder, rifles, and cannons, shoes, uniforms, etc., and we will help to
arrange a loan to permit you to pay for this." We can then go to a local
bank and say " Now you want to arrange a loan to the government to pay for
this material on which you will get a large percentage." This bank will get
up a private loan, promising large interests to the subscribers, subject to a
purchase of material to our combination.
In order to work this we must work through an American bank who will
act as an intermediary between us and the local bank and must be able to do
its share in raising the loan among the rich nationals of the country to which
we sell, who are resi'lents in America. If we could find a bank who knew
how to do this we should get up an expedition to go to those countries, con-
sisting of representatives of the bank, technical men from the Bethlehem Steel,
a small-arms company, an ammunition company, and sit on the job until we
could negotiate.
The most difficult problem in America would be to find a bank accustomed to
this kind of operations. There are a great many such banks in England, par-
ticularly the Anglo-Persian Bank, who does nothing else, but I doubt if we
can count on the English banks to be interested in the purchase of material
from America. The American bankers are not accustomed to this type of
operation in the Balkan countries. I had a little talk with the Morgan
people in Paris and they say they have no relations in those countries and
that while such operations are done they are not organized to work in the
Balkans. The Guaranty Trust Co. people think they might be able to do some-
thing with regard to Greece but they both say that they think that it should
be done through a Jewish bank.
Any attempt to organize this by having an issue of the local Government
bonds to be sold in America on the open market, is utterly impossible. If we
want this business bad enough we could take the Government notes ourselves
and we could arrange to have enough commission on the sales to be distributed
to the right people and to be paid to the officials only after the Government
has met his obligations to us, this commission being a sort of insurance on
being paid. If we could do it ourselves we would save considerable money on
commissions and would make our prices more reasonable and less open to public
criticism. I think if we could take the Government notes in payment for the
offer of a combined lot of materials to about $1,500,000 for Serbia and about
$3,000,000 for Greece and would allow enough percentage to be distributed and
get hold of a fairly trustworthy distributor, we could do considerable business
in these countries. Otherwise I think our only chance of doing business is
to sell a little powder to the people who are operating in that manner, which
would mean instead of working in those countries attempting to sell to a
Franco-Tchec group " Skoda & Co." or to the British group around Vickers.
Selling a combined lot of ordnance and taking in hand the creation of a
loan would have the best chance of success ; sales to Vickers or Schneider have
the second best chance of succeeding, and an attempt to sell powder directly
to these Governments the least chance of succeeding.
I know this sounds lilce a story from the Arabian Nights and will probably
be digested with difficulty at Wilmington, but it is as clear an exposure of
the situation in the Balkans as I am able to make. Please think this over
and tell me which line you wish me to pursue. If you don't feel like going
into a loan of this kind, and don't know any bankers who would undertake
it, it is possible that our best mode of operation would be this : That our
agents in these countries do the best they can toward little sales and have
me put my time on the big munition companies in the western European
countries. So far I have put all my efforts on straight selling to these countries
and I expect to get some results but I don't believe that that method is going
to bring us anything very big. I think, from what I saw in the Orient, that
there are very great chances in favor of a war in the Near East. And one
must include the Balkans as being part of the Near East. Those savage people
tlon't know how to live without w-ar and robberies. They have in the past
been helped in a certain line of good conduct by fear of the military action
of file great powers. Before the Anglo-Turkish incident there was still in
the Orient a great fear of the eastern powers but the fact that both the French
and the English refused to fight Kemal and are going to permit him to enter
MUNITIONS INDUSTRY 2597
Europe, has given a tremendous blow to the European prestige in tliat part
of the country. All the people are absolutely astonished. I saw Turks, Bul-
garians, Greeks, and Serbians, and with one accord they say that the great
powers are done for, that they are afraid to fight and add " we don't have to
obe.v them any more."
To maintain European prestige in those coimtries there was nothing to do
but fight the Turks but as neither the French nor the British Governments
felt it possible to ask their people to go to war, they simply have had to ac-
cept a tremendous moral defeat. The result will be that all those Near-Eastern
people will feel that the time has come to throw off the government of the
great powers and if it does not lead to one enormous war it will lead to a
great number of small ones.
If we want to sell military powder to these people we have got to hit on the
proper plan and get busy in a concentrated way. All these people will prob-
ably buy fixed ammunition and it looks to me as if a powder factory had a
fairly small chance of selling directly to these countries. But the sales to these
countries should be made by the big munition people and perhaps our best
plan is to concentrate all our efforts on these munition firms.
Please give me a directive.
(s) William N. Taylor.
WNT/Mg.
("Exhibit No. 949" appears in text on p. 2489.)
Exhibit No. 950
[File MS-80-A]
February 3, 192S.
Personal.
Col. W. N. Taylor,
16 Place Vendome, Paris, France.
Dear Taylor : In reply to your private and confidential letter of January 18,
1928. designated " Letter A", I cabled you a reply as per my telegram no. 588,
confirmation of which is attached.
We will pay a cash discount of 2% at the signing of the contract, understand-
ing that the 2% so paid is part of the regular 7% commission. Our payment,
however, is predicated upon Polish payments for the 300 tons of powder being
satisfactory to us and, of course, the price at which the powder is sold likewise
being satisfactory.
You may be sure in the event that you conclude a deal along the lines indi-
cated in your letter of January 18th that I will promptly remit by cable the
amount involved to pay the 2% commission, so that there will be no delay.
With kindest regards and wishing the best of luck, I am,
Sincerely yours,
W. H. O'GoRMAN, Assf. Director.
WHO'G/h.
Exhibit No. 951
[144— Polish Government. MS-80-A]
July 3, 1928.
D-1552.
Col. W. N. Taylor,
16 Place Veudomc, Paris, France.
Deiar Sir: We acknowledge receipt of your cable no. 678 and confirm our
reply no. 571, copies of both are attached.
1. The news that you had actually begun negotiations on a new contract
with Poland covering the sale of 1,200 tons of short-barrel rifle powder, was
indeed gratifying. It is noted that your negotiations may be concluded within
the next two months and that the conditions will be the same as the last
contract.
2. Because of price cutting on smokeless powder by competitors, you ask us to
name the lowest price at which powder referred to above could be sold to
2598 MUNITIONS INDUSTRY
Poland. In our telegram 571, we advise that our lowest price would be 750 per
pound f.o.b. our plant. Based on this price if the agent is to be paid a 7%
commission, lie would receive 5i/40 per pound on our f.o.b. price. Wo assume
that the freight and insurance charges would amount to 20 per pound so that
the total c.i.f. price, including everything, would be 821/40 and we authorize
you to name this price if conditions so warrant.
3. In i-egard to advance of 2% on agent's commission on new order, this
matter can be handled exactly the same as we did on the 1,000-ton contract
so that the money will be available upon receipt of telegraphic advices from
you. You may rely upon me to personally take care of this matter so that the
funds will be placed to Mr. Klawe's credit within 48 hours after receipt of
telegraphic advices from you.
4. If the above arrangement does not meet with Mr. Klawe's approval, we
could arrange to make Mr. Klawe an advance against his commission on the
present 1,000-ton contract. Personally, I do not think the advance should be
made until you are absolutely certain thnt the new 1.200-tou contract will be
signed. This, however, is a matter of bookkeeping within the du Pont Company
and you may proceed on the basis that the amount involved will be available
in cash either at the signing of the contract or just prior to the date that
the contract is scheduled to be signed.
5. Under separate cover, I am writing you concerning new prices on smokeless
powder.
Yours very truly,
W. H. O'GoRMAN, Asst. Director.
WHOG : MHS
Exhibit No. 952
[144, Polish Gov't]
May 20, 1930.
Sale of aircraft finishes — Polish Government — Stefan Klawe.
Parlin Plant,
Industrial Finishes Division, Export Department,
(Attention J. H. Frechen.)
In reply to your letter of May 14th and confirming our telephone conversa-
tion on the above subject, we are glad to advise that Mr. Klawe has been
agent for the ^Military Sales Division in Poland for the past six years, during
which time he was successful in obtaining for us orders from the Polish
Government for large quantities of smokeless powder. Some of the sales
were made on a cash basis, others on credit extending over a year and a half
and on the last contract, which was for 1,000 tons of powder, ijayments ex-
tended over a three-year period.
For your confidential information the total sales price of the 1,000 tons
of smokeless powder amoinited to $1,846,000. Poland agreed to pay this sum
in twelve equal instalments, adding to each instalment a premium of 9% and
interest at the rate of 6% annually. The Republic of Poland gave to us
twelve treasury notes, note no. 1 being in the amount of approximately $108,000
and note no. 12 approximately $204,000. The other ten notes ranged in face
value between these figures.
Mr. Klawe's commission on the above-mentioned contract was 7%, or ap-
proximately $126,000. Upon signing of the contract, even before we i-eceived
the Polish notes, we made an advance payment of commission to Mr. Klawe
of $30,000.
The Polish Government has met all of its obligations promptly and in a
very satisfactory manner. We would have no hesitancy in extending credit
to the Polish Government and, at the present time, we are negotiating for a
larger contract than the (me referred to above. The prospective contract will
be along the same credit lines as the last.
In dealing with the Polish Government you are rather fortunate to have
Mr. Klawe as agent, as he is a man who is very well connecteil and
thoi-oughly understands what must be done in order to secure business. He
is very trustworthy and I suggest that you follow his advices so far as the
obtaining of Polish Government business is concerned.
In regard to the inspection of nitrocellulose dopes, the order would probably
be too small to justify the Polish Government sending a representative to this
MUNITIONS INDUSTRY 2599
country and you will therefore have to depend upon inspection in Warsaw or,
if Klawe can arrange it, the writer feels that the U. S. Army would be glad
to function as inspector for the Polish War Department. This is a matter
which would have to be taken up by the Polish Lesation in Washington
through tile State Department of the U. S. Government but the request would
have to be initiated in Warsaw.
W. n. O'GoKMAN, Asst. Director.
WHO'G :MH
("Exhibit No. D53 " appears in text on p. 2497.)
Exhibit No. 954
December 27, 1929.
(Circulation MANAGiai,
Du Pont Magazine.
Dr. C. Y. Wang is a chemical engineer in charge of dyestuffs demonstration
in our Shanghai office, but since Dr. Wang is al^o engaged in military sales
work, the Du Pont Magazine would be of value to him. as he is in constant
touch with Government officials.
Col. de Fremery is a Dutch officer working under contract with the Chinese
Government as an advisor, but we do not wish the title " technical advisor "
to appear in the address. The other men mentioned are all members of the
so-called " technical section " or technical committee in the ordnance department
of the Chinese Army, and it is essential that each one receive a copy of the
magazine.
In the future we shall be mindful to follow your suggestions in keeping with
the policies you have adopted, it being our desire to cooperate with you as much
as possible.
W. H. O'GORMAN,
NEB/h Assistant Director.
The above as per last three paragraphs of letter of above date to circulation
manager.
("Exhibit No. 955" appears in text on p. 2500.)
Exhibit No. 956
[Copy]
Original noted by Major Casey and returned to dyestuffs department.
(S) J. C. G.*
private and confidential,
Wilmington, Delaware,
August 22, 1929.
[No. SW-PC-177, August 2, 1!)2'J
Kec'd : M.S.: Military E^plo.sives]
File 34— Chinese Gov't.
E. I. DU Pont de Nemours & Company,
Dyestuffs department, sales dinision.
This will acknowledge with thanks the receipt of your letters WS-PC-103,
105, 106, and 121, all of which make very interesting reading; 121 particularly
is important inasmuch as it gives very complete information on the respective
qualities of powders nos. 17, 17 special. 25. and 25i/2- It came at a most op-
portune moment as I am at present engaged in discussing a 30-ton powder
contract with the Shanghai arsenal.
Proving ground : The matter is in order and will be used for bargaining.
Ballistic tests : No comments whatsoever are required : we now have the
fullest data on hand. As a matter of interest, we might mention that 7.9
Pencil notation.
8:i87G— 35— PT 11 14
2600 MUNITIONS INDUSTRY
m/m pointed " S " bullets weighing 10 grams are used exclusively by the Chinese
Army in a long-barrel rifle of Mauser type.
Cannon powder : A form letter was received from Nanking this morning
signed by an official of the ministry of war, requesting offers on cannon powder
on the following characteristics :
No. 1. 75 m/m 14 cal. mountain gun. Muzzle velocity, 280 meter seconds.
Maximum pressure, 1,400 atmospheres. Weight of powder charge, 140 to 1.50
grams. Weight of projectile, 5.3 kilograms.
No. 2. 75 m/m 14 cal. field gun. Muzzle velocity, 510 meter seconds. Maxi-
mum pressure, 2,700 atmospheres. Weight of powder charge, 430 to 440 grams.
Weight of projectile, 6 kilograms.
You cable dated July 29th, advising that you were sending cannon powder
together with the rifle powder, came in very handy and we are going to follow
up the matter. We trust that full information covering ballistic tests of this
powder will reach here by an early mail. I regret to be unable to give you any
further information on the subject as the mail is closing this afternoon. Col.
de Fremery is back and I shall discuss the matter with him.
Further contracts: I have been nei;()tiatiug for the last few days for a 30-ton
Cfiutract of du Pont I.M.R., powder no. 25 with the Shanghai Arsenal. I have
quoted them the price of g'old $2.30 c.i.f. Shanghai, shipment east coast. If
shipment is made via the west coast, 100 extra per kilo will be charged.
The terms are similar to the first contract, copy of wliich is now in your hands.
In order to increase their interest in the matter, I have suggested that it
liii.^ht be of mutual advantage to make a 50-ton contract now that they know
from the tests of the Frankford Arsenal that our powder is satisfactory, in
which case I would quote 2.26 (or 2.36) and not insist on a higher deposit
witli the order. The matter has been referred to Nanking and will probably
be settled next week.
The German advisers have remained singularly quiet of late, ixjssibly on my
hint that they were being spied upon by the Chinese authorities. Anyway,
from further information I have been able to obtain through Chinese sources,
all three of them are going to be transferred to various places in the interior,
and there seems to be a very good chance of our now lieing free from inter-
ference. I have also learned that the chief engineer of the arsenal, whose
name is on the contract and with whom I have been negotiating, is considered
to be absolutely square. Anyway, presents will have to be given to various
parties at China New Year and tlie over price we get can be used for this
purpose. Incidentally, we are spending a fortune on cable charges and I think
that it is only right to charge all the traffic can bear. Later on if we discuss
a 500-ton contract or so we can bring down our price to your figure of 2.18.
We are accumulating a considerable amount of information, partly through
Colonel de Fremery, partly through Chinese sources, and C. Y. Wang is giving
me most excellent service in this connection. The new Nationalist Government
is more or less controlled by returned students, and C. Y. is certain to find
either former classmates or friends or relations of classmates of his wherever
we go.
Eight-ton contract : Enclosed herewith please find translation of your cable
dated July 30th. Considering that the cabled advice to the arsenal was sent
by your good selves and not by the Frankford Arsenal officials, and that we
are negotiating a new contract, I found it more diplomatic not to ask our
friends for the second quarter of our first contract. I shall do so when the
original documents signed by the Frankford Arsenal come on hand. This
means a month's loss of interest, but I tliink that just at present it is much
safer to act as I have done as the Chinese offirials may very rightly point out
that the information is coming from us.
There is no time to giv^^^ you any further information as the mail is closing.
As soon as anything develops I shall let you know by cable.
Shanghai Dyestufps OmoE,
(S) F. A. M. NOELTING,
Director of sales for C'hUia.
MTJNITIONS INDUSTRY 2601
Exhibit No. 957
[File: MS-IOO-C]
Wilmington, Dei^awarei,
December 11, 1921.
Report of Trip to : Washington, D. C. December 16tli.
Called at the Department of Commerce regarding their letter of December
9th concerning onr negotiations in Argentine. Saw Mr. P. S. Smith and
Mr. J. P. Bushnell. Mr. Bushnell is a former employe of the du Pont Export
Company, who was a ti'aveling salesman in Mexico and South America for
the Export Company. Mr. P)nshnell stated that he knew Mr. Lissner and
therefore was interested in doing all he could for us.
Mr. Smith stated that the information did not come through the representa-
tive of his department in Buenos Aires, namely, Mr. Feely. Mr. Smith's
letter to us was founded on a confidential report sent to him by the American
Charge d'Affaires in Buenos Aires. I requested Mr. Smith to permit me to
read the report but he stated that the department was not permitted to show
confidential reports received from the various embassies. However, I told him
that I felt there would bo something in the I'eport which would be of material
aid to us in straightening out this matter, and he finally agreed to let me
read it if I would consider it strictly confidential and personal.
From my memory the following is the substance of the report :
October 27, 1921.
The du Pont Company has in Buenos Aires a German Jew named A.
Lissner, who is negotiating with the Argentine Government for the sale of a
quantity of powder which the du Pont Company has on hand, due to the can-
cellation of a contract with the Italian Government. In a conversation with
the Chief of Ordnance he told me confidentially that Lissner was endeavoring
to bribe Argentine officials by indiscriminately distributing funds through a
middle man. The Chief of Ordnance, together with other Argentine officials,
strongly resents Lissner's business methods, contending that Lissner came to
Argentine with the idea that tlie government officials were corrupt and that
he could f>nly obtain a contract by paying bribes. Argentine does not like
to do business with this type of a representative and therefore the Chief of
Ordnance stated that the du Pont Company would not get the contract.
The vice president of the Baldwin Locomotive Co. came here last year and
made a vei-y good impression on the Argentine Cabinet, together with all
Argentine officials. He succeeded in putting through a $14,000,000 contract
for the supplying of locomotives, etc., and not one penny of graft was paid to
anyone. American manufacturers would do well when negotiating \Aith
Argentine to do so through an officer of their company or through some very
high official. A vice president of an American corporation carries much more
prestige with Argentine officials than does an ordinary representative. A vice
president is generally a higher type of man, whose Inisiness methods are on
a much higher plane and the Argentine Government feels complimented when
an American corporation sends a higli official to conduct negotiations with
them.
While I do not personally know Mr. Lissner, it is rumored that he is fre-
quently drunk and does not represent the true type of American busin.ess man.
This last statement is given to you with reser\ation in that the writer has
no proof of it being true.
(signed) Francis White."
Both Mr. Smith and Mr. Bushnell felt that a great deal of the above report
could be discounted, stating that Mr. White was a very high typ<^> of man,
conscientious and painstaking. The moral conclusion which Mr. White at-
tempted to draw attention to in his report, of course, is a high thought, but
Mr. Smith stated that he spent eight months last year in Buenos Aires and
knew for a fact that the officials were corrupt and endeavored to obtain graft
whenever possible. He ventured to say that it was quite possible that the
Chief of Ordnance was incensed because Lissner had not conducted the busi-
ness flirectly through him, and furfher, that it might be likely that he objected
to Lissner's methods because he was not getting part of the graft.
Mr. Smith agreed to cnble his representative, Mr. Feely, at once and instruct
him to get in touch with Mr. Henuiug and to conduct in conjunction with
Mr. Henning a thorough investigation of the case. I agreed to pay the cost
2602 MUNITIONS INDUSTRY
of a cablegram and Mr. Smith will send us an English translation of the cable
he sends to Mr. Feely.
Mr. Smith stated that as far as the Department of Commerce was concerned,
they merely felt it was their duty to report to us the fact that our representa-
tive had not been discreet in conducting negotiations. He stated that they knew
perfectly well that the du Pont Company would not permit a representative
to negotiate along the lines described by the Charge d'AftViires, and wliether
his report be true or not, it was Mr. Smith's belief that Mr. Lissner must
have been very indiscreet.
W. H. O'GORMAN.
WHO'G/h.
Exhibit No. 958
[File: MS-67]
Memorandum for A. Felix du Pont.
March 23, 1922.
Mr. Joseph McCarthy, a personal friend of mine, has been in business in
Buenos Aires for the last eight or nine years. At the present time he is
South American manager of the Singer Sewing Machine Company. A busi-
ness associate of Mr. McCarthy, Mr. Thomas D. Valentine, is on a visit to the
States, and at present is living in New York City. Mr. McCarthy requested
Mr. Valentine to call on me and inquire as to whether the Du Pont Company
contemplated building a power factory in Argentina.
I had the pleasure of talking with Mr. Valentine on March 20th while in
New York, and I feel it my duty to pass along to you certain information and
remarks regarding Mr. Lissner's performances and negotiations in Argentina.
I might add that Mr. Valentine knows Mr. Lissner very well, having become
acquainted with him upon Mr. Lissner's first trip to Buenos Aires. While some
of Mr. Valentine's information and remarks are not new, I feel that since he
is in no way interested or connected with this company, they are worth
repeating to you. The story as told to me by Mr. Valentine can be summarized
as follows :
During Mr. Lissner's first trip to Argentina in 1920, Mr. Valentine became
acquainted with Mr. Lissner by meeting him at the American Club. Mr. Liss-
ner openly announced that he was down there to sell Argentina a quantity of
Italian powder which he personally repurchased from the Italian Government
at 1^ a pound and which we intended to resell to the Argentine Government
at a price of 70f per i)ound. This fact was made public by people who heard
it ; and naturally, before very long the officials of the Government knew the
exact cost of this repurchased powder and fought shy of buying it. In Mr.
Valentine's opinion, this is the real reason why the Argentine Government did
not contract with us for a quantity of Italian-purchased powder.
Secondly, Mr. Lissner at no time made any secret of his negotiations and
often told the complete story while drinking with a party of friends at the
various bars in Argentina. These friends consisted of the hangers-on around
hotels and barrooms and were men of the type who had no social or business
standing and were nothing more tlian news-gatherers, who did at the first
opportunity repeat the entire stoi-y to people who could do the cause most harm.
It therefore was not very long before the American business men, the American
Chamber of Commerce, and the representative of the American Department of
Commerce looked upon Lissner as the wrong type of individual to rejiresent
an American concern such as the Du Pont Company. The American element,
therefore, regretted that this company sent such a type as Lissner to Argentina.
Mr. Valentine said that it was absolutely necessary to pay for any favors
received at the hands of the Government and that graft was one of the essen-
tials in the Government departments, but that Lissner res(n-ted to open bribery
methods to such an extent that the officials in the Government were afraid to
deal with him and considered him irresponsible.
Mr. Valentine, in order to let me know that Lissner was prone to tell any
and all phases of his business, recited the story as to Lissner's exiiense accounts
on his first trip, and how the president of the firm authorized him to be paid
$5,400 in excess of his fund, although the hea<l of the department, a man
named Casey, refused to reimburse Lissner.
MUNITIONS INDUSTRY 2603
I might continue and add a great many details to this summary, but I do
not deem it advisable or necessary. I am passing this on to you not as a
slam against Lissner but as a veriflration of the details you already have
concerning Llssner's actions, and further as an additional justification for your
recent action concerning him. Personally I could never understand why
Lissner did not succeed in selling at least some of the purchased powder, Init
the explanation as set forth above seems to be a feasible reason as to his lack
of success in this respect.
I desire it to be strictly understood that I did not invite Mr. Valentine to
comment on Lissner and that same was done voluntarily by Mr. Valentine
during my conversation with him. I consider Mr. Valentine's comments to be
the public opinion in Argentina regarding Mr. Lissner; and further, I sized
him up to be a man who know what he was talking about and one who had
no axe to grind, and therefore I feel that the information is worth repeating.
Mr. Valentine will probably call on me in Wilmington at some future date;
and if you are desirous of talking with him I shall be very glad to present
him to you.
W. H. OGORMAN.
WHO'G/N
( •• ExHiiUT No. 959 " appears in text on p. 2485. )
Exhibit No. 960
Heedles & Bbeidsprbcher,
Mexico, D. F.
Date: September 1st, 1930.
To: Remington Arms Co., Inc.
Subject: Guadalajara.
Although we know that Mr. Jonas, of Winchester, returned to U. S. A.
last week without going to Guadalajara, the writer made a trip to Guada-
lajara last week in order to investigate whether Winchester made any special
offers there, specially to the Club Cinigetico which favored us with an important
order last year.
AVe are pleased to advise you that Winchester has not received any impor-
tant business from this section of the country lately ; in fact, the Club Cinigetico
has not ordered anything up to the present and should the club need an addi-
tional supply of shot shells, etc.. you can be confident that we shall get the
order. The club has been well satisfied with what you shipped the early
part of this year, but conditions are bad and the members of the club are
holding back witji money and besides there is still a lot of shot shells, etc.,
left from your shipment whicli will be distributed among the members of the
club as soon as the shooting season starts.
With reference to the metallic business we found a very peculiar situation
in Guadalajara. Tlie writer saw more contrabands in this section of the
country than anywhere else ; there is a fellow with name of Godinez installed
right in the market place ; he has no permit to sell nor has he permit to import,
and yet lie must have at least IDU.OOO metallics in stock. ]\Iost of it is western
ammunition which lie gets from Negates as contrabands and the balance is from
Arms & Metal who sell this man metallics at less than the cost laid down
Guadalajara would be by regular importation. Arms & Metal is doing this to
compete with prices cpioted to this man by Quintana, and it will not take long
until Quintana will make use of tlieir confidential discount and will try to
underbid Arms & Metal, etc. Uoberto A. Gonzales of this city offered cal.
25 auto, at Mex. $70.00 a hundred to this man, and laid down costs of this
cartridge is $92.30 Mex. a hundred and you realize that this also must be
■contrabands metallica. (K course, the regular trade in Guadalajara is suffer-
ing under this unnormal situa.tion and within time they trade will be forced
to buy contraband or give up the sale of metallico cartridges.
A similar situation seems to arise in Mexico City. Roberto A. Gonzalez seems
to buy contraband metallics exclusively and told the writer yesterday that he
would have printed a new price list underbidding all prices quoted by Quin-
tana at about $3.U0 Mex. a hundred.
Mr. Heedles undoubtedl.x told you that we are making every effort to have
the Government realize this situation and reduce the duty, but it seems very
doubtful whether our efforts in this direction will have any success ; the writer
2604 MUNITIONS INDUSTRY
is afraid within a short time this contraband affair will become a very serious
handicap in the regular sale of our metallics. Guadalajara seems to be a very-
good example of what is going to happen. Godinez maintains that he yet has
not been able to buy any Kleanbore cartridges in Nogales. He said to the-
writer that in Nogales he can buy western ammunition only and if lie would
not look to the writer as a very dangerous person, perhaps it would be ad-
visable to do some business with him, but under present circumstances it
looks better to keep away from him.
Luis Ramirez Zcnteno. — Attached find order #264 for this account which
should be shipped together with the clients' pending orders. We beg to advise
that we have applied for a special permit to cover this importation and hoi)e
that same will reach you yet in time to make a combined shipment, if this
is not possible, please ship the pending orders right away and let us know when
this order is ready for shipment, later on the client perhaps allows us to add
some shot shells in order to make a full shipment.^
Vda de Celio Ramirez kiucr. Tcstamcntaria Marizano Ramirez Jimenez,
Callc Eje Poniente #352, Guadalajara, Jul. — This is a new account and we beg
to enclose order #267 of this client, which kindly ship as soon us the cor-
responding permit reaches you. We have applied for the permit and same will
cover everything specified in the order. You will remember that some time agO'
you received an inquiry from this account calling for 100,000 metallics, well, on
account of the contrabando and low prices bidding of Quintana and Arms &
Metal, he only can import the calibre shown on the order, too bad indeed.
This is a responsible firm and the writer obtained very satisfactory references
and in order to make our offer attractive to the client, we allowed for half
of the amount of your invoice 60 days' sight and for the balance 90 days' sight
net. The question arises whether we should sell metallics direct to such a
client who is also client of Quintana. The writer believes that we should sell
him direct since this is an established firm and would buy from Arms &
Metal or contraband if we would not try to sell him direct, and then of course,
he would not sell Kleanbore ammunition. Besides he has ordered rifles from
us and look up the few rifles v.hich Quintana have bought from us. We trust
that you will at once write to this account and acknowledge receipt of their
order and advise them that shipment would be made at the terms specified as
soon as the permit has reached you."
Salvador Sanchez, of the firm Sanchez \i Rosalcs. Caile 12, # -}79, Gnadnlajara,
Jal. — This is also a new account and you will remember that some time ago
you received an inquiry from this man. The writer hesitated first to sell him
direct in view of tlie fact that this man has not yet established a stove in town
and according to his advice is going to establish an arm and ammunition store
shortly.'
However, the writer saw an order for metallics and rifles which was taken
by Winchester and also an order for Colt revolvers. Mr. Sanchez also showed
the writer the corresponding permits and in view of the fadt that he offered
to pay half cash with order ;ind balance against sight draft with his first order,
we of course, at once accepted and made up attached order #266. We have
applied for the permit covering all items specified on this order and as soon
as same has been received, we shall communicate with you. Mr. Sanchez will
send you check covering about half of the amount of the order as soon as the
permit has been recei^■ed and we suggest that you figure at once the exact cost
of this order in order to enable us to ask him for the exact amount as soon as
the permit has been received.* Ink Note. — Acknowledge receipt of this order
direct to client.
Selorzano Hermanes. — The writer also took an order for metallics from this
account but same is being revised by the client at present and will be sent to
you at a later date.
War Department. — Since the writer returned from Guadalajara, the War
Department finally issued new permit instructions which are as follows :
1. A new general permit will be issued to all clients which had such a permit
up to the present. This permit will be valid until December 31st, 1930, and will
again cover all calibers of shot shells, escopetus, cai. 22 cartridges and cat. 22'
rifles.
^ This paragraph is in a circle (P. note). Ilalsey.
' Ink note. — Suggest j'ou also got credit information.
^ Note. — This paragraph is in a circle.
* Also this paragraph.
MUNITIONS INDtrSTRY 2605
2. A special permit must be applied in eacli case of importation of metallic
cartridges, pistols, etc. In other words, this special permit affair stays as it is
right now.
3. Our clients will be allowed to sell and ship within the country 5 pistols
and 1,000 metallics without a special permit (at a time) ; sales of larger quan-
tities of pistols and ammunition are subject to a special permit of the War
Department. Our clients can freely sell escopetas, rifles cal. 22 and cal. 22
and shot shell ammunition as before.
4. In the future under no circumstances permits will be issued covering sales
or importations of rifles and ammunition and pistols which develop a higher
velocity of 500 meters per second. Such a permit can only be issued by the
President of Republic.
At a cost of Mex. $80.00 we are having all these new permits printed as cour-
tesy for the War Department ; we further have applied for all our clients for
these new permits, but you will appreciate that it will take considerable time
until all these permits have been communicated to the foreign oflBce and hence
to the consul, therefore we have applied for special permits covering pending
order in the meantime so that shipment of these pending orders will not be
delayed.
The general in charge of the War Department, Artillery Dep., has, however,
not signed for the past three weeks and this in spite of the fact that we have
contributed with $200.00 oro nacional to make the general's life more pleasant
and reform the new law on ammunition and arms, so with all contrabando, price
under bidding of Arms & Metal and Quintane, permit affairs, etc., etc., you
will appreciate what joy it is to work for Remington Arms Company, Inc.°
Tour credit notes or better, said cash to cover $280.00 pesos Mex., will be
appreciated.
Yours very truly,
(Signed) M. M. Veuicier,
Heedles & Breidsprecher.
Ink Note. — I forgot to mention that $200.00 which we kept at the office ready
for War Dept. expenses, were stolen the other day, so you better make the
check $480.00 or U. S. G. $240.00. Breid.
Exhibit No. 961
"A ' MX
[(Stamped) Answered Mar. 16, 1931, G. Rugge]
Heedles & Breidsprecher,
Mexico, D. F., (Date) March J 1th, 1931.
To Mr. Geo. Rugge,
Remington Arms Co., Inc.
Subject :
Dear Geo. : Your letter of the 7th relative to orders from Sr. Guillermo
Clements #314, A, #314B, and #315 has been received and we cK>uflrm our
cable reply, advising you to ship this client in accordance with the regular
terms, that is, three drafts, one-third sight, one-third thirty days, and balance
60 days, with instructions to allow a discount of 2%. providing the full amount
is paid upon presentation of drafts. Attach the documents to the draft.
It is rather difficult to inform you as to the future because we really are
upside down and nobody knows what next they are going to tliink of over at
the War Department to disturb matters and make things more difficult for us.
I certainly hope we do not have to go thru another month like the past one, as
it was the worst we have had in six years, and that after taking into consid-
erations revolutions, etc., we paid thru the nose last month all right.
For the past ten days I have been giving considerable attention daily to the
War Department better said, the person responsible for all of our grief, but
he certainly is a tough egg and knows where he is. We had a friend over
there at the Department that represented quite an investment for us, and he
was supposed to stay on and the trouble maker go out at the end of last month,
and the result was that the trouble maker held on and he went out.
^ Ink Note. — Winchester underbidding.
2606 MUNITIONS INDUSTRY
He was asking for 1^ Mexican Cy., per cartridge and you can appreciate
what tliat means, for revolvers lie asked for $2.00 each, I have heen taking
him out and endeavoring to demonstrate where he was wrong and why and
although it has taken a while I may be able to get somewhere with him this
week. Some of the excuses he has given for turning down applications are
really foolish but he is the boss and can make trouble for everybody. The
clients are writing and telegraphing and we are making out applications, visits,
etc., l)ut to no avail as $1,000 per 100,0(X> is a great deal of money and more
to today.
"Winchester have been after me to take up the matter jointly with theui l)ut
I tliink it best to handle the situation between the clients and oui-selves, as it
is only when they cannot do something themselves that they call on us. I
might add they are up to their old tricks of offering terms and contidentials,
with permits being turned down they cannot do much but we know two clients
they have already approached. There may be something more pleasant to re-
port in a couple of days as I have been with the fellow responsible for our
trouble almost daily morning and evening and this morning was the first time
I saw an opportunity to accomplish something but we shall not know definitely
until the end of the week.
Between exchange and conditions we are bad off down tliis and wliile we
are not paying attention to anything but just continuing our traveling and
everything else, just as though things were fine and dandy, orders are few and
far between with everybody apparently firing help and cutting down expenses.
Kind regards to everybody.
Yours respectfully,
(Signed) .Tosb:ph A. Hkedles.
Exhibit No. 962
[(Stamped) Answered Mar. 24, 1931. G. Paigge]
Heedles & Bheidspkecheu,
Mexico, D. F., (Date) March 21st, 1931.
To Remington Arms Company, Inc.
Subject :
Quintana has secured a permit for 170,000 metallics for Winchester. This has
happened as follows : They made a contract with Winchester last year for
450,000 to secure a discount of 10% ; they did this with Jonas. From this amount
was left the above balance and they have succeeded in liaving Wincliester
continue to allow them the 10% and ship the above amount, that is, 170,000,
at present prices, with of course, the 10% confidential'^ they allow tliem.
In view of the the fact that the writer put over the de;il whereby we could
continue to secure permits, or better said, do business, Majuregui asked whether
we would ratlier have him hold off placing or soliciting the Winchester permit,
but, as you can appreciate, he asked this with the object of preventing us from
permitting the rest of our clients taking advantage of the ari'angemcnt and I
told him we had no objections to his soliciting the permit as well as placing
the order, so tliat we could cnutinue solicit orders from the rest of our friends,
besides he will not need the Winchester goods in a hurry with our pending order.
Gonzalez also secured a permit for 100,000, but this was a slip-up on our
friend in the department, we both had an application in ; that is, Winchester as
web as ourselves and he permitted both to be issued at the same time, but I
think Gonzalez also will delay his order."
The cut in duties has l)een put off once more, but I think we can get out the
department recommendation for a cut by the end of the month and then all
we have to contend with will be the Sec. of Treasury, but the department
reconunendation as we shall see that it is made, should bring about sufficient
pressure to secure a reduction in duties.
We are consulted for most of tlie " acuerdos ", that is, to whom permits can
be granted, dehiyed, canceled, refused etc., and we hope it lasts for a while longer,
because in about six months time nothing but Kleanbore would be allowed.
Yours respectfully,
(Signed) Heedles ^: I>KHnDsi>i;ECHEi:.
1 Note. — Underscored in pencil.
* Pencil note.
MUNITIONS INDUSTRY 2607
Exhibit No. 963
"A" MX
[(Stamped) Answered Apr. 20, 1931, G. Rugge]
HeHDLBS & BREaOSPRECHER,
Date : El Paso, Texas, March 16, 1931. Mexico, D. F.
To: Remington Arms Co., Inc.
Subject: Mexico Hardware Co., P]l Paso, Texas, Ciudad Juarez, Chih.
Dear Mr. Rugge: I called this morning on Mr. S. R. Silva, manager of the
above-mentioned company and had a long talk witli him on the arms and am-
munition business into Mexico. He showed me an invoice covering a sliipment
of metallics which you made to this firm recently and also told me that he
would send you a large order soon. Before I left Mexico City about three
weeks ago, Enrique Gutierrez M. of Mexico City placed an order with this
company for cal. 22 cartridges which this company offered to Gutierrez at
lower prices c.i.f. Mexico City than they cost Gutierrez c.i.f. Vera Cruz, includ-
ing duty. The rensnn for this is that this company is getting a large quantity of
metallics over the border without paying duty. Mr. Silva has a combination
with a number of custom house officials in Ciudad Juarez.
However, in order to import large quantities of metallics, which is the inten-
tion of Mr. Silva. he is going to send to our office several applications for special
permits which will cover a greater quantity of metallics than specified later
on the permits, the permits simply cover up the whole affair and if he gets in
trouble he can make reference to these permits. As soon as I get to Mexico
City I shall see that the War Department will grant these permits and as soon
as we have secured same you can exjiect quite large orders from this client.
Mr. Silva told me that your Mr. Heath. I believe this is the name of the
gentleman, recently called on him and the company is now selling Remington
arms and ammunition exclusively.
You are undoubtedly aware of the fact that all of the arms and ammunition
which you ship to this client is for sale into Mexico, he does not do any
domestic business in this line, in fact he handles this business thru his Ciudad
Juarez branch.
I believe we never received any commission on the sales which you make to
this company although all of these sales cover goods for sale into Mexico and
for that reason you sell this account at export prices and shij* from your
export department and not domestic department and I would appreciate if
you kindly would look up this matter and see that the commission whi'h will
be due to us will be taken care of.
As mentioned above I promised to Mr. Silva to take care immediately of
his permit affair at the War Department as soon as I return and I hope that
once the permit question arranged, his orders will increase considerably. Please
keep the information given above as to the contraband business this company
is doing strictly confidential and do not mention anything of this in letters
you send to our Mexico City office.
The reason I write you about this is that I am in El Paso today and not
in Mexican territory.
Awaiting your comments and with the writer's personal regards also to friend
Monaghan, we are,
Respectfully yours,
(Signed) MM. Vezuinni,
Heedles & Breidsprbohek.
cc Mexico City office.
[(Stamped) Received Mar. 20, 1931, E^xport Department.]
Exhibit No. 964
["A- «U]
Ju.AN Van de Putte & Co.. Sues. Almacen "El Cazador ",
Guatemala, C. A.. November 13. 1929.
(Dirrecion Cablegrafica : Cazador-Guatemala, Guatemala.)
