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Full text of "Munitions industry : hearings before the Special Committee Investigating the Munitions Industry, United States Senate, Seventy-third [-Seventy-fourth] Congress, pursuant to S. Res. 206, a resolution to make certain investigations concerning the manufacture and sale of arms and other war munitions"

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MUNITIONS INDUSTRY 



HEARINGS 

BEFORE THE 

SPECIAL COMMIHEE 

INVEBTIGATIJiG THE MUNITIONS INDUSTRY 

UNITED STATES SENATE 

SEVENTY-THIED CONGRESS 

PCBSCANT TO 

S. Res. 206 

A RESOLUTION TO MAKE CERTAIN INVESTIGATIONS 

CONCERNING THE MANUFACTURE AND SALE 

OF ARMS AND OTHER WAR MUNITIONS 



^ 



PART 15 — / f' 

■- ,11, i_j,i,iMMiMii — riiTTTnTrnnn-— -~~— "^*— ~^ 

DECEMBER 17 AND 18, 1934 
OLD HICKORY CONTRACT (continued) 

AND 

INDUSTRIAL ORGANIZATION IN WAR 

(EXAMPLES IN WORLD WAR AND PLANS FOR NEXT WAR) 



Printed for the use of the 
Special Committee Investigating the Munitions Industry 




UNITED STATES 
GOVERNMENT PRINTING OFFICE 
8387« WASHINGTON : 1936 



MUNITIONS INDUSTRY 

HEARINGS 

BEFORE THE 

SPECIAL COMMinEE 

INVESTIGATE G 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 15 

DECEMBER 17 AND 18, 1934 

OLD HICKORY CONTRACT (continued) 

AND 

INDUSTRIAL ORGANIZATION IN WAR 

(EXAMPLES IN WORLD WAR AND PLANS FOR NEXT WAR) 



Printed for the use of the 
Special Committee Investigating the Munitions Industry 




UNITED STATES 
GOVERNMENT PRINTING OFFICE 
83876 WASHINGTON : 1935 



'^,<-vArtl \.OLLt€f L/BKAfllir 
iRi^NSFE^yED fmy THE 

6K^DIjA1L SCHtiU(/0F EDUCAltOI 




SPECIAL COMMITTEE INVESTIGATING THE MUNITIONS INDUSTRY 
GERALD P. NYE, North Dakota, Chainna7i 



WALTER F. GEORGE, Georgia 
BENNETT CHAMP CLARK, Missouri 
HOMER T. BONE, Washington 
JAMES P. POPE, Idaho 



ARTHUR H. VANDENBERG, Michigan 
W. WARREN BARBOUR, New Jersey 



Stephen Raushenbush, Secretary 
Alger Hiss, Legal Assistant 



CONTENTS^ 



Testimony of— ^^^^ 

Banker, W. B., assistant chief engineer, E. I. du Pont de Nemours 

& Co 3600,3603 

Bradway. F. W., assistant general manager, smokeless-powder depart- 
ment, E. I. du Pont de Nemours & Co 3630 

Brannon, Lt. E. M., first lieutenant, Infantry, in the Judge Advocate 

General's department ;5612, 3617, 

3619, 3621, 3622, 3625, 3628, 3631, 3636, 3660, 3668, 3700, 3713 
Casey, K. K. V., director of sales, smokeless-powder department, E. 1. 

du Pont de Nemours & Co 3686,3687,3695,3697 

Chasmar, J. H.. Bridgeport works manager. Remington Arms Co 3610 

Cochran, H. H., accountant, E. I. du Pont de Nemours cS: Co 3605, 3606 

Cults, Lt. Richard Malcolm, Marine Corps 3543 

Davis, C. K., president and general manager. Remington Arms Co — 3035, 

3639, 3677, 3679, 36S1. 3683, 3688, 3695 
Du Pont, Irenee, vice chairman of board of directors, E. I. du Pont 

de Nemours & Co 3543,3593,3600,3602,3630,3637, 

3639, 3054, 3658. 3661, 3672, 3687, 3692, 3694, 3708, 3715, 3717 

Du Pone, Lammot, president, E. I. du Pont de Nemours & Co 3654 

Du Pont, Pierre S., chairman of board of directors, E. I. du Pont de 

Nemours & Co 3540, 3604, 3606, 3640 

Gregg, William S., attorney, E. I. du Pont de Nemours & Co.__ 3539, 3543, 

3576, 3578, 3588, 3590, 3593. 3601, 3604, 3607 

Hadley, Egbert C, technical director, Remington Arms Co 3676, 

3678, 3680, 3684, 3694, 3696 

Handy, E. E., vice president. Remington Arms Co 3678, 3683, 3685, 3688 

Harris, Lt. Col. C. T., in the planning branch, oflSce of The Assistant 

Secretary of War 3540, 

3604, 3609, 3610, 3614, 3618, 3620, 3621, 3623, 3627, 3629, 3633, 
3634, 3637, 3639, 3653. 3656, 3662, 3683, 3688, 3699, 3701, 3708, 
3715. 

Nielsen, A. C, co(mptr()ller E. I. du Pont de Nemours & Co 3578, 

3588, 3607, 3608 

Pugsley, Edwin, vice president, Winchester Repeating Arms Co 3633. 

3638, 3643, 3675 

Reisinger, W. U., secretary and treasurer Remington Arms Co 3698 

Relationship between War and Navy Departments and American in- 
ventors 3543 

Nature of obligations assumed and security furnished by Du Pont Co. 

under Old Hickory contract 3577 

Further testimony as to nature of audit of Old Hickory contract 3600 

General description of industrial mobilization plan 3610 

History of preparation by War Department of forms of contracts for use 

in next war 3619 

Adjusted-compensation contract form : 

General 3628 

Profits of integrated companies 3629 

Accounting methods of contracts 3632 

Acceptability to contractors of 6-percent fee 3636, 3699 

Domestic sales of Winchester Repeating Arms Co 3643 

Industrial connections of certain War Department and other officials in- 
volved in procurement and related activities during World War 3655 

Relations between munitions makers and War Department and War De- 
partment officials 3670 

Examples of scope of activities of War Industries Board 3704 

1 In casps of exhibits comprised of excerpts from the minutes of certain war-time 
civilian boards only such parts as were actually entered into in the hearings have 
been published in the appendix. At a later date the committee ordered to he Printed 
separately as committee prints, the miiuites of the following war-time asencies : War In- 
dustries Board, Price Fixing Committee of the War Industries Board, Council of National 
Defense. Advisory Commission of the Council of National Defense, Munitions Standards 
Board, General Munitions Board. 

Ill 



INVESTIGATION OF MUNITIONS INDUSTRY 



MONDAY, DECEMBER 17, 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, Sen- 
ator Gerald P. Nye presiding. 

Present: Senators Nye (chairman), Clark, Pope, Vandenberg, and 
Barbour. 

Present also : Alger Hiss, legal assistant to the committee. 

At this point the committee concluded that part of the testimony 
which is incorporated in Part XIV, of these hearings, " Old Hickory 
Contract (continued)". 

The Chairman. The committee will be in order. 

Mr. Pierre du Pont. Mr. Chairman, before we start, might I 
offer for the record two documents, one the original request from 
Colonel Hoffer asking for a bid on a plant the size of Old Hickory ; 
and second, the proposition submitted by the du Pont Co. the fol- 
lowing day, which was the basis of this construction work. 

The Chairman. That will be accepted. 

Mr. Pierre du Pont. May I have them listed as exhibits? 

The Chairman. They will be placed in the record. 

(The letters referred to were marked " Exhibit No. 1197 ", and 
" Exhibit No. 1198 ", respectively, and are included in the appendix 
on p. 3719.) 

Mr. Gregg. May it please the committee, I should like to offer as 
an exhibit a statement by du Pont Engineering Co. of the facts 
concerning the audit of expenditures under the du Pont Engineering 
Co. contracts. In other words, this is our position as to the audit 
by the Government during construction and operation, and the 
reaudit by the Government after the signing of the armistice. 

The Chairman. Is this a statement just prepared, or is it a state- 
ment of long standing? 

Mr. Gregg. I might say this, Mr. Chairman, that this is a state- 
ment of long standing, with the exception that I eliminated from 
the statement certain references to Government employees. It, in 
effect, with those eliminations, is the same as it was prepared several 
years ago, probably back as far as 1923. 

The Chairman. You wish that to be received ? 

Mr. Gregg. I would like to introduce that as an exhibit, please. 

The Chairman. Very well. 

(The statement referred to was marked " Exhibit No. 1199 ", and 
is included in the appendix on p. 3721.) 

3539 



3540 MUNITIONS INDUSTRY 

Senator Clark. Mr. Chairman, I ask to have made a committee 
exhibit an analysis of the war profits of the du Pont Co. This is 
an analysis of testimony heretofore given, prepared by John T. 
Flynn, recently published in the New Kepiiblic. 

The Chairman. Do you wish to have it incorporated into the 
record, Senator Clark? 

Senator Clark. Yes. 

The Chairman. That is ordered. 

(The article referred to was marked "Exhibit No. 1200", and 
is included in the appendix on p. 3727.) 

Mr. Pierre du Pont. Might we have a copy of that record that 
has been presented? 

Senator Clark. I have it over in my office. 

The Chairman. Senator Clark is offering it for the record. He 
has it at his office and will introduce it later. He will bring it here, 
and you will have a chance to see it. 

I might say that that appeared in the New Republic, the issue of 
October 3. 

Mr. Pierre du Pont. All right. Of this year ? 

The Chairman. Yes. 

Mr. Pierre du Pont. Thank you. 

TESTIMONY OF LT. COL. C. T. HARRIS AND LT. E. M. BRANNON— 

(Resumed) 

(The witnesses were previously duly sworn by the chairman.) 

Mr. Hiss. Colonel Harris, did you bring with you some material 
as requested from the files of the War Department? 

Lieutenant Colonel Harris. I did. 

Mr. Hiss. Will you please submit the material. Colonel Harris, 
that was requested last week, namely, the audit material prepared 
by the War Department on Old Hickory? 

Lieutenant Colonel Harris. I should like to present this verbally, 
as it was done so hurriedly it is not in proper form to present in 
writing. 

The papers pertaining to the audit of the Old Hickory powder 
plant were taken by the Department of Justice some time ago. 
These papers were receipted for by Mr. Fortune, and photostatic 
copies of the list of papers taken and receipted for by Mr. Fortune 
have been furnished to the Nye committee. 

Mr. Hiss. May I ask you if you can identify these as the docu- 
ments so furnished? 

Lieutenant Colonel Harris. I am not familiar with them. 

Mr. Hiss. This is a letter signed by George H. Dern, Secretary 
of War. I will just read that letter into the record, if 3^011 are not 
familiar with it. 

Lieutenant Colonel Harris. I think it would be better. 

Mr. Hiss. This is under date of December 10, 1934. The Secretary 
of War wrote a letter to the chairman of the committee: 

Reference your letter dated November .30, lO-'U. 
* * * there are enclosed herewith two photostatic copies of records of this 
oflSce indicating the experience of George K. Foulke, Jr., prior to his com- 
mission in the Onhiance Department. 



MUNITIONS INDUSTRY 3541 

That has already been introduced in evidence as " Exhibit No. 

1188." ^ 

Copy of letter from Major Booton to Arthur Carndiiff, dateil June 15, is 
enclosed herewith. 

That has also been introduced in evidence as " Exhibit No, 1177 ".- 
And the last paragraph : 

111 accordance with telephonic request from Mr. Higgins there is also en- 
closed 20 photostatic sheets from the records at E^rankford Arsenal, indicat- 
ing the papers withdrawn from the files stored there pertaining to the du Pont 
Engineering Co. and turned over to James H. Fortune, accountant of the 
Department of Justice, in connection with an investigation being made approxi- 
mately 10 years ago. 

I will offer that letter and the attached sheets for the record. 

(The letter and attached sheets referred to were marked " Exhibit 
No. 1201 ", and are included in the appendix on p. 3728.) 

Mr. Hiss. None of the attached sheets constitutes any statement 
of the examination of underlying records or vouchers, nor can it in 
any sense be considered an audit. 

Mr. Pierre du Pont. Have you copies of those letters ? 

Mr. Hiss. That is the only set we have. I will be glad to let you 
examine this. 

Colonel Harris, did you find any other audit material? 

Lieutenant Colonel Harris. The records do not disclose any other 
audit material. 

Mr. Hiss. Colonel Harris, you will remember the statement of 
Colonel O'Shaughnessy and his telegram which was put in evi- 
dence as " Exhibit No. 1172 " ^ some time ago, that no original audit 
had been made, and the evidence that has been disclosed as to whether 
a reaudit was made. I would like to ask you this question: 

According to " Exhibit No. 1167 " *, the recapitulation of the Old 
Hickory and other Government contracts held by the du Pont En- 
gineering Co., a total of some $37,000,000 was advanced by the 
United States in connection with both construction and operation 
of Old Hickory, and a total of some $72,000,000 was reimbursed by 
the United States. In other words, the United States advanced 
sums to the du Pont Engineering Co., and the United States further 
reimbursed expenditures by the du Pont Co., and yet no audit was 
made of the expenditures by the du Pont Co. in the true sense of 
an audit. In other w^ords, the burden of proof was put completely 
on the United States as to whether or not there had been improper 
payments. 

The question, Colonel Harris, is this : 

Is it not customary in the War Department to put the burden of 
proof the other way — namely, the contractor must prove a right to 
reimbursement before he is reimbursed? 

Lieutenant Colonel Harris. I think that is true. 

Mr. Hiss. Colonel Harris, I also requested information as to which 
Assistant Secretary of War was referred to when Secretary Baker 
wrote that he had turned the matter over to The Assistant Secretary.^ 

Lieutenant Colonel Harris. The records show that Mr. Stettinius 
was appointed Second Assistant Secretary on April 11, 1918, and 

1 Hearings, Part XIV, p. 3248. 
-Mbid., p. 3239. 
»Ibid., p. 3236. 
Mbid., p. 3220. 
«lbid., p. 3213. 



3542 MUNITIONS INDUSTRY 

resigned on November 13, 1918. I am of the opinion, however, that 
Mr. Stettinius was on duty in the office before that date. 

Mr. Crowell was the Assistant Secretary of War up to that time. 

Under date of May 7, 1918, a division of duties between the various 
assistant secretaries was published as follows: 

Hon. Benedict Crowell, The Assistant Secretary, will have charge of War 
Department administration. 

Hon. Edward R. Stettinius, Second Assistant Secretary, will have charge of 
all questions of purchase and supply for all bureaus of the Department. 

Hon. Frederick F. Keppel, Third Assistant Secretary, will have charge of all 
matters affecting the nonmilitary life of the soldier, including the relations of 
the Army with the Y. M. C. A., Red Cro.ss ; questions affecting chaplains and 
personal discipline. 

Other than this, I cannot answer your question. 

Mr. Hiss. I offer for the record, if it has not already been intro- 
duced, a letter of April 27, 1918, a copy of which has been furnished 
under the seal of the Department of War, signed Samuel McRoberts, 
Colonel, Ordnance, by Lt. Col. Charles N. Black. 

Can you identify Samuel McRoberts? 

Lieutenant Colonel Harris. He was officer on duty in the Ordnance 
Department in charge of the Procurement Division. 

(The letter referred to was marked " Exhibit No. 1202 ", and is 
included in the appendix on p. 3736.) 

Mr. Hiss. This letter or memorandum was addressed to the Hon. 
Edward R. Stettinius, Second Assistant Secretary of War, from the 
Procurement Division, Ordnance Department. [Reading :] 

I am handing you herewith printer's proof of contract with the Du Pont 
Engineering Co. for the construction and operation of the Nashville powder 
plant. I find that corrected copies have not yet been returned from the printer's 
loffice. As soon as we receive these, which will probably be later today or 
Monday morning, I will send you a clean copy. I am advised, however, that the 
copy herewith enclosed is correct, and I trust it will answer your purpose for 
the time being. 

Mr. Pierre du Pont. What is the date of that letter, please ? 

Mr. Hiss. April 27, 1918. 

Does that not constitute additional confirmation, in your opinion, 
of your impression that this contract was under the supervision of 
Assistant Secretary Stettinius? 

Lieutenant Colonel Harris. It does, 

Mr. Hiss. That is all on Old Hickory, unless the du Ponts have 
something more to offer. 

The Chairman. The Chair offers for the record a letter dated De- 
cember 14, 1934, addressed to it by Ogden L. Mills, which he asks 
to have made an exhibit. 

(The letter referred to was marked " Exhibit No. 1203 ", and is 
included in the appendix on p. 3736.) 

The Chairman. The Chair suggests to the witnesses that unless 
they have something they wish to say upon that, the committee has 
completed, for the moment at least, the consideration of the Old 
Hickory matter. 

Mr. Pierre du Pont. Mr. Chairman, we have some charts in 
preparation which we woidd like to present later, if we may, and 
also a summary of this Old Hickory history ; but with your permis- 
sion we will defer that until later. 

The Chairman. All right. 



MUNITIONS INDUSTRY 3543 

Mr. Gregg, Mr. Chairman, there was introduced on Friday a copy 
of a report by Mr. Storck to the Department of Justice. It is in as an 
exhibit, I assumed that that was the report that Mr. Storck said he 
saw in my possession on December 5, 1923, at the hearing of the joint 
board, I testified on Friday that I did not have Mr, Storck's report 
at that time, that I never saw his report nor had ever seen a copy 
of it or any extracts from it, and I would like to see the exhibit that 
was introduced on Friday, 

The Chairman, Is that what you are offering now, Mr. Hiss ? 

Mr, Hiss, Yes, 

Mr, Irenee du Pont. Mr, Chairman, might I just call attention to 
this exhibit you put in, the New Republic article of October 3, 
3934? That was printed before a great deal of this testimony, espe- 
cially on Old Hickory, was put in, 

I would like to point out in that, that it compares the total 
amount paid 200,000 men in the trenches for a full year with the 
profits which we made from the foreign countries in the war before 
the United States got into the war. It does not seem to me that 
they are very germane to each other. I just wanted to remark on 
that, because although this is hardly testimony, I suppose in the 
«yes of the Senators at the same time it is rather misleading. 

Senator Clark. It is not testimony. It is put in in the way in 
which we permitted the du Pont Co. repeatedly to put in statements 
from time to time. 

Mr. Irenee du Pont. Then we have permission to put in some 
newspaper articles which have appeared since this hearing in other 
papers, a little later in the hearing, similar to this ? 

Senator Clark. If they are analyses of testimony before the com- 
mittee, I think they would be pertinent. If it is simply a matter of 
editorial comment or reporters' opinion, I do not think so. Mr. 
Flynn is a member of the advisory committee to this committee. 

The Chairman. Mr. du Pont, there will be no occasion for you 
and your associates to be here before 2 o'clock this afternoon, if you 
wish that information to comply with any plans you might have. 

TESTIMONY OF LT. KICHARD MALCOLM CUTTS 

eelationship between war and navy departments and american 

inventors 

(The witness was duly sworn by the chairman.) 

Senator Clark. Give to the committee. Lieutenant, your full name. 

Lieutenant Cutts. Richard Malcolm Cutts. 

Senator Clark, You are a lieutenant in the Marine Corps? 

Lieutenant Cutts. Yes. 

Senator Clark. At present on the active list? 

Lieutenant Cutts. I am, sir. 

Senator Clark. Mr. Chairman, the committee desires very briefly 
this morning, simply as an interlude between the present major hear- 
ings of this investigation, to give a preliminary examination to a 
question which the committee may later decide to go into in some 
detail. It has to do with the relationship between the military arms 
of the Government, that is the War Department and the Navy De- 



3544 MUNITIONS INDUSTRY 

partment, and American inventors, more particularly inventars in 
the military and naval service of the United States. 

Lieutenant, in its work, this committee has learned of considerable 
correspondence between yourself and several arms firms. The com- 
mittee understands that you with your late father, Colon«l Cutts^ 
who was also an officer in the Marine Corps, was he not 

Lieutenant Cutts. That is right. 

Senator Clark. When did he retire ? 

Lieutenant Cutts. He died November 24. 

Senator Clark. Was he on the active list at the time of his 
death ? 

Lieutenant Cutts. He died 1 week before he retired, sir. 

Senator Clark. The committee understands that you in connection 
with your father were the inventors of the Cutts compensator, a 
device for reducing recoil in Thompson submachine guns and other 
weapons. I will ask you first. Lieutenant, in order to clear the 
matter up as we go, what weapons were these compensators ap- 
plicable to ? 

Lieutenant Cutts. They are applicable to all weapons, but our 
largest interest is the shotgun, sporting field. 

Senator Clark. For the purpose of taking' what we call the " kick " 
out of it? 

Lieutenant Cutts. They have other purposes also. In the shot- 
gun it is most revolutionary. We eliminate the old choke. We 
have changeable choke features, with new types of patterns, and 
it has a combination of seven guns in one by changing these chokes. 
The recoil reduction is thrown in extra. The main part is the im- 
provement of the patterns. We are now spending practically all our 
energies on that development. 

Senator Clark. It was also adaptable peculiarly to the Thompson, 
submachine gun ? 

Lieutenant Cutts. It is adaptable to the Thompson submachine- 
gun. 

Senator Clark. And a great deal of your energies in the past 
were devoted to its exploitation in connection with the submachine 
gun? 

Lieutenant Cutts. Yes. 

Senator Clark. It is also applicable to the ordinary army service 
rifle? 

Lieutenant Cutts. Yes. 

Senator Clark. Such as the Springfield, Enfield, or Krag? 

Lieutenant Cutts. Yes, sir. 

Senator Clark. It would seem to me, recognizing the ability of 
Lieutenant Cutts as an inventor, that his activities in relation to 
various arms firms while he remained on the active list of the 
United States Marine Corps, are of particular interest to this 
committee. 

Lieutenant Cut^ts. I beg your pardon ? 

Senator Clark. It would seem that the activities which are dis- 
closed in this correspondence, as to your activities and correspond- 
ence with various arms companies while a lieutenant on the active 
list of the United States Marine Corps, are of particular interest 
to this committee in its investigation. Lieutenant, am I correct in 



MUNITIONS INDUSTRY 3545 

the information that when this device was first perfected some 7 or 
8 years ago, it was offered to tlie Secretary of tlie Navy? 

Lieutenant Cutts. You are correct, sir. 

Senator Clark. Under what terms was it offered to the Secretary 
of the Nav}^ ? 

Lieutenant Cutts, With no strings attached. Tlie story is as 
follows : 

We felt that we had something new, at the point that our investi- 
gations had carried us so far. We also knew to carry it through to a 
logical conclusion it would cost a great deal of money and would 
probably be of interest to the Government. Whereupon we offered 
it to the Government and asked them if they had a fund to help 
us develop this device. They informed us that they were sorry, 
but there was no such fund available. 

Then we asked if we could have the facilities of the Naval Gun 
Factory, where they have the equipment which we desired, and 
were informed that unfortunately it meant punching the time clock 
and the labor involved would have to be paid for, wdiich amounted 
to money in the end. Accordingly, after we had gotten to this 
point, w^e then filed our patents ourselves and developed it on our 
own time and at our own expense. Then, before the patent issued, w^e 
notified the Navy Department and asked them if they washed it 
placed in the secret archives, figuring that once a patent comes 
out it becomes public knowledge. We were informed that they 
did not so desire. That was clue to no fault of anyone in the De- 
partment that I can conceive. It was a new thing. It had been 
tried many times before and failed, and until the proof of the pud- 
ding had come out, they had no way of really knowing of its value. 

Senator Clark. Let me ask you, Lieutenant, did your proposi 
tion to the Secretary of the Navy include any specific proposition as 
to compensation ? 

Lieutenant Cutts. No, sir. 

Senator Clark. Did your proposition for placing the patent in 
the secret archives and not having it published contain any propo- 
sition as to compensation? 

Lieutenant Cutts. No, sir. 

Senator Barbour. During that development period which you 
were discussing with the Department, had the Department inter- 
ested themselves in this invention, in that event the patent would 
belong to the Government? 

Lieutenant Cutts. As I understand the regulations of the law, 
so to speak, they are as follows: The position of the Government 
to its employees is exactly similar to that of an employer on the 
outside with his employees. In other words, a man who is hired 
by a civilian employer to develop certain devices or, in certain 
laboratories; naturally, his developments belong to his employer, 
for that is what he is being paid for. The same thing obtains in 
the service. But, however, the employee may keep his commercial 
rights, providing the Government does not wish to keep it secret. 

Senator Clark. As a matter of fact, the Thompson submachine 
gun was invented and developed by a man who was Assistant Chief 
of Ordnance at the time he developed it, was it not ? 

Lieutenant Cutts. I cannot state that, sir. 



3546 MUNITIONS INDUSTRY 

Senator Clark, Assistant Chief of Ordnance of the United States 
Army ? 

Lieutenant Cittts. I cannot tell you sir. That was before my time. 

Senator Clark. He was a high ranking officer of the Ordnance 
Department, I know. I cannot state just what. I cannot say 
whether he was Assistant Chief at the time, or had resigned, or not. 
When was this negotiation with the Secretary of Navy, Lieutenant? 

Lieutenant Cutts. About November 1925. 

Senator Clark. Who was Secretary of the Navy? 

Lieutenant Cutts. Curtis D. Wilbur, sir. 

Senator Clark. If the invention really were that. Lieutenant, 
assuming it is successful, it would be of the very greatest importance 
to the United States Navy and United States Army, wouldn't it? 

Lieutenant Cutts. I feel that it would be, sir. 

Senator Barbour. It is your observation that green troops, par- 
ticularly, almost invariably flinch the first time they go on a range, 
and endeavor to use high-power Army rifles ? 

Lieutenant Cutts. Yes, sir. 

Senator Clark. That interferes, of course, with the accuracy of 
their marksmanship? 

Lieutenant Cutts. Yes, sir. 

Senator Clark. Even in the Camp Perry matches, the old timers 
usually employ shoulder pads when firing guns ? 

Lieutenant Cutts. Yes, sir. 

Senator Clark. And it is more noticeable even as to flinching 
and marksmanship in regard to the Thompson submachine gun? 

Lieutenant Cutts. Yes, sir. In the Thompson submachine gun it 
is not so much the recoil as the climb of the weapon. 

Senator Clark. The recoil reduction of the compensator or 
stabilizer? 

Lieutenant Cutts. Compensator. 

Senator Clark. That interferes with the marksmanship and so 
does the rapidity of firing? 

Lieutenant Cutts. And it is dangerous to bystanders. It is very 
important that the gun shoot where it is aimed. 

Senator Clark. Now, Lieutenant, after you took out the patent 
on this device you sold certain rights in the letters patent to the 
Lyman's Gun Sight people? 

Lieutenant Cutts. Lyman? 

Senator Clark. Lyman; yes. 

Lieutenant Cutts. No, sir. All we do is license to manufacture 
for a period of time under a royalty agreement. 

Senator Clark. And also to the Auto Ordnance Corporation? 

Lieutenant Cutts. Under the same type of agreement, sir. 

Senator Clark. In other words, simply a license. You do not 
mean the ownership of the patents ? 

Lieutenant Cutts. I do not mean the ownership of the patents; 
no, sir. 

Senator Clark. The Lyman Co. has manufactured this compen- 
sator ? 

Lieutenant Cutts. Yes, sir ; they have, sir. 

Senator Clark. On the submachine guns sold by the Auto Ord- 
nance or the Federal Laboratories you received a royalty on your 
compensator? 



MUNITIONS INDUSTRY 3547 

Lieutenant Cutts. Yes, sir. 

Senator Clark. Have you received any commissions for the sale 
of that compensator or for the sale of ordnance other than your 
royalty on the patent? 

Lieutenant Cutts. I may clarify the situation by stating we have 
never sold any gun of any type whatsoever, nor have we ever ac- 
cepted any fonii of gratuity, other than that to which we are justly 
entitled, in the form of royalties. 

Senator Clark. You have not attempted to obtain commissions? 

Lieutenant Currs. No, sir; w^e have not. 

Senator Clark. I call your attention to a letter dated November 
17, 1932, signed by you, addressed to Mr, Walter B. Ryan, Jr., which 
I will ask to have marked with the appropriate exhibit number. 

(The letter referred to was marked " Exhibit No. 1204 " and is 
included in the appendix on p. 3737.) 

Senator Clark. Mr. Ryan's address is 20 Pine Street, New York 
City. Who is Mr. Ryan ? 

Lieutenant Cutts. Mr. Ryan is president of the Auto Ordnance 
Corporation. 

Senator Clark. This letter is headed, " Marine Barracks." 

Lieutenant Cutts. That happened to be my address at that time. 

Senator Clark. " Navy Yard, Philadelphia, Pa., November 17, 
1932." 

Lieutenant Cutts. Yes, sir. 

Senator Clark (reading) : 

Dear Mr. Ryan. I got in touch v.ith Captain Edson in regard to the Nic- 
araguan order for 61 guns. 

Who is Captain Edson ? 

Lieutenant Cutts. He is a captain of the Marine Corps. 

Senator Clark. Was he at that time stationed in Nicaragua? 

Lieutenant Cutts. In Nicaragua; yes. 

Senator Clark. At that time the marines were occupying Nic- 
aragua ? 

Lieutenant Cutts. When the marines were occupying Nicaragua; 
yes. 

Senator Clark (reading) : 

I got in touch with Captain Edson in regard to the Nicaraguan order for 
61 giins. He informed me that he considered that the new style compensators 
would be preferable on this order. I did not wire you for he said that he 
was getting in touch with you by telephone. 

Will you kindly send me 1 dozen of the new catalogs when they come 
out? Also send a few copies to the colonel — 

That was your father, was it ? 

Lieutenant Cutts. Yes, sir. 

Senator Clark (continuing reading) : 

For he will be able to place them at the War College. 

Lieutenant Cutts. That was in regard to the advance landing 
base. The marines were equipped with guns and they were making 
a study at the War College. 

Senator Clark (reading) : 

I have been thinking over the foreign sales proposition and I have a proposal 
to make. I would appreciate it if you could see your way clear to extend the 
same discounts to me on foreign sales that you extend to Federal Laboratories. 



3548 MUNITIONS INDUSTRY 

Federal Laboratories was the foreign sales agent for the Auto 
Ordnance Corporation ? 

Lieutenant Cutts. That is correct, sir. 
Senator Clark (reading) : 

It is not our iutentiou to compete with them. However, we also have many 
contacts and orders are apt to come through us at any time. 

Lieutenant Cutts. Yes, sir. 

Senator Clark (continuing reading) : 

In all probability these orders will come from different sources than those 
available to Federal Laboratories. I am not saying that our contacts are 
better than theirs, but in some cases it is only natural that this should be so. 

It would be particularly true in Nicaragua, where the marines 
were occupying the country, and both you and your father were 
officers of the Marine Corps, wouldn't it? 

Lieutenant Cutts. That would not apply, sir. I beg your pardon, 
sir. 

Senator Clark (reading) : 

But, in any case, the proposition of commissions is the important point. 
You are familiar with the fact that these have to be passed around on all 
foreign sales. NaturaUy, if Federal Laboratories should figure in on a sale 
in which they Iiave had no part, there are going to be objections. This is 
all the more true, for in every sale that we make there are going to be more 
people figuring in on the deal than would be the case if Federal Laboratories 
were to make the sale direct. 

Why would that be true, Lieutenant? 

Lieutenant Cutts. They generally have an agency. 

Senator Clark. Why would more people be figuring in on a deal 
made through you and your father than through the ordinary sales 
agency of the Federal Laboratories? 

Lieutenant Cutts. That is because it is the usual thing. If a man 
approaches you in making a sale, he generally has associates in his 
own country. There is a purchasing agent and you turn it over 
to me and he demands his share. 

Senator Clark. What ^vay did you proceed? 

Lieutenant Cutts. We did not proceed. 

Senator Clark. How did you intend to proceed when you were 
making this jDroposition ? 

Lieutenant Cutts. I do not recall, sir; because it was never car- 
ried through. 

Senator Clark (reading) : 

This is due to the fact that we have had to first establish our contacts 
over here and it will be necessary to take care of these contacts. 

Lieutenant Cutts. That answers that. 

Senator Clark. Who were those contacts? 

Lieutenant Cutts. It depends on separate deals. 

Senator Clark. You already having established contacts, who 
were some of the contacts? 

Lieutenant Cutts. We had one concern in Germany, our own rep- 
resentative there. 

Senator Clark. I will read you this sentence again. 

Lieutenant Cutts. Yes, sir. 

Senator Clark (reading) : 

This is due to the fact that we have had to first establish our contacts over 
here, and it will be necessary to take care of these contacts. 



MUNITIONS INDUSTRY 3549 

Lieutenant Cutts. That is correct. 

Senator Clark. There is nothing said about a firm in Germany 
here. 

Lieutenant Cutts. We had a German contact through a man in 
this country, who goes over there. 

Senator Clark. Who was that^ 

Lieutenant Cutts. Mr. Besler. 

Senator Clark. Who? 

Lieutenant Cutts. Besler. He is not in the gun game. 

Senator Clark. What is his business? 

Lieutenant Cutts. His business is railroad equipment. 

Senator Clark. Now, Lieutenant, the paragraph I have just read 
clearly shows that at that time you were proposing to enter into 
the sale of Thompson submachine guns abroad, weren't you? 

Lieutenant Cutts. We were thinking of it abroad. 

Senator Clark. Provided the commission v.as satisfactory to you? 

Lieutenant Cutts. Our agents over there were going to handle 
them for police guns. We wanted to know what arrangements they 
could make. 

Senator Clark (reading) : 

Fortunately, or unfortunately, our contacts are all big ones and they just 
won't be bothered unless the financial return is commensurate. They are not 
interested in small stuff. 

Who are the big ones? 

Lieutenant Cutts. The big one is Neuhaus, Dr. Neuhaus. 

Senator Clark. Who is he? 

Lieutenant Cutts. Of Germany. He was the chief engineer of 
A. Borsig & Co. 

Senator Clark. So, Lieutenant, your answer was not strictly ac- 
curate awhile ago when you said you never proposed to engage in 
a sale of Thompson submachine guns if the commission was satis- 
factory ? 

Lieutenant Cutts. No ; I beg your pardon. As I stated earlier, 
we never sold any guns. After this letter was written, within a 
week, I reversed my decision and decided not to enter into it in any 
way, because it might put me in a false position, and since then we 
have stuck entirely to compensators, and I think the records of any 
company in this country will bear me out. 

Senator Clark (reading) : 

You are out to move guns, and I feel confident that we can help you move 
them just as well as Federal Laboratories — that is, if we can make it worth 
our agents' while. 

Lieutenant Cutts. That is the point. 

Senator Clark. In other words, it was a question of commissions. 

Lieutenant Cutts. It was a question of the agent. 

Senator Clark. The commission being satisfactory, you were will- 
ing to engage in the business of moving these guns, weren't you ? 

Lieutenant Cutts. Well, this was not consummated, sir. It was 
considered, but it was not carried through. 

Senator Clark. I understand it was not consummated. I am get- 
ting at your attitude. 

I do not see where Mr. Young will have an objection for he has granted us 
discounts on all of his equipment and gas that we may sell. 

Lieutenant Cutps. Yes, sir ; that was never carried out. 



3550 MUNITIONS INDUSTRY 

Senator Clakk. That apparently refers to a previous arrangement 
with Mr. Young. What was the discount he granted you? 

Lieutenant Cutts. I do not recall, sir. It was just an oral state- 
ment, that is all. 

Senator Clark (reading) : 

If an ordei* comes in for guns there will be an order for gas, etc., to go 
along with it. In other words, he also stands to profit — so it is reciprocal 
all along the line including compensators. 

Lieutenant Cutts. That is our interest, in the compensators. 
Senator Clark (reading) : 

Next, in regard to Nicaragua. This is a foreign sale and does not come 
under Federal Laboratories existing agreement for domestic sales. If you 
know the history of the T. S. M. G.— 

What is that? 

Lieutenant Cutts. Thompson submachine guns. 
Senator Clark. Oh, yes ; Thompson submachine gun. [Continues 
reading :] 

in Nicaragua, you will know that at the beginning the powers that be were 
against the gun, speaking of the marines. They did not even wish to give 
the gun a trial on the trails. Fortunately, we had an active agent who gave 
many demonstrations and after intensive effort on his part he finally brought 
the necessary high-ranking officers around to his point of view. Then the 
playing up of the gun in the reports was not accidental. True, the gun did 
its stuff — but so did the other weapons. Next, our friend was made ordnance 
oflicer of the Nicaraguan Government and the initial orders for T. S. M. G.'s 
for the Nicaraguan Government came through. All the above occurred in 
Nicaragua. 

Who was the officer who was made ordnance officer of Nicaragua? 

Lieutenant Cutts. Mr. Bleasdale. 

Senator Clark. Who is he ? 

Lieutenant Cutts. He is an officer in the Marine Corps. I might 
clarify that, sir, that demonstration at that time. You see, the 
marines already had these guns. They were bought back in 1926 
for the mail guard. There was a question at that point of meeting 
the bandits with the gun. So the marines took the gun and com- 
pensated it and had a superior weapon and used it. Then when 
Nicaragua broke, the marines went to Nicaragua and took these 
guns with them. The gun was a fast gun, firing at the rate of 1,200 
a minute, and was not at all suitable for military purposes ; first, on 
account of the waste of ammunition; second, due to the lack of 
accuracy with that high rate of fire. 

So we took the gun, and with Auto Ordnance changed the mech- 
anism inside and developed the gun into its present military model, 
which is a slowed-down gun, firing at the rate of 500 to 600 shots 
per minute. 

Then the Auto Ordnance took the new parts and replaced them for 
the Government for the old parts. That was what this demonstra- 
tion referred to, the putting over of the new type of gun, which gave 
the marines a very valuable weapon on the trails, which they did 
not have before. 

Senator Clark. I will read this again : 

If you know the history of the T. S. M. G. in Nicaragua, you will know 
that at the beginning the powers that be were against the gun, speaking of 
the marines. They did not even wish to give the gun a trial on the trails. 

Lieutenant Cutts. That was the fast gun. 



MUNITIONS INDUSTRY 3551, 

Senator Clark (reading) : 

Fortunately, we had an active agent who gave many demonstratums and 
after intensive effort on his part he finally brought the necessary high-ranking 
officers around to his point of view. 

Who was j^our active agent? 

Lieutenant Cutts. That was Bleasdale, 

Senator Clark. Was he in the Marine Corps at the time? 

Lieutenant Cutts. Yes, sir ; he was a compensator man. 

Senator Clark. I say, was he in the Marine Corps at the time? 

Lieutenant Cutts. Yes, sir. 

Senator Clark. So he was occupying a dual position, being an 
officer in the Marine Corps which was at that time occupying Nic- 
aragua, and at the same time being your active agent for the purpose 
of getting high-ranking officers, marine officers, to reverse their opin- 
ion in regard to the gun. 

Lieutenant Cutts. No, sir; I object to that, sir. 

Senator Clark. All right, I will read the sentence again : 

They did not even wish to give the gun a trial on the trails. Fortunately,. 
we had an active agent — 

Who you now say was on the active list of the Marine Corps — 

who gave many demonstrations, and after intensive effort on his part he 
finally brought the necessary high-ranking ofiicers around to his point of view. 
Then the playing up of the gun in the reports was not accidental. 

Naturally, if your own agent was writing the reports. 
Lieutenant Cutts. He did not write the reports. 
Senator Clark (reading) : 

True, the gun did its stuff — but so did the other weapons. Next, our friend' 
was made ordnance officer — 

That was your own agent that was made ordnance agent of 
Nicaragua ? 

Lieutenant Cutts. In Nicaragua; yes. 

Senator Clark. At the same time he was on the active list in tlie 
Marine Corps? 

Lieutenant Cutts. Yes, sir. 

Senator Clark (reading) : 

Next, our friend was made ordnance officer of the Nicaraguan Government 
and the initial orders for the T. S. M. G.'s for the Nicaraguan Government 
came through. All of the above occurred in Nicaragua. 

You are now getting what will probably be the final order before the 
Marines pull out. A new government, the Sacasa Government has come into 
power — a new deal all around. 

Does that mean your agent was going out as ordnance officer for- 
the Nicaraguan Government? 

Lieutenant Cutts. I beg your pardon? 

Senator Clark. I say, does this mean that your agent, this officer 
you mentioned, was going out as ordnance officer for the Nicaraguan 
Government? 

Lieutenant Cutts. That is correct. 

Senator Clark. And you thought that was something that Mr- 
Ryan better be advised about? 

A new government, the Sacasa Government, has come into power — a new- 
deal all around. I have asked for commissions on foreign sales in general: 
83876— 35— PT 15 2 



3552 MUNITIONS INDUSTRY 

which we are able to make. But here is what I plan doing specifically. I 
want Nicaragua. If you can grant this, I will have our friend make tlie 
necessary contacts, probably the Minister of War. We will have the commis- 
sion on this sale of 61 guns to pave the way and it ought to make a nice 
incentive for sales to follow. 

What does that mean, Lieutenant? 

Lieutenant Cutts. It means 

Senator Clark (reading) : 

If you can grant this, I will have our friend make the necessary contacts, 
probably the Minister of War. We will have the commission on this sale of 
61 guns to pave the way. 

Lieutenant Cutts. Yes. 

Senator Clark. How did the commission on the sale of 61 gims 
pave the way with the Minister of War in Nicaragua for further 
sales ? 

Lieutenant Cutts. It paved the way for an active agent down 
there. 

Senator Clark. Was the Minister of War getting any cut out of 
this commission on the 61 guns? 

Lieutenant Cutts. No, sir. 

Senator Clark. Paving the way is another technical term we are 
er.countering here. We have had a good many technical terms 
in the course of this investigation. 

Then, when the marines pull out, the good work will continue. If this is 
not done — this order will probably be the last except for replacements. On 
the other hand, if Ave have the right party down there working for us and 
receiving a commission — the situation pi*esents an entirely different picture. 

Wlio is the right party to whom you refer? 

Lieutenant Cutts. We had none. The point was, it was a sug- 
gestion to them to find the right representative there to handle the 
guns, only to sell to governments. They do not sell to both sides. 
That is directly to the government on government sales. But this 
was never done. We decided against it. 

Senator Clark (reading) : 

Would you kindly draw up the necessary papers similar to the ones you are 
making up for Young? You see, I really have to have some credentials before 
I am in a position to go ahead. In this agreement will you kindly include 
Nicaragua specifically. 

Next, if you see what I am working for, and I believe you will, will you 
kindly let me know what the commission v\'ill be on this Nicaraguan order, 
so that I may go ahead and make my plans? 

That was the order that had already been made for 61 guns, was 
it not, to which those refer? You wanted him to let you know 
what the commission on the 61-gun order would be. 

Lieutenant Cutts. Yes, sir. 

Senator Clark (reading) : 

The commission should be the same as for other foreign sales. 

The time is short before the marines pull out, and there is much to be done 
by air mail, so the favor of an early reply is requested. 

I am looking into the future on this stuff, and I am out to help you sell 
guns. As you know, our record to date has not been bad, and I am certain 
tbat my plan is going to work. 



MUNITIONS INDUSTRY 3553 

I forgot to mention, but will you kindly let me know what the commission 
is on spare parts? The liost thing, if possible, would be to send me the dope 
on commissions on everything that you handle. 
With best wishes, I am cordially yours, 

R. M. CuTTS, Jr., 
Cutis Compensator. 
P. S. — I do not know the price of the last guns that you sold to Nicaragua. 
If tiiey were $147.50, they were at the United States Government price, and 
they never should have gone out at this price. It cannot be continued after 
we withdraw — 

that is, after the marines withdraw from Nicaragua ? 
Lieutenant Cutts. Yes. 
Senator Clark (reading) : 

and the time to make the break is now. I feel that this can be done and save 
face with the new model compensators providing you stamp the guns as per the 
Army specifications. The new gun could then be called a new model and the 
price of $225 could be charged. If the Marine Corps sold the guns to Nicara- 
gua at the United States Government price, I feel that they had no business 
doing it. At any rate we must let that pass and build for the futiire. I'lease 
let me know the price you are quoting on these guns and the price quoted on 
the old guns as soon as possible and I shall see if I cannot arrange things 
on this end. It may be possible to do so without killing the deal. Of course, I 
shan't do that. 

What did you mean by " arrange things on this end ", you being 
in the Marine Corps? 

Lieutenant Cutts. The point is this — I might explain tliat whole 
paragraph, to clarify it. 

Senator Clark. Be very glad to have you do it. 

Lieutenant Cutts. You see, there was no commission on the 61 
guns. Those are sold through the Marine Corps at the Govern- 
ment price, and the Auto Ordnance, knowing that was no business of 
the marines, inquired, wanting to know what they could do about 
it, because they could not afford to sell at that price, or other parts; 
there was no profit in it. The cost of changing over from the old 
model to the new absorbed every bit of profit there was. That is why 
they came and asked me what to do in the matter, and I told them 
the best procedure would be to sell the new model at the $225 
jDrice. This whole thing was for them to get an agent down there to 
represent them. 

Senator Clark. You say the marines had no business doing this? 

Lieutenant Cutts. I mean from the Auto Ordnance point of view. 

Senator Clark. You say you would undertake to arrange things 
on this end. Did you take the matter up with your superiors? 

Lieutenant Cutts. No, sir ; I did not. 

Senator Clark. How did you go about arranging things on this 
end? 

Lieutenant Cutts. As a matter of fact, I did not at this time. The 
Marines left, and I do not know what their final disposition was of 
the case. 

Senator Clark. So that this letter conclusively indicates, Lieuten- 
ant, that you had not only an arrangement for receiving commis- 
sions on the sale of Thompson submachine guns and the rest of Mr. 
Ryan's line, but you were undertaking to make a new and specific 
arrangement, specifically mentioning Nicaragua, for which you 
w'ere to have the agency ? 

Lieutenant Cutts. No; we did not carry that through. 



3554 MUNITIONS INDUSTRY 

Senator Clark. I understand it was not carried through. 

Lieutenant Cutts. Yes. 

Senator Clark. But at the time you wrote this letter, that is what 
you Avere requesting of Mr. Ryan? 

Lieutenant Cutts. We considered it was not ethical, and we did 
not carry it through. Our main interest was with the compen- 
sators, and naturally we were interested in seeing the guns move 
w^th the compensators. But there is one other point we were very 
much interested in, and that was to see the guns only go to the 
Government and not to wrong hands. It would be very foolish 
to go down there again, as I would probably have to in the service, 
with many of my friends, and face compensators in the wrong hands. 

Senator Clark. So your only interest was in the capacity of an 
officer of the Marines and as proprietor of this compensator? 

Lieutenant Cutts. I can point out that we held out some stuff 
on foreign governments. We did not want to sell them. 

Senator Clark. Lieutenant Cutts, how much knowledge did your 
commanding officer or superior in the Marine Corps have at that time 
of your activities ? 

Lieutenant Cutts. I cannot state that, sir. They knew of the 
compensator. They knew of our arrangements. There was nothing 
unfair about it. 

Senator Clark. Did they know that Mr. Bleasdale was acting as 
the agent for the Cutts compensator at the same time he was an 
officer on the active list of the Marine Corps and at the same time 
was the ordnance officer for Nicaragua? 

Lieutenant Cutts. Bleasdale is a partner. He is not really an 
agent. 

Senator Clark. You refer to him as an agent. 

Lieutenant Cutts. I may have ; but he is a partner. 

Senator Clark. You identified him as an agent when I asked you 
who he was. 

Lieutenant Cutts. He is a partner, that is what he is. 

Senator Clark. " Fortunately, we had an active agent." What is 
fortunate about it? He was engaged actively to sell compensators 
to the Marine Corps and was interested in the submachine guns. 

Lieutenant Cutts. The Marine Corps had the submachine gun. 
It was a change to a new model. 

Senator Clark. I did not say to sell guns, but to overcome the 
Marine Corps prejudice against it, to move the guns, to overcome 
their prejudice against the gun. He was active in pushing it. 

Lieutenant Cutts. Yes. 

Senator Clark. At the same time he was also active in the Marine 
Corps. 

Lieutenant Cutts. Yes. He carried out his duty as he saw fit. 

Senator Clark. And at the same time was ordnance officer for 
Nicaragua. 

Lieutenant Cutts. That is correct. This gun was a gun that we 
believed in from the first and it subsequently proved itself. If we 
had not believed in it, it would have been another story. It proved 
itself in Nicaragua and turned out to be one of the most valuable 
weapons we had down there. 

Senator Clark. There evidently is some connection between his 
being an ordnance officer and the sale of guns. 



MUNITIONS INDUSTRY 3555 

Lieutenant Cutts. As a matter of fact, I did not conduct any of 
that. 

Senator Clark. I understand that. After saying that fortunately 
you had an active agent on the ground who obtained these tests and 
brought the necessary high ranking officers around to his point of 
view, you called attention to the fact that other weapons showed up 
very good, too. 

Lieutenant Cutts. We did. 

Senator Clark. And you say: 

Next, our friend was made ordnance officer of the Nicaraguan Government 
and the initial order for the T. S. M. G.'s for the Nicaraguan Government came 
through. 

You evidently saw a direct relationship between cause and effect 
there, between his being made ordnance officer for Nicaragua and 
the initial order coming through ; and then you ask for the amount 
of commission you are to be given. 

Lieutenant Cutts. Possibly, Senator, you have heard about sales 
letters before? 

Senator Clark. We have heard a great deal about sales letters 
here. 

Lieutenant Cutts. That is a sales letter, selling myself to the Auto 
Ordnance Corporation. As a matter of fact, the Marines equipped 
the Nicaraguan Army and these sales would have come through in 
any event. 

Senator Clark. You do not mean to say as an officer of the Gov- 
ernment you would tell Mr. Ryan something that was not true, in 
order to sell these things? 

Lieutenant Cutts. No; that would have come through anyway, 
because the Marine Corps would equip them as they equipped them- 
selves, even as to uniforms and everything else. 

Senator Clark. Did your superiors have information that you 
were writing around, dating your letters at the marine barracks 
and entering into sales arrangements for munitions? 

Lieutenant Cutts. The marine barracks, sir, happened to be where 
I was living. It happened to be my address, just like any other 
man's address, and every one to whom I have written knows that I 
was in the marines. 

Senator Clark. Did your superiors know of this practice of yours 
writing from the marine barracks, dating your letters at the marine 
barracks, in connection with the sale of munitions for your private 
profit ? 

Lieutenant Cutts. I cannot say that they did, but I imagine they 
would, because that is where I was living. 

Senator Clark. Who was your superior officer at that time? 

Lieutenant Cutts. I beg your pardon? 

Senator Clark. On November 17, 1932, when you wrote the letter 
I just read. 

Lieutenant Cutts. I was there definitely. I was stationed there. 
I lived there. 

Senator Clark. I say, Who was your commanding officer? 

Lieutenant Cutts. Captain Steel — just a minute, sir. I will think 
of it. Come back to that later, please. I will think of it later. 

Senator Clark. And who was your post commander or station 
commander ? 



3556 MUNITIONS INDUSTRY 

Lieutenant Cutts. The commanding officer? 

Senator Clark. Yes. 

Lieutenant Cutts. I was directly under the commanding officer. 
It was Colonel Evans. 

Senator Clark. I now call your attention to a letter dated, " Ma- 
rine Barracks, Navy Yard, Philadelphia, Pa., December 7, 1932 'V 
addressed by you to Mr. Walter B. Ryan, Jr., which I will offer for 
appropriate marking. 

(The letter referred to was marked "Exhibit No. 1205 '\ and 
appears in full in the text.) 

Senator Clark. This is about 3 weeks after the other letter that I 
just read. 

Mr. Walter B. Ryan, Jr., 

New York City. 

Deiar Mr. Ryan : I have delayed in answeriiis your letter of Novem!)er 23 
for I hoped to be able to tell yon definitely when I would be in New York. I as 
yet do not know just when I shall be able to get away, but I am trying to- 
arrange it for the near future. 

The reason I got in toucli with you in regard to the foreign-sales proposition 
was because I did not want yovi to tie up with Young hand and foot. I have 
brought up the fact that as far as selling is concerned, the more representatives 
the merrier. 

That would not indicate that you had a week after the previous 
letter withdrawn your offer? 

Lieutenant Cutts. I don't know the time, but Avithin a very short 
period after that I decided not to carry it on. 

Senator Clark (reading) : 

There is a company known as the " Government Service Co." in which I am 
interested, and I hope they will be able to handle foreign sales of your products. 
I can't guarantee just what they will be able to do, but in many ways their 
prospects are just as good as l^oung's, and in some ways they are better. I 
shall run over the situation when I see you. 

I also have some ammunition lined up for you at a discount. Of course it 
will be subject to test. 

When do you expect your new pamphlets oft the press? I have run out of 
them and am in urgent need of about 2 dozen. These are to go out to about 
10 or more countries, and I hope that you will be able to send me new ones. 
Our contacts are widening constantly, and something ought to pop soon. 

Now, what was the Governmental Service Co.? 

Lieutenant Cutts. The Governmental Service Co. is now non- 
existent, except as an operating company for compensators. It 
handles nothing but compensators. 

Senator Clark. What was it at this time ? 

Lieutenant Cutts. It was conceived to be able to handle other 
things besides compensators, anything that was desired, but it was 
decided, as I informed you. Senator, not to carry it through, so we 
relegated the whole thing to the discard and handled nothing but 
compensators and have done so, and the Government Service Co. 
has never done any business of any sort in anything else. 

Senator Clark. Who owned the stock of the Governmental Serv- 
ice Co.? Was it incorporated? 

Lieutenant Cutts. No ; it was not incorporated, sir. 

Senator Clark. Who were the formers? 

Lieutenant Cutts. Mr. Barron in New York, an attorney in New 
York. He operated in his office, and we used that for the 
compensator. 



MUNITIONS INDUSTRY 3557 

Senator Clark. Were you a partner in the firm ? 

Lieutenant Cutts. No; I am not, sir. 

Senator Clark. Were _you at the time ? 

Lieutenant Cutts. No, sir; I have no active interests outside of the 
compensators, sir. 

Senator Clark. What was your interest? You say there is a 
company known as the " Governmental Sales Co.", to which I made 
reference. 

Lieutenant Cutts. That is correct. 

Senator Clark. And he says they will be able to handle foreign 
sales for your products ? 

Lieutenant Cutts. Correct. 

Senator Clark. How were you interested? 

Lieutenant Cutts. That was the company that Mr. Barron and 
myself formed but did not operate for the reasons I have given 
before. 

Senator Clark. But you were a partner in it at the time it was 
formed ? 

Lieutenant Cutts. No ; it is now a compensator company. 

Senator Clark. On December 16, 1932, there was a letter from 
Auto-Ordnance Corporation to Lt. R. M. Cutts, Jr., which I offer 
for appropriate number. 

(The letter referred to was marked " Exhibit No. 1206 " and ap- 
pears in full in the text.) 

Senator Clark. Mr. Ryan wrote you as follows under date of 
December 16, 1932 : 

Lt. R. X. Cutts, Jr., 

Marine Barracks, Navi/ Yard, Philadelphia, Pa. 

Dear Lieutenant Cutts : Pursuant to our telephone conversation of last 
night, I hand you herewith our regular export price list of the Thompson 
submachine gun, spare parts, and equipment. The dealers prices listed thereon 
are all net to us, f.o.l). Hartford, Conn., and we make shipment only against 
cash or the equivalent thereof, such as a letter of credit established in our 
favor in a New York bank. Furthermore, we reserve the right to submit any 
order prior to its acceptance by us to the State Department at Washington, 
and reserve the right to refuse to fill any order for any reason whatsoever. 

We quote you tliese prices on a nonexclusive basis for export to some 
European country other than the following, in which countries we have already 
exclusive sales arrangements : British Empire, Poland, Esthonia, Latvia, 
Lithuania, Bulgaria, Turkey, Norway, Sweden, Denmark. 

Should the country to which you desire to have shipment made by one 
of the above mentioned, it is possible that we could make arrangements to be 
released from our present exclusive agencies. In addition, if the order which 
you contemplate receiving is a large one, the prices we have quoted you on 
the enclosed list may possibly be modified to some extent, depending upon the 
size of the order and special circumstances connected therewith. 

Trusting that business will eventuate, and assuring you of our desire to 
cooperate with you in every way, we are 
Yours faithfully, 

Auto-Ordnance Corporation. 

Initialed by Mr. Ryan. 

That, Lieutenant, referring to telephone conversation of the night 
before, and giving you nonexclusive territory in Europe, was dated 
on December 16, 1932, just a month after the first letter which I read. 

Lieutenant Cutts, Correct. 

Senator Clark. So that apparently up to that time you had not 
yet concluded it was unethical for an officer on the active list to do 
this. 



3558 MUNITIONS INDUSTRY 

Lieutenant Cutts. Mr. Senator, that decision was made before we 
did any business. I cannot remember exactly the dates. I said it 
was about — maybe it was about 2 months — but no business was ever 
consummated, for the reasons I gave. 

Senator Clark. But it was a definite sales arrangement 

Lieutenant Cutts. It was a definite sales arrangement. 

Senator Clark. Wait until I finish my question. 

But it was a definite sales arrangement made by you in a tele- 
phonic conversation, confirmed by letter from Mr. Ryan, of New 
York, to you at the Marine Barracks at Philadelphia, for the sale 
of Thompson submachine guns. 

Lieutenant Cutts. That is correct. 

Senator Clark. Did any commission ever result under that? 

Lieutenant Cutts. No guns have ever been sold. 

Senator Clark. Did you ever get any commission on the guns for 
Nicaragua ? 

Lieutenant Cutis, No; we did not want the commission. It was 
for an agent, and was never done. These guns were sold at the 
United States Government price. 

Senator Clark. You were going to pay an agent and give him a 
commission on a sale already made, were you ? 

Lieutenant Cutts. Absolutely, because we had only the compensa- 
tor and took the royalty on the compensator. When a gun is sold, 
that means a compensator royalty. We cannot play both ends 
against the middle. 

Senator Clark. The guns had been sold through Mr. Bleasdale — 
what is his rank? 

Lieutenant Cutts. Captain. 

Senator Clark (continuing). Through Captain Bleasdale at the 
time he was agent in Nicaragua. Why give him a new commission 
on a sale already made? 

Lieutenant Cutts. There was no commission. 

Senator Clark. You asked for a commission. 

Lieutenant Cutts. I suggested we do pay a commission on that in 
order to establish some sales later down there. 

Senator Clark. To whom did you intend to pay a commission on 
the 61 guns? 

Lieutenant Cutts. That commission was never paid, and we were 
looking around to find out who in the new Sacasa government would 
be the most reputable man to handle them in that territory. 

Senator Clark. You say 3^ou were looking for a man in the new 
Sacasa government? 

Lieutenant Cutts. A man with connection with the government. 

Senator Clark. Let me see if I understand you correctly. 

Lieutenant Cutts. Yes, sir. 

Senator Clark. You were going to get a new agent down there 
and pay him a commission on a sale which liad already been made, 
with which he had nothing to do, in order to straighten him up 
for future business? Is that correct? 

Lieutenant Cutts. I was suggesting that they do tliat. We had 
no agent. 

Mr. Senator, one of the difficulties in these situations which de- 
velop with respect to the Thompson gun is well known, and when the 
marines come out of a country, every person who thinks he can get 



MUNITIONS INDUSTRY 3559 

it, wants to get the agency for those guns. The same thing occurred 
in Haiti, and they wrote me and asked me, " How about this gentle- 
man who was down there at the time ? " And I said, " No ; I thought 
if they were to do that, they should deal direct with the Haitian 
Government." 

Senator Clakk. What about the commission to the man on the 
61-gun order, which had already been made with the Nicaraguan 
Government through Captain Bleasdale? You asked for a com- 
mission on that order. What was to go with that commission? 
What was to be done with that commission, if it was given? 

Lieutenant Cutts. I believe I answered that in the letter, sir. 

Senator Clark. What was Captain Bleasdale's first name? 

Lieutenant Cutts. Victor. 

Senator Claek. Is he still on the active list of the Marine Corps? 

Lieutenant Cutts. Yes, sir. He has never received any commis- 
sion on any sales, either. 

Senator Clark. Apparently none of you received a commission. 

Lieutenant Cutts. No. 

Senator Clark. I am trying to find out what you intended to do 
with the commission if Auto-Ordnance had come through with it,, 
when you had asked for it. 

Lieutenant Cutts. I told them, on page 2 of the letter dated 
November 17, 1932, Mr. Senator, the second paragraph. I stated 
that we would have the commission to pave the way for future sales 
and that would make further contact. 

Senator Clark. That is what I am trying to find out, how paying 
a man a commission on a sale which had already been made, with 
which he had nothing to do, is going to pave the way for a future 
sale. That is connected up with the Nicaraguan Minister of War. 
I want to know how the paying of a commission on a sale which 
had already been made, with which he had nothing to do, is going 
to pave the way for future sales. 

Lieutenant Cutts. Nobody got the commission, and it only 
amounted to a retainer to awaken the interest of whoever was to be 
the representative. 

Senator Clark. How much roj'alty did you get on these various 
sales ? 

Lieutenant Cutts. I do not recall that. They vary. 

Senator Clark. What was the basis of it, if you recollect? 

Lieutenant Cutts. It generally works on a percentage basis. 

Senator Clark. A percentage on the sales price of the gun? 

Lieutenant Cutts. Yes, sir. 

Senator Clark. Captain Bleasdale shares in the royalty? 

Lieutenant Cutts. He shares in our royalty. 

Senator Clark. And did share in the royalty at the time he was 
ordnance officer for Nicaragua? 

Lieutenant Cutts. Yes, sir; but he did not sell those guns be- 
cause the Marine Corps was equipped with them, the same as we 
equipped the first guns they already had. They had already been 
purchased. 

Senator Clark. I will read to you a letter dated November 8, 1933, 
from Auto-Ordnance Corporation to you, which I offer for appro- 
priate number. 

(The letter referred to was marked " Exhibit No. 1207 " and ap- 
pears in full in the text.) 



•3560 MUNITIONS INDUSTRY 

Senator Clark (reading) : 

Lt. R. M. CuTTS, Jr., 

Marine Corps Headquarters, Neto Navy Building, Washington, D. C. 
Dear, Lieutenant Cutts : — 

This is at the time you were still in Washington, is it Lieutenant? 

Lieutenant Cutts. Yes, sir. 

Senator Clark. Was that during the period that you were an aide 
at the White House? 

Lieutenant Cutts. No, sir. 

Senator Clark. You were going right onto this business at the 
time you were an aide at the White House, were you. Lieutenant ? 

Lieutenant Cltts. On the compensator, yes, sir; but the White 
House has nothing to do with it. 

Senator Clark. I understand that. 

Lieutenant Cutts. Our duties at the White House were social 
duties only. 

Senator Clark. But you were engaged in this business at the same 
time you were a White House aide? 

Lieutenant Cutts. I have been engaged in it since we developed 
the compensator business. 

Senator Clark. That letter reads [reading " Exhibit No. 1207 "] : 

Lt. R. M. Cutts, Jr., 

Marine Corps Headquarters, New Navy Building, Washington, D. C. 

Dear Lieutenant Cutts : I would appreciate your letting uie know at once 
exactly what steps you have taken in your negotiations for a sale of our guns 
to Russia. I would also like to know through whom you are attempting to 
work this and what further steps you contemplate taking in the near future, 
in view of recent developments between this country and Russia. 

I am anxious to have this information with all possible speed, inasmuch as 
I do not wish to run afoul of your negotiations in certain matters that I am 
planning to act myself very shortly. Needless to say, what you tell me will be 
kept in strictest confidence, if you so desire it. 

What steps had you taken to initiate negotiations for the sale of 
Thompson submachine guns in Russia ? 

Lieutenant Cutts. Nothing. He was interested in that point be- 
cause he knew we were thinking of and contemplating selling com- 
pensators, and when we sell a compensator, that means the guns 
they are on, naturally. You show the Thompson machine gun and 
other types in the catalog, and what the status is in this country. 
We had made no steps on sales to Russia. He was inquiring. 

Senator Clark. Evidently Ryan got the idea yo uhad negotia- 
tions on sales for Russia, and he might run afoul of j^ou unless you 
acted in agreement. Had you ever told him anything to that effect? 

Lieutenant Cutts. He knew we were looking over the compen- 
sator situation with regard to compensator sales, and which needed 
a different kind of compensator. Our agreement with Ryan figured 
on a percentage of sales price. If he sold an uncompensated gun 
or a compensated gun, the sales price would have to be different to 
take care of it. 

Senator Clark. How would he run afoul of your negotiations by 
selling submachine guns, unless j^ou were also engaged in selling 
submachine guns? 

Lieutenant Cutts. I cannot say. He was inquiring in that regard 
if we were, which we were not. He was requesting information. 



MUNITIONS INDUSTRY 3561 

Senator Clark. Coming back to this exhibit, Lieutenant; that 
date is November 8, 1933? 

Lieutenant Cutts. That is correct. 

Senator Clark. You were a White House aide at that time. You 
were there, roughly, from March 1933 to September 1934? 

Lieutenant Cutts. Correct. March 1933 ; I went in at the time 
the President did, shortly after. 

Senator Clark. What were the matters concerning wdiich Mr. 
Ryan writes, which you had pending in Russia, that he had to bo 
certain not to interfere with? 

Lieutenant Cutts. He says, " in certain matters that I am plan- 
ning to act myself very shortly." 

Senator Clark. He says he does not w4sh to run afoul of your 
negotiations. 

Lieutenant Cutts. He has used the word '' negotiations." I had 
no negotiations. I was merely investigating the situation. 

Senator Clark. Do you have an agent in Russia ? 

Lieutenant Cutts. No, sir. 

Senator Clark. Did you ever have an agent in Russia? 

Lieutenant Cutts. No, sir. 

Senator Clark. What countries did you have representatives in? 

Lieutenant Cutts. A representative in France. 

Senator Clark. Who w^as that? 

Lieutenant Cutts. Carnot. And a representative in Germany. 

Senator Clark. Who was that? 

Lieutenant Cutts. Dr. Neuhaus. They were our foreign repre- 
sentatives at that time. 

Senator Clark. Now I call your attention to a letter dated No- 
vember 9, 1933, addressed to" Mr. Ryan, headed " Headquarters 
U. S. Marine Corps, Washington", wliicli I ask be appropriately 
numbered. 

(The letter referred to was marked " Exhibit No. 1208 " and 
appears in full in the text.) 

Senator Clark. That letter reads : 

Mr. Waltejr B. Ryan, 

31 Nassau Street, New York City. 
Deiar Mr. Ryan : I am enclosing a letter from Dr. Neuhaus, my German 
representative, in regard to the Schmeisser M. P. for your information, 
comment, and return. 

What is the Schmeisser M. P. ? 

Lieutenant Cutts. It is a police pistol similar to the Thompson, 
shooting a 9 millimeter. 

Senator Clark (continuing reading) : 

Now in regard to Russia, I interviewed a Mr. D. A. Uger, chief inspector of 
the Aviation-Automotive Department. 

Was that Mr. LTger, the chief inspector of the Aviation-Automo- 
tive Corporation? 

Lieutenant Cutts. No; that is Amtorg. 

Senator Clark. That is the purchasing corporation? 

Lieutenant Cutts. That is the purchasing corporation for Russia ; 
yes, sir. 

Senator Clark (continuing reading " Exhibit No. 1208 ") : 

They had no military men over here. Mr. Uger requested that I furnish 
him with complete information and he would forward it to Russia. He assured 



3562 MUNITIONS INDUSTRY 

me that there would probably be no difficulty in having a commission sent 
over here. This would seem all fine on the surface but there are two important 
catches. 

The first catch is the question of payment and this includes contracts. 
Their contracts are so drawn that they can generally find a loophole. The 
second catch is in regard to patents. Russia really recognizes no patents and 
this means that they will only buy a few. These few will be used as models 
so they can duplicate. Tliis duplication may take place in Russia or they 
may have them made in some other country at a very low price. 

What was this information that Mr. Uger requested? Was it 
with respect to compensators or submachine guns as well as com- 
j^ensators ? 

Lieutenant Cutts. Compensators. 

Senator Clark. Your talk with Mr. Uger was solely relative to 
compensators ? 

Lieutenant Cutts. As I remember it, that was all. 

Senator Clark. Do you remember having any discussion in that- 
conversation of Thompson machine guns? 

Lieutenant Cutis. No, sir. 

Senator Clark (continuing reading) : 

In connection with the above I wish to remind you that the Chinese arsenal 
at Mukden used to make Thompson guns, complete in every detail. Their only 
difficulty lay in the fact that they did not have good steel. However, the 
fact remains that they did cut your Chinese market. The present case is some- 
what different inasmuch as Russia can easily obtain Swedish or German 
steel. 

I am taking this matter of patents up with the administration for I feel 
that it should be incorporated in any treaty arrangements made with Russia. 

How did you take it up with the administration ? 

Lieutenant Cutts. It was not taken up. 

Senator Clark. What did you mean by saying [reading] : 

I am taking this matter of patents up with the administration for I feel 
that it should be incorporated in any treaty arrangements made with Russia? 

Lieutenant Cutts. At that time, if you will remember, sir, it was 
before the recognition of Russia, and it was generally conceded that 
anything that was developed or sold in this country to Kussia, it 
would be only a matter of time until they would copy everything 
without making any arrangement with patentees. I thought this, 
and, in fact, I had made a search of the matter, and I said I was 
going to take it up, and I intended to, but I did not. 

Senator Clark. You said you intended to take it up with tlit 
administration. With whom did you intend to take it up? Ho^? 
were you going to have written insertions in the treaty? 

Lieutenant Cutts. That can be done in the usual manner. There 
are different ways it could be taken up, but I did not take it up, sir. 

Senator Clark (continuing reading) : 

In view of the above, I feel that it might be a good plan if we worked 
on the Russian situation together. Consequently, it might be well to let me 
know of your progress to date and your future plans. The situation at best 
is an extremely ticklish one and will require utmost caution. 

Wliat did you mean by that ? 

Lieutenant Cutts. Exactly what I said, sir. He was interested 
in selling guns and I was interested in selling compensators and 
an exchange of mutual information would probably prove valuable. 

Senator Clark. Why was it " an extremely ticklish " situation ? 



MUNITIONS INDUSTRY 3563 

Lieutenant Cutts. On account of the patent situation, sir; and, 
us I mentioned before, it was a question of steels. We do not like 
to f^ive out what types of steel we are using. Steels are difficult 
to duplicate. 

Senator Clark (continuing reading " Exhibit No. 1208 ") : 

If you do not consider it best under tlie circumstances to work with me, 
please do not hesitate to let me know. In any case kindly let uie liear from 
.you at your earliest convenience. 
With best wishes, I am, 
Cordially yours, 

(Signed) R. M. Cutts, Jr. 

Lieutenant, how was it possible for an active officer in tlie Marine 
Corps to conduct a commercial business venture of this sort? 

Lieutenant Cutts. The law on that, sir, allows an active officer to 
conduct a commercial business, providing he does not allow it to 
interfere with his own duties. Of course, naturally, if it interferes 
with his own duties, his efficiency reports would be marked down 
accordingly, and he might eventually be cashiered, if he did not 
do his duty properly, but we are not allowed to represent firms in 
negotiations with the United States Government. 

Senator Clark, I understand that. 

Lieutenant Cutts. That is correct. 

Senator Clark. What I think is important to this committee. 
Lieutenant, and what I am asking you, is whether or not there is 
any regulation of the Marine Corps of any sort that prevents such 
activities on the part of marine officers, or prevents using marine 
stationery in conducting commercial negotiations. 

Lieutenant Cutts. We have the rights to these patents, in accord- 
ance with the decision of the Navy Department itself, sir. 

Senator Clark. I am not questioning your right to patents at all, 
but I am trying to find out whether there is any regulation that pre- 
vents an officer on the active list from engaging in such commercial 
transactions and from using the stationery of the Marine Corps in 
-conducting them. 

Lieutenant Cutts. That is a double-barreled question, sir. I will 
try to answer the first one first. 

Senator Clark. All right. 

Lieutenant Cutts. The first one, with regard to the regulations: 
As I understand it — and I think I am correct — we cannot represent 
a firm doing business with the Government. That is the first. The 
second one is that men in the service, such as musicians, and so forth, 
cannot play in outside orchestras, thereby putting other people out 
of a livelihood. Those are the regulations that I laiow oi. 

Senator Clark. Apparently from your first letter, your partner. 
Captain Bleasdale, was representing a commercial venture in nego- 
tiations with the Government, in that you say he was your active 
agent on the ground, and induced the high-ranking officers of the 
Marine Corps to reverse the previous judgment on the Thompson 
submachine gun. 

Lieutenant Cutts. That can be explained more fully. He is our 
partner. He is not an agent of Thompson. He is a compensator 
agent. 

Senator Clark. He got a royalty from Thompson on every gun he 
sold, did he not? 

Lieutenant Cutts. A royalty on every compensator sold. 



3564 MUNITIONS INDUSTRY 

Senator Clark, That is what I say; he got a royalty for the 
Thompson submachine gun on every gun sold to the Government, 
did he not? 

Lieutenant Cutts. No, sir; he did not, sir. He received a royalty 
from the compensator. There is a difference there. 

Senator Clark. The compensator was one additional step. The 
compensator company received the royalty from the Auto-Ortlnance 
Company ? 

Lieutenant Cutts. That is correct, sir. 

Senator Clark. Which they, in turn, turned over to the partners 
of the compensator company? 

Lieutenant Cutts. That is correct, sir. 

Senator Cl^vrk. So that it is simply an additional step, but he gets 
part of the money that the Government pays for furnishing Thomp- 
son submachine guns with these compensators on them, does he not?' 

Lieutenant Cutts. Correct, sir. 

Senator Vandenberg. Is not that in violation of the regulations? 

Lieutenant Cutts. No, sir. 

Senator Clark. That is what I am trying to get at. That is the 
important part of this case, from the standpoint of the Govern- 
ment. 

Lieutenant Cutts. We have the right to these patents, and the 
way it is worded it says that the United States Government can 
treat with us in regard to purchases of the compensator. In other 
words, Ave are at liberty to do business with our own Government 
on compensators, because we have fulfilled our end of the contract, 
and so far as that business is concerned, we are the same as any 
outside corporation. 

Senator Clark. But apparently Captain Bleasdale, Lieutenant, 
was using his position as an officer in the Marines, and later as an 
ordnance officer for the Nicaraguan Government, for which the Cutts 
compensator had a contract. That is your own statement and not 
mine. 

Lieutenant Cutts. That was, as I said before, the old model gun 
against the new. The marines had the old model and had improve- 
ments put on it. They took the gun there and made it what it is 
today. 

Senator Clark. Lieutenant, I do not want to take the trouble to 
read this letter to you again, because I have read it two or three 
times, but I do not believe any man who understands the English 
language will understand anything except you are telling Captain 
Ryan that the high-ranking officers of the Marine Corps were caused 
to reverse their decision, and that the action in that regard was on 
the basis that business would be done with the Niacaragnan 
Government. 

Lieutenant Cutts. That is correct. It is difficult to explain, sir. 

Senator Clark. I think it is. 

Lieutenant (Vtts. They had the old-model gun and the old-model 
gun was ineffective and there w^as a situation where it could not be 
used down there. The practice was to turn over the new model to 
the Government, and all the officers had known of the old model, and 
there was a difference between the old and new models, and that is 
what was done, and that gun proved satisfactory to Nicaragua. 



MUNITIONS INDUSTRY 3565' 

Senator Clark, And at the same time Bleasdale was acting on 
that, he wasi also acting in the capacity of an active officer in the 
marines? 

Lieutenant Cutts. I woukl not say that, sir. 

Senator Clark. Where is Captain Bleasdale stationed now, sir? 

Lieutenant Currs. I think he is at sea, sir. As I explained, Mr.. 
Senator, that letter was a sales letter originally. 

Senator Clark. Now, I would call your attention to a letter dated 
November IT, 1933, just 1 year after the first one, which I read, 
also written on the letterhead of " Headquarters, United States 
Marine Corps, Washington ", which I offer for appropriate number. 

(The letter referred to was marked " Exhibit No. 1209 ", and 
appears in full in the text.) 

Senator Clark. That letter reads : 

In replying address : The Major General Commandant and refer to Nc 

Mr. Walter B. Rvan, Jr., 

31 A^rtssoM Street, New York Citij, N. Y. 

Dear Mr. Ryan : I wish to thank you for your letter of November 15 in 
regard to Russia and I wish to reiterate that I would be only too happy to- 
give you a hand, if necessary. In any case I would appreciate being kept in- 
formed of your situation as it would be of value to you. You may rest assured 
that any information you may feel free to give me will be considered as 
confidential. 

When I originally spoke to you in regard to Paraguay and Argentina, I did 
not know that you had entered into an exclusive license with Federal Lab- 
oratories with respect to foreign sales. When you so informed me, I then 
asked if you could withdraw these two countries in question from the agree- 
ment. This request on my part was due to a peculiar situation which seems- 
to exist down there. However, I have seen John Young since our last con- 
ference and I decided that the best way would be to take the entire matter 
up with him as I have never believed in playing both ends against the middle. 
In view of this, I Iteiieve that Y'^oung and I will be able to work the problem- 
out together and you may consider my request in regard tO' these two coun- 
tries as canceled pending any further advices from me. 

This letter was written at the time when Paragitay was engaged' 
in w^ar, was it not? 

Lieutenant Cutts. Yes, sir. 

Senator Clark. And what was the reason which you had in mind 
for Mr. Ryan granting you a sales contract in Paraguay and Argen- 
tina, if he could withdraw them from Federal's exclusive sales 
contract? 

Lieutenant Cutts. That was in regard to what I informed the 
Senator before, that we decided not to enter into the business, and 
Young represented us on compensators. 

Senator Clark. Yes; but your first letter was dated November 
17, 1932. 

Lieutenant Cuti's. Yes, sir. 

Senator Clark. You said that a week later you concluded that to 
be imethical as a marine officer to engage in that business. 

Lieutenant Cutts. I did not state that 

Senator Clark. And yet 1 year later you said : 

When I originally spoke to you in regard to Paraguay and Argentina, I 
did not know that you had entered into an exclusive license with Federal 
Laboratories with respect to foreign sales. 

This was when Paraguay was engaged in war? 
Lieutenant Cutts. Correct. 



3566 MUNITIONS INDUSTRY 

Senator Clark (reading) : 

When you so informed me, I then asked if you could withdraw these two 
countries in question from tlie agreement. 

That was for the purpose of withdrawing it from Federal's 
agency and giving it to you, was it not? 

Lieutenant Cutts. Yes; but that was a long time prior to this 
letter. 

Senator Clark (continuing reading) : 

This request on my part was due to a peculiar situation which seems to 
exist down there. 

The peculiar situation was a state of war, was it not ? 
Lieutenant Cutts. No, sir. 

Senator Clark. That was one peculiar situation? 
Lieutenant Cutts. That was very peculiar; yes, sir; but there is 
another one. 

Senator Clark (continuing reading) : 

However, I have seen .John Young since our last conference and I decided 
that the best way would be to take the entire matter up with him as I have 
never believed in playing both ends against the middle. 

What did you do with this? 

Lieutenant Cutts. I do not exactly recall, but Young represented 
him down there on Thompson machine guns and with no interest in 
the compensator end. We at one time contemplated the possibility 
of compensating guns in that territory, and then we decided against 
it. In fact, Mr. Senator, all of this which has been brought up 
before the committee has never occurred, sir. You have all the 
books of every corporation, I believe, at your disposal, and you 
will never find that we have accepted a commission on anything 
but our royalties. 

Senator Clark. Were you ever tendered a commission? I am 
trying to say that the records which we have before us do not 
show you have accepted a commission, but they do not show you 
have ever had a chance to accept a commission, but they have asked 
for arrangements as to commission. That is a fair statement? 

Lieutenant Cutts. That is a fair statement, before it was changed. 
We never took it. 

Senator Clark. You had not changed your mind up to Novem- 
ber 17, 1933, 1 year after the first letter I read? 

Lieutenant Cutts. It is rather difficult to think back 3 or 4 years. 

Senator Clark. You have the letter right before you. 

Lieutenant Cutts. I have the letter right before me. 

Senator Clark. It is rather conclusive, it seems to me, on that 
point. 

Lieutenant Cutts. What I was coming to is this: The original 
agreement I asked about was 'way back. 

Senator Clark. I understand that, but you say here on Novem- 
ber 17, 1933, that you would take it up to see if you could get 
Argentina and Paraguay removed from their exclusive agency. 

Lieutenant Cutts (reading) : 

When I originally spoke to you — 
that was some time prior, and I do not remember. 



MUNITIONS INDUSTEY 3567 

Senator Clark (reading) : 

However, I have seen John Young since our last conference, and I decided 
that the best way would be to take the entire matter up with him, as I have 
never believed in playing both ends against the middle. 

Lieutenant Cutts. That is correct. 
Senator Clark (continuing reading) : 

In view of this, I believe that Young and I will be able to work the problem 
out together, and you may consider my request in regard to these two countries 
as canceled pending any further advices from me. 

By the " problem " you were talking about the withdrav^al of 
Argentina and Paraguay from the original sales agreement? 

Lieutenant Cutts. I did not say that. 

Senator Clark. If you read the paragraph together, that is the 
only construction which can be put on it. 

Lieutenant Cutts (reading) : 

When I originally spoke to you in regard to Paraguay and Argentuia, I 
did not know that you had entered into an exclusive license with Federal 
Laboratories with respect to foreign sales. 

Senator Clark (reading) : 

I then asked if you would withdraw these two countries — 

Argentina and Paraguay, from that exclusive sales agreement. 
Lieutenant Cutts. Yes. 
Senator Clark (reading) : 

When you so informed, I then asked if you could withdraw these two 
countries in question from the agreement — 

and then you go ahead and say you would take up this with Young, 
and do not want to be in a position of playing both ends against 
the middle. 

Lieutenant Cutis. That was an oral conversation of over a year 
ago and, as I remember it, the point in question at that time was 
the selling of Thompson machine guns with compensators, and then 
the selling of compensators without guns. If there were appointed 
an agent down there, the agent would be entitled to all sales in that 
territory. That is natural. 

If Thompson sold guns with compensators on, Young would be 
entitled to the commission, the selling commission on the compen- 
sated gun. In effect, the agent would also be entitled to it, and it 
would bring up a very peculiar situation, and that was with regard 
to the thing which I mentioned at the time. Young had the agree- 
ment to sell compensated guns. I was trying to prevent any conflict 
in that situation, should we decide to enter into that field. 

As I remember it, that was over a year ago, in oral conversation. 

Senator Clark. I call your attention to a telegram signed by 
yourself, dated Washington, May 16, 1934, addressed to Walter B. 
Ryan, Jr. 

(The telegram referred to was marked "Exhibit No. 1210", and 
appears in full in the text.) 

Senator Clark (reading) : 

Our European agent sails from New York first of next week ; all letters must 
be photostated, bound, and forwarded to be of use. Stop. Your cooperation 
appreciated by special delivery. Stop. Thought contract finished business along 
lines discussed; telephoned Colonel the result; he seemed satisfied. Please help. 
Best regards. 

83876— 35— PT 15 3 



3568 MUNITIONS INDUSTRY 

What does that mean? What was the contract you thought was 
finished ? 

Lieutenant Cutts. I would like to have a copy of that, if I may. 
1934, May. That was our man leaving for Germany, sir. 

Senator Clark. Who was that? 

Lieutenant Cutts. Von Zastrow. 

Senator Clakk. Who was he? What was his first name? 

Lieutenant Cutts. Fritz von Zastrow. 

Senator Clark. Who was he? 

Lieutenant Cutts. He was acting as intermediary between me 
and my agent over there, Dr. Neuhaus. 

Senator Clark. Where does he live? Is he a German? 

Lieutenant Cutts. Neuhaus? He is German; lives in Berlin. 

Senator Clark. No; I mean von Zastrow. 

Lieutenant Cutts. Von Zastrow is a German, also, I believe. 

Senator Clark. He lives in Germany? 

Lieutenant Cutts. No ; he lives in this country. He goes back and 
forth a good deal. 

Senator Clark. He was acting as intermediary? 

Lieutenant Cutis. Yes, sir; an intermediary. 

Senator Clark. To your own agent? 

Lieutenant Cutts. Yes. 

Senator Clark. For what purpose? 

Lieutenant Cutts. I wished to find out what the situation was 
in Germany in regard to patents and with regard to developments 
over there, and instead of sending a whole lot of our new literature 
and things and papers by mail, I was having him take them with him. 

Senator Clark. I do not believe you answered my question a mo- 
ment ago, when I said you had said that you never accepted a com- 
mission. It is a fact you never had a chance to accept a commission, 
although you suggested commissions on several occasions, did you 
not? You have never been tendered a commission, in other words? 

Lieutenant Cutts. That question is not quite — it is a little difficult 
to answer, the way you have put it. 

Senator Clark. You said j-ou never had accepted a commission. 
I asked you if you had a chance to accept a commission. 

Lieutenant Cutts. We could have sold guns had we decided to do 
so, there is no question about it ; but we decided not to do so. 

Senator Clark. You apparently had not decided up to November 
17, 1933. Were any of these suggestions of yours for commissions 
ever acted upon favorably by the Federal 

Lieutenant Cutts. That I cannot say. 

Senator Clark. In other words, you were never tendered a com- 
mission, and therefore did not have a chance to accept the commis- 
sion? 

Lieutenant Cutts. That is like trying to say whether a person is 
honest. They are not dishonest because they never had a chance 
to be. 

Senator Clark. You say you never accepted one. You were never 
offered one, were you, just to put it bluntly? 

Lieutenant Cuits. No, because 

Senator Clark. You say you never got a commission ; I will agree 
with that, because that is what this correspondence shows. 



MUNITIONS INDUSTRY 3569 

Lieutenant Cutts. Yes; that is right. Of course, we never went 
into the business of selling guns. Had we done so, we would have 
made commissions — then we Avould have accepted them. 

Senator Ci.ark. Did you ever have a contract to get a commission 
on the sale of guns ? That is what I am trying to get at. 

Lieutenant Cutts. No, sir. 

Senator Clark. They never acceded to any of your several re- 
quests for making that sort of an arrangement? 

Lieutenant Cutts. Yes, sir. They gave us a contract here which 
the Senator read, dated December 16, 1932, in which we could have 
sold guns and accepted a commission had we so desired, but we did 
not sell any guns. 

Senator Clark. That was in their nonexclusive territory? 

Lieutenant Cutts. Yes; in nonexclusive territory. 

Senator Clark. Did you accept that letter as stating a contract? 

Lieutenant Cutts. That amounts to a contract; yes, sir; signed 
by the president. 

Senator Clark. A contract is an offer that is accepted; an ac- 
cepted offer? 

Lieutenant Cutts. Yes, sir. 

Senator Clark. An offer to make a contract is not a contract 
unless it is accepted. Did you ever accept this contract? 

Lieutenant Cutts. If I remember correctly, it was accepted; but 
we never sold any guns. 

Senator Clark. But you never sold any guns, and therefore were 
not in any position either to accept or refuse a commission? 

Lieutenant Cutts. But we could have been, because we could have 
sold if we so desired. 

Senator Clark. I now call your attention to a letter dated Paris, 
July 19, 1934, signed " George." 

(The letter referred to was marked "Exhibit No. 1211" and is 
included in the appendix on p. 3739.) 

Senator Clark. Who is George? 

Lieutenant Cutts. That is Mr, Besler, I believe. 

Senator Clark. Who is he? 

Lieutenant Cutts. I explained before, sir ; he is a railroad man. 

Senator Clark. He was your agent? 

Lieutenant Cutts. No. He is not really an agent. He was a 
personal friend. He has been interested in the compensator since 
its inception. He went between us and France. 

Senator Clark. He is not your European representative? 

Lieutenant Cutts. No, sir; he was not. He turned all his interest 
that he had at first over to Carnot & Neuhaus. 

Senator Clark. It is addressed " Lieutenant K. M. Cutts, Head- 
quarters U. S. Marine Corps, Washington." 

Dear Dick : The clipping from the Washington Post dvily received and most 
hearty congratulations. When will the big event take place? 
Your telegram as follows : 
" Conferring Russian next week will ' Carnot result ' " — 

Lieutenant Cutts. That is garbled. That message was garbled. 
Senator Clark (reading) : 

" ' Bigard has six rifle compensators his contract now up for renewal writing 
Hotchkiss contact Neuhausson compensated Schmeisser thanks.' " 



3570 MUNITIONS INDUSTRY 

What was that? You say it is trarbled. I certainly cannot make 
any sense of it. What was that, Lieutenant? 

Lieutenant Cutts. He says there he was conferring with the Rus- 
sians next week. 

Senator Clark. Was this from him to you or from you to him? 

Lieutenant Cutts. This is from him. 

Senator Clark. He says " Your telegram as follows." 

Lieutenant Cutts, Oh, no ; that is an answer to him. That is my 
telegram that was garbled. He cabled me in regard to the situation 
there, that Bigard's contract had run out and Carnot kept the con- 
tract. He continued as our agent. 

Senator Clark (reading) : 

The French army is very interested in the application of compensators to 
submachine guns which they find are practically valueless because of the 
jump. They are not interested in rifles because of the bayonet nor are they 
interested in the larger machine guns because they have very firm basis and 
the compensator would interfere with the flash preventer wh'ch they use at 
night time and which, they feel, is more valuable than the compensator. 

They have at least one or more models of every type of machine guns so 
the thing for you to do is to send immediately a compensator for a Thompson 
or other similar machine gun, properly labeled as to sizes, bullets, etc. * * * 
and with complete instructions. 

The letters of recommendation, etc., * « * wh'ch you sent me are being 
translated by Carnot, and he decided not to remove anything from the War 
Department until he had heard from you, so that we could not in any way 
interfere with the business in case Bigai'd is to handle it. 

Who is Bigard? 

Lieutenant Currs. Bigard is the man we originally had, and it 
was up for decision as to the progress he had made there as against 
Carnot. And Bigard's contract ran out. 

Senator Clark. Did Bigard ever sell anj^thing for you? 

Lieutenant Cutts. No, sir. 

Senator Clark. "Wliat is this reference in this telegram? It says, 
" Bigard has six rifle compensators." 

Lieutenant Cutts. He had them in his possession. 

Senator Clark. They were samples? 

Lieutenant Cutts. Samples; yes, sir. 

Senator Clark (reading) : 

I am very hopeful that business can be done in submachine guns within 6 
montlis, and I will try to find out if Bgard was sent any compensators for 
machine guns, whicli he did not mention, and he only showed us one com- 
pensator whicli he got out of a cupboard near his desk; perhaps there were 
others there. 

What does George mean by say"ng he is very hopeful that busi- 
ness can be done in submachine guns? Was he selling submachine 
guns for you over there? 

Lieutenant Cutts. No. sir. 

Senator Clark. For whom was he selling them? 

Lieutenant Cutts. I do not Icnow a^vthin"- about that. He 
thouglit they were interested in that model. They no doubt pur- 
chased 

Senator Clark. What did he mean by saying he was hopeful that 
business could be done in submachine guns? 

Tvieutenant Cutts. Spoak'ng of compensators. 

Senator Clark. But he does not say " compensators." He says, 
^' I am very hopeful that business can be done in submachine guns." 



MUNITIONS INDUSTRY 3571 

Lieutenant Cutts. Meaning compensators for siibmacliine guns. 
May I explain sometliing, sir ^ 

Senator Clark. Yes. I would be glad to have you do so. 

Lieutenant Cutts. Thompson guns at the price in this country 
cannot hope to compete with guns from abroad. It would be im- 
possible to sell a gun made here over in Europe, because they manu- 
facture them from about one-third to one-fourth the price. When 
he speaks of submachine guns, he is speaking of the generic term 
of submachine guns, and he means compensators on those guns, 
because in the paragraph he asks about compensators for that. 

Senator Clakk (reading) : 

I have spoken about the business of interesting private manufacturers and 
a Mr. P. Cunisset-Carnot, cousin of Ciaude, is interested in approaching some 
of the manufacturers as he is a well-known hunter and sportsman and feels 
that, even if not used for regular production, a considerable number of guns 
could be fitted with compensators each year among the limited number of 
people who go hunting. 

Claude Carnot feels that there is so little business to be had in the sporting 
field that it is scarcely worth going after as compared with the introduction 
of the unit into the Army for, as he says, what is there to hunt and where? 

As soon as he hears from you and is in a position to collect the various 
material scattered around, we will turn the compensated rifles over to Cunisset, 
as tlie Army will be through with them and Cunisset will take them around 
to gun manufacturers, repair shops, etc. * * * 

As to Germany, the Schmeisser gun is in Germany and both Germany and 
Belgium export rifles. However, as you know, no money in the way of royalty 
is allowed to be sent out of Germany and therefore it will not do you much 
good if they manufacture and you will flood the markets of the world with 
compensated guns on wliicli you will receive no royalty and which will be 
sold at prices less than is possible with guns manufactured in the United 
States of America and elsewhere on which you will have royalty paid. 1 will 
see Neuhaus next week and talk over the matters with him as he cannot or 
will not see this face of the matters, being such a loyal German. Have you 
any patents in Japan, for they will probably sell machine guns, compensators 
and all, for $6 or $7, if they follow their present practices of selling watches 
for 15 cents, bicycles with tires for $2, and the equivalent of a Ford auto- 
mobile for $150. * * * 

I may still be here in time to receive the letter which you will write to 
Claude Caruot and I will be able to help him getting business under way. 

Did you have patents in Japan? 

Lieutenant Cutts. No, sir. We did not wish to disclose anything 
to Japan. 

Senator Clark. In what countries have you taken out patents? 

Lieutenant Cutts. England, France, Germany, Belgium, Czecho- 
slovakia, Italy, Spain, Switzerland, Sweden, and Canada. 

Senator Clark. You said that George what was his last 

name ? 

Lieutenant Cutts. Besler, 

Senator Clark. Mr. Besler was not your agent? 

Lieutenant Cutts. No, sir. He is not our direct agent. 

Senator Clark. Was he going to get a commission on anything he 
sold over there? 

Lieutenant Cutts. Not that I know of; no, sir. He told me he 
turned it all over to Carnot and Neuhaus. He originally was inter- 
ested and went over there and appointed those men as our represen- 
tatives and he turned the business over to them. 

Senator Clark. Did he have an interest in your company at the 
time ? 

Lieutenant Cutts. No, sir. 



3572 MUNITIONS INDUSTRY 

Senator Clark. Was he to participate in their commissions? The 
commissions of the agents he appointed ? 

Lieutenant Cutts. I cannot say, sir. I do not know about that. 

Senator Clark. Did you pay his expenses on the trip to Europe? 

Lieutenant Cutts. No, sir. 

Senator Clark. He just went over there as an act of friendship, 
devoted his time and services to going around appointing agents 
for you ? 

Lieutenant Cutts. He was conducting other business there. He 
has a large business over there, and was making the trip anyhow. 
There was really no expense involved. 

Senator Clark. He inquires about the patents in Japan. You 
do not know whether he Avas trying to sell submachine guns and 
compensators to Japan? 

Lieutenant Cutts. "Wliat I gather here, he wanted to know if we 
were protected there, because if we were not, Japan would keep it 
and flood the world, as he says, the way they have with other things. 

Senator Clark. I call your attention to a letter dated " 11 Francis 
Street, Newport, K. I., August 11, 1934," which I offer for appropri- 
ate number. 

(The letter referred to was marked " Exhibit No. 1212 ", and is 
included in the appendix on p. 3740.) 

Senator Clark. It is addressed to Mr. Bernard S. Barron, 10 East 
Fortieth Street, New York City. 

^Ir. Barron was the gentleman whom you mentioned awhile ago 
that operated the Governmental Service Co.? 

Lieutenant Cutts. Yes. 

Senator Clark. You say, " I would suggest that you get in touch 
with the quartermaster at Washington." 

That is the quartermaster of the Army? 

Lieutenant Cutts. Our quartermaster. 

Senator Clark. The marine quartermaster. [Reading:] 

and request a list of those firms from whom the Marine Corps purchases khaki, 
also the name of the company to whom a contract was last awarded. You will 
then be in a position to get bids. Since you are in the Reserve you should be 
able to get a line on the price if you request same properly. 

What does tha,t mean ? 

Lieutenant Cutts. That means this, that he knows exactly what 
the stuff is. This w^as done so he could get the information. 

Senator Clark. What was he talking about. Lieutenant, that he 
wanted to get bids ? 

Lieutenant Cutts. As I remember that, you see, the way this 
compensator works is this, that when people come in and ask for 
things we cannot sell them things. We are not operating that way. 
We refer them to the proper manufacturers. This man was after 
compensators. He wanted a compensator agreement. He came into 
the company and said his contracts were such and such, and so forth, 
and he had the specifications that he wanted. 

Senator Clark. He wanted to sell compensators ? 

Lieutenant Cutts. He wanted to sell compensators. 

Senator Clark. If he simply wanted to sell the compensators, why 
did you tell him to get in touch with the marine quartermaster ? 

Lieutenant Cutts. No, no; this is Barron. 



MUNITIONS INDUSTRY 3573 

Senator Clark. A list of firms from whom the Marine Corps pur- 
chased khaki. What did khaki have to do with the sale of compen- 
sators ? 

Lieutenant Cutts. Among other things, he had the specifications 
of various articles, and he wanted to know where to get them. So 
we just inquired to find out where he could gll the order. As I re- 
member, the American Woolen Co. was probably one of the biggest 
suppliers. At the same time he was asking for compensators. We 
sold no stuff to him. 

Senator Clark. What significance did it have that Mr. Barron 
was in the Reserve ? You say : 

Since you are in tlie Reserve, you should be able to get a line on the price if 
you request same properly. 

Lieutenant Cutts. That is correct. 
Senator Clark (continuing reading) : 

As soon as you get this dope, shoot it along to me and I'll try to get the 
interested parties lined up. 

Who were the interested parties ? 

Lieutenant Cutts. I do not remember what that was about, sir. 

Senator Clark. Then it refers to the same thing as in the second 
paragraph, the paragraph I just read? Just read, those two para- 
graphs again, Lieutenant. [Reading :] 

I would suggest that you get in touch with the quartermaster at Washington 
and request a list of those firms from whom the Marine Corps purchases khaki ; 
also the name of the company to whom a contract was last awarded. You will 
then be in a position to get bids. Since you are in the Reserve, you should be 
able to get a line on the price if you request same properly. 

Lieutenant Cutts. Correct. 
Senator Clark (reading) : 

As soon as you get this dope, shoot it along to me and I'll try to get the 
interested parties lined up. 

What did that mean? 

Lieutenant Cutts. As soon as he got that dope? The point is 
this 

Senator Clark. Who were the interested parties you were going 
to get lined up as soon as you got this dope ? 

Lieutenant Cutts. The point was as follows: This man came in 
requesting this material and wanted to know where to get it. Our 
purpose in lining up on this was we were finding out who he was 
and what his contacts were at the time. 

Senator Clark. Who were you going to line up ? You say as soon 
as you got this dope you were going to get the interested parties 
lined up. There is nothing very complicated about lining anj'body 
up if a man simply wants to buy khaki? 

Lieutenant Cutts. It is compensators that he wanted. 

Senator Clark. Did you tell him to get a list of the last bidders 
on khaki? 

Lieutenant Cutts. That is a separate paragraph, sir. 

Senator Clark. It is a separate paragraph, but you go right along. 
[Reading:] 

As soon as you get this dope- 
Lieutenant Cutts. Tliat is correct. 



3574 MUNITIONS INDUSTRY 

Senator Clark. It is the same as in the previous paragraph. 

As soon as you get this dope shoot it along to me and I'll try to get the inter- 
ested parties lined up. 

To what use were you going to put the dope, as to who the last 
bidders for khaki for the Marine Corps were, and the prices at which 
the khaki was bought, which you told Mr. Barron to get in his ca- 
pacity as a Reserve officer? When you got the dope shot along to 
you, what use were you going to make of it in getting the interested 
parties lined up? 

Lieutenant Cutts. The " interested parties " was this man, mean- 
ing we were to have a line on him. You see, the thing was this, it 
was a stall to find out who this man was at the time. He later turned 
out to be not what he represented himself to be. As soon as he got 
this dope, I told him to shoot it along to me. In the meantime, I 
could liave the parties lined up to find out who he was. 

Senator Clark. You wanted to find out who this man was? 

Lieutenant Cutts. That is all. 

Senator Clark. What did you care about the price at which the 
last contract was awarded? 

Lieutenant Cutts. I did not care. 

Senator Clark. You told Barron to get it. 

Lieutenant Cutts. That is correct. 

Senator Clark. Told him to find out also the name of the com- 
pany to whom the contract was last awarded. 

Lieutenant Cutts. That is correct. 

Senator Clark (reading) : 

You will be in a position to get bids. 

Get bids for what? 

Lieutenant Cutts. Bids on the khaki. 
Senator Clark. Did you want bids on the khaki? 
Lieutenant Cutts. Not ourselves; no, sir. 

Senator Clark. You tell him to use his position in the Marine 
Corps to get the price. 

Lieutenant Cutts. No, sir; he is not in the Marine Corps. 
Senator Clark. I mean, in the Reserve. 

Lieutenant Cutts. No. I said 

Senator Clark (reading) : 

Since you are in the Reserve you should be able to get a line on the price if 
you request same properly. 

Lieutenant Cutts. Yes. In other words, he knows the form of 
letter to write. It is public information. 
Senator Clark (reading) : 

As soon as you get this dope shoot it along to me and I'll try to get the 
interested parties lined up. 

Lieutenant Cutts. That is correct. 

Senator Clark. Do you know who the interested parties were? 

Lieutenant Cuti'S. Yes, sir. 

Senator Clark. Who? 

Lieutenant Cutts. Thompson, on compensated guns, and so forth, 
and ourselves, who were interested. This gun was over there, as 
I explained. 



MUNITIONS INDUSTRY 3575 

Senator Clakk. What did Thompson and the manufacturer of 
submachine guns care about the price at which the last contract for 
khaki had been awarded? 

Lieutenant Cutts. That does not refer to the contract for khaki, 
sir. It might appear to do so, but it does not. 

Senator Clark. That paragraph certainly refers to the preced- 
ing paragraph, because you tell him as soon as he gets that dope 
to shoot it along to you. 

Lieutenant Cutts. That is right. 

Senator Clark. I now offer in evidence for appropriate number 
a statement addressed to this committee by Lieutenant Cutts, from 
Washington, D. C, 2400 Sixteenth Street NW., dated September 5, 
1934, to the Special Committee Investigating the Munitions In- 
dustry, United States Senate. Subject, the Governmental Serv- 
ice Co. 

1. The Governmeutal Service Co. was originally organized on the possibility 
of acting as purchasing agents for the Government of Santo Domingo. 

What contacts did you have in Santo Domingo ? 

Lieutenant Cutts. I know the president very well. 

Senator Clark. Your father was at one time commandant of 
the Guardia Republique or something? 

Lieutenant Cutts. He was, and I have also served there. I know 
them myself personally. At that time they were having difficulty 
in purchasing. They wanted the same materials that we have 
up here. 

Senator Clark. What is the name of that organization down 
there ? 

Lieutenant Cutts. Policia Nacional. 

Senator Clark. Was your father the commandant of the Policia 
Nacional at the time the Governmental Service Co. was organized? 

Lieutenant Cutts. No, sir ; he was not. 

Senator Clark. How long afterwards? 

Lieutenant Cutts. Approximate!}^ 10 years. 

Senator Clark. After he had been the commandant of the Policia 
Nacional ? 

Lieutenant Cutts. Yes. 

Senator Clark (reading) : 

2. I soon realized that it would not be proper for me to be actively as- 
sociated with a company engaged in this type of business. 

3. It was therefore decided to continue the Governmental Service Co. as 
a " blind." 

Lieutenant Cutts. Correct. 

Senator Clark. What did you mean by that ? 

Lieutenant Cutts. Exactly what was brought out in this last let- 
ter," sir. When the people come to us asking information, they come 
to me. They come to New York shopping. They want to biiy this, 
they want to buy that, they want to buy something else. They hear 
about the compensator and they want to represent us. They come 
lo the Governmental Service Co. Immediately Barron notifies me 
Avho they are, what he has learned about them. Then later they 
come down here, and they come to see me. In the meantime, we 
have had time to investigate them. All the Governmental Service 
Co. does is refer them to other people, just like this khaki thing. 



3576 MUNITIONS INDUSTRY 

Senator Clark (reading) : 

4. All inquiries on equipment of various kinds that came into the Govern- 
mental Service Co. have been referred to the proper manufacturing companies. 
This was necessary in order that the Governmental Service Co. would appear 
to be operating as a company. 

Lieutenant Cutts. Correct. 
Senator Clark (reading) : 

However, this company has made no sales, nor has it accepted any com- 
missions. 

Lieutenant Cutts. Correct. 

Senator Clark. We still have this phrase of " accepting commis- 
sions." 

A great many so-called " agents " from other countries make inquiries from 
the Governmental Service Co. During the necessarily involved correspondence 
resulting therefrom, the true status of the agent is generally quickly ascer- 
tained. 

The above method of operation acts as a safeguard to prevent Cutts com- 
pensators falling into the hands of irresponsible parties. 

There is practically no overhead in conjunction with the operation of the 
Governmental Service Co., inasmuch as it operates from the oflSce of Mr. 
Bernard S. Barron, 10 East Fortieth Street, New York City, and its operation 
has proven of value to Cutts compensator only along the lines indicated. 

Attached to this is another page, sworn to by Lieutenant Cutts. 

Total royalties received from December 1926 to September 1934 : 

Auto-Ordnance Corporation, $32,514.24. 

From Lyman Gun Sight Corporation, $3,292.51, making a total 
of $35,806.75. 

Another page of the exhibit shows a distribution to Victor F. 
Bleasdale of $1,577; Mary E. Quayle, $2,444; Richard M. Cutts, Jr.. 
$4,362.60; and Richard M. Cutts of $5,786.40. 

What went with the rest of the $35,000, Major? 

Lieutenant Cutts. That goes into development expenses, develop- 
ment experimentation, and so forth, improvements, and engineering. 

(The letter referred to was marked " Exhibit No. 1213 " and is 
included in the appendix on p. 3740.) 

Senator Clark. That is all. 

(Witness excused.) 

The Chairman. Mr. Gregg. 

TESTIMONY OF MR. IRENEE DTT PONT AND W. S. GREGG— Resumed 

(The witnesses were previously duly sworn by the chairman.) 

The Chairman. Mr. Gregg, it has been indicated that there were 
some matters in connection with the Old Hickory controversy that 
you wanted to go a little further with. 

Mr. Gregg. Yes; I would, Mr. Chairman. 

The Chairman. Very well. Let us take this time to do it. 

Mr. Gregg. As I said, it would take about a half an hour. 

The Chairman. That is all right. 

Mr. Gregg. May it please the committee, I have just read over Mr. 
Storck's report that was filed in September, I believe, 1923. There 
are some statements in there about expenditures that I never heard 
of before. I would like the permission of the committee sometime 



MUNITIONS INDUSTRY 3577 

later on during the investigation to file a statement in connection 
with the matters that Mr. Storck referred to.^ 

It was testified, Mr. Chairman, on Friday — I believe it was Colonel 
Harris; I am not sure — that there was no other contract entered 
into that was as broad in its terms as the Old Hickory contract. 
I wish to state that a contract was entered into in May of 1918 
between the Government and the Hercules Powder Co. for the oper- 
ation of the Nitro plant, and I would like to put a copy of that con- 
tract into evidence, because it will be apparent upon reading its 
provisions that as to reimbursement to the Hercules Powder Co. it 
is broader than the provisions in the Old Hickory contract. In 
other words, the Nitro contract provides that the Government shall 
reimburse the Hercules Powder Co. for expenditures made by it, 
upon certification by the treasurer or assistant treasurer of the Her- 
cules Powder Co. The Old Hickory contract provided that the du 
Pont Engineering Co. should be reimbursed upon producing satis- 
factory evidence of expenditures, while this other contract merely 
provided that reimbursements should be made upon the certification 
of the treasurer or assistant treasurer of the Hercules Powder Co. 

Mr. Hiss. Mr. Chairman, I do not recall the exact place in the tes- 
timoii}^ to which Mr. Gregg refers. I do not remember Colonel 
Harris' testimony to that effect. But if Colonel Harris did testify 
to that effect, it would seem to me that this would be relevant ; other- 
wise I do not see how this particular contract would be relevant to 
the testimony so far. Have you the page citation to Colonel Harris' 
testimony ? 

The Chairman. The committee excused Colonel Harris for the 
morning and asked him to be back again at 2 o'clock. 

Mr. Geegg. My recollection is that Colonel Harris, Mr. Chairman, 
testified that he did not know of any other contract as broad in its 
provisions with respect to reimbursement as the Old Hickory 
contract. 

Mr. Hiss. I do not recall that particular place, Mr. Gregg. 

Mr. Gregg. I would like to introduce 

The Chairman. Wouldn't we do well to wait until Colonel Harris 
returns at 2 o'clock? 

Mr. Gregg. Yes, sir; we can check his testimony on Friday. 

The Chairman. Then we can see if he has made such a statement 
and we can go into it at 2 o'clock. 

Mr. Gregg. All right, that is satisfactory. 

Mr, Hiss brought up the question the other day as to the respon- 
sibility of the DelaAvare Surety Co., which was the surety on one 
of the bonds of the du Pont Engineering Co.^ 

That is right, is it not, Mr. Hiss ? 

Mr. Hiss. That is correct. 

NATURE OF OBLIGATIONS ASSUMED AND SECURITY FURNISHED BY DU PONT 
CO. UNDER OLD HICKORY CONTRACT 

Mr. Gregg. Let me have that statement, please. 
I should like to introduce in evidence a statement of the assets and 
liabilities, as of January 31, 1918, of the Delaware Surety Co. 

1 Under date of Apr. 26, 1935, Mr, Gregg submitted a brief to the committee in relation 
to Mr, Storck's report. This brief appears in the appendix to Part XIV, p. 3516, 

2 Exhibit No. 1166 ", Hearings, Part XIV, p, 3217. 



3578 MUNITIONS INDUSTRY 

Mr. Hiss. May I see that? 

Mr. Gregg. Certainly. 

(The statement referred to was marked " Exhibit No. 1214," and 
is inchided in the appendix on p. 3741.) 

Mr. Hiss. May I ask the source of this statement, Mr. Gregg? 

Mr. Nielsen. That statement was prepared by the accounting de- 
partment. 

Mr. Hiss. What company? 

Mr. Nielsen. Of the Delaware Surety Co. It was their monthly 
balance statement. 

The Chairman. Speak a little louder, please. 

Mr. Hiss. This was published in this form, was it, Mr. Neilsen? 

Mr. Nielsen. The Delaware Surety, as I recall it. did not pub- 
lish reports. 

Mr. Hiss. How did you secure this particular statement from 
them? 

Mr. Nielsen. The Delaware Surety was a hundred percent owned 
subsidiary at that time. 

Mr. Hiss. Of the du Pont Co.? 

Mr. Nielsen. Of the du Pont Co. We had the balance sheet in 
our files. 

Mr. Gregg. Mr. Chairman, Mr. Hiss informs me that he has al- 
ready introduced in evidence the settlement contract of October 31, 
1925,^ but that he has not put in evidence the memorandum of the 
Ordnance Department which was prepared at that time. I should 
like to introduce it in evidence. It is in connection with the settle- 
ment contract. I would like to introduce in evidence the memoran- 
dum. It is headed, " Memorandum with respect to the settlement of 
contracts entered into by the United States with the du Pont En- 
gineering Co." 

The Chairman. That will be ordered. 

(The memorandum referred to was marked " Exhibit No. 1215 " 
and is included in the appendix on p. 3742.) 

Mr. Gregg. With respect to the Old Hickory contract, the con- 
tract provided that in connection with the construction the United 
States was to advance $18,750,000 to the contractor. It also provided 
for an advance in connection with o^Derations of $18,970,000. I have 
before me a copy of a bond. In other words, the $18,750,000 on 
construction was advanced to the du Pont Engineering Co. 

I have before me a bond to the United States of America by the 
du Pont Engineering Co., principal, and E. I. du Pont de Nemours 
& Co., surety, in the penal sum of $20,000,000, covering that ad- 
vance. 

I should like to read the first paragraph of that bond : 

Know all nieu by these presents, that we, du Pont Engineering Co., a cor- 
poration organized under the laws of the State of Delaware, as principal, and 
E. I. du Pont de Nemours & Co., a corporation, organized under the laws of 
the State of Delaware, as surety, are held and firmly bound unto the United 
States of America in the penal sum of $20,000,000, for the payment of which 
sum, well and truly to be made, we bind ourselves and our successors, jointly 
and severally, firmly by these presents. 

Then it goes on and provides the conditions of the obligation. I 
should like to introduce a copy of that bond in evidence. 

' Entered as " Exhibit No. 1195 ", see Hearings, Part XIV, p. 3252. 



MUNITIONS INDUSTRY 3579 

The Chairman. Let it be given an appropriate number as an 
exhibit. 

(The bond referred to was marked " Exhibit No. 1216 " and is 
included in the record on p. 3755.) 

Mr. Gregg. The same character of bond, Mr. Chairman, was 
given by the E. I. du Pont de Nemours & Co. in connection with 
the first advance of $6,318,000 in connection with the operation. 
Later on there was another advance of $12,636,000. Up to the pres- 
ent time I have been unable to find the executed bond for the $12,636,- 
000, but I am having a search made for it, and I am satisfied that 
it was entered into.^ 

I should like to introduce a copy of the bond covering the $6,- 
318,000 advance as an exhibit. 

The Chairman. It will be received as an exhibit. 

(The bond referred to was marked " Exhibit No. 1217 " and is 
included in the appendix on p. 3756.) 

Mr. Hiss. Mr. Gregg, in addition to the two bonds which you 
have just introduced in evidence, was any collateral security of any 
kind furnished to back up the bonds? 

The Chairman. Any what kind of security? 

Mr. Hiss. Collateral security. 

Mr. Gregg. No collateral security. It was a bond of the E. I. 
du Pont de Nemours Co., which apparently the Government con- 
sidered as good or a better bond than the bond of any surety com- 
pany. 

Now, in addition to the bond, there were passed two resolutions 
by the board of directors of the E. I. du Pont deNemours Co., under 
which Mr. P. S. du Pont was authorized to execute this first bond 
of $20,000,000, and in addition to that, to execute a guaranty of 
performance by E. I. du Pont deNemours Co. that the Du Pont 
Engineering Co. would carry out all of the terms and provisions 
of the contract. 