Remington Arms Co. Inc.,
29 Warren Street, New York City.
(Attention of Mr. Geo. Rugge.)
Gentlemen : I wish to confirm the cable I sent you today, which reads as
follows; "Hold million order. Await instructions", and now I wish to
2608 . MUNITIONS INDUSTRY
acknowledge receipt of your wire reading thus : " Entire shipment in New York.
Will hold. Hope no trouble. Regards, liugge."
I regret very much that I was forced to send you the above-referred-to wire,
but circumstances obliged me to. I am going to explain to you fully my
motive.
When I booked the order for the million rounds, and I sent you the cable
advising you, the order had been approved by the Minister of War, the Detol
General de Rentas, and it only had to be signed by the Minister of Finance,
who gave instructions to the Subsecretary to do so, on account of his being
ill in bed. This Subsecretary held the signing of same and tiually did not
sign. He is a very close friend of Salvador Koenigsberger, agent for Western,
and showed Salvador Koenigsberger the contract for the paltry sum of $100.00
and at the same time made a lot of noise, recommending that the order was
not legal because it was not submitted to public bidding, and at the same time
attached to Van de Putte's contract an offer from Western's agent for the
same quantities but for the amount of $15,066.00, Van de Putte's contract being
for $18,000.00. The difference between your quotation and the amount appear-
ing on the contract was to be divided among the Minister of War, etc., etc.,
and Juan Van de Putte & Co. had already advanced to General Juan Padilla
the sum of $1,000.00 on account of this order and another $4,000.00 for an-
other contract effected for some leather kids and belts for the National Army.
When this happened the Minister of War sent for all the papers and docu-
ments and was going to put it through because they expected a clean-up in all
departments, and naturally the order remained in status quo, although we re-
tained the right-of-way, the Minister of War being " morally obligated."
The change in all departments took effect, and there is a cousin of the Presi-
dent at the head of the Departamento de Kentas, contracts for ammunition
to be sold to the patent holders. However, this change in this department has
not affected us, but then Jonas arrived and he joined the parade. He has
been fighting like hell. He is a very close friend of General Padilla, the
Minister of War, and this Minister of War is indebted to Winchester, because
they give him a commission for ordering in all the permits Winchester
ammunition. You will recall that when Freddy arrived in New York he had
cjuite a nice order for loaded shells and some cartridges. Both these orders
were for Winchester, but Freddy gave you the order for the cartridges, and
he bought the loaded shells from Winchester ; and when he arrived here the
general gave him hell for doing so, and he Anally admitted to Freddy that
he was " morally " interested in Winchester. The percentage of commission
which they give the Minister of War I have been unable to find out, but I
believe that I will secure this information before I leave.
This morning I went with Mr. George Cordere with another contract for
$18,000.00 to see Mr. Castaneda, the new man at the head of the Depto. de
Rentas, and the contract specified Remington's ammunition and same was
signed and then we went to the Minister of Finance, who also signed and
gave instructions to the Subsecretary to notify the Minister of Foreign Rela-
tions so that he can issue the instructions to the consul of Guatemala in New
York to approve the consular invoice. So far everything is all right, but
this new man wants $3,000.00 before he lets go the contract, promising that
as long as he holds the job Remington will have the clear road through Juan
Van de Putte Co. Naturally, Mr. Cordero accepted the conditions, but when
we came back to the store Mr. Herman Topke, of Topke & Co., objected to
advancing this sum (Topke & Co. owns Juan Van de Putte & Co.) because
he does not want his books to show so much money advanced in commission,
as the books are quarterly revised by Government officials. Now, both Mr.
Cordero and myself were placed in an awful predicament. The contract
signed and Mr. Castaneda could not be convinced that the money would be
given him as soon as tlie cartridges arrived. Then Mr. Topke suggested that
it was better if the $3,000.00 would appear on the invoice, and it was decided
that I should communicate with you. In the meantime I sent you a wire to
hold the shipment, because I do not know if you would be agreeable to their
proposition. In view of the above, I sent you the following cable:
"To proceed with shipment order need .$3,000.00 advance, adding same to
value of order plus interest drawing, as stated, if agreeable. Wire funds
Cazador. Latest development make it necessary, otherwise lose business.
Advance required guaranteed. Recommend approval."
Jonas knows all about it, and he has been red hot after Mr. Cordero to give
him a chance to quote, but so far Mr. Cordero has stuck with us. He is placed
MUNITIONS INDUSTRY 2609
in awkward position, Mr. Topke refusing to advance tlie money and the
other man wants his money in advance. Mr. Cordero hinted to Jonas if his
company would be willing to accept the order at the same basis which I am
outlining to you, and he answered in the affirmative. I am afraid if you do not
want to advance the money that Mr. Cordero, in order to secure the contract,
■will give the contract to Winchester.
In the cable I recommended the approval, because I am quite sure of the
solvency and seriousness of botli .Tuan van dp Putte and Topke & Co. I, at the
same ti'me. besides getting the order signed for $16,100.00 instead of $12,100.00,
will secure a letter guaranteeing the advance of $3,000.00 in the event that for
an unforeseen circumstance the goods are not shipped.
I am through with my work here, and I have been detained on account of
this order and looking after your interests. If the order is not secured because
you refuse to accept their proposition, I will be out of luck, because my ex-
penses have been running just the same, and more. However, I always mix the
sweet with rhe bitior, and if thr deal is not closed I will take my medicine; but
you can rest assured that I have done everything possible to guard your
interests, not letting go the order to another channel.
I understand that Juan van de Putte sent you another cable confirming my
cable and informing you that the advance is guaranteed by them. I told Mr.
Cordero to charge both cables to Remington's account, to be deducted from your
next invoice to them.
I am attaching hereto an additional order for 100 M percussion caps, which
you will be kind enough to ship in conjunction with the first shipment which you
-will make to them. They are in dire need of these caps, as their stock is nearly
depleted.
I am planning to leave for New Orleans on the 21st inst., arriving at New
York on the 27th instant, and trust that everything will be arranged satisfac-
torily before I leave, and with my warmest regards, I am.
Yours very sincerely,
G. FE31NANDEZ.
Exhibit No. 965
[(Pencil note) Letter No. 31. "A"]
Managua, DN., Nicabagua, 27 June, 193-'i.
My Dear Frank : General Somoza had dinner wath me last night and he
told me that he intended to equip the Army with .45 calibre Colt automatic
pistols as standard equipment. Guruceta, of course, when he is here is push-
ing the Star pistol, so I suggest that you communicate with Mister Nicols
to write direct to General Somoza offering to sell him direct. I would suggest
that in his quotation he should include a 10% commission for General Somoza.
General Somoza has accepted this commission with the full knowledge of
the president nnd it is not considered as graft but is considered as an extra
pajmaent for the work he is doing here. If Colt would see the way clear to
reserve 2i/^% commission for Ample it would be a good idea as he will push
matters throiigh and attend to the details of opening credits, etc.
I expect to have an answer from the General today on the various Remington
items on which I have quoted him for the Government.
The order for the Guardia Nacional has been reduced to approximately
$1,900 — as the terms I granted they consider rather stiff. I saw copies of last
Winchester order in which Guruceta allowed them 30% with the order and
the remaining 70% at 90 days sight. The general believes that the Guardia
Nacional should be able to dispose of $4,000 to $5,000 monthly on arms and
ammunition [(Pencil note) in the dry .season] if we give the same terms as
Winchester. Furthermore, he has agreed to give me all the ammunition
and as much of the Army business as he can. They say there is no risk
entailed on doing business with them on this basis as all money are deposited
in the National Bank of Nicaragua as soon as they make their sales. They
increase the price 10% to the dealers when they pay cash and 15% when
credit is allowed. Of course, I realize that conditions change very rapidly in
these coimtries so I am against going too deeply and it might be better to allow
the competitors to get some of the business.
Of course, on Government business, that is, business for the Army, the terms
will be as follows : The Government will establish an irrevocable letter of
2610 MUNITIONS INDUSTRY
credit for the total amount of the order, providing for payment to be made in
tlie following manner : 20% against delivery of shipping palmers to the Bank,
of New York and monthly payments of 20% until the full liquidation of the
order. This is the way in which they are paying the Auto-Ordnance Corpora-
tion, Winchester, and other manufacturers, therefore, as long as the letter of
credit is irrevocable there is no risk, except the risk of the National Bank of
Nicaragua becoming insolvent, which is not probable from the reports I have-
secured here. Their set-up is very sound.
(Signed in ink) Sincerely,
Fkank S. Jonas,
Frank.
[In ink] P. S. — Dry season means about 6 months of tlie year. Therefore-
their purchases can amount to about 25 to 30 thousand.
Exhibit No. 966
["A"]
San Salvador, March 5th, 1932.
Reaiington Arms Co., Inc.,
29 Warroi Street, Neic York City, N. Y.
(Attention of Mr. Geo. Rugge.)
Wish to acknowledge receipt of your cable of last Saturday which reads as
follows :
" Quotations sent week-end cable, ten percent included. Carbines shotguns
shipped, documents air-mail you."
I also received your week-end letter quoting on the 580 M rounds of sporting
ammunition as follows :
" FAS New York eighty-one hundred sieventy-six dollars. La Libertad
eighty-seven liundred sixty-seven dollars not including consul fees. Oui'
revolver cartridges oil proof, also Kleanbore. Try get getter payment arrange-
ment."
I am working with Mr. Armando Frenkel on this business, as I informed you.
Yesterday the quotation from his connection in Toronto arrived and much to
my suriirise their quotation is much lower than ours. I will send by next week's
mail copy of their letter quoting on the same quantity. Fortunate Mr. Frenkel
will not present their bid.
Re: Last payment on the government 7 m/in order. — Last Monday I received
your cable as follows :
" Balance mausers ready for shipment Friday. Has check been sentV If not,
request cable remittance, answer immediately."
I did not answer right away because I was in hopes to cable you that I was
going to send the draft by air mail leaving Tuesday. However, since 10 days
ago, I have been after the money, and only last Monday I succeeded in securing
the receipt properly signed by General Martinez. Coronel Valdez. the minister ot
war, and Dr. Molina, the minister of finance. I went immediately to the treas-
ury but I met with bad luck. It happens that the money that was deposited
with the Banco Agricola Commercial to cancel the last payment of the order
was withdrawn by the treasurer and although both Mr. Rodolfo Duke and Mr.
Antonio Vilanova the treasurer of the Consejo Civico had the assurance of the
treasurer of the republic to cancel the last payment as soon as the receipt was
properly signed, he did not want to do it on account of the exchange being so
high. He promised to pay next Monday, the 8th. and I will immediately cable
.vou to that effect. I did not want to take any chances and that is why I sent
you the following cable :
"Hold shipment following steamer."
I do not kiuiw wlicther you know ah >ut tie exchange here. It fluctuates
up or down every day. F(>w days ago the rate of exchange was 257 colones
for $100.00. The normal rate is two for one. Now it has come down to 24;i.
You can appreciate how something like tliis effects any business transaction.
However, the nonpayment of the last installment of the order has nothing to-
do with the exchange at all. I know all the do]ie. The treasurer, IMr. Joaquin
Rodezno, is a "son of a so-and-so", to put it mililly. T have been trying not
to have another clash with him. He is a very goo<l friend of Saul Garcia..
MUNITIONS INDUSTRY 2611
Winchester representative, and he has heeu " greased " by Garcia, with the
result that he is as mad as a " puppy " because I secured the business, and
he is trying to place everything in my path just to bother. I liad a sort of
an argument with him in trout of Mr. Dulve. and I finally had the upper
hand. The document which I have signed by the parties which I mentioned
in another jiaragraph is a bona fide legalized document, and as far as securing
the money is jierlectly safe. I did not want to trouble General Martinez
about it, but if he does not come rUjross next Monday I will have to resort
to this measure. At any rate, I feel quite confident that I will send you
the money during the next few days and will cable you to effect shipment
as soon as the drafts is in my possession.
Re: Carbines and shotf/iins. — I i-ecelved the document covering the sliipment
through Pts. Barries, and I have been informed that they are due here early
next week. I trust that I will be able to secure some nice business for both
these items and some "Riot shot shells." I will keep you posted on this
business.
Re: Neir quotation on the 7 m/ni Mauser Cartridges. — I have already written
you that I have found your quotation lower than the previous one. I have
thought it best not to present same until I get tlie final payment of the
previous order. There is a lot of competition on this item. They will prob-
ably buy 3 million rounds. As I told you before, the Consejo Civice is
going to have the control of the buying and paying, but the War Dept. will
instruct them what they want. I am very much enthused because the Treas-
urer, Mr. Antonio Vilanova is a very honest and good friend of mine. I am
very close to his brothers, Jimmy and Alberto and Frank. This is one party
I do not have to " grease ". but there are plenty in some other directions.
For instance, Colonel Bara, Chief of the War Supply Dept., wants 2%.
There is the buyer of tbe Republic Provendor General. He wants something
too and there is Mr. Armando Frenkel who is working with me on this busi-
ness and there is me too. That is why the 7-1/2% is not an enormous per-
centage as you seem to think it is. As I cannot remain here indefinitely and
as we need some reliable person to take care of the business I believe honestly
that I have made the best connection there is in town in Mr. A. Frenkel. He
sells to the Government a lot of goods and certainly knows the ropes too. He
sold to the Government 100 Swiss-made machine guns and 150 M rounds
of m/m cartridges for same. He is a Mason, and General Martinez is a
Mason, too. and it seems that General Martinez when he was appointed last
year Minister of War induced Mr. Frenkel to get some connection in the arms
and ammunition line. I am including herewith original letter signed by Mr.
Frenkel. and as you will note, the final confirmation has come from you, so
thei-e is not a commitment on my part. You are the one to decide if Mr.
Frenkel is going to work with us or not. For your particular infomiation
Dupont wrote to him offering their representation without him asking for it, and
he is working with mo on the Government business not taking into consideration
that Canadian firm of which I have written you about.
As soon as you receive this letter I wish you would send me by air mail a
check to my favor for the sum of $300.00 (three hundred dollars), which you
will please charge to my account.
With nothing further .iust at present, and hoping that I will have some
good news for you during the course of the next week, I am.
Yours very truly,
L. G. Fernandez.
ExHiBiiT No. 007
J. Saul Garcia.
Apartado Postal No. 23,
San Salvador. El Salvador, C. A., Tslovemher 5, 1932.
WiNOHESTEH REPEATING AkMS COMPANY,
'New Haven. Conn., U. S. A.
Gentlemen : Attached I am pleased to send you note from the ministry of
war, so that once you have read it you will return it to me for my files.
As you will note, that order was reduced to 200,000 and placed at the price
of $14.70 c. i. f. This is the same price that was quoted by the three com-
petitors from that country, and I was able to secure the order for you thru
the very efficient cooperation of Colonel Ernesto Biira, chief of the <lei;artment
of war.
2612 MUNITIONS INDUSTRY
Regarding the commission of 20 cents offered by you, and wliicli is now
reduced, I would state tliat I have offered it to a person who was very influ-
ential in securing this business for you, and, as I have told you in previous
correspondence, I am not interested in making any profit on tliis transaction,,
and, on the contrary, the cable, correspondence, and other charges will be for
my account, and my only gain is that I have secured this order for you in spite
of the fact that Remington was intensely, and this is a source of great
satisfaction to me.
As there will be no more time this week to carry thru the arrangements to
get the % mentioned in the contract, I trust to do this during the coming week.
As regards tlie manner of packing which they have specified, it appears to me
to be very costly. Therefore, it would be best that you write me a letter
acknowledging receipt of the order and, at the same time, telling me that the
price quoted does not include packing in tin-lined cases, and that, therefore,,
you will ship the goods well packed in standard cases.
The order from the Proveedor del Gobierno for you will be delivered to me,,
and I will send it to you by the next air mail.
Yours,
Garcia.
JMS— 11-10-32.
Exhibit No. 968
["A"]
Hotel Ntnevo Mundo,
San Salvador, C. A., March 5, 1932.
REiMiNaxoN Arms Co., Inc.,
29 Warreti Street, New York City.
(Attention of Mr. George Rugge.)
Gentlemen : I wish to acknowledge receipt of your letter of the 16th ultimo,
in connection witli various cables exchanged between us pertaining to the
second remittance of $11,533.00.
I also liave for acknowledgment your letter of the 17th of Feb. in which you
confirm my cable to advising that the draft sent was for the same amount and
that the last payment was guaranteed by the Banco Agricola Commercial.
Your letter of the 17th of February confirm your cable in which you advised
me that you were shipping three hundred thousand rounds and to hurry permit
for my order for rifles and shotguns.
Your letter Feb. 19th brought the documents covering your shipment on the
steamship Santa Elisa, and acknowledge receipt of the remittance of $11,533.00.
I was not surprised at all about the information you give me in your letter of
the 19th relative to the permit for the carbines and the shotgun. I do appre-
ciate all the trouble you went through at that end, and if I must be frank I had
a hell of a lot of trouble trying to have the Ministerio de Relacioues in this city
sent tlie cable to the consul at that end. Fortunately you finally got through
the shipment which is expected here sometime early next week.
I agree with you that during these general unfavorable conditions throughout
the world " half a loaf " is better than none. It is also interesting to know that
I and Mr. Expenses will derive an amount that is not far away from your profit.
It is also of great interest to me to note that the unpleasant fellow " Mr.
Overhead " is much in evidence. I might add that this same fellow is still
very much with me. Communications, hotel, incidentals, etc., etc., are vei-y
much the same around this neck of the woods. I do not wish you to assume
that I am selfish in this respect. I will give you an. idea of how I came out
on the Guatemalan order which I would have not brought up, but to prove to
you my sincere standhig with you. It cost me, round trip to Guatemala by
plane, $45.00 and 10 days which I spent there at the rate of $6.00, not counting
some extras, $60.00'. There you have a figure of $105.00. Now, you will please
check up what commission I will derive from this transaction and you wiil see
how much is left for me as a way of profit, and then I w'as taking the chance of
securing the business or not. Fortunately I was able to secure it. On normal
conditions I would have been able to procure some business for the other lines
which I represent. However, this is not the case. I only got an order for
Pexto which does not amount over $200.00, leaving a profit for myself of some
odd $12.00. Now you see, Mr. Rugge, that the same fellow is around with me,
" Mr. Overhead ", and please do not forget that I am holding the bag.
MUNITIONS INDUSTRY 2613
On this order for 7 m/ni mauser which I got the whole commission of 7%%
is not for L.G.F. As you probably know you liave to "oil" or "grease'"
certain parties in order get it through. Otherwise you are out of luck. Nat-
urally, I would like to make a little bit for myself, otherwise I will go straight
and drown myself in the river. I will not discuss this point with you any
more and I will not go bothering with your quotations, until I have the pleasure
of being back in N. Y., when again I will take this matter up with you.
I also wish to acknowledge receipt of your letter quoting me on 7 m/m mauser
cartridges on both 1 million and 2 million rounds, F. A. y. and c.i.f. La
Libertad. I noted that your quotation is lower than the previous one. I have
not taken this new quotation with the powers that be until I have concluded the
present transaction. I will take this matter further up.
In your letter of the 20th you confirm the commission of 7^/^% on further
potential government business on 7 m/m cartridges c.i.f. La Libertad and advise
that in the event that a much lower price is necessary to secure the order, to
keep you advised of the developments by cable and that you will cooperate
with me to that end.
I have been told that Elmslie Jonas is already in Panama and that he will
arrive here by the end of the present month. You will be surprised to note
how things are here now as far as the competition is concerned. There are
representatives from Czechoslovakia, Spain (2 of them), Belgium, France, and
Germany, plus Winchester, and little me. Representatives have sprung up
from the ground. As soon as I think it advisable to leave San Salvador I will
fly to Honduras and go south passing through Costa Rica and to my final
destination, Panama. I have not great hopes in Costa Rica as I believe that
there is not much doing over there in the way of securing any military
cartridge business. I might be wrong at that.
I also received your letter of the 23rd of Feb., contents of which I have duly
noted. I do really appreciate that my efforts have been considered as splendid
by you and I am looking forward to your cooperation with me. I also wish to
acknowledge receipt of the letterheads which came under separate cover.
I also have for acknowledgement your two letters of February 24th in con-
nection with your quotation for .45 automatic and .44 Win. It is true that this
government has some Thompson's machine guns.
With my warmest regards, I am,
Yours very truly,
L. G. Fernandez.
Exhibit No. 969
L"A"]
Tegucigalpa, Honduras, April 25, 1932.
Remington Arms Co., Inc.,
29 Warren Street, New York City.
(Attention of Mr. George Rugge.)
Gentlemen : I wish to confirm my letter to you dated the 16th instant. You
will probably have received the order for Rentas from Mr. Armando Frankel
and probably you will have received advices from the bank that the outstanding
draft has been paid. As you perfectly know I sold that merchandise sometime
last year, at the old list prices. There was an average of 10% for Mr. Lemus at
that time the Proveedor General del Gobierno. Since Mr. Lemus has been
kicked out we do not have to pay him up. You will discount from this
average your percentage for the interest figured at 6% per annum ; and the
balance we will split up. I wi,ll take this matter when I return and will
explain to you all I went through with this collection.
Attached you will please find order no. 132 for account of Bazar Union —
Messrs, Agurtia y Mendoza ; of this city. These people are rated Al. Please
do not fail to send them samples of the " Kleanshave " razor blades and
quotations, I wish also to advise you to send samples of the " Kleanshave "
razor blades to the following firms :
Messrs. Felix Olivella e Hijo, San Salvador, El Salvador, C. A.
(Quote on 60m blades.)
Messrs. C. Bernheim & Co., San Salvador, El Salvador, C. A.
Send these samples by first-class mail, otherwise they will not reach desti-
nation.
2614 MUNITIONS INDUSTEY
You will also find attached hereto receipt from the cable office covering
my last cable to you, in the amount of $2.60 which you will please credit to
my account.
I am enclosing herewith a sheet of paper with the signature of Jose M.
Ocho V. the Minister of War and Mr. J. A. Santos P, the Sub-Secretary of
War. I promised that you would send them by reg. parcel post, one each pen
knives with their signatures. Please take care of this request.
I have been quite busy since I arrived here and the chances are that we
will get some very attractive business from this territory. It is too bad that
the President cancelled all the permits for sporting ammunition and revolvers;
otherwise I would haxe cleaned up here. All our clients, Rossner, Koencke,
Sierke, Rafael Quan, Santos Soto, wanted to place orders with me.
Tegucigalpa.
I am trying to manipulate a very nice business through another source. I
believe that jou already know how the permits are gotten here. There is a
man here by the name of Miguel Brooke, very wealthy and influential. He
always gets permits because he advances money to public officials ; including
the President himself. He is working with the chief of police for an order for
500 M rounds of revolver ammunition and 200 S & W revolvers. Today I will
know definitely if I will book this order.
Just before I left San Salvador I called on Huber & Co., and Mr. Huber
talked to me of how influential they were here in Tegucigalpa, etc., etc. He
asked me to write them a letter, sort of temporary agreement, which I did.
You will find a copy of this letter attached hereto, which does not mean a
tlarntHl thing. Immediately upon my arrival here in five minutes I convinced
myself of how little these people could help us. On the contrary, they would
do us some harm if we hook up with them. I have not gone over to see them
after the first day I arrived. Please do not pay any attention to Huber & Co.
I asked Mr. Ochoa, the Minister of War. in a very diplomatic way who was
the persona grata with him and the President for Government l)usiness and
he sent me over to Mr. Cornelio Zamora. of the firm of Zamora, Henriquez &, Co.
It seems that this firm is now doing all the Government business, and they split
with the officials the commission and overages, etc. This Government is in need
of some ammunition, but the Ministerio de la Guerra will not have money until
the month of August. I talked to the President, the Minister of War, and the
Sub-Secretary of War with this fellow Zamora, and we convinced them that
they should write up the order now for what they want and when they have
the money Zamora will get the money and send it to us and instruct us to ship.
Today is Monday, and Mr. Santos, the Sub-Secretary of War, promised to work
with me in the morning ; but he did not show up. It happens that yesterday
I went on a picnic with him and he got plastered. Probably he has a hog over
today, but I trust that I will see him this afternoon. I do hope that before I
leave I will be able to have in my possession the pro-forma order. I am writing
up an agreement similar to the one I wrote for Mr. Frankel with the firm of
Zamora, Henriquez & Co.
I have booked passage on the place leaving here Wednesday morning for
Nicaragua. I have already given instructions to the firm of Borghi B Daglio
& Co. to forward my mail there, and I am in hopes that during the next few
days I will have news from you in Nicaragua.
in the meantime with my kindest regards to all, I am.
Yours very truly,
L. G. Fernandez.
Exhibit No. 970
t"A"l
San Salvador, Ai)ril 7, 1932.
Remington Arms Co., Inc.,
29 Warroi Street, Ncic York Citij.
(Attention of Mr. George Rugge.)
Gbntt.embn : I wish to acknowledge receipt of your letter of March 29'th en-
closing receipt from the Equita))le Life. etc. etc. Tlianks a lot for all your
trouble. I liave taken due note of niy debt to you and when I get back I will
probably settle it with you at " Mitcliels."
I have taken due note of all your interesting comments of your letter and I
can appreciate how things are over tiiere. Let me tell you. George, things are
MUNITIONS INDUSTRY 2615
pretty rotten, even in Denmark. I do sincerely liope that old man depression
will go to hell and damn quick, too. If he insists to be around any longer I will
probably take a job as a street cleaner, as selling apples over there is out of
fashion now, I presume.
Too bad about Frank Jonas. I believe him to be a very able man and I am
quite sure that he will eventually secure something interesting. You will prob-
ably know by this time that Elraslie Jonas arrived here a few days ago. Indeed,
it will be of great interest to you to know about his activities. I have a lot to
tell you and I am going to commence. If I pass up any information right now
later on I will pass them on to you either personally or by writing. Ehnslie has
traveled quite fast from Panama up here. He stopped at San Jose, but could
not do a thing over there. Then he stopped in Managua for a few days during
Holy Week and he was able to sell some flashlights. He did not go to Teguci-
galpa at all. He has been raising hell here witli his agent Saul Garcia on ac-
count of my taking the order for the million rounds 7 m/m and if it were not
for the fact that this Government still owes Winchester about $6,000.00 and
Garcia can help collect this amount for them, he will kick Garcia about exactly
one thousand feet from the representation. He has been unable to secure any
orders from the trade here and as you probably have taken note I have booked
all the orders that were to be gotten, even with Jonas right here. You see, I
do not wish to pat myself on the shoulder but I will be hanged if Jonas or any-
body else woukl get an order away from me from the commercial trade here.
With me it is a personal thing more so than anything else, not overlooking the
fact that I sell the best ammunition manufactured in the world. No kidding.
Kleanbore Oilproof and what have you. He went around to Felix Olivella and
offered him a special discount of 7%% if he would stock Western. Felix, who
by the way is a very close friend of mine, called me over the phone inmiediately
to put me wise. He informed Jonas that even if he offered him a bigger per-
centage he would not change from Remington as Fernandez was selling this
particular brand and that any confidential discount that he might offer him " le
venia muy flajo " (would fit him loose — translated literally). In other words,
he just informed him that he would not be interested at all. Naturally Jonas
upon his arrival got ail the information from his agent here about everything
that was going around. The order for the 45 and the order for the Adrainis-
tracion de Rentas. Mr. Frenkel and I have been after the order for the 45 and
we had the business. Then before Jonas arrived they quoted lower, as I have
already informed you. It has been a great thing that you authorized me to book
the order at the lower price of .$24.50 GIF, including our commission, otherwise
we would have been out of luck. Mr. Gurozeta, the agent for the " Star " Span-
ish pistol, resides in Guatemala and he left a party by the name of J. D. Mendez
as his subagent here. Not to bore you any more, Mr. Frenkel quoted on the
" Star " pistol to the Guardia Nacional. from his agent in Hamburg, Mr. Lach-
mann, and he got the business. When Jonas arrived they had a meeting at the
hotel between this fellow Mendez, Garcia, his agent, and himself and they sent a
telegram to this Mr. Guruzet and he arrived here yesterday. It was a good
thing that this fellow arrived as he was very pleased that Mr. Frenkel got the
order for the 750 pistols and naturally we got the ammunition order. It has
been clinched. The order was put through the consul of the National Guard
and has been decided, etc. etc. We only need the signature of General Llanos
the head of the Guardia Nacional. Yesterday we talked to him and he informed
us not to worry as the order is ours. No matter what the competition say or
holler. They are discounting 10 colones every month from each soldier of the
Guardia (750) making a total of 7,500 colones every month to pay for the pistols
and the ammunition. They are depositing this amount in a bank in a joint
account Armando Frenkel -Guardia Nacional. You see these pistols have to be
shipped from Germany and the cartridges from New York. It does not matter
how soon you will receive the order as it will have to be held up at your office
until Mr. Frenkel advises you to ship so that the cartridges would arrive more
or less about the same time as tlie pistols. By the time that the pistols are ready
there will be enough money in the bank to pa.v for the cartridges and Mr. Frenkel
will see to it that you get your money first as he has agreed with mp. That
is. you will have the money in your possession before you ship the cartridges.
The order fo)' the Guardia will be for 112,500 rounds of ammunition and for the
Ministerio de la Guerra will be for 21 M rounds, making a total just at present
cf 1331/! M rounds. There is an additional order for Guardia of 199' M of 45
after they i*eceive the pistols and ammunition and you can rest assured that this
s;:JS76 — .•'..■i— PT 1 1 1 .-
2616 MUNITIONS INDUSTRY
additional order will come our way. I am enclosing herewith the order for
the Ministerio de la Guerra for the 21 M and I do hope that before long I will
send you the order for Guardia Nacional. You are not to ship this order for
the Ministerio de la Guerra until Mr. Frenkel advises you.
Now, since Elmslie has not been able to book any* orders from the trade here
and he lost out on the orders for the 45 he is as mad as hell. Yesterday at the
hotel he told me that he was going to secure the order for the Administracion
de Rentas for the 580 M rounds even if he had to quote below cost. That is a
hell of a broad statement to make but you can appreciate what I am up against.
Last Sunday I tried to convince him that we should quote the same prices and
to split the order so that everybody would be satisfied. He did not want to agree
and on Monday he delivered bis quotation to Mr. Tomas Molina, de Minister of
Finance, and later on I delivered my quotation. Dr. Molina is going to decide
and be will give the order to the lowest bidder. He expects to decide either
tomorrow or next Monday. You will know all al)out it pretty soon. You told
me that I am perfectly capable of taking care of myself but with these odds I
do not believe that anybody would have a chance. If we lose the business it
will not be on account of Mr. Frenkel's or my ability, but it will be due to the
fact that Jonas is sore and will try to secure the business at any cost, even jeop-
ardizing future business as far as prices is concerned. He will establish a per-
cent as far as low prices is concerned and it will take a hell of a time to restore
the prices so that everybody could get a decent profit. I explained to him all
these points but he is stubborn and did not want to listen to reason. He wants
to show the new Co. that even with all the competition he ai'rived and he secured
the business. It is a question of pride with him more so than anything else.
I also received your letter relative to the business for carbines for Guatemala.
That same day Saturday last. I sent the original letter I received from you to
Mr. Isidore Berkowitz, of the firm of F. Koenigsberger & Co. I was going to send
a sample of the carbine, one which I have in my room, but the Air-Plane Co. did
not accept it, being against the regulations of the company to carry any arms or
ammunition. You will hear direct from F. Koenigsberger & Co. I also wrote to
them by that same mail. They will probably get busy on it before Elmslie gets
over there.
Yours very truly.
L. G. Fernandez.
Exhibit No. 971
["A", Letter no. o-S]
San Salvador, Julu 6th, WS//.
Remington Arms Co.,
Bridgeport, Conn.
(Attention of Mr. Frank Monaghan.)
Da\B Sirs: I arrived here on Tuesday the 3rd.
Together with Josephs, Frankels nephew, we visited the trade and am en-
closing three small orders. The recent floods have effected business and it
makes it very difiicult inducing a customer to puix-hase anything at all.
Snrs. C. Bernheim & Co. : This is a fair-sized department store, who carry
our arms and ammunition exclusively. Ov.-ing to the restrictions and hard
times, their piu-chases now are very small. Credit good.
Snr. Antonio Bou : A general store who handle our line exclusively. They
have an order on tlie way, so cou^d only interest them in our rifles. Carry
our 22 cal. ammunition, shotgun shells, and a few 22-caliber rifles. Gof>d credit.
Snrs. Borghi E. Daglio & Co. : Largest and wealthiest hardware store in Sal-
vador. Handle our line exclusively, but owing to J-estrictions and poor business
have curtailed their purchases considerably. Received a small order for am-
munition. Credit excellent.
Snrs. Mugdan & Co.: This is a large hardware store, who are exclusive Win-
chester distributors. They carry their flashliirhts. 22-caliber riuimunition, 22-
caliber rifles, and shotgun shells. As they have the exclusive snle of Winchester
and the information that they did not purchase enough to split the business, I
did not press too hard for an order. Creilit good.
Sr. Felix Alive.'la: A large hardware store who handle our line exclusively.
Claim they have an order in transit i;nd owing to conditions could not see their
way clear to place a further order. Credit very good.
MUNITIONS INDUSTRY 2617
Snrs. Sagrera & Co. : A small hardware store who handles at present our line
exclusively. Did have some ranger civtridges iu but from ;ill appearance-, they-
had been there for years. Claim.s to have an order in transit, so could get
nothing. Credit questionable.
Snrs. Carlos A. Schmidt »& Co. : Not in, so could do nothing.
Snrs. Roberto Soundy & Co. : Very small hardware store. Has Winchester
advertising, but carries our line exclusively. Sold practically all of his last
order, but as elections are coming on, claims he is afraid to put in a stock, as in
case of trouble the government will take over all of his stulf. Fair credit.
Please take the other lirms off of your trade list, as they are out of business or
do not deal in the line any more.
I called on Colonel Ernesta Bara. who does all of the purchasing for the
Salvadore Army, and his opinion of Joseph was nil. Th:it evening we had
dinner together and he frankly stated that whenever he could evade it he would
do no business with Iheui. Later in the evening he became quite excited about
both Frankel and Josephs, cursing their ancestry from the beginning of time. It
appears that there is not much friendship lost between these two parties. The
Government purchased from Frankel in 1932 47 7m/m Solothurn field machine
guns and 500 — 9 m/m submachine rifles, and one million Steyer 9 m/m car-
tridges for same. Evidently Col. Bara did not get his proper share, and his
opinion was formed. He now recommends Dada, Dada & Co., speaking most
highly of them. Frankel, of course, speaks very disparagingly of Dada, Dada,
claiming that they had Iwught Bara, hence their friendship. He did admit, how-
ever, that he had also paid Bara ; but undoubtedly Dada had given him more.
It is such a small place and there is so much jealousy that everyone knocks
the other fellow.
I called on the Anglo Bank, and their report on Dada was not favorable,
but the Banco Agricola or the Banco de Reserve could not speak too highly of
them, so take your choice. Dada now has a contract drawn up with the Gov-
ernment on a deal he is closing with the Madison gun manufactured by the
A/S Dan^k RekylrifSe syndikat of Copenhagen for 200 Madsen machine rifles
at one hundred and thirteen pounds each, which includes extra barrels for each
gun and accessories of all kinds for the gun. I am bi'inging you a catalog. This
company had a Colonel Walter MacKesson out here for the past two months
demonstrating this gun. and he has given the agency to Dada Dada. The terms
on which the deal was closed was one-third cash, one-third in eighteen months,
and balance in eighteen moutlis. Of course, the last two payments are covered
with a bank guarantee. I met Mr. Vorley, of the Imperial Chemical Industries,
Ltd., of London, and he informed me that he knew MacKesson, who is an officer
in the German Army, and that their firm work very closely with the Madsen
Co.* Whenever a sale of machine guns are sold, they quote an ammunition
through them. He claims to have closed a big deal in Peru with this same
firm. On MacKesson's instructions, Dada quoted the Government £4-8-6 per M
for two million 7 m/m cartridges in clips. Now that Vorley, of the Imperial
Chemicals has arrived, he is supposed to have given his agency to anotlier party
and Dada is going to withdraw his quotation, as he claims to control the situa-
tion, and frankly I believe from the way Bara treats him he certainly is in a
fine position. He now wants to put in a quotation for us ; that is, Remington^
for the following specifications :
2,000.000, 7 m/m cartridges, pointed.
100,000, 45 cal. Colt auto.
lOO.OuO, 3S •' "
100,000, 38 " S. & W. Special Klennbore & Black.
I have explained to Dada our position with Frenkel, and told him that I could
do nothing until I had written to you on the subject. I have suggested that
in case you would not agree to this, you might be interested in permitting hira
to quote on Peters. In any event. Colonel Bara says there is no particular
hurry about quoting, as an order will not be placed for the next three or four
months.
The Departmenf of Renta handles the commercial business and as onr
ammunition is preferred in this market, I can see no I'eason why Frenkel splits
with Winchester's Agency, except that he follows the line of least resistance,
Dada feels certain that he would have difficulty, as the line is not known in
the trade. We will have time to t;^lk the matter over thoroughly upon my
return, so there is no use going into further details.
* Pencil note: Frank, is this true? — EH.
2618 MUNITIONS INDUSTRY
This Government has a stock of over 3,000 new Model 1901 7 m/m Remington
single shot rifles and 4,000 11 m/m rifles. I learned that Huber liad securetl
a sample of these rifles and had proposed to Colonel Bara that if he would
permit him to sell these to Honduras, he would replace them with two Spanish
Mauser rifles lor every three Remington rifles sold. I asked Bara what guar-
antee had Huber to put up and he told me that it was agreed that Huber
would tirst deliver the Mauser rifles, before they would deliver their Reming-
tons. I, therefore, suggested that if a deal like that is feasible and I could sell
the rifles to the Honduran Government at $25.00 each and they opened credit for
an amount equivalent to our price for 3,000 new Remington Enfield rifles that
we could handle the deal. In that case he said, he would deliver the rifles to
Honduras the moment we instructed him to do so, as he would have confidence
in us delivering the new rifles to him. Upon my return to Tegucigalpa, I am
taking our rifle and if I cannot interest them, I will propose the single shot
deal. I went out to inspect a couple of cases of these rifles and they are in
perfect condition, just as they were when shipped from the factory.
Colonel Bara as well as others who have seen our rifle think that it is too
heavy and want a rifle the same size as the Mauser. The Mauser they showed
me weighed 8 and four-fifth pounds, while ours weighed 9 and % pounds, that
is without the bayonet. The length of the barrel of the Mauser measures 23
inches and the overall measurement is 42 inches. This is the size rifle that
they wanted in Cuba, Panama, Costa Rica, and Honduras.
The last order for 7 m/m cartridges, quantity three million was purchased
from a German factory Karlsruher Industrie Werke Berlin. According to
Frankel, the price was $19.00 CIF according to Dada it was sold in gold and
they cost landed about $25.00. This price included clips and tin lined.
This morning the Minister of War as^ked me to ship him one model 25A
standard rifle .32 cal. Winchester and 500 cartridges for same. Have suggested
to Dada that he place the order thru' Baltic, as I do not know of any other
way it can be handled. Dada always has shipments coming through and it
could be included.