I found in the files a form of the guaranty, but it is an unexecuted 
copy, and I know there is an executed copy somewhere, and I am 
making an effort to find it.- But this form was in the files with the 
executed contract, and I will show you in a moment that in connec- 
tion with the Penniman shell-loading contract, the Tullytown bag- 
loading plant, and the Seven Pines bag-loading plant, that the 
guaranties were actually executed. Therefore, it necessarily follows 
that if the Government required a guaranty in connection with the 
Penniman shell-loading plant, Avhich was a smaller plant than the 
Old Hickory powder plant, a similar guarantee was executed in con- 
nection with the Old Hickory powder plant. 

That guaranty provides : 

Whereas, simultaneously with the execution hereof, and at the request of 
E. I. du Pont de Nemours & Co., the United States has entered into a certain 
contract with Du Pont Engineering; C<»., hearing even date herewith, lor the 
erection and operation of a smokeless powder plant at Nashville, Tenn., under 
which contract the United States will, in reliance upon these presents, amongst 
other things, advance to said Du Pont Engineering Co. large sums of money 
for use thereunder (as by reference thereto will more fully appear) ; and 



1 Further data regarding bonds given Government as surety covering advances under 
Old Hickory Contract ^^as submitted by du Pont Co. to the committee on Apr. 24, 1935, 
and appears in the appendix on p. 3919. 

2 Under date of Apr. 19, 1935, Mr. Gregg informed the committee that altliough an 
exhaustive search of du I'ont Co.'s files failed to disclose a copy of the signed guaranty, 
he is still entirely confident that it was duly executed. 



3580 MUNITIONS INDUSTRY 

Whereas, E. I. du Pont de Nemours & Co. is the owner of all, or substantially- 
all, of the capital stock of said Du Pont Engineei-ing Co. and has agreed to 
place its officers, organization, experience, and processes of manufacture at the 
disposal of said Du Pont Engineering Co. in the performance of said contract 
ana expects to derive certain pecuniary and other benefits from the operation 
of said plant: 

Now, there Lore, in consideration of the foregoing, and of $1 to it in hand 
paid by the United States, receipt whereof is hereby acknowledged, E. I. du 
Pont de Nemours Co. hereby guarantees to the United States the full and 
faithful performance of said contract between the United States and said Du 
Pont Engineering Co. and of each and every part, term, and condition thereof. 

Executed in triplicate at Washington, D. C, March 23, 1918. 

I should like to introduce a copy of the form of this guaranty. 
It was executed in triplicate and therefore there must be a copy on 
file with the- Government. 

The Chairman. That may be marked with the appropriate 
number. 

(The guaranty referred to was marked "Exhibit No. 1218", and 
aj^pears in full in the text.) 

Mr. Hiss. Will you also reserve that to be asked of Colonel Harris 
when he returns? 

Mr. Gregg. Yes ; I will be glad to do that. 

Mr. Hiss. Mr, Gregg, you are testifying of your own knowledge 
that this was executed, or you are testifying from the logical state- 
ment already made by you that it is your inference that it must have 
been executed? ^ 

Mr. Gregg. That is correct. 

Mr. Hiss. Which was correct — the former or the latter ? 

Mr. Gregg. In other words, Mr. Hiss, I have not seen the executed 
copy ; therefore, I cannot testify positively that it was executed ; but 
from resolutions of the board of directors and from the fact that it 
was executed in subsequent contracts, I have every reason to believe 
it was executed in connection with Old Hickory. 

Mr. Hiss. May I call your attention in regard to the bond, to the 
language of the contract of March 23, 1918, being " Exhibit No. 
1168"?^ I am reading from article 5, paragraph (a), the last 
sentence : 

Said advances shall be secured as and when made by bonds or other 
security satisfactory to the contracting officer. 

The contracting officer accepted the bond of the du Pont Co. as 
satisfactory, under that paragraph? 

jNir. Gregg. That is correct. 

In this connection I would like to introduce a copy of the resolu- 
tion of the board of directors, authorizing Mr. P. S. du Pont or 
Mr. E. G. Buckner to execute the bond of $20,000,000, and another 
resolution of the same date authorizing Mr. P. S. du Pont to 
execute the guarant}^ that I just read. 

The Chairman. What Avere the dates? 

Mr. Gregg. The date of the resolution is March 27, 1918. 

(The resolution referred to was marked " Exhibit No. 1219 " and 
is included in the appendix on p. 3758.) 

1 See footnote 2 on p. 3579. 
^ Hearings, Part XIV, p. :J220. 



MUNITIONS INDUSTRY 3581 

Mr. Hiss. Mr. Gregg, I call your attention to what in my copy 
appears to be article 14 of the contract of March 23, 1918, being 
exhibit no. 1168, the second sentence : 

The United States shall hold and save harmless the contractor from all loss 
by accident, fire, flood, explosion, or otherwise, arising or growing out of the 
constniction or operation of the plant. 

What is your legal opinion, jSIr. Gregg, as to the effect of that in 
the event of any form of loss that the du Pont Engineering Co. 
might have suffered in the construction or operation of the Old 
Hickory powder plant? 

Mr. Gregg. I should say that the way that is worded the Govern- 
ment would hold the contractor harmless, as it says, from all loss by 
accident, fire, flood, explosion, or otherwise ; and " otherwise " might 
mean any other loss than those losses specifically mentioned. 

Mr. Hiss. Then what possible liability on its bond would the 
du Pont Co. have, unless the du Pont Co. simply decided not to carry 
out the contract and so might be sued for breach of contract? 

Mr. Gregg. Not to carry out the contract, or the du Pont Co. 
would be liable on its bond if the Engineering Co. failed in any 
way to carry out its contract. 

Mr. Hiss. Would you give me a specific example of the kind of 
loss that might be covered by the bond and not be reimbursable 
under this article? 

Mr. Gregg. Let us assume that some official of the du Pont En- 
gineering Co. embezzled funds that had been advanced by the Gov- 
ernment; then in that case E. I. du Pont de Nemours Co. would be 
liable. I might think of others. 

Mr. Hiss. I call j^our attention 

Senator Clark. Mr. Gregg, you were in the habit of having your 
officers and employees who handled money bonded, weren't you? 

Mr. Gregg. Yes, sir. 

Mr. Hiss. Mr. Gregg, particularly referring to that question of 
Senator Clark's, I call your attention to article 13 of the contract, 
which authorized the contractor to procure liability insurance to 
protect it against any and all loss due to claims on the part of em- 
ployees or the public, and to charge off premiums as part of the 
cost of construction and operation. You could protect yourself 
against all loss by appropriate insurance and charge the cost of the 
premium to the cost of construction, isn't that correct? 

Mr. Gregg. That not only covered any embezzlement by any em- 
ployee or official of the du Pont Engineering Co,, but any claims 
of employees of the du Pont Engineering Co. growing out of acci- 
dents at the plants, or any claims by the public against the du Pont 
Engineering Co. growing out of any claim by any one of the public 
that was perhaps injured in any way in connection with that con- 
tract. 

Mr. Hiss. Under the example you gave, wouldn't you have been 
able, under article 13 to have provided against that by insurance, 
the cost of which would have to be borne by the Government? 

Mr. Gregg. It states that we are authorized to procure liability 
insurance. 

Mr. Hiss. Furthermore, under article 14 wouldn't you consider 
that a loss due to embezzlement would be a loss arising out of or 



3582 MUNiTioisrs industey 

growing out of the construction of the plant and would of itself 
be reimbursable under article 14? 

Mr. Gregg. Well, it would be a loss reimbursable under article 
13, assuming that liability insurance had been taken out and was 
sufficient to cover the amount of the embezzlement. 

Mr. Hiss. Wouldn't it be a loss under article 14 arising out of or 
growing out of the construction or operation of the plant, as well 
as a loss which you could have been prompt to guard against by 
insurance, had you so chosen, under article 13? 

Mr. Gregg. In the first part of article 13 you will note that it saj^s 
to procure liability insurance. 

Mr. Hiss. Yes, sir. 

Mr. Gregg. That is liability, as I construe it, of the du Pont 
Engineering Co. to any of its employees or to the public, just the 
same as you would take out liability insurance, automobile-liability 
insurance, to protect against any claim your employee may make 
or the public may make in connection with your work under the 
contract. 

Mr. Hiss. Then you are inclined to change your first opinion 
that under article 13 you could have provided against embezzlement 
by insurance ; is that correct ? 

Mr. Pierre du Pont. Mr. Secretary, might I remark there that 
this bond was given, I believe, at the instance of the Government 
and not of the company. If they required a $20,000,000 bond, there 
was some reason to ex])ect a liability on the part of the du Pont Co. 

Mr. Hiss. That is just the point we are trying to determine, Mr. 
du Pont, and I was asking Mr. Gregg to give us an example. 

Mr. Gregg. On that bond of $20,000,000 that was given to secure 
an advance of $18,750,000, that was a bond in connection with that 
advance. In other words, so that the Government would be pro- 
tected so far as that advance was concerned. 

Mr. Hiss. To whom was the advance made? 

Mr. Gregg. The advance was made to the du Pont Engineering 
Co. 

Mr. Hiss. And the du Pont Engineering Co., under article 14, 
can charge any loss to the Government; in other words, I do not 
see that the bond given by the du Pont parent company backing 
up the du Pont Engineering Co. is anything other than a " ring 
around the rosy." 

Mr. Gregg. No. 

Mr. Hiss. Because for any liability of the du Pont Engineering 
Co. arising out of the construction or operation it may get reim- 
bursed by the United States. Therefore, any liability on that bond 
would wash out. 

Mr. Gregg. I don't think that necessarily follows. Let us assume 
that one of the officials of the du Pont Engineering Co. embezzled 
some money. Article 14 jirovides that the contractor shall be held 
harmless from loss by accident, fire, flood, explosion, or otherwise. 
That, in my opinion, would not be construed by any court to cover 
a case where an employee of the contractor embezzled a lot of 
money and the contractor had not protected himself with the proper 
insuranre. 

Mr. Hiss. Mr. Gregg, isn't that a somewhat more narrow con- 
struction of the contract than you were accustomed to make in 
presenting claims against the United States under this contract? 



MUNITIONS INDUSTRY 3583 

Mr. Gregg. In presenting claims against the United States under 
this contract the du Pont Engineering Co. did, I have no doubt, 
suffer some losses — I do not mean by embezzlement through its 
officials, or anything of that character — and any losses that it may 
have suffered, the Government was obligated to reimburse the du 
Pont Engineering Co. 

Now, I think it is pertinent at this point to call attention to 
the termination clause under the contract.^ It appears under article 
6, paragraph 5. That paragraph provides: 

Should this contract cease or be terminated after the manufacture of powder 
has begun, the contractor shall be paid by the United States in addition to 
all costs and expenses incurred to the date of such cessation or termination, 
the sums provided in paragraphs (c), (cl), and (e) of article IV hereof, for 
all finished powder produced to the date of such termination, and also for all 
other powder, whether air or water dried — that is, in process of drying or 
further state of completion. If there shall remain due the United States 
from the contractor any sum theretofore advanced by the United States, 
after all reimbursements and payments outlined in this article have been 
made, such sums shall be promptly returned by the contractor to the United 
States. 

Now, the paragraph just preceding that provides: 

When the operation of the plant shall cease, or upon termination or can- 
celation of this contract under article XV, the United States shall reimburse 
the contractor for all costs and expenses of every character and description 
incurred or made in, or connected with, the construction, equipment, or oper- 
ation of the plant, or any part thereof, including the cost of all labor, freight, 
and all apparatus and materials purchased, whether delivered or undelivered, 
in connection with the construction and equipment of the plant or the operation 
or contemplated operation thereof; all obligations of the contractor incurred 
hereunder, outstanding at the date of su"h cessation or termination or which 
may thereafter arise, shall be assumed by the United States and the United 
States shall save harmless the contractor in respect of any liability whatsoever 
in connection therewith. At the option of the United States, the contractor 
shall assign or transfer to the United States, or its nominee, all contracts then 
outstanding entered into by the contractor hereunder. 

Mr, Hiss. What do you deduce from those two paragraphs you 
just read, Mr. Gregg? 

Mr. Gregg. That the Government agreed to reimburse the con- 
tractor for all costs and expenses of every character and description 
incurred or made under or connected with the construction, equip- 
ment, or operation of the plant. 

Mr. Hiss. Is that an example of a possible loss or liability under 
the bond ? It seems to me that merely goes further to show the duty 
of the United States to reimburse the Engineering Co. for any losses. 

Mr. Gregg. No; I cannot construe the contract in that way. In 
other words, that paragraph was intended to cover this. We had 
made certain expenditures under the contract, the purchase of ma- 
terials, labor, and various other things, and the Government says 
in this contract : 

For all your cost and expenses in connection with those matters, when this 
contract is terminated, we will reimburse you. 

Mr. Hiss. What lias that to do with any possible liability of the 
du Pont Co. on its bond? 

Mv. Gregg. If the du Pont Engineering Co. has not properly 
accounted for the advaiice payment of $18,750,000 advanced to it 

1 " Exhibit No. 11G8 ", Hearings, Part, XIV, p. 3220. 
8.3876 — 35— PT 15 4 



3584 MUNITIONS INDUSTRY 

by the Government, then the E. I, du Pont de Nemours Co. would 
be liable, and it was never the intention 

Mr. Hiss. You mean if they had misapplied funds advanced to 
them by the United States then the du Pont parent company would 
have been responsible under its bond to the United States ? 

Mr. Gregg. Tliat is correct. 

Mr. Hiss. That is the only liability you can figure under that 
bond? 

Mr. Gregg. Weil, under that bond, I say that bond was given to 
protect that advance of $18,750,000 made by the Government to the 
du Pont Engineering Co. 

The Chairman. Protect it to the extent that you have outlined ? 

Mr. Gregg. I beg your pardon? 

The Chairman. You mean to protect it to the extent you have 
outlined ? 

Mr. Gregg. Yes. 

Mr, Hiss. It was a guaranty on the moneys advanced by the 
United States to a 100-percent-owned subsidiary, formed at the re- 
quest of the du Pont Co. as an agency to carry out the contract that 
had been made, and the only form of bond that was given was a 
personal bond of the du Pont parent company without collateral 
security ; in other words, an open I O U note on sums advanced by the 
United States. 

Mr. Gregg. Don't you think that a company witli the assets of 
the E. I. du Pont de Nemours & Co., that its bond to the Government 
in connection with that $18,750,000 was as good a bond as the 
Government could get anywhere? 

Mr. Hiss. Did it give any more right to the Government in the 
sense of security than if it had simply turned it over to the du Pont 
Co. on an open account and reserved the right to sue if it was not 
properly accounted for? 

Mr. Gregg. You mean if the contract had been made direct? 

Mr. Hiss. If the contract had been made direct with du Pont, the 
parent company, and the United States had advanced the money 
on an open account, would the United States have had any less se- 
curity than it had under this bond that j^ou have just put in evi- 
dence ? 

Mr, Gregg. Any less security? 

Mr. Hiss. Right. Would an open account be less security than 
this bond? 

Mr. Gregg. It would have had this security : That the Govern- 
ment could have then proceeded against E. I. du Pont de Nemours 
& Co. 

Mr. Hiss. And that is what it could do under this bond? 

Mr. Gregg. That is what it could do under this bond. 

Mr. Hiss. Right. 

Mr. Gregg. That it gave for this advance of $18,750,000. 

Mr. Hiss. Right; to a wholly owned subsidiary, formed at the 
suggestion of the du Pont Co. to limit its liability. 

Mr. Gregg. I am not sure that the du Pont Engineering Co. was 
formed at the suggestion of the du Pont Co. 

Mr. Hiss. Mr. Gregg, it has already been put in evidence that 
Judge LafFey, general counsel for the company, requested the 
War Department to permit them, the du Pont Co., to set up this 



MUNITIONS INDUSTRY 3585 

subsidiary company to limit the dii Pont liability. It has already 
been shown by an exhibit which I think has been entered in this 
record. 

Mr. Gregg. Did he so state, that it was to limit the du Pont 
liability? 

Mr. Hiss. That is correct. 

Mr. Gregg. My understanding has always been that the reason 
the du Pont Engineering Co. was set up to keep the accounts sepa- 
rate and apart from the E. I. du Pont de Nemours & Co., so there 
would be no confusion in the accounting under these contracts be- 
tween the du Pont Engineering Co. and the Government. I may 
be in error as to that. 

Mr. Hiss. I call your attention to a memorandum dated October 
21, 1917.^ It has been entered as an exhibit, but I haven't the 
number of it. 

jMr. Gregg. Did you say 1917? 

Mr. Hiss. Yes. It is signed by E. A. Hamilton, captain. Ordnance 
Department. This is all relating to the proposed contract, under 
the paragraph numbered 4: 

The argument advanced in paragraph 1 of the memorandum — 

This refers to Judge Laffey's memorandum, which in the first 
paragraph of this is described as follows : 

Judge Laffey, counsel for the company, has submitted a memorandum to 
whic-h this is an endorsement wherein he reviews the reasons advanced by his 
company in support of their request that they be permitted to form a new 
company for the performance of this worli. 

Mr. Hiss. The fourth paragraph reads [reading] : 

The argument advanced in paragraph 1 of the memorandum is based upon 
a desire to limit liability which " lies in tlie possibility of its being hereafter 
held that the Ordnance Department exceeded its lawful powers in making 
this contract, in which event the agent might be held liable on its implied 
warranty of authority on all contracts signed by it as agent of the Government. 
The du Pont Co. desires to assume no risk of financial loss to itself." 

That is a quotation from Judge Laifey. 

Mr. Irenee du Pont. You mentioned reasons there. That is one 
reason. Would you read the others, too? 

Mr. Hiss. I do not have a copy of Judge Laffey's memorandum. 
I would be happy if you would introduce it in evidence.^ 

Mr. Gregg. We would be glad to get it for you. 

I was stating to you what my understanding was. I might say 
that that was on October 25, was it ? 

Mr. Hiss. October 21. 

Mr. Gregg. That was before I came with the company. 

I would like to state for the information of the committee that 
when this contract of March 23, 1918, was drawn up I drew up 
that contract with the representatives of the legal section of the 
Ordnance Department, and when the contract was in complete form, 
or had been agreed to by both sides, I insisted that it go to the 
Secretary of War and be approved by the Secretary of War. 

Col. Samuel McRoberts was then Chief of the Procurement Divi- 
sion of the Ordnance Department, and I suggested to Colonel Mc- 

1 " Exhibit No. 1129 ", Hearings, Part XIII, p. 2953. 

- Under date of Jan. 10, 19.35, the du Pont Co. supplied the committee with additional 
data re Judge Laflfey's memorandum, which appears in the appendix on p. 3920. 



3586 MUNITIONS INDUSTRY 

Roberts that we submit this contract to the Comptroller of the 
Treasury before it was finally signed. I, having had a number of 
years' experience with the Government, in Government employ, 
felt that it was advisable to have the views of the Comptroller 
of the Treasury with respect to this contract before it was executed. 
I fully appreciated that the Comptroller could not give a formal 
approval of the contract. That would only come up when matters 
came before him in connection with reimbursement under the con- 
tract, but I did feel that we should have his views with respect to any 
suggestions that he might make concerning accounting. 

Colonel McRoberts asked me to make an appointment with Judge 
Warwick — by the way, the Comptroller of the Treasury preceded the 
Comptroller General. In other words, the act was passed about in 
1921 creating the office of Comptroller General, which took the place 
of the former office of the Comptroller of the Treasury. 

I made such an appointment. The morning we were to go up 
there Colonel McRoberts called me up and said, "It is impossible 
for me to go this morning. A matter has come up that I must 
attend to today here in the Ordnance Department, and you go over 
and submit it to the Comptroller." 

I told him I did not like to do that, that I would much prefer 
that he was present. He said, " That is all right. You go over and 
take it up with the Comptroller." 

I did, and I sat down with Judge Warwick and went over the 
contract, and he did make certain suggestions in the contract with 
respect to reimbursements, and which were incorporated in the con- 
tract. It was then executed and approved by Benedict Crowell, as 
acting Secretary of War. 

Now, I stated that in some of these other contracts of the du Pont 
Engineering Co., this form of guarantee that I spoke of — not the 
bond of the E. I. du Pont de Nemours & Co., but the guarantee 
given by E. I. du Pont de Nemours & Co. for the du Pont Engineer- 
ing Co. would fortify, I take it, the contracts. I have some of those 
contracts here showing those forms of guarantee, attached and 
signed, and I am making every effort now to find the executed guar- 
antee that I feel satisfied was given in connection with the Old 
Hickory contract. 

Mr. Hiss. Mr. Gregg, was the liability of the parent company, 
E. I. du Pont de Nemours & Co., enlarged over the liability on the 
bonds by its giving a guarantee, in your opinion? 

Mr. Gregg. I do not cjuite understand what you are driving at. 

Mr. Hiss. Was the liability under the bond coextensive with the 
liability under the guarantee, or was one broader than the other? 

Mr. Gregg. They were different things. 

Mr. Hiss. Did you cover different eventualities, and, if so, what 
is the difference ? 

Mr. Gregg. They covered different eA^entualities in this way: 

The bond which was given by E. I. du Pont de Nemours & Co. for 
$20,000,000, covering the advance of $18,750,000, covered that 
advance. 

Mr. Hiss. Right. 

Mr. Gregg. And the projjer accounting by the du Pont Engineer- 
ing Co. to the Government of that amount of money, $18,750,000. 



MUNITIONS INDUSTRY 3587 

Mr. Hiss. We have already discussed that. What did the guar- 
antee cover ? 

Mr. Gregg. As to the guarantee, it was on a different basis, and 
the guarantee provided that E. I, du Pont de Nemours & Co. guar- 
anteed to the Government the full and satisfactory performance of 
the contract between the United States and the du Pont Engineer- 
ing Co. and each and every part and condition and term thereof. 

Mr. Hiss. As a matter of law, did that make the du Pont Co. 
any more liable to the Government of the United States than if it 
itself had entered into the original contract instead of entering into 
it through a subsidiary? 

Mr. Gregg. If the contract had been made directly between the 
Government and the E. I. du Pont de Nemours & Co., in my opinion 
E. I. du Pont de Nemours & Co.'s obligation under this form of 
guarantee here was no greater than if the contract had been entered 
into directly with E. I. du Pont de Nemours & Co. 

Mr. Hiss. I agree with you fully. 

Mr. Gregg. I might say, Mr. Hiss, that in the performance of 
contracts between E. I. du Pont de Nemours & Co. and the Gov- 
ernment, E. I. du Pont de Nemours & Co. got several advances, and 
in some of those cases, in a few of those cases, they were bonds of 
the Delaware Surety Co., and in other cases E. I. du Pont de 
Nemours & Co. 

Mr. Hiss. But never an outside surety, as far as you remember? 

Mr. Gregg. I think there was one case, but there was only one, 
something like $600,000, that I found in the files. 

Mr. Hiss. In all cases except this one of $600,000 

Mr. Gregg. That is all I recall now, Mr. Hiss. 

Mr. Hiss. — the United States accepted the personal responsibility 
of the du Pont Co., unsecured, for its advances, and for its carrying 
out of the contract? 

Mr. Gregg. I would not say " unsecured." It was secured by all 
the assets of E. I. du Pont de Nemours & Co. 

Mr. Hiss. Would not that be true of any ordinary promissory 
note or any contract into which it entered ? 

Mr. Gregg. I think it has a great deal to do 

Mr. Hiss. Was there any mortgage of its assets specifically exe- 
cuted to the Government? 

Mr. Gregg. Mortgage of assets? 

Mr. Hiss. Yes, sir. 

Mr. Gregg. Not to my knowledge. 

Mr. Hiss. Therefore, they were not pledged in any sense that 
they are not pledged under ordinary notes or contracts? 

Mr. Gregg. It gave the Government the right to proceed against 
E. I. du Pont de Nemours & Co. to recover under the bond. I do 
not mean to say — and I see what you are driving at: Supposing 
that a small company, with small assets, were to make a contract 
with the Government — I do not concede for one moment the Govern- 
ment would have accepted the bond of the contractor in that case. 

Mr. Hiss. It is very unusual, is it not? 

Mr. Gregg. They would have to take into consideration the finan- 
cial responsibility of the contractor. And I have every reason to 
assume that that is what the Government did in this case, with all 
assets of the E. I. du Pont de Nemours & Co. 



3588 MUNITION'S INDUSTRY 

The Chairman. Gentlemen, how far are we from finishino^? 

Mr. Gregg, It won't take but 3 or 4 minutes longer, Mr. Chairman. 

The Chairman. All right. 

Mr. Nielsen. Mr. Hiss, the Delaware surety bonds were the same 
as the surety bonds of anj^ other company. That was organized 
as a surety company, and has separate reserves. You cannot classify 
that as the du Pont Co. 

Mr. Hiss. Remember, Mr. Nielson, you have already testified that 
the Delaware Surety Co. was a 100-percent owned subsidiary of the 
du Pont Co., and the amount of its bond was $250,000 as to the 
Old Hickory contract, involving advances of $37,000,000, and total 
exi:ienditures, as it turned out, of $129,000,000. 

Mr. Gregg. I might say, Mr. Hiss, that I think it is well under- 
stood that in a case of that character, the Government always stands 
in the position of a preferred creditor. In other words, that the 
Government's claim would have preference over any other claims 
against the du Pont Co. 

Mr. Hiss. That is true of any relationship that the Government 
might enter into, of any similar contractual relationship that the 
Government might enter into with any other company. 

Mr. Gregg. That is correct. 

Mr, Hiss. The du Pont Co. is not unusual in that respect. 

Mr. Gregg. That is correct. As I pointed out a while ago, it was 
the assets back of E. I, du Pont de Nemours & Co. that I assume 
caused the Government to take the bond of E. I. du Pont de Nemours 
& Co. 

I believe on Friday you put in something from Mr. Towler, in 
connection with Old Hickory. 

Mr. Hiss. Who was Mr. Towler? 

Mr. Gregg. He was chief of the Bureau of Investigation in Nash- 
ville. 

Mr. Hiss. How do you spell the name? 

Mr. Gregg. T-o-w-l-e-r. 

Mr. Hiss. I do not recall it offhand. 

Mr. Gregg. I wnll have to check that testimony and, if it was 
brought in, then I have a letter which I would like to put in evi- 
dence.^ 

There has been some claim that there was no competition in the 
purchase of materials for the construction and operation of the Old 
Hickory powder plant. It was brought out on Friday that Mr. 
R. H. Williams and Mr. Frierson were appointed special counsel to 
go into the matter in connection with the du Pont Engineering con- 
tracts by the Department of Justice. 

Mr. Williams and Mr. Frierson called on us for certain informa- 
tion in that connection. I made one trip to Chattanooga in connec- 
tion with that matter. They then wanted additional information, 
and I sent Mr. Sliafer, who was then chief accountant for du Pont 
Engineering Co., and who is now dead, to Chattanooga to take up 
some matters and furnish certain information that Mr. Williams 
and Mr. Frierson desired. 



1 Under date of Apr. 19, 1935, Mr. Gregg advised the committee that he had reviewed 
the record and found that no testimony concerning Mr. Towler was introduced, and there 
is therefore no necessity to put In the Towler letter. 



MUNITIONS INDUSTRY 3589 

I have before me a copy of a letter dated May 10, 1924, written 
by Mr. Shafer to Mr. Williams, in which he says [reading] : 

Among the subjects which we discussed in reference to the Old Hickory 
contract, while I was in Chattanooga, was the methods used by the purchasing 
department in connection with the procurement of material for the Old 
Hickory projects. You requested me, at the time, to furnish you with evi- 
dence which would illustrate that prior to placing orders for materials the 
purchasing departm'ent obtained competitive price quotations. In this con- 
nection I am enclosing herewith a special report citing transactions wherein 
competitive prices were obtained by purchasing department prior to placing 
orders for materials procured in connection with the Old Hickory powder 
plant, and a copy of a report dated January 18, 1919, addressed to Mr. David 
D. Kankin, assistant purchasing agent, which was prepared by Mr. T. W. 
Harris, one of the purchasing department employees. 

He then coes on to point out in this letter a number of materials 
on which the Government had fixed the price. In other words, he 
lists them : 

Cement, lumber, pig iron, steel plate, rails, sheet steel, high silicon iron 
castings, carbon tetrachloride, benzol, methyl alcohol, acetone, toluol, acetate 
of lime, coal, fuel oil, cotton linters. 

I should like to introduce in evidence, because it has been con- 
tended that we did not get any competitive bids in connection with 
that work, a copy of this letter of Mr. Shafer to Mr. Williams, with 
exhibits attached thereto. 

Mr. Hiss. I have no objection. 

The Chairman. It will be received and identified properly. 

(The letter and attachments were marked, collectively, " Exhibit 
No. 1220 ", and are included in the appendix on p. 3758.) 

Mr. Hiss. May I interrupt you long enough, Mr. Gregg, to offer 
a letter of October 19, 1918, " subject : Prices of Raw Materials for 
Old Hickory Plant — Benzol and Alcohol ", written by Major Mac- 
Cleary, of the Ordnance Department, to the du Pont Engineering 
Co. I will ask that that be appropriately numbered. 

(The letter referred to was marked " Exhibit No. 1221 " and is 
included in the appendix on p. 3782.) 

Mr. Hiss. The third paragraph saj^s [reading] : 

The letter from Mr. Richards does not satisfactorily explain the prices 
paid for alcohol and benzol, and or why any contract engagements for this 
material did not include protection against extra declines. 

4. Perhaps you will also agree that it was a little extraordinary to feel that 
long-term contracts were necessary when material is required by the Gov- 
ernment, and when the United States could always commandeer that material 
whenever necessary or desirable to do so. 

5. This division has not paid over 3.18 on any bookings for benzol which 
have been made since May. 

6. As regards alcohol, the highest price which the Government has paid 
is 9.6 cents per pound, and the average is probably about 9.2 cents per pound. 
Furthermore, it has been generally understood between a sufficient number 
of alcohol distillers and the United States that the price could not at any 
time exceed 65 cents per gallon, unless by special agreement, and there is 
really no excuse for any Government agency to pay more than that price. 

7. In view as above, it is suggested that at least on the raw materials 
which could be supplied by this division, that your purchasing department 
be so kind as to submit prices which you can obtain, or permit this division 
to advise prices at which it can furnish any of the raw materials which it 
attends. 

Mr. Gregg. Do you have a copy of the reply to that? 
Mr. Hiss. I have not seen any reply. 



3590 MUNITIONS INDUSTRY 

Mr, Gregg. I would like to have the opportunity of checking up 
on that and seeing what reply was made/ 

Mr. Hiss. Mr. Gregg, was there any competition in the purchase 
of the material bought from Harrison Bros, 'i - Do you know. 

Mr. Gregg. Any compensation? 

Mr. Hiss. Any competition? 

Mr. Gregg. Oh, competition? 

The Chairman. Gentlemen, our 3 minutes have now" become 12. 
I would like to close up this particular matter before we recess, 
but there must be a recess at this time. 

Mr. Hiss. I do not know how much more Mr. Gregg has. 

The Chairman. Then let the committee be in recess until 2 
o'clock, and we will clear it up then. 

(Thereupon, at 12:48 p. m., a recess was taken until 2 p. m. of 
the same day.) 

AFTERNOON SESSION 

The committee resumed pursuant to the recess, at 2 o'clock p. m., 
Hon. Gerald P. Nye (chairman) presiding. 

TESTIMONY OF WILLIAM S. GREGG, IRENEE DU PONT, LT. COL. 
C T. HARRIS, AND LT. E. M. BRANNON— Resumed 

The Chairman. Colonel Harris, in your absence this morning we 
reverted to the Old Hickory controversy again, and certain points 
were raised that we had postponed until this afternoon when you 
could be back. 

If you will go on with your statement, Mr. Gregg, where you 
left off this noon, we will proceed. 

Mr. Gregg. Referring to the bonds, I would like to add this as 
to the bonds that were given by E. I. du Pont de Nemours & Co. 
to secure the advances to du Pont Engineering Co. by the Govern- 
ment. 

Article 2 of the Old Hickory contract provides : 

The United States shall reimburse the contractor for all costs and ex- 
penses of evei'y character and description incurred or made in connection 
with the construction and equipment of the plant or any part thereof, including 
the pro rata share properly attributable to the construction work under this 
contract (a), and the expenses of maintaining the contractor's offices at Wil- 
mington, Del., or elsewhere, and (&) of the salaries and traveling expenses of 
all officials and employees of the contractor and of E. I. du Pont de Nemours 
& Co. 

That means, of course, the employees of the E. I. du Pont de 
Nemours & Co. wdio were devoting their time to, and working on, the 
Old Hickory contract. As I stated this morning, I am assuming 
that the reason the Government took the bond of E. I. du Pont de 
Nemours & Co. for those advances was because the Government felt 
that it was getting just as good or better security than if a surety 
company bond had been put up. Surety companies, as we all know, 
fail. And I am assuming that in taking the bond of E. I. du Pont 

1 Under date of Apr. 19, ]935, Mr. Gregg notified the committee that Major McCleary'a 
letter had never bcH'n replied to. See appendix, p. 3921. 

^ Under date of Apr. 19, 1935, Mr. Gregg informed the committee that above subject 
is dealt with under head of " Subsidiaries " in the du Pont Engineering Co."s reply of 
Dec. 4, 1923, to certain inquiries of the War Transactions Section, Department of 
Justice. See " Exhibit No. 1173 ", Hearings, Tart XIV, p. 3236. 



MUNITIONS INDUSTRY 3591 

de Nemours & Co. the Government felt that it was gettmg good 
security. 

The Chairman. While security companies have been known to 
fail, the du Fonts never have been known to fail; is not that the 
secret of the whole thing? 

Mr. Gregg. That is true. 

The Chairman. Of course. 

Mr. Gregg. The du Pont Co. has never failed up to the present 
time. 

Furthermore, if a surety bond had been given, there would have 
been a premium on that bond. Take this bond of $20,000,000. At 
the premiums charged for surety bonds, the chances are that the 
]:)remium on that bond might have amounted to $250,000 or $300,000. 
Under the language of this contract that premium would have been 
a charge against the Government, because the Government agreed 
to reimburse the contractor for all costs and expenses of every char- 
acter and description incurred or made in connection with the con- 
struction or equipment of the plant. That same language is also 
used later in the contract with respect to operation. 

As to the form of guaranty, which was discussed this morning, 
given by E. I. du Pont de Nemours & Co. in connection with a full 
and faithful performance of the contract between the du Pont En- 
gineering Co. and the United States, I merely used as an illustration 
embezzlement by employees, but that would apply to any failure on 
the part of du Pont Engineering Co. If du Pont Engineering Co. 
deliberately delayed the work and did not use its best efforts to get 
the plant constructed and into operation as soon as possible, in other 
words, did not act in good faith, E. I, du Pont de Nemours & Co. 
would have been responsible under this guaranty, because the 
language is that — 

E. I. du Pont de Nemours & Co. hereby guarantees to the United States the 
full and faithful performance of said contract between the United States and 
said du Pont Engineering Co. and of each and every part, term, and condition 
thereof. 

Mr. Hiss. You have not changed your opinion since this morning 
that the guaranty put no further obligations on the du Pont Co., 
the parent company, tJian would have been placed upon it had it 
itself entered into the construction and operation contract with the 
United States, have you? 

Mr. Gregg. That is my opinion. 

Mr. Hiss. Any loss arising out of the construction or the opera- 
tion not attributable to the failure of the engineering company to 
cairry on the contract would be reimbureed under article XIV, not- 
withstanding the guaranty, is that correct? 

Mr. Gregg. The full and faithful performance by the du Pont 
Engineering Co. of its contract with the United States. 

Pardon me, Mr. Hiss, did you not start to ask me just before ad- 
journment something about the purchase of paints? 

Mr. Hiss. I thought I had asked it and that you had answered it. 

Mr. Gregg. I think you adjourned before I answered. 

Mr. Hiss. May I restate the question ? 

Mr. Gregg. Yes. 



3592 MUNITIONS INDUSTRY 

Mr, Hiss. The question was in relation to an exhibit ^ which you 
introduced which purported, as I understood your description of it, 
to show that there had been competition or competitive prices ob- 
tained in the case of the purchase of certain of the materials ac- 
quired by the engineering company for the construction and opera- 
tion of Old Hickory. 

Mr. Gregg. I did not mean to infer by that that we got competi- 
tive bids in every instance, because sometimes that was not feasible. 
"We had to get the material promptly. 

Mr. Hiss. But only in the instances referred to in the exhibits 
you offered, is that correct? 

Mr. Gregg. No, I would not say that. Those were only given as 
illustrations. 

Mr. Hiss. But my specific question was, had there been any com- 
petitive prices obtained in the case of the paints which were pur- 
chased either by Mason & Hanger or by the engineering company, 
from Harrison Brothers, a subsidiary of E. I. du Pont de Nemours 
&Co.? 

Mr. Gregg. In that connection, Mr. Hiss, may I read a paragraph 
that was in my brief that I filed before the Joint Board, and which 
is in evidence? 

Mr. Hiss. All right. 

Mr. Gregg. This is in connection with the purchase of materials. 

One of the questions asked by the Department of Justice was this : 

Was it not the rule to purchase materials from Du Pont subsidiaries? Was 
this not profitable to E. I. du Pont de Nemours & Co.? 

This was filed on December 5, 1923. 

Answer : There was no rule relating to the purchase of materials from 
du Pont subsidiaries. Cotton linters and hull shavings were purchased directly 
from or through E. I. du Pont de Nemours & Co. or its subsidiary, du Pont 
American Industries, Inc. The cost of shavings and linters purchased for use 
at Old Hickory was approximately $4,580,000. No profit resulted to E. I. 
du Pont de Nemours & Co. or du Pont American Industries, Inc., through the 
purchase of linters and shavings. 

Certain special machinery and equipment were purchased by du Pont Engi- 
neering Co. from E. I. du Pont de Nemours »& Co., aggregating in value approxi- 
mately $7,342,926.03, under an arrangement approved by the contracting officer 
for the United States which provided that E. I. du Pont de Nemours & Co. was 
to receive a profit of 10 percent above cost. See exhibit 14 hereto attached. 
However, E. I. du Pont de Nemours & Co. voluntarily waived its rights to the 
10 percent profit, and settled with du Pont Endineering Co. on the basis of cost 
in which was included the amortization of special facilities purchased for 
producing such machinery and equipment. The total amount of profit waived 
by E. I. du Pont de Nemours & Co. in connection with this matter was 
$734,292.60, while the total charges for amortizing facilities was $475,338.99, or a 
saving to the United States of $258,953.61. 

Automobiles manufactured by the General Motors Corporation and its sub- 
sidiaries 

Mr. Hiss. Are you getting to the point after a while, Mr. Gregg? 
Mr. Gregg. Yes, sir ; in just a short time here. 

Automobiles manufactured by the General Motors Corporation and its sub- 
sidiaries were purchased from dealers in the vicinity of the several plants oper- 
ated by the contractor. Such purchases, however, were the result of expediency 
and on account of the fact that the class of car in question was suitable to 
the contractor's requirements, deliveries could be made promptly. The indi- 
rect profits accruing to E. I. du Pont de Nemours & Co. during its stock owner- 



1 " Exhibit No. 1220.' 



MUNITIONS INDUSTRY 3593 

ship in the General Motors Corporation on account of automobiles purchased 
by the du Pout Engineering Co. were intangible and insignificant. 

Mr. Hiss. Mr. Gregg, may I interrupt you just a moment there? 
The parent Company's holdings in General Motors at that time were 
approximately what percent of the total outstanding stock of Gen- 
eral Motors, do you know? 

Mr. Gregg. ]May I let Mr. du Pont answer that ? 

Mr. Irenee du Pont. What is the date of this, 1918? 

Mr. Gregg. 1918. 

Mr. Irenee du Pont. My recollection is, it was approximately one- 
fourth of the common stock. 

Mr. Hiss. Then the profits accruing indirectly were one-fourth of 
the profits to General Motors; whether that be intangible and 
insignificant or not is a question of opinion. 

Mr. Irenee du Pont. I think he means by " intangible " another 
word. He means that it is difficult to compute, or incomputable. I 
do not think he ineans they are insignificant. 

Mr. Gregg (reading) : 

For use at the Old Hickory powder plant, 54 Ford cars were purchased by 
du Pont Engineering Co. from the Hippodrome Motor Co. and Blackwood Tire 
Co., and 41 Chevrolet cars were purchased from the Broadway Motor Co., which 
handled CheA'rolet cars, which serves to illustrate that the contractor did not 
show any preference for cars manufactured by companies in which E. I. du 
Pont de Nemours & Co. was interested. 

The contractor purchased its principal supply of paint and paint ingredients 
from the Harrison branch of E. I. du Pont de Nemours & Co., although a 
considerable quantity was bought from competitive manufacturers and vendors 
who dealt in competitive brands. Purchases of paint, pigments, lead, etc., 
were made from E. I. du Pont de Nemours & Co. on account of the fact that 
by reason of the relationship between E. I. du Pont de Nemours & Co. and the 
contractor, pressure could be exerted to insvire priority in deliveries, and 
paints could thus be obtained when needed without delays. Preference was 
not given to E. I. du I'ont de Nemours & Co. for the purpose of increasing its 
profits, inasmuch as the demand for such commodities throughout the war 
period was in excess of the supply, and a ready market was available for all 
the commercial products then manufactured by E. I. du Pont de Nemours & Co. 
and its branches. Paints purchased from the Harrison works were invoiced 
to the contractor at the market price. No profit accrued to E. I. du Pont de 
Nemours & Co. on account of paint sales to the contractor, as the du Pont Co.'s 
paint business resulted in a deficit for the year 1918. 

Mr. Hiss. Mr. Gregg, why does it follow from the sale of paints 
at market price and the fact that the total i^aint business of the year 
showed a loss that the sales at market price to the engineering com- 
pany were not at a profit ? I do not follow that at all. 

Mr. Gregg. The reason I pointed that out in that way was to 
show that there was no profit in the paint business for the year 1918. 
I did make the positive statement they were sold at the market price, 
whatever that was at that time. It may have been — I cannot say 
whether it was or not — ^that there might have been a profit, a small 
profit, or some profit in connection with the paints that were sold 
to the du Pont Engineering Co. 

Mr. Hiss. And there is nothing to indicate that at least it was not 
helpful in carrying the overhead of the paint business ? 

Mr. Gregg. I do not know, Mr. Hiss. That would all depend on 
the amount of the purchases. 

Mr. Hiss. Do you know the total quantities purchased by Mason 
& Hangar and by the engineering company? 

Mr. Gregg. No; I do not. 



3594 MUNITIONS INDUSTRY 

Mr. Hiss. Mr, Gregg, in the statements you have just read no ref- 
erence is made to the purchase of nitrates. Would you add in your 
testimony that no profit was made in the 'transfer of nitrates, that 
no profit accrued to E. I. du Pont de Nemours & Co. ? 

Mr. Gregg. My recollection is that the nitrate of soda was fur- 
nished by the Government and not purchased by E. I. du Pont de 
Nemours & Co, 

Mr. Hiss. That is not quite responsive, because we have had some 
testimony about a nitrate of soda pool. Specifically, are you pre- 
pared to testify that no profit accrued to E. I. du Pont de Nemours 
& Co. on the nitrate of soda used in the Old Hickor,y powder plant? ^ 

Mr. Gregg. I do not recall, Mr. Hiss, that that question ever came 
up before. I will be glad to go into that and furnish you with any 
information that I can obtain. 

In view of the fact that E. I. du Pont de Nemours & Co. ovvmed 
all of the stock of du Pont Engineering Co., and the further fact 
that E. I. du Pont de Nemours & Co. had any number of contracts 
with the Federal Government after the armistice, and the further 
fact that the newspapers have broadcast that we made enormous 
profits in connection with Old Hickory, in other words, the impli- 
cation being that we were out to make a profit all the time and to 
take advantage of every situation that arose in connection with our 
contracts with the Government, I would like to state this: That im- 
mediately upon the signing of the armistice, E. I. du Pont de Ne- 
mours & Co. and du Pont Engineering Co. started in to close down 
as rapidlj^ as possible. The Old Hickory contract provided that 
the Government had the right to suspend or terminate the contracts 
at any time. The E. I. du Pont de Nemours & Co. contract con- 
tained the same provisions. And in addition to that, a number of 
the contracts between E, I. du Pont de Nemours & Cb. and the 
Government contained provisions that gave the company the right 
to operate for given periods after the receipt of suspension requests. 

Mr. Hiss. Is that last clause in the Old Hickory contract, Mr. 
Gregg ? 

Mr. Gregg. To operate for a given period? 

Mr. Hiss. Yes, sir. 

Mr. Gregg. No. My recollection is, it is not. That was in the 
E. I, contracts. 

I had an estimate made up for me several years ago as to the 
approximate saving to the Government by promptly starting in 
after the signing of the armistice to close down. In many cases we 
had to take it up with the Government. We were guided by the 
Government's directions in the matter. But taking all the contracts 
into consideration, and I am now speaking of the E. I. du Pont de 
Nemours & Co. contracts, because as to du Pont Engineering Co. 
were were governed largely by the instructions from the War De- 
jjartment 

Mr. Hiss. I am not quite clear as to your statement on this point, 
Mr. Gregg. You are saying that you closed down the Old Hickory 
plant after the armistice on instructions of the War Department or 
on your own initiative ? 

^ Under date of Apr. 29, 1935, Mr. Gregg advised the committee that he found that 
the du I'ont Co., through it.s .siih.sidiary, the du Pout Nitrate Co., liandled tho procurement 
of nitrate of soda for the Government's use at Old Hickory on a cost basis, and made 
no profit in doing so. He gives further details in his reply to the " Storck Report."' See 
Hearings, Part XIV, p. 3250, appendix, p. 3516. 



MUNITIONS INDUSTRY 3595 

Mr. Gregg. We did ever3''thing we could to close down as rapidly 
as possible on all five contracts that du Pont Enoineering Co. had, 
but we were in touch with the War Department and receiving in- 
structions from the AVar Department as to what we should do from 
time to time and the further work that we should do after the sign- 
ing of the armistice. 

Mr. Hiss. Colonel Harris, at the time the armistice was signed, 
was it or was it not the general practice of the Ordnance Depart- 
ment to terminate so far as possible all contracts for operation and 
construction ? 

Lieutenant Colonel Harris. It was the general policy to shut down 
the contracts as soon as possible, but there were several determining 
ideas that had to be given consideration. One was the status of 
material going through the plants, and the second was whether labor 
would be thrown out of work. In some cases contractors were di- 
rected to proceed a certain length of time before coming to a stop, 

Mr. Hiss. Mr. Gregg, on what date was the Old Hickory powder 
plant turned over to the United States? 

Mr. Gregg. April 17, 1919. 

Taking the E. I. du Pont de Nemours & Co.'s contracts with the 
Government, the estimate that was made up for me — and this is 
not a recent estimate, it was made up in 1926, at a time when the 
Department of Justice was reviewing the settlements between E. I. 
du Pont de Nemours & Co. and the Government — not du Pont En- 
gineering Co. but E. I. du Pont de Nemours & Co. and the Govern- 
ment. It is my best recollection that I filed this memorandum with 
the Department of Justice at that time. A man by the name of 
Holzhoff was in charge of that review. 

The estimate that I gave him, which has never been disputed, so 
far as I know, and what I said in that memorandum brief, was this : 

It is to be remembered that the du Pont Co., after the signing of the 
armistice, on November 11, 1918, did not wait for cancelation notices or sus- 
pension orders from the Government, but started in to close down operations 
under its contracts with the Government. Immediately upon the signing of 
the armistice the company started in to close down operations under its contracts 
with the Government, and thus saved the Government millions of dollars. 
The amount thus saved to the Government, through the prom])t closing down 
of plants after the signing of the armistice, amounted to approximately $10,- 
000,000 by discontinuing operations prior to the receipt of suspension requests 
from the Government. In addition thereto, the company saved the Govern- 
ment approximately $4,000,000 by not taking advantage of rights which it 
had under certain of its contracts to operate for certain specified i)eriods after 
receipt of notice of suspension. 

Mr. Hiss. May I interrupt you just a moment? 

Mr. Gregg. Yes. 

Mr. Hiss. Colonel Harris, after the armistice whenever a com- 
pany voluntarily ceased operations, did the Ordnance Department 
consider it necessary thereafter to send formal notice immediately 
to cease operation? 

Lieutenant Colonel Harris. I have no recollection on that point, 
but I feel sure the Ordnance Department would be likely to notify 
them whether they had stopped or not. 

Mr. Hiss. Would you feel there was as much haste to save the 
Government money where they had already stopped as where they 
had not? 



3596 MUNITIONS INDUSTRY 

Lieutenant Colonel Harris. Perhaps not; but the obligation 
would still be on the Government to give them formal notice. 

Mr. Gregg. My best recollection is that one suspension request 
came through as late as April 1919, and others came through during 
that period from the signing of the armistice until April 1919. 

Mr. Hiss. Is that all, Mr. Gregg? 

Mr. Gregg. I have just a couple of things more and I am through. 

In connection with the closing down of plants after the armistice, 
1 have here a file which I shall be glad to submit to the committee 
or Mr. Hiss for his examination, of correspondence between the 
home offices at Wilmington and the various plants with respect to 
closing down after the armistice. I am sorry I did not have time 
to make copies of all this. It is here for your examination if you 
care to see it. 

Mr. Gregg. There has been considerable criticism at various places 
that appeared in the hearing before the joint board in connection 
with freight bills, that there were overpayments on freight bills. 

In the brief that I filed before that joint board one of the ques- 
tions asked me by the Department of Justice was : " Was a reaudit 
or a refund of excessive freight ever made ? " 

Answer. A reaudit of freight bills was made by the War Department, and 
refunds of freight overcharges detected by the contractor or revealed by the 
Government audit, or disclosed during audit made by the Railroad Adminis- 
tration, were refunded to the contractor, with the exception of overcharges in 
freight by the N. C. & St. L. Railroad Co., which claims aggregating $26,411.09 
were withheld by the N. C. & St. L. Railroad Co. on the ground that its ac- 
counts with the United States were in process of adjustment, and it was not 
considered advisable to pay this amount to the contractor at the time. In this 
connection, it is well to state the method which was pursued by the contractor 
in handling freight bills. 

Freight bills were presented at the contractor's plants when materials cov- 
ered by such freight bills were delivered. These freight bills were then noted 
with reference to the contractor's order numbers for identification purposes. 
The railroad companies made sight drafts on the contractor at convenient 
intervals attaching to such drafts statements of the freight bills covered, which 
drafts were honored by the contractor, and after the freight bills were received 
from the plants at the Wilmington ofiice, they were checked with the above 
described statements, and any discrepancies detected were taken up with the 
railroads for adjustment. 

Mr. Hiss. May I interrupt you just a minute? 

Mr. Gregg. Yes, sir. 

Mr. Hiss. A great many things you have referred to have not 
previously been referred to in the testimony. I don't think there is 
any statement about this freight matter that I recollect. 

Mr. Gregg. It is mentioned in Mr. Toll's report that is now an 
exhibit in this case. 

Mr. Hiss. What is the exhibit number, if I may learn? I have 
been trying to locate it. Was that the Storck report ? 

Mr. Gregg. I beg your pardon, that is the Storck report.^ [Read- 
ing :] 

The railroad companies made sight drafts on the contractor at convenient 
intervals attaching to such drafts statements of the freight bills covered, which 
drafts were honored by the contractor, and after tlie freight bills were received 
from the plants at the Wilmington office they were checked with the above- 
doscribed statements, and any discrepancies detected were taken up with the 
railroads for adjustment. At the Wilmington office of the contractor all freight 
bills wei'e checked with the material orders or requisitions and the proper ref- 



' Entered as " Exhibit No. 1190 ", Hearings, Part XIV, text, p. 3250, appendix, p. 3347. 



MUNITIONS INDUSTRY 3597 

erences cross noted for record. Each freight bill was given a serial number 
and entered on registers. The charges were then recapitulated and distributed 
to the proper ledger accounts. After the contractor had completed the above 
pi-ocess the freight bills were transmitted to the contracting officer of the 
United States who proceeded to audit same in any manner that he desired. 

Mr. Hiss. Mr. Gregg, may I interrupt you once more ? I am sorry, 
but it is a question of time. The Storck report was not read in evi- 
dence and your brief which you are reading is already an exhibit. 
Isn't that sufficient to clarify the record on that point? 

Mr. Gregg. I want to read in this connection — in connection with 
the freight charges — instructions that we received from the Ord- 
nance Department. This letter is dated April 1, 1919. [Reading:] 

From : Cost Accounting Branch, Accounting Section, Ordnance Department, 

du Pont Engineering Co. 
To : du Pont Engineering Co., Wilmington, Del. 

1. This is to inform you that it will net be necessary for your traffic de- 
partment to audit the freight bills on various contracts here, after we have 
had them, as we have had a ruling from Washington stating that this should 
not be done by the du Pout Co., as they intended performing this function in 
Washington. 

2. The main point of this is that the traffic department would not know or 
be able to catch errors of rates that the Government is entitled to on all 
shipments. 

Another letter, dated February 26, 1921, from the Administration 
Division, War Department, Office of the Chief of Ordnance, Wash- 
ington, addressed to the du Pont Engineering Co., Wilmington, 
Del. [reading] : 

Gentlemen : Under date of April 1, 1919, Mr. C. H. Hartman, supervising 
accountant in charge at Wilmington, Del., addressed a communication to you 
as per copy attached, on the subject of freight bills affecting the contracts 
held by you for the Old Hickory Powder Plant, the Penniman Bag Loading 
Plant, the Seven Pines Bag Loading Plant, the Tullytown Bag Loading Plant, 
and the St. Ives TNT plant. 

2. It is understood that certain of the railroads, particularly the N. C. & St. L. 
Railroad Co. and the Tennessee Central Railroad Co., have certain amounts 
of money which the railroads represent as money refundable by reason of over- 
charges made by the carriers on shipments of materials to your company in 
connection with Government work. It is understood that the carriers concede 
the propriety of returning these sums and that the money is now available. 

3. You will therefore disrec;ard the communication of April 1, 1919. above 
referred to in tlie following respect: You are authorized to accept for the 
United States the sums of money due upon shipments made to the Government 
plants in question. You will not be required to audit the amounts in order 
to determine the particular shipments upon which the conceded overcharges 
were made. 

May it please the committee, in connection with the audit, may 
I say this, and then I am through. Reference has been made in 
the testimony to Major Farr. Colonel Anderson, Mr. Williams, and 
Mr. Frierson. I would respectfully request, if they have not already 
been summoned, that Mr. Williams and Mr. Frierson, Colonel Ander- 
son, and Major Farr be summoned before the committee, and I 
think it might be well in that connection — in other words, Mr. John 
C. Jones was head of the Ordnance Claims Board in Philadelphia, 
and it was from his office that a re-audit of the du Pont Engineer- 
ing Co. contracts was started in October 1919 and he was there 
until that Claims Board was abolished — for the committee to 
summon Mr. John C. Jones. 

The Chairman. If any of those who have been named want to 
be heard, the committee will hear them. 



3598 MUNITIONS INDUSTRY 

Mr. Gregg. I beg your pardon? 

The Chairman. If anj^ of those you named want to be heard, 
the committee, of course, would be inclined to hear them. 

Mr, Gregg. It may be that some of them would not want to 
appear voluntarily, or they might appear if the committee requested 
them to appear. Of course, I do not like to go to these people and 
ask them to appear. It does not seem to be within my province. 

The Chairman. You had an exhibit here this morning or under- 
took to develop something this morning that we asked you to with- 
hold until Colonel Harris could be here. You were introducing it 
on the assumption that Colonel Harris had made an assumption 

Mr. Gregg. That w^as a copy of the Nitro operating contract. 

The Chairman. Yes. 

Mr. Gregg. I have had the testimony of Colonel Harris examined 
and I was in error in my recollection that he had stated that some- 
one had stated that that was a broader contract — that the du Pont 
contract for the construction of Old Hickory was a broader con- 
tract than any other contract the Government had entered into. I 
now understand that what Colonel Harris testified to was that it 
was the largest contract. 

Mr. Hiss. Then you withdraw the offer of that particular docu- 
ment as an exhibit 1 

Mr. Gregg. I withdraw it for the time being, unless something 
comes up in the future. 

Mr. Hiss. Mr. Gregg, can you inform the committee from which 
source the sulphur that was used at Old Hickory was purchased? 
Do you know the name of the supplier of sulphur? ^ 

Mr. Gregg. I can get it for you. I will be glad to. 

Mr. Hiss. Also from what source the linters were supplied. 

Mr. Gregg. The linters were supplied by the du Pont American 
Industries, Inc. It was acting as agent for the Government in the 
purchase of cotton. 

Mr. Hiss. You have already adopted the statement in your brief 
to the extent that you testified that no profit was derived by du Pont 
on the sale of those linters; is that correct? 

Mr. Gregg. Linters or shavings, hull shavings. 

Mr. Hiss. Is that all, Mr. Gregg? 

Mr. Gregg. I don't know whether the committee desires to hear 
me or not on this point: It does seem to me that it is important, 
because the question of the cost of Old Hickory, the construction 
and operation, has been brought out here, and I do have a com- 
parison of the cost of construction of Nitro and Old Hickory, taking 
Old Hickory on the same basis as Nitro. Nitro was a five-unit 
plant and Old Hickory was a nine-unit plant. That appears in 
one of the exhibits attached to the brief that I filed at the hearing 
before the joint board. The brief, as we agreed the other day, 
would go in as an exhibit, but the exhibits would become a part 
of the record ; is that correct ? 

^ T'ndcr dato of .Tun. 9, 1935, Mr. Gregg Tnformed the committee that the sulphur 
uspd at the Old Hickory plant ■was purchased from the Freeport Sulphur Co., and the 
sulphur was shipped from Freeport. Tex. Tinder date of Apr. 18, 19:^5, he supplemented 
this statement as follows : " The greater part of the sulphur used at Old Hickory was 
procured from the Freeport Sulphur Co. as stated. A minor but still considerable 
po'-tion. however, was bought from the Union Sulphur Co., of Sulphur Mines, La., and 
shipped from that point." 



MUNITIONS INDUSTRY 3599 

Mr, Hiss. Not to be printed, but to be part of the public record 
of the committee. 

Mr. Gregg. I do have a statement here that covers the compari- 
son between Old Hickory and Nitro, as to the cost.^ If the com- 
mittee will bear with me, I would like to state it. 

The Chairman. If you have that comparison prepared, why not 
insert it in the record? 

Mr. Gregg. If I may be permitted to do so, then I will make a 
copy of this and insert that as an exhibit. 

The Chairman. That w^ll answer the purpose. 

Mr. Gregg. As well as another comparison as to • 

Mr. Hiss. May I interrupt just a minute? Will you also submit 
at the same time an estimate of the cost of the Carney's Point plant 
which the du Pont Co. had just built? That also had a million 
pounds a day capacity at this time; is that correct? 

Mr. Irenee du Pont. That Avas the manufacture of powder, but 
it did not make the gun cotton. That was at Hopewell. But the 
combination of the two, Carney's Point and Hopewell, might be 
sufficient.- 

Mr. Hiss. Can we have that? 

Mr. Irenee du Pont. I think that can be prepared, but I don't 
think it can be prepared in a few minutes. 

Mr. Hiss. No; I understand. 

Mr. Gregg. If the committee will just give me 2 minutes and stop 
me when that time is up, I will be obliged. 

The estimate of the date of completion as given in the contract 
of March 23, 1918, for Old Hickory's first unit was August 15, 1918. 
It was completed July 2, 1918. 

The estimate for the second unit was September 15, 1918, and it 
was completed July 24, 1918. 

The third unit, the estimated date of completion of the contract 
was October 15, 1918. It was completed August 26, 1918. 

The fourth unit, estimated date, November 15, 1918. It was com- 
pleted September 3, 1918. 

The fifth unit, estimated dat€, December 15, 1918, completed 
September 24, 1918. 

The estimated date on the sixth unit was January 16, 1919. It 
was completed November 11, 1918. 

For the next unit the estimated date was February 15, 1919, and 
it was 98 percent completed on November 11, 1918. That date is 
the same as the armistice. 

Mr. Hiss. What number was that last unit? 

Mr. Gregg. I beg your pardon? 

Mr. Hiss. What number was that last unit ? Out of the total of 
nine units, how many was that? 

Mr. Gregg. The February 15, 1919? 

Mr. Hiss. The one that was 98 percent completed on Armistice 
Day. 

Mr. Gregg. That was the seventh unit. 

Mr. Hiss. The seventh unit? 



1 statement of comparative costs of Old Hickory and Nitro appears in the appendix 
on p. 3922. 

2 Statement of comparative costs of Hopewell and Carney's Point appears in the 
appendix on p. 3924. 

83876— 35— PT 15 5 



3600 MUNITIONS INDUSTRY 

Mr. Gregg. The estimated date was February 15, 1919, and 98 
percent was completed on November 11, 1918. 

Mr. Hiss. No more than seven units were ever completed ; is that 
correct ? 

Mr. Gregg. The estimated date for the eighth unit was March 
15, 1918. It was 60 percent completed on November 11, 1918. 

Mr. Hiss. Was that thereafter completed or was work suspended ? 

Mr. Gregg. It is my understanding that it was suspended. Is 
Mr. Banker here ? 

Mr. Banker. Yes. 

Mr. Irenee du Pont. I can answer that question. I know that 
all that construction work was suspended. 

Mr. Hiss. It was suspended? 

Mr. Irenee du Pont. Yes. 

Mr. Gregg. Mr. Banker, the seventh unit, according to the report 
made to me, was 98 percent completed on November 11, 1918. The 
eighth unit was 60 percent completed November 11, 1918, and the 
ninth unit was 60 percent completed on November 11, 1918. Did 
you after the signing of the armistice complete those units? 

Mr. Banker. No, sir. They were stopped just as quickly as you 
could handle the labor situation. 

Mr. Hiss. Whose estimate of completion were you reading from? 
An estimate prepared by the Ordnance Department or prepared by 
the du Pont Co.? 

Mr. Gregg. No; it was an estimate prepared by the du Pont Co. 
from the history that was written up by Mr. Jackling of the Nitro 
plant. 

Mr. Hiss. I meant whose estimate as to the time within the various 
units were expected to be completed ; who made those estimates when 
they were made, Mr. Gregg ? 

Mr. Gregg. You mean when the contract was entered into? 

Mr. Hiss. The estimate as to when completion of the various units 
would be had. 

Mr. Gregg. It was a matter arranged between the du Pont Co. 
and the Ordnance Department as to the best guess when those units 
would be completed. 

Mr. Hiss. Were not those estimates based merely upon the du Pont 
Co.'s own estimates as to when they w^ould be completed? 

Mr. (iIregg. I am not competent to answer that. 

Mr. Irenee du Pont. I am sure those are the du Pont Co.'s esti- 
mates. I don't think those were made in March. I think those are 
the same estimates that were made in January, when the contract 
was started. But it is interesting to know in October, when we signed 
the first contract with the Government, which was later canceled by 
Secretary Baker, the estimated time at which the different units 
would go into production, giving the first unit in July 1918 and carry- 
ing over to April 1919, the facts are that the first unit did produce 
powder, beginning on the 1st of July 1918, so in spite of delays, by 
rapid work, that progress was made. 

further testiiviony as to nature of audit of old hickory contract 

Mr. Irenee du Pont. Could I get back to the matter of summon- 
ing the witnesses on the audit ? I understand these gentlemen were in 
charge of the different audits of the c(Jinj)any's work; that was re- 



MUNITIONS INDUSTRY 3601 

f erred to in the testimony last week, I believe it waa, that no complete 
audit was ever made of Old Hickory. I also heard testimony, I 
think, that the Government had spent a million dollars in auditing 
this, and I think in view of the fact these four different men who 
were referred to had charge of the auditing, if it is still incomplete 
after spending a million dollars on this work, I think it would be 
rather interesting to know why. Certainly, if our auditing cost 
million dollars on this job, we could have never gotten our overhead 
down as low as it Avas anticipated in the contract. 

Mr. Hiss. Colonel Harris, can you enlighten the committee on this 
matter that Mr. Irenee du Pont has just raised? 

Lieutenant Colonel Harris. I haven't any knowledge on tliis sub- 
ject, other than what I have given from looking up the records. 

Mr. Gregg. As to the nitro plant 

The Chairman. For the information of the committee again, do 
those records reveal that any audit was made by the War Depart- 
ment ? 

Lieutenant Colonel Harris. I don't know what the records do 
reveal, because I have never seen them. They were given to the 
Department of Justice. Mr. Hiss has them in his possession now. 

Mr. Hiss. They have already been put in evidence. 

Lieutenant Colonel Harris. But whether those are all of the 
records of the audit existing, I do not know, and I don't think any- 
body else knows. 

Mr. Gregg. Might I ask Colonel Harris a question ? 

The Chairman. Yes. 

Mr. Gregg. Colonel Harris, I notice you produced some records 
of this audit this morning and you said that was all you could find. 
Has anvone informed you there are any of those records stored at 
Curtis Bay? 

Lieutenant Colonel Harris. We are familiar with what is stored 
at Curtis Bay, but those records are apparently not there. 

Mr. Gregg. I don't know. Two or three weeks ago someone told 
me that those records in connection with the reauclit were stored over 
at Curtis Bay. 

Lieutenant Colonel Harris. Mr. Chairman, I might say in regard 
to war records, the war records are so voluminous they are stored 
at every Government establishment right now, portions of those 
war records. I don't know how available those sources as to ma- 
terial have been, but they have all been opened to your investiga- 
tors. 

Mr. Hiss. No more has been found on this subject than has al- 
ready been put in. 

Mr. Gregg. Now, as to Nitro and the completion dates, the esti- 
mated date of the first unit was July 1, 1918, and it was completed 
September 1, 1918. 

()n the second unit the estimate was August 1, 1918, and it was 
completed October 5. 

On the third unit the estimated date was September 1, 1918, and 
it was completed November 9, 1918. 

The estimated date on the fourth unit was October 1, 1918, and 
it was G5 percent completed November 15, 1918. 

The estimated date on the fifth unit was November 1, 1918, and 
it was 45 percent complete on November 15, 1918. 



3602 MUNITIONS INDUSTKY ' 

Just one word, and I am through. We have stored at Wihning- 
ton, Del., records in connection with the du Pont Engineer Co.'s con- 
tracts, which I am informed consists of about 400 boxes, about 3 
feet long, about 2 feet deep, and 2 feet wide, and in addition to 
that there are several hundred folders or binders. 

I just merely state that to show that we have retained those rec- 
ords. 

Mr. Hiss. Colonel Harris, you w^ere avsked the other day if you 
could find out for the committee what contractor received the con- 
tract for the building of the Nitro plant to which Mr. Gregg has 
just referred? 

Lieutenant Colonel Harris. It was the Thompson-Starrett Co. 
for the building of the plant and the Hercules Powder Co. for the 
operation of the plant. 

Mr. Hiss. I would like to say for the record at this time that it 
does appear that Mr. T. Coleman du Pont was one of the direc- 
tors of the Thompson-Starrett Co. in 1918 and 1919, according to 
the New York City directory of directors. 

Mr. Irenee du Pont. Mr. Hiss — I don't know what your proper 
title is — Mr. Coleman du Pont was not a stockholder or officer of 
the du Pont Co. The fact he had the name '' du Pont " might be 
misleading to the press in that connection. 

Mr. Hiss. My information is that Mr. T. Coleman du Pont's stock 
holdings have already been requested for the period of 

Mr. Irenee du Pont. I say, in 1918 he was not. 

Mr. Hiss. Colonel Harris, I should also like to call your atten- 
tion to another letter referring to a question that we raised before, 
as to Mr. Stettinius being the assistant secretary who had charge of 
the Old Hickory contract. This is a letter of February 26, 1925, 
from Colonel O'Shaughnessey, then Major O'Shaughnessy, to Mr. 
Andrews, of the war transactions section of the Department of 
Justice, reading: 

My Dear Mr. Andrews : Complying with your oral request, I inclose here- 
with a history of the transactions which led up to the making of the contract 
with the du Pont Engineering Co. 

P"'or your information, I may add tiiat at the time I prepared this paper I 
was more concerned with the determination of reasons for the delay in getting 
into production than with the technique of the contract itself. My conclusion 
was that, under the contract, the du Pont Engineering Co. was authorized to 
incur any expenses in connection with the building of the plant which it deemed 
necessary, and that the company was to be reimbursed for all such expendi- 
tures, even if it should later develop that mistakes had been made. I remem- 
ber very particularly being impressed with this view by the statement of Mr. 
Stettinius, made at the meeting with the Secretary of War when the contract 
was finally approved. 

I would like to offer that for the record. 

(The letter referred to was marked " Exhibit No. 1222 ", and 
appears in full in the text.) 

Mr. Hiss. Mr. Irenee du Pont, you testified the other clay — I think 
it was in answer to a question from Senator Vandenberg — that in 
your opinion the Old Hickory contract was primarily a service con- 
tract, the giving of the du Pont Co.'s services, engineering ability, 
and experience to the Government, and should not be regarded as an 
investment-basis contract ; is that correct ? 

Mr. Irenee du Pont. Senator Vandenberg made that statement, 
and I assented to it in part. 



MUNITIONS INDUSTRY 3603 

Undoubtedly, the capital involved in the Engineering Co. itself 
was only nominal and consequently was not the funds which pro- 
duced the profits. That fund alone put in a savings bank or in any 
ordinary investment could hardly be expected to jaeld any such 
profit as came to the du Pont Engineering Co. as it was in propor- 
tion to the funds handled. The bond which we gave to cover the 
advances or any surety that was given was good, because the credit 
of the company was behind it, and that ran in one case to $20,000,000, 
and some other bonds that have not been disclosed. So that the 
capital really used by the company in its credit form was really more 
than $5,000. 

INIr. Hiss. In spite of the advance made by the Government? 

jNIr. Irenee du Pont. I say that advance was obtained on the du 
Pont bond, and that was accounted for. To that extent I stand by 
the Senator in what he says in regard to it being a service proposition. 

Mr. Hiss. I call your attention to the letter just introduced, as well 
as the clause of article 14 of which Mr. Gregg and I discussed this 
morning, to the effect that even mistakes of the du Pont Co. were 
meant to be reimbursable, not to come out of the bond of the 
guaranty. 

Now, Mr. du Pont, one further question : Is it not true that the 
du Pont Co., the parent company, furnished certain engineering 
services to the Engineering Co.? In addition to supplying per- 
sonnel who were put on the pay roll of the Engineering Co., did 
not the parent company furnish additional administrative and 
engineering service ? 

Mr. Irenee du Pont. I presume so. 

Mr. Hiss. Were not charges made against the Engineering Co. 
and reimbursed by the United States Government for those services? 

Mr. Irenee du Pont. I think for specific performance they would 
be charged. 

Mr. Hiss. So when we refer to this as a service contract, with 
one million nine hundred thousand profit plus for the services, it is 
]:)ertinent also to state that specific compensation was made for serv- 
ices actually performed when they were performed. Have you a 
statement, Mr. Gregg, of how much the du Pont charges were? ^ 

Mr. Gregg. Yes; we have that in the records. How much was 
that ? 

Mr. Hiss. If you will supply that, it will just about complete the 
case on that point. 

One other point, Mr. Irenee du Pont. It has already been brought 
out that only seven units were completed. Do you happen to know 
what the capacity per day in pounds was on November 11; how 
much was being produced at that time ? 

Mr. Irenee du Pont. I think the first five units were in full pro- 
duction, 500,000 pounds. 

Mr. Hiss. So that at that time only half of the maximum pro- 
duction, roughly half — it may have been 900,000 or a million; isn't 
that correct, Mr. Banker? 

Mr. Banker. Nine hundred thousand was the rated capacity. 

Mr. Hiss. That was the rated capacity ? 

Mr. Banker. Yes. 



1 statement of du Pont Co. charges appears in appendix on p. 3927. 



3604 MUNITIONS INDUSTRY 

Mr. Hiss. Somewhat more than half the maximum capacity or 
rat^d capacity had been achieved. That had been in force for only 
a comparatively short time, since the first unit was not ready until 
July. 

Mr. Irenee du Pont. Correct. 

Mr. Hiss. Yet in that very short period the company's profits 
were $1,900,000. Therefore,- had it reached full production and 
continued for any considerable length of time, the profits would 
have been considerably larger, wouldn't they ? 

Mr. Ikenee du Pont. I think that is reasonable. 

Mr. Pierre du Pont. May I correct a statement my brother 
assented to? Although 50 percent of the powder manufacturing was 
in operation, the guncotton and acid plants and all of the rest that 
contributed to the powder were in much fuller operation. I think 
that plant as a whole, including the material on hand ready to com- 
plete construction, was between 75 and 90 percent completed and 
m operation. 

Mr. Hiss. I understand the profit was based on the completed 
powder, was it not? 

Mr. Pierre du Pont. Yes; it was. 

Mr. Irenee du Pont. There is one qualification in my reply to 
you. You stated there was a profit of $1,900,000. I do not recall 
the figure $1,900,000. I have not checked on that, in other words. 
I am not assenting to that. I don't know what it was. It was read 
in the testimony. 

Mr. Hiss. That is the figure that has already been furnished the 
committee by the company. 

Mr. Gregg. Mr. Hiss has referred to the reimbursement and the 
evidence on reimbursement. I might say tliat the Old Hickory con- 
tract, both in connection with construction and operation, provides 
that upon presentation of satisfactory evidence showing the costs 
and expenditures incurred or made in connection with said construc- 
tion work, the United States shall promptly pay to the contractor 
amounts equal to such costs and expenditures, which payments shall 
be made in addition to the advance payment mentioned in para- 
graph (a) of this article. 

That advance payment was $18,750,000. There is the same provi- 
sion with respect to operation. 

Mr. Hiss. You will remember that the testimony has shown that a 
10-percent check was considered sufiicient under that clause, Mr. 
Gregg. 

Mr, Gregg. I would like to present a statement of the billings — 
and this comes in connection with paints — a statement of the billings 
by E. I. du Pont de Nemours & Co. to the du Pont Engineering Co. 
in connection with these contracts. I would like to introduce that 
as an exhibit, if I may. 

The Chairman. Let that be received and identified. 

(The statement referred to was marked " Exhibit No. 1223 " and 
is included in the appendix on p. 3783.) 

Lieutenant Colonel Harris. May I remark on something? 

The Chairman. Yes, Colonel. 

Lieutenant Colonel Harris. With reference to Mr. Hiss' remark 
of 10 percent audit check, I want to call attention to the fact that 
every bill was audited by an Army auditor before it was paid. 



MUNITIONS INDUSTKY 3605 

Mr. Hiss. But only in 10 percent of the cases did they account for 
the supporting original documents back of the vouchers which came 
through, according to the testimony. 

Lieutenant Colonel Harris. That would not seem normal. I am 
not speaking of knowledge in this case. 

Mr. Hiss. The testimony introduced indicated that was the only 
time that ever happened. 

Lieutenant Colonel Harris. The paying or contracting officer did 
not audit the bill before he paid it? 

Mr. Hiss. That in only 10 percent of the cases were the original 
documents back of it considered. 

Lieutenant Colonel Harris. In the meantime he paid it? 

Mr. Hiss. In the meantime he paid it. 

Mr. Gregg. By the way, Mr. Chairman, in that connection Mr. 
Cochran was on that work at that time, and I think it might be well 
for him to state to the committee how it was handled. He has not 
been sworn. 

Mr. Hiss. If you would like to have Mr. Cochran testify, we would 
be pleased to have him testify. 

Mr. Gregg. Be sworn. 

TESTIMONY OF H. H. COCHRAN 

(The witness was duly sworn by the chairman.) 

Mr. Hiss. Will you give your connection with the du Pont Co. ? 

Mr. Cochran. Accountant. 

Mr. Hiss. Mr. Cochran, have you heard the testimony that has 
been introduced to the effect that a Lieutenant Foulke on May 9, 
1918, issued an order ^ that 10 percent of the vouchers coming 
through should be checked for original documents behind them; 
and the further testimony that General Williams, then Chief of 
Ordnance, said that he assumed responsibility for this order, and 
the further testimony that that order was in fact carried out there- 
aft-er? 

Senator Clark. When was this order issued? 

Mr. Hiss. May 9, 1918, in the middle of the construction. 

Do you know anything to the contrary of that testimony, of your 
own knowledge, Mr. Cochran? 

Mr. Cochran. This is the first time I have heard of it. 

Mr. Hiss. Do you know anything to the contrary of that? 

Mr. Cochran. I have never heard anything in reference to the 
testimony which you have referred to until this morning. 

Mr. Hiss. Do you know anything of your own knowledge to con- 
tradict that testimony? 

Mr. Cochran. I have not; no, sir. 

Mr. Gregg. What was done, so far as you know, in connection 
with it? 

Mr. Hiss. Do you have any knowledge of what was done? 

Mr. Cochran. Yes ; I was employed by the du Pont Engineering 
Co. from its inception to the end. 

Mr. Hiss. Do you know whether the order of May 9, 1918, to 
which I have referred, was issued? 

Mr. Cochran. No ; I do not. 

1 Introduced into the record as " Exhibit No. 1186." Hearings, Part XIV, p. 3246. 



3606 MUNITIONS INDUSTRY 

Mr. Hiss. Have you any reason to believe it was not issued? 

Mr. Cochran. I have no knowledge of it at all. 

Mr. Hiss. That is all. 

Senator Vandenberg. Do I understand from you, Colonel Harris, 
that you think that is a bit unusual ? 

Lieutenant Colonel Harris. Senator, I was speaking without 
having heard this testimony, and was surprised, because the usual 
method is for the contracting officer to have vouchers with support- 
ing papers. 

Senator Clark. Colonel, in your experience, did you ever hear 
of any other case in which this 10-percent system was followed? 

Lieutenant Colonel Harris. I have never ; no, sir. 

Mr. Pierre du Pont. Mr. Chairman, I am afraid there is a good 
deal of confusion, having nothing to do with the du Pont Co. af- 
fairs, but Mr. Nielsen checks my opinion that a Government in- 
spector signed or approved every voucher that was paid, and, pre- 
sumably, the documents were accompanying those vouchers at the 
time they were signed. I do not know. But this 10 percent, I think, 
was a spot check of vouchers after the original voucher was made 
by the men on the ground. 

Mr. Hiss. I must call your attention, first, to the date of the order, 
Mr. du Pont, which was May 9, 1918, before construction had been 
completed, and secondly, to the statement of Mr. O'Shaughnessy, 
who is not able to be present to testify personallj^ because he is in 
Florida, that no original audit was ever made, and there was only 
this 10-percent check, according to the testimony, in the original 
audit. 

Mr. Pierre du Pont. That is a great surprise to me. 

Mr. Cochran. Do you mean, Mr. Hiss, the original audit by the 
War Department? 

Mr. Hiss. It was testified the du Pont Co. had their own audit. 

Mr. Cochran. There were during the years 1918 and 1919, 115 
Government auditors of the War Department. 

Mr. Hiss. That has already been gone into, Mr. Cochran, the other 
day. 

Mr. Cochran. Who did nothing but audit and reaudit these 
vouchers. 

Mr. Hiss. That is correct. We have already received that 
testimony. 

Mr. Cochran. So far as any payments are concerned, the sup- 
porting papers are attached to the vouchers showing the purposes 
of the entire transaction. 

Mr. Hiss. You are testifying now to your own knowledge that 
attached to each voucher of the 400 boxes, to which Mr. Gregg re- 
ferred, there are original documents? 

Mr. Cochran. There are, sir. 

Mr. Hiss. That is an astonishing statement to make, Mr. Cochran. 

Mr. Cochran. The details are attached to each accounts-payable 
voucher supporting the prime voucher. 

Mr. Hiss. My question was, original documents back of each 
voucher contained in the 400 boxes. 

Mr. Cochran. For instance, if the du Pont Engineering Co. pur- 
chased — say you were the seller of materials, and you presented the 
du Pont Engineering Co. a bill for $500 — your bill would be at- 



MUNITIONS INDUSTRY 3607 

tached to the accounts-payable voucher of the du Pont Engineering 
Co. They were all drawn on our own forms and all supporting 
papers were attached to the prime voucher. 

Mr. Hiss. All I can say, Mr. Cochran, is that your testimony, for 
the first time in these hearings, raises a conflict with the testimony 
presented at the joint board hearings in 1923, where it was testified 
to the contrary. 

Mr. Nielsen. Mr. Hiss, you are talking about " audit." I do not 
know what is meant by " audit ", but every voucher representing 
payment was approved by some official of the Government, before 
the disbursing officer paid it. 

Mr. Hiss. That is conceded. 

Mr. Neilsen. He agreed to the accuracy of that bill. 

Mr. Hiss. That is not conceded, because the testimony of the 
Government officers was onl}^ in 10 percent of the cases did they 
check back to find out if the original documents were supporting it. 

Mr. Nielsen. What do you suppose a Government officer's signa- 
ture meant on the voucher? 

Senator Clark. It meant you could get the money. 

Mr. Nielsen. It was O. K. for payment or they would not have 
done it. 

Senator Clark. Some officer of the Ordnance Department was 
satisfied to have vouchers approved on a 10-percent check. Nobody 
is contending you got the money under false pretenses. What we 
are examining into now is the care which the Government took be- 
fore issuing the vouchers. 

Mr. Nielsen. The care that was taken was 100 percent. 

Senator Clark. That is your opinion, but it is not my opinion, 
if they made only a 10-percent check. 

Mr. Nielsen. You cannot prove a 10-percent check was made. 

Senator Clark. We can prove the standing order issued by the 
War Department. 

Mr. Nielsen. That does not prove it was done. 

Senator Clark. That is in accordance with the Army orders. 
If you were ever in the Army, you would know that. 

Mr. Nielsen. I was in the Navy; sir. 

Senator Clark. Then you know it is customary to follow out 
standing orders, do you not? 

Mr. Gregg. I might say that in an exhibit put in by me this 
morning, prepared by one of our men in 1923, who is now dead, and 
who was a very able man, and very familiar with this work, the 
situation was covered, and I would like to read to the committee just 
what he said about these audits and checks [reading " Exhibit No. 
1199 "] : 

Certain proficient employees were appointed to direct and supervise the 
work of the several departments retained for the purpose of constructing and 
operating the plants. 

Mr. Hiss. Mr. Gregg, do you propose to read all of that? 
Mr. Gregg. No, sir; not all of it. [Continuing reading:] 

Whenever the procurement of material or equipment was necessary, requisi- 
tions were issued by the departments responsible, and forwarded to the pur- 
chasing agent in Wilmington, unless the need was sufficiently urgent to neces- 



3608 MUNITIONS INDUSTRY 

sitate ordering direct by telegrapli or otlierwise. In all cases, requisitions were 
sent to tlie purcliasing agent for record. Orders for materials specified on sueli 
requisitions! were issued by tlie purcliasing department, and numbered in series, 
copies being sent, respectively, to the vendors, plants, and accounting depart- 
ment, one being retained by the purchasing department for comparison with 
the vendors' invoices. 

Vendors were required to show the order number on the face of each invoice 
for identification. Each invoice, after receipt at the home office was compared 
with the orders, and checked as to terms, quantity, and price by the purchasing 
department ; forwarded to the plant whicli issued the requisition, where certi- 
fication was made as to receipt of material, and the approval of the plant 
representative affixed ; then returned to the home office at Wilmington. * * * 

When vouchei-s had been audited, recorded, approved, and paid by repre- 
sentatives of the contractor, they were transmitted to the contracting officer 
of the United States, who checked and verified the expenditures until satisfied 
that the requirements of the contracts had been fulfilled. 

Mr. Hiss. Mr. Gregg, excuse me for interrupting. Is not what 
you are reading the accounting system adopted by the du Pont Co. 
itself? 

Mr. Gregg. I am coming now to the point where he takes up what 
the Government auditors did. [Reading :] 

The vouchers were then approved by the departmental director responsible 
for such expenditures, and the charge distribution noted was thereon, after 
which the accounting department functioned, checking extensions, recording, 
and issuing checks in payment therefor. 

When vouchers had been audited, recorded, approved, and paid by repre- 
sentatives of the contractor, they were transmitted to the contracting officer 
of the United States, who checked and verified the expenditures until satisfied 
that the requirements of the contracts had been fulfilled. He then indicated 
his approval on each voucher and forwarded all vouchers applicable to con- 
struction projects to the disbursing officer, who recorded the approved expendi- 
tures on public vouchers, and issued instructions for the contractor's reim- 
bursement. 

Senator Clark. Mr. Gregg, if I may interrupt you right there, 
there is nothing inconsistent in what you just read and what Mr. Hiss 
read, issued by the authority of the Chief of Ordnance of the United 
States Army. That document which you just read says that the 
contracting officer satisfied himself, and what Mr. Hiss read was 
instructions from the Chief of Ordnance, indicating they were to be 
satisfied with a 10-percent check. 

Mr. Nielsen. This is a 100-percent check referred to here. 

Mr. Hiss. It does not say so. 

Mr. Nielsen. It does say so. 

May I ask Colonel Harris a question? Is it possible for a reim- 
bursing agent of the Government, either Army or Navy, to pay 
without approval by somebody in the Army or Navy? Can he pay 
a bill under those circumstances? 

Lieutenant Colonel Harris. I am a little distressed by this turn 
of affairs because my chief, for whom I have the highest regard, 
General Williams, is brought in. I would never believe that he 
gave approval to vouchers checked blindly to the extent of 10 per- 
cent. I think there is a confusion in the word " audit." 

Mr. Nielsen. That is my idea. 

Lieutenant Colonel Harris. An original voucher could be checked 
and satisfied. 

Mr. Nielsen. That is my impression. 



MUNITIONS INDUSTRY 3609 

Mr, Hiss. May I read from an order of May 9, 1918, which is 
signed by First Lieut. George R. Foulke, Jr., paragraph III (C), 
page 2? [Reading:] 

At least 10 percent of the docunients received in this office without support- 
ing papers will be held out and will be forwarded to the contractor with 
request for supporting papers. 

There was later testimony that the order was followed out and 
no more than 10 percent of the documents received without sup- 
porting papers were held out and sent to the contractor with the 
request that he ftirnish them. There is a further report which has 
been oifered in evidence ^ which states that a certain percentage of 
that 10 percent, in the course of 1 week, or some period of a report. 
had no supporting papers when they went back for them that they 
could find. 

Furthermore, General Williams testified, according to the record 
already introduced from the joint board, to which Mr. Gregg has 
already referred, which sat in May 1923 and again in December 
1923, when asked. Major General Williams said: "I assume respon- 
sibility for that order." 

I do not know that General Williams directed Lieutenant Foulke 
to issue it, but I do know he testified, according to the transcript, 
" I assume responsibility for that order." 

Mr. Nielsen. I am talking about audit and not approval before 
advance. 

Mr. Hiss. This is May 9, 1918. 

Lieutenant Colonel Harris. May I respond? 

Mv. Hiss. We found by the statement of Colonel O'Shaughnessy 
that there was no current audit on this, and that is the only way in 
which he knew that to be the fact. 

Lieutenant Colonel Harris. May I respond? 

In the statement you have read, Mr. Hiss, you stated that those 
vouchers had come before the disbursing officer without proper sup- 
porting papers. What is the 10 percent? I remember the testi- 
mony the other day that there were very few that did come before 
him without supporting papers. In one case of almost 4,000, there 
were none, and in another case of some 4,000 there were 1,000. 

Senator Clark. How many? 

Lieutenant Colonel Harris. One thousand, sir. According to this 
statement, 10 percent of those without supporting papers were sub- 
jected to this treatment. That is not the whole set of vouchers, as 
I understand it. 

The Chairman. Who is here from the Remington and Winchester 
corporations this afternoon? 

Mr. PuGSLEY. I represent the Winchester Repeating Arms Co. 

Mr. Dam^s. I am here. 

The Chairman. Will you come forward? 

Mr. Pierre du Pont. Mr. Chairman, may I ask if a number could 
be reserved for an item on Old Hickory, which I have not ready 
to put in. I will submit it later. May we have a reservation of 
number. 

The Chairman. It may go in. 

(The document referred to was submitted later and marked "Ex- 
hibit No. 1224 " and is included in the appendix on p. 3784.) 

1" Exhibit No. 1187", Hearings, Part XIV, p. 3247. 



3610 MUNITIONS INDUSTRY 

The Chairman, We want it understood that the dii Fonts will 
be wanted for testimony in connection with the afternoon work as 
well. 

Have yon gentlemen been sworn? 

Mr. PuGSLEY, No, sir. 

The Chairman, Is Mr, Lammot du Pont present? 

Colonel Donovan, He was excused todaj^ until tomorrow, I think. 

The Chairman, Then we will want Mr. Irenee du Pont, please, 

TESTIMONY OF C. K. DAVIS (recalled) AND TESTIMONY OF EDWIN 
PUGSLEY, EGBERT C. HADLEY, AND J. H. CHASMAR 

(The witnesses were duly sworn by the chairman.) 

The Chairman. Will you gentlemen give your names for the 
record ? 

Mr. PuGSLEY. Edwin Pugsle}^, vice president, Winchester Repeat- 
ing Arms Co. 

Mr. Hadley. Egbert C, Hadley, technical director, Remington 
Arms, 

Mr. Chasmar, J. H. Chasmar, Bridgeport works manager. Rem- 
ington Arms. 

general description of industrial mobilization plan 

Mr. Hiss. Colonel Harris, you are familiar with the printed plan 
which the War Department has prepared, entitled " Industrial 
Mobilization Plan ", are you not ? 

Lieutenant Colonel Harris. I am. 

Mr. Hiss. As director of the planning branch of the Office of the 
Assistant Secretary of War, you have immediate supervision over 
the industrial mobilization plan. Is that not true? 

Lieutenant Colonel Harris. Under the direction of the Assistant 
Secretary of War, I have. 

Mr. Hiss. This plan embraces all industries which, in your opin- 
ion, or that of the Office of the Assistant Secretary of War, may be 
needed in time of war to supply the United States. Is that correct? 

Lieutenant Colonel Harris. That is correct. 

Mr, Hiss. Under your supervision or under the supervision of 
the Assistant Secretary of War, rather, have there been prepared 
contract forms to be used in the event of war for the procurement 
of supplies for the War Department? 

Lieutenant Colonel Harris. There have been, but it is pertinent to 
state that these contract forms are in a fluid state, and it is a con- 
stant development, and that the present status of the contract forms 
might be later changed. 

Mr, Hiss. Have 3^011 copies with you of the latest forms? 

Lieutenant Colonel Harris. I have. 

Mr. Hiss. Has the Office of the Assistant Secretary of War sur- 
veyed several thousand plants in the United States in connection 
with the industrial mobilization plan. Colonel Harris? 

Lieutenant Colonel Harris. Not the Office of the Assistant Sec- 
retary of War, but the supply branches, acting under the direction 
of the Assistant Secretary of War. 



MUNITIONS INDUSTRY 3611 

Mr. Hiss. Do you know how many plants have been, as it were, 
retained on a current list of plants to be relied on by the War De- 
partment in the event of war? 

Lieutenant Colonel Harris. Approximately 12,000. 

]\rr. Hiss. That is applied to all the different purcha^-ing branches 
of the Army, is it, Colonel Harris? 

Lieutenant Colonel Harris. Of the Army; yes, sir. 

Mr. Hiss. Have there also been drafted under the direction of 
the Assistant Secretary of War comprehensive drafts of statutes 
to be presented to Congress in the event of the outbreak of war? 

Lieutenant Colonel Harris. That is correct. 

Mr. Hiss. How large a fcfrce is required in the War Department 
for the work of this plan, both in the office of the Assistant Secre- 
tary of War and in the various supply branches ? 

Lieutenant Colonel Harris. There are 14 officers of the Army on 
duty in the planning branch, full time. There are approximately 
50 officers in the supply branches, either full time or part time, on 
industrial planning. 

Mr. Hiss. How large is the civilian and clerical force? 

Lieutenant Colonel Harris. About one-half civilian to one 
military. 

Mr. Hiss. In other words, there are more officers engaged in this 
than civilians? 

Lieutenant Colonel Harris. Yes. 

Mr. Hiss. And that is true also of the clerical force in general? 

Lieutenant Colonel Harris. I think my statement is a little wrong. 
I would say in the whole field they are about even, one and one, 
and in my office it is less. 

Mr. Hiss. What is the legislative authority for the plan which 
the War Department, or which the Assistant Secretary of War has 
prepared ? 

Lieutenant Colonel Harris. Section 5 (a) and section 120 of the 
National Defense Act. 

Mr. Hiss. Have you a copy of the national defense act with you? 

Lieutenant Colonel Harris. I have. 

Mr. Hiss. By the way, what is the date on which the national 
defense act was passed, Colonel Harris? 

Lieutenant Colonel Harris. It was passed originally in 1916, 
amended in 1920, and numerous amendments have been made since, 
but the amendment of 1920 is basically Avhat we are working under. 

Mr. Hiss. When was section 5 (a) passed? 

Lieutenant Colonel Harris. In the amendment of 1920. 

Mr. Hiss. When was section 120 passed? 

Lieutenant Colonel Harris. In 1916, in the original act. 

Mr. Hiss. Are you familiar with the legislation passed just before 
the United States went into the World War on the general subject 
of the mobilization of the country's industrial forces, Colonel 
Harris? Did I make my question clear. Colonel? 

Lieutenant Colonel Harris. No, sir. 

Mr. Hiss. I say, are you familiar with the legislative enactments 
})rior to and after the national defense act, which relate to industrial 
mobilization and coordination? 

Lieutenant Colonel Harris. Generally speaking, but I would pre- 
fer, as to the details of the act, to have Lieutenant Brannon answer 
it. 



3612 MUNITIONS INDUSTRY 

Mr. Hiss, Lieutenant Brannon, do you have before you a report 
of the War Industries Board? 

Lieutenant Brannon. I have not. 

Lieutenant Colonel Harris. I have. 

Mr. Hiss. Colonel Harris, could you furnish Lieutenant Brannon 
with a cojDy of that ? 

Lieutenant Colonel Harris. Yes, sir. 

Mr. Hiss. Roughly speaking, Lieutenant Brannon, do you know 
iabout when the tirst legislative enactment relating to surveying 
industry and determining the industrial needs was passed? 

Lieutenant Brannon. As I understand it, this was the act which 
established the Council of National Defense, which was passed In 
August 1916. 

Mr. Hiss. Are you familiar with the Naval Consulting Board? 

Lieutenant Brannon. I know that was established about 1915, 
I think. 

Mr. Hiss. Do you know under what authority that was estab- 
lished. Lieutenant Brannon? 

Lieutenant Brannon. I do not recall any legislative authority for 
it. 

Mr. Hiss. If you will turn to page 19 of Mr. Baruch's report, 
the second complete paragraph on that page, it says [reading] : 

Three official movejnents began iu 1916. The Naval Consulting Board ap- 
pointed a committee which made a comprehensive survey of some 18,000 
industrial plants throughout the country. 

Do you know, or could you state for the committee's information, 
the personnel of the Naval Consulting Board, Lieutenant Brannon ? ^ 

Lieutenant Brannon. We could get that, 1 think. 

Mr, Hiss. Do you know oifhand Avhether they were civilians or 
naval oiiicers^ 

Lieutenant Brannon. As I understand, they were outstanding 
civilians. I think Thomas A. Edison was one, and a number of men 
of that caliber. 

Mr. Hiss. The third complete paragraph on page 19 of the re- 
port of the War Industries Board states [reading] : 

Another survey of Importance was made by the Kernan Board, appointed 
by the Secretary of War to investigate the country's munitions resources 
with a view to determining the advisability and practicability of the Govern- 
ment's manufacturing its arms, munitions, and other war equipment. 

Do you know when that board was appointed, Lieutenant Bran- 
non ? 

Lieutenant Brannon. I know approximately. It was appointed 
under a paragraph of the National Defense Act, I think section 121, 
and, of course, that was passed in June 1916, and the report was 
supposed to be submitted before January 1, so that the Kernan 
Board was appointed between June and December. I think they 
submitted their report in 1916. 

Mr. Hiss. Then the Council of National Defense Act, to which we 
referred, was passed originally June 3, 1916? 

Lieutenant Brannon. Yes, sir. 

Mr. Hiss. And when was the Council of National Defense created, 
and under what authority? 

1 The membership of the Naval Consulting Board was later furnished to the committee 
and appears in the appendix on p. 3929. 



MUNITIONS INDUSTRY 3613 

Lieutenant Brannon. It was under an act, I think, in August 
1916. 

Mr. Hiss. August 29, 1916, I think. 

Lieutenant Brannon. I do not remember the day. 

Mr. Hiss. I will show you a copy of this [referring to document]. 
Was not the provision in the act of August 29, 1916, a much more 
ambitious statement of the duty to coordinate industry than the 
previous statement in what is now section 120 of the National De- 
fense Act, passed in June of the same year ? 

Lieutenant Brannon. You mean as far as planning is concerned? 

Mr. Hiss. As far as the directive contained in this particular pro- 
vision is concerned. 

Lieutenant Colonel Harris. I think that it is a more comprehen- 
sive development of the subject, but its directive is not so em- 
phasized. Section 120 of the National Defense Act places a directive 
on the Secretary of War, covering one limited field of industrial 
mobilization. The Council of National Defense Act covered a 
broader field and did not give the power, as I recall it, except in an 
advisory capacity. 

Mr. Hiss. For the record, I would like to state the citation to this 
particular act. This was section 2 of an Army appropriation act 
for the year 1917, approved August 29, 1916, which appears at 39 
Statutes at Large, page 619, at pages 649 to 650. 

This j)rovided for a Council of National Defense — 

For the coordination of industries and resources for the national security 
and welfare * * *. 

That provided, furthermore, that the council, which was com- 
posed of various Cabinet members — that is correct, is it not. Lieuten- 
ant Brannon? 

Lieutenant Brannon. Yes, sir. 

Mr. Hiss (continuing reading) : 

shall nominate to the President, and the President shall appoint an advisory 
commission consisting of not more than seven persons, each of whom shall 
have special knowledge of some industry, public utility, or the development of 
some natural resource, or be otherwise specially qualified, in the opinion of 
the council, for the performance of the duties hereinafter provided. The 
members of the advisory commission shall serve without compensation, but 
shall be allowed actual expenses of travel and subsistence when attending 
meetings of the commission or engaged in investigations pertaining to its 
activities. * * * 

That it shall be the duty of the Council of National Defense to supervise 
and direct investigations and make recommendations to the President and the 
heads of executive departments as to the location of railroads with reference 
to the frontier of the United States so as to render possible expeditious concen- 
tration of troops and supplies to points of defense; the coordination of mili- 
tary, industrial, and commercial purposes in the location of extensive highways 
and branch lines of railroad ; the utilization of w^aterways ; the mobilization 
of military and naval resources for defense; the increase of domestic produc- 
tion of articles and materials essential to the support of armies and of the 
people during the interruption of foreign commerce; the development of sea- 
going transportation ; data as to amounts, location, method and means of 
production, and availability of military supplies; the giving of information 
to producers and manufacturers as to the class of supplies needed by the mili- 
tary and other services of the Government, the requirements relating thereto, 
and the creation of relations which will render possible in time of need the 
immediate concentration and utilization of the resources of the Nation. 

That the Council of National Defense shall * * * provide for the 
work of the advisory commission to the end that the special knowledge of 
such commission may be developed by suitable investigation, research, and 



3614 MUNITIONS INDUSTRY 

inquiry and made available in conference and report for the use of the coun- 
cil; * * *. 

For this purpose the sum of $200,000 was appropriated. 

Is that act still in force, Lieutenant Brannon? 

Lieutenant Brannon. I understand it is; never been repealed. 

Mr. Hiss. Does the Council of National Defense now have meet- 
ings? 

Lieutenant Brannon. I think not. 

Mr. Hiss. Do 3'ou know whether any of the advisory members still 
consider themselves as on the Council? 

Lieutenant Brannon. I understand no appropriation has been 
made since about 1920. 

Mr. Hiss. Have specific appropriations in recent Army appropria- 
tion statutes referred to the duties of The Assistant Secretary of War 
under sections 5a and 120 of the national defense act? 

Lieutenant Brannon. They have made some reference to person- 
nel for planning, I believe. 

Mr. Hiss. Would you please select those specific references for the 
Committee, Lieutenant Brannon, so that we may have those in the 
record ? 

Lieutenant Colonel Harris. You understand those references were 
in the hearings before the Appropriations Committee and were not 
contained in the appropriation acts. 

Mr. Hiss. There is no specific appropriation for planning? 

Lieutenant Colonel Harris. It is in the whole Army appropria- 
tion. 

Mr. Hiss. And none of that is specifically related to the subject 
of planning? 

Lieutenant Colonel Harris. In the presentation of the require- 
ments of the Department it is broken down and explained. There 
is where it shows the portion for industrial planning. 

Mr. Hiss. Is that stated in the reports of the committee to Con- 
gi^ess ? 

Lieutenant Colonel Harris. I should think it would be. 

Lieutenant Brannon. I would just like to add one thing. I be- 
lieve there were two or three appropriation acts about 1922 — I do 
not know how long it continued — which placed a limitation on the 
number of persons employed in planning. I think it stated that no 
additional personnel should be employed, but by implication it re- 
ferred to persons who were already employed.^ 

Mr. Hiss. I should like to read into the record at this point the 
provisions of the national defense act which have been referred to, 
those parts which are pertinent. 

Section 5a [reading] : 

Hereafter, in addition to such other duties as may be assigned him by the 
Secretary of War, The Assistant Secretary of War, under the direction of the 



' Under date of Mar. 29, 1935, Colonel Harris supplied additional data concerning 
personnel for planninsi', as follows : 

The followinR proviso in the War nepartmont Appropriation Act for the fiscal year 
10;!1 (act approved May 28, 1930, 46 Stat. 432-4."0) makes specific reference to indus- 
trial planning activilics: 

" Provided, That no appropriation contained in this Act shall he available for any 
expenses incident to the empU)yment of an average number of ofQcers, enlisted men, or 
civilian emplo.veos greater than the largest number employed during the fiscal year 
ended .Tune 30, 1020. in connection with work incident lo the assurance of adequate pro- 
vision for the mobilization of materiel and industrial organizations essential to wartime 
needs." 

A similar proviso has been included in subsequent War Department Appropriation Acta 
MG Stat. 1284; 47 Stat. 671, 1578; 48 Stat. G22) 



MUNITIONS INDUSTRY 3615 

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 materiel and 
industrial organizations essential to war-time needs. 

That clause is the fundamental clause under which your branch 
ojDerates, is it not? 

Lieutenant Colonel Harris. We operate under both clauses. 

Mr. Hiss. Section 120 consists of five paragraphs, the first two 
of which deal with compulsory orders in time of war. 

Lieutenant Colonel Harris. And commandeering of plants. 

Mr. Hiss. The first three paragraphs do. The fourth paragraph 
provides that — 

The Secretary of War shall also make, or cause to be made, a complete list 
of all privately-owned plants in the United States equipped to manufacture 
arms or ammunition, or the component parts thereof. 

Colonel Harris, what is the accepted definition in the War 
Department of the words " arms or ammunition" or parts thereof? 

Lieutenant Colonel Harris. It is, generally speaking, all weapons, 
bombs, and the ammunition therefor. 

Mr. Hiss. Would it include the Quartermaster's supplies? 

Lieutenant Colonel Harris. It would not. 

Mr. Hiss. Would it include aviation requirements? 

Lieutenant Colonel Harris. It would in a broad analysis, and par- 
ticularly the armament on aviation. 

Mr. Hiss. I call your attention to the fact that this fourth para- 
graph, in directing the listing of privately owned plants and the 
determination of whether or not they may be converted into ammuni- 
tion factories, deals specificall}^ with arms or ammunition or parts 
and with ammunition factories, whereas the second paragraph, deal- 
ing with compulsory orders in time of war, speaks of arms or am- 
munition or parts of ammunition or any necessary supplies or 
equipment, and is considerably broader than paragraph 4. Do you 
consider that under paragraph 4 The Assistant Secretary of War 
has been directed by Congress to include in any list or any plans 
plants other than plants engaged in or capable of producing arms 
and ammunition or parts thereof, Colonel Harris? 

Lieutenant Colonel Harris. Yes; I consider that to be true; but 
I further consider that 5a covers the same responsibility in a broader 
way. 

Mr. Hiss. Therefore 5a is really the particular provision under 
which the planning branch operates, rather than section 120, which 
refers to arms and ammunition in a limited way ? 

Lieutenant Colonel Harris. That is true. There is another para- 
graph that I wish you would read, if j^ou do not mind, in that sec- 
tion 120, and that is the last paragraph about an authorization to 
appoint a board. I want to bring that up. 

Mr. Hiss. I wanted to take that up. The last paragraph is 
[reading] : 

The President is hereby antborized, in his discretion, to appoint a Board 
on Mobilization of Industries Essential for Military Preparedness, nonpartisan 
in cliii racier, and to take all necessary steps to provide for sucli clerical assist- 
ance as he may deem necessary to organize and coordinate the work herein- 
before described. 

Has any such board to your knowledge ever been appointed? 

83876— 35— PT 15 6 



3616 MUNITIONS INDUSTBY 

Lieutenant Colonel Harris. It has not. 

Mr. Hiss. Has any appropriation for the activities of such a board 
ever been provided by Congress, so far as you know, Colonel Harris? 

Lieutenant Colonel Harris. Not since the war. 

Mr. Hiss. This was passed before the Council of National Defense 
sections of the Army Appropriation Act of August 29, 1916; is that 
not correct? 

Lieutenant Colonel Harris. That is correct. 

Mr. Hiss. Would you not say that both were a part of the then 
recognized necessity of planning and preparing for the possibility — 
then seeming very likely — of participation by this country in the 
European war? 

Lieutenant Colonel Harris. I do. 

Mr. Hiss. Do you think that either act was considered at the time 
a mandate to The Assistant Secretary of War to plan indefinitely 
in times of peace, such as in the year 1934? 

Lieutenant Colonel Harris. I consider The Assistant Secretary as 
now under mandate to plan elaborately for mobilization in time of 
war. 

Mr. Hiss. By virtue of what particular legislative provision, Colo- 
nel Harris? 

Lieutenant Colonel Harris. Basically 5a. supported by section 120. 

Mr. Hiss. I have already pointed out that section 120 is limited 
to arms and ammunition. 

Lieutenant Colonel Harris. I think mv answer takes cognizance 
of that. 

Mr. Hiss. I also call your attention to the fact that 5a refers in 
the first paragraph, in the first sentence, to two points, one of which 
is current procurement for the ordinary needs of the Army in peace 
time or indeed at any time, and the last part of it, " and the assur- 
ance of adequate provision for the mobilization of materiel and indus- 
trial organizations essential to war-time needs." So that those lines 
represent the legislative authority for a rather elaborate peace-time 
organization on planning set up in the Assistant Secretary of War's 
office. 

Returning to the report of the War Industries Board, after the 
passage of the Council of National Defense legislation, the Council 
was formed according to the statement on page 20 on October 11, 
1916. On Februarv 28, 1917, the Council created a body known as 
the "Munitions Standards Board." On July 28, 1917, the War 
Industries Board was created. Then on March 4, 1918, the War 
Industries Board was reorganized, and after the passage of the 
Overman Act an Executive order was issued by the President under 
date of May 28, 1918, formally empowering the War Industries 
Board. 

Does that correctly summarize the planning agencies established 
during the war? 

Lieutenant Colonel Harris. Not quite. The Munitions Standards 
Board was formed just before war was declared, with an idea of 
standardizing specifications. War was declared just about 6 weeks 
later, and they knew then it was too late to try to bother with stand- 
ardizing munitions to any great extent. So they formed the Gen- 
eral Munitions Board. Mr. Frank Scott was chairman of both. 



MUNITIONS INDUSTRY 3617 

It was really the General Munitions Board that carried on until the 
War Industries Board was formed. 

Mr. Hiss. That was under the authority of the Council of Na- 
tional Defense Act rather than under the authority of the National 
Defense Act. 

At what period was begun the planning now set up in the Assist- 
ant Secretary of War's office under section 5a and section 120, to 
the extent that it is applicable ? 

Lieutenant Colonel Harris. It was started in 1921; its develop- 
ment has been rather slow because we could not afford to make mis- 
takes. It was started in 1921. 

Mr. Hiss. That was the first time that the mandate of Congress 
under which you are now acting was carried out, or was begun by 
the War Department; is that correct? 

Lieutenant Colonel Harris. It is the first time that anything under 
5a was done. There may have been something under 120, these 
other surveys you speak of during the war; but after the war it 
was the first act. 

Mr. Hiss. Lieutenant Brannon, have you before you copies of the 
contract forms that you have already referred to ? 

Lieutenant Brannon. Yes. 

Mr. Hiss. I show you excerpts from a memorandum jn'epared 

Senator Clark. IVIay I interrupt you just a minute, if I may? 

Colonel, did I understand you to say that you have prepared and 
have on file in the War Department now a lot of legislation that is 
to be sent up to Congress to be passed after the declaration of war? 

Lieutenant Colonel Harris. The statement was, Senator, that we 
had an industrial mobilization plan, and that industrial mobilization 
plan carried an annex of needed legislation. 

Senator Clark. That included war legislation? 

Lieutenant Colonel Harris. Yes. 

Senator Clark. But you propose to wait until after the declara- 
tion of war, then send it all up to Congress to be passed in one bunch 
as an emergency measure, at a time when the cry will be raised that 
if Congress takes time to scrutinize it or study it in detail, they are 
delaying the defense of the country in a national emergency. 

Why is it not possible to send that legislation up there and have it 
examined in the meantime, before the declaration of war? 

Lieutenant Colonel Harris. I might state in answer to that that 
the War Policies Commission in 1932 had before it the same general 
character of legislation. I think they did submit a report to the 
Congress at least embodying this proposed plan of legislation in their 
report. 

Senator Clark. What the legislation itself was has never been 
submitted to Congress. 

Lieutenant Brannon. I think Attorney General Mitchell in a 
memorandum to the War Policies Commission raised a question as 
to the constitutionality of passing legislation of this kind in peace 
time. This legislation will contemplate price fixing and general con- 
trol of industry by Congress. I think he stated in that memorandum 
that the prime basis for the constitutionality was the determination 
by Congress after the emergency arose of the necessity of control 
measures. 



3618 MUNITIONS INDUSTRY 

Senator Clark. There are a great many other provisions in that 
legislative program, which I glanced over last night, to which that 
objection would not be in the least applicable, are there not ? 

Lieutenant Brannon. With reference, for example, to the War 
Trade Board? 

Senator Clark. Yes ; in reference to the draft, conscription, and a 
number of other things to which that objection of price fixing would 
not in any manner be applicable ; certainly since the N. R. A. with its 
price-fixing program, it is doubtful that that objection would be 
applicable to any Government act. 

Lieutenant Brannon. Might I add one thing, sir, that up until I 
think the time of the War Policies Commission hearing of the bills, 
the drafts of the bills in The Assistant Secretary's office were in the 
form of legislation to be enacted in peace time. It was assumed 
this thing would be w^orked up and submitted to Congress. I be- 
lieve that the drafts of the bill submitted to the War Policies Com- 
mission were in that form, but they apparently took the position that 
it should not be submitted in pesLce time. 

Senator Clark. The point I had in mind, if they were submitted 
in peace time there would be no reason why Congress should not 
examine them in detail and know what they were passing before 
they enacted this very far-reaching and drastic legislation. On the 
other hand, we all I'emember how when war is declared the War 
Department or the Navy Department or the War Industries Board 
or any other Government activity will send up a bill, no matter 
how drastic or far-ieaching, and Congress is asked to pass it under 
whijD and sj^ur as an emergency measure, without considering its 
consequences or anything in it ; and if Congress does not pass it in 
that fashion, then a fanfare of protests is raised all over the country 
that Congress is delaying the national defense. It seems to me these 
matters ought to be considered at the proper time. 

Senator Vandenberg. You do not have to go back to the war. 
That is the history of the last 18 months. 

Senator Clark. The Senator will recall that I have always stood 
for the fullest consideration by Congress of anything. 

The Chairman. Colonel, is there objection to the consideration of 
and passage of much of this legislation now in peace time? What 
is the policy of the Department as respects that? 

Lieutenant Colonel Harris. There is not the slightest objection,. 
Senator, to the consideration by Congress of these measures. 

The Chairman. There has been no effort on the part of the War 
Department, then, to prevent that consideration? 

Lieutenant Colonel Harris. Not the slightest. 

The Chairman. Or prevent its passage? 

Lieutenant Colonel Harris. Not the slightest. This industrial 
mobilization plan was prepared with the idea of having something 
ready on " M. day." ^ 

1 " M. day ", the date designated in War Department orders as the first day of mo- 
bilization. ' Popularly referred to as the first day of war. 



MUNITIONS INDUSTRY 3619 

HISTORY OF PREPARATION BY WAR DEPARTMENT OF FORMS OF CONTRACTS 

FOR USE IN NEXT WAR 

Mr. Hiss. Lieutenant Brannon, have you before yoii a copy of ex- 
cerpts from memorandum of February 20, 1934, headed " War-Time 
Contract Forms and Emergency Codes ", that I handed you ? 

Lieutenant Brannon. Yes, sir. 

(The memorandum referred to was marked " Exhibit No. 1225 ", 
and is included in the appendix at p. 3790.) 

Mr. Hiss. Do j^ou reniember the memorandum prepared by Major 
Joyner, Lieutenant Commander Lynch, Captain Jones, Captain 
Johnson, and yourself? 

Lieutenant Brannon. Yes. 

Mr. Hiss. Those are excerpts from that memorandum? 

Lieutenant Brannon. I have not checked it. I assume it is. I am 
familiar with that original paper. 

Mr. Hiss, For the purposes of the record, the underscoring 
that is not under headings should not be followed. That is errone- 
ously typed in. 

In 1921, Lieutenant Brannon, the Bureau of the Budget set up 
an interdepartmental board of contracts to revise, standardize, and 
simplify contract forms in use by the Government. Is that not 
correct ? 

Lieutenant Brannon. I think that is correct. 

Mr. Hiss. That board has j)repared the familiar printed forms of 
Government contracts ? 

Lieutenant Brannon. That is right. 

Mr. Hiss. Now currently in use ? 

Lieutenant Brannon. That is right. 

Mr. Hiss. At the same time was there formed a board to standard- 
ize war-time-contract forms ? 

Lieutenant Brannon. There was. 

Mr. Hiss. Under the Assistant Secretary of War ? 

Lieutenant Brannon. Yes. Not directly the Assistant Secretary. 
It was appointed under War Department order, but it has func- 
tions in cooperation with the Office of The Assistant Secretarv of 
War. 

Mr. Hiss. I refer you to a quotation under the second heading 
there, the first page [reading] : 

In 1921 the Assistant Secretary of War convened a board to standardize 
war-time-contract forms. 

Lieutenant Colonel Harris. That was by authority of the Secre- 
tar}' of War. 

Mr. Hiss. Has that board met consistently since that time and 
devoted itself primarily to the study of the appropriate contract 
forms to be used in the event of war? 

Lieutenant Brannon. All the members of the board perform their 
duty in addition to the other duties. It has met from time to time, 
and subcommittees have been formed to work out particular ques- 
tions or make changes. 

Mr. Hiss. But that board has been in continuous existence ? 

Lieutenant Brannon. Yes. 

Mr. Hiss. It has not been, like the Council of National Defense, 
inactive? 



3620 MUNITIONS INDUSTRY 

Lieutenant Brannon. Oh, no. 

Mr. Hiss. It is a going- concern? 

Lieutenant Brannon. That is correct. 

Lieutenant Colonel Harris. I might state that Lieutenant Bran 
non is a member of that board. 

Mr. Hiss. Reading from the memorandum already identified and 
offered as " Exhibit No. 1225 "— 

Tlie Board to standardize war-time contracts in preparing contracts for use 
in war recognized tlie following conditions which afCect war procurement 
contracts ; 

1. Uncertain labor and material costs which preclude accurate determina- 
tion of fixed prices. 

Is it the opinion of the War Department that for many purchases 
in time of war a fixed-price contract will be impracticable? 

Lieutenant Brannon. There are two different points there, Mr. 
Hiss. One is a fixed-price contract where at a particular time we 
can arrive at a satisfactory price, but due to the uncertainties of 
the future on a contract which contemplates production over a 
long period, the uncertainties regarding the increases in the cost of 
labor and material make it undesirable to fix the price definitely. 

Mr. Hiss. May I just go on with 2 and 3 of this, then we will 
come back to that. 

Lieutenant Brannon. Yes. 

Mr. Hiss. The second part: 

The termination of contracts due to cessation of hostilities. 

That means whenever the war ends the problem arises of termi- 
nating many hundreds of contracts. We have had reference to Tt 
in connection with the Old Hickory testimony today. 

Lieutenant Colonel Harris. May I interject a remark there? 

Mr. Hiss. Certainly. 

Lieutenant Colonel Harris. This paper you are reading is a study 
by a group of officers. 

Mr. Hiss. It is. 

Lieutenant Colonel Harris. If you are coming to any decision 
where the War Department states a policy, please 

Mr. Hiss. I am using this merely to ask a question. 

Lieutenant Colonel Harris. I just want to make that clear. 

Mr. Hiss. We are relying on your testimony and that of Lieu- 
tenant Brannon as the official statement of the War Department, not 
this memorandum. 

The third point : 

Confusion due to increased industrial activity and unfamiliarity of manu- 
facturers with war equipment and material. 

That is one of the problems which must be faced in war-time 
procurement ? 

Lieutenant Brannon. Yes. 
Mr. Hiss. Fourth : 

Haste incident to the emergency. 

5. Opportunities for profiteering. 

6. Increased powers of the President and removal of legislative restriction 
upon the powers of the Government agencies. 

In time of war it is necessary for the War Department to have 
untrammeled discretion in many fields in order to move quickly 



MUNITIONS INDUSTRY 3621 

without delay and without red tape, and so forth, is it not, Lieu- 
tenant Brannon ? 

Lieutenant Brannon. I think they have such authority. Under 
section 120 Congress has already given them rather wide powers in 
the event of war. 

Mr. Hiss. Has the War Department drawn up a list of statutes 
which it believes will have to be suspended or superseded in time 
of war to permit this wide flexibility of operation ? 

Lieutenant Brannon. There was such a list prepared about 1926, 
and it was not brought up to date. At present there is no such offi- 
cial list, merely a tentative study on the thing that is a sort of pre- 
liminary list. It was prepared in the office, but has not been passed 
upon or approved. 

Mr. Hiss. In your opinion will there have to be certain liberalizing 
amendments to existing statutes governing Government procurement 
in order to give the necessary flexibility in time of war? 

Lieutenant Brannon. Yes. The draft of one of the bills con- 
templates that some measures will be included for suspension. 

Mr. Hiss. The draft does not mention any specific measures at the 
present time? That is left blank; is that correct? 

Lieutenant Brannon. That is left blank. 

Mr. Hiss. Paragraph 7 of this memorandum " Exhibit No. 1225 " — 

Recent recommendations of the War Policies Commission " to minimize 
the profits of war " — 

Does the board to standardize war contracts in developing drafts 
of those contracts have in mind as one desideratum at least the 
minimization of the profits of war ? 

Lieutenant Brannon. Yes, sir. 

Mr. Hiss. And they have attempted to achieve that in the fornix 
prepared ? 

Lieutenant Brannon. They have. 

Mr. Hiss. When you say " minimize the profits ", just what 
does the War Department have in mind, Colonel Harris? 

Lieutenant Colonel Harris. I think to answer that generally that 
the War Department based its recommendations and its actions on 
paying 6 percent on the capital invested in the undertaking. 

Mr. Hiss. And no more. 

Lieutenant Colonel Harris. Generally speaking, no more. 

Senator Clark. Then you would have to have in that case, 
Colonel, one of these rate cases just as a utility has every time the 
Government made a contract, would you not? 

Lieutenant Colonel Harris. It would be difficult, Senator. 

Senator Clark. You would have to go into all the questions of 
original cost and cost of reproduction new and capital devoted tO' 
the particular contract, which would be rather cumbersome at a time 
when the Government is making 100 or 150 contracts a day. 

Lieutenant Colonel Harris. I am glad to have the opportunity to 
answer that question, because in all cost-plus-a-percentage contracts, 
or adjusted compensation where it is based on costs, the accounting 
responsibility placed upon the Government is enormous and leads 
to difficulties. That is a bad feature of a contract of that kind. 

Senator Clark. I have seen one rate case before a public service 
commission where they were trying to find out the actual value of 
the property devoted to the public service last 4 or 5 months. It 



3622 MUNITIONS INDUSTRY 

would seem to me to be an insuperable task, when the Government 
is making 100, 125, or 150 contracts a day to obtain any figures on 
which you could base a percentage figure. 

Lieutenant Colonel Harris. We hope in our development of peace- 
time planning to arrive at some of these figures in carrying this out — 
to arrive at an estimated cost and the values of plants involved. 
It is a scheme to have, if our system works out to its full flower, 
the peace-time planning deA-elop the basic data as to that feature 
of the contract. 

Mr. Hiss. Lieutenant Brannon, in subparagraph (c) under para- 
graph 7, the following statement is made : 

The cost-plus-percentage methods of purchase shall be eliminated. 

By that you mean the cost plus percentage of cost, do you not? 

Lieutenant Brannon. Yes. 

Mr. Hiss. Because under some of the present forms, it is the best 
opinion of the Assistant Secretary of War's office that in the ord- 
nance field and in the large construction field you must still have 
cost plus a percentage of something ? 

Lieutenant Brannon. That is correct, cost plus a fee of some kind. 
But the reason the percentage was in there was to get away from a 
fee which will increase as the cost increases. 

Mr. Hiss. In this particular paragraph your committee had in 
mind cost plus percentage of cost, did it not ? 

Lieutenant Brannon. That is correct. 

Mr. Hiss. The view of the War Department is that the cost-plus- 
a-percentage-of-cost contract which was used frequently during the 
war and which was used in some of the early drafts of the Old Hick- 
ory contract and was used in two or three of the other contracts 
adopted by the du Pont Enginering Co. that we have referred to, 
should as a matter of policy not be adopted by the Government for 
future war procurement; is that correct? 

Lieutenant Brannon. That has been the assumption of the con- 
tract board, I believe, Mr. Hiss. 

Mr. Hiss. Has Congress specifically disapproved or at least hinted 
its disapproval of cost-plus contracts? I call your attention to an 
excerpt from the Housing Appropriation Act of June 12, 1918, 
which appropriated $60,000,000 for housing for war needs and 
amended section 7 of the general housing act as follows : 

That no work to be done or contract to be made under or by authority of 
any provision of this act shall be done or made on or under a percentage or 
cost-plus-percentage basis. 

Lieutenant Brannon. May I just add there, Mr. Hiss, that the 
contract form shown in the report of the Housing Corporation shows 
that they used a cost-plus contract but not a cost plus percentage 
of cost. 

Mr. Hiss. Referring again to " Exhibit No. 1225 ", Lieutenant 
Branno, paragraph eight — 

Provision for changes in plans and specifications and necessary readjust- 
ments of original estimated cost of contract — 

in time of war it will be necessary to have flexibility in that field, 
too, will it not. Lieutenant Brannon? 

Lieutenant Brannon. Yes ; the equipment is changing all the time 
in war. 



MUNITIONS INDUSTRY 3623 

Mr. Hiss (reading) : 

The board on war-time contracts, after much research and collaboration 
with the supply arms and services, adopted certain forms for use in war pro- 
curement. These were embodied in a letter to The Adjutant General dated 
January 25, 1929. 

They were the first formal statement in writing of formal adoption 
by the board of forms of contracts; is that correct? 

Lieutenant Brannon. I believe that is the first we found in our 
research. 

Mr. Hiss (reading) : 

The forms as then adopted by the board were later referred to another 
committee appointed by it for further study and recommendations as to revi- 
sion. This later committee held numerous conferences with representatives of 
the several supply arms and services and consulted freely with liaison officers 
of the Navy Department. Consideration was also given to suggestions received 
from district procurement planning officers and from Reserve officers. 

Who are the district procnrement planning officers, Colonel Har- 
ris? Are they the men you have already referred to as assisting in 
the planning? 

Lieutenant Colonel Harris. They are the field agencies of each 
of the supply branches engaged in industrial planning. 

Mr. Hiss. Your estimate was that there about 50 of those at 
present? 

Lieutenant Colonel Harris. Yes. 

Mr. Hiss. "And from Reserve officers." AYliat Reserve officers 
do you have in mind there? AVhat Reserve officers were referred to? 

Lieutenant Colonel Harris. Each one of the planning branches 
have assigned to them for the war-time associations certain Reserve 
officers, and they have periodic meetings. At their meetings ques- 
tions of this character are discussed. 

Mr. Hiss. The functions of those Reserve officers in time of war 
would normally be within the supply arms to which they are at pres- 
ent attached ? 

Lieutenant Colonel Harris. Normally. 

Mr. Hiss. Are they men who have some familiarity with industry ? 

Lieutenant Colonel Harris. Generally speaking they have. 

Mr. Hiss. How many of them have some connection with industry? 

Lieutenant Colonel Harris. Most of them have. 

Mr. Hiss. Colonel, in connection with your Reserve officers in 
the procurement branches, are the Reserve officers who now have 
some connection with industry expected by the War Department 
to be proficient in the details of that industry when they are called 
to active duty? 

Lieutenant Colonel Harris. They are expected to be proficient 
in the production of the industry rather than the procurement or 
making any contracts with the industry. 

Mr. Hiss. Will you use them as advisers in connection with pro- 
curement, from the industries with which they were formerly as- 
sociated ? 

Lieutenant Colonel Harris. When we speak of the procurement 
branch, I would like to state that there are several phases of it. 
There is the actual making of the contract, there is the production 
activitj^, inspection activity, and the pay activity, all of which we 
group under the word " procurement." 



3624 MUNITIONS INDUSTRY 

Senator Clark. Just as an example, Colonel, that may be used 
by some fellows who remember so long ago that the most of you may 
have forgotten it — the parties concerned are nearly all dead — there 
was a time when the Carnegie Steel Co. made a practice of selling 
to the Government defective armor plate at a very excessive price. 
Now, it occurs to me that if at that time an officer of the Carnegie 
Steel Co. was the Reserve officer who was inspecting that armor 
plate, it would be very difficult for the Government to detect that 
defective armament. 

That is what I was getting at in connection with Mr. Hiss' ques- 
tion, in connection with the matter of taking officers of industry and 
using them as Reserve officers to regulate those industries in time of 
war. 

Lieutenant Colonel Harris. When we entered the war we had 85 
Ordnance officers as such and when we came to the close of the war we 
had from three to five thousand. 

Senator Clark. What I am trying to find out is whether the re- 
serve officers of these corporations, officials that have been given re- 
serve commissions, are going to have to do with the manufacturing 
and inspection of munitions produced by their own companies. 

Lieutenant Colonel Harris. Not by their own companies. 

The Chairman. Let us make clear on it. Why not by their own 
companies ? 

Lieutenant Colonel Harris. Because generally even the most hon- 
est man cannot help but be swayed to a limited agree, at least, by 
association. We would have to free them of any implication of that 
kind, and in our plans we hope that no employee of one company 
will have to do with that particular company. 

The Chairman. You mean then specifically this : As an example, 
in the case of the Colt Corporation, that there would not be a re- 
serve officer assigned in that field who was in any way related to 
the Colt Arms and Ammunition Co. ? 

Lieutenant Colonel Harris. I would say there might be a reserve 
officer selected who had that relationship that you speak of, but he 
would not be put on that duty that had to do with the Colt Co. 

Senator Clark. He would be assigned to some other industrial 
plant? 

Lieutenant Colonel Harris. Yes, sir. We are bound to have in 
time of war some reserve officers who have affiliations with large 
industrial corporations, but we endeavor to put them now where 
there are no connections with their own companies. 

Mr. Hiss. Then their peculiar knowledge that they have gained 
from their industrial experience Avould be of no value to the War 
Department ? 

Lieutenant Colonel Harris. I would not say that. 

Mr. Hiss. Let us say their peculiar business knowledge. 

Lieutenant Colonel Harris. Let us not say peculiar knowledge. 

Mr. Hiss. Their knowledge of that particular industry. In other 
words, if an expert is an expert in the explosives industry, you will 
not use his expert explosive knowledge in time of war in regard 
to procurement? 

Lieutenant Colonel Harris. What do you mean by procurement? 

Mr. Hiss. The making of contracts. 



MUNITIONS INDUSTRY 3625 

Lieutenant Colonel Harris. You use it in the narrow sense. Pro- 
curement for me is getting the stuff, and that covers a wide field. 

Mr. Hiss. In the contract field, won't they be your advisers? 

Lieutenant Colonel Harris. I think it is quite likely that some 
of them may be advisers; yes. 

Mr. Hiss. When you say they would not be in the same field, you 
mean you will not have them actually sign the contracts or carry 
on the final negotiation for the contracts. Won't you, however, use 
them to advise you as to how the contracts should be entered into? 

Lieutenant Colonel Harris. Undoubtedly there may be special 
cases that way, where they should advise, but I like to stick to my 
original statement, that we will endeavor not to have peoj)le in time 
of war engaged in duties related to the companies from which they 
came. 

Mr. Hiss. Referring to the same memorandum, entered as " Ex- 
hibit No. 1225 " : 

Based on these studies, revised drafts of forms were prepared and submitted 
to chiefs of supply arms and services for further consideration and sugges- 
tions. Final redrafts were then prepared by the committee and submitted 
to the board. At a formal meeting of the board on December 22, 19.31, the 
revised forms as submitted by the committee were adopted. 

Are these the forms you have submitted to me hitherto. Lieutenant 
Brannon ? 

Lieutenant Brannon. I think so. That last one was not included. 

Mr. Hiss. The last one in there ? 

Lieutenant Brannon. No ; that was not included. 

Mr. Hiss. Do you have copies of these? 

Lieutenant Brannon. Yes, sir. 

Mr. Hiss. I am offering in evidence those contracts which were 
referred to here as having been adopted by the board on December 
22, 1931. 

(The contract forms referred to were marked " Exhibit No. 1226-A 
to 1226-D " respectively, the adjusted-compensation form being no. 
1226-A ; the evaluated fee form, no. 1226-B ; the construction form, 
no. 1226-C ; and the supplies form, no. 122&-D. They appear in the 
appendix on pp. 3795, 3804, 3814, 3819.) 

Mr. Hiss. I understand that the form I have here in itself contains 
certain revisions of the December 22, 1931, form; is that correct? 

Lieutenant Brannon. I do not think any revisions of the form 
have been made since December 1931. 

Mr. Hiss. I see. 

Lieutenant Brannon. Except that a new form has been included. 

Mr. Hiss. These are contracts for supplies, contract for construc- 
tion, adjusted compensation contract, exhibit A to the adjusted com- 
pensation contract. 

The final redrafts were forwarded to The Assistant Secretary of War in 
February 1932, togetlier with the recommendations for their approval for use, 
in their respective fields, for all war procurement purposes, except that of 
large-scale construction projects. 

The Construction Division, Office of the Quartermaster General, was of the 
opinion that none of the proposed forms was adaptable to large-scale con- 
struction and wished to prepare a form which would be suitable for such 
project. 

The Assistant Secretary of War, through the Army and Navy Munitions 
Board, submitted the proposed forms for consideration of the Navy Depart- 
ment as to their suitability for war procurement purposes by that Depart- 



3626 MUNITIONS INDUSTRY 

ment — with a view to promoting uniform war-time contracts in ttie War 
and Navy Departments. After consideration of tlie forms by tlie Navy 
Department, they were returned with the notation that wliile most of the 
principles contained in them w?re embodied in forms adopted by tlie Navy, 
it was not believed advisable or possible to standardize both Department forms 
into a single form. 

Do€s that state substantially the history of these particular forms 
to that point? 

Lieutenant Brannon, I think so. It was written some time ago, 
but, as I recall it, we looked it up at the time. 

Mr. Hiss (continuing reading) : 

In view of recent criticism and suggestions on war contract forms received 
from procurement district planning officers and industrialists, The Assistant 
Secretary of War has referred the 1931 war contract forms to the Board on 
War Contracts for further consideration. 

Pursuant to these instructions the Board met on January 11, 1934. and 
appointed a committee to consider all papers now in the liands of the Board 
and to present to the Board definite recommendations as to a form of con- 
tract based on the adjusted compensation principle and a manual of instruc- 
tions for the drawing of contracts thereon. 

Does that state your recollection of what occurred up to Janu- 
ary 11, 1934, Lieutenant Brannon? 

Lieutenant Brannon. I think that is correct. 

Senator Clark. What do you mean by adjusted compensation, 
Colonel? Congress passed an adjusted compensation bill once 
having to do with soldiers, and after having been passed everybody 
got to calling it a bonus. I wonder if this is going to be any 
different. 

Lieutenant Colonel Harris. Basically, it is a contract covering a 
noncommercial item with which the particular contractor is not 
familiar, and is not able to estimate his costs and for which the 
Government has got to finance the operation. 

Mr. Hiss (reading) : 

The Board to Standardize Wartime Contract Forms has recommended 
adoption of the following forms of contracts for use during war. 

That is subsequent to January 11, 1934, Lieutenant Brannon? 

Lieutenant Brannon. No ; this is simply going ahead in the state- 
ment of the thing to say these are the particular forms. 

Mr. Hiss. This goes back to the December 1931 recommendation? 

Lieutenant Brannon. Yes. 

Mr. Hiss. Formal contracts. Fixed price contracts, two kinds, 
contracts for supplies and contracts for construction. Adjusted 
compensation contracts. 

Lieutenant Brannon, will you turn to 3'our form of adjusted- 
compensation contract ? 

Lieutenant Brannon. May I add one thing right there, Mr. 
Hiss? 

Mr. Hiss. Certainly. 

Lieutenant Brannon. In preparing this thing no reference was 
made to the fact that we expect many cases will arise where the 
standard Government peace-time form can be used. 

Mr. Hiss. I am sorry; I didn't get that. Will you repeat it, 
please ? 

Lieutenant Brannon. I say it is not mentioned here, but, as I un- 
derstand it, it is expected that a number of cases will arise where 
the standard Government peace-time forms will be used. 



MUNITIONS INDUSTRY 3627 

Mr. Hiss. May we just go into that a little more specifically, 
Lieutenant Brannon? 

Lieutenant Brannon. Yes. 

Mr. Hiss. During war time in which fields or in what supplj' 
arms were the cost plus a percentage of cost and similar contracts 
used to the greatest extent? 

Lieutenant Brannon. Under the Quartermaster Corps for con- 
struction and the Ordnance Department for noncommercial items. 

Mr. Hiss. I call your attention at this time to an exhibit already 
introduced, " 1107 ", being appendix A to the letter of the Secretary 
of War, which shows that a total of $1,271,000,000 was spent in 
construction during the World War.^ All of that was not canton- 
ment construction, and, therefore, I assume all of it was not under 
the Quartermaster Corps, but I should assume that all of that was 
either under the Quartermaster Corps or to a large extent under 
Ordnance. 

Lieutenant Brannon. Yes. 

Mr. Hiss. Is that a substantially correct statement to make? 

Lieutenant Brannon. Yes; I think that is correct. 

Mr. Hiss. I have handed you that document. What is the num- 
ber of that exhibit again? 

Lieutenant Brannon. 1107. 

Mr. Hiss. In addition to the exhibit just referred to on cost of 
construction, I refer again to " Exhibit No. 1104 ", heretofore intro- 
duced on the relative proportions of the expenditures of the Army 
supply branches during the war.- It will be noticed that the Quar- 
termaster Corps and the Ordnance Department wei-e by far the major 
purchasers. 

Senator Clark. What is that? 

Mr. Hiss. This is the Quartermaster Corps and this is the Ord- 
nance and this is the Air Service. 

Is it not true, Colonel Harris, that in the event of another war 
the Air Service expenditures will be proportionately considerably 
larger than as shown on this chart? 

Lieutenant Colonel Harris. Quite true. 

Mr. Hiss. What type of contract do you think would be suitable 
for taking care of the requirements of the Air Service, for the Air 
Corps? 

Lieutenant Colonel Harris. I think some will be fixed price and 
some will be contracts of the character of the ones we are proposing 
here. 

Mr. Hiss. As between those two, which will predominate or pre- 
ponderate in volume, in your opinion, as between fixed price and 
adjusted compensation? 

Lieutenant Colonel Harris. I think there would be more fixed 
price in the Air Corps, for air equipment, than there will be in the 
Ordnance Department, for example, but there will be a large pro- 
portion of the adjusted form of contract. 

Mr. Hiss. In the Air Service ? 

Lieutenant Colonel Harris. Yes. 

Mr. Hiss. In ordnance, what would be your estimate — I think 
you have already testified on this, but I would just like to bring it 

» Hearings, Part XIII, p. 2910, appendix, p. 2981. 
2 Ibid., p. 2906, appendix, p. 2974. 



3628 MUNITIONS INDUSTRY 

out — your estimate as to the proportion of the contracts during the 
war in the field of ordnance which were fixed-price and those which 
were some other form.^ 

Lieutenant Colonel Harris. I am getting that data prepared ta 
present at a later date and I prefer not to answer, because I want, 
to give you the exact figures. 

Mr. Hiss. We can at this time say a large part 

Lieutenant Colonel Harris. A large part undoubtedly would be. 

Lieutenant Brannon (continuing). Would be of the non-fixed- 
price type ? 

Lieutenant Colonel Harris. Quite true. 

ADJUSTED-COMPENSATION CONTRACT FORM " GENERAL 

Mr. Hiss. Under the adjusted-compensation contract, which I 
have asked you to turn to, Lieutenant Brannon, the scheme of pay- 
ment is to pay the cost of production ; is it not ? 

Lieutenant Brannon. That is correct. 

Mr. Hiss. And this particular contract is believed to be especially 
suitable to the needs of the ordnance branch — the Ordnance Depart- 
ment — is that correct, in time of war ? 

Lieutenant Brannon. Yes, for the protection of noncommercial 
items manufacturers, and, of course, they are largely the ones to 
use them. 

Mr. Hiss. Ordnance is the largest consumer, if we can use that 
word, of noncommercial items? 

Lieutenant Brannon. Yes. 

Mr. Hiss. Under ordnance come the purchase of explosives, small 
arms, and ammunition, and steel for large ordnance, is that correct? 

Lieutenant Brannon. I think so. It is a question of how much 
steel they buy, of course. 

Mr. Hiss. In determining the costs of a contractor who also sup- 
plies his own raw material — let us take, for example, one of the 
steel companies, which has its own coal mines, or one of the copper 
companies which has its own copper mines — what will the War De- 
partment regard as the cost of the raw materials for a component 
element produced by a contractor? 

Lieutenant Brannon. I think if you look at the form, Mr. Hiss, 
it is not contemplated that a contractor will furnish any raw ma- 
terial except what he may have on hand, 

Mr. Hiss. Suppose you have the example given, of a steel com- 
pany with its own coal mine, will you permit them to use their own 
coal, or Avill they have to buy on the market? 

Lieutenant Brannon. I think that the form provides only for 
the material which they have on hand at the time. I will have to 
look at that. 

Mr. Hiss. I don't think there is any specific provision containing 
that, forbidding a company from using 

Lieutenant Colonel Harris. Mr. Hiss, may I answer that ques- 
tion? 

Mr. Hiss. Certainly. 

1 Colonel Harris Inter submitted a list of total cost-plus and fixed-price contracts. See 
hearings, Tart XVI, p. .S936. 

2 Entered as " Exhibit No. 1226-A ", p. 3625. 



MUNITIONS INDUSTRY 3629 

Lieutenant Colonel Harris. We contemplate that the prices will be 
set for raw materials shortly after war is begun, and that all raw 
material will be on that basis. 

Senator Vandenberg. Is that the price-freezing plan that Mr. 
Baruch and his board speak of^ 

Lieutenant Colonel Harris. We do not use those terms, but it is 
under our price control set-up. We hope to take over the next war 
more or less where the last war wound up on the control of price. 
At that time they had a standard price on many raw materials, 
set by the War Industries Board, generally by agreement. There 
was no legal authority for those prices. 

Mr. Hiss. Lieutenant Brannon, are you familiar with the memor- 
andum of February 6, 1934, headed, " Comments, Criticisms, and 
Proposals on the Adjusted Compensation Contract Form? " 

Lieutenant Brannon. Yes; I have a copy here. 

Mr. Hiss. I show you some excerpts, which may be a little more 
convenient, and I offer this for their record. 

(The excerpts from memorandum referred to were marked " Ex- 
hibit No. 1227 " and are included in the appendix on p. 3823.) 

Mr. Hiss. Turn to the third typewritten page, under the heading, 
" Philadelphia ordnance district." You will see there a statement 
reading : 

There is nothing in the contract to prevent the contractor from obtaining 
the market price for such raw materials or component parts as are produced 
by liim. 

I agree with that particular provision. I have not been able to 
find a provision which prevents a manufacturer who also happens to 
produce his own raw materials from taking over those raw materials 
at the market price and charging that at cost. 

ADJUSTED-COMPENSATION CONTRACT FORM PROFITS OF INTEGRATED 

COMPANIES 

Senator Clark. In other words, if you had a manufacturer of 
heavy ordnance Avho also controlled his own coal mine and his own 
iron mine and the railroad to transport them from one part to an- 
other, he would make one profit as a producer of coal, he would make 
another profit as a producer of iron, he would make another profit 
on the railroad transportation, on the steel, and a further one as a 
manufacturer of ordnance, wouldn't he, under this proposition? 

Lieutenant Colonel Harris. Unless other governmental agencies 
had been established to set prices, that is true. 

Senator Clark. But under this plan he would make a separate 
profit on each business in which he was engaged. 

Lieutenant Colonel Harris. But under our industrial mobiliza- 
tion plan we provide a price-control agency which we hope will 
nullify the feature you speak of. 

Mr. Hiss. But not under the contract itself. 

Lieutenant Colonel Harris. Quite true. 

Mr. Hiss. I call your attention to a similar proposition. Take 
the du Pont Co., which produces many of its own component ele- 
ments. In the production of smokeless powder, for example, the 
smokeless powder department secures cotton from the Parlin plant, 
which is under the fabrics and finishings department; it secures 
sul})huric acid from the dye works at Deep Water Point. 



3630 MUNITIONS INDUSTRY 

Is that correct, Mr. Irenee du Pont? 

Mr, Irenee du Pont. We make sulphuric acid at several different 
places, but your idea that nitrocellulose for smokeless powder would 
be made at the Parlin plant and shipped somewhere else and made 
into smokeless powder is erroneous. 

Mr. Hiss. I mean at the present time. 

Mr. Irenee du Pont. We make some nitro cotton at Parlin ; yes. 

Mr. Hiss. And the smokeless powder plant receives cotton — Mr. 
Bradway, you know about that. 

Mr. Bradway. It gets purified cotton. 

Mr. Hiss. It gets purified cotton and you make your own nitro- 
cellulose. 

Br. Bradway. Yes. 

Mr. Hiss. Mr. Bradway, will you correct me on any of these 
points, please? 

Br. Bradway. I will. 

Mr. Hiss. So far it is all right, is it? 

Mr. Bradway. I believe so. 

Mr. Hiss. The information I am supplying I believe I got from 
Mr. Bradway. I may not have understood him correctly. 

The smokeless powder department receives its sulphuric acid from 
the dye works at Deep Water Point, under the organic chemicals de- 
partment of the du Pont Co. 

It receives its nitric acid from the explosives department at 
Repauno, which in turn has secured its ammonia from the am- 
monia department. 

Diphenylamine, which is an ingredient in smokeless powder, is 
prepared at Repauno under the explosives department, and the ani- 
line used in the manufacture of the diphenylamine is furnished to 
Repauno from the dye works at Deep Water Point under the organic 
chemicals department. 

Senator Clark. I just wonder if it is sometimes borrowed from 
the Government. 

Mr. Hiss. Alcohol used in the explosives department, smokeless 
powder department, is also received from the dye works at Deep 
Water Point. Trinitrotoluene is also made at the dye works? 

Now, I have here an exhibit showing the costs at which the 
du Pont Co. carries certain of these items within its individual 
departments. 

For example, in 1933 the average manufacturing cost price, within 
the ammonia department, of ammonia was 0.0291. This is trans- 
ferred to the next department at 0.0360 the slight percentage of 
profit being retained in the ammonia department. 

Then from the ammonia, nitric acid is made in the next ]ilant, 
namely, the explosives department. In 1932 the average manufac- 
turing cost price of nitric acid was 2.86 a hundredweight. The 
average transfer price from the explosives department to the smoke- 
less powder department was 3.83. In 1933 those figures were, re- 
spectively, 2.84 manufacturing price and 3.28 transfer price. 

Similarly, in regard to aniline produced in the dye works, in 1932 
the average price was 8.78. The average transfer price from the dye 
works to the explosives department was 9.80. In 1933 those figures 
were, respectively, 9.53 cost, 9.95 transfer. 

Similarly, diphenylamine manufactured by the explosives depart- 
ment and transferred to the smokeless powder department was 



MUNITIONS INDUSTRY 3631 

manufactured in 1932 at 16.42 and transferred at 27. It was manu- 
factured in 1933 at 20.20 and was transferred at 21,45. 

I offer that as an exhibit for the record. 

(The document referred to was marked " Exhibit No. 1228 ", and is 
included in the appendix on p. 3830.) 

Senator Clark. Do those figures you have been reading include 
the allocation of all costs? 

Mr. Hiss. Do you know, Mr. Bradway? 

Mr. Bradway. That information you received from the Treasurer's 
Office. I know nothing about that. 

Mr. Hiss. Is there anyone here from the du Pont Co. that knows 
the basis for these figures? 

Mr. Irenee du Pont. I note one thing you leave out of it, and 
that is the freight for transferring these things. Take ammonia 
down at West Virginia, at one price, delivered at Repauno at an- 
other. You have got to pay the freight en route. Furthermore, if 
we can sell it at West Virginia at the price we can get at Repauno, 
there is no particular point in selling it at Repauno at a lower price. 

Mr. Hiss. Colonel Harris, what is the view of the War Depart- 
ment on the issue presented by this evidence and by Mr. Irenee du 
Pout's statement, that there would be no particular sense in the du 
Pont Co. furnishing component elements at less than market price? 

Lieutenant Colonel Harris. There is a clause in the form that cov- 
ers part of that. 

Mr. Hiss. What is that? 

Lieutenant Colonel Harris. This is the adjusted form, paragraph 
9, referring to material on hand, but it does not refer to material 
thereafter. 

Mr. Hiss. Material on hand has to be taken over at market price. 

Lieutenant Colonel Harris. No ; taken over at the cost of 

Mr. Hiss. Not in excess of the current market price. 

Lieutenant Brannon. Neither in excess of the current market 
price or the price set forth in exhibit A. 

Mr. Hiss. This exhibit A is not costs, is it? 

Lieutenant Brannon. Oh, yes. 

Mr. Hiss. Oh, exhibit A is costs ? 

Lieutenant Brannon. Yes; on the cost of the material, which 
cannot be exceeded unless by approval'of the contracting officer or 
governmental agency. 

Mr. Hiss. Suppose the contractor had on hand goods that he 
bought for X dollars? 

Lieutenant Brannon. Yes. 

Mr. Hiss. If, then, the current market cost was X plus Y, the 
figure in exhibit A w^ould be X plus Y. He would be entitled under 
paragraph 9 to transfer that at X plus Y; isn't that correct? 

Lieutenant Brannon. That is correct, if they had agreed in ad- 
vance that that was the correct price. But here is the thing : Under 
this adjusted compensation contract, if the stuff is produced in the 
plant all he gets is a percentage on the value at the plant. We pay 
the costs. If he gets it from some other plants, if he has two differ- 
ent plants. I don't think there is anything here that specifically 
prohibits him from buying from a subsidiary, for example; but he 
could not exceed that cost which had been predetermined in exhibit 
A. You see, the market price of the materials at the time, all of 

83876— 35— PT 15 7 



3632 MUNITIONS INDUSTRY 

the different materials which go in, is included in exhibit A; that 
is fixed in advance and he cannot exceed that, unless either the con- 
tracting officer approves or, first, unless a Government agency had 
raised the price, or if there is no such Government agency, then the 
contracting officer had approved. 

Mr. Hiss. But the profits might be more to a contractor who sup- 
plies his own raw material or the component parts than 6 percent 
on the investment. 

Lieutenant Brannon. No; he could not make two profits. We 
might pay him a certain amount plus 6 percent on what he pro- 
duced. Now, if he sold coal which would have to go to some other 
company, on which we did not pay him anything on his mine, it is 
true on that coal he might make a separate profit, but not a double 
profit. We would not pay him anything for the use of that mine. 
You see, we pay him for the use of his plant. 

Mr. Hiss. The market price of that material? 

Lieutenant Brannon. Yes; we have got to pay the market price 
to somebody. But if he gets it, he gets not a double profit on his 
contract, but because he is operating two different things. 

Mr. Hiss. The War Department has no desire to eliminate any 
profit on that other transaction? 

Lieutenant Brannon. Not on a separate transaction; no; so long 
as we have already determined in advance that the price he charges 
is correct. 

Lieutenant Colonel Harris. I might state in drawing up this 
thing we recognize the current market price as being the basic price. 

Mr. Hiss. I call your attention to a provision of an act approved 
March 2, 1923, appearing in 42 Statutes, page 1377, at page 1416. 

This provides: 

Except as expressly otherwise authorized herein, no part of the sums ap- 
piopriated by this act for military purposes shall be expended in the purchase 
from private manufacturers of ordnance and ordnance supplies at a price in 
excess of the cost of manufacturing such material by the Government, or, 
where such material is not or has not been manufactured by the Government, 
at a price in excess of the estimated cost of manufacture by the Government. 

Suppose the Government itself begins to manufacture ammonia, 
nitric acid, diphenylamine, and some of those other elements, what in 
your opinion will be the effect of this statute on the adjusted com- 
pensation form of contract. Lieutenant Brannon? 

Lieutenant Brannon. I am not familiar with this except it says 
" as otherwise authorized herein." Do you know what the reply to 
that is, Mr. Hiss.^ 

Mr. Hiss. No, sir. We will have to look that up after we adjourn 
today. 

adjusted-compensation contract form ACCOUNTING METHODS OF 

contracts 

Colonel Harris, in determining costs, what is the policy of the 
War Department with respect to cost-accounting systems which you 
find in effect when you start negotiations with a particular contrac- 
tor? Will the War Department, in other words, make any attempt 

' Ordnance supplios as specified, 42 Statutes, pp. 1403 to 1406, show no other author- 
ization. 



MUNITIONS INDUSTRY 3633 

to force a contractor to adopt a different cost-accounting method 
than that he is currently using? 

Lieutenant Colonel Harris. Quoting article IV, page G, paragraph 
1 of the adjusted compensation contract form 

Mr. Hiss. What page is that? 

Lieutenant Colonel Harris. Page 6, article IV, " Kecords and ac- 
counts " [reading] : 

The method of accounting used by the contractor shall be subject to the 
approval of the contracting officer. No material change will be made in the 
contractor's method if it conforms to good accounting practice and the costs 
are readily ascertainable therefrom. The original documents of all trans- 
actions not delivered to the Government in the course of payments shall b6 
retained by the contractor and shall be open to inspection and examination by 
the contracting officer at all times prior to final settlement. 

ISIr. Hiss. Is there someone from the Winchester Co. present? 

Mr. PuGSLEY. Yes, sir. 

Mr. Hiss. Are you familiar with the relations between your com- 
pany and the United States Cartridge Co.? The United States 
Cartridge Co. is a subsidiary of the National Lead Co., is it not? 

Mr. PuGSLEY. I believe it is. 

Mr. Hiss. In 1926 did your company enter into such an agreement 
with the United States Cartridge Co. for the manufacture of their 
entire line of ammunition? 

Mr. PuGSLEY. The Winchester Repeating Arms Co., which went 
into receivership in 1931, went into such agreement. 

Mr. Hiss. Your predecessor company? 

Mr. PuGsnEY. Yes, sir. 

Mr. Hiss. Are you familiar with the provisions of that contract, 
which provided for reimbursement to the Winchester Co. on a basis 
related to cost? 

Mr. PuGSLEY. In a very general way only. 

Mr. Hiss. Are you familiar with the fact that it was based on 
various percentage burdens charges according to different depart- 
ments and different manufacturing processes through which the 
ammunition was passed? 

Mr. PuGSLEY. I remember there was such a clause ; yes, sir. 

Mr. Hiss. Were you not, because of the size of your business with 
the United States Cartridge Co., forced to adopt that particular 
burden charge as to cost-accounting in general for the entire com- 
pany, until its reorganization? 

Mr. PuGSLEY. No ; I think it was rather the other way. That was 
the method. We kept our own costs and we based the contract on 
that general procedure, with the exception that we more or less 
froze those overheads, if you want to use that term. 

Mr. Hiss. From 1926 on? 

Mr. PuGSLEY. That is right. 

Mr. Hiss. In other words, the contract was entered into on the 
basis of your 1926 cost-accounting methods ; is that correct ? 

Mr. PuGSLEY. That is correct. 

Mr. Hiss. Did not that freeze your cost-accounting methods as 
of 1926? 

Mr. PuGSLEY. So far as the billings of the United States Cartridge 
Co. were concerned; yes, sir. 



3634 MUNITIONS INDUSTRY 

Mr. Hiss. Did you not go further than that, so that you maintained 
this form of accounting for your entire cost accounting? 

Mr. PuGSLEY. I do not think that that changed our accounting 
system in any way. 

Mr. Hiss. Did you have two separate means of determining cost — 
t)ne for the United States Cartridge Co. contract and one for your 
♦other business — or did you use the same form throughout? ^ 

Mr. PuGSLEY. Insofar as our own business was concerned, we oper- 
ated a burden debit or burden credit, depending upon the operation 
of the particular departments. That was not applicable to the 
United States Cartridge Co., as I recollect it. 

Mr. Hiss. It was different from the United States Cartridge Co.? 

Mr. PuGSLEY. As I recall it; yes. 

Mr. Hiss. Will you inquire into that and make sure, because we 
have information to the contrary, that you adopted a uniform ac- 
counting method? 

Mr. PuGSLEY. Yes, sir. 

Mr. Hiss. Until we can establish that differently, on© way or the 
other. Colonel Harris, may I state a hypothetical question? 

Assume that because of such a contractual relation or for some 
other reason a particular accounting system, cost-accounting system, 
■was adopted by the Winchester Co., which, because of the size 
of their contractual arrangement they felt must be used as their 
general cost-accounting system, and that after a period of years those 
charges or burdens became, because of changes in the company's 
processes, arbitrary, and did not truly represent cost. Would you 
require, under the provision which you have just read from the 
adjusted-compensation contract, a complete new cost-accounting sys- 
tem to be instituted by the Winchester Co. ? 

Mr, PuGSLEY. The clause covering that? 

Senator Clark. May I ask a question ( I do not want to interrupt 
you, but I have a question along a different line. Colonel Harris, 
I have before me a public document know^n as " Industrial Mobiliza- 
tion Plan. Revised 1983 ", issued by the Government Printing Office 
in 1933, and in the back of that is included the draft of eight bills 
nbout legislation which it is contemplated to submit to the Congress 
immediately on the declaration of war. Those eight bills do not 
comprise all the legislation which you have prepared down there to 
send to Congress, do they? 

Lieutenant Colonel Harris. It includes all the legislation which 
■we feel is necessary to put this plan into effect ; yes, sir. 

Senator Clark. I am not speaking from knowledge, but from hear- 
s;ay only, but is it not a fact that you have a bill drawn down there 
to be submitted to Congress as soon as the declaration of war comes 
for licensing the press of the country? 

Lieutenant Colonel Harris. For doing what? 

Senatoi- Clark. Licensing the press. 

Ijieutenant Colonel Harris. Licensing the press? 

Senator Clark, Yes, sir. 

Lieutenant Colonel Harris. I know nothing outside of those bills. 



'The (•oiiiniittcp »in(l<>r date of Apr. 5. 1985. was informed by the Winchester Co. that 
Hinder the ajirecnient with the t'nited States Cartridge Co. certain overhead percentages 
'in the Winchester Co.'s cartridge shops were agreed upon as standard and were used 
as the basis of all Winchester ammunition cost accounting until the company was sold 
in I>ecember 1931 by its receivers. 



MUNITIONS INDUSTRY 3635 

Senator Clark. Do you have any knowledge, Lieutenant, of any 
such bill as that? 

Lieutenant Brannon. No, sir. 

Senator Clark. Has that ever been discussed down there in any 
of your numerous memoranda? 

Lieutenant Brannon. No, sir. 

Lieutenant Colonel Harris. Answering your question, here is the 
part of the form applicable to the following methods : 

No material change will be made in tlie contractor's method if it conforms 
to good accounting practice and the costs are readily ascertainable therefrom. 

Mr. Hiss. May I ask Avhat, in your opinion — you do not have to be 
too exact, but just off hand — what would be your opinion as to the 
hyjjothetical case which has just been stated? 

Lieutenant Colonel Harris. As I understand it, your question is, 
based over a period of time 

Mr. Davis. The overhead is 



Lieutenant Colonel Harris, We would certainly examine into it. 

Mr. Hiss. Would not the obligation imposed on the War Depart- 
ment by that clause demand lengthy and difficult examination and 
the determination of very doubtful questions from the standpoint of 
discretion and judgment? 

Lieutenant Colonel Harris. It would. As I stated previously, the 
accounting phases of this contract have very serious objection to it. 

Mr. Hiss. May I call your attention to an agreement dated January 
1, 1934, which I believe has not been hitherto introduced in evidence,, 
between a German corporation, the Dynamit Actien Gesellschaft and 
the Remington Arms Co., which I offer in evidence at this point? 

(The agreement referred to was marked " Exhibit No. 1229" and 
is included in the appendix on p. 3830.) 

Mr. Hiss. Who is the representative of the Remington Arms Co.? 

Mr. Davis. Mr. Green and myself. 

Mr. Hiss. Have you a copy of this contract of January 1, 1934?' 

Mr. Davis. Yes, sir. 

Mr. Hiss. Will you turn to page 5, paragraph VII, which reads 
[reading] : 

The royalty paid to D. A. G. — 

That is Dynamit Actien Gesellschaft, Mr. Davis, referred to in 
the preamble to the agreement? Is that correct? 
Mr. Davis. Tliat is correct. 
Mr. Hiss (reading) : 

The royalty paid to D. A. G. by Remington with respect to military ammuni- 
tion manufactured and sold by Remington shall not be less than 1 percent 
without the express consent of D. A. G. 

Colonel Harris, would a royalty to a foreign government, a 
friendly government, be considered a proper allowance of cost under 
the adjusted -compensation contract? 

Lieutenant Colonel Harris. If that was the only way we could get 

it, I would say " yes." 



3636 MUNITIONS INDUSTRY 

ADJUSTED-COMPENSATION CONTRACT FORM ACCEPTABILITY TO 

CONTRACTORS OF G PERCENT FEE 

Mr. Hiss. Colonel Harris, the adjusted-compensation contract/ 
in its present form, calls for a fee of 6 percent, does it not, on the esti- 
mated value of that part of the plant used in connection with the 
contract? Is that correct? Have you got that provision? 

Lieutenant Colonel Harris. Yes, sir. I will let Mr. Brannon 
answer it. He is more familiar with it, 

Mr. Hiss. Have you the page reference? 

Lieutenant Brannon. You spoke of article II and in exhibit A 
the details of the printed form. 

Mr. Hiss. Roughly, the fee is G percent of the estimated value of 
the plant used in connection with the contract. Is not that correct? 

Lieutenant Brannon. There is a rate of 6 percent per annum. 

Mr. Hiss. That is the fee ? 

Lieutenant Brannon. That is right. 

Mr. Hiss. In addition to the difficulties which Colonel Harris has 
referred to in computing cost and in computing valuation, do you 
not have to enter a further field of uncertainty, in that you cannot 
simply value a manufacturer's entire plant, but you must break it 
down into the valuation of that part of the plant which he is using 
currently, if he does not require his entire plant for the particular 
contract ? 

Lieutenant Brannon. We may have cases where we will have to 
do that. 

Mr. Hiss. That will be extremely difficult, will it not, of deter- 
mination ? 

Lieutenant Brannon. Yes ; it will be difficult. 

Mr. Hiss. Has this adjusted-compensation contract been discussed 
rather generally with those industries to whom it is most likely to 
be applied in the event of war? 

Lieutenant Brannon. It has been discussed quite fully with indus- 
tries in the various ordnance districts. 

Mr. Hiss. Have they agreed to the form which has been intro- 
duced in evidence and to which we are now addressing ourselves ? 

Lieutenant Brannon. There have been a number of objections. 
Usually, that they do not get enough. 

Mr. Hiss. Have you found a unanimity of agreement on the 6 
percent on the investment point? 

Lieutenant Brannon. It is hard to say, but just remembering 
various criticisms, I think generally industry seems to think G per- 
cent is not enough. 

Mr. Hiss. Has the "War Department made up its mind definitely 
as to whether G percent is enough or not ? 

Lieutenant Brannon. I cannot say the War Department, because 
the War Department has never approved these forms. The board 
has made them up on the assumption that 6 percent is correct, 
and that is the rate recommended to the War Policies Commission. 

Mr. Hiss. Did not General MacArthur testify before the War 
Policies Commission, on behalf of the War Department, that 6 
percent had been determined on by the War Department? 

1 Entered as "Exhibit No. 1226-A", see p. 3625. 



MUNITIONS INDUSTRY 3637 

Lieutenant Colonel Harris. I think, answering your question, the 
War Department does look with favor upon 6 percent of the capital 
invested. 

Mr. Hiss. And thinks that that is sufficient ? 

Lieutenant Colonel Harris. I think that is true. 

The Chairman. I think it would be altogether interesting to know 
what the representatives of industry think of that, rather, what 
their reaction is to it. Mr. du Pont, what of the 6 percent? 

Mr. Irenee du Pont. Mr. Chairman, I have not given any long, 
consecutive thought to this problem, but it would seem to me that 
tlie fixing of a definite percentage would at least eliminate all the 
embarrassment about trusteeship for your stockholders. In other 
words, if you are in a position where you deserve more than 6 per- 
cent by reason, we will say, of their position in the industry and 
their efficiency, if 6 percent were the limit, it might be that: that 
would keep them from signing their name on a contract limiting 
Ihem to 6 percent. I think it would have that very definite advant- 
age in eliminating the double responsibility to stockholders as trus- 
tees, and a desire to aid the Government in every way possible on 
the other hand. 

If the general principle is adopted of a fixed percentage like 6 
percent for everything in this country, I think that would take 
away a great deal of the feeling that some people are treated better 
than others, and I think that that kind of feeling does a great deal 
of harm. Each thinks somebody else is getting more, and they 
want to get more for that reason. I think on the war materials 
which you do not classify as munitions such as grain, perhaps, it is 
going to be extremely difficult to know whether the farmer gets 6 
percent or not. Perhaps it w^ould be found wise to let the price 
of grain soar, and placate the farmer. I do not know. I tliink 
you are going to have great difficulty in drawing the line on war 
munitions, and if you try to fix it on grain or cotton, on a 6 percent 
basis, I think you are going to get into grave difficulty. But I do 
not think that these difficulties are insuperable, and I think the War 
Department is doing a grand job, trying to figure out ahead of time 
as to how and where to start this thing and get a plan ahead of 
them. 

Mr. Hiss. Mr. du Pont, this 6 percent, as I understand it, is not 
on the basis of freezing prices. Is that correct, Colonel Harris ? 

Lieutenant Colonel Harris. There are two different things. 

Mr. Hiss. Does the War Department consider that it has juris- 
diction over the fixing of prices in time of war? 

Lieutenant Colonel Harris. The War Department does not, but 
it has the responsibility for planning for it. 

Mr. Hiss. And making recommendations? 

Lieutenant Colonel Harris. I would like to make the point clear. 
We have one great responsibility in the War Department, super- 
vising procurement, and we have another responsibility, planning for 
operation in war, to be operated by this agency appointed by the 
President. 

Mr. Irenee du Pont. Mr. Chairman, could I finish one other 
thought on this thing? 

I do not think we ought to forget in these times that the main 
object of a war is to win, and fixing the dollars, whether for your- 



3638 MUNITIONS INDUSTRY 

self or preventing somebody else from getting them, is, after all, 
minor, compared with winning the war. If war came, it would be 
a very expensive thing to pay all of these damages. I am not say- 
ing that the idea is to favor preparedness, regardless of expense, 
because I am opposed to that thing. 

Lieutenant Colonel Harris. Mr. Chairman, may I read a para- 
graph on that from the Foreword to the Industrial Mobilization 
Plan? 

The Chairman. Yes, sir. 

Lieutenant Colonel Harris (reading) : 

In formulating this plan, the recommendations of the War Policies Commis- 
sion of March 5, 1932, have been taken into ct)nsideration. The tendency to 
overemphasize administrative efficiency and underemphasize national effec- 
tiveness has l>een guarded against. The objective of any warring nation is 
victory, immediate and comi'lete. It is conceivable that a war might be con- 
ducted with such great regard tor individual justice and administrative effi- 
ciency as to make impossible those evils whose existence in past wars is well 
known. It is also conceivable that the outcome of a war so conducted might 
be defeat. In all plans for preparedness and policies to be pursued in event 
of war it must never be overlooked that while efficiency in war is desirable, 
effectiveness is mandatory. 

The Chairman. Colonel, is any consideration given in these plans 
at all that would in any wise regulate the salaries that would be 
paid officials of an industry, or bonuses that were to be awarded? 

Lieutenant Colonel Harris. Please answer that. 

Lieutenant Brannon. In this adjusted-compensation contract 
there is provided in 2 (a) a schedule of the salaries and wages which 
would be paid, and which cannot be exceeded unless either approved 
by a governmental price-fixing agent or by a particular officer. 

Senator Clark. How about the bonuses prevailing in the last 
war? Would your limitation include bonuses paid in the last war 
to the various workers in munitions plants, so far as concerns the 
discussions which we have had from time to time? 

Lieutenant Brannon. I think so. 

Lieutenant Colonel Harris. I do not think you understand the 
Senator. I think he is asking whether the Government would sanc- 
tion including bonuses in the rates. 

Senator Clark. Whether the limitations you are speaking of for 
this would include bonuses, or whether bonuses would be in addi- 
tion to that. 

Lieutenant Colonel Harris. The rates are for salaries or wages to 
be paid, and there is nothing about bonuses, and 6 percent is on the 
capital investment involved. 

Senator Clark. What I am trying to get at. Colonel, is this : 

Whether or not a set-up was made for them and for bonuses to 
be paid for the work. 

Lieutenant Colonel Harris. I think that is prevented in this con- 
tract, because the only bonus paid is where an agreement is made as 
to some form of piecework, in which some incentive to rapid pro- 
duction may be included. 

The Chairman. Mr. Pugsley, do you have any thought which you 
wish to express concerning the limitation of 6 percent? Have you 
given it any thought at all? 

Mr. Pugsley. Practically none. My recollection of the adjusted- 
compensation contract, so far as my own connection with it is con- 
cerned, was a meeting which I attended 6 or 7 years ago in Hartford, 



MUNITIONS INDUSTRY 3639 

at which the original draft was presented, and that seemed to in- 
volve so many diiRculties of accounting that we did not get as far 
as discussing' the percentage. I heard nothing more from it until 
I should say 2 or 3 years ago there was another conference, and at 
that time we were informed by representatives of the Ordnance De- 
partment that the former contract which we had discussed was now 
obsolete and was being revised, and they were swinging away from 
that type onto another type, and that we would be advised in the 
matter. 

I do not remember ever having any further conference about 
that, and I have no idea about the 6 percent. I would want to dis- 
cuss that with the board of directors before I express an opinion. 

The Chairman. Mr. Davis, would you like to discuss that thought, 
too? 

Mr. Davis. I have given no thought to it at all. Senator, but I feel 
sure that you could count on Remington giving their 100-percent 
support to any plan that the War Department thought was equitable. 

Mr. Hiss. Mr. du Pont, did you understand that the 6 percent re- 
ferred not to general fixing of such throughout industry but to a 
return to specific contractors with the War Department? 

Mr. Irenee du Pont. I appreciate that now, but I do not know 
how far you are going down the line. 

Mr. Hiss. As I understand it, those contractors who the War De- 
partment determines require this particular type of contract will be 
primarily certain contractors with the Ordnance Department. That 
is correct, Colonel Harris? 

Lieutenant Colonel Harris. But applying to noncommercial 
material. 

Mr. Hiss. And the Ordnance Department is the primary purchaser 
of such material? 

Lieutenant Colonel Harris. Generally speaking; yes, sir. 

Mr. Irenee du Pont. May I say a word about bonuses ? 

The du Pont Co. certainly paid out very large bonuses throughout 
the period of the war, especially before the United States went into 
the w^ar, when we had larger profits than during the war, to offer 
incentive to men for carefulness and energeticness in the pursuit 
of their work. 

Senator Clark. That was very general throughout industry, was 
it not ? 

Mr. Irenee du Pont. I do not know how general it was, but the 
du Pont Co. had been giving them for many years. It is my belief 
that the best investment we made during the war was in our bonus 
plan. I think we got back more earnings by economies from opera- 
tion, savings all along the line, preparatory to getting further prog- 
ress, than we could have gotten by the investment of that fund in 
any other way, without exception. 

If that could be grafted onto the plan to incite people to efficiency 
and the like, it would be a very fine thing to do. I talked to a fellow 
who used to be vice president of the United States Rubber Co., and I 
asked why he did not use the bonus plan. He said the plan worked 
wonderfully if you were working under a beneficent autocracy. 

Senator Clark. The thing I had in mind was that there were men 
in the front-line trenches frequently working 24 hours a day, with- 



3640 MUNITIONS INDUSTRY 

out any incentive, and I was trying to find out the difference between 
a civilian man back of the line and the man in the front-line trenches. 

Mr. Irenee du Pont. Mr. Senator, I do not know much about the 
Army, because I have never been in it. If it could be grafted onto 
the Army, it might do good and might not. I have my doubts about 
it, but that is for you Army officers to pass on, not me. 

The Chairman. Mr. du Pont, was the matter of bonuses essential 
to the creation of initiative as respects the executives of the cor- 
poration during that period ? 

Mr. Irenee du Pont. I think it was ; yes, sir. 

The Chairman. You mean that there was a larger initiative and 
a larger service performed by reason of the fact that executives felt 
there was going to be a bonus for them ? 

Mr. Irenee du Pont. Yes ; if they could earn it. I think that ran 
all through the organization. I have not the least doubt that it 
was the real cause of a great deal of improvement in our efficiency. 
You will appreciate that efficiency is very important. Take the 
matter of alcohol, I mentioned before. The old plan called for 
using nine-tenths of a pound of alcohol for a pound of powder, prob- 
ably eight-tenths. I think both the Army and the Navy had the 
same experience. By concentrating on that particular problem, 
among the innumerable other problems, we gradually reduced the 
amount of alcohol required for powder to three-tenths of a pound. 
Alcohol was extremely scarce at that time, and its price was fixed 
in the price of molasses and grain. That is, those were means oi 
fermentation. That saving was not only large in dollars, running 
into millions of dollars, but we might not have been able to gel 
enough alcohol to make all the powder required if we had not saved. 

Mr. Pierre du Pont. Mr. Chairman, may I sa}^ a word on this ? 

The Chairman. Yes; Mr. du Pont. 

Mr, Pierre du Pont. I think I have had a great deal to do with 
the bonus system in the du Pont Co. and elsewhere. I never hap- 
pened to have received a bonus for anything in my life — and pos- 
sibly I did not deserve it — but that is a fact. However, I have had 
a great deal to do with other people receiving bonuses, and I have 
recommended to everyone having control over men to award a man 
for good work accomplished, whether it is in the Army, industry, 
or anywhere. I cannot imagine how the Army would fail to im- 
prove in its operation if there was a system of reward for success, 
financial as well as honors. Some people are appealed to more by 
honors than money, and frequently the reverse is the case. But the 
fact remains that it appeals to a man to be awarded in that way 
for good things accomplished. In the du Pont Co. my brother 
said a lot of men received a bonus. I doubt if he received a bonus 
at all. 

Mr. Irenee du Pont, I did not after becoming president but in 
the war I received two bonuses. It is in the record of compensation 
I received. 

Mr. Pierre du Pont. It is the second line of men who generally 
receive the larger bonuses, rather than the first line. Their bonuses, 
if received at all, are extremely small, but it is the second-line men 
who are stepping into the big positions who are the ones who get 
the best bonuses. It is a plan that certainly worked very well. 



MUNITIONS INDUSTRY 3641 

May I say a word on the question of a 6-percent profit? I agree 
with what my brother says, but I cannot imagine anything that 
would discourage invention more than a known policy of that kind 
applying to everything. I am not trying to raise objections, and I 
do not know how to overcome that difficulty. But, for instance, in 
the air business, which is a new thing, it certainly would discourage 
all invention, if it were known that a 6-percent money reward was 
all that was being paid, because a tremendous amount of money is 
going to be required in developing the inventions. A great many 
i^eople know that the better part of the inventions will fail. 

If the man who succeeds has nothing but 6 percent ahead of him, 
and maybe over 90 percent open to failure, he is not going to pursue 
that business very far. 

New business must be encouraged by higher profits, otherwise 
nobody will go into it and nobody will follow the inventions which 
are necessar3\ 

The Cpiairman. Do you mean that is true in time of war? 

Mr. Pierre du Pont. No; I do not. I think in time of war that 
patriotic feeling gets possession of everybody and they will do 
everything, knowing what they do will have a direct result. It 
was certainly apparent when w^e joined the war, how everybody 
joined in in every way. That is a condition entirely different from 
what is a normal condition, and how to meet that condition as against 
normal is a very difficult problem. 

I agree with the starting of this plan, possibly on the G-percent 
basis, especially with the things that have become standard, it is a 
very good plan, possibly at the start, but I think there should be a 
great deal of care taken in preparing it and not to go so far that we 
are going to discourage invention, from time to time, which possibly 
should be promoted in military affairs. 

Mr. Hiss. Do you realize that your brother, Mr. Irenee du Pont, 
was referring to a proposal relating to war-time contracts, not to 
general procurement contracts? 

Mr. Pierre du Pont. I was not certain about that, whether he 
was speaking of both or only war time ; but I think the whole propo- 
sition would be much easier to put in force in war time than in 
peace time, for the reason that the incentive to go ahead and do 
things is so much greater then that the money profit is more lost 
sight of. 

Mr. Hiss. Do you believe that a 6-percent return on valuation 
as the fee is a sufficient fee to be paid by the War Department in 
time of war? 

Mr. Pierre du Pont. I should say probably yes. I would not 
want to say without exception. But I think, in general, probably 
that would be a good throw-down to start. 

Mr. Hiss. Do you think the War Department should not attempt 
to be arbitrary about it and apply it to all contractors, but should 
make exceptions? 

Mr. Pierre du Pont. I think it ought to be open to possible excep- 
tions. I cannot name any. I agree with my brother it is very diffi- 
cult to lay down a rule that will apply to everyone. I do not see 
how the rule could apply to things such as farm products. I do 
not see how they could be controlled. 



,3642 MUNITIONS INDUSTRY 

Mr. Hiss. Do you think the dii Pont Co. would be included in 
the exception, or do you think the du Pont Co. would agree that 6 
percent would be sufficient return for it on its contracts with the 
Crovernment ? 

Mr. Pierre du Pont. I have no right to speak for the du Pont 
Co. Personally, I should say it was all right, probably. 

Senator Clark. Coming back to this question I was asking a while 
ago. Lieutenant Brannon has been kind enough to direct my atten- 
tion to paragraph 5, section D, on page 100 of the Industrial Mobili- 
zation Plan to which I referred a little while ago. It is a Presi- 
dential proclamation which has been prepared to be issued in the 
event of war. 

I hereby appoint and designate 

as Administrator of Public Relations. His duties and powers shall be to advise 
■and assist the President in all matters relatinjj to public informati<m as to 
the progress, aims, and purposes of the Government of the United States in 
the present emergency. Said Administrator of Public Relations shall also 
lave the authority to employ such assistants and subordinates as may from 
time to time be deemed by him necessary, and to tix the compensation of such 
.assistants and subordinates. 

Lieutenant Brannon, is there any specific indication as to what 
tlie duties of this Administrator of Public Relations would be, other 
than this chart found opposite page 46 of this document? In other 
vrords, is it the purpose of the War Department in setting up this 
administration of public relations having control of the public infor- 
mation that that is simply a reference — for instance, the administra- 
tion of the Administrator of Public Relations is divided into the di- 
vision of news, both domestic and foreign ; division of pictures, films, 
posters, cartoons, photographs, and scenarios; the administrative 
division ; division of civic cooperation — does that simply apply to co- 
operation or does it apply to taking control of the avenues of public 
information which are ordinarily put out by the newspapers and 
magazines, is what I was trying to get at? 

Lieutenant Brannon. Following page 45 are the outlines of the 
plan so far as they pertain to public information. 

Senator Clark. I see paragraph (g) there. Lieutenant, under sec- 
tion 2 on page 46, among the functions to be performed : 

To enlist and supervise a voluntary censorship of the newspaper and peri- 
odical press. 

Do your plans contemplate anything other than voluntary' cen- 
sorship ? 

Lieutenant Brannon. So far as I know, they do not. 

Senator Clark. Colonel Harris, do you have any further informa- 
tion on that subject than what the Lieutenant has given? 

Lieutenant Colonel Harris. I am sure it does not. Senator. 

The Chairman. The committee will be in recess until 10 a. m. 
tomorrow morning. 

(Thereupon, at 5 : 10 p. m., Monday, December 17, 1934, the hear- 
ing was recessed until tomorrow, Tuesday, December 18, 1934, at 
10 a. m.) 



INVESTIGATION OF MUNITIONS INDUSTRY 



"ACl ' 



TUESDAY, DECEMBER 18, 1934 



United States Senate, 
Special Committee to Investigate 

The Munitions Industry, 

Washington^ D.C. 
The hearing was resumed at 10 a.m., in room 357 Senate Office 
Buihling, pursuant to the taking of recess. Senator Gerald P. Nye 
presiding. 

Present: Senators Nye (chairman), Clark, Vandenberg, Barbour^ 
and Pope. 

Present also: Alger Hiss, legal assistant to the committee, and K- 
Wohlforth, assistant chief investigator for the committee. 

The Chairman. Will the witnesses who were on the stand last 
night please come forward. 

TESTIMONY OP EDWIN PUGSLEY, C. K. DAVIS, EGBERT C. HADIEY^ 
J. H. CHASMAE, LT. COL. C. T. HARRIS, AND LT. E. M. BRANNON— 
Resumed 

Mr. Pierre du Pont. Mr. Chairman, might I present " Exhibit 
No. 1224" for the record, the document I spoke of last evening? 

The Chairman. Present what, Mr. du Pont? 

Mr. Pierre du Pont. This is a record concerning Old Hickory 
that I have prepared. 

Senator Clark. That was the exhibit for which you reserved the 
number ? 

Mr. Pierre du Pont. Yes. 

The Chairman. Yes ; that may be received at this time. 

(The statement referred to was marked " Exhibit No. 1224 " and 
is included in the appendix on p. 3784.) 

domestic sales of WINCHESTER REPEATING ARMS CO. 

The Chairman. Mr. Pugsley, for the purpose of making the recoi'd 
clear at this stage, what is your official capacity? 

Mr. Pugsley. Vice president of the Winchester Repeating Arms 
Co. 

The Chairman. There are one or two matters, Mr. Pugsley^ 
concerning your domestic sales about which the committee is desir- 
ing information this morning. Is the committee correct in under- 
standing that your production is primarily that of sporting arms 
and ammunition? 

Mr. Pugsley. Yes, sir. 

3643 



3644 MUNITIONS INDUSTRY 

The Chairman, Have you manufactured certain parts of guns 
that have not been intended for sporting purposes ? 

Mr. PuGSLEY. Possibly. 

The Chairman. You have manufactured gun barrels alone? 

Mr. PuGSLEY. Yes, sir. 

The Chairman. Information before the committee reveals that 
you manufactured some 200 gun barrels at one time, 100 barrels in 
1933, and 100 barrels in 1934. Can you tell the committee who they 
were for? 

Mr. PuGSLEY. I think you are referring to an order of short 
barrels. The first order was made for Griffin & Howe. 

The Chairman. For whom? 

Mr. PuGSLEY. Griffin & Howe is my recollection. The second 
order came in and Mr. Beebe handled that. I don't remember who it 
was made for. I think it was a short barrel similar to a Thompson 
submachine gun barrel. 

The Chairman. The correspondence before the committee indi- 
cates that these gun barrels were for the Hyde Arms Co. of 
Brooklyn. 

Mr. PuGSLEY. I think that is correct. 

The Chairman. What was the other company to which yon 
referred ? 

Mr. PuGSLEY. Griffin & Howe. 

The Chairman. Are they in any way related? 

Mr. PuGSLEY. That I cannot tell you. As far as I know they are 
a subsidiary of Abercrombie & Fitch. 

The Chairman. I offer in evidence to be marked with such number 
as is in order a letter dated September 8, 1934, addressed to the 
Winchester Repeating Arms Co. by the Hyde Arms Corporation, 
signed by F. V. Huber, sales manager. 

(The letter referred to was marked " Exhibit No. 1230 " and is 
included in the appendix on p. 3833.) 

The Chairman. Is that the same Mr. Huber who is present here ? 

Mr. PtGSLEY. I could not tell you that. I do not know Mr. 
Huber. 

The Chairman. I read the letter. 

Gentlemen : Confirming our telephone conversation with your Mr. Elmslie 
Jonas, please enter our order for 100 barrels as per specifications of the 
previovjs 100 that you supplied. 

It is understood that delivery is guaranteed in 6 weeks or less and that the 
price will be $5.50 each, placed in New York City. We are enclosing a 
check for $550 to cover the value of this order. 

We will appreciate having you make early delivery on these barrels. 

Do you know what these barrels were for. Mr. Pugsley? 

Mr. PuGSLEY. From the contour of the barrels, they looked as 
though they were for Thompson submachine guns; that same type. 

The Chairman. You had knowledge that the barrels were for 
use possibly in machine guns? 

Mr. Pugsley. Possibly. 

The Chairman. Mr. Pugsley, I read from a letter dated June 10, 
1933, addressed to Mr. Jonas by the Winchester Repeating Arms Co., 
for whom Mr. H. F. Beebe was writing. I offer this for appropri- 
ate exhibit marking. 

(The letter referred to was marked " Exhibit No. 1231 " and is 
included in the appendix on p. 3833.) 



MUNITIONS INDUSTRY 3645 

The Chairman, This letter reads: 

Referring to your statement that you had heard confidentially that the Lake 
Erie Chemical Co. were considering manufacturing a machine gun similar to 
the Thompson submachine gun, I spoke to Mr. Pugsley about this and he was 
quite interested. I believe he would like an opportunity to figure on the 
manufacture of such a gun if contemplated. 

He told me that we had received an order from Griffin & Howe for some 
500 barrels different from anything that we make which might be intended 
for machine gune. 

I take it then there were sales to GrifRn & Howe of barrels of this 
kind, as well as to the Hyde Arms Corporation? 

Mr. PuGSLET. That is my belief ; yes, sir. 

The Chairman. The committee, Mr. Pugsley, is interested in this 
because of its anxiety to find out how machine guns are assembled 
by securing parts from different manufacturers. Do you know of 
any material business along that line, buying of parts from different 
manufacturers and then assembling them? 

Mr. Pugsley. No, sir ; not on new guns. This is the only instance 
that I have run into on this type of business. 

The Chairman. How similar is the Hyde gun to the Thompson 
machine gun ? 

Mr. Pugsley. I never saw it, sir. 

Senator Barbour. Are the barrels similar? 

Mr. Pugsley. The barrels look about the same length and they 
are about the same design. 

Mr. "WoHLFORTH. Are the magazines similar? 

Mr. Pugsley. That I could not tell you. 

The Chairman. Is there any law or any regulation, Mr. Pugsley, 
that you know of. which might prevent persons from buying or 
having manufactured parts of machine guns? 

Mr. Pugsley. No, sir. 

The Chairman. Quite obviously it would take the cooperation 
of reputable manufacturers, such as your firm, to supply component 
parts to anyone who was engaged in that kind of business ? 

Mr. Pugsley. If you were going to make them in large quantities; 
yes. Any machine shop could make this barrel in relatively small 
quantities. 

The Chairman. This order with which we are dealing this morn- 
ing, you had good reason to believe that those were for machine gun 
purposes ? 

Mr. Pugsley. Yes, sir. 

The Chairman. Does the National Fire Arms Act serve to restrict 
m any way the manufacture by some individual collecting the parts 
from various manufacturers? 

Mr. Pugsley. It Avould regulate it, as I understand it, on account 
of the barrel length. Barrels would have to be more than eighteen 
inches long. 

The Chairman. Have you finished, Mr. Pugsley? 

Mr. Pugsley. Somebody asked the question " why " back here. 

The Chairman. Could that question be answered; why? 

Mr. Pugsley. Because that is what the law says. 

The Chairman. Are you acquainted with E. F. Sedgley? 

Mr. Pugsley. Yes, sir. 

The Chairman. What is he known as? How is he spoken of? 



3646 MUNITIONS INDUSTRY 

Mr. PuGSLEY. He is a manufacturer of revolvers. He has made 
wrenches and he also supplies military arms. 

The Chairman. Particularly machine guns? 

Mr. PuGSLEY. He supplies machine guns ; yes, sir. 

The Chairman. Is he known in the trade as " Sidewalk " Sedgley ? 

Mr. PuGSLEY. I heard some paper published that some time ago. 
I never heard it but that one time. 

The Chairman. Have you heard any reason given as to why he 
would be termed in such manner? 

Mr. PuGSLEY. Only the headlines in that article. 

The Chairman. AVhere does Sedgley secure his stocks of machine 
guns? 

Mr. PuGSLEY. I could not tell you that. 
, The Chairman. You do not know? 

: Mr. PuGSLEY. I imagine from Government sales, but I am not 
familiar with that end of the business. 

The Chairman. Have you had any transactions with him, your 



company 



Mr. PuGSLEY. We have. 

The Chairman. What have you sold him ? 

Mr. PuGSLEY. We have sold him sporting barrels. We have also 
sold him some military barrels. 

The Chairman. Barrels for what? 

Mr. PuGSLEY. Rifles ; shoulder rifles. 

The Chairman. Rifles alone? 

Mr. PuGSLEY. He makes quite a line of sporting rifles. We supply 
him the barrels for those sporting rifles. 

The Chairman. Have you knowingly manufactured any com- 
ponent parts of machine guns for him? 

Mr. PuGSLEY, Not to my recollection. 

The Chairman. I have here a letter dated as recently as April 12, 
1933, Mr. Pugsley, which has the advice that six machine guns by 
your firm were sold to Mr. Sedgley. I offer that letter for the record. 

(The letter referred to was marked " Exhibit No. 1232 " and is 
included in the appendix on p. 3833.) 

The Chairman. I read from that letter : 

Conflrming your conversation with Mr. Pugsley and telephone conversation 
with the signer this afternoon, we are forwarding to you a case containing six 
Browning light-weight machine guns, caliber 30 Government 06 on consignment. 

That letter was written by Mr. Beebe and addressed to R. F. 
Sedgley, Inc., at Philadelphia. Can you tell us whether or not this 
was the only sale of machine guns made to Sedgley ? 

Mr. Pugsley. I think it was. The old company may have made 
one similar sale. These particular guns were guns that were kept 
over from the war and turned up when we opened up some boxes that 
had gotten mislaid, and we found those six guns; I think there was 
one other sale but I am not sure of that. 

The Chairman. How many guns do you carry in stock; machine 
guns ? 

Mr. Pugsley. None. 

The Chairman. Were you carrying machine guns in stock back 
there in April 1933 ? 



MUNITIONS INDUSTRY 3647 

Mr, PuGSLEY. These were experimental samples that had been 
filed away for experimental work when we had the war work and 
they had been mislaid and never been disposed of. 

The Chairman. Mr. Beebe is not present today ? 

Mr. PuGSLEY. No, sir ; he is not. 

The Chairman. I wish you would make note, Mr. Pugsley, so 
that upon your return you can gather for and supply to the com- 
mittee definite information concerning- stocks on hand and concern- 
ing sales of machine guns or component parts to Mr. Sedgley.^ Will 
you do that'!' 

Mr. Pugsley. Yes, sir. 

The Chairman. And send it to the committee ? 

Mr. Pugsley. Yes, sir. 

The Chairman. Make that inclusive, Mr. Pugsley, of all sales to 
agencies other than governmental agencies. 

Mr. Pugsley. Yes, sir. 

The Chairman. I have before me a letter dated July 16, 1934, 
from one G. Oberdick, of Federal Laboratories, Inc., to the Auto 
Ordnance Corporation — who are the dealers in the Thompson Ma- 
chine Gun ? 

Mr. Pugsley- I believe they are- 

The Chairman- I offer this letter for the record. 

(The letter referred to was marked " Exhibit No. 1233 " and 
appears in full in the text.) 

The Chairman. The letter reads as follows : 

A few days ago Mr. Thompson, export manager of the Winchester Repeat- 
ing Arms Co., telephoned to our New York otfice for a price of 250 tyiJe L 
drums for the Thompson submachine gun. 

It is our opinion that these drums are for shipment into Cuba and, no 
doubt, inquiry was received by Winchester from Lal^e Erie Chemical Co. 

We have advised them that we must know the sliipping destination in order 
to secure the necessary State Department permit before quoting or promising 
delivery on the equipment. 

It is just possible that they may approach you direct on this lot of equip- 
ment, so we are passing this information on to you. 

Do you also supply machine-gun drums, Mr. Pugsley? 

Mr. Pt^GSLEY. No, sir- 

The Chairman. This letter would indicate it, wouldn't it? 

Mr. Pugsley. It would, from the first paragraph. 

The Chairman. You never have handled the drum ? 

Mr. Pugsley. No, sir. 

The Chairman. Nor have you had any sales. Have you acted 
as intermediary for the sale of any such drums? 

Mr. Pugsley. Not to my knowledge. 

The Chairman. The F. V. Huber mentioned in the exhibits which 
have been referred to this morning, do you know him to be sales 
manager for the Hyde Arms Corporation? 

Mr. Pugsley. No, sir ; I do not know Mr. Huber at all. 

The Chairman. Do you know him to be an officer of the Lake 
Erie Chemical Co. ? 

Mr, Pugsley, No, sir; I do not. 

The Chairman. Do any of those associated with you who are 
present know him ? 

^ Thp information regarding sales of machine guns was submitted to the wmmittee 
under date of Jan. 7, 1935, and appears in the appendix on p. 3929. 

83876— 35— PT 15 8 



3648 MUNITIONS INDUSTRY 

Mr. PuGSLEY. I do not think so. 

The Chairman. Is there any association that you know of be- 
tween the Hyde Arms Corporation and the Lake Erie Chemical 
Co.? 

Mr. PuGSLEY. I do not know a word about it. 

The Chairman. How many parts of a submachine gun can you 
manufacture ? 

Mr. PuGSLEY. We could manufacture them, sir, if we were tooled 
up for it. 

The Chairman. If what? 

Mr. PuGSLEY. If we were tooled up for it. 

The Chairman. You mean equipped for it? 

Mr, PuGSLEY. Yes, sir. 

The Chairman. Do you manufacture any at all ? 

Mr. PuGSLEY. No, sir. 

The Chairman. Never have ? 

Mr. PuGSLEY. Not to my knowledge, except these barrels. That 
is the onlj^ thing that I can recall. 

The Chairman. And you do not think the company has ever 
produced the drums ? 

Mr. PuGSLEY. I am certain of that. 

The Chairman. Mr. Pugsley, by shopping around it would be 
possible for anyone to get the parts from reputable manufacturers 
to make a complete machine gun ? 

Mr. PrGSLEY. I think that if anybody came to us that was a 
legitimate customer, and asked us to bid on a part, that we would 
bid on them. 

Mr. Wohlforth. Do you consider the Hyde Arms Co. a legitimate 
customer ? 

Mr. Pugsley. I do not know anything about the Hyde Arms Co., 
Mr. Wohlforth. 

Mr. Wohlforth. That is the corporation to whom you sold these 
barrels. 

Senator Clark. If you did not know who the Hyde Arms Co. 
were. Mr. Pugsley, how did you know you were dealing with a 
legitimate customer ? 

Mr. Pugsley. Mr. Beebe would have to testify as to who they were. 
I had nothing to do with that transaction other than that I was told 
that another order for barrels had been received. 

Senator Clark. It has been shown in evidence here that the manu- 
facture of those guns was financed by the Lake Erie Chemical Co., 
a gas manufacturer of Cleveland, Ohio. 

The Chairman. Mr. Pugsley, the committee has before it a letter 
written by yourself, dated March 21. 1932. upon which we should like 
to have a little information. Your letter is addressed to Maj. Julian 
S. Hatcher, Office of the Chief of Ordnance, Washington, D. C. 

(The letter referred to was marked "Exhibit No. 1234" and 
appears in full in the text.) 

The Chairman. It reads: 

Dear Major Hatchek: Some time ago T understood that the War Department 
were testing various types of bullets and velocities and their action in meat and 
to this end had developed a synthetic material which simulated the action of 
flesh as regards behavior vi^hen struck with rifle bullets. 

We are continually experimenting along similar lines and it will be a great 
aid to us if we could develop such synthetic material to enable us to study action 



MUNITIONS INDUSTRY 3649 

of soft point and steel- jacketed bullets and, therefore, will appreciate any in- 
formation you could give us with reference to composition and behavior of such 
a meat substitute. 

"Very truly yours, 

WiNCHESTEai Repeating Arms Co., 
By Edwin Pugsley. 

What is this practice referred to here? 

Mr. Pugsley. When we develop a new sporting cartridge, it is 
always of importance to find out how it will mushroom. It has been 
very difficult to find anything that acts like living flesh. You cannot 
experiment on that, so the best we can do is to buy beef from the 
butcher, and that is not a satisfactory substitute. 

The Chairman. You actually use meat as a target or a receiver for 
the projectile? 

Mr. Pugsley. On testing such sporting cartridges ; yes, sir. 

Senator Clark. Do you use it on military cartridges, Mr. Pugsley ? 

Mr. Pugsley. No, sir; we do not use it on military cartridges, but 
we do for jacketed bullets, because the trappers object to the hides 
being torn, and we have to furnish jacket-ed bullets for the hide trade. 

Senator Clark. Of course, the military authorities are not con- 
cerned about how much hide they tear. 

The Chairman. You are writing now to the War Department, and 
jou discover that they have been doing some experimental work, 
and you want the advantage of their knowledge. What is the rela- 
tionship there, if it had to do only with sporting goods? 

Mr. Pugsley. The relation is, if they had discovered a material 
which would act in the same way that live tissue would, it would be 
of advantage to us in designing our sporting cartridges. 

The Chairman. What does the War Department practice on ? 

Mr. Pugsley. That I could not tell you. That is what I was trying 
to find out. 

The Chairman. You understood that they were testing types in 
meat, did you not? 

Mr. Pugsley. I had heard they were making some tests. 

The Chairman. For what purpose? 

Mr. Pugsley. That I do not know. 

The Chairman. Do you know to what extent the War Depart- 
ment engages in experimentation of this kind? 

Mr. Pugsley. No, sir. 

The Chairman. What reply did you have from the War Depart- 
ment in answer to your inquiry? 

Mr. Pugsley. My recollection is that we either got no answer or it 
was a negative, in any event. I do not remember, but we got no 
information. 

The Chairman. What degree of perfection is attained by a perusal 
of this practice ? 

Mr. Pugsley. I do not quite know as I understand your question, 
Senator. 

The Chairman. What is it you would want to know about the 
action of a bullet in meat? 

Mr. Pugsley. A: softiuosed bullet has to be hard enough so 
that it will not go to pieces, and yet soft enough so that it will 
mushroom when it strikes the animal. We have tried soft pine 
boards and various other materials, but it is very hard to get a sub- 



3650 MUNITIONS INDUSTRY 

stitute for living tissue. We have reports from hunters continu- 
ously telling us about various exiDeriences they have with the use of 
these hunting bullets, and it is our endeavor to perfect our hunting 
bullets. 

The Chairman. Have you found any synthetic substances yet? 

Mr. PuGSLEY. No, sir. 

The Chairman. Nothing to take the place of living flesh ? 

Mr. PuGSLEY. The nearest we can come to it is beef which we 
buy from the butcher. 

The Chairman. How extensively have you experimented with 
beef? 

Mr. PuGSLEY. I would say that for any cartridge which w^e get 
out, before it is finally approved for the market, it is tested in beef. 

The Chairman. What results do you seek to accomplish in these 
tests? 

Mr. PuGSLEY. Simply to determine whether the bullet acts all right 
in beef ; whether the upset is proper. 

The Chairman. And this testing is confined exclusively to sporting 
ammunition, is it? 

Mr. PuGSLEY. Absolutel3^ 

The Chairman. You have no knowledge of these experiments by 
the War Department at all? 

Mr. PuGSLEY. None whatsoever. 

The Chairman. This was in March 1932, that you w^ere writing 
the War Department for this information. Have you heard since, 
or have you had any understanding since, that they were testing 
types of bullets upon flesh? 

Mr. PuGSLEY. No. sir. 

The Chairman. Have you ever made any further inquiry as to the 
results of the War Department experimentation ? 

Mr. PuGSLEY. Not to my recollection ; no, sir. 

The Chairman. Did the War Department, in responding to you, 
say that they were not engaged in that kind of experimenting ? 

Mr. PuGSLEY. I do not remember that they did. 

The Chairman. But they gave you no advantage of their 
experience ? 

Mr. PuGSLEY. No, sir. 

The Chairman. Mr. Pugsley. assuming that you are sufficiently 
well acquainted with the submachine gun to know, I want to ask 
you again on what scale one could engage, if he were inclined to do 
it, in the manufacture of submachine guns, through purchasing com- 
ponent parts from various manufacturers? 

Senator Barbour. You mean assembling guns, Mr. Chairman? 

The Chairmai*. That is right. Assembling guns without the neces- 
sity of having to buy all parts from one factory. 

Mr. Pugsley. The parts would all have to be specially made for 
the particular ,gim, and it would be possible to contract for these 
parts, yes, sir, in different gun shops. 

The Chairman. AVhat of the Hyde gun? Are there not parts of 
the Hyde gun which could be used in the Thompson submachine gun ? 

Mr. Pugsley. I do not know. 

Senator Clark. Mr. Pugsley. do you know anything about the 
practice of the Government in disposing of rifles and machine guns? 

Mr. Pugsley. Of what? 



MUNITIONS INDUSTRY 3651 

Senator Clark. Of rifles and machine guns, when they are sup- 
posed to be rendered useless and sold for junk. 

Mr, PuGSLET. I know that they are sold. 

Senator Clark. As a matter of fact, it is the practice of the Gov- 
ernment arsenals in one case to break the barrel, and in another 
arsenal to break the stock, is it not, and if a man wants a machine 
gun, all he has to do is to buy some so-called " useless " weapons from 
one arsenal and some from another arsenal, and put them together? 

Mr. PuGSLEY, The guns wdiich I have seen have invariably been 
burned with an acetylene torch and the barrels, bolts and so forth 
would be affected. 

Senator Clark. Is it not a fact that some arsenals make it a i^rac- 
tice to break the stock and other arsenals make it a practice to break 
the barrel ? 

Mr. Pi^gslet. Not that I know of. 

Senator Clark. And by assembling the various parts, it is pos- 
sible to make a serviceable weapon ? 

Mr. PuGSLEY. Not that I know of. I have never seen that, in 
other words. 

Mr. Wohlforth. Mr. Pugsley, just to make the record clear, it 
is perfectly easy to buy a barrel from your company, and you do 
not inquire to whom you sell it, that is, you did not know who the 
Hyde Arms Co. was. You simply made the 200 barrels and sold 
them. 

Mr. Pugsley. Mr. Wohlforth, I personally did not know who tne 
Hyde Arms Co. were and had never heard of the Hyde Arms Co. 
at the time. When Griffin & Howe inquired for the barrels, we 
knew Griffin & Howe, and made them for them. I cannot testify 
for the Hyde Arms Co., because I did not know anything about 
them. I Avas simply told by Mr. Beebe that they had another order 
for more of the gun barrels. 

Seiiator Vandenberg. If you had an offer from Sedgley for bar- 
rels, would you fill it? 

Mr. Pugsley. Yes, sir ; we do fill orders from Sedgley for barrels. 

Mr. Wohlforth. This letter previously referred to, dated Sep- 
tember 8, 1934, is a letter in which Mr. Huber is writing you as 
an official of the Hyde Arms Corporation, and he says [readinsrl : 

Please enter our order for 100 l»arrels as per siiecifications of the previous 
100 that you supplied. 

The previous 100 were the Griffin & Howe barrels, were they not ? 

Mr. Pl'gsley. I imagine so. 

Mr. Wohlforth. Would not this seem to indicate that the Hyde 
Arms Co. and Griffin & HoAve Corporation are very closeh^ allied? 

Mr. Pugsley. I do not know anything about that. 

Mr. Wohlforth. After getting the barrel, it would be easy to get 
the stock and then the other mechanism could perhaps be just as 
easily assembled and screwed together, and you would have a fairly 
good submachine gun wath a little bit of work, would you not? 
The point I want to make is that there is no restriction. You will 
sell it and somebody else will sell the stock, and they can take a 
pistol and file down the sear, perhaps, and develop some sort of a 
very dangerous weapon, which often gets into the wrong hands? 

Mr. Pugsley. I imao-ine that could be done. 



3652 MUNITIONS INDUSTRY 

Senator Clx^ek. Mr. Pugsley, there has been put in evidence in 
this hearing last September ^ testimony showing a contention raised 
hj the Federal Laboratories, Inc., at Pittsburgh, which make gas, 
but has a side line, an agency for the Thompson submachine gun, 
that this Hyde gim which is being put out by the Lake Erie Chemi- 
cal Co., now the U. S. Ordnance, Inc., of Cleveland, a competitor 
of Federal Laboratories — that the Hyde gun was nothing on earth 
except a Thompson machine gun with a new barrel, that they were 
getting solne Thompson machine guns and putting on a new barrel 
for sale in Cuba. Do you know anything about that ? 

Mr. Pugsley. No, sir; not a word. 

In answer to your other question. Senator, you were a little bit 
confused in my remark, saying, " tooling up." I might saj^ that to 
tool up to make a given rifle, or any rifle, is a very long and ex- 
pensive job. It would take 6 months or a year just to tool up to 
make the Springfield rifle, making the jigs, fixtures, and tools. 

Senator Clark. As a matter of fact, bearing out what you say, 
American troops were compelled to use the Enfield rifle throughout 
the war, Mr. Pugsley, because Remington and Winchester were 
tooled up for making Enfields, which is a far inferior gun to the 
American Springfield, but the Government went ahead and bought 
those and used them because of the assurance on the part of the 
manufacturer that it would take some time to tool up. Is that 
correct ? 

Mr. Pugsley. That is the only way it could be done. 

Senator Clark. I am not criticizing, but I am just pointing out 
that. 

Mr. Pugsley. We have no military rifle in our line whatsoever, 
and had no military rifle in our line when the Great War broke 
out, sir. 

The Chairman. The parts which you were manufacturing might 
have entered into the making of guns for military purposes? 

Mr. Pugsley. Only a very inferior military rifle. We supplied 
the Russian Government with some of our model 95, which is a 
sporting rifle, made over into a military model. It was an ex- 
tremely unsatisfactory military rifle, but Russia had to have it 
because it was all they could get. 

Senator Clark. Wliat is the difference between a sporting rifle 
and a military rifle. Mr. Pugsley ? 

Mr. Pugsley. A military rifle, I think, is generally acknowledged 
as a bolt-action rifle. There is no Army I know of who has any- 
thing but bolt-action rifles. 

Senator Clark. Do you think that the British troops who op- 
posed the Americans in the Battle of Kings Mountain and at the 
Battle of New Orleans would regard the old squirrel rifle that the 
American troops were armed with as military or sporting weapons? 

Mr. Pugsley. They were sporting weapons but they turned out 
to be a great and important factor in winning the war. 

The Chairman, Are not sporting rifles and sporting ammunition 
used to some extent in practice by the Army? 

Mr. Pugsley. In practice, possibly. 

Mr. WoHLFORTH. Mr. Pugsley, you have a bolt-action which is 
caliber .30 in your line, do you not* 

Mr. Pugsley. We do. We have a model called 54. 

1 Hearings, Part VIII, p. 1933. 



MUNITIONS INDUSTRY 3653 

Mr, WoHLFORTH. All you would need to do would be to change 
the front sight and the rear sight a little bit, and you would have 
a military rifle, would you not'^ 

Mr. PuGSLEY. I do not think it would be a military rifle which 
could be sold to any military country. The gun would have to be 
designed from the gi'ound up to make it a satisfactory military rifle. 
If you wish to go into the technical reasons, I would be very 
glad to. 

The Chairman. China would be a market for it, vvoidd it not? 

Mr. PuGSLEY. I do not think they would take the rifle the way it 
is at the present time. It would have to be redesigned. Further 
than that, we are tooled up to produce about 50 guns a day, and it 
would take a long time to stock an army on 50 guns a day. 

Senator Clark. Colonel Harris, on the very point we raised, that 
is, that American troops used Enfieids, which are notoriously in- 
ferior to Springfields, that is a point to which I think you will agree. 

Lieutenant Colonel Harris. Springfield rifles are superior to the 
Enfield. 

Senator Clark. The Springfield rifle is the best military rifle in 
the world? 

Lieutenant Colonel Harris. It is so regarded by the world, I 
think. 

Senator Clark. I call your attention to section 123 of the Na- 
tional Defense Act, headed : 

Frocurement of gages, dies, jigs, and so fortti, necessary for manufacture of 
arms, and so forth. 

That reads [reading] : 

Tlie Secretary of War be, and lie is hereby, authorized to prepare or cause 
to be prepared, to purchase or otherwise procure, such gages, dies, jigs, tools, 
fixtures, and other special aids and appliances, including specifications and 
detailed' drawings, as may be necessary for the immediate manufacture, by the 
Government and by private manufacturers, of arms, ammunition, and special 
equipment necessary to arm and equip the land forces likely to be required 
by the United States in time of war. 

I regard that as the most important section in the National De- 
fense Act. I do not wish to ask you to what extent the War De- 
partment has been making preparations under that section, but I 
would like to ask you whether the War Department is taking steps 
to obviate such occurrences as arose during the war due to the fact 
that the Remington Co. and other manufacturers of small arms were 
tooled up for British Enfieids and the American troops were com- 
pelled to use an inferior weapon during the war, or whether you are 
prepared with the necessary tools to start into production in the 
event of war? 

Lieutenant Colonel Harris. We are not prepared. We are pre- 
pared to the extent that money is appropriated. 

Senator Clark, You are limited to the amount of the appropria- 
tion by Congress? 

Lieutenant Colonel Harris. The appropriation of some $75,000 a 
year. I imagine that the jigs, dies, and fixtures required for a mili- 
tary program would cost $100,000,000. 

Senator Clark. That would be the cheapest money that the 
United States Government could spend. 



3654 MUNITIONS INDUSTRY 

Lieutenant Colonel Harris. It would, indeed, sir, and we would 
like to have the money, too. 

Mr. Hiss. Toward the close of yesterday's hearing, there was tes- 
timony on the question of what costs w^ere to be included in the 
adjusted compensation contract, and there was some suggestion on 
the part of Mr. Pierre du Pont, I think, that bonuses should be 
included. 

I would like to offer for the record at this time an analysis ob- 
tained by the committee from the du Pont Co., showing income 
taxes, experimental and engineering expense in connection with new 
production, and part of the foreign-trade development expenses, as 
well as bonuses, to October 31, 1934. 

(The document referred to was marked " Exhibit No. 1235 " and 
is included in the appendix on p. 3834.) 

Mr. Hiss. It shows " B " bonus. What is the " B " bonus. Mr. 
Irenee du Pont? 

Mr. Irenee du Pont. The " B " bonus is really the regular bonus. 
We have "A" bonus, which is specific compensation for special inven- 
tion or special activity. 

The " B " bonus is based on the judgment of the men, Senator, all 
the way up, checked as they go up, as to how much he really con- 
tributed, to the best of his judgment, to the general progress. 

Mr. Hiss. Is that a cash bonus or a stock bonus? 

Mr. Irenee du Pont. It used to be entirely a stock bonus. I think 
that since the law regulating issuing securities, which was recently 
passed, we have been obliged to pay in cash because we would be 
involved in some of the red tape pertaining to the issuing of stock. 
I am not quite sure of that, but it is my impression it is so. But in 
those days it was substantially all stock. 

Senator Vanderberg. That is your impression of the red tape, at 
any rate? 

Mr. Irenee du Pont. Very seriously, I think it is a case of over- 
reaching by the legislators in trying to make a thing good and for- 
getting what other harm may come about in the effort to do good. 

Mr. Hiss. Mr. du Pont, the " B " bonus is paid to Avhat class of 
employees, roughly? 

Mr. Irenee du'Pont. My recollection is — of course, I am going 
back a good many years — that the limit was down to a salary of 
$400 a month. 

Mr. Davis. $300. 

Mr. Irenee du Pont. $300. 

Mr. Hiss. From there up? 

Mr. Irenee du Pont. From there up. 

Mr. Hiss. It does not include pay-roll employees, but just salary 
employees. 

Mr." Irenee du Pont. I think that is correct, although I am not 
absolutely sure of that. I think in later years that was departed 
from, but I am not at all familiar with the details since 1925, 8 
years ago. 

Mr. Hiss. Mr. Lammot du Pont, can you answer the question ? 

Mr. Lammot du Pont. I think that is correct. 

Mr. Hiss. That from $300 a month up, the salary employees are 
included, and no pay-roll employees are included? 

IVIr. Lammot du Pont. I think that is correct. 



MUIinTIONS INDUSTRY 3655 

Mr. Hiss. What is the " merit bonus ", Mr. Lamniot du Pont, as 
distinguished from the "B" bonus? Are you familiar with tlie 
" merit bonus " paid by your company ? 

Mr. Lammot du Pont. I do not know of anything at the present 
time that is referred to as " merit bonus." 

Mr. Hiss. This statement prepared by the comptroller, Mr. Niel- 
sen, shows a " B " bonus (consolidated) (including previous year 
adjustment) for 1934 up to the 31st of October of $945,000, and a 
merit bonus, also (consolidated) (including previous year adjust- 
ment), of $1,733,000. Do you know what that particular bonus 
referred to there is? 

Mr. Lammot du Pont. I have just been reminded that the term 
" merit bonus " is ordinarily applied to a bonus paid which was set 
aside under a certain agreement plan, an executive trust agreement 
plan, which the company adopted some years ago. 

Mr. Hiss. Is that a cash-bonus or a stock-bonus plan? 

Mr. Lammot du Pont. That is a stock-purchase plan. 

Mr. Hiss.. Colonel Harris, I call your attention to that specific 
topic. The present adjusted compensation form of contract ex- 
cludes from cost the payment of bonuses. Is that correct? 

Lieutenant Colonel Harris. I will get Lieutenant Brannon to 
answer that. 

Mr. Hiss. Lieutenant Brannon? 

Lieutenant Brannon. Just a second, and I will check on that. 

Article III, paragraph 2, subparagraph I, the contract provides 
(Exhibit No. 1226-A) : 

The Government will not reimburse the contractor for any of the following 
expenditures : 

1. Bonus iiiij-ments to officers and employees based upon profits earned by 
the contractor. 

Mr. Hiss. Mr. Lammot du Pont, do either the '' B " bonus or the 
merit bonus, in your opinion, constitute bonus payments to officers 
and employees based upon profits earned by the contractor, assum- 
ing that the du Pont Co. were a contractor with the Government ? 

Mr. Lammot du Pont. Yes ; I would so consider it. 

Mr. Hiss. Colonel Harris, does not that constitute one point at 
which there is not agreement between the War Department and 
one of the major contractors in the event of war? 

Lieutenant Colonel Harris. There are a number of points. 

industrial connections of certain war department and other 

OFFICIALS involved IN PROCUREMENT AND RELATED ACTIVITIES DURING 
WORLD WAR ^ 

Mr. Hiss. Judging from the exhibit which is put in, this particu- 
lar one may be a rather sizeable item. 

Also, toward the close of yesterday's session, there was some tes- 
timony on the question of the men who would be chosen by the 
procurement branches, the supply branches of the Army, to operate 
on behalf of the Government. . 

Colonel Harris, I show you a memorandum of April 1, 1924, 
signed by Mr. Henning, of the du Pont Co., which I offer for 
appropriate number. 

1 This subject was entered into furtlier in hearings of Dec. 19, 1935. See Part XVI, 
pp. 3991 and 4002. 



3656 MUNITIONS INDUSTRY 

(The memorandum referred to was marked " Exhibit No. 1236 " 
and appears in full in the text.) 

Mr. Hiss. That memorandum reads: 

Acting on telephone request, obtained tbe following information regarding 
the method of contact between the War Department and the General Motors 
Corporation. Until recently, this was had directly from the office of the 
Secretary of War, but now through the Detroit district ordnance office in 
charge of Mr. O'Dell, and with Captain Barnard as executive assistant, and 
handling joint allocations for the Air Service, Ordnance, and Quartermaster 
Service. It has been recently proposed to make Mr. Mott of the G.M.C. 
a colonel of ordnance, and handling matters relative to tractors, motorization 
of artillery, etc. 

This was dated in 1924. Under the proposed plan would Mr. 
Mott, if he became a colonel of ordnance, deal with the topics here 
stated, tractors, motorization of artillery, et cetera? 

I am not sure that I understand your testimony of yesterday which 
has been called to my attention. 

Lieutenant Colonel Harris. That is a rather difficult question to 
answer. This Reserve officer in time of peace would be used in 
planning in connection with these materials with which he was 
familiar, and if he were called to active service would probably be 
used somewhere in connection with the production of material of 
this nature. But, as I stated yesterday, common sense would dic- 
tate that he should not deal with his own comjDany. 

Mr. Hiss. I misunderstood your statement. I thought you said 
he would not deal with his own industry, meaning the field in which 
he had been. 

Lieutenant Colonel Harris. No; I referred to his own company. 

Mr. Hiss. But he would probably be used within the industrial 
field from which he came and with which he would be familiar? 

Lieutenant Colonel Harris. There are no written regulations now 
existing which says a thing like that, but I imagine he would, be- 
cause that is where he would be most useful. 

Mr. Hiss. Was that true during the World War, Colonel Harris, 
that men from a given industry — by that I do not mean a com- 
pany — were used within the War Department on matters relating 
to that particular industry? 

Lieutenant Colonel Harris. That is true. 

Mr. Hiss. Was it understood that the Government was requesting 
the services of men from various industries, in order to have people 
from those industries? 

Lieutenant Colonel Harris. In many cases they did ; yes, sir. 

Mr. Hiss. I offer a letter dated August 21, 1917, addressed to 
Mr. P. S. du Pont, by Clarence C. Killen, secretary of the Chamber 
of Commerce of Wilmington, Del. 

(The letter referred to was marked " Exhibit No. 1237 " and ap- 
pears in full in the text.) 

Mr. Hiss. That letter reads : 

I beg to call your attention to the enclosed copy of letter from the secretary 
of the Chamber of Commerce of the United States. To secure the type of men 
suggested in Mr. Goodwin's letter I know of no one else to appeal save to your 
company. If you are in position to suggest the names of men who are 
qualified and free to accept these positions in the War Department, I would 
thank you exceedingly to advise me so that I can make the suggestions to 
Mr. Goodwin. 



^ 



MUNITIONS INDUSTRY 3657 

Then there is attached a letter under date of August 8, 1917, from 
Mr. Goodwin, secretary of the Chamber of Commerce of the United 
States, to Mr. Killen,' secretary of the Chamber of Commerce of 
Wihnington, DeL, which reads as follows : 

The Orclnance Bureau of the War Department is in urgent need of securing 
the services of GO office managers to serve in that Bureau in a civih'an capac- 
ity during the length of the war. It is essential that those selected shall 
thoroushly understand office management. The compensation will range from 
$2,000 to $2,500, but the responsibility calls for men who are now receiving 
twice that amount, but who will make the sacrifice for patriotism. 

Please wire us at the earliest opportunity the names of 5 men who will 
serve, stating in detail their business connections, and any other information 
available in regard to their experience in office management. 

This affords an excellent opportunity for business organizations to serve 
the Government efficiently, which we feel sure you will welcome. We shall 
appreciate your cooperation in securing immediate action. 

Mr. Hiss. I also show you a letter dated October 9, 1917, which 
T offer in evidence. 

(The letter referred to was marked " Exhibit No. 1238 " and ap- 
pears in full in the text.) 

Mr. Hiss. This is addressed to Colonel Hoffer, gun division, 
Ordnance Department, Washington, D.C. ; signed by Pierre S. du 
Pont (reading) : 

In formal reply to both your verbal and written request of September 23 
to this company to supply to the gun division of the Ordnance Department 
men from this company of the highest grade to assist in the development, 
purchase, and production of explosives, and the urgent need of your Department 
for such men, and the necessity of the du Pont Co.'s giving the Department 
assistance in this connection, I would say that we have, as you know, given 
careful consideration to this request during the past week or 10 days and 
have arrived at the following conclusion and for the following reasons : 

Appreciating the enormous work wliich is before this company, we still 
feel it our duty to comply with the Government's request. The men of the 
class which you require are high-salaried men with this company and men 
who have been with it a great nun\ber of years, and men who are financially 
interested in the company through their stock holdings. They are also men 
who will have to make serious sacrifices by severing their active connection 
temporarily with the du Pont Co., and men who have homes and families in 
this city. The company feels that they cannot ask these men to simply 
resign from the company in order to take up this work. The company, 
therefore, after serious consideration, has decided that they will immediately 
grant to Mr. Charles A. Patterson leave of absence, with full pay. until the 
end of the war. It is our feeling that after I\Ir. Patterson has been with you 
for 2 or 3 week's he can better judge of what other men it would be well 
for you to have, and we believe at this time that we can arrange to let you 
have tlu-ee or four men under tiiese terms. 

W^e have been somewhat disturbed over section 3 of the Lever Food Act, 
which forbids any person acting either as a voluntary or paid agent in the 
employ of the United States in any capacity where he lias in any sense a 
pecuniary interest in contracts or belongs to any firm or company directly or 
indirectly interested in contracts. We assume, however, that as tlie Govern- 
ment has requested of this company assistance in the way of men this difficulty 
can be overcome so that it will not subject either the company or these men 
to criticism. 

The following was written on the reverse side : 

October 12, 1917. This letter read by Colonel Hoffer but not delivered to him, 
as there seemed to be no way by which employees of du Pont could accept 
positions without sacrificing all connection with the company, including sale of 
their stock. .. . 



3658 MUNITIONS INDUSTRY 

Then on October 22, 1917, a letter apparently signed also by Mr. 
Pierre du Pont, addressed to the Chief of Ordnance, United States 
Army. 

(The letter referred to was marked "Exhibit No. 1239 ", and ap- 
pears in full in the text.) 

Mr. Hiss (reading) : 

I take great pleasure in introducing and recommending to you Mr. Charles 
A. Patterson who has been employed by E. I. du Pont de Nemours <& Co. for a 
number of years. His duties with us have been very extended in both manu- 
facturing and administrative affairs. 

What was Mr. Patterson's duty, do you know, Mr. Irenee du Pont, 
with the du Pont Co.? 

Mr, Irenee du Pont. At that time I think he was general man- 
ager of the dynamite division, high-explosives division of the com- 
pany ; either was the head or the next to the head. I am not per- 
fectly sure which. 

Mr. Hiss. Was he a member of the board of directors? 

Mr. Irenee du Pont. I could not tell you offhand. I would have 
to refer back to the records. That was 1917? 

Mr. Hiss. 1917. 

Mr. Irenee du Pont. I could not carry it in my head. 

Mr. Hiss (reading) : 

Mr. Patterson is particularly well suited to the work which you have at 
hand from the fact that he has a thorough knowledge of practical explosive 
manufacturing, coupled with the necessary experience in administrative affairs 
and, above all, a disposition particularly adaptable to surrounding circum- 
stances and methods of associates. You will find him invaluable ;ind he leaves 
our company only because a sense of high duty to the Government prompts us 
to release him for service \\'ith you. Mr. I'atterson leaves us witliout obligation 
of any kind to further serve E. I. du Pont de Nemours & Co. or to return to 
its services and it is our desire that he should perform his new work with no 
sense of obligation to his former associates. 

Did Mr. Patterson return to the company after his war-time serv- 
ice, do you know, Mr, Irenee du Pont ? 

Mr. Irenee du Pont. I do not think he left the company at all. 
I think he could not stand the physical examination, if I recall it 
rightly. 

Mr.' Hiss. Then on November 9, 1917, the president of the du 
Pont Co., presumably Mr. Pierre du Pont, wrote to General Crozier, 
Chief of Ordnance, 

(The letter referred to was marked "Exhibit No, 1240". and ap- 
pears in full in the text,) 

Mr. Hiss (reading) : 

I take great pleasure in recommending for a position in the Ordnance Depart- 
ment of the United States Army Mr. W. C. Spruance, Jr. 

What was Mr. Spruance 's connection with the du Pont Co. at this 
time. Mr. du Pont? 

Mr. Irenee du Pont. He had been the head of the engineering 
division of tlie explosives dejiaitment. I think at this time he was 
second in command of the explosives department, Mr, Patterson. I 
think, was first in command. 

Mr. Hiss. Was he a member of the board of directors, do you 
know ? 

Mr. Irenee du Pont, I do not think he was at that time. He has 
been since. 



MUNITIONS INDUSTRY 3659 

Mr. Hiss (readino: " Exhibit No. 1240 ") : 

Mr. Spruance has been prominent in the administrative affairs of our com- 
pany for many years, particularly with reference to the manufacture of high 
explosives. His knowledge in this line is extensive, accurate, and up-to-date. 
It is with great regret that I have consented to the leaving of Mr. Spruance 
from the employ of our company, and he is doing so only on account of sense 
of duty. He leaves with no obligation or service to E. I. du Pont de Nemours 
& Co. in any way or tn return to its .service at any time. 

Mr. Spruance did return to the companv after the war, Mr. du 
Pont? 

Mr. Irenee du Pont. He did. 

Mr. Hiss. This was in answer to a letter attached to the letter 
already offered in evidence. 

Mr. Irenee du Pont. Mr. Secretary, I am not quite sure whether 
]\Ir. Patterson and Mr. Spruance were on the board of directors. 
I would rather withdraw any reply I made to that question and ask 
to look it up for the record.^ 

Mr. Hiss. All right. 

The letter of November 9, which has just been read, was an answer 
to a letter from Colonel Hoffer, of the Ordnance Department, dated 
November 6, addressed to Mr. P. S. du Pont. 

Colonel Buckner has spoken to me of Mr. J. A. Haskell as one wlio might 
possibly fill the position for which Mr. Patterson was selected. 

That indicates Mr. Patterson did not finally serve with the Army. 

I took the matter up wih General Crozier. who has personally known Mr. 
Haskell for some years, and we have considerable misgivings as to whether 
he would meet the requirements. We fear that his age would be against him, 
and also that he has lost touch with problems of a character whicii we would 
want him to handle. 

It is with considerable regret and hesitation that I came to this conclusion, 
particularly as Colonel P>uckner stated that Mr. Haskell's name had been 
suggested by you. 

Mr. Haskell had what position with your company at that time, 
]Mi'. Irenee du Pont? 

Mr. Irenee du Pont. He had been vice president and member of 
the board of directors, but whether he had ceased to be a vice presi- 
dent at that time, I could not recall. 

yiv. Hiss (reading) : 

I can't but hope that your .company will see its way clear to give me an 
active member of its staff to assist me in this great undertaking which has 
been thrust upon me and wh'ich I am so little able to bear v/ithout able 
fissistance. 

Then, one final letter in this field, letter of June 29, 1918, which 
I offer in evidence. 

(The letter referred to was marked '•'Exhibit No. 1241'", and is 
included in the appendix on p. 3836.) 

Mr. Hiss, This is an excerpt from a letter of Mr. Pierre du Pont 
on June 29, 1918, to Mr. Barksdale at White Sulphur Springs. 

There seems a little more activity in Washington with regard to the nitro- 
gen question but nothing definite nor hopeful. We have agreetl to lend Edgar 
and Liljenroth — 

Who were Edgar and Liljenroth? 



1 See p. 3661 for corrected reply. 



3660 MUNITIONS INDUSTRY 

Mr. Irenee du Pont. Edgar was in the development end, a special- 
ist in the fixation of atmospheric nitrogen. Liljenroth was a man 
we had gotten from outside. He was an expert in nitrogen fixation. 

Mr, Hiss (reading) : 

We have agreed to lend Edgar and Liljenroth tor a portion of their time 
without cost to the Government in the belief that tlieir intluence will be helpful 
toward a proper solution of the problem. 

Lieutenant Brannon, have you the personnel of the Naval Con- 
sulting Board to which reference has already been made? 

Lieutenant Brannon. Mr. Hiss, I took this memorandum from a 
bound brochure pertaining to diU'erent agencies associated with the 
Council of National Defense. It is not a printed volume. I do not 
know^ the authority for it, but I have no reason to question it. 

Mr. Hiss. This was an official Government document? 

Lieutenant Brannon. It is a document we had in the library, but 
the author's name is not given, so I cannot atte;-t as to the accuracy 
other than that we have it in the library and use it for reference 
purposes. 

Mr. Hiss. This is the Naval Consulting Board personnel? 

Lieutenant Brannon. Yes. 

Mr. Hiss. So far as you know, was that the first board of promi- 
nent civilians appointed just before the war to assist the Navy or the 
War Department in their problems? 

Lieutenant Brannon. I think this is the personnel just after we 
entered the war. There may have been a few changes. I do not 
suppose there were very many. 

Mr. Hiss. Do you know when the Naval Consulting Board was 
first established? 

Lieutenant Brannon. Yes ; I have an extract from a book entitled 
'• Handbook of Economic Agencies of the War of 1917-19." 

Mr. Hiss (reading) : 

NAVAL CONSULTING BOARD, DEPAETMENT OF THE NAVY 

A body of scientific experts representing the scientific and technical fields 
involved in the solution of naval problems. It was appointed by the Secretary 
of tiie Navy and met for organization on October 6, 1915. After the organiza- 
tion of the Council of National Defense it became a part of that body, acting 
as an inventions committee. It handled correspondence relating to naval 
inventions, and examined such inventions as did the Inventions Section, General 
Staff, and the National Advisory Committee for Aeronautics. It functioned 
through the following committees : Aeronautics ; Aids to Navigation ; Chemistry 
and Physics ; Electricity ; Food and Sanitation ; Internal-Combustion Motors ; 
Life-saving Appliances ; Metallurgy ; Mines and Torpedoes ; Optical Glass ; 
Ordnance and Explosives ; Production, Organization, Manufacture, and Stand- 
ardization ; Public Works ; Yards and Docks ; Ship Construction ; Special 
Problems ; Steam Engineering and Ship Propulsion ; Submarines ; Transporta- 
tion ; Wireless and Communications. President, Thomas A. Edison ; chairman, 
William L. Saunders. 

The personnel of that board as supplied by Lieutenant Brannon 
consisted of [reading] : 

Chairman, Thomas A. Edison ; Washington representative, Capt. William 
Strouther Smith ; secretary, Thomas Robbins ; member.s, Lawrence Addieks, 
Bion J. Arnold, Dr. L. H. Baekland, Howard E. Coflin, Alfred Craven, William 
LeRoy Emmet, Peter Cooper Hewitt, Andrew Murray Hunt, Dr. Miller Reese 
Hutchinson, B. G. Laume, Hudson Maxim. Spencer Miller, Prof. Joseph W. 
Richards, Andrew L. Riker, William L. Saunders, Matthew Bacon Sellers, 
Elmer A. Sperry — 



MUNITIONS INDUSTRY 3661 

That is the inventor of the Sperry gyroscope ? 
Lieutenant Brannon, I do not know. 
Mr. Hiss (continuing reading) : 

Frank J. Sprasue, Benjamin B. Thayer, Dr. Arthur G. Webster, Dr. W. R. 
Whitney, and Dr. Robert S. Woodward. 

Mr. Irenee du Pont. Mr. Secretary, I can now answer those ques- 
tions about the directorate that you asked. I have been handed a 
copy of the list of officers and directors of the du Pont Co. on October 
5, 1917, in connection with these Old Hickory contracts. Neither 
the name of Mr. Patterson, referred to, nor Mr. Sprague appears 
on the board of directors at that time. Mr. J. Haskell was on the 
board at that time. 

Mr. Hiss. Thank you. 