Tariffs : Owing to Germany's action in embargoing coffee or only accepting as
much as the particular country purchases from them, it has caused quite some
excitement in this country, as practically their entire crop of coffee is shipped
to Germany. Salvador has therefore fixed the tariff laws into three categories,
namely, a minimum, a medium, and a maximum tariff. A minimum tariff is to
be apiilied to countries importing large quantities of coffee, a medium tariff,
which means 15% higher than the minimum to be applied to countries, whose
purchases of Salvador coffee i-epresent 25% or more of their exports to Salvador.
A maximum of 200% more than the minimum tariff to countries who import
less than 25% of their exports to Salvador. This they say means that the Gov-
ernment will place as many orders, as they can with Germany, as they are their
biggest customer for coffee. This probably will effect our ammunition sales to
this country. It will hit the Japanese, as they have been dumping millions of
dollars worth of goods here and they import nothing from Salvador. This
tariff, of course, does not effect countries like the U. S. A. with a favored-nation
treaty.
I received your cable this morning, reading as follows :
" Cable itinerary regards " to which I replied :
" Guatemala 8th, Tegucigalpa 15th, Managua 18th, San Jose 21st, Havanna
28th."
and received your cable this afternoon, reading as follows :
"Writing Panama, Guatemala, Tegucigalpa."
The National City Bank are correspondents of the Salvador Bank, so you
should be able to get references from them on Dada.
The Salvador Government would not give me permission to take the sample
rifle to Guatemala, however they consented to my taking it to the other Central
American republics, but I had to agree to return it, as it was shipped to them
gratis and has been entered on the Government records. Evidently they are not
on very friendly terms with Guatemala and as soon as there is a rumor that
Guatemala has made a purchase, they do likewise. I was quite surprised at
their army and public oflScials. They appear very efficient and everything is
well run.
Yours very truly,
(Signed) F. S. Jonas.
MUNITIONS INDUSTRY 2619
EXHB^IT No. 972
[Letter ><'o. oS]
Tegucigalpa, Honduras, July 3id, 193Ji.
Remington Arms Co..
Bridgeport, Conn.
(Attention of Mr. Frank Monaghan.)
Dear Sirs : I spent five clays in Honduras and am returning ttiere on my
way back, because tbey are true to form and anytliing tbey can do today, they
invariably leave for next month, except a^-cepting a luncheon or a dinner.
The president was the first man on whom I called and he appeared most
pleased to see me, informing me that the order for the parts, in accordance
with your letter of June 7th, had been placed. He then informed me that he
was very much interested in placing an order for single-shot, seven-millimeter
rifle?, and a further order for ammunition and instructed, me to see the
minister of war. Dr. Gnlvez. I wasted two days before I could reach him, as
he has been Icept busy on relief work, due to the flood.
After I finally did meet this man, he told me that the crcler hud not as yet
been placed, as they had calculated on a sum, half of the amount of which we
]iad advised it would cost. After several conferences \\ ith his generals, he
told me he would arrange to open n credit in a few days. The final result was
that he would do so upon my return from Guatemala and he would have
everything ready.
I tried to interest them in our new r fle. but they insisted that I quote them
ftn a single shot 7 m/m. similar model 1901 you sold them. They have, how-
ever, asked me l)ring them the sample repeating rifle which we have in Sal-
vador, which I intend to do upon my return. If I recall I think you told me
that tb.e single-shot rifle would cost about .$25.00 each, so I quoted them
accordingly, so am herewith attaching copy of a letter they requested me to
submit. They speak of buying ten thousand rifles, but wnnted me to quote on
one thousand. I told them that I would do so, but I did not think that you
would accept an order for le.ss than three thousand. You will note that I
have not quoted a c.i.f. price on the rifles, as I do not know whether you can
accept the business, if we get it at that price. Please write me by air mail to
Tegucigalpa, quoting me firm prices on all the articles I hnve quoted.
They are very much interested in pu'-chasing a fifty caliber Colt machine
gun. I was not sure of the price, so quoted approximately ,$1,500.00. Please
ask them to send me parti cuhirs and also prices on their seven m/m auto
rifles. They want to standardize their ammunition to this caliber only.
I am told that they have no money, and then again it is said for army
equipment. someliOAv or otiier, they nre always able to raise the money. I
have not learned of any large purchases they have made, except 150 re-
conditioned 7 m/m Maxims, which were purchased in Europe.
It is rumored that the only way that this president can hold his job Is
through being well pi'pp;ired, so I have hopes of the various rainbows coming
through.
I expect to be back in Tegucigalpa inside of twelve to fourteen days.
With reference to commei-cial business, as you know mnrs'hal law prevails,
so nothing is being done. They expect to lift it shortly and I think from the
way they talk, it vill put under Govei'nment control and probably sell to one
distributor for th;^ entire country.
I therefore Ionised around for a possible distributor and would recommend
the firm of Walter Bros. They are an English outfit, considerable capital, and
have been established in Honduras for the past twenty years. They have
branches in San Pedro on the coast and their head office is in Tegucigalpa.
They represeiit various American and English firms, carry stocks and also take
indent ordei's on commis.sion. I suggested the possibility of taking on the
Remington line and they appeared quite interested, if tliey are able to work
it with the Government. I think they have a very good chance as they do
considerable Government business, as they represent the American Bank Note
Company and up to recently the General Motors. They have now switched
to the Reo line. In a conversation with the subsecretary of state, Gen'l Pinedo,
I asked him to advise me who would be a good agent and he immediately
suggested Walter Bros. Will give you full details upon my return.
The president told me that they did not want to work thru an agent on
their Government business, but suggested if we decided to do so, he would like
2620 MUNITIONS INDUSTRY
to recommend his nephew-in-law, Mr. Grave de Peralta. I have evaded this,
so as to leave us in a positioa in case of competition, but I called on Mr.
Peralta and told him that upon my return, we might be able to do something
with the Peters line.
They are not in the market at present for any revolver ammunition, as some
was purchased from Peters, thru whom I was unable to find out.
I did not write to Zaiiioii-a Henriquez cancelling; the agency as the firm
has failed and I felt that if I did write to them they may think there is
some pending business and want to horn in.
I received your letter of 21st ulto. addressed to Tegucigalpa and note your
remarks regarding Mexico. I am glad you feel that way, as I think it is
absolutely necessary that I return by the same route and pick up the business
that has been promised to me. I note in this morning's paper that the Govt.
in Washington has placed an embargo on arms to Cuba, so I am wondering
what it will all mean eventually. Don't they realize that Europe will continue
to ship and they will get all of the business?
Yours very truly,
(Signed) F. S. Jonas.
P. S. — Have .iu-st arrived in Salvador. Met Gomez for a few minutes. He
is having dinner with me tonight. No time for further news as there is
only a minute to catch the plane.
BxHiiiiT No. 973
["A"]
Articles of agreement eJitered into on the I'i ' day of August, A. D. 1934,
between the Government of the Republic of Honduras, acting through its repre-
sentative. Dr. I\onan Bogran, Consul General at New York, hereinafter referred
to as the " Government ". and Remington Arms Company, Inc., a corporation of
the Stati of Delaware, United States of America, liereinafter referred to as
Remington.
Witnessetli:
"Whereas Remington is a manufacturer of and dealer in arms and ammimi-
tion of the type and kind hereafter referred to and.
Whereas the Government desires to purchase said arms and ammunition from
Remington in the amount, at the prices and upon the terms and conditions
hereafter set forth,
Now, therefore, the Government and Remington have agreed and by these
presents do agree with each other as follows:
First. Remington agrees to sell and deliver to the Government, and the
Government agrees to purchase and accept from Remington, the following arms
and ammunition at the prices set oposite each item thereof and upon the terms
and conditions hereinafter set forth :
3,000 " Remington Enfield " rifles. Model 1934, caliber 7 m/m,
without bayonets, but with sling straps. $26.00 per ritle. c. i. f.
Amapala, total price $78, 000. 00
1,000,000 cartridges caliber ^ 7 m/m " Kleanbore Smokeless ".
$23.00 per thousand, c. i. f. Amapala, total price 23,000.00
.50,000 cartridges clips 7 m/m $10.00 per thousand, c. i. f.
Amapala, total price .lOO. 00
200,000 cartridges, 45-caliber Colt automatic " Kleanbore Smoke-
less " for Thompson machine guns, $16.00 per thousand, c. i. f.
Amapala, total price 3, 200. 00
50 Thompson machine guns, 21-A, $140.00 each, f. o. b. New
York, total price 7,000.00
$111, 700. 00
Second. In addition to the price of t!ie arms and ammunition referred to in
the price of the arms and ammunition referred to in the last preceding para-
graph, the GovernnKHit shall pay to Remington the amount of any consular taxes
or other charges which may be paid by Remington in order to accomplish de-
livery: it being understood and agreed that with the exception of the Thompson
* Pencil note.
MUNITIONS INDUSTRY 2621
machine guns, the above prices include cost, insurance, and freight, and that
with respect to said Thompson macliine guns, the Government shall pay to
Remington all freight and insurance charges arising out of the shipment of
said guns from New York to Amapala.
Third. At or before the execution of this agreement, the Government shall
establish an irrevocable credit in favor of Remington v?ith the National City
Bank of Nevv' I'ork in an amount sufficient lo cover the price of said arms and
ammunition, together with all costs and charges arising out of the shipment of
the same ; it being estimated that said costs and charges shall be approximately
five thousand dollars ($5,000.00), and it is understood and agreed that the total
amount of sucii credit, upon the execution of this agreement, shall be one hun-
dred and sixteen thousand seven hundred dollars ($116,700.00).
Fourth. As and when shipments are made by Remington, pursuant to the
terms and conditions of this agreement, Remingion shall present to tlie Na-
tional City Bank of New York the following documents covering each shipment:
Three copies of the bills of lading.
Consular invoice.
Invoices for the merchandise in triplicate, including freight, insui-ance,
and consular charges.
^ Certificate of insurance.
and upon presentation of the foregoing documents with respect to any ship-
ment, the said National City Bank shall be and it is hereby duly authorized to
pay to Remington the amount of such invoices covering the price of the
merchandise, freight, insurance, and consular charges from the credit above
referi'ed to.
Fifth. Remington agrees that all invoices covering shipments hereunder shall
show the value of such shipments, f. o. b. New York, and that separate invoices
shall be rendered showing the cost of insurance, freight, and consular charges.
Sixth. Shipments of the arms and ammunition referred to in this agreement
shall be made by Remington from New York as follows :
Rifles: 500 within four months, and approximately 1,000 each month
thereafter.
Cartridges, 7 m/m : Approximately 200,000 \ it bin two weeks, and approxi-
mately 200,000 each week thereafter.
Cartridges. 45-caliber Colt automatic : 200,000 within two weeks.
Cartridge clips : 50,000 within three weeks.
Thompson machine guns within two weeks.
Seventh. The foregoing arms and ammunition shall be consigned by Reming-
ington to the Ministerio de Guerra, Marina, y Aviaciou, and the shipping cases
containing the same shall be marked as follows :
Ministerio db Guerra, Marina, y Aviacton
TEGUOiGArj>A via Amapala
It being understood further that the insurance to be procured by Remington
shall cover and include all risks to Amapala, Honduras.
Eighth. It is the intention hereof, and the Government agrees, that notwith-
standing the amount of the credit hereinabove referred to, to be placed in the
National City Bank of New York in favor of Remington, Remington shall be
reimbursed by the Government and paid any amount by which said credit shall
be insufficient to cover any lawful charges arising out of the shipment of said
arms and ammunition in accordance with the terms of this agreement.
In witness whereof the Government, by Dr. Ronan Bogram, Consul General
at New York, and Remington, by its duly authorized representative, have caused
this agreement to be executed on the 16 * day of August, A. D. 1934.
Government of the Republic of Honduras,
By .
Remington Arms Company, Inc.,
By , * Vice President.
Attest :
* Pencil note.
2622 MUNITIONS INDUSTRY
Exhibit No. 974
["A"]
Luis G. Feknandeiz,
Remington Arms Co., Inc., 'Netc York City, June 10, 1931.
29 Wan en Street, New York City.
(Attention Mr. Geo. Eugge.)
Gentlemen: Pursuant to the conversation I had with you upon my arrival
to New York two weeks ago, I wish to infoiin you tliat the extra five percent
charged to take care of certain party in Tegucigalpa, as agreed by the writer,
part of the total amount of $740.25 has already been paid up to Mr. Francisco
Argueta, of San Salvador. This Mr. Argueta received instructions to receive
this amount from Coronel Villanueva, or the party who was interested in
Tegucigalpa. I effected a payment of $800.00 to Mr. Argueta in San Salvador,
when you cabled me the $500.00. Before I left San Salvador I handed Mr.
Argueta the amount of $1.50.00, making it a total of $450.00. Two days ago
I received the attached cable from Mr. Francisco Argueta (Chico), as every-
body nickname him, requesting of me to turn over some funds to a friend
of his here in New York. Today I will hand this party here in New York the
sum of $75.00 ; and, as you have arranged that this amount be turned over to
us, I wish to report that as soon as the balance of the amount is turned over
to me, I will remit to Mr. Francisco Argueta a bank's check for the balance
of $215.25, thus completing this transaction.
I further state that this is my understanding, that Mr. Argueta is a relative
of, residing in San Salvador,^ of the party in Tegucigalpa, Honduras.
Yours very truly,
L. G. Fkbnandez.
Confirm $500 cabled Fernandez, San Salvador, Apr. 20/31.
240 25
• ■„' paid by check to his order 6/11/31.
I received the amount of $740.25 in payments as noted herein.
L. G. Fernandez.
Exhibit No. 975
"A" DR
Mr. S. NoRVELL, President, Dkcembeb 22, 1928.
25 Broadnay:
We have recently had an example of how the U.S. Department of State at
Washington, D.C., can help us.
In 1927 we had some nice business fi-om the Dominican Republic for 30/06
Springfield cartridges, but tliis year those in charge of the purchasing for that
Government made arrangements with a German concern to purchase .303
British rifles and cartridges for same. The rifles and cartridges were supposed
to be new, and a unit price was set of $77.00 for each rifle, with a thousand
cartridges. Our agent viewed the sample rifle, gave us the serial number, and
we had our London office investigate. It was found the rifles were all second-
hand war material and the cartridgesi were quite old, being purchased in Great
Britain by tlie German concern at $12.00 each for the rifles and about the same
price per thousand for the cartridges. Of course, the idea was to leave a big
margin of graft for the Government people.
When we approached the State Department they admitted knowing something
of the deal, but were glad to get the additional information we had obtained.
They sent a copy of our letter, giving the full facts to our Minister at Santo
Domingo. They are willing to shut their eyes to small graft on such trans-
actions in Latin American countries, but they felt this was going too far,
especially asi the Dominican Republic still has a lot of unsettled American
claims. Our agent, who knows nothing of our dealings with the State Depart-
ment, which have to be strictly confidential, now reports the President of the
Dominican Republic called for an investigation, with tlie result the contract for
the .303 rifies and cartridges has been canceled, and the first installment is to
be shipped back. Our chances of regaining the business are, therefore, very
bright, for the President has issued an order that in future all purchases are
to be made direct from manufacturers.
(Signed) Monaghan.
rjM N
MUNITIONS INDUSTRY 2623
("Exhibit No. 976" appears in text on p. 2540.)
Exhibit No. 977
[Representante de Manutactureros]
Lots E. Nicolas,
Caixb Colon No. 38, Apartado No. 231,
Santo Domingo, Republica Dominicana, June lltli, 1930.
Cables Nicolas, Todos los Cotiges, Codiges Privados, Telefono No. 1262.
T§E Remington Arms Co., Inc.,
29 Wairen Street, New York City, U. S. A.
Dear Sirs: I have the pleasure to acknowledge receipt of your kind letter
dated June 10th, contents of which have been duly noted. I am glad that the
situation has been cleared to your satisfaction and that of all concerned.
As per my letter of last mail, which you will surely receive together with
this mail, as it could not be placed in the mails until after the steamer had left,
you will be advised that the permit situation is the same, maybe worse at
present, because the Army is now after a few generals that took the mountains
against the actual Government. No permits will be issued to anybody while
peace and tranquility are unstable.
The reason for my mail not getting the last boat was that a few minutes after
it was written I was induced to hide by some friends who knew in advance that
the order to imprison me had been given by Goverument officials. On Wednesday
noon, after communicating with the general, I gave myself up and was locked
in Columbus place at the Torre del Homenajo for 48 hours, after which I was
released. The reason for my prosecution has been given as " For being a friend
of Dr. Morales and selling arms and ammunition to the revolution." This charge
was made by some competitors intei'ested in wiping me out of the map and
taking my agencies away, both of which things they will be unable to do.
I took advantage of this opportunity to celebrate my interview, which I re-
ported in my last letter to you, with General Trujillo, who understood my posi-
tion and assured me that nothing will happen to me in the future, and that as
soon as conditions in the country warranted the extension of permits they will
be granted, and that meanwhile no permits will be issued to anybody. I also
informed him that I am no politician, and that my business was to work and
sell everybody that came in power, and that he will find me ready to cooperate
with him to that end.
I understand that conditions will S(ym be normal and that our activities will
be resumed. Meanwhile I will be in my post, doing everything possible to com-
plete the transactions now pending. With kind regards to all, I remain,
Yours sincerely,
Ltjis E. Nicolas.
Exhibit No. 978
"A" DR
Remington Arms Compant, Inc.,
Brill ffeport, June 10. 1932.
Mr. Luis E. Nicolas,
Apartado 231, Santo Domingo, D. R.
Delus Sib: We acknowledge your letter of June 1 in respect to Mr. Naramore
and his scheme of reloading cartridges for the Government. This subject was
also covered by part of one of your letters of May 31.
You ask thtit we make up a detailed comparison of the cost of i-eloading car-
tridges as against purchasing the fully loaded cartridges. This is a rather
difficult thing to do and give the proper effect to all factors which go into reload-
ing cartridges. Even after you get through with such a comparison, it is far
from giving a true picture, for the mere comparative costs do not reflect the loss
sustained in ammunition going bad when reloaded by people outside the factory.
Then, of the gi-eatest importance is the element of safety. Without the proper
ballistic instruments for measuring breech pressure, velocity, etc., one can never
be certain the ammunition is not dangerous to use.
2624 MUNITIONS INDUSTRY
We had an example recently in Peru of someone reloading cartridges which
would have a salutary effect in warning against tliis method. The cartridges
which were reloaded in Peru were sent to us for testing, and the first thing we
did was to try them for breech pressures. We found tliey developed a breech
pressure of 58,000 pounds to the square inch, whereas the maximum we would
allow in our manufacture is 48,000 pounds to the square inch. This increased
pressure was sufficient to endanger the life of the shooter. When loading powder
one can never tell by merely weighing or measuring the powder the pressure it
will develop, and the only way this can be determined is through the use of
chronographs and pressure guns. Such ballistic equipment, as you well know,
is very expensive and requires the services of a real ballistic engineer. Such a
man commands a very high salary. This factor alone would increase the cost of
reloading cartridges in Santo Domingo to such an extent as to make the reloaded
product more expensive than to purchase from us.
There is another very important factor in reloading cartridges and that is
such cartridges cannot be stored for an indefinite period and expected to be
capable of use. Reloading machinery does not properly seal the bullet in the
shell or seat the primer in such a way as to prevent moisture, oil, or other ele-
ments attacking the powder or priming mixture. When loaded at the factory,
these precautions are always watched closely. Take, for example, our revolver
and pistol cartridges : As you know, these are oilproofed by shellacking the
primer and using asphaltum in the mouth of the shell to insure against oil from
the arm attacking the powder or priming mixture. This cannot be done when
cartridges are reloaded.
There are two very important elements in primers for reloading purposes.
They have to be both nonmercuric and noncorrosive. Our primers are both non-
mercuric and noncorrosive. Our competitors, Winchester, supply a nonmercuric
and also a noncorrosive primer, but they have no one primer which embodies
both these necessary features. Their priming mixture is not comparable with
our Kleanbore priming, and, in fact, they have found it necessary in some of
their primers to increase the size because their mixture was not as effective
as ours, requiring that they load a greater amount of priming mixture in the
primer.
When all is said and done, there is only one real primer in this market and
that is the Kleanbore primer, of which fact you are well aware. The tests we
make to insure our cartridges being able to withstand heat and humidity for a
great period of time have clearly proved the secret of the success of our product
is that our Kleanbore primer and priming mixture are superior in every respect
to the product of our competitors. As you know, Kleanbore priming is patented
and cannot be duplicated.
We should be very glad to have you watch this matter of reloading very
closely, advising us what Mr. Naramore did during his stay in Santo Domingo.
We imagine you are not going to find it very difficult to convince the Govern-
ment they are adopting a very dangerous policy in considering the reloading of
ammunition.
It is rather interesting to learn from your letter that Mr. Naramore is wear-
ing the uniform of a captain of the United States Army. This, to say the least,
is a serious breach of etiquette and perhaps a more serious charge could be
brought. It is our understanding an officer of the Army is not supposed to wear
the uniform except on active duty or state occasions. Certainly Mr. Naramore
is not entitled to wear the uniform when representing the Lyman Gunsight
Corporations, which was the case when he was in Santo Domingo.
With kindest regards,
Yours very truly,
FJMN
Manager Foreign Department.
Exhibit No. 979
"A"
OcTOBEK 27, 1932.
Mr. Roger L. Bbaokein,
Export Manager Millers Falls Company,
Greenfield, Mass.
Dear Roge3i: Geo. Rugge has sent me from 20 Wan-en Street your letter of
October 25. I have thought of you mauy times, especially since we had to move
MUNITIONS INDUSTRY 2625
to Bridgeport, for I felt we could sympathize with one another. Why don't you
stop off some time on your way to the big town?
I am very glad to confirm the good news Restrepo sent you. He is certainly
doing a wonderful job for us, and the way he is taking hold of things the last few
months has simply been a revelation to me. I don't think I ever had a man in
the foreign field who kept us so informed of the complete picture of things as
they were happening. Yes, indeed, you were due for thanks in having trained
him and recommended him to us.
AVe had some unfortunate publicity in connection with the Colombian order,
and for that reason we are now doing mighty little talking about it, so we ask
you to hold it confidential.
Kindest regards.
Yours sincerely,
Remington Arms Company, Inc.,
f. j. monaghan,
Manager Foreign Dept.
F.JMN
("Exhibit No. 980" appears in text on p. 2544.)
Exhibit No. 981
[Air mail- — Confidential]
HEaiNAN Restkepo,
Bogota, Heptemher 10th, 1932.
Remington Arms Company, Inc.,
Bridgeport, Conn., U.S.A.
(Atten. Mr. F. J. Monaghan.)
Dear Sirs : I wish to confirm my cable dated the 7th inst. requesting your
quotation on 2 million seven milimeter mauser cartridges for the Colombian
Government. In this sams cable I informed you that European competition is
of $22.00 per thousand.
In doe course I received your cable reply dated the 8th inst. informing me
to meet the European mauser price.
Coronel Carlos Padilla, about whom I wrote you sometime ago, is a very
close friend of the writer, as well as his family. They live next door to
my home. This gentleman occupies now a high position in the Colombian
Army and belongs to the Estado Mayor del Ejercito. In the strictest confidence
Coronel Padilla informed me the Government wants to buy at the present
lime 2 million cartridges and inforihed me about the quotation they have
from Switzerland of $22.00. These cartridges are intended for part of the
Army that is being sent to Puerto Leticia on the Amazon River, our frontier
with Peru — Puerto Leticia has just been taken by Peruvian insurgents but not
in any way connected with the Government of Peru with whom this Govern-
ment enjoys cordial relations. This matter is being treated in the Colombian
and Peruvian Congress in secret conferences. However, this Government is
taking the necessary measures in order to protect our national integrity.
Coronel Padilla put me in contact with Coronel Adelmo A. Ruiz, Chief of the
Armament and Ammunition Dept. of the War Dept. with whom I had a very
long talk relative to your products, quality, guaranty, etc. Coronel Ruiz is
having today a conference with the Minister of War relative to this purchase
and will give me a definite answer next Monday morning. Coronel Ruiz has
also asked me to obtain your quotations in the following material for the
Curtiss aeroplanes the Government bought sometime ago :
90,000 metal clips for aircraft machine guns (red).
90,000 Eslavones metalicos para ametralladoras Aereas.
Quotations on different types of bombs for same aeroplanes.
I do not know if you manufacture the just-mentioned material, and hope
you will be able to give me this information.
Coronel Padilla is giving me his full support in order to get the business
and is keeping me confidentially informed of this matter. Indirectly, I under-
stand he wants a commission ; however, I may be wrong and am keeping a very
diplomatic attitude until further developments This gentleman also informs
me he is doing his best in order to induce this Government to buy 40 million
cartridges.
2626 MUNITIONS INDUSTRY
At this moment I cannot give you any furtlier information, but will do so
after my interview next Monday. Anyway, you can rest assured that I am
doing my utmost to get this business and that my connections are of the best.
After you take note of the contents of this letter, which you will treat in a
most confidential way, kindly destroy same, as this request was made to
the writer by the War Dept.
Cordially yours,
(Signed) Hebnan Restbepo.
Exhibit No. 982
NOVEMBEB 12. 1930.
Mr. Herman Restbepo,
Bogota, Colombia:
We duly received your letter of October 16th, and it was quite encouraging
to learn that Genl. Angel wishes prices on 7 m/m pointed cartridges, on which
action will be taken toward the end of this year.
We are well acquainled with the 7 m/m Mauser pointed cartridge which the
Colombian Government requires, as we operate very closely with the du Pont
Company, who had their Government business representative visit the cartridge
factory in Bogota two years ago (Mr. N. E. Bates), and consequently we are
in a position to meet the requirements of the Government in al! ballistic details.
You mentioned an initial velocity of S.50 meters, which we can meet, but, of
course, there is always a tolerance, and we presume it will be approximately
plus or minus 10 meters.
The powder we would supply would be du Pont I.M.R. powder, which the
Government is familiar with. The primer would be our Kleanbore type, which
eliminates rusting, pittiug, and corrosion of the rifle bore, and this is an advan-
tage which the Government will readily recognize as compared with the old
types. We shall be glad to supply a bullet jacket of either cupro nickel or
gilding metal, whichever is preferred, and we presume it will be the latter.
The cartridges will be packed 2— to 'he carton and 10,000 cartridges to the
wooden case, each such case to be lined with tar paper. However, if the Co-
lombian Government desired, we would supply tin-lined cases, for which there
would be an extra charge of 75t* per thousand in addition to the prices men-
tioned hereafter.
All manufacture and inspection would l»o in accordance with the Remington
stand;, rds.
Now we come to th»' question of price. The prices we are going to mention
are net to us F.A.S. New York; and if any coniniissions have to be paid to
intermediaries in Bogota whom you might find would be helpful in obtaining
this business, the price will have to be increased by the amount of such com-
missions. Furthermore, the prices are based on present market prices of such
materials as lead and copper : and in the event of any violent fluctuation in
such prices, our price would have to be changed accordingly. It i? miehty diflS-
cult to sit here in New York and name a price schedule without knowing the
full picture in Bogota, but we shall have to give you some basis on which to
work and then let you use your best .ludgment in submitting them.
Our price net to us f.o.b. New York for 1,000.000 cartridges is $27.00 per
thousand; .$26,.50 per thousand for 2,000.000; $26.00 per thousand for 3.000.000.
As we stated above, there will be an additional charge of 750 per thousand
if tin lining is required.
Deliveries would be 300,000 two weeks after receipt of order, 200,000 three
weeks following, and 200,000 weekly thereafter. These deliveries would be in-
creased somewhat in the event of an order for 3.000,000 being placed. The
initial delivery of 300,000 in two weeks would be dependent on business that
may come to us in the meantime from other markets, but in any event we
would commence deliveries of 2(X),000 at least five weeks after receipt of order
with the same quantity weekly thereaftei-.
You mentioned the government will probably receive quotations from <ither
manufacturers in Europe and here, and certainly we do not want to lose this
business because of some small difference in price and we are relying on you to
learn of bona fide quotations made by others to the end that we will be afforded
an opportunity of making any slight adjustment that may be necessary to
MUNITIONS INDUSTRY 2627
assure the busiuess reaching ns. So far as American manufacturers are con-
cerned, we are quite sure the prices nientioned will he the lowest, but this
may not he entirely true with European competition. However, in the latter
case you know European manufacturers promise many things which tliey do
not fulfill, both in deliveries and quality, and you can stress these points.
You will probably desii-e to bring every influence you can to bear to obtain
this business for us, and as a suggestion we should like to mention that in some
instances we have found it advisable to diplomatically ask the Minister of
War or the person who will have the final say in placing the order, who he
would like to have us work with as our agent. In other words, who is the
intermediary to see and pay commission for the business. Such commission
as we mentioned before, would have to be added to the prices we have given
you.
The prices we have quoted are quite the lowest we have ever entered on
7 mm cartridges, for we are extremely anxious to obtain this order and have
sacrificed profit. However, you will have to be reimbursed for your work in
event of the order being placed, and the prices contemplate a small commission
for you ; but we ask that you leave the amount for determination when the
business assumes a more definite aspect.
We eagerly await your further advices, and with kindest regards we remain,
F. J. MoNAGHAN, Export Manager.
FJM
JM
Exhibit No. 983
Palmer & Company,
570 — Moreno — 574,
Buenos Aires, August 22nd, 1933.
Remington Aems Co., Inc.,
Bridgeport, Conn., U. S. A.
DuAR Sirs: This will confirm the exchange of cables with you as follows:
Yours of the 19th : " Effective orders dated after August twentieth, twenty-two
caliber cartridges increased ten percent, firearms caliber
twenty-two percent, firearms all other calibers and gauges
fifteen percent. Advise customers."
Yours of the 19 : " 22 meaning is not clear ; 10% over list 14 or merely elimi-
nating 10% recently allowed."
Yours of the 21st: "Fourteen list of twenty-two reinstated without discount
or confidential."
From all of this we understand that on caliber .22 cartridges we have to sell
strictly in accordance with list no. 14, no longer offering the 10% discount
which has recently been allowed. We understand further than on .22 calil>er
rifles we are to advance the prices of list no. 14, £"0%, and we are to advance
15% the prices of all other rifles and of all shotguns. As you have said nothing
about cartridges larger than cal. 22, we take it that list no. 14 applies to such
cartridges with the 10% confidential which has heretofore been allowed on
certain items.
Immediately upon receipt of your first cable we got in touch with our cus-
tomers and we have pleasure in sending you by this air mail 4 orders, that is
our orders nos. 1193, 1194, 1195, and 1196.
Order no. 1193 is i-eally for Mr. Werns. but he has arranged for Mr. Redaelli
to receive the goods for him so as to cut down the incidental charges. So far
as you are concerned, order no. 1193 is to be shipped and invoiced to Mr.
Redaelli and it is unnecessary to put Mr. Werns' name on any document or on
any case.
Rifle model 33 was formerly pi'iced at $3.30 each. Mr. Werns would like to
get this price on order 1193 ; if, however, this is impossible it is understood
that you will bill at $3.80, which is the price according to list no. 14, that is to
say these rifles should be billed at all events at the prices prevailing before
you sent your cable of the 19th. and this applies to the model 34 also. With
reference to the packing of the 3 model 34's in each shipment, please put them
in boxes such as are used for the model 33, so that the Custom House inspector
2628 MUNITIONS INDUSTRY
will not notice any difference at all in the boxes when the cases are opened.
Furthermore, please put the boxes which contain the model 34's right in the
center of the case, that is the center from side to side and also the center from
top to bottom. If these instructions are all carefully followed it will be very
bad luck indeed if the Custom House inspector discovers that there are some
repeating rifles in this shipment. Mr. Werus is not only anxious to save the
additional duties on repeating rifles, but even more he wishes to avoid the de-
lays incident to the entry of repeating caliber .22 rifles. Strictly speaking,
repeating rifles of any caliber should not come into the country at all but
single shot 22's can come in.
Order no. 1194 requires no si)ecial comment, it being understood, of course,
that you will give the 10% which was allowed before you sent us your recent
cable.
Order no. 1195 requires no special comment either, except that it is subject
to the same condition. Please note, however, that when drawing on Gonzalez
& Russel for this shipment you should deduct the credit of $13. — U. S., which
you promised to give them in your letter of August 11th, 1932. We are quite
sure that this credit has not been deducted from any draft up to the present
time.
Order no. 119G. You will note that this order is for Liprandi, De Eoni &
Scholberg of Montevideo. This, of course, brings up again the question of
payment and credit. Our suggestion, is, therefore, that you hold order 1196
for a few days, as Mr. Liprandi has promised an additional order for other
sizes. This we will probably receive tomorrow or the next day. Consequently,
on the 25th we expect to v^'rite you again by air mail and at that time we will
answer your letter of the 9th iust. about Liprandi's payments and at the
same time take up order no. 1196 and the additional order which we expect
to receive. It is understood, however, that if order 1196 is finally accepted
by you it will be billed to Liprandi at the prices of list no. 14, but we will get
the discount of 10, 10 »& '2%, which we have been receiving lately on Liprandi's
business.
You will have noted that we have sent you by last air mail an order for
800,000 22's for Kirschbaum. This was, of course, mailed before we received
your first cable.
In one of the paragraphs above we have been rather explicit about the pack-
ing of the rifles for Mr. Werns and we have done so because of what happened
in connection with a recent shipment for Gonzalez & Rossell. In our letter
of June 6th we asked yon to pack the caliber .44's in the center of the cases
and your letter uf June 23rd indicated that you understood just what was
wanted. But, apparently the man who actually did the packing did not under-
stand it at all because in each case or cases (v.'e do not know at the moment
how many there were) the small calibres have been put around the oufsiile of
the case from top to bottom and the 44's have been put in the center of the
case also from top to bottom. The result is that as soon as the top of the case
is lifted one sees immediately the caliber 44's, which is, of course, just what
we wanted to avoid. The Custom House inspector immediately discovered that
the case did not contain only small calibers and the large calibers have been
seized. Gonzales & Rossell say they will have to abandon them. So far they
not made any very urgent claim on you, seeming to think for some reason
that they did not explain their desires very well. If we were in their place
we would certainly not take such a charitable view of the situation and we do
not think that you would either. In any event, we will let the matter rest
for the present and if the customer brings it up again we will advise you. In
the meantime, however, it would be well to take up this incident with your
packer to avoid repetition of it in the future.
Very truly yours,
pp. Pai-mer & Company,
(Signed) Thueston V. V. Ely.
TVVE.HS
MUNITIONS INDUSTRY 2629
Exhibit No. 984
"A"
Otto Kuhlen, Unico Representante Para of Biasil, da Remington Arms Com-
panj', Inc., New York, 29 Warren Street, a Maior Fabrica do Mundo de
Armas-Minicoes-Cutelarias. Telephone : 2-4106-Caixa Postal 495
Marca Registrada — Remington, UMC
Sao Paulo, 21 de October de 1929.
Trav. do Coramercio, 2 — 1. candar.
Remington — reg. U. S. Pat. Off. End. telegraphico, Remac ; codicos
Usados, Bentley ; A. BC. Sth ed. Boi-ges
[Answered Nov. S, IQilQ. G. Rugge]
Mr. George Rugge,
General Export Manager Remington Arms Compo/ny, Inc.,
29 Warren Street, Neio York City.
Deiae ]Me. Kugge : Regarding office rent, you know that some time ago the
late Mr. Kuhlen advised you that he had arranged with the landlord to reduce
the rent from Rs 650$000 to Rs 500$0<]0, but I do not know whether or not you
are aware of the fact that there was not any reduction because the space rented
for the company's offices comprises the two large front rooms and the small side
room, and since Mr. Kuhlen occupied the small room for his private cutlery
business he paitl a separate rent of Rs 150$000 for it and charged the Co. only
Rs 500$00O for the two large rooms. Now, the small room has been vacant since
Mr. Kuhlen died, and, as I have no use for it, I have arx-anged with the landlord
to take it over, and, as he does not seem to be able to rent it to somebody else,
he proposed to let me have the two front rooms for Rs 550$0OO, or, then, I would
have to keep everything at the rent Mr. Kuhlen contracted ; i. e., Rs 650$000. I
decided that it is best to pay Rs 550$00O for the rooms I occupy and let the small
one go. Therefore the rent to be paid at the end of this month will be Rs
550$000.
I want to suggest to you that as soon as everything is settled you permit the
changing of this office to more suitable and cheaper quarters. There are plenty
of offices for rent in modern buildings centrally located which can be rented
much cheaper ; I say for about Rs 300$000 or less. I know that you will send
me your instructions in due time regarding this matter.
The Christmas season is approaching. I had better ask you now for advices
as to what to do in regards to giving presents to the Government officials who are
rendering us services in connection with permits.
Last year Mr. Kuhlen distributed Christmas presents amounting to $300.00
amongst his friends of the Regiao Militar in S. Paulo and Mr. Bispo de Araujo,
Consul Florambel, Col. Lapagesse, and a Capt. Scares, of Rio. Mr. Moura, of
J. J. F. & Cia. also received a present.
The amounts spent on eacli person were as follows :
General Hastimphile Rs 150$000
Capt. Tores Homom 140$
Colonel Rezond? 140$
Capt. Cuisserat 240$
Major Moreira 240$
Mr. Bspo de Araujo 700$
Consul Florambel 300$
Col. Lapagesse _ 150$
Capt. Soares 240$
Mr. Moura 200$
Since the new permit regulation has gone into effect it has not been neces-
sary for this office to utilize the services of the officers of the local Regiao
Militar. Our local clients now deliver their own applications and when neces-
sary they go themselves to the regiao for any information or favor they may
need. As everything in connection with permits has proceeded normally I have
not yet had the opportunity to ask for any favors from these local military
authorities.
The only person who has been rendering us valuable services just now has
been Mr. Araujo, of Rio. He has been giving me prompt information about the
applications from our clients that arrive at the war dept. When I give an
2630 MUNITIONS INDUSTRY
application to a client for signnture I immediately advise Aran jo. He is on
the lookout for it in Rio and puts it liefore the minister for dispatch as soon
as it arrives at the war dept.
If you are going to decide to discontinue the practice of giving Christmas
presents to any government officials from Rio as well as from S. Paulo, I
think you should make an exception in the case of Mr. Araujo. A Christmas
gratification to him in addition to what he gets every month will act as an
encouragement to his continuing to give us his good services in Rio.
After all, the discontinuance of this practice, with the exception named, may
be the best thing to do. We are not any longer dealing with these i)eople
direct in connection with permits, so they may hot accept anything from us,
but from the clients who no doubt will not forget them. Besides, these people
were Mr. Kuhlen's personal friends and he needed their friendship for the
reason that applications for permits were filed from this office. Now that
their friend has died and. the permit regulation has changed they may not
expect anything.
However, the decision about this matter will be entirely up to you, and I
know that you are not going even to give the matter much thought, but that
you alread.v have in mind .iust what to do. Please, advise me in due time in
connection with this matter.
Very truly yours,
A. M. Barata.
Exhibit No. 985
January 31. 1930.