Colonel Harris, I show you extracts from special orders relating 
to the Kernan Board. 

(The memorandum referred to was marked "Exhibit No. 1242", 
and is included in the appendix on p. 383G.) 

Mr. Hiss (reading) : 

Under the provisions of section 121 of the act of Congress approved June 
3, 1916, a board to consist of Col. Francis J. Kernan, Lt. Col. Charles P. 
Sumnierall, Maj. Lawson M. Fuller, Mr. Benedict Crowell — 

Was Mr. Crowell at that time Assistant Secretary of War. do you 
know, Colonel Harris, or was he later appointed? 

Lieutenant Colonel Harris. I think he was appointed later, I 
do not have the record. 

Mr. Hiss (reading) : 

and Mr. R. Goodwyn Rhett — 

Was Mr. Rhett at that time president of the United States Cham- 
ber of Commerce, Colonel Hariis, do you happen to know ''. 

Lieutenant Colonel Harris. I do not know. 

Mr, Hiss. I understand that he was at that time. [Continues read- 
ing :] 

is appointed to meet in this city at the call of the senior member of the board 
for the purpose of investigating and reporting upon the feasibility, desirability, 
and practicability of the Government manufacturing arms, munitions, and 
equipment. 

I also offer in evidence excerpts from a letter of December 5, 1916, 
from Mr. Bascom Little, chairman of the LTnited States Chamber of 
Commerce Executive Committee on National Defense addressed to 
or, rather, found in Mr. Pierre du Pout's files. 

(The excerpt from letter referred to was marked '' Exhibit No. 
1243 ", and appears in full in the text.) 

Mr. Hiss (reading) : 

The Chamber of Commerce of the United States has been keenly interested 
in the attempt to create an entirely new relationship between the Government of 
the United States and the industries of the United States. It is hoped that 
the atmosphere of confidence and cooperation which is beginning in this coun- 
try, as shown by the Federal Trade Commission, the Federal Reserve Board and 
other points of contact which are now in existence, may be further developed, 
and this munitions question would seem to be the greatest opportunity to 
foster the new spirit. 

Senator Clark. '\'\^iat is the dat^" of that letter. Mr, Hiss? 



3662 MUNITION'S INDUSTRY 

Mr, Hiss. The date of that letter is December 5, 1910. 

May I oifer in evidence at this time a memorandum furnished by 
the du Pbnt Co. showing their subscriptions in the year 1934 to 
various chambers of commerce, manufacturers associations, trade 
associations, and technical associations? The 1933 total payment 
of dues or contributions to chambers of commerce totaled $14,563; 
to manufacturers associations, $10,398 ; to trade associations $49,416 ; 
and to technical associations $3,257. A grand total of $77,636. 

(The memorandum referred to was marked "Exhibit No. 1244", 
and is included in the appendix on p. 3836.) 

Mr. Hiss. Referring to page 20 of the report of the War Indus- 
tries Board, the personnel of the advisory commission to the Coun- 
cil of National Defense, which was organized, according to the 
report to which I am referring, on October 11, 1916, consisted of 
Daniel Willard, HoUis Godfrey, Howard E. Coffin, Dr. Franklin 
H. Martin, Bernard M. Baruch, Julius Rosenwald, and Samuel 
Gompers. 

Reading from the page referred to : 

Each of these commissioners took eliarjje of a speoinl field. One was as- 
signed to transportation, one to engineering and education, one to munitions 
and manufacturing, one to medicine and surgery, one to raw materials, one 
to supplies, and one to labor — 

Wlio was presumably Mr. Gompers. [Continues reading :] 

A system of contracts through " committees of the industries " was worked 
out by the commissioner in charge of raw materials, and it was on March 3. 
1917, that the idea of a large organization was made effective. 

Colonel Harris, are you familiar with the Council of National 
Defense subcommittee or committee known as the Munitions Stand- 
ards Board? I show you excerpts from a meeting of that council 
dated February 28, 1917. 

(The memorandum referred to was marked " Exhibit No. 1245 ", 
and appears in full in the text.) 

Mr. Hiss (reading) : 

Chairman Willard read the following list of men nominated by the Com- 
mission to compose a " Munitions Standards Board " : 

W. H. Vandervoort. Root & Vandervoort. builders of special machine tools 
and president of the Moline Automobile Co. 

E. A. Deeds, ff)rmerly general manager of the National Cash Register Co.. 
president of the Dayton Engineering Ijaboratories Co., and interested in many 
industrial activities. 

Frank A. Scott, Warner «& Swasey Co., Cleveland, manufacturers of auto- 
matic machinery and optical instrument.s. 

Frank Pratt, General Electric Co., Schenectady. 
Samuel Vauclain, Baldwin Locomotive Works, Remington and Westing- 
house Cos. 

.John E. Otterson, vice president Winchester Arms Co. 

Colonel Harris, what were the duties of the Munitions Standards 
Board when it w^as first created? 

Lieutenant Brannon. As I understand it, the Munitions Stand- 
ards Board was created for the purpose of standardizing specifica- 
tions for munitions. 

Mr. Hiss. On page 21 of Mr. Baruch's report there is a statement 
that a month after the appointment of the Munitions Standards 
Board the General Munitions Board Avas established, with the duty 
of coordinating th« buying of munitions by the War and Navy 
Departments and to assist those Departments in acquiring raw ma- 



MUNITIONS INDUSTRY 3663 

terials and manufacturing plants to meet their requirements. This 
new and larger board had the same chairman, and included the 
civilian personnel of the Munitions Standards Board. 

According to that statement the General Munitions Board had a 
wider scope of duty than the Munitions Standards Board. Is that 
correct, so far as you know ? 

Lieutenant Brannon, As I understand it, the war was declared 
before the Munitions Standards Board had an opportunity to do 
very much, and the need then was to assist the War and Navy De- 
partments in actually procuring munitions, so that the General 
Munitions Board was formed. 

Mr. Hiss. Colonel Harris, can you identify Colonel Hawkins, who 
was in the War Department during the war ? 

Lieutenant Colonel Harris. Col. J. H. Hawkins? 

Mr. Hiss. Yes. 

Lieutenant Colonel Harris. He was an ojEcer in the Ordnance 
Department during the war. He was a man of legal training and 
had to do with legal matters. 

Mr. Hiss. I would like to offer for the record excerpts from his 
testimony before the Graham committee, to be marked as an exhibit. 

(The excerpts from testimony referred to was marked " Exhibit 
No. 1246 ", and is included in the appendix on p. 3840.) 

Mr. Hiss. Can you identify Colonel McRoberts, who was referred 
to in these excerpts? 

Lieutenant Colonel Harris. Colonel McEoberts was an officer of 
the Ordnance Department in charge of the Procurement Division 
of the Ordnance Office, having to do with the placing of orders and 
making contracts. 

Mr. Hiss. Do you know what his services had been before ? 

Lieutenant Colonel Harris. He was a banker in New York City. 

Mr. Hiss. Do you know what bank he was connected with ? 

Lieutenant Colonel Harris. I do not recall just now. 

Mr. Hiss. Colonel Hawkins in his testimony stated that he was 
with the National City Bank. 

Mr. Lammont du Pont. Mr. Chairman, might it be proper for 
us to see copies of these matters that are being presented now ? 

(Copies of the exhibits were handed to Mr. Lammot du Pont.) 

Mr. Hiss. Colonel Harris, you referred yesterday to the function 
of some non-War Department agency in time of war in controlling 
prices. That was the function during the World War of a special 
committee, a price-fixing committee of the War Industries Board, 
was it not? 

Lieutenant Colonel Harris. It was a price-fixing committee, the 
chairman of which reported directly to the President. The chair- 
man happened to be a member of the War Industries Board, but 
the committee, while it had personnel from the War Industries 
Board, was a separate committee answerable to the President. 

Mr. Hiss. It had separate legal authority of its own, apart from 
the War Industries Board? 

Lieutenant Colonel Harris. Yes, but it used the War Industries 
Board as its source of information. 

Mr. Hiss. The personnel of the War Industries Board as stated 
on page 22 of INIr. Baruch's report was Frank A. Scott, chairman 
of the Board; Bernard M. Baruch; with whom were associated L. 
L. Summers — can you identify Mr. Summers, Mr. Irenee du Pont ? 

83876 — 35— PT 15 9 



3664 MUNITIONS INDUSTRY 

Mr. Irenee du Pont. I recall having met him. I could not iden- 
tify him; no sir. 

Mr. Hiss. Perhaps it will refresh your recollection: You wrote 
a memorandum on April 16, 1917, relating to a conference in Wash- 
ington, in which you referred to Mr. Summers as late assistant to 
Mr. Stettinius. Do you remember that? 

Mr. Irenee du Pont. I do not recall that ; no, sir. 

Mr. Hiss. Alex Legge, Eugene Meyer, Jr., J. L. Eeplogle, S. H. 
MacDowell, M. F. Chase, O. F. Weber, E. A. Pierce, and Fred 
Allen. They were associated with Mr. Baruch, who was commis- 
sioner of raw materials. 

Robert S. Brookings, commissioner of finished products; Robert 
S. Lovett, priorities commissioner; Hugh A. Frayne, labor commis- 
sioner; Colonel, later Brig. Gen. Palmer E. Pierce, Army represent- 
ative ; and Rear Admiral F. F. Fletcher, Navy representative. 

Was Colonel Pierce succeeded by other officers as the Army 
representative ? 

Lieutenant Colonel Harris. Yes, in the development of the War 
Industries Board he was succeeded by General Goethals. 

Mr. Hiss. And was General Goethals in turn succeeded by 
another representative of the Army? 

Lieutenant Colonel Harris. I think he was succeeded by Hugh 
Johnson. Mr. Hiss, I miglit state that the record of the Board does 
not show General Johnson, it shows General Goethals, but General 
Johnson was associated with the Board. I do not know whether 
he was a member or not. 

Mr. Hiss. As an Army representative? 

Lieutenant Colonel Harris. As an Army representative. 

Mr. Hiss. I call your attention to the fact that at a meeting of 
the Council of National Defense and the advisory commission on 
February 14, 1917, Mr. E. S. Stettinius, a member of the firm of 
J. P. Morgan & Co., addressed the meeting on the manufacture in 
this country of munitions for the Allies. 

(The memorandum containing the excerpt referred to and other 
excerpts from minutes of meetings of the Council of National De- 
fense was marked " Exhibit No. 1247 ". and is included in the 
appendix on p. 3843.) 

Mr. Hiss. Do you know when Mr. Stettinius became Assistant Sec- 
retary of War, Colonel Harris? 

Lieutenant Colonel Harris. The records I had yesterday showed 
that he became Assistant Secretary of War on April 11, 1918. 

Mr. Hiss. Will you turn to page 5 of those excerpts. Colonel 
Harris ? 

Mr. Hiss [reading " Exhibit No. 1247 "] : 

Excerpts from meeting of the Council of National Defense, March 3, 1917. 

Secretary Baker requested Director Gifford and Mr. Clarkson to retire dur- 
ing the consideration of the election of a director and secretary. Following upon 
this, Mr. W. S. Gifford was elected as director, and Mr. Grosvenor B. Clarkson 
as secretary of the council. 

On page 8 of the excerpts you have : 

Report of Commissioner Coffin on formation of munitions standards boards 
and problems of manufacture in aeronautics. 

The repoit of the Advisory Commission's committee on munitions is one of 
progress. The Munitions Standards Board, created by the Council of National 



MUNITIONS INDUSTRY 3665 

Defense, following recommendation of the Advisory Commission, held its meet- 
ing Wednesday, March 21. 

Then there is stated on page 9 the following: 

By formal action, the Board resolved itself into six subcommittees, and by 
appointment of the Cliair the members were assigned to the chairmanship of 
subcommittees as shown in the following list: 

J. E. Otterson : Small arms, including machine guns and small arms ammuni- 
tion ; 

Samuel Vauclain : Army artillery and the ammunition therefor ; 

W. U. VanDervoort : Naval artillery and ammunition therefor ; 

Francis Pratt: Gages, specifications, jigs, and fixtures; 

E. A. Deeds : Time fuses and detonators ; 

Frank Scott : Scientific instruments, including optical and range-finding ap- 
paratus. 

Are you familiar with the patent situation in the aeronautical field 
at this time, Colonel Harris^ 

Lieutenant Colonel Harris. I am not. 

Mr. Hiss. Will you turn to page 11 of " Exhibit No. 1247 ", which 
refers to the report of Commissioner Cofl^. These are excerpts from 
the same report of Commissioner Coffin which I quoted before. 

PATENT SITUATION 

On March 22, there occurred in this city a meeting of all the manufacturers 
of airplanes and the members of the National Advisory Committee for 
Aeronautics. The difficulties in the way of a rapid development of the air- 
plane business were discussed in detail, and two definite actions were taken, 
which should go far towards clarifying the situation. Through the first of 
these actions, there was created a committee representing the American Aircraft 
Manufacturers' Association, for active cooperation with the National Advisory 
Conunittee in the investigation and elimination of the difficulties preventing 
progress in quantity production. The second important step had to do with 
the patent situation. A tentative agreement was reached whereby all manu- 
facturers agreed to execute a cross-licensing patent agreement, as of date of 
March 2. The agreement further provides that each manufacturing member 
of the association shall pay into the treasury of the association a certain stipu- 
lated sum for each plane made and sold. A quarterly accounting period is 
provided. Of the sum thus created, a certain percentage per plane is paid to 
the Wright-Martin Co. over the period of 6 years for which the Wright patents 
run. Another definite but smaller percentage is to be paid to the Curtis- 
Burgess interests during the 15-year period of the life of the Curtis patents. 
or until such time as the payment to the Curtis Co. has equalled the total 
sum paid to the Wright Co. during the 6-year period above mentioned. 

******* 

In looking over the purchasing records of the War and Navy Departments 
during the 8-year perior prior to 1916, four names are found responsible for 
the development of the art during this time when Governmental support was 
almost entirely lacking. These names are Wright, Curtis, Burgess, and Martin. 
Peculiarly, Wright has joined Martin, and Burgess has joined Curtis, thus 
setting up two groups of patents representing the early development of the art 
and combining in these two camps the men to whom we owe most for aero- 
nautical development in this country. In the recognition which it is proposed 
to accord the patents controlled by these two groups, there is a recognition 
also of the moral obligation to these four men. Through an ari-angement such 
as outlined above, the- total tax upon the industry has been reduced to a figure 
considered reasonable, and the airplane manufacturers of the country have 
been joined together in a closely knit and cooperative organization, and the 
danger of patent litigation between manufacturing members has been removed 
for many years and probably for all time. Moreover, an organization thus 
firmly knit together insures a definite channel of contact between the industry, 
the National Advisory Committee for Aeronautics, and the departments of the 
Government, which will bring about the greatest possible development within 
the briefest space of time. 



3666 MUNITIONS INDUSTRY 

Mr. Hiss. Do 3^011 know whetlier the cross license or patent pool 
referred to in this report has remained in effect in the aviation field 
since that time, Colonel Harris ? ^ 

Lieutenant Colonel Haeris. They have just had a study made on 
that in the office, but I am not familiar with the results. I can find 
out and answer your question later. 

Mr. Hiss. Colonel Harris, will you please turn to page 29 of " Ex- 
hibit No. 1247 ", excerpt from minutes of joint meeting of the Council 
of National Defense and Advisory Commission, June 2, 1917 : 

Commissioner Willard read the following letter, of date May 31, 1917, from 
E. H. Gary, cliairman of the committee on steel and steel products, of the 
Advisory Commission : 

" I send you herewith copy of letter just received from one of the manu- 
facturers in reply to our request for detailed information concerning the supply 
of ferromanganese on hand. I do not add the names. Tlie letter speaks for 
itself. If there is any question in regard to these matters we should know 
it now. 

" The letter referred to by Mr. Gary reads as follows : 

" ' Ferromanganese consumption approximately 250 gross tons per month. 
Two months' supply on hand May 1. Contracts on open market for 6 to 8 
months additional. Do not use Spiegel.' 

" We are anxious to do everything we can to assist the Government, and 
have complied with their request for detailed information regarding all of our 
business, including the steel mill. We are very doubtful, however, as to how 
far it is safe or proper for us to cooperate with some of the committees that 
are endeavoring to assist in the matter. I was called to Washington a few 
weeks* ago in connection with some of this committee work, and found that 
they were operating in flagrant disregard of the Sherman Law, the Clayton 
Law, and all the other statutes that are supposed to regulate business, particu- 
larly big business. 

" The Government officials who were sitting in at this conference admitted 
that tliey had no authority for doing so, and upon a little further inquiry we 
were advised that the Government officials' presence at the conference would 
not in any way protect us. As a matter of fact, we have recently made a 
settlement with the Treasury Department of a transaction which took place in 
1903, notwithstanding the fact that the Government admitted that we had 
acted in good faith at the time, and under the explicit instructions of the 
official representative of the Treasury Department. The present administra- 
tion takes the position that tlie former contracts were wrong, and not in con- 
formity with the law ; therefore we must be punished for doing exactly what 
we were told to do by the authorized representative of the department at the 
time. 

" It seems to us that if the Government desires cooneration on the nart of 
the business interests in helping them with their problems, the least they could 
do would be to have Congress pass a resolution suspending operation of these 
laws during the period of the war. Until such time as such action is taken 
to protect us against persecution in the future, we should prefer to do our 
bit by responding to the direct requests of the several branches of the Govern- 
ment for assistance, and this we are doing practically every day." 

The director was requested to send the foregoing letters to the Attorney 
General with the statement that the council and commission, and the various 
committees acting thereunder, are constantly encountering the difficulty referred 
to, and if there is any expression on the subject that the Attorney General can 
make, the council will be glad of his helpful cooperation. 

Senator Clark. What is the date of that letter? 
Mr. Hiss. This is quoted from a meeting of June 2, 1917, and 
Judge Gary's letter was May 31, 1917, after war had been declared. 



1 Undor (late of March 29, 1935, Colonel Harris submitted the following information 
respecting aviation cross-license agreements : " With reference to the patent pool men- 
tioned in ' Exhibit No. 1247 ', the Manufacturers Aircraft Association, Inc., has continued 
an agreement for the cross licensing of aircraft patents. The original agreement has 
l>een modified from time to time to meet changed conditions, but the principle has 
remained in effect." 



MUNITIONS INDUSTRY 3667 

Do you know, Colonel Harris, or Lieutenant Brannon, what was 
decided as to the antitrust laws during the war? 

Lieutenant Brannon. I do not recall, except I do remember there 
was conflict between the different agencies of the Government. In 
other words, I remember there was some lack of cooperation between 
the Attorney General's office and either the War and Navy Depart- 
ments and some of the agencies under the Council of National De- 
fense, l)ut I haven't any data here as to the particulars. 

Mr. Hiss. If you will look at the bottom of page 30 of " Exhibit 
No. 1247 "; this is from a meeting of the Council of National Defense, 
June 8, 1917 : . 

The director read the following letter, of date June 6, 1917, from the Attorney 
General, in response to inquiry made of the Attorney General as directed by 
the council on June 2, 1917 : 

" I have your letter of the 4th instant transmitting a copy of a letter from 
Mr. E. H. Gary, chairman of the committee on steel and steel products of the 
Advisory Commission, Council of National Defense, together with a copy of 
a letter' from an unnamed manufacturer. You inquire whether the Depart- 
ment of Justice desires to express an opinion on the question raised by these 
letters. 

"As I read the letters, the question raised is whether the operation of certain 
laws, more especially the Sherman law and the Clayton law, should be sus- 
pended by resolution of Congress during the period of the war. This is not 
a legal question, but a question of national policy, in respect of which I do 
not feel that I should express an opinion unless requested to do so by the 
President." 

So far as you know, they Avere not suspended during the war ? 

Lieutenant Brannon. I do not think so. 

Senator Vandenbeeg. Were there any subsequent prosecutions 
growing out of the situation to which Judge Gary referred? 

Mr. Hiss. None have been called to my attention, Senator. 

Senator Clark. The incident spoken of there in 1903 occurred at 
a time when the United States was not engaged in war. 

Mr. Hiss. I will offer this next document for appropriate exhibit 
marking. 

(The excerpts from meetings of the War Industries Board were 
marked " Exhibit No. 1249 " and are included in the appendix on 
p. 3848. )i 

Mr. Hiss. May 28, 1918, a meeting of the War Industries Board 
was held, according to these excerpts of minutes, at which were 
present Mr. Baruch, chairman, INIr. Brookings, Brig. Gen. Hugh S. 
Johnson, Mr. Frayne, Mr. Legge, Judge Parker, Mr. Peek, Mr. 
Replogle, Mr. Summers, and Mr. Ingels, secretary. 

Under the subject of " Price fixing ", I read : 

Attention of the board was called to the probable differences in rulings 
of the Price Fixing Committee and the Board of Appraisers of the War 
Department now operating under the direction of the Surveyor General of 
Purchases. If a manufacturer or producer refuses to deliver his product to 
the Government at prices fixed by the Price Fixing Committee and the product 
is commandeered, under the present arrangements, it is the function of the 
Board of Appraisers to determine a fair and just compensation. Considering 
the demoralizing effect tliat would result from having the Board of Appraisers 
fix prices different from those fixed by the Price Fixing Committee, Mr. 
Brookings was requested to discuss with General Johnson the advisability of — 

1. Having the Board of Appraisers work with the Price Fixing Connnittee, or 

2. To have the Price Fixing Committee take over the work novr being done 
by the Board of Appraisers. 

1 There was no exhibit marked "No. 1248." 



3668 MUNITIONS INDUSTRY 

Page 9, Colonel Harris, excerpts from meeting of the War Indus- 
tries Board on Tuesday, June 18, 1918. Present Mr. Baruch, chair- 
man, Mr. Legge, Admiral Fletcher, General Johnson, Mr. Brookings, 
Mr. Frayne, Judge Parker, Mr. Peek, Mr. Replogle, Mr. Summers, 
Judge Ritchie — the general counsel of the War Industries Board was 
Albert C. Ritchie, isn't that true ? 

Lieutenant Colonel Harris. He was. 

Mr. Hiss. Mr. Ingels, Secretary. Under the heading of " Curtail- 
ment of Industry (Pooling of Production)", "Exhibit No. 1249" 
reads : 

Judge Ritchie reported that he had considered the question referred to him 
by the Board on June 11, 1918, namely, when the output of phmts in the con- 
gested area was cut down, whether it would be legal to require the pooling 
of the output of all plants of the same character, l)oth within and without the 
congested area, in order to prevent the plants outside that area, where output 
was not cut down, from undue profiting at the expense of the plants within 
the area, where output was cut down. 

Mr. Ritchie's opinion was that a' pooling agreement of this kind would not 
violate the Sherman Law, provided the Government was a party to it, because 
he thought that under the circumstances the pooling agreement could not be 
construed as unreasonable. The only difficulty he saw was that he knew of no 
act of Congress authorizing the War Industries Board, or even the President, 
to enter into such an agreement relating to industries controlled by this 
Board, but Mr. Ritchie felt that, even without such an act of Congress, the 
President's war powers? were sufficient to authorize him to enter into or direct 
such an agreement with the industries affected. 

On April 9, 1917, the General Munitions Board's minutes show 
that the advisory committee of the Council of National Defense 
assignment to various subcommittees or subdivisions was as follows ■. 

Raw material, Bernard M. Baruch, chairman; industrial, Howard 
E. Coffin, chairman ; supplies, Julius Rosenwald, chairman ; medicine, 
Dr. Franklin Martin, chairman, 

I offer General Munitions Board minutes for appropriate marking 
as the next exhibit. 

(The minutes referred to were marked " Exhibit No. 1250 " and 
are included in the appendix on p. 3849.) 

Mr. Hiss. At a meeting held on June 1, 1917, of the executive 
committee of the General Munitions Board 

Lieutenant Brannon, these boards all continued to some extent 
overlapping, didn't they, during this period ? 

Lieutenant Brannon. The General Munitions Board had, I think, 
the same personnel as the Munitions Standard Board, except that 
a representative from the Army and a representative from the Navy 
were added. 

Mr. Hiss. Under the heading of " Publicity Campaign," the min- 
utes contained the following — 

Lieutenant Colonel Harris. What page are you on, Mr. Hiss ? 

Mr. Hiss. The last page, page 16 [reading] : 

At the suggestion of Mr. Coffin, the chairman advised that a publicity 
campaign to guard against adverse public opinion was to be begun immediately. 
It was suggested that Major McArthur, Captain INIarshall, and Maj. Preston 
Brown be appointed members of this committee. The chair advised that all 
information would have to come through Mr. Creel, chairman of the Committee 
on Public Information, and that he would take this matter up with Mr. 
Clarkson. 



MUNITIONS INDUSTEY 3669 

I offer the next set of excerpts from minutes of the General Muni- 
tions Board for appropriate marking as the next exhibit. 

(The excerpts from minutes were marked " Exhibit No. 1251 ", 
and are included in the appendix on p. 3851.) 

Mr. Hiss. On the first page, on June 5, 1917, at a meeting of the 
General Munitions Board, we have the following : 

Military instruments: A communication from the Ordnance Department was 
snlimitted relative to a proposed arrangement with the Warner & Swasey Co. 
of Cleveland, covering the manufacture of 3,000 panoramic sites for the use 
of the field artillery. 

Chairman Scott retired — 

Chairnum Scott had been connected with the Warner & Swasey 
Co.? 
Lieutenant Brannon. Yes. 
Mr. Hiss (continuing reading " Exhibit No. 1251 ") : 

And Colonel Blunt presided. Colonel Blunt stated that this company had 
agreed to take this work only after considerable pressure from the Ordnance 
Department. 

It was moved by Mr. Rosenwald and seconded by General Aleshire, that 
the price of $300 being fair and just, the proposition would be approved, and 
it was recommended that orders be placed. 

Meeting of June 19, 1917, under the heading, " Organization : 
Investigation by Major Stimpson ", we have the following : 

Mr. Scott stated that now that the emergency in connection with the work 
of the board is somewhat lessened, that it seemed right to so organize the 
Board and the members of its subcommittees that the board and the members 
of its subcommittees shall be free from reasonable criticism. This is par- 
ticularly necessary in relation to the membership on a board or subcommittee 
of a man who is actively interested in a concern which may benefit by the 
awarding of a contract concerning the recommendation of which the subcom- 
mittee or board has some authority. To investigate this condition, Mr. Scott 
suggested that the Board ask Major Stimpson if he would be willing to give 
his time to this matter. Major Stimpson stated that he would be glad to do 
this. He thereupon asked what functions the board and its subcommittees 
had and was informed that the final decision regarding the awarding of 
contracts did in no case rest with the board or its subcommittees. He asked 
whether the final decision by the Government officer was simply based on 
the experience of the board's recommendation and was informed that this 
was not always the case as recommendations of the board had been reversed 
on several occasions, the contractor for the cantonment at Chillicothe, Ohio, 
being mentioned, likewise reversal of the decision by the Secretary of the 
Navy of the recommendation of the board regarding the price of gun forgings 
to be placed with the Bethlehem Steel Corporation. 

Major Stimpson asked whether it would help matters if a small body of 
men constituted by law took the place of the heads of the Departments in 
making final decisions and awards. Mr. Scott stated that the present plan 
of the board was to coordinate and supplement the work of the departments 
and that with the present arrangement the small-board idea is impossible. 

Mr. Rosenwald give his opinion that a central pui'chasing body was neces- 
sary. 

Colonel Dunn stated that the order of the Secretaiy of War removing 
the necessity of bids for purchases led the Ordnance Department to believe 
that the prices submitted by the General Munitions Board were correct and 
thus accepted them. 

Colonel Hodgson outlined for the benefit of Major Stimpson the method 
pursued in recommending purchases by the Committee on Supplies. 

Major Pierce stated that the General Staff had been greatly relieved by 
the result of the methods used, and complimented the board on the prices 
received. 



3670 MUNITIONS INDUSTRY 

Excerpts from June 20, 1917, meeting of General Munitions 
Board : 

A memorandum from Colonel Littell, approved by the Secretary of War, 
was presented, asking the board to reconsider their recommendation for con- 
tractor to build cantonment at Yaphank, Long Island, because of the interest 
which Chairman W. A. Starrett had in the Thompson-Starrett Co., which 
firm had been previously recommended. 

The matter was referred to Mr. R. J. Bulkley, to investigate the exact 
standing of Mr. Starret relative to the Thompson-Starrett Co., and likewise 
the George A. Fuller Co. 

Then on June 21, " Exhibit No. 1251 ", the same subject is re- 
ferred to: 

Cantonments : Request for I'econsideration of Yaphank, Long Island, recom- 
mendation : 

In accordance with action of the Board, Mr. Bulkley presented a report show- 
ing that Mr. W. A. Starrett has not had any connection with the Thompson- 
Startett Co. for a period of more than 4 years. 

The first paragraph of this connuunication was approved without changes. 
The second paragraph was altered by the addition of a list of contractors to be 
furnished by the Committee on Emergency Construction, who might have the 
ability to build the above cantonment. 

Mr. Bulkley likewise reported by request, relative to Mr. Starrett's alleged 
connection with the George A. Fuller Co. showing that Mr. W. A. Starrett has 
no connection with said company ; but that one of his brothers is the president 
of the George A. Fuller Co. 

Page 7, Colonel Harris. On June 26, 1917, under the heading of 
" Prices, Steel ", we have the following : 

The chairman outlined the conference held with President Farrell of the Steel 
Corporation originally called to settle the matter of priority, and eventuating 
into a discussion as to the prices of steel for the Shipping Board, etc. 

A memorandum submitted on the price question to the Secretary of AVar and 
to the Secretary of the Navy as being the sense of the conference, was read, to- 
gether with an answer by the Secretary of War asking that nothing be done at 
present, but stating that he liad informed the governmental purchasing depart- 
ments that steel should be bought now at pre-war-time prices and the difference 
in prices adjusted at a later date. 

It was thereupon suggested that Mr. Scott find out what was meant by " pre- 
war-time prices ", and that if the prices previous to the war, August 1914 was 
meant, that the sense of the Board was not in accord with the suggestion of the 
Secretary. 

July 13, 1917, minutes of the executive committee of the General 
Munitions Board, page 11 : 

Machine-gun committee: Resignation of Mr. Hanson. A communication from 
Mr. Hanson, chairman of the machine-gun committee, was presented stating 
that due to his having accepted a position with the Colt's Patent Fire Arms 
Manufacturing Co., who were to receive and had received Government orders for 
machine guns, he felt it necessary to tender his resignation as chairman of that 
committee. 

Mr. Hanson's resignation was ordered accepted and the Secretary was in- 
structed to advise Mr. Hanson of the regret of the Board at his action and to 
express the Board's thanks for the valuable assistance he had rendered. 

Page 15, Colonel Harris, meeting of the executive committee of the 
General Munitions Board, July 28, 1917 : 

Present: Colonel Pierce, Colonel Blunt, Colonel Hodgson, Pay- 
master Hancock, Mr. Meyer, Mr. Rosenwald, Dr. Simpson, Major 
Starrett, Mr. Scott presiding, and Mr. H. P. Bingham secretary. 

Investigation : A telegram from Mr. Rosenwald to the President, bearing on 
the rider which was to be attached to the food bill relating to the employment of 
men in an advisory capacity, and regarding such men interested in companies 
receiving orders, was read and a copj- of this telegram together with the Presi- 



MUNITIONS INDUSTRY 3671 

deut's letter to Senator McKellar on this subject was ordered made a part of the 
record. 

Copy of a telegram forwarded July 2, 1917, to President Woodrow Wilson at 
the White House, Washington, D. C, from Mr. Julius Roseuwald : 

" Dear Mr. President. It is of the most vital importance that the rider 
in the food bill referring to the Advisory Commission and its method of 
securing supplies be stricken out. To cast suspicion on men in many indus- 
tries who without exception have been eager to serve the Government rather 
than themselves will destroy a spirit which should be encouraged. The com- 
mittees representing these industries have succeeded in instilling and securing 
a loyalty to the Government from many in their own lines that could never 
have been produced under the old system. Even at this early stage of the 
war the savings to the Government due to this desire to serve, runs into many 
tens of millions of dollars. Having been intrusted with a responsibility to 
protect and serve their Government interests a patriotism has been aroused in 
these men which is absolutely necessary to secure rapid production. It is 
probably impossible to devise any plan which is dishonesty proof but any man 
of standing in his profession or industry will sacrifice everything rather than 
be unfaithful to his trust. At any rate, such has been my experience with the 
men who have served as advisers to the Commission which I have had the 
honor to appoint. The present system should not be destroyed until a better 
one is found. If changes in method are desirable they can be made after 
proper investigation. It is vital that the cooperation which has already 
been established should be maintained and furthermore it is of greatest 
importance that confidence exist between Government and industi"y and that 
suspicion which has existed on the part of both be eliminated." 

Do you know, Lieutenant Brannon, the provision to which Mr. 
Rosenwald referred in his telegram? 

Lieutenant Brannon, I am not familiar. As I understand it, 
considerable criticism was made against the General Munitions 
Board and the subcommittees, because in some cases the same men 
were representing both the Government and industry. I believe 
there was a provision in the Food and Fuel Control Act which 
prohibited officers or advisers of the Government having any interest 
in corporations receiving Government contracts. I believe a refer- 
ence was made to that earlier in the discussion this morning. 

Mr. Hiss. On the last page of " Exhibit No. 1251 ", page 17, Colonel 
Harris, meeting of August 6, 1917, of the executive committee of the 
General Munitions Board, under the head, "Artillery f orgings ", we 
have the following : 

Attention of the Board was called to the question of the distribution of 
forgings to the Midvale Steel Co. and the Bethlehem Steel Co., particular at- 
tention being called to the plan of IMidvale furnishing the Navy forgings and 
the Bethlehem Steel Co. furnishing the Aimy forgings. Mr. Scott referred to 
an understanding with these two companies, that each of them was to furnish 
Army and Navy forgings at a certain fixed price, this price being based on 
the Navy forgings being divided equally between them. He stated that he did 
not believe Bethlehem would agree to accept only Army forgings at the prices 
agreed upon. 

The Chairman. The committee will be in recess until 2 o'clock. 
(Whereupon, at 12:20 p. m., the committee recessed until 2 p. m.) 

AFTERNOON SESSION 

The hearing was resumed at 2 p. m., pursuant to the taking of the 
recess. 



3672 MUNITIONS INDUSTEY 

FURTHER TESTIMONY OF LT. COL. C. T. HARRIS, IT. E. M. 
BRANNON, LAMMOT DU PONT, IRENEE DU PONT, EDWIN 
PUGSLEY, C. K. DAVIS, E. C. HADLEY, J. H. CHASMAR, E. E. 
HANDY, AND W. TJ. REISINGER 

(The witnesses were previously duly sworn by the chairman.) 

The Chairman. The committee desires for a few moments to go 
to the 

Senator Clakk. Mr. Chairman, before you do that, may I offer an 
exhibit ? 

The Chairman. Surely, Senator. 

Senator Clark. I have before me the document to which I re- 
ferred yesterday, the Industrial Mobilization Plan, Revised, 1933, 
approved by the Secretary of War February 1, 1933, approved by 
the Secretary of the Navy February 23, 1933. from the Government 
Printing Office, 1933. This is a public document, but I understand 
that the supply of it was exhausted within 48 hours after it was 
printed last year, at the time of its publication. I ask that it be 
made a committee exhibit and be published separately. 

The Chairman. That is ordered. 

(The Industrial Mobilization Plan was marked " Exhibit No. 
1252 ", and was published separately as Committee Print No. 2.) 

Mr. Irenee DU Pont. Mr. Chairman, you granted us permission 
to put in, under an appropriate number reserved for it, charts show- 
ing the relative prices paid for powder and other commodities.^ 

The Chairman. Yes. 

Mr. Irenee du Pont. I desire to do that now, and if you will per- 
mit me just a few minutes to explain the charts, I think it will clear 
up any indefiniteness. 

The Chairman. Wlien you say " a few minutes " is that what you 
mean? 

Mr. Irenee du Pont. If you do not ask me too many questions, I 
can do it in 5 minutes. 

The Chairman. Because the committee has an intense week ahead 
of it. 

Mr. Irenee du Pont. I think, Mr. Senator, this is a very impor- 
tant phase of it, because some of the curves going on that chart I 
think are very striking. 

The Chairman. Very well. Let us proceed to that consideration. 

Mr. Irenee du Pont. Mr. Chairman, I prepared in writing a de- 
scription of what I am about to say, but my eyes are none too good, 
but I shall try to follow it accurately, and I would like to attach 
this as an exhibit to the chart. 

This first chart which they are putting up, which you can read, is 
the price per pound of Army and Navy cannon powder, air-dried. 
The data was taken from War Industries Board information, the 
data used for powder and powder materials. 

Raw material prices, which are the double line, are weighted, again 
all the data taken from the War Industries Board. You will notice 
the dotted line is the powder price paid by the United States. That 
is according to-the War Industries Board's figures. Of that powder, 
the vast bulk came from the du Pont Co. I do not know Avhether it 



1 Hearings, Part XIII, p. 2928. 



MUNITIONS INDUSTRY 3673 

is 96, 98, or 93 percent, but it is substantially du Pont prices, and 
our prices would probably be a little lower because at that time, to 
encourage other manufacturers, they were given a little bit higher 
price than the du Pont Co. were given on their powder. 

That double line there represents the cost of ingredients in powder, 
weighted, as I say, to get the amount of ingredients per pound of 
powder. 

All these lines refer to 100 percent, being the 1913 price of the 
commodity. 

The full black line is the same as you had on your charts, the 
general average commodity prices. You will note from this that 
powder declined quite materially from pre-war prices, in spite of 
the fact that the raw materials entering into it are considered double 
wdiat they were prior to the war. 

A small part of the time they were above that, and for a consider- 
able time quite a little bit below it, but most all at least 150 percent 
throughout the whole period. 

That refers to the United States alone. 

■Now as to powder sold to foreign nations 

Senator Clark. Mr. du Pont, does this dotted line include also 
the price of the powder made by funds furnished by the United 
States? 

Mr. Irexee du Pont. I pi"esume it does, but I do not think that 
will disturb the cost much because our manufacturing cost — to the 
Government on the relatively small production of powder at Old 
Hickory — was just a little bit above our selling price on powder made 
in our own plants, and, if anything, it would tend to raise the price, 
and I think that is negligible. 

The second chart shows the prices charged the foreign nations. 
You will note the large bulge in the dotted line, beginning in Janu- 
ary 1915 or December 1914 and starting in January 1917; that bulge 
represents the amortization of the plants, wdiich we had to build, the 
facilities which had to be created to meet the demands, and which, 
of course, would be worthless after the war. 

If you can draw a straight line across the 100 percent line con- 
necting those two dots, it will represent v\diat was charged for the 
powder, that is, the balance being amortization. 

That is again compared with the upper two lines, the United 
States lines, showing how^ it affected manufacturing for foreign 
shipment. 

The foreign line is essentially all du Pont manufacture. The 
contribution by other manufacturers was very small, and I would 
state the Government made none of it. 

Senator Clark. Mr. du Pont, I notice on both of these charts that 
in 1917, after there had been a steadily growing cost of powder raAv 
materials, there began to be a very marked drop on both charts. 
That is due to the fact the United States Government took charge 
of the matter of raw materials? 

Mr. Irexee du Poxt. Yes, sir ; and I want to bring that out, show- 
ing in a later chart the control of raw-material prices. 

This third chart represents the price of cotton as compared wath 
the same all-commodity price, the clotted line being cotton, the upper 
one of those two, and the lower one being the general commodity 
price, showing that cotton went up even more than other commodities. 



3674 MUNITIONS INDUSTRY 

That is, you might take in one of our ingredients, which is cotton, 
and it went up unduly high compared with the price of powder, at 
least even more than other commodities. 

The chart below is the wheat price and the corn price, which 
undoubtedly affect the price of alcohol, in that alcohol has to be 
made from grain or molasses, and the molasses price got out of 
control entirely, which indicates how the grains went up 'way above 
the ordinary increase in general commodities. That, of course, in 
turn influenced the cost of raw materials going into powder, which 
had to be absorbed, and are included in the smaller prices of powder 
on the first of the charts. We had to absorb part of the increase. 

The corn price, you will find on the right, Mr. Senator, and it 
indicates about the same as the wheat. We put up both grains, 
because one might be substituted for the other. 

Now the last chart to which I would like to call attention may 
seem 'way afield from powder, namely, flaxseed. Flaxseed comes 
from the Argentine essentially. That is the product which repre- 
sents its price. That requires shipping from the Argentine to the 
United States and, due to the scarcity of shipping, undoubtedly, -it 
went unduly high, as you will see. 

Nitrate also comes* from Chile, in the southern part of South 
America, and undoubtedly it, too, would have skyrocketed in price 
had not the Government intervened and fixed merchant marine rates, 
at least attempted to fix them, held them down somewhat, although 
nitrate prices did actually about double in this period. 

Senator Clark. Flaxseed does not enter into the manufacture of 
munitions, does it? 

Mr. Irenee du Pont. Not at all, but it shows the general ocean 
freight rates which might have applied to nitrates, had the Govern- 
ment not gone back and attemptecl to fix prices of raw materials. 

I want to point out this : That that astonishing price of powder 
was the result not of fortuitous circumstances. Powder might have 
been expected to cost a great deal more. The labor rates went up 
a great deal in this period, as well as the raw material prices. 
But I think it is a monument to show what organized efficiency can 
do. 

At the peak I think the du Pont Co. had approximately 100,000 
men organized. Each division knew what they were doing and how 
to do it, and had competent men in charge, and we applied the 
principle of rewarding those men especially well if they could do 
especially well. 

Now take alcohol, a point which I keep always bringing up as a 
case in point. We were able to reduce the amount of alcohol, which 
had become very valuable, and thereby effect economies in the cost 
of manufacture of our product. 

I think I have covered everything in this memorandum which I 
would like to put in as an exhibit, but the striking part, to my mind, 
is that the real profiteers on war are not the powder manufacturers. 
The real profiteers, the ones who did not have to do any additional 
work, but got two and sometimes three times the price of their 
product, are the raw-material manufacturers, essentially the farming 
group. 

I do not know how the case of profiteering is going to be done 
away with, but it is evident that there was much more than any 
profiteering in the manufacture of powder. 



MUNITIO^SIS INDUSTRY 3675 

(The memorandum on the charts referred to was marked " Exhibit 
No. 1253 " and is inchided in the appendix on p. 3854.) 

(The charts referred to were marked "Exhibits No. 1253-A to 
1253-F " and appear in the appendix on pp. 3855 to 3857.)^ 

The Chairman. Mr. du Pont, are you aware of the fact that the 
urge which was upon the producers, for example, of wheat and 
flaxseed, particularly flaxseed, the urge which was upon them by the 
Government to produce more, has inflicted upon the flaxseed-produc- 
ing area an injury that is certainly not yet overcome and won't be for 
a long time? The farmers went out and turned over sod which 
ought never to have been done, because the Government was urging 
them to produce flaxseed. Therefore, we are today having condi- 
tions in those regions which I do not know how we are going to solve, 
or when we are going to catch up ourselves on it, because of the 
response given when the urge was upon the farmer to produce those 
things which the Government was calling for. 

Mr. Irenee du Pont. I appreciate that there are very many bad 
things which flow out of war, and that is one of the reasons why 
I am against war. But I simply want to point out to you the real 
expenditure of money above the normal price of commodities does 
not lie in powder, but it lay in the matter of raw materials, mostly 
agricultural, that is, from that point of view. 

Perhaps the other may be agricultural — I do not know, but the 
things which enter into powder went higher up compared with the 
price of powder, and I think those charts conclusively prove it. 

The data on agriculture is taken from the Department of Agricul- 
ture, Bureau of Agricultural Economics, and the powder tables are 
taken from the War Industries Board, price data used for powder 
and powder materials. 

Are there any further questions on that? I am afraid I took a 
little bit over 6 minutes. 

The Chairman. Mr. Pugsley, do you want to be heard? 

Mr. Pugsley. Yes, sir. I have three documents here in connec- 
tion with the Geneva Convention, which we thought might be help- 
ful to the committee to have, and we ask that they be inserted in 
the record. 

They are, first, a transcript of the hearings before the Committee 
on Foreign Relations, United States Senate, Sixty-ninth Congress, 
Supervision of International Trade in Arms, dated April 28, 1926. 

(The document referred to was marked "Exhibit No. 1254 " and 
is included in the appendix on p. 3858.) 

Mr. Pugsley. The second is a copy of the message from the Presi- 
dent of the United States transmitting a convention for the super- 
vision of the international trade in arms and ammunition and in 
implements of war, signed at Geneva, Switzerland, on June IT, 11)25. ^ 
It was confidential, and was made public on the 18th of May this 
year. 

(The letter of transmittal from the President referred to was 
marked " Exhibit No. 1255 " and is included in the appendix on p. 
3866.) 

1 See Hearings, Part XIII. p. 2928. appendix, pp. 3011 to 3014, for committee charts 
on commodity prices, " Exhibit No. 1115-A to 1115-F." 

2 The text of the Convention for the supervision of the international trade in arms and 
annameiits and in implements of war is included in the appendix to Committee Print No. 
1, on p. SO. 



3676 MUNITIONS INDUSTRY 

Mr. PuGSLEY. Third, we have a report of the Foreign Relations 
Committee to the Senate on the Geneva Convention, which is dated 
May 18, 1934. 

(The document referred to was marked " Exhibit No. 1256 " and 
is inchided in the appendix on p. 3866.) 

Mr. PuGSLEY, In connection with this report of the Foreign Rela- 
tions Committee, I call attention particularly to the letter on page 
2 of the report, from the Hon. Cordell Hull, Secretary of State, to 
Senator Pittman, in which the Secretary states that the convention 
of lQ'2i) was signed at Geneva and in all essentials was based upon 
the preliminary draft adopted at Geneva in 1924, and which has 
been argued in this proceeding was essentially altered by the con- 
ference. 

I also call attention to the fact that the resolution, as adopted by 
the Senate June 15, 1934, and as appearing in this report of the For- 
eign Relations Committee, recommends the approval of the treaty 
by the United States. 

I quote from the report: 

* * * subject to the reservation that the said convention shall not come 
into force so far as the United States is concerned imtil it shall have come into 
force in respect to Belgium, the British Empire, Czechoslovakia, France, Ger- 
many, Italy, Japan, Sweden, and the Union of Soviet Socialist Republics. 

Senator Clark. I think the last exhibit is already in the record. 

The Chairman. Of course, if any part of it is in the record, the 
reporter will make note of that. They will be received and given 
exhibit numbers. 

Senator Clark. Mr. Pugsley, on the subject of these exhibits, did 
your company have a representative on the committee which pre- 
pared a recommendation as a result of this conference in the com- 
merce department, which is its first recommedation recommended 
the removal of automatic pistols and revolvers from the category of 
military weapons? 

Mr. Pugsley. Mr. Beebe was on that committee. 

Senator Clark. I have no objection to these exhibits. 

relations between MUNITIONS MAKERS AND WAR DEPARTMENT AND WAR 
department OFFICIALS 

The Chairman. The committee desires to turn, for a moment, to 
the question of relationship between the munition manufacturers 
with the War Department and with the officials of the War Depart- 
ment. I want to direct my questions mostly to Mr. Hadley. 

The committee has before it a letter dated October 25, 1933, signed 
by Mr. Frank J. Kahrs, promotion and advertising manager for the 
Remington Co., addressed to Lt. Col. Townsend Whelen, headquarters 
Seventh Corps Area, Corps Area Ordnance Office, Omaha, Nebr., 
which I offer for appropriate number. 

(The letter referred to was marked " Exhibit No. 1257 " and appears 
in full in the text.) 

The Chairman, That letter states: 

My Dear T. W. :— 

Is Lieutenant Colonel Whelen still in the service, Mr. Hadley ? 
Mr. Hadley. I have the impression that he is. 



MUNITIONS INDUSTRY 3677 

The Chairman. Colonel Harris, are you aware? 
Lieutenant Colonel Harris. That is Lieutenant Colonel Whelen. 
He is still in the service ; j^es, sir. 
The Chairman. Lieutenant colonel. 
Lieutenant Colonel Harris. Yes, sir. 
The Chairman. I read from " Exhibit No. 1257 " : 

Our foreign department would like us to furnish them with an article deal- 
ing with the subject of what the United States Government is doing in training 
marksmen with .22 rifles and ammunition. 

Along the lines we discussed the whole proposition when you were here at 
the factory some time ago, I wish you would get up something for me that 
we could furnish some of our foreign publications which would be informative 
and perhaps furnish the incentive for them to do likewise. 

Of course, we are entirely selfish in this because, naturally, we would benefit 
by the increased sale of our excellent .22 L. R. Kleanbore cartridge to the 
various countries. 

As you know we have two excellent rifles for this purpose, both modeled 
along military lines, models 33 and 34 N. R. A., and it would give our repre- 
sentatives abroad an opportunity to place these before the various foreign 
governments who might become interested in training their troops in the same 
manner as our own Government. 

This is just a little more propaganda, of course, and I am sure that you 
could treat it in a way that would make it very interesting as well as inspira- 
tional. I think one fairly long article with complete information would be 
better than several shorter articles, although I would leave that to you. We 
could probably do the rewrite stuff here and send out as many articles as 
we desire from the basic information that you would furnish. 

If you happen to have any photographs so much the better. 

I will read, also, the concluding paragraph : 

Haven't heard from you in some time. They tell me that you are still on 
active service, in other words not yet retired. 

Hope you will drop me a line when you have the opportunity. 

Mr. Hadley, to what extent has Lieutenant Colonel Whelen done 
propaganda work for you? 

Mr. Hadley. I should say, so far as I am aware, that the work 
that he has done has been primarily literary — in fact, that he has been 
writing for certain magazines and thereby aiding in creating an 
interest in small-bore rifle shooting. 

The Chairman. The article which was referred to, the article 
which you referred to in this letter, was it ever furnished? 

Mr. Hadley. I am not aware as to whether it was or not. 

The Chairman. The committee is advised by its investigator that 
it was furnished by Lieutenant Colonel Whelen. 

Mr, Davis. I do not believe that was ever used, Senator. I am 
not sure of that. I will check it up. but I do not believe it was ever 
used. 

The Chairman. Why was it not used ? 

Mr, Davis. I cannot answer the question. 

The Chairman. But it was furnished? 

Mr. Davis, I am not sure of that, either. I would be glad to check 
it up. 

The Chairman, In the article which was furnished, did it specifi- 
cally mention your brand, your line of ammunition? 

Mr. Davis, t did not see the article, I am sorry to say. 

The Chairman. Mr. Wohlforth, what reference does the article 
which was prepared by Lieutenant Colonel Wlielan make to this 
matter ? 



3678 MUNITIONS INDUSTRY 

Mr. WoHLFORTH. I requested that article, Mr. Senator, and on 
page 3 of the article which was supplied to me by Mr. L. K. Larson, 
the assistant treasurer of the Remington Arms Co., the following 
paragraph is included, and this is from the article which Lieutenant 
Colonel Whelen furnished [reading] : 

Another matter which has operated for the economy of this sj'stem of 
training with a .22 caliber rifle is the noncorrosive ammunition wliicli was 
first developed by the Remington Arms Co. The United States Government 
pui'chases only noncorrosive ammunition. 

The Chairman. Very well. 

Mr. Handy. I am sure. Senator, that that article was not used. 

The Chairman. Why was it not used ? 

Mr. Handy. I do not know. We just got it from the colonel. 

The Chairman. It was available for use, if you wanted it, was 
it not? 

Mr. Handy. Yes, it was. 

The Chairman. Have there been other articles written by him 
which were not used? 

Mr. Handy. I think he has written a handbook on small-bore 
shooting, which has not been used either. 

The Chairman. At whose request did he write that? 

Mr. Handy. I believe at Mr. Kahrs'. 

The Chairbian. Is there a regulation against Army officers mak- 
ing statements on the method of service and supplies for advertising 
purposes ? 

Mr. Handy. I do not know, I am sure. 

The Chairman. Colonel Harris? 

Lieutenant Colonel Harris. I do not know whether there is a writ- 
ten regulation, but I should be glad to look into it. 

The Chairman. I have before me a letter written by Major 
Gatchell to the Eemington Arms Co. on April 27, 1931, which I 
offer as an exhibit. 

(The letter referred to was marked " Exhibit No. 1258 " and is 
included in the appendix on p. 3875.) 

The Chairman. I read from it : 

In reply, you are informed that there is an Army regulation forbidding the 
oflficers or other agencies of the War Department from making statements on 
the merit of services or supplies furnished for the Army for use in advertising 
by commercial firms. This would clearly prevent this office from authorizing 
you to use either Colonel Whelen's or Colonel Schull's letter in full or in 
part in any advertising. 

It would not, however, in the opinion of this office, prevent you from in- 
corporating In the advertisement a statement as to what accuracy figures 
were olitained in the official test of the 40,000,000 rounds of caliber .22 long 
rifle Kleanbore ammunition recently furnished to the Government. The state- 
ment of the accuracy figures should appear as your own statement and not 
as the statement of a Government official. 

Does that. Colonel Harris, coincide with your own thought as to 
the regulation ? 

Lieutenant Colonel Harris. Yes, sir. 

The Chairman. Does this state the reason why you have not used 
Lieutenant Colonel "Wlielen's article that he furnished you with? 

Mr. Davis. I do not think so, Senator. I did not know that 
there was any such regulation. 

Mr. Hadley. Senator Nye, it may well be that that is a reason why 
it has not been used in that particular form. This particular letter 



MUNITIONS INDUSTRY 3679 

that you read, signed by Gatchell, referred to a certain specific state- 
ment which was made .to us after the test of tliis 40,000,000 rounds by 
the commanding officer at Springfiekl Armory, who was cliarged with 
the test of that ammunition. The results that he obtained were so 
satisfactory that he freely mentioned them to us. It was the possible 
use of that that we had in mind when we wrote the letter to which 
this is a response. But, of course, this precluded the possibility of 
our using that information or tliat statement, so that we were guided 
by this letter and never made use of it. 

The Chairman. The fact remains, does it not, that this kind of 
work done by Lieutenant Colonel Wlielen is of great value and 
service to the country? You do make much use of his studies and 
his writings? 

Mr. Hadley. We feel that his published writings which create and 
continue interest in shooting certainly are of benefit to those who 
make small arms ammunition of .22 caliber. That was the particular 
thing that he was writing about. 

The Chairman. Whelen is recognized as something of a writer, is 
he not ? 

Mr. Hadley. I should say that he is decidedly recognized as a 
person of not only Army experience but also extended experience 
in hunting, also in target shooting of this nature, .22 caliber target 
shooting. 

The Chairman. Relative to his response, I have before me a 
confidential memorandum supplied to me to J. B. Smiley. 

Who is Mr. Smiley ? 

Mr. Hadley. He was a former president of Remington Arms Co. 

(The letter referred to was marked " Exhibit No. 1259 ", and 
appears in full in the text.) 

The Chairman. This is by Pete Carney, manager of the advertis- 
ing department: 

Attached find Whelen's letter in reference to Kleanbore and my answer to him. 

Whelen is a real high type of writer who can be trusted in every way. It 
is just such things as Whelen wants to do that I would like to do because 
what he can do for us we could not buy for many thousands of dollars and a 
written article by Whelen in an honest-to-goodness magazine will bring us mor« 
return than any amount of paid advertising. 

So you do recognize in Lieutenant Colonel Wlielen's writings a 
large degree of authority, and when you can quote him or when 
you can use his writings, it reverts to your very decided advantage, 
does it not? 

Mr. Hadley. As an authoritative writer on the subject; yes. 

The Chairman. What does Lieutenant Colonel Whelen receieve 
from your corporation for such services as he performs ? 

Mr. Hadley. I am not aware that he has received anything. 

The Chairman. Mr. Davis? 

Mr. Davis. I think he has been paid a small hourly rate. I do not 
know what it is. 

The Chairman. He has been paid a small hourly rate ? 

Mr. Davis. I think so. That is my understanding. 

The Chairman. What do you mean by " an hourly rate " ? 

Mr. Davis. So much per hour for his writing. 

Senator Clark. You mean he writes by the hour ? 

Mr. Davis. In his spare time. 

83876 — 35— PT 15 — —10 



3680 MUNITIONS INDUSTRY 

The Chairman. Are you prepared to say in the aggregate what 
has been paid to Lieutenant Colonel Wlielen for his writings ? 

Mr. Davis. No, sir ; but I think it is a very small sum indeed. 

The Chairman. Do you pay him anything in any other than that 
manner for his service? 

Mr. Davis. No, sir. 

The Chairman. Have you given him rifles and ammunition as 
gifts? 

ISlv. Davis. Not to my knowledge. I do not know. 

The Chairman. Mr. Hadley? 

Mr. Hadley. I am not aware of any rifles that have been given 
to him as gifts. I can say that certain new rifles have been put into 
his hands for test, so that we could perhaps gain the benefit of his 
opinion on the subject. 

Senator Clark. Is he still testing them? 

Mr. Hadley. I should say that the test was only as a new product. 

Senator Clark. Is he still testing them or does he return them 
after he has tested them ? 

Mr. Hadley. I have no information on that. 

Mr. WoHLFORTH. There is a letter here that may be marked as an 
exhibit, and I would like to read an excerpt from it. 

(The letter referred to was marked " Exhibit No. 1260 ", and 
is included in the appendix on p. 3875.) 

Mr. WoHLroRTH. It is dated November 17, 1933, to Lt. Col. 
Townsend Whelen, from Mr. Kahrs. 

In part it says : 

I have the story that you wrote for the export department. It is fine. 
I have turned it over to them. I don't think I want to accept this without 
compensating you in some form. Isn't there a rifle or a shotgun that you 
need? Let me If now about this. 

The Chairman. How have you accounted for the payments that 
have been made to Colonel Whelen? 

Mr. Davis. I cannot answer that question. 

The Chairman. You are quite confident he has been paid? 

Mr. Davis. I think he has ; yes, sir. 

The Chairman. The only information our agents are able to 
ascertain on that score involved the payment of $100 to him at one 
time, but it was made to appear that this $100 payment was to cover 
expenses that he had been put to in bearing witness in a lawsuit in 
which your company was interested. That lawsuit was known as 
the Hoen case. 

What was the Hoen case? 

Mr. Davis. What was the date of that, Senator ? 

The Chairman. In 1930. 

Mr. Davis. That was before my time with the Remington Arnis. 

Mr. Hadley. I can answer that. The Hoen case was one in 
which .22-caliber cartridges were used in a gallery in New York — 
that is, one of these galleries that you walk into from_ the street. 
There was an injury that was caused to Hoen. It was either in one 
of these galleries or else it was in some performance, some stage 
performance; I am not sure which. He suffered an injur;v, I believe, 
to his eye. The cartridge which caused it was the subject of the 
discussion, whether that was because of defective manufacture or 



MUNITIONS INDUSTRY 3681 

possible carelessness in manufacture or whether it was simply an act 
of God. 

The Chairman. What testimony could Lieutenant Colonel Whelen 
have borne in such a case ? 

Mr. Hadlet. I do not know specifically what he would have done, 
except such evidence as his long experience in shooting might have 
shown. 

The Chairman. A memorandum before me indicates that though 
Lieutenant Colonel Whelen went to New York twice on this case, 
he never was called upon to testify. You are not prepared to 
know just what it is that he might testify to in that case? 

Mr. Hadley. No ; I do not know specifically, but my recollection is 
that the case was compromised rather than brought to a final trial 
in court. It may have started, but it seems to me there was a com- 
promise of some sort, as the result of which it was dropped with- 
out there being any conclusion in the court. 

The Chairman. Mr. Hadley, has Lieutenant Colonel Whelen's 
service in the way of writing for your company been very large? 

Mr. Hadley. I am glad you asked that question because I wanted 
to perhaps clarify it, or at least I feared there might be a misun- 
derstanding in respect of what has been said on his writing. He 
has written quite a good deal, as has been stated heretofore. My 
impression is that any writing that he has done for us specifically 
has been very small in quantity compared with his general writings. 
I recall one w^riting in connection with a sporting-rifle stock, and 
I believe that in our book of instructions on how to assemble and 
disassemble, there is something that was written by him. But cer- 
tainly the major part of his writings I should say we have nothing 
to do with whatever. 

Incidentally, I should perhaps remark in respect of that rifle which 
he tested, or ammunition which he tested, that that is not something 
that is peculiar to him, as far as our company goes, nor yet as far 
as other companies are concerned, because the practice is when a 
new product is brought out for different companies to supply those 
who write in different magazines with those new products so that 
their opinions on the subject may appear simultaneously, more or 
less, in the magazines with the bringing out of the article in question. 

Senator Clark. Did you pay Lieutenant Colonel Whelen for 
going to New York on these two occasions to testify as an expert 
witness in this lawsuit? 

Mr. Hadley. The Senator stated something about that. I do not 
know myself. 

The Chairman. The record reveals that he was paid $100 to cover 
his expense on those two trips to New York. 

What, in addition to money, if anything, has been used to reward 
Lieutenant Colonel Wlielen for the services that he performed for 
your company, Mr. Davis? 

Mr. Davis. I know of nothing. Senator. 

The Chairman. Has he ever been offered a position in the 
company ? 

Mr. Davis. Yes, sir; he was. We established in the Empire State 
Building an exhibit of all of our arms and ammunition. We were 
looking for a man to take charge of that exhibit, also take charge 



3682 MUNITIONS INDUSTRY 

of our rifle promotional work. His name was suggested to us. 
We wrote to him, and he informed us 

The Chairman. By whom was his name suggested ? 

Mr. Davis. I think it was Mr. Kahrs that suggested it. We re- 
ceived a telegram back from Lieutenant Colonel Whelen as follows : 

Retired officers employed by firm doing business witli Government cannot 
draw retired pay. Sorry cannot draw. Letter follows. 

TowNSEND Whelen. 

The Chairman. Let us turn to that letter that followed. The 
reasons that he ascribes for his refusal to accept the position rather 
interest me, and I am sure they will the committee. 

I offer this letter of February 9, 1934, as an exhibit. 

(The letter referred to was marked " Exhibit No. 1261 ", and is 
included in the appendix on p. 3876.) 

The Chairman. I read the letter not in its entirety, but almost. 

The letter is written from Omaha, Nebr., to Mr. Frank J. Kahrs, 
Remington Arms Co., Bridgeport, Conn. 

Deae Frank : I have your letter of February 6 relative to the position in 
your New York office. It sounds very attractive and a splendid opening, and 
I wish so much that I could accept it, but, unfortunately, I cannot do so. 

About 10 years ago, when General Harbord retired from the Army to accept 
the position as president of the Radio Corporation of America, certain soreheads 
in Congress, peeved because he was bettering himself so much, introduced andi 
passed a law which provides that if a retired officer is employed by any firm 
which does business with the Government, that officer cannot draw his retired 
pay. This position which you have in view would prevent my drawing my 
pay, which, in event of retirement, would be $375 a mouth, and, of course, I 
could not therefore consider it. 

Perhaps I had better tell you just how I am situated. I had planned to 
retire last fall after my daughter's marriage, but the expense of the wedding 
and the general financial depression at that time made me hesitate. Just 
now I am approaching my promotion to full colonelcy, and should get it within 
8 months, perhaps a little less. It seems wise to wait until that time, when 
I will then be entitled to slightly more retired pay, and will also have the 
satisfaction of retiring with the highest rank which I can normally expect. 
Mrs. Whelen and I have practically made up our minds that we will then 
retire — that is next fall or early winter. 

When I do retire I have been planning that I would go back to Washington 
where I own and home and there bang out my shingle as a consulting ordnance 
engineer, specializing on design, publicity, and selling counsel. In this way, 
being in business for myself, I shall be free to work for Remington, or for 
any other individual or company, billing them in the usual manner for the work 
done. 

In the eyes of the law I will not then be employed by any firm doing busi- 
ness with the Government or otherwise. I will simply be selling my own 
product as any other business man might. In fact, I have already done a little 
of such work. Recently, you will remember, I did work of this kind, and sold 
my own product to you for the Remington Arms Co. I have also done a small 
amount of work for other companies from time to time. 

It seems to me that I might do work for the Remington Arms Co. from time 
to time under such conditions in a way that would be very satisfactory to you, 
and also more economical to you than under the conditions you suggest. I will 
be a free lance, and I can go anywhere, or do anything that you might wish, 
merely billing you for the services on completion of the project. I have no 
idea of charging exhorbitantly, as you already know. 

It strikes me, Mr. Davis, that Lieutenant Colonel Whelen here is 
saying in effect, " I cannot work for you but I can work for you." 

What are we to make of this ? 

Mr. Handy. Our understanding, Senator, is that an Army officer 
while in the service is permitted to write and sell his articles. I was 
wondering if Colonel Harris could answer that point for us. 



MUNITIONS INDUSTRY 3683 

Lieutenant Colonel Harris, what thought do you have on it? 

Lieutenant Colonel Harris. An officer is permitted to write on his 
own time and sell his articles subject to written Army regulation 
limitations. 

The Chairman. Here we have a man who serves in a rather dual 
capacity. He is in the Ordnance Department and at the same time 
he is an ammunition expert. That opportunity which the Govern- 
ment has given him makes him one whose service can be extremely 
valuable to a company like the Winchester Co. 

Lieutenant Colonel Harris. I would say that he is a hunting am- 
munition arms expert rather than a military arms ammunition 
exj^ert. 

Mr. Davis. I think that is correct. 

The Chairman. What is he doing in the Ordnance Department, 
then ? 

Lieutenant Colonel Harris. He is an officer. All officers in the 
Ordnance Department are not necessarily expert on all matters. 
He gives satisfactory service in the Ordnance Department. But my 
statement was that as to being an expert, I thought with his long 
hunting experience and long interest in shooting, he would qualify 
more as an expert on sporting types of arms and ammunition than 
on military. 

Senator Clark. That is no part of his duties in the Ordnance 
Department, is it. Colonel ? 

Lieutenant Colonel Harris. He has been on duty at Frankford 
Arsenal, which manufactures small arms and ammunition. He came 
into the Ordnance Department right after the war. He was an In- 
fantry officer. All this shooting was with the iDackground of Infantry 
service. 

Senator Clark. This .22 caliber ammunition that you have been 
talking about is considered an adjunct to military service, is it not? 

Lieutenant Colonel Harris. It is a training ammunition. 

Senator Clark. It is a training ammunition. In other words, you 
can teach a man the position, the handling of his piece, the trigger 
squeeze, the use of the sights, and everything else on a miniature 
range with .22 ammunition just as well as, in fact, better than you 
can with a high-powered Army rifle on a regular Army range, is 
not that true? 

Lieutenant Colonel Harris. That is true. In that respect, he is 
an expert on that phase of it. 

The Chairman. Mr. Davis, what utilitj^ would these articles which 
Lieutenant Colonel Whelen wrote be to you except as he could be 
advertised as being of the Ordnance Department and an expert on 
ammunition in the Army? Supposing he had never had those Army 
contacts, would his service have been of the value to you that it was? 

Mr. Davis. Just as much. 

The Chairman. Just as much? 

Mr. Davis. Yes, sir. 

Mr. Handy. There are quite a few writers, Senator, on the same 
subject, who have no connection with the Army; quite a few sport- 
ing writers around the country. 

Mr. Davis. He is an expert on small-bore shooting, and one of 
the most outstanding experts in the country. Regardless of whether 



3684 MUNITIONS INDUSTRY 

he was attached to the Ordnance Department or not, his opinion 
would be very valuable to us. 

The Chairman. In the conclusion of his letter, " Exhibit No. 
1261 ", Colonel Whelen says : 

Under these conditions I do not see wiiy I cannot do any work tliat the 
Remington Arms Co. desires, and it will be the greatest pleasure to cooperate 
with tliem. Indeed, I have always tried to do so in the past, and I think that 
from time to time I have been of some little help. Of course, until I am 
actually retired I cannot travel, but my pen is at your service now as always. 
After retirement I am a free lance. 

I want to go back to that again. Does not the fact that Colonel 
Whelen is connected with the Army lend considerable weight to his 
request ? 

Mr. Davis. I do not think so, Senator ; no. I think his knowledge 
of small-bore rifle shooting and 

The Chairman. What is the writing that has been published? 

Mr. Davis. I do not know. 

Mr. Hadley. He has written a book. I think it is entitled. " The 
American Rifle." In this he treats of all the sporting rifles at 
length of all different makes. My impression is that that was pub- 
lished about 15 years ago — some time ago. His interest in sporting 
rifle shooting is clearly shown there. 

The Chairman. I suppose that when his articles are published 
they are ]Dublished as coming from one Townsend Wlielen, without 
any reference to his Army connection? 

iNIr. Hadley. I cannot say as to that. My observation is that most 
Army officers use their titles day in and day out, as it were. But 
I do think that his reputation as a writer is sufficiently broad to 
stand on its own, even though he had no connection with the Ord- 
nance Department. 

The Chairman. But it would be prett}?^ safe to declare that there 
have been no articles published by him or no articles published 
which he has written without drawing attention to the fact that 
he was connected with the Army? 

Mr. Hadley. I could not speak with finality on that. 

Mr. Wohlforth. Lieutenant Colonel Wlielen's reputation is 
founded upon his skill and knowledge as a military shot, is it not, 
rather than as a hunter and on revolver shooting? 

Mr. DA^^:s. I do not think so. 

Mr. Wohlforth. Can you answer that? 

Mr. Hadley. I should say that from our point of view his interest 
is a twofold one ; primarily that is the .22 caliber shooting, and also 
the big game shooting that he has done, as I recall it. He has shot 
big game in various countries as well as the United States. He has 
had a broad experience in that way. 

The Chairman. I want to digress from that for just a molment 
long enough to make reference to a solicitation which was made of 
the Remington Arms Co. for an advertisement in the Army and 
Navy Journal. Colonel Harris, is the Army and Navy Journal 
privately owned? 

Lieutenant Colonel Harris. It is. 

Senator Clark. General Reilly's? 

Lieutenant Colonel Harris. I do not Imow. 

Senator Clark. Formerly with the Thirty-third Division? 



MUNITIONS INDUSTRY 3685 

Lieutenant Colonel Harris. He had some connection with it at 
some time. 

Senator Clark. He owned it? 

Lieutenant Colonel Harris. I do not know whether he does or not, 
now, Senator. 

The Chairman. You do not know where the ownership rests? 

Lieutenant Colonel Harris. No. The reputation is as of a pri- 
vately owned magazine. 

The Chairman. This evidence to which I refer is a letter dated 
January 4, 1934, addressed to Mr. E. E. Handy, vice president of 
the Remington Arms Co., Inc., Bridgeport, Conn. 

(The letter referred to was marked " Exhibit No. 1262 ", and ap- 
pears in full in the text.) 

The Chairman (reading) : 

Dear Mb. Handy : Colonel O'Laughlin has written to me from Wasbington 
stating that the Remington Arms contract for the Army-Navy Journal has 
expired. 

Ed Ferriday has already undertaken to get for us the 28 half-page du Pont 
contract. I know liow busy you are so I shan't take any more of your time 
than to wish you a most successful 1934. The rest I'll leave to your inference. 
Can we count on you? 

Yours very respectfully, 

Lt. B. R. Chadwiok. 

Who is Lieutenant Chadwick? 

Lieutenant Colonel Harris. I do not know, Senator. I can find 
out. 

The Chairman. Mr. Handy, who is Lt. B. R. Chadwick? 

Mr. Handy. I do not know him. Senator, other than that. That 
is all I know about it. 

The Chairman. This letter soliciting this advertising was written 
on War Dei^artment stationery. Is Lieutenant Chadwick by any 
chance stationed in the War Department here? 

Mr. Handy. I am certain I do not know. 

The Chairman. I will read that part of the letter again [reading] : 

I know how busy you are so I shan't take any more of your time than to wish 
you a most successful 1934. The rest I'll leave to your inference. 

What is the rest that is left to your inference ? 

Mr. Handy. I do not know. We had a request to take an ad in 
the Army and Navy Journal, as I recall it, some time during 1933. 
I think we did so at a cost of around $100 or such a matter. 

Senator Clark. Did you infer that this lieutenant was asking you 
to take an ad? He said he left it to your inference. Did you 
infer that he was asking you to put an ad in the Army and Navy 
Journal when you got this letter ? 

Mr. Handy. Yes. I think that was the request. I do not think 
there was any inference with respect to that. 

Senator Clark. He says he leaves it to your inference. 

The Chairman. He reminds you that your contract has expired, 
and the inference, of course, would be in part at least that you renew 
that contract for the new year. 

Mr. Handy. That is right. I think that Remington had previously 
taken ads in the Army and Navy Journal. 

The Chairman. Lieutenant Chadwick in a postcript to his letter, 
which is " Exhibit No. 1262 ", says [reading] : 

Thank you very much for your help last year. We appreciate it veiy much. 



3686 MUNITIONS INDUSTRY 

I assume that means your help in the way of advertising in the 
Army and Navy Journal. 

Mr. Handy. I presume it does. That was just prior to the time, 
Senator, that du Pont took control, or about the time. 

The Chairman, Who is Ed Ferriday, who is referred to in the 
letter? 

Mr. Handy. He has charge, or formerly had charge of the con- 
tractors section, I believe, of the explosives department of the du 
Pont Co. 

The Chairman. Do you know Mr. Ferriday very well ? 

Mr. Handy. Quite well. 

The Chairman. Does he not have a very high regard for Lieuten- 
ant Chadwick? 

Mr. Handy. That I do not know. I presume he does. 

The Chairman. He wired you, Mr. Handy, on January 6 of this 
year as follows [reading] : 

Would appreciate very much if you would give Lieutenant Chadwiclj Army- 
Navy Journal same advertising space as last year, or more if possible, as 
we have wonderful contact with U. S. Engineers, from General Markham, 
Chief, down the line, great friends of ours, and du Pont will sell plenty of 
dynamite on projects under their direction. Please go as far as you consistently 
can. Regards and happy New Year. 

E. C. Fereiday. 

(The telegram referred to was marked " Exhibit No. 1263 ", and 
appears in full in the text.) 

The Chairman. Mr. du Pont, what contracts with General Mark- 
ham or the engineers have you or your company had? 

Mr. Irenee du Pont. I really do not know, sir. I do not know. 

Mr. Lammot du Pont. I do «ot know of any, Senator. 

Senator Clark. What is Mr. Ferriday's position? 

The Chairman. Mr. Casey? 

Mr. Casey. That is a commercial proposition with which we 
have nothing whatsoever to do. The only contact that we have 
with the engineers is the development of a special demolition bomb. 

Senator Clark. When you say " we ", you mean your department 
of the du Pont Co.? 

Mr. Casey. Yes. 

Senator Clark. Mr. Ferriday is also connected with the du Pont 
Co., is he not? 

Mr. Casey. Yes. 

Senator Clark. In what capacity? 

Mr. Lammot du Pont. Mr. Ferriday is in charge of the contrac- 
tors division of the explosives department, commercial explosives. 
Of course, contractors have worked with the United States Govern- 
ment and for the United States Government, and we frequently 
furnish powder for those purposes. 

Senator Clark. Apparently very wonderful contacts, too, accord- 
ing to this telegram. 

The Chairman. Your man Ferriday's telegram says [reading] : 

We have wonderful contact with United States Engineers from General Marli- 
ham, Chief, down tlie line — great friends of ours — and du Pont will sell plenty 
of dynamite on projects under their direction. 

Mr. Lammot du Pont. If General Markham is the Chief of the 
United States Army Engineers, I can understand how Mr. Ferriday 



MUNITION'S INDUSTRY 3687 

might have contact with him. I didn't know that was the gist of 
your first reading. 

The Chairman. What is General Markham at the present time? 

Mr. Lammot du Pont. I understand the United States Engineers 
have charge of these river and liarbor projects for the Government 
and large quantities of explosives are used in those projects. 

The Chairman. In order to stand in with the Engineers, is it 
necessary to advertise in the Army and Navy Journal? 

Mr. Lammot du Pont. I would not think so. 

The Chairman. It would seem to be a part of the program and his 
work, inviting that cooperation, is it not, from this correspondence? 

Mr. Lammot du Pont. I do not think that is correct. Senator. 

Mr. Casey. I think it would be more pertinent to advertise in the 
United States Engineers Journal. 

The Chairman. What was that. Mr. Casey? 

Mr. Casey. I would think it would be more pertinent to advertise 
in the United States Engineers Journal, which is a private publica- 
tion. 

The Chairman. That you do as well ; don't you ? 

Mr. Casey. No. 

Senator Clark. Apparently Mr. Ferriday does not agree with you. 
Major. He says [reading] : 

Would appreciate very much if you would give Lieutenant Chadwick Army 
Navy Journal same advertising space as last year or more if possible as we have 
wonderful contact with United States Engineers. 

In other words, he assigns some wonderful contact with the Corps 
of United States Engineers for du Pont to sell plenty of dynamite 
for projects under their direction as a reason for giving Lieutenant 
Chadwick of the Army and Navy Journal the same space as last year, 
if possible. 

Mr. Casey. I do not know what contact Mr. Chadwick had with 
the Army and Navy Journal. That is a very old publication. It 
was published by Church in New York for a great many years. 

Senator Clark. Yes; I know. 

Mr. Irenee du Pont. Mr. Chairman, isn't this another sales letter? 
Mr. Ferriday wanted to get a little advertising out of the Remington 
Co. 

The Chairman. Why is it, Mr. du Pont, every time we get a com- 
munication here that affords the least bit of embarrassment, it be- 
comes a sales letter? 

Mr. Irenee du Pont. Mr. Chairman, I didn't say it was a sales 
letter. I asked you the question, doesn't it seem so? I never heard 
of it before. 

The Chairman. It does not seem that way at all, for we find Mr. 
Ferriday of your company telling Mr. Handy of the Remington 
Arms Co. that — 

We have wonderful contact with United States Engineers from General 
Markham, Chief, down the line. Great friends of ours, and Du Pont will sell 
plenty of dynamite on projects under their direction ; please go as far as you 
consistently can. Regards, and happy New Year. 

Senator Clark. Considering that this is a telegram sent from an 
official of a company which controls the Remington Arms, it seems 
to me it gets somewhat out of the category of a sales letter. 



3688 MUNITIONS INDUSTRY 

The Chairman. I was just goin*!' to ask Mr. Handy, what does it 
mean to you to know that the Chief of Engineers and the Engineer- 
ing Department are going to purchase large quantities of dynamite, 

Mr. Handy. From the standpoint of Remington it did not mean 
anything. We merely continued our advertising in the Army and 
Navy Journal, as I recall it. Remington had been accustomed to do 
it in the past. 

The Chairman. Why did Mr. Ferriday feel that you ought to be 
advised of what the du Pont Co. was going to get? 

Mr. Handy. I assume he was soliciting the continuation of that 
advertising, Senator. It must have been the case. 

The Chairman. And he realized that if you could be made to 
realize how large a contract for explosives was in the offing, you 
would be more inclined to renew your advertising contract; is that 
correct? 

Mr. Handy. That might have been the way he felt about it. 

Senator Vandenberg. Mr. Chairman, you said this was written 
on War Department stationery. I call your attention to the fact 
that it is written on War Department stationery and also the United 
States Engineer's Office of the War Department. 

The Chairman. I am glad the Senator calls attention to that fact. 

Senator Vandenberg. I think it is quite pertinent to find out 
whether Lieutenant Chadwick was in active service at the time he 
wrote this letter making this solicitation. 

The Chairman. Colonel Harris, will you ascertain for us just 
what Lieutenant Chadwick's status is? 

Lieutenant Colonel Harris. I will, sir. 

The Chairman. At the present time, and what it was in January 
of this year. 

Lieutenant Colonel Harris. B. R. Chadwick, is that the name? 

The Chairman. B. R. ; yes. This letter was written from Detroit, 
engineer's office in Detroit. 

Lieutenant Colonel Harris. I will be prepared at the next session 
to give you that information. 

The Chairman. Now, Mr. Davis, has Lieutenant Colonel Whelen 
performed any services for you beyond those that have already been 
referred to? 

Mr, Davis. I know of none. Senator. 

The Chairman. Hasn't he been more or less of a contact man for 
you in the War Department? 

Mr. Davis. No, sir; not to my knowledge. 

The Chairman. Hasn't he interested himself in matters of legisla- 
tion, matters in which you have had an interest? 

Mr, Davis. I do not know as to that. Not for us. 

The Chairman. Here is a letter dated April 27, 1929, by Mr. 
Kahrs, the assistant advertising manager at that time, to Mr, 
Saunders Norvell, who Avas president of the corporation at the time. 
The letter has reference to one which was written by Lieutenant 
Colonel Whelen on the subject of legislation having to do with the 
sale of firearms. I will offer that for the record for appropriate 
marking, 

(The letter referred to was marked " Exhibit No. 1264 " and is 
included in the appendix on p, 3877.) 



MUNITIONS INDTTSTRY 3689 

The Chairman. I read from Mr. Kahrs' letter to Mr. Norvell : 

Colonel Whelen's letter is the result of one I wrote at the suggestion of 
Mr. Strugnell that we try to get the War Department on record as being 
opposed to legislation of this type, as it affects the War Department's plans 
for mobilizing industrial and manufacturing concerns in time of peace for 
war service. 

The thought was inspired by a telegram sent by the War Department to the 
Legislature of Massachusetts early in the present legislative session, retiuesting 
that certain stringent firearms bills before the Massachusetts Legislature be 
not passed. My purpose in bringing this to your attention is to recommend that 
you write the letter to the Assistant Secretary of War, recommended by 
Colonel Whelen, and, knowing the colonel as I do, I am sure that he has 
everything prepared in Washington so that favorable action will be taken. 

What possible interest could Lieutenant Colonel Whelen have in 
tliis controversy? 

Mr. Davis. I cannot answer that. 

The Chairman. This legislation? 

Mr. Davis. I cannot answer that. It is the first time I have 
known anything about it. 

The Chairman. Doesn't it begin to look as though possibly Lieu- 
tenant Colonel Whelen was something of a contact man for your 
corporation here? 

Mr. Davis. I cannot answer that. 

The Chairman. In the War Department? 

Mr. Davis. I cannot answer that. 

The Chairman. It seems, in the light of what further evidence is 
to be offered, that he was at least in the position of paving the way 
for the accomplishment of things that the company w^anted. You 
notice that language there that Mr. Kahrs w^as sure that Colonel 
Whelen has everything prepared in Washington so that favorable 
action will be taken, providing, of course, the War Department can 
be prevailed upon to ask for the thing that has been prepared. 

Mr. Davis. I know nothing of this case, Senator, but is it criticism 
of our bringing matters to the attention of our legislators? 

The Chairman. No; I am trying to bring out how through de- 
vious paths, perhaps, there is accomplished through the War De- 
partment things that might not be so readily accomplished but for 
the fact that there were those within it ready to pull the strings, and 
that maybe Lieutenant Colonel Whelen was one of those pulling the 
strings. 

Mr. Davis. We have always felt if there is any prospective legis- 
lation detrimental to our industry that w^e certainly have the right 
to bring it to the attention of our legislators. If we cannot go to 
them with our problems and our difficulties, to whom can w^e talk ? 

The Chairman. But in this case you were asking or your company 
was asking the War Department for a service that w^ould be forth- 
coming if the War Department decided to afford the service, and 
Colonel AVhelen w^ould have everything ready when the War Depart- 
ment so decided. 

Senator Clark. More than that, this letter indicates that you were 
suggesting that the letter be written on the suggestion of Colonel 
Whelen. In other wT)rds, Colonel Whelen suggests to Mr. Kahrs 
and Mr. Kahrs suggests to the president of the company, Mr. 
Saunders Norvell, according to this here, that Colonel Whelen will 
have the whole thing prepared in the War Department so that the 



3690 MUNITIONS INDUSTRY 

Secretary of War will accede to the request made by the Kemington 
Co.? 

Does that seem to you to be the ordinary course of business for an 
officer in the Army, to be recommending to a manufacturer of muni- 
tions that he write a letter to the Secretary of War and preparing 
the War Department to have the Secretary accede to that request s 

Mr. Davis. Senator, I know nothing except what is in this letter. 
I have never seen it before. 

The Chairman. To indicate that Colonel Whelen is something of 
a contact man for you in the War Department, I am going to read 
a letter written by the president of the Remington Arms Corpora- 
tion to Hon. Patrick J. Hurley, Assistant Secretary of War, on 
April 30, 1929, which I will offer as an exhibit. 

(The letter referred to was marked " Exhibit No. 1265 ", and is 
included in the appendix on p. 387T.) 

The Chairman. I will start reading with the third paragraph : 

In these two connections we find that our business throughout the country is 
being constantly jeopardized and in some cases injured by injudicious legisla- 
tion which is introduced and sometimes passed in the legislatures of the various 
States. We refer particularly to legislation to curb the use of firearms in the 
commission of crimes. Some of tins legislation is good, some of it we realize 
is necessary, but the great mass of bills so introduced will, we believe, not 
accomplish the results desired and they interfere with the legitimate use of 
firearms in the promotion of rifle practice and of healthy sport. It is neces- 
sary for this company to combat such unwise legislation or matters would 
soon reach such a state that our company would be obliged to discontinue the 
manufacture of arms and ammunition, which in turn, would be very detri- 
mental to national defense, as we believe our own company, together with 
other manufacturers of arms and ammunition, form a very considerable asset 
to the United States Government in the event of war. 

What was the occasion for this letter, Mr. Davis, in the light of 
the evidence already before us? 

Mr. Davis. I cannot answer the question, Senator, I was not 
theie at that time and I have never seen it before. 

The Chairman. Was it not a suggestion that if a letter of that 
kind were written to the Secretary of War, everything would be 
ready to accomplish an expression from the ^^»r Department, that 
the expression would be ready ? 

I am going to read on, the next paragraph in that letter: 

We have found that one of the best ways to combat such legislation in the 
various States is to have it done by our traveling representatives and our sales- 
men, who bring attention of the legislatures to the unwise character thereof. 
In this connection our own standing and that of our representatives would be 
very greatly strengthened if we could have from you, as representative of the 
War Department, a statement as to the War Department policy regarding such 
legislation. I hope you will understand that we do not complain about that 
legislation which is wise and necessary and well thought out to curb the use 
of firearms in the commission of crimes, but we do consider that our work 
could be very greatly assisted could we have from you a statement that the War 
Department is opposed to any legislation which would restrict legitimate use of 
rifles and shotguns in target practice and in proper sport, or any legislation 
which would sei'inusly interf.Me with the ]iroperly controlled manufacture of 
arms and ammunition in this country. 

That was written on April 30, 1929. May 15, 1929, brings a re- 
sponse from W. P. Wooten, colonel. Corps of Engineers, Director of 
Procurement, written on War Department stationery, from the office 
of the Assistant Secretary. The letter is addressed to Mr. Saunders 



MUNITIONS INDUSTRY 3691 

Norvell, president, Remington Arms Co., Inc., which letter will be 
offered as an exhibit. 

(The letter referred to was marked "Exhibit No. 1266", and 
appears in full in the text.) 

The Chairman. This letter reads: 

Your letter of April 30, addressed to The Assistant Secretary of War, in 
which .you ask for a definite expression of the policy of the War Department 
with regard to legislation concerning the manufacture of small arms and small- 
arms ammunition, has been received and has been handed to me for reply. 

During the World War privately owned arms and ammunition plants pro- 
duced approximately 95 percent of our small-arms ammunition, about 50 percent 
of our rifles, and almost all of our machine guns and our pistols. In a future 
war they would be absolutely essential for the production of about 90' percent 
of our small-arms ammunition and a large percentage of our machine guns and 
pistols, as our arsenals do not have a productive capacity sufficient to fill more 
than a small percentage of our requirements. 

It is, therefore, regarded as essential to our proper national defense that 
private manufacturers be in a position to undertake the production of these 
items. Because of the fact that it is not possible to produce small arms in 
quantity from newly created facilities where highly trained personnel is re- 
quired in less than a year to IS months, it is vitally important that the small- 
arms industry be continued in existence in peace time. 

Although the maintenance of our munitions industries is highly important, 
it cannot of course be stated, in advance, what position the War Department 
will take in regard to any specific legislation affecting the manufacture of small 
arms and ammunition. That can only be determined after the Secretary of 
War shall have had an opportunity to study the particular measure proposed. 

Mr. Davis, that letter was a very valuable one, was it not, to you, 
from the standpoint of the call that was upon the company to 
combat legislation pending in certain State legislatures ? 

Mr. Davis. I don't know what use was ever made of this letter. 
Senator, if any. 

The Chairman. This letter which j^our representatives and your 
agents whom Mr. Kahrs had declared did a great deal of work with 
legislatures in setting them right and letting them know what the 
facts were — a letter like this would be a great asset, wouldn't it, to 
them ? Did not the company consider it that at the time? 

Mr. Davis. I do not know. 

The Chairman, The facts are that President Norvell lost only 
1 day in replying to this letter. This letter is dated May 15, 1929. 
On May 16, 1929, Mr. Norvell wrote, mind you, not to Colonel 
Wooten, but wrote to Lieut. Col. Townsend Whelen, office of the 
Chief of Ordnance, "Washington, D. C, which I will offer as the 
next exhibit. 

(The letter referred to was marked " Exhibit No. 1267 " and 
appears in full in the text.) 

The Chairman. This letter reads : 

We are this morning in receipt of a letter from Col. W. P. Wooten, Corps 
of Engineers, Director of Procurement, copy of which is attached. 

This letter is just what we need, to use against all this legislative effort 
against arms and ammunition. We will, of course, use this letter in such a 
manner as to stir up just as little animosity as possible. 

Our Mr. Dodge tells me of his interview with you in Washington. Allow 
me to thank you for your interest in this situation. 

I trust when you visit New York that you will be sure to call on us. 

Who is Mr. Dodge? 

Mr. Davis. Mr. Dodge was formerly a president of the Remington 
Arms Co. and I think chairman of the board at that time. 



3692 MUNITIONS INDUSTRY 

The Chairman. Can we draw any other conclusion, that there 
was a very close contact afforded for you in the War Department 
through Lieutenant Colonel Whelen ? 

Mr. Dam:s. Senator, I cannot say that there ever was. 

The Chairman. What would you say on the face of the evidence 
that we have just gone over? 

Mr. Irbnee du Pont. Mr. Chairman, I would like to answer that 
question if you will permit me. I never saw any of these letters 
before. My mind is just as open to it as anybody's. It seems to 
me that this gentleman who is being criticized is a fan on ammuni- 
tion, small-arms ammunition, small-arms shooting. He is naturally 
interested in the thing, and I think is doing a public service in his 
interest. It is perfectly natural for an industrial company to utilizt 
as best they can those things. 

The Chairman. Why don't they go direct to the Secretary of War 
and state what they want? Why do they work around through 
those who are employed and paid out of the treasury of these com- 
panies for service that they render? 

Mr. Irenee du Pont. Now, Mr. Chairman, I don't think that is 
fair. This man is evidently a fan on small-arms shooting. I never 
heard of him before. I may have, but I have forgotten about him 
if I did. But we did write a letter — I say " we " — I mean the former 
president of the Remington Co. wrote a letter to the Secretary of 
War telling him what the}^ wanted. There is nothing sinister in 
that. 

Senator Clark. Why did the jDresident of the Remington Co. 
thank Colonel Whelan for a letter that had been written to him the 
day before by Colonel Wooten? 

Mr. Irenee du Pont. You ask why that is? 

Senator Clark. Yes; why did he thank Colonel Whelen for a 
letter written to him the day before by Colonel Wooten? 

Mr. Irenee du Pont. If I knew an expert who is a fan in the 
game, I would like to give him information to help him along, and 
help us too. 

Senator Clark. But that wasn't it. He wrote back the next day 
to Colonel Whelen thanking him for Colonel Woo ten's letter. 

Mr. Irenee du Pont. Thanking him for it? 

Senator Clark. Thanking him for Colonel Wooten's letter. 

Mr. Irenee du Pont. I didn't get that, then. 

The Chairman. Let us get this again. Colonel Wooten had writ- 
ten this letter v»'hich was so much desired, and Mr. Norvell, instead 
of thanking Colonel Wooten. thanks Lieutenant Colonel Whelen. 

Mr. Irenee du Pont. I don't see anything like that. What is that? 

The Chairman. That is a letter of May 16. 

Mr. Irenee du Pont. Where is the word '" thanks," sir ? I didn't 
get it. 

The Chairman. Well, there isn't any " thank you " in it. 

Mr. Irenee du Pont. That is the point. He was not thanking him. 
He was simply telling him that 

The Chairman. Could he explain his thanks any more keenly 
than he did in this letter? 

Mr. Irenee du Pont. He was thanking Mr. Wooten for getting it. 
He is not thanking Mr. Whelen. I think you are reading all sorts 
of sinister things in this. 



MUNITIONS INDUSTRY 3693 

The Chairman. Why did he write to Colonel Whelen ? 

Mr. Irenee du Pont, Because Colonel Whelen is a fan on small 
arms shooting. He is interesting himself in stopping the prohibition 
on the use of small arms. Here is some valuable aid to him in his 
effort. Senator, I would have written just such a letter. 

Mr. Davis. He is quite a sportsman. He is trying to protect the 
interests of 15,000,000 sportsmen in America, the same as we are. 

Mr. Lammot du Pont. It occurs to me if you saw a copy of the 
bill in question, you would better understand the position of the 
War DeiDartment and the Remington Co. opposing such legislation. 
Have you a copy of that bill ? 

Mr. WoHLFOKTH. But, Mr. du Pont, that is not the point, as I 
get it. Colonel Whelen is in the office of the Chief of Ordnance. A 
letter was written to the Assistant Secretary of War. The reply 
comes back fiom the office of the Chief of Ordnance, and then the 
m'esident of the Remington Co. thanks, not the writer, but Colonel 
Whelen. The reply aclmowledges the letter. 

Mr. Irenee du Pont. He does not acknowledge it, sir. 

Lieutenant Colonel Harris. The letter did not come back to the 
Chief of Ordnance. 

The Chairman. Let us go back to the letter of April 27, 1929, 
" Exhibit No. 1264 ", which Mr. Kahrs, assistant advertising man- 
ager, wrote to Mr. Saunders Norvell, telling him just how to proceed. 
[Reading:] 

My purpose in bringing this to your attention is to recommend that you 
write the letter to The Assistant Secretary of War, recommended by Colonel 
Whelen, and, knowing the colonel as I do, I am sure that he has everything 
prepared in Washington so that favorable action wil be taken. 

Evidently he did have everything prepared. 

Mr. Irenee du Pont. What is the date of the letter? 

The Chairman. April 27. x^Lnd the letter from Mr. Norvell to 
Colonel Whelen is May 16, only a matter of 18 days intervening. 

Mr. Irenee du Pont. But the April letter was certainly written 
before the May letter. 

The Chairman. Oh, yes, but I am trying to show you here how 
Colonel Whelen had engineered the whole thing. 

Mr. Irenee du Pont, That is the point I have been trying to 
make. He is a fan on small arms, small shooting arms, and he is 
interested in it, and the Remington people evidently knew it. 

Senator Clark, They must have known it, because Whelen sug- 
gested to the Remington people that they write a letter to the Assist- 
ant Secretary of War. Then the president of the Remington Co. 
wrote the letter suggested by Colonel Whelen, the recommendations 
being transmitted through Mr. Kahrs. Then in answer to that there 
is a letter to the Remington from Colonel Wooten, Whereupon the 
proposition is again stated to Mr, Whelen, who has been stated in 
the Kahrs' letter to have fixed things in the War Department in the 
first place. 

The Chairman. I can imagine Colonel Wooten, if called on the 
stand, would have a hard time admitting he had ever written the 
letter, and would probably admit he never had written it. Mr. 
Davis, did Colonel Whelen perform any service beyond those we 
have been discussing, for your corporation? 



3694 MUNITIONS INDUSTRY 

Mr. Davis. I know of no service. In fact, I do not know Colonel 
Whelen. I have never met him. 

Mr. Hadley. Mr. Senator, may I interpose a remark there. Be- 
fore Mr. Davis came with the company there was one occasion when 
there was some consultation with Whelen on the shape of the stock 
for high-power sporting arms. We had had one on the market 
for some time and we had had some criticism of it, and thought to 
change it, and Colonel Whelen at that time consulted with us a bit 
as to the shape which we had in mind for the modification of that 
rifle. 

The Chairman. Back there in 1929 there were certain regulatory 
bills pending in the House of Representatives, bills having to do 
with the regulation of arms manufacture and sales. Did Colonel 
Whelen perform any service for your corporation at that time? 

Mr. Hadley. I am not aware of any, sir. 

The Chairman. He appeared before the Ways and Means Com- 
mittee, didn't he? 

Mr. Hadley. I don't know. 

The Chairman. Mr. Wohlf orth, will you state for the information 
of the committee from the record of the hearings before the Ways 
and Means Committee just what Colonel Whelen's attitude was? 

Mr. WoiiLFORTH. On page 2317 of the hearings before the Com- 
mittee on Ways and Means of the House of Representatives, Seven- 
tieth Congress, second session, volume 3, there was a statement by 
Lt. Col. Townsend Whelen, Ordnance Department, United States 
Army. The gist of it is this: That the Secretary of War asked 
Colonel Whelen to present to the committee the matter of the value 
to the United States of our existing arms and ammunition manu- 
facturers from the point of view of national defense, and then 
Colonel Whelen goes on and in substance tells the story about the 
same as it was in the letter of Colonel Whelen, referring to the 
number of rounds produced and the importance of the private manu- 
facturers in the last war. 

Mr. Irenee du Pont. May I see that, sir ? 

Lieutenant Colonel Harris. May I make a remark there, Mr. 
Chairman? 

The Chairman. Yes, Colonel. 

Lieutenant Colonel Harris. In this connection, I believe the Rem- 
ington Arms could have gotten that letter from the Secretary of 
War by just writing to him, without all of this. 

The Chairman. That may well be. 

Mr. Wohlforth. That is right. 

The Chairman. That may well be. 

Mr. Irenee du Pont. Mr. Chairman 

The Chairman. But evidently. Colonel Harris, there were those 
in the fraternity in the industry who did not want to take any 
chances on a thing like that. They had other ways of getting it. 

Mr. Irenee du Pont. Mr. Chairman, this testimony of Mr. Whelen 
or Lieutenant Colonel Whelen starts off: 

Colonel Whelan. The Secretary of War has asked me to present to the 
committee the matter of the value of the United States existing arms, etc. 

The Chairman. I wonder if the Secretary of War's interest in 
this was occasioned or was brought about in the same manner that 



MUNITIONS INDUSTRY 3695 

the interest in obtaining the letter we have just had so much 
discussion about was put forth. 

Mr. Irenee du Pont. You may have that information. I loiow 
nothing about it, but I rather gathered you were planning some- 
tliing else. 

I'he Chairman. The chairman of the board, Mr. Dodge, seemed 
to have a pretty high opinion of Lieutenant Colonel Whelen and 
thought he might be of some value as a lobbyist when issues were 
pending before the House and Senate here in Washington. I have 
a letter here written by Mr. Dodge, who was chairman of the 
Board, to Mr. Norvell, dated June 14, 1929, which I will have 
marked with the appropriate number. 

(The letter referred to was marked " Exhibit No. 1268 ", and ap- 
pears in full in the text.) 

The Chairman. This letter reads: 

I had a telephone call from Walsh yesterday and he gave me this idea. 
It seems to me very important. 

Who is Walsh? 

Mr. Davis. Walsh was one of the company's attorneys. 

The Chairman (continuing reading) : 

He says that Senator Reed, who is chairman of the subcommittee which 
decides paragraph 365 of the arms tariff, is also chairman of the Military 
Affairs Committee of the Senate. 

He suggests that we get someone from the War Department to inform liim 
of the great importance to the Government of keeping those who are familiar 
with automatic machinery on arms at work, and to state how important 
this industry is to the Government. 

I am wondering what is the best way to do this. Colonel Whelen who 
helped us with the tariff is most familiar but lie is not big enougla to speak 
to a United States Senator or does he have the authority to do so unless the 
Secretary of War directs him. 

Mr. Casey. He is at least 6 foot 1, and he still isn't big enough. 

The Chairman. I wonder if Mr. Dodge or if Mr. Norvell found 
anyone who was bigger in the way of rank than Lieutenant Colonel 
Whelen to perform service of that particular character. Does any- 
one know? 

Mr. Da%'is. I do not know ; no. Senator. 

The Chairman. Colonel Harris, do you have knowledge of efforts 
that are made to win officials or officers in the Army over to the 
status of lobbyists for private interests or corporate interests that 
are removed from the issue of national defense? 

Lieutenant Colonel Harris. I have no knowledge of anything of 
the kind. Nobody has ever attempted to use me in that regard. 

The Chairman. Mr. Davis, have you tried to have lobbyist repre- 
sentation before Congress? 

Mr. Davis. We certainly have not, Senator. 

The Chairman. Mr. Casey, when the du Fonts took over the Rem- 
ington control, I think we have in evidence some assertion as to 
what you advised Mr. Davis and the corporation to do in the way 
of making themselves serviceable to the Government. 

Mr. Casey. Yes, sir. 

The Chairman. It was language to the effect that they should 
consider themselves, consider the corporation, a subdivision of the 
War Department. 

Mr. Casey. Right. 

83876— 35— PT 15 11 



3696 MUNITIONS INDUSTRY 

The Chairman. In the light of what transpired just before that, 
they did not need much coaxing, did they, to make themselves such 
a subdivision ? 

Mr. Casey. I did not know exactly wliat their contact was before. 

Senator Clark. You did not know how close akin thej^ were, did 
you, Major? 

Mr. Casey. Maybe not. But what I wanted them to do was to 
get the people in the Ordnance Department to realize that under 
du Pont management they must " play ball " with the Ordnance De- 
partment the way the Ordnance Department wanted them to. 

Senator Clark. Major, I will read you from the minutes of a 
meeting held at Bridgeport. Conn., on September 7, 1933, at which 
there were present : C. K. Davis, E. E. Handy, W. U. Reisinger, 
D. F. Carpenter, J. H. Chasmar, E. C. Hadley, H. J. Strugnell, F. J. 
Monaghan, H. A. BroAvn, L. Reed, and L. K. Larson. 

This was an excerpt from the minutes of the meeting of the Rem- 
ington Co., was it not, Mr, Hadley? 

Mr. Hadley. Very possibly. I cannot identify it as yet. 

Senator Clark. Paragraph 3 states [reading] : 

Mr. Haclley stated that Major Casey at Wilmington had informed tlie United 
States Ordnance Department that it was our wish that they would consider the 
Remington Co. in the same light as they consider the du Pont Co. — that is, 
almost a subdivision of their own Department. 

What did the Ordnance Department say to you when jon made 
that representation, that j^ou desired the Remington Co. to attain 
the status of the du Pont Co., the status of a little brother of the 
du Pont Co. ? 

Mr. Casey, I took Mr. Hadley around the Ordnance Department. 

Senator Clark. What did the Ordnance Department say when you 
said you wanted them to be a subdivision of their Department? 

Mr. Casey. I did not use that language. 

Senator Clark. Mr, Hadley, did you quote Major Casey's con- 
versation ? 

Mr, Hadley. I do not know whether it is the verbatim language 
used, but the principle, I think, is clear enough, that du Pont had 
relations with the Ordnance Department, in a much broader way 
than we had had in the past, because of the diversity of things where 
they had occasion to contact the Ordnance Department. Our field 
was more limited. Major Casey took me around, as he has just 
stated. 

Senator Clark. What I am trying to get at is, Mr. Hadley, in this 
report of September 7, 1933 — 

that Major Casey, at Wilmington, had informed the United States Ordnance 
Department that it was our wish that they would consider the Remington Co. 
in the same light as they consider the du Pont Co. — that is, almost a subdivision 
of their own Department. 

Did the officials of the Ordnance Department seem to be startled 
at this characterization that the du Pont Co, is almost a subdivision 
of the Ordnance Department? 

Mr. Hadley. I am not aware of that. 

Senator Clark. You used that language. 

Mr. Hadley. Did I say he used those express words ? 



MUNITIONS INDUSTRY 3697 

Senator Clark I will read it aojain : This is an excerpt from the 
minutes of the staff meetmg, Mr. Hadley [reading] : 

TT ^^/\ ^!'^^^' r}'-"^^'^ "'-'^^ ^^''*j^^ Casey at Wilmington had informed the 
United States Ordnance Department that it was oiu wish that thev would 
consider the Kemington Co. in the same light as they consider the du Pont 
CO. — that IS, almost a subdivision of their own Department. 

That is your language and not mine, Mr. Hadley. 

Mr Hadley. I should say that represents substantially the 
thought, but unless it is in quotation marks. Senator, I should say 
that there was no inference that he had used that language in speak- 
mg to them. » & i 

Senator Clark. What did he say to them ? You were with him 
according to Major Casey. ' 

Mr. Hadley. Yes ; I was with him. 

Senator Clark. Did he tell anything to the officials of the Ord- 
nance Department about the du Pont being almost subdivision of 
their own Department? 

Mr. Hadley. I do not recall that expression. I do not recall 
he used the expression quoted. 

Senator Clark. What did he say? 

Mr. Hadley. I do not recall his exact words, but, nevertheless, 
the substance of it was in it. 

Senator Clark. You mean the substance of it was that the du 
Pont Co. was almost a subdivision of the War Department? 

Mr. Hadley. No ; T should not put it that way, in that lanmiaee, 
perhaps. fe & 5 

Senator Clark. That is the language you did put it in in reporting 
to your own staff meeting. 

Mr. Casey. Senator, let me report what I did say. I said I 
wanted the Ordnance Department to feel that they can look to the 
Remington Co. the way they looked to du Pont; that is, they 
would consider du Pont the same as they would consider a Govern- 
ment arsenal, to be depended on to give them what they wanted 
when they needed it. 

Senator Clark. Mr. Hadley, is that your recollection of what 
Major Casey said? 

Mr. Hadley. I do not remember his exact words. 

Senator Clark. At any rate, the impression that Major Casey's 
language made on your mind is what you reported to this staff 
meeting, the du Pont Co. is almost a subdivision of the War De- 
partment. Is that true? 

Mr, Hadley. In the matter of cooperation and service, I believe 
that is true. 

Senator Clark. You did not put any qualifications in your report. 

Mr. Lammot du Pont. He said " almost ". 

Senator Clark. You are standing on the word " almost ", are you 
Mr. du Pont ? [Laughter.] 

Mr. Casey. Senator, I can readily see that somebody might take 
what I did say and interpret it in another way. 

Senator Clark. What I was really trying to find out. Major, is 
the impression that this language on* your part made on the officers 
of the War Department, and what response there was. 

Mr. Casey. Why not ask them? 



3698 MUNITIONS INDUSTRY 

Senator Clark. As to whether they agreed to bring in the Rem- 
ington people. 

Mr. Irenee du Pont. Senator, he made the suggestion, why not 
ask some of the men he talked to what their impression was. 

Senator Clark. If I knew the War Department Official to whom 
Major Casey was talking about that I would be very glad to find out 
his reaction. 

Mr. Casey. I can tell you, sir. 

Senator Clark. Then we can find out about that. 

Mr. Casey. Major Hatcher. 

The Chairman. What is his capacity? 

Mr. Casey. He was in charge of small arms and anti-aircraft in 
the general manufacturing divisioji. 

Senator Clark. Of what? The Ordnance Department? 

Mr. Casey. Of the Ordnance Department. 

Senator Clark. We will try to see what the major had to say. 

Mr. Casey. And Major Glen P. Wilhelm. 

Senator Clark. Maybe you were conducting a conversation we 
can find out about. Do you recall whether in fact they were to be 
made a subdivision of the War Department ? 

Mr. Casey. They stated they were glad to feel that they could 
dependent on Remington the way they always felt they could depend 
on du Pont. 

The Chairman. Even when the Government requested Old Hick- 
ory to be built? 

Mr. Casey. And a lot of other things. They asked us to make 
smokeless powder, load tracer, and incendiary bullets, when we did 
not know one end from the other, bag loading, shell loading; any- 
thing they wanted during the war they stated, " Let du Pont do it." 

Mr. Reisinger. Mr. Chairman, you stated that the President did 
not reply to Lieutenant Colonel Whelen's letter of May 15 but replied 
to Colonel Wooten's letter. 

The Chairman. Did not reply to Wooten's letter? 

Mr. Reisinger. Did not reply to Wooten's letter, but replied to 
Whelen. 

The Chairman. The committee did not have a letter written to 
Colonel Whelen. It did not seem very material. If you want the 
record to show a letter written, all right. What is the date ? 

Mr. Reisinger. May 16. 

The Chairman. The same day one was written to Lieutenant 
Colonel Whelen? 

Mr. Reisinger. I would like to read this into the record [reading] : 

Colonel W. P. Wooten, 

Corps of Engineers, Director of Procurement, 

War Department, Office of The Assistant Secretary of War, 
Washinffton, D. C. 
Deiar Sir: Your letter of May 15 received and is just what we needed. We, 
of course, will use this letter with discretion, as it is not our desire to stir up 
any moi-e controversy than is necessary. However, there undoubtedly is a great 
deal of ignorance among our legislators in the various States as to the general 
situation of arms and ammunition. This letter will help us do a little educa- 
tional work and, of course, is from the very highest authority. 
Again thanking you, I am, 
Yours, 

Saunders NoK^'EU,, 



MUNITIONS INDUSTRY 3699 

Mr. Davis. Senator, that letter was pulled by the investigators, 
I think. 

Mr. Hiss. There was some testimony, you will remember, Colonel 
Harris, yesterday, as to the G-percent return as a fee under the 
adjusted compensation contract on the estimated valuation of that 
part of the plants engag-ed in carrying out the ])roposed adjusted 
compensation contract. Do you rememoer that particular testimony'^ 

Lieutenant Colonel Harris. Yes, sir. 

ADJUSTED-COMPENSATION CONTRACT FORM ACCEPTABILITY TO CONTRAC- 
TORS OF PERCENT FEE 

Mr. Hiss. There was some testimony from various of the wit- 
nesses, other than the representatives of the War Department, as 
to whether on behalf of their companies they could state that they 
considered a 6-percent fee a sufficient fee. Mr. Lammot du Pont 
was not present, and, consequently, no direct testimony from the 
present executive head of the du Pont Co. was possible. Mr. Pierre 
du Pont said he could not speak on behalf of the company, and I 
believe Mr. Irenee du Pont spoke in a similar vein. 

Mr. Lammot du Pont, are you familiar with the proposed ad- 
justed compensation contract, included in the mobilization plan or 
procurement plan of the War Department, which Colonel Harris 
has testified would be used primarily in ordnance purchases? 

Mr. Lammot du Pont. I am not familiar with it ; no, sir. 

Mr. Hiss. It provides, according to evidence introduced yesterday, 
a fee of 6 percent on the estimated valuation of the contriactor's 
plant, or, rather, that part of the plant used in complying with the 
contract. In your opinion 

Lieutenant Colonel Harris. May I interrupt? 

Mr. Hiss. If that is not accurate, please correct me. 

Lieutenant Colonel Harris. There is a little bit more to be added. 
If there is an estimated cost of the work to be performed, and if 
there is a saving on that estimated cost of the material, there is a 
fee in addition to the 6 percent of one-fourth of the difference in 
percentage. And if there is a failure to meet the estimated cost 
by exceeding it, there is a penalty of 1 percent for each percent of 
failure. So that the 6 percent has slight adjustments. 

Mr. Hiss. Just limiting the question to the 6-percent valuation — 
Colonel Harris is perfectly correct; there is a bonus for bettering 
cost, and there is a penalty for exceeding estimated costs — but, 
leaving that part of it aside, and limiting yourself to the 6-percent 
compensation, in your opinion is that an adequate compensation for 
war-time contracts, Mr. Lammot du Pont? 

Mr. Lammot du Pont. Mav I ask what the 6 percent is applied 
to? 

Mr. Hiss. Six percent of the estimated valuation of that part of 
the contractor's plant utilized in fulfilling the particular contract. 

Mr. Lammot du Pont. I would say that might not be fair. 

Senator Barbour. Mr. Hiss, I do not know that I know exactly 
what you mean by " that part of the plant." As a manufacturer my- 
self, that would be a very ambiguous designation unless I know what 
you have in mind. 



3700 MUNITIONS INDUSTRY 

Mr. Hiss. Lieutenant Brannon, will you read the exact language, 
and then explain it? 

I find the same difficulty. 

Mr. Irenee du Pont. Mr. Secretary, might I correct something 
in my answer yesterday ? I did not understand that it was only the 
plant. I should think the materials provided by the contractor 
should also get some return. For instance, if you are manufactur- 
ing white lead, you might have 3 months' output tied up in the proc- 
ess, and if you had to take 3 months in addition to the flat 6 percent, 
that might be very inadequate. I thought you said the capital en- 
gaged in that particular branch of the business. 

Mr. Hiss. Lieutenant Brannon, have you the specific provision? 

Lieutenant Brannon. Yes, sir. 

Mr. Irenee du Pont. Also the land on which the plant is located 
might have some value. ' 

Mr. Hiss. I understand the land would be included. 

Lieutenant Brannon. Yes, sir. 

Mr. Irenee du Pont. Is the working capital included? 

Lieutenant Brannon. Yes, sir. In the first place, the Govern- 
ment pays the cost of manufacture, which includes direct labor, 
direct materials, overhead, salaries of officials of the company; it 
pays the cost of new facilities; it pays an amount agreed to in ad- 
vance for depreciation; it pays an agreed amount for rehabilitation 
at the end of the contract in case the plant has had to be converted ; 
and pays, first, the figure — and reaches an agreement with the con- 
tractor as to the estimated value of the buildings, machinery, and 
facilities owned by the contractor and to be used in connection with 
the work. 

Then the estimated percentage of the buildings, machinery, and 
facilities required in performing the work. 

In other words, an agreed value as to the plant and then if only 
a part of the plant is used an agreed percentage for the part of the 
plant which is to be used. 

That cost is determined. To that is added an estimated amount to 
be provided by the contractor, and that is the current payments 
plan, reimbursed by the Government. 

In other words, the value of the plant devoted to the Government 
work, and the value of the amomit of capital which the contractor 
will have to use in order to get advance payments. 

Mr. Hiss. May I interrupt there, Lieutenant Brannon? 

Lieutenant Brannon. Yes, sir. 

Mr. Hiss. That capital means the capital throughout any average 
period, does it not ? 

Lieutenant Brannon. The estimated amount of cash, and I take it 
it would be an average for meeting pay rolls and interest payments. 

Mr. Hiss. You would not add the first, second, and third months? 

Lieutenant Brannon. No; that is estimated average amount of 
capital. 

Mr. Hiss. The estimated amount at any one time? 

Lieutenant Brannon. Yes, sir. That is, of course, subject to 
agreement. This is agreed to : The agreed payments to the plant, 
the agreed percentage of the plant which will be used in case the 
contractor gets his material. 



MUNITIONS INDUSTRY 3701 

Senator Clark. When is that agreement to be made, Lieutenant? 
After war starts? 

Lieutenant Brannon. There is a provision for a preliminary esti- 
mate to be submitted by the contractor as a part of procurement 
planning. 

Senator Clark. How many of the preliminary estimates are on 
hand down there now? 

Lieutenant Brannon. None that I know of, sir. 

Then a rate of 6 percent per annum on the value of the plant, 
and the amount of cash capital which is agreed upon. 

Senator Clark. That is an ordinary cost-plus contract, is it 
not, Lieutenant? 

Lieutenant Brannon. I would not say ordinary. It is a cost- 
plus contract, but not a cost-plus percentage of cost, which is the 
objectionable form of contract, as I understand it. 

Senator Barbour. That is true. There is that difference. 

Mr. Hiss. Mr. Lammot du Pont, addressing yourself to the fee 
as described by Lieutenant Brannon, in your opinion is that a fair 
fee or a sufficient fee for war-time procurement, so far as your 
company is concerned, in your opinion ? 

Mr. Lammot du Pont. I think that it is fair to the company, to 
the contractor; yes, sir. 

Mr. Hiss. Colonel Harris, have you found unanimity of opinion 
on the question from the other manufacturers; that is, manufac- 
turers other than those present here today, or whose representatives 
are here present today? 

Lieutenant Colonel Harris. This contract has been in the course 
of preparation for a number of years and has been discussed with, 
I should think, hundreds of contractors on the various stages of its 
development, and many think that it is not liberal enough and many 
think that it is satisfactory. So that there is a difference of opinion ; 
but as to how many, I do not know. 

Senator Clark. You do not profess to have there anything but a 
tentative plan, do you. Colonel? 

Lieutenant Colonel Harris. This contract is in tentative form. 

Senator Clark. I mean, you do not undertake to fix the percent- 
age of profit which they are going to get, do you? I notice in the 
excerpts from the mimeographed memorandum, dated February 
20, 1934, headed " War-time Contracts Forms and Emergency 
Codes ", page 5 says [reading " Exhibit No. 1225 "] : 

The question of the amount of profit to be allowed the contractor is one 
of the most critical in any form of cost-plus contract. The fee adopted should 
be fair alike to the producers and the Government. In the adjusted compen- 
sation contract the fee is based primarily upon the rental value of the 
facility. It is true that the contractor assumes few of the risks of an entre- 
preneur for which profit is paid. He does, however, have certain risks of 
management and cei*tain expenses for which no compensation is made. The 
committee believes that some increase in the pi'esent figure might well be 
made, but doubts the advisability of attempting to determine the exact amount 
until war is imminent. It can then be decided on the basis of then-existing 
conditions. 

Having in mind, as Lieutenant Brannon states, you have in your 
approximation of value of new facilities to be employed at the 
present time, that simply means if war were declared you would go 
back to the old system of scuffling around as to how much profit was 



3702 MUNITIONS INDUSTRY 

to be made and straighten it out after the declaration of war by 
agreement. 

Lieutenant Colonel Harris. I would like to state, Senator, I felt 
somewhat as you express yourself, and am responsible for the recent 
activity to try to straighten out the thing and bring it to some 
reasonable conclusion. 

Senator Clark. I think that is very desirable, Colonel. We have 
been going along for 15 years and it seems to me we ought to be 
getting somewhere. 

Mr. Hiss. Colonel Harris, have you a copy of the excerpt I gave 
you yesterday? 

Lieutenant Colonel Harris. Which one? 

]\Ir. Hiss. Excerpts from a mimeographed memorandum dated 
February 6, 1934, headed " Comments, criticisms, and proposals on 
the adjusted-compensation contract form, approved December 20, 
1931 ",' which was introduced as " Exliibit No. 1227." 

Lieutenant Colonel Harris. Yes, sir. 

]Mr. Hiss. Will you turn to the second page of that, at the top 
of the second page, under the general heading on the first page, 
Boston Ordnance District. Colonel Harris, will you explain wliat 
ordnance districts are, please? 

Lieutenant Colonel Harris. The territory of the United States is 
divided into geographical districts for decentralized procurement in 
war. There are 11 ordnance districts and a lesser number of districts 
for the other supply branches, the minimum number being four. In 
each one of these districts' headquarters there is a skeleton organi- 
zation engaged in the field development of industrial planning. 
This Boston district represents one of those districts. 

Mr. Hiss. And the contract forms have been submitted to the 
various ordnance districts? Is that correct? 

Lieutenant Colonel Harris. Yes, sir; that is true, and in each 
one of the ordnance districts a board has been assembled to analyze 
some of the recommendations as to the matter of this contract form. 

Mr. Hiss. The contract forms have been discussed within each 
district with some of the major industrial companies that might be 
involved in procurement. Is that correct? 

Lieutenant Colonel Harris. That is true. 

Mr. Hiss. Referring again to " Exhibit No. 1227 ", under the head- 
ing Boston Ordnance District, it states [reading] : 

The cost-plus contract offers the ideal conditions for profiteering. It seems 
to the writer questionable whether the Government would have received such 
whole-hearted cooperation from manufacturers during the World War had 
all opportunity for profiteering been eliminated. In other words, it seems 
that there are incentives to the best efforts of the manufactures in both the 
fixed price and the cost-plus contracts which are absent from the adjusted- 
compensation contract. 

Then, again, at the top of page 3 of " Exhibit No. 1227 "—this 
being an excerpt from the Cincinnati ordnance district — it states 
[reading] : 

We note from the contract that the War Department does not propose to 
have included in the cost of producing War Department material any charges 
for interest on funded and other debts. However, this expense of doing busi- 
ness must be covered in some way, so we will assume it is to be taken care 
of in the profit allowed the contractor. 



MUNITIONS INDUSTRY 3703 

Then, again, on the fourth page, it states— and this is a comment 
from the St. Louis ordnance district — [reading] : 

It is the general concensus of opinion among owners and executives of in- 
dustrial plants in this vicinity that the adjusted-compensation contract, while 
getting away apparently from the cost-plus contract, still retains some features 
highly objectionable and subject to prolonged argument. Some of the firms are 
frank to state it would be extremely difficult for them to voluntarily enter 
into such a contract in either peace or war time. * * * 

There is no question but that the proposed contractors in this vicinity think 
the reward inadequate and unjust. This is particularly true of companies 
having a large bond issue and an issue of preference accumulative stock 
whereby the fee and the uncertain bonus would not be sufficient to protect the 
company and the investors of the preference stock. 

Then at the bottom of the page it states [reading] : 

It is the opinion of this office, based on the discussions at the various con- 
ferences held on this subject, that the present form of adjusted-compensation 
contract includes a number of fundamental objectionable features and is not 
satisfactory to the contractors in general. 

Now, under the San Francisco ordnance department, on the next 
page, it states [reading] : 

After careful perusal of the Bridgeport district report on the adjusted-com- 
pensation contract, it is believed that the contract is impracticable, and that 
its use would involve intolerable delay in the initiation of procurement. 

That memorandum referred to the report of the Bridgeport dis- 
trict? Do you know what that was? 

Lieutenant Colonel Harris. I have an idea they are talking about 
this contract. 

Mr. Hiss. You think it is the present form of contract ? 

Lieutenant Colonel Harris. I think it refers to this contract, but 
I am not sure. 

Mr. Hiss. And instead of that suggested some alternative forms. 
In the third paragraph of their alternative suggestion the following 
appears : 

It should be expected that the set price will permit of a profit of at least 
10 percent on the gross price to the average bidders. 

By " gross price '' under the cost contract that must mean 10 per- 
cent of cost. Do you not think so. Lieutenant Brannon? 

Lieutenant Brannon. I was trying to see the entire part of that 
San Francisco observation, Mr. Hiss. 

Mr. Hiss. That appears at page 10 of the memorandum, I think, 
lieutenant. I think I quoted the entire part of that. 

Senator Barbour. Colonel Harris, I was wondering if it would be 
a practical suggestion — I make this only as an individual and not 
officially — to try to work out several different cases with respect to 
materials that you are interested in with that manufacturer, what 
the cost would be, and what the problem would be in relation to 
this contract which you have made. Li other words, to get examples 
as to wdiat this problem is going to be. I do not mean for publica- 
tion, necessarily, but in relation to some actual production problem. 
If you work out a few of those examples, in my judgment, you would 
find very valuable experience. 

Lieutenant Colonel Harris. I think your suggestion is a good one, 
Senator, and we will endeavor to follow it out. I am perfectly will- 
ing to confess that I see lots of things wrong in this situation, lots 



3704 MUNITIONS INDUSTRY 

of causes for delay, argument, and confusion, but I do not know how 
to take the profits out of war and get the material we have to get. 

Senator Barbour. We certainly want to limit them and get them 
out as much as we can. 

Mr. Hiss. Colonel Harris, we cannot be sure at the present time 
that the present 6-percent provision in the adjusted-compensation 
contract can, as a matter of practical necessity, be retained in the 
event of war? 

Lieutenant Colonel Harris. To be perfectly frank, I am very 
doubtful. 

EXAMPLES OF SCOPE OF ACTI\^TIES OF WAR INDUSTRIES BOARD 

Mr. Hiss. Turning to the topic that we were discussing just before 
recess, relating to tlie understanding of the problems arising during 
the World War, before the War Industries Board. I show you» 
Colonel Harris, some excerpts from minutes of meeting of the Coun- 
cil of National Defense held July 28, 1917, which I offer for appro- 
priate number. 

(The excerpts referred to were marked " Exhibit No. 1269 " and 
are included in the appendix on p. 3878.) 

Mr. Hiss. That reads : 

All members of the Council and the Director were present. 

There ensued a discussion of tlie reorganization plan, which was finally 
approved and x-eleased for tlie press in the following form: 

" The Council of National Defense totlay decided, with the approval of the 
President, to create a small body to be known as the War Industries Board." 

Then, jumping to the second page, the second full complete para- 
graph reads : 

Of this Board, Mr. Baruch will give his attention particularly to raw ma- 
terials ; Mr. Brookings, to finished products ; and Mr. Lovett, to matters of 
priority. These three members, in association with Mr. Hoover, so far as food- 
stuffs are involved, will constitute a commission to arrange purchases in 
accordance with the general policies formulated and approved. 

Colonel Harris, what was the duty, in your opinion, so far as you 
can remember it, of the War Industries Board in connection with the 
arrangement of purchases? 

Lieutenant Colonel Harris. At this time the War Industries Board 
was still a part of the Council of National Defense, and their rela- 
tion was more of an advisory one. They were exerting influence on 
agreed prices for raw materials. They were finding new facilities 
for production, and they were advising on overloading certain geo- 
graphical districts, and in other Avays assisting the procurement 
program, but, generally speaking, in an advisor}^ capacity. 

Mr. Hiss. So that the statement that the " three members " men- 
tioned, " in association with Mr. Hoover, so far as foodstuffs are 
involved, will constitute a commission to arrange purchases " is 
])erhaps an overstatement of the case, in your opinion ? 

Lieutenant Colonel Harris. I think they were looking ahead, to 
getting more authority or taking more authority. I do not know 
which. I think they could have probably taken the authority, if 
they had gone ahead and done it. 



MUNITIONS INDTJSTKY 3705 

Mr. Hiss. Referring to the last paragraph on the page, Colonel 
Harris, it states [reading] : 

The purpose of this action is to expedite the work of the Government, to 
furnish needed assistance to the Departments engaged in making war pur- 
chases, to devolve clearly and definitely the important task indicated upon 
direct representatives of the Government not interested in commercial and 
industrial activities with which they will be called upon to deal, and to make 
clear that there is total disassociation of the industrial committees from the 
actual arrangement of purchases on behalf of the Government. 

On the next page, Colonel Harris, it states [reading] : 

It was voted that the five civilian members (exclusive of the two Army 
and Navy representatives) of the War Industries Board should receive a salary 
of $400 per month. 

Do you know whether that resolution was ever carried out? It 
is my understanding that the members of the War Industries Board 
served without compensation. Do you have anv information on 
that? 

Lieutenant Colonel Harris. I have the same information as you 
have. 

Mr. Hiss. Would it be possible for you to attempt to find out 
about that? 

Lieutenant Colonel Harris. I will try to find out. 

Mr. Hiss. I show you a further set of excerpts. Colonel Harris, 
Which I will ask be appropriately numbered. 

(The excerpts referred to were marked "Exhibit No. 1270" and 
are included in the appendix on p. 3879.) 

Mr. Hiss. Will you turn to page 5? Excerpts from a Meeting of 
the Price Fixing Committee, March 20, 1918, subject. Steel Prices. 
Reading from the verbatim statement of Judge Gary : 

We are anxious to get at facts and figures, and to arrive at some conclusion 
that is fair and reasonable to all concerned. If it was a question of bargain 
only, then the manufacturers would be trying to secure as much as possible for 
their product, and your board would be endeavoring to secure as low prices 
for the Government, its Allies, and the general public as possible. But we 
don't feel like approaching the subject from any such point, and I am sure you 
don't. 

Then, turning to page 10, Mr. Brookings' statement [reading] : 

We appreciate the attitude the steel people have always shown. We are in 
entire sympathy with practically all of the things you have stated. 

Then on page 11 it states [reading] : 

None of us are steel people and therefore we have been perfectly willing 
to be more or less guided by you, and I think we have been wisely guided. 

Do you know whether the price-fixing committee and the War 
Industries Board dealt with the whole range of industries vital to 
the Government in time of war, Colonel Harris? 

Lieutenant Colonel Harris. At this time, March 20, 1918. the final 
War Industries Board had been constituted under the authority of 
the President of the United States and in charge of all of the indus- 
trial field except that portion for which there were other corpora- 
tions, such as food, fuel, and transportation, for which other organi- 
zations were organized. 

Mr. Hiss. Was it not an extremely difficult, almost superhuman 
task for a board of five men, exclusive of the Army and Navy repre- 
sentatives, to be expertly familiar with all the industries that came 
before them and with which they had to deal ? 



3706 MUNITIONS INDUSTRY 

Lieutenant Colonel Harris. Please understand that was a govern- 
ing board. They had an organization of many hundreds of people 
assisting them, and in their organizations they did have men of 
experience covering each sector of the field. 

Mr. Hiss. I call your attention to a collection which has been pre- 
pared by the committee's staff, showing a sample of the work which 
the War Industries Board had to take up in a single month. This is 
by no means complete, and they had undoubtedlv other duties in 
addition to this. This is for December 10, 1917, to January 10. 1918, 
consisting of excerpts from the minutes of the War Industries Board. 

(The document referred to was marked " Exhibit No. 1271 " and 
is included in the appendix on p. 3885.) 

On December 10, 1917. there was a meeting called to consider 
steel prices with representatives of the steel industries. 

The War Industries Board personnel a"*'tending this conference 
were Mr. Willard, chairman, Mr. Baruch, Mr. Brookings, Mr. 
Frayne, Judge Lovett, Col. P. E. Pierce, and Mr. Bingham, secre- 
tary; also Mr. Legge, Mr. Replogle, Mr. Davies of the Federal Trade 
Commission, Mr. Blavalt representing the Fuel Adminibt^« ^"or; also 
the following representing the steel industrj' : 

F. N. Beegle, president, Union Draw Steel Co.. Pittsburgh, Pa. 
James B. Bonner, representative, American Iron & Steel Institute, Wash- 
ington. 

James A. Burdon, president, Burdon Iron Co., Troy, N.Y. 

E. A. S. Clarke, president, Lackawanna Steel Co., New York, N.Y. 
A. C. Dinkey, president, Midvale Steel & Ordnance Corp., Philadelphia, Pa. 
James A. Farrell, president, Unite<l States Steel Corp.. New York, N.Y. 

W. J. Philbert, comptroller, United States Steel Corp., New York, N.Y. 
Judge E. H. Gary, chairman. United States Steel Corp., New York, N.Y. 

F. H. Gordon, general manager of sales, Lukens Steel Co., Coatesville, Pa. 
E. G. Grace, president, Bethlehem Steel Co., South Bethlehem, Pa. 

W. S. Horner, president. National Association of Sheet and Tin Plate Manu- 
facturers, Pittsburgh, Pa. 

A. F. Huston, president, Lukens Steel Co., Coatesville, Pa. 

Eli .Joseph, member of firm, Joseph, Joseph & Brother, New York, N.Y. 

Willis L. King, vice president, Jones & Laughlin Steel Co., Pittsburgh, Pa. 
'" W. Vernon Phillips, president, F. R. Phillips & Sons Co., Philadelphia, Pa. 

Kai-1 C. Roebling, general manager of sales, John A. Roebling's Sons Co., 
Trenton, N.J. 

Charles M. Schwab, chairman, Bethlehem Steel Co., South Bethlehem, Pa. 

John A. Topping, president. Republic Iron & Steel Co., New York, N.Y. 

Roy A. Rainey, Rainey Coke Co., New York, N.Y. 

Scott Stewart, assistant to Roy A. Rainey, Rainey Coke Co., New York, N.Y. 

Mr. Willard, chairman, explained that while the cost data in 
course of preparation by the Federal Trade Commission was not yet 
at hand it had been felt advisable to call the representatives of the 
steel industry to Washington to discuss the general situation as 
brought about by the prices fixed and by general conditions in order 
that the Board could approach the subject more intelligently and a 
decision be arrived at more expeditiously when the Federal Trade 
Commission data came to hand, it being understood that in the terms 
of the previous price agreements it had been stipulated that prices 
would be reconsidered prior to January 1, 1918. 

Then on December 13 there was a meeting at which were consid- 
ered chemicals — plan from War Minerals Committee to increase sup- 
ply of pyrites ; and machine gun.s — arrangements covering royalties 
for Lewis machine gun patents; and chemicals — compact for power 
for Muscle Shoals nitrate plant. 



MUNITIONS INDUSTRY 3707 

On December 14 there was a special meeting of the copper industry 
to consider conditions in the copper industry as bearing on possible 
revision of prices. There were present the same members of tlie War 
Industries Board as referred to in the meeting of December 10, plus 
Prof. Walter M. Adriance, representing the War Trade Board, and 
Mr. Sidney H. Solomon, representing the War Trade Board; also 
Mr. Lewis A. Haney representing the Federal Trade Commission, 
Mr. Eugene Meyer, Jr., of the raw materials division, and Mr. Pope 
Yeateman, of the raw-materials division. 

There w^ere also present representatives of the following copper 
interests : 

C. F. Kelley, Anaconda Coppei- Co. 

Joseph Clendeunin, American Smelting & Refining Co. 

R. Agassiz, Calumet & Hecla Mining Co. 

S. Rosenstamm, Miami Copper Co. 

T. Woli'son. United Metal Selling Co. 

James MacNaughten, Calumet & Hecla Minmg Co. 

P. Todd, Copper Range, Quincy Copper Co. 

N. L. Amster, Shannon Copper Co. 

James A. Nelson, Cuba Copper Leasing Co., Norfolk Smelting Co. 

Then on December 20 they considered TNT — royalty agreement 
with Flurscheim for manufacture of TNT. 

On December 21 they considered chemicals — order for smokeless 
powder with Aetna Explosives Co. 

December 22 they again considered fixing steel prices. 

December 24 they considered the fixing of steel prices. 

December 28, the fixing of steel prices. 

Then there were present in addition to the men named representing 
the Government at the meeting of December 10, Judge Gary, Mr. 
Farrell, Mr. Topping, Mr. Clark, Mr. Burden, Mr. Grace, Mr. Din- 
key, Mr. Dalton, Mr. Filbert, Mr. Bonner, and Mr. King. 

On January 2 they considered the question of an order for 
3*0,000,000 pounds of smokeless powder from the Hercules Powder 
Co. ; considered action to secure necessary raw materials for explo- 
sives program ; they considered a request for assistance in securing 
explosives from the Ordnance Department; and they also considered 
cooperation with the Allies. 

On January 4 they considered the subject of crude TNT as explo- 
sives, and the fixing of prices for nickel. 

On January 9 they considered the fixing of copper prices and the 
fixing of aluminum prices. 

On January 10 they again considered the fixing of aluminum 
prices. 

That is a pretty full month's outline, is it not. Colonel Harris? 

Lieutenant Colonel Harris. It seems so. 

The Chairman. Mr. Harris, how good and how thorough a job 
could men, however industrious and intelligent they might be, do 
with great problems like these many that were being thrown on their 
desks day after day? 

Lieutenant Colonel Harris. They were w^orn out. It was just a 
stupendous burden to carry. 

The Chairman. But could they do a thorough job? 

Lieutenant Colonel Harris. At the end of the war, toward the end 
of the war when the War Industries Board was fully developed, 
they did have a grasp of the situation and were prepared then to' 



3708 MUNITIONS INDUSTRY 

carry the load. But this is early in the game when everything was 
in much confusion, and they themselves were not very well organ- 
ized and had not worked out a smooth working arrangement. I think 
in the latter part of the war, the last 2 or 3 months of the war, the 
War Industries Board was capable of functioning properly. 

The Chairman. But certainly the experience w^as such that we 
ought to want to be better prepared at another time than we were 
at that time and have as many of these controverted matters out 
of the way as we can. 

Lieuenant Colonel Harris. Entirely so, sir. I must say that our 
industrial planning is in the hope of commencing the next w^ar some- 
what as we were performing at the end of the last war, due to the 
experience ; but there will be many confusions. 

Mr. Irenee du Pont. Mr. Chairman, I would like to ask if it is 
proper that Colonel Harris give his views on what the effect would 
be of nationalization of industry, which I understood had been advo- 
cated as a substitute for the past method. I think that might be 
rather important testimony here. 

The Chairman. Mr. Du Pont, we are going to have sessions de- 
voted to that phase under the resolution at which Colonel Harris 
and many other technical advisers will be asked to offer testimony. 

Mr. Irenee du Pont. That Avill be before the committee, not before 
Congress ? 

The Chairman. Assuredly before the committee. 

Mr. Hiss. Colonel Harris, will you explain the nature and the 
functions of the war service committees during the war ? 

Lieutenant Colonel Harris. The war service committees started 
off with each committee being composed of a group of men familiar 
with the subject. The different situation between the Government 
side and the industries side was not so well marked, and there was 
objection naturally to that situation and a desire on the part of 
those operating the system to get away from that. Toward the end 
of the war they developed a system of a commodity committee com- 
posed of a financially disinterested membership familiar with the 
subject, and in contact with them a war service committee that was 
avowedly on the side of industry. Here you had a Government 
group with an industry group, each one knowing exactly what the 
other one stood for. That is the system that we are carrying over 
into our industrial plans that we now have. 

Mr. Hiss. What was the function of the war service committees in 
their later phase? 

Lieutenant Colonel Harris. There were some 54 commodity com- 
mittees covering most of the raw materials and many of the finished 
and some unfinished commodities. On the opposite side of each of 
these commodity committees was the war service committee. 

The function of the war service committee was to give informa- 
tion on new sources, rates of production, and any other pertinent 
data that industry could furnish. It was the duty of the commodi- 
ties committee on the Government side to use that information, ana- 
lyze it, weigh it, and come to a conclusion for the Government. The 
war service committee did not take part in the conclusion except 
in an advisory, data-furnishing capacity. 

Mr. Hiss. Were they regarded as representing industry, the 
specific industries to which they were assigned? 



MUNITIONS INDUSTRY 3709 

Lieutenant Colonel Harris. Generally speaking, they were; yes. 

Mr. Hiss. Did they undertake to estimate for the Government 
whether or not certain policies should be carried out within their 
respective industries? 

Lieutenant Colonel Harris. They were asked by the commodities 
committees for their opinions on these subjects, and gave them. 

Mr. Hiss. I would like to read in just for the record certain per- 
sonnel of some of these committees wdiich appear in appendix 44 
of the report heretofore referred to by Mr. Baruch, on page ;395. 

The war service executive committee had as its chairman Mr. 
Harry A. Wheeler. 

Do you know who Mr. Wheeler was? 

Lieutenant Colonel Harris. I am afraid I do not. 

Mr. Hiss. The automobile committee had Mr. Chalmers, Mr. 
Willys, Mr. Rice, Mr. Graham, and many others.. 

The iron and steel committee, appearing on page 402, had Mr. 
Gary, Mr. Farrell, Mr. Burden, Mr. Dinkey, Mr. King, Mr. Grace, 
Mr." Schwab, Mr. Topping, Mr. Dalton, and Mr. Huston. They 
were the names that appeared previously in the price-fixing meet- 
ings. Undoubtedly that was a meeting with that particular war 
service committee. Is that correct? 

Lieutenant Colonel Harris. Yes. These committees you are nam- 
ing now are the committees representing industry. 

Mr. Hiss. Right. 

I call your attention to further excerpts from meetings of the 
Price-Fixing Committee. 

(The memorandum referred to was marked " Exhibit No. 12T2 " 
and is included in the appendix on p. 3887.) 

Mr. Hiss. Meeting of June 1. It does not appear whether it is 
1017 or 1918. This is under the heading of " Lumber." 

At this point Mr. Brookings surrendered the chair to Dr. Taussig, as he had 
an interest in this industry and did not wish to take part in the committee's 
deliberations. 

Copper : At this point Mr. Brookings took the chair. 

Mr. Brookings read a letter from M. R. L. Agassiz, of the Calumet & Hecla 
Mining Co., taking issue on several points which occurred in the meeting of the 
representatives of the copper industry on May 22. 

On June 21, 1918 — page 3 of the memorandum — a meeting of the 
price-fixing committee with representatives of the iron ore, pig iron, 
and steel industries. That is presumably the war service com- 
mittee that we referred to, is it not. Colonel Harris, that you see 
there listed on the first page, the names that have been read in from 
the report plus certain additional representatives here? 

Lieutenant Colonel Harris. Yes. This has both the commodity 
committee and the industry committee. 

(The minutes of June 21, 1918, referred to was marked " Exhibit 
No. 1273 ", and is included in the appendix on p. 3888.) 

Mr. Hiss. Quoting from the third page, statement of Judge Cary : 

Our committee does not appear here as an advocate, but more as a judge or 
as an advisory committee, having in consideration the interests of the Govern- 
ment and the interests of the steel-producing and the iron-producing fraternity. 

Would you say that these conferences with the various war service 
committees were as Judge Gary described them in that particular 
passage, in your opinion were those meetings in the nature of dis- 
cussions across the table as to reasonable prices to be fixed, or did 



3710 MUNITIONS INDUSTRY 

they constitute what Judge Gary here refers to, a meeting at which 
the committee appears as a judge? 

Lieutenant Colonel Harris. I do not know what he could mean by 
that. Certainly the detailed negotiations of that particular con- 
ference would show that Judge Gary was not a judge on that 
occasion. 

Mr. Hiss. Quoting from minutes of a meeting of the War Indus- 
tries Board with representatives of the automobile industry for the 
determination of what action is to be taken with regard to the situa- 
tion, dated May 7, 1918, I read the following : 

(The memorandum referred to was marked " Exhibit No. 1274", 
and is included in the appendix on p. 3893.) 

Mr. Hiss, (reading) : 

Mr. DuEANT. Can we increase the supply of pig iron and what would it be 
necessary for us to do to obtain tlie increase? 

Mr. Baeuch. Those suggestions are referred to us daily ; we have made every 
move possible to increase pig-iron capacity. It has been a matter of fuel and 
transportation ; all of those things have occurred to us, and, no doubt, have 
occurred to you, because you have perhaps made a more intensive study of the 
situation. We don't approach this subject any different from any one of you; 
I realize this is a mutual problem and we have to look to you to help us, and 
we don't take from the producer of steel a market of steel. We don't want to 
take from the consumer of steel his ability to use it; but it wouldn't be well 
to have this production of steel lie around for no purpose. We want suggestions 
from you as to how we are going to meet the problem. 

Lieutenant Colonel Harris. I may state, Mr. Hiss, that to my 
mind that is the proper procedure on that sort of negotiation. 

Mr. Hiss. Then on May 9, 1918, there was a conference regarding 
fixing aluminum prices. This is the stenographic transcript of the 
conference. 

(The memorandum referred to was marked " Exhibit No. 1275 ", 
and is included in the appendix on p. 389*5.) 

Mr. Hiss. On page 4 of this memorandum Mr. Brookings made 
this statement: 

After arguing the matter for some length, we fixed the price at 32 cents, 
which seemed to be fair and seemed to offer Mr. Davis and his people an 
opportunity to make a fair profit, a liberal profit. We recognized the fact, 
however, that there was more or less a monopoly, and we felt that he met 
us not in the spirit of a monopolizer at all but a good American citizen who 
wanted to be a patriotic citizen ; in fact, he had .shown that disposition in the 
price he made the Government, and the supplies he had furnished the Govern- 
ment, and we recognized it when we adopted that price. We felt, after hearing 
all Mr. Davis had to say about it, and taking into consideration the probable 
increase as raises [wages] were going up, and we fixed the price at 32 cents. 

Then on page no. 10 at the top, Mr. Brookings later in the same 
memorandum said: 

Mr. Ycatman, in order to enable these gentlemen to maintain a monopoly 
I think it would be a very healthy thing to keep the price down. Don't you? 
Keep these other fellows from getting in — that is the best way to promote a 
monopoly. What do you think about a 25-cent price?— that was j'our old 
price. 

Lieutenant Colonel Harris. May I make a remark there? 

Mr. Hiss. Yes, sir. 

Lieutenant Colonel Harris. I have not seen this report, but I 
think that the subject matter must have been the high-cost producers 
of copper, trying to get greater production and bring in high-cost 
producers. 



MUNITIONS INDUSTRY 3711 

Mr. Hiss. On page 14, marked at the top, next to the last page of 
the memorandum, Mr. Brookings said: 

Frankly, Mr. Davis, we don't iinderst.-md that. Wo vranted to give yon 
somi'thing to take care of this advance in labor since March. We won't send 
you out again. We have reconsidered this and v>-e have made up our minds 
to advance the price of ingots a pound, so that you will get something, making 
it 33 cents instead of 32 cents, and still leave tl'.ese differentials as tliey are, 
which you apparently get very little of ; and to give you in addition to that — 
we want to be fair — vrhile I told them at the time we fixed the 32-cent price — 
it was a l)attle royal ! Judge Lovett and some of us thought that 30 cents 
was an awfully big price and we stood and worked on 30 cents for a long time. 
I don't know but I had that too much in my mind at that time. Whether you 
got too much then or not, it is perfectly evident that there has been or will 
be certainly some advanced costs in labor. While labor is a small part of your 
costs, as compared with some other things we deal with — we thought in giving 
you the differential we were giving you nine-tenths of a cent a pound or 1 cent, 
a pound on your product. We want to make it good and we will fix it at 33.' 
cents, and we hope you will be perfectly satisfied. 

Mr. His«. Turn to the second page of this memorandum of the 
meeting of the price-fixing comm.ittee with representatives of the 
nickel men. 

(The memorandum referred to was marked " Exhibit No. 1276 ", 
and is included in the appendix on p. 8904.) 

Mr. Hiss. ^Ir. Brookings said : 

All morning we have kept you waiting because tlie history of the industry's 
costs at different period:^ of time have not been available until this morning 
and we had to look tliem over and discuss them before we saw you. We 
have not had time to do them justice really, but some of the committee felt 
that so long as we have brought you here we ought to explain to you why 
we brought you here and ask you whether you have given any thought to the 
question of prices and whether you liave any figures of your own as to any 
additional cost of producing nickel during the past 6 months or a year. Of 
course we know that our war needs have enormously increased the consumption 
of nickel. The Navy program and the Army program have '"equired nickel 
for alloying certain steel and has doubled your production and has, of course, 
enormously increased your profits. We are not in an attitude of envying you 
your profits; we are more in the attitude of justifying them if v.-e can. That 
is the way we approach these things. 

Please turn now to pages marked 9 and 10 of this document. 

(The memorandum referred to was marked "Exhibit No. 1277'', 
and is included in the appendix on p. 3905.) 

Mr. Hiss. This is a meeting of the price-fixing committee on April 
3, 1918. This relates to fixing the price of copper. 

Mr. Brookings said : 

You complain that you are unfortunate for having made contracts for a 
long period of time. We would have to take into consideration two things. 
One, the fixing of the price of copper, and, two, the fact that contracts made 
by you which yoii haxe expected to be profitable contracts have become un- 
profitable contracts. Have we not all been in that position in our lives? 
On the best judgment we have, feeling that the average over a period of time 
is going to be a profitable one. have we not all made contracts? As a matter 
of fact, I made some contracts with your father 40 years ago. 

Did not the price-fixing committee and the War Industries 
Board, in general, have continually before them the manifold com- 
plicated questions of prices, costs, and all the matters that were so 
difficult of determination in any one industry? Did not they have 
them continuallj^ before them in almost all industries? 

Lieutenant Colonel Harris. They did. 

88876 — 35— PT 15 12 



3712 MUNITIONS INDUSTBY 

Mr. Hiss. On July 2, 1918, Colonel Harris, page 26. This is a 
meeting of the price-fixing committee with representatives of the 
copper industry for the purpose of fixing prices. 

(The memorandum referred to was marked " Exhibit No. 1278 ", 
and is included in the appendix on p. 3911.) 

Mr. Hi&s. Quoting a statement of Mr. Brookings : 

We have made the statement that any shipments, any deliveries, made after 
the date at which the price was fixed was subject to the revision of price by 
the Government. Just as soon as this information commenced to come in on 
increased cost, we did try to protect the producer in asking the Government 
not to place any large orders of copper with the producer, because we would 
be responsible for that, and having it in mind, we feel that we ought to at 
least spare you all that. 

How long after the armistice had been signed, Colonel Harris, did 
the War Industries Board continue in existence, do you know? 

Lieutenant Colonel Harris. Mr. Baruch resigned very shortly. 
The organization continued on for a longer period. I have not the 
date when they were actually discontinued. 

Mr. Hiss. Do 5^011 know what their duties were after tiie war 
ended ? 

Lieutenant Colonel Harris, I have the impression that they turned 
over the settlement of the war to other agencies and got out. 

Mr. Hiss. Did they continue in the price-fixing field even after 
the war had ended? 

Lieutenant Colonel Harris. I cannot say. 

Mr, Hiss. Were there not problems of readjustment back to peace- 
time levels which required Government control over prices for some 
time after the war. Lieutenant Brannon? 

Lieutenant Braknon. I think I can find in the book where Mr. 
Baruch says that due to the lack of authority the Board did not 
have control of that transition period from war to peace. He in- 
timates. I believe, in his book — I think I can find it — that he thinks 
it would have been very desirable had the War Industries Board had 
that authority. 

Mr. Hiss. Do you know whether it continued to function in- 
formally ? 

Lieutenant Brannon, As I remember, some of these from the 
record, some of these agreements, and so forth, were for a definite 
period of time, several months in advance, and as I remember there 
was some clearing up to do. Of course, the Government attempted 
some later price fixing. 

Mr. Hiss. I offer two letters for the record, a letter of November 
9, 1918, just before the armistice, and a letter of November 11, 

(The letters referred to were marked " Exhibit No, 1279 ", and are 
included in the appendix on p. 3911.) ^ 

jNIr. Hiss. The letter of November 9 is from Mr. Clarke, secretary 
of the American Iron and Steel Institute, to Mr. Brookings: 

Articles appear from time to time in the newspapers in regard to tlie fixing 
of price on rails, Init naturally we do not know whetlier they are authoritative. 
The price of rails ought, in justice to rail manufacturers, to be determined 
\-ery slmrtly. 

The reply is dated November 11, 1918: 

The fixing of a price on rails, of course, mainly involved the interest of the 
Kailroad Administration, and, as you probably know, they have felt that as 
the rails they buy are, by the nature of their leases, a matter of interest to 



MUNITIONS INDUSTRY 3713 

each of tbe railroads, they could not justify themselves in paying the price 
which the price-tixing committee recommended. As we liad never fixed tlae 
price of rails, and as the Railroad Administration was so overwhelmingly 
the largest interest involved, we submitted the question to the President for 
his determination. 

AVhile I saw the President in person regarding the matter, and have had 
some little correspcjidence with him since, he has been so occupied with 
weighty matters of state recently that I hated to bother him further about it 
for tiie present. However, I realize the importance to the rail manufacturers, 
and while I presume you are collecting for rails furnished at the prices you 
mention ; i. e., $55 and $57 per thousand, as long as it is simply a tentative 
price, subject to our final ruling, you naturally feel that the matter should 
be settled without any unnecessary delay. I am called to St. Louis for 2 or 
3 days, and on my return, the middle of next week, I will take the matter up 
with the President again. 

Please consider this for the information of those only who are interested, 
as we are in no way responsible for the newspaper articles you mention, and 
will trust to your seeing that notiiing of this kind gets into the press. 

If you are likely to be in Washington any time soon, after Thursday of 
next week. I wish you would let me know, as I think the problem which we 
discussed at our meeting a few days ago has been anything but exhausted, 
and it seems to me that, witliout reducing labor, there might be some adjust- 
ments on two or three articles tliat would satisfy the Navy and the Railroad 
Administration, and yet leave tbe steel industry a fair profit. 

You have probably noted in this morning's press that McAdoo recommends 
the wiping out of all excess-profit taxes on next year's business. I think we 
will all agree that this is wise. 

Lieutenant Colonel Harris. Mr. Hiss, are you interested in the 
developments of the War Industries Board after the War? 

Mr. Hiss. Yes. 

Lieutenant Colonel Harris. There is a paragraph here that might 
be of interest. 

Mr. Hiss. Will you please read that, Colonel Harris? 

Lieutenant Colonel Harris. Perhaps Lieutenant Brannon will 
read it. 

Mr. Hiss. Will you just read that, Lieutenant? 

Lieutenant Brannon. This is from the preface of Mr. Baruch's 
book, '"American Industry in the War." 

Lieutenant Colonel Harris. It is a letter to the President. 

Lieutenant Brannon. It is in the form of a letter to the Presi- 
dent in submitting a statement of the activities of the Board. 

Mr. Hiss. Just give the page, please. 

Lieutenant Brannon. It is on page 8. [Reading:] 

Between the time of the signing of the Armistice and the discontinuance 
of the War Industries Board, the problem was faced of reversing the Board's 
machinery in order to demobilize from war service and assist it back to its 
normal cliannels. The German collapse had been spectacular in its sudden- 
ness. When fighting ceased war production in the United States was reaching 
its peak. Every unit of the vast machinery was keyed up to high speed. 
There is no doubt but that knowledge of this fact contributed materially 
to Germany's sudden realization of the hopelessness of her position. The 
Board did all that was possible to prevent any injury to industry as it was 
put back on a peace basis. The price-fixing committee of the Board deter- 
mined as a genera' policy that price agreements should continue for the period 
originally fixed. The President directed the various departments of the 
Government not to market, in competition with private producers, materials 
in which there was no shortage and whicli were not of a perishable nature. 
The Board, through recommendations and advice, aided in cancelation of 
■contracts so as to stabilize as far as possible the flow of materials, labor, 
and plant facilities back to peace channels. It was arranged with all of the 
war-making agencies of the Government that the Board should be advised 



o714 MUNITIONS INDUSTRY 

of revisions and adjustments of all Government contracts in excess of $100,000. 
The Board's facilities section, for a brief time, remained as tlie clearing house 
for all information relating to contract adjustment. Contact also was main- 
tained with the Labor Department, so that as labor was released from war 
work it was distributed to peace-time industries needing it. If the proper 
authority had been at hand, it would have been possible for the War Industries 
Board to have continued its functions during the period of readjustment. Much 
good could have been accomplished. But with the signing of the Armistice, 
the purchases by the Allies and our own great departments coming to an end, 
the power of the Board, without further additional legislative authority, ceased 
and it was possible to do only what was done — to wind up its work as quickly 
as possible. 

Mr. Hiss. Colonel Harris, I show you another collection of ex- 
cerpts. These are front a meeting of the price fixing committee of 
the War Industries Board with the representatives of the steel in- 
dustry, December 11, 1918, for the purpose of considering the advis- 
ability of discontinuing the existing maximum prices on steel. 

(The minutes of meeting referred to were marked " Exhibit No. 
1280 " and are included in the appendix on p. 3912.) 

Mr. Hiss. On page 2 Mr. Brooldngs said : 

Now it simply leaves us nothing to do at this meeting but to express, in 
words that I should like to have the privilege to compile more at leisure for 
our records, the earnest appreciation which the price fixing committee have of 
the manner in which the steel industry has met us more than half way in 
doing practically everything that wo have asked them to do in the way of 
not only allocating their production, but in increasing their production and 
investing their funds in additional capacity at a time when costs were probably 
double normal ; and I wouldn't care to have what I say informally here now to 
fully express our appreciation of that; I can do it very much better by taking 
a little time and formulating it for our records and we may have something 
which we would be glad to send you a copy of. 

Judge Gary replied : 

We have no disposition to return to this Board the beautiful bouquet of 
flowers that has been bestowed upon us by th'^ chairman in his words of praise 
and appreciation for we cherish tlieir possession. We would, if capable, fully 
reciprocate, though we have no disposition to resort to fuUsome praise. A 
mere statement of the facts uppermost in our thoughts concerning the Board 
in its treatment of us would be praise enough for anyone. 

On the next page : 

In order to secure the largest production of steel — to permit the operation 
of all of the facilities of all the companies, and firms — it was necessary to 
arrive at a basis of prices which, as applied to many of the corporations, 
yielded large profits, yet at the same time did not permit an unreasonable 
profit to many of the high-cost mills. Therefore we need not be especially 
grateful ijecause you permitted profits which seemed to be large in many in- 
stances, but rathei- because we know that your motives were right, that you 
recognized your obligation to your country, and still at the same time in tlie 
performance of your duties you were always considerate, friendly, and fair, 
and were as liberal in your conclusions as your duty to the Government you 
represented permitted. We have reason to be grateful that the Board has 
consisted of men who had not only the disposition but the intelligence to rise 
to a plane of action wliere exact justice could be done to all concerned. 

Colonel Harris, does not this refer to one of the difficulties ex- 
])erienced during the war, namely, the fixing of prices so as to en- 
courage maximum production, so that the prices would have to be 
high enough to permit high-cost producers to produce at a profit so 
as to be able to continue in business, which means for the low-cost 
]M'odncers ratlier high returns? 

I^ieittenant Colonel Harris. Yes. 



MUNITIONS INDUSTRY 3715 

Mr. Hiss (continuing reading) : 

To come in contact with Government officials, dealing at arm's length, and 
to get through with all our work with the belief that our intercourse has been 
satisfactory, agreeable, and pleasant, is a most remarkable thing. 

Mr. Irenee du Pont. Mr. Chairman, is it essential if yon pay a 
high-cost producer a rate that you have to pay a lower-cost producer 
the same rate, because my impression was that the Aetna Powder 
Co. got a very much higher price for powder than we got at tlie 
same time ? 

Mr. Hiss. Mr. Irenee du Pont, this relates to the fixing of prices in 
industries throughout the country, not those set by contract. 

Mr. Irenee du Pont. Not dickering for prices ? 

Mr. Hiss. Not contract. 

Lieutenant Colonel Harris. This is not contract work. This is 
basic prices. 

Senator Clark. Is it not a fact, Colonel, that in the case of steel, 
for instance, the great bulk of steel produced in this coimtry was 
produced by the low-priced factories or low-priced steel mills? In 
other words, the United States Steel Corporation and some of the 
big ones were able to produce steel much more cheaply, so I have 
understood, than the smaller mills, which did not have the facilities 
and did not own their own coal mines and iron and transportation 
facilities, so that the fixing of this uniform price throughout the 
country on a basis to allow a margin of profit to the small and rela- 
tively inefficient producer did result in enormous profits to the big- 
gest producers and to the bulk of the production. Isn't that true? 

Lieutenant Colonel Harris. The low-cost producers made much 
higher profits than the high-cost producers. 

Senator Clark. Yes; and that represented the great bulk of steel 
production in the country, didn't it? 

Lieutenant Colonel Harris I don't know. I imagine it did. 

Senator Clark. I am not certain of that, but that is my informa- 
tion. 

Lieutenant Colonel Harris. Yes. 

Mr. Hiss. On page 9 of this memorandum of excerpts. Colonel 
Harris, Mr. Replogle has this to say : 

As director of steel supply, I want to express my appreciation for the 100 
percent cooperation which we have gotten on all occasions. It has been per- 
fectly wonderful, and one of the delights of my life has been to work with 
you, and I thank you from the bottom of my heart — all of you. 

I have next to present for the record a report of the meeting of 
the price-fixing committee on December 20, 1918, with representa- 
tives of the copper industry, which I offer as the next exhibit. 

(The report of meeting referred to was marked " Exhibit No. 
1281 ", and is included in the appendix on p. 3917.) 

Mr. Hiss. Mr. Brookings has this to say, on the first page : 

As the price fixing committee has always functioned through the commodity 
section of the War Industries Board, it goes without saying that the necessity 
for fixing future prices has ceased and that we are allowing all prices fixed 
heretofore to expire by limitation and as the copper prices expire by limitation 
at the end of this month, about the only business that justified our holding this 
meeting today was the desire of meeting the copper people again and to express 
to them the Government's appreciation of the splendid spirit vv'ith which they 
have assisted us in solving next to the most important problem we have had 
to solve in connection with out war needs. Steel and copper, of course, have 



3716 MUNITIONS INDUSTRY 

been fundamentally the few industries that were most directly concerned ip 
our war needs in everything pertaining to stimulating production and in agree- 
ing with us upon what was a fair price for the Government and our Allies 
and the public, we feel that while we have endeavored to agree with you upon 
a price that was fair and proiitable and sufficiently profitable to maintain a 
maximum production, it was not very profitable to some concerns and rather 
more than normally profitable to others ; but we recognize through efforts made 
to stimulate production and through excess-profit prices 

That should be " excess-profit taxes ", should it not, Colonel ? 
Lieutenant Colonel Harris. I assume it is " excess-profit taxes." 
Mr. Hiss (continuing reading) : 

and through excess-profit taxes none of the industries have profited beyond 
what seems to be perfectly fair ajid reasonable. 

Mr. RosENSTAMM. It is permissible for me to ask what the Government pro- 
poses to do with the surplus of copper in the hands of the consuming interest? 

Mr. Beookings. We have never had anything to do with the Governuient's 
orders, the commodity sections representing contracting departments of the 
Government have submitted price-fixing problems to us and we fixed the prices 
and passed them back for administration of the department and we have 
absolutely no knowledge or connection with them. 

Mr. SussMAN. The thought Mr. Rosenstamm wished to ask you was if 
you could enlighten us as to the copper that the Government has on hand. 
You did express yourself as to that last week, as to whether they were going to 
throw that on the market or whether it is going to further assist the trade by 
Withholding it for a while until it is stabilized. I don't ask this as an authorita- 
tive matter but as general information. 

Is that not one of the problems that must be faced at the termina- 
tion of any war, Colonel Harris? That is, the disposal of surplus 
stocks that the Government has on hand, without upsetting prices to 
too great an extent? 

Lieutenant Colonel Harris. It is. 

Mr. Hiss. Then Mr. Brookings says [reading] : 

I don't remember having expressed an opinion on that. I am perfectly will- 
ing to express a personal opinion growing out of the knowledge that we all 
have in the War Industries Board. The general policy of the Government 
seems to be that as far as it can it is going to protect the industry against 
competing with anything which they have on hand or accumulated in large 
quantities and by fwlvice and cooperation with the industry would endeavor to 
prevent the sale of their stuff, demoralizing the market. That has been given 
out publicly and I believe has been pretty widely published as the policy of the 
Government. 

I next refer to the meeting of December 10, 1918, of the War In- 
dustries Board, page 3, the last page. I will offer this document for 
appropriate exhibit marking. 

(The document referred to was marked " Exhibit No. 1282 ", and 
is included in the appendix on p. 3918.) 

Mr. Hiss. After the war, I think you have already stated. Colonel 
Harris, there was considerable difficulty with reference to many 
contracts, which were regarded, for one reason or another, as out- 
side the power of the War Department or as having been improperly 
executed, is that correct ? 

Lieutenant Colonel Harris. Please state that over. I don't think 
I quite got that. 

Mr. Hiss. I say during the war there arose a number of cases of 
contracts which were deemed by the War Department or some other 
agency to have been improperly executed or not finally executed or 
for one reason or another imperfect, although production had gone 
ahead at cost to the producer under those contracts. 



3IUNITI0NS INDUSTRY 3717 

Lieutenant Brannon. There were two general classes of cases, Mr. 
Hiss. Under Revised Statute 3744, the contract has to be signed 
at the end by the contracting parties. A number of contracts in the 
heading stated that they were contracts made between such and such 
contractor and such and such officer as the contracting officer of the 
Government. Due to pressure of business a number of those con- 
tracts were signed by subordinates. The Comptroller of the Treas- 
ury ruled that they did not comply with Revised Statute 3744. 

Another class of cases was where contractors had been given what 
are called " procurement orders ", that is, orders to go ahead, which 
fixed the amount and the price and ordinarily the drawing of spec- 
ifications, but not a complete contract with the understanding that 
a contract would be executed as soon as it could be worked out, the 
general details being fixed in advance. But after the armistice the 
Comptroller again ruled that due to the fact the Government no 
longer needed the supplies contracted for, a contract could not be 
entered into merely to protect the contractor. 

That was cared for by the Dent Act. 

Mr. Hiss. At this meeting of December 10, 1918, there is the fol- 
lowing statement under " Legislation " [reading] : 

Mr. Peek and Mr. Ritchie submitted draft of a bill which, after several con- 
ferences with the War Department, they had prepared to legalize war agree- 
ments and orders which had not been executed or drawn in compliance with 
legal requirements. 

That is probably what is referred to, is it not? 

Lieutenant Colonel Harris. I have not found the reference, Mr. 
Hiss. 

Mr. Hiss. It is on the third page. 

Lieutenant Colonel Harris. December 10? 

Mr. Hiss. Yes. It is on the third page under the heading of 
" Legislation." 

Lieutenant Colonel Harris. I see; yes. 

Mr. Hiss, (reading) : 

Mr. Peek and Mr. Ritchie submitted draft of a bill which, after several con- 
ferences with the War Department, they had prepared to legalize war agree- 
ments and orders which had not been executed or drawn in compliance with 
legal requirements. 

Lieutenant Colonel Harris. That unquestionably must be it. 
Mr. Hiss. Lieutenant Brannon can possibly explain it. 
Lieutenant Brannon. I do not remember which one that was. but 
the Dent Act was the final one. 

Mr. Hiss. This continues [reading] : 

and which draft, they thought, should be submitted to the War Department, 
and then to the Military Committees of the Senate and House, with the recom- 
mendation that it be substituted in place of the bill on the same snhje -t now 
pending before them. The draft was approved, and the chairman was requested 
to send the same to the said committees, and also to the United States 'Chamber 
of Commerce, which was interested in the subject. 

The Chairman. The committee will be in recess until 10 o'clock 
tomorrow morning. 

Mr. Irenee du Pont. Mr. Chairman, I would like to ask on behalf 
of the company whether we could find when a hearing is going to 
take place on the operations under Government ownership and what 
might be expected of it. I think possibly we might have some wit- 
nesses on that, if we are permitted, and if we have notice. 



3718 MUNITIONS INDUSTRY 

The Chairman. Mr. du Pont, you will surely have notice of it in 
due time. 

Mr. Irenee du Pont. Thank you. 

The Chairman. Ten o'clock tomorrow morning, gentlemen. 

(Whereupon, at 4 : 45 p.m., the committee recessed to lU a.m. of the 
following day, Wednesday, Dec. 19, 1934.) 

This concludes that part of the testimony known as " Part XV, Old 
Hickory Contract (continued) and Industrial Organization in War 
(examples in World War and plans for next war)." At this point 
the committee continued with the subject of Industrial Organization 
in War. (See Part XVI.) 



i 



APPENDIX 



Exhibit No. 1197 

All communications should be addressed to "The Gun Division, Office of the 
Chief of Ordnance, U. S. A., 1330 F Street, Washington, D. C." 

[ajli/ig] 

War Department, 
Gun Division, Office of the Chief of Ordnance, 

13S0 F Street, Washington, October 3, 1917. 
In replying refer to no. 

(Memorandum for Colonel Buckner.) 

1. Referring to our conversation of this ir^orning and to the urgent need for an 
increase in the capacity of this country for the manufacture of smokeless powder, 
I will be pleased to have you take up with your company the following: 

(a) Would your company be willing to create additional capacity for the 
manufacture of smokeless powder to the extent of 500,000 pounds of finished 
powder per day; also, would they be willing to create new^ capacity for twice that 
amount; the plants to be the propert.y of the United States? 

(b) The principle is appreciated that this increased capacity should in some 
form or other be paid for in its entirety by the United States, as it will have 
practically no value except its salvage value at the conclusion of the war. I would, 
therefore, like to knov.^ under what terms the company would be willing to under- 
take the design and erection of these new plants, as vrell as their operation. This 
will probably involve the selection of sites, the purchase of the land, as well as 
the procurement and erection of a plant complete in all respects for the manu- 
facture of finished powder. 

(c) The plan would be for the Du Pont Compan.y to operate the plant as tlie 
agent of the United States Government, either on a cost plus profit basis, a flat 
fixed price basis, or on a flat price basis adjustable to the fi.uctuating prices of 
certain raw materials. 

2. It is evident that, if such an agreement is entered into, it would be necessary 
for the Government to do everything in its power to assist the company in pro- 
curing all the material needed, as well as the necessary labor, and, furthermore, 
it is conceded that the contract could extend no further than binding the company 
to use its best endeavors to erect the buildings and to operate them in the manner 
contemplated by the agreement. 

Exhibit No. 1198 

Washington, D. C, Oct. 4, 1917. 
(Construction of smokless powder plants.) 
Chief of Ordnance, U. S. A., 

Washington, D. C. 
Dear Sir: In accordance with your recjuest of October 3, E. I. du Pont de 
Nemours & Co. beg to present the following propositions for your consideration: 

1. The Du Pont Co. offers to select two or more sites, prepare necessary plans 
and erect plants capable of producing 1,000,000 pounds per day of w^ater-dried 
smokless cannon powder, with all possible dispatch. 

2. For this service the Du Pont Co. request that the U. S. Government pay to it 
monthly the exact cost of such construction work, including cost of the land, all 
materials and equipment purchased for the plant, all labor (including superin- 
tendence on the ground), insurance, both fire and personal liability, plus 15% of 
the total of the foregoing to cover the cost of preparing the plans, main office 
supervision, purchasing expense, and the company's profit on this work. 

3719 



3720 



MUNITIONS INDUSTRY 



3. The U. S. Government to audit the accounts each month as rendered, which 
audit must be completed by the 15th of the following month, at which time pay- 
ment shall be made. 

4. The Government to place in the Du Pont Company's hands full control of 
the character of the design and quality of the construction work, as the Du Pont 
Co. cannot otherwise be held responsible for the operation outlined below. 

5. The Du Pont Company's estimate, based on past experience with its best 
knowledge as to the allowance that should be made for increased cost of con- 
struction work, is that the necessary plans to manufacture 1,000,000 lbs. per 
day of water-dried smokleess cannon powder will cost approximately $90,000,000, 
which would include sulphuric and nitric acid manufacturing and recover}- plants, 
cotton purification, guncotton, water supply, waste disposal, power, land, lines 
of communication and transmission lines, storehouses, freight yard with broad 
gauge tracks, plants for the manufacture of ether and diphenylamine, and water- 
dried cannon powder manufacturing facilities, houses for workmen to the extent 
which we have found at our existing plants, administrative building, laboratories, 
shops, etc., but would not include a box factory. 

The above proposition is made only upon the understanding that the following 
proposition for the operation of the plants is accepted at the same time: 

1. That the Du Pont Co. be appointed agents to operate the above plants for a 
period for not less than one year, provided their operation is necessary, in which 
event the Du Pont Co. proposes to agree to inanufacture up to 1,000,000 of water- 
dried smokeless cannon powder per day at these plants on the following basis. 

2. The Government to pay monthly the entire mill cost of the powder manu- 
factured during the previous month on the same terms of payment and audit as 
in the foregoing proposition for construction of the plants, plus 5fi per lb. to cover 
main office supervision, purchasing expense, administrative and profit. Should 
such mill cost of water-dried smokeless cannon powder, exclusive of boxes, be 
less than 44)20 per lb. in any month the difference will be divided equally between 
the Government and the Du Pont Co., which would result in the cost to the 
Governnaent and compensation to the Du Pont Co. as per the following table: 



Mill cost 
of powder 


Cost to 
Govern- 
ment 


DuPont's 
compen- 
sation 


Cents 
44.5 
42.5 
40.5 
38.5 
36.5 
34.5 


Cents 
49.5 
48.5 
47.5 
46.5 
45.5 
44.5 


Cents 
5 
6 

7 
8 
9 
10 



Should the Government desire a part of the pov/der to be air-dried a sliding 
scale of payment would be increased by 2)^^ per pound as follows: 



Mill cost 


Cost to 


DuPont's 


of 


Govern- 


compen- 


powder 


ment 


sation 


Cents 


Cents 


Cents 


47 


52 


5 


45 


51 


6 


43 


50 


7 


41 


49 


8, etc. 



3. It would be our intention that these plants would be erected in units of 
100,000 pounds, so that the first might be expected to begin operation in about 
8 month.s from the time the land is secured, additional units to follow monthly, 
so that the full output would i:e obtiiined in about IS months, wliich is equivalent 
to the 10 units starting operation in 13 months. The time of completion would 
depend very largely upon the extent of the help that the Government would give 
us in obtaining early deliveries of essential building materials, equipment, and 
workmen. 



MUNITIONS INDUSTRY 3721 

In both parts of the foregoing proposition the du Pont Co. would be acting 
purely as the agent of the United States Government and any expenditures there- 
under would be for the Government's account. 

If it is desired by the Government, the above proposition could be amended to 
provide for plants with an output of 500,000 pounds of water-dried smokeless 
cannon powder per day. 
Yours very truly, 

E. I. DU Pont de Nemours & Co., 

By , 

Vice President. 



Exhibit No. 1199 

statement by du pont engineering company of the facts concerning the 
audit of expenditures under the contracts between the united states 
government and the du pont engineering company 

The contracts are as follows: 

Penniman Shell Loading contract, P 2337-1228-A. 
Old Hickory Smokeless Powder Plant, P 4755-71 1-E. 
Seven Pines Bag Loading Plant, P 9050-960-E. 
Tullytown Bag Loading Plant, P 3509-643-E. 
Ives'T. N. T. Plant, P 15271-1433-E. 

Accounting and auditing system during operating -period. — Prior to the starting 
of operations by the contractor, the Ordnance Department provided inspection and 
auditing units consisting of inspectors and auditors in charge of commissioned 
officers and civilians at the main office of the contractor and in the field at the 
site of each operation. 

The following plan for making, checking, and recording disbursements and 
keeping a record of the contractors' business, approved by the representatives 
of the United States in charge at the time, was modeled on the system which 
has been followed by the E. I. du Pont de Nemours & Company, and found by 
experience to be satisfactory. 

Certain proficient employees were appointed to direct and supervise the work 
of the several departments retained for the purpose of constructing and operating 
the plants. Whenever the procurement of material or equipment was necessary, 
requisitions were issued by the departments responsible, and forwarded to the 
purchasing agent in Wilmington, unless the need was sufficiently urgent to neces- 
sitate ordering direct by telegraph or otherwise. In all cases, however, requisi- 
tions were sent to the purchasing agent for record. Orders for materials speci- 
fied on such requisitions were issued by the purchasing department, and num- 
bered in series, copies being sent, respectively, to the vendors, plants, and account- 
ing department, one being retained by the purchasing department for comparison 
with the vendors' invoices. 

Vendors were required to show the order number on the face of each invoice 
for identification. Each invoice, after receipt at the home office was compared 
with the orders, and checked as to terms, quantity, and price by the purchasing 
department; forwarded to the plant which issued the requisition, where certifica- 
tion was made as to receipt of material, and the approval of the plant representa- 
tive affixed; then returned to the home office. The vouchers were then approved 
by the departmental director responsible for such expenditures, and the charge 
distribution noted thereon, after which the accounting department functioned, 
checking extensions, recording, and issuing checks in payment therefor. 

When vouchers had been audited, recorded, approved and paid by representa- 
tives of the contractor, they were transmitted to the contracting officer of the 
United States, who checked and verified the expenditures until satisfied that the 
requirements of the contracts had been fulfilled. He then indicated his approval 
on each voucher, and forwarded all vouchers applicable to construction projects 
to the disbursing officer, who recorded the approved expenditures on public 
vouchers, and issued instructions for the contractor's reimbursement. 

Whereas vouchers applicable to the operating projects were checked and ap- 
proved in the manner described above, the contractor was reimbursed as provided 
by the several contracts in accordance with bills rendered to the United States 
for the cost and profits agreed upon under each contract. The cost of manu- 
factured products in total is equivalent to the cost of the materials and labor 
utilized or consumed in production, and was verified in total by checking the 



3722 MUNITIONS INDUSTRY 

material cost with the cost of the materials used and on hand at the close of 
operations. 

In connection with the above statements, certain exceptions to the system 
described were found necessary as the work proceeded; viz, invoices were some- 
times paid prior to certification for receipt of material in order to obtain cash 
discounts, which otherwise would have been forfeited. Pay rolls, which had been 
held up for reimbursement on account of delays on the part of the United States 
auditors, were reimbursed for 90% of the total in certain instances prior to com- 
plete audit, with the understanding that the completion of the audit would be 
made in regular routine, in order that the contractor might be placed in possession 
of funds necessary to carry on the work. 

Under normal conditions it was the practice of the purchasing department, 
prior to placing orders for materials in quantity, to request vendors to submit bids 
or quote prices for comparison; but throughout the war period, this procedure was 
not always followed, as the interests of the United States were frequently l^est 
served by securing the materials required in the shortest possible time. The 
saving of a few dollars on the i>rice of materials at the expense of delay meant 
loss of time in the production of the munitions urgently needed. Vv'hereas it v.as 
the policy of the contractor to consider the factor of price, and the prices paid for 
materials and equipment were fair and equitable under the conditions then exist- 
ent, ability to furnish materials when required on the part of the vendor was also 
a paramount consideration. 

After shipments arrived at the plants, a record was made of the materials in 
each consignment as promptly as possible by employees of the contractor assigned 
for the purpose. This record, however, was not in all cases perfect, owing to the 
impossibility of avoiding errors in counting, weighing, and computing measure- 
ments of the vast quantities of materials of various kinds arriving at the plants 
during periods of congestion. The cars, however, had to be unloaded, as the 
contractor was under threat of embai'go by the Railroad Administration if held 
longer than a specified time, regardless of the practicability of immediately check- 
ing and recording the contents. 

The recording avA distribution of materials received at the plants was a stu- 
pendous task, as the work was progressing with such speed that usually the work- 
men were ready to utilize any materials available immediately upon arrival; 
therefore in addition to the difficulties described above in securing sufficient labor 
to unload cars and record shipments it was difficult to prevent the removal of such 
materials by overzealous employees before checking and recording could be 
completed. 

Wlien field work was at its peak at Old Hickory, cars vrere arriving at the rate of 
300 per day, and as many as 800 cars have been held on the sidings at one time due 
to the inability of the contractor to obtain sufficient laborers and checkers to 
unload cars as rapidly as they were received. 

The United States also provided inspectors and auditors who checked and 
verified the contractors receiving records and whose reports were available to the 
contracting officer in charge for the verification of invoices. The pay-roll depart- 
ments, located for convenience at the several plants, v.^ere divided, respectively, 
into three units, each under the direction of a chief clerk or supervisor as follows: 

Pay-roll department which recorded time, prepared pay rolls, recorded deduc- 
tions to be made from employees' wages, and prepared and signed the checks for 
payment of wages. 

The paymaster's department, which functioned in the actual paying off of 
employees, kept a record of the pay-roll receipts, unclaimed wages, etc. 

The auditing department, which maintained a checking system over the other 
departments and carefuU}' investigated all complaints by employees or others. 

The United States Government also provided a force of accountants at each 
plant under the direction of an auditor which maintained a rigorous supervision 
and check of the contractor's pay-roll records. The work of the Government 
auditing staff was carried on concurrently with the work of the contractor, and 
owing to tlie vigilance and close cooperation between the Government auditing 
staff and auditing staff of the contractor, losses on account of errors, fraud, or dis- 
honesty were reduced to a minimum. 

It is estimated by the contractor that the cost to the United States for main- 
taining the inspection and auditing system carried on throughout the period of 
construction and operation, excluding the cost of the contractor's office personnel, 
prior to October 1919 was approximately $1,000,000.00. 

In the manner described al)ove 76% of the disbursem.ents made by the con- 
tractor under its several contracts with the United States had been approved for 



I 



MUNITIONS INDUSTRY 3723 

reimbursement by the War Department prior to the beginning of the reaudit 
aiitliorized by the Philadelpliia Claims Board in October 1919. 

Reaudit. — Wlien the negotiations were in progress, wliich culminated in the 
cancellation of the agency contracts, and the execution of the contracts which 
superseded the cancelled contracts, the United States was confronted with the 
necessity of promptly providing plants and facilities for the manufacture of muni- 
tions which were essential for the protection of the lives of its citizens and the 
successful prosecution of the war. 

These contracts with the Du Pont Engineering Company were unusual; but 
unusual methods were necessary to cope with an unusual condition; and the 
War Department was cognizant of the fact that the Du Pont Engineering Com- 
pany was competent to build such plants and manufacture the munitions specified 
in the several contracts, provided it was not hampered by the necessitj^ of 
following the usual War Department procedure, and was allowed to use its discre- 
tion and initiative as to waj's and m.eans. 

After the armistice, however, when the munitions then being produced in 
quantities exceeding the most optimistic anticipations of the War Department 
officials, were no longer required, and field operations under the several contracts 
were terminated, the persons designated l)y the War Department to succeed the 
representatives in charge of the audit of the contractors accounts during the 
operating 'period for the i)urpose of completing the audit, were un\\illing to recog- 
nize the authenticity of the approvals of their predecessors, and consequently a 
complete reaudit was ordered by the Philadelphia Claims Board in October 1919. 
The vouchers, cancelled checks, and other records used during the reaudit were 
in the possession of the United States auditors, or were made available and acces- 
sible to them, and most of the primary records were held by them from sometime 
prior to January 1919 until June 1, 1922. 

Notwithstanding the fact that the audit was fro mi 75 to 80 percent complete 
prior to the beginning of the reaudit, for nearly three years a large staff of men were 
intensively engaged in making this reaudit at a cost, which the contractor esti- 
ma.tes was not less than .$500,000.00, including the cost of maintaining the con- 
tractor's office force employed in furnishing information in connection with the 
audit. 

Throughout the progress of this reaudit, the contractor was the recipient of 
hundreds of questionnaires listing thousands of vouchers, which indicated an 
exhaustive attempt on the part of the auditors to obtain evidence and informa- 
tion. There is no doubt that all of the primary vouchers and cancelled checks 
were examined and passed upon during this period. The present condition of 
some of the vouchers is mute testimony that they were handled and rehandled 
many times. Many are nearly worn to shreds, and nearly all are marked up with 
notes or have attached checking memoranda. 

Powder produced and delivered to the United States at Old Hickory was 
attested by acceptances signed by a representative of the United States. 

The United States was not billed with shells or loaded bags, as the essential 
materials vrere furnished bj' the United States and the bills rendered were for 
the cost of loading. 

Production records were kept at the plant, and the United States Government 
inspectors kept their own records in addition thereto. The cost is substantiated 
in total by the contractor's record of dis):)ursements. Materials procured for 
conversion into finished products, other materials acquired for operating purposes, 
and semifinished products on hand at the close of operations were recorded on 
inventories which were signed by representatives of the United States and the 
contractor. 

Prices. — With the exception of prices on certain specified component materials, 
the contractor was not limited under the terms of its several contracts as to the 
prices which were to be paid for materials or ecjuipment required in the construc- 
tion and operation of the several projects and whereas the contractor was enabled 
to save the United States a considerable sum on accovmt of availing itself of the 
services of the organized purchasing department of the E. I. du Pont de Nemours 
& Company and the experience of its employees, it should be borne in mind that 
throughout this period the prices of all commodities including such commodities 
as v.ere regulated by the various price-fixing bureaus of the United States, were 
unusually high, and frequently materials were very difficult to obtain regardless 
of prices offered. Prices of the principal materials purchased were compared with 
the prevailing market prices by the contractor and also by the United States 
Government contracting officer throughout the progress of the original audit. 



3724 MUNITIONS INDUSTKY 

While the reaudit was in progress the contractor was occasionally requested to 
explain prices which were alleged to be excessive, which is an indication that such 
prices had been compared with standards of some kind, and if this was done in 
the instances mentioned it would be fair to infer that the prices were to some extent 
subjected to scrutinj' and audit. 

Materials purchased from E. I. du Pont de Nemours & Co. and subsidiaries. — 
Certain component operating materials approximating $2,000,000.00 in value 
were purchased from E. I. du Pont de Nemours & Company which could not be 
procured advantageously from other sources, and it was the intent of the vendor 
to bill the contractor with such materials at cost. However, through an error 
in the purchasing department in omitting to adjust the cost of linters and shav- 
ings, the contractor was charged in excess of actual cost the sum of approximately 
$300,000.00. This overcharge was promptly refunded to the United States when 
the error was located and brought to the attention of the contractor. Although 
a rigid investigation was prosecuted by the Government auditors for further 
errors of this nature, no additional discrepancies in the prices charged by the E. I. 
du Pont de Nemours & Company for such materials were brought to the attention 
of the contractor. 

Certain special materials and equipment aggregating in value approximately 
$7,600,000.00 were purchased from E. I. du Pont de Nemours & Company 
under a contract which provided that E. I. du Pont de Nemours & Company would 
bill same at cost plus a profit of 10%. E. I. du Pont de Nemours & Company, 
however, waived this profit and billed the material at cost including amortization 
of certain facilities which were installed for fabricating the equipment. 

The total profit which would have accrued to E. I. du Pont de Nemours & 
Company on account of this contract would have been $760,000.00, whereas the 
charge made by E. I. du Pont de Nemours & Company for amortization of 
additional facilities aggregates approximately $475,000.00. 

Automobiles manufactured by General Motors Corp., in which E. I. du Pont 
de Nemours & Company is financially interested, were purchased from dealers 
in the vicinity of the several plants, but a greater number of cars of other makes 
were specified in our requisitions. Automobile and accessory bills were all 
carefully audited by the United States as indicated by the questions on record 
pertaining thereto. 

Paints and varnishes were bought to some extent from the Harrison Paint 
Works, a subsidiary of the E. I. du Pont de Nemours & Company, as deliveries 
were assured. 

No considerable purchases other than above were made from subsidiaries or 
companies in which the E. I. du Pont de Nemours & Company was financially 
interested, nor was any preference given to such corporations. 

Substantiation and proof of expenditures. — The several contracts entered into 
between the United States and the du Pont Engineering Company contained 
practically the same fundamental provisions which may be stated as follows: 

The contractor was authorized to do all things necessary or convenient in 
connection with the work. 

The contractor was to be reimbursed for all exi^enditures of every character 
and description upon presentation of satisfactory proof of disbursement. 

The contractor was to be protected from any and all liabilities arising out of 
or in connection with contracts. 

All vendors' invoices were numbered in series and entered on registers, the total 
of which were periodically posted to a controlling account on the general ledger 
as a credit. All disbursements in payment of invoices were recapitulated from 
check stubs and posted periodically to the same controlling accoiuit as a debit. 
The balance in this account at the end of any period indicating the total of unpaid 
vendors' invoices. This balance was reconciled periodically by comparison with 
the total of unpaid invoices entered on the registers, thus mathematically proving 
that the disbursements were in accord with the invoices recorded as paid. 

The Government auditors, during the progress of the audit and also during 
the reaudit, "substantiated" disbursements by comparing canceled checks 
endorsed by the vendors with the invoices. 

Law courts regard an endorsed, paid check, after identification with a specific 
invoice, as conclusive evidence of payment, consequently it would appear that the 
paid canceled checks of the vendor are "satisfactory" evidence of disbursement. 

Authority. — Under the terms of the contract the Du Pont Engineering Company 
was authorized to do all things necessary or convenient in connection with the 
construction or operation of the plants, therefore, no further Government pro- 



MUNITIONS INDUSTRY 3725 

curement orders or further Government authority was required or obtained for 
making specific expenditures. 

Tlie contractor delegated, to direct various departments, certain experienced 
employees, whose duty it was to know the requirements of such departments 
and procure such materials, labor, supplies, etc., as might be required for the 
prosecvition of the work, and when invoices were received the departmental 
directors' approvals thereon indicated that the said materials, supplies, etc., 
were necessary and were for use in connection with the projects specified. 

The United States Government, as herein above stated, maintained a staff of 
men at the plants who were instructed to check up and to audit bills in connec- 
tion with materials received, and inspectors to report any delinquincies which 
might have existed on the part of employees of the contractor. 

Applicability to contract. — -Throughout the progress of the reaudit thousands of 
vouchers were returned to the contractor with requests from the United States 
contracting officers to establish "applicability to the contract". Applicability 
to the contract, the contractor assumes, is proof that the materials in question 
were for use in constructing the plants or for the purpose of producing finished 
products. Preceding paragraphs relate the methods adopted and used by the 
contractor for procuring materials and certification of expenditures therefor. 

Materials purchased were either utilized in construction, consumed in the pro- 
duction of manufactured products, or left on the premises at the several plants 
and turned over to the United States property custodian with the plants, with 
the exception of certain waste products and salvage, which were sold in accordance 
with Government orders. ^Jo history was written or certifications recorded 
regarding the utilization or final disposition of the specific materials billed on each 
invoice, consequently the approvals or accredited representatives of the con- 
tractor and the United States are the only available proofs of "applicability". 
It is obviously impracticable at this date to identify any purchase of specific 
material with the actual inaterial in its present location and condition, and any 
number of audits would prove futile in the production of supplementary proofs 
of "applicability". 

Receipt of material. — -All vouchers transmitted to the contracting officers of 
the United States were approved by the contractor's representative for receipt of 
material, and inasmuch as no further certification was required under the terms 
of the contracts, which provided that the contractor should do all things neces- 
sary or convenient in connection with the construction and operation of the 
plants. However, it was noted that most of the vouchers suspended by the 
auditors for alleged lack of proof as to receipt of materials were supported by the 
plant receipt of material records, most of which had been approved by represent- 
atives of the United States, and by transportation companies receiving records. 

Major R. R. Farr, special representative of the Assistant Secretary of War, 
delegated to supervise the audit of the Du Pont Engineering Company contracts, 
investigated the conditions asserted by the contracting officer in reference to 
receipt of m.aterial, and issued a decision accepting the existing proofs as evidence 
that such material was received, with exceptions as to known shortages, which 
subject was acted upon later by supplementary decisions supporting the con- 
tractor's position. 

Losses on account of miscounts, errors, goods lost in transit, etc., were recouped 
whenever possible by instituting claims and other methods of procedure usually 
practiced in such cases. In this manner a considerable amount was collected and 
refunded to the contractor. There were, however, losses which could not be 
recouped on account of the inability of the contractor to produce evidence 
of loss and in some cases alleged losses were undoubtedly the result of errors on 
the part of receiving clerks in properly recording and counting material arriving 
at the plant. Such losses are unavoidable in the carrying on of operations of 
great magnitude in times of stress and the contracts provide for such contingen- 
cies, stipulating that the contractor was to be reimbursed for all expenditures 
of every character and description. 

Commissary losses. — Losses consequent to the establishment and maintenance 
of stores, restaurants, cafeterias, etc., usually referred to as commissary losses, 
in connection with contracts whereunder both construction and operating projects 
were involved, were distributed between construction and operation costs in the 
ratio of the respective total labor cost. This method and ratio having been 
agreed to by the contracting officer in charge at the time. Charges and credits 
to this account in the form of vendors' invoices, cash vouchers, etc., were checked 
by the United States Government auditors, who also familiarized themselves 
with the method and ratio used, but made no objections during the original 



3726 MUNITIONS INDUSTRY 

audit or throughout the reaudit to the procedure or ratio used in distributing 
commissary losses. 

Comptroller^ s decision. — The contracts provide that all matters in dispute be- 
tween the United States and the Du Pont Engineering Company shall be adjudi- 
cated by the Secretary of War, consequently Major Farr, wlio had been dele- 
gated by the Assistant Secretary of War to act as his representative, was 
apparently acting within bis rights in disregarding the alleged decisions of 
the Comptroller relating to certain vouchers, which had been presented to him 
by the contracting officer. 

General. — Throughout the reaudit the contracting officers ignoring the ap- 
provals on the face of the vouchers establishing authority and applicaJjility, and 
the canceled checks "substantiating" the disbursements, returned thousands of 
such vouchers with rec|uests for information or evidence to establish authority, 
applicability, substantiation, receipt of material, etc. 

Most of the recommendations for disallowance and suspensions made by the 
contracting officer were disposed of by Major R. R. Farr, who was appointed to 
act as special representative of the Assistant Secretary of War in directing the 
contract unit emploj^ed in auditing the accounts of the Du Pont Engineering 
Compa.ny. In some instances, however, a,ppeals from Major Farr's decisions 
were made to the War Department Claims Boa,rd and the Assistant Secretary 
of War. 

The persons who supervised and directed the reaudit of the Du Pont Engineer- 
ing Company at the beginning were apparently obsessed with the idea that thej^ 
expected to "find something which the contractor was desirous of concealing and 
consequently an air of secrecy a,nd mystery prevailed for several months there- 
after. Employees assigned by the claims board to carry out this audit refused 
to consult with employees of the Du Pont Engineering Company or to disclose 
their objects in seeking various records and iii certain instances made state- 
ments to the effect that they had bee;i instructed by their superiors not to dis 
cuss anything with employees of tlte Du Pont Engineering Co. as all matters 
requiring discussion would be presented to the Du Pont Engineering Company 
through the proper channels. Thus a great deal of time was lost by the Govern- 
ment emploj-ees in vainly seeking for facets or information which the employees 
of the contractor could have furnished in a very much shorter time. No record 
of hidden transactions existed and obviously the persons who had expected to 
find "something big" were disappointed. 

Later a different line of tactics was tried out, viz. the listing of thousands of 
vouchers and appending at the bottom of such lists indefinite questions, followed by 
a statement that the contractor was invited to submit any information or evi- 
dence which it desired to substantiate disbursements. Inasmuch as the con- 
tractor considered that the evidence already presented was sufficient to comply 
with the requirements on the contracts it was practica,l]y impossible for it to 
determine from such ciuestions the specific information which the auditors de- 
sired, but nevertheless all such questions were answered b}' the contractor to 
the best of its ability. This course was pursued for approximately a year when 
it became obvious to all parties concerned that no great progress was being made 
.toward bringing the reaudit to an end. Every invoice apparently was subjected 
to a microscopic examination in an effort to find something lacking, which was 
technically required by such rules and definitions as had been adopted for 
carrying on the reaudit. 

Vouchers were not checked by one set of accouritants only, but were apparently 
rehandled by different i)ersons and if any stone was left unturned in the effort 
to discover dishonesty, fraud, or wilfuU negligence on the part of the contractor 
or its emplo\'ees, it must have been an exceedingly small pebble and so thoroughly 
hidden that a microscope would not reveal its presence. Whereas thousands of 
vouchers were suspended by the auditors, erroneously in some instances, on 
account of their failure to locate offsetting entries, or to observe attached papers 
and approvals, most of the disallowances were the result of the contractor's in- 
ability to prodvice, several years after the completion of the work, certain kinds 
of technical evidence which were required under their interpretations of certain 
rules and definitions wiiich had no part in the contracts between the United 
States and the Du Pont Engineering Company. 



MUNITIONS INDUSTRY 3727 

Exhibit No. 1200 

I Reprinted from the New Republic of Oct. 3, 1934] 

Other People's Money 

THE DU fonts ARE LESS THAN FRANK A SUCCESSFUL REORGANIZATION WHEN 

ARE WAR PROFITS NOT WAR PROFITS? 

At the hearings of the Senate Committee on Munitions, Senator Gerald P. Nye 
sought to show that the foundation of the great Du Pont industrial empire was 
the profits made from the v ar. This Mr. Pierre du Pont flatly denied and later 
Mr. Lammot du Pont energetically explained away by saying that the vast 
acquisitions made by the Du Pont company since the war were made, not out 
of profits, but chiefly by absorption of other companies through an exchange of 
stock involving no cash outlay whatever. In this I think the Messrs. du Pont 
were less than frank. And I shall try to prove it. 

First let me preface this with the statement made bj^ Mr. Pierre du Pont that 
at the conclusion of the war the Du Pont company booked its surplus as $71,- 
000,000 and that though this was a goodly sum, it represented all that the com- 
pany had to show for the so-called "vast wai- profits." 

I shall put aside for the moment the simple arithmetical calculation that this 
is the sum required to pa^' 200,000 men in the trenches for a full year. It is not 
to be supposed that these 200,000 men have .$71,000,000 left at the end of a year 
of fighting. The entire amount is consumed in caring for the families or in 
meeting the simple wants of the soldier himself. This $71,000,000 was what the 
Du Pont company had left, over and above all salaries, outlays, expenses, at 
the end of the war. If this were all, it seems to me it would be quite enough. 

But the facts are something different. I beg the reader to follow these figures 
closely in order to see how well the carefree statements of great financiers will 
stand examination. 

At the end of 1913 the Du Pont company had assets amounting to $74,816,826. 
Against these, however, there were outstandng bonds, preferred stock, bills 
payable, deferred liabilities, etc., amounting to $39,708,437. The common 
stock, therefore, had a valuation on the company balance sheet of $29,426,100. 
To this must be added the surplus of $5,682,289. Thus the free assets, the value 
allocated to the common stockholders, was $35,109,389. 

Then came the war in Europe. The Du Ponts began to make enormous sales 
to the Allies. In the year before the war the net profits were $5,769,132. In 
1915 they were $57,840,788. This only partly states the fact. Huge sums in 
cash were advanced by the Allies to the company to enable it to make plant 
expansions. In each year, these expenditures, made out of these advances, were 
written off gradually. 

Then in 1915 a new company was formed. I will not befuddle this account 
with names. The new company, which really represented only a slight change of 
name, bought out all the assets of the old company foi $120,000,000, which it 
paid for in stock. When this was over, the new company had the business. 
The old company had all the stock issued by the new company, amounting to 
$120,000,000. 

Then the old company proceeded to call in the preferred stocks and the bonds 
standing against the old company. These were valued at $33,990,801. (There 
may be a discrepancy of a few thousand dollars in these figures.) They were 
exchanged for stock. After buying them up, therefore, and canceling them, the 
common stockholders of the old company had for themselves $120,000,000 of 
stock paid to them by the new company, less the $33,990,801 paid for retiring 
the preferred and bonds. This left them debenture and common stock valued 
on the new company's balance sheet at $86,009,199. 

This, then, was the first gain of the Du Pont common-stock holders. They 
gained in this reorganization the difference between the old $29,000,000 of common 
and the new $86,000,000 of common and debenture stock which they retained. 
I assume they continued to hold it. 

At the end of the war, then, they had thi3 $86,000,000 of common and deben- 
ture stock plus the $71,000,000 of surplus which had been piled up. 

But they had a good deal more. They had the approximately $141,000,000 
in cash dividends which had been declared. 



83876— 35— PT 15 13 



372S MUNITIONS INDUSTEY 

In those war j-ears they bought powder factories, chemical factories, paint 
and lacquer companies, and other related industries and all out of earnings. 
There were no exchanges of stock. Moreover, they bought a one-fourth interest 
in the stock of the General Motors Corporation, and this was bought with earn- 
ings. How much this is worth to the company may be seen from this simple fact. 
In 1929, the last big year, the dividends from the General Motors stock amounted 
to over half of all the earnings of all the extensive Du Pont enterprises. That 
stock is now carried at a book value of $147,000,000 on the company's books and 
in the six years up to and including 1929 brought into the du Pont company 
$142,000,000 in earnings. 

After the war, with this vast foundation, these huge earnings, the immense 
power and prestige of the company, it was able to acquire a large number of 
industries by an exchange of stock. But to say that they made only $71,000,000 
out of war, that the swollen war profits are not the foundation of their far-flung 
interests of today, is to impose on the credulity and common sense of their 
listeners. 

Mr. Ir^n^e du Pont made another remark over and over again. He insisted 
that his company had made no profit out of its American war orders. It had 
made profits, of course, but these profits were less than the taxes the Government 
took back from the company during the war. Here again Mr. du Pont was less 
than frank. In those two war years the Du Pont company made enormous 
profits out of its sales to the AUies and to the United States Government. On 
those total sales it paid income taxes. It may be that the total income taxes 
were more than the profits made from the United States. But all the income 
taxes paid out were not paid on the profits made from America. If the taxes 
allocated to the American profits are measured against the American profits 
then it will be seen that the Du Pouts did make a handsome profit out of this 
Government during the war. They should not be allowed to do that again. 

John T. Flynn. 



Exhibit No. 1201 

War Department, 
Washington, Dec. 10, 1934. 
Honorable Gerald P. Nye, 

Chairman Special Committee Investigating the Munitions Industry, 

United States Senate. 
Dear Senator Nye: Reference your letter dated November 30, 1934, per- 
taining to War request no. 31, there is inclosed herewith two photostatic copies 
of records of this office, indicating. the experience of George R. Foulke, Jr., prior 
to his commission in the ordnance department. 

A statement of total advances to the du Pont American industries and the 
purposes of such advances has not as yet been located, but will be supplied as 
soon as possible. 

Copy of letter from Major Booton to Arthur Carnduff, special assistant to the 
Attorney General, dated June 15, 1923, is inclosed herewith. 

In accordance with telephonic request from Mr. Higgins, there is also inclosed 
twenty photostatic sheets from the records at Frankford Arsenal indicating the 
papers withdrawn from the files stored there pertaining to the du Pont Engineer- 
ing Company and turned over to James H. Fortune, accountant of the Depart- 
ment of Justice, in connection with an investigation being made approximately 
ten years ago. 

Very sincerely yours, 

Geo. H. Dern, 

Secretary of War. 
23 Incls. 



MUNITIONS INDUSTRY 



3729 



Frankford Arsenal, 
Philadelphia, Pa., September 18, 1924. 
Received from Mr. F. K. Wildermuth the following cost-summary sheets: 

du Pont Engineering Company — Seven Pines operation 



Summary 
no. 


Amount 


Description 


Summary 
no. 


Amount 


Description 


1 


$47), 761. 88 
160, 058. 20 

9, 983. 99 
28, 157. 37 

3, 322. 10 

79.20 

21,131.61 

236. 21 

1, 648. 97 

3, 146. 85 
17, 402. 32 

7. 009. 59 
17, 512. 43 
28, 675. 55 
383. 30 
16, 189. 37 
26, 700. 84 

3, 234. 34 


Direct labor. 
Administrative and 
general. 

Do. 

Do. 

Do. 

Do. 

Do. 

Do. 

Do. 

Do. 

Do. 

Do. 

Do. 
Direct material. 

Do. 
Indirect material. 

Do. 

Do. 


4 


$2, 223. 07 

50, 674. 4) 

173, 708. 64 

7,131.91 

285. 65 

222. 50 

3, 251. 73 

178. 66 

62, 567. 09 

739. 87 

507. 57 

290. 31 

779. 27 

52.80 

144. 50 

400.00 




1 


5 


Do. 




6 


Do. 


2 


7 


Do. 


3 


8 


Do. 


4 


9 


Do 


5 


10 .. .- 


Do. 


6 .. 


11 . 


Do 




1 




8 


2 


Do. 


9 


3 


Do. 


10 


4 


Do. 


91 


5 


Do 


12 


6 


Do. 


1 


7 


Do 


1 


8 


Do. 


o 






2- . 


1, 125, 852. 22 




3 









James H. Fortune, 
Accountant, Department of Justice. 
Per B. P. Wheatley. 



du Pont Engineering Company — Tullytoivn 



Summary 
no. 


Amount 


Description 


Summary 
no. 


Amount 


Description 


20 


$10,797.81 

9, 197. 84 

3, .302. 31 

26, 980. 17 

909. 48 

871. 15 

62, 601. 50 

34, 069. 7fi 

8, 449. 53 

47, 747. 72 

44, 545. 38 

40.96 

10, 349. 58 

13, 621 85 

3, 017. 21 

108. 78 

383. 38 

25, 930. 02 

17, 661. 93 


Factory overhead. 

Do. 

Do. 

Do. 

Do. 

Do. 
Administrative and 
general. 

Do. 

Do. 

Do. 

Do. 

Do. 

Do. 

Do. 

Do. 

Do. 

Do. 

Do. 
Indirect material. 


21 


$68, 508. 42 
19, 008. 10 
12, 078. 07 

N"one. 

320. 17 
50, 270. 00 
74, 748. 39 
32, 19.5. 27 

502. £0 

849, 460. 46 

57, 769. 52 

61, 830. 87 

51, 872. 85 

817. 58 

702. 63 
1, 430. 34 




21 


90 


Do 


22 


23 

24 


Do 


23 -. 


Do 


24 


25 


Do 


25 


20 




20 


21 


Do 




22 


Do. 


21.. 


23 

20 


Do 


22 




23 


21 

20 


Do 


24 


Special purchases. 
Do 


25 


21 


26 


09 


Do 


27 


23 


Do 


28 


24 


Commis.sary. 
Do 


29 


25 


30 


20 

27 


7, 850. 71 
10, 350. 21 


Undistributed. 
Power, heat and light. 


31 


20 









James H. Fortune, 
Accountant, Department of Justice. 
Per B. P. Wheatley. 



3730 



MUNITIONS INDUSTRY 



Office of the Director of Accounting Investigation, 

War Transactions Section, Department of Justice, 
150 Old Land Office Building, Washington, D. C, May 12, 1924. 
Du Pont Engineering Company 

Received from Colonel Odus C. Honiey, commanding officer, Frankford 
Arsenal, Philadelphia, Pa., the following photostatic copies of contracts and 
audit report: 

contracts 
Old Hickory: 

Supplemental contract dated April 1, 191S, War Ord. P4755-711-E. 
Supplemen.tal articles of agreement dated Nov. 2, 1918 War Ord. P4755- 
711-E. 
Penniman: 

Articles of agreement dated Dec. 31, 1917. 
Articles of agreement dated Mar. 27, 1918. 
Contract dated April 12, 1918. 
Supplemental agreement dated April 19, 1918. 
Supplemental agreement dated May 23, 1918. 
Supijlemental articles of agreement dated Oct. 9, 1918. 
Procurement order dated Jan. 25, 1918, War Ord. 2337-1228-A. 
Tullytown and Seven Pines: Contract dated March 2nd and June 1, 1918, re- 
spectively (one contract covering operation of bag-loading plants). 
Ives: Articles of agreement dated Oct. 2, 1918. 

Supplemental report of audit review, Seven Pines Contract, P-9050-960-E, 
dated August 15, 1921. 

James H. Fortune. 
Not to be returned by Mr. Fortune. F. K. Wildermuth, 5/13/24. 



Frankford, Arsenal 
Phila. Pa., September 18, 1924. 
Received from Mr. F. K. Wildermuth the following cost summaries: 



Du Pont Engineering Company (Ives) 



Summary number 

1 

2 

3 

4 

5 

6 

7 



10. 
11. 
12. 
13. 
14. 
15. 
16. 



Amount 
$61, 475. 90 

22, 681. 17 
104, 102. 71 

89, 550. 45 



128, 602. 28 

2 14,' 507.' 60 

87, 518. 30 

98, 318. 10 

319, 508. 46 

174, 084. 55 



Summary number Amount 

17 $735, 407. 23 



I 



18. 

19 

20 

21 

22 

23 

24 

25 

26 

27 

S. O. 1-R_ 
S. O. 2-R. 



138, 996. 72 
27, 979. 31 
98, 965. 13 
70. 16 
21, 032. 62 
6, 738. 49 
39, 234. 13 
67, 247. 52 
27, 460. 43 
14, 485. 46 

110, 118. 21 
51, 065. 21 

2, 639, 150. 14 



Approved cost on Ives, applied on advances. 

James H. Fortune, 
Accountant, Department of Justice. 
Per B. P. Wheatley. 



[1st Ind., AWH/amh, Tel. War Br. 2031, B-2-302] 

August 16, 1919. 
FCA 160/37269 du Pont Eng. Co. 

From: Ordnance office. Administration Division, Cost Accounting Section, 
To: Mr. C. H. Hartman, Cost Accounting Section, U. S. Ordnance Office, du Pont 
Engineering Company, Wilmington, Del. 



I 



MUNITIONS INDUSTEY 3731 

1. All papers listed in cover letter are forwarded herewith. 

2. The decision of the contracting officer will enable you to disjwse of the extra 
compensation. 

C. L. Tewksbury, 
Major, Ord. Dept., U. S. A. 
By E. A. Jones, 
Chief Statistician. 
Incs. 

Frankford Arsenal 
Phila. Pa., Sept. 18, 1924. 
Received from Mr. F. K. Wildermuth the following cost summary sheets: 

Du Pont Engineering Company {Penniman construction) 
Summary number Amount Summary number Amount 



224 $664, 294. 06 

225 7,875.32 

226 35,949.97 

227 223, 245. 75 

228 100, 625. 20 

229 105, 143. 13 

230 1 425, 587. 10 

231 45,531.66 



232 262, 091. 39 

233 ' 504, 064. 01 

234 165, 393. 01 

235 14,357.91 

236 95,319.59 

1-R 406, 008. 61 

2-R 13,446.54 

3-R 451.68 

James H. Fortune, 
Accountant, Department of Justice. 
Per B. P. Wheatley. 



Wilmington, Delaware, July 15th, 1919. 

From: Cost accounting branch, accounting section, ordnance department, 
Du Pont Engineering Company. 

To: Ordnance office, administration division, cost accounting section, Wash- 
ington, D. C. 

Subject: Extra compensation to employees — Du Pont Engineering Company. 

1. Attention is invited to letter addressed to this office dated May 2nd, FCA 
2488/177 Miscl., Finance Division, O. O., War Department. 

2. Under this cover please find all inclosures accompanying letter of May 2nd, 
and in addition thereto letter addressed to the writer under date of June 4th, 
1919 by Mr. Wm. Coyne, vice president, E. I. du Pont de Nemours & Company. 

Report of findings is made as follows: 

Proposed extra compensation to employees for meritorious service on construc- 
tion; proposed extra salary compensation to employees discharged due to cessation 
of war work; proposed moving and travelling expenses paid to employees dis- 
charged due to cessation of war work on contracts as follows: P-4755-711-E, 
Old Hickorv smokeless powder plant; P-2337-1228-A, Penniman shell and 
booster Id. plant; P-15271-1433-E, Ives T. N. T. plant; P-3509-643-E, Tully- 
town bag-loading plant; P-9050-960-E, Seven Pines bag-loading plan... 

3. The principle upon which bonus for meritorious service was based is ex- 
plained in Mr. Coyne's letter of June 4, 1919, attached, which conforms with the 
general policy of E. I. du Pont de Nemours & Co. 

4. Attention is directed to the detail schedule on which is shown salary received 
by each employee interested as of January 1918, March 1918, August 1918, 
and May 1919, as well as the date of his transfer from the parent company, as 
well as the extra compensation which he received on account of his being released 
from the service of the contractor, due to the cessation of work. Tlic point is 
raised as to whether in the case of an employee receiving both extra compensation 
and a meritorious lionus there was not dual payment. Contractor holds, however, 
that such is not the case, and that the meritorious bonus was granted for signal 
services rendered during the time of employment, and that the extra compensation 
was in lieu of a formal notice usually given an employee dropped through no 
fault of his own. 

5. It is the opinion of this office that in no case should an employee be eligible 
for more than one month extra salary compensation under the ruling of E. I. du 
Pont de Nemours & Company's executive committee, as the contract was in 
force less than one year. The term of service is shown on the detail schedule, so 
that the contracting officer may be guided in making his final decision. 

lOredit. 



3732 



MUNITIONS INDUSTRY 



6. This office deemed it necessary to establish the fact as to whether the pro- 
posed meritorious bonus was more liberal than those established in previous 
years, and the audit of this office discloses the following facts: 



Du Pont Engineering Company 


E. I. du Pont de Nemours & Co. 


Name of dept. 


Extra com- 
pensation 
as percent 
of salaries 
paid 1918 


B bonuses 
paid per- 
cent of 
salary 1918 


B bonuses 
paid per- 
cent of 
salary 1917 


B bonuses 
paid per- 
cent of 
salary 1916 




14.39 
20. 16 
4.78 


47.8 

40.48 

24.79 


129.8 
156. 04 
43.19 


124.7 




146. 35 




41.49 







7. It might also be mentioned that in quite a number of instances grants of 
both common and debenture stock have been made to individuals whose names 
appear on this schedule, increasing the net amount of the bonuses. This may 
be made more clear by the following explanation: It has been the practice to 
set aside a certain block of stock each year for an individual, it being understood 
that he is to receive all the earnings of that stock and to acquire title to one-fifth 
its value each year, full ownership being vested in him at the end of the fifth 
year. Therefore, in making our computations for the years 1916, 1917, and 
1918, there was taken into account only the amount earned i. e., dividends on 
the full amount of stock, plus one-fifth of its book value at the close of 1916; 
dividends plus two-fifths at the close of 1917 and dividends plus three-fifths at 
the close of 1918. 

8. It is suggested that this meritorious bonus, if reimbursed, be without profit. 

9. Relative to travelling and moving expenses and salaries allowed account of 
discharge due to cessation of work, schedules are submitted marked respect- 
ively a, b, c, and d, covering extra-salary compensation allowed to employees. 
It is impossible to submit a schedule covering travelling and moving expenses, as 
these expenses are submitted for reimbursement on individual vouchers, and are 
scrutinized and passed on their individual merits. Doubtless, however, figures 
submitted by the contractor as an aggregate represent the amount which he has 
disbursed, and for which amount he will seek reimbursement, such reimbursement 
to be made through cost accounting branch on nonquestionable items, and by the 
cost accounting branch through district claims board on items of dispute. 

10. It is also suggested that reimbursement of travelling and moving expenses, 
if made, be without profit. 

11. Attention is also invited to letter written by Mr. Wm. Coyne, dated 
April 2d, to C. B. Landis on the question of whether employees returning to 
the parent company were allowed the salaries the same as if they had been 
discharged. Mr. Coyne's statement while no doubt made in perfectly good faith 
is not borne out by the facts, as this office finds that in only about twenty-five 
(25) cases did employees return the difference between their new and old rate, 
and thereby cure their former employment record. In the majority of cases, in 
fact, in all of the cases except in the twenty-five (25) just hereinbefore mentioned 
have the employees retained the amount of extra salary given them for "release 
on account of cessation of war work", and accepted the status of a new employee 
with E. I. du Pont de Nemours & Company, or subsidiaries. , 

12. Attention is also invited to a misstatement in letter of January 15tht 
paragraph 1, written by Mr. Wm. Coyne to Col. R. P. Lammott, Procuremen 
Division, relative to the item of return transportation. In this letter it is stated 
that pay rolls employees were to be returned to the place of their being recruited. 
In actual practice, employees were not only returned to their domicile, but were 
allowed an amount equivalent to a return to their domicile, and, in some cases 
were allowed amounts in excess of that figure. These items are being individually 
and specifically questioned, and wherever the cost accounting branch, as repre- 
sented by tliis office, cannot approve for reimbursement, such differences are held 
as being in "dispute" and will be submitted to the district claims board for 
final adjudication. 

13. Respectfully submitted. 

C. H. Hartman, 
Supervising Accountant in Charge, 

Ordnance Department, U. S. A. 
chh;grat. 



MUNITIONS INDUSTRY 



3733 



Information requested by Mr. J. H. Fortune, visit 9/9-10-12-13/1924. 
Old agency contract, Peu, & O. H. 

1. Disbursements by various D/0. 

2. Details re summaries applied against contractual advances 0. H. & Peu. 

3. E. I. du P. departmental charges (excluding salaries and travel exp.) 
$126,071.30. 

(over) 

4. Bonus for saving transportation of nitrate soda. 

(over) 

5. Profit adjustments. 

(over) 

6. Copy of McRoberts' testimony. War Dept. Claims Board meeting March 
1920. Pages 233 to 238. 

7. Summaries 694 to 752 O. H. construction. 

8. Statement of recoupment of advances on Du Pont contracts. 

9. Statement of balance of suspended items at clost of audit as at 8/31/22 or 
6/31/22. 

(over) 
Information concerning items 3, 4, 5, 9 will probably be found on U. S. G. 
records contained in packages which W. G. Kileen and R. R. Farr left with the 
contractor in Aug. 1922. W. G. Kileen took these papers away from the con- 
tractor just before the meeting was called in Wash, of Peebles, Yonmans & Kileen 
& Farr about December 1923, for information just received from W. A. Shafer, 
thru J. Fortune, Dept. of Justice. These records were found by J. Fortune in 
Washington 9/11/24. 

Frank K. Wildermuth. 



Frankford Arsenal, 
Philadelphia, Pa., September 18, 19S4- 
Received from Mr. F. K. Wildermuth the following cost summaries: 





Du Pont Engineering Company (Penniman operati 


on) 


Summary 
no. 


Amount 


Description 


Summary 
no. 


Amount 


Description 


R-1 


.$1,942,857.24 

1,074.72 

134. 51 

138,941.93 

23, 824. 37 

363. 58 

815, 229. 04 

72, 037. 76 

S3, 216. 74 

9, 079. 49 

2, 386. 52 

14, 328. 12 

236, 672. 32 

4,515.65 

19, 002. 64 

1, 520. 87 

4, 904. 23 

73,047.45 

242, 022. 10 

28, 712. 55 

93, 798. 97 

23, 985. 81 

555. 71 


Direct labor. 

Do. 

Do. 
Direct material. 

Do. 

Do. 
Indirect material. 

Do. 

Do. 

Do. 

Do. 

Do. 
Increased facilities. 

Do. 

Do. 

Do. 

Do. 
Administrative and 
general. 

Do. 

Do. 

Do. 

Do. 

Do. 


7 


$134. 30 

1, 637. 45 

14, 850. 91 

82.05 

362. 86 

84, 988. 15 

8, 479. 00 

75, 542. 78 

5, 738. 13 

224, 538. 85 

15, 123. 27 

668. 98 

13, 169. 03 

8,414.37 

I 1, 056, 015. 56 

4, 087. 46 

86, 026. 98 

11,098.06 


Administrative and 


2... 


8 


general. 


3 


Do. 


1 


9 


Do. 


2 


1 


Factory overhead. 


3 


2 


Do. 


1 


3... 


Do. 


2 


4 


Do. 


3 


5 


Do. 


4 


6 . . 


Do. 


5 


7 


Do. 


6 


8 


Do. 


J 


9 


Do. 


2 


10 


Do. 


3 


11 . 


Do. 


4 


12 


Do. 


5 


13 


Do. 


1 


14 


Do. 




1-R 


Do. 


2 


Total ap- 
proved cost 
(past paid 
by Finance) 




3 


3, 302, 139. 39 




4... 




5 




6 ._ 









1 Credit. 

Total approved co.st (past paid by Finance). 



James H. Fortune, 
Accountant, Department of Justice. 
Per B. P. Wheatley. 



3734 MUNITIONS INDUSTEY 

Office of the Director of Accounting Investigation, 

War Transactions Section, Department of Justice, 
105 Old Land Office Building, Washington, D. C, May 12, 192 U. 
Du Pont Engineering Company 

Received from Colonel Odus C. Horney, commanding officer, Frankford 
Arsenal, Philadelphia, Pa., the following contracts, in connection with the above 
company: 

1. Typewritten copies of contracts: 

(o) Old Hickory, old agency contract, dated Jan. 29, 1918 (printed) 

(30 pages). 
(6) Old Hickory, new contract, dated Mar. 23, 1918 (18 pages). 

(c) Penniman supplemental agreement, dated July 17, 1918 (2 pages). 

(d) Penniman supplemental articles of agreement, dated Sept. 5, 1918 

(3 pages). 

(e) Ives supplemental contract, dated Oct. 2, 1918 (2 pages). 

(/) Ives subcontract between Dunn-McCarthy Co. and Du Pont Engi- 
neering Co., dated iMov. 2, 1918 (7 pages). 

{g) Contract between Mason & Hanger Co. and Du Pont Engineering 
Co., dated March 23, 1918 (subcontract) (9 pages). 

James H. Fortune. 

The above lists are those of extra copies in the files given to Mr. Fortune for 
his files. 

Philadelphia, Pa., September IS, 1924- 
Received this date from F. K. Wildermuth, Frankford Arsenal, Philadelphia, 
Pa., copies of summaries #694 to 752, inclusive. Old Hickory construction. Also 
copies of summaries of payments made to Du Pont Engineering Co., and direct 
to vendors in connection with them at Old Hickory powder plant covered by 
contract 100211, January 29, 1918. Old agency contract. 

B. P. Wheatley, 
Accountant, Dept. of Justice. 

For Mr. J. Fortune, in charge, Dept. of Justice investigation of Du Pont 
Engr. Co. contracts. 

Also received: Copy of statement of recoupment of advances dated Jan. 1923. 
Copy of pages 233 to 238; testimony of Col. McRoberts, at War Dept. Cl. Bd. 
Mtg. Information and explanation of summaries applied against contractual 
advances. Information and explanation of disbursements made on old agency 
contracts, Penniman, and Old Hickory. 



[Copy] 

May 22, 1919. 
Mr. C. H. Hartman, 

Accoxmtant in charge. Ordnance Department, Old Court House. 
(Attention Mr. L. W. Koch) 
Dear Sir: Our file C-1 and C-5. Du Pont Engineering Company, treatment 
of emploj^ees resigned or laid off on account of cessation of war work. We are 
enclosing herewith the following for your use in connection with the audit covering 
the figures given you by Mr. Britton of Mr. Coyne's office in connection with this 
subject: 

1. Old Hickory: Recapitulation — detailed statement of transportation of pay- 
roll employees. 

2. Old Hickory: Details showing individuals for whom transportation was paid, 
disbursement sheet numbers, etc. 

3. Penniman: Copy of letter from Mr. D. D. LeFevre to us dated March 28, 
subjected "Transportation of pay-roll employees". 

4. Penniman: Copy of telegram from Mr. C. H. Trask, resident engineer at 
Penniman, to us dated March 22. 

5. Penniman: Carbon copy of letter from Mr. C. H. Trask, resident engineer 
at Penniman to us dated March 19, 1919, subjected "Transportation of pay-roll 
employees." 

6. Penniman: Details showing expenditures as covered by disbursement sheets 
listed in Mr. Trask 's letter of March 19, 1919. 

7. Ives: Copy of letter from Mr. Lynch to us dated March 19, subjected "Re- 
turn transportation furnished employees." 



MUNITIONS INDUSTRY 3735 

8. Ives: Details showing employees, disbursement sheet numbers, etc. from 
whom transportation was paid. 

9. Old Hickory: Memorandum dated March 25, 1919, showing traveling and 
moving expenses allowed pay-roll and salary-list employees. 

10. Old Hickory: Carbon copy of letter from Mr. A. J. Brandt, resident engi- 
neer at Old Hickory, to us dated March 22 showing how above details were 
arrived at. 

11. Penniman: Memorandum dated March 25, 1919, showing traveling and 
moving expenses allowed pay roll and salary list employees. 

12. Ives: Memorandum dated March 25, 1919 showing traveling and moving 
expenses allowed pay-roll and salary-list em])loyees. 

The expenditures shown for Penniman and ives are to Felsruary 28 inclusive 
with the exception of Edward E. Pease and Jud Cleveland listed in the last sheet 
of details for Ives, which were paid after March 1. The figures for Old Hickory 
are to March 14, inclusive. 

Please return enclosures after they have served 3'our purpose. 
Yours very truly, 

H. M. Pierce, Chief Engineer. 
Per W. J. M. 
(Please receipt and return carbon copv.) 
WJM:TM 



[ACH/mbs, Tel. Br. 1444, B-2-325] 



August 14, 1919. 



From: Contract section, administration division, O. O. 

To: Cost accounting section, administration division, O. O. 

Subject: Du Pont Engineering Company — Extra compensation to employees. 

P-4755-711-E, Old Hickorv smokeless powder plant; P-2337-1228-A, Penni- 
man shell and booster Id. plant; P-15271-1433-E, Ives T. N. T. plant; P-3509- 
643-E, Tally town bag loading plant; P-9050-960-E, Seven Pines bag loading 
plant. 

1. Upon consideration of yours of July 22, 1919 (FCA 160-36763), the under- 
signed, as contracting officer, under date of July 24, 1919, gave contractor a letter 
as follows: 

"It is the opinion of the contract section and also of the undersigned as con- 
tracting officer, that the above contracts provide for, cover and include payments 
by the contractor to its employees of bonuses, compensation upon discharge, 
traveling expenses, railroad fare, etc., according to the general classification of 
statements furnished by you, the amounts of which bonuses, compensation upon 
discharge, traveling expenses, railroad fare, etc., to be determined according to 
the plan in use during the same period and previously by the contractor and 
contractor's parent organization, E. I. du Pont de Nemours & Co." 

2. It is the understanding and interpretation of this section and the contracting 
officer that all these classes of items used by contractor in statements submitted, 
and also specifically designated in attached letter, dated at Wilmington, Dela- 
ware July 15, 1919. 

(F. C. A. 248.8-216 Misc.), by C. H. Hartman, supervising accountant in 
charge to administration division cost accounting section, namely: 

(a) Proposed extra compensation to employees for meritorious service on 
construction, 

(6) Proposed extra salary compensation to employees discharged, due to 
cessation of work, 

(c) Proposed moving and traveling expenses paid to employees discharged, 
due to cessation of work, are included in and covered by the contracts, 
and are obligations of the United States, and that contractor is entitled to be 
reimbursed on account thereof. 

3. The exact amount of the various items to be reimbursed to contractor 
under the several classes and under the several contracts shall depend on the 
audit of the cost accounting section. 

4. It is understood that your section will function as to items and the deter- 
mination of amounts, also including the certification of vouchers. 



3736 MUNITIONS INDUSTRY 

5. Such other action as may be needed or required of the contracting officer 
to accomplish the above purpose will be furnished. 
By order of the chief of administration division. 

R. H. Hawkins, 
Lt. Col, Ord. Dept., U. S. A., 

Chief of Contract Section. 

By A. C. HiNDMAN, 

Major, Ord. Dept., U. S. A. 

Ends.— Letter 7-15 (F. C. A. 248. 8/216 Misc.). 15 sheets schedule attached- 
Letter June 4, 1919, contractor to C. H. Hartman. 1 sheet schedule attached- 
Letter (F. C. A. 248.8-177 Misc.), May 2, 1919. Copy letter April 26, 1919, 
contract sec. to cost ace. sec. Letter April 1, 1919, contractor to contract sec- 
tion. Letter April 11, 1919, contractor to contract section. Copy letter April 
2, 1919, Coyne to Landis. 2 copies, 15 sheets ea. schedule statements by con- 
tractor. Letter Jan. 15, 1919 (P248-5) by contractor to Col. Lamont, re meri- 
torious on construction. 2 sheets schedule by contractor attached. Memoran- 
dum opinion. Major Hindman. Letter Jan. 15, 1919 (P-248-6), contractor 
to Col. Lamont, re extra compensation. 3 sheets contractors schedule attached. 
Letter April 11th, contractor to contract section, enclosing letter from Coyne 
to Landis. 23 sheets contractor's schedule exhibit A. 35 sheets contractor's 
schedule exhibit B. 43 sheets contractor's schedule exhibit C. 1 sheet con- 
tractor's schedule exhibit D. 

Mr. Fortune wants the statements listed hereon if they can be found. 

WiLDERMUTH. 

5/10/24. 

Exhibit No. 1202 

[Copied from File No. P-4755-711E. P-600.1-377. CNB/meb.] 

War Department Procurement Division, 

Office of the Chief op Ordnance, 
Sixth and B Streets NW., Washington, D. C, April 27, 1918. 
To: Hon. Edw. R. Stettinius, Second Assistant Secretary of War. 
From: Procurement Division, Ordnance Department. 

1. I am handing you herewith printer's proof of contract with the Du Pont En- 
gineering Company for the construction and operation of the Nashville powder 
plant. I find that the corrected copies have not yet been returned from the 
printer's office. As soon as we receive these, which will probably be later today 
or Monday morning, I will send yovi a clean copy. I am advised, however, that 
the copy herewith enclosed is correct, and I trust it will answer your purpose for 
the time being. 

2. I regret that there was a mistake made yesterday in sending you the load- 
ing contract instead of this powder contract. 

Samuel McRoberts, 

Col. Ordnance N. A. 
By Chas. N. Black, 

Lt. Col. Ordnance N. A. 
Enc. 
1 copy contract. 

Exhibit No. 1203 i 

Ogden L. Mills, 
15 Broad Street, New York, December 14, 1934. 
The Chairman Senate Munitions Committee, 

United States Senate, Washington, D. C. 
Dear Sir: The New York press of this morning publishes a list of individuals 
whose annual income was a million or over during the years 1915 to 1918, re- 
ported to have been made public by your committee. 
This list includes mv name. 



I 
I 



I 



1 " Exhibit No. 1112", list of individuals reportinc: net incomes of $1,000,000 or over for any one or more 
of the years 1917 to 1920. Mr. Ogden L. Mills' name is not included in this list although that of his father, 
the late Mr. Ogden Mills, is included. See Hearings, Part XIII, p. 2923. 



MUNITIONS INDUSTEY 3737 

In including my name in this list, j'our committee has l^een guilty of an error 
which I must ask you to correct. 

During the vears mentioned, my income from all sources averaged approxi- 
mately $138,000 a year. 

No part of this income was remotely connected with the munitions business 
except, conceivably, dividends received on 250 shares of the Lackawanna Steel 
Company. 

It may be that your committee has confused me with my father, the late Mr. 
Ogden Mills. If so, may I add that I have examined his books, and that the 
facts do not justify the implication that his income was in any way connected 
with the war or munitions business. Except dividends on a comparatively small 
number of shares of Lackawanna Steel Company, which may or may not have 
manufactured war materials, his income was totally unconnected with any busi- 
ness engaged in the manufacture of war materials. 
Very truly yours, 

OLM:T. Ogden L. Mills. 