Mr. A. M. Barata,
Caiwa Pofital ^95, Sao Paulo. Brazil.
Dear Mr. Barata : Your letter dated January 4th covers certain expenses
you outlaid during the holiday season and we approve all the items of this na-
ture shown on your statement for the month of December. It is quite all right
to give the Christmas bonification to Mrs. Felice and hope she is quite satisfied
with the gift. Glad to note that Mr. Moura and Capt. T. H. were delighted
with what you presented to them. Keep up the good work to have our operating
expenses as low as possible.
Your letter dated January 7th confirms the cablegram you sent covering your
visit to the Rio Embassy in con.iunction with the embargo and detained ship-
ments. It is certainly good to note that there continues to be prospects of the
Minister of "War allowing the shipments held up to pass into the hands of the
consignees and we hope that ere this letter reaches you something as been done
in this regard.
Just as soon as you have completed your investigation into the report that
shipments to the Amazon District will again be permitted and your detained
shipments be released, please let us hear from you. We are perfectly satisfied
with your trip to Rio.
Yours very truly,
Remington Arms Company. Inc.,
Geo. RiTGGE. Genl. Expoj't Manafrer.
GRN
Exhibit No. 986
[A. M. Barata. representante Remington Arms Company Tno.. Sao I'aulo, Brazil. Teleph.
Central 4106. Caixa Postal 495]
" Reniiiiiztoi! " Armas. Municoes e Cutelarias.
.sV/o Paulo, June 23, 1930.
[Ponril nolf- -Ans. S/G/^.O — M.]
Remington Arms Company. Inc.,
29 Warren S! reet. Ncv' York Vitii.
Gentlemen: In a previous letter T havp informed you that I was leaving
for Rio on the Sth iiistant for the imrnrso of also investigating about the Gov-
ernment husinesis to which you refeircd in your letters da*e<l May 9th and 16th.
The interest on the ))art of the present Governnient to i>urchase 7 ni/ni car-
tridges abroad is not recent. The iiearest time since which the Government
MUNITIONS INDUSTRY 2631
has first contemplated that purchase is about one year ago. Although there are
stories to the effect that such purchas^e has been decided upon since a longer
time, we cannot err to accept as the real truth that the decision was made in
the early part of 1929. Such intention on the part of the Government was first
known at that time, and from that date began the activities of the sellers to
secure tlie Government business. All this I know from information gathered
up in the office of the American commercial attach^ in Rio and from individual
army officers whom I know in Ilio and who could post me with positiveness
on the case.
Knowing, in fact, that the Government had been even from such a long date
interested in the purchase of 7 m/m cartridges from abroad, I immediately put
into execution my plans to find the right sort of connection with the Govern-
ment. From what I investigated I did not consider Messrs. L. Figueira & Cia
a good medium for my case. Mr. Forman, of the Coll Company, informed me
that he has been depending on them for over six months to get orders from the
Government without any concrete results, and I was also informed that they
have not been able to do"^ anything in the way of getting business for the repre-
sentative of the Curtis-Wright Export Corp., of New York, although through
other mediums the French have sold airplanes to tlie Government.
I preferred, therefore, some firm that has not only been selling to the Gov-
ernment but that has also enough pull and power to obtain the Government's
preference to a proposition it offers irrespective of how attractive other propo-
sitions made by different concerns may look to the Government. I found this
firm, one of the partners of which is Dr. Firmino de Mello, who is son-in-law
of President Washington Luiz. There are two other partners who are very
well known in Government circles. The name of one of them is Dr. Max
Leitao, with whom I instituted friendship and dined together a couple of times^
Dr. de Mello, in our first interview, told me right away that he knew about
this business. He evidently had heard it commented upon by high officials. He
had an idea that orders from 7-m/m cartridges had been placed abroad, in Eng-
land, Italy, Austria, and with the Fabrica Nacional of Sao Paulo. He knew that
such orders had been placed some time ago. He was not sure that all the Gov-
ernment requirements for such cartridges had been filled. He would find it out
for me. He knew further than an American concern had offered a bid. I men-
tioned the name of the Western Cartridge Company ; he remembered it, but he
stated that this concern did not get an order. A question of prices, he added.
He spoke about the claim made by Western that their cartridges were the best
on account of the bullet jackets being of a very soft metal composition which
would cause the prolongation of the life of the rifle barrel. A bullet jacket of
such composition could never injure the rifling of the bore in tlie barrel because
it being so soft it did not offer much pressure upon the rifling. He remembered
the term Lubaley by which Western called these cartridges. Mr. de Mello
knew everything and I wondered whether he had ever been approached by some-
body interested in getting through him this Government business. As we con-
tinued to talk he revealed to me that the Companhia Imperial Industrias
Chimicas do Brazil, Ltda., Nobel's Brazilian subsidiary, had some time ago
approached him to work for them on this deal on a split commission basis. His
firm, the name of which is Souza Sampaio & Cia., Ltda., Rio, refused the propo-
sition because it only works for full commission, therefore it works only direct
with principals. No wonder, then, that Dr. de Mello was so fully acquainted
with the matter about which I approached his firm.
Of course, the only thing left for me to do was to ask him to investigate for
me whether in fact the entire order had been placed in Europe, and give me a
confirmation on all his above statements.
I had to wait quite a few days for his reply. In the meantime I kept on calling
on them to cement my friendship with the partners of the firm. Finally he
reported to me that Nobel wiis the British concern that got a part of the business,
the balance havmg been divided up between an Austrian and an Italian factory,
the names of wLich he could not remember, and the Fabrica Nacional in Sao
Paulo. He told me, furthermore and confidentially, that the business for the
European factories was obtained through intervention by their respective ambas-
sadors. That the Italian ambassador, upon knowing what the price quoted by
Nobel was, went personally to the President of theRepublic and obtained his
consent to cutting down the share given to the British factory and giving a part
of the order to the Italian factory. He also confirmed that the American
factory's bid was turned down.
83876— 35— PT 11 16
2632 MUNITIONS INDUSTRY
Knowing all the facts of the case which I could know through Mr. de Mello's
firm, I asked them to be on the lookout for me for future Government require-
ments, which they promised to do, and added that in future occasions they would
act as intermediaries for me. They have all the facilities in the world to get
business from the Brazilian Gov't, which is easy to understand. Dr. Mello
assured me that in the future our company would not miss the chance of making
a bid, and that it might not be very long before the Gov't required more ammuni-
tion for the army. By the way, he was not sure about the quantity purchased
in this instance, but the figures you gave me in your letter seemed to him to be
exaggerated. Besides my conversations with Dr. de Mello, the President's son-
in-law, I had many separate talks with the partner. Dr. Max Leitao, who
assured me of all his cooperation in future cases.
The person who put me in contact with Messrs. Souza Sampaio & Cia., Ltd., is
a civil engineer of high prestige in social and commercial circles of Rio. His
name is Clovis da Norbrega, and he is an old friend of mine. He is a cousin of
the Governor of the State of Rio Grande do Norte. He introduced me to
various congressmen from his State and promised to do everything he possibly
could for me in Rio.
My stay in Rio this time was longer than in previous occasions, but it was
not useless insofar as our future interests are concerned. With the connec-
tions I have made I can assure you that no Government business shall be given
in the future to any of our European competitors without our being given a
break. I dare say that a firm as influential with the Government as Souza
Sampaio & Cia., Ltda., can shut out any comi>etitors having even ambassadors
as intermediaries.
I could not obtain from Dr. de Mello the prices quoted by the Euroi^ean
factories, but I am going to find a way of getting this information, which is
very important for us to know so as to enable us to determine whether we
could have competed with the other factories for this business. I will also
endeavour to find out the exact quantities ordered from each factory. Of
course, it should be appreciated that Dr. de Mello would not feel inclined to
ask the Minister of Vv'ar or some other high official for too many details which
these officials might not wish to impart to him just because he is the President's
son-in-law. He would have to be discreet in his endeavours to do me a favor.
My comprehension of the reason why this matter was never brought to my
attention during the time I have been in charge of this office, and to the
attention of Mr. Kuhlen since early last year or even before that until the
days he began to feel ill, is based on the fact that this oflice has never had
a firm like the one I have now arranged to be on the look-out for future Gov-
ei'nmeut business for us. Such a connection is essential if we want to get
Government business in this country, and it should be also considered advisable
that the representative take one or two days run to Rio every two mouths at
the most to make personal investigations in that direction. And who knows
that it has been for these reasons that for many years, in fact as far as I
lemember since the time I have been with the company, we have never sold
anything to the Brazilian Government, except in 1920 or 1921, at which time
we sold some Colt pistol cartridges to the Brazilian Navy. I believe I am
not wrong on this statement, however you may wish to do me the favor of
informing me v>hether I am or not.
I trust that you will find that I am giving you satisfactory information on
the investigation I have made in Rio about this Government business, and if
there is anything else that you wish to know about the matter which I have
not reported fully and clearly please let me know, so that I may satisfy you.
Naturally, I regret that our company was not favored with a share of this
Government business.
Yours very truly.
(Signed) A. M. Babata.
Exhibit No. 987
["A" BR]
August 8, 1930.
Mr. A. M. Bar AT A,
Sao Paulo, Brazil.
We duly received your splendid report of June 23rd on the subject of govern-
ment business. You are to be congratulated on the clarity and conciseness of
the manner in which you have presented us with the facts and your deductions
MUNITIONS INDUSTRY 2633
therefrom, followed by your preliminary steps to insure our having the pi-oper
contact for the future.
We absolutely agi-ee with 5'ou that in government business, the prime essen-
tial is to have the right connection ; otherwise price, quality, or other con-
siderations are of no avail.
Furthermore, it is necessary to nurse these contacts from time to time ;
but the extent of the time and money to be employed has to be gauged by
the potential business that might ensue. Before long you will no doubt know
more on this score and in particular the prices we would have to quote in
order to obtain the business. Then we can tell if we can meet competition.
The fact we are now ready to manufacture Tracer ammunition in 7 m/m,
7.65 m/m or similar rifle cartridges, will be a big advantage to you. You know
we maniifacture armor-piercing cartridges, for the 50 calibre Colt giui, and
we are the only manufacturers in this country. Nobels also make them and
perhaps some continental manufacturers, but Colt's has told use our product
is vastly superior to any competitor. You will be glad to know we are pre-
pared to supply Tracer type of bullet in this 50 calibre. Colt predicts tlie
business in this arm will grow at very rapid strides, and no doubt Mr. Forman
is pushing its sale. It is used for antiaircraft work and against tanks.
You are quite right. We have never received any Brazilian Government
business, although we had many inquiries for prices from Mr. Kuhlen, but
nothing ever came of them.
Awaiting your further reports with keen interest, we remain, with kindest
regards,
F. J. MoNAGHAN, Export Manager.
F.M— JM
Exhibit No. 988
Remington Arms Company, Inc.,
October 24, 1930.
Mr. A. M. Babata,
Caixa Postal J/QS Sao Paulo, Brazil.
We have to hurry in order to catch today's mail. The latest news we have
this morning is that the Brazilian Government resigned and the new people
are in power. What the developments are within the next few days remains
to be seen and no doubt we will have your cable advices as to the prospects
for business.
Of course the change in government is no absolute reason to our way of
thinking that there will be no further inquiries for government supplies, but
rather we are inclined to think the new government will consider it necessary
to replenish their stocks of cartridges, and perhaps even build up the stocks
beyond the point at which they were before the trouble. Of course we are
wondering what your status will be with the new Government, that is to say,
if you will be accepted as a friend in view of your negotiations for attempt-
ing to sell those formerly in power and we await with interest your advices
on this point. The same thought holds good in respect to Figueira & Co.
Will they be the right people for the future?
Now for the most important subject of this communication. All week we
have been exasperated beyond words at the absence of definite advices from
you by which you understood what we were doing and the instructions we
were giving you. Here is the picture as far as we can give it to you quickly
of the position in which we were placed. The Brazilian naval attache in
Washington, Mr. J. C. Aguirre, has always, and this means for years past,
done his buying through a man in New York and for good and sufficient
reasons at the present moment we do not want to give you his name. The
quotations are made to Commander Aguirre in the name of the manufacturer
and a commission is included for the man in New York. We found our com-
petitors in this country were quoting through this channel and, therefore, it
was obligatory for us to place our quotations through this channel, because
we know this channel was not adding as much for commission as your inter-
mediary. You know in previous communications we have called your attention
to the fact that we believed the commission of 15% was entirely too much.
When we gave our quotation to Commander Aguirre we realized that you
not having had much experience with these government transactions might
2634 MUNITIONS INDUSTRY
have in some way left us liable for commission to Figueira & Co. in the event
of an order reaching us through Washington and yet Figueira & Co. have
absolutely nothing to do with influencing the order to us. Whether they
influenced it or not we certainly could not pay commission to two people.
Where you appoint a man as your agent and do not do it in the proper way,
he can claim commission no matter through what channel the order reaches
the manufacturer, and therefore, we always keep this in mind and make our
arrangements to protect against such a happening. The best way to accom-
plish this is to quote the intermediary as a principal ; in other words, when
we give Figueira & Co. a quotation, that means he has to buy the goods from
us at the price we give him less the 15% or whatever other commission may
be decided upon. The same holds true when we give a quotation to Com-
mander Agniirre through his agent here. We are always careful in confirm-
ing any of these quotations not to leave any loopholes for people to take
advantage of.
Information reached us through more than one channel that Figueira & Co.
were working for practically every American ammunition manufacturer, and
reports we have had on them from people whom we know are to the effect
that Figueira & Co., while well placed with the government that was, have to
be watched very closely, as they are tricky.
In one of your cables you told us the inquiry from the American commercial
attache was instigated by F. & Co. Maybe you are right ; but a couple of
other ammunition manufacturers were told by their representative in Kio that
they instigated the inquiry through the commercial attache, so you can use
your own imagination as to how much truth there is to tl^s story.
When we cabled you that inquiries were reaching us through various chan-
nels, we really had in mind only one which we would recognize, and that is
the Brazilian naval attache ; and our cable was intended, as it clearly read, to
make sure you had not involved us so we would have to pay commission to
F. & Co. in the event of an order reaching us through Commander Agiiirre,
You did not answer our question, but instead you cabled in defense of F. & Co.
and absolutely evaded our question, which you must not do in future. At the
same time you probably inspired the cable we received from F. & Co. they sent
the same day, saying they were working in cooperation with you.
The day before yesterday we cabled you our only quotation was to the Wash-
ington attache through his agent, and, of course, we meant the Brizilian naval
attach^. This was in reply to your cable to advise you confidentially the
names of others making inquiries. At the same time we cabled F. & Co., but
did not mention the word agent ; and yet in the cable received today from F. &
Co. they asked us the name of the Washington attache and the agent, indicating
you showed them your cable. We certainly expectetl a cable from you ac-
konwledging this cable we sent you, for we told you to cable acknowledgment,
yet yon have not done so. Today we answered Figueira's cable by cabling them,
" We quoted Brizilian naval attache." We did not want them to know there
is any agent involved, and we are going to refrain from saying so directly to
them.
Early this week we received an inquiry from Commander Aguirre for 200,000
.308 British pointed cartridges for machine gnus, and we quoted him, receiving
his order two days ago, which is now in course of preparation ; and, even in
spite of Ihe change in government, we understand the order is to go through.
Of course, this is confidential information for you.
This morning we received a cable from Figueira asking for prices on 100,000
.303 Britisli pointed, and we cabled them $36.00 per thousand ci. i. f., which
includes 15%, as they requested. For your confidential information the price
Aguirre quoted the Government was $34.00 per 1,000.
The prices Aguirre gave the Government on 7 m/m are about $1.00 per
1,000 lower than what Figueira quoted the Government. These are two con-
crete examples, substantiating our belief that 15% was too high.
You can recognize you have left us completely in the dark as to what yow
were doing with F. & Co. and we can imagine they left you the same way
until they found we had another channel when they immediately awoke as
evidenced by their cables to us.
The situation as we see it now is quite complicated and being without any
definite advances from you that your negotiations with Figueira & Co. have
not left us open to claim from them in the event of business through Washing-
ton on 7 m/m"s, wo beilive the present is the proper time to conclude and
finalize all your negotiations up to the present time with Figueria and start
MUNITIONS INDUSTRY 2635
•everything with a clean slate. The change in Government will make this
possible. If you believe there is any way that you have left us open to claim
or the least chance of it, and even if you do not think so, we believe it will be
well for you to close all negotiations with Figueira and repoen them afresh.
Furthermore, you are not authorized to make any arrangements for us with
any intermediary without all the details being submitted to us in advance.
Yesterday we received your cable telling us the commercial attach^ was
cabling the Commerce Department to ascertain from the War Department
here whether they used gilding metal or Lubaloy. The cable has not yet
arrived, but when it does you may be sure the answer you want will be sent
and it will be the truth — namely. Gilding metal. Even the Commerce Depart-
ment at "Washington laughs about this Lubaloy for they know Figueira was
saturated with a lot of Western's propaganda.
In all these negotiations for Government business, you as well as ourselves
have been working up toward the top instead of the way some big companies
do — from the top down. In other words, you find what you believe is a
good intermediary and then try to reach the Minister of War or whoever else
has authority in placing orders. The du Pont Company makes it a practice
of finding out who is the right man to work with, the Minister of War, the
Head of the Ordnance Department, or whoever else it may be, and then asks
that authoritative person who it believes would be a good agent to appoint for
negotiations. But again we want to say no details are to be arranged by
you with an intermediary without our authority after we have received
complete data from you.
Mr. Rugge just mentioned that perhaps Sant' Anna will be acquainted
with the new powers and it may be well for you to seek his cooperation.
In hurrying to catch this mail we have not the time nor inclination to
couch this letter in any but plain unvarnished English, and, as a matter of
fact, that is perhaps the best way to give you the picture of things as they
are disturbing or have been disturbing us all week.
17:)plng you are well, we are
, Export Manager.
Exhibit No. 989
Remington Abms Company, Inc.,
Bridgeport, November 30, 1932.
Personal and confidential.
Mr. A. M. Barata,
Itajtiba Hotel, Rio de Janeiro, Brazil.
Dear Sir: Since we received your letter saying the Government was going
to close up the local ammunition factory in Sao Paulo, we have given a lot of
thought to that situation, for we recognize it is a mighty important one to
our interests. What we are going to say to you in this letter we want
treated strictly confidential.
In the first place we want to tell you that nearly all the companies in this
country and Europe, who would be benefited by having the local factory out of
the way, agreed some time ago not to enter bids with Mr. Matarazzo for
his company, for we all felt by standing off the factory would eventually faiL
This is the reason we never turned a sympathetic ear to any of the overtures
made through you for us to become interested in the purchase of the company.
What we would like most to see is the Government take over the factory
and scrap machinery, especially that part intended for the manufacture
of revolver and pistol ammunition and shot-gun cartridges. If the Government
continues in their present intention of closing the plant, we would want to
do everything possible to see that the Government oflScials responsible for
the closing of the plant went through with their plans and actually had the
machinery scrapped. For the Government people to allow the machinery to
come into the hands of any new group might result, as it did before, in the
equipment being used to the detriment of the Government.
It might be that some incentive could be given the Government official who
was responsible for the scrapping of the plant to see that he went through
with these plans. With all the ammunition factories practically broke now-
adays, not much could be done in the way of paying worthwhile money, but we
2636 MUNITIONS INDUSTRY
are tlunking the result possibly could be accomplished if handled diplouiatically,
at a very small cost.
One thing is certain, we do not want to see this machinery get into the
hands of some other group who would be relieved of all the indebtedness
of the present company and thereby be in a better position to bid with us
than is the present company, for the statement you sent us of their financial
status we consider a very poor one.
What we want you to do is to watch this situation from every angle and
add any propaganda you can with the proper Government oflBcials to the
end that the plant be scrapped.
This is a rather sketchy plan we are presenting to you and you want to be
careful you do not make any false moves. As a matter of fact you should
do nothing where you would appear as a principal. First and foremost, we
want every bit of information from you as to what transpires and is intended
in connection with this local plant. Your suggestions as to what could be done
in furthering our interests in connection with this factory will be anxiously
awaited by return air mail.
In watching the situation you have to be careful to see that none of our
competitors make any moves to purchase the equipment of the local plant.
Yours very truly,
Manager, Foreign Department.
MUNITIONS INDUSTRY
HEARINGS
BHFORB THB
SPECIAL COMMIHEB
INVESTIGATING THE MUNITIONS INDUSTRY
UNITED STATES SENATE
SEVENTY-THIED CONGRESS
PDRSDANT TO
S. Res. 206
A RESOLUTION TO MAKE CERTAIN INVESTIGATIONS
CONCERNING THE MANUFACTURE AND SALE
OF ARMS AND OTHER WAR MUNITIONS
PART 12
DECEMBER 11 AND 12, 1934
RELATIONSHIP OF MUNITIONS MAKERS
TO THE GOVERNMENT
INTERNATIONAL CONNECTIONS IN THE
CHEMICAL INDUSTRY
Printed for the use of the
Special Committee Investigating the Munitions Industry
UNITED STATES
GOVERNMENT PRINTING OFFICE
83876 WASfflNGTON : 1935
MUNITIONS INDUSTRY
r
HEARINGS
BEFORE THE
SPECIAL COMMITTEE
raVESTIGATING THE MUNITIONS INDUSTRY
• UNITED STATES SENATE
SEVENTY-THIRD CONGRESS
PURSUANT TO
S. Res. 206
A RESOLUTION TO MAKE CERTAIN INVESTIGATIONS
CONCERNING THE MANUFACTURE AND SALE
OF ARMS AND OTHER WAR MUNITIONS
PART 12
DECEMBER 11 AND 12, 1934
RELATIONSHIP OF MUNITIONS MAKERS
. TO THE GOVERNMENT
INTERNATIONAL CONNECTIONS IN THE
CHEMICAL INDUSTRY
Printed for the use of the
Special Committee Investigating the Munitions Industry
UNITED STATES
GOVERNMENT PRINTING OFFICE
WASHINGTON : 1935
\ /
*Atl¥A«\> COLLfsr U^BAHY
fifCElVfO THROUGH THI
flUKlAU ^0« RE2tARCH IN
MUNICiPAi tiJirVEBNMENT
1^37
X?'
SPECIAL COMMITTEE INVESTIGATING THE MUNITIONS INDUSTRY
GERALD P. NYE, North Dakota, Ohairman
WALTER F. GEORGE, Georgia ARTHUR H. VANDENBERG, Michigan
BENNETT CHAMP CLARK, Missouri W. WARREN BARBOUR, New Jersey
HOMER T. BONE, Washington
JAMES P. POPE, Idaho
Stephen Rabshenbush, Secretary
Alger Hiss, Legal Assistant
CONTENTS
Testimony of — • Page
Beebe, H. F., manager foreign department, Winchester Repeating
Arms Co 2735-2742
Bradway, F. W., assistant general manager, smokeless-powder depart-
ment, E. I. du Pont de Nemours & Co 2681-2716-2805
Casey, K. K. V., director of sales, smokeless-powder department,
E. I. du Pont de Nemours & Co 2638, 2640, 2645, 2652, 2654, 2669,
2683, 2688, 2692, 2698, 2706, 2715, 2718, 2728, 2732, 2744, 2747
du Pont, Iren^e, vice chairman of board of directors, E. I. du Pont de
Nemours & Co 2639, 2643,
2651, 2654, 2688, 2709, 2730, 2741, 2754, 2766, 2781, 2784, 2806
du Pont, Lammot, president E. I. du Pont de Nemours & Co 2641,
2653, 2668, 2684, 2689, 2705, 2707, 2717, 2727, 2732, 2734, 2740,
2746, 2752, 2766, 2782, 2786, 2793, 2799, 2803, 2808, 2815.
du Pont, Pierre S., chairman of board of directors, E. I. du Pont de
Nemours & Co 2712-2819
Sparre, Dr. Fin, director development department, E. I. du Pont de
Nemours & Co 2699-2711
Swint, W. R., director foreign-relations department, E. I. du Pont de
Nemours & Co 2784-2788, 2791-2794, 2802-2808
Relations of United States Army and Navy officers with munitiong makers. 2644
Business with the United States Government 2661
Relations of du Pont Co. with the State Department 2672-2683
Submergence of Government powder under water at Old Hickory 2679
Influence of munitions companies on the policies of Government 2691
Use of United States Government guns for commercial demonstrations. ._ 2700
National policy regarding munitions shipments to foreign countries 2706
Attitude of du Pont Co. toward embargoes and legislation regarding em-
bargoes 2717
Question of international disarmament in 1922 and its relation to the chem-
ical industry 2754
International connections in the chemical industry 2781
m
INVESTIGATION OF MUNITIONS INDUSTRY
TUESDAY, DECEMBEB 11, 1934
United States Senate,
Special Committee to
Investigate the Munitions Industry,
Washington^ t). G.
The hearing was resumed a 10 a.m. in the Finance Committee
Eoom, Senate OflSice Building, pursuant to the taking of recess,,
Senator Gerald P. Nye presiding.
Present: Senators Nye (chairman), Barbour, Clark, and Pope.
Present also: Stephen Raushenbush, secretary to the committee.
At this point the committee concluded that part of the testimony
which is incorporated in Part XI of these hearings, " Chemical
Preparation following the War and Interchange of Military In-
formation."
The Chairman. The committee will be in order.
Senator Clark desires on the stand this morning Mr. Casey and
either or both Mr. Irene© du Pont and Mr. Lammot du Pont.
TESTIMONY OF IRENEE DU PONT, LAMMOT DU PONT, AND
K. K. V. CASEY
Senator Clark. Gentlemen, I desire this morning to examine
somewhat briefly into the question of the relations of private muni-
tion companies to the United States Government, particularly the
War and Navy Departments. I will first read a letter from Mr.
Phellis, general director of sales, to Mr. Irenee du Pont, president,
room 9042, building, dated November 26, 1919, which I ask to have
marked with the appropriate number.
(The letter referred to was marked " Exhibit No. 990 " and ap-
pears in full in the text.)
Senator Clark. That letter reads :
Subject : Nobel agreement.
Before leaving today Mr. Pickard asked that we send you copy of the at-
tached letter from Maj. K. K. V. Casey for your information.
C. W. Phexllis. General Director of Sales.
I also desire to read extracts from a letter, which I will be glad
to read any other parts in, which you gentlemen desire read, but I
will read the parts I consider important, being a letter dated Novem-
ber 25, 1919 ; that is, memorandum to Mr. F. W. Pickard, vice presi-
dent, signed by Major Casey, director of sales.
(The letter referred to was marked " Exhibit No. 991 " and is
included in the appendix on p. 2820.) *
2637
2638 MUNITIONS INDUSTRY
I think this letter may have been used in Senator Vandenberg's
examination the other day, although I was not here.
Mr. Casey. Not this one, Senator.
Senator Clark. I read :
As I understand the situation, we are contemplating entering into an
agreement witli tlie Explosives Trade Limited —
The Explosives Trades Ltd., Major, was one of the component
parts of what is noAv I. C. I., was it not?
Mr. Casey. Yes, sir.
Senator Clark [continuing reading] :
on a division of profits from the sales of military and commercial products in
South America and elsewhere. I am not familiar with the purpose in back of
this arrangement, but assume that the idea is that it will result in a better
percentage of profit by the elimination of competition ; that is the only reason
I can imagine.
Personally, I cannot see whereby we will be the gainers by any arrangement
we can make with Nobel. The du Pont Co. today is preeminently the leading
manufacturer of explosives in the world and with a record for satisfactory
production that has never been equalled. This fact is known not only by the
Allies, but has been thoroughly appreciated by the Central Powers as well as
the neutral nations. Therefore, we have a prestige second to none, which will
not be materially strengthened by the above-mentioned arrangement. As far
as prestige is concerned, we will be given more than we receive.
If it is expected that this arrangement will enable us to control the market
in South America to our mutual advantage, I think we are working on a false
hypothesis. South American countries, with the exception of their navies, are
armed and equipped with German-made small arms, and with German and
French field artillery. There may be a few English guns for Cordite in some
of the coast defenses, but my understanding is that the majority of these guns
are Krupp, which practically indicates that the only English powder used is
powder that is sold for use on English-built warships.
England has succeeded for some years in impressing nations where guns built
for nitroglycerin powder have been supplied that they will work satisfactorily
with nitroglycerin ix)wder only, that tins notion has been shown to be er-
roneous, and now it is a relatively small matter to prove to the satisfaction
of interested people that nitrocellulose powders can be made that will give
equal satisfaction in guns of the so-called " nitroglycerin " type.
The competition that we have to fear is that of the German, French, and
Italian, but principally German, and unless there is something with which I
am not familiar I cannot see in what way any arrangement we make with
Nobel will protect us against this competition. In fact, even in the case of
the Engli.sh-made guns, if the nation should insist on using nitroglycerin
powder, we are still unprotected by reason of Italian competition. Therefore,
as I see it, we will be making an arrangement whereby instead of dividing a
fair profit which division will net us more, we will in reality be in an arrange-
ment where the division of profit will be materially lessened by reason of
the fact that we still have the competition of Germany, France, and Italy
to meet.
Will you explain what that arrangement was for the manufacture
of nitroglycerin powder and nitrocellulose powder so that we can
understand it, and just state what the arrangement was about.
Mr. Casey. Du Pont was looked upon as a nitrocellulose powder
manufacturer.
Senator Clark. Do you manufacture nitroglycerin powder?
Mr. Casey. No.
Senator Clark. Not at all?
Mr. Casey. "We did a little shotgun powder business, whereas the
English have always been looked upon as nitroglycerin powder
manufacturers.
MUNITIONS INDUSTRY 2639
Senator Clark. This letter refers to " military propellants."
Mr. Casey. That is all I am talking about.
Senator Clark. In the statement on page 2 which I just read you
say that you fear German competition. This letter was written in
1919. Did you understand at that time, in 1919, that Germany was
making and ex]3orting military propellants?
Mr. Casey. No ; but I thought there was a possibility that at any
time they might be allowed to.
Senator Clark. In other words, you thought there might be a
modification of the Versailles Treaty, which you had to take into
contemplation in the agreement which you might make with Nobel ?
Mr. Casey. Correct.
Senator Clark. I will read further in that letter [reading] :
The above indicates the practical side, but there is another angle which in
my mind is more important, and that is, that by making an arrangement to
divide profits on siales of military explosives, we are inviting the attack of
unfriendly people and miickrakers. No matter how clean the arrangement may
be, it is bound to be misconstrued. We will be accused of exchanging Govern-
ment information with England. Our explanation that this is but a selling
arrangement will not alter the fact that in order to divide profits, those profits
are based on some cost. That cost will be stated to be the United States Gov-
ernment cost. Therefore we will be informing England as to what it isi costing
the United States to manufacture its powder. We will also be accused of
informing England as to the quantity of powder for military purposes made
in the United States, how much is exported, and how much the United States
has.
Major, those objections were very valid, were they not? If this
agreement had been made there would have been a very valid objec-
tion that it did disclose information based on cost, and that in order
to determine the basis it would be necessary to disclose the United
States Government cost?
Mr. Casey. As I said, that is what we would be accused of.
Senator Clark. You could have been accused of it very justly?
Mr. Irenee du Pont. No, sir.
Senator Clark. Why not?
Mr. Irenee du Pont. Because the cost of Government powder
might be very different than the cost of powder shipped down there.
You take the cost of Government powder provided in 1918 to the
United States, and it certainly had no relation to any powder we ever
made before.
Senator Clark. You do not mean the cost, but the selling price?
Mr. Irenee du Pont. Both. They were both way below what was
ever manufactured before.
Senator Clark. It did not cost you less to manufacture?
Mr. Irenee du Pont. It cost us less to manufacture and it was
sold for less.
Senator Clark. It cost you less to manufacture ?
Mr. Irenee du Pont. It cost us less to manufacture than ever
before.
Senator Clark. It did not cost you less to manufacture powder
for the United States Goverinnent than before?
Mr. Irenee du Pont. It certainly did, because we were in larger
production.
Senator Clark. In the manufacture of powder in 1918, of com-
parable kind, it did not cost you any less to manufacture the powder
2640 MUNITIONS INDUSTRY
you furnished to the United States Government than the powder you
furnished to any other government during that period?
Mr. Irenee du Pont. It is here in the record, that is, the records
are here to show it exactly, and I believe it was less, because of the
larger volume of manufacture, and also we began getting materials
at lower cost after the United States went into the war.
Senator Clark. But if you manufactured during the period 1918 —
did you manufacture exclusively for the United States Government
after we got into the war, or did you start to manufacture to some
extent for the Allies ?
Mr. Irenee du Pont. We manufactured for the Allies the orders
we had uncompleted.
Senator Clark. That is what I say. If you manufactured the
same powder, in the same factory, or a similar kind, and sold some
to the United States and some to the Allies, it did not cost you less
to manufacture for the United States than the Allies?
Mr. Irenee du Pont. It might have.
Senator Clark. That is the point I am making, Mr. du Pont.
Mr. Irenee du Pont. At any rate, the exact cost of manufactur-
ing powder cannot be known, but the approximate cost must be
known. The approximate cost of manufacture must be known to the
Nobel people as well as to us. The approximate cost of manufacture,
whether it costs 55 cents or 53 cents, would be utterly immaterial.
Senator Clark. But in setting up your cost base, is not Major
Casey's suggestion here well taken, that the cost would be what is
the United States Government cost?
Mr. Irenee du Pont. I do not think that is necessarily so.
Senator Clark. Therefore it would be informing England as to
what it cost the United States to manufacture it.
Mr. Irenee du Pont. I think the cost of a lot of powder sold in
South America would be very different than what it cost in the
United States.
Senator Clark. Major Casey goes on [reading] :
In spite of the fact that on interchange of information on patents, military
explosives are specifically exempted, we will be attacked with the statement
that by informing them of the sales and the costs on which the profits are
based, that we cannot avoid informing them regarding compositions.
Is that objection not well taken?
Mr. Casey. That is again on the same premise. We can be ac-
cused of a lot of things.
Senator Clark. I understand you can be accused of a lot of things,
but I am asking your opinion whether you could be fairly accused.
This was an intercompany memorandum. I understand you said
you could be accused of it. What I am trying to find out now is
whether it is your opinion that you could have been accused of it
with justice.
Mr. Casey. I am trying at this time to make the strongest case
that I possibly can.
Senator Clark. I understand.
Mr. Casey. To something to which I objected personally.
Senator Clark. What was your opinion as to the justice of those
accusations which might be made?
Mr. Casey. I think I have stated pretty clearly, Senator, that they
might be just or unjust.
MUNITIONS INDUSTRY 2641
Senator Clark. I understand you said they might be just or un-
just, but I am trying to find out your opinion as to whether they
would be just or unjust. You are an expert on the subject, and I
know you have an opinion as to whether they were just or unjust.
Mr. Casey. I felt most of them would have been unjust, but we
were still open to attack.
Senator Clark. As a matter of fact, your present arrangement
with I. C. I., while it is termed a " selling arrangement ", does pro-
vide for a division of the profits and would be open to the same
objections that you raise there, would it not?
Mr. Casey. Not on the basis that I was fearful of at this time.
That is because any division of profits is a variable proposition, de-
pending on the particular transaction.
The fact of the matter is, that after we have added selling expense,
travel expense, and so forth, we do not have a profit, in a great
many cases.
Senator Clark. Nevertheless, the division takes place on the divi-
sion of cost, and your suggestion here that this agreement which was
under discussion would be subject to the attack that it was based on
cost, which would be taking the United States Government cost and
would disclose the volume and also the composition, would apply
as much to the existing agreement with I.C.I, as it would to this
agreement, would it not. Major? "Without going into the question as
to whether the attack is just or unjust, whatever you said about this
agreement might as fairly be said about your existing agreement
with I.C.I. ? Is that not true?
Mr. Casey. Except for the facts being different. As I said before,
I was afraid an arrangement would be entered into. I was not fa-
miliar with the contemplated arrangement, and I was afraid an
arrangement might be entered into where there would be a division
of the profits based on our plant costs.
Now, as the matter stands today, as I have just explained, there
is no such animal. It is simply the result of a year's costs. We have
probably gotten the net return after all expenses have been included
of a certain amount, and it bears no relation to the cost, and nobody
could possibly take that figure and say " the powder cost them so
much." There is the distinction.
Senator Clark. Major, the agreement provides for a division of
profits, does it not ?
Mr. Casey. Yes.
Mr. Lammot du Pont. No ; the agreement does not provide for it.
Senator Clark. What does it provide?
Mr. Lammot du Pont. Costs.
Senator Clark. Profits are necessarily based on costs, are thev not,
Mr. du Pont?
Mr. Lammot du Pont. I did not hear your statement.
Senator Clark. It is impossible to have any determination of
profit in any commercial enterprice and not have a determination
of the cost, is it not, Major?
Mr. Casey. It may sound to you like a fine distinction, but what
I was trying to avoid at that time, in my own opinion, waB any
arrangement whereby it would be based on our cost at the mill,
which is really what we would term equivalent to Government cost.
2642 MUNITIONS INDUSTRY
On the other hand, under the present arrangement we know what
our own figures are, what the mill cost is, and then we have to add
to that every item of expense which we have been put to during the
period in which that powder was sold. The result is, on a number of
occasions where over our mill cost we might show a profit, the net
result will be an actual loss because of the small quantity involved
and the selling expenses and everything else which goes on all the
time.
Senator Clark. Major, do I understand under this existing agree-
ment with I. C. I., when you go to settle with them, you would just
set up your cost figure as a flat figure, as a flat cost, without breaking
it down into your mill cost or anything else ?
Mr. Casey. There is one feature of that thing which has not been
brought out, and that is this : At the time we had the discussion with
Mitchell we said : " There is one thing we want distinctly under-
stood. There is going to be no break-down as to where we get our
final figures. That is one thing we will not agree to. Unless you are
willing to accept our figures as to what we say the powder costs us
at the end of a year's period of transaction, we will not enter into
the agreement."
Senator Clark. So that under the agreement you do not break
down the cost?
Mr. Casey. We refused to give the data.
Senator Cl^vrk. And refused to give any information on mill cost ?
Mr. Casey. And unless they are willing to accept our figures and
we are willing to accept theirs on the same evidence, there is none
applied.
Senator Clark. That is, under the agreement you have no break-
down of the figures ?
Mr. Casey. We absolutely refused to do it.
Mr. Lammot du Pont. I think. Senator, the present agreement
will speak for itself, but it is my understanding that it does not refer
to costs, but it refers to profits, and the profit figures are to be
accepted without break-down. It is not a break-down of cost, but a
break-down of profit.
Senator Clark. It is impossible to figure profit without figuring
costs. Profit is the difference between the selling price and cost.
Mr. Lammot du Pont. You understand it means that it is not
breaking down cost, that it is a question of breaking down profits,
and Ave do not have to break-down our profits.
Senator Clark. If yon do not break-down your costs, I can see that
Major Casey's explanation of the difference between the contract
which he is discussing here and the contract with I.C.I, is a valid
distinction.
Now, Major, I will read further from the same letter [reading] :
In addition, the attack made on us in Harper's Weekly
Mr. Casey. Have you not skipped one paragraph ?
Senator Clark. I read that, but I will read it again [reading] :
In spite of the fact that on interchange of information on patents, military
explosives
I was just asking you about that.
Mr. Casey. I do not think you finished the paragraph.
MUNITIONS INDUSTRY 2643
Senator Clark (continuing reading) :
* * * military explosives are siiecifically exempted, we will be attacked with
the statement that by informing them of the sales and the costs on which the
profits are based, that we cannot avoid informing them regarding compositions.
This arrangement will give Representatives in Congress just the ammunition
they are looking for to attack us. and we will be accused of bein.cj traitors;
of giving away Government secrets, etc. All we have to do is to look over
the hearings on the different appropriation bills to realize what thin ice we
would be on.
In addition, the attack made on us in Harper's Weekly in 1914 is still pretty
fresii in our minds, and we still hear of this occasionally.
What is that, Major?
Mr. Casey. That is the attack by a man named Post, where he ac-
cused the company of giving Government information to Germany.
Senator Clark. You mean the du Pont Co. as distinguished from
munition makers in general ?
Mr. Casey. Yes; and, as I understand it, he referred to a case
where the United States Navy needed brown prismatic powder.
At the request of the Secretary of the Navy I believe Mr. Alfred
I. du Pont went to Germany and made an arrangement whereby we
would get the " know-how " of brown prismatic powder.
Senator Clark. You mean get it from Germany ?
Mr. Casey. I mean get it from Germany. In connection with that,
of course, we had to agree, which was approved by the Secretary
of the Navy, to let them have information which we might develop
in connection with this same powder. That was a part of the agree-
ment, and the only agreement on which the Germans would let us
have the information.
Senator Clark. That was the Harper's Weekly article to which
3^ou referred?
Mr. Casey. Yes, sir.
Senator Clark (reading) :
The testimony and exhibits at the time of the du Pont dissolution suit, the
testimony and exhibits at the time of the Post-du Pont libel suit, are con-
clusive evidence of the risk we are running.
What was the Post libel suit?
Mr. Casey. That was a libel suit growing out of the Harper's
Weekly article.
Senator Clark. Who was the Post involved ?
Mr. Casey. He was the man who wrote the article.
Senator Clark. Did j^ou sue him for libel?
Mr. Casey. Yes, sir.
Senator Clark. What was the judgment?
Mr. Casey. Somebody else can tell j^ou.
Senator Clark. Do you know. Mr. du Pont?
Mr. Lammot du Pont. No, sir.
Mr. Irenee du Pont. ;Mr. Pierre du Pont can tell you. I think
we won it.
Senator Clark. Did you get judgment from Post?
Mr. Pierre du Pokt. I have no recollection of it.
Senator Clark. I think some of you would remember it if you
liad won the suit. [Reading:]
In that case there was this difference: When we were accused of inter-
changing information with Germany on account of the arrangement we had
with the Rhenish-Westphalian Co., this agreement had been made at the
request of the Secretary of the Navy.
2644 MUNITIONS INDUSTRY
Is that the arrangement which you just referred to, Major?
Mr. Casey. Yes, sir.
Senator Clark. That is the reason I was reading this, to show
what the arrangement was. [Continuing reading:]
The arrangement which we are contemplating at the present time has no
such foundation and, I am sure, would not be loolied on with favor by the
officials of the Army or Navy. Furthermore, I fear that such an arrangement
as we are contemphiting would jeopardize our present friendly relations with
the Army and Navy, for their representatives would hesitate about taking us
into their confidence for fear that the information would reach England.
Was this arrangement made with Nobel at that time. Major?
Mr. Casey. There was an arrangement, but some of our objections
were observed, but I do not know exactly to what extent.
Senator Clark. Which ones were observed?
Mr. Casey. The interchange of information was definitely out,
because there was a saving clause in that agreement about Govern-
ment objection being a valid objection, and there was always Gov-
ernment objection. I think that was brought out the other day.
You did not read the last paragraph, and I do not know whether
it is important or not.
Mr. Irenee du Pont. I think you are getting confused between
the exchange of information agreement and the South American
agency agreement, are you not?
Mr. Casey. No.
Mr. Irenee du Pont. This was a proposed agency agreement.
Mr. Casey. This was the agreement which I understand was being
contemplated at the time with I.C.I.
Senator Clark. I would be glad to have you read the last one, if
you want.
Mr. Lammot du Pont. I have got the information, Senator, with
regard to the Post libel suit. Major Casey's recollection, evidently,
was not quite correct.
Post wrote the article in Harper's Weekly. One of our men criti-
cized the article and referred to it as libelous. Post sued the du
Pont Co. for that statement, and the judge instructed the jury to
find that in fact the article w^as libelous, so that the company's posi-
tion was vindicated.
relations of united states army and navy officers with munitions
makers
Senator Clark. I see. I now read a letter dated May IT, 1922,
which I will ask to be marked appropriately.
(The letter referred to was marked " Exhibit No. 992 " and is
included in the appendix on p. 2821.)
Senator Clark. This is a memorandum from W. H. O'Gorman,
assistant director, a memorandum of his trip to Washington on May
16, 1922 [reading] :
Called on Major O'Leary, small-arms division, regarding purchase from
Frankford Arsenal of 160,000 cupro nickel bullet envelops, lead plugs, and sur-
rated plugs for incendiary ammunition. Major O'Leary iiad received a letter
from Major Whelen on this subject. He stated that it was not regular proced-
ure to sell material which was being held in reserve, but due to the fact that we
needed the components in a hurry, he would oblige us and would at once notify
Frankford Arsenal to make the sale under the conditions outlined in Major
Wheien's letter of May 15.
MUNITIONS INDUSTRY 2645
Who is Major Whelen?
Mr. Casey. Major Whelen at that time — I may not be absokitely
right, but I think he was either on the technical staff on small-arms
matters or in the ammunition division.
Senator Clark. He was in the Army at that time ?
Mr. Casey. Yes, sir.
Senator Clark. I was trying to find out whether he was your
representative, or in the Army.
Mr. Casey. No, sir.
Senator Clark (reading) :
Major O'Leary also stated that we could obtain the material ou Thursday,
May 18.
Now, when Major O'Leary said that it was not regular procedure
to sell material which is being held in reserve, he really meant there
was no authority in law for permitting it, did he not?
Mr. Casey. No; there was authority in law to sell.
Senator Clark. Out of the reserve stock?
Mr. Casey. Provided it was going to be replaced and replaced
very soon. But this thing was a proposition which looked like good
business, if we might have difficulty in getting these component ma-
terials. As it turned out afterwards, we found we had no difficulty in
getting the components from other sources, so that nothing happened
from this thing.
Senator Clark. These bullets were to be taken out of the reserve
stock which the Government had, were they not?
Mr. Casey. I think so. That was the intention. It was an Eng-
lish bullet.
Senator Clark. They were incendiary bullets?
Mr. Casey. Yes, sir.
Senator Clark. Do you know what government they were to be
sold to?
Mr. Casey. I think this sounds very much like Japan.
Senator Clark. I call your attention to a tabulation of foreign
business from the armistice to December 31, 1933, not including
United States business, taken from the files. I find that in one item,
Japan, incendiary cartridges, quantity, 100,000; total, $22,750.
(The tabulation referred to was marked " Exhibit No. 993 " and is
included in the appendix on p. 2822.)
Senator Clark. Would that indicate to your mind. Major, on that
that part of this material you Avere trying to get from the United
States Government was for sale to Japan?
Mr. Casey. That Japanese incident is very interesting. They
came to us and wanted to get 150,000 rounds of .303 British in-
cendiary ammunition. The first statement I made was, "Why do
you come to us for a British cartridge with a British bullet^ the
Buckingham bullet? " The answer was that du Pont had made such
a splendid reputation in the loading of both tracer and incendiary
bullets during the war that that is what they told me.
They were advised we were not ammunition manufacturers. We
Avould have to get the components from outside. In our search for
components we thought it was possible that Frankford arsenal might
have some components for the .303 British. If they did not hc-Tve,
it might be possible to utilize certain of those components by re-
forming and swedging to raise the diameter of the bullet "from
2646 MUNITIONS INDUSTRY
.308 to .311. But, as I say, before the discussion had hardly ended,
we found we were able to get the components not only for the
ammunition but for the bullets from another source without any
difficulty.
Senator Clark. Your sales charge shows that you sold 240,000
rounds of that ammunition. Did any part of that come from the
United States Government?
Mr. Casey. None of it.
Senator Clark. Because you found another place you could buy it?
Mr. Casey. Yes.
Senator Clark. But you had made arrangements with the United
States Government to supply you 160,000 rounds from their reserve
stock ?
Mr. Casey. If we could use it, they were willing to help us to
tide over this proposition.
Senator Clark. Was the United States Government apprised that
that was for sale to a foreign government?
Mr. Casey. Oh, yes.
Senator Clark. To Japan?
Mr. Casey. Yes. The fact of the matter was, when the}^ realized
that Japan could have gone right to England and have probably
gotten this ammunition out of stock, they were very glad to see
American manufacturers get the business.
Senator Clark. I will read you fui'ther from this memorandum
of Mr. O'Gorman's, " Exhibit No. 992 ", recounting his trip to Wash-
ington May 17, 1922. Beginning with the second paragraph at the
top of the second page. Major :
Called on General Humphrey and asked him what he knew about Mr. A. W.
Randall.
AVlio is General Humphrey?
Mr. Casey. General Humphrey was a retired quartermaster gen-
eral of the Army, who went with Colonel Buckner on some special
Avork around about somewhere between 1908 and 1912, I am not
quite sure ; but he had been retired at that time. When I took over
Colonel Buckner's work after the Avar, I still had General Humphrey
on a nominal retainer. Therefore, when there was occasion to find
out what connection this Captain Randall had with the Polish
Government, or whether he knew them or not, I got hold of General
Plumphrey and asked him if he could not find out.
Senator Clark. Mr. du Pont, have you a list, or could you make
us a list, of the former Army and naval officers that have been
employed by the du Pont Co. since the war?
Mr. Irenee du Pont. We certainly could.
Senator Clark. I come across the names of captains, majors, col-
onels, and generals here. Would you make us a list for the record
of just how many former Army officers you have employed?
Mr. Casey. Senator, by that you mean regular officers, do you not ?
Senator Clark. Yes; I do; of course.
Mr. Casey. I think we could almost recite that.
There was General Humphrey^ — he is the first one I know of —
formerly Quartermaster General, who, I think, retired because of
the age limit, 64 years. He came with us in a period — I am not quite
sure of the exact date. Then when we got into large production, in
MUNITIONS INDUSTRY 2647
the early stages of the World War, and required a little better super-
vision, a man of executive ability to handle commissary and welfare
work, we got Maj. Kobert E. Wood, who had been with General
Goethals down in the Panama Canal Zone. He then took over this
welfare work at Carneys Point. He was only with us a short time
when he left to go with the Barber Asphalt Co. From that he went
into the service. I believe he eventually became Quartermaster Gen-
eral of the A. E. F. He is now president of Sears Roebuck.
He w^as succeeded when he left by Maj. Frank O. Whitlock. He
had likewise been with General Goethals in the Panama Canal. He
continued on that welfare work until his services with the company
ceased, around 1920 or 1921, somewhere in there.
The only other Army, Navy, or Marine officer we had was Maj.
L. W. T. Waller, Jr. He had resigned from the Marine Corps and
had started in a business of his own, supplying rust-preventative
compounds, gun-cleaner materials, and so forth, under the name of
Conversion Products Corporation.
When we first started our attempt really to make a study of game-
conservation work, because of Major Waller's interest as a sports-
man and his knowledge of shotgun conditions and the use of the
shotgun in hunting game — and naturally with that goes the question
of the entire study of wildlife — he took on this work and continued
from about 1928 until possibly 1932. I think that was the end of
that service.
That represents four officers. None of those men had any connec-
tion whatsoever with military work, unless you would call the service
of Wood and Whitlock on commissary and welfare work in connec-
tion with military production.
Senator Clark. I remember General Rice. Was he not in your
employ for a while?
Mr. Casey. General Rice was another story.
Senator Clark. He was formerly Chief of Ordnance?
Mr. Casey. He was former Chief of Ordnance: that is, of the
A. E. F.
Senator Clark. Yes.
Mr. Casey. I think we brought out the other day that Colonel
Taylor had urged on us to try to get
Senator Clark. Was Colonel Taylor an Army officer or was that
a courtesy title ?
Mr. Casey. National Army. He went to Plattsburg. I think at
the armistice he was still at Fort Sill, commanding officer of the
Nineteenth Field Artillery, and also acting as instructor in field artil-
lery. But he kept urging us to let him have a man who was techni-
cally equipped to discuss the question of gun design, because we were
running against that problem in trying to fit our powder to guns,
especially where these different nations wanted to increase their
velocity.
So I went to General Williams and asked him if he knew where
there was such a man. He said, " Have you considered General
Rice?" General Rice by this time had retired. I said, "No", I
had not considered General Rice, because I never thought for a
moment he would consider it.
He said, " I do not suppose the remuneration can be very great,
but I think you would find this, that while General Rice has retired
2648 MUNITIONS INDUSTRY
from the Army, at the same time he still has a tremendous interest
in all their problems."
So I got in touch with General Rice, and I must say frankly to
my surprise he said, " I would be tickled to death to do that, because
it will just keep me going on it."
So General Rice went to Europe. He could not operate in this
country. He had absolutely no connection with any negotiations
we had with the United States Government because of the clause
in the retired pay.
Senator Clark. I understand that.
Mr. Casey. He was only used on the other side as a technical
adviser. I think that has been brought out.
Senator Clark. How about Colonel Simons?
Mr. Casey. Colonel Simons had been with the du Pont Co. a
great many years ago in black powder. He was an engineer, like-
wise. He left us and went with the U. S. Finishing Co., at Provi-
dence. I believe while there he joined the Rhode Island Guard, and
he went overseas with the Twenty-sixth Division in the Artillery.
He went over there and because of the fact that he knew several lan-
guages, they grabbed him and put him on the staff as a liasion
officer.
When he came back — I did not know Simons very well ; I simply
had, you might say, a bowing acquaintance. But you may remember
yesterday this incident was brought up of an unsatisfactory repre-
sentative in South America. So I got Simons on, because he is a
gentleman, to send him down to South America to try to undo some
of the results that were left there by reason of the previous agent.
Now, you cannot call him an Army officer.
Senator Clark. I was inquiring. I did not know whether he was
regular or not.
Mr. Casey. You may say I am one. I saw it in the paper the
other day I was one.
Question (from the press). Wliat are you?
Mr. Casey. I enlisted in the Seventy-first New York in the Span-
ish-American War and served through it as a private. I have been
in the National Guard ever since. I was on the Mexican border
as a battalion commander of infantry. My regiment was converted
into field artillery. There were only two battalions provided for
at that time, and I was out.
Senator Clark. I do not blame an infantryman for getting out of
the artillery. I will put in with you on that.
Mr. Casey. Then we check on one thing.
Senator Clark. Captain Gillis was also a naval officer, was he
not?
Mr. Casey. Yes. He was an ex-naval officer, retired, as I stated
the other day, but you could not call him a du Pont man, he was so
finely divided between
Senator Clark. According to your statement he was divided up
into a great many parts, but he evidently put in a good deal of time
on du Pont business, as shown by the correspondence.
Mr. Casey. Senator, in the correspondence there were a great many
of the paragraphs, especially his references to the political situation
and such things, that were common to all his letters, that he sent
to every concern he represented.
MUNITIONS INDUSTRY 2649'
Senator Clark. I will go on with this letter.
The Chairman. Have you finished reciting those?
Mr. Casey. If there are any others, I do not believe I know of
them, and I do not believe you do.
Mr. Irenee du Pont. There was another group.
Senator Clark. The title of Colonel Buckner, was that a courtesy
title?
Mr. Casey. He was a full-fledged Kentucky colonel, from Owens-
boro, Kentucky.
Senator Clark. That was just a Kentucky colonel, was it?
Mr, Casey. Yes.
Senator Clark. That was before the days of the present Governor
of Kentucky, though, was it not?
Mr. Casey. Yes. He qualified, by the way. He met every re-
quirement that was expected of a Kentucky colonel.
Senator Clark (reading from " Exhibit No. 992 ") :
Called on General Humphrey and asked him what he knew about Mr. A. W.
Randall. Told General Humphrey that Mr. Randall mentioned his name during
a conversation and further stated that he, Mr. Randall, was very well con-
nected with the Polish Government. General Humphrey reported that he knew
Captain Randall very well in a business way; that Captain Randall was for-
merly chief of transportation for the Polish Mission in this country, and as
General Humphrey supplied boats and arranged for transportation of materials
purchased by the Polish Mission from the United States Government, he came
in contact with Captain Randall a great deal.
General Humphrey called up the counselor of the Polish Embassy and in-
quired as to whether Captain Randall had any connection with them ; also as-
to what they thought of him. I was permitted to listen to counselor's reply —
That would indicate on an extension phone —
in which he stated that he had not seen Randall in 8 or 9 months but thought
very well of him. General Humphrey, however, believes that a Maj. C. S.
Marsden, purchasing agent for the Polish Mission, would be of greater help to
us in negotiating a sale of military iwwder to Poland. He further stated that
it was quite likely that he himself could negotiate the deal through the Polish
Embassy, where he is very well thought of and highly regarded.
At that time, Major, if I understand you correctly. General Hum-
phrey was on the pay roll of the du Pont Co.
Mr. Casey. Yes.
Senator Clark, Do you recall anything about this transaction,.
Major? It is signed by Mr. O'Gorman.
Mr, Casey, Yes.
Senator Clark. He was your assistant, was he not, Major?
Mr, Casey. Yes. Capt. W. E. Witsil, who had been my assistant
from 1914 and then had left to go into the service, was in the inspec-
tion division of the Ordnance Department, on the small arms. When
he came back he promptly resumed his old duties. Therefore I sent
him down to contact this man Marsden.
Senator Clark. First let me understand you. This Capt. A. W.
Randall approached you with a view to representing you in negotia-
tion with Poland, did he ?
Mr. Casey. I believe he did.
Senator Clark. In other words, he was not at this time connected
Avith the Polish Government ?
Mr, Casey. No.
83876 — 35— PT 12 2
2650 MUNITIONS INDUSTRY
Senator Clark. He had been connected with the Polish Gov-
ernment, but was at this time approaching you witii a view to rep-
resenting you, and also investigating his standing with the Polish
Government ?
Mr. Casey. Yes.
Senator Clark. That is what this letter would indicate.
Mr. Casey. Yes; that is right.
Senator Clark. I am not familiar with the facts except as shown
in the letter.
Mr. Casey. So Captain Witsil contacted Major Marsden, who I
believe was a National Army officer, but he had been either assigned
or picked up by the newly established Polish Government to advise
them on a great many matters in connection with the formation of
a national defense. So after contacting Marsden, Marsden then
said
Senator Clark. This letter speaks of him as purchasing agent for
the Polish Commission. Was he purchasing agent for the Polish
Commission at that time, do you know?
Mr. Casey. I do not believe so. That may have been so, but I do
not believe that was the fact, because we were referred to a Dr.
Arkt, who was head of the Polish Purchasing Commission, 'which
at that time was established on West Fortieth Street, just opposite
the public library, in one of those old private houses. So, therefore,
from that time on all our contact was with this Dr. Arkt and an
associate of his whose name I cannot remember at the time.
Senator Clark. What did General Humphrey do? [Reading:]
He furt'acr stated that it was quite likely that lie himself could negotiate the
deal through the Polish Embassy, where he is very well thought of and highly
regarded.
Mr. Casey. He did not do anything further.
Senator Clark. He did not do anything further ?
Mr. Casey. No; just as soon as we had the contact, we thought
we could handle it, you see. General Humphrey was pretty well
along in years then. He was 64 when he retired around 1910, we
will say, so he was probably 74 at this time.
Senator Clark. He volunteered to handle the thing, but you did
not accept his offer. That was the proposition, was it. Major?
Mr. Casey. That is right.
Senator Clark. I now call your attention to a memorandum signed
by Mr. C. I. B. Henning, on August 18, 1922, of a visit to officers
of Bethlehem Steel Co., August 16.
(The memorandum referred to was marked " Exhibit No. 994 ",
and is included in the appendix on p. 2823.)
Senator Clark. Major, I believe it has been testified here who
Mr. Henning was, but it has slipped my mind. What was his
official connection?
Mr. Casey. He had two jobs. One was assistant director of sales.
Later on he became technical director of smokeless powder sales.
Senator Clark. What was he in 1922?
Mr. Casey. He was assistant director.
Senator Clark. This was a report of a visit to officers of Bethle-
hem Steel Co., August 16. [Reading:]
Discussed the following subjects with Messrs. Struble, Tioe, Mixsell, and
Froelich.
MUNITIONS INDITSTRY 2651
I call your attention to paragraph 4. [Reading :]
Nothing new in Brazilian developments, except that as the battleship Mary-
land, and posRibly also the Nevada will be in the harbor of Rio de Janeiro at
the time of the exposition to represent the United States, the Bethlehem Steel
Co. is supplying the officers of the Maryland with data on Bethlehem Steel guns
and armament for appropriate use. We will endeavor to determine to what
extent this suggestion might be followed to our advantage, it behig primarily
a question of personalities, etc.
Major, do you understand that the " appropriate use " of the infor-
mation referred to was to use it in selling Bethlehem Steel Co.
products ?
Mr. Casey. I would imagine that; that is, not by having them
sell it, but having them know sufficient about it so that if they are
asked : " What do you think of Bethlehem products "
Senator Clark, In other words, to use the personnel of the United
States Navy as peddlers for Bethlehem Steel guns ?
Mr. Casey. I do not know what their arrangement with them
was.
Senator Clark. What do you understand by Henning's sugges-
tion? [Reading:]
AVe will endeavor to determine to what extent this suggestion mi2:ht be
followed to our advantage, it being primarily a question of personalities, etc.
Mr. Casey. Whatever his suggestion was, it was not acted on.
Senator Clark. Was not acted on?
Mr. Casey. No.
Senator Clark. Do you know to what extent it was acted on in the
interests of the Bethlehem Co.?
Mr. Casey. I have not the slightest idea.
Senator Clark. You never heard any more about it?
Mr. Casey. No.
Senator, I have some data here which might assist you.
Senator Clark. Just a .minute, Major. This statement, " We will
endeavor to determine to what extent this suggestion might be fol-
lowed to our advantage ", would certainly indicate that so far as one
of your rather prominent employees, Mr. Henning, was concerned,
he had no compunction against using naval officers as salesmen for
munitions, but it was simply a question of contacting the right man,
was it not?
Mr, Casey. You must realize
Senator Clark, You took that to be his viewpoint in this memo-
randum ?
Mr. Casey. Yes.
Mr. Irenee du Pont, I do not think he asked that they be used as
salesmen at all. I think it is education. You want to crack up your
product to everybody.
Senator Clark. Advance agents, Mr. du Pont. They were not
actually, probably, going to close the transaction, but the officers of
the United States Navy were clearly being educated by the Bethle-
hem Steel Co. as to guns and armament, the phrase here is " for
appropriate use." That was certainly to act as advance agents for
the real salesmen who come along and close the deal, was it not?
Mr. Irenee du Pont. I do not know what " advance ajrent " is, but
if you mean putting out some good advertising matter for the excel-
lence of our wares, we are not a bit backward in doing that. I would
like to get you in the same idea.
2652 MUNITIONS INDUSTRY
Senator Clark. You will have a very hard time doing that, Mr.
dii Pont, I assure you.
Mr. Casey. Senator, just as a matter of information for the record,
Gen. Charles F. Humphrey was employed January 1, 1908. He was
off the salary roll June 4, 1926, when he died.
Senator Clark. He held on pretty well.
Mr. Casey. He did.
Maj. Kobert E. Wood was employed July 30, 1915, resigned
November 7, 1915. That was, I stated, to go with the Barber
Asphalt Co.
Maj. Frank O. Whitlock succeeded Wood; employed November 1,
1915, off salary roll June 30, 1921.
Our recollection, from this memorandum, is that both Wood and
Whittock came from the Panama Canal Zone, which I had already
stated.
Mr. Raushenbush. How about this Captain Witsil you were re-
ferring to a minute ago ? Is he employed, too ?
Mr. Casey. He was my man. He went into the National Army as
an ordnance officer on inspection.
Mr. Raushenbush. That completes the list of Army officers?
Mr. Casey. Yes ; he is now with the Remington Co.
Senator Clark. I was interested primarily, Major, in getting a
list of Regular Army officers.
Mr. Casey. Yes.
Mr. Irenee du Pont. There were several others, like Witsil, that
left our company to go into the war. A number of those came back
at the end of the war.
Senator Clark. I was primarily interested in the Regular service.
Mr. Irenee du Pont. That is what I thought you were.
Senator Clark. Because, of course, men who were temporarily
in the Army or the Navy might go into any business when they left.
I was primarily interested in getting at the Regular Army.
I will call your attention to a letter from Mr. A. Felix du Pont,
of the smokeless-powder department, to the executive committee.
In this letter I myself have deleted the names of the countries men-
tioned and substituted for the names the terms " Country A" and
" Country B '•. for reasons which will appear from the context.
This memorandum is headed " Promotion of Military Sales in
Country A."
(The letter referred to was marked " Exhibit No. 995 ", and
appears in full in the text.)
Senator Clark (reading) :
During the winter we were called upon by Lieut. Col. J. H. Mackie, who
is at present head of the Canadian relief work. He had been in Country A
for some months and at that time was also a member of the Canadian Par-
liament. He is a man of very considerable experience, both commercial and
political. During the war he secured the Country A contracts for the Canadian
Car & Foundry Co., also the contracts for rifles for Westinghouse, Remington,
and Winchester, the total business amounting to some $80,000,000. During the
war he was in charge of the proving ground in Canada for the Canadian Car
& Foundry Co.
Colonel Mackie suggested to us that there exists a demand in Country
A for military powder and as he was going there he would serve us if we
wished him to do so. We looked into this matter very carefully and discussed
it with Colonel McCabe, recently in charge of Military Intelligence. Colonel
McCabe could see no objection to our dealing with Country A if we wanted to
MUNITIONS INDUSTRY 2653
and used the following argument : That Country A will buy munitions if she
needs them, therefore there is no reason why manufacturers in this country
should not sell to Country A. From tlie military standpoint the business has
this value, that if Country A is going to obtain munitions somewhere, by
obtaining them from the United States our Army learns how much and
what kind of powder she is buying and by deduction is in a position to obtain
a considerable amount of information of military value. The advantage
in dealing with potential enemies in order to obtain information is recognized
by both branches of the military service and in discussing a similar condition
in connection with Country B, Admiral Long, recently in charge of Naval
Intelligence, advised Major Casey that the same condition applied to that
country.
For the above reasons we are convinced that it is not undesirable to sell
powder to Country A for political or moral reasons and the most important
disadvantage that we must guard ourselves against very carefully will be
in the matter of making contracts that will assure payment. We think it
wise also not to incur the displeasure of some of our other customers by
letting it be known that we are selling or attempting to sell to Covuitry A. In
order to protect ourselves we have made the following arrangement with
Colonel Mackie : We pay half of his expenses on this trip to Country A and
he promotes sales of powder in his own name, the powder being shipped to
Country A from Canada. We believe that should the occasion arise from
making such shipments, they can be made to advantage through the C.X.L.
What was the C.X.L. ?
Mr. Casey. Canadian Explosives, Ltd.
Senator Clark. You had an arrangement with them for shipping
under their name when occasion demanded?
Mr. Casey. To meet this situation.
Senator Clark (reading) :
Colonel Mackie has talked with Mr. McMasters, with whom he is well ac-
quainted, and Mr. McMasters is desirous of giving him every assistance. With
regard to inspection, Mr. McMasters advised that if it seemed advisable, a
Country A inspector could come to Canada and be sent from C.X.L. to inspect
the powder.
(Signed) A. Femx du Pont,
Mr. Lammot du Pont. Senator, that is not a complete letter. There
has been a deletion from that.
Senator Clark. I suppose there is, Mr. du Pont. This is all that
was furnished me.
Mr. Lammot du Pont. Might we see the complete letter, to know
what that deletion consists of?
Senator Clark. Do you have that, Mr. Raushenbush ?
Mr. Raushenbush. We have it somewhere, but in the deletion to
leave out the names of those countries we had the whole letter copied.
I do not think anything of significance was left out.
Mr. Lammot du Pont. There is a row of dots in that that indi-
cated to me something was left out.
Senator Clark. That was simply in order to leave out the names
of the countries, Mr, du Pont, We would have no objection on
earth to showing the whole letter.
Mr. Casey. July 14, 1923.
Senator Clark. Do both branches of the military service still rec-
ognize the advantage of private munitions manufacturers in this
country dealing with potential enemies of the United States?
Mr. Casey. I have not approached them on the subject recently,
but the last time I did that was still their attitude.
Senator Clark, That was the policy the last time you were in-
formed about it.
2654 MUNITIONS INDUSTRY
Mr. du Pont, in your opinion, does the knowledge from a military
standpoint of the character of powder purchased by our potential
enemies and such information concerning their guns as this knowl-
edge produces outweigh the disadvantage from the standpoint of
our Government of having our potential enemies fully stocked with
the very latest type of powder ?
Mr. Irenee du Pont. I would certainly depend upon our military
arm for an answer to that question. I would not know.
Senator Clark. You would not attempt to give an opinion about
that?
Mr. Irenee du Pont. Certainly not.
Senator Clark. Is it possible lor these countries purchasing pow-
der, we will say according to your latest formula, Mr. du Pont, to
analyze that powder and determine your formula ?
Mr. Irenee du Pont. I did not get the question.
Senator Clark. I say, I am asking you from a chemical or me-
chanical standpoint, as I assume it is a mixed question, is it pos-
sible— we will assume a case in which you manufacture powder
according to a secret formula of your own which may not be in the
possession of a foreign nation or anybody except yourselves — is it
possible for a foreign government by purchasing a quantity of that
powder to have it analyzed and determine the components and the
process by which you have manufactured it?
Mr. Irenee du Pont. I am quite sure they could determine its
composition. Whether they could duplicate it or not, I think de-
pends on their skill in manufacturing powder. But that is reall}'^
a question you should not ask me. I am not a technical powder
maker.
Senator Clark. I understand you are not a technical powder
maker, Mr. du Pont, but you are thoroughly familiar with the whole
situation, and you have had the most expert technical advice through
a long career in the manufacture of powder; therefore you are in a
good position to answer the question.
Mr. Irenee du Pont. From past experience I should think that
if the du Pont Co. received a sample of powder they could come
pretty close to duplicating it.
Senator Clark, That would be true, assuming a high degree of
expertness in the powder business, if a foreign powder expert received
a quantity of your powder?
Mr. Irenee du Pont. I could not say that, whether that would be
true or not.
Mr. Casey. Senator, I might say this, that if the powder has been
patented, a nation buying that powder might want to buy it because
of what they have observed in the patent applications of which they
have a copy, and probably can get all the transactions as Dr. Sparre
explained the other day. Therefore, the patent would enable them
to know what to look for.
Senator Clark. I understand that, Major, that when a process or
an invention or anything else is once patented in a foreign country,
and a foreign government wants to use it, you are absolutely helpless
to protect yourself against that.
Mr. Casey. Yes.
Senator Clark. I had assumed from the testimony that has been
put in the record here that certain of your formulas were not pat-
MUNITIONS INDUSTRY 2655
ented, but were held secret in your own plant. I was inquiring- as
to whether in a case of a formula which had not been registered or
patented in a foreign country, they could determine your process by
an analysis of the powder.
Mr. Casey. They could not determine the process. They might be
able to determine approximately the composition with a reasonable
degree of accuracy, but not the process.
Senator Clark. An expert powder maker would probably be able
to take the composition and hit on the process, wouldn't he, Major?
Mr. Casey. He might hit on the process, not necessarily the same
one. Now, in a great many of these more modern powders, Senator,
a process ma}^ mean one thing to a certain man. He may attempt to
duplicate or make the powder by that process and may get certain
results. If he knew that there was another process, he might get
the real answer. It is the " know how " that is so important, and
the "know how " is very difficult to even write down. It is a matter
of what you might call plant practice.
Senator Clark. I understand that. Major, but there are expert
powder manufacturers with the " know how " in foreign countries
as well as the du Pont Co. in this country.
Mr. Casey. Oh, yes. In fact, they all believe they are very much
better than we are.
Senator Clark. I understand you do not agree with that con-
clusion, but nevertheless it is entirely probable that by taking a
quantity of your powder, inen who are versed in the art would be
able to duplicate the powder,
Mr. Casey. They would be able to to a certain extent; yes. Now,
of course. Senator, before a powder has ever reached the stage where
a foreign government would even be interested, by that time it is in
the category where the existence of such a powder is no longer a
secret. That is what I tried to state the other day. I want to make
the distinction between secret and " know how." I said there was
no such thing as a secret after 2 years. Other countries may know
there is in existence something mysterious or they may know a
certain item is in existence and they want to find out about it.
Senator Clark. That is w^hat I am trying to get at. Major; the
effect of this whole trade, as to whether it does disclose to foreign
countries the latest developments of the manufacture of powder or,
for that matter, the manufacture of guns or any other military
equipment.
Mr. Casey. To go a step further, we will assume, which has noth-
ing to do with this case incidentally, but we will just take a hypo-
thetical case, that a certain nation wanted to buy a certain quantity
of powder which you might say was the latest development we had
for the United States Government. Let us assume for the sake of
the argument that part of it has been patented, part of it is secret
process. Then we take this proposition, and we put it right squarely
up to the Federal Government, what do you think would be the
advantages and the disadvantages of us selling them this powder ? "
Then it is for them to decide.
Senator Clark. I understand that, and that is exactly what I am
trying to get at, Major, what the effect of decisions that have been
made may be.
.2656 MUjsriTioisrs industry
Mr. Casey. We have never had a case come up where it repre-
sented a final decision. Did you get that, Senator?
Senator Clark. No.
Mr. Casey. I say, we have never had a case come up parallel to
this hypothetical case where there was a final decision, so the thing
has never occurred. But I would like to give you an illustration of
what the Government that we contact — and by that I mean the Army
and the Navy — have asked us tO' do, and on one occasion which is
very recent. I will not mention the type of powder except to say it
is a small-arms powder.
I was requested by the small-arms division of the ammunition
branch if du Pont would, if requested by the Government, refuse to
sell that powder even to our American loading companies, if they
asked us to. I said. '" AVell, that is putting us in a very awkward spot."
In the first place, before du Pont purchased Remington, even then
the loading companies, if they did have a foreign order, did not
want us to know for whom that ammunition was intended, because
they were afraid that we might in turn advise the other loading com-
panies; then they would have competition. But since we have bought
Remington the situation in that respect is worse. They naturally
feel, if it happened to be some other company than Remington, that
if they told us for whom it was intended, then they would say,
■"Well, Remington will know this within a few hours."
So I gave the answer to the officer, " It seems to me your propo-
sition is to get after the loading company and ask them not to ship,
if you request it. But we will do our part. When we get the in-
quiry for that type of powder, we will let you know that a certain
company has given an inquiry, but we cannot attempt to tell our
<;ustomer that because of a request we are not going to let them have
the stuff, because the answer would be that they would then go to
another powder company and not get the same powder, but they
would get a powder that would solve the problem."
Senator Clark. You simply mean by that. Major, that you can
•disclose your own business to the Government, but you cannot dis-
close that of somebody else?
Mr. Casey. Exactly.
Senator Clark. That is entirely natural.
Mr. Casey. In this particular case of Mackie, what we were offer-
ing was exactly the same kind of powder that we had furnished
Russia in the war, and it was a powder that was in stock at the time
we were offering it to Mackie at a low price.
Senator Clark. By the v;ay, Mr. du Pont, I am informed that
the paragraph vrhich Avas deleted from that letter which I just read
had to do with some expressions of private opinion from Mr. Mackie
as to the character of the people of one of the nations mentioned.
We would be very glad to put it in the record if it is desired.
Mr. Lammot du Pont. I have read that paragraph which has
been deleted, and it seems to be of no imjiortance.
Senator Clark. We will be glad to put it in tlie record if you
want it.
Mr. Lammot du Pont. It seems to me to be of no consequence.
Senator Clark. Now, I call your attention to a memorandum for
Mr. Felix du Pont, dated March 26, 1924, which indicates a similar
MUNITIONS INDUSTRY
2657
attitude of mind on the part of the Navy Department, which I will
offer for appropriate number. . , -r. i i v at c^ao ^^
(The memorandum referred to was marked ' li,xhiDit JNo. \)\)b y
and is included in the appendix on p. 2824.)
Senator Clark. It is headed, "Assistance from Navy Department
in connection with sales to foreign governments."
In December 1923, during an inteiTiew with Admiral Block, of the Navy-
Department, I was informed that the Bureau of Ordnance, Navy, would da
everything within its power to assist us in making sales to foreign goveniments.
Dropping down to the last paragraph :
This is a good example of cooperation on the Navy's part, and we believe
it is worth while to make the facts of the case known to the executive
committee.
I call vour attention to a letter dated July 24-
Mr. Irenee du Pont. Before you leave this, Mr. Senator, I should
like to read from the National Defense Act a paragraph which refers-
to just that kind of assistance, which I think is quit€ apropos.
This is page 18 [reading] :
COGNATE ACTS
That the President of the United States be, and hereby is, authorized, upon
application from the foreign governments concerned, and whenever in his dis-
cretion the public interests render such a course advisable, to detail officers
and enlisted men of the United States Army, Navy, and Marine Corps to assist
the governments of the Republics of North America, Central America, and
South America, and of the Republics of Cuba, Haiti, and Santo Domingo, in
militai*j- and naval matters: Provided, That the officers and enlisted men so
detailed be, and they are hereby, authorized to accept from the government to
which detailed offices and such compensation and emolumentsi thereunto ap-
pertaining as may be first approved by the Secretary of War or by the Sec-
retary of the Navy, as the case may be: Promded furiher. That while so
detailed such officers and enlisted men shall receive, in addition to the com-
pensation and emoluments allowed them by such governments, the pay and
allowances whereto entitled in the United States Army, Navy, and Marine
Corps, and sihall be allowed the same credit for longevity, retirement, and for
all other purposes that they would receive if they were serving with the forces
of the United States.
Senator Clark. I am thoroughly familiar with that provision, Mr.
du Pont. We have had occasion to examine somewhat into that
heretofore in these hearings.
It was under that provision of the National Defense Act, I believe,
that the United States Government loaned Peru a naval mission^
which in the course of its services to Peru, while they were receiving,
I believe, $8,000 apiece from the Peruvian Government in addition
to their pay as American naval officers, recommended the purchase
by Peru of certain submarines manufactured by an American com-
pany. Then shortly thereafter the potential enemy of Peru, to wit,
Colombia, felt that it was necessary for it to prepare its national
defense against those submarines which had been furnished them
under the advice of the American Naval Mission; and the United
States Government then loaned to Colombia another naval officer,
who recommended and specified certain guns manufactured by an-
other American concern as a defense against the submarines which
had been previously sold to Peru.