Exhibit No. 1204 

Marine Barracks, 

Navij Yard, Phila., Penna., Nov. 17, 1932. 
Mr. Walter B. Ryan, Jr. 

20 Pine Street, New York City. 

Dear Mr. Ryan: I got in touch with Capt. Edson in regard to the Nicaraguan 
order for Gl guns. He informed me that he considered that the new style com- 
pensators would be preferable on this order. I did not wire you for he said 
that he was getting in touch with you by telephone. 

Will you kindly send me one dozen of the new catalogues when they come out? 
Also send a few copies to the colonel, for he will be able to place them at the War 
College. 

I have been thinking over the foreign sales proposition and I have a proposal 
to make. I would appreciate it if you could see your way clear to extend the 
same discounts to me on foreign sales that you extend to Federal Laboratories. 
It is not our intention to compete with them. However, we also have many 
contacts and orders are apt to come through us at any time. In all probability, 
these orders will come from different sources than those available to Federal 
Laboratories. I am not saying that our contacts are better than theirs, but in 
some cases it is only natural that this should be so. But, in any case the propo- 
sition of commissions is the important point. You are familiar with the fact that 
these have to be passed around on all foreign sales. Naturally, if Federal Labora- 
tories should figure in on a sale in which they have had no part, there are going to be 
objections. This is all the more true for in every sale that we make there are 
going to be more people figuring in on the deal than would be the case if Federal 
Laboratories were to make the sale direct. This is due to the fact that we have 
had to first establish our contacts over here, and it will be necessary to take care 
of these contacts. 

Fortunately, or unfortunately, our contacts are all big ones and thej^ just 
won't be bothered unless the financial return is commensurate. They are not 
interested in small stuff. 

You are out to move guns and I feel confident that we can help you move them 
just as well as Federal Laboratories; that is, if we can make it v\'orth our agents' 
while. 

I do not see where Mr. Young will have an objection for he has granted us dis- 
counts on all of his equipment and gas that we may sell. If an order comes in for 
guns there will be an order for gas, etc., to go along with it. In other words, he 
also stands to profit — so it is reciprocal all along the line including compensators. 

Next, in regard to Nicaragua. This is a foreign sale and does not come under 
Federal Laboratories' existing agreement for domestic sales. If you know the 
history of the T. S. M. G. in Nicaragua you will know that at the beginning the 
powers that be were against the gun, speaking of the Marines. They did not 
even wish to give the gun a trial on the trails. Fortunately, we had an active 
agent who gave many demonstrations and after intensive effort on his part he 
finally brought the necessary high ranking officers around to his point of view. 
Then the playing up of the gun in the reports was not accidental. True, the 
gun did its stuff — ^but so did the other weapons. Next, our friend was made 
ordnance officer of the Nicaraguan Government and the initial orders for T. S. 



3738 MuisriTioisrs industry 

M. G.'s for the Nicaraguan government came through. All the above occurred 
in Nicaragua. 

You are now getting what will probably be the final order before the Marines 
pull out. A new government, the Sacasa gov. has come into power — a new 
deal all around. I have asked for commissions on foreign sales in general which 
we are able to inake. But here is what I plan doing specifically. I want Nica- 
ragua. If you can grant this I will have our friend make the necessary contacts 
probably the minister of war. We will have the commission on this sale of 61 
guns to pave the way, and it ought to make a nice incentive for sales to follow. 
Then, when the Marines pull out, the good work will continue. If this is not 
done, this order will probably be the last except for replacements. On the other 
hand, if we have the right party down there working for us and receiving a com- 
mission, the situation presents an entirely different picture. 

Would you kindly draw up the necessary papers, similar to the ones you are 
now making out for Young. You see, I really have to have some credentials 
before I am in a position to go ahead. In this agreement will j'ou kindly include 
Nicaragua specifically? 

Next, if you see what I am working for, and I believe you will, will you kindly 
let me know what the commission will be on this Nicaraguan order so that I 
may go ahead and make my plans. The commission should be the same as for 
other foreign sales. 

The time is short before the Marines pull out, and there is much to be done by 
air mail, so the favor of an early reply is recjuested. 

I am looking into the future on this stuff and I am out to help you sell guns. 
As you know, our record to date has not been bad, and I am certain that my plan 
is going to work. 

I forgot to mention, but will you kindly let me know what the commission is 
on spare parts? The best thing, if possible would be to send me the dope on 
commissions on everything that you handle. 

With best wishes, I am 
Cordially vours, 

(Signed) R. M. Cutts, Jr., 

Cutis compensator. 

P. S. — I do not know the price of the last guns that you sold to Nicaragua. If 
they were $147.50, they were at the U. S. Govt, price and they never should have 
gone out at this price. It cannot be continued after we withdraw and the time 
to make the break is now. I feel that this can be done and save face with the 
new model compensators providing you stamp the guns as per the Army specifica- 
tions. The new gun could then be called a new model and the price of $225.00 
could be charged. If the Marine Corps sold the guns to Nicaragua at the U. S. 
Govt, price I feel that they had no business doing it. At any rate we must let 
that pass and build for the future. Please let me know the price you are ciuoting 
on these guns and the price quoted on the old guns as soon as possible and I shall 
see if I cannot arrange things on this end. It may be possible to do so without 
killing the deal. Of course, I shan't do that. 

R. M. C, Jr. (Sgn.) 

("Exhibit No. 1205" appears in text on p. 3556) 



(" Exhibit No. 1206 " appears in text on p. 3557) 



(" Exhibit No. 1207" appears in text on p. 3560) 



("Exhibit No. 1208" appears in text on p. 3561) 



(" Exhibit No. 1209" appears in text on p. 3565) 



MUNITIONS INDUSTRY 3739 

(" Exhibit No. 1210" appears in text on p. 3587) 



Exhibit No. 1211 

[Copy] 

S.E.B.S., 
Paris, le. July 19th 1934. 
Lieutenant R. M. Cutts, 

Headquarters U.S. Marine Corps, 

Washington. 
Dear Dick: The clipping from the Washington Post duly received and most 
hearty congratulations. When will the big event take place? 
Your telegram as follows: 

Conferring Russian next week. Will "Carnot result. Bigard has 6 rifle com- 
pensators. His contract now up for renewal. Writing Hotchkiss. Contact 
Neuhaus on compensated Schmeisser. Thanks." 
has been received, also a cop.v of the letter which Neuhaus recently sent to you. 

The French army is very interested in the application of compensators to sub- 
machine guns which they find are practically vanieless because of the jump. They 
are not interested in rifles because of the bayonet, nor are the.y interested in the 
larger machine guns because they have very firm basis, and the compensator 
would interfere with the flash preventer which they use at nighttime and which, 
they feel, is more valuable than the compensator. 

They have at least one or more models of every type of machine guns, so the 
thing for you to do is to send immediately a compensator for a Thompson or other 
similar machine gun, properly labelled as to sizes, bullets, etc. . . . and with com- 
plete instructions. 

The letters of recommendation, etc. . . . which you sent me are being trans- 
lated by Carnot, and he decided not to remove anything from the War Depart- 
ment until he had heard from you, so that we could not in any way interfere with 
the business in case Bigard is to handle it. 

I am very hopeful that business can be done in submachine guns within six 
months, and I will try to find out if Bigard was sent any compensators for machine 
guns, which he did not mention, and he only showed us one compensator which he 
got out of a cupboard near his desk; perhaps there were others there. 

I have spoken about the business of interesting private manufacturers, and a 
Mr. P. Cunisset-Carnot, cousin of Claude, is interested in approaching some of 
the manufacturers as he is a well-known hunter and sportsman and feels that, 
even if not used for regular production, a considerable number of guns could be 
fitted with compensators each year among the limited number of people who go 
hunting. 

Claude Carnot feels that there is so little busines to be had in the sporting field 
that it is scarcely worth going after as compared with the introduction of the unit 
into the army, for, as he says, what is there to hunt and where? 

As soon as he hears from you and is in a position to collect the various material 
scattered around, we will turn the compensated rifles over to Cunisset, as the 
army will be through with them, and Cunisset will take them around to gun 

manvifacturers, repair shops, etc 

As to Germany, the Schmeisser gun is in Germany and both Germany and 
Belgium export rifles. However, as you know, no money in the way of royalty 
is allowed to be sent out of Germany, and therefore it will not do you much good 
if they manufacture and you will flood the markets of the world with compensated 
guns on which you will receive no royalty and which will be sold at prices less than 
is possible with guns manufactured in U.S.A. and elsewhere on which you will 
have royalty paid. I will see Neuhaus next week and talk over the matters 
with him as he cannot or will not see this face of the matters, being such a loyal 
German. Have you any patents in Japan, for they will probably sell machine 
guns, compensators and all, for $6 or 7, if they follow their present practices of 
selling watches for 15 cents, bicycles with tires for $2 and the equivalent of a 

Ford automobile for $150 

I may still be here in time to receive the letter which you will write to Claude 
Carnot and I will be able to help him getting business under way. 
With sincere regards, 
Ever yours, 

George. 



3740 MUNITIONS INDUSTRY 

Exhibit No. 1212 

[Copy] 

11 Francis St., Newport, R. I., August. 11, 1934. 
Mr. Bernard S. Barron, 

10 E. 40th St., New York City. 

Dear Pete: I am at home as you can see by the heading, for father is quite 
seriously ill. I expect to return to Washington around the twentieth. 

In the meantime the inclosed inquiry came in and was fowarded up here. 
Needless to say, I am quite helpless at the present time due to force of circum- 
stances. It looks as though it is bona fide. 

I would suggest that you get in touch with the quartermaster at Washington 
and request a list of those firms from whom the Marine Corps purchases khaki, 
also the name of the company to whom a contract was last awarded. You will 
then be in a position to get bids. Since you are in the Reserve you should be able 
to get a line on the price if you request same properly. 

As soon as you get this dope shoot it along to me and I'll try to get the interested 
parties lined up. 

Sorry that I am out of the running at this time but I believe you understand. 

My very best to you and Pat, 
As always, 



Exhibit No. 1213 

Washington, D.C, 
2400 16th Street NW., September 5, 1934. 
FroiTi: R. M. Cutts, Jr. 

To: The Special Committee Investigating the Munitions Industry, U.S. Senate. 
Subject: The Governmental Service Company. 

1. The Governmental Service Company was originally organized on the possi- 
bility of acting as purchasing agents for the Government of Santo Domingo. 

2. I soon realized that it would not be proper for me to be actively associated 
with a company engaged in this type of business. 

3. It was therefore decided to continue the Governmental Service Company 
as a "blind." 

4. All inquiries on equipment of various kinds that came into the Governmental 
Service Company have been referred to the proper manufacturing companies. 
This was necessary in order that the Governmental Service Company would 
appear* to be operating as a company. However, this company has made no 
sales, nor has it accepted any commissions. 

5. A great many "so-called" agents from other countries make inquiries from 
the Governmental Service Company. During the necessarily involved corre- 
spondence resulting therefrom the true status of the agent is generally quickly 
ascertained. 

6. The above method of operation acts as a safeguard to prevent Cutts com- 
pensators falling into the hands of irresponsible parties. 

7. There is practically no overhead in conjunction with the operation of the 
Governmental Service Company inasmuch as it operates from the office of Mr. 
Bernard S. Barron, 10 East 40th St., New York City, and its operation has 
proved of value to Cutts compensator only along the lines indicated. 

R. M. Cutts, Jr., 

Cutis Compensator. 
District of Columbia, ss: 

Subscribed and sworn to before me this fifth day of September, 1934. 
[seal.] Troy A. Nubson, 

Notary Public, District of Columbia. 

My commission expires November 27, 1935. 

Total royalties received December 1926-September 1934: 

From Auto-Ordnance Corporation: $2,500.00, $110.00, $200.00, $4,495.00, 
$5,270.00, $3,050.00, $350.00, $905.50, $752.50, $639.50, $1,040.00, $487.50, 
$405.00, $510.00, $465.00, $472.50, $1,109.00, $502.50, $115.50, $252.00, $415.20, 
$372.00, $1,686.00, $273.00, $255.00, $855.00, $939.00, $1,057.05, $1,770.49, 
$600.00; total $32,514.24. 



MUNITIONS INDUSTRY 



3741 



From Lvman Gun Sight Corporation: $85.25, $312.44, $386.25, $622.32, 
$105.45, $73.00, $127.54, $95.01, $437.25, $1,048.00; total $3,292.51. 
Grand total, $35,806.75. 
The above totals are correct to the best of my knowledge and belief. 

R. M. CuTTS, Jr., 

Cults Compensator. 
District of Columbia, ss: 

Subscribed and sworn to before me this fifth day of September 1934. 
[seal.] Troy A. Nubson, 

Notary Public, District of Columbia. 

My commission expires November 27, 1935. 

Royalties paid from February 8, 1928, to September 5, 1934. 

Victor F. Bleasdale: $292, $425, $300, $410, $50, $50, $50; total, $1,577. 

Mary E. Quayle: $584, $850, $600, $260, $50, $50, $50; total, $2,444. 

Richard M. Cutts, Jr.: $817.60, $1,190.00, $840.00, $915.00, $200.00, $200.00, 
$200.00; total, $4,362.60. 

Richard M. Cutts: $1,226.40, $1,785.00, $1,260.00, $915.00, $200.00, $200.00, 
$200.00; total, $5,786.40. 

A true accounting to tlie best of my knowledge and belief by the Cutts Com- 
pensator to the partners. 

R. M. Cutts, Jr. 
District of Columbia, ss: 

Subscribed and sworn to before me this fifth day of September 1934. 

[seal.] Troy A. Nubson, 

Notary Public, District of Columbia. 

My commission expires November 27, 1935. 



[Copy] 



Exhibit No. 1214 



Delaware Surety Company, Statement of Assets and Liabilities, January 

31, 1918 



ASSETS 

Cash 

Accounts receivable 

Investment securities: 

$68,000 Chicago Rock Island & Pac. R. R. Co. 
4>^'s 

$50,000 N. Y. C. & H. R. R. 6's 

$100,000 Brooklyn Rapid Transit Co. 5's 

$42,000 Toronto Rwy. 4>^'s 

$125,000 General Rubber Co. 5's 

$50,000 Cuban- American Sugar Co. 6's 

$50,000 Ft. Dodge, Des Moines & Sou. 5's 

$92,000 American Thread Co. 4's 

$50,000 Manchester Traction L. & P. Co. 5's-_. 

$200,000 American Bank Note 5's 

$100,000 Cuba R. R. Co. 5's 

$50,000 Braden Copper Mines 6's 

$50,000 United L. & Rwy. 6's 

$50,000 Remington Arms U. M. C. 5's 

$50,000 N. Y. Central Equipment 4/2's 

$2,000 Shs. E. I. du Pont de Nem. Pdr. Co. Pfd. 

Stock 

$34,000 Todd Ship Yard Corp. 6's 

$45,000 American Graphophone 6's 

$200,000 Imperial Russian Govt. Loan Q^i's 

$300,000 U. Kingdom of G. B. & Ireland 5's 

$25,000 Lacledge Gas & Light 5's 

$50,000 American Woolen Co. Notes 

$100,000 Armour & Co. Notes 

$25,000 Arlington Mills, Notes 

$25,000 Firestone Tire & Rubber Co. Notes 

$50,000 Mt. Vernon Woodbury Mills 6's 



$454, 738. 87 
27, 572. 65 



51 

100 

40 

125 

50 

50 

91 

50 

200 

99 

50 

50 

49 

50 

200 
33 
45 

200 

29$: 

25 
50 
100 
25 
25 
50 



141. 92 
750. 00 
043. 75 
742. 01 
010. 38 
069. 33 
000. 00 
264. 65 
000. 00 
000. 00 
958. 32 
000. 00 
250. 00 
874. 98 
134. 18 

000. 00 
762. 00 
000. 00 
000. 00 
500. 00 
020. 85 
000. 00 
000. 00 
000. 00 
000. 00 
000. 00 



3742 MUNITIONS INDUSTRY 

Investment securities — Continued. 

$100,000 Bethlehem Steel Co. 5's $98, 828. 12 

$100,000 Philadelphia Elect. Co. 5's 99, 625. 00 

$100,000 Balto. & Ohio R. R. Co. 5's 99, 750. 00 

$75,000 Hocking Valley Rly. Co. 6's 74, 625. 00 

$100,000 United Fruit Co.'s 5's 100, 012. 50 

$300,000 United States Govt. 4% Bond 299, 600. 52 

$200,000 U. S. Treasury 4% Certificates & In- 

debitness 200,022. 21 

$3, 151, 985. 72 

Total assets 3, 634, 297. 24 

LIABILITIES 

Deferred credit (income tax) 12, 326. 32 

Accounts payable 00. 00 

Unearned premiums 61, 538. 57 

Capital stock 2, 000, 000. 00 

Surplus 1,000,000. 00 

Profit and loss (brought forward) 544, 591. 50 

Profit and loss (1 month ending January 31, 1918) 15, 840. 85 



Total liabilities 3, 634, 297. 24 

(2-28-1918—8 copies.) 

Exhibit No. 1215 

Memorandum With Respect to the Settlement op Contracts Entered 
Into by the United States With the Dupont Engineering Company 



In October 1917 Congress passed an urgent deficiency appropriation bill pro- 
viding, among other things, for the manufacture, prior to September 1, 1918, of 
300,000,000 pounds of powder. At that time the powder situation in this 
country and abroad had reached a very critical stage. The United States had 
outstanding orders for 67,000,000 pounds of powder for the Army, and 56,000,000 
pounds of powder for the Navy, and practically the entire capacity of the plants 
in this country was taken up until June 1918. 

The situation in France was such that its factories working at their utmost 
capacity fell short nearly 19,000,000 pounds per month of the quantity required 
by the French armies, and to add to their troubles, their stock of nitrate of soda 
would last only until December 1917. Their supply had to be brought from 
Chile, and the submarine had played such havoc with transportation that the 
question of securing additional supplies was difficult and uncertain. 

General Pershing, in a cable dated August 23, 1917, recommended that the 
United States furnish all powder and explosives needed for present contracts 
with the French Government, and further, that the United States Government 
prepare to furnish by December 1917 three hundred tons per day of explosives 
and two hundred tons per day of powder for French consumption. 

The procurement of powder became one of the pressing problems before the 
War Industries Board. That Board in its survey determined that the total esti- 
mated requirements of powder for the Allies and the United States to be pro- 
duced in the United States up to November 1, 1918, was 1,016,748,000 pounds 
and that the capacity of the plants in this country was about 472,000,000 pounds 
of powder — in other words, that our factories could produce less than half of all 
of the powder needed. 

The powder-making plants of the United States had increased their capacity 
from slightly over 1,000,000 pounds per month in August 1914 to approximately 
35,000,000 pounds per month in October 1917. The increases in plants and 
facilities of our nationals had been paid for by the Allied Governments, and the 
President of the United States very properly established the policy that we 
would assist the Allies in taking full advantage of the facilities they had amor- 
tized. To secure the supply of powder needed by this Government and its 
Allies, it became necessary to construct additional plants, and steps were taken 



MUNITIONS INDUSTRY 3743 

immediately by the Ordnance Department and the War Industries Board to 
provide these additional facilities. 

II 

On December 15, 1917, Mr. D. C. Jackling was appointed director of explosives 
without compensation, and was given a free hand and full authority over the work 
of constructing and operating powder plants. 

Mr. Jackling had been prominently connected with large and successful mining 
enterprises, but up to that time he had no experience in the construction and 
operation of smokeless powder plants. Needless to say, he entered into a difficult 
undertaking. 

Upon Mr. Jackling's appointment as director of explosives, he entered into a 
contract with the Thompson-Starrett Company for the construction of a smoke- 
less powder plant at Nitro, West Virginia, near Charlestown — this plant to be 
constructed under the direct supervision of the Government. Mr. Jackling soon 
realized that a difficult task confronted him, and that, in view of the urgent need 
for powder, it was necessary to secure the assistance of others experienced in the 
construction and operation of powder plants. He, therefore, solicited the aid 
of the Du Fonts, as the concern best fitted to construct and operate smokeless 
powder plants. Mr. Jackling, therefore, entered into negotiations with the 
Du Fonts and on January 24, 1918, made a tentative agreement, which later 
became an agency contract dated January 29, 1918, under which the Du Pont 
Engineering Company agreed to construct and operate a smokeless powder plant 
near Nashville, Tennessee, capable of producing 500,000 pounds of smokeless 
powder per 24-hour day. 

E. I. du Font de Nemours & Company had not been engaged in the business 
of acting as an agent, and did not desire to do so. The Du Font Engineering 
Company, with all of its capital stock owned by E. I. du Pont de Nemours & 
Company, had been organized in the fall of 1917, and in view of the fact that 
E. I. du Pont de Nemours & Company did not desire to act as agent, and also 
for accounting reasons, the contract was entered into between the Du Pont 
Engineering Company and the United States. E. I. du Pont de Nemours & Com- 
pany agreed to furnish the Du Pont Engineering Company the services of all of 
its departments, thereby securing to the Government precisely the same service 
that it would have received if the contract had been entered into with the parent 
company. 

Under the agency contract, the Du Pont Engineering Company was to be paid 
a fee of $500,000 for designing and preparing the plans for the plant, and in 
addition thereto, a profit of 3% on the cost of the construction of the plant, 
which profit of 3% was limited to a maximum of $1,500,000. The estimated cost 
of the plant was approximately $50,000,000. The profit to the Du Font Engin- 
neering Company for the operation of the plant was to be a fixed compensation 
of 3^2 cents per pound for each pound of powder produced, and 50% of the saving 
if the powder was produced below a certain base price stated in the contract. 

The agency contract required that the Du Font Engineering Company should 
first secure the approval of the special director on all drawings and specifications, 
and should follow all instructions issued by him from time to time ordering 
changes in drawings and specifications and for additional work. The written 
approval of the special director had to be obtained from time to time as authority 
for the Du Font Engineering Company to purchase and procure material and 
labor, and for salaries and expenses of officers and employees. The United States 
was to make all disbursements through its own disbursing officers. 

It was estimated that the first unit of the plant would be ready for operation 
in eight months and the entire plant was to be completed in fourteen months. 

The office of the special director was located in New York City, and he also 
had an office in Washington. It was necessary that the Du Font Engineering 
Company employees explain drawings, specifications, equipment, necessity for 
material to be purchased, prices, labor rates, etc., in order that the approval of 
Mr. Jackling might be secured from time to time. Obtaining such approvals 
resulted in serious delay in the construction of the plant. 

Ill 

In February 1918 the demand for smokeless powder became more and more 
urgent. Several divisions of our troops had reached France. The draft had 
called into service a tremendous number of citizens, and the special director was 
advised by the War Department that it was necessary to provide additional 
smokeless powder capacitj', and it was suggested that a third plant be built 
83876 — 35 — pt 15 14 



3744 MUNITIONS INDUSTRY 

similar to the two then under construction at Nitro, West Virginia, and Nash- 
ville, Tennessee. Mr. Jackling pointed out the difficulty in securing organization 
and talent to construct the third plant and recommended, as a more practical 
plan, the increase in capacity of the then existing plants in the United States and 
Canada, and the enlarging of the plants to be l^uilt at Nitro, W. Va., and 
Nashville, Tenn. He communicated his views on this matter to the president of 
the du Pont Engineering Company and asked his opinion as to what modifications 
of the terms of the agency contract of January 29th would be necessary. To 
his request the du Pont Engineering Company, on March 1, 1918, replied in part, 
as follows: 

"You have explained to me the urgency of this work, as well as the necessity 
of its undertaking by E. I. du Pont de Nemours and Company. It is only this 
necessity that warrants our considering the burden. The latter is so great that 
the question of compensation is of less importance than the question of the saving 
of man-power, especially that of the administrative end of the business. 

" I therefore urge upon you to arrange that the carrying out of this work may be 
placed in the hands of our company entirely without hindrance as to supervision 
and approvals. In return for this concession, we are prepared to place the ques- 
tion of compensation beyond possibility of criticism." 

Briefly, the Du Pont Engineering Company proposed, in subsequent confer- 
ences, in line with the letter above quoted, that if the Government desired to 
enter into a new contract with the Du Pont Engineering Company and give that 
company authority to proceed with the construction and operation of the plant 
in its own way, and according to the methods and plans, as used by E. I. du Pont 
de Nemours and Company in the construction and operation of its plants, the 
Government to bear all costs and expenses of every character and description 
incurred or made in connection with the construction and operation of the plant, 
the Du Pont Engineering Company would waive all profit in connection with the 
construction work, including the profit which had already accrued — the profit 
on operation to remain the same as in the agency contract. This proposal the 
United States accepted, and on March 23, 1918, a new contract, approved by the 
Acting Secretary of War, superseding and cancelling the agency contract of 
January 29, 1918, was entered into, under and by the terms of which the only 
profit that could be paid to the Du Pont Engineering Company on account of 
construction was the nominal profit of $1.00. 

Under the contract of March 23, 1918, the capacity of the plant was increased 
from a 5-unit plant, estimated to produce 500,000 pounds of smokeless powder 
per day, and at an estimated cost of approximately $50,000,000, to a 9-unit plant, 
estimated to produce 900,000 pounds of smokeless powder per day, at an esti- 
mated cost of approximately $75,000,000, which estimate was later increased, by 
amendment to the contract, to $90,000,000, due largeh^ to the increased cost of 
labor, material, and freight rates. 

Under the contract of March 23, 1918, the Du Pont Engineering Company was 
to receive an advance of $18,750,000 on account of construction work, without 
interest. Prior to the execution of the contract, it was carefully examined by the 
Secretary of War, by Mr. Stettinius (then Second Assistant Secretary of War), 
by Colonel Samuel McRoberts, Chief of the Procurement Division, Ordnance 
Department, and by Major Mudd (representing Mr. Jackling), and, although 
Mr. Stettinius pointed out the fact that the contractor would be reimbursed for 
every expenditure, even to the extent that if the contractor made mistakes the 
Government would have to pay for them, the Secretary of War stated that he 
would approve the contract, and it was thereupon executed. 

IV 

Thereupon Mr. Jackling ceased to have supervision of the construction of the 
smokeless ])owder plant at Nashville, Tenn., and the plant was constructed and 
operated by the Du Pont Engineering Company with such diligence that the first 
unit was in operation and powder was actually produced on July 2, 1918, a little 
over three months from the date of executing the contract. 

The plant was constructed at what is known as Old Hickory, Tenn., about 
twelve miles from Nashville, in a bend of the Cumberland River. Approximately 
6,000 acres of land were acquired for the purpose. 

The Du Pont Engineering Comi)any built a railroad seven miles long to con- 
nect the plant with the main lines of the Tennessee Central Railroad and the 
Nashville, Chattanooga and St. Louis Railroad. They constructed huge switch- 
ing yards with miles of spur track in and about the plant. It was necessary to 



MUNITIONS INDUSTRY 3745 

construct a village with all the adjuncts thereof, such as schools, hospitals, fire 
departments, water supply, etc., to care for the tremendous number of employees 
at the plant. 

The Du Pont Engineering Company employed all the local labor that was pos- 
sible, but was obliged to import a large number of employees from other sections 
of the country, wherever they could be ol^tained, to carry on the work of construc- 
tion and operation. At one stage of the work approximately 43,000 employees 
were carried on the pay roll. 

On November 11, 1918, when the armistice was signed, the entire plant was 
approximately 93% completed. The du Pont Engineering Company was able 
to produce powder at the Old Hickory plant at a low cost, and when we take 
into consideration the magnitude of the task, the performance by the du Pont 
Engineering Company must always be considered as a remarkable achievement. 



In addition to the contract for the construction and operation of the Old 
Hickory powder pla,nt, the du Pont Engineering Company entered into four 
additional contracts with the United States for the construction and/or operation 
of explosives plants, making a total of five contracts, as follows: 

Contract numbered P-4755-711-E; contract numbered P-2337-1228-A; con- 
tract numbered P-3509-643-E; contract numbered P-9050-960-E; contract 
numbered P-15271-1433-E. 

Contract War Ord. P-2337-1228-A, dated April 12, 1918, referred to above, 
for the construction and operation of a loading plant for shells and casings at 
Penniman, Va., superseded and canceled an agency contract dated December 31, 
1917, between the du Pont Engineering Company and the United States. Under 
the agency contract of December 31, 1917, the du Pont Engineering Company 
was to be paid, in addition to the cost of the construction and equipment of the 
plant, a sum equal to 10% of the cost of construction as compensation and profit. 

The construction of the Penniman shell loading plant was also under the 
direction of Mr. Jackling, and the same delay was encountered in the work of 
construction under that contract as was encountered under the agency contract 
for the construction of the Old Hickory powder plant. The du Pont Engineering 
Company, therefore, submitted a proposal to the Government that if the Gov- 
ernment would agree to a contract similar to the contract of March 23, 1918, 
for the construction and operation of the Old Hickory powder plant, the du Pont 
Engineering Company would waive all profit on account of construction of the 
Penniman shell loading plant This proposal was accepted by the Government 
and on April 12, 1918, a new contract, similar to the Old Hickory contract, was 
entered into, the du Pont Engineering Company waiving all profit on account of 
the construction work. 

All of the five contracts, specified above, contained similar provisions with 
respect to reimbursing the du Pont Engineering Company for all costs and 
expenditures incurred. As an example of the provisions of these contracts, 
with respect to reimbursing the du Pont Engineering Company, we shall quote 
the following from the contract dated March 23, 1918, for the construction and 
operation of the Old Hickory powder plant: 

"construction 

"Art. I. — 'The contractor agrees to proceed with a survey of the site and 
general layout of the plant, to design and prepare all plans, drawings, and speci- 
fications, to procure all the necessary labor and materials, and to construct on a 
site owned by the United States, at or near Nashville, Tennessee, a complete 
pla,nt for the manufacture of smokeless powder to consist of nine (9) sections or 
units, each with a capacity of one hundred thousand (100,000) pounds of smokeless 
powder per day of 24 hours,' etc. 

H: ***** * 

"Art. II. — 'The contractor is hereby authorized to do all things necessary or 
convenient in and about the construction of tlie plant including the purchase 
and procurement of all materials and labor necessary therefor, except that the 
United States shall furnish the requisite amount of platinum, estimated at 
approximately 13,000 ounces, to be paid for by the contractor and charged to 
the cost of construction. In order that the contractor may expedite the work 
of construction, it may in its discretion, from time to time, pay extra compensa- 
tion for materials or services, subject, however, to the approval of the contract- 



3746 MUNITIONS INDUSTRY 

ing officer, which extra compensation shall be charged to the cost of construc- 
tion.* * * 

'"The United States shall reimburse the contractor for all costs and expenses 
of every character and description, incurred or made in connection with the con- 
struction and equipment of the plant, or any part thereof, including the pro rata 
share properly attributable to the construction work under this contract (a) of 
the expense of maintaining the contractor's offices at Wilmington, Delaware, or 
elsewhere, and (b) of the salaries and traveling expenses of all officials, and 
employees of the contractor and of E. I. du Pout de Nemours & Company. 

" 'In order that the work of construction may proceed with the utmost prompt- 
ness and dispatch, the contractor shall, from time to time, make the expenditures 
and pay the costs aforesaid, and the United States, upon presentation of satis- 
factory evidence of such expenditures and payments, shall promptly reimburse 
the contractor therefor.' 

"OPERATION 

"Art. IV. — '(a) As each section is completed the contractor shall forthwith 
proceed to operate it and shall do all things necessary or convenient in and about 
the operation of the plant, or any part thereof, including the purchase and pro- 
curement of all necessary materials and labor therefor. The contractor shall not, 
except with the written consent of the contracting officer, purchase raw materials 
for the manufacture of powder in excess of the amounts required for the complete 
fulfillment of this contract. The United States shall bear all costs and expendi- 
tures of every character and description, incurred or made in connection with the 
operation of the plant, or any part thereof, including the cost of labor, materials, 
and their conversion, repairs, power, transportation, general works expense, works 
accidents as provided in article XIV hereof, plant superintendence, maintenance 
of guards, and also the pro rata share properly attributable to the operation of the 
plant, or any part thereof, (1) of the cost and expense of maintaining the con- 
tractor's offices at Wilmington, Delaware, or elsewhere; and (2) of the salaries and 
traveling expenses of all officials and employees of the contractor and of E. I. 
du Pont de Nemours & Company.' 

"Art. IX. — 'The contractor shall keep complete records as to all construction 
and operation expenses, all of which records shall at all times be open to the 
inspection of the United States or its duly authorized representatives. The 
United States may examine all work as it progresses and shall audit all accounts, 
but in such a manner as not to interfere with the contractor proceeding with the 
construction and operation in any manner and by any means that in its judgment 
will best produce the desired results under this contract.' 

"Art. X. — 'To facilitate prompt payments to the contractor, the United States 
shall detail paymasters at the plant and at the contractor's home office. Any 
payments by the United States shall be subject to correction for errors, if any.'" 

All of the above contracts were suspended, following the signing of the armis- 
tice, and early in 1919, the United States took over all the plants, equipment, 
and materials. 

VI 

During the period of construction and operation of the above plants, the 
United States had a corps of employees engaged in checking the receipt of ma- 
terial and auditing expenditures by the du Pont Engineering Company. 

After the armistice, the du Pont Engineering Company decided that it was 
inadvisable, in the interest of the Government, to carry a large force of employees 
to complete the construction, and to carry on the operation of the plants, and 
rather than expend money for paying wages and using up a lot of material that 
could be sold commercially, they disbanded their organization as rapidly as 
possible. 

After the plants were turned over to the Government early in 1919, the Phila- 
delphia district ordnance office was charged with the work of settling all five 
contracts. That office appointed a corps of auditors and instructed them to check 
up all expenditures of every nature made by the du Pont Engineering Company 
during the period of performance. These auditors carried on this work up to 
and including May 1922 at an expense to the United States of approximately 
$1,000,000. 



MUNITIONS INDUSTEY 3747 

During the period of this audit there arose a number of questions concerning 
the expenditures made, and these questions were sul)mitted to the War Depart- 
ment Board of Contracts and Adjustments, or to the War Department Claims 
Board. Such questions as these boards were unable to settle were finally ruled 
upon by Mr. Wainwright, Assistant Secretary of War. 

In tlie settlement contract, herewith submitted, the rulings of the Assistant 
Secretary of War and of the above boards have been followed, and where a 
ruling was adverse, deduction has been made in the amount of expenditure 
claimed by the Du Pont Engineering Company. 

One of the points that came before the Assistant Secretary of War was with 
respect to the fee to be allowed Mason & Hanger Company, subcontractors of 
the Du Pont Engineering Company on construction work. The legal aspects 
of this question were such that the Secretary of War decided to refer the matter 
to the Attorney General for an opinion. The Attorney General ruled that the 
fee as paid to Mason & Hanger was correct, and in accordance with the terms 
of the contract, and that the Du Pont Engineering Company should be reim- 
bursed therefor. 

While the above matter was pending before the Attorney General, rumors in 
connection with the construction and operation of the Old Hickory plant came 
to the attention of the United States district attorney, at Nashville, Tenn., who 
reported to the Attorney General that fraud and crime had been committed by 
the Du Pont Engineering Company during the period of construction and opera- 
tion of the Old Hickory powder plant. 

The charges that the district attorney made were referred to the war trans- 
actions section of the Department of Justice, and that section called upon the 
War Department for its records in the case. All of the records of this office 
were placed at their disposal. Special counsel were appointed to examine into 
these various contracts that are covered by this settlement, and the result of 
the investigation, as made by the Attorney General, is embodied in a letter 
(exhibit A), addressed to the Secretary of War, under date of August 5, 1925, 
from which we quote the following: 

"An extensive investigation of the charges of fraud or crime above referred to 
has failed to disclose reasonal)le or probable grounds for believing that during 
the performance of the contracts in question the du Pont Company committed 
the offenses with which it has been charged, or any crimes, and in my opinion 
there is no warrant either for further investigation along these lines or for the 
institution of proceedings against the company based upon charges of fraud or 
crime." 

The Department of Justice, in the letter above referred to, question certain 
of the expenditures made under these contracts as being proper charges there- 
under. These expenditures fall under six heads and we quote from their letter, 
as follows: 

"The expenditures which I have in mind may be classified, as follows: 

"1. So-called 'meritorious bonuses.' 

"2. Thirty days' pay on discharge of men employed on the work. 

"3. Return transportation and moving expenses furnished employees to the 
places from which they had come in order to engage in the work. 

" Payments made to discharged employees for living expenses after they arrived 
at their home stations and the cost of returning their families to their homes, 
would, in my opinion be governed by the same principles as the items numbered 
2 and 3 above. 

"4. Payments to ba,nks for losses which the banks sustained in establishing 
branches at the points at which work was being performed under the contracts. 

"5. A sum variously stated as $45,572.27 or $42,354.98, being the excess of 
the price of certain cotton shavings above the price prescribed by the contract. 

"6. Expenses incurred by the contractor in the course of the Government's 
audit." 

With respect to the first three of these items, the Attorney General states, as 
follows: 

"I realize that the contracting officer approved the meritorious bonus before 
payment and approved or ratified the other bonuses after payment under the 
contract. However, he had no authority to approve payments of extra compensa- 
tion unless made to expedite the work of construction. If not made for that 
purpose, his approval would be without warrant in the contract. Nevertheless, 
in view of the broad terms of the contract, the length of time which has elapsed 
since the payments were made, the enormous task performed by the contractor, 
the urgent necessity for not disturbing the labor market by turning loose upon it 
numbers of penniless men, and the possibility that under such circumstances a 



3748 MUNITIONS INDUSTKY 

court might be inclined to indulge every intendment in favor of the Du Pont 
Company, the contracting officer's approval or ratification of the bonus payments 
might possibly be regarded as conclusive of the purpose for which they were made 
and as binding upon the Government. Accordingly, I do not feel that in case of 
a legal action to recover the amount of this bonus payment the Government could 
feel absolute assurance of success. 

"2. Thirty days' pay on discharge. 

"3. Return transportation and moving expenses. 

"These two classes of bonus payments, in my opinion, are governed by the 
same considerations as the so-called meritorious bonus." 

VII 

Each one of the points raised by the Attorney General had been previously 
carefully considered by representatives of the Secretary of War and the findings 
are as follows: 

1. Meritorious bonuses. 

The above item was incurred under the following contracts: P-4755-711-E, 
Old Hickory smokeless powder; P-2337-1228-A, Penniman Shell loading plant, 
P-15271-1433-E, Ives, T.N.T. plant. 

During the period of negotiations that led up to the making of these contracts, 
the Du Pont Engineering Company, as evidenced by letters of its president in the 
files in the Ordnance Department and the War Industries Board, stressed the 
fact that it was their policy to award employees of their organization certain 
bonuses for meritorious services, and it was made clear to all the representatives 
of the United States engaged in the negotiation of these contracts that the Du Pont 
Engineering Company intended to pursue this policy, for only by so doing could 
it expect to get the maximum results. 

The War Department was in the position that it had to have these various 
plants constructed as readily as possible, and if, by the payment of a bonus to 
certain of the employees for meritorious work performed, it could get the plants 
erected and in operation earlier than the time contemplated, it was in the interest 
of the Government to pay such bonuses. Accordingly, there was inserted in the 
contracts a clause reading as follows: 

"In order that the contractor may expedite the work of construction, it may, 
in its discretion, from time to time, pay extra compensation for material or services 
subject, however, to the approval of the contracting officer, which extra compensation 
shall be charged to the cost of construction." 

It requires no argument to show that a bonus for meritorious services could 
not be paid until the completion of the work, for until such time it could not be 
determined which of the employees were entitled to receive same. 

That the work was prosecuted with dispatch is beyond question. 

When contract P4755-711E for the Old Hickory powder plant was negotiated, 
it was the opinion of all concerned that the first unit would not be ready for 
operation before eight months from the date when work was begun, and that 
each month thereafter another unit would be put in operation. Ground was 
broken on March 8, 1918, and powder was actually being produced in the first 
unit on July 2, 1918, and the entire plant was 93% completed on the date of the 
armistice. 

We mention the above merely to show that the work was expeditiously per- 
formed, and the Du Pont Engineering Company, realizing its obligation to certain 
of its employees who made this performance possible, prepared a list of such 
employees and the amount of extra compensation or bonus which they proposed 
to pay for meritorious services. This list was submitted to the contracting officer 
in April 1919, and, in accordance with the contract, the contracting officer, who 
himself was an attorney, ruled that, according to the terms of the contract, the 
United States was obligated to pay such bonuses, and they were thereupon paid 
by the Du Pont Engineering Company. 

In view, therefore, of all the circumstances of the case — 

(1) That tlie payments as maf'e were first submitted to the contracting officer 
for approval and that such approval was given; 

(2) In view of the ruling of Col. Morrow, vice chairman of the War Depart- 
ment Claims Board, dated November 19, 1921, that these meritorious bonuses 
should be allowed; and 

(3) In the light of the statement of the Department of Justice that in case of 
legal action to recover, the Government could not feel absolute assurance of 
success: 



MUNITIONS INDUSTRY 3749 

we have in our settlement contract included the payments already made as 
meritorious bonuses. The total amount involved is $199,650. 

2. Thirty days' pay on discharge of men employed on work. 

For years it had been the practice of the E. I. du Pont de Nemours & Company 
to pay salaried employees a month's salary at the time of discharge, this salary 
being in lieu of a month's notice. Upon the signing of the armistice, the Du Pont 
Engineering Company endeavored to close down the work as promptly as possible, 
so as to save the Government unnecessary expense. The large force of emploj-ees 
engaged on the work at these different plants was disbanded as rapidly as the 
conditions would j^ermit, and salaried employees, when their work reaiched the 
point where their services were no longer needed, were given thirty days' pay in 
lieu of notice of discharge, as was the practice of the parent company. The action 
of the Du Pont Engineering Company in making this payment was approved by 
the contracting officer as being an item of expense under article VI of the contract 
which reads as follows: 

''When the operation of the plant shall cease, or upon termination or cancella- 
tion of this contract under article XV, the United States shall reimburse the 
contractor for all costs and expenses of every character and description incurred 
or made in, or connected with, the construction, equipment, or operation of the 
plant, or any p3,rt thereof, including the cost of all labor, freight, and all aj^paratus 
and materials purchased, whether delivered or undelivered, in connection with the 
construction and equipment of the plant or the operation or contemplated oper- 
ation thereof; all obligations of the contractor incurred hereunder, outstanding 
at the date of such cessation or termination or which may thereafter arise, shall 
be assumed by the United States and the United States shall save harmless the 
contractor in respect of any lialjility whatsoever in connection therewith. At 
the option of the United States, the contractor shall assign or transfer to the 
United States, or its nominee, all contracts then outstanding entered into by the 
contractor hereunder." 

The remarks of the Department of Justice, referred to under the heading 
"Meritorious bonuses", apply with equal force to this item. The question of 
this extra compensation was made the subject of study by the War Department 
Claims Board, and Colonel Morrow, vice chairman of that Board, on November 
19, 1921, ruled that this item was an allowable expense, and the payment therefore 
has been included in this settlement contract. 

3. Return transportation and moving expenses furnished employees to the places 
from which they had come in order to engage in the work. 

During the period of construction and operation, it was necessary to bring large 
numbers of employees from various points in the United States to the plants 
which were being erected and operated under these contracts. In some cases 
these plants were located at considerable distances from large centers of popula- 
tion, and it was necessary to pay the expenses incident to the transportation of 
these employees from the point at which they were hired, to the plant, and it 
was found necessary to assure these men of their return transportation when the 
work was terminated. As stated before, the Du Pont Engineering Company 
very properly stopped their construction work and disbanded their operations 
as soon after the armistice as possible. This threw large numbers of men and 
women out of employment. Many of these people had no funds with which to 
return to their homes. The policy of the War Department at that time was 
not to throw large numbers of people out of employment, and create undue 
hardships, and so the Du Pont Engineering Company, in accordance with its 
assurances to these employees, paid their transportation to other centers where 
the employees believed their services could be utilized, relying on the United 
States to reimburse them for such travel expenses, in accordance with the con- 
tracts under discussion. It so happened that in some cases the Du Pont Engi- 
neering Company paid travel to points farther distant than those from which 
the employees came, and the matter became the subject of consideration before 
the War Department Claims Board and The Assistant Secretary of War. The 
contracting oflficer had previously ruled that the payments, as made by the Du 
Pont Engineering Company, were just and proper expenditures under the con- 
tracts, but the War Department Claims Board and The Assistant Secretary of 
War reversed the ruling of the contracting officer and decided that only such 
part of the payments for transportation as represented the travel to a point no 
more distant than that from which the employee had been hired should con- 
stitute an expense under these contracts. In accordance with the ruling of The 
Assistant Secretary of War, that portion of the expenditures of the Du Pont 
Engineering Company in excess of the cost of transporting employees to a point 



3750 MUNITIONS INDUSTRY 

no more distant than that from which they were obtained, was disallowed and 
stands in this settlement contract as a disallowance. 

Again, we might add that the remarks of the Department of Justice, referred 
to under "Meritorious bonuses" with respect to the doubtful possibility of re- 
covering all or any part of this payment, apply with equal force to this item. 

4. Payments to banks. 

The total expense charged to the United States under this item is $33,700.62. 
The actual amount paid by the Du Pont Engineering Company was some $7,000 
in excess of this item, and relates to the contract at Penniman, Va. The expense 
which is allowed, viz, $33,700.62, applies only to the Old Hickory powder plant. 

As we have stated heretofore, this plant was located approximately twelve miles 
from the city of Nashville, Tenn., and in the earlier period of construction the 
employees found it necessary to leave the plant and go to Nashville to get their 
checks cashed. As the banks in Nashville were open only until 3 o'clock in the 
afternoon, there was a considerable loss of time after each pay day, by reason of 
employees being absent. To get around this, the Du Pont Engineering Company 
conceived the idea of paying these men at the plant and it was estimated that the 
expenses of providing the facilities to pay these employees during the period of 
the contract would cost the United States approximately $75,000. If an arrange- 
ment could be secured with a bank in Nashville to handle the funds and to pay 
these employees at the plant, the Du Pont Engineering Company believed that the 
bank could do it more economically than the Du Pont Engineering Company, and 
further that these employees would not have to absent themselves from their work 
after each pay day. Accordingly, an arrangement was made by the treasurer of 
the Du Pont Engineering Company with the Fourth and First National Bank of 
Nashville, Tenn., by which that bank established a branch at Old Hickory under 
an agreement with the Du Pont Engineering Company that it would be reimbursed 
for any losses that it might sustain in providing such facilities. 

In the Spring of 1918 a branch was established by the Fourth and First National 
Bank, and it functioned in the capacity of cashing checks and handling the ac- 
counts of these employees all through the period of construction and operation. 
It was clearly to the interest of the Government to have some such institution at 
the site of the work. It did away with the necessity of employees absenting them- 
selves after each pay-roll period; it insured prompt payment in cash to the em- 
ployees on each pay day; it enabled those who lived in the village to carry ac- 
counts, etc. ; all of which cost the bank a considerable sum of money, and in return 
for which the bank, by reason of deposits made with it, derived some benefit. 

When the work was terminated and the Du Pont Engineering Company were 
ready to turn over the plant to the United States, the bank set up a statement of 
account, in which it showed the moneys it derived, by reason of interest on bal- 
ances on deposit, and against that it set out the losses which it sustained by reason 
of payment of salaries to its employees in the branch bank, and other expenses 
incident thereto, — the difference being the net loss above referred to. 

Under the agreement which the Du Pont Engineering Company made with the 
bank, they believed they were obligated for that loss, and under the estimate 
prepared by the treasurer at the time he entered into the agreement, the United 
States was saved approximately $42,000 assuming that the treasurer's estimate 
was correct. The Du Pont Engineering Company believed that this was a proper 
charge under the contract, and when the question was presented to the Assistant 
Secretary of War for decision, he ruled on April 12, 1922, that this was an allowable 
expense under the contract. 

It will be noted that the Attorney General, in his remarks, makes the following 
statement: 

"Should it be established to your satisfaction that these payments were made 
pursuant to agreements between the Du Pont Company and the respective recipi- 
ents antedating the performance by the banks of the services for which the pay- 
ments were made, I think they would be proper cliarges against the Government. 
The facts presented to me, however, fall short of establishing this. 

"One of these claims, amounting to approximately $7,000, appears to have 
been withdrawn by the Du Pont Company itself. Another amounting to approxi- 
mately $33,000, was denied by various War Dei)artment boards, and upon appeal 
denial was affirmed. It was paid b}' the Du Pont Engineering Company only 
after these denials." 

The facts are as outlined in my previous statement. An agreement was actually 
made between the respective recipients antedating the performance of the banks. 
This was properly established before the Assistant Secretary of War made his 
decision. 



MUNITIONS INDLTSTKY 3751 

Tlie claim of $7,000, which was disallowed, refers to tlie Penniman contract, 
and that still stands as a disallowance, because no such arrangement w-as made 
at Penniman, as was made at Old Hickory. Both questions, viz, the payment 
of the $7,000 at Penniman and of the $33,000 at Old Hickory, were Ijrought up 
for decision, and the Penniman payment was disallowed bj' all of the various 
boards, but the payment of $33,000 to the bank at Nashville was allowed by the 
Assistant Secretary of War, because it was conclusively shown that an agreement 
had been entered into in that case. 

5. A su7n variously stated as $45,572.27, or $42,354-98, being the excess of the 
price of certain cotton shavings above the price prescribed by the contract. 

The amount involved, according to the records of this office, is $42,354.98. 
According to the terms of its contract, the Du Pont Engineering Company were 
authorized to pay not more than 20% in excess of certain base prices for raw 
materials, as set out in a schedule. The base price of cotton shavings was 4.22 
cents per pound; subsequently, they were authorized to pay not more than 25% 
in excess of the base price, or 5.275 cents per pound, delivered at Nashville, for 
the reason that they were unable to procure cotton shavings for less than this 
amount. The Railroad Administration increased the freight rates on this class 
of material and tlie Du Pont Engineering Company was faced with a condition, 
where it either had to stop the manufacture of powder, because it could not buy 
shavings, delivered at Nashville, for the price stipulated in the contract, or await 
the approval of the contracting officer for an increased price. 

On October IS, 1918, the Du Pont Engineering Company at a conference with 
the procuring officers, stated that the price should be Byi cents per pound, f. o. b. 
point of production, and confirmed their conversation by a letter of that date. 
The purpose of the confirmation was to have in writing the authorized approval 
of the contracting officer, which approval had been tentatively given during the 
conversation. 

Confirmation of the increase price, however, was not actually forthcoming 
until November 8, 1918, but the Du Pont Engineering Company had secured a 
considerable quantitj' of this material, and paid the increased price, amounting 
in all of $42,354.98. When the auditors examined the payments made by the 
Du Pont Engineering Companj' for these cotton shavings, they took exception 
to the payment of the increased price. The matter became the subject of an 
appeal to the Assistant Secretary of War. It was pointed out to the Assistant 
Secretary of War that the increase in the price paid was due largely to the fact 
that the Railroad Administration had increased the freight rates; that the 
P»,ailroad Administration was a part of the Government; that the increase in 
price paid accrued to the Government; and that, in fact, it was taking the money 
out of one pocket of the Government and putting it in another; and because of 
this state of facts, the Assistant Secretary of War ruled that the amount paid was 
an allowable cost under the contract, and has been included as a cost under this 
settlement contract. 

6. Expenses incurred by the contractor in the course of the Government audit. — 
During the settlement of these contracts, it was necessary for the Du Pont 
Engineering Company to furnish the Government with records, information, 
and assistance in making the audit. The expense incurred in connection with 
this work was tremendous, and the Du Pont Engineering Company claimed that, 
under the terms of its contract, it should be reimbursed for the total amount. 
The War Department took the stand that the amount claimed by the Du Pont 
Engineering Companj^, included, among other items, the salaries and expenses 
of certain officers of the company, who w-ere really defending the claims as dis- 
tinct from the employees of the company, who were engaged in assisting in the 
audit of the accounts, and the Assistant Secretary of War ruled that only such 
part of the expense in connection with this audit as was incurred in explaining 
entries and such necessary rental of office space and traveling expenses as these 
employees incurred, was a proper charge under the contract. 

Accordingly, the allowance included in this settlement contract covers only 
the salaries and expenses of the employees engaged in assisting the Government 
in making an audit of these contracts. 

The Attorney General, in his letter, stated that "if the expenditures of the 
contractor in the course of the Government audit v\'ere made primarily for the 
purpose not of furthering and helping that audit and of furnishing information to 
the Government, but on the contrary, of opposing the Government's audit and 
of defending against and refuting such claims as the Government might raise 
against the company, the legality of charging the contractor's expenses in this 
audit against the Government w^ould be open to serious question. This becomes 



3752 MUNITIONS INDUSTRY 

a question of fact, of course, and I have not sufficient information before me to 
enable me to determine the matter." 

The letter of the Attorney General confirms the views of the Assistant Secretary 
of War, and, as stated before, only such expenses have been included as were 
made primarily for the purpose of furthering and helping the audit, and furnishing 
information to the Government. 

VIII 

In the settlement contract herewith submitted we have left out all reference 
to disallowances. The Du Pont Engineering Company expended approximately 
$300,000 over and above the amounts allowed in this settlement, and it contended 
that the United States was obligated under the contracts to reimburse this 
expenditure as it was made in good faith; but the War Department held that the 
above sum which covered numerous items was not reimbursable. However, for 
the purpose of settlement, the Du Pont Engineering Company is willing to accept 
the findings of the War Department. 

_ In conclusion, it may be stated that the entire cost of construction and opera- 
tion, under the five contracts, is approximately $129,000,000, and on this expendi- 
ture, the Du Pont Engineering Company have made a net profit, after deducting 
Federal taxes, of approximately $400,000. 

The net result of this settlement is that the Du Pont Engineering Company 
will make refund to the United States of $352,840.35. 

P. J. O'Shaughnessy, 

Major, U. S. A., Ret. 
Approved: 

(Signed) C. C. Williams, 

Major General, Chief of Ordnance. 

Exhibit "A" 

Office of the Attorney General, 

Washington, D. C, August 5, 1925. 
00160/28592 
Du Pont Co. 
The Honorable, the Secretary of War. 

My Dear Mr. Secretary: Heretofore you have referred to the Department 
of Justice for study and investigation certain criminal charges against the 
Du Pont Engineering Corporation in connection with its performance of certain 
war contracts with the Government. A reference of the case to this Department 
was also recommended by a committee of the joint board of survey of which 
the chairman was the Assistant Secretary of War. 

Since, however, you indicated in your letter of May 23, 1924, that upon the 
determination of the question of criminality you desired the case returned to 
your Department for administrative settlement of the contracts involved, I have 
ordered the files returned to the War Department. 

An extensive investigation of the charges of fraud or crime above referred to 
has failed to disclose reasonable or probable grounds for believing that during 
the performance of the contracts in question the Du Pont Company committed 
the offenses with which it has been charged, or any crimes, and in my opinion 
there is no warrant either for further investigation along these lines or for the 
institution of proceedings against the company based upon charges of fraud or 
crime. 

However, in the course of this Department's investigation, its attention was 
called to and it made a study of certain expenditures of the Du Pont Company. 
On the basis of the information before me, I have concluded that there is grave 
doubt as to such expenditvires being properly chargeable against the Government. 
I, therefore, felt it my duty to call them to your attention, especially since, in 
your letter of May 23, 1924, you invite my advice on any phases of the matter 
which may become the subject of special study by this Department. 

The expenditures which I have in mind may be classified as follows: 

1. So-called "meritorious bonuses." 

2. Thirty days' pay on discharge of men employed on the work. 

3. Return transportation and moving expenses furnished employees to the 
places from wliich they had come in order to engage in the work. 

Payments made to discharged employees for living expenses after they arrived 
at their home stations and the cost of returning their families to their homes, 
would, in my opinion be governed by the same principles as the items numbered 2 
and 3 above. 



MUNITIOXS INDUSTEY 3753 

4. Payments to banks for losses which the banks sustained in establishing 
branches at the points at which work was being performed under the contracts. 

5. A sum variously stated as $45,572.27 or $42,354.98, being the excess of the 
price of certain cotton shavings above the price prescribed by the contract. 

6. Expenses incurred by the contractor in the course of the Government's audit. 
My reasons for believing that on the basis of the information in my possession 

there is grave doubt as to propriety of charging the Government with the expendi- 
tures above mentioned, are very briefly as follows: 

1. Meritorious bonuses. Some reasonable sanction for each payment must be 
found within the contract or else such payment was not properly chargeable to 
the United States. The language of article II seems to have been relied on by the 
Du Pont Company as supporting this class of bonus payments. Article II, it will 
be remembered, deals exclusively with the construction of the plant, not with its 
operations after completion, article II reads as follows: 

The contractor is hereby authorized to do all things necessary or convenient in 
and about the construction of the plant including the purchase and procurement 
of all materials and labor necessary therefor * * * i^ order that the 
contractor may expedite the work of construction it may, in its discretion, from 
time to time, pay extra compensation for materials or services subject, however, 
to the approval of the contracting officer, which extra compensation shall be 
charged to the cost of construction. 

I will not discuss in detail the reasons for my conclusion that article II applies 
to construction only and not to operation, but, if I am correct in this, it follows 
that no authority can be found therein for any part of these bonus payments 
made to operating, as distinguished from construction employees. 

As far as such payments to construction employees are concerned, I have seen 
no evidence except the unsupported statement of the company that such bonuses 
were paid pursuant to any agreement between the recipients and the company, 
made when such recipients were employed or subsequently, to the effect that at 
the end of the work they would receive a bonus for meritorious services. If it 
turns out that no such agreements were made or can be proved, then I question 
whether the Du Pont Company could charge the amount of this bonus against the 
Government on the theory that it expedited the work. Moreover, on the 
■company's own statement, so far as my information extends, the only promises 
which they claim to have made to their employees were that the men transferred 
from E. I. du Pont de Nemours Company to the Du Pont Engineering were not to 
lose their status as employees of the former or their eligibility to a bonus or extra 
compensation under the system prevailing in the former company. But I call 
your attention to the fact that the system of bonuses of the parent or E. I. du Pont 
de Nemours Company did not contemplate the payment of cash bonuses under 
such circumstances as those arising under the Du Pont Engineering Company's 
contracts and did not involve the positive obligation to pay bonuses at all. The 
parent company did pay cash bonuses as a reward for inventions or conspicuous 
service, but these were paid on an entirely different theory from the bonus now 
in question. 

Article II authorizes tlie payment of extra compensation for the purpose of 
expediting the work. A bonus after the conclusion of the work pursuant to 
no prior agreement could not have had that effect. Except article II, I find 
nothing in the contract which expressly or impliedly permits the payment of 
bonuses or extra compensation, or which, in the absence of previous agreement 
with the recipients would make the bonus contracts legal charges against the 
United States. 

I realize that the contracting officer approved the meritorious bonus before 
payments and approved or ratified the other bonuses after payment under the 
contract. However, he had no authority to approve payments of extra com- 
pensation unless made to expedite the work of construction. If not made for 
that purpose, his approval would be without warrant in the contract. Never- 
theless, in view of the broad terms of the contract, the length of time which has 
elapsed since the payments were made, the enormous task performed by the 
contractor, the urgent necessity for not disturbing the labor market by turning 
loose upon it numbers of penniless men, and the possibility that under such cir- 
cumstances a court might be inclined to indulge every" intendment in favor 
the Du Pont Company, the contracting officer's approval or ratification of the 
bonus payments might possibly be regarded as conclusive of the purpose for which 
they were made and as binding upon the Government. Accordingly, I do not 



3754 MUNITIONS INDUSTRY 

feel that in case of a legal action to recover the amount of this bonus payment 
the Government could feel absolutely assurance of success. 

2. Thirty days' pay on discharge. 

3. Return transportation and moving expenses. 

These two classes of bonus payments, in my opinion, are governed by the same 
consideration as the so-called " ineritorious bonus." 

4. Payments to banks. Should it be established to your satisfaction that 
these payments were made pursuant to agreements between the Du Pont Com- 
pany and the respective recipients antedating the performance by the banks of 
the services for which the payments were made, I think they would be proper 
charges against the Government. The facts presented to me, however, fall 
short of establishing this. One of these claims, amounting to approximately 
$7,000, appears to have been at one time withdrawn by the Du Pont Company 
itself. Another, amounting to approximately $33,000, was denied by various 
War Department boards and on appeal the denial was affirmed. It was paid by 
the Du Pont Engineering Company only after these denials. In the absence o 
proof, such as is not contained in the files before me, to the effect that these banks 
were entitled to be repaid their losses under preexisting agreement with the 
Du Pont Company, I question that these payments constitute proper charges 
against the Government. 

5. Excess price of cotton shavings. The contract prescribed limits for the 
price to be paid by the Du Pont Company for these shavings. The contractor 
exceeded this price but relies on a letter from the War Department authorizing 
and permitting an increase in that price. That letter, while doubtless sufficient 
authorit}' for making subsequent purchases at the increased price, in my opinion 
does not support the contention of the conti'actor that the increase in price was 
to be retroactive. 

6. Contractor's audit expenses. I suggest for your consideration, that if the 
expenditures of the contractor in the course of the Government's audit were 
made primarily for the purpose, not of furthering and helping that audit and of 
furnishing information to the Government, but, on the contrary, of opposing 
the Government's audit, and of defending against and refuting such claims as the 
Government might raise against the Company, the legality of charging the con- 
tractor's expenses in this audit against the Government would be open to serious 
question. This becomes a question of fact, of course, and I have not sufficient 
information Isefore me to enable me to determine the matter. 

You will appreciate that this letter contains only a brief summary of the reasons 
for my opinion as to the items mentioned. If, in the course of your adminis- 
trative settlement of this case or at any other time, you desire a more full state- 
ment of these reasons, or if this Department can be of anj^ service to you in that 
connection, I shall be glad to have you call upon me. 

In passing, I also note that the War Department has disallowed claims of the 
contractor for general overhead expense of the E. I. du Pont de Nemours Com- 
pany, and for an adjustment of profits on the bonus for saving amounting to 
$55,862.28, due to the manner in which freight between Nashville and Jackson- 
ville, Tennessee, had been accounted for by the contractor. Both of these 
disallowances are, in mj^ opinion, correct under the contracts. 

In conclusion, may I emphasize the fact that, in accordance with my under- 
standing of your wishes, expressed in your letter of May 23, 1924, this Depart- 
ment has made no general investigation into the payments made to the Du Pont 
Company in the course of its work under the contracts in ciuestion. I am 
therefore making no suggestions as to the propriety of any payments except 
the ones above mentioned. Furthermore, this Department has for obvious 
reasons made no effort to pass upon the accuracy or completeness of the War 
Department's audit in this case, except that, incident to this Department's 
investigation of the general payments above referred to, its accountants determ- 
ined the amounts paid on account of the so-called "meritorious and discharge 
bonuses." 

Sincerely yours, 

(Sgd.) John G. Sargent, 

Attorney General. 



MUNITIONS INDUSTRY 3755 

Exhibit No. 1216 

bond to united states of america by du pont engineering company, 
principal, and e. i. du pont de nemours & company, surety. in penal sum, 

$20,000,000 

Know all men by these presents, That we, Du Pont Engineering Company, a 
corporation organized under the laws of the State of De!av\-are, as principal, and 
E. I. du Pont de Nemours & Company, a corporation organized under the laws 
of the State of Delaware, as surety, are held and firmlj- bound unto the United 
States of America in the penal sum of twent}- million dollars ($20,000,000), for 
the payment of which sum, well and truly to be made, we bind ourselves, and 
our successors, jointly and severally, firmly by these presents. 

The condition of this obligation is such, That whereas the above bounden Du 
Pont Engineering Company has on the 23d day of March, 1918, entered into a 
contract with the United States, represented by Samuel McRoberts, Colonel, 
Ordnance Department, United States National Army, whereby the said Du Pont 
Engineering Company has agreed to do all things necessary for the construction, 
on a site owned by the United States, at or near Nashville, Tennessee, of a com- 
plete plant for the manufacture of smokeless powder, and whereas in and by 
said contract it is agreed that the United States is to advance on account of said 
construction work to said Du Pont Engineering Company, contemporaneously 
with the signing of said contract, the sum of eighteen million, seven hundred fifty 
thousand dollars ($18,750,000); 

And whereas, by the terms of said contract said advance is to be kept separate 
from the funds of said Du Pont Engineering Company and expended exclusively 
upon the construction and equipment of said plant and for no other purpose; 

Now, therefore, if the above bounden Du Pont Engineering Company, or its 
successors, shall and will, in all respects, duly and fully observe and perform all 
and singular the covenants, conditions, and agreements in and by the said contract 
agreed and covenanted by said Du Pont Engineering Company to be observed 
and performed by it, regulating the use, expenditure, disposal or return of said 
advance payment, according to the true intent and meaning of said contract, and 
as well during any period of extension of said contract that may be granted, or 
during anj' period when the time limit may be waived on the part of the United 
States as during the original term of the same, then the above obligation shall be 
void and of no effect, otherwise to remain in full force and virtue. 

In witness whereof. The parties hereto have executed this instrument under their 
seal this 29th day of March, 1918; the name and corporate seal of said principal 
being hereto affixed and these presents duly signed by its vice president, pursuant 
to resolution of its board of directors passed on the 6th day of February, A. D. 
1918, a copy of the record of which is hereto attached; and the name and corporate 
seal of said surety being hereto affixed and these presents duly signed by its 
president, pursuant to resolution of its board of directors passed on the 27th 
day of March, A. D. 1918. 

Du PoNT Engineering Co. [seal] 
By (sgd.) E. G. Buckner [seal] 

Vice President. 
By (sgd.) Pierre S. du Pont [seal] 

President. 

In presence of — 

(sgd.) Alexis I. du Pont, 

Secretary. 
(sgd.) Alexis I. du Pont, 

Secretary. 

Attest: 

I hereby certify that the following is a correct copy of a resolution of the Board 
of Directors of E. I. du Pont de Nemours and Company as the same appears in 
the minutes of a meeting of said board held at the principal office of the company 
in the city of Wilmington, Delaware, on the 27th day of March, 1918, at which 
meeting there was present a quorum of said board, viz: 

"Resolved that P. S. du Pont, president, or E. G. Buckner, vice president of 
this company, be and either of said officials is authorized and directed to execute 
for and on l^ehalf of this company, and in its corporate name as surety, that 
certain bond in the penal sum of twenty million dollars ($20,000,000), wherein 
the du Pont Engineering Company, a corporation organized under the laws of 
the State of Delaware, is principal, and this company is surety, securing the per- 



3756 MUNITIONS INDUSTRY 

formance by said principal of all and singular the covenants, conditions and agree- 
ments agreed by it to be performed in a certain contract entered into March 23, 
1918, by said principal, as party of the first part, and Samuel MacRoberts, Colo- 
nel, Ordnance Department, United States National Army, as party of the second 
part, covering the construction of a smokeless powder factory at Nashville, 
Tennessee, and Alexis I. du Pont, Secretary, is hereby authorized and directed 
to affix this Company's corporate seal to said bond." 

I further certify that I am the custodian of the records of said company includ- 
ing the minutes of the meetings of the board of directors, and that said resolution 
has not been revoked, annulled or amended in any manner whatever. 

In witness whereof I have hereto set my hand and affixed the corporate seal 
of the company this 27th day of March, 1918. 

(Signed) Alexis I. Du Pont, 

Secretary. 

Extract from minutes of executive committee meeting no. 4, April twenty-six 
1918, Du Pont Engineering Company. 

The following resolution was offered and unanimously adopted: 

Resolved, that the president and any vice president of this company, or either 
of them, is authorized and directed to procure, on any terms that they or either 
of them deem expedient, an advance payment or payments on any one or more 
contracts now existing, or hereafter made, between this company and the United 
States of America, or any department thereof, and to execute and deliver in the 
name and on behalf of this company all notes, bonds, obligations, amendatory 
contracts, supplemental contracts, and/or other contracts that the United States, 
or any department thereof, may require in respect of the making and repayment 
of any such advance payments, and to give such security therefor as may be 
required, and to affix the seal of this company to any papers requiring the same, 
and to do such other acts and things, and execute and deliver such other instru- 
ments as the United States may require in the premises. 

Resolved further, that any previous action in conflict with the above be and 
the same is herebv rescinded. 



Exhibit No. 1217 

bond to united states op america by du pont engineering company, 
principal and e. i. du pont de nemours & company, surety. in penal 

SUM, $6,318,000 

Know all men by these presents, that we, Du Pont Engineering Company, a 
corporation organized under the laws of the State of Delaware, as principal, and 
E. I. du Pont de Nemours & Company, a corporation organized under the laws 
of the State of Delaware, as suretj^ are held and firmly bound unto the United 
States of America in the penal sum of six million three hundred eighteen thousand 
dollars ($6,318,000.00) for the payment of which sum, well and truly to be made, 
we bind ourselves, and our successors, jointly and severally, firmly by these 
presents. 

The condition of this obligation is such, that whereas the above bounden 
Du Pont Engineering Company has on the 23d day of March 1918 entered into 
a contract with the United States, represented by Samuel McRoberts, Colonel, 
Ordnance Department, United States National Army, whereby the said Du Pont 
Engineering Company has agreed to do all things necessary for the operation, 
on a site owned by the United States, at or near Nashville, Tennessee, of a com- 
plete plant for the manufacture of smokeless powder, and whereas in and by said 
contract it is agreed that the United States is to advance on May 15, 1918, on 
account of said operation, to said Du Pont Engineering Company, the sum of 
six million three hundred eighteen thousand dollars ($6,318,000.00); 

And whereas, by the terms of said contract said advance is to be kept separate 
from the funds of said Du Pont Engineering Company and expended exclusively 
upon the operation of said plant and for no other purpose; 

Now, therefore, if the above bounden Du Pont Engineering Company, or its 
successors, shall and will, in all respects, duly and fully observe and perform all 
and singular the covenants, conditions, and agreements in and by the said con- 
tract agreed and covenanted by said Du Pont Engineering Company to be ob- 
served and performed by it, regulating the use, expenditure, disposal or return 
of said advance payment, according to the true intent and meaning of said con- 



MUNITIONS INDUSTRY 3757 

tract, and as well during any period of extension of said contract that may be 
granted, or during any period when the time limit may be waived on the part of 
the United States as during the original term of the same, then the above obliga- 
tion shall be void and of no effect, otherwise to remain in full force and virtue. 

In witness whereof, the parties hereto have executed this instrument under 
their seals this 13th day of May 1918; the name and corporate seal of said princi- 
pal being hereto affixed and these presents duly signed by its vice president 
pursuant to resolution of its executive committee passed on the 26th day of April 
A. D. 1918, copy of the record of which is hereto attached; and the name and 
corporate seal of said surety being hereto affixed and these presents duly signed 
by its president, pursuant to resolution of its finance committee passed on the. 
13th day of May, A. D. 1918; 

In presence of — 

Du Pont Engineering Company 
(sgd.) E. G. BucKNER, Vice pres. 



Secretary. 
ATTEST: 

E. I. DU Pont de Nemours & Company, 
(sgd.) Alexis I. du Pont 

(sgd.) P. S. DU Pont, Pres. 



DU PONT ENGINEERING COMPANY EXECUTIVE COMMITTEE 

The following resolution was offered and unanimously adopted: 

Resolved, That the president and any vice president of this company or either 
of them, is authorized and directed to procure, on any terms that they or either 
of them deem expedient, an advance payment or payments on a!iy one or more 
contracts now existing, or hereafter made, between this company and the United 
States of America, or any department thereof, and to execute and deliver in the 
name and on behalf of this company all notes, bonds, obligations, amendatory 
contracts, supplemental contracts, and/or other contracts that the United States, 
or any department thereof, may require in respect of the making and repayment 
of any such advance payments and to give such security therefor as may be 
required, and to affix the seal of this company to any papers requiring the same, 
and to do such other acts and things, and execute and deliver such other instru- 
ments as the United States may require in the premises. 

Resolved further, That any previous action in conflict with the above be and the 
same is hereby rescinded. 

This is to certify that the above is a true and correct copy of resolution adopted 
by the executive committee of the Du Pont Engineering Company, at meeting 
held on April 26, 1918. 



Secretary Du Pont Engineering Co. 

E. I. DU PONT DE NEMOURS & COMPANY FINANCE COMMITTEE 

The following resolution was offered and unanimously adopted: 
Resolved, That the president or any vice president, of this corporation ))e and 
they, or either of them, are hereby authorized to execute in the name and behalf 
of this corporation, under its corporate seal to be attested by the secretary, or an 
assistant secretary, on any terms that they or either of them deem expedient, all 
contracts and obligations, guarantees, bonds, or instruments, either as principal 
or surety, necessary, convenient, or incidental, to the execution and/or perfor- 
mance of contracts heretofore or hereafter entered into by this corporation, or the 
Du Pont Engineering Company, with the United States of America, or any 
department thereof, including the execution, either as principal, or surety, of 
obligations for the purpose of the procurement by Du Pont Engineering Company 
of payments in advance or otherwise, on account or in respect of, said contracts 
with said United States Government; hereby ratifying and confirming all acts, 
instruments, or obligations performed, signed, or executed in pursuance of the 
foregoing authority. 

This is to certify that the above is a true and correct copy of resolution adopted 
by the finance committee of E. I. du Pont de Nemours & Companv at meeting 
held on May 14th, 1918. 

Signed M. D. Fisher, 
Asst. Secy. E. I. Du Pont de Nemours & Co. 



3758 MUNITIONS INDUSTRY 

("Exhibit No. 1218" appears in text on p. 35S0.) 



Exhibit No. 1219 

E. I. Du Pont de Nemours & Company Resolution Adopted by the Board 
OF Directors at Meeting Held March 27, 1918 

execution of bond in re NASHVILLE PLANT 

On motion, duly made and seconded it was 

Resolved, That P. S. du Pont, president, or E. G. Buckner, vice president of 
this company, be and either of said officials is authorized and directed to execute 
for and on behalf of this compan j', and in its corporate name, as surety, tliat certain 
bond in the penal sum of twenty milHon dollars ($20,000,000), wherein tlie du 
Pont Engineering Company, a corporation organized under the laws of the State 
of Delaware, is principal, and this company is surety, securing the performance 
by said principal of all and singular the covenants, conditions and agreements 
agreed by it to be performed in a certain contract entered into March 23, 1918, 
by said principal, as party of the first part, and Samuel MacRoberts, colonel, 
Ordnance Department, United States National Army, as party of the second part, 
covering the construction of a smokeless jsowder factory at Nashville, Tennessee, 
and Alexis I. du Pont, secretary, is hereby authorized and directed to affix this 
company's corporate seal to said bond. 



Exhibit No. 1220 

[Copy] 

May 10, 1924. 
Mr. R. H. Williams, 

First National Bank Building, Chattanooga, Tenn. 

Dear Sir: Among the subjects which we discussed in reference to the Old 
Hickory contract, while I was in Chattanooga, was the methods used by the 
purchasing department in connection with the procurement of material for the 
Old Hickory projects. You requested me, at the time, to furnish you with evidence 
which would illustrate that prior to placing orders for materials the purchasing 
department obtained competitive price quotations. In this connection I am 
enclosing herewith a special report citing transactions wherein competitive 
prices were obtained by purchasing department prior to placing orders for ma- 
terials procured in connection with the Old Hickory powder plant, and a copy of 
a report dated January 18, 1919, addressed to Mr. David D. Rankin, asst. 
purchasing agent, which was prepared by Mr. T. W. Harris, one of the purchasing 
department employes. 

In this connection I would like to call your attention to the fact that a great 
many materials used in connection with the Old Hickory construction and opera- 
ting projects were purchased at prices fixed by the Government, for example: 
Cement, lumber, pig iron, steel plate, rails, sheet steel, high silicon iron castings, 
carbon tetrachloride, benzol, methyl alcohol, acetone, toluol, acetate of lime, 
coal, fuel oil, cotton linters. 

Large purchases of sulphur were made in connection with the Old Hickory 
operation and it might be pertinent to add that sulphur was purchased by us at 
a price agreed upon between the principal producers and the United States. 

Most of the sulphuric acid used in connection with the Old Hickory operation 
was manufactured at Old Hickory, but in the early stages of the operating period, 
it was necessary to purchase quantities of sulphuric acid aggregating 594,138 
pounds. It is my understanding that this material was procured at prices 
fixed by the Government. You of course, understand that the price of sulphuric 
acid varies in the ratio of strength. 

Trusting that this information will serve your purpose, I am 
Yours very truly, 

W. A. Shafer, 
Assistant to the Treasurer. 
WAS:p. 



MUNITIONS INDUSTRY 3759 

Special Report — -Citing Transactions Wherein Competitive Prices were 
Obtained by Purchasing Department Prior to Placing Orders for 
Materials Procured in Connection with the Old Hickory Powder 
Plant 

transaction #1 

Exhibit 1, copy of requisition USN-769-1/2L. 

Exhibit 2, copy of letter from Republic Iron & Steel Company. 

Exhibit 3, copy of letter from American Steel & Wire Company. 

Exhibit 4, copy of letter from director general, Military Railways. 

Requisition USN-769-1/2L was issued by the construction division and 
transmitted to the purchasing department, which proceeded to obtain com- 
petitive quotations from two purveyors: 

Republic Iron & Steel Company. 

American Steel & Wire Company. 

The order for the material specified on requisition 769-1/2L was ultimately 
placed with the Dilworth Porter Co., Inc., as per instructions of the Director 
General of Military Railways at the price specified in his letter, viz, $4.05 per cwt. 

TRANSACTION #2 

Exhibit 5, requisition USN-768-1/2L. 

Exhibit 6, letter from Light Railway Equipment Company. 

Exhibit 7, letter from Lorain Steel Company. 

Exhibit 4, letter from Director General Military Railways. 

Requisition USN-768-1/2L was issued by the construction division and 
transmitted to the purchasing department, who then obtained competitive 
quotations from — - 

Light Railway & Equipment Company. 

The Lorain Steel Company. 

The order for material specified on requisition 768-1/2L was ultimately placed 
with Lakewood Engineering Company, Cleveland, Ohio, as per instructions of 
the Diiector of Military Railways, at prices specified in his letter (exhibit 4). 

TRANSACTION #3 

Exhibit 8, letter from Bass Foundry & Machine Company. 
Exhibit 9, letter from Buffalo Foundry & Machine Company. 
The order for the material specified was placed with Buffalo Foundry & Ma- 
chine Company. Requisitions USN-2460-1/2A, 2462-1/2A, 2463-1/2A. 

TRANSACTION #4 

Exhibit 10, letter from Eagle Tank ComiDany. 
Exhibit 11, letter from Wendnagel & Company. 
Exhibit 12, letter from Challenge Company. 

As the need for these materials was urgent, the orders were divided among the 
three bidders to facilitate promjot delivery. 

TRANSACTION #5 

Exhibit 13, letter from Dover Boiler Works. 
Exhibit 14, letter from W. H. Thompson & Company. 
Exhibit 15, letter from Tippett & Wood. 

Exhibit 16, telegram from Chattanooga Boiler & Tank Company. 
Order for the material specified on requisition USN-6854-1/2X was placed 
with the Chattanooga Boiler Works. 

TRANSACTION #6 

Exhibit 17, letter from Dover Boiler Works. 
Exhibit 18, letter from Tippett & Wood. 
Exhibit 19. Coatesville Boiler Works. 

The order for materials specified USN-8001-1/2G was placed with Coatesville 
Boiler Works. 



83876— 35— PT It 



3760 MUNITIONS INDUSTRY 

TRANSACTION #7 

Exhibit 20, letter from Chattanooga Boiler & Tank Company. 
Exhibit 21, letter from Tippett & Wood. 
Exhibit 22, letter from Dover Boiler Works. 

The order for material specified was placed with Chattanooga Boiler & Tank 
Company, requisition USN-5632-1/2X. 

TRANSACTION #8 

Exhibit 23, letter from W. H. Thompson & Company. 
Exhibit 24, letter from Coatesville Boiler Works. 

Order for material specified was placed with Coatesville Boiler Works, requisi- 
tion USN-7518-1/2A. 

TRANSACTION #9 

Exhibit 25, letter from Geo. D. Wetherill & Company, Inc. 

Exhibit 26, letter from John Lucas & Company, Inc. 

Exhibit 27, letter from John T. Lewis & Brothers, Company. 

Order for materials specified was placed with the lowest bidder, Geo. D. 

Wetherill & Company, Inc., req. GOH-719. 



Exhibit No. 1 

February 11, 1918. 

War Department, United States of America, Ordnance Department, Du Pont Engineering Co., agents, 

Wilmington, Del.] 

Req. No. USN-769>^-L. 

Charge Const. Nashville Smokeless Powder Plant — Material. 

400 kegs 4" x 7/16" railroad spikes. Tramwavs. Delivery 160 kegs March 15, 
1918; deUverv 160 kegs April 15, 1918; deUvery'80 kegs May 15, 1918. 

Dilworth Porter & Co., Inc., Pittsburgh, Pa., $4.05 cwt. f.o.b. Pitts. As per 
instructions from Director Gen'l of Military Rys. (See letter 3/13). — C. R. H. 

(Director General Military Railways, 734 15th St., Washington, D.C. $4.90 
cwt. — D. B. W. Cancelled; placed as above.) 
PLH*EC 

Mark and ship as follows: To Ordnance Department, U. S. Army, Du Pont 
Engineering Co., agents; destination, c/o E. F. Johnson, R. E. (USN-769J'^-L). 
Via freight. 

Shipment as above. 

H. M. Pierce, Chief Engr. 
Per Wm. N. Howson. 



Exhibit No. 2 
[C. T. Johnston, Gen'l Manager of Sales; W. B. Topping, Ass't Gen'l Manager of Sales] 

Republic Iron & Steel Company, 

General Offices, Republic Building, 

Yoimgstown, Ohio, Feb. 14, 191S. 
War Department, U. S. of America, 

Ordnance Department, Du Pont Engineering Co., Agents 

Wibnington, Delaware. 

Gentlemen: We are in receipt of your favor of the 12th inst. "DSW" re- 
quisition USN-769J'^-L, inquiry for 400 kegs 4" x 7/16" railroad spikes, would 
advise that if order is received at once, could furnish these spikes in about three 
to four weeks after receipt of order and quote you $3.90 base f.o.b. Pittsburgh. 
Yours very truly, 

W. B. Topping, 
Ass't General Manager of Sales. 
Diet, by G. L. G 



MUNITIONS INDUSTRY 3761 

Exhibit No. 3 

[All agreements contingent upon strikes, accidents, and causes beyond our control prices subject to change 

without notice] 

Sales Department, 
American Steel & Wire Company, 

30 Church Street, 
New York, October 22nd, 1918. 
Du Pont Engineering Co., 

Wilmington, Del. 
Gentlemen: We have your letter of the 21st, file "HMA", enclosing copy 
of telegram and would state that we have no record of having received this tele- 
gram. However our price on 100 kegs, 4 x 7/16 railroad spikes is $5.15 per 100 
lbs., f.o.b. Pittsburgh and the less car lot rate of freight from Pittsburgli to 
Racine, Wis., is A.2]i^ per 100 lbs. plus the war tax of 3% on the freight. We 
also charge the freight on the tare of the kegs and the keg weight, 10 lbs. As 
near as we can estimate we have about five weeks work on railroad spikes at the 
present time, but shipment of the 100 kegs for you could possibly be made in two 
to three weeks. 

Terms, thirty days net or }^ of 1% discount if paid within ten days from date 
of invoice or thirty days net. 
Yours truly 

American Steel & Wire Co., 
O. B. Coles, Sales Agent. 
HJM:AN 

The prices quoted for the materials named herein are subject to revision to a 
basis that may be fixed by the proper U. S. Government agency, by agreement 
or otherwise, as the public or market price for such materials at the time of 
shipment. 



Exhibit No. 4 
[FAM*AFC. In reply refer to file no. O. File C. R. H.) 

War Department, Corps of Engineers, U. S. Army, 

Office of the Director General of Railways, 

734 Fiftee7ith Street NW., 
Washington, D. C, March 13th, 1918. 
Du Pont Engineering Company, 

Wilmington, Del. 
(Attention Mr. F. A. LaMotte, Jr.) 

Gentlemen: 1. Since writing you on the 8th instant we have received certain 
rail orders for 25# rail accessories and turn-outs, which are herewith returned you. 

2. As stated in my letter of March Sth, arrangements have been made in your 
behalf in respect to the allotment and prices of the 25# rail, and it is further 
arranged for you to place your order, instead of this office, in the following 
inanner: 

Arrangements have been made with the Cambria Steel Company to furnish 
the tonnage on order 118-P, for 408,000 ft. of 25# rail should read — 1,574 gross 
tons 25# A. S. C. E. section rail in accordance witli specifications of D. G. M. Ry. 
dated March 4th, 1918, together with 16,520 pairs of splices, the rail at Sf' per 
cwt., splices at 38fS per pair. All of the above rail should be 30 ft. lengths, ex- 
cepting 56 gross tons, which should be requested in 455 pieces 32 ft. lO in. in 
length, which will take a price of .309^,, and should be consigned to the Lake- 
wood Engineering Company, Cleveland, Ohio, for the fabrication of your 365 
turn-outs. The above prices are f. o. b. Johnstown, Pa. 

Your order 116-P should be made to the Lakewood Engineering Company, 
covering 365 #4 turn-outs, 3 ft. gauge, to be made of rail as furnished without 
charge f. o. b. their works, at a price of $32.75 each, plus $16.60 for switch stands. 

Your order 117-P, covering 400 kegs of 4 by }{" railroad spikes should be 
made to Dilworth, Porter & Co., Inc., Pittsburgh, Pa., at a price of $4.05 per cwt., 
f. o. b. Pittsburgh, Pa. 

Your bolt requirement consists of 275 kegs approximately, or 54,400 pieces 
2y% by }^", priced at 4.9?i per pound, f. o. b. Pittsburgh, and can be taken care 
of by the Oliver Iron & Steel Company, Pittsburgh, Pa. 



3762 MUNITIONS INDUSTRY 

3. The above-named firms have been notified of the above and are awaiting 
your formal order. 

Very respectfully, 

S. M. Felton, 

Director General Military Railways. 
By F. H. Malilor, 

Lt. Col., Engineers, N. A. 

Inclos. Copies of orders, CC Lakewood Engineering Co., Cleveland, Ohio; 
Dilworth, Porter & Co., Inc., Pittsburgh, Pa.; Oliver Iron & Steel Company, 
Pittsburgh, Pa.; Cambria Steel Co., Woodward Building, Washington, D. C. 



Exhibit No. 5 
Req. No. USN-768>^-I. 

February 11, 1918. 

(War Department, United States of America, Ordnance Department, Du Pont Engineering Co., agents, 

Wilmington, Del.] 

Charge: Construction Nashville Smokeless Powder Plant — Material. 

365 turn-outs for tramway, 3'0" gauge, 25-lb. rail, each turn-out to consist of 
2 5'0" split switch points, right and left; 4 head blocks; 1 head tie rod with 
switch stand connections and one (1) auxilliary tie rod; 1 ground throw, lever 
to parallel track; 1 #4 rigid rivetted plate frog 4'8" long and two (2) 5'0" guard 
rails. 

(Director General of Military Railways, 734 15th St., Washington, D. C. 
Cancelled.) 

Tramways, delivery 146 complete turn-outs March 15, 1918; delivery 146 
complete turn-outs April 15, 1918; delivery 73 complete turn-outs May 15, 1918. 
PLH*EC 

(Replace Lakewood Engineering Co., Cleveland, O. $32.75 ea. -\- $16.50 ea. 
for switch stands, as instructed in letter of 3/13 from Director Gen'l of Militarv 
Rys.) 

Mark and ship as follows: To Ordnance Department, U. S. Army, Du Pont 
Engineering Co., agents. Destination, c/o E. F. Johnson, R. E. (USN-76S}^-I), 
Old Hickory (via Hermitage) (near Nashville), Tennessee. 

Shipment, as above. Via freight. 

H. M. Pierce, Chief Engr., 
Per Wm. Howes. 



Exhibit No. 6 

Light Railway Equipment Company, 

Phila., Pa., Feb. 15th, 1918. 
DupoNT Engineering Co., 

Agents, Ordnance Dept., U. S. of America, 

Wilmington, Del. 

Your file DSW. Req. USN-768>^-L. 

We propose to furnish f. o. b. our works, Chester, Pa., within from date 

of receipt of your order, unless delayed by strikes, fires, or other causes beyond 
our reasonable control, the hereinafter described material, as called for in your 
inquiry of Feb. 12th, 1918, 365 turnouts for tramway 3' gage, made of 30# rail, 
each turnout to consist of- — 

2-5' split switch points (right and left). 

4 head blocks or slide plates. 

1 head tie rod with switch stand connections. 

1 auxiliary tie rod to reach the ground throw. 

1 ground throw, lever to operate parallel with track. 

1 #4 rigid plate frog 4' 8" long. 

2-5' guard rails notched and bent. 

Each set as described above at a price of $38.40 each. 

We will make delivery shipping 100 in three weeks from date of order, and 
100 per week following. 



MUNITIONS INDUSTRY 3763 

Thanking you for the opportunity of quoting and hoping to be favored with 
your order. 

Terms: 30 days 1% 10 days. 
Respectfully submitted. 

Light Railway Equipment Co., 

H. A. Ellis, Pres. 



Exhibit No. 7 

[FUe D. S. W.] 

Carnegie Steel Co., 
Illinois Steel Company, 
National Tube Co., 
American Steel & Wire Co., 
American Sheet & Tin Plate Co., 
Universal Portland Cement Co., 
United States Steel Products Company, 
American Bridge Co., 
Tennessee Coal, Iron & R. R. Co., 
The Lorain Steel Co., 
Wilkins Building, Washington, D. C, February 18, 1918. 

Ordnance Department, U. S. A., 

Du Pont Engineering Company, Agents, 

Wilmington, Delaware. 
(Your file " DSW ", Requsition USN-768i^-L.) 
Dear Sirs: In response to your letter of the 12th instant, addressed to our 
Johnstown, Pa., office, for quotation on 365 turn-outs of #30 lb. rail, we are pleased 
to quote you price of $45.70 per set f. o. b. cars our works, Johnstown, Pa., based 
on each set being made up as follows: 

Rigid split switch 5'0" long, complete with 1 head rod and 1 tie rod with clips 
and bolts, and 4 slide plates, and equipped with parallel ground throw; #4 riveted 
plate frog, 4'8" long; two (2) 5'0" guard rails; built of #30 lb. ASCE tee rail; 
gauge of track, 3'0"; ground throw to be of the type shown at the top of page 39 
of our #19 catalog; frog to be of the type shown on page 88 of same catalog. 
Cuts mentioned are enclosed herewith. 

We have enough rail in stock to take care of approximately 75% of the ma- 
terial required, and this rail is offered for immediate acceptance and subject to 
prior sale. The balance of rails required for this work can be secured from roll- 
ing within 2 to 3 weeks, and in order that we may secure from this rolling it will 
be necessary that your order be received immediately. On this basis we can make 
shipment at the rate of 65 sets in 28 working days and 100 sets per week there- 
after, after receipt of order and full information, although this promise is made 
subject to nonpenalty. 

Trusting this proposition will prove of interest and that we may be favored 
with your order to cover promptly, we await your further advices. 
Very truly yours. 

The Lorain Steel Company, 
W. N. Brandt. 
WNB-X 



Exhibit No. 8 

The Bass Foundry & Machine Company, 

Fort Wayne, Ind., February 2Srd, 1918. 
Bid on castings for Nashville, Tenn. 
D. S. Wood, 

Asst. Pur. Agf., E. I. du Pont de Nemours cfc Co., 

Wilmington, Delaivare. 
Dear Sir: Referring to vour inquiry of the 12th instant, file "DSW", inviting 
our price on ciastings for Nashville, Tenn., beg to advise that we are prepared to 
bid on one double unit only, for your July or August schedule of deliver}^ There 
were some discrepancies in your specification sheet as compared with the blue- 
print sent us. You failed to send us details of castings 3953-B and 1239-B but 
with tl ese exceptions we are bidding on the other castings as follows: 
4 #4125-A1 supports. 
4 #412£-B perforated plates. 



3764 MUNITIONS INDUSTRY 

128 #4125-D2 grids. 
16 #4125-C supports. 
4 #3953-A tower tops. 
20 #1245- A lantern inlets. 
20 #1243- A lantern bodies. 
20 #1243-B lantern covers. 
8 #3958-A inlet sleeves. 
20 #1242-B shield plates. 
20 #1242-C wearing plates. 
20 #1241-A spray saucers. 
20 #1242- A gradings. 
80 #1244-A supports. 
8 #3958-B gas sleeves. 
40 #1244-C gas sleeves. 
20 #1244-B blank flanges. 
20 #189-A base plates. 
620 #4607-A grates. 
620 #4607-B grates. 
620 #4607-C grates. 
620 #4607-D grates. 
12 #1244-D acid sleeves. 
12 #1238-C inlet sleeves. 

4 #4168-A sleeves. 

15 #4213-C ring flanges 3". 

5 #421 3-D ring flanges 4". 
5 #4213-E ring flanges 5". 
5 #4213-F ring flanges 6". 

4 #4149-B 16'' X I'iYi" blank flange. 
4 #4149-A1 manifold (cast steel). 
4 #4268-A fillers. 
4 #4268-B fillers. 

16 #3990- A 1 furnace fronts. 
16 #3989-F weights. 

8 #399 1-A sills. 

16 #920-A ash pit frames. 

16 #920-B ash pit doors. 

16 #920-C ash pit doors. 

32 #39S9-E sheaves. 

16 #3989-B arch plates. 

16 #3989-D side frames. 

16 #3989-G side frames. 

8 #399 1-B bar supports. 

24 #3965-B lug guides. 

24 #3965-C slot guides. 

8 #3965-A straight pipe. 

288 #3965-Dl sleeves. 

144 #3940-C u-pipes. 

120 #3940-A u-boxes. 

8 #3942-A inlet manifolds. 

8 #3941-A outlet manifolds. 

80 #3939-A plain roof bars. 

72 #3939-B lug roof bars. 

40 #92 1-A frames. 

40 #92 1-B doors. 

32 #3989-C doors 12 x 24. 

32 #3989-A frames 12 x 24. 

20 #1207-C pipe saddles. 

20 #1207-D saddle shoes. 

2 #3940~B si)lit collars. 

16 #4091-A floor plates. 

32 #4091-B floor plates. 

72 #3888-E base blocks. 

8 #3884-Al bottom sections. 

40 #3885-A intermediate sections. 

8 #3886-A covers. 

80 #3888-A grills. 

200 #3888-B distance bars. 



MUNITIONS INDUSTKY 3765 

80 #3888-C segments. 

192 #3888-Dl spring washers. 

2 #4125-A1 supports. 

2 #4125-B perforated plates. 

64 #4125-D2 grids. 

We estimate the total weight of all the foregoing to be 941,090 pounds and our 
total price for same, including all machine work wliere called for, would be $59,047 
f. o. b. Fort Wayne. If the four manifolds from pattern #4149-A1 are made of 
cast iron instead of cast steel, our price would be reduced $1,700.00. We could 
have all of these castings shipped during July but as there are about 15 carloads 
of castings involved, we would no doubt begin shipping as early as June and prob- 
ably sooner, but we would not care to be pushed for any of the castings before 
July, owing to Government work already on our books. 

A majority of the necessary patterns our records show to be in existence. We 
give below separate prices for such patterns as our records do not show we have 
previously had in our possession, as follows: 

Patt. #4125-A1 support, $54.00. 

Patt. #4125-B perforated plate, $15.00. 

Patt. #4125-D2 grids, $39.00. 

Patt. #4125-C support, $49.00. 

Patt. #1245-A lantern inlet, $18.00. 

Patt. #4168-A sleeve, $18.00. 

Patt. #4213-C flange, $1.00. 

Patt. #4213-D flange, $1.00. 

Patt. #4213-E flange, $1.50. 

Patt. #4213-F flange, $1.50. 

Patt. #4149-B flange, $6.00. 

Patt. #4149-A1 manifold, $8000. 

Patt. #4268-A filler, $5.50. 

Patt. #4268-B filler, $5.50. 

Patt. #1207-C pipe saddle, $3.75. 

Patt. #1207-D saddle shoe, $5.50. 

Trusting this proposition will receive favorable consideration, we remain, 
Very respectfully, 

The Bass Foundry & Machine Co., 
By William E. Slater. 



Exhibit No. 9 

Buffalo Foundry and Machine Co., 

Buffalo, N. Y., Mar. 4, 1918. 
Mr. D. S. Wood, P. A., 

War Department, du Pont Engineering Co. — Agents, 

Wilmington, Del. 
My Dear Mr. Wood: Referring to the writer's conversation with you on 
Saturday, beg to advise that we this morning carefully went over this matter, 
and in view of the fact that we desire to help you out, we finally decided that the 
lowest price we could make would be six and one-half cents (6}^^) per pound, 
which really leaves us little or no profit. Our former quotation should be the 
price we ought to ask, but appreciate the position you are in, and, therefore, re- 
duced our price as above, which we embodied in the following telegram we a few 
moments ago sent you — • 

"After careful consideration find best price can make on rough iron castings is 
six and one-half cents pound f. o. b. Buffalo. Patterns $865.00 additional. 
Machine work $11,272.00 additional. If only part order is placed divided over 
entire quantity pattern charge will be same but machine work will be on propor- 
tionate quantity. Please wire decision." 
which we hereby confirm. 

Thanking you for past kind favors, and trusting to be favored with your order, 
we are 

Yours very truly, 

Buffalo Foundry & Machine Co. 
EGR-S. E. G. RipPEL, Sales Manager. 



3766 



MUNITIONS INDUSTRY 



Exhibit No. 10 

Eagle Tank Co., 
Chicago, III, Feb. 21, 191S. 
Du Pont Engineering Co., 

Agents, U. S. Government, 

Wilmington, Del. 
Dear Sirs: We agree to deliver f. o. b. cars Chicago, knocked down wood tanks, 
as follows: 

32 wooden bleach tanks: 

13' 8" dia., 12' 6" deep, all inside measures, each 
with 13%" dia. hoops with two malleable iron 

lugs @ 

32 wooden stuff tanks, each — 

15' 6" dia., 10' 6" deep, all inside measures, each 
with 12%" dia. hoops with two or more malleable 
iron lugs @ 

20 wooden hot water tanks, each — 

13' 0" dia., 13' 0" deep, all inside measures, each 
with 13^4" dia. hoops with two malleable iron 

lugs, @ 

64 wooden tanks, 9942-A, each — 

13' 0" inside dia., 18' 0" staves outside. These 
tanks to have two bottoms, one flat and one 
sloping. No bottom supports or sluice valves 
furnished, @. 



Each 
$337. 00 


Total 

$10, 784. 00 


340. 00 


10, 880. 00 


327. 00 


6, 540. 00 



9%" dia. hoops and O^:*" dia. hoops with two malle- 
able iron lugs. 
12 wooden tanks, each — 

8' dia. inside, 16' staves outside, each with 1Q%" 

dia. hoops, with two malleable iron lugs 

760 wooden boiling tubs, each — 

10' 5" dia., 6' 2" deep, all inside measures, each 
with 11%" dia. hoops with two malleable iron 

lugs. Croze & Chime, as shown, @ 

240 wooden poachers, each— 

13' 0" dia., 11' 0" deep, all inside measures, each 
with 13js" dia. hoops with two malleable iron 

lugs, @ 

The above tubs are all open tops and made from 
clear Tank grade fir, or we may substitute long 
leaf j^ellow pine 90% heart and sound knotted. 
Thickness 3" before being machined and 2?4" 
approximately, when finished. 
Five 35,000-gal. water tanks, each — 

18' 0" dia., 20' 0" staves, all outside measures'i 
made of 3" clear tank grade fir with 20%" dia. 
hoops with lugs. 1" D. & M. flat pine cover. 

Pine ruberoid-covered conical roof 

Five 30-foot high towers: 

4 posts each, for supporting above tanks with a 

factor of safety of four, including balcony, hand 

rail and ladders, all painted one coat at factory. _ 

Additional cost of freight and expense of sending men to 

Nashville and erecting above 5 tanks and towers on 

foundations furnished by others 

The above tanks are all made with straight sides. 

We can furnish about 25% of the above tanks. 

Yours very truly. 



492. 00 31, 488. 00 

204. 00 2, 448. 00 

175. 00 133, 000. 00 

325. 00 78, 000. 00 



' 1, 800. 00 9, 000. 00 



700. 00 3, 500. 00 



Eagle Tank 
W. O. Olsen, 



Co., 
President. 



MUNITIONS INDUSTRY 



3767 



Exhibit No. 11 

Wendnagel & Co., 
Chicago, III., Feb. 21, 1918. 
Du Pont Engineering Co., Agents, 

Wihnington, Del. 
Gentlemen: We propose to furnish, f . o. b. Chicago, the following tanks, all to 
be made of 3" best quality and grade old-growth j-ellow fir, or 3" long-leaf yellow 
pine, 90% heart, all to be entirely free from sap on the inner surface and practi- 
cally free from knots and all defects. All to be worked up to their proper size 
and shape by machinery; staves convex and concave; joints all smoothly planed 
(not sawed) and thoroughly dowelled. Hoops made to proper length, threaded 
and bent to circle. 



32 (thirty-two) wood bleach tanks, 13' 8" dia. x 12' 6" deep, inside dimen. with 

13 W round screw hoops, 2 lugs on each @ _ _ 

Can furnish 16 tanks. 
32 stuff tanks, 15' 6" dia., 10' 8" deep, inside dimen. with 12 }i" round screw hoops, 

2 lugs on each @._ 

Can furnish 16 tanks. 
20 hot water tanks, 13' dia. 13' deep, inside dimen., with 13 H" round screw hoops, 

2 lugs on each, @ 

Can furnish 10 tanks. 
64 tanks, print 9942-A, 13' dia. inside 18' full length of stave. These tanks to have 
two bottoms, one flat and one sloping. The supports under tanks and slide 
valves not included herein. Each tank to have nine Ji" and nine H" round 

screw hoops, 21ugs on each, (a» 

Can furnish 21 tanks. 
12 tanks, 8' diam. inside, 16' staves, with sixteen H" round screw hoops, 2 lugs on 

each, @ 

Can furnish 12 tanks. 
760 boiling tanks, 10' 5" diam. 6' 2" deep, inside dimen., with eleven li" round 

screw hoops, 21ugs on each, @ 

Can furnish 100 tanks. 
240 poachers, 13' dia. 11' deep, inside dimen. with thirteen %" round screw hoops, 

21ugs on each, @ 

Can furnish 120 tanks. 

5-35,000-gal. water tanks, 18' dia. outside 20' stave, with 20 W' round screw hoops, 

2 lugs to each, with conical cover covered with ruberoid and to have apex, 

brackets, and hinged manhole door. A wooden ladder inside of tank and a steel 

ladder outside, also a 30' high steel tower for each tank, tank and tower to receive 

one coat of paint at factory, f. o. b. cars Chicago 

These five tanks and towers we will furnish f. o. b. Chicago and erect on supports 
provided by you, at Nashville, you to pay freight and do the necessary cartage, 

for - 

Can furnish five equipments. 



Each 



$339. 00 
345. 00 
316. 50 

471. 50 
195. 00 
171. 00 
295. 00 

1, 498. 00 
2, 045. 00 



Total 



This lumber will all dress to 2%". 

Please note that we have included inside wood ladders and outside steel ladders 
for the 35,000-gallon water tanks in this proposition. These are not called for 
in your specifications, nor is the ruberoid covering which we specified. 

We make the same price on the yellow pine and fir tanks, and regard one as 
being just as good as the other. We guarantee them first-class in every detail 
and should like to have the option of furnishing either. 
Yours very truly, 

Wendnagel & Co., 
By Wm. Wendnagel. 

P.S. — We did not give you the totals as we did not know whether you want the 
total figures of the number of tanks specified or the number of tanks we can 
furnish. 

W. & Co. 



3768 MUNITIONS INDUSTRY 

Exhibit No. 12 

Challenge Co., 
Batavia, III., Feb. 21st, 1918. 

Du Pont Engineering Co., Agents, 

Wilmington, Delaware. 
Gentlemen: Complying with your request of yesterday for prices on tanks, will 

advise that we take pleasure in handing you herewith our prices on this material, 

which are as follows: 

32 bleacher tanks 12' 6" straight stave inside measurement x 13' 8" 
inside diameter made of 3" fir lumber and equipped with 13^4 
round hoops, and malleable lugs, $356.00 each, total for 32 tanks. _ $11, 392. GO 

32 stuff tanks 10' 8" straight stave inside measurement x 15' 6" 
inside diameter, made of 3" fir lumber and equipped with 12%" 
round hoops, and malleable lugs, $347.00 each, total for 32 tanks_ 11, 104. 00 

20 hot-water tanks 13' straight stave inside measurment x 13' 
inside diameter, made of 3" fir lumber, equipped with 13^1" 
round hoops, and malleable lugs, $304.00 each, total for 20 tanks. 6, 080. 00 

64 tanks 18' straight stave outside x 13' diameter inside, made of 3" 
fir lumber, equipped with 9%" and 9%" round hoops and malle- 
able lugs, and supplied with false bottom, $503.00 each, total for 
64 tanks 32, 192. 00 

12 wooden tanks 16' straight stave outside x 8' diameter inside, 3" 
fir lumber, equipped with 16^4" round hoops and malleable lugs, 
$213.00 each, total for 12 tanks 2, 556. 00 

760 boiling tubs 6' 2" straight stave inside x 10' 5" diameter in- 
side, made of 3" fir lumber and equipped with 11%" round hoops, 
$165.00 each, total for 760 tanks 125, 400. 00 

240 poachers 11' straight stave inside x 13' diameter inside, made 
of 3" fir lumber and equipped with 13%" round hoops, $299.00 
each, total for 240 tanks 71, 760. 00 

The above prices are for material f. o. b. Batavia, Illinois. Terms, one-half 
on presentation of bill of lading, balance 30 days from date of invoice. 

We are in a position to handle any of the above items, with the exception of 
the 64 18' X 13' diameter tanks. 

Trusting that our proposition will have due consideration, we beg to remain, 
Very truly. 

Challenge Company, 
By J. R. JuDD. 



Exhibit No. 13 

Dover Boiler Works, 
Dover, N. J., May 27/18. 
The du Pont Powder Co., 

Wilmington, Del. 
(Mr. Harris.) 
Quotations are for immediate acceptance and are subject to change without 
notice. 
(1) Steel tank as per B/P 71-A-54, specifications #204-A, Req. USN- 

6854>^-X, same delivered f.o.b. cars Dover, N.J., for the sum of $997. 63 

Delivery could be made in six weeks. 

Please note that the 8" Standard companion flange for gas outlet is not in- 
cluded in this estimate, and neither have we included the guage glass or cocks. 
This proposition does not constitute a contract until your order has been 
accepted from the home office. Delivery subject to delay beyond our control. 

Dover Boiler Works, 
Per 



MUNITIONS INDUSTRY 3769 

Exhibit No. 14 

W. H. Thomson & Co., 
511-512 Land Title Building, 

Broad and Chestnut Streets, 

Philadelphia, Pa., May ,22, 1918. 
DU Pont Engineering Co., 

Mr. D. D. Ranken, A. P. A., Purchasing Department, 

Wilmington, Del. 
Gentlemen: Replying to your valued favor of the 16th instant, file TWH» 
Req. USN-6854}^-X, and confirming conversation of today with your Mr. T. W- 
Harris, would advise we are pleased to quote you $520.00 f.o.b. Pottstown, Pa., 
for supplying: 

One steel tank 71-A-54, blueprint 71#54, to measure 4' in diam. by 12' long 
and made of J4" and ^ie" thick steel, as indicated on drawing. One head to be 
flanged and dished, other head to be flat and bolted to place. Shell seams to be 
lapped and single-riveted and caulked inside and out to a standard of 60 lbs. 
pressure per square inch. Tank equipped with cast-iron nozzles, reinforced 
outlets, and one built-up coil of 2}^" wrought-iron pipe and pipe supports, as 
shown on blueprint. 

We desire to state for your information, however, that in making this coil 
cast-iron return bends would be used, and the lengths of wrought pipe would 
be screwed to place in same and coil would not be constructed with welded joints 
and steel return bends, as indicated on drawing, as we have learned upon investi- 
gation that it would require at least three inonths to secure cast-steel return 
bends. 

We could make shipment of tank constructed as outlined above, in about eight 
weeks. 

Hoping to have the pleasure of serving you, we remain, 
Very truly yours, 
JMT/DE W. H. Thomson & Co. 

This proposition is for immediate acceptance, subject to change without 
notice, and is based on today's mill and shop conditions; with the proviso that 
Federal or State authorities do not increase operating costs prior to completion 
of this work. 



Exhibit No. 15 

TipPETT & Wood, 
Phillipsburg, N. J., May 24-1 S. 
Quotations subject to change without notice. All ageements are contingent 
upon strikes, accidents, and other delays unavoidable or beyond our control. 
DU Pont Engineering Company, Agent, 

Wilmington, Del. 
Attention T. W. Harris. 

Gentlemen: Your file "TWH", Req. USN-6854K-X. 

Answering yours of 22d inst., beg to state we will furnish f.o.b. cars Phillips- 
burg, N.J., riveted up complete, one steel tank as per drawing 71-A-54 and speci- 
fication sheet 204-A accompanying your letter, for the sum of eight hundred 
fifty-four ($854.00) dollars, and can ship in four weeks after receipt of order. 

This price is based on using material now on hand in our yards at Government 
warehouse price. 
Very truly, 

TipPETT & Wood, 
By S. Taylor Wilson 
STW-H President. 



Exhibit No. 16 
[Telegram] 

Chattanooga, Tenn., May 24, 1918, 9:22 p.m. 
T. W. Harris, 

Wilmington, Del. 
Referring your inquiry May twentv-second, requisition USN sixty eighty 
fifty-four one-half X, we quote four hundred dollars Chattanooga, not including 
iron gate valve. Can ship as required. 

Chattanooga Boiler and Tank Works. 



3770 MUNITIONS INDUSTRY 

Exhibit No. 17 

Dover Boiler Works, 
Dover, N. J., June 26, 1918. 
The Du Pont Powder Co., 

Wilmington, Del., U. S. A. 
(Mr. Harris.) 
Quotations are for immediate acceptance and are subject to change without 
notice. 

KIND OF MATERIAL 

Three (3) tanks 54" dia. x 24' long, detail 1514-A, req. 8001}^"-G 

USN, delivered f. o. b. cars Dover, N. J., for the sum of each_. $1, 884. 50 



5, 653. 50 



Delivery in three weeks after receipt of steel castings. 
Two (2) tanks 9' dia. x 36' long, detail 3500-B, requisition #7701}^ 

USN, delivered f. o. b. cars Dover, IS. J., for the sum of each.. 2, 646. 00 



5, 292. 00 



Delivery could be made in two weeks after the receipt of heads 
from the mill, as we have no 9' heads in stock. 

We have 10' heads in stock and would be pleased to furnish you 
with two (2) tanks 10' dia. x 30' long, at a price of delivered f. o. b. 
cars Dover, N. J., for the sum of (each)._ 2, 885. 52 

And these we could get out in two weeks time. 
This proposition does not constitute a contract until your order has been 
accepted from the home office. 

Delivery subject to delay beyond our control. 

Would expect to make delivery days from receipt of order. 

Terms: cash days, via R. R. 

Dover Boiler Works, 
Per 



Exhibit No. 18 

Tippett & Wood, 
Phillipsburg, N. J., June 25, 1918. 
Du Pont Engr. Co., 

Wilmington, Del. 
(Attention T. W. Harris.) 
Gentlemen: 

Your file TWH, spec, sheets 222-223-A, req. USN-7518;'^-P, 7701i^2-P, 
8OOI1/2-G. 

Answering yours of 22d inst., we are pleased to quote you as follows all f. o. b. 
Phillipsburg, N. J., riveted up complete: 

3 steel tanks, detail 1514-A, 4' 6" diam., 24' long, req. USISI-8001}-^-G, price 
thirteen hundred thirty-one ($1,331.00) dollars each, shipment 6 weeks after 
receipt of plates from the mill, which would have to be obtained on priority 
certificate. 

1 tank 8' 0" diam., 30' 0" long, detail 11913-A, req. USN-7518i^-A, price 
twenty-two hundred twenty ($2,220.00) dollars f. o. b. Phillipsburg, M. J., ship- 
ment six to seven weeks after receipt of order. 

Tank to be made from stock material now on hand and made up as follows: 
Shell made in 4 rings, 2 plates to a ring, each head made in two pieces. 

2 tanks 9' diameter, 36' long, req. USN-7701!^-P, detail 3500-B, price twenty- 
six hundred ninety-four ($2,694.00) dollars each, f. o. b. Phillipsburg, IN. J. 
Shipment 8 weeks after receipt of order. Tanks to be made from stock material 
now on hand, and made as follows: Tank made in 6 rings, 2 plates per ring, 
heads made in two pieces. 

We return Vilue prints as per your request. 
Very truly, 

Tippett & Wood, 
STW-HZ By S. Taylor Wilson, 

President. 



MUNITIONS INDUSTRY 3771 

Exhibit No. 19 

Notice. — On account of present extraordinary conditions all our quotations 
are made for immediate acceptance and subject to our ability to handle the busi- 
ness when same is placed with us. General conditions are such that we cannot 
leave anything open. Therefore, all orders are accepted by us under the condition 
that we are not to be held liable for nondelivery because of nontransportation 
facilities, labor strikes, fires, war, flood, accidents at factory, inability to secure 
labor or materials required to fill the contract, or any other unavoidable cause. 
The above is a part of this proposal. 

COATESVILLE BoiLER WORKS, 

Phila., June 25, 1918. 
Du Pont Engineering Co., 
Agents for U.S. Government, 

Wilmington, Del. 

Gentlemen: We propose to furnish you steel plate work as per schedule 
attached hereto and forming part hereof at prices, delivery, terms, etc., as herein- 
after stated. 

The material furnished comprises: Three (3) steel tanks detail 1514— A, each 
4'6" diameter by 24'0" long. 

Delivery. — F.o.b., Coatesville. 

Price. — -Nine hundred ninety-seven dollars ($997.00) each. 

Terms of payment. — Net, 30 days. 

Time of shipment ten days to two weeks after receipt of all materials. 

The time of delivery named herein is the approximate date of shipment from our 
works, and this company shall not be responsible for delays or nonperformance 
occasioned by strikes, fire or other causes beyond its reasonable control. 

The acceptance of the material when delivered shall constitute a waiver of all 
claims for damages caused b}' any delay. 