2658 MUNITIONS INDUSTRY
It does not seem to me that those provisions for military and naval
missions or for the loan of American Army or Naval officers has
anything to do with the thing which I just said. This says :
In December 19'23, during an interview with Admiral Blocb of the Navy De-
partment, I was informed that the Bureau of Ordnance, Navy, would do every-
thing within its power to assist us in making sales to foreign governments.
Tills is a good example of cooperation on the Navy's part, and we believe it
■'S worth while to make the facts of the case known to the executive committee.
Now, I understand that provision of the statute which you just
read. It does not say anything about the bureaus of the Army and
Navy actually engaging in assistance in the sale of muntions, and I
do not find anything in that statute that justifies any such conduct
on the part of the Army or the Navy.
Mr. Casey. Senator, we are not attempting to interpret whatever
interpretations they may get from that act.
Senator Clark. I understand that. Major, but Mr. du Pont read
that into the record as though it was apropos, and I am simply re-
cording ni}^ opinion that it is not at all apropos to such action as this
on the part of the Navy Department.
Mr. Rausiienbush. Major Casey, have any Army or Navy officers
used t]iat act to interpret their actions to you ?
Mr. Casey. That I do not loiow.
]Mr. Raushexbush. You have not gotten that as authority from
the Army and the Navy, however, have you ?
Mr. Casey. In every instance where there has been such occasion
it has always been under the direct authority of the Secretary of the
Navy or the Secretary of War.
Mr. Raushenbush. And vou have not had any reference to that
act?
Mr. Casey. No; they do not refer to any act. They simply say,
" By power vested in me," or whatever the proper language is. We
cannot go any higher than that.
Mr. Raushenbush. Is it your idea that that act
Mr. Casey. I am not attempting to make any interpretations.
Mr. Raushenbush. But it is yours, though, Mr. du Pont?
Mr. Irenee du Pont. I have been wondering since last night what
the authority is.
Senator Clark. I have been wondering too, Mr. du Pont.
Mr. Irenee du Pont. It must be there, or they would not do it.
Senator Clark. I know many departments do many things not
authorized by law. I did not mean to interrupt you, Mr. du Pont.
Excuse me.
Mr. Irenee du Pont. I don't know where we left off.
Senator Clark. Now, Major, I am absolutely not certain that we
are talking about the same thing. Let me ask you this question : I
understand you to say that both branches of the United States mili-
tary service, that is, the Arm}^ Intelligence, Military Intelligence, and
Naval Intelligence, so far as you know from your last information,
take the position that it is good policy on the part of the United
States to sell munitions made in the United States to potential
enemies of the country?
Mr. Casey. On the basis that, in the first place, it gives business to
this country. That is one thing.
MUNITIONS INDUSTRY 2659
Senator Clark. That is the reason set out in Mr. Felix du Font's
memorandnm.
Mr. Casey. Yes. Secondly, it gives us the advantage of knowing
at least part of what they are buying and what guns it is intended
for. Third, it also gives us knowledge of certain guns which we may
have no knowledge of before. In other words, in order to sell the
powder you must have what are termed the gun constants. Do I
make that clear?
Senator Clark. But it is the policy of the Government that it is
good policy from a Government standpoint for American munitions
makers to sell munitions to potential enemies of the United States.
Mr. Casey. That is from my last information.
Mr. Raushenbush. Major, just in passing, before we get off that,
would you care to identify, from your knowledge of the letter just
read a moment ago, that the countries marked by this committee as
A and B, whose names were deleted, have generally been considered
by some groups in this country as potential enemies of the country ?
Mr. Casey. Regarding country A I would say no.
Mr, Raushenbush. Not even in 1922 or 1923, when that letter was
written ?
Mr. Casey. No. There might have been a difference of opinion
as to the methods of our former government, but not the present
government. In the case of country B, the less said about it the
better.
Mr. Raushenbush. That was my own idea in deleting it.
Senator Clark. Now, I call your attention to a memorandum dated
July 24, 1924, from Major Casey to F. W. Bradway, which I will
ask to have marked with the appropriate exhibit number.
(The memorandum referred to was marked " Exhibit No. 997 ",
and is included in the appendix on p. 2824.)
Senator Clark. F. W. Bradway was the man Avho was here yester-
day?
Mr. Casey. Yes. He is now assistant general manager. He was
at that time director of manufacture.
Senator Clark. From this letter I notice that the former head of
the ordnance service, General Rice, who was your representative in
Paris at that time, I believe, had given a letter to a Polish military
officer, requesting the Ordnance Department of the Army to show
him some very important plans and contracts. I will read from the
last paragraph on the page :
The program which they desire for this officer is as follows : When he arrives
ill America, he will go directly to Wilmington and present himself to Major
Casey. I have given him a letter of introduction. He will also have a letter
from General Rice to an officer in the Ordnance Department in which General
Rice will request the Ordnance Department to show him our various schemes
of mohilizing the powder industries, what contracts our Government make.s
with powder industries, and have him visit the Government arsenals.
Did you consider that that was conducive to the Government's
interests to have the Government's secret plans for mobilizing the
powder industry of the country in the event of war disclosed to a
representative of a foreign power ?
Mr. Casey. Don't you think that that is a matter that is up to the
Government to decide ?
2660 MUNITIONS INDUSTRY
Senator Clark. Yes; I do, Major; but I am trying to get at the
attitude of the former Chief of Ordnance of the United States Army,
who was at that time your representative.
Mr. Casey. Take the country at that time, Poland, starting from
zero, with a famous concert pianist at the head of the Government,
Paderewski. The United States at that time were doing all they
could to see that Poland got on its feet before something happened
to it, and at that time there was absolute fear that before anything
got going the Bolsheviks would have them bottled up. That was
proven a few years after that when the war between Poland and the
Bolsheviks took place. If it had not been for the assistance the
United States gave them, there would not have been a Poland today,
I do not believe.
Senator Clark. Then, you do think that General Rice was pro-
ceeding in the proper manner in requesting the United States Gov-
ernment to disclose their secret mobilization plans to the representa-
tive of a foreign power ?
Mr. Casey. He was making a request.
Senator Clark. Was that done ?
Mr. Casey. That I do not know. We never knew what the United
States Government did.
Senator Clark. What did you do about it, Major? I will say that
I think you proceeded with more discretion than General Rice did,
because you said — no; I assume this is Colonel Taylor — at the top
of page 2 :
I trust you will be able to arrange a suitable program for him 90 that he
will get general information and not learn the things you don't want him to
know and that he will get some idea of how the powder business should be
conducted and contracts and so forth should be made. I believe that it will
be a good thing for us to have an opportunity to educate him and the proper
method of doing business in America, as this officer's functions in Poland will
be a check on the activities of the other people which we have to deal mth.
Now, Colonel Ta3dor's attitude seems to have been that it was a
good thing to show this Polish officer enough to make him think
that du Pont powder was better than anybody else's, without letting
him actually find out how to make it.
Mr. Casey. Don't you think. Senator, there is a very vital distinc-
tion between the two letters? One was a letter of introduction
handed to the man who was going to take that letter, and that man
was allowed to read that letter. It is certainly a cinch if that letter
that this Polish officer had contained the language that Colonel
Taylor wrote to us, he would not have been very enthusiastic about
coming.
Senator Clark. I understand, but the difference was that Colonel
Taylor wrote his letter to you and General Rice wrote his letter
to the Ordnance Department of the Army, in which he requested
them to show our various schemes for mobilizing the powder in-
dustry, what contracts our Government made with the powder in-
dustrj'^, and have him visit the Government arsenals. While Colonel
Taylor may have tipped you off privately, there is nothing to show
that the Government was tipped off privately, and here was a re-
quest from the former chief of ordnance of the United States Army
to a man who i)robably had been his subordinate when he w^as chief
of ordnance, requesting him that this examination be made and
also to disclose all our private contracts.
MUNITIONS INDUSTRY 2661
Mr. Casey. But remember this: The Government does not need
to be tipped off. They know where they are. They have got their
feet on the ground. Now, what happened
Senator Clark. What did happen?
Mr. Casey (continuing). When they were willing to have an
officer visit our plant? That officer came with a letter from the
Ordnance Department saying, " We would appreciate it if you have
no objection to showing him the manufacture of powder, but then
we get another letter which does not quite say that.
Senator Clark. It is your idea, then, that General Eice was just
giving this Pole the run-around ?
Mr. Casey. He was giving him a sales talk.
Senator Clark. We have heard a good deal about sales talks here
the last week.
Mr. Casey. Maybe we will make salesmen out of you fellows yet.
Senator Clark. Not for munitions.
business with the UNITED STATES GOVERNMENT
Senator Clark. Now I call your attention to a memorandum from
Mr. C. I. B. Henning, headed — I will have to get one of you gentle-
men to pronounce tliis for me
Mr. Casey. Diphenylamine.
Senator Clark. " Diphenylamine, Ordnance Department, Wash-
ington, D. C, November 17, 1924 ", which I will ask to be marked
with the appropriate exhibit number.
(The memorandum referred to was marked " Exhibit No. 998 "
and appears in full in the text.)
Senator Clark. I will read from this memorandum :
On suggestion of Major Casey, made hurried trip to Washington and dis-
cussed with Gen. C. C. Williams and his executive assistant, Maj. C. T. Harris,
arrangements by which the du Pont Co. might secure such portion of the stock
of diphenylamine as held in reserve by the Ordnance Department. Their total
stock is approximately 67,000 pounds in storage at Pica tinny Arsenal. It is
partly of du Pont manufacture and complies with the specifications of the
Ordnance Department as set forth in their pamphlet no. 450 governing the
manufacture of smokeless powder for cannon. These specifications are not
quite as stringent as those set forth in the small blue advertising folder of
the dyestuffs department. Copy of this letter was presented with the sugges-
tion that the Ordnance Department might profit through the " I'econditioning "
of their stock of diphenylamine.
The important point to l)e emphasized in this memorandum is that General
Williams immediately stated that it was his desire to do anything in his
po\\er which would assist the du Pout Co., that he was very appreciative of
the spirit of cooperation extended by Major Casey, and that, although there
was grave doubt in his mind as to the readiness by which the legal require-
ments of the transaction might be complied with, he would immediately instruct
Maj. C. T. Harris to find a way by which the transaction could be carried out.
So that General Williams, although there was very grave doubt in
his mind as to the legality of the transaction, instructed his sub-
ordinate, Major Harris, to find a way by which the transaction
could be carried out.
It has been your observation, hasn't it. Major, that when a general
instructs a major to find a way to do something, the major is apt not
to be too meticulous as to the law on the subject?
Mr. Casey. He may give those instructions and find out after-
ward that it cannot be done. But let me tell you about this
matter
2662 MUNITIONS INDUSTRY
Senator Clark. Just let me finish this memorandum :
I wished to obtain the maximum proportion of their diphenylamine jjrac-
licuble and mentioned 50,000 pounds. Major Han is tlKaiuht it well to reduce
this to 40,000 iwunds, in order to avoid criticism ot' undue depletion of their
stock. I mentioned 3 months as the time for return, but Major Harris thought
it well to increase this to 120 days. Major Harris inunediately endeavored
to get in touch with the division of the Ordnance Department handling legal
details of contracts, but these ofBcers had all gone for the day. Some discus-
sion was then held regarding details of arrangements. It was not considered
practicable for the Ordnance Department to offer any of the diphenylamine
tor sale, inasmuch as it is really all needed. I pointed out that there is a
certain precedent set in that the Ordnance Department has offered the various
contractors materials on hand for reconditioning, and particularly, that it has
come to our knowledge that Frankford Arsenal has by this means obtained new
supplies of cups for cartridge cases-, primers, etc. General AVilliams thought
that he was justified in recommending the transjiction because the diphenyla-
mine which they would obtain would comply with specifications somewhat
more stringent than those under which the diphenylamine now on hand was
accepted. This point is emphasized for the dyestuffs department, with the
suggestion that we should not accept the reserve supply of the Ordnance
Department's diphenylamine unless we have reasonaule expectations of being
able to tleliver diphenylamine complying sti'ictly and thoroughly v.'ith the
specifications as set forth in their advertising literature. When we are pre-
pared to make return of diphenylanune the inspectors at Picatinny Arsenal
will pay particular attention to this. Major Harris, after consulting the legal
experts of the Ordnance Department, will ha\e prepared a contract for recon-
ditioning probably 40,000 pounds of diphenylamine. We v>ill pay all trans-
jiortation costs and handling charges and mav receive as compensation for
this work $1.00.
Major, that was a subterfuge about reconditioning the diphenyl-
amine, was it not?
Mr. Casey. It might have been a legal subterfuge.
Senator Clakk. In otlier words, General Williams had already
expressed his desire to do it, although he had very grave doubts, legal
doubts, about it, and instructed his subordinate to find a way in which
to do it, and then Avhen it came to finding a way in which to do it,
some suggestion Avas made about sale and they said they could not
do that because the diphenylamine in the reserve stock was really
all needed by the Government, and then this other matter about
reconditioning Avas suggested as getting around the law. Isn't that
the situation.?
Mr. Casey. That is what the memorandum says.
Senator Clark. That is exactly what the situation was.
Mr. Casey. Yes.
Senator Clark. Now, you want to make an explanation, Major
Casey ?
Mr. Casey. What really happened was this: W. F. Harrington,
who at that time was general manager of the dyestuffs department,
came to me one day and said that they had had a fire and they needed
some diphenylamine, which is, of course, extensively used, and in
fact used more in the dye than any other place.
Senator Clark. It is also used in the manufacture of smokeless
powder.
Mr. Casey. About one-half of 1 percent.
Senator Clark. As a stabilizer.
Mr. Casey. As a stabilizer. And he wanted to know if it was
possible to take care of the situation if we could borrow that from
the Government. I said, " No ; such a thing is impossible." He said,
" Could you effect a trade with them ? " I said, " No. The only ar-
MUNITIONS INDUSTRY 2663'
rangeinent you can ever make with the Government is this : In any
transaction you take up, whether it is the modification of an exist-
ing contract or otherwise, the Government will not agree unless by
doing so they gain. They must have something to show as a gain."
Harrington said, " They are going to gain by this, because the
diphenylamine made according to the specifications at the time it
was made which the Government has now is of a much lower grade
than the stuff we are now making.-' That is why this question of
the blue book containing the specifications for the better grade of
diphenylamine has been referred to several times.
Therefore, General Williams — I can see his viewpoint — felt this
way : That while this is a reserve stock, that reserve stock, even under
Avar-time conditions, would have taken an awfully long time to use
up, 60,000 pounds. You can simply take one-half of 1 percent. But
in addition to that
Senator Clark. Major Harris said it was really needed by the
Government.
Mr. Casey. What is that ?
Senator Barbour. This memorandum states that Major Harris said
it was really needed by the Government.
Mr. Casey. Because it was part of their program of reserve. In
other words, they could not dispose of it and not replace it.
Senator Clark. This memorandum does not indicate that this
diphenylamine that the Government had w^as of a much lower grade
than the other. He said it complied with the ordnance specifications.
He said, " These specifications ai-e not quite as stringent as those
set forth in the small blue adiVertising folder of "the dyestuffs
department."
In other words, it would not make much difference or it would not
be much different.
Is it not a fact, reading from this memorandum, that as far -as
General Williams was concerned, the question of reconditioning was
not raised with him? He just said, " I want to do it, and I have
some grave doubts about it ", and turned around to his subordinate
and said, " Find a way to do it." When the subordinate talked to
Mr. Henning they first brought up the question of sale, and Harris
said, " We would not sell it because it is actually needed by the Gov-
ernment ", and then as an afterthought, apparently, Mr. Henning
suggested this subterfuge of reconditioning as a way of getting
around the law.
It appears that there was a desire on your part to increase the
amount of diphenylamine.
Mr. Casey. We wanted to get as much as they were willing to let
us have.
Senator Clark. I call your attention to a memorandum from Mr.
Henning, dated November 20, 1924, which was 3 days later than the
one I just read, which I will offer to be marked with the appropriate
exhibit number.
(The memorandum referred to was marked " Exhibit No. 999 "
and is included in the appendix on p. 2825.)
Senator Clark. This memorandum says :
Referring to memorandum no. 105, dated November 18, and following up ttie
unfinished featuies of this, trip was made to Washington to negotiate details
by which we would obtain the diphenylamine, also to increase the amount, if
possible. Maj. C. T. Harris had given Maj. P. J. O'Shaughnessy instructions
2664 MUNITIONS INDUSTRY
to have a contract prepared acceptable to us, but at the same time complying
with Ordnance Deiartment procedure and the laws of Congress rela mg o
Tontracts for ordnance material. Major O'Shaughnessy's first move was to
CO suit the ammunition division as to their wishes, and especially the matter
of detail ol specifications. C. G. Storm handled this matter tor the ammunition
division and inasmuch as this subject had been previously discussed with Dr.
Stoim on Monday, November 17, he was not inclined to make any trouble.
Mr. Casey. Would you mind reading the next paragraph,
Senator? , ^ r-r. t n
Senator Clark. I would be glad to. [Reading :J
As a follow-up of this discussion, it will be desirable to send to the ammunition
division aS for the attention of Dr. Storm, report ««. investigations carried
out by the experimental station a number of years ago, indicating the effect of
fmnurities in diphenylamine when used for stabilizing cannon powder Also
Twrn be in order to consider further revisions of the specifications for di-
phe^y amine, taking advantage of the fact that we are now enabled to jnanu-
facture a pure product because of our experience in the manufacture of
Snhenylam?ne as an intermediate in preparing dyestuffs. The particular point
fs that th? Ordnance Department specifications contain no requirement as to
he percentage of dfphenylamine in the product supplied, depending upon van-
nnt nhvsical tests such as melting point and the tests for certain impurities.
Su'^rSmmercill siic^^^^^ that the diphenylamine offered will con-
tain atTe^S 99.5 percent diphenylamine. Major O'Shaughnessy would like to
have made use of the new specifications for reworked diphenylamine as a 3us-
?mcat?on for the Contract for "reworking", but we convinced him that the
time necessary to prepare and have approved new specifications was such that
it was impracticable to do this.
All of this correspondence would indicate a very extraordinary
desire on the part of all officers concerned to please the du Pont Co.
and find some legal subterfuge or excuse for makmg this transac-
*' mV^Casey. Senator, do you not think they were justified in trying
to do that, because of the fact that they have always found the du
PontCo. ready and willing to do anything of that sort ^
Senator aARK. If you ask my opinion, which is not so important,
I do not think the War Department was justified m depleting it^
stock of essential ingredients for its powder to the extent of letting
so of 60,000 pounds of what they had. Have you ever known of
Iny case in your lonff experience, Major, m which tlie head ot a
department, or a branch of the War Department or Navy Depart-
ment just simply issued orders to a subordinate to do something
of this sort? , , ,, ,
Mr. Casey. I cannot think of another one at t^e inoment
Mr Irenee du Pont. Senator, bear in mmd that 67,000 pounds
represents 2 years' supply of diphenylamine for the Army It is
not a working supply, but a reserve supply, and it is important that
'^'JnatOT CLAR^^That was an afterthought and a subterfuge for
* Mr^IplNEE DU Pont. Sixty-seven thousand pounds of diphenyla-
mine will make 12,000,000 pounds of powder, and I think the
Government plants make only 4,000,000 a year. , , . ,
The Chairman. But assume that an emergency had arisen i
Mr Irenee du Pont. They could not make 12,000,000 pounds of
Dowder before we had the diphenylamine back to them.
Mr. Casey. We would have had the diphenylamine back long
before they could use it.
MUNITIONS INDUSTRY 2665
Senator Clark, Let us read the context [reading] :
The contract prepared for reworking 60,000 pounds of diphenylumine and as
eventually obtained, follows tlio laws of our " standard contract " as used in
the supply of smokeless powder to the Ordnance Department. The provisions
of the contract are made as simple as possible and require no bond for the
performance.
So that the Government was loaning the du Pont Co. the most of
its reserve supply without any bond for performance. [Continues
reading :]
Further, article VI relating to liquidated damages has been deleted and the
date of delivery was made very liberal, that of March 31, 1925. We have
arranged to have deliveries at Raritan Arsenal, and this point has to us the
advantage of involving lower transportation costs than delivery to Picatinny
Arsenal.
So that in addition to finding a way to do it, the officials of the
War Department seemed disposed to be just as lenient as they pos-
sibly could on the matter, not requiring a bond for performance, or
any provision for liquidated damages, such as is usually contained
in such contracts.
Mr. Casey. No; not always.
Senator Clark. Your own man said, Major, that he took the stand-
ard contract which is used with the Government, and deleted these
provisions from it.
Mr. Casey. The standard contract provides both a bond and liqui-
dated damages, but there is any number of cases where the Govern-
ment says, "We do not want the liquidated damages in here because
in a great many cases the liquidated-damages clause may require a
higher price to safeguard it."
Senator Clark. Your representative, Mr. Henning, apparently
thought it was of sufficient importance, because he set it out. He
says :
The contract prepared for reworking 60,000 pounds of dipheuylamiue and as
eventually obtained, follows the laws of our " standard contract " as used in
the supply of smokeless powder to the Ordance Department. The provisions
of the contract are made as simple as possible and require no bond for the
performance. Further, article VI relating to liquidated damages has been
deleted and the date of delivery was made very liberal, that of March 31, 1925.
We have arranged to have deliveries at Raritan Arsenal, and this point has
to us the advantage of involving lower transportation costs than delivery to
Picatinny Arsenal.
He evidently thought it was of sufficient importance to put a
feather in his cap about the good contract he had been able to
negotiate.
Mr. Casey. Wait a minute. Let us take into account personalities.
Henning was a technical man. Whenever a technical man makes a
report, he feels he is duty boimd to save himself to report every
blessed thing.
On the question of Raritan, there is a proposition there : The Gov-
ernment would prefer to have a part of their diphenylamine stock
at Raritan, but that would have meant using some of their funds for
transportation.
Another thing you meet by the contract is instead of their paying
for the transportation of their own diphenylamine from Picatinny
to Raritan they also got us to move the diphenylamine w^here they
preferred to have it.
83876 — 3.5— PT 12 3
2666 MUNITIONS INDUSTRY
Senator Clark. Now I call your attention to a night letter signed
by Major Casey, directed to Maj. N. F, Ramsey at Picatinny Ar-
senal. He was the commanding officer in charge ?
Mr. Casey. He was the commanding officer in charge.
Senator Clark (reading) :
Our tnick will call at arsenal Thursday for load of diphenylamine. Will
you please deliver approximately 10,000 pounds, in accordance with our agree-
ment with Ordnance Department? Letter giving shipping instructions for
balance of approximately 50,000 pounds follows.
(Signed) K. K. V. Casey.
So that you actually did take delivery of the diphenylamine?
Mr. Casey. Yes; and the Government took delivery of diphenyl-
amine with 99.5 of diphenylamine in it.
Senator Clark. That letter may be appropriately numbered.
(The letter referred to was marked " Exhibit No. 1000 " and is
included in the appendix on p. 2826.)
Senator Clark. I call your attention to a very strange communi-
cation, it seems to me. Major, about which I would like to find out
the meaning [reading] :
confidentxajl memo fob major casey
November 20, 1924.
Diphenylamine. Negotiations with Ordnance Department,
signed by Mr. Henning.
I will offer that for appropriate number.
(The memorandum referred to was marked " Exhibit No. 1001 "
and appears in full in the text.)
Senator Clark [reading] :
Referring to memorandum H-105 and 106 on the above subject, and to our
conversation this afternoon, we have anticipated that further developments on
this subject, especially those which may be brought about by the competitors
of the du Pont Co. endeavoring to sell diphenylamine of foreign manufacture
in this market, also the possible interest which American dyestuffs manufac-
turers might have in the transaction, should lead us to take steps to protect
ourselves, as well as the Ordnance Department, from criticism. I thought it
well, therefore, in discussing the subject freely with Maj. P. J. O'Shaughnessy,
to state briefly the relation between American supply and our import laws, stat-
ing specifically that if Mr. H. A. Metz were able to establish that there was
no American manufacture of diphenylamine that he should be able to sell for-
eign-made diphenylamine in this coimtry without the purchaser paying the 40
percent ad valorem import duty. This statement came appropriately after a
considerable general discussion of the importance to the Ordnance Department
and to American defense of affording protection to American manufacture of
dyestuffs. The Ordnance Department is apparently thoroughly appreciative of
the importance of chemical industry in general to their plans for national
defense. It was further stated that we recognize, and that they probably also
recognize, that certain un-American interests are quite active in this countiy in
breaking down the success and efficiency of the American dyestuffs industry,
and that it might be anticipated that if any activities developed in tliis country
in criticism of our action or of the Ordnance Department that they might be
expected to originate with some such person as Mr. Herman A. Metz.
Mr. Metz was formerly comptroller of the city of New York and
a former Member of Congress ?
Mr. Casey. I believe so, but I am not sure. I believe plenty of
our people know who he is in connection with the dye industry.
Senator Clark. I do not know his connection with the dye indus-
try, but I know Metz and knew him in Congress.
MUNITIONS INDUSTRY
2667
What do you understand is meant by that memorandum? Do you
get the impression, which is apparently conveyed by this^ memo-
randum, that you were manufacturing diphenylamine, and that any
importer who competes with you would have to pay a tarilt, and that
was the only purpose of the manufacture of diphenylamine '{
Mr. Casey. Oh, no. Before the war I do not believe there was any
diphenylamine made in this country. When we got into big pro-
duction we had to devise a way to make diphenylamine. It was one
of our big problems. Here is the close of the war. One of the
important things from the standpoint of the United States Govern-
ment was a source of supply in connection with the things needed in
connection with the manufacture of all the important components,
Diphenylamine was one of them.
Now, if foreigners were able to come in here and put us out of the
business, it would have affected the national defense.
Senator Clark. What did you understand by Mr. Henning going
down and talking to this major in the War Department and explain-
ing to him that if there was any criticism of this loan of the Govern-
ment's reserve stock of diphenylamine, it would come from a man.
named Metz because of his tariff views?
Mr. Casey. Do you not think. Senator, that we are interested in
the integrity of this country as well as anybody else, and we are
duty bound to inform the proper officer of what we thought might go
on, if there was an opportunity given to help un-American interests,
as we thought?
Senator Clark. Apparently the thing about which you were in-
forming the War Department was that unless they loaned you their
reserve stock of diphenylamine, somebody else might use it as an
argument for taking off the tariff on diphenylamine.
Mr. Casey. Do j^ou not think there is a sequence of dates there?
Senator Clark. What is the sequence of dates?
Mr. Casey. Was not this after the agreement was made?
Mr. Irenee du Pont. About the same time.
Mr. Casey. Or about the same time ?
Senator Cij^rk. It was the day before the memorandum.
Mr. Casey. Before the first memorandum, was it?
Senator Clark. It was the same day, both dated November 20,
1924.
Mr. Casey. Which one?
Senator Clark. The one which I just read, in which he boasted of
the contract secured, dated November 20, 1924, and, in addition to
that, he wrote you this confidential memorandum in which he told
you he had explained to Major O'Shaughnessy that if there was any
criticism of this deal, it would come from un-American sources who
were interested in breaking down the tariff.
Mr. Casey. Senator, would you not have done the same?
Senator Clark. How is that?
Mr. Casey. Would you not have done the same, if you felt there
was an un-American influence attacking our integrity?*
Senator Clark. You think that anybody who desires to import
into this country in competition with your products is un-American.
Mr. Casey. Oh, no ; I would not say "that. I say that any importa-
tion of material which will put out of business an American manu-
2668 MUNITIONS INDUSTRY
factuier of an essential component, involving the national defense,
that that is an un-American activity.
Senator Clark. Yes; but, Major, what this memorandum indi-
cates is that this man was down there negotiating a contract, the
provisions of which were of doubtful legality, and in which it had
been necessary to beat the devil around the stump by getting at the
reconditioning theory as an excuse, and an agent down there turns
around to the man who negotiated this very lenient contract and
says, himself, that if anybody criticizes the loaning of the United
States' reserve stock of diphenylamine, it will be from un-American
interests.
Mr. Casey. Do you not think the purpose is clear ?
Senator Clark. I do, and I want to know if you agree with me?
Mr. Casey. Major O'Shaughnessy was not the negotiator but the
legal representative.
Senator Clark. He was preparing the contract?
Mr. Casey. Yes; he was preparing the details of the contract.
Senator Clark. Now, as a matter of fact. Major, you stated when
you took the diphenylamine it was of poor qualit}^ and it was in
poor condition and of varying qualities?
Mr. Casey. That is what I understand. The Government was
really a distinct gainer by that transaction.
Senator Clark. And it afforded them an additional excuse after
the fact for the transaction?
Mr. Lammot du Pont. Senator, I do not think you are quite fair
in referring to that as an excuse. It was a reason.
Senator Clark. Mr. du Pont, the correspondence very clearly
shows it was an excuse. Long before the question of reconditioning
was ever mentioned by anyone, and before any such excuse was ever
conceived of. General Williams said he was very doubtful of the
legality of it, but said to his subordinate to go find a way to do it,
and he then found a way to do something which was of doubtful
legality, and, after two or three attempts, they hit on the recondi-
tioning as an excuse.
Mr. Lammot du Pont. They found it a reason for it.
Senator Clark. After they had been ordered to make a contract,
they found a reason for it. They found an additional reason for it.
Mr. Lammot du Pont. Correct. The reason was a better reason
than they first thought.
Senator Clark. Apparently General Williams did not know any
way when he ordered Harris to try to find a way to make the
contract.
Mr. Lammot du Pont. I do not think that that is a fair statement.
Senator. You do not know what was in General Williams' mind.
Senator Clark. All I have is Henning's statement,
Mr. Lammot du Pont. That may not be all he had in his mind.
Senatoi- Clark. He stated it was of very doubtful legality, and
told Harris to find a way to do it.
Then comes along a memorandum dated November 21, 1924, from
Mr. Henning, which I will offer for appropriate number.
(The memorandum referred to was marked " Exhibit No. 1002 "
and appears in full in the text.)
MUNITIONS INDUSTRY 2669
Senator Clark. That reads:
Report No. 107-H-1924, Picatinny Arsenal, November 21, 1924.
The following subjects were discussed with Major Ramsey and Miles :
" 1. Diphenylamiue. • Refining ' of 60,000 pounds.
" Endeavored to ascertain in detail the origin, quality, condition of pack-
ages, etc. The stuck of diphenlyamine on hand at the arsenal is all stored in
building no. 218. It has not been carefully segregated as to lot numbers or
origin. It stands on the arsenal records as consisting mostly of General Chem-
ical Co.'s ' Lot No. 112.' It was shipped during the war to the Hercules
Powder Co. at Kenvil on requisition no. HHK 879, and afterwards disposed
of as surplus, being transferred to Picatinny Arsenal. Some few of the wooden
barrels in which it is packed have tags indicating that it came from the
General Chemical Co.'s ' Baker & Adamson Works ' at Easton, Pa. Many of
the wooden barrels are in poor condition, having inadequate hoops, and unless
considerable care is taken In recording both gross and net weights received,
there is a good chance for argument over the weight received. Many barrels
are marked ' 250 ll>s.' although there is obvious variation in size and weight.
" The diphenylamine if? of a buff or brown color, possil)ly due to oxidation
from storage in poor containers. Barium nitrate is now stored on top of some
of the barrels, hence it would not be surprising if there were contamination
from this source. The laboratory analyses are not conclusive as to the quality
of the product, although mostly indicating that the diphenylamine does not
strictly comply with the requirements of the Ordnance Department specifica-
tions. Thesie deficiencies are color; insoluble content, and color of sulphuric
acid solution. I have requested Picatinny Arsenal to write a letter transmitting
to us copies of their laboratory tests ; also I advised Major Ramsey that it was
desired to place on record the fact that their stock of diiilieuylamine did not
comi)ly with specifications, was poorly packed, and in need of refining, and that
this record might be needed to avoid criticism in the future. Major F. H.
Miles accompanied the writer to the building in which the diphenylamiue was
stored, and assisted in the inspection, also search for laboratory records. At
the first opportunity the information gained was passed on to Wilmington by
telephone, on account of its possible effect on plans for handling the details of
transportation, refining, etc."
Major, that would indicate that the Government — the War Depart-
ment — had been very careless in its handling of its reserve stock of
diphenylamine, would it not ?
Mr. Casey. I would not say so. It came from the Hercules Pow'der
Co. and had been transshipped as surplus, and the Lord only knows
whether or not the barrels may have been broken, or something of
the sort.
Senator Clark. I understand that, Major, but the fact that it was
reserve, if the reserve was to be of any effect, it ought to be just as
good as that in actual use, ought it not, and your own technical man,
Mr. Henning, states that they were storing barium nitrate on top
of some of the barrels, and that it was likely contamination would
resitlt from that source, and his whole description of the thing would
indicate to anj^ lay mind such as mine that the Government liad been
very careless in its taking care of the reserve stock.
Mr. Casey. Senator, I would not want to criticize, not knowing the
situation.
Senator Clark. I can understand, since you do business with the
War Department you might not be as free in your expression of
opinion as you might otherwise.
Mr. Casey. Leave that out. I think that is not an indication of
criticism.
Senator Clark. That was a confidential memorandum to you ?
2670 MUNITIONS INDUSTRY
Mr. Casey. That is not confidential. But there may have been
instances at such time that in moving stuff all around the country
they could not exercise the care they would in ordinary times, in
ordinary transportation in time of peace.
Senator Clark. It would seem to me from Henning's memorandum
that the Government at some previous time had accepted diphenyla-
mine as either short in weight or it did not meet the specifications.
Mr. Casey. That I do not know.
Senator Clark. That would seem to be the inference from the
memorandum.
Mr. Casey. It might be possible as a result of our experience with
inspectors.
Mr. Lammot du Pont. Senator, I agree with Major Casey that
this is not a proof of carelessness, and I would also like to point
out that this was an additional reason after the fact.
Senator Clark. I am not disputing that. It may be that the deal
turned out to the advantage of the Government. I have not dis-
puted that at any time. The Government got its diphenylamine
back, I understand, before any emergency developed which might
have required it, but the essential feature in the whole transaction
is, it was stated by General Williams, without any qualifications
whatever, to be of doubtful legality, yet he ordered it carried out.
Just to close up this transaction, I offer for the record a letter
from the War Department, signed by Major O'Shaughnessy, ad-
dressed to the du Pont Co., dated December 22, 1924.
(The letter referred to was marked " Exhibit No. 1003 " and
appears in full in the text.)
Senator Clark. That reads :
I am transmitting herewith, for your files, your number of the contract,
fully executed, entered into with you under date November 19, 1924, covering
reworking of 60,000 pounds of diphenylamine located at the Picatinny Arsenal.
For the Chief of Ordnance:
Respectfully,
P. J. O'Shaughnessy.
Now, I call your attention. Major, to a memorandum dated
December 4, 1924, which I will offer for appropriate number.
(The memorandum referred to was marked " Exhibit No. 1004 "
and appears in full in the text.)
Senator Clark. First, let me call your attention to the letter
which I just read — " Exhibit No. 1003." It is very short, and I will
read it again :
I am transmitting herewith, for your files, your number of the contract,
fully executed, entered into with you under date November 19, 1924, covering
reworking of G0,000 pounds of diphenylamine located at the Picatinny Arsenal.
Now, from reading the files of the War Department, it would not
ho possible to determine what the nature of this contract was,
would it?
Mr. Casey. That I do not know.
Senator Clark. That letter does not indicate what the contract
was.
Mr, Casey, The letter might not indicate it.
Senator Clark, The letter says it was a contract for recondition-
ing. As a matter of fact, it was a loan of the powder to you, to be
returned by a different grade of ingredient. That is what the con-
?
MUNITIONS INDUSTRY 2671
tract really was, the Government really loaning you 60,000 pounds,
and you returning 60,000 pounds of a grade that would conform
to a more stringent specification?
Mr. Casey. Right.
Senator Clark. Now I read you another memorandum, signed
by the dyestuffs department, by Mr. G. T. Barnhill, Jr., dated
December 4, 1924, memorandum for the explosives department, atten-
tion W. S. Lynch, headed " Diphenylamine " [reading " Exhibit No.
1004 "] :
The du Pont Co., under a contract negotiated through the military sales
division, has arranged to borrow 00,000' pounds of diphenylamine from the
United States Government at Picatlnny Ai-senal ; 50,000 pounds of the di-
phenylamine is now en route to Repauno to he reworked and the other 10,000
pounds has been delivered to the dye works and will not be reworked. As I
undersitand the contract, the entire quantity of 60,000 pounds is to be returned
to Picatinny Arsenal at a date specified in the contract.
There have been no internal arrangements made for accounting in connection
with this transaction, and since the replacement will be made from Repauno,
it would seem proper for dye works to send an order to the explosives depart-
ment for 10,000 pounds of diphenylamine to be billed at the present transfer
price of 45 cents per pound.
If this procedure is satisfactory, please advis»e.
Now, do you know whether that method was carried out, Major?
Mr. Casey. That I do not know. You see, that was not a trans-
action in which we were in any way involved. We simply got a copy
of the letter.
Senator Clakk. Do you know, Mr. du Pont?
Mr. Lammot du Pont. No.
Senator Clark. The point I make is, if that procedure were fol-
lowed, suggested by Mr. Barnhill, then your own account books
would not show the real nature of this transaction.
Mr. Casey. That may be the case. I do not Imow, Senator.
Senator Clark. Do you have any other instances of that sort,
Major, where transactions were entered into which would not show
in your accounts?
Mr. Casey. I do not think so. I cannot think of any. It might
be, but I do not know.
I can say this: That there would not be anything of that sort
unless it were to the advantage of the Government.
Mr. Lammot du Pont. Senator, it might be pertinent to mention
that this matter of reworking military supplies is not unusual at all.
Most of my powder experience has been in black powder, and it was
a very usual thing for the Government to send the du Pont Co.
black powder to be reworked.
Senator Clark. I understand that.
Mr. Lammot du Pont. May I continue a moment ?
Senator Clark. Excuse me.
Mr. Lammot du Pont. The practice in reworking that was that
practically never does the same poAvder go back which you receive.
Literally it was impossible to do so. And it is a perfectly well-
recognized fact that when the powder is reworked, the actual pound-
age which we returned was not that which we received.
Senator Clark. I can perfectly well understand that, Iklr. du
Pont. The actual point of this transaction which impressed itself on
my mmd was not as to whether it worked to the benefit of the Gov-
ernment. I can very readily understand that in the ordinary course
2672 MUNITIONS INDUSTRY
the Government might have s(jme powder, or any other ingredient
of war, which might have deteriorated and needed to be worked
over, and might take bids from suppliers of that particular munition,
or that a man who was engaged in that business or a representative
of a company engaged in that busiriess might go to the War Depart-
ment and say, '' You have got some diplienylamine over there which
has been here a long time, and we have improved the process, im-
proved the quality, and why do you not let us work that over? "
That is one thing. But for a company which is engaged in private
business for their own purposes, not for purposes of the Government
but for their own purposes, to go to the Chief of Ordnance and say,
" We need most of your reserve supply of diplienylamine ", and for
him to say, " I have very grave doubt about the legality for it, but
I will tell my subordinate, Major Harris, to go find a way to do
it ", that, to my mind, is the outstanding and essential feature of
this transaction in the matter of ordinary routine of the Government
wanting some powder reconditioned.