The title to and property in the material, shall remain in this company until 
payment shall have been completed, risk of fire or other casualty shall be in the 
purchaser. 

The material shall at all times be and remain personal property notwithstanding 
the manner of its annexation to realty. 

The foregoing proposal is subject to the approval of an executive officer of this 
company, and shall not be binding upon this company until so approved, nor 
unless accepted by the purchaser within reasonable time. 

All previous communications between the parties hereto, either oral or written, 
with reference to the subject matter of this proposal, are hereby superseded, and 
this proposal, when duly accepted and approved, shall constitute the agreement 
between the parties hereto, and no modification thereof shall be binding upon the 
parties, or either of them, unless such modification shall be in writing, duly 
accepted by the purchaser and approved by an executive officer of this company in 
writing. 

Prices quoted are based on present prices of materials to this company and are. 
subject to change accordingly. 

There are no understandings or agreements outside of this written proposal. 

Respectfully submitted. 

Coatesville Boiler Works, 
By Herbert H. Evans. 

Accepted 191 

ApjDro ved 191 . 

Coatesville Boilek Works. 

In duplicate. 

[Proposal] 

Coatesville Boiler Works 

boilers and steel plate construction 

schedule 
To: Du Pont Engineering Co. 

Three (3) Steel Tanks, detail 1514-A, each 4'6" dia. 24'0" long. SheU to be 
made of }^" steel in 3 sheets. 

Heads to be made of yi" pressing steel, dished as shown on drawings. 



3772 MUNITIOXS INDUSTRY 

Tanks to be complete with nozzles, manholes and other connections, of material 
specified as shown on drawing. All castings, of cast steel and cast iron, must be 
made from good clean metal, free from blow holes, sand dirt, or shrinkage cracks. 

All parts to be machined and finished to size and shape specified on drawings. 

All seams to be lap, single riveted. 

Tanks to be used as acid containers. Size and spacing of rivets to be manufac- 
turers standard for this class of work. No dutchmen will be permitted. 

All seams to be caulked both inside and outside and subjected to a hydrostatic 
test pressure of 80 lbs. per sq. inch. Tanks to be given one coat quick drying 
black paint on outside before shipment and after inspection. Tanks to be subject 
to inspection by representative of engineering department before shipment and 
before painting. Workmanship and material must be first class in every respect. 

Per specification sheet 223-A, dated June 22, 1918, Rq. USN 8001>2-G. 

The price herein quoted is based on present price of steel as fixed by the Gov- 
ernment, namely 3%^ per pound, base Pittsburgh. If the Government increases 
the price of steel plates before the mills deliver the plates to our shops, you are to 
pay us additional for such increase, provided the mills charge us such increase, 
and on the other hand, if the Government price of steel goes below the present 
price before the plates are delivered to us by the mills, we are to credit you with 
the decrease in price, provided the mills allow us such decrease in price. 

In regard to delivery, it will be necessary for you to secure priority certificate 
from the Government in order to facilitate shipment from the mills to our wo-ks. 

Standard flanging and dishing has been figured as per list of January 1, 1917. 
If there should be any change in this price, you are to pay us for any increase and 
we will make you an allowance for any decrease. 

HHS/BK. 



Exhibit No. 20 

Chattanooga Boiler & Tank Co., 

Chattanooga, Tenn., April SO, 1918. 
Du Pont Engineering Co. Agents, 

Wibnington, Del. 
(Attention Mr. T. W. Harris.) 
Gentlemen: We received your inquiry this morning. Yours of April 26th, 
specification sheet #183-A, Req. USN-5632)/2-X, covering two tanks 8' diameter 
X 10' high. We wired you as follows this morning: 

"Your inquiry April 26 received, Req. USN— 5632 one-half X, covering two 
tanks. We can furnish these tanks from our stock at Seven Hundred Dollars 
each Chattanooga. Shipment between June fifth and tenth. Answer." As this 
was the only way we could get quotation to you in time. We have all material 
in stock for these tanks, but will have to make the head in two pieces. This, we 
judge, will be entirely satisfactory to you, as we could either weld this, or put a 
butt strap on it, either of which will be just as safe as the other joint in the tank. 
We are forced to do this because we require sheet at least 102" wide to make 
this head, otherwise we would follow your specifications. We hope to hear from 
you some time this week advising that we can go ahead with this business. 

We would like to have promised you better shipment than June 5 to 10th, but 
beUeve this is about the best we can do for you. 
Yours very respectfullj^, 

Chattanooga Boiler & Tank Co., 
Per E. C. Patterson, Secy. & Gen. Mgr. 
ECP:A 



Exhibit No. 21 

TippETT & Wood, 
Builders of Water Towers, Stand Pipes, and Tanks, 

Phillipsburg, N. J., April 29-18. 
War Department U. S. Army, 
Du Pont Engr. Co., Agents, 

David D. Ranken, Asst. Purch. Agt., 

Wilmington, Del. 

Gentlemen: Your file TWH. Specification sheet 183-A, Req. USN-5632K-X. 

Answering yours of 26th inst., beg to state we will furnish f . o. b. cars our works 

Phillipsburg, N. J., riveted up complete, two (2) Steel Tanks 8' diam., 10' high, 

open top, as per blueprints W-23, detail 11415 and specification above noted, for 



MUNITIONS INDUSTRY 3773 

the sum of nine hundred sixty-one ($961.00) dollars, and could ship in two to three 
weeks after receipt of order. 

These tanks will be made from stock material we now have on hand in our yard. 
We return blueprints above noted. 
Very truly, 

TippETT & Wood, 
By S. Taylor Wilson, President. 
STW-HZ 



Exhibit No. 22 

Dover Boiler Works, 
Dover, N. J., April 29118. 
The War Department, du Pont Engr. Co., 

Wilmington, Del. 
Mr. T. W. Harris. 
Quotations are for immediate acceptance and are subject to change without 
notice. 

kind op material 

Two (2) steel tanks, drawing W. 23, detail 11415, 8' x 10' x %", open top, 
Req. USM-5632}< X, same deUvered f. o. b. cars Dover, N. J., for the 

sum of (each) _ _ $946 

We have all this material in stock, and shipment could be made in 
three weeks. 

This proposition does not constitute a contract until your order has been 
accepted from the home office. Delivery subject to delay beyond our control. 

Dover Boiler Works, 
Per F. F. Birch. 



Exhibit No. 23 

W. H. Thomson & Co. 
Philadelphia, Pa., June 28th, 1918. 
Du Pont Engineering Co., 

Mr. D. D. Ranken, A. P. A., 

Purchasing department, Wilmington, Del. 
Gentlemen: Replying to your valued inquiry of the 22nd instant, file TWH, 
Req. US N -751 8 >^- A would advise we are pleased to quote you $2,100.00 F. O. B. 
Pottstown, Pa., for supplying — 

One steel tank 11913-A, blueprint 11913 to measure 8' in diam. by 30' long 
and made throughout of y%" thick steel. Heads flanged and dished and fastened 
to place in shell in manner shown. Shell to consist of five belts of one plate 
each. Seams lapped and single riveted and caulked inside and out and made 
to show tight under a test pressure of 60 lbs. per sq. in. Tank equipped with 
the cast iron mountings and reinforced outlets shown (water gauge fixtures not 
included). Also would supply one built-up coil made of 2" wrought black 
pipe and consisting of four lengths of pipe about 28' long and cast iron return 
bends and coil support shown on drawing. 
Painted black on the outside. 
Delivery during September or October. 

Terms: Net cash within thirty days from date of shipment. - 

Hoping to have the pleasure of serving you, we remain 
Very truly yours, 
JMT/DE W. H. Thomson & Co. 

This proposition is for immediate acceptance, subject to change without 
notice, and is based on today's mill and shop conditions, with the proviso that 
Federal or State authorities do not increase operating costs prior to completion 
of this work. 



3774 MUNITIONS INDUSTRY 

Exhibit No. 24 

COATESVILLE BoiLER WoRKS, 

Boilers and Steel Plate Construction, 

Philadelphia, June 25th, 1918. 
Du Pont Engineering Co., 

Agents for United States Government, Wilmington, Del. 
Req. U. S. N. 7518y2-A: 

Gentlemen: We propose to furnish you steel plate work as per schedule 
attached hereto and forming part hereof at prices, delivery, terms, etc., as herein- 
after stated. 

The material furnished comprises: One steel tank, detail 11913-A, 8' 0" dia. 
X 30' long. 

Delivery. — F. O. B. cars Coatesville, Pa. 

Price. — Thirteen hundred and ten dollars ($1,310.00). 

Terms of payment. — Met 30 days. 

Time of shipment. — Ten days to two weeks after receipt of material. 

The time of delivery named herein is the approximate date of shipment from 
our works, and this company shall not be responsible for delays or nonper- 
formance occasioned by strikes, fire, or other causes beyond its reasonable control. 

The acceptance of the material when delivered shall constitute a waiver of all 
claims for damages caused by any delay. 

The title to and property in the material, shall remain in this company until 
payment shall have been completed, risk of fire or other casualty shall be in the 
purchaser. 

The material shall at all times be and remain personal property notwithstand- 
ing the manner of its annexation to realty. 

The foregoing proposal is subject to the approval of an executive officer of this 
company, and shall not be binding upon this company until so approved, nor 
unless accepted by the purchaser within reasonable time. 

All previous communications between the parties hereto, either oral or written, 
with reference to the subject matter of this proposal, are hereby superseded, and 
this proposal, when duly accepted and approved, shall constitute the agreement 
between the parties hereto, and no modification thereof shall be binding upon 
the parties, or either of them, unless such modification shall be in writing, duly 
accepted by the purchaser, and approved by an executive officer of this company 
in writing. 

Prices quoted are based on present prices of materials to this company and 
are subject to change accordingly. 

There are no understandings or agreements outside of this written proposal. 

Respectfully submitted. 

Coatesville Boiler Works, 
By Herbert H. Evans. 

In duplicate. 

Notice. — On account of present extraordinary conditions all our quotations 
are made for immediate acceptance and subject to our ability to handle the 
business when same is placed with us. General conditions are such that we 
cannot leave anything open. Therefore all orders are accepted by us under the 
condition that we are not to be held liable for nondelivery because of non- 
transportation facilities, labor strikes, fires, war, fiood, accidents at factory, 
inability to secure labor or materials required to fill the contract, or any other 
unavoidable cause. The above is a part of this proposal. 

[Proposal] 

Coatesville Boiler Works 

boilers and steel-plate construction 

To E. I. du Pont de Nemours & Co. 

One steel tank detail 11913-A 8' 0" diameter 30' 0" long. Shell to be made 
of %" tank steel in 5 sheets. Heads to be made of %" steel, dished as shown 
on drawing. Tanks to be completed with nozzles, manholes, and other connec- 
tions of material shown on drawing, also 2" black iron pipe coil, flanges, lock 



MUNITIONS INDUSTRY 3775 

nuts, pads. All castings of cast iron, must be made from good clean metal, free 
from blow holes, sand, dirt, or shrinkage cracks. All parts must be machined 
and finished to size and shape specified on dwg. All seams to be lap, single 
riveted. Tanks to be used as acid containers. Size and spacing of rivets to be 
manufacturers standard for this class of work. No dutchmen will be permitted. 
All seams must be caulked both inside and outside and subjected to a hydro- 
static test pressure of 60 lbs. per sq. in. Tanks to be given one coat quick-drying- 
black paint on outside before shipment and after inspection. Tanks to be sub- 
ject to inspection by representative of engineering dept. before shipment and 
before painting. Workmanship and material must be first-class in every respect.. 

SPECIFICATION SHEET #222-A 

The price herein quoted is based on present price of steel as fixed by the Gov- 
ernment, namely Syi^ per pound, base Pittsburgh. If the Government increases 
the price of steel before the mills deliver the plates to our shops you are to pay us 
additional covering such increase, provided the mills charge us such increase in 
price, and on the other hand if the Government price of steel goes below the pres- 
ent price before the plates are delivered to us by the mills, we are to credit you 
with the decrease in price, provided the mills allow us such decrease in price. 

In regard to delivery it will be necessary for you to secure priority certificate 
from the Government in order to facilitate shipment from the mills to our works. 

Standard flanging and dishing has been figured as per list of January 1st, 1917. 
If there should be any change in this price you are to pay us for any increase and. 
we will make you an allowance for any decrease. 
HHS/L 

Exhibit No. 25 

Geo. D. Wetherill & Co., Inc., 

Philadelphia, August 2, 1918. 
du Pont Engineering Co., 

Wilmington, Del. 
Gentlemen: We wish to acknowledge your telephone order for 40,000 lbs. 
pure white lead in oil at lO^lfi per lb.; 9,000 lbs. dry red lead in oil at 10%^; per lb. 
Your requisition GOH, 719, to be shipped to Du Pont Engineering Company,, 
contractor, c/o E. S. Johnson, manager, operating department. Old Hickory 
via Hermitage, Davidson Co., Tenn. 
Yours very truly, 

Geo. D. Wetherill & Co., Inc.,. 
Per G, E. Glover. 
GEG-H. 

Exhibit No. 26 
[File 0. K. H.] 

John Lucas & Co. Inc., 

Philadelphia, August 2, 1918^ 
DU Pont Engineering Company, 

Wilmington, Del, 
(Attention of Mr. Hilberry.) 
Dear Sir: This will confirm our telephone quotation on 40,000 lbs. pure 
white lead in oil, $11.97 per 100 lbs. f. o. b. Philadelphia. Terms: 30 days net. 
This price is for immediate acceptance only. We are not in position to quote 
on the 9000 lbs. dry red lead. 
Yours very truly, 

John Lucas & Co., Inc., 
Alfred V. Brown, 

Industrial Department.. 
JB— M. 



83876 — 35— PT 15 16 



3776 MUNITIONS INDUSTRY 

Exhibit No. 27 
[File C. R. H.] 

John T. Lewis & Bros. Company, 
Office N. E. Cor. Fifth & Chestnut Streets, 

Philadelphia, August 5, 1918. 
The DTJ Pont Engineering Company, 

Wilmington, Delaware. 
(Attention of Mr. Hilberry.) 
Gentlemen: Confirming our telephone conversation on Friday, your inquiry 
directed to the National Lead and Oil Company of Pennsylvania to our Pittsburgh 
representative has been referred to us. 

We are very glad to quote you: 

40,000 pounds of white lead in oil @$1L84 per hundred 

9,000 pounds of dry red lead @ 11.84 

Terms: 2% for cash 15 days, net 60 days, f. o. b. Nashville, Tenn. 

We can make delivery from our Cincinnati branch within 30 days after the 
receipt of your order. 

We hope you will be able to see your way clear toward placing this order with 
us, which we assure you will have our very careful attention. 
Yours very truly, 

John T. Lewis & Bros. Company, 
Chas. a. Wilson, 

Asst. Sales Manager. 
CAW— KE. 
17-7-62. 

Purchasing Department 

Mr. David D. Ranken, Asst. Pur. Agt. 

E. I. DU Pont de Nemours & Company, 

Wilmington Delaware, January 18, 1919. 

[Our file "TWH"] 

RESUm6 of year's work, 1918 

The following data has been accumulated covering the amount of purchases 
that have been made in my office during the year 1918, and these purchases have 
been divided into two main divisions, viz: 

A — Materials purchased not on contract, but as each individual order presented 
itself. 

B — Material purchased under contract. 

Division A. — -Below are listed 14 subdivisions of the actual cost of material 
purchased with the average competition or market price at time of purchase 
determined by averaging all quotations obtained, including the firm obtaining the 
business, if such quotations are comparable, viz: Only such firm's quotations 
were considered who could render as good workmanship as the successful bidder 
and who could make deliveries possibly not as soon but at least within a reason- 
able time for the delivery required. Thus as a rule all bidders' quotations were 
considered as we very seldom approach firms who do not render us the workman- 
ship required, or who were in such a position as to have impossible deliveries. 

Subdivision #1. — Autoclaves, mixers, and dephylagamators: 

Cost $113, 137. 00 

Competition 119, 547. 00 

Saving 6,410.00 

This covered all purchases of special mixers, jacketed autoclaves, etc., required 
mostly for the dye plant and for which requirements there appears to be a future 
for 1919. It covers the purchases from such firms as: 

E. B. Badger & Sons • " 

J. P. Devine Co. 

Stokes Machine Co. 

J. H. Day Co. 



MUNITIONS INDUSTRY 3777 

Gedge-Gray Co. 

Buffalo Foundry & Machine Co. 
and the tank manufacturers such as: 
Bass, Foundry & Machine Co. 
Struthers- Weils Co. 
W. H. Thomson & Co. 

Subdivision #,?. — Breechings: 

Cost $56,819.00 

Competition 63,600.00 

Saving 6, 781. 00 

This includes breechings purchased for the du Pont Engineering Company for Old 
Hickory, etc., and covers in nearly 100%, cost of the large power-house breech- 
ings in which the price of steel was figured at 3^4?^ per lb., base Pittsburgh, or 
approximately 3!'2^ per lb. delivered at the fabricator's plant, and at a fabricating 
cost of Shif. per lb. 

Subdivision #5. — Steel stacks: 

Cost $35,613. 00 

Competition 37, 608. 00 

Saving 1, 995. 00 

These stacks including preheater stacks purchased for Old Hickory plant and 
Ives, were based on a 3^4^ per lb. steel price, f. o. b. Pittsburgh, or approximately 
S%(/^ per lb. delivered at the fabricator's plant, with a cost of fabrication of approx- 
imately 2?^^ per lb. The competition on this class of work was very keen in that 
the southern fabricators, such as Walsh- Weidner Co., could fabricate these tanks 
in the early part of the year 1918 at very low costs, due to low labor charges. 
The other competing firms at the same time were also anxious to get this kind 
of work in order to fill this end of their shops which was somewhat stagnant 
during this year. Therefore, the purchase price was very low and the saving 
shown was relatively low. 

Subdivision #4- — Tanks and towers: 

Cost $20, 775. 00 

Competition 22, 010. 00 

Saving 1, 235. 00 

There were very fetv tanks and towers purchased during the year 1918, and those 
that were purchased were bought mainly from the Chicago Bridge & Iron Works. 
The cost per pound for same averaged approximately. 

Subdivision #5. — Steel plate work including tank plates, heads, cans, ventilat- 
ing ducts, casings, etc.: 

Cost $73, 926. 00 

Competition 84, 696. 00 

Saving 10, 770. 00 

This did not include the cost of the plate and heads for the J;anks for the Ives 
plant, as the cost of this item alone amounted to $156,170. We have this cost, 
however, figured in the cost of the tanks for the Ives plant. Of course this was 
purchased at Government price and there was no possible competition. The 
steel was allocated by Washington and the price fixed by the U. S. Government. 
However, this subdivision does include mostly fabricated plate work so that a 
saving could be made. 

Subdivision #6. — Apron conveyers: 

Cost $61, 105. 00 

Competition 69, 374. 00 

Saving 8, 269. 00 

In making the original purchases for the United States Government Penniman 
plant the engineering department had obtainecd from the Link Belt Co. their 
quotation and requested me to get into the conference with them for placing the 
order. Their price seemed high, so even though the order was placed with the 
Link Belt Co. we obtained quotation from the Alvey-Ferguson Co. and found 
their price to be 14% lower. We took this matter up with the Link Belt Co. 
and told them we did not feel justified in having them go ahead with the order 
at this high price for equipment going into a U. S. Government plant. Upon 
taking this up with Mr. Tallman he felt that the attitude we had taken was 



3778 MUNITIONS INDUSTRY 

correct, and finally the Link Belt Co. abandoned the installation, not being willing 
to meet the competition. 

Subdivision #7. — Freight and bucket elevators and repair parts including chain, 
kickers, etc.: 

Cost $87, 167. 00 

Competition 104, 662. 00 

Saving 17,495. 00 

A percentage of these elevators were Otis elevators, regarding which the engi- 
neering department refused to accept a substitute due to dangerous operations 
at the plant. Therefore, we could now show a larger saving, although we did hold 
Otis down to a very low price compared with their regular selling price, but this 
was not shown in the form of a saving. We were able to make some substitutes, 
supplying Speidel elevators, thereby shov/ing a saving over the Otis, which has 
been entered in the above total, and also we were able to substitute at the Penni- 
man Plant, Otis hydraulic elevators for Craig Ridgway's, which substitute proved 
very satisfactory in the operation at the Penniman Plant, and in which purchase 
considerable saving was made. 

Subdivision #8. — Coal handling machinery: 

Cost $287,869. 00 

Competition 348, 133. 00 

Saving 60, 264. 00 

This includes the coal-handling equipment for Old Hickory, which amounted to 
$212,800 for handling 600 tons per hour with storage capacity of 100,000 tons, 
competition $268,548. This competitive estimate was determined from the differ- 
ence in cost derived from the average cost for complete installation, less the 
actual cost of complete installation of the equipment purchased. The purchase of 
the coal-handling equipment for all plants, exclusive of one installation at Hope- 
well and one at Deep Water Point, which were purchased by Mr. DeWolf, was 
made in this office. On account of the fact that after the end of March it was 
found that due to the nscessity for me to oversee the urging of steel tanks which 
in turn took so much of my time it was possible for me to purchase not only the 
steel materials covered by subdivisions 1 to 5 inclusive, and 12, 13, and 14, but 
also for me to make the purchases of the coal-handling equipments as required 
with the exceptions as mentioned above, especially for the reason that when the 
equipment was purchased for Racine Mr. deWolf was ill and this part of his work 
was turned over to me. 

Subdivision #9. — Concrete bunkers: 

Cost '- $38, 465. 00 

Competition 39, 763. 00 

Saving 1,298. 00 

This saving was so low, due to the fact that there was practically a Government 
fixed price on cement, sand, stone, and lumber, or the material going into the 
construction of the bunkers with prices for labor fixed at the plant so that the 
cost per cubic yard averaged from $30.00 to $40.00 throughout the year on all 
competitive bids, and it was merely a question of deciding upon the most reliable 
contractor, Ferdinand Barre building three bunkers and Chas. Bond Company 
one. All the bunkers were built within the time required, if not sooner. 

Subdivision #10. — Brick stacks: 

Cost $90,486.00 

Competition 98, 457. 00 

Saving 7,971. 00 

This does not include the stacks for Old Hickory for units 6 to 9, as the purchase 
of same did not come through this office. These stacks were purchased at ap- 
proximately $15.00 per ton of brick for Old Hickory, and $20.00 per ton for Racine. 

Subdivision #11. — Miscellaneous equipment, including coils, hand trucks, stir- 
ring equipment, screw conveyors, flat cars, gas holders, hoists, temperature 
regulators, filter presses, and blower engines: 

Cost $72, 565. 00 

Competition 79, 037. 00 

Saving 6, 472. 00 



MUNITIONS INDUSTRY 



3779 



Subdivision #12. — Miscellaneous wooden tanks, total number 672: 

Cost $73, 735. 00 

Competition 80, 761. 00 

Saving 7,026.00 

These tanks were purchased mostly for the dye plant and were to a large extent 
made of cypress, although we have endeavored and have been successful in a good 
many attempts in getting this end of our manufacture to use yellow pine or fir, 
as the cost of this lumber is so much less than cypress, and cypress itself is of an 
inferior grade at present, due to insufficient drying. Where we have been able to 
substitute yellow pine for cypress the life of the tub appears to be nearly as 
long as cypress, and the saving in dollars and cents amounts to from 40 to 50%. 
However^ as this saving would be hard to show due to insufficient data as to the 
life of the tubs made from present-day cypress and those made from yellow pine 
or fir, this saving has not been included in the above item. 

Subdivision # IS. — Wooden tanks for Old Hickory, units 1 to 5, total number of 
tanks 1,139: 

Cost $234,209.00 

Competition 240, 956. 00 

Saving 6, 747. 00 

This does not include the tanks for Old Hickory units 6 to 9 which were purchased 
by Mr. Fulton, but at the quotations we had obtained, he placing his additional 
orders on the same basis, except for a warranted increase in price. This price 
is based on the tanks being made of yellow pine or fir with lumber at $60.00 to 
$65.00 per M delivered, and skilled labor 60 to 70(4 per hour. At the time of 
purchasing these tanks quotations were also obtained for tanks practically equal 
to the $234,209 for the Thompson-Starrett Co. which has not been shown in this 
report, due to the fact that it was not a Du Pont purchase, but were to assist the 
Government. 

Item #14- — Steel tanks: 



Plant 


No. of 
tanks 


Cost 


Competi- 
tion 


Saving 


Total 
weight 


Cost per 
pound 


€ld Hickory: 


1,974 

1,231 

392 

129 

688 

1,409 


$1,117,894 
719, 507 
251, 766 
83, 587 
416, 236 
4G5, 461 


$1,278,717 
794, 690 
280, 847 
86, 280 
451,992 
505, 424 


.';160, 82.3 
75, 123 
29, 081 
2, 693 
35, 756 
39, 9G3 


Ions 
6,471H 


?0. 08638 


Units 6 to 9 
















Racine 


1,916 


. 10S61 






Total 


5,823 


3, 054, 511 


3, 397, 950 


343, 439 













The purchases for the plants are made in the order in which the tanks were 
bought during the year, except in the case of the miscellaneous tanks which covers 
a year's purchase. The miscellaneous tanks were bought mostly for the dye 
industry, and there is no doubt from all indications that there will be considerable 
purchases in 1919 along the same lines as these tanks are mostly special and cannot 
be obtained from our surplus stocks at the present closed plants. As can be noted 
the competition is verj' keen, due to the fact that the manufacturers have been 
brought down to the lowest possible basis of profitable manufacture with efficient 
production, the tanks having been selected for manufactures taking into considera- 
tion those best adaptable to the manufacturer's shop, and also taking into con- 
sideration the steel mills available in their locality. This has special reference 
to the size of heads as some mills are very limited in size in turning out steel for 
these heads. The cost per pound of fabrication is higher than it might have been 
if we could have obtained wider plates, but due to the great scarcity of steel plate 
the only plate available was from the narrow steel mills, which necessarily in- 
creased the cost of fabrication. This cost of fabrication reached the maximum at 
the purchases for the Racine plant where the Government price for steel, including 
the cost of the heads amounted to $0.04075 and the cost of fabrication $0.06786 
per pound. In this case in order to expedite delivery we actually made the pur- 
chase of these plates and heads ourselves, and regardless of the fact that the 
steel situation was so bad we obtained shipments of practically all of the plates 
and heads two to three weeks after the orders were placed, this being due to the 
high priority of A-3 which we received, and also to personal visits made by myself 
to the steel mills. 



3780 MUNITIONS INDUSTRY 

Division B. — This division includes all materials contracted for, and they can be 
subdivided as follows: 

Subdivision #j?.— Fire brick and clay, including fire tile with some chemical 
brick: 

Cost $314, 376. 00 

Competition 342, 863. 00 

Saving 28, 487. 00 

This includes 3,000,000 brick for Old Hickory plant and we were able to contract 
at the beginning of the year 1918 for high grade boiler brick from the Union 
Mining Co., being their best brand " Mt. Savage" capable of standing 3200° F. 
at $47.50 per M, f. o. b. factory. We also contracted for Ohio brick, capable of 
standing 2700° F. at $30.00 per M, f. o. b. factory, and these prices were held 
throughout the .year, being considerably under the market price; in fact being 
under the price unofficially set by the U. S. Government for these qualities of 
brick. 

Subdivision §2. — Bilge barrels, total purchase 4,000: 

Cost $42,040. 00 

Competition 47, 440. 00 

Saving 5,400.00 

These drums were purchased from the Detroit Range Boiler Co. at contract 
price, the contract price being for the year 1918 and the last quarter of the year 
1917, being based on a sliding scale for steel with a fixed price for labor, overhead, 
and profit. The contract proved to be $1.35 per drum under contracts in effect 
during 1918, as the cost of labor advanced so considerably, and in fact at the pres- 
ent time the Detroit Range Boiler Co. will only contract at a 90^ per barrel 
advance. 

Subdivision fS. — Gravitv convevors: 

Cost '_ ' $77,368.00 

Competition 84, 331. 00 

Saving 6,963.00 

These conveyor systems were purchased on a contract basis agreement at $2.90 
per lineal foot, and consist of concave wood rollers with iron collars 14" long 
spaced at 6" center, and were bought mostly for the Penniman shell-loading 
plant, and saving is based on actual figures obtained at time of contract. 

Subdivision if-4. — Gauges. Although the actual handling of the gauge contract 
after it was executed did not come under mj' supervision, yet the negotiation of 
the contract was made in my office, and the contract closed previous to the trans- 
ferring of the purchases on this contract to another office. This contract with 
Schaeffer & Budenberg Mfg. Co. has proved very satisfactory and saved our 
company considerable money, due to the fact that from them we obtain all 
classes of 'gauges, including high pressure and ammonia gauges which at one time 
were purchased at high prices from Crosby Steam Gauge & Valve Co. owing to 
this gauge having been determined upon by the Standards Committee, and also 
low pressure gauges which were previously purchased from the Ashcroft Mfg. 
Co. The prices submitted by Schaeffer & Budenberg Mfg. Co. were very much 
lower, amounting to as mucli as 20 to 30% less than those submitted by Crosby 
and at the time the Schaeffer & Budenberg Mfg. Co. submitted the contract this 
contract was held up for almost a month as we felt their prices on the low pressure 
gauges were too high compared with Ashcroft. Finally S. & B. Co. met our offer 
and the contract was negotiated; thereby we have received not only good prices, 
but excellent service, in view of the fact that all our gauges were purchased from 
one manufacturer and they have made very prompt shipments. This has been 
advantageous also in having one source for repairs. 

Subdivision #.5. — E grade asbestos fibre. Although the actual handling of the 
requisitions on this material was done by Mr. de^\'olf , yet as Mr. Niles had stated 
that he wished us to clean up this subject before turning it over to Mr. La Motte's 
division, and in view of the fact that we had purchased fibre at $70.00 per ton 
from the Asbestos & Rubber Wks. of America, which had not proved satisfactory 
and against wliich we had to collect from $5,000 to $6,000 credit, I continued to 
work on this sul\ject. After collecting this credit the Asbestos & Rubber Wks.'s 
quality of fibre was brought up to that furnished by Johns-Manville Co., and Mr. 
Niles requested me not to turn it back to Mr. La Motte but to contract for the 
next year, which was done October 1, 1918. During the year of 1918 to October 
1, we purchased this fibre at from $67.50 per ton delivered Hopewell, Va., to $70.00 
per ton, compared with $98.00 per ton quoted l)y Johns-Manville Co. This 



MUNITIONS INDUSTEY 3781 

comparison was fair in view of the fact that where the Asbestos & Rubber Wks. of 
America did not furnish fibre up to the quality of Johns-Manville for a while, 
yet on all filjre furnished by them of inferior grade they rendered us a credit on 
the basis of furnishing us equal quality of fibre as Johns-Manville at $70.00 per ton. 

Cost $58, 800. 00 

Competition 78, 645. 00 

Saving 19, 845. 00 

It might be well to mention that Johns-Manville Co. dropped their price to $78.00 
delivered Hopewell for the last three months of 1918, so that the saving at that 
time was not as much as the first nine months. 

Grand total: 

Cost $4, 792, 966. 00 

Competition 5, 339, 833. 00 

Saving 546, 867. 00, or 11.4% 

(This is 2}4 times the purchases made in this office in 1917.) 
During the month of December most of my time was taken up in cancelling 
or arranging for cancellation of such war material as was not required after the 
signing of the armistice on November 11th. Without going into detail on this 
subject, it might be well to mention the fact that we have been able to cancel 
a large amount of material without cost to the du Pont Company, including such 
material as 100,000 fire brick from the Union Mining Company, 7 carloads of 
asbestos fibre from the Asbestos & Rubber Works of America, amd also a large 
amount of steel plate from the steel mills for the du Pont Engineering Company, 
together with numerous other items. As the policy of actual adjustments for 
orders cancelled against which there was a cancellation expense was not deter- 
mined until very late in the year of 1918, this end of the work has practically 
come during the year 1919, and, therefore, no summation of same will be made 
in this report. 

In summing up the above it might be well to call attention to the fact that 
greater savings could not be made in quite a few cases in view of the fact that 
the Government had fixed the price of materials, either in the case of the finished 
article or at least of raw materials going into the production, so that the compe- 
tition in many cases would be very similar, and the success of the purchase 
depended largely in choosing a manufacturer best capable of turning out the 
equipment as required, both in respect to time and workmanship. However, 
all these purchases were made after bringing in considerable competition, as 1 
was handling practically no equipment standard with the engineering depart- 
ment, or equipment which could only be purchased from one manufacturer, 
such as in the case of American Tool wringers, etc. This naturally meant that 
the above purchases took considerable time in analysing and ordering, yet it 
would have been possible to handle a considerably larger amount of purchases 
had it not been necessary for me to apply the months of May, June, and July, 
also one-half of April, August, and October, mapping out a campaign and super- 
vising the urging of steel tanks purchased for Old Hickory, Barksdale, Indian 
Head, and Ives plants. This required considerable chart making, which I did 
personally for the Old Hickory plant and had done by draftsman in the case of 
the Ives plant, and also required a lot of time and study in keeping charts up- 
to-date and seeing that the object for which the charts were originated was 
carried out. This also recjuired my making trij^s to the steel mills and tank 
fabricators. 

I would like very much to go back several years and call attention to certain 
firms whom I have actually brought into the furnishing of our requirements of 
certain commodities, or have done considerable towards developing them for these 
lines of purchases. 

Tanks: Quaker City Iron Works, Walsh- Weidner Boiler & Tank Co. 

Radiators: National Radiator Company. 

Fire brick and fire clay: Union Mining Co. 

Bucket elevators: Webster Mfg. Co. 

Asbestos fibre: Asbestos & Rubber Works of America. 

Brooms: Indianapolis Brush & Broom Co. 

Piveted bucket conveyors, etc.: C. W. Hunt Co. 

Gravity & apron conveyors: Alvey-Ferguson Co. 

Brick stacks: Rust Engineering Co. 



■3782 MUNITIONS INDUSTRY 

Concrete bunkers: Chas. Bond Co., Ferdinand Barre. 

Drums (steel): Steel Barrel Co. of America. 

Bilge barrels: Detroit Range Boiler Co. 

Wooden tanks: Eagle Tank Co., Challenge Co. 

Pipe coils: Whitlock Coil Pipe Co. 

Automobile tires: Kelly-Springfield Co. 
'These firms have been very successful in furnishing us with materials which met 
our needs both as to workmanship, delivery required, and also for furnishing 
these materials at a much lower cost than the concerns with whom we previously 
dealt, and which were in quite a few cases concerns which the engineering depart- 
ment were wedded to, and who charged us high prices for our having standardized 
to a certain extent on their equipment. 

The prospects of work along these lines of purchases which we have made here- 
tofore are of course dependable upon the extent to which the du Pont Com.pany 
will operate along industrial lines, but as has been mentioned in this letter, there 
appears now as though there would at least be considerable purchases in the line 
of special tanks, steel and wood steam jacketed autoclaves and mixers for the 
ensuing year. How far the other lines of purchases will be required it is very hard 
to analyze, although at the present time there is in project form some Badger 
equipment for the synthetic camphor plant, and considerable paint equipment 
for the new paint plant proposed near Chicago. This paint equipment will be 
to a certain extent oil tanks similar to the Bowser small tanks. 

There is also another line of work which will take considerable time and which 
is dependable to a certain degree upon the records whicli we have kept in this 
office covering the cost of tanks in past years; i. e., under the pre.sent status of 
work where the du Pont Co. is purchasing tanks from the du Pont Chemical Co., 
we send an inquiry to the du Pont Chem. Co. and outside concerns. This 
necessitates consideral^le analysis to determine the price which should be paid 
the du Pont Chem. Co. for their second-hand equipment, comparing same v. ith 
quotations at the present market price, and making allowances for depreciation 
in value for the second-hand equipment. We have already had cjuite a few 
cases along this line, and feel that as this is purely a purchasing department 
function unquestionably this will require considerable time and application. 

In closing I would like to state that the work performed during the year 1918 
in this office has of course been accomplished only through cooperation with and 
advice from yourself, and has also been greatly assisted by the help of my secre- 
tary. Miss Fitzpatrick, who has done much toward handling the office end of 
the work, telephoning, originating correspondence, etc., and also by Miss Mc- 
Nerney who has been very valuable in taking dictation, and also in tabulating 
aijd recording work which has Vjeen vitally necessary in the nmning of the office. 
The work which Miss Fitzpatrick has undertaken has required initiative and 
that of Miss McNerney of accuracy, and they have both proved to be very 
capable and have applied themselves to this work with a marked degree of 
satisfaction. 
TWH/MPF. 

Exhibit No. 1221 

October 19, 1918. 
Major J. W. Sholes. 

Du Pont Engineering Company, 

Mr. E. G. BucKNER, Vice President, 

Wilmington, Dela ware. 
'Gentlemen: 

Subject: Prices of Raw Materials for Old Hickory Plant — benzol and alcohol. 

1. The Chief of Ordnance directs me to acknowledge your communication of 
the 15th, with copy of letter from Mr. W. W. Richards, which is attached thereto. 

2. Although matters of this kind were not specifically provided in the contract 
mentioned, it is believed that whenever you cannot purchase raw materials in 
good and reasonaMe accordance with prices at which the United States could 
supply them, that then the Government should be given every reasonable 
opportunity to save from unnecessary costs. 

3. The letter from Mr. Richards docs not satisfactorily explain the prices paid 
for alcohol and benzol, and or why any contract engagements for this material 
did not include protection against extra declines. 

4. Perhaps you will also agree tliat it was a little extraordinary to feel that 
jong-term contracts were necessary when material is recjuired b\' the Govern- 



MUNITIONS INDUSTEY 3783 

merit, and when the United States couki always commandeer that material 
whenever necessary or desirable to do so. 

5. This Division has not paid over 3.18 on any bookings for benzol which 
have been made since May. 

6. As regards alcohol, the highest price which the Government has paid is 
9.6^ per pound, and the average is probably about 9.2 cents per pound. Further- 
more it has been generally understood between a sufficient number of alcohol 
distillers and the United States, that the price could not at any time exceed 65^ 
per gallon, unless by special agreement, and there is really no excuse for any 
Government agency to pay more than that price. 

7. In view as above, it is suggested that at least on the raw materials which 
could be supplied by this Division, that your purchasing department be so kind 
as to submit prices which you can obtain, or permit this Division to advise prices- 
at which it can furnish any of the raw materials which it attends. 

8. Your cooperation as herein will be appreciated. 

Respectfully, 

Raw Materials Section, 
W. M. MacCleary, 

Major, Ord. Dcpt., U. S. A. 
By W. H. Gelshenen, 

Major, Ord. Dept., U. S. A. 

("Exhibit No. 1222" appears in text on p. 3602) 



Exhibit No. 1223 

E. I. du Pont de Nemours & Co., billings to the Du Pont Engineering Co. 

Shop orders $7,342,926.03- 

Materials: Construction and operation 2,676, 127.42: 

Stationei'y and printing supplies 7, 155. 05 

Telephone & telegraph 12, 767. 84 

Freight & express 43, 978. 99 

Postage stamps 1, 590. 88 

Medical supplies 3, 207. 42 

Blueprints and photographs 19, 690. 79 

Cartage & storage of household goods 20, 981. 76 

Surveys & special projects 38, 076. 73 

Plant rentals 12, 943. 91 

Office alteration and repairs 15, 559. 28 

Furniture and fixtures 8, 281. 85 

Group life insurance 1, HO. 58 

Traveling expense 128, 150. 72 

Plant labor charges 4, 396. 92" 

Engineering Dept. salaries 681, 984. 03 

Engineering Dept. expense 150, 007. 80 

Mail-room salaries 6, 878. 39 

American Nitrogen Co., salaries 6, 201. 98 

Smokeless powder operating Dept., salaries 78, 066. 98 

Smokeless powder operating Dept., expense 106, 652. 15- 

Arlington Co., salaries 196. 00 

Carpenters time and material 3, 051. 53 

Police protection, material 2, 380. 65- 

Employment agency expense 23, 467. 80' 

Salaries of men in training 89, 881. 04 

Experimental expense 12, 857. 25 

Explosive manufacturing Dept., salaries and expense 97, 761. 03- 

Pay roll and salary deductions 14, 855. 69 

Office rent and expenses 2, 157. 49' 

Purchasing Dept. expenses (Eng. Dept.) 12, 794. 08 

Purchasing Dept. salaries 101, 426. 21 

Salarv Dept. salaries 1, 532. 40' 

Traffi'c Dept. expenses 28, 088. 40' 

Miscellaneous salaries 45, 129. 51 

Purchasing Dept. expenses 3, 785. 58 



3784 MUNITIONS INDUSTRY 

£1. I. du Pont de Nemours & Co., billings to the Du Pont Engineering Co. — Con. 

Mail-room salaries (Eng. Dept.) $20, 640. 16 

Incorporation expense 3, 055. 45 

Transcript of proceedings before Claims Board 81. 60 

Bond premium 6. 25 

Janitor service 213. 11 

Interest on loans 267. 13 

Professional services by outside parties 407. 74 

Commissions to salvage Dept 4. 96 

Total 11,830, 778. 56 



Exhibit No. 1224 
"old hickory" 

"Old Hickory", the largest military po^\der factory of its day, was designed 
to "practically double" the capacity of the then existing factories of E. I. du 
Pont de Nemours & Company which had been constructed to meet the military 
powder needs of England, France, Russia, Italy, and Belgium in the Great War 
<See Record p. 5018). 

The magnitude of powder requirements had not been anticipated in the spring 
of 1917. A letter of the Ordnance Department, written April 21, 1917, gives 
"anticipated needs of the Ordnance Department of the Army for smokeless 
powder during the next twelve months, 78,500,000 lbs." (See Ex. 1121), but by 
October 4th, 1917, this estimate had increased to 500,000,000 lbs. prior to 
January 1st, 1919 (Record p. 5004). 

Meantime, there had been no total lack of preparation. On March 22, 1917, 
E. I. du Pont de Nemours & Company had addressed a letter to Secretary of 
War Baker, with copy to the Secretary of the Navy, submitting data on the 
powder manufacturing capacity of that company and its commitments to the 
"Entente Allies". This letter covered also the situation with respect to all 
essential raw materials and to the manufacture of TNT (See Ex. 1118, R. 4974). 

On February 7th, 1917, four days after the breaking of diplomatic relations 
with Germany, E. I. du Pont de Nemours & Company started a search for sites 
suitable for smokeless powder plants, resulting in the recommendation of two that 
eventually were chosen for the building of the two great war plants, "Old Hick- 
ory" near Nashville, Tennessee, and "Nitro", near Charleston, West Virginia. 

The first definite announcement of Government powder plant construction 
on a large scale was made on October 3rd, 1917 (See testimony P. S. du Pont 
12/14/34) when Col. Hoffer of the Ordnance Department addressed a letter to 
the vice-president of E. I. du Pont de Nemours & Company, asking if that com- 
pany would be willing to create additional capacity for the manufacture of 
smokeless powder amounting to 500,000 ll3s. per day and for double that amount. 
(See Ex. — ). It was stated that the ].'laiits should be the property of the United 
States and should be operated by the du Pont Company, either on a cost-plus 
or other basis. 

It is to be noted that the du Pont Company had already examined into and 
recommended the proper sites for these plants and had actually constructed, 
during the preceding 30 months, powder-making capacity for the "Entente 
Allies" of over 1,000,000 lbs. daily capacity. The engineering and other forces 
needed for i;he undertaking, though temporarily diverted to other work, were 
held readv to move on a moment's notice. 

The day after receipt of Col. Hofi"er's inquiry the du Pont Company made a 
proposal to construct and operate all or part of the plants contemplated. This 
proposal estimated the cost of the 1,000,000 lbs. daily capacity at $90,000,000, 
and the probable time of first operation about July 1st, 1918, with completion 
about April 1, 1919. 

The actual outlav on this plant, finally of 900,000 lbs. daily capacity was 
$83,000,000, and the first powder was maiuifactured early in July 1918. On the 
signing of the armistice, November 11, 1918, the plant was 93% completed and 
over 50% in full operation with every prospect of completion on or before March 
1st, 1919. 

Such is the record of private industry in emergency. 

The original proposal of the du Pont Company as of October 4th, 1917, was 
elaborated and submitted to the Chief of Ordnance on October 8th, 1917 (see 
Ex. 1126, R. 5004, 5006). These proposals were reduced to a final order of the 



MUNITIONS INDUSTRY 3785 

Chief of Ordnance and accepted bv E. I. du Pont de Nemours & Company on 
October 25, 1917 (see Ex. 1130, R. 5023). 

Meantime, on October 11th, 1917 (see Ex. 1127, R. 5018), the Chairman of 
the War Industries Board had stated to his fellow members that the Chief of 
Ordnance "had practically decided to recommend that they (the du Pont Com- 
pany), be permitted to expend additional $90,000,000 to double their smokeless- 
powder capacity, and that the Chief of Ordnance expected to recommend this 
without bringing the matter before the War Industries Board." The record 
■does not show protest bv that Board against the proposed procedure. 

On October 16th, 1917 (see R. p. 5018), the Chairman of the War Industries 
Board reported "that he had been verbally advised by the Ordnance Department 
that the Secretary of War has given his approval to the plan authorizing the 
•du Pont Company to practically double their capacity for the manufacture of 
smokeless powder at an expense of approximately $90,000,000." 

The minutes of that meeting stated, "It was the unanimous opinion of the 
Board that immediate and drastic action should be instituted as the explosive 
situation was regarded as critical and of supreme importance." 

On October 31, 1917 (see Ex. 1131, R. page 5035), three weeks after notice of 
the proposed order, the War Industries Board ordered the following letter sent 
to the Chief of Ordnance: 

Oct. 31, 1917. 
The Chief of Ordnance, 

War Department, Washington, D. C. 

Sir: 1. Replying to your communication of October 29th, we beg to say that 
the only previous definite information the War Industries Board had regarding 
the contract referred to therein with the E. I. du Pont de Nemours & Company 
was a telephone message to the Chairman of the Board to the effect that you 
proposed to make a contract with the du Pont Company involving the expendi- 
ture of about $90,000,000 without referring it in any way to the Board. 

2. We now understand that you simply advise us of your action as a matter 
of information. 

Respectfully, 

H. P. Bingham, 
Secretary War Industries Board. 

On the same day, October 31 , 1917, the Secretary of War sent a telegram to the 
du Pont Company, as follows: 

Washington, D. C, Oct. 31, 1917. 
Pierre du Pont, 

Wilmington, Del.: 
Have just had presented to me the details of the proposed contract with regard 
to increased capacity for powder production, This matter is large, intricate, and 
important. Do nothing about it until you hear further from me. Stay all action 
under the order until I can acquaint myself thoroughly with all features of the 
matter. 

Newton D. Baker, Secretary of War. 

It is to be noted that this telegram was not to cancel an order but "until you 
liear further from me, stay all action under the order." The essentials of the 
du Pont proposals of October 4th and 8th, 1917, were (R. page 5032): 

1. Complete plants to manufacture all or part of 1,000,000 lbs. smokeless 
powder per day. 

2. An estimated cost of $90,000,000. 

3. Estimated time for starting the first complete unit, 8 months. 

4. Completion of plants at rate of one additional unit each month. 

5. The du Pont Company, or a company to be organized by it, to act as agent 
of the Government in the construction and operation of the plant or plants, 
"with the usual power and authority of an agent to contract for and in the name 
of his principal." The Government to be liable for any expenditure or obliga- 
tion arising out of the construction or operation of the plants and for loss by 
accident, fire, flood, or explosion. 

6. The Government to furnish sufficient funds to enable the du Pont Company 
to pay all bills and other obligations. 

7. The Government had the privilege of cancelling the agency at any time. 

8. Compensation, in event of cancellation, $900,000 per month of construction 
completed, not to exceed $13,500,000. 



3786 MUNITIONS INDUSTRY 

9. Compensation for construction, a percentage of profit on cost estimated by 
the du Pont Company at 0-6}^% (exhibit 1134). 

10. Compensation for operation, 5p per lb. of powder manufactured and 
packed. 

11. Additional compensation, 50% of saving below a cost of 44}^f4 per lb. for 
water-dried powder, or 47^ per lb. for air-dried powder. 

These essentials, excepting nos. 8, 9, 10, and 11, relating to compensation, were 
substantially preserved in the order of October 25th, 1917; the suggested order of 
December 11th, 1917, the contract of January 29th, 1918, and the final substi- 
tuted contract of March 23, 1918. 

The proposed compensation in event of cancellation of contract presented no 
serious problem, though it was several times modified, as may be seen by examina- 
tion of exhibits. 

The proposed compensation for saving in cost was modified in the December 
draft of order to a base price of 46?^ on water-dried powder, and in the drafts of 
January 29th and March 23rd, to 45?2^. for air-dried powder. 

The proposed compensation for operation, originally written at 5^ per lb. v/as 
changed to Syzf- per lb., subject to certain charges, in the submitted order of 
December 11, 1917. This compensation, SM^i per lb., was continued in the con- 
tracts of January 29th and March 23rd, but was stated in the letter to be above 
all costs of operation, i. e., a clear profit. 

Almost the entire discussion relating to these order contracts was centered upon 
the question of compensation for construction of the proposed plant or plants. 

The original proposal of E. I. du Pont de Nemours & Company was made over- 
night, and the elaborated proposal within five days. The Company itself offered 
the undertaking. It was evident that a considerable part of the work was to be 
done in the engineering, purchasing, and administrative division of the company 
which were then very active in the operation of other military powder and com- 
mercial business. As it was practically impossible to allocate actual charges to 
the proposed new plants, an estimate, based on the cost of plants recently built 
for supplying the European governments, was prepared. This estimate was sub- 
mitted to the Ordnance Department on ISlovember 2nd, 1917 (exhibit 1134, 
Record, page 5049). It showed a balance above cost of 6.8% as a maximum and 
as a minimum, with an estimated mean of 3.6%. However, as interference with 
other business of the company was estimated at 2.9-5.5%, with mean of 4%, it 
might be argued that the "out-of-pocket" estimate given should not include such 
items and that therefore the maximum gross profit should be stated at 9.7%, the 
minimum at 5.5% and the mean at 7.6%. 

Though these figures were carefully explained verbally as well as in the written 
communication to the Ordnance Department, neither the Secretary of War nor 
the War Industries Board seemed able to grasp the fact that the 15% charge for 
named overhead expenses was not a clear profit, all of which was explained in letter 
to the Chief of Ordnance of November 2, 1917 (exhibit 1134). 

Again, letter of November 23, 1917 (Record, p. 5102) confirmed to the Secre- 
tary of War the agreement of E. I. duPont de Nemours & Company to construct 
all or part of the proposed plants or to donate the plans so that the work might be 
done by others. The company refused only: 

1st. To work without proper compensation and with a possibility of loss. 

2nd. To divide with others the work at any one site. 

Letter of December 1, 1917, addressed to the War Industries Board, agreed to 
do the work for a compensation of 6^2% on construction work or a like sum 
guaranteed through the operation of the proposed plants. 

On November l4, 1917 (exhibit 1142) a member of the War Industries Board 
wrote the Secretary of War, stating that the du Pont Company had agreed to re- 
bate 6.5% of the total 15% on cost of construction, by charges against profits on 
operation, and also had agreed to reduce the profit per pound on powder manu- 
factured to 3.5% under certain conditions. However, the members of the War 
Industries Board declined to approve the contract so modified. The Chief of 
Ordnance, believing it fair and reasonable, urged its adoption on account of the 
emergency necessity. (It is to be noted that this 6.5% was the entire estimated 
actual pmfit on construction work.) (Exhibit 1134, letter to Chief of Ordnance 
dated November 2, 1917.) 

On November 19, 1917, the Chief of Ordnance addressed an order to E. I. 
du Pont de Nemours & Company (Record, p. 5149), which reduced the profit per 
pound to 3.5% as above indicated, but — instead of rebating 6.5%, i. e., the profit 
item of the 15% allowance of former proposals — 6y3% was named as the percent- 
age allowed for engineering, purchasing, and administrative expense, leaving no 



MUNITIONS INDUSTRY 3787 

profit whatever on construction. Naturally this proposal was not acceptable to 
the du Pont Company. 

On November 27, 1917, the President of the du Pont Company visited the 
Secretary of War at his request to learn of the decision in regard to Government 
powder plants. He was shown a communication of the War Industries Board of 
November 26 (exhibit 1148). This communication proposed an advance of 
$1,000,000 on account of "net profit or compensation" and a further negotiation 
as to additional profit. On completion of the entire contract arbitration was 
offered if it then appeared necessary. It is to be noted that this "net profit or 
compensation" evidently referred to the disputed 15% on construction, of which 
at least 9% was out-of-pocket expense for engineeing, purchasing, and adminis- 
trative items. This 9% the du Pont Company was asked to carry for many 
months before adjustment by arbitration or otherwise. 

In a report to the board of directors of the E. I. du Pont de Nemours & Com- 
pany, by the president (exhibit 1149), the latter stated that at the interview of 
November 28, 1917, the Secretary of War said that he would be in favor of giving 
the work to other contractors but had decided to adopt the decision of the War 
Industries Board, which was thereupon submitted to the board of directors with 
the recommendation "that we decline the offer of the War Industries Board as 
presented by the Secretary of War and recommend to the latter that he employ 
other contractors, as we have reached the conclusion that our services to the 
Government have not the value that v/e had supposed." The board adopted this 
recommendation with the request that the Secretary of War be advised that in 
any contract entered into the company would agree that the total compensation 
might be limited to 10% of the actual cost of construction, and 15% of the actual 
mill cost of powder produced. 

On December 1, 1917, the president of the du Pont Company wrote the War 
Industries Board (exhibit 1151), stating that the letter of the War Industries 
Board had been submitted to the du Pont Company and "it is with the deepest re- 
gret that we find ourselves unable to accept the plan of the War Industries Board." 

This letter further points out that the proposed base price on powder (44.5^ 
per lb.) is 16% below pre-war price, in the face of an advance in the cost of pow- 
der of 10^ per lb. brought about by increase in prices of essential raw materials. 
The letter adds that a similar condition with respect to reduction of price does 
not exist in any other business and that the Government is paying a very sub- 
stantial advance of pre-war figures in the purchase of all other supplies. 

On December 3, 1917 (Exhibit 1153), the Secretary of War informed the 
War Industries Board that the du Pont Company had refused to undertake the 
building of the proposed plant on any terms other than those contained in their 
last proposition, except for a minor change. 

Notwithstanding this refusal, on December 10, 1917 (Exhibit 1154), E. I. 
du Pont de Nemours & Company addressed a letter to the Secretary of War 
calling attention to the delay that had occurred in the construction of the powder 
plants as proposed in the order dated October 25th issued by the Chief of Ord- 
nance. It also called attention to the recent visit of the Chief of Ordnance in 
which he had assured the company that it was necessary to call upon it for 
assistance. This letter asked an appointment with the Secretary for the pur- 
pose of presenting a proposition, copies of which were enclosed. This proposi- 
tion adopted the views of the Ordnance Department in form of an order sub- 
mitted on November 19, 1917, and limited maximum compensation to 15% on 
cost of manufacture and 10% on cost of construction. A further provision 
agreed to an arbitration of the paragraphs relating to compensation, the arbi- 
tration to determine the proper compensation to the company "in view of 
services to be rendered and in view of compensation provided in similar con- 
tracts now being entered into by the departments of the United States Govern- 
ment." 

On December 12, 1917 (Exhibit 1157), the Secretary of War notified E. I. 
du Pont de Nemours & Company that as the du Pont Company had declined to 
accept the proposition suggested by the War Industries Board on November 
27th, "the War Department proceeded to work out a plan for the direct creation 
of this capacity by the Government itself", that this action had been reported 
to Messrs. du Pont and Buckner on December 10th, and "that the question 
would not be reopened and the Government would proceed directly in the 
matter." 

The Secretary added, "I then assured Mr. du Pont of my great appreciation 
of the generous willingness expressed by your company to aid the Government 
in its undertaking and I shall be most happy from time to time to call on you 



3788 MUNITIONS INDUSTRY 

for such assistance as in the nature of the case you are most highly quahfied 
to render." 

The recital of the above events makes evident several important facts: 

(1) Notwithstanding the low Department estimates for powder needed for 
the year 1917-1918, the du Pont Company did much preparatory work looking 
to the eventual building of large powder plants. 

(2) When the call came for a proposition to construct the largest factory 
ever planned, a reply proposition was made overnight, on October 4th, 1917, 
and reduced to definite form within five days. 

(3) An order was issued by the Ordnance Department twenty-three days 
after the receipt of the proposal of the du Pont Company. 

(4) The War Industries Board, though it had been informed of the con- 
temijlated action of the Ordnance Department three weeks earlier, took no 
action until October 31st. 

(5) Action under the order was held up by the Secretary of War on the same 
date, but the order was not canceled. 

(6) The Secretary of War notified the du Pont Company on December 12 
that he had already told the president and vice president of the du Pont Com- 
pany that as a result of the refusal of the company to accept the plan of the War 
Industries Board the Secretary had "proceeded to work out a plan for the direct 
creation of this capacity by the Government itself", and that the case would 
not be reopened. This was a definite cancelation, on December 1st, of the 
order of October 25th, and relieved the du Pont Company of further responsi- 
bility, although the formal cancelation was not issued until the month of 
January 1918. 

(7) Prior to that date the preparatory work within the du Pont Company 
went steadily forward in order that completed plans might be available when 
needed for whoever did the construction. Agreements with subcontractors and 
others were kept alive and further options on and purchases of land and machinery 
were made and secured. In these ways the effect of the delay caused by Govern- 
ment representatives was minimized by the du Pont Company in every possible 
way. 

(8) According to the decision announced by the Secretary of War, a contract 
was let to other parties for the construction of the plant at Nitro near Charles- 
ton, West Virginia, and ground broken about January 1, 1918. 

(9) Ground was broken during the first week of March at Old Hickory near 
Nashville, Tennessee, by the du Pont Company under a contract dated March 
23, 1918, Bj' expediting the work in every conceivable way this factory started 
operation on July 3, 1918, the very date originally contemplated in the order of 
October 25th, notwithstanding the fact that construction work had been delayed 
practically three months, and at the time of the armistice production was pro- 
ceeding at the rate contemplated in that contract, and no actual delay in the 
delivery of powder was experienced. 

(10) The total compensation of the du Pont Company for the work at Nash- 
ville and other plants constructed or operated for the United States Govern- 
ment, costing approximately $129,000,000, was between $400,000 and $500,000, 
or about three-tenths of 1%. (Record, p. — .) 

January 9, 1918. 
e. g. buckner, 

Vice President, E. I. du Pont de Nemours & Company, 

Wilmington, Delaware. 

Dear Sir: On December 17th, 1917, I had a visit from Mr. D. C. Jackling who 
presented a letter from Secretary Newton D. Baker, dated the day previous, 
introducing him as the appointee to take the business direction and management 
of organization and construction of the new Government powder plants. 

Mr. Jackling announced that he v/ishes to learn the nature of the assistance that 
the officers of E. I. du Pont de Nemours & Company were willing to give him and 
to obtain the preliminary "layout" of the proposed plant which this company 
was asked to build under General William Crozier's order of October 25th, 1917. 

With respect to the assistance to be given him: 

The War Department has now j)roceeded to work out a plan for the direct 
creation of this capacity by the Government itself. Under such policy our 
company believes it unnecessary to reveal our practices with respect to such lines 
of manufacture that are now commercially developofl in the United States, such 
as those of sulphuric acid, nitric acid, cotton purification, diphenylamine and. 
ether, as sufficient information is obtainable elsewhere. 



MUNITIONS INDUSTRY 3789 

Manufacture of the powder itself has been developed by our company so far 
beyond the practice of others that we are willing to permit inspection of our proc- 
esses by accredited representatives of the War Department on written request 
as to information desired. These representatives may witness the operation of 
processes; make measurements, sketches or drawings of apparatus, buildings, 
layouts, etc., as long as such work does not interfere with the operation of safety 
of our factories. Copies of existing drawings owned by our company will be 
furnished on application. It is understood that this information is for the use of 
the United States Government only and that it will not be given to other manu- 
facturers. The company assumes no responsibility as to the use of the data and 
its application to the new factories that the War Department proposes to erect. 
In general this company will not attempt to criticize or approve the plans of the 
War Department as the close interrelation of the parts of the proposed factories 
makes piecemeal criticism useless and cur services as directors of the whole project 
are deemed by the Government as unnecessary. 
With respect to the work already done by us: 

We have provided Mr. Jackliug with our preliminary "layout" and the memo- 
randum of principal materials needed for the construction work. Our chief 
engineer has explained this data to him. We will furnish the drawings that we 
had prepared for the "layout" but none of the information is certified as correct, 
or final for the purposes of the proposed Government plant, and it must be checked 
out and passed upon by those qualified to do so. 

We pointed out to Mr. Jackling that the proposed work involved no problems 
that cannot be solved by capable engineers of industrial training but that economy 
and speed of reaching maximum output with a properly balanced plant are out of 
the question unless the work is in charge of an organization of experience. On 
that account we will not delegate any of our men as suitable to assist the War 
Department in its work, knowing full well that the withdrawal of even large 
numbers of them cannot win satisfactory results for the Government without the 
backing of our entire organization. Since suspension of General Crozier's order 
we have taken on important work for the Government which, together with that 
theretofore on hand, will call for the use of all our forces. On this account we 
should not be called upon for men. If the War Department decides to set aside 
this recommendation, we request that negotiations be made with our men direct, 
though v.e would appreciate the courtesy of being informed as to what is intended 
in this respect. 

Conversation with Jackling suggested the construction and short-time operation 
of part of the proposed factories by E. I. du Pont de Nemours & Company, 
As a result we submitted to him by telephone the following: 

E. I. du Pont de Nemours & Company will construct one plant of five 

units, capacity 500,000 pounds per day. 
E. I. de Pont de Nemours & Company will operate these units when com- 
pleted until a total output equal in amount to five months' full opera- 
tion, 62,500,000, has been made. 
The War Department will pay as compensation 10% of cost of construction 
and 10% on cost of manufacture, figured on base price of 450, making 
cost to the Government 49J^0 base. To this compensation is to be 
added one-half the savings in cost of manufacturing up to a maximum 
of 15% on base cost of the output of the factory. 
If the work is discontinued before completion of the above the War 
Department is to pay E. I. du Pont de Nemours & Company a sum not 
less than 15% on construction cost alone. 
Mr. Jackling inquired as to the profit expressed in cents per pound which would 
produce the maximum in the above offer. On being informed that this maximum 
figure was Q.75^ par pound he stated that he was not authorized to give more than 
one-half of that amount. Mr. Jackling's counter offer was rejected by our com- 
pany because we are informed that contracts are being closed by the Government 
on terms quite similar to the proposal made by us and we have been given no 
reason why our services are considered worth less than those of other contractors. 
This letter gives a condensed statement of our position as outlined to Mr., 
Jackling. 

Very truly yours, 

Pierre S. du Pont, President. 



3790 MUNITIONS INDUSTRY 

Exhibit No. 1225 

Excerpts from the mimeographed memorandum dated February 20, 1934, 
headed "War-time contract forms and emergency codes" being a study made by 
a committee of student officers at the Army Industrial College during the 1933- 
1934 course. 

PRESENT STATUS OF WAR-TIME CONTRACT FORMS 

Interdepartmental Board of Contracts and Adjustments. — World War experiences 
in placing, administering and terminating contracts directed attention to the 
necessity for changes in the forms used by the Government in its contractual 
relations. To effect these, in 1921 there was set up in the Bureau of the Budget 
3,n Interdepartmental Board of Contracts and Adjustments, to revise, standardize 
and simplify the contract forms in use by the Government. 

This Board has prepared various contract forms for use in current procurement, 
and their use by governmental contracting agencies is made obligatory. 

Board to standardize war-lime contracts. * * * 

In 1921 The Assistant Secretary of War convened a Board to standardize 
war-time contract forms. The Board was composed of a representative from 
each of the supply arms and services and from the Office of Tlie Assistant 
Secretary of War. * * * 

The Board to standardize war-time contracts in preparing contract forms for 
use in war recognized the following conditions which affect war procurement 
■contracts: 

1. Uncertain labor and material costs which preclude accurate determination 
of fixed prices. 

2. Tlie termination of contracts due to cessation of hostilities. 

3. Confusion due to increased industrial activity and unfamiliarity of manu- 
facturers with war equipment and material. 

4. Haste incident to the emergency. 

5. Opportunities for profiteering. 

6. Increased powers of the President and removal of legislative restriction 
upon the powers of the Government agencies. 

7. Recent recommendation of the War Policies Commission "to minimize the 
profits of war." 

(a) President's power, in war, to stabilize and adjust prices; to secure use to 
the Government of any private property needed in the prosecution of war with- 
out affording the owner thereof profit due to the war; and to compel contractors 
to accept war orders. 

(6) Upon the declaration of war and during the period of the emergency, 
individuals and corporations shall be taxed 95 percent of all income above the 
previous three-year average, with proper adjustment for capital expenditures 
for war purposes by existing or new industries. 

(c) The cost plus percentage methods of purchase shall be eliminated. 

8. Provision for changes in plans and specifications and necessary readjust- 
ments of original estimated cost of contract. 

9. Inspection clauses — costs and materials. 

10. Failure on tlie part of the contractor to complete his contract satisfactorily. 
The Board on War-Time Contracts after much research and collaboration 

with the supply arms and services adopted certain forms for use in war procure- 
ment, These were embodied in a letter to The Adjutant General dated January 
25, 1929. 

Tlie forms as then adopted by the Board were later referred to another com- 
mittee appointed by it for further study and recommendations as to revision. 
This later committee held numerous conferences with representatives of the 
several supply arms and services and consulted freely with liaison officers of the 
Navy Department. Consideration was also given to suggestions received from 
district procurement planning officers and from Reserve officers. 

Based on these studies revised drafts of forms were prepared and submitted 
to chiefs of supply arms and services for further consideration and suggestion?. 
Final redrafts were them prepared by the committee and submitted to the Board. 
At a formal meeting of the Board on December 22, 1931, the revised forms as 
submitted by the committee were adopted. 

The final redrafts were forwarded to The Assistant Secretary of War in Febru- 
ary 1932, together with the recommendation for their approval for use, in their 
respective fields, for all war procurement purposes except that of large-scale 
construction projects. 



MUNITIONS INDUSTRY 3791 

The Construction Division, Office of the Quartermaster General was of the 
opinion that none of the proposed forms was adaptable to large-.->cale construc- 
tion and wished to prepare a form which would be suitable for such projects. 

The Assistant Secretary of War, through the Army and Navy Munitions Board, 
submitted tlie proposed forms for consideration of the Navy Department as to 
their suitability for war procurement purposes by that department — with a view 
to promoting uniform war-time contracts in the War and Navy Departments. 
After consideration of the forms by the Navy Department they were returned 
with the notation that while most of the principles contained in them were 
embodied in forms adopted by the Navy it was not believed advisable or pos- 
sible to standardize both Department forms into a single form. 

In view of recent criticism and suggestions on war contract forms received 
from procurement district planning officers and industrialists, The Assistant 
Secretary of War has referred the 1931 war contract forms to the Board on War 
Contracts for further consideration. 

Pursuant to these instructions the Board met on January 11, 1934, and ap- 
pointed a committee to consider all papers now in the hands of the Board and 
to present to the Board definite recommendations as to a form of contract based 
on the adjusted compensation principle and a Manual of Instructions for the 
drawing of contracts thereon. 

Forms recomtyiended. — The Board to Standardize War-Time Contract Forms 
has recommended adoption of the following forms of contracts for use during 
war: 

Informal contracts. 

Purchase orders. 
Formal contracts. 

Fixed price contracts. 

Contracts for supplies. 
Contracts for construction. 
Adjusted-compensation contracts. 
******* 

(1) In both forms the provision that requires approval by the head of the 
department for any change involving an estimated increase or decrease of more 
than five hundred dollars has been deleted. This change will avoid delays 
incident to securing approval of emergency changes by the Secretary of War. 

4. Adjusted compensation contract. 

The committee believes that in the event of war cases will arise in the pro- 
curement of technical noncommercial items where the use of a fixed-price contract 
will be impractical. The committee further believes that under such circum- 
stances some variation of the cost-plus principle must be adopted. This simply 
means that the Government will pay the cost of manufacture and will in addition 
pay the contractor a fee determined by one of several means. In cases where 
there is no reasonable basis for determining a fixed price for an article, producers 
cannot well oljject to the cost-plus principle; but their dissatisfaction will be as 
to the details of accounting, the various elements of cost, and the amount of 
profit allowed. 1 

The proposed adjusted compensation contract is essentially a cost-plus form of 
contract. The Government pays the cost of manufacture plus a fee based on 
the value of the plant and equipment, provided by the contractor. In addition 
the fee is increased if the actual cost is below the estimated cost and is decreased 
if the actual cost is above the estimate. 

(a) Accounting. 

Any form of cost-plus contract will necessarily involve detailed accounting 
supervision by the Government. The proposed form does not attempt to i:)rescribe 
any particular forn^ of accounting. The committee Ijelieves that the adoption of 
standard cost accounting methods as required by the industrial codes will prove 
of material assistance in administering cost-plus contracts. 

The proposed contract does not specify the basis upon which the contractor's 
plant will be valued. 

(b) Elements of cost. 

The proi:)osed contract leaves a wide latiti;de both as to the elements of cost 
that may be included in the contractor's estimate and in the cost accounting. 
It does, however, specify certain costs that will not be allowed. 

1 Brief on Just Compensation, prepared by Lt. Comdr. E. D. Stanley, Supply Corps, U. S. N., p. 34. 
83876— 35— PT 15 17 



3792 MUNITIONS INDUSTRY 

Article III, par. 2 (i) provides that the Government will not reimburse the 
contractor for "bonus payments to officers and employees, based upon profits 
earned." The statement has been made that this is unfair because many con- 
cerns pay small salaries and rely upon bonuses based on profits. If salaries are 
less than the services are worth proper figures may be used in the estimate. The 
committee recommends that in exhibit A the contractor be required to enter the 
salaries and bonuses paid all officials of the company during the preceding cal- 
endar year. This will permit the contracting officer to determine the reasonable- 
ness of salary increases and thus prevent the pajanent of exorbitant salaries as 
was done by certain aricraft producers during the World War. 

(c) Profit. 

The question of the amount of profit to be allowed the contractor is one of the 
most critical in any form of cost-plus contract. The fee adopted should be fair 
alike to the producers and the Government. In the adjusted compensation 
contract the fee is based primarily upon the rental value of the facility. It is 
true that the contractor assumes few of the risks of an entrepreneur for which 
pi-ofit is paid. He does, however, have certain risks of management and certain 
ex])enses for which no compensation is made. The committee believes that 
some increase in the present figure might well be made but doubts tlie advisa- 
bility of attempting to determine the exact amount until war is imminent. It 
can then be decided on the basis of then existing conditions. 

(d) Time. 

One serious question in connection with the use of the adjusted compensation 
contract is the possible delay in production incident to negotiating the contract. 
Theoretically, this is cared for by the use of the preliminary data sheet. Prac- 
tically, it is difficult to form a satisfactory estimate of costs without a carefully 
prepared factory plan. Little progress is being made at present in preparing 
such plans. The committee recommends that consideration be given to the 
advisability of using compulsory orders in connection with adjusted compensa- 
tion contracts. 

Suppose, for instance, the A company is willing to undertake the manufacture 
of one million fuses on an adjusted compensation basis. A compulsory order for 
that number of fuses would be issued and the company would start converting 
its plant. 

In the meantime contract negotiations would go forward. As soon as an agree- 
ment could be reached the contract could be substituted for the compulsory 
order. If for any reason no agreement could be reached both parties would be 
adequately protected. 

(e) Payment. 

The contract is so drawn that no matter by how much the contractor exceeds 
his estimate he will receive 50% of the agreed fee. The committee, therefore, 
recommends that provision be made for paying the contractor each month upon 
the approval of the contracting officer one-half of the prorata share of the fee 
for that month, such payments in no event to exceed 50% of the estimated fee 
prior to final determination of the contract. 
******* 

The committee believes that the fixed price contract form for construction 
devised for war-time purposes is only suited to small scale construction projects. 
It is further the committee's opinion that the adjusted compensation contract 
form as proposed is unsatisfactory for use in connection with construction 
projects. 

The committee recommends that a form for war-time scale construction 
projects be considered which will be of the cost-plus a fixed percentage of the 
piHtimated cost type. 

Such a form would contain the following provisions: 

1. Provision for payment of a graduated bonus for reducing the cost, and/or 
the time of performance below the estimated cost and/or time of performance. 

2. Provision for a nominal penalty for exceeding either the estimated cost or 
time of performance or both. 

3. Provision for revising the estimated cost, the estimated time of performance, 
and the fee, for changes in costs of labor, material, and for delays beyond control 
of the contractor. 



EFFECT OF EMERGENCY CODES 

* * * Not only had new jobs for white collar and professional workers 
actually become non-existent but there was a surplus rather than a dearth of 



MUNITIONS INDUSTKY 3793 

industrial labor as well. Class lines had been clearly drawn, the danger of class 
hostilities appeared no longer remote but actually on the horizon. 

This break-down, it must be realized, led to the creation of conditions favorable 
to either revolution or counter-revolution. Fortunately, however, the philo- 
sophers of the "new deal" refused to agree that the mechanism had failed. They 
have proceeded to wind it up again and having done that, hope to bring order 
out of chaos and suspend in balance for all time the existing class relation in 
American society. 

Private ownership of the means of production is to continue, but capitalism 
is to be prevented from exploiting, on the one hand, the producers of raw materials 
and, on the other, its labor suppl}'. Agriculture, despite its over-capitalized 
plant and restriction to domestic markets, will get sufficient profit for the payment 
of fixed charges and the purchase of capii;al and consumers' goods. Wage earners 
will be assured of a means of employment and at least a means of subsistence, 
if not incomes, conducive to decent standards of living. 

The "new deal" has assumed that it is possible to establish a permanent truce 
on class antagonism!:, and as a means to this end is applying that idea known to 
antiquity and the Middle Ages — the just price. 

The American farmer was to be restored to the capital and consumption 
markets by giving him a just price for his commodities on the basis of production 
limited to the home market. Industry was to be revived by the reasonable 
assurance of a just price for its production. While there was no guarantee, 
there was at least the goal of a fair return on investment. Industry was now 
formed into cartels, working through the agencies of its own trade associations 
it was to devise codes of fair practice for the purpose of regulating methods of 
competition. 

The first handful of codes prepared under the supervision of the National 
Industrial Recovery Act indicated the abandonment of laissez faire. Unfair 
methods of competition, secret rebates, the pirating of trademarks and labels 
were barred by various codes, but those practices were not very much inilike 
what the Federal Trade Commission Act so cheerfully set out to accomplish in 
another day. 

More significant was the fact that codes were written and accepted calling for 
price control and the banning of selling below cost, for the fixing of production 
quotas, for the limiting of plant expansion and machinery installation. Once 
codes were approved by the -President they had the sanction of law, and violators 
were liable to punishment. 

Naturally the adoption of the N. I. R. A. and its network of codes produced a 
period of transition beset with great variety of difficulties for Government con- 
tractors and the Government as well. However, as industry ol:)tained a better 
understanding of code requirements and a better grasp of the purpose of the new 
order tenderness changed to an attitude of vigorous compliance and wholehearted 
cooperation. 

At the present time War Department and Navy Department purchases are 
made with comparatively little embarrassment and contracts are being executed 
efficiently and in a manner wholly satisfactory to both parties. 

By virtue of the fact that codes are worded so as to permit a maximum of 
flexibility no drastic changes were necessary in existing contract forms. Sched- 
ules or invitations to bid have been modified to include a provision that bidders 
are complying with the requirements of the applicable code, and contracts to 
include an affidavit specifying that in the execution of the particular contract, 
code requirements and the provisions of the N. I. R. A. will be observed. 

To some extent, under code control, the element of competition is eliminated, 
and this throws confusion and additional responsibility on the shoulders of 
Government contracting officers. Bidders from such industries as steel and 
lumber bid a uniform price for their products. Under existing law covering tie 
bids awards are made by lot. There are times when this procedure results in 
an apparently inequitable distribution of business, and industry seems inclined 
to the idea that the Government should adopt some system of allocation to 
obviate such a condition. As Government business must not only be right but 
must look right, legal procedure and practice are invariably observed in the 
making of awards. Under the code set-up these grievances are referred to the 
N. R. A. for adjudication. This affords industry an opportunity to adjust its 



3794 MUNITIONS INDUSTRY 

own problems through the code authorities, and so far the system seems to 
operate with satisfactory results. 

Realizing that the institution of codes was precipitated by an emergency which 
threatened the very lifeblood of our economic structure and that a few short 
months of application have demonstrated its efficiency and success, it seems not 
unreasonable to assume that the system of control as it now operates, or with 
certain applicable modifications, has come to occupy a permanent place in our 
economy. This then brings us to the vital phase of our discussion — -what effect 
would emergency codes have upon Government war contracts? 

Undoubtedly such provisions of the emergency codes as apply to maximum 
hours of labor and minimum wages would have to be scrapped during war but 
most other stipulated conditions could be modified to meet the expansion and 
new economy. 

4: :(: :i: si: * ^ :J: 

Code authorities in their administration of codes in connection with wartime 
contracts would aid effectively in the distribution and conservation of raw 
materials essential for war output, so also would they assist in the advance of 
standardization and the elimination of unnecessarj- sizes, styles, and shapes, 
thus conserving raw material, labor, and capital. 

As an organized superagency for the direction and control of industrj^ and the 
coordination of wartime contracts the committee is of the opinion that the 
N. R. A. and its existing emergency codes, with certain modifications, can be 
utilized effectively to insure that wartime contracts will be let quickly, adminis- 
tered economically, and terminated with a minimum of confusion and aftermath. 
Since the adoption of the N. I. R. A. industry has operated under supervised 
control and with continued education will develop the required temper to assume 
the added burdens of wartime supply without disruption. 

During an emergency the code authorities under the N. R. A. would form the 
backbone of the superagency structure. Through them, expert information, 
direct contact with industry and purchasing officers, suggestions, requests, com- 
plaints, and the enforcement of regulations and control, would be obtained. 

This would constitute unified control from the individual plants and various 
branches of industry through the code authorities and such other emergency 
organized units as may be set up, to the N. R. A. Administrator, and the Presi- 
dent. 

When industry is devoting its maximum effort toward the fulfillment of Gov- 
ernment contracts code authorities would be constant sources of information 
regarding the sentiments of trade, their complaints and their suggestions. Ap- 
proaching critical situations would be sensed and would meet with the required 
treatment by conferences of representatives of affected industries or such other 
means as may be deemed expedient. Alcove all, the importance of the Govern- 
ment's requirements would be kept constantly in mind. By industry dealing 
with industry, sj'stems of distribution, priorities, and all other methods of control 
would be developed and coordinated to the end that Government contracts would 
be executed with the efficiency needed to meet the emergency. 

Attitude of National Chamber of Commerce and Associated General Contractors. — 
Contact was made with the National Chamber of Commerce and the Associated 
General Contractors and developed that the proposed wartime contract forms 
had not as yet been referred to their body.i Both organizations are especially 
interested in the subject and requested that they be given an opportunity to study 
the proposed forms. They assured the committee that they were not only inter- 
ested but wanted to give the Government the benefit of their experience and 
services in this matter. 

Conclusions. — The committee is of the opinion that existing emergency codes, 
modified to meet wartime conditions, will facilitate the proper execution of Gov- 
ernment war contracts, in that: 

1. They constitute a method by which the Government can quickly present 
to all factors in an industry its needs in a particular line and receive dependable 
information as to how they may be met and as to the facilities available for use. 

2. They provide figures as to cost of production and can keep the Government 
informed as to changing conditions which might affect such cost. Cost records 
will of course be available for inspection by Government representatives. 

3. They will aid in the distribution and conservation of raw materials. 

'Contact has been made since this report was written. 



MUNITIONS INDUSTEY 3795 

4. They provide organized machinery for the collection of information and 
advise the Government as to the needs of industry to meet future requirements. 

5. They can bring to the attention of the Government unemployed facilities 
which may readily be adapted to the production of needed supplies, thus avoiding 
the misuse of money, material, and labor for the expansion of existing plants. 

6. Distribution of orders so as to prevent railroad congestion and labor dis- 
turbances can be effected. 



Exhibit No. 1226-A 

Form no. Contract no. 

Revised December 1931. Dated 19.. 

Adjusted Compensation Contract 
(For use in war or other national emergency) 
(Department) 



(Contractor) 

Contract for Amount $ 

Place 

This contract, entered into this day of , 19-., 

by the IFnited States of America, hereinafter called "the Government", repre- 
sented by the contracting officer executing this contract, and 



of the city of , in the State of 

hereinafter called "the contractor", witnesseth that the parties hereto mutually 
agree as follows: 

article I. definitions 

1. The term "Chief of branch" as used herein shall mean the head of the 
branch, bureau, service, or agency of the executive department or independent 
establishment involved, or his assistant. 

2. The term "contracting officer" as used herein shall include his duly ap- 
pointed successor or his duly authorized representative. 

3. The term "estimate" as used herein shall mean the estimated cost set forth 
in "Exhibit A." 

ARTICLE II. performance 

1. The contractor shall immediately proceed with the performance of this 
contract and shall deliver the articles, perform the work or render the services 
set forth in "Exhibit A", which is attached hereto and made a part hereof, in 
accordance with the terms thereof and of this contract. 

2. For the purposes of this contract: 

(a) The Government will provide such inspectors, auditors, and other personnel 
as the contracting officer may deem necessary. 

(b) The contractor shall allow such inspectors, auditors, and other personnel 
free access to its plant, operations, and accounting records and shall furnish such 
facilities and supplies, including office space, office furniture, heat, light, etc., as 
the contracting officer may require for their use on the work: Provided, That 
the value of the office and other space so furnished shall be included in the esti- 
mated value of the buildings, machinery, and facilities upon which the fee is 
based, and that the actual cost of such other items so furnished shall be reim- 
bursed the contractor by the Government and shall not be included as part of 
the estimate. 

3. The contractor shall give his personal supervision to the work or have a 
competent representative on the work at all times during progress with authority 
to act for the contractor. 

article III. payments 

1. The contractor shall submit to the contracting officer for payment summaries 
of accounts setting forth the expenditures for which reimbursement is sought. 
The Government will currently reimburse the contractor for all expenditures 
which may be determined by the contracting officer to have been necessary for 
the performance of the contract. 



3796 MUNITIONS INDUSTRY 

2. The Government will not reimburse the contractor for any of the following 
expenditures: 

(a) Federal taxes, except sales taxes imposed directly upon articles manu- 
factured under this contract. 

(b) Expenses of experimental research and other departments not engaged on 
work under the contract. 

(c) Interest on outstanding debts owed by the contractor. 

(d) Appropriations to reserves for bad debts. 

(e) Appropriations to reserves for outstanding debts owed by the contractor, 
including redemption of stocks, bonds, and mortgages. 

(f) Brokerage fees on commercial paper, including issues of stocks and bonds. 

(g) Entertainment, except entertainment of employees properly chargeable to 
welfare expenses and then only when approved by the contracting oflBcer. 

(h) Contributions to charity and other gratuities. 

(i) Bonus payments to officers and employees, based upon profits earned by 
the contra^ctor. 

(j) Compensation or other payments for services rendered prior to the com- 
mencement of work under the contract. 

(k) Payments on insurance vmder which the contractor is the beneficiary 
carried by the contractor on the lives of any of his executives or employees. 

(1) Expenses for patents and royalty payments not incident to the work 
performed under the contract. 

3. Upon the completion of the contract the fee set forth in exhibit A, adjusted 
if necessary, for authorized changes, will be paid to the contractor. 

4. If the cost of performing the work is less than the estimate, adjusted if 
necessary for authorized changes, the Government will pay to the contractor 
upon the completion of the work an additional compensation determined as 
follows: 

The percentage which the difference between the cost and the estimate bears 
to the estimate will be divided by 4 and multiplied by the cost; the resulting 
product will be the additional compensation allowed. 

5. If the cost of the work is greater than the estimate, adjusted if necessary for 
authorized changes, the fee shall be reduced by one percent (1%) for each one 
percent (1%) that the costs exceed the estimate, but in no case shall the fee be 
reduced more than fifty percent (50%). 

6. The Government will pay to the contractor the amount set forth in exhibit 
A as "Rehabilitation costs" upon the completion or termination of the contract. 

7. The amount set forth in exhibit A as "Depreciation" will be paid in equal 
monthly installments during the period of performance. If the contract is com- 
pleted in less than the estimated time, the difference between the amount pre- 
viously paid and the estimated amount set forth in exhibit A will be paid to the 
contractor. 

8. If the contractor makes expenditures at prices higher than those set forth 
in exhibit A, the Government will not reimburse him for the excess amount, 
except: 

(a) When and if such increased prices for labor, personal services, or material 
are authorized or ratified by a Federal agency set up for the purpose of controlling 
prices of labor and/or materials or, if no such agency exists, by the contracting 
officer. 

(b) When, with the approval of the contracting officer, the contractor has paid 
increased compensation for overtime work performed. Overtime work shall be 
construed as the time worked in excess of eight (8) hours in any one day by 
employees who come within the provision of the Federal eight-hour law, and the 
time worked in excess of the normal working day by other employees. 

When either of the exceptions (a) and (b) above are made, the estimate will be 
revised to include the estimated cost of sucli change. 

9. If, upon commencement of work, the contractor has on hand material which 
he desires to use in the performance of this contract, such material maj' be taken 
over and paid for by the Government at prices not in excess of the current market 
prices, nor of those set fortli in exhibit A. 

10. Coincident with making final payment, the contractor shall furnish the 
Goverimient with a final release, if required, in such form and containing such 
provisions as shall be approved by the chief of branch concerned of claims against 
the Government arising under and by virtue of this contract. 



MUNITIONS INDUSTRY 3797 

ARTICLE IV. RECORDS AND ACCOUNTS 

1. The method of accounting used by the contractor shall be subject to the 
approval of the contracting officer. No material change will be made in the 
contractor's method if it conforms to good accounting practice and the costs are 
readily ascertainalale therefrom. The original documents of all transactions not 
delivered to the Government in the course of payments shall be retained by the 
contractor and shall be open to inspection and examination by the contracting 
officer at all times prior to final settlement. 

ARTICLE v. CHANGES 

1. The contracting officer may at any time by written order and without 
notice to the sureties — 

(a) Make changes in the drawings and specifications. 

(b) Direct temporary suspension of the work. 

(c) Direct procurement of additional facilities so as to expedite the work. 

(d) Provide material or facilities which the contractor has agreed to furnish 
but is unable to furnish. 

2. Wlien any of the above changes are ordered, the contractor shall submit to 
the contracting officer an estimate showing the increase or decrease in cost, if 
any, that will result by reason of such change. If such estimate is approved by the 
contracting officer, an equitable adjustment shall be made in the original estimate, 
the schedule of performance, the fee and the depreciation allowance. Any claim 
for adjustment under this article must be asserted within ten (10) days froiB the 
date the change is ordered unless the contracting officer shall extend such time. 
If the parties cannot agree upon the adjustment, the dispute shall be determined 
as provided in Article XII hereof, but nothing in this Article shall excuse the con- 
tractor from proceeding with the contract as changed. The written order of the 
change shall be attached to and made a part of the contract. 

ARTICLE VI. INSPECTION 

1. All material and workmanship shall be subject to inspection and test by the 
contracting officer at all times and places and, when practicable, during manufac- 
ture. 

2. The contracting officer shall have the right to reject work which contains 
defective material or workmanship. The cost of defective work performed by 
the contractor, whether due to defective workmanship or material shall be reim- 
bursed the contractor by the Government. Provided, That if the contracting 
officer shall determine that the defective work is due to the fault or neglect of 
the contractor the cost thereof shall be borne by the contractor. 

ARTICLE VII. FAILURE TO PERFORM 

1. If, in the opinion of the contracting officer, the contractor does not prosecute 
the "work, or any part thereof, in accordance with the conditions of this contract, 
the contracting officer, with the approval of the chief of branch, may, be written 
notice to the contractor, either — 

(a) Require the contractor to proceed with the performance of this contract 
under such supervision as the contracting officer may elect to exercise, in which 
case the contracting officer shall have the right to employ, or require the contrac- 
tor to employ, on such terms as the contracting officer may direct, such additional 
personnel, executive or otherwise, as the contracting officer may deem desirable, or 

(b) Cancel the contract. 

Should the contracting officer elected to proceed under paragraph (a) above, 
such action shall in no case estop or otherwise preclude him from subsequently 
proceeding under paragraph (b) above. 

2. In j, case of proceeding under paragraph 1 (a), the increased cost to the 
Government, if any, occasioned thereby and approved by the contracting officer, 
shall be included in the cost of the work. 

3. In case of proceeding under paragraph 1 (b) — 

(a) The Government shall have the right to enter upon the premises of the 
contractor and take therefrom all Government property, and 

(b) The contractor shall not receive any fee, termination fee, or compensation. 



3798 MUNITIONS INDUSTRY 

ARTICLE VIII. SUBCONTRACTS 

1. Each subcontract, purchase order, or other recognized form of commercial 
commitment, in excess of five tliousand dollars ($5,000), hereinafter called 
"subcontract", shall be reduced to writing and shall contain the following 
provisions: 

"Whereas the United States of America (hereinafter called the Government) 

has under date of entered into a contract with 

(hereinafter called the prime contractor) for 

supplying .- and 

' ' Whereas (hereinafter called 

the subcontractor) has accepted this contract (hereinafter called subcontract) to 
furnish the services or supplies set forth herein and incident to the prime contract: 

"It is understood and agreed that — ■ 

"(a) The Government may at any time by notice in writing to the parties 
hereto assume the rights and obligations of the prime contractor. Except when 
such rights and obligations are so assumed by the Government, this subcontract 
shall not be construed as creating any oliligation between the Government and 
the subcontractor. 

"(b) This subcontract may be terminated at any time upon notice in writing 
from the prime contractor to the subcontractor: Provided, Tliat such termina- 
tion and any settlement or agreement growing out of or incident thereto shall 
have the prior approval of the Government officer authorized to administer the 
prime contract. 

"Upon receipt of such notice, the subcontractor shall, unless the notice directs 
otherwise, immediately discontinue all work and the placing of all orders for 
materials, facilities and supplies in connection with the performance of this 
subcontract, and proceed to cancel promptly all his existing orders and terminate 
work under all outstanding agreements insofar as such orders and/or work are 
chargeable to this subcontract: Provided, however, That the actual cost incurred 
for tlie protection, collection, and disj^osition of the property of the prime con- 
tractor shall be paid by the prime contractor. 

"Upon the termination of this sul)contract as hereinbefore provided, unless 
the subcontractor is in default, full and complete settlement of all claims or 
demands of the subcontractor arising out of this subcontract shall, as soon as 
practicable after such termination, be made as follows: 

" (a) The prime contractor shall pay to the subcontractor the contract price 
not previously paid for articles completely manufactured, or work a,nd'or services 
completely performed. If this subcontract price includes cost of transportation 
to destination, and the articles are not shipped, such transportation cost shall 
be deducted therefrom. 

"(b) The prime contractor shall pay to the subcontractor for work and 
articles in process of completion that percentage of the subcontract price repre- 
sented by the percentage of completion, less the salvage value thereof. 

"(c) The prime contractor shall pay to the subcontractor the cost of material 
on hand ])urc]msed for and necessary for the subcontract, which has not entered 
into production, less the salvage value thereof. 

" (d) The prime contractor reserves tlie right to take over all or any part of 
the uncompleted articles or materials by paying the subcontractor the salvage 
value thereof. 

"(e) The prime contractor shall reimburse the subcontractor for the cost of 
cancelling his subcontracts under this contract in accordance with the principles 
set forth in subparagraphs (a), (b), (c), and (d) above. 

"(f) No allowance will be made for prospective profits; but if it is determined 
that the sum total of the above payments is not adequate to cover the cost to 
which the subcontractor has been subjected by reason of the termination of 
this sut)contract, the prime contractor may add thereto a sum sufficient to cover 
such costs. 

" (g) The sum total of the pavments so made shall not exceed the total amount 
of the subcontract less payments previously made." 

2. If, during the progress of the work, the contractor performs work which he 
originally planned to subcontract as per exhibit A, or if he subcontracts work 
not shown therein, and such change effects an increase or decrease in the use of 
facilities, an equitable adjustment shall be made in the fee and the depreciation 
allowance. 



MUNITIONS INDUSTRY 3799 

ARTICLE IX. TERMINATION 

1. This contract may be terminated by the Government at any time upon 
notice in writing from the contracting officer to the contractor. Such termina- 
tion shall be effective in the manner and upon the date specified in said notice 
and shall be without prejudice to any claims which the Government may have 
against the contractor. Upon receipt of such notice the contractor shall, unless 
the notice directs otherwise, immediately discontinue all work and the placing of 
all orders for material, facilities, and supplies in connection with the performance 
of this contract, and shall proceed to cancel promptly all his existing orders and 
terminate work under all subcontracts insofar as such orders and/or work are 
chargeable to this contract: Provided, That the expenditures made by the con- 
tractor for protection, collection, and disposition of property of the Government 
and for accounting services for completion and determination of payments and 
settlements under this contract, as approved by the contracting officer, shall be 
paid by the Government. 

2. Upon the termination of this contract as hereinbefore provided, unless the 
contractor is in default, full and complete settlement of all claims of the contract 
tor arising out of this contract shall, as soon as possible after such termination, 
be made as follows: 

(a) The Government shall reimburse the contractor for all expenditures made 
in accordance with the terms of this contract and not yet reimbursed by the 
Government; and 

(b) Such further expenditures made by the contractor after the date of ter- 
mination, including the cost of cancelling subcontracts, as may be authorized by 
this contract or by the notice of termination; and 

(c) The charge for depreciation will cease as of the date when termination 
becomes effective; and 

(d) In lieu of fee and compensation set forth in article III, paragraphs 3 and 4, 
the Government will pay to the contractor that portion of the fee which the actual 
time of performance bears to the estimated time of performance. 

ARTICLE X. PROPERTY 

1. All articles, materials, buildings, machinery, facilities, and work for which 
the contractor has been reimbursed shall immediately become the property of 
the Government. Upon completion or termination of this contract the Govern- 
ment shall have the right to remove all such property, including buildings, ma- 
chinery, or facilities, erected or installed upon land not belonging to it. 

2. The contractor shall reimburse the Government for all damages to Govern- 
ment propertj' and for the cost of any Government property lost or destroyed 
through the fault or neglect of the contractor. 

3. All scrap from materials furnished or paid for by the Government shall be 
the property of the Government. 

ARTICLE XI. SECURITY 

The contractor agrees to furnish a bond in the sum of $ in the 

form and with sureties acceptable to the Government, guaranteeing the faithful 
performance of this contract. Sliould the surety on any bond so furnished 
become unacceptable to the Government, the contractor agrees to furnish such 
additional security as may be required from time to time to protect the inter- 
ests of the Government. 

ARTICLE XII. DISPUTES 

If any doubts or disputes arise as to the meaning of anything in the contract, 
drawings, plans, or specifications, or if any discrepancy appears between said 
drawings, plans, or specifications and this contract, the matter shall be referred 
at once to the contracting officer for determination, and his decision in the 
premises shall be conclusive and binding upon the parties hereto: Provided, 
That both parties hereto shall have the right of appeal to the chief of branch 
concerned and his decision upon such appeal shall in all respects be final and 
conclusive on the parties hereto. In the meantime, the contractor shall dili- 
gently proceed with performance. 



3800 MUNITIONS INDUSTRY 

ARTICLE XIII. CONFIDENTIAL WORK 

If the contracting officer designates any work as confidential, the contractor 
shall not permit access to such work, nor any information in connection there- 
with, to be given to any person other than employees of the contractor approved 
by the contracting officer. 

ARTICLE XIV. OFFICIALS NOT TO BENEFIT 

No Member of or Delegate to Congress or Resident Commissioner shall be 
admitted to any share or part of this contract or to any benefit that may arise 
therefrom, but this provision shall not be construed to extend to this contract 
if made with a corporation for its general benefit. 

ARTICLE XV. COVENANT AGAINST CONTINGENT FEES 

The contractor warrants that he has not employed any person to solicit or 
secure this contract upon any agreement for a commission, percentage, broker- 
age, or contingent fee. Breach of this warranty shall give the Government the 
right to annul this contract or, in its discretion, to deduct from the fee the 
amount of such commission, percentage, brokerage, or contingent fee. This 
warranty shall not apply to commissions payable by the contractor upon con- 
tracts or sales secured or made through bona fide established commercial or 
selling agencies maintained by the contractor for the purpose of securing business. 

In witness whereof, the parties hereto have executed this contract as of the 
day and year first above written. 

The United States of America, 
By 



(Official title) 



Two witnesses: 



(Contractor) 
(Business address) 



I, , certify that I am the Secre- 
tary of the corporation named as contractor herein; that 

who signed this contract on behalf of the contractor was then __ 

of said corporation; that said contract was duly signed for and in behalf of said 
corporation by authority of its governing body, and is within the scope of its 
corporate powers. 

[corporate seal] 

I hereby certify that to the best of my knowledge and belief, based upon 

observation and inquiry, , who signed this contract for 

the had authority to execute the same and is the indi- 
vidual who signs similar contracts on behalf of this corporation with the public 
generally. 



(Contracting officer) 

Revised December 1931. 

Exhibit A. Adjusted Compensation Contract 

(Place) :. 

(Date) 

To _ 



The undersigned hereby proposes to furnish and deliver to the United States 
of America, under the terms and conditions set forth in United States Govern- 
ment Contract Form No. the following: 



MUNITIONS INDUSTEY 



3801 



in strict accordance with the specifications, schedules, and drawings herein 
enumerated: 

Delivery to be made f. o. b. plant as follows: 

Estimated time for performing the work is: 

Except as provided in article III, paragraph 8 of the contract, the rates of pay 
for the various classes of labor (executive, supervisory, mechanical, and common), 
which will be employed on the work shall not exceed the following (these rates 
are based on the scale of wages now being paid in this vicinity for similar super- 
visory, mechanical, and common labor) : 



Designation 



Rate of pay 



Except as provided in article III, paragraph 8 of the contract, the unit prices 
of the various items of material which will be used in performing the work shall 
not exceed the following (these prices are based on current market prices): 











It is proposed to procure the following work or material by subcontract: 


Material or work 


Proposed subcontractor 


Estimated 
cost 







































In addition to the buildings, machinery, and facilities owned by the imder- 
signed, the following must be procured by him. The actual cost of these build- 
ings, machinery, and facilities shall be paid for by the United States, and their 
estimated cost is included in this estimate. 



Designation 


Quantity 


Estimated 
cost 


Total 



















































3802 MUNITIONS INDUSTRY 

The United States will furnish and deliver the following materials and/or 
facilities for use in performing the work: (the cost of such materials and/or 
facilities has not been included in the estimate): 



The amount to be allowed for depreciation on the buildings, machinery, and 
facilities owned by the undersigned and to be used in connection with the work 
is dollars ($ ). 

The amount to be allowed for rehabilitation costs, i.e., for restoring the plant 
to its original condition, due to changes to be made in the buildings and the 

arrangement of the machinery for the performance of the work is 

dollars ($ _'___)• 

Based on the above, the estimated cost of performing the work is 

dollars ($ ). 

For performing the work the undersigned shall be paid a fee of 

dollars ($ ) which is computed as follows: 

(a) Estimated value of buildings, machinery, and facilities owned 

by the undersigned and to be used in connection with the 
work: $ 

(b) Estimated percentage of buildings, machinery, and facilities 

listed in "(a)" and required in performing the work: 
%. 

(c) "(a)" applied to "(b)": % of $ $ 

(d) Estimated amount to be provided by the undersigned to meet 

current payments prior to reimbursement by the Govern- 
ment $ 

(e) Total of "(c)" and "(d)" $ 

W 6% per annum on "(e)" ($ ) for the estimated 

period of performance is the amount of the fee. 

(Signature) 

Witness: 

Preliminary Data Sheet — Adjusted Compensation Contract 

(City) 

(Date) 

To: 



Being desirous of cooperating with the War Department in carrying out its 
plans for industrial preparedness, the undersigned submits herewith an estimate 
of the cost of furnishing and delivering to the United States of America, under 

the terms and conditions set forth in United States Contract Form No. , 

the following: 



in accordance with the following drawings and specifications 



Estimated time for performing the work is: 

If the plant is operated on shifts of hours each per day it is 

estimated that delivery f. o. b. plant can be made as follows: 

First month 

Second month 

Third month 

Fourth mouth 

Fifth month 

Sixtli month 

Seventh month 

Eighth month 

Ninth month 

Tenth month 



MtJisriTiOisrs industry 



3803 



The designations of various kinds of labor, and the estimated number of hours 
required by each class to perform this work are as follows: 



Designations 


Labor hours 


























The material required for the work is as follows: 


Kind 


Quantity 


























The following material or work will be procured by subcontract: 


Material or work 


Subcontractor 


























Facilities required in addition to those owned 


Designation 


Quantity 


























Summary of estimate 
Labor $ 


Material _. 


Overhead __ __ 


Depreciation on buildings and facilities 
Subcontracts 







Additional facilities required. 

Rehabilitating plant after completion of work. 



Total estimated cost 

These data are submitted upon the express understanding that it is not and 
shall not be considered as an offer subject to acceptance by the United States, 



3804 MUNITIONS INDUSTRY 

and with the further understanding that it will in no way be binding upon the 
undersigned. 



Exhibit No. 1226-B 

Form no. 

Approved Contract no. 

Evaluated Fee 

construction contract 

(For use in war or o.ther national emergency) 



Contract for 



(Department) 
(Branch) 

(Contractor) 
(Address) 



To be performed at 

Amount $ Date 



Construction Contract 

This contract, entered into this day of , 19 , 

by the United States of America, hereinafter called the "United States," repre- 
sented by the contracting officer executing this contract, and 

a corporation organized and existing under the laws of the State ofi 

a partnership consisting of' 



of the citj^ ofi 

in the State of^ 

an individual trading as ' 

of the cit}^ of' 

in the State of' 

hereinafter called the "contractor", witnesseth, that the parties hereto do mutu- 
ally agree as follows: 

article I 



Extent of the work. — The contractor shall, in the shortest possible time, furnish 
the labor, materials, tools, machinery, equipment, facilities, supplies, and services 
and do all things necessary, for the completion of the following work: 



in accordance with the drawings and specifications to be furnished by the con- 
tracting officer, and subject in every detail to his supervision, direction and 
instruction. 

The contracting officer may, from time to time, by written instructions or 
drawings issued to the contractor, make changes in or additions to said drawings 
and specifications, issue additional instructions, require additional work, or direct 
the omission of work previously ordered, and the provisions of this contract shall 
apply to all such clianges, modifications, and additions with the same force and 
effect as if they were embodied in the original drawings and specifications. The 
contractor shall comply with all such written instructions, drawings, and specifica- 
tions immediately upon receipt thereof. 

The title to all work, completed or in the course of construction, shall be in the 
United States, and likewise upon delivery at the site of the work, and upon 

1 Delete all lines which do not apply. 



MUNITIONS INDUSTRY 3805 

inspection and acceptance in writing by the contracting officer, all the machinery, 
equipment, hand tools, supplies, and materials, for which the contractor shall be 
entitled to be reimbursed under article II, section (a). The provision as to title 
being vested in the United States shall not operate to relieve the contractor from 
any duties imposed under the terms of this contract. 

ARTICLE II 

Cost of the loork. — The contractor shall be reimbursed in the manner hereinafter 
described for such of its actual net expenditures in the performance of said work 
as may be approved or ratified by the contracting officer and as are included in 
the following items: 

(a) All lalDor, material, machinery, hand tools not owned by the workmen, 
supplies, and equipment, necessary for either temporary or permanent use for the 
benefit of said work; but this shall not be construed to cover the cost of machinery 
or equipment mentioned in section (c) of this article, or materials, equipment, 
etc., that may be furnished by the contracting officer. 

(b) All subcontracts made in accordance with the provisions of this agreement, 
including subcontractors' fees computed in the same manner as described in 
article III hereof. 

(c) Rental actually paid by the contractor, at rates not to exceed those men- 
tioned in tlie schedule of rental rates hereto attached, for construction plant in 
sound and workable condition, such as pumps, derricks, concrete mixers, boilers, 
clam-shell or other buckets, electric motors, electric drills, electric hammers, 
electric hoists, steam shovels, locomotive cranes, power saws, engineers' levels and 
transits, and such other equipment as may be necessary for the proper and 
economical prosecution of the work. 

Rental to the contractor for such construction plant or parts thereof as it may 
own and furnish, at not to exceed the rates mention'ed in the schedule of rental 
rates hereto attached, except as hereinafter set forth. When such construction 
plant or any part thereof shall arrive at the site of the work, the contractor shall 
file with the contracting officer a schedule setting forth the fair valuation at that 
time of each part of such construction plant. Such valuation shall be deemed 
final, unless the contracting officer shall, within five days after the machinery 
has been set up and is working, modify or change such valuation, in which event 
the valuation, so made by the contracting officer, shall be deemed final. When 
and if the total rental paid to the contractor for any such part shall equal the 
valuation thereof, no further rental therefor shall be paid to the contractor, and 
title thereto shall vest in the United States. At the completion of the work, the 
contracting officer may at his option purchase for the United States any part of 
such construction plant then owned by the Contractor by paying to the contrac- 
tor the difference between the valuation of such part or parts and the total 
rentals theretofore paid therefor. 

Rates of rental as substitutes for such scheduled rental rates may be agreed 
upon in writing between the contractor and the contracting officer, such rates to 
be in conformity with rates of rental charged in the particular territory in which 
the work covered by this contract is to be performed. If the contracting officer 
shall furnish or supply any such equipment, the contractor shall not be allowed 
any rental therefor. 

(d) Loading and unloading of construction plant, the transportation thereof 
to and from the place or places where it is to be used in connection with said work, 
subject to the provisions hereinafter set forth, the installation and dismantling 
thereof, and ordinary repairs and replacements during its use on the said work. 

(e) Transportation and expenses to and from the work of the necessary field 
forces for the economical and successful prosecution of the work, procuring labor 
and expediting the production and transportation of material and equipment. 
Expenditures under this item must have the written authorization of the contract- 
ing officer in advance. 

(f) Salaries of resident engineers, superintendents, timekeepers, foremen, and 
other employees at the field offices of the contractor in connection with said work. 
In case the full time of any field employee of the contractor is not applied to 
said work but is divided between said work and other work, his salary shall be 
included in this item only in proportion to the actual time applied to this work. 

(g) Buildings and equipment required for necessary field offices, commissary, 
and hospital and the cost of maintaining and operating said offices, commissary, 
and hospital, including such minor expenses as telegrams, telephone service, 
expressage, postage, etc. 



3806 MUNITIONS INDUSTRY 

(h) Such premiums on bonds, including performance bonds, fire, public 
liability, employers' liability, workmen's compensation, and other insurance as 
the contracting officer may approve or require and such losses and expenses, not 
compensated by insurance or otherwise, as are found and certified by the contract- 
ing officer to have been actually sustained (including settlements made with the 
written consent and approval of the contracting officer) by the contractor in 
connection with said work, and to have clearly resulted from causes other than 
the fault or neglect of the contractor. The cost of reconstructing and replacing 
any of the work destroyed or damaged shall be included in the cost of the work 
for the purpose of reimbursement to the contractor, but any expenditures under 
this item must have the written approval of the contracting officer in advance. 

(i) Permit fees, deposits, royalties, and other similar items of expense incidental 
to the execution of this contract which are necessarily incurred. Expenditures 
under this item must have the written authorization of the contracting officer 
in advance. 

(j) Such proportion of the transportation, traveling, and hotel expenses of 
officers, engineers, and other employees of the contractor as is actually incurred 
in connection with this work. 

Expenditures under this item must have the written authorization of the con- 
tracting officer in advance. 

(k) Such other items as should in the opinion of the contracting officer be 
included in the cost of the work. When such an item is allowed by the con- 
tracting officer, it shall be specifically certified as being allowed under this 
paragraph. 

The United States reserves the right to pay directly to common carriers any 
or all freight charges on material of all kinds, and machinery, furnished under 
this contract, and certified by the contracting officer as being for installation or 
for consumption in the course of the work hereunder; such freight charges shall 
not be included in the cost of the work on which the contractor receives a fee. 
The contractor shall be reimbursed for such freight charges of this character as 
it shall pay and as shall be specifically certified by the contracting officer; pro- 
vided, that charges for transportation of such construction equipment, construc- 
tion plant and tools over distances in excess of five hundred miles shall require 
the special approval of the contracting officer in advance. 

No salaries of the contractor's executive officers, no part of the expense in- 
curred in conducting the contractor's main office, or regularly established branch 
office, and no overhead expenses of any kind, except as specifically listed above, 
shall be included in the cost of the vv'ork; nor shall any interest on capital em- 
ployed or on borrowed money be included in the cost of the work. 

The contractor shall take advantage to the extent of its ability of all discounts 
available, and when unable to take such advantage shall promptly notify the 
contracting officer of its inability and its reasons therefor. 

All revenue from the operations of the comniissar,v, hospital or other facilities, 
or from rebates, discounts* refunds, etc., shall be accounted for by the contractor 
and applied in reduction of the cost of the work. 

ARTICLE III 

Determination of fee. — As full compensation for the services of the contractor 
including profit and all general overhead expense, the contractor will be paid by 
the contracting officer a fee, in addition to the cost of the work as defined in 
article II above. The contractor will be paid a minimum fee amounting to one 
percent (1.0%) of the actual cost of the work to be determined as provided in 
article II of this contract. 



MUNITIONS INDUSTRY 3807 

The contractor may be paid a maximum fee based on the following table: 



Cost of work (as per article II) 



Maximum 

fee 

(percent 

of cost 

of work) 



$100,000 or under- 

$500,000 

$1,500,000 

$2,500,000 

$3,500,000 

$5,000,000 

$7,000,000 

$10,000,000 



6.0 
5. 5 
5. 
4. 5 
4. 
3. 5 
3. 



If the cost of the work is intermediate between any of the costs stated in 
the above table the corresponding maximum fee will be determined Ijy arith- 
matical interpolation between the adjacent costs and the corresponding per- 
centages. 

However, if the cost of the work exceeds ten million dollars ($10,000,000.00) 
the minimum fee will be one hundred thousand dollars ($100,000.00) and the 
maximum fee shall not exceed two hundred and fiftv thousand dollars 
($250,000.00). 

Tlie actual fee to l^e paid the contractor hereunder, whether minimiuii, maxi- 
mum, or some value in between those limits, will be determined by the chief of 
l;ranch under whose supervision the work is performed, giving due and equitable 
weight to the following factors: 

(a) Time of contract performance, an important essence of the contract. 

(b) Efficiency of the contractor in executing the work: Output of mechanics 
and laborers in comparison with peace time work and other war time projects. 

(c) Quality of v/orkmanship and materials in completed project, in com- 
parison with that specified. 

(d) Initiative of contractor's overhead organization. 

(e) Willingness shown by contractor to cooperate with United States repre- 
sentatives, and generally be mindful of the interest of the United States. 

(f) The extent to which the work originally contemplated is changed by written 
orders, as provided in articles I, VII, and VIII hereof, and the speed, economy, 
and success with which such changes are accomplished by the contractor. 

(g) Extent to which materials, machinery, and equipment entering into the 
work are i)urchased, and freight paid, direct by the United States. 

(h) Pro]:)er use of machinery to conserve hand labor. 

(i) Extent to which the contractor has performed the work without the assist- 
ance of subcontractors. 

(j) Care in handling United States property. 

(k) Final cost of the work: Diligence shown in endeavoring to keep down the 
cost of the work, consistent with good workinanship and materials. 

(1) Honest and accurate accounting: Prompt payment of bills. 

(m) Elimination of fraud. 

ARTICLE IV 

Payments. — On or about the seventh day of each month the contracting officer 
and tlie contractor shall prepare a statement showing as completely as possible (1) 
the cost of the \\ork as defined in article II up to and including the last daj' of the 
previous month, (2) an amount equal to 1 percent (1.0%) of (1), on account of 
the contractor's fee. The contractor at the same time shall deliver to the con- 
tracting officer the original signed pay rolls for labor, the original paid invoices 
for materials purchased, and all other original papers, not theretofore delivered, 
supporting expenditures claimed l^y the contractor to be included in the cost of 
the work. If there be any item or items entering into this statement upon which. 



83876— 35— PT 15 18 



3808 MUNITIONS INDUSTRY 

the contractor and the contracting officer cannot agree, the decision of the con- 
tracting officer as to such disputed item or items shall govern. The contracting 
officer shall then pay to the contractor on or about the ninth day of each month 
the cost of the work mentioned in (1) and the fee mentioned in (2) of such state- 
ment, less all previous payments. The statement so made and all payments 
made thereon shall be final and binding upon both parties hereto, except as pro- 
vided in article XIV hereof. Upon presentation of paid invoices the contracting 
officer may also make payments at more frequent intervals than above provided 
for the purpose of enabling the contractor to take advantage of discounts at inter- 
vals between the dates above mentioned or for other lawful purposes. Upon final 
completion and acceptance of the work by the contracting officer he shall pay 
to the contractor the unpaid balance of the cost of the work and of the fee as 
determined under articles II and III hereof, less any unsettled claims the United 
States may have against the contractor. The contracting officer will accept the 
completed work with reasonable promptness. 

ARTICLE V 

Inspection and audit. — The contracting officer shall at all times be afforded 
proper facilities for inspection of the work and shall at all times have access to 
the premises, the work and the materials, and to all books, records, corres- 
pondence, instructions, plans, drawings, receipts, vouchers, and memoranda of 
every description of the contractor pertaining to said work; and the contractor 
shall preserve for a period of 3 years after completion or cessation of work 
under this contract, all the books, records, and other papers just mentioned. 
Any duly authorized representative of the contractor shall be accorded the 
privilege of examining the books, records, and papers of the contracting officer 
relating to the cost of said work for the purpose of checking up and verifying 
such cost. The sj^stem of accounting to be employed by the contractor shall be 
such as is satisfactory to the contracting officer. 

If at any time the contracting officer shall find that bills for labor or material, 
or other bills legitimately incurred by the contractor hereunder, are not promptly 
paid by the contractor, the contracting officer may, in his discretion, refuse to 
make further payments to the contractor until all such obligations past due 
shall have been paid. Should the contractor neglect or refuse to pay such bills 
within 5 days after notice from the contracting officer so to do, then the con- 
tracting officer shall have the right to pay such bills directly, in which event such 
direct payment shall not be included in the cost of the work. 

ARTICLE VI 

Special requirements. — The contractor hereby agrees that it will: 

(a) Begin the work herein specified at the earliest time practicable, and 
continue to diligently proceed so that such work may be completed at the earliest 
possible date. 

(b) Promptly pay for all labor, material, or other service rendered. 

(c) Procure and thereafter maintain such insurance in such forms and in such 
amounts and for such periods of time as the contracting officer may approve or 
require. 

(d) Procure all necessary permits and licenses, and obey and abide by all 
laws, regulations, ordinances, and other rules applying to such work, of the 
United States of America, of the State or Territory wherein such work is done, of 
any subdivision thereof, or of any duly constituted public authority. 

(e) Unless this provision is waived in writing by the contracting officer, insert 
in every contract made by it for the furnishing to it of services, materials, supplies, 
machinery and equipment, or the use thereof, for the purpose of the work here- 
under, a provision that such contract is assignable to the United States; will 
make all such contracts in its own name, and will not bind or purport to bind the 
United States or the contracting officer thereunder. 

(f) In every subcontract made in accordance with the provisions hereof 
require the subcontractor to agree to comply fully with all the undertakings and 
obligations of the contractor herein, excepting such as do not apply to such 
subcontractor's work. 

(g) At all times keep at the site of the work a duly appointed and qualified 
representative who shall receive and execute on the part of the contractor such 
notices, directions, and instructions as the contracting officer may desire to give. 
In the event the contractor's representative, or any other employee or agent, is 
considered by the contracting officer unqualified or for any reason not a proper 



MUNITIONS INDUSTRY 3809 

person to remain on the work embraced herein, then the contractor will, on 
request of the contracting officer, remove such person from the work. 

(h) At all times use its best efforts in all its acts hereunder to protect and 
subserve the interest of the United States. 

ABTICLE VII 

Right to terminate contract. — Should the contractor at any time refuse, neglect, 
or fail in any respect to prosecute the work with promptness and diligence, or 
default in the performance of any of the agreements herein contained, the con- 
tracting officer may, at his option, after five days' written notice to the contractor, 
terminate this contract, and may enter upon the premises and take possession, 
for the purpose of completing said work, of all materials, tools, equipment, and 
appliances, and all options, privileges and rights, and may complete, or employ 
any other person or persons to complete said work. In case of sucn termination 
of the contract, the contracting officer shall pay to the contractor such amounts 
of money on account of the unpaid balance of the cost of the work and of the fee 
as will result in fully reimbursing the contractor for the cost of the work up to 
the time of such termination, plus a fee computed thereon at the rate or rates 
for monthly payments set forth in article IV hereof; and the contracting officer 
shall also pay to the contractor compensation, either by purchase or rental, at 
the election of the contracting officer, for any equipment retained; such compensa- 
tion, in the event of rental, to be in accordance with paragraph (c) of article II, 
and in the event of purchase to be based upon the valuation determined by the 
contracting officer as of the time of his taking such possession. The contractor 
hereby agrees that such payments when made shall constitute full settlement of 
all claims of the contractor against the contracting officer and the United States 
or either of them for money claimed to be due to the contractor for any reason 
whatsoever. 

In case of such termination of the contract the contracting officer shall further 
assume and become liable for all such obligations, commitments, and unliqui- 
dated claims as the Contractor may have theretofore in good faith undertaken or 
incurred in connection with said work and in accordance with the provisions of 
this contract, and the contractor shall, as a condition of receiving the payments 
mentioned in this article, execute and deliver all such papers, and take all such 
steps as the contracting officer may require for the purpose of fully vesting in 
him the rights and benefits of the contractor under such obligations or connnit- 
ments. When the contracting officer shall have performed the duties incumbent 
upon him under the provisions of this article, the contracting officer shall there- 
after be entirely released and discharged of and from any and all demands, actions, 
or claims of any kind on the part of the contractor hereunder or on account hereof. 

ARTICLE VIII 

Abandonment of work by contracting officer. — If conditions should arise which in 
the opinion of the contracting officer make it advisable or necessary in the interest 
of the United States to cease work under this contract, the contracting officer may 
abandon the work and terminate this contract. In such case the contracting 
officer shall assume and become liable for all such obligations, commitments, and 
unliquidated claims as the contractor may have theretofore, in good faith, under- 
taken or incurred in connection with said work; and in accordance with the pro- 
visions of this contract, and the contractor shall, as a condition of receiving the 
payments mentioned in this article, execute and deliver all such papers, and take 
all such steps as the contracting officer may require for the purpose of fully vesting 
in him the rights and benefits of the contractor under such obligations or commit- 
ments. The contracting officer shall pay to the contractor such an amount of 
money on account of the unpaid balance of the cost of the work and of the fee as 
will result in the contractor receiving full reimbursement for the cost of the work 
up to the time of such abandonment, plus a fee to be computed in accordance with 
the provisions of article III hereof. When the contracting officer shall have per- 
formed the duties incumbent upon him under the provisions of this article, the 
contracting officer and the United States shall thereafter be entirely released and 
discharged of and from any and all demands, actions, or claims of any kind on 
the part of the contractor hereunder or on account hereof. 



3810 MUNITIONS INDUSTEY 



ARTICLE IX 

Bond. — The contractor shall prior to commencing the said work furnish a bond 
with sureties satisfactory to the contracting ofBcer, in the sum of 

dollars, contitioned upon its full and faithful performance of all the terms, con- 
ditions and provisions of tliis contract, and upon its prompt payment of all bills 
for labor, material, or other service furnished to the contractor. 

ARTICLE X 

Convict labor. — No person or persons shall be employed in the performance o^ 
this contract who are undergoing sentence of imprisonment at hard labor imposed 
by the courts of any of the several states, territories, or municipalities having 
criminal jurisdiction. 

ARTICLE XI 

Hours and conditions of labor. — (a) Hours law: No laborer or mechanic doing 
any part of the work contemplated by this contract in the employ of the contrac- 
tor or any subcontarctor contracting for any part of said work contemplated, 
shall be required or permitted to work more than eight (8) hours in any one 
calendar day upon such work, such prohibition being in accordance with the act 
approved June 19, 1912, limiting the hours of daily service of mechanics and 
laborers on work under contracts to which the United States is a party. For 
each ^'iolation of the recjuirements of this article a penalty of five dollars ($5.00) 
shall be imposed upon the contractor for each laborer or mechanic for every cal- 
endar day in which said employee is required or permitted to labor more than 
eight (8) hours upon said work, and all penalties thus imposed shall be withheld 
for the use and benefit of the United States: Provided, That this paragraph shall 
not be enforced nor shall any penalt^y be exacted in case such violation shall occur 
while there is in effect any valid Executive order suspending the provisions of 
said act approved June 19, 1912, or waiving the provisions and stipulations 
thereof with respect to either tliis contract or any class of contracts in which this 
contract shall be included, or when the violation shall be due to any extraordinary 
events or conditions of manufacture, or to any emergency caused by fire, famine, 
or flood, by danger to life or property, or by other extraordinary events or con- 
ditions on account of which, by subsequent Executive order, such jjast violation 
shall have been excused. 

(b) Prevailing rates of wages: The rate of wage for all laborers and mechanics 
employed by the contractor or any subcontractor on the public buildings covered 
by this contract shall be not less than the prevailing rate of wages for work of 
a similar nature in the city, town, village, or other civil division of the State in 
which the public buildings are located, or in the District of Columbia if the 
public buildings are located there, and in case any dispute arises as to what are 
tlie prevailing rates of wages for work of a similar nature applicable to the con- 
tract which cannot be adjusted by the contracting officer, the matter shall be 
referred to the Secretary of Labor for determination and his decision thereon 
shall be conclusive on all parties to the contract: Provided, That the provisions 
of this paragraph are not suspended by the President during a national emergency, 
in accordance with the provisions of the act approved March 3, 1931. 

(c) Disputes: In the event of any dispute with reference to wages, hours, or 
other conditions appertaining to said work, between the contractor or any sub- 
contractor and labor employed by him on said work, the contractor or subcon- 
tractor shall immediately notify the contracting officer of the existence of such 
dispute and the reasons therefor. The contracting officer may, at his option, 
instruct the contractor or subcontractor involved in such dispute as to the 
metliod or steps which the contractor or subcontractor should follow with refer- 
ence thereto, and the contractor or subcontractor shall thereupon comply with 
such instructions. 

ARTICLE XII 

Right to transfer or sublet. — Neither this contract, nor any interest therein, 
shall be assigned or transferred. The contractor shall not enter into any sub- 
contract for any part of the work herein specified without the consent and ap- 
proval in writing of the contracting officer. In case of such assignment, transfer, 
or subletting witliout the consent and approval, in writing, of the contracting 
officer, the contracting officer may refuse to carry out this contract either with the 
transferror or transferee, but all rights of action for any breach of this contract 
by the contractor are reserved to tlie United States. 



MUNITIONS INDUSTRY 3811 

ARTICLE XIII 

No participation in profits by Government officials. — No Member of, or Delegate 
to, Congress, or Resident Commissioner, nor any other person belonging to or 
employed in the military service of the United States, is or shall be admitted to 
any share or part of this contract, or to any benefit that may arise therefrom, 
but this article shall not apply to this contract so far as it may be within the 
operation or exception of section 116 of the act of Congress approved March 4, 
1909 (35 Stats. 1109). 

ARTICLE XIV 

Settlement of disputes. — This contract shall be interpreted as a whole and the 
intent of the whole instrument, rather than the interpretation of any special 
clause, shall govern. If any doubts or disputes arise as to the meaning or inter- 
pretation of anything in this contract, or if the contractor shall consider itself 
prejudiced by any decision of the contracting officer made under the provisions 
of this contract, the matter shall be referred to the chief of branch concerned for 
determination. If, however, the contractor shall feel aggrieved by the decision 
of that officer, it shall have the right to submit the same to the Secretary of the 
Department concerned, whose decision shall be final and binding upon both 
parties hereto. 

ARTICLE XV 

This contract shall bind and inure to the contractor and its successors. 

It is understood and agreed that wherever the words "contracting officer" are 
used herein, the same shall be construed to include his successor in office, and 
any other person to whom the duties of the contracting officer may be assigned 
by competent authority. 

Witness the hands of the parties hereto the day and year first above written, 
all in triplicate. 



(contractor) 
By 



Witnesses: C-'tle) 

(1) 



(2) 



The United States of America, 
By 



(title) 



Witnesses: (contracting offlcer) 

(1) 

(2) 



Torm No. Subcontract no. 

Approved Principal contract no. 

Evaluated Fee 

construction subcontract 

(For use in war or other national emergency) 

(Department) 

(Branch) 

(Contractor) 

(Address) 

(Subcontractor) 

(Address) 



3812 MUNITIONS INDUSTRY 



Contract for 



To be performed at 

Amount $ Date 



Construction Subcontract 
This contract, entered into this day of 19 by 

a corporation, organized and existing under the laws of the State of 

a partnership consisting of 

an individual trading as 

of the city of in the State of 

(hereinafter called the contractor) and a corporation, 

organized and existing under the laws of the State of 

a partnership consisting of 

an individual trading as 

of the city of in the State of 

(hereinafter called the subcontractor), witnesseth: 

Whereas the contractor has heretofore, to wit, on the day of 

19 , entered into a contract with the United States 

of America to construct for the Government of the United States 



at or near ; and 

Whereas the parties hereto have agreed that the subcontractor shall for and 
in the stead of the contractor fullfill and perform such part of said principal con- 
tract as is hereinafter set forth; and 

Whereas the subcontractor has read and is familiar with each and every part 
of said contract, and the respective rights, powers, benefits and liabilities of the 
contractor and the United States of American thereunder; 

Now, therefore, this contract witnesseth; That in consideration of the premises 
and of the payments to be made as hereinafter provided, the subcontractor hereby 
covenants and agrees to and with the contractor as follows: 

I 

The subcontractor shall in the shortest possible time furnish the labor, materials 
tools, machinery, equipment, facilities, services, and supplies and do all things 
necessary for the construction and completion of the following work: 



II 

In the performance of this subcontract the subcontractor binds self 

to the contractor and to the United States of America to comply fully with all 
the undertakings and obligations of the contractor, excepting such as do not 
apply to this subcontractor's work, as are set forth in the principal contract made 

and entered into on the day of 19 ._.., 

by and between the contractor and the United States of America. Said principal 
contract is hereby adopted and made a part of this contract, and a copy thereof 
is hereto attached. 

Ill 

It is expressly stipulated and agreed that the contractor has and reserves 

to self, and the subcontractor grants to said contractor, the same rights 

and powers, in everv detail and respect and in the same language and intent, 
which the United States of America reserves to itself in the said principal contract; 
it being the intent and purpose of the parties hereto, except as herein otherwise 
provided, to place the contractor in the same position in regard to this subcontract 
which the United States of America occupies in the principal contract, and place 
the subcontractor in the same position in regard to this subcontract which the 
contractor occupies in said principal contract. The contractor shall in regard to 
this subcontract have all the rights and powers which the United States of 
America has in the principal contract, and the subcontractor assumes all the 
obligations placed upon the contractor by said principal-contract and accepts 



MUNITIONS INDUSTRY 3813 

and binds self faithfully and fully to observe toward the contractor and 

the United States of America each and every term and provision thereof, so as to 

enable the contractor to fulfill every obligation to the 

United States of America according to the intent and provisions of said principal 
contract. 

IV 

The subcontractor binds self to protect and save harmless the contractor 

from any and all loss, cost or damage to on account of any damage or 

injury to third persons or property occasioned by any act, negligent or otherwise, 

of said subcontractor, associates, servants, agents or employees, 

and to promptly pay all bills for labor, material or other service furnished to the 
subcontractor; and said subcontractor further agrees to keep all property, 
equipment, materials, tools, and supplies free of all liens or charges, and in the 
event of suit against the contractor on any account in connection with the work 
hereby included, the subcontractor upon notice from the contractor will appear 
and defend same and hold the contractor clear of all loss, costs or expense. 

V 

Neither this subcontract nor any interest therein shall be assigned or trans- 
ferred, except that the whole or any part is assignable to the United States of 
America. 

VI 

The subcontractor shall be reimbursed by the contractor in the manner and for 
the items set out in article II of the principal contract hereinabove incorporated 

(except that no part of this contract may be sublet) , for such of actual 

expenditures in the performance of the work designated in article I hereof as 
may be approved or ratified by the contracting officer; and in addition thereto 
as full compensation for the services of the subcontractor, including profit and 
all general or overhead expenses, the contractor shall pay to the subcontractor a 
fee, the amount of which will be determined by the chief of branch under whose 
supervision the work is performed in accordance with the provisions of article III 
of the principal contract. 

VII 

The contractor may retain out of any moneys at any time due to the sub- 
contractor a svun sufficient to pay all persons who have performed labor or fur- 
nished materials for the work included in tiiis subcontract, and said sums may 
be retained until satisfactory evidence is furnished the contractor that all such 
claims have been fully satisfied. 

In testimony of all of which the parties have heretunto set their hands at 
the day and date first above written. 

Witnesses: 



(1) 
(2) 



(Contractor) 
"(Title)' 



(Subcontractor) 
Bv 



Witnesses: 

(1) - 

(2) .- 



(Title) 



CONTRACTING OFFICERS APPROVAL 

The undersigned duly appointed and acting representative of the contracting 

officer who entered into the principal contract of 19 > 

with 

to construct 



•3814 MUNITIONS INDUSTRY 

at or near , 

does on behalf of said contracting officer and the United States of America here- 
by assent to and approve the foregoing subcontract between said 

and , 

for the performance of the worlc therein specified. 

Witness my signature at , this dav of 

-■ , 19 



(Title) 



Exhibit No. 1226-C 



Form no. Contract no. 

Revised December 1931. Dated 19. _ 

Contract for Construction 
(For use in war or other national emergency) 



(Department) 



(Contractor) 

Contract for Amount S 

Place 

Contract for Construction 

This contract, entered into this day of 19__, by the 

United States of America, hereinafter called the "Government", represented by 
the contracting officer executing this contract, and 



of the city of in the State of here- 
inafter called the contractor, witnesseth that the parties hereto mutually agree 
as follows: 

article 1 

Statement of work. — The contractor shall furnish all labor and materials, and 
perform all work required for_ 

for the consideration of 



in strict accordance with the specifications, schedules, and drawings, all of which 
are made a part hereof and designated as follows: 

The work shall be commenced 

and shall be completed 



article 2 

Specifications and draivings. — The contractor shall keep on the work a copy of 
the drawings and specifications and shall at all times give the contracting officer 
access thereto. Anything mentioned in the s])ecifications and not shown on the 
drawings, or shown on the drawings and not mentioned in the specifications shall 
be of like effect as if shown or mentioned in l)oth. In case of conflict between 
drawings and specifications, the specifications shall govern. In any case of dis- 
crepency in the figures or drawings, the matter shall be immediately submitted 
to the contracting officer, without whose decision said discrepency shall not be 
adjusted by the contractor, save only at his own risk and expense. The con- 
tracting officer shall furnish from time to time such detail drawings and other 
information as he may consider necessary, unless otherwise provided. Upon 
completion of the contract the work shall be delivered complete and undamaged. 



MUNITIONS INDUSTRY 3815 

ARTICLE 3 

Changes.- — The contracting officer may at any time, by a written order, and 
without notice to the sureties, make changes in the drawings and (or) specifications 
of this contract and within tlie general scope thereof. If such clianges cause an 
increase or decrease in the amount due under this contract, or in the time re- 
quired for its performance, an equitable adjustment shall be made and the con- 
tract shall be modified in writing accordingly. Any demand by either partj' for 
adjustment under this article must be asserted within ten days from the date the 
change is ordered, unless the contracting officer shall for proper cause extend 
such time, and if the parties cannot agree upon the adjustment the disj^ute shall 
be determined as provkied in article 12 hereof. But nothing i)rovided in this 
article shall excuse the contractor from proceeding with the prosecution of the 
work so changed. 

ARTICLE 4 

Changed conditions. — Should the contractor encounter, or the Government dis- 
cover, during the progress of the work, subsurface and (or) latent conditions at 
the site materially differing from those shown on the drawings or indicated in the 
specifications, the attention of the contracting officer shall be called immediately 
to such conditions before they are disturbed. The contracting officer shall there- 
upon promptly investigate the conditions, and if he finds that they materially 
differ from those shown on the drawings or indicated in the specifications, he shall 
at once make such changes in the drawings and (or) specifications as he may find 
necessary, and any increase or decrease of cost and (or) difference in time resulting 
from such changes shall be adjusted as provided in Article 3 of this contract. 

ARTICLE 5 

Inspection. — (a) All material and workmanship (if not otherwise designated 
by the specifications) shall be subject to inspection, examination, and test by 
Government inspectors at any and all times during manufacture and (or) con- 
struction and at any and all places where such manufacture and (or) construction 
are carried on. Tlie Government shall have the right to reject defective material 
and workmanship or require its correction. Rejected workmanship shall be 
satisfactorily corrected and rejected material shall be satisfactorily replaced with 
proper material without charge therefor, and the contractor shall promptly segre- 
gate and remove the rejected material from the premises. 

(b) The contractor shall furnish promptly, without additional charge, all 
reasonable facilities, labor, and materials necessary for the safe and convenient 
inspection and test that may be required by the inspector. All inspection and 
tests by the Government shall be performed in such manner as not to unnecessa- 
rily delay the work. Special, full size, and performance tests shall be as described 
in the specifications. The contractor shall be charged with any additional cost 
of inspection when material or workmanship is not ready at the time inspection 
is requested by the contractor. 

(c) Should it be considered necessary or advisable by the Government at any 
tirrie before final acceptance of the entire work to make an examination of work 
already completed, by removing or tearing out same, the contractor shall on 
request promptly furnish all necessary facilities, labor, and material. If such 
work is found not to meet the requireinents of the contract due to fault of the 
contractor or his subcontractors, he shall defray all the expenses of such examina- 
tion and of satisfactory reconstruction. If, however, such work is found to meet 
the requirements of the contract, the actual cost of labor and material necessarily 
involved in the examination and replacement, plus 10 percent, shall be allowed 
the contractor, and he shall, in addition, if completion of the work has been de- 
layed thereby, be granted a suitable extension of time on account of the additional 
work involved. 

(d) Inspection of material and finished articles to be incorporated in the work 
shall be made at the place of production, manufacture, or shipment, whenever 
the cjuantity justifies it, unless otherwise stated in the specifications, and such 
inspection and acceptance, unless otherwise stated in the specifications, shall be 
final, except as regards latent defects, departures froin specific requirements of 
the contract and the specifications and drawings made a part thereof, damage or 
loss in transit, fraud, or such gross mistakes as amount to fraud. Subject to the 
requirements contained in the preceding sentence, the inspection of material and 
workmanship for final acceptance as a whole or in part shall be made at the site. 



3816 MUNITIONS INDUSTRY 

ARTICLE 6 

Superintendence by contractor. — The contractor shall give his personal superin- 
tendence to the work or have a competent foreman or superintendent, satisfac- 
tory to the contracting officer, on the work at all times during progress, with 
authority to act for him. 

ARTICLE 7 

Delays — damages. — If the contractor refuses or fails to prosecute the work, or 
any separable part thereof, with such diligence as will insure its completion 
within the time specified in article 1, or any extension thereof, or fails to com- 
plete said work within such time, the Government may, by written notice to 
the contractor, terminate his right to proceed with the work or such part of the 
work as to which there has been delay. In event the contractor's right to pro- 
ceed is terminated the Government may take over the work and prosecute the 
same to completion by contract or otherwise, and the contractor and his sure- 
ties shall be liable to the Government for any excess cost occasioned the Govern- 
ment thereby. If the contractor's right to proceed is so terminated, the Gov- 
ernment may take possession of and utilize in conapleting the work such mate- 
rials, appliances, and plant as may be on the site of the work and necessary 
therefor. If the Government does not terminate the right of the contractor to 
proceed, the contractor shall continue the work, in which event the actual dam- 
ages for the delay will be impossible to determine and in lieu thereof the contractor 
shall pay to the Government as fixed, agreed, and liquidated damages for each 
calendar day of delay until the work is completed or accepted the amount as set 
forth in the specifications or accompanying papers and the contractor and his 
sureties shall be liable for the amount thereof: Provided, That the right of the 
contractor to proceed shall not be terminated or the contractor charged with 
liquidated damages because of any delays in the completion of the work due to 
unforeseeable causes beyond the control and without the fault or negligence of 
the contractor "as determined by the contracting officer: Provided further, That 
the contractor shall within ten days from the beginning of any such delay give 
written notice of the causes of delay to the contracting officer, who shall deter- 
mine the extent of the delay and is determination thereon shall be final and con- 
clusive on the parties hereto, subject to appeal within thirty days by the con- 
tractor to the chief of branch concerned, whose decision on such appeal shall in 
all respects be final and conclusive on the parties hereto." 

ARTICLE 8 

Permits and care of ivork. — The contractor shall, without additional expense to 
the Government, obtain all required licenses and permits and be responsible for 
all damages to persons or propertj' that occur as a result of his fault or negli- 
gence in connection with the prosecution of the work, and shall be responsible 
for the proper care and protection of all materials delivered and work performed 
until completion and final acceptance. 

ARTICLE 9 

Covenant against contingent fees. — The contractor warrants that he has not 
employed any person to solicit or secure this contract upon any agreement for 
a commission, percentage, brokerage, or contingent fee. Breach of this war- 
ranty shall give the Government the right to terminate the contract, or, in its 
discretion, to deduct from the contract price or consideration the amount of 
such commission, percentage, brokerage, or contingent fees. This warranty 
shall not apply to commissions payable by contractors upon contracts or sales 
secured or made through bona fide established commercial or selling agencies 
maintained by the contractor for the purpose of securing business. 

ARTICLE 10 

Other contracts. — The Government may award other contracts for additional 
work, and the contractor shall fully cooperate with such other contractors and 
carefully fit his own work to that provided under other contracts as may be 
directed by the contracting officer. The contractor shall not commit or permit 
any act that will interfei-e with the performance of work by anj^ other contractor. 



MUNITIONS INDUSTRY 3817 



ARTICLE 11 

Officials to not benefit. — No Member of or Delegate to Congress, or Resident 
Commissioner, shall be admitted to any share or part of this contract or to any 
benefit that may arise, therefrom but this provision shall not be construed to 
extend to this contract if made with a corporation for its general benefit. 

ARTICLE 12 

Disputes. — If any doubts or disputes arise as to the meaning of anything in the 
contract, drawings, plans or specifications, or if any discrepancy appears between 
said drawings, plans, or specifications and this contract, the matter shall be 
referred at once to the contracting officer for determination ; and his decision in the 
premises shall be conclusive and binding on the parties hereto: Provided: That 
both parties hereto shall have the right of appeal to the chief of branch concerned 
and his decision upon such appeal shall in all respects be final and conclusive on 
the parties hereto. In the meantime the contractor shall diligently proceed with 
performance. 

ARTICLE 14 1 

Payments to contractors. — (a) Unless otherwise provided in the specifications, 
partial payments will be made as the work progresses at the end of each calendar 
month, or as soon thereafter as practicable, on estimates made and approved l3y 
the contracting officer. In preparing estimates the material delivered on the site 
and preparatory work done may be taken into consideration. 

(b) In making such partial payments there shall be retained 10 percent of the 
estim.ated amount until final completion and acceptance of all work covered by 
the contract: Provided, however, That the contracting officer, at any time after 
50 percent of the work has been completed and after 45 percent of the contract 
price has been paid if he finds that satisfactorj^ progress is being made, may make 
any of the remaining partial payments in full: And provided further, That on 
completion and acceptance of each separate building, vessel, public work, or other 
division of tlie contract, on which the price is stated separately in the contract, 
payment on account thereof may be made in full, including retained percentages 
thereon, less authorized deductions. 

(c) All material and work covered by partial payments made shall thereupon 
become the sole property of the Government and is left in possession of the 
contractor solely for completing this contract, but this provision shall not be 
construed as relieving the contractor from the sole responsibility for the care and 
protection of materials and work upon which ])ayments have "been made or the 
restoration of any damaged work, cr as a v.aivtr of the right of the Government 
to require the fulfillment of all of the terms of the contract. 

(d) Upon completion and acceptance of all work required hereunder, the amount 
then due the contractor under this contract will be paid upon the presentation of a 
properly executed and duly certified voucher therefor, after the contractor shall 
have furnished the Government with a final release, if required, in such form and 
containing such provisions as shall be approved by the chief of branch concerned, 
of claims against the Government arising under and by virtue of this contract. 

ARTICLE 15 

Changes in prices of labor or material.- — If a Federal agency appointed for the 
purpose of controlling the prices of labor and/or materials causes or approves of an 
increase in the prices which the contractor is paying for lalaor or materials for use 
in the performance of this contract the excess amount which the contractor pays 
by reason of such increase v\"ill be reimbursed to the contractor by the Government 
upon the completion or termination of the contract. 

ARTICLE 16. 

Termination. — This contract may be terminated by the Government at any 
time upon notice in writing by the contracting officer to the contractor. Such 
termination shall be effective in the manner and at the time specified in said 
notice and shall be without prejudice to any claim which the Government may 
have against the contractor. Upon receipt of such notice, the contractor shall, 
unless the notice directs otherwise, immediately discontinue all work and the 

1 There is no Article 13 in the copy of the Construction Contract submitted to the committee by the War 
Department. The War Department lays the omission to an error in mimeographing which wiU be corrected 
in final form. 



3818 MUNITIONS INDUSTEY 

placing of all orders for material, facilities, and supplies in connection with the 
performance of this contract, and proceed to cancel promplty all his existing 
orders and terminate work under all subcontracts so far as such orders and/or 
work are chargeable to this contract, proivded, however, that the actual cost 
incurred for protection, collection, and disposition of property of the Government 
as approved by the chief of branch concerned shall be paid to the contractor 
by the Government. 

Upon the termination of this contract, as hereinbefore provided, unless the 
contractor is in default, full and complete adjustment and payment of all amounts 
due the contractor arising out of this contract as determined by the chief of 
branch concerned, shall as soon as practicable after such termination, be made 
as follows: 

(a) The Government shall reimburse to the contractor all expenditures made 
in accordance with the terms of this contract less amounts previously paid. 

(b) The Government shall reimburse the contractor for all costs to which the 
contractor has been subjected by reason of the termination of the contract. 
Reimbursement for the cost of terminating subcontracts under this contract shall 
be in accordance with the principle set forth in (a) above. 

(c) The Government shall pay to the contractor an additional amount equal 
to percent of the total expenditures referred to in (a) above. 

(d) The sum total of the payments made under this article shall not exceed 
the total amount of the contract less payments previously made. 

(e) Title to all property accruing to the Government by reason of the termina- 
tion of this contract shall immediately vest in the Government upon payment 
therefor. 

(f) Coincident with making final payments, the contractor shall furnish the 
Government with a final release as provided in paragraph (d), article 14. 

ARTICLE 17 

f 

Additional security. — Should any surety upon the bond for the j^erformance o 
this contract become unacceptable to the Government, the contractor must 
promptly furnish such additional security as may be required from time to time 
to protect the interest of the Government and of persons supplying labor or 
materials in the prosecution of the work contemplated by the contract. 

ARTICLE 18 

Definitions.- — (a) The term "chief of branch" as used herein shall mean the 
head of the branch, bureau, service, or agency of the executive department or 
the independent establishment involved or his assistant. 

(b) The term "contracting officer" as used herein shall include his duly 
appointed successor or his duly authorized representative. 

ARTICLE 19 

Alterations.' — The following changes were made in this contract before it was 
signed by the parties hereto: 



In witness whereof, the parties hereto have executed this contract as of the 
day and year first-above written. 

The United States of America, 
By 

(Official title) 

(Contractor) 

(Business address) 
To witnesses: 



I, , certify that I am the 

secretary of the corporation named as contractor lierein; that 

who signed this contract on helialf of the contractor, was then 

of said corporation; that said contract was duly signed for and im 



MUNITIONS INDUSTRY 3819 

behalf of said corporation by authority of its governing body, and is within the 
scope of its corporate powers. 

[corporate seal] 

I hereby certify that, to tlae best of my knowledge and belief, based npon 

observation and inquiry, who signed this contract for 

the had authority to execute the same, and is the indi- 
vidual who signs similar contracts on behalf of this corporation with the public 
generally. 

(Contracting officer) 



Exhibit No. 1226-D 

Form No. Contract No. 

Revised December 1931. Dated 19.. 

Contract for Supplies 

(For use in war or other national emergency) 



(Department) 



(Contractor) 

Contract for Amount $ 

Place 

Contract for Supplies 

This contract, entered into this day of 19__, by the 

United States of America, hereinafter called the "Government," represented by 
the contracting officer executing this contract, and 



of the city of , in the State of hereinafter 

called the "contractor," witnesseth that the parties licreto mutually agree as 
follows: 

article 1 

Scope of this contract. — The contractor shall furnish and deliver 



for the consideration stated. 



in strict accordance with the specifications, schedules and drawings, all of which 
are made a part hereof and designated as follows: 



Deliveries shall be made as follow: 



article 2. 

Changes. — Where the supplies to be furnished are to be specially manufactured 
in accordance with Government drawings and specifications, the contracting 
officer may at any time, by a written order, and without notice to the sureties, 
make changes in the drawings or specifications. Changes as to shipment and 
packing of all supplies may also be made as above provided. If such changes 
cause an increase or decrease in the amount due under this contract, or in the 
time required for its performance, an equitable adjustment shall be made and 
the contract shall be modified in writing accordingly. Any claim for adjustment 
under this article must be asserted within ten days from the date the change is 
ordered unless the contracting officer shall for proper cause extend such time, 
and if the parties cannot agree upon the adjustment the dispute shall be deter- 
mined as provided in Article 10 hereof. But nothing provided in this article 
shall excuse the contractor from proceeding with the contract as changed. The 
written order of change shall be attached to and made a part of this contract. 



3820 MUNITIONS INDUSTRY 



ARTICLE 3. 

Extras. — Except as otherwise herein provided, no charge for extras will be 
allowed unless the same have been ordered in writing by the contracting officer 
and the price stated in such order. 

ARTICLE 4. 

Inspection. — (a) All material and workmanship shall be subject to inspection 
and test at all times and places, and, when practicable, during manufacture. 
The Government shall have the right to reject articles which contain defective 
material or workmanship. Rejected articles shall be removed by and at the 
expense of the contractor promptly after notification of rejection. 

(b) If inspection and test, whether preliminary or final, is made on the premises 
of the contractor or subcontractor, the contractor shall furnish, without addi- 
tional charge, all reasonable facilities and assistance for the safe and convenient 
inspections and tests required by the inspectors in the performance of their 
duty. All inspections and tests by the Government shall be performed in such 
a manner as not unduly to delay the work. Special and performance tests shall 
be as described in the siDccifications. The Government reserves the right to 
charge to the contractor any additional cost of inspection and test when articles 
are not ready at the time inspection is requested by the contractor. 

(c) Final inspection and acceptance of materials and finished articles will be 
made after delivery, unless otherwise stated. If final inspection is made at a 
point other than the premises of the contractor or a subcontractor, it shall be 
at the expense of the Government except for the value of samples used in case 
of rejection. Final inspection shall be conclusive except as regards latent 
defects, fraud, or such gross mistakes as amount to fraud. Final inspection 
and acceptance or rejection of the materials or supplies shall be made as promptly 
as practicable, but failure to inspect and accept or reject materials or supplies 
shall not impose liability on the Government for such materials or supplies as 
are not in accordance with the specifications. In the event public necessity 
requires the use of materials or supplies not conforming to the specifications, 
payment therefor shall be made at a proper reduction in price. 

ARTICLE 5 

Delays — Damages. — If the contractor refuses or fails to make deliveries of the 
materials or supplies within the time specified in article 1, or any extension thereof, 
the Government may terminate the right of the contractor to proceed with deliv- 
eries or such parts or part thereof as to which there has been delay. In such 
event, the Government may purchase similar materials or supplies in the open 
market or secure the manufacture and delivery of the materials and supplies by 
contract or otherwise, and the contractor and his sureties shall be liable to the 
Government for any excess cost occasioned the Government thereby: Provided, 
That the contracting officer shall determine that the delay of the contractor in 
making deliveries is due to unforseeable causes beyond the control and without 
the fault or negligence of the contractor, then the contractor shall not be charged 
with any excess cost occasioned the Government by the purchase of materials or 
supplies in the open market or under other contracts: Provided further, That the 
contractor shall within ten days from the beginning of any such delay give written 
notice of the causes of delay to the contracting officer, who shall determine the 
extent of delay and his determination thereon shall be final and conclusive on the 
parties hereto, subject to appeal within thirty days by the contractor to the chief 
of branch concerned, whose decision on such appeal shall in all resf)ects be final 
and conclusive on the parties hereto, 

ARTICLE 6 

Responsibility for supplies tendered.- — -The contractor shall be responsible for the 
articles or materials covered by this contract until they are delivered at the desig- 
nated point, and shall bear all risk on rejected articles or materials after notice of 
rejection. Where final inspection is at point of origin but delivery by contractor is 
at some other point, the contractor's responsibility shall continue until delivery 
is accomplished. 

ARTICLE 7 

Payments.- — ^The contractor shall be paid, upon the submission of properly 
certified invoices or vouchers, the prices stipulated herein for articles delivered 
and accepted or services rendered, less deductions, if any, as herein provided. 



MUiSriTTONS INDUSTRY 3821 

Unless otherwise specified, payments will be made on partial deliveries accepted 
by the Government when the amount due on such deliveries so warrants; or. when 
requested by the contractor, payments for accepted partial deliveries shall be 
made whenever such payments would equal or exceed either $1,000 or 50 percent 
of the total amount of the contract. 

ARTICLE 8 

Officials not to benefit.- — No Member of or Delegate to Congress or Resident 
Commissioner sha.ll be admitted to any share or part of this contract or to any 
benefit that may raise therefron, but this provision shall not be construed to 
extend to this contract if made with a corporation for its general benefit. 

ARTICLE 9 

Covenant against contingent fees. — The contractor warrants that he has not 
employed any person to solicit or secure this contract upon any agreement for a 
commission, percentage, brokerage, or contingent fee. Breach of this warranty 
shall give the Government the right to annul the contract, or, in its discretion, to 
deduct from the contract price or consideration the amount of such commission, 
percentage, brokerage, or contingent fees. This warranty shall not apply to 
commissions payable by contractor upon contracts or sales secured or made 
through bona fide established commercial or selling agencies maintained by the 
contractor for the purpose of securing business. 

ARTICLE 10 

Dispides. — If any doubts or disputes arise as to the meaning of anything in the 
contract, drawings, plans, or specifications, or if any discrepancy appears between 
said drawings, plans, or specifications and this contract, the matter shall be 
referred at once to the contracting officer for determination; and his decision in 
the premise shall be conclusive and binding on the parties hereto: Provided, That 
both parties hereto shall have the right of appeal to the chief of branch concerned 
and his decision upon such appeal shall in all respects be final and conclusive on 
the parties hereto. In the meantime the contractor shall diligently proceed with 
performance. 

ARTICLE 11 

Definitions. — (a) The term "chief of branch" as used herein shall mean the 
head of the branch, bureau, service, or agency of the executive department or the 
independent establishment involved or his assistant. 

(b) The term "contracting officer" as used herein shall include his duly 
appointed successor or his duly authorized representative. 

ARTICLE 12 

Changes in prices of labor or material. — If a Federal agency appointed for the 
purpose of controlling the price of labor and/or material causes or approves an 
increase in the prices which the contractor is paying for labor or materials for 
use in the performance of this contract the excess amount which the contractor 
pays by reason of such increase will be reimbursed to the contractor by the Govern- 
ment upon the completion or termination of the contract. 

ARTICLE 13 

Terminatioji.- — This contract may be terminated b,y the Government at any 
time upon notice in writing by the contracting officer to the contractor. Such 
termination shall be effective in the manner and at the time specified in said notice 
and shall be without prejudice to any claim wdiich the Government may have 
against the contractor. Upon receipt of such notice the contractor shall, unless 
the notice directs otherwise, immediately discontinue all work and the placing 
of all orders for material, facilities and supplies in connection with the performance 
of this contract, and proceed to cancel promptly all his existing orders and ter- 
minate work under all subcontracts so far as such orders and/or work are charge- 
able to this contract, provided however, that the actual cost incurred for protec- 
tion, collection and disposition of property of the Government, as approved by 
the contracting officer, shall be paid to the contractor by the Government. 

Upon the termination of this contract, as hereinbefore provided, unless the 
contractor is in default, full and complete adjustment and payment of all amounts 



3822 MUNITIONS INDUSTRY 

due the contractor arising out of the contract as determined by the chief of branch 
concerned shall, as soon as practicable after such termination, be made as follows: 

(a) The Government shall pay the contractor the contract price not pre- 
viously paid for articles completely manufactured, or work and services completely 
performed. If the contract price includes cost of transportation to destination, 
and the articles are not shipped, such transportation cost shall be deducted 
therefrom. 

(b) The Government shall pay to the contractor for work and articles in 
process of completion that percentage of the contract price represented by the 
percentage of completion, less the salvage value thereof. 

(c) The Government shall pay the contractor the cost of material on hand 
purchased for and necessary for the contract, which has not entered into produc- 
tion, less the salvage value thereof. 

(d) The Government reserves the right to take over all or any part of the 
work or articles in process of completion and/or materials by paying the contractor 
the salvage value thereof. 

(e) The Government shall reimburse the contractor for the cost of cancelling 
his subcontracts under this contract in accordance with the principles set forth 
in this article. 

(f) If the contractor shall have submitted with his bid a list of new facilities 
required for the performance of this contract and the cost of such facilities has 
been included in the contract price the Government v>ill pay the contractor the 
unamortized portion of the cost of such facilities, e. g.: 

Cost of facilities $10, 000 

Fair value on termination 8, 000 

Amount to be amortized 2, 000 

Assumed that the contract is 30 percent completed, contractor absorbs 

30 percent of $2,000, or 600 

Government absorbs 70 percent of unamortized cost, or 1, 400 

The Government reserves the right to take over such facilities by paying to 
the contractor the fair value on termination plus the Government's portion of 
the unamortized cost. 

(g) No allowance will be made for prospective profits; but if it is determined 
that the sum total of the above payments is not adequate to cover the costs to 
which the contractor has been subjected by reason of the termination of this 
contract, the chief of branch may add thereto a sum sufficient to cover such costs 
and the action of the chief of branch shall be final and conclusive. 

(h) The sum total of the payments made under this article shall not exceed 
the total amount of the contract less payments j^reviously made. 

ARTICLE 14 

Alterations. — The following changes were made in this contract before it was 
signed by the parties hereto: 



In witness whereof, the parties hereto have executed this contract as of the 
day and year first above written. 

The United States of America, 
By 

(Official title) 



(Contractor) 

(Business address) 
Two witnesses: 



MUNITIONS INDUSTRY 3823 

I, , certify that I am the secre- 
tary of the corporation named as contractor herein; that 

who signed this contract on behalf of the contractor was then 

of said corporation; that said contract was duly signed for and in behalf of said 
corporation by authority of its governing body, and is within the scope of its 
corporate powers. 

[corporate seal] 

I hereby certify that, to the best of my knowledge and belief, based upon 

observation and inquiry, , who signed this contract for 

the , had authority to execute the same, and is the indi- 
vidual who signs similar contracts on behalf of this corporation with the public 
generally. 



(Contracting oflBcer) 



Exhibit No. 1227 



EXCERPTS FROM THE MIMEOGRAPHED MEMORANDUM DATED FEBRUARY 6, 1934, 
HEADED "comments, CRITICISMS AND PROPOSALS ON THE ADJUSTED COMPEN- 
SATION CONTRACT FORM, REVISED DECEMBER 1931 " 

This report was compiled by the board of officers on forms of war contracts, 
the recorder of which was Captain Fred A. McMahon, Ordnance Dept. 

The board of officers for standardizing war contracts, appointed by Par. 20, 
S. O. 235-0, 1921, as amended, has received numerous replies from Ordnance 
district offices in answer to a letter sent out from the ordnance office under date 
of August 21, 1933: subject: "war contract forms — adjusted compensation, 
Revised December 1931." 

Extracts from the various replies are quoted below for the information of all 
members of the board. 

Birmingham Ordnance district. — This district believes that the changes are 
good and would improve the contract. The elimination of the necessity for ap- 
praisals of machinery and equipment is particularly recommended. This appraisal 
of plant never should have been iu the contract. It could never be determined, 
would be subject to violent fluctuations and would be a constant source of argu- 
ment and disagreement. The public-utility commissions have attempted to 
appraise the value of plants with a view to establishing fair rates. Nearly every 
valuation they attempted to determine was fought through the courts for years. 

With reference to par. c(2), it is believed that nothing definite should be 
stated at this time. This involves labor and labor unions. It would be safer to 
eliminate the word "incentive." 

Boston Ordnance district. — The adjusted compensation form in avoiding the 
evils of fixed price contracts and cost plus contracts has also eliminated the 
advantages to be derived under such contract and the new form has introduced 
additional evils such as those to which attention is called by the Bridgeport 
committee. The fixed price contract when circumstances make it safe for a con- 
tractor to sign such a contract, offers a gamble under which a man may make a 
large profit or under which he may make a great loss which spurs the contractor 
to his most efficient efforts. The cost plus contract offers the ideal conditions for 
profiteering. It seems to the writer questionable whether the Government would have 
received such whole hearted cooperation from manufacturers during the World War 
had all opportunity for profiteering been eliminated. In other words, it seem3 that 
there are incentives to the best efforts of manufacturers in both the fixed price 
and the cost plus contracts which are absent from the adjusted compensation 
contract. 

The three difficulties enumerated by the Bridgeport committee will be present 
in more or less degree in any type of contract which compromises between cost 
plus and fixed price. It is the writer's opinion that the suggestions offered by the 
committee do a great deal to mitigate the evils of the adjusted compensation 
contract. He believes, however, that a fixed price contract with allowances for 
changes in the price of materials and labor occurring between the signing of the 



83876— 35— PT 15 19 



3824 MUNITIONS INDUSTRY 

contract and completion should be most satisfactory to both the Government and 
the contractor. 

Cincinnati ordnance district. — 

% * 4: 4: 4: 4: ^ 

The American Rolling Mill Company. — 

Where the manufacture, under the contract, is performed in conjunction with a 
manufacture of other products, it will be necessary for the contractor to set up a 
complete cost system. Reimbursement for labor, service, use of machinery and 
equipment, and manufacturing overhead cannot be made direct in this case. 
The conversion cost in the various manufacturing departments, where these 
departments are also processing other materials, will have to be made on the basis 
of an equitable distribution. In many cases, the labor charge can be coded and 
made direct against the contract, in other cases — this will not be possible. 

* * * We do not believe it at all necessary to have an appraisal naade of 
plant to determine the full and true value of depreciable properties at the time of 
contract. We believe that, without question, the district ordnance office and the 
manufacturer can arrive at a satisfactory basis for computing depreciation 
charges. 

We note from the contract that the War Department does not propose to 
have included in the cost of producing War Department material any charges 
for interest on funded and other debts. However this expense of doing business 
must be covered in some way, so we will assume it is to be taken care of in the 
profit allowed the contractor. 

In relation to purchase of special inachinery and other equipment we agree 
that this should be purchased by the War Department, so as not to constitute 
a drain on the financial resources of the manufacturer. The manufacturer, 
however, should maintain detail property" ledger records (memorandum) covering 
each item of property purchased for his use by the War Departinent. These 
property ledger sheets should include each element of the total cost (vendor's 
invoice price, freight, service and handling charges, foundations, installation 
cost, etc.). At the close of the contract then the manufacturer and the Ordnance 
Department can either agree on a sale of the equipment to the manufacturer, if 
he chooses to buy it; or, if the Ordnance Department is to retain this equipment, 
they will have a record of its total cost installed. 

Philadelphia Ordnance District. — 

(2) There is nothing in the contract to prevent the contractor from obtaining 
the market price for such raw materials or component parts as are produced by 
him. 

St. Louis Ordnance District. — This office has conducted one general meeting 
of executives of manufacturing plants in St. Louis and vicinity and numerous 
reserve officer conferences regarding the adjusted compensation contract. The 
following summary, as a result of these conferences, is submitted herewith. 

It is the general concensus of opinion among owners and executives of indus- 
trial plants in this vicinity that the adjusted compensation contract, while 
getting away apparently from the cost plus contract, still retains some features 
highly objectionable and subject to prolonged argument. Some of the firms are frank 
to state it would be extremely different for them to voluntarily enter into such a con- 
tract in either peace or war time. 

There is no question but that the proposed contractors in (he vicinity think the 
reward inadequate and unjust. — This is particularly true of companies having a 
large bond issue and an issue of preference accumulative stock whereby the fee 
and the uncertain bonus would not be sufficient to protect the company and 
the investors of the preference stock. The present form of contract specifically 
precludes the Government from reimbursing the contractors for appropriation 
to reserves for outstanding debts owed by the contractor including redemption 
of stocks, bonds, and mortgages. If the Government expects any production 



MUNITIONS INDUSTRY 3825 

from companies with above described investment, it will eitlier have to increase 
the reward or reimburse the contractor for appropriations to reserves for out- 
standing debts. It would ai^pear the former would be the more equitable. 

Another point raised in this discussion is the fact that a company could not 
ascertain its actual profits from month to month by this form of contract. In 
the event a company was in the middle of its contract at the end of the calendar 
year it would be impossible to properly prepare income-tax reports. This would 
have the effect of throwing the larger part of profits in the year in which the 
contract was completed and not spreading them over the years in which partial 
shipments were made. If there was a war tax as was the case in the World 
War, the profits being lumped into one year would get into the higher brackets 
and the fee and probable bonus earned would all be taken away in taxes. 

It is the opinion of this office, based on the discussions at the various conferences 
held on this subject, that the present form of adjusted compensation contract 
includes a number of fundamental objectionable features and is not satisfactory to 
the contractors in general. — The contractors, of course, realize that the Govern- 
ment can in an emergency commandeer their facilities and it is believed this will 
be necessary in a number of cases providing the objectionable features of the 
present form of contract are not removed. 

San Francisco Ordnance District. — After careful perusal of the Bridgeport 
district report on the adjusted compensation contract, it is believed that the 
contract is impracticable, and that its use would involve intolerable delay in the 
initiation of procurement. 

Some thoughts on an alternate form of contract which might be developed are 
contained in the following: 

A FORM OF CONTRACT 

1. The form of contract suggested is in part based on a belief that the present 
practice of making award to the lowest bidder is fallacious, in that it is not con- 
ducive to the stability of industry and the general welfare. Perhaps the worst 
elements are the effect on more reputable bidders and the uneconomic con- 
sequences of default. But the buyer seldom receives the quality he desires. It 
would seem to be better business to make the award to the contractor whose 
bid was closest to the average of all bids. 

2. The objective is a contract which may be let quickly, administered economi- 
cally, and terminated with little aftermath. The speed of letting is the para- 
mount consideration, and hence the determination of a price seems to be most 
desirable. Economy in administration is also important in keeping down the 
aggregate cost to the Government. Termination is in the future but it can be 
simplified by foresight, and contractors relieved from fear of its effects. 

3. It is proposed that procurement of the same article from all contractors be 
made at a single predetermined unit price exclusive of direct material. The 
determination of this price will be important, and it should be subject to change 
annualh', for successive or continuing contracts. In determining the price, 
consideration should be given to importance of the demand, the availability, the 
risks and sacrifices by the contractors as a whole, and their right to profit. The 
best method which suggests itself at present is by a Federal estimate considered 
together with the average of contractors' estimates or unbonded bids received 
after M day, the estimated cost of material being shown separately. The ulti- 
mate price might even be determined in council with contractors represented. 
Such bids or estimates would have to be made with full knowledge of the terms 
of the contract. It should be expected that the set price will permit of a profit of at 
least 10% on the gross price to the average bidders. Experience shows that this 
is about the minimum average profit on which a business can survive. The net 
price will not include the cost of direct material, and will be the basis of com- 
pensation. 

4. Such a net price having been promulgated, the letting of contracts will be 
relatively simple and expeditious. They should be given, in order, to the con- 
tractors requiring the least expansion of facilities, provided for below. 

5. When adequate facilities do not exist, the Government cannot escape the 
expense of providing them. Therefore, it should agree to pay for needed equip- 
ment in plants to which it awards contracts. This should be limited to grounds, 
buildings, and installed equipment; title to which would remain with the Govern- 
ment. All purchases or rental of land, construction, and equipment would be 
approved in advance and paid for by the Government. 



3826 MUNITIONS INDUSTRY 

6. In the event of cancellation for the convenience of the Government, the 
contractor should be paid a profit on all or a part of the unexpired portion of the 
contract. This is very essential to him, but represents only a percentage of the 
expense the Government expected to incur. The payment should be 10% of the 
amount expected from the Government for deliveries on the unexpired portion 
of the contract. Since under normal conditions the Government habitually 
requires a 20% performance bond from the contractor, it is not unreasonable 
that, with conditions practically reversed, the Government should give a con- 
summation guarantee of lesser amount. This payment would tend to obviate 
claims except possibly from contractors who had incurred high tooling-up costs 
and had made few or no deliveries. The contractor's performance bond would 
still be required. 

* * * 

The Navy Department, under date of May 18, 1932, commented on the 
Adjusted Compensation Contract, as follows: 

* * * 

Exhibit A, page 7. Depreciation. — The period of performance mil in many 
cases be indefinite and the amount of depreciation indeterminable. — 

* * * 

Page 3, article III-2 (a). — To be stricken out since every large industrial plant 
has research and experimental work which cannot be allocated directly to any 
one contract but is a part of the cost of all. 

Page 3. Article III-2 (g) and (h), entertainment and contributions. These 
items of cost are universal to the industrial world and are considered legitimate 
expense. They should be stricken out. 

Page 3. Article III-2 (1). As in the case of research and experimental work, 
legitimate industrial firms have a general patent and royalty expense which is 
considered part of their general overhead. In most cases the entire product of 
the plant, no matter what it may be, benefits by such items of expense. The 
item should be stricken out. 

******* 

Page 5. Article III-6. It is not believed that rehabilitation should be set forth 
as a specific item of reimbursement (see comment on exhibit A). Where the 
contractor produces for the Government in his usual line of product, there will 
be no rehabilitation cost. Where special facilities are ordered, the necessary 
provisions for all these special facilities will cover the question. 

Page 5. Article III-7. (See comment on exhibit A.) 

Page 14. Article X. A separate paragraph should be inserted authorizing the 
sale of Government-owned facilities and property to the contractor upon terms to 
be agreed upon. This is essential as the sale would be illegal unless so provided 
for and, in many instances, sale will he the proper and reasonable disposition. 

Rochester ordnance district.— In July 1925, the Rochester district submitted a 
proposed adjusted price contract form, prepared by the General Electric Company, 
which that district still believes to be the correct form of contract, for the following 
reasons: 

1. It makes the manufacturer's contract and all subcontracts part of one trans- 
action with the Government, all subject to the same terms and conditions and to 
the same governmental supervision. 

2. It enables the contractor to place all subcontracts and work out all difficulties 
before the emergency arises. 

3. By doing so, it enables]the contractor]and the Government to figure accurately 
on contract costs. 

4. It makes the price adjustment on the main contract and on all subcontracts 
automatic as of the date of beginning performance. 

5. By eliminating possible suspensions and interferences with production, it 
enables the contractor and all subcontractors to figure on a definite rate and to 
fix prices accordingly. 

6. It insures deliveries at a predetermined rate at the lowest cost and gives 
both the Government and the contractor benefits which result from "quantity 
production." 

7. It avoids necessity for special accounting systems or expert accountants to 
determine how much is due at any time under the contract. 

8. It avoids expense and delay (reflected in contract prices) otherwise inevitable 
in adjusting amounts due on termination. 



MUNITIONS INDUSTRY 3827 

9. It places all contractors and subcontractors on the same basis in determin- 
ing costs of labor and material and price of commodities by making all contracts 
start automaticalhj on the declaration of war, unless started earlier by governmental 
order. 

Pittsburgh ordnance district. — Wm. J. Moorhead, chief of the legal staff of the 
Pittsburgh ordnance district. 

The reasonableness of a fee of six per centum seems to me to be open to question. 
In turning his plant and facilities to Government work, the contractor is bound to 
lose a portion or all of his regular business. In addition, as industry becomes 
congested with Government emergency contracts, the supply of facilities for ordi- 
nary business if decreased and, in accordance with familiar economic laws, prices 
and profits are enhanced. Based on the assumption that the estimate has been 
fairly made and that an excessive profit to the contractor is not possible, under 
the provisions hereinafter mentioned, profit at the rate of six percent per annum 
would not tempt successful industrial companies. There would be a tendency 
to let the competitor take the Government business and take a chance on greater 
profits from private business. I am not unmindful of the fact that the structure 
of this contract practically guarantees the contractor against loss and I deplore 
the fact that great wealth has been amassed by profiteers during emergencies; 
however, it seems to me that, in order to attract the officers and managers of 
great industrial enterprises with their efficient organizations and capacity for 
production, it would not be out of line to increase the rate of the fee from six per 
centum to ten per centum as representing a reasonable profit. 

On the other hand, it must be recognized that, in estimating the cost of pro- 
duction of articles not currently manufactured and for the production of which 
costs have not been ascertained, the contractor will protect himself by increasing 
the estimates, especially in view of the penalty in case the costs exceed the esti- 
mate. It must also be recognized that certain types of contractors will furnish 
very high estimates in the hope that, after compromise and adjustment, they 
wilf still be above the proper level. In both such instances, the percentage pro- 
vided for may be too high. It is possible that, in the former case, some special 
limitation of increased compensation might be provided for, while, in the latter 
case, the Government would do well to refuse to negotiate with the contractor 
until he revised his estimates within reasonable limits. 

You will recall that I mentioned the provision for a penalty in case the cost 
exceeds the estimate. The article on "Payments" provides that, in such event, 
the fee shall be reduced by one percent for each one percent of such excess, with 
the limitation, however, that in no case shall such reduction exceed fifty percent. 

The penalty provided is moderate. The fee, based upon facilities appraised at 
$100,000, would amount to $6,000. This would be reduced, under the penalty 
provision, by $60 for each one percent that the cost exceeded the estimate. A 
penalty of $1,200 is not a heavy assessment for exceeding the estimate by twenty 
percent of the estimate was fair and accurate when made. Any penalty whatso- 
ever tends to heighten the incentive to economy. On the other hand, were the 
penalty severe, the contractor would seek protection bj' boosting the estimate. 
In mj^ opinion, a moderate penalty is desirable. 

Remarks submitted by the executive assistant, Pittsburgh ordnance district, on the 
above suggestions from Mr. Moorhead. 

This office believes that all three of the above points are worthy of consideration. 
Without more factual data before us with respect to the method of determining 
the six percent utilized as a basis for this contract, we hesitate to support the 
recommendation of a change to ten percent. However, it must be remembered that 
interest on funded indebtedness and. dividends on money furnished by stockholders 
for operation of the business, must be paid out of the profits. Therefore, it is cjues- 
tionable whether the fee calculated on a basis of six percent would be adequate 
return in every case. Of course, circumstances vary and the correctness of the 
appraisal of facilities would have considerable bearing on the amount of the fee. 

The above comments cover our remarks with respect to each point raised by 
Mr. Moorhead. In addition to the above, we desire to present for consideration 
certain suggestions which arose during our discussion of the adjusted compensa- 
tion contract and proposed changes with the director of industrial accounts of 
the Westinghouse Electric and Manufacturing Company. 



3828 MUJsriTioisrs industry 

(a) Under the article on "The Fee", it is stated that "The fee shall be a sum 
equal to six percent per annum * * * on the appraised replacement value of 
the facilities owned bythe contractor and used in connection with the work * * *." 

This office believes that the Manual of Instructions for the adjusted compensa- 
tion contract should set forth in some detail the method of appraisal to be used 
and in addition "replacement value" should be defined accurately. It is safe to 
assume that the working of economic laws in time of emergency will cause con- 
siderable increase in the prices of equipment and facilities for manufacturing 
purposes. Further, the manufacturing equipment in any one plant selected for 
work under the adjusted compensation contract may be in different degrees of 
serviceability. Certain amounts of depreciation will have been already written 
off in the equipment. Therefore, the exact meaning of "replacement value" will 
be cause for controversy unless it is adequately defined. Since this appraisal of 
facility and equipment forms the basis for payment of the fee, it is believed that 
the Manual of Instructions should give considerable space to elucidation on this 
subject. The accounting manual in our possession may be an old one, but no 
reference to method of appraisal is contained therein. 

d. In the contract, it is noted that "The contracting officer may, by written 
order, direct temporary suspension for any or all work at any time, in which c&se 
the expense, if anj', occasioned the contractor by reason of such temporary 
suspension shall * * * ^g reimbursed by the United States." 

This paragraph is considered very desirable by manufacturers and representa- 
tives of the Westinghouse Electric & Mfg. Company believe that it should be 
incorporated in all fixed price contracts for emergency use. 



CRITICISMS FROM BRIDGEPORT ORDNANCE DISTRICT, SPRINGFIELD, MASS. 

Proposal of principles for a changed adjusted compensation contract. — Under date 
of June 1, 1931, the accounting section reported the results of its study and practical 
applications of the present adjusted compensation contract. The conclusions of 
this report were that, as written, the present contract had certain difficulties that 
tended to make it unsatisfactory. 

First. The necessity for appraisals of machinery and equipment would be 
costly, and a constant basis of dispute, adjustment, or even dishonesty, since 
they were to be the basis of profit figuring. 

Second. The necessity for constant accounting supervision due to changes in 
machinery, etc. 

Third. Inadequate reward to the contractor. 



PROPOSED CHANGE IN PRINCIPLES 

a. (1) Raiv materials. — Purchased by the contractor, to be reimbursed as fast 
as checked for proper application, amount, and fair market price including 
transportation. 

(2) Where raw materials, or even component parts, are standard articles of 
general production such as brass rod, screws, etc., even if produced by the prime 
contractor, they may be entered into the estimate at market price and so paid for. 

e. (1) The profit to the contractor shall be fixed at a standard percent on the 
unit cost, in original estimate of labor and overhead. 

******* 

comments on criticisms by the bridgeport ordnance district on the 
adjusted compensation contract 

(April 4, 1932.) 
(The above comments submitted by Lt. Col. P. J. O'Shaughnessy, U. S. A., 
ret'd, member of the Board on War Time Contracts, April 1932.) 

******* 

* * * Ajj examination of the reports of numerous corporations extending 

over a period of several years indicates that the average return on capital in 

commercial work is less than 5 percent. In times like the present it is very 

considerably less. The board concluded that 6 percent was a fair return on the 



MUNITIONS INDUSTEY 3829 

nve.sted capital of the contractor, especially in view of the fact that additional 
compensation is provided for if the contractor is efficient. 

c. (2) The contractor shall introduce a proper and agreed-upon incentive plan of 
paying direct labor, in order to bring about both speed of production and reduced 
cost per unit. — I am not clear as to just what is meant by this. If it contemplates 
paying a bonus to workmen, it would have the effect of enabling the contractor to 
rob the plants of other contractors doing work for the Government of its work- 
men by paying these workmen higher wages. This is what happened durijig the 
World War, and what brought al^out a condition which necessitated the appoint- 
ment of the National War Labor Board. There is, of course, no objection under 
the adjusted compensation contract to a contractor making any agreement with 
his workmen to pay them a bonus for producing the articles expeditiously and 
economically; but this bonus will have to be paid by the contractor from his 
profits under the contract. The Government cannot be a party to it. Suppose, 
for example, that we contracted with the Betlilehem Steel Company to manu- 
facture guns and shell forgings, as we did during the World War, and the bonus 
sj'stem then in vogue in that company was agreed upon, extended, however, 
down to the direct labor engaged in the work. I am afraid that the adjusted 
compensation contract would be looked upon by the public as very objectionable, 
and that it would not be long before Congress would legislate against it, as it has 
against the cost-plus contract. The Bridgeport district, however, may have 
some other thought in mind than paying direct labor, a bonus, and my remarks 
in that case would not apply. 

e (1). The profit to the contractor shall be fixed at a standard percent on the unit 
cost, in original estimate of labor and overhead. Originally we attempted to 
do just this; but there are so many thousands of parts that go to make up the 
nomenclature list of the Ordnance Department that it was impossible to agree 
on a standard percent of the unit cost. Suppose, for example, that we say that 
10 percent of the unit cost is fair. If the contractor is working wholly on copper, 
he would make a large profit; if he is working wholly on steel, his profit would 
be much less. So we would have to fix a percentage for each article. It must 
be borne in mind that in time of war we are going to turn to people to make 
things for the Army that they have never made before. One manufacturer's 
costs may be very reasonable — in fact, they may be very low; while another 
manufacturer's costs for the same article may be very high. In machining 
shells the Symington Company, of Tochester, N. Y. used single-purpose machin- 
ery which was almost fool proof. They could train an operator to perform work 
with a particular machine, and in a very short time this operator became an 
expert. Rejections in that plant were almost nil. Another plant, machining 
exactly the same kind of a shell on universal lathes, required a much higher 
degree of skill on the part of its workmen. The costs of the two plants were 
out of all proportion to each other. 

e (2). An additional percent of profit to the contractor for producing at less than 
estimated unit cost shall be provided in a standard percent of the saving over unit 
estimated cost. And a reduction of the profit may be made in a similar manner if 
the unit cost rises above the estimated cost. — This was the plan in vogue during the 
World War when we used the bogy-price contract. When this type of contract 
was adopted we were prohibited by Congress from using the cost-plus contract, 
and since it was necessary, in order to get munitions, that we guarantee the contractor 
his costs, we provided for the payment of a fixed percent based on the estimated 
cost, and for an additional percentage as profit in the event that the costs were 
less than the estimate. Under this type of contract one concern made approxi- 
mately 30 percent on its completed contracts; another made very nearly 100 
percent. Of course, we could reduce the percentage to be paid as profit, 
but is not that precisely what we have done in the adjusted compensation con- 
tract? There we agree, first, to pay the contractor his costs; second, to pay him 
a fee for the use of his plant and facilities; and, third, to give him an opportunity 
to make a profit if he produces the articles for less than the estimate. The only 
objection that can be made to this contract is that the profit may be too small. 
But bear in mind that the report of the War Policies Commission, if adopted 
by Congress, would permit manufacturers to earn only about 6 percent. 



3830 



MUNITIONS INDUSTRY 



Sixth. The thought and effort of management and labor may be more effec- 
tively concentrated on producing by the proposed methods. This is the ideal 
that we are attempting to attain. We hope that when we save the contractor 
fear of loss; when we pay him and his officers the salaries which they have been 
receiving; when we pay his labor, material, and overhead bills currently; when 
we save him the necessity of having to borrow large sums from the banks at a 
time when interest rates are high; that the management and labor producing 
things that are urgently required by the Nation will effectively concentrate on 
producing these things as rapidly and economically as possible. 



Exhibit No. 1228 





Unit 


Average 

transfer 

price 


Average 
manu- 
facturing 
cost price 


Ammonia: 

1932 


Lb 


$0. 0455 
.0360 

3.83 
3.28 

19.80 
19.95 

27.00 
21.45 


$0. 0550 


1933.... 


Lb 


.0291 


Nitric acid: 

1932 


Cwt - 


2.86 


1933. - 


Cwt 


2.84 


Aniline: 

1932 . . . . . 


Cwt 


8.78 


1933 


Cwt 


9.53 


Diphenylamine: 
1932 


Cwt -- 


16.42 


1933-. -. ... ... 


Cwt...- 


20.20 









1 Aniline is transferred at cost when used as an ingredient in the manufacture of diphenylamine, which is 
the only commodity consuming aniline used in manufacturing munition powders. This product is also 
transfered to other departments to be consumed in our commercial line and in such cases the above transfer 
prices prevailed for the respective years. 



Exhibit No. 1229 



MEMORANDUM OF AGREEMENT 



This agreement, made as of January 1, 1934, by and between Dynamit Actien 
Gesellschaft, a corporation of Germany, having its executive offices at Troisdorf, 
Germany, hereinafter referred to as "D. A. G."; and Remington Arms Company, 
Inc., a corporation of the State of Delaware, U. S. A., having a factory and office 
at Bridgeport, State of Connecticut, U. S. A., hereinafter referred to as "Reming- 
ton"; Witnesseth: 

Whereas Remington, on or al)out the 14th day of November 1929 entered into 
a certain contract with the Rheinisch Westfaelische Sprengstoff A. G., a cor- 
poration of Germany, which contract, hereinafter for convenience referred to as 
the "R. W. S. contract", is attached hereto and made a part hereof; and 

Whereas the original and reissue applications for United States patents men- 
tioned in said R. W. S. contract have eventuated as follows: Application serial 
no. 352893 was abandoned after filing as a continuation application serial no. 
430138 which has resulted in Patent No. 1,889,116, November 29, 1932; applica- 
tion serial no. 400738 was abandoned in view of application serial no. 430138; 
reissue application serial no. 400723 has resulted in reissue Patent No. 17540 of 
December 31, 1929; 

Whereas D. A. G. has succeeded to all the rights and obligations of Rheinisch 
Westfaelische Sprengstoff A. G. under and by virue of said R. W. S. contract; 
and 

Whereas the parties hereto are desirous of modifying certain of the provisions 
of said R. W. S. contract as hereinafter provided: 

Now, therefore, in consideration of one dollar and other good, valuable, and 
sufficient considerations, extending from each of said parties to the other, the 
receipt of which is hereby acknowledged, and in consideration of the covenants 
and promises herein contained, said parties do hereby mutually covenant and 
agree as follows: 



MUNITIONS INDUSTRY 3831 

I. Royalty payments shall be made by Remington on the sales made during 
each quarter based upon the net selling price after deduction of all discounts and 
rebates. For convenience and simplicity, the average rate of discount allowed 
by Remington in its ammunition business for the preceding quarter will be used 
in reducing Remington's gross billings to their net cash value. When accounts 
with respect to which royalties have been paid are uncollectible, the proper 
deduction will be made from the next royalty payment due after such accounts 
have been found to be uncollectible. 

II. "Military ammunition" is defined as ammunition of sizes and types 
ordinarily used in war and sold directly to or made under a license from Remington 
by a government actually engaged in war, or storing the ammunition thus made 
or purchased for the purpose of war. All loose primers sold to the I'nited 
States Government shall be considered as military ammunition. "Commercial 
ammunition" (nonmilitary ammunition) includes all ammunition not coming 
within the above definition of military ammunition. 

in. The royalties to be paid to D. A. G. by Remington on commercial ammu- 
nition, primers and primed shells, coming within the claims of Reissue Patent No. 
17540 based on the net selling price as hereinbefore set forth, shall be as follows: 

(a) Rimfire ammunition: Percent 

1. Sold and intended for consumption within the United States. _ /4 of 1 

2. Sold in and for export from the United States 1 

(b) Centerfire metallic ammunition and shot shells: 

1. Sold and intended for consumption within the United States.- . 5 of 1 

2. Sold in and for export from the United States . 6 of 1 

(c) All loose primers and empty primed shells 1 

This rate to remain the same regardless of the volume of sales. 

IV. When during any calendar year Remington shall have paid to D. A. G. as 
royalties the sum of $20,000, the rates at which royalties shall be paid for the 
remainder of such calendar year shall be one-third {%) of those specified in para- 
graph III; provided, however, that should German and United States currencies 
be stabilized at a ratio of 3.5 or more German marks per United States dollar for 
two or more quarters in any one calendar year, royalty rates of one-third (Ys) 
of those specified in paragraph III shall apply when Remington during such 
calendar year shall have paid to D. A. G. as royalties the sum of $18,500. 

V. The maximum royaky to be paid to D. A. G. by Remington in any calendar 
year with respect to commercial ammunition, primers, and primed jhells, shall be 
$35,000, and when this amount has been paid no further royalties shall accrue to 
D. A. G. with respect to sales of commercial ammunition during such calendar 
year. 

VI. If and when the total amount paid by Remington with respect to com- 
mercial ammunition under this contract and the R. W. S. contract reaches 
$250,000, no further royalties shall be paid by Remington with respect to com- 
mercial ammunition, primers, and primed shells, but it is understood that when 
the amount paid by Remington in any one year exceeds $30,000 the excess shall 
not be included in computing the maximum of $250,000. 

VII. The royalty paid to D. A. G. by Remington with respect to military 
ammunition manufactured and sold by Remington shall not be less than 1% 
without the express consent of D. A. G. D. A. G. agrees that it will not unreason- 
ably withhold its acceptance of royalties reduced to not less than }io of 1% where 
such a reduction of royalties is found by Remington to be necessary or desirable 
to facilitate the securing of substantial orders or volume of sales of military 
ammunition by Remington. 

Remington shall not, without the consent of D. A. G., license the Government 
of the United States or other American manufacturer to manufacture and/or 
sell military ammunition coming within the terms of this agreement at a royalty 
less than the following: (a) for cartridges. Fifteen Cents ($0.15) per thousand; 
(b) for primers and empty primed shells, 1% of Remington's net selling price of 
similar military primers and primed empty shells. The consent of D. A. G. to 
licenses at a less royalty, when necessary to the granting of profitable licenses, 
will not be unreasonably withheld. 

One-quarter (Yi) of the royalty received by Remington from the Government of 
the United States or other licensee with respect to military ammunition shall be 
paid to D. A. G. 

VIII. The royalties paid by Remington to D. A. G. with respect to military 
ammunition manufactured and/or sold by Remington or its licensees shall not be 



3832 MUNITIONS INDUSTRY 

included in the amount of $20,000 (or $18,500) beyond which a reduced royalty- 
is paid, or in the annual total of $35,000, or in the grand total of $250,000. 

IX. The royalty provisions of this agreement shall become effective January 
1, L934. 

X. Should Remington desire to manufacture and/or sell ammunition, military 
or commercial, containing a priming mixture coming within the claims of Patent 
No. 1889116 but not within the claims of Reissue Patent No. 17540; or in the 
event that upon the expiration of Reissue Patent No. 17540 the total of $250,000 
with respect to commercial ammunition has not been paid, then and in either of 
such events the royalties herein provided shall be reduced to one-half (^o) of the 
amounts herein specified. 

XI. Royalties paid to Imperial Chemical Industries with respect to sales of 
Tetrazene primed ammunition in Great Britain and Northern Ireland shall be 
deducted from payments to D. A. G., as hitherto. 

XII. The provisions of the R. W. S. contract, and particularly paragraphs 11, 
III, III (a). Ill (d), IV, V, VI, VII (c), VII (D), VII (F), VIII, IX, XI, XII, 
XIII, and XIV, except as herein modified shall remain in full force and effect. 

XIII. In case an,y controversy under this agreement shall arise between the 
parties hereto which they are unable to adjust between themselves, such contro- 
versy shall be settled by arbitration in accordance with the provisions of the 
United States Arbitration Act in the following manner: 

Either party may, by notice in writing served on the other, appoint one arbi- 
trator and call upon the other to appoint a second arbitrator with thirty days 
after the receipt of such notice; and each party agrees that, upon receiving any 
such notice, it shall so appoint an arbitrator. The two arbitrators thus appointed 
shall, within thirty days after the appointment of the one last appointed, jointly 
appoint a third arbitrator. The controversy shall be submitted to the three 
arbitrators in such manner as they shall direct and their decision, or the decision 
of a majority of them, rendered in writing shall be final, conclusive and binding 
upon the parties. In the event that a second arbitrator shall not be appointed as 
above provided, or the two arbitrators first appointed shall fail to appoint a third, 
application may be made by either party to the United States District Court of 
Delaware, or to a judge thereof, to designate and appoint an arbitrator or arbi- 
trators, as the case may require. Each party shall pay its own expenses in con- 
nection with the arbitration, but the compensation and expenses of the arbitrators 
shall be borne in such manner as may be specified in their decision in writing. 

XIV. This agreement shall inure to the benefit of and be binding upon the 
parties hereto, and their respective subsidiaries and assigns. 

In witness whereof the parties hereto have executed this agreement by their 
duly authorized officers. 

[Seal] Dynamit Actien Gesselschaft, 

By , 



Directors. 
Attest; Remington Arms Compant, Inc., 
• , Secretary. By 



President. 

On this day of , , before me personally' appeared Dr. Pau 1 

Muller and Dr. Rudolf Schmidt, they being by me duly sworn, did depose and say 
that they reside at Cologne, Germany; that they are directors of Dynamit Actien 
Gesellsciiaft, of Troisdorf, Germany, the corporation described in and which 
executed the above instrument; and that they signed their names in behalf of 
said corporation thereto by order and authority of said corporation. 

State of Connecticut, 

County of Fairfield, ss.: 

On this day of , 193 , before me personally appeared C. K. 

Davis, to me known, who, being by me duly sworn, did depose and say that he 
resides at Fairfield, Connecticut; that he is the president of Remington Arms 
Company, Inc., the corporation described in and which executed the above 
instrument; that he knows the seal of said corporation; that the seal affixed to 
said instrument is such corporate seal ; that it was so affixed by order of the board 
of directors of said corporation, and that he signed his name and the name of said 
corporation thereto by like order. 

, Notary Public 



MUNITIONS INDUSTRY 3833 

Exhibit No. 1230 

Hyde Arms Corporation, 
Brooklyn, N. Y., September 8, 1934. 
Winchester Repeating Arms Co., 

New Haven, Conn. 
Gentlemen: Confirming our telephone conversation with your Mr. Ehnslie 
Jonas, please enter our order for 100 barrels as per specifications of the previous 
100 that you supplied. 

It is understood that delivery is guaranteed in six weeks or less and that the 
price will be $5.50 each, placed in New York City. We are enclosing a check for 
$550.00 to cover the value of this order. 

We will appreciate having you make early delivery on these barrels. 
Yours very truly, 

Hyde Arms Corporation, 
(Signed) F. V. Huber, Sales Manager. 
FVH:RL 
Enc.-check 

(Written in) 
Quoted $5.50 on lots of 100. 
Quoted $5.00 on lots of 500. 
Quoted $4.50 on lots of 1,000. 

Price on above order to be equalized with quantity price if they order larger 
quantity. 

H. F. B. 



Exhibit No. 1231 

June 10th, 1933. 
Mr. Elmslie E. Jonas, 

393 West End Avenue, Apt. 15-E, New York, New York. 
Dear Elmslie: Referring to your statement that you had heard confidentially 
that the Lake Erie Chemical Company were considering manufacturing a machine 
gun similar to the Thompson submachine gun, I spoke to Mr. Pugsley about 
this and he was quite interested. I believe he would like an opportunity to figure 
on the manufacture of such a gun, if contemplated. 

He told me that he had received an order from Griffin & Howe for some 300 
barrels different from anything that we make, which might be intended for 
machine guns. 

We will be glad to have you see if you can find out anything more about this 
proposition. 



Yours very truly, 
HFB: ERJ-63. 



Winchester Repeating Arms Company, 
H. F. Beebe. 



Exhibit No. 1232 

[Copy— E. T. Hyde] 

April 12, 1933. 
R. F. Sedgley, Inc., 

2311-17 North 16th Street, 

Philadelphia, Pa. 
(Att: Mr. R. F. Sedgley.) 
Dear Mr. Sedgley: Confirming your conversation with Mr. Pugsley and 
telephone conversation with the signer this afternoon, we are forwarding to you a 
case containing six (6) Browning light weight machine guns, caliber 30 Govt. 06 
on consignment. 

We offer you cur stock on hand of these guns at $75.00 each net. 
We are pleased to quote you on 1,000,000 30 Govt. 06 cartridges for export 
$26.00 per thousand net to us. Unless we make the shipment, ourselves, the 
10% excise tax will have to be added. This we will refund to you upon proof 
of exportation satisfactory to the Government authorities. 



3834 MUNITIONS INDUSTRY 

We could deliver approximately 100,000 in one week and 300,000 per week 
thereafter. If the emergency warrants we might be able to complete the order 
in three weeks. 

Hoping that you will be successful in securing this business, we remain 
Yours very truly, 

Winchester Repeating Arms Company, 
H. F. Beebe, 

Mg)\ Foreign Department. 
HFB:ERJ-57 



(" Exhibit No. 1233 " appears in text on p. 3647.) 



(" Exhibit No. 1234 " appears in text on p. 3848.) 



Exhibit No. 1235 

Undistributed expense To December 

SI, 1931 

New industries, expended by ammonia department $8, 806. 26 

New industries, expended by development department 88, 788. 80 

New industries, expended by engineering department 28, 907. 95 

New industries, expended by explosives department 11, 226. 69 

New industries, expended by general chemical department 230, 880. 01 

New industries, expended by organic chemicals department 107, 042. 48 

"B" bonus (consolidated) (including previous year adjustment).. 284, 638. 05 

Merit bonus (consolidated) (including previous year adjustment). 534, 680. 05 

Foreign trade development division 31, 174. 49 

Taxes paid to foreign countries 38, 317. 35 

Federal & New York State stock transfer taxes 568. 60 

Franchise & State income taxes 104, 776. 22 

Stamp tax on new stock issues 5, 898. 90 

Federal taxes: Income, consolidated (including previous years 

adjustment) 2, 205, 411. 73 

Total-. 3, 681, 117. 58 



To December 

SI, 193S 

New industries, expended by ammonia department $24, 967. 46 

New industries, expended by development department 69, 676. 23 

New industries, expended by engineering department 2, 359. 89 

New industries, expended by explosives department 6, 093. 21 

New industries, expended by general chemical department 141, 259. 54 

New industries, expended by organic chemicals department 27, 459. 98 

"B" bonus (consolidated) (including previous year adjustment) __ ' 39, 888. 88 

Merit bonus (consolidated) (including previous year adjustment). ' 107, 332. 72 

Foreign trade development division 28, 840. 47 

Taxes paid to foreign countries 33, 396. 86 

Federal & New York State stock transfer taxes 3, 058. 40 

Federal tax on checks. _i 4, 495. 12 

Federal tax on safe deposit boxes 26. 00 

Franchise & State income taxes 113, 584. 01 

Special adjustment. Dr. H. R. Carveth 29,016.90 

Federal taxes: Income, consolidated (including previous years 

adjustment) 965, 938. 77 



Total 1,302, 951. 24 

• Red figures. 



MUN^ITIOXS INDUSTRY 3835 

Undistrihuted expense — Continued to December 

SI, 19S3 

Fundamental research, expended by general chemical department $142, 683. 51 

New industries, expended by ammonia department 2, 411. 47 

New industries, expended by development department 107, 279. 17 

New industries, expended by engineering department 70. 77 

New industries, expended by explosives department 1. 66 

New industries, expended by general chemical department 190, 376. 46 

New industries, expended by organic chemicals department 15, 047. 00 

New industries, expended by the R. & H. chemicals department. 23, 640. 12 

"B" bonus (consolidated) 696, 241. 00 

Merit bonus (consolidated) 1, 216, 188. 00 

Argentine business survey 7, 609. 78 

Argentine consolidation survey 1, 640. 00 

Foreign trade development division 22, 096. 85 

Taxes paid to foreign countries 49, 249. 13 

Federal & New York State stock transfer taxes 11,548. 87 

Federal tax on checks 11, 154. 60 

Federal tax on safe deposit boxes 26. 00 

Franchise & State income taxes 154, 088. 03 

Federal taxes: 

Capital stock, year ending June 30, 1 933 111, 005. 00 

Capital stock, year ending June 30, 1934 57, 668. 50 

Income, consolidated 3, 431, 356. 00 

Total 6,251,381. 92 

To October 31, 1934 

Fundamental research, expended by general chemical depart- 
ment $165, 108. 03 

New industries, expended by development department 60, 197. 45 

New industries, expended by explosives department 5, 116. 03 

New industries, expended by general chemical department 203, 349. 37 

New industries, expended by organic chemicals department 4, 053. 76 

New industries, expended by the R. & H. chemicals department.. 32, 950. 93 

"B" bonus (consolidated) (including previous year adjustment).. 945, 274. 00 

Merit bonus (oonsolidated) (including previous year adjustment). 1, 733, 965. 00 

Argentine business survey i 7, 609. 78 

Argentine consolidation survey 4, 205. 89 

Foreign trade development division 16, 610. 38 

Taxes paid to foreign countries 184, 007. 83 

Federal tax on checks 11, 379. 26 

Federal tax on safe deposit boxes 21. 00 

Franchise and State income taxes 128, 934. 79 

Federal taxes: 

Capital stock, year ending June 30, 1934 167, 322. 50 

Capital stock year ending June 30, 1935 78, 000. 00 

Income, consolidated (including previous years adjustment) 2, 286, 612. 

Total 6, 009, 498. 53 



1 Loss. 



("Exhibit No. 1236" appears in text on p. 3656.) 



("Exhibit No. 1237" appears in text on p. 3656.) 



("Exhibit No. 123S" appears in text on p. 3657.) 



3836 MUNITIONS INDUSTRY 

("Exhibit No. 1239" appears in text on p. 3658.) 



("Exhibit No. 1240" appears in text on p. 3658.) 



Exhibit No. 1241 

[File 30] 



June 29, 1918. 



Mr. H. M. Barksdale, 

White Sulphur Springs, West Virginia. 

Dear Barkie: Our cash position will be a matter for careful study from this 
time forward. Total balances of $28,000,000, of which $10,000,000 is in the 
du Pont Engineering Company, will leave no cause for immediate concern, but 
our transactions are on such an enormous scale that John is requesting a close 
study of the situation, especially with respect to cash outlay for acquiring new 
properties. It seems that we have already arranged for investment of the funds 
that we have agreed to employ permanently and should make decision as to 
further investment. 

There seems a little more activity in Washington with regard to the nitrogen 
question, but nothing definite nor hopeful. We have agreed to lend Edgar and 
Liljenroth for a portion of their time without cost to the Government, in the 
belief that their influence will be helpful toward a proper solution of the problem. 
I have very little hope of a satisfactory outcome in reasonable time. 

(Unsigned.) 

(Above excerpt has been taken from pages 4 & 5 of letter dated June 29, 1918, 
to Barksdale.) 
12 



Exhibit No. 1242 

[Kernan Board] 

War Department, 
Washington, November 15, 1916. 
Special Orders, No. 268. 

(EXTRACT) 

26. Under the provisions of section 121 of the act of Congress approved June 
3, 1916, a board to consist of Col. Francis J. Kernan, Twenty-eighth Infantry; 
Lieut. Col. Charles P. Summerall, Field Artillery; Maj. Lawson M. Fuller, 
United States Army, retired; Mr. Benedict Crowell, Cleveland, Ohio; and Mr. 
R. Goodwyn Rhett, Charleston, S. C, is appointed to meet in this city at the 
call of the senior member of the board for the purpose of investigating and report- 
ing upon the feasibility, desirability, and practicability of the Government manu- 
facturing arms, munitions, and equipment. 

(2488037, A.G.O.) 

By order of the Secretary of War: 

H. L. Scott, 
Major General, Chief of Staff. 
Official: 

H. P. McCain, 

The Adjutant General. 

("Exhibit No. 1243" appears in text on p. 3661.) 



Exhibit No. 1244 

Sept. 25, 1934. 

(1) Chambers of Commerce (National, State, and City), 1933 

$12. 50 Ass'n. of Commerce, Grand Rapids, Mich.— F. & F. 
60. 00 Board of Trade— F. & F., San Francisco, Calif. 
75. GO Chamber of Commerce, Birmingham, Ala. — Explosives. 



MUNITIONS INDUSTEY 



3837 



236. 00 
50. 00 

100. 00 
25. 00 

300. 00 
25. 00 

150. 00 

400. 00 
40. 00 
40. 00 
50.00 
75.00 

600. 00 
50. 00 

200. 00 
50.00 
10. 00 

200. 00 
30. 00 
75. 00 
12. 50 
37. 50 

500. 00 
25. 00 
25. 00 

125. 00 

100. 00 

400. 00 

400. 00 
10. 00 

100. 00 

200. 00 

100. 00 

85.00 

200. 00 

25. 00 

130. 00 

5, 025. 00 

2, 850. 00 

100. 00 

185. 00 

50. 00 

500. 00 

25.00 
100. 00 
250. 00 

150. 00 



Chamber of Commerce 
Chamber of Commerce 
Chamber of Commerce 
Chamber of Commerce 
Chamber of Commerce 
Chamber of Commerce 
Chamber of Commerce 
Chamber of Commerce 
Chamber of Commerce 
Chamber of Commerce 
Chamber of Commerce 
Chamber of Commerce 
Chamber of Commerce 
Chamber of Commerce 
Chamber of Commerce 
Chamber of Commerce 
Chamber of Commerce 
Chamber of Commerce 
Chamber of Commerce 
Chamber of Commerce 
Chamber of Commerce 
Chamber of Commerce 
Chamber of Commerce 
Chamber of Commerce 
Chamber of Commerce 
Chamber of Commerce 
Chamber of Commerce 
Chamber of Commerce 
Chamber of Commerce 



Buffalo, N. Y.— Rayon. 
Butte, Mont. — Explosives. 
Calif. State— F. & F. 
Canton, O. — Grasselli. 
Charleston, W. Va. — Ammonia. 
Charlotte, N. C— Orchem. 
Illinois State— F. & F. 
Cleveland, O. — Grasselli. 
Cincinnati, O. — Grasselli. 
Denver, Colo. — Explosives. 
Clarksburg, W. Va. — Grasselli. 
Duluth, Minn. — Explosives. 
East Chicago, Ind. — Grasselli. 
Huntington, W. Va.^ — Explosive. 
Illinois — Explosives, F. & F. 
Indiana State — Grasselli. 
Juneau, Ak. — Explosives. 
Leominster, Mass. — Viscoloid. 
Linden, N. J. — Grasselli. 
Los Angeles, Calif.— F. & F., R. & H. 
Miami, Fla. — Explosives. 
Miami, Okla. — Explosives. 
Nashville, Tenn. — Rayon. 
New Brunswick, N. J. — F. &. F. 
New Castle, Pa. — Grasselli. 
Newburgh, N. Y.— F. & F. 
N. J. State — Service. 
Niagara Falls, N. Y.— R. & H. 
Columbus, O. — Grasselli. 
Perth Ambov, N. J.— R. & H. 
Philadelphia, Pa.— F. & F 



Grasselli, 



Chamber of Commerce, 

Chamber of Commerce, 
National Ammonia. 

Chamber of Commerce, Richmond, Va. — Rayon. 

Chamber of Commerce, St. Louis, Mo. — National Ammonia Co. 

Chamber of Commerce, San Francisco, Calif. — F. & F., Rayon 
Viscoloid. 

Chamber of Commerce, Scranton, Pa. — Du Pont Co. of Pa. 

Chamber of Commerce, Spokane, Wash. — Explosives. 

Chamber of Commerce, Toledo, O. — Grasselli. 

Chamber of Commerce, U. S. Wash. — Service, R. & H. 

Chamber of Commerce, Wilmington, Del. — Publicity, service. 

Chicago Assn. of Commerce — Explosives. 

Chicago Assn. of Commerce — F. & F., Grasselli, R. & H. 

Chamber of Commerce — Atlanta, Ga. — F. & F. 

Chamber of Commerce, Paterson, N. J. — Grasselli,! Orchem, 
R. & H. 

Chamber of Commerce, St. Louis, Mo. — Grasselli. 

Great Kanawha VaUey Imp. Assn. — -Ammonia. 

Merchants Assn. of N. Y. City — Explosives — Grasselli, Inter- 
national Freighting, Rayon, Viscoloid. 

Milwaukee Assn. of Commerce — Grasselli, Orchem. 



14, 563. 50 Total. 

(2) Manufacttjrers Associations (Those Not Devoted to any Particular 

Industry) 1933 

1, 000. 00 American Tariff League — ^ Ray on. 

500. 00 Assoc. Industries of Cleveland — Grasselli. 

30. 00 Assoc. Industries of Kentucky — Grasselli. 

95. 37 Assoc. Industries of Missouri — National Ammonia, Legal. 

510. 00 Assoc. Industries of New York State — ^Legal, R. & H., Rayon. 

10. 00 Bridgeport Employment Mgrs. Assn. — F. & F. 

50. 00 California Manufacturers Assn. — F. & F. 

60. 00 Federated Industries of Washington — -Legal. 

75. 00 Indiana Mfgrs. Assn. — Grasselli. 

234. 50 Industrial Association, Perth Amboy — R. & H. 

350. 00 Manufacturers' Assn., E. Chicago — Grasselli. 



3838 MUNITIONS INDUSTRY 

Manufacturers' Assn., New Jersey — Legal. 

Mfgrs. & Dealers League of New York — Nationar Ammonia. 

National Assn. Mfgrs. of the U. S. A. — Service. 

National Indus. Conference Board — Service. 

New England Council — Viscoloid. 

Ohio Mfgrs. Association — GrasseUi. 

Pennsylvania Mfgrs. Assn. — Legal. 

Tacony Mfgrs. Association — National Ammonia. 

Tennessee Mfgrs. Assn. — Rayon. 

Trumbull County Mfgrs. Assn. — GrasseUi. 

Virginia Mfgrs. Assn. — Rayon. 

West Virginia Mfgrs. Assn. — Ammonia, GrasseUi. 

Total. 

(3) Trade Associations (Devoted to Specific Trades or Industries), 1933 

American Brush Mfgrs. Assn. — Viscoloid. 

American Ceramic Society — R. & H. 

American Cotton Mfgrs. Assn.- — Orchem, Rayon. 

American Electro-Platers Soc. — R. & H. 

American Gas Assn. — Ammonia. 

American Hardware Assn. — Smokeless. 

American Inst. Food Distrib. Inc. — Rayon. 

American Paint & Var. Mfgrs. Assn. — F. & F. 

American Paint & Var. Educa. Bureau. — Krebs. 

American Petroleum Institute.— Chemical, F. & F., GrasseUi, R. & H 

American Railway Assn. Signal Sec.^ — F. & F. 

American Stockmen's Supplies Assn.- — GrasseUi. 

American Welding Society. — Ammonia, R. & H. 

Amer. Wood Preservers Assn. — GrasseUi. 

American Zinc Institute.^ — Explosives, GrasseUi. 

Assd. Cigar Mfg. & Leaf Tobacco Dls. — Rayon. 

Assoc. Mfgrs. of Fabric Auto Equp. — F. & F. 

Assn. of Highway Const. Indus. — Explosives. 

Assn. of Operative Millers. — R. & H. 

Amer. Pulp & Paper Mill Supt. Assn. — Krebs. 

Assoc. Mfrs. of Toilet Articles, Inc. — Orcliem. 

Auto RebuiJders Assn. of Amerca. — F. & F. 

Automotive Chem. Spec. Mfgrs. Group.— F. & F. 

Bakery Sales Promotion Assn.— Rayon. 

Baltimore Drug Exchange Bureau. — R. &. H. 

Buffalo Better Bus. Bureau, Inc. — Rayon. 

Bureau of Explosives^ — National Ammonia, Explosives, Grasseli. 

California Assn. of Ice Industries. — National Ammonia. 

Ceramic Assn. of New Jersey. — R. & H. 

Chattanooga Yarn Assn. — Rayon. 

Chicago Drug & Chemical Assn. — GrasseUi, R. & H. 

Clean Up & Paint Up Campaign, Cleveland. — Krebs. 

Cleveland Automatic Machine Co.- — GrasseUi. 

Coal Mining Inst, of America. — Explosives. 

Compressed Gas Mfgrs. Assn. — Orchem, National Ammonia, 

R. & H. 
Chemical Alliance, The. — GrasseUi, Krebs, National Ammonia, 

Service, R. & H., Viscoloid. 
Chicago Perfumery: Soap Extract Assn. — Orchem. 
Florida Ice Mfgrs. Assn. — National Ammonia. 
General Contractors Assn. — Explosives. 

Idaho Hardware Implement & Paint Dealers Assn. — Explosives. 
Illinois Assn. of Ice Industries. — National Ammonia. 
Indiana Ice Dealers' Assn. — National Ammonia. 
Industrial Alcohol Institute, The. — Orchem. 
Institute of Amer. Meat Packers. — CeUophane. 
Inst, of Leathercloth & Laccjuered Fabrics Manufacturers. — F. & F. 
Inst, of Makers of Explosives. — Explosives. 
Inst, of Paper Chemistry, The. — Orchem. 
Inter. Assn. of Ice Cream Mfgrs. — National Ammonia. 
Inter. Soc. of Master Painters & Decorators. — F. & F. 



25. 


00 


10. 


00 


725. 


00 


5, 000. 


00 


100. 


00 


100. 


00 


84. 


50 


4. 


17 


850. 


00 


54. 


63 


100. 


00 


430. 


00 


10, 398. 


17 


(3) Trade 


250. 


00 


10. 


00 


60. 


00 


11. 


00 


16. 


50 


75. 


00 


150. 


00 


6, 700. 


00 


123. 


90 


102. 


00 


6. 


00 


60. 


00 


10. 


00 


1, 520. 


00 


75. 


00 


60. 


00 


30. 


00 


20. 


00 


5. 


00 


25. 


00 


35. 


00 


100. 


00 


10. 


00 


10. 


00 


5. 


00 


100. 


00 


832. 


49 


10. 


00 


3. 


50 


15. 


00 


20. 


00 


25. 


00 


25. 


00 


3. 


00 


610. 


00 


2, 780. 


00 


10. 


00 


10. 


00 


536. 


65 


25. 


00 


10. 


00 


25. 


00 


4, 127. 


52 


50. 


00 


3, 132. 


68 


8, 743. 


00 


1, 000. 


00 


25. 


00 


115. 


,00 



MUNITIONS INDUSTRY 3839 

10. 00 Iowa Ice Dealers' Assn. — National Ammonia. 

25. 00 Illinois State Council Master Painters & Decorators. — F. & F. 

75. 00 Insecticide & Disinfectant Mfgrs. Assn. — Orchem. 

5. 00 Kansas Assn. Ice Cream Mfgrs. — National Ammonia. 

3, 949. 00 Manufacturing Chemists Assn. of U. S. — Chemical, Grasselli. 

4. 00 Master Brewers Assn. of U. S.- — National Ammonia. 
25. 00 Master Painters & Decorators Assn. — F. & F. 

15. 00 Michigan Ice Industries. — National Ammonia. 

1, 600. 00 Motor & Equipment Assn.— F. & F. 

10. 00 Mountain States Assn. Ice Indust. — National Ammonia. 

230. 00 National Assn. Cotton Mfgrs.— Orchem, Rayon R. & H. 

62. 00 National Assn. Dyers & Cleaners. — Rayon, R. & H. 

20. 00 National Assn. Paint Distributors.— F. & F. 

100. 00 National Battery Mfgrs. Assn. — Grasselli. 

50. 00 National Confectioners Assn. of U. S. — Rayon. 

100. 00 National Crushed Stone Assn.^ — Explosives. 

200. 00 National Fertilizer Assn. — Ammonia. 

56. 25 National Luggage & Leather Gds. Mfg. — F. & F. 

100. 00 National Macaroni Mfgrs. Assn. — Cellophane. 

15. 00 New England Assn. Ice Cream Mfgrs. — National Ammonia. 

10. 00 New England Ice Dealers Assn. — National Ammonia. 

40. 00 N. Y. & N. J. Paint & Varnish Plant Mgrs. Assn.— F. & F. 

5. 00 New York, Penna. & Ohio Ice Assn.^ — National Ammonia. 
10. 00 Northwest Assn. Ice Industries. — National Ammonia. 

150. 00 Northwest Crop Improvement Assn. — -R. & H. 

5. 00 Northwest Mining Association. — Explosives. 

31. 00 Phila. Drug. Exchange.— R. & H. 

25. 00 Porcelain Enamel Institute. — R. & H. 

1, 350. 00 Pyroxylin Plastics Mfgrs. Assn. — Viscoloid. 

2. 00 Ross, C. B. Mining Institute. — Explosives. 

50. 00 Rubber Mfgrs. Assn. of America.- F. & F. 

10. 00 Shoe & Leather Assn. of Chicago. — Grasselli. 

750. 00 Silk Assn. of America, Inc. — Rayon. 

300. 00 Sodium SiUcate Mfgrs. Institute. — Grasselli. 

1, 305. 63 Solvents Institute.— F. & F. 

10. 00 Southern Assn. of Ice Cream Mfgrs. — National Ammonia. 

10. 00 Southern Bakers Assn. — Rayon. 

10. 00 Southern Ice Exchange. — National Ammonia. 

25. 00 Southern Textile Assn. — Orchem. 

6, 500. 00 Synthetic Organic Chem. Mfgrs. Assn. — Orchem. 

5. 00 Tennessee Ice Mfgrs. Assn. — National Ammonia. 

160. 00 Textile Color Car Assn., The — Orchem, Ravon, Viscoloid. 

100. 00 Tri-State Soc. Master Painters & Decor.— F. & F. 

60. 00 Tri-State Zinc & Lead Ore Prod. Assn. — Explosives. 

50. 00 United Containers Association. — Grasselli. 

25. 00 Wisconsin Assn. of Ice Dealers. — National Ammonia. 

5. 00 West Virginia Hardware Assn. — Explosives. 

58. 65 Window Shade Institute.— F. & F. 



49, 416. 77 Total. 

(4) Technical Associations (For Technical Men or Engaged in Technical 

Development) 1933 

$17. 00 Acad._ Med. Clev. Medical Society — Grasselli. 

13. 00 American Ass'n. for the Advancement of Science — Chemical, Rayon. 
235. 00 American Ass'n. of Textile Chemists and Colorists — Orchem, 

Grasselli, Rayon, R. & H. 
403. 00 American Chemical Society — Ammonia, Chemical, F. & F., Grass- 
elli, Krebs, Rayon, R. & H., Service, Smokeless Powder, Viscoloid 
35. 00 American Inst, of Chemists — Viscoloid. 
15. 00 America Inst. Chem. Eng. — Service. 

45. 00 American Inst. Mining & Metallurgical Engineers — Chemical, Ex- 
plosives. 

6. 00 American Inst, of Physics — Viscoloid. 

25. 00 American Inst, of Refrigeration — National Ammonia. 
10. 00 American Library Ass'n. — Chemical, Technical Library. 

7. 00 American Medical Association — -Raj'on. 

83876— 35— PT 15 20 



3840 MUNITIONS INDUSTRY 

10. 00 American Mining Congress — Explosives. 

10. 00 American Physical Society — Chemical. 

5. 00 American Phytopathological Soc. — R. & H. 

15. 00 Amer. Soc. of Agric. Engineers — Explosives. 

30. 00 American Soc. of Mechanical Eng. — Ammonia, Chemical. 

35. 00 American Soc. of Refg. Engineers — Ammonia, R. & H. 

40. 00 Amer. Soc. for Steel Treating — Ammonia, R. & H. 

169. 00 Amer. Soc. for Testing Materials — Ammonia, Cliemical, F. & F., 

Grasselli, Rayon, R. & H. 

20. 00 Automotive Engineers, Inc. — Ammonia. 

16. 00 Acad. Medicine & Davidson Cb. Med. Soc. — Rayon. 
5. 00 Amer. Ass'n. for Advancement of Science — Viscoloid. 
5. 00 Amer. Ass'n. of Textile Chem. & Colorists — Viscoloid. 

350. Buffalo Municipal Research Bureau — Rayon. 

66. 00 Chicago Engineers Club — Explosives. 

14. 00 Cleveland Law Library Ass'n. — Grasselli. 

46. 14 Electrochemical Society — Chemical, Grasselli, R. & H., Service. 

50. 00 Engineering Societies Library — Engineering. 

19. 82 Faradav Society — Chemical, R. & H. 

15. 00 Franklin Institute— F. & F. 

40. 00 Grayiron Institute — Engineering. 

3. 00 Illinois Mining Institute — E.xplosives. 

4. 00 Inter. Ass'n. for Testing Materials — Chemical. 

5. 00 Medical Society of Virginia — Rayon. 

25. 00 Mine Inspectors Institute of Amer. — Explosives. 

89. 00 National Ass'n. Prac. Refrig. Eng.— National Ammonia. 

10. 00 Optical Society of America — Chemical. 

35. 00 Richmond Academy of Medicine — Rayon. 

66. 00 Society of Automotive Engineers — -Ammonia, F. & F. 

24. 93 Society of Chemical Industry — Chemical, Orchem. 

3. 45 Society of Chemical Industrv, London — Chemical. 

12. 00 Society of Rheology — F. & F., Krebs, Viscoloid. 

588. 35 Sodium Phosphate Institute — Grasselli. 

8. 00 Southern Medical Ass'n. — Rayon. 

50. 00 Special Libraries Association — Chemical, R. & H., Technical 
Library. 

245. 00 Technical Ass'n. of Pulp & Paper Indus. — Orchem, Chemical, R. 
&H. 

6. 89 Textile Institute — -Chemical. 

200. 00 Tech. Ass'n. of the Pulp & Paper Ind.— Krebs. 

110. 00 U. S. Inst, for Textile Research, Inc. — Orchem, Chemical. 



3, 257. 58 Total. 

Totals: 

(1) $14,563. 50 

(2) 10,398. 17 

(3) 49,416. 77 

(4) 3,257.58 

Grand total 77, 636. 02 



("Exhibit No. 1245" appears in text on p. 3662) 



Exhibit No. 1246 

Testimony of Col. J. H. Hawkins as Given Before Select Committee on 
Expenditures in War Department, 1919, vol. 275, Part 1, Pages 288-292 

Mr. Graham. As a matter of fact. Colonel, the price fixing that was done on 
copper, and the prices paid by the Ordnance Department so long as you were 
connected with it, were set by parties outside of the Ordnance Department, were 
they not? 

Col. Hawkins. Yes, sir. 



MUNITIONS INDUSTRY 3841 

Mr. Graham. And all you gentlemen did who represented the Army in this 
matter was to follow Executive orders in that regard? 

Col. Hawkins. Yes, sir. 

Mr. Graham. And make your contracts accordijig to prices that were given 
you by the War Industries Board, or some other price-fixing board? 

Col. Hawkins. I should say, as to the price, that we had absolutely no ne- 
gotiations or trading at all. As to the terms of the contracts we did have some 
trading occasionally or negotiations. 

Mr. Graham. But as to the prices you had no ■ 

Col. Hawkins (interposing). As to the prices we had no negotiations at all. 

Mr. Graham. I think that is all I care to ask the colonel. 

Mr. Jefferis. Colonel, in regard to the Lieut. Col. Black, wasn't he somewhat 
connected with the J. Pierpont Morgan business in New York? 

Col. Hawkins. Col. Black was connected with the British purchasing com- 
mission prior to the time tliat we entered the war, in connection with Mr. Stettin- 
ius, and I understand that purchasing commission was organizde by J. P. Morgan 
& Co., who were the fiscal agents for the British in this country. 

Mr. Jefferis. And this Lieut. Col. Black that you mentioned in response to 
some questions by Mr. Graham, is the man you refer to? 

Col. Hawkins. Yes, sir. 

Mr. Jefferis. Do you know for what length of time he had been helping the 
Morgans purchasing for the British before he came to Washington? 

Col. Hawkins. No; I do not know for what period of time, but I know he 
familiarized himself with munitions remarkably well. He knew all about mu- 
nitions and was about as well qualified as any civilian that came in from the out- 
side. 

Mr. Jefferis. Do you know what time he appeared on the scene? 

Col. Hawkins. He came in in January of 1918. 

Mr. Jefferis. Do you know whether he has gone back to the office of J. P. 
Morgan & Co.? 

Col. Hawkins. He has gone back to his engineering firm. 

Mr. Jefferis. And he and Col. McRoberts, from the National City Bank, 
both came about the same time together? 

Col. Hawkins. Yes, sir. 

Mr. Jefferis. And the first work that each of them were doing here in Wash- 
ington you do not exactly know? 

Col. IHawkins. I do not know what Col. McRoberts was doing in the first part 
of December definitely, but Col. Black arrived in Washington with his commission. 
I do not think he did any work in Washington as a civilian; I am quite sure he 
did not. 

Mr. Jefferis. Well, both of them- — that is, Col. McRoberts and Col. Black, 
whatever their titles were — became chief contracting oflncers for the Ordnance 
Department, did they? 

Col. Hawkins. Yes, sir. 

Mr. Jefferis. When they came in? 

Col. Hawkins. Yes, sir; Col. McRoberts and Col. Black, and Col. R. P. 
Lamont, and Col. C. W. Watson, and Col. Williams. 

Mr. Jefferis. Were they all civilians? 

Col. Hawkins. Yes, sir; they all came from civil life. 

Mr. Jefferis. These five or six gentlemen that you have just mentioned, they 
were the chief men in charge of the purchasing for the Ordnance Department? 

Col. Hawkins. Yes, sir. Col. McRoberts had charge of the Procurement Di- 
vision, and these other gentlemen were on his staff and they were instructed by 
him to sign contracts in his naipe. Col. McRoberts signed a number himself, 
and these gentlemen, I think, took their turns; they signed about an equal num- 
ber of them. Some of them specialized on particular lines. 

Mr. Jefferis. Well, it turned out after a while that those contracts were con- 
sidered illegal, did it not? 

Col. Hawkins. Yes, sir. The comptroller said a contract signed by Col. 
McRoberts, by Col. Black, was illegal. 

Mr. Jefferis. And was that followed up by securing legislation through 
Congress? 

Col. Hawkins. Yes, sir. The manufacturers of the country presented a bill 
in December of 1917, which came out as the act of March 9, 1918. 

Mr. Jefferis. What relief did they get? What relief did they give these 
people with whom these gentlemen had contracts, if anything? 



3842 MUNITIONS INDUSTRY 

Col. Hawkins. The Secretary of War was authorized to settle and discharge 
the Government's obligations under these improperly executed contracts. 

Mr. Jefferis. Now, who was the Watson that you mentioned as one of the- 
contracting fellows? 

Col. Hawkins. Clarence W. Watson was United States Senator from West 
Virginia, succeeding Gassaway Davis, and was here for a short time, and was 
chairman of the board of directors of the Consolidated Coal Co. of West Virginia. 
He came from Fairmont, W. Va. 

Mr. Jefferis. What rank did he get in the Army? 

Col. Hawkins. Lieutenant colonel. 

Mr. Jefferis. Did he have his commission when he got here? 

Col. Hawkins. Yes, sir. 

Mr. Jefferis. How long did he stay? 

Col. Hawkins. He went to France in connection with the service of supplies- 
over there, I think, in August or September 1918. 

Mr. Jefferis. Did he get promoted over there? 

Col. Hawkins. No, sir; he is a man about 55 years of age. 

Mr. Jefferis. What particular line of purchases, if you know, did Senator 
Watson have to do with? 

Col. Hawkins. Senator Watson was particularly active in the negotiation of 
contracts for the byproducts problems, for the production of toluol. 

M,T. Jefferis. Had he been a manufacturer? Did you know? 

Col. Hawkins. He had been in the coal and coke business all his life. 

Mr. Jefferis. There was another man, by the name of Williams, you said was 
one of them? 

Col. Hawkins. Col. Williams came down here with his commission from 

Mr. Jefferis (interposing). What commission did he have? 

Col. Hawkins. Lieutenant colonel; and he was discharged as a lieutenant 
colonel in January 1919. He was continuously on the job here. 

Mr. Jefferis. Where did he come from? 

Col. Hawkins. He was a lawj'er in New York City. 

Mr. Jefferis. What aged man? 

Col. Hawkins. He was of the class of '81 at Yale, in the university, and '84 
at the Harvard Law School. 

Mr. Jefferis. Was he a writer of something? 

Col. Hawkins. He wrote a book on mountain climbing once. 

Mr. Jefferis. Do you know what line of law he practiced in New" York? ^ 

Col. Hawkins. He was a member of Mayor Mitchel's cabinet in New York 
City, and he had something to do with the preparation of some of the big con- 
tracts for the public utilities in New York City. 

Mr. Jefferis. Was he a leal practicing lawyer, or was he engaged in contract- 
ing of some kind in New York? Do you know? 

Col. Hawkins. I do not think he was a trial lawyer for some j^ears past. 

Mr. Jefferis. Speaking of Mayor Mitchel's cabinet in New York, what do 
you mean by that, Colonel? 

Col. Hawkins. John Purroy Mitchel was mayor for two terms, I think, in- 
New York City. 

Mr. Jefferis. Did he have a cabinet? 

Col. Hawkins. Yes, sir; every mayor had, I think. 

Mr. Jefferis. Kind of a kitchen cabinet? 

Col. Hawkins. In Pittsburgh, where I come from, the mayor has a cabinet, a 
director of public safety, and a director of public works, and so on. 

Mr. Jefferis. Do you know what position Col. Williams had in Mayor 
Mitchel's cabinet before he came down here? 

Col. Hawkins. I am not very familiar witH the nomenclature up there, but 
something akin to the department of public works. 

Mr. Jefferis. When he came down here with his commission and stepped into 
the Ordnance Department, what particular line of activity did he follow in the 
Ordnance Department? 

Col. Hawkins. He was quite active in the drafting and some of the negotia- 
tions for certain of the explosives and components for explosives. 

Mr. Jefferis. Do you know whether he had any knowledge or experience in 
that line before he came here or not? 

Col. Hawkins. I think he had some knowledge; yes, sir; not very technical 
knowledge, but he familiarized himself pretty well with the material, such as 
nitrates; he had studied a good deal, I think, and seemed to know something 
about the different kinds of nitrates. 



MUNITIONS INDUSTRY 3843 

Mr. Jefferis. He studied a good deal? 

Col. Hawkins. I think he had read a good deal. 

Mr. Jefferis. What aged man was he? 

Col. Hawkins. He was of the class of '81 at New Haven, Yale University. 

Mr. Jefferis. Now, you mentioned some other fellow? 

Col. Hawkins. Col. R. P. Lamont. 

Mr. Jefferis. Where did he come from? 

Col. Hawkins. He came from Chicago, where he had been president of the 
-American Steel Foundries Co.; he came about the 15th of January, as I recollect, 
1918. 

Mr. Jefferis. Did he have his commission when he came? 

Col. Hawkins. Yes, sir. 

Mr. Jefferis. What commission did he have? 

Col. Hawkins. Lieutenant colonel; he was promoted to fuU colonel in October 
1918, and he was discharged from the service about January 1919. He became 
■chief of the procurement division when Col. McRoberts went to France in the 
fall of 1918. 

Mr. Jefferis. So then, as a matter of fact, the Ordnance Department, the 
obtaining of all ordnance supplies, was in effect in the hands of those civilians, 
that stepped in there about that time? 

Col. Hawkins. Yes, sir; the buying end of it was practically exclusively in the 
hands of the civilians. 

Mr. Jefferis. And the only Army man that had anything to do with that 
whatever was this man Hoffer? 

Col. Hawkins. Col. Hoffer, for the gun division; Col. Rice, of the Regular 
Army, for the carriage division; and Col. Babbitt, of the Regular Army, for the 
equipment division. 

Mr. Jefferis. And any others? 

Col. Hawkins. And Col. Moody of the Regular Army for some of the motor 
equipment. 

Mr. Jefferis. What did they do after these other people entered with their 
commissions? 

Col. Hawkins. Col. Hoffer, I think I spoke of; he went to the Watertown 
Arsenal from the Ordnance Department down here. Col. Babbitt went to France 
and was connected with his old line of infantry, I think. Col. Moody went to 
France and did some engineering work for the Ordnance Department in France. 
Col. Rice became chief ordnance officer of the A. E. F. in France. I think that 
is all of the officers I remember just now. 



Exhibit No, 1247 

Excerpts from Meeting of the Council of National 
Defense, March 3, 1917 

Secretary Baker requested Director Gifford and Mr. Clarkson to retire during 
the consideration of the election of a director and secretary. Following upon this 
Mr. W. S. Gifford was elected as director, and Mr. Grosvenor B. Clarkson as 
secretary of the council, it being directed by Chairman Baker that such action be 
spread upon the minutes. 

Commissioner Willard stated that Chairman Godfrey of the Advisory Commis- 
sion had informed the Commission that his private affairs would not permit him 
longer to serve as chairman. Mr. Willard thereupon announced his election as 
chairman of the Commission at its meeting earlier in the day. 

Secretary Houston, following on the suggestion of Chairman Willard, rnoved 
that the regular, stated joint conferences of the council and Advisory Commission 
be held hereafter on the first Saturday of each month. Carried. 

Chairman Willard read the following list of men nominated by the Commission 
to compose a "munitions standards board": 

W. H. .Vandervoort, Root & Vandervoort, builders of special machine tools, 
and president of the Moline Automobile Compan}\ 

R. A. Deeds, form