Mr. Casey. Senator, I am willing to bet dollars to doughnuts that
if you had been Chief of Ordnance at the same time, you would have
done the same thing.
Senator Clark. I am willing to bet dollars to doughnuts I would
not have done anything of the kind.
RELATIONS OF DU PONT CO. WITH THE STATE DEPARTMENT
Senator Clark. I call attention to a memorandum dated May 3,
1932, memorandum to Maj. K. K. V. Casey, signed by Colonel Simons,
which I oifer for appropriate number.
(The memorandum referred to was marked " Exhibit No, 1005 "
and appears in full in the text.)
Senator Clark (reading) :
On my visit to Washington on Friday. April 2t), I called on Capt. William
Baggaley, Office of Naval Intelligence, and handed him a copy of the correspond-
ence between the Mitsubishi Co. of Japan, and I. CI. wherein it developed that
the Japanese were trying to buy a du Pout mechanical dipper from the above
British firm, and had been informed that it was not available.
Senator Clark. What is the mechanical dipper?
Mr. Casey. That is a dipper used in the process of manufacturing
nitrocellulose ; is it not, Mr. Bradway ?
Mr. Bradway. Yes.
Senator Clark (reading) :
This enabled me to develop the point of view of Naval Intelligence on the
sale of munitions or luunition-producing machinery to the Japanese. The atti-
tude of the Navy Department has not changed and they still believe it not
only permissible, but desirable, for American firms to sell such material and
equipment to the Japanese, basing their judgment on the fact that the .Japanese
will undoubtedly purchase what they desire anyhow, and that it is desirable for
America to secure the business and the Navy to be informed of the amount and
nature of the purchases, which information would be lacking if purchases were
made in Europe.
It would not disclose anything as to the nature and amount of the
purchases for the Japanese to have a mechanical dipper, would it?
Mr. Casey. No; but a mechanical dipper represents a certain,
capacity in powder.
Senator Clark (reading) :
Later on I called at the Office of Assistant Chief of StafC G-2—
MUNITIONS INDUSTRY 2673
That is Military Intelligence?
Mr. Casey. Yes.
Senator Clark (continuing reading) :
•and similarly discussed the situation witli Majors Wilson, Marley, and Kroner,
-with substantially the same results, that is to say, that the Army sees no objec-
tion whatsoever to our dealing with Japan.
My conversations with all of these oflBcers were confidential. They under-
stand, of course, that I report my actions to my superiors, but at the same time
they should not be embarrassed by the information herein contained reaching
the'state Department, especially since I had requested them not to report these
conversations to the State Department.
Mr. Casey. You left out one sentence.
Senator Clark. I left out one sentence. I will be glad to read it.
Mr. Casey. I wish you would.
Senator Clark (reading) :
It was here stated that the announced policy of the State Department was
not to hamper in any way trade with Japan, since any embargo would be
regarded as an unfriendly act and tend to render more difficult the already
delicate situation in the Orient.
Then he goes on to the paragraph which I just read, which I will
read again:
My conversations with all of these officers were confidential. They under-
stand, of course, that I report my actions to my superiors, but at the same
time they should not be embarrassed by the information herein contained
reaching the State Department, especially since I had requested them not
to report these conversations to the State Department.
Major, how does that square with the testimony we had here last
week, that you never did anything about the sale of munitions with-
out the permission of the State Department?
Mr. Casey. I do not think I said that.
Senator Clark. We had that repeatedly stated in connection
with
Mr. Casey. I said where there was an embargo.
Senator Clark. Where there was an embargo?
Mr. Casey. Now, here is the point
Senator Clark. In other words, here you, through your represent-
ative, are actively seeking to prevent the State Department, which
has control of our foreign relations, from learning of the conversa-
tions that you had with the War and Navy Departments.
Mr. Casey. Within the last 6 months I was told this right in the
State Department by a man I know pretty well. He said : " Casey,
I wish you fellows would not come to us when you have a propo-
sition to sell to a foreign government and ask us if we can give
you permission. We have no right to either approve or disapprove
of anjr such action unless there is an embargo, when it is then our job.
When you come to us and ask us for permission, we have to go to
work and simply say we cannot give you permission, nor can we dis-
approve of the shipment: but it only embarrasses us to have those
questions asked."
Senator Clark, Why would it embarrass the officers of the Mili-
tary and Naval Intelligence with whom Colonel Simons had had his
conversations for that information to reach the State Department?
Mr. Casey. That I do not know.
2674 MUNITIONS INDUSTRY
Senator Clark (reading) :
My conversations with all of these oflScers were confidential. They under-
stand, of course, that I report my actions to my superiors, but at the same
time they should not be embarrassed by the information herein contained
reaching the State Department.
That very clearly shows a definite effort to keep that information
away from the State Department, which has control of our foreign
affairs, and that is conclusively proven by the last part of the sen-
tence, " especially since I had requested them " — that is, the du
Pont representative had requested the Military and Naval Intelli-
gence " not to report these conversations to the State Department."
Yet they dealt with matters that might be of the most vital impor-
tance to our foreign relations.
Mr. Casey. Has not the position of the State Department been
stated in the previous paragraph?
Senator Clark. It was stated what the impression was that tha
Military Intelligence had. But why, then, was it necessary for
Colonel Simons to warn you against that information reaching the
State Department, and stating that it would be an embarrassment to
the Military and Naval Intelligence, and then stating that he had
advised them not to report any of that information to the State
Department ?
Mr. Caset. Senator, I cannot speak for either the Military or
Naval Intelligence as to their reason.
Senator Clark. I am getting at Colonel Simon's recommendation
to you. He was your representative.
The Chairman. Major Casey, the date involved here is quite
closely related to the Manchukuo controversy. Is there any rela-
tionship at all there ?
Mr. Casey. That I could not tell you. You see, this inquiry did
not come to us. It came to LCI.
Senator Clark. Yes; but the question of the discussion of policy
was between your representative and Military and Naval Intelligence.
Mr. Casey. That is perfectly correct.
Senator Clark. I am not talking about where the inquiry came
from. The point I am making is this, that a representative of the
du Pont Co. went down and conferred with Military and Naval In-
telligence on a question of policy which might conceivably have
involved the United States in war.
Mr. Casey. I do not see that.
Senator Clark. And specifically requested them not to convey that
information to the State Department.
Mr. Lammot du Pont. Senator, I think it is clear from this
letter that the proposition had not reached a stage where it was
important that it should be communicated to the State Department.
Senator Clark. I am not asking as to why it was important it
should be communicated to the State Department, I am asking why
it is important it should not be, whicli this memorandum clearly
indicates was the desire.
Mr. Lammot du Pont. There were good reasons at that time why
it should not be conununicated.
Senator Clark. Do you know what they were ?
Mr. Casey. No ; they were Military and Naval Intelligence reasons.
Senator Clark. Do you know what the reasons were, Mr. du Pont?
Mr. Lammot du Pont. I do not know.
MUNITIONS INDUSTRY 2675
Mr. Raushenbush. Senator, may I point out that the inquiry had
been addressed to the I.C'.L, and Mitsubishi had been informed that
the dipper was not available there, so the negotiations did come back
to this country and to this company.
Mr. Lammot du Pont. I understand the shipment was not made.
Senator Clark. Just on this question of relations with the State
Department I desire to drop back to another matter briefly. I call
your attention to a letter dated March 15, 1926. This is the one of
which you said you did not have a copy.
Mr. Raushenbush. No ; we do not have that, I am afraid.
Senator Clark. Well, I will come back to that in a minute. I
will pass that for a moment.
Mr. du Pont, is the du Pont Co. receiving benefits of any P.W.A.
money at the present time ?
Mr. Lammot du Pont. Not that I know of ; I think not.
Senator Clark. In contracts from the Navy?
Mr. Casey. I think we are, Lammot. I think there was a Navy
contract last year for some powder.
Mr. Lammot du Pont. Have we got the benefits of P.W.A. money ?
Mr. Casey. They said it was P.W.A. money, because there were
certain provisions in the contract which applied to the P.W.A. situa-
tion.
Mr. Lammot du Pont. Mr. Casey is better informed that I am. I
did not know it.
Senator Clark. I call your attention to a memorandum dated Jan-
uary 12, 1924, from Major Casey, headed "Washington, D. C,
January 11, 1934."
" Saw General Tschappat " — he is the Assistant Chief of Ord-
nance, is he not?
Mr. Casey. Chief of Ordnance right now.
Senator Clark. He was Assistant Chief at this time ?
(The letter referred to was marked " Exhibit No. 1006 '' and is
included in the appendix on p. 2826.)
Mr. Casey. Yes ; General Hof was then Chief of Ordnance.
Senator Clark (reading) :
Saw General Techappat, who advised me that while they had had nothing
definite regarding the Public Works money for the fiscal year 1935, that they
were relying on the promise the President had made to The Assistant Secretary
of War, Woodring, where he agi-eed to allot the Ordnance Department
$6,000,000 per year for 2 years in order to enable them to continue with their
ammunition projects.
Mr. Casey. They got that. I believe it was urged by Secretary
Perkins in order that they could keep their personnel at Picatinny
Arsenal employed ; otherwise they might have had to shut down.
Senator Clark. How much of it did you get, Major; do you
know?
Mr. Casey. We may have gotten a couple of hundred thousand
dollars out of it, something of that sort. I do not know.
Mr. Lammot du Pont. Senator, I am confused on this matter. If
we got any benefit of P.W.A. money, it must have been from the sale
of goods which were paid for.
Senator Clark. Yes ; I assume that is true.
Mr. Lammot du Pont. We cannot tell where customers get their
money.
2676 MUNITIONS INDUSTRY
Senator Clark. Apparently you knew. You may not have known
personally, but it was within the knowledge of officials of your
company.
Mr. Lammot du Pont. We may have been told.
Mr. Casey. I think in the case of the Army, I do not have any
recollection at the moment that there were any provisions in the con-
tracts we made with them directly referring to provisions of the
P.W.A. We did have that with the Navy, however.
Senator Clark. That was my understanding, Major. I have never
been informed that you had any contracts with the Army involving
P.W.A. funds, but you did have contracts with the Navy.
Mr. Casey. Yes.
Senator Clark. Which involved the use of allotments of P.W.A.
funds.
Mr, Casey. And therefore there were certain additional provisions
put in the contracts to cover that situation.
By the way, Senator, you may remember my referring to an inci-
dent a little while ago. The next paragraph brings that out, on
the first page.
Senator Clark. What is that?
Mr. Casey. This is the letter of January 12 from which you just
read ; the last paragraph on the first page.
Senator Clark. Yes. I am just coming to that now, Major. I
will ask you about it:
Had quite a discussion with Majoi- Borden
Who is Major Borden?
Mr, Casey, In charge of the small arms and anti-aircraft section
of the Ammimition Division of the Ordnance Department,
Senator Clark (reading) :
Had quite a discussion witli Major Borden on the general topic of the sales
of ])owder to foreign countries. Major Borden stated that they knew the
position du Pont would take in such matters in case they should request
that material not be supplied to a certain power but he asked if we would
be willing to go a step further and refuse to supply material to a manufacturer
of ammunition who in turn might be offering it to a foreign power where they
were anxious to prevent this foreign power from getting ammunition. I soon
gathered from Major Borden that he had in mind particularly .50 caliber
powder and while he did not mention Cuba it was clear that he was referring
to the shipment by the Remington Arms Co. of 100,000 rounds of .50 caliber
ammunition. Major Borden advised me that the money for the purchase of
150,000
It says " pounds " ; " rounds " in one place, and *' poimds " in
another.
Mr. Casey. One is powder and the other is rounds of ammunition.
Senator Clark (reading) :
150,000 pounds of .30 caliber powder had come about in this manner. After
setting aside all the money secured from the Public Works last year they
discovered they would have a slight sun^lus and, therefore, it was decided that
rather than turn this money back to the Treasury they would utilize the
surplus to buy what material they could for the next fiscal year's consumption,
I discussed generalities with Colonel Wesson and Major Zornig.
Mr, Casey, That is the incident I referred to a little while ago.
Senator Clark, Yes.
Mr. Rausiienbush. Major, in testifying about orders from the
Army, were they or were they not accompanied with the special
P.W.A, provisions that accompanied the Navy orders?
MUNITIONS INDUSTRIE 2677
Mr. Casey. I do not think they were.
Xow, I am not going to take an oath to that effect, because I want
to be sure when I make a positive " Yes " statement. But I really
do not think they were. But we do know in the case of the Navy we
had definite P.W.A. requirements to meet.
Mr. Kaushenbush. Let us get it straight:
Are you under the impression that some of these other orders
recently were from P.W.A. funds, as the letter seems to indicate ?
Mr. Casey. I do not think they were, because we did not have
those provisions.
Mr. Eaushenbush. And you are not quite sure about the pro-
visions ?
Mr. Casey. I am not sure at all.
Mr. Raushenbush. Would Mr. Bradway or somebody else be able
to testify there on that point?
Mr. Casey. We can find out; if the matter is of sufficient impor-
tance, we can find out. We would have to get in touch with Wil-
mington.
Mr. Raushenbush. You testified further a moment ago about how
it happened that some of those P.W.A. funds were allocated to the
War Department, and stated that Miss Perkins, the Secretary of
Labor, I take it, had asked that that be done.
Mr. Casey. Of course, I have no first-hand information.
Mr. Raushenbush. You testified to it, it seemed, very positively,
and then wanted to check where your information came from on that
point.
Mr. Casey. That is simply what I was told.
Mr. Raushenbush. Who told you on that 'i
Mr. Casey. Somebody in the Ordnance Department. I could not
tell you that.
Mr. Raushenbush. Somebody in the Ordnance Department?
Mr. Casey. Yes.
Mr. Raushenbush. That is ail I had. Senator.
Senator Clark. I call your attention to a memorandum dated May
22, 1931, from Colonel Simons to Mr. T. R. Hanley, legal department.
(The letter referred to was marked " Exhibit No. 1007 " and is
included in the appendix on page 2827.)
Senator Clark (reading) :
lu reference to negotiations now being conducted between t!ie du Pont
Ammonia Corporation and a national or a foreign friendly government, I do
not see any necessity at the present time of notifying either the United States
State Department or ]VIilitary or Naval Intelligence in view of the fact that the
negotiations are confidential from a commercial standpoint.
A transaction of that sort might be partly commercial and partly
military ?
Mr. Casey. This was considered, at the time at least that this
letter was written, as a strictly commercial proposition.
Senator Clark. And you did not feel it was necessary under such
circumstances of transport of an essential munition to consult either
the Navy or War Departments ?
Mr. Casey. It was not looked on as an essential munition, nor is it
looked on as that today.
Senator Clark. Ammonia?
Mr. Casey. No. It is pretty far-fetched. You have to go through
a number of processes, but let some chemist talk about that.
2678 MUNITIONS INDUSTRY
Senator Clark. I am not a chemist. I am not going to undertake
to examine you on chemistry.
I always understood that ammonia in time of war was a very
important ingredient of several munitions.
Mr. Casey. You realize, Senator, that in spite of the fact that we
bent over backward in keeping Military and Naval Intelligence in-
formed on everything, here was a case where we felt that at that
time it was unadvised. Later on we told them all about it, when the
transaction took place. It did take place, did it not? Or was that
hydrogen ?
Mr. Irenee du Pont. I do not know what it is they are talking
about. It is after my time.
Mr. Lammot du Pont. It is not clear from this letter.
Mr. Casey. I am not sure which it was.
The last paragraph of that sentence explains why it was not com-
municated to ONI and MID.
Senator Clark. You mean the last paragraph ?
Mr. Casey. Yes.
Senator Clark. This says:
"While I am firmly convinced that any information given to Military Intelli-
gence or Naval Intelligence would be regarded and held as confidential, in view
of the delicacy of the negotiations at the present time, I believe that no mention
should be made until the other party of this negotiation has so arranged their
affairs as to render the dissemination of the news as harmless.
Mr. Casey. So you can see it was not a question of keeping it from
them, but only for that particular moment.
Senator Clark. That would be fully as true of the military sale of
munitions as anything else would?
Mr. Casey. If it was military we would have gone to them the very
first minute we had the first nibble.
Mr. Raushenbush. It is military to the extent they refer to your
department, is it not. Major? Yours is the military sales?
Mr. Casey. No ; it was not referred to our department. We learned
of it, and there you are.
Mr. Raushenbush. This is a memorandum from " Military Sales."
Mr. Casey. Oh, yes.
Mr. Raushenbush. To the legal department.
Mr. Casey. That is for their information.
Mr. Raushenbush. The fact that it came to you, the only point
I am making is that even at this date it was recognized as having
some military significance.
Mr. Casey. I do not think so. If anybody was ^oing to contact
the Government, we would be the ones. It is a possibility, however,
that somebody might have asked us what would be the attitude
Senator Clark. Is Colonel Simons in your department?
Mr. Casey. Yes.
Senator Clark. That memorandum is signed by Colonel Simons?
Mr. Casey. Yes.
Senator Clark. Would that not indicate that it was a matter
having to do with military affairs?
Mr. Casey. I do not know what originally brought this letter up.
It may have been that Tom Hanley requested of Simons, " What do
they think about this in Washington?
MUNITIONS INDUSTRY 2679
SUBMERGENCE OF GOVERNMENT POWDER UNDER WATER AT OLD HICKORY
Senator C!lakk. Major, do you know how much powder was left
over in the hands of the Government at the end of the war?
Mr. Casey. I have a rough idea.
Senator Clark. It was at least 15,000,000 pounds ?
Mr. Casey. Oh, no ; more than that.
Senator Clark. I say, it was at least 15,000,000?
Mr. Casey. At least; that is enough for the purpose, I guess.
Senator Clark. I call your attention to a letter from Colonel
Simons to Mr. W. H. O'Gorman at 16 Place Vendome, Paris, the
second paragraph from the bottom :
Major Casey was in Washington yesterday and was told that an inspector
general has been appointed to look into the matter of putting the powder
under water at Old Hickoi-y. This oflScer, Col. Louis J. Van Schaick. of the
Inspector General's Department, was put on the job by General Summerall
and not by the Secretary of War as we had previously understood.
Col. Van Schaick is an Infantry officer who knows little or nothing about
powder, and is looking into the question as to whether the Ordnance Depart-
ment was not culpable in putting the powder under water. He has also asked
several officers if they own du Ponl stock, etc., so that the investigation
appears to take the nature of persecution rather than inquiry.
(The letter referred to wa.^ marked "' Exhibit No. 1008 ", and is
included in the appendix on p. 2828.)
Senator Clark. What is that Old Hickorv business, Major? That
has come ud here : several of these letter's refer to that.
Mr. Casey. I will tell you liriefly what that indicates: It had
been learned that France had put a terrific qviantity of ]:)owder left
over from the war under water. They put it in the glacial lakes in
the Pyrenees, where the water was very cold. They seemed to be
convinced in France that that was a splendid way to keep this powder
from deterioration, which it probably would undergo through natural
storage conditions. It might then be available for an emergency, a
powder which could be taken out of water, dried, and promptly
used. Remember that " promptly used." So the United States Gov-
ernment, I presume, naturally looked into the matter; we had
reported all we had learned about the French experience, which was
not very much. They felt, " Well, here we have a quantity of pow-
der. We had better try this same thing." They did not have money
to transport the powder to the northern part of the country.
Senator Clark. The War Department, was it ?
Mr. Casey. The War Department. They did not have the money
to transport the powder to the northern part of the country, so there-
fore they decided they would try this proposition, using some of the
old tanks at Old Hickory, which, of course, is a little warmer than
the Pyrenees.
Senator Clark. Where is Old Hickory?
Mr. Casey. Near Nashville.
I think about this time it was discovered that the powder was
not remaining in the condition it was hoped, and we had learned
that apparently the Secretary of War decided he had better investi-
gate this proposition.
Senator Clark. How much powder did you put under water,
Major, do you know?
2680 MUNITIONS INDUSTKY
Mr. Casey. That I do not know ; at least 15,000^000 pounds.
Senator Clark. All they had ?
Mr. Casey. Oh, no.
Senator Clark. You mean they just took 15.000,000?
Mr. Casey. I think they just took 15,000,000. There may have
been more than that under water, but it was about that quantity.
That is near enough for the purpose. So it was at the time, that
this memorandum was written w^e had learned that instead of it
being the Secretary of War who had Colonel Van Schaick on the
job making an inspection, as I understood it,, he was from the In-
spector General's Department. It was in reality General Summerall,
Chief of Staff.
Senator Clark. Had the War Department done that on your
advice, Major?
Mr. Casey. I do not believe so. We give them all the informa-
tion w^e get.
Senator Clark. Why would they be investigating you in connec-
tion with it, then? I notice in a letter that was put in the record
here a day or two ago — I believe you had written the letter — you
referred to the unpleasant publicity growing out of the Old Hickory
incident.
Mr. Casey. I do not know what that particular incident referred
to, but in this case here, because we had given them certain infor-
mation we had learned, Colonel Van Schaick, I guess, as an inspector
general, felt that he could not say his investigation was complete
unless he came after us.
Senator Clark. Do you consider it persecution for an officer from
the Inspector General's Department conducting an investigation of
that sort to inquire whether officers own du Pont stock?
Mr. Casey. We do not say that.
Senator Clark. Colonel Simons says it.
Mr. Casey. No ; but the point is
Senator Clark. He says :
Colonel Van Schaick is an Infantry officer, who knows little or nothing about
powder and is looking into the question as to whether the Ordnance Depart-
ment was not culpable in putting the powder under water. He has also asked
several officers if they own du Pont stock, etc., so that the investigation appears
to take the nature of persecution rather than an inquiry.
Those questions seem to me to be entirely proper questions. I was
trying to find out what you understood was in Colonel Simons'
mind.
Mr. Casey. It looked at the time as if it was a question of trying
to find a goat.
Senator Clark. Do you consider it an improper question for an
inspector general to ask whether certain officers own du Pont stock?
Mr. Casey. I do not think it was at all improper. In fact, I think
it was a good thing he did ask the question.
Senator Clark. You do not agree w^ith Colonel Simons, then, that
it was persecution?
Mr. Casey. I do not agree with everything Colonel Simons says.
Senator Clark. I understand. I am trying to find out what part
of Colonel Simons' remarks you do agi'ee with. Since we cannot
liave Colonel Simons here, I want to find out tlie impression tliese
connnunications made on vou.
MUNITIONS INDUSTRY 2681
Mr. Casey. In all this correspondence j^ou have to take into con-
sideration the peculiar characteristics of the man writing the letter.
Senator Clark. I understand that, and since we do not have
Colonel Simons here, I am trying to find out from you, knowing
Colonel Simons very well, just what was in his mind.
Mr. Casey. I am trying to tell you tlie best I can.
Senator Clark. Do you know whether all the 15,000,000 pounds
that they put under water deteriorated? Were you informed about
that?
Mr. Casey. I think it got to the point it was not longer satisfactory
as powder, was not that it? Is not that right?
Mr. Bradway. Some of it was and some of it Avas not. But the
larger calibers were still satisfactory.
Senator Clark. Do you know about the proportion of it?
Mr. Bradway. No; I do not remember.
Senator Clark. In other words, you do not remember what pro-
portion of the 15,000,000 was spoiled and what was not?
Mr. Raushenbush. Senator, may I ask a question ?
Senator Clark. Yes.
Mr. Raushenbush. Was this powder that had been manufactured
at the Old Hickory plant?
Mr. Casey. I think it was.
Mr. Bradway. No.
Mr. Casey. No, no; shipped from other places, was it not?
Mr. Bradway. After the war the Government shipped into Old
Hickory a great deal of powder from various parts of the country
where it had been manufactured, and this happened to be 15,000,000
pounds of that quantity. It was not their whole reserve stock by anj^
means.
Mr. Raushenbush. Are you pretty sure about that 15,000,000
figure? We were in some doubt about it a minute ago. Was it
about 15,000,000 that was put under water?
Mr. Bradway. About 15,000,000 pounds.
Mr. Casey. They have always referred to a certain quantity
of powder, including 15,000,000 under water. That is near enough,
Mr. Bradway. That was only a part of their reserve stock, I
understand.
Mr. Raushenbush. About how much did that powder cost the
Government, how much a pound? Do you remember the Old
Hickory cost?
Mr. Bradway. I do not believe that this was powder that was
manufactured at Old Hickory, but I suppose 45 or 46 cents.
Mr. Casey. I think that would be about an average.
Mr. Bradway. The cost at Old Hickory? That was not the cost
at Old Hickory as I recall it.
Mr. Raushenbush. No; I do not want testimony on that. I am
trying to get an average of what that powder cost the Government.
Mr. Bradway. I should say if you said it cost them 45 cents or
46 cents
Mr. Casey. On the average.
Mr. Raushenbush. On the average?
Mr. Bradway. Somewhere between 40 and 50 cents.
83876— ;!o—px 12 4
2682 MUNITIONS INDUSTRY
Mr. Raushenbush. That is about $7,000,000 worth of powder; is
that right?
Mr. Bradwat. About that; when it was new.
Mr. Raushenbush. When it was new. And they put that
$7,000,000 under water, and it deteriorated ?
Mr. Irenee du Pont. Remember, it is 11 years old at this time,
and the life of powder is supposed to be not over what? About 15?
Mr. Bradway. About 16 years old.
Senator Clark. What did they do with that?
Mr. Casey. I think they have disposed of about half of it. They
did find some people who were able to use it for solvent solutions,
lacquers, coating of textiles, and tilings of that sort.
Mr. Bradway. Understand that this putting that powder under
water was not the cause for its apparently having decomposed or
started decomposition. Powder manufactured during the war stored
ordinarily also decomposes. They endeavored to safeguard that by
putting it under water. It is a question of opinion whether at the
time when they brought it up to the du Pont Co. — we did not know
a whole lot about it, and we gave it as our opinion, as I recall, that if
powder were placed under water, any traces of decomposition would
probably stop; but that we did not consider it a very good idea,
because after a long period of time, depending on the condition of
the storage — that is, the temperature of the water and the changing
of the water, and so forth — we did not consider over a long period
of time it was a good practice, because the powder when it was taken
out would have to be used right away. It was really for an
emergency.
Senator Clark. Do you know anything about the result of the
French experiment?
Mr. Casey. It is still there.
Senator Clark. Still in the water?
Mr. Bradway. Oh, yes; it is still in the water.
Mr. Casey. But they have different water.
I was just advised it is a standard practice. The Western Cart-
ridge Co. have a considerable quantity of powder stored under
water; I think at Newburgh they have a large quantity.
Mr. Bradway. We have stored powder under water that we were
going to use for other purposes, but we have stored powder under
water. We use it for lacquers and solutions and other things, a
certain percentage.
Senator Clark. Not for munitions after you get it out of the
water, unless you use it immediately; is that the theory?
Mr. Bradway. That is what we suppose. There is no experience
on that yet.
Senator Clark. In other words, you do not know till somebody
tries to use that powder that has been under water ?
Mr, Casey. The French had the first experience on a large scale.
Senator, in connection with that, when General Hof first suc-
ceeded General Williams as chief of ordnance and he came across
this FNH powder proposition, which was new to him, he said to me
one day, " Casej'', joii have just upset our entire schedule. Here for
years we have been predicating our question of reserve ammunition
on powder with an expected life on the average of about 15 years.
MUNITIONS INDUSTRY 2683
Now, you have given us a powder that may last over 100 years.
What are we going to do about it?"
That is what the new powder probably represents.
Senator Clark. What did he do about it?
Mr. Casey. The idea that powder would last so long was just
inconceivable to him, but that is what the new powder means. We
do not say 100 years.
Mr. Bradway. No ; you have no right to say it will last 100 years.
Mr. Casey. But that is the way we approached the problem.
Senator Clark. You cannot say that until you get to be 140 vears
old.
Mr, Casey. I can tell you some day about it.
RELATIONS OP DU PONT CO. WITH THE STATE DEPARTMENT
Senator Clark. I hope we will both be here at that time.
Coming back to the question of the possibility of arming possible
enemies, I will call your attention to a letter dated August 22, 1928,
addressed to Col. W. N. Taylor, 16 Place Vendome, Paris, France.
(The letter referred to was marked as " Exhibit No. 1009 ", and
appears in full in the text.)
Senator Clark (reading) :
Replying to your letter T-1351 of August 9 in wliicli you inquire if we can
sell powder and explosives to H.I.H. in Holland
Who is H.I.H., one of those Dutch names?
Mr. Casey. One of those Dutch names. That is enough.
Senator Clark (reading) :
which will be loaded in ammunition eventually destined for Russia.
Discreet inquiries with the War Department in Washington indicate that
they believe there is no legal or ethical bar to our negotiating this business.
On a previous occasion we were permitted to see a staff memorandum which
stated in part as follows :
" There are no restrictions imposed by the United States Government on
trade with Russia or with the Soviet regime. Individuals and corporations
carrying on such trade, however, do so upon their own responsibility.
" The State Department, however, views with disfavor trade with Soviet
Russia in arms and munitions of war and has so informed several American
firms who have asked their advice concerning such trade."
In view of the above you are at full liberty to conduct such negotiations as
may, in your judgment seem advisable, bearing in mind that it is not expedi-
ent that the State Department be consulted in any way directly or indirectly.
Very truly yours,
W. H. O'GoEMAN, Assistant Director.
Mr. Casey. That is another letter written to our own man.
Senator Clark. Yes, but it certainly indicates a very outspoken
desire to keep the State Department from finding out anything about
it, doesn't it?
Mr. Casey. The last paragraph would indicate that. Of course
at that time, 1928, the memorandum that Simmons referred to in
this letter which you are quoting was a memorandum which I under-
stand was written several years before that, when tlie attitude of the
State Department was different.
Senator Clark. Yes, I understand, but, Major
Mr. Casey. Their attitude changed in 1925, which was brought
out the other dav.
2684 MUNITIONS INDUSTRY
Senator Clark. In 1928 we had not recognized Russia and there
was very strong sentiment in this country against doing so.
Mr. Casey. Yes.
Senator Clark. And this refers to that memorandum and states:
•' The State Dopurtment, however, views with disfavor trade with Soviet
Russia in arms jind nnmitions of war and has .so informed several American
firms wlio liave aslied tlieir advice concerning such trade."
In view of the above .vou are at full liberty to conduct such negotiations as
may, in your judgment, seem advisable, bearing in mind that it is not expedi-
ent that the State Department be consulted in any way, directly or indirectly.
Mr. Casey. The net result was that nothing came of it, and I do
not believe
Senator Clark. I understand, but wdiat I am interested in is the
fact that you were willing and anxious to make this deal without
any information to the State Department.
Mr. Lammot du Pont. Senator, it does not say that.
Senator Clark. Although you had been informed that the State
Department had viewed such trade with disfavor.
Mr. Casey. So the memorandum says.
Mr. Lammot du Pont. Senator, you stated that incorrectly. It
does not say that we were ready to make that deal. Colonel Taylor
was authorized to negotiate.
Senator Clark. You are not paying a man to stay in Europe and
negotiate just to have him have the fun of negotiating for j'ou?
Mr. Lammot du Pont. No, sir ; but when he is in the process of
negotiating w^e may call it off at any time.
Senator Clark (reading) :
In view of the above you are at full liberty to conduct such negotiations as
may, in yonr judgment, seem advisable, beariuj^ in mind that it is not expe-
dient that the State Department be consulted in any way, directly or indirectly.
Mr. Lammot du Pont. Now, as Major Casey says, Colonel Taylor
understood perfectly well that we would not close that deal without
the State Department's knowledge.
Senator Clark. It certainly does not appear in the letter.
Mr. Lammot du Pont. It does not appear there, but Major Casey
explained that Colonel Taylor knows that is the policy.
Mr. Casey. He is our man.
The Chairsian. Are we to understand that in all matters of that
kind, where negotiations were called for, j^ou would not finally enter
into any contract or any arrangement or agreement, without the
consent of the State Department?
Mr. Lamjiot du Pont. I won't say the consent. Not without their
knowledge. As Major Casey has said before, they do not give their
consent.
Mr. Casey. Unless there is an embargo. Then they may give
consent or they may not. But unless there is an embargo, as I stated
before, they say we really embarrass them by asking them the
question.
Senator Clark. You were on occasion willing to go ahead with
these deals, irrespective of the attitude of the State Department?
Mr. Casey. We may start the negotiations.
Senator Clark. I mean, go ahead with it irrespective of their
attitude.
Mr. Lammot du Pont. No, sir ; not on military matters.
\
MUNITIONS INDUSTRY 2685
Senator Clark. I call your attention then to an exhibit that we
had here a minute ago, a letter dated March 15, 1926, addressed to
Aiken Simons, which I will ask to have marked the appropriate
exhibit number.
(The letter was marked " Exhibit No. 1010 ", and appears in full
in the text.)
Senator Clark. This letter is numbered 26 and if you have not got
a copy I will be glad to read it to you.
Mr. Lammot du Pont. Yes.
Senator Clark. This says:
Major Strong, of War Plans, came to me the other day and asked me if I had
any information of the Poles nefiotiatin^ with American firms for the erection
of chemical-warfare munitions plants in Poland. I had no such information.
Further information indicates tliat the du Pont Co. was one of the American
firms approached. I suppose, of course, you gave this information to the
Chemical Warfare Service.
Had you given the information to the Chemical Warfare Service?
Mr. Casey. I think so.
Senator Clark (continuing reading) :
It would put us in a very strong position when the Geneva protocol comes
up in Con,L';ress if we could definitely prove that the Poles are negotiating with
our people for the erection of these plants.
Do you know why it would put the General Staff in a very strong
position with Congress?
Mr. Casey. I have not the .slightest idea.
Senator Clark (reading) :
I would like to take this matter up with the Commerce Department and
have them use their machinery to locate any American plnnt which might be
considering the erection of chemical plants in Poland, but in view of the
fact that your information is usually given confidentially, I do not feel free to
inform the Commerce Department (Mr. Concannon) of the source of our
information. On your next trip to Washington I would like very much to .go
over with you and see Mr. Concannon, and for you to tell him the wh( le story.
He would then go ahead and use all the machinery of the Commerce Depart-
ment to locate the American firms who may be interested in this proposition.
I presume you will be down this week, and, in case I am not here, Colonel
Stone is thoroughly infonned on this whole affair, and I will ask you to take
it up with him.
Sincerely yours,
Lhigh,
l. f.' j. ze31bee,
Major, General Staff.
Then, on March 27, 1926, in the same connection, I have here a
letter signed by Dwight F. Davis, Secretary of War, addressed to
your smokeless-powder department, which I will ask to have marked
appropriately.
(The letter referred to was marked " Exhibit No. 1011 " and ap-
pears in full in the text.)
Senator Clark. This reads:
Receipt is acknowledged of your confidential letter of March 16 pertaining to
the proposed establishment of a chemical warfare plant in Poland. I note
that you do not believe that the du Pont Co. sliould undertake work of this
sort for a foreign government without llie written assent of the War Depart-
ment. Since this is a matter which the Department of State must determine,
I have submitted an extract of your letter to that Department (copy attached).
and no doubt you will hear from that Department in a reasonable time.
I appreciate your brhiging this matter to my attention.
Sincerely yours.
Dwight F. Davis, Secretary of War.
2686 MUNITIONS INDUSTRY
Then a copy of his letter of the same date to the Secretary of
State, which I will ask to have marked appropriately.
(The letter referred to was marked " Exhibit No. 1012 " and
appears in full in the text.)
Senator Clark. This reads:
The Honorable The Secrktaky of State.
Dear Mr. Secretary: The following extract is taken from a letter dated
March 16, 1926, from the E. I. du Pout de Nemours & Co., smokeless powder
department, military sales division, Wilmington, Del., addressed to the Secre-
tary of War :
" For your confidential information, we wish to advise that we are in receipt
of communication from the Polish War Department in which it is requested
that we submit a proposal on the establishment of a chemical Avarfare gas
plant in Poland. We are attaching an extract from letter dated January 9,
signed by the Chief of Army Administration, Republic of Poland.
" We believe the du Pont Co. should not undertake work of this sort for a
foreign government except on the written assent of the Secretary of War,
stating that the project has the approval of the War Department, * * *."
The extract from the letter of January 9 from Poland furnished by the
du Pont Co. is appended.
Since this is believed to be a State Department matter it is submitted to you,
and the du Pont Co. has been so advised.
I will appreciate very much any infonnation you may be able to furnish
me as to the action of the State Department in this matter.
Sincerely yours,
DwiGHT F. Davis, Secretary of War.
So that we have the matter broiiglit to the attention of the Secre-
tary of War in a confidential letter from the du Pont Co. and the
du Pont Co. advised by the Secretary of War that the matter was
outside his control and properly within the control of the State
Department.
If yon gentlemen have not been furnished copies of these letters
we will see that you get them.
Mr. Lammot du Pont. Thank you.
Senator Cl.vrk. We now come down to a letter dated April 12,
192G, addressed to Col, W. N. Taylor at Paris, and signed by Major
Casey, which I will also ask to have marked with the appropriate
exhibit number.
(The letter referred to was marked " Exhibit No. 1013 " and is
included in the appendix on p. 2828.)
Senator Clark. This letter addressed to Colonel Taylor reads :
Attached please find confirmation of our cable no. 330. You will note that
we have decided to let Major de Lanoy quote direct to Poland through Mr.
Klawe on the chemical warfare project.
Who was Major de Lanoy?
Mr. Casey. Major de Lanoy was a private in the same regiment I
was in 1898. He went out with the Seventy-first Regiment during
the war. He was detached from that and later went with the
Chemical Warfare and I believe was stationed likewise at Edgewood
Arsenal when that was established. He then resigned, and was the
first man to start making these tear-gas grenades for police depart-
ments. He was not very successful with them, however, but at any
rate he started, and when this inquiry for a chemical-warfare propo-
sition came from Poland it was not a thing that du Pont either
wanted or was prepared to handle, so we simply turned the matter
over to de Lanoy for such action as he saw fit, stating that we would
MUNITIONS INDUSTRY 2687
advise he get in touch with our agent Klawe in Warsaw as the man
who might be able to assist him. But it is a matter that we had
nothing further to do with.
Senator Clark (reading on) :
It is quite essential for you to kuow the company's attitude toward this
project, and we will therefore give you the details as follows :
When the inquiry was first received from the Polish War Department we con-
sulted Major de Lanoy and asked him to prepare a detailed proposal for sub-
mission to Poland, either directly by him or by the du Pont Co., in which latter
case deLanoy was to act as our technical adviser. We also referred the matter
to our dyestufCs department and asked them to prepare a proposal. Our dye-
stuffs department decided that we were not in possession of complete technical
details which would enable us to handle the Polish warfare project, and that
unless we could secure the complete cooperation of the United States Ordnance
Department, particularly the Chemical Warfare Section, it would be useless for
us to undertake the construction of the chemical warfare plant.
That was because you did not have sufficient technical knowledge
to proceed without the information that the War Department had?
Mr. Casey. That was one reason.
Senator Clark. I mean that is the reason assigned there.
Mr. Casey. Yes; so far.
Senator Clark (continuing) :
To obtain the cooperation of the War Department we addressed the Secretary
of War, who in turn submitted our question to the State Department. After
many weeks we received a reply from the State Department which was quite
evasive and left us in the same position that we were when the Polish inquiry
was received. We decided that we could not get a firm assurance of coopera-
tion from the War Department because of the position taken by the State
Department and thought it best to let Major de Lanoy proceed and submit his
proposal.
In other words, it is not only a question of submission but of coop-
eration from the War Department and their technical staff?
Mr. Casey. Yes.
Senator Clark (reading on) :
We have addressed the Polish War Department on this subject, with copy
of letter to you, also copy to Mr. Klawe.
Major de Lanoy is willing to let Mr. Klawe act as his agent in this matter
and has included in his price a commission of 5 percent for Mr. Klawe. Major
de Lanoy will send his proposal to Mr. Klawe, who inturn will present it to the
Polish War Department in de Lanoy's name. Major de Lanoy will write Mr.
Klawe in detail and we will keep you posted on developments from this end.
If de Lanoy is awarded a contract, we will receive no connnission.
You would have supplied him with some materials, wouldn't you,
Major?
Mr. Casey. I don't think so. We might have supplied him with
some minor things.
Senator Clark. This goes on:
The matter will be handled entirely by de Lanoy and Klawe. We cannot
afford to arouse the criticism of the State Department, because you are familiar
with the position they take on chemical-warfare gases. If we were in possession
of complete technical details which would enable us to construct and operate
the proposed chemical warfare plant, we would undertake the project regardless
of the attitude taken by the State Department.
Major, that seems at variance with your statements that you would
not proceed without the permission of the State Department.
Mr. Casey. Yes.
2688 MUNITIONS INDUSTRY
Mr. Irenee uu Pont. Without their Ivtiowledge, not permission.
Senator Clark. I asked him if he would proceed against the
objections of the State Department, and he said, " No."
Mr. Irenee du Pont. But the State Department did not object.
Senator Clark. I understand, Mr. du Pont, but here he says that
the reason shown previously in this memorandum for not proceeding
with the negotiation was that you were not in possession of suffi-
cient technical information to do it, without that deficiency being
helped out by technical information from the technical staff of the
War Department, and then he goes on :
If we were in possession of complete technical details which would enable
us to construct and operate the proposed chemical warfare plant, we would
undertake the project regardless of the attitude taken by the State Department.
Mr. Irenee du Pont. Well, their attitude was noncommittal.
Senator Clark. I understand.
Mr. Casey. Senator, there is another angle to this. Poland by
this time had begun to rel}^ on us. We did not want to make them
feel that we were unwilling to undertake the job that they thought
we could do. Further than that, with the evasive reply from the
State Department, we did not w^ant to go back to them and embarrass
the State Department by saying that the State Department objects,
because the Polish Embassy would pretty certainly get after the
State Department. That was what was meant by the previous
statement of mine.
Senator Clark. But what you said was that if you were able to
do it from the standpoint of technical preparation, you would go
ahead regardless of the State Department.
Mr. Casey. All right. That w^ould enable the Dej)artment to take
our letter and show it to the Poles.
Senator Clark. That is some more sales talk, is it?
Mr. Casey. Yes; sales talk.
Senator Clark. Major de Lanoy seemed to learn some technical
trade expressions from this investigation, if nothing else.
Major de Lanoy seems to be in this position, and we are sure no criticism
will be directed against him for technical services which he may render to
the Polish Government.
We regret the delay, etc.
Mr. Casey. I believe that instead of the job being done in a short
time it took about twice as long as expected.
Mr. Raushenbush. It was done by Major de Lanoy, was it not?
Mr. Casey. We had nothing whatever to do with it.
Mr. Raushenbush. Didn't you sell him some material?
Mr. Casey. I don't think we sold him any material. We did
assist him in getting some equipment from other manufacturers,
because he had nobody in this country to represent hiuL I did that
purely out of my own friendship with de Lanoy.
Senator Clark. There is one iettei- here which I should have put
in previous to the one that I just read, which I will ask to have
marked with the next exhibit number.
(The letter referred to was marked '' Exhibit No. 1014 ", and is
included in the appendix on p. 2829.)
MUNITIONS INDUSTRY 2689
Senator Clark. This is dated April 5, 1926; and to make the
record complete, I will read that also. It is a lettei- from Major
Casey to Col. W^ N, Taylor in Paris.
We acknowledge receipt of your cable no. 412 and confirm our reply no. .329.
Chemical Warfare Plant — Poland.
As soon as we received the letter from the Polish War Department requesting
us to submit a proposal on the installation of a chemical-warfare factory in
Poland, we conferred with Major de Lanoy and turned the matter over to
him. He in turn has worked up a detailed proposal which has been in our
hands for several weeks. The project was fully disciissed with our dyestuffs
department and it was decided, from a policy standpoint, that the du Pont
Co. would not bid on the project unless we received a complete authoriza-
tion from the War Department. We accordingly addressed the War Department
and asked them to state their position in connection with the inquiry. The
War Department in turn submitted the matter to the State Department and
no decision has been received from the State Department as yet. In the
event that the State Department takes the attitude that we should not bid. we
will turn the matter over to Major de Lanoy. who will immediately submit a
proposal. He will forward the proposal to Mr. Klawe and Klawe can act
in his behalf.
We have had several cablegrams from Mr. Klawe on this subject and replied
to him, stating that the proposal would go forward about March 15th. This
occurred, liowever, befoi'e the policy of the du Pont Co. had been detei'-
mined. The submission of the project to the War Department has greatly
delayed forwarding the proposal in question. It is hoped, however, that a
decision will be reached before the end of this week, in which event a proposal
will go forward either from du Pont or from de Lanoy.
I just read that for the purpose of completing the record.
Mr. Casey. That practically confirms what I stated.
The Chairman. Is this a convenient place to stop, Senator?
Senator Clark. Yes; this is a convenient place to quit.
The Chairman. Let the committee be in recess then until 2 o'clock.
(Whereupon, at 12. 48 p. m. the committee recessed to 2 p. m. of
the same day.)
afternoon session
The hearing was resumed at 2 p. m., pursuant to the taking of
the recess.
The Chairman. The committee will be in order.
Mr. Lammot du Pont. Mr. Chairman, may I interject something?
At the close of the session a letter was put in evidence from the
Secretary of War stating that he was referring to the State De-
partment this complaint of the construction of a chemical war-
fare gas plant in Poland, and that no doubt we should hear from the
State Department in due course. I thought at the time that the reply
of the State Department, the letter from the State Department to us,
had been put in evidence, but I find that that is not so.
I would like to read that letter into the record. Your secretary
has a copy of it.
The Chairman. Very well.
Mr. Lammot du Pont. And enter it into the record.
The Chairman. You may read it.
Mr. Lammot du Pont. It is not a very long letter, a page and a
half. This is from the Department of State, dated April 8, 1926,
addressed to the du Pont Co. [Reading " Exhibit No. 1015 " :]
The Department has received, under date of March 27, an extract from your
letter to the Secretary of War of March 16 with reference to the request
which you have received from the Polish War Department for the establishment
2690 MUNITIONS INDUSTRY
of a chemical warfare gas plant in Poland. In this letter you state that in your
opinion this worli should not be undertaken without the consent of the War
Department.
In referring your inquiry to this Department the Secretary of War stated
that he believed this to be a matter for the Department of State and indicated
that you had been so advised.
It is not the practice of this Department to undertake to intervene in private
business transactions of the character covered by your letter or to give or to
withhold assent. It is possible that in referring the matter to the War
Department you had in mind that American representatives have signed agree-
ments with respect to the prohibition of the use in time of war of poisonous
gases ; provisions of this character being included in a treaty signed at Washing-
ton on February 6, 1922, and in a protocol signed at Geneva June 17, 1925.
While it would appear that these instruments would have only an indirect
bearing upon the proposal which has been submitted to you, even if such
treaties had been ratified, the treaty and protocol in question are not now in
effect since ratifications have not been deposited.
In conclusion it may be stated that it has been the policy of this Govern-
ment to favor international agreements for the prohibition of the use of poison-
ous or noxious gases in time of war.
I am, sirs, your obedient servant,
(Signed) Frank B. Kellogg.
The Chairman. What is the date, Mr. du Pont?
Mr. Lammot du Pont. This is dated April 8, 1926, and refers to
the letter of March 27, from the War Department to the State
Department.
The Chairman. Do yon consider the letter rather evasive?
Mr. Lammot du Pont. Who, me?
The Chairman. Yes.
Mr. Lammot du Pont. Yes; I do. [Heading:]
It is not the practice of this Department to undertake to intervene in private
business transactions of the character covered by your letter or to give or to
withhold assent.
That, in the vernacular, means, to me, " ducking the question."
Senator Clark. And it was on the basis of your considering it
evasive that Major Casey 4 days later wrote Colonel Taylor and said :
If we were in possession of complete technical details which would enable us
to construct and operate the proposed chemical warfare plant, we would
undertake the project regardless of the attitude taken by the State
Department.
Mr. Lammot du Pont. That is not the explanation which Major
Casey gave, I believe.
Senator Clark. Major Casey speaks in this same letter, which was
entered as " Exhibit No. 1013 ", 4 days after the receipt of the
Secretarj^ of State's letter, written to obtain the cooperation and
not permission, which is an essentially different matter, to obtain
the cooperation of the War Department :
To obtain the cooperation of the War Department we addressed the Secretary
of War, who in turn submitted our question to the State Department. After
many weeks we received a reply from the State Department which was quite
evasive and left lis in the same position that we were when the Polish inquiry
was received.
Then, in the same letter, he continues :
If we were in possession of complete technical details which would enable
us to construct and operate the proposed chemical-warfare plant, we would
undertake the project regardless of the attitude taken by the State
Department.
MUNITIONS INDUSTRY 2691
Mr, Lammot du Pont. You will remember that Major Casey
explained that that letter was worded with the probable object or
probable eventuality that it would be shown to the Polish authorities.
Senator Clakk. Yes; I understand that.
Mr. Lammot du Pont. It was worded so as not to offend the Poles.
Senator Clark. But the situation was that what you were appar-
ently after was not only the permission but the technical knowledge
and cooperation of the War Department. Major Casey put in this
letter, in so many words, that —
We could not carry out tiie coutract, if we get it, without the cooijeration
•of the War Department.
Mr. Lammot du Pont. So the letter states.
Senator Clakk. Not the letter of the Secretary of War. The
letter from Major Casey to Colonel Taylor states it.
Mr. Lammot du Pont. Yes, sir.
Mr. Casey. Does not the later letter clear it up ?
Senator Clark. Then j^ou say that you regard the letter of the
Secretar}" i!s too evasive; and then you say, if you were expected to
go ahead and carry out the contract, you would do it regardless of
the State Department.
Mr. Irenee du Pont. Not regardless of the State Department
but regardless of the attitude of the State Department, being non-
commital; their attitude being noncommital, we would disregard it.
Senator Clark (reading) :
If we were in possession of complete technical details which would enable
us to construct and operate the proposed chemical-warfare plant, we would
undertake the project regardless of the attitude taken by the State Department.
Mr. Irenee du Pont. What is the attitude taken by the State
Department ? Noncommital.
Senator Clark. I understand you are going into it regardless of
what their attitude might be.
Mr. Irenee du Pont. It does not say that.
Senator Clark. That is the inference to be drawn : " We are going
to do it regardless of the attitude of the State Department."
Mr. Irenee du Pont. We have the attitude of the State Depart-
ment.
Mr. Lammot du Pont. Senator, has the State Department letter
been assigned a number?
Senator Clark. That may be marked with the appropriate
number.
(The letter referred to was marked " Exhibit No. 1015 " and
appears in full in the text on p. 2689.)
influence of munitions companies on the policies of governments
Senator Clark. The other day there was some discussion came
up between Senator Vandenberg and some of you gentlemen as to
the possible influence, or influence, of munition companies on the
policies of governments. In that connection I desire to offer for
appropriate number the letter of May 2, 1928, to Major Casey from
William N. Taylor, by Fred G. Singer.
(The letter referred to was marked " Exhibit No. 1016 " and
appears in full in the text.)
2692 MUNITIONS INDUSTRY
Senator Clark. That is headed " Status of Negotiations," [Read-
ing "Exhibit No. 1016":]
Poland. — For the moment, powder sales are held up on account of the diplo-
matic action of the Swedish Government. We are doing all we can to get
counterpressure put on by the British Government.
Do you know what Colonel Taylor was doing to get counterpres-
sure put on by the British Government?
Mr. Casey. I do not know anything he did, but notify I.C.I.
of the apparent action taken by the Swedish Government.
Senator Clark. You do not know what he meant when he said:
We are doing all we can to get counterpressure put on !)y the British
Government.
Mr. Casey. All I know is what he said.
Senator Clark. Do you not have any further information on
that?
Mr. Casey. No.
Mr. Rausiienbusii. Do you not remember the Bofors interest in
Sweden putting pressure on Sweden?
Mr. Casey. So we heard.
Senator Clark. I offer for appropriate number a memorandum by
Colonel Simons dated October 5, 1926, headed " S-44 Washington —
September 30, 1925."
The letter referred to was marked " Exhibit No. 1017 " and
appears in full in the text.)
Senator Clark. I direct your particular attention to the last para-
graph on page 2, Major [reading] :
Called on Major Burns of the Office of the Assistant Secretary of War, in
reference to the article prepared with the assistance of the du Pont Co. for
publication in some popular magazine. Major Burns looked up this matter and
reported that the article had been passed on by General Williams as satisfac-
tory and had then gone to the various branches of the General Staff who
returned it to General Williams with full approval of all except one passage
of three or four lines which the General Staff regarded as controversial and
to be revised or omitted. When this revision is made, it is expected that the
article will be published over General Williams' signature.
It indicates that you were actually preparing articles for the Chief
of Ordnance of the United States Army to sign. Does not that pretty
well reflect the relationship between the War Department and the
du Pont Co. ?
Mr. Casey. Would you mind if I read the entire letter?
Senator Clark. Not at all. [Reading " Exhibit No. 1017 " :]
Called on Colonel Pegram who advised me that the matter of the small arms
targets sent by the Canadian Government as a present to the United States
Government had at last been straightened out. These targets had been sent to
Rock Island Arsenal where a thorough study was made of them, the general
result being that they were considered an infringement of the Aiken patents
and very much inferior mechanically to the Aiken design. However, a courteous
letter will be sent to the Canadian Government through the channels of the
British Ambassador at Washington.
Were you concerned about these targets. Major?
Mr. Casey. Only to this extent : I t<jok up a rifle team to Canada in
1924, and in watching their operation I got the Dominion of Canada
Rifle Association to agree to send down for examination by our
people that form of target.
MUNITIONS INDUSTRY 2693
Senator Clark. It is not material [continuing reading] :
I also learned from other sources that the State Department had consented
in principle to the visit of a military mission from Holland to buy munitions
in this country, it being a known fact that the Hollanders are very much
dissatisfied with the treatment they are receiving from the French and
British munitiims manuiacturers. The personnel and time of arrival of this
mission has not yet been announced.
It was also learned on excellent authority that a decided change of policy
in the publication of military secrets has been inaugurated by the War
Department.
Do you know what that was ?
Mr. Casey, No; I do not.
Senator Clark. It affected you, disclosures by the War Depart-
ment of military secrets?
Mr. Casey. I do not think it had anything to do with that.
Senator Clark. This change in military policies had nothing to
do with you?
Mr. Casey. No.
Senator Clark (continuing reading:)
Called on Major O'Shaughnessy of the Ordnance Department in reference
to my visit to Old Hickory. Major O'Shaughnessy informed me that it would
be impossible for Captain Fidlar to accompany me, since his presence was
urgently needed in Washipgton at a meeting of the district chiefs. Major
O'Shaughnessy provided me with a letter of introduction to Sergeant Larsen
who is in charge of the so-called " ordnance reserve depot " at Old Hickory.
It was also learned that a bid of $15,000 was expected from a New York
dealer for the powder-making machinery advertised for sale.
Do you know why the War Department would be telling the
du Pont Co. what sort of bids would be received for the powder-
making machine at Old Hickory?
Mr. Casey. I have not the slightest idea.
Senator Clark. What was Colonel Simons doing at Old Hickory ?
Do you know ?
Mr. Casey. I think he was going down there to inspect some ma-
chinery offered there for sale.
Senator Clark (reading) :
Called on General Joyes who discussed with me a list of thesis subjects
appropriate for graduating students in the colleges where there is an ordnance
R. O. T. C. The list prepared by General Joyes impressed me as extremely
good in that it brought about a study of subjects of equal importance to the
Ordnance Department and value to the student in question. General Joyes
also called my attention to an article published in French which he is having
translated. This article is A Lecture Delivered on the 29th of February 1920
on the Manufacture of Powders and Explosives, by M. I'Heure. This is a
pamphlet of 64 pages printed in Paris by Librairie de I'Enseignement Technique.
Called on Dr. Storm, who seemed to be very much concerned about the
difficulty of securing possession of the tracings covering the design and layout
of the smokeless powder plant at Old Hickory.
Do you know what that was?
Mr. Casey. No ; I do not.
Senator Clark. It is ncit material [continuing reading] :
Called on Major Bums, of the Office of The Assistant Secretary of War, in
reference to the article prepared with the assistant of the du Pout Co. for pub-
lication in some popular magazine. Major Burns looked up this matter and
reported that the article had been passed on by General Williams as satisfactory
and had then gone to the various branches of the General Staff who returned
it to General Williams with full approval of all except one passage of three
2694 MUNITIONS INDUSTRY
or four lines which tlie General Staff regarded as controversial and to be
revised or omitted. When this revision is made, it is expected that the article
will be published over General Williams' signature.
Mr. Caset. I think I recollect that incident. This was in con-
nection with an effort on the part of Major Burns to get General
Williams to write an article for the Saturday Evening Post on the
general problem of national defense. General Williams said he did
not have the time ; that if an article was prepared that he was satisfied
with he would put his name to it.
Burns did not have the time to prepare such an article on account
of his job in the Office of Assistant Secretary of War. The result
was that Mr. Byrnes in our company, I think, prepared the article,
or one was submitted. After this letter was written it was decided
that probably the article had better not be published, so that it was
never published.
Senator Cl-\ek. The only point I am getting at, Major, is that
it does show the very close relationship between your company and
the War Department for you to be preparing, through your own per-
sonnel, articles to receive the signature of the Chief of Ordnance of
the United States Army.
Mr. Casey. But realize this: Before he put his name to it, he
would have to be fairly satisfied.
Senator Clark. He would read it over, I understand.
The Chairman. Senator Clark, will you pardon us long enough
so that there may be offered for the record a letter which is dated
today, December 11, 1934, to the committee, by Leo Kohn, who has
been mentioned in connection with the testimony here? I shall
read the letter and offer it for the record [reading] :
At the end of September 1934 my attention was called to an article appearing
in the New York American of September 15 reporting a session of your com-
mittee of September 14. A letter of one Col. William N. Taylor, Paris repre-
sentative of E. I. du Pont de Nemours & Co., addressed to Maj. K. K. "V. Casey^
was read. Your exliibit No. 507.
In this letter one Leo Kohn, of 90 West Street, New York City, was men-
tioned ; furtlier, one James Magnus & Co., of Hamburg, Germany, was men-
tioned.
I am the Leo Kohn, of 90 West Street, New York City, and my brother, Karl
A. Kohn, is the owner of James Magnus & Co., of Hamburg, Germany,
I have communicated with my brother regarding Colonel Taylor's letter, ex-
hibit no. 507. Neither he nor I have ever been directly or indirectly connected
in the remotest sense with anything that has to do with ammunitions, guns, etc.
Colonel Taylor, I charge, has deliberately lied in this letter about my brother
and myself, and I would ask you to permit me to testify before your committee.
I wish to add that I also communicated with Mr, A. Felix du Pont and
received a very unsatisfactory reply. I have this letter with me, as well as
the correspondence with my brother.
Thanking you for your cooperation, I am.
Very truly yours,
Leo Kohn.
(The letter referred to was marked "Exhibit No. 1018" and
appears in full in the text.)
Senator Clark. Major Casey, to go back to that exhibit again, did
the du Pont Co. bid on the powder machinerv advertised for sale at
Old Hickory?
Mr. Casey. Yes.
Senator Clark, Do you remember how much they bid ?
MUNITIONS INDUSTRY 2695
Mr. Casey. I think probably more than double the price here men-
tioned. But that probably was in the nature of a proceeding such;
as this. As we understood it, the Government had to get off the
property at Old Hickory. It had been sold to the Nashville indus-
trial Corporation or some such company. They had a lot of powder-
making machinery and they were very anxious to have someone take-
the machinery.
They asked us if we would not undertake to purchase this ma-
chinery so as to hold it, with the understanding that if we did get an
opportunity to dispose of it and took it up with them they would
then decide as to whether or not there was sufficient balance left so
that we would be justified in disposing of it.
Therefore we put in a bid on this machinery.
Senator Claek. Do you know how much the bid was, Major ?
Mr. Casey. I have not got the exact amount.
Senator Clark. Have you got it in your records ?
Mr. Casey. Yes, sir.
Senator Clakk. Will you look it up and supply it for us ? ^
Mr. Casey. Certainly. The result was that we did take the ma-
chinery, and, I think, with the exception of one piece of machinery,
it is all in this country today.
Senator Clakk. I am not interested in where it is located today.
I am interested in the question as to whether it is not bad practice
for the War Department to be telling one prospective bidder a bid
they expect from another prospective bidder.
Mr. Casey. The only point is this: The other bidder would bid
on it as junk. We are bidding on the basis of holding that machin-
ery intact. Their bid, or any junk dealer's bid, would have no influ-
ence on the purpose we were trying to assist the War Department in
doing.
Senator Clark. That is the reason they told you what bids were
expected.
Mr. Casey. That may be ; I do not know.
Senator Clark. I call your attention to a letter dated January
26, 1929, signed by C. I. B. Henning, technical director, addressed to
Dr. C. M. Stine, chemical director, which I otfer for appropriate
number.
(The letter referred to was marked " Exhibit No. 1019 " and is
included in the appendix on p. 2830.)
Senator Clark. That is headed " Cooperation with Chemical War-
fare Service." [Reading:]
Confirming informal discussion with you yesterday, there are a number of
reasons why our contact with the Chemical Warfare Service should follow
principles similar to our contact with the Ordnance Department, United States
Army, and Bureau of Ordnance, United States Navy. We recognize the essen-
tial difference that for the present there is prospectively little to sell to Chem-
ical Warfare ; also that the company's developments in fundamental research
are of such a character that the writer, for instance, is not a competent judge
of what is and what is not important to the other industries with which this
department is not connected ; and hence our suggestion that individuals in the
chemical department and the company's laboratories be careful to refer all
1 On March 29, 1935, the du Pont Co. informed the committee that the purchase
price of the Old Hickory machinery amounted to .$15,000. The purchase of necessary
land, buildings, and incidental expenses tor the storage of the machinery amounted to
$14,500.
2696 MUNITIONS INDUSTRY
these questions to you personally before passing information on direct to indi-
viduals from Edgewood Arsenal or Chemical Warfare Service's officers in
Washington.
It is also appropriate to review a little of the past history of this subject.
In February 1924 question was raised as to our assisting Dr. Rossi, an im-
portant Italian chemical manufacturer, witli technical advice in the erection
and putting into operation of a plant in Italy for the manufacture of war gases
for the Italian Government. Mr. Ir§n6e du Pont wrote General Fries under
date of February 4, 1924, stating, " We believe the du Pont Co. should not
undertake work of this sort for a foreign government except on the written
request of the Secretary of War stating that it is done in the interest of the
United States Government and, in the present case, authorizing the Chemical
Warfare Department to give us such assistance as they feel is justifiable to
aid us in properly doing the work, in return for which this company will keep
the Chemical Warfare Department iiostt-d with such information as we may
obtain." No answer was forthcoming from General Fries for some time, and
on December 2, Mr. Irenee du Pont and Mr. A. Felix du Pont attended a meet-
ing in the office of the Secretary of War, at which were present Assistant
Secretary of War Davis, General Williams, Chief of Ordnance, and Colonel
Ferguson. It was found that after the matter was explained to Secretary of
War Weeks, he was entirely in sympathy with the proposition and promptly
arranged for an interview with the President. The entire party, with the
exception of Colonel Ferguson, put this matter up to Mr. Coolidge, who promptly
grasped the basic principles and in a few words stated what practically
amounted to the " munitions policy."
What was that policy ?
Mr. Casey. The policy is a pretty long proposition.
Senator Clabk. It says President Coolidge stated it " in a few
words."
Mr. Casey. I believe President Coolidge could probably do that,
but the munitions policy was pretty well described by General Wil-
liams in a speech he made, which was printed in the Army Ordnance
Magazine several years before that.
Senator Clark. Can you give us the essentials of the munitions
policy ?
Mr. Casey. I could not. I am not Coolidge.
Senator Clark. You must know what the general policy was re-
ferred to in the interdepartmental correspondence of your own com-
pany.
Mr, Casey. It was not really the correspondence of our company.
Senator Clark. I say, the interdepartmental correspondence of
your own company. This is an interdepartmental memorandum.
Mr. Casey. It was establishing the function of the Ordnance De-
partment on its munitions policy and program to conform with the
principles of the National Defense Act of 1916, as amended, and such
an extract was read this morning, in which are described the duties
of The Assistant Secretary of War.
Now, we have that here, and it might be read into the record.
Have you got that [addressing associate] ?
Senator Clark. Did the policy approve selling a poison-gas plant
to the Italian Government or not?
Mr. Casey, I do not think there is anything in the policy there
except
Senator Clark. That is what these gentlemen were over to the
White House about, is it not?
Mr. Casey. Wait a minute — except the policy enunciating the
principle of necessity of maintaining as much as possible the interest
of private industry as a reserve for production in time of war.
MUNITIONS INDUSTKY 2697
Senator Clark. These gentlemen were over there on a particular
proposition about selling a gas plant to Italy. Do you not know
what the decision was ? I will read the next paragraph, which may
clear it up in your mind [reading] :
Nothing has ever been done in connection with the Italian proposition, but
the above facts are given you as a guide for action in any similar problem that
may arise in the future.
Now, was there any objection to selling a poison-gas plant to Italy?
Mr. Casey. I was not present at the meeting.
Senator Clark. You Imow the result of the negotiations.
Mr. Casey. Nothing ever happened.
Senator Clark. I understand ; but what was the policy laid down
at this meeting ?
Mr. Casey. I was not present. I do not know. This was in an-
other department entirely.
Senator Clark. You were familiar with such matters, were you
not, Major?
Mr. Casey. If I attempted to keep myself familiar with every-
thing that went on in the company, I would not have time
Senator Clark. If you do not know, I will take your word for it,
but I wanted to know if you knew the policy laid down with regard
to selling poison-gas plants to foreign countries.
Mr. Casey. I do not know. Senator, could we introduce into the
record
Senator Clark. Mr. Irenee du Pont, were you at that meeting at
the White House ?
Mr. Irenee du Pont. This letter says so.
Senator Clark. Can you tell us what this policy so briefly enun-
ciated by President Coolidge was?
Mr. Irenee du Pont. I certainly cannot.
Senator Clark. Do you know whether he gave you an O. K. on
selling this poison-gas factory to Italy?
Mr. Irenee du Pont. I am rather mystified, because the funny
part is I have not the least recollection of the meeting.
Senator Clark. Mr. Felix du Pont, were you at the meeting at the
White House?
Mr. A. Felix du Pont. No. The only thing I recollect is having
been at the meeting in the White House when the smokeless-powder
matter was discussed.
Senator Clark. Did you ever hear President Coolidge very briefly
enunciate a munitions policy?
Mr. A. Felix du Pont. No.
Mr. Casey. Senator, could we have this paragraph read into the
record from the national defense act?
Senator Clark. If it is material.
Mr. Casey. It is. It is a very short one.
Mr. Lammot du Pont. It is on page 22, section 5-A. [Beading :]
Hereafter, in addition to such other duties as may be assigned him by the
Secretary of War, The Assistant Secretaiy of War, under the direction of the
Secretary of War, shall be charged with supervision of the procurement of all
military supplies and other business of the War Department pertaining thereto
and the assurance of adequate provision for the mobilization of material and
industrial organizations essential to war-time needs. The Assistant Secretary
of War shall receive a salary of $10,000 per annum. There shall be detailed to
83876— 35— PT 12 5
2698 MUNITIONS INDUSTEY
the office of The Assistant Secretary of War from the branches engaged in pro-
curement such number of officers and civilian employees as may be authorized
by regulations approved by the Secretary of War. The offices of Second Assist-
ant Secretary of War and Third Assistant Secretary of War are hereby
abolished.
Senator Claek. That is very interesting, but it certainly does not
say anjrthing about The Assistant Secretary of War acting as a
salesman of munitions.
I now read excerpts as per the first and last two paragraphs from
a letter dated February 4, 1929, from Major Casey to the command-
ing officer. Edge wood Arsenal, Edge wood, Mr., headed, " Cooperation
in Experimental Work."
(The excerpts referred to were marked " Exhibit No. 1020 "', and
appear in full in the text.)
Senator Clark (reading) :
Attention of Major Alexander Wilson.
Referring to discussion held in your office during the recent visit of Dr. C. M.
Stine, Lt. Col. Aiken Simons, and C. I. B. Henning, the military sales division
is expected by the various departments of the du Pont Co., and to a considerable
extent by its associate companies, to serve as the contact organization in all
matters pertaining to military use of this company's products. In order to
make this contact more effective, we discussed various phases of your past
experience. Without going too much into detail, there are several pending
items on which we desire to advise and in turn to receive your suggestions.
Major Prentiss of his own initiative discussed —
Who is Major Prentiss, Major?
Mr. Casey. I imagine he is connected with Edgewood Arsenal.
Senator Clark. In other words, he is an Army officer?
Mr. Casey. I think so.
Senator Clark (reading) :
Major Prentiss of his own initiative discussed a somewhat more formal
interchange of information between the Chemical Warfare Service and the
du Pont Co., stating that on his next trip to Washington there might be some
advantage in ascertaining the views of General Fries on this subject. It is
our desire to be a help in making our contact with you as efficient as possible.
Owing to the complexity of our own organization, it is necessary that some one
division be responsible for contacts of this nature.
This letter is written with the intention not of emphasizing unduly the imme-
diate problems presented, but to obtain from you suggestions as to how, from
your viewpoint, we can function most efficiently.
In connection with that, I will read a letter from Major Prentiss
to Col. Aiken Simons.
(The letter referred to was marked " Exhibit No. 1021 ", and
appears in full in the text.)
Senator Clark. Tliis is headed " Chemical Warfare Service, Edge-
wood Arsenal, Office of the Technical Director.'' [Reading:]
Edgewood, Md., April 24, 1929.
Col. Aiken Simons, du Pont Co.,
Wilmington, Del.
Dear Colonel Simons : Replying to your letter of April 22, in which you
advise me that Dr. Stine has not yet returned to Wilmington and is not ex-
pected for several days, and upon his return will undoubtedly be extremely
busy for some time, I may say that the matter which I wished to discuss with
Dr. Stine was the general "modus operandi" of the exchange of information
which we discussed upon the occasion of your last visit to this arsenal. As
you will recall, the chief's office did not think it feasible for us to exchange
technical reports but did feel that information might be freely exchanged
by personal conference. It is for the purpose of laying down some regular pro-
cedure to effect this exchange of information that I particularly desire to see
MUNITIONS INDUSTRY 2699
Dr. Stine, and I doubt very nnich if anyone else will be in a iwsition to act for
Dr. Stine in this matter, as it is a rather unusual one.
Under the circumstances I would suggest that you advise me of the earliest
convenient date at which Dr. Stine could see me to talk over this matter, and
I will be glad to arrange my visit accordingly.
Sincerely yours,
A. M. Prentiss,
Major, C. W. 8., Technical Director.
If you sell a war-gas factory to a foreign country it might very
well be that with the system of interchange of information between
yourselves and the Chemical Warfare Service some of the informa-
tion in the Chemical Warfare Service will be passed along to the pur-
chaser, will it not?
Mr. Casey. I think that would be a natural result, because I
stated in that previous memorandum where the conference with Pres-
ident Coolidge came in, it was clearly stated there that we would not
take any action unless requested by the Government.
Senator Clark. I am glad to see somebody's memory coming back
about the matter of that conference at the White House.
Mr. Casey. I had not,been to the White House on that matter, but
I say in the memorandum they make that very selfsame statement.
Senator Clark. There is no question about the fact that if you are
in the process of interchanging information with the Chemical War-
fare Service, and you sell a war-gas factory to a foreign government,
which you install for them and undertake to teach them to operate,
it is almost inevitable some of this information which you acquired
in this interchange with the Chemical Warfare Service will be passed
on to the purchaser.
Mr. Casey. It is self-evident from that previous memorandum that
we could not do it unless the United States Government wanted us
to do it and gave us the information.
Senator Clark. I understand that, but that is the fact, is it not,
Major?
Mr. Casey. It is the fact; yes.
Senator Clark. You recognize it in that memorandum to which
you are referring?
The Chairman. What is the difference between exchanging tech-
nical reports and freely exchanging this information by personal
conference ?
Mr. Casey. I think the answer is this. I cannot speak for either
Prentiss or Stine, but our work was in connection with the general
chemical research work on inorganic chemicals. Is not that right,
Doctor ?
Dr. Sparre. Organic.
Mr. Casey. Organic and inorganic, both, for that matter. The
other day I think it was brought out that there is a point up to which
you might say both dyes, pharmaceuticals, photographic material,
and so forth, and explosives or gases may be brought, that you woukl
call the main trunk of the tree. When you reach that point, then
they branch off on the one hand into the line of commercial ma-
terial such as dyes and other materials of that type, or on the other
hand they may branch off into high explosive material or related
materials.
Because of our fundamental research, there was no doubt in the
world that we could communicate to them considerable information
2700 MUNITIONS INDUSTRY
that would permit them to go from the main branch of the tree into
the line of research they were following. We were not following
any research work along the line that interested Edgewood Arsened
or the Chemical Warfare Service.
USE or UNITED STATES GOVERNMENT GUNS FOR COMMERCIAL
DEMONSTRATIONS
Senator Clark. Now, Major, when you sell a powder to a foreign
government, you have to give a demonstration of the powder, do
you not, ordinarily?
Mr. Casey. In a great many cases, yes ; others not.
Senator Clark. It is the ordinary custom?
Mr. Casey. If it is something new, yes.
Senator Clark. I now call your attention to a letter from Colonel
Taylor to Major Casey, dated June 3, 1930, which I offer for appro-
priate number.
(The letter referred to was marked " Exhibit No. 1022 ", and
appears in full in the text.)
Senator Clark (reading) : *
F. N. H. Powder — Holland.
Dear Sir: The Dutch Government advises that it is impossible for them to
borrow a gun from any European Government using the French 75-mm field gun.
Regarding obtaining a gun from the United States Government we had a
conversation with Colonel Wesson about this matter.
Who is Colonel Wesson?
Mr. Casey. He is an ordnance officer. I think at that time he was
stationed in London.
Senator Clark (reading) :
We had a conversation with Colonel Wesson about this matter, and he be-
lieves that this occasion had never arisen before, and thinks it would certainly
be refused so as not to create a precedence. Colonel Wesson believes, however,
that it would be possible for our company to borrow a gun from the United
States Government for a certain length of time by taking full responsibility for
wear and tear and for its return. Our company could then send it to Holland
to be fired for tests and returned.
It seems to me desirable to make every effort to obtain this gun in this way,
as we know the powder acts all right in it, and as it will give a good impression
of our powder. We have warned the Dutch Government that fitting their guns
may be very difl^cult, but they want to see the powder presented under the best
conditions.
I believe it impossible to get a gun in Europe except by buying one from
Schneider. The Fabrique Nationale of Li^ge, Belgium, do not make artillery.
As we would particularly like for Mr. Bradway to be present at the F. N. H.
trials in Holland, we advised you of the above by our cable No. 845, hoping
that you can arrange to send the gun and 40 made-up rounds to Holland early
enough for firings to be made in Holland before Mr, Bradway returns to
America.
You actually got this gun, did you. Major?
Mr. Casey. I believe we did. The gun in question was by that
time an obsolete type in the United States as to design.
Senator Clark. It was still in service in the War Department?
Mr. Casey. Oh, yes; it is still in service, but it is an obsolete
design. In other words, as fast as they can get the money for the
new designs, they will have that.
Senator Clark. I call your attention to another memorandum, to
the traffic department, signed by W. H. O'Gorman, assistant director,
dated September 8, 1930.
MUNITIONS INDUSTRY 2701
(The letter referred to was marked "Exhibit No. 1023'', and
appears in full in the text.)
Senator Clark (reading) :
Shipment of gun and ammunition to Holland.
This is directed to Mr. O. E. Pyle.
In connection with prospective sale of du Pont F. N. H. cannon powder to
the Holland Government, we have borrowed a 75-mm gun, model 1917, from
the United States Government, which we propose to ship to Holland together
with 40 rounds of ammunition. The gun and ammunition are being shipped
for firing tests in Holland and we desire to make immediate booking to cover.
We do not think it is advisable to make shipment of the items mentioned in
the name of the du Pont Co., and consequently would ask that you arrange to
have the matter handled by one of your export brokers making shipment, if
possible, in their name.
Why did you not desire to have it shipped in the name of the du
Pont Co. ?
Mr. Casey. There was some reason at the time; I have forgotten
what it was; whether it was because we did not want to have the
name " du Pont " tied up with a gun or what, I do not know, because
we did not make the guns.
Senator Clark (reading) :
We are attaching copy of memorandum indicating the specifications of the
gun and spare parts, which will be included, together with the value of each
item. In the first instance we were of the opinion that the gun should be dis-
mantled for shipment. However, Aberdeen Proving Ground recommended that
it be shipped intact, and this recommendation was adopted. The gun has been
securely crated, the weights and dimensions of the crate being as follows :
Length, 13 feet 8 inches ; width, 6 feet 8 inches ; height, 5 feet 4 inches ; gross
weight, 3,900 pounds. This gross weight includes weight of gun and carriage,
which is 2,887 pounds, and weight of tools, accessories, and crate, which is
1,013 pounds.
We have not received actual weights and dimensions of the cases containing
the 40 rounds of ammunition. However, we know that each round will eon-
tain 26.6 ounces of smokeless powder and will have a proof slug weighing
approximately 15.96 pounds. From this you will note that there is only
approximately 66i/^ pounds of smokeless powder involved. This ammunition
will be equipped with primers. The packing cases in which the ammunition
will be shipped will be approximately 9 inches by 9 inches by 26 inches, there
being 4 rounds included in each box.
We have executed a bond in favor of the Government, in the amount of
$8,500, covering the return of the gun in question within a period of 1 year.
In view of this, it is important that shipment be arranged immediately. Since
the gun is now 
